KULR Technology Group, Inc.

Welcome to the Cooler Technology Group third quarter 2023 earnings call. I'm your host, Stuart Smith, and with me on the call today is the CEO of Cooler Technology Group. That's Michael Moe, company president and COO. Keith Cochran will be also joining us and the CFO, the chief financial officer here. Sean Cantor. As you probably know, Cooler Technology Group is a publicly traded company listed on the NYSE American under the ticker symbol KULR. As such, before we begin the call today, please listen to the following Safe Harbor statement covering this call. This call does not constitute an offer to sell or a solicitation of offers to buy any securities of any entity. This call may contain certain forward looking statements based on management's current expectations, forecasts, and assumptions that involve risks and uncertainties. Forward looking statements made on this call are based on the information available to the management team as of the date hereof. The company's actual results may differ materially from those stated or implied in such forward-looking statements due to risks and uncertainties associated with the company's business, which include the risk factors disclosed in their Form 10-K filed with the Securities Exchange Commission on March 28, 2023. Forward-looking statements include statements regarding management'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 words all forecasts are provided by management on this call are based on the information available at this time and management expects that internal projections and expectations may change over time in addition Forecasts are entirely on management's best estimate of their financial performance given their current contracts, current backlog of opportunities, and conversations with new and existing customers about their products and services. Cooler Technology Group assumes no obligation to update the information included on this call, whether as a result of new information or future events, or otherwise. With that, I will now turn the call over to the CEO of Cooler Technology Group, Michael Moe. Michael, the call is yours.

Thank you, Stuart. Thanks, everyone, for joining the Cooler Q3 2023 earnings call. This is Michael Moe. I'm the CEO and co-founder of Cooler Technology Group. I'm pleased to report that we achieved another record revenue quarter in Q3 of 2023. While our overall revenue grew approximately 120% year-over-year to over $3 million, our service contract revenue grew over 4,800% year-over-year. Our business model and customer engagement process start with design and testing services for our customers. We expect strong growth in our service contract revenue to be an early indication of our overall revenue growth potential, which will be driven largely by product sales ramp. Our Cooler One platform continues to see strong growth in design services and product sales in energy storage, space, battery recycling, and electric transportation markets. In addition, our proprietary thermal management products for the aerospace and defense markets are contributing to the acceleration of our growth into 2024. Our CoolerOne space battery of the CoolerOne platform has received broad interest in Q4 across the board due to NASA levying heavy safety requirements on the CubeSat and SmallSat industry. As a result, the company has executed a contract to deliver a flight CoolerOne space unit for a new customer account for a 2024 mission, and the program begins in Q4 of 2023. Based on continued record quarterly growth, and the broadening and deepening of our customer engagements across multiple market verticals. Our sales funnel shows that our current 2024 revenue potential to be between $26 and $34 million. Q3 growth is largely fueled by our Q1 platform, which is well positioned to serve multiple fast-growing, multi-billion dollar markets where safety, performance, and sustainability is of the utmost importance. Here are some of the highlights of our achievements. Cooler is selected by a top five American electric truck manufacturer to test and analyze its next generation batteries with the CoolerOne Design Solutions Platform. This manufacturer has forecasted a substantial ramp up in production of the electric SUV and truck over the next few years. According to research and markets, The U.S. electric truck market is expected to grow at a 54% CAGR to reach over $15 billion by 2030. Cooler and Serva Solutions announced a groundbreaking national recycling program for lithium-ion batteries and battery materials. The collaboration focused on developing a safe transportation platform for original equipment manufacturers to store, transport lithium-ion batteries by utilizing cooler safe case and surplus solutions, nationwide logistics, and recycling services. The collaboration between cooler and surplus solutions is an exclusive nationwide program. The global battery recycling markets project to grow to $54 billion by 2030. Quora secured a third NASA order for automated battery cell testing service. The latest purchase order from NASA is part of a multi-phase agreement for Quora's advanced automated battery cell screening system. In addition to NASA, we're engaged with electric aviation and battery cell companies to provide comprehensive cell testing service for their battery products. The global battery testing market is anticipated to reach over $7 billion by 2030. Cooler and Forge Nano formed a strategic partnership for enhanced battery safety and performance. This partnership will utilize Cooler One Design Solutions platform to develop next-generation battery packs with Forge Nano's proprietary battery cell technology. The strategic partnership is estimated to be a $3.5 to $5 million revenue opportunity. Recently, the U.S. Department of Energy announced it intends to make available a second round of funding to support U.S. battery production and recycling. The announcement of this additional $3 billion in bipartisan infrastructure law funding is welcome news to American businesses seeking to produce North American-made batteries. We expect this partnership to be well-positioned to participate in U.S. Department of Energy programs. We partner with Velos Rotors to provide Coral Vibe service as an added enhancement to Velos UAV drone platform to reduce vibration and also increase balance of the drone payloads that are highly sensitive to aircraft vibration. By reducing the vibration up to 90%, Coral Vibe significantly improves data quality and visual clarity for LiDAR and high-resolution optical cameras. Quota by barf is an important solution for the UAV drone market that's projected to reach $38 billion by 2028. Next, our CFO, Sean Cantor, will go over Q3 financial highlights.

Sean? Thank you, Mike. Cooler posted another record quarter, the second in a row, adding to the record-setting revenue of the second quarter. Revenue for the quarter was approximately 3 million compared to approximately 1.4 million in the third quarter last year. This represents approximately 120% increase or more than doubling of revenue comparing the two periods. For the first nine months of 2023, Cooler generated approximately $7.5 million of revenue compared to approximately $2.1 million in the first nine months of 2022 for approximately a 245% increase or more than a tripling of revenue comparing the same periods. Our product revenue this quarter was approximately 1.9 million, up about 38% from the same quarter last year. Our service revenue this quarter was approximately 1.1 million, up about 4,800% from the same quarter last year. As Mike mentioned earlier, our service revenue can be viewed as a foreshadowing of scalable product revenue opportunities. Our gross margin for the third quarter was 44%, up from 33% in the same period last year. Achieving a gross margin in the mid-40s has been a goal of the Cooler team. We continue to work to increase our gross margin based on revenue mix, pricing, and additional scale. Our revenue per paying customer in the quarter was almost $170,000, up approximately 94% versus the same quarter last year. For the nine months ending Q3, our revenue per paying customer was over $200,000, up approximately 170%, with the number of paying customers growing to 37, up 28% from the same nine-month period last year. Our revenue per employee in the quarter was approximately $43,000, which is up 14% from the second quarter and 70% from the first quarter of this year, indicating increasing human capital productivity. Turning to capital allocation, we want to highlight that for the first nine months of 2023 versus 2022, Our cash used from operations is down approximately 20%, and our cash used from operations and investing combined is down approximately 26%, all while increasing revenue by about 245%, or almost three and a half times. We believe our focus on resource optimization and productivity is beginning to show in the numbers. Given what management sees today, We believe we are on track and comfortable with analysts' fourth quarter 2023 revenue estimates. Stuart, that concludes our comments. I think we're ready for the questions now.