ToughBuilt Industries, Inc. (NASDAQ:TBLT) Q4 2022 Earnings Call Transcript March 15, 2023
Operator: Greetings, and welcome to the ToughBuilt Industries Fourth Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. . As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Martin Galstyan. Please go ahead.
Martin Galstyan: Good morning and thank you all for joining us today to discuss ToughBuilt’s fourth quarter and full year 2022 financial and operating results. Again, my name is Martin Galstyan, and I am the Chief Financial Officer of ToughBuilt. Joining me on today’s call is; Michael Panosian, President and Chief Executive Officer of ToughBuilt. Michael will begin today’s discussion by providing operational and financial highlights from the fourth quarter and full year. I will then review our financial performance for the same period. Michael will conclude the discussion with our growth plans for the upcoming fiscal year and beyond. Before turning the call over to Michael, I would like to remind you that any forward-looking statements made by management are covered under the U.S. Private Securities Litigation Reform Act of 1995 and are subject to the changes, risks and uncertainties described in the press release and in our U.S. security filings.
In addition, during the course of the call, we may refer to non-GAAP financial measures that are not prepared in accordance with accounting principles generally accepted in the United States and that may be different from non-GAAP financial measures used by other companies. Investors are encouraged to review ToughBuilt’s current report on Form 8-K, furnished with the SEC for ToughBuilt reasons for including those non-GAAP financial measures in its earnings release and presentation. The reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures are contained in our earnings press release issued earlier today, unless, otherwise noted, therein. I will now turn the call to Michael.
Michael Panosian: Thank you, Martin, and thank you all for joining us today. 2022 was a very strong year for ToughBuilt culminating in record revenue of 94.9 million and approximate 36% year-over-year increase compared to 2021. Fourth quarter revenue came in at a record 29.6 million, representing a 20% increase compared to the same quarter in the prior year period. Revenue growth in the fourth quarter, as well as for the full year in 2022. was driven by a combination of growing business within existing retail partners, onboarding new retail customers, and the introduction of new lines and continued strong demand for our existing products. Our 2022 results are testament to the importance of establishing a platform of strong teams in product development, sales and distribution.
This is demonstrated by our numerous product launches, including our all new cutting tools, such as reload utility knife, measuring, handsaw line, striking tools, long handle tools and landscaping tools, screwdriver line, rotary laser levels, workbench, totaling approximately 200 plus SKUs. This year proved to be a milestone expansion period for ToughBuilt, growing our network with North American and global trade partners. We are excited to currently be servicing over 17,300 large and mid-sized stores and online portals worldwide. To help combat logistics related costs during the year, we successfully negotiated improved shipping rates, lowering the cost by roughly 70%. We also worked with our large retail partners to implement direct import ordering as we have discussed on previous earnings calls where possible.
We have seen this activity significantly decrease our logistics costs, in part by shifting several supply chain steps from ToughBuilt to our retail partners. As a result of our strong product introduction momentum and our growing brand recognition around the world, we expect to see retail and online revenues continue to grow year-over-year in 2023. I will turn the call back to Martin to cover our financial results. in greater details. Martin?
Martin Galstyan: Thank you, Michael. Revenues for the three months ended December 31, 2022 increased over 20% to approximately 29.6 million compared to 24.7 million in the same period last year. Revenues for the 12 months ended December 31, 2022, increased 36% to approximately 94.9 million compared to 70 million in the prior period. The increase in sales for both periods was primarily due to wide acceptance of our products receive a recurring sales orders for metal goods and soft goods from our existing and new customers, and the introduction of new soft and electronic good products to our customers. Cost of goods sold for the three months ended December 31, 2022 were approximately 23.6 million compared to 19.4 million for the same period in 2021.
Cost of goods sold for 12 months ended December 31, 2022 were approximately 73.1 million compared to 50.9 million for the year ago period. Cost of goods sold increased in 2022 over 2021 primarily due to increase in cost of steel and plastic polyester needed to manufacture metal goods and soft goods. An increase in labor cost in China, high inflation rates, as well as increased prices in tariffs and shipping rates. Selling, general and administrative expenses for three months ended December 31, 2022, were approximately 23.6 million compared to 19.4 million for the same period last year. Selling, general and administrative expenses for 12 months ended December 31, 2022, were approximately 58.9 million compared to 51.4 million for 12 months ended December 31, 2021.
SG&A expenses increased in 2022 over 2021 primarily due to hiring additional employees and engaging additional independent contractors and consultants to grow the company. We expect our SG&A expenses will start to increase at a lesser rate as our business matures and we will see substantial operating leverage. Research and development costs for the three months ended December 31, 2022 were approximately 4.6 million compared to 3.4 million in 2021. Research and development costs for the year ended December 31, 2022, were approximately 15.6 million compared to 6.9 million in 2021. This increase was primarily due to the costs incurred in developing new tools and software applications to run on the mobile device related to the construction industry.
In the full year of 2022, we had a net loss of 39.7 million compared to 37.5 million in the year ago period. The net loss is mainly attributable to building our team to meet the demand for current product lines and new product lines and design as well as significant increase in cost of goods sold prices as noted previously. As of December 31, 2022, cash position was 2.6 million, management anticipates that our capital resources will improve and our products will gain even wider market recognition and acceptance, resulting in its increased product sales. On November 17, 2022, we completed a private placement with aggregated gross proceeds of 7.5 million before deducting placement agent fees and other offering expenses. I will now turn the call back to Michael for his final remarks.
Michael?
Michael Panosian: Thank you, Martin. I would like to reiterate the tremendous market opportunities that exist at ToughBuilt and infrastructure we have in place to capitalize on those opportunities. For this end, in the fourth quarter, we entered into four major retailers in Germany, which accounts for 35% share of global hand tools market in 2022, and also successfully launched ToughBuilt products into a major retailer, Wickes, which has 230 locations across the United Kingdom. Moreover, Toolstation U.K. with over 550 stores nationwide and Toolstation France demonstrated consistent and impressive sales. Lastly, we reached a comprehensive distribution agreement with Sodimac, the largest home improvement and construction supplier in South America.
In this agreement stores in Peru and Colombia initially began with 15 SKUs in store and growing. The agreement has subsequently been expanded to encompass other countries in the region and brought 23 SKUs to Sodimac online marketplace as well. As demand for our products increase around the world, we continue to expand our capabilities to meet this growing demand. As we look ahead, our future revenue growth opportunities include continuing to expand with existing retail partners, adding new retail partners internationally, and introduction of new product lines. I firmly believe that we can be a disruptor in the home improvement industry and are well positioned for 2023. In closing, I’d like to thank our shareholders and our team for helping grow ToughBuilt into a high-quality brand that customers can rely on.
Our team remains dedicated to our mission even through a global pandemic and difficult economic conditions. I’m looking forward to the upcoming year and remain very confident in our ability to execute on our growth, cost saving and profitability plans. With that, I would like to turn it over to our operator.
Operator: This concludes today’s teleconference. You may disconnect your lines at this time and thank you for your participation.
