KULR Technology Group, Inc.

Q4 2022 Earnings Conference Call


spk_0: you're in the right place for the cooler technology group fourth quarter in full year twenty twenty two earnings call set for today's thursday march twenty third twenty twenty three and four thirty pm eastern all right everybody thank you so much for joining us today i'm your host stewart smith and before this call can begin i need to read some statements for you that can be found at the bottom of every press release using the ticker symbol for the company k u l r that's also the same way you find this information at the securities and exchange the commission using the company's named cooler technology group spelled k u l r statements made on this call do not constitute an offer to sell or solicitation of offers to buy any securities have any entity this call may contain certain forward looking statements based on coolers current expectations forecasts assumptions that involve risks and uncertainties forward looking statements made on this call color based on the information available to the company as of the date here of the company's actual results may differ materially from those stated or implied in such forward looking statements due to risks and uncertainties a so so he added with coolers business which include the risk factors disclosed in coolers form ten k filed with the securities exchange commission on march twenty second twenty twenty two forward looking statements include statements regarding the company's expectations beliefs intentions or strategies regarding the future and can be identified by forward looking words such as anticipate believe could estimate expect intend may should and would or similar or words all forecasts are provided by management on this color based on the information available at this time and management expects that maternal projections and expectations may change over time in addition the forecasts are entirely on management's best estimate of their future financial performance given their current contract current backlog of opportunity and conversations with new and existing customers about their products and services cooler assumes no obligation to update the information included on this call whether as a result of new information future events or otherwise johnny me on the call today from the cooler management team will be c e o michael mo president and c oh keith cochran as well as chief financial officer simon westbrook after opening comments are completed by the management team of cooler technology group we will be joined on the call by howard halpern from tag which brothers theodore o'neill from litchfield hills research and jake the kill ski from alliance global partners for their questions i will turn the call over now
spk_1: to chief executive officer michael most michael the call is yours and you sort this is michael mouth thank you everybody for joining our car today quarters mission is the developed world leading energy management platform to accelerate the global transition to a sustainable electrification economy would provide the hardware and software solutions for renewable energy and of as lability applications which team our mission by helping our customers to use less energy to use energy more efficiently to make energy consumption safer and cooler to use less material to achieve these goals and to complete the circle economy the recycling the following are cute or and four year twenty twenty two financial highlights or to for twenty two revenue was one point a one million dollars an increase of one hundred thirty seven percent or two for of twenty twenty one gross margin was ninety two percent in two or twenty two compared to seventy percent a cube or twenty one revenue for twenty twenty two full year was three point nine nine million dollars an increase of sixty six percent from twenty twenty one gross margin for twenty twenty two was fifty nine percent compared to fifty four percent in twenty twenty one the straw revenue growth it used to meet you bought twenty twenty two and a gross margin expansion or the result of quarters long term investments in technology portfolio to complete our holistic approach to let him on battery sick as we game or treasure when large oh yeah customers we expect revenue growth more madam to accelerate in twenty twenty three speaking of course long term investment with investing in our people our infrastructure or technology portfolio and i'll brent teeth coughlin would update you on all the important milestones we've accomplished in building our team in infrastructure in north america i'm particularly proud of iso nine thousand certification and the completion of the automated sell screening line for nasa working structured thirty seven and other deity customers at the end of twenty twenty two we had three point one nine million dollars in equipment and properties compared to three hundred seventy five thousand dollars in twenty twenty one would be working on all showing our manufacturing capabilities in north america in twenty two we had three point five million dollars the equipment deposits at the end of twenty two compared to two point five million in twenty one would leave that we had done or it heavy investments in cap of equipment for us is solidly grow our business in twenty twenty three at the end of year twenty two we have one point nine million dollars in the inventory compared to one hundred ninety one thousand dollars in twenty twenty one in the early tenfold increase in inventory as we prepare for the revenue growth acceleration in twenty twenty three in forty twenty three are entering into a monetize asian face of the investments were made to build our t technology passports we introduce and all new modular any energy platform cool or one at this year's c s cool one is a family of revolutionary battery packs accelerating the global transition to a sustainable electrification he caught these new and innovative designs bring a combination of safety performance in colleges modularity and reliability for the world's most good many applications since the launch of the product in january corner one has half a dozen development engagements with electrical be a ghost vehicle that the audi applications the electric aviation a charging infrastructure customers weeks back corner want to have the the opportunity of over two hundred million dollars by twenty twenty six cooler one design solutions is suite of products and services that comprised of a holistic approach to battery safety this approach that we adopted from the nasa methodology to die flock to address some of the most critical battery safety pops it starts from deep analysis of the battery cells from the time it's make understand how it be he hates when he goes into thermal runaway to the at the i see past that take all that data it design the battery pack it was so terrible and mechanical analysis capability that testing the battery pack it provides real time monitoring analysis to sell check and our safety case we a products enable large for my batteries to be stored transport it and recycled sake embedding this process is a lot of proprietary ip as and though house that would game over the last two years day was twelve quite the pens and many more any pets energy storage is by far the largest market opportunity boss this market is to reach over four hundred billion dollars by twenty third we believe our solution is a fundamental enabling technology that makes your batteries are safe a complied with governor regulations our energy storage customers include lockheed martin for these to bury testing i see testing for the largest automotive many thatcher in the us and see case production orders for top tier power too many factors we expect to achieve over one hundred million dollars in revenue for cooler one design solutions over to next three years as we concede to gain crash with large oh yum customers in the products begin to ramp a lot of very excited about the next phase of our technology and product development to integrate all these functions together with a i powered software and solutions are cell technology provides a real time moderate about me to provide state of health data to a customers we recently acquired qualified which is a software technology identifies eliminates by gracious related loss of energy in motors so by incorporating a into a suite of tools will provide the capabilities for efficient energy source of energy usage the future features the integrated a i tools such as t t t it are aging your inflow to increase productivity it also into quarter one design solutions to provide more intelligence and data analysis capabilities next keith coughlin will provide operational updates keith please thank you michael proceed that hello everyone and piggy for joining or call today twenty twenty two has been an incredibly year for cooler
spk_2: so let's take a look back that some important milestones that leave us very well positioned for a future and q one we shared with you doctor william walker former nasa johnson space center senior leader in thermal analysis was hired as director of engineering to build out or sweet of battery thermal management and safety products as well as our next generation high performance computing thermal management initiatives
spk_1: it became quickly a parrot the doctor walker she take the helm of our technological vision
spk_2: and was moved into the city a wrong he and his team have delivered on the initial charter but rapidly expanded the color capabilities to include advanced offerings such as ft t see which is fractional thermal runaway our imagery bomb kalorama tree and multi physics modeling additionally with the strategic hires a former nasa battery engineers the team was able to develop and deliver as he asked this january or first cooler one battery the product is highly configurable with a broad range of applications from a bikes even paul's cube sat and much more we are now engaged in element work with multiple customers with the goal of delivering in volume starting in the second half of the sheer also in que one we noted are impact by covert lockdowns in china that that time we said we're moving quickly to reduce supply chain risk we delivered on that commitment and queue to twenty two by moving are safe case and say sleeve production to mexico while we still have some risk remaining in china we now have a dual source for trs manufacturing materials in mexico
spk_0: furthermore we have placed on order fully automated equipment or trs manufacturing that is scheduled for delivery this june
spk_2: the equipment will be put into operation in the us during do three of twenty three as we seek to provide a the more stability to the supply chain and significantly reduce or risk to try to exposure
spk_0: as we moved into queue to our focus remains strong an operational excellence a quarterly the team worked very closely to achieve i so nine thousand and one certification the audit found zero nonconformity was demonstrating corps dedication in the pursuit of manufacturing excellence and operational control polls
spk_2: this was a significant milestone delivered by our entire organization as noted in queue to call color continue to expand our workforce in the area of sales supply chain in engineering the hires have been critical to delivering the growth in our service offerings as well the increase in our customer engagements an autocue good three i share of we have begun to install are automated lithium ion eighty six fifty and twenty one seven hundred battery sell testing capability which leads the performance requirements of nasa were construction thirty seven and cooler would have the only boy into and automated tests as i'm capable of meeting or construction thirty seven the system allows for volume testing a battery cells required for all manned missions by nasa and many other deity branches we can be indicated on the call the system would launch operations in december and cooler would begin shipping fully tested cells in january twenty three while or system was fully operational
spk_0: and january we didn't per a slight delay do the final permitting accordingly the team completed the first fully screen cells in february and hand delivered them to the after the first week of march is with a major milestone delivered by are dedicated op's organization
spk_2: gore also announced in que three the introduction of cool irvine we're very pleased to say the response has been extremely positive cooler previously announced we have signed a long term service agreement to support a major helicopter operation we have also had numerous favorable engagements with the marine corps industrial drone operators and commercial flight operators we're very pleased with the progress the team is made to develop a significant cells bottle and a like customer demonstrations for the superior balancing and vibration reduction technology we do expect to see numerous new customer wins very soon living autocue for the focus remained on operational efficiency the delivery of the various platforms and services noted previously and the start of them are texas facilities for advanced testing a battery cells impact of element we're pleased to say that both locations in texas are fully operational that have all already begun to contribute to coolers top line growth we have also continued to hire strategic personnel specifically in the area of battery technology cool currently has seventy two employees and has been able to attract and retain our strategic fires with that said are hiring and twenty three will slow to a few strategic engineering hires and rip is hires as we are moving our team to focus on that top growth of the company for the platforms developed over the past two years we are currently well staffed to deliver twenty three and we have a plan for only minor capital outlay is this year compared to the last two we stand well poised to deliver our at like twenty three vision
spk_1: at this moment i would like to say a big thank you to our employees their dedication and at the as he as and for were cooler is going to simply incredible
spk_2: i also want to recognize our values shareholders we appreciate you all i know the current market is tough who has position the company for solid growth and has delivered on the vision presented as far back as que to twenty one with multiple platform developments deployed
spk_0: these developments to capital investment in time
spk_2: but they have also now delivered and are poised for significant topline growth and twenty three
spk_3: are cooler team is committed to delivering for you thank you i will now to from the call of a sudden westbrook who will share course financial highlights simon your time and westbrook care how they reported revenue of one point eight million in the current quarter compared to seven hundred and sixty six thousand and a quarter ended up sympathetic best two thousand twenty one thousand he said a hundred and thirty seven percent as a result or increase production shipments following improve on it our supply constraints issues sign general i'm expenses increase to four point five million and a half quarter of twenty twenty two and three point eight man and the corresponding quarter of two hours and twenty one the sixteen percent increase and extra expenses was jewish would wish the locks and appetizing expenses consulting fees and noncash stock based compensation expense paid to employers and consultants as well as expansion and cutting out of new production facilities are the expenses increase sixty eight percent am so hundred and five thousand or the fourth quarter of two thousand twenty one to one point two million in the fourth quarter of twenty twenty two reflecting a combination of headcount a new an automated tests of production equipment continue our investment in a mass manufacturing at a sampling facilities that was began in the last quarter twenty twenty watt alice operations decreased by point six percent from just over four man the fourth quarter twenty twenty one to three point nine million and a fourth quarter of a career the twenty five thousand dollars increase in the operating loss included an increase in revenue offset by increases in payroll and research and development projects our net loft decreased by nine percent just over home in the fourth quarter of two thousand twenty one to four point four million in a whole quarter or this bishop and i met last best chance of a or order to twenty two was for fence compared to fix have of a couple period and twenty twenty one finance right she cost increased by four hundred and eleven thousand largely jewish watching in prepaid of badges on the cash i'd i december thirty first two thousand roger to the company reported cash balances of ten point three million compared with fourteen point nine million as of december thirty first last year taking into account after passed a general further advances under the terms of the fifa we believe they are well positioned to expand operations support new business
spk_1: s and consolidate our manufacturing operations in the us to ensure greater control over logistics in the face of continuing worldwide of this banker
spk_2: and now turn a pullback to michael take his time as sort out or and a call to you for at the answer questions far analyst
spk_3: or a very good as stated at the beginning of the call were joined by several different analysts and i will let the members of the cooler management team decide which one of them or answer each question with that let me first introduced howard halpern from tiger woods brothers power the call it now
spk_4: yours you have a few questions that come up here are you are gradually isn't it great
spk_5: great building of the moment young into next all i do wanna clarify what i think i've heard on the call
spk_1: and over the next three years you anticipate generating can simply a hundred million dollars in revenue yeah this is howard is michael oh yeah this is our aspirations for the equal no one platform
spk_6: with the what we think is the current engagement and future engagement to be for this product as we saw launching them and we think that that two hundred million the end up by twenty twenty six is our aspiration
spk_7: okay having up to me
spk_2: okay ah it and in terms of if he did i get give an example with of by the news that when you cast where you had how long did it take to materialize him and how long the the candidate to deploy it across their whole for you yeah hey i'll take that one of my so or with our current customer with i see already deployed that across the entire fleet so ah that particular customer that we announced ah has a universal system for track imbalance in their helicopters and so does our technology was
spk_7: sorry i'm completely ready to support their entire fleet
spk_4: at and i use the that with similar customers that
spk_2: it'll be a very quick deployment orders as they did depends on the customer how complex next that the lord will be tied for the major helicopter deployments and are out there there's a really just a handful of vibe of what i would call these helicopters that are used in a mass service emperor all of those particular helicopters we already have ah are solutions in place to support them hundred percent yup gambling a one thing about most of these by helicopter services the hardware that they use the have sensors in place so they can provide data rapidly to us of with you that data people by a and will be able to
spk_4: help them are emulator vibrations in improve their track and balance
spk_8: okay and just i guess one last one was you that so many different platforms that you know to sell the different types of customers is there anyone that we should focus on it as being a big driver of were elite with it it's current fiscal year
spk_1: so i would say yeah key to me that it does when you and you can you can can add on top of that so our the cooler wanted i have solutions package power i think that if that's what is gaming the most traction the boy twenty twenty three this what we see lot of momentum including some the customer announcements that we said recently have that so that you know that incorporating are the capabilities of into that are into that solutions package and be showcase product of that package is or one the unit on doubt one of we announced in the he and in cs and like god teeth i thought about we already have many customers gauge month on this so that the second half twenty twenty three leading to twenty twenty four are qualified is actually kind of it in power track on this one so on but you know yeah yeah and it when you get into at the later half the year as all the platforms such getting crash and especially the mobility like he vito customers high performers immobility mobility customers out we see on opportunity to cross sell it up sell cool obeid into those customers who already you know using our battery solution and in in d drive pay for that will be motors and you know to make the park system more efficient that those are will be higher value engagements was okay okay guys thanks and keep up the great work
spk_0: yeah thank you i appreciate it
spk_9: or i thank you how are now we will move on to fear door oh neil from litchfield hills reach search the theodora us
spk_10: yes and or congratulations on the good quarter
spk_9: thank you gift great and so on the thirteenth you announce the opening of an rd said or in west texas going to be outfitted with state of the art or attack green equipment and that leads me to three questions one could you talk about the demand you're seeing for prototype
spk_2: and how these fit within the sales process and when you do get production type orders is like the two point six eight million you got last month will wear will production run fucker yeah i have a michael out a gallon a methinks with the question so are the demand for prototype battery systems is huge given the push for electrification across many industries and damn supporting the development of these systems under the umbrella of okay one design services is one of the major focuses of are engineers and it's going to facilitate the internal growth projections that we have for twenty three a too much larger scale ah in twenty four is based on them the projections michael's already to shared with you and damn were already engaged and prototype designs for hi rebecca royal reliability battery packs for companies and automotive or defense aviation the energy storage and know space markets so were also in collaboration with the major car manufacturer some luck perjury tellers a marine battles as well as energy storage and bride mobility applications all looking for rk one design services
spk_9: there is done a tremendous amount of interest in the yeah the engineering team that we have been able to assemble and the capabilities that team was brought to the table
spk_0: great and and walk away you to get brushed orders were were those to get built
spk_2: ah well it depends on the size of the order so if it's a
spk_9: a small like lot like order or that would actually be built within our own laboratories if it's are a large order in mass production are we intend to outsource the production
spk_11: okay
spk_2: and in the following up on that two point six eight million dollar order or the presently says it's partly about heavy construction and other other mobile applications is this product being designed specifically for electric power construction equipment ah no not yeah
spk_9: i'd say it's not specifically just her or that are we can also support them
spk_0: a critical systems including medical medical equipment emergency services financial institutions that he backup power or data centers are a big cetera
spk_2: okay mls push it is a i went onto the website to try to understand how cool vibe work and i wanted to know a lot of a little more about it is it a combination of sensors and voltage your current modulation software the controls motors are the some something else i'm not really a cool vibe is a multifaceted platform and a concern many industries and in the technology can balance and remove vibration from pretty much almost anything that spends
spk_9: for healers for example are those sensors already in place as part of the track and balance system that's on board as a we just use the information already coming from those sensors when we have other products or technology that we need to remove vibrations from or improve the track imbalance are we also have our own says
spk_2: answers that were able to use in those environments along with our software to be able to to perform done be any vibration and and balancing of those products this doesn't mean you have to add so i've seen the sensors and everything in some cases the sensors are already there for for probably sleep stabilizing out of products for the air but does that mean that there's this other components that have to get added as well beyond sensors yeah not have been barely the sensors that in certain applications will actually build path pictures more customers so we're able to not only perform be the track and balance about were able to use in certain cases that lasers for example to remove materials
spk_1: we will show them exact placement of were weights should be placed in order to balance a system and we can you do that with a visual representation for them that the products certainly under a helicopter business that it's very straight board for us and other businesses it can be more complex for we have the team inside that can build the hardware and put that place the sensors properly sore able to do the adjustments and what we're trying to get down to his zero point zero x it's a vibration okay great thanks for a while yet head of you're glad yeah for a pet as if i may yeah if i may add on have a bad was one down key thing i think the lot people you know what to do dig deeper into quoted i'm so i think that you know it's fair to say that to a bible work with existing equipment and censor years and the i doubt that's what he built in to from the helicopters and applications that the key just talk about of but what's also more exciting is that going forward you applications like he vetoed that's coming online twenty twenty five hundred twenty six industrial applications like wind farm and of applications there's op te to develop very are know cause censor out to be embedded into these new applications of and then a bad our corner by software or onto the vehicle itself knob either integrated into the of a the computer that's on board or added qualified can sit inside our cool one bad
spk_12: or unit to do the monitoring as well so we we see an opportunity going for were aware the corner of a cooler was becomes the the at the the power source and intelligence intelligence unit of the vehicles in and by become the says a part of it and they work together to give you the maximum benefit
spk_13: the dog keeping the battery school and save as was keeping the i've cause you know or that the rotors ah and motors running
spk_14: smooth and that more energy efficient done you know dog eat dog will be a video or cool adage okay
spk_2: thank you
spk_1: i thank you again on a we're going to be joined now by jake the tell dj kids with alliance global partners j for you with us yeah hey michael unseen thanks for my question hey jake go looking at the answering their supply chain to think it's important ah yeon and looking at the facility in in texas tom different a lot of government funding across the battery supply chain the becoming available on there any program either out there are on the horizon that you think cooler my qualify for down the road
spk_2: yeah this is something that i'm frankly is do we haven't put a lot of focus on and twenty twenty two but we are putting a lot more focus on and twenty twenty three and going forward that couple programs or maybe the biggest one is the bipartisan because structure bill things somewhere around three hundred and fifty billion dollars so there is multiple places and the last year whole bunch of companies god sizeable chunk for that are now we have our domestic north america supply chain in place i think that that you know we can we can start that initiative in he ended up applying for that gunman financing the our police force is also the ocean or the oh ye are arpa and deal the financing available so dark as we really start showcasing be the north america the us
spk_14: the supply chain and manufacturing base that we will be a very actively are going after of those the support
spk_2: yeah to sad to that we we are currently engaged with that reaper part these are that specialize in being able to get back those opportunities out of the deal we and some of the sand government funding nets breed up now
spk_1: so we've been working with them now for about the last month on different opportunities and narrowing down the list that we're going to pursue each of those opportunities take quite a bit of engineering how odd hours to be able to adjust that and put him through the system about three solid money behind that so we're trying to make sure that we put our best proposes out there but yes it is on our radar and it is something that we're working on look up but that's good the her arm and then just looking at the two point seven million dollar follow on order you announced earlier and and que one arm
spk_14: it seems like the man from that customers starting to ramp up a bit you have any visibility on know what what the men might look like in the second half forgotten point for ah on the apostles you see additional follow on orders year later this year or next
spk_0: yeah i'd our say that you know we don't want to have killed the thunder from from san customers so i'll i'll let them you know speak for themselves but up a i think as it is just as with this customer and and others and it takes quite a while to design
spk_15: and tests and certify the systems palm and you don't comply with them and regulations you are sort of certifications in the whole bit at once it's design in
spk_16: i think that you know the sticking it is very high and it's it's can be a long cycle you know products got to run its life so i will not be surprised that the i will will have fall all offers for second half of this year out the ended you know it's definitely one of those products that has a lot of on

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