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spk00: Greetings. Welcome to the Tufts-built fourth quarter and full year 2021 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Martin Galskian, CFO. Thank you. You may begin.
spk02: Good morning and thank you all for joining us today to discuss TuffBuild's fourth quarter and full year 2021 financial and operating results. Again, my name is Martin Gostian and I am the Chief Financial Officer of TuffBuild. Joining me on today's call is Michael Panosian, President and Chief Executive Officer of TuffBuild. 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 2022 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 Delegation Reform Act of 1995 and are subject to the changes, risks, and uncertainties described in the press release and in our US 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 Tough Build's current report on Form 8K, furnished with the SEC for Tough Build's reasons for including those non-GAAP financial measures in its earnings releases and presentations. 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.
spk03: Thank you, Martin, and thank you all for joining us on today's call. 2021 was a very strong year for TuffBuild, culminating in record revenues of $70 million, an approximately 78% year-over-year increase compared to 2020. The fourth quarter revenue came in at a record 24.7 million, representing a 105% increase compared to the prior year. Please keep in mind that based on seasonality, the fourth quarter is typically the highest volume period of the year. Revenue growth in the fourth quarter, as well as for the full year in 2021, was driven by a combination of onboarding new retailers, the introduction of new SKUs, and continued demand for our existing products. Tuffield continues to be a leader known for innovation and for developing some of the most unique products for the construction and home improvement industry. We believe that much of our success is due to our ability to attract the best talent Our unique platform has proven to be a tremendous draw for professionals eager to join an organization known for its creativity and ability to quickly and efficiently bring ideas from concept to shelves in a matter of months. Our 2021 results are a testament to the importance of establishing a platform of strong teams, demonstrated by our numerous product launches, including our first technology-enabled tool, the ToughBuild LaserLine. One of ToughBuild's major differentiating features, which we are confident will result in continued demand for our products, is the integration of technology which empowers our customers to expedite projects, automate processes and track information all in one place to help combat logistic related costs in 2022 we are negotiating improved shipping rates as well as working with our large retail partners to implement direct import ordering where possible Direct import ordering would result in our retail partners taking Tuffbuilt products directly from ports and shipping to their own warehouses. This would significantly decrease our shipping costs by shifting several supply chain steps from Tuffbuilt to our partners. This is a win-win scenario in which our larger partners can leverage their existing logistics infrastructure to ship at cheaper rates. while allowing us to focus on designing and manufacturing innovative products, thereby enabling more lines of products to be shipped. Based on our current inventory and accounts receivable levels as well as the revenue we expect to generate from new product lines in 2022, we expect our cash burn to significantly decrease in the second half of 2022. I will now turn the call back to Martin to cover our financial results in greater detail. Martin?
spk02: Thank you, Michael. Revenue for the three months ended December 31st, 2021 increased over 105% to approximately $24.7 million compared to $12 million in the same period last year. Revenues for the 12 months ended December 31st, 2021 increased 78% to approximately 70 million compared to 39.4 million in the prior period. The increase in sales for both periods was mainly attributable to continued demand for our portfolio of products, international expansion, and demand for new products into the holiday season for the fourth quarter. Cost of goods sold for the 12 months ending December 31st, 2021 were approximately $50.9 million compared to $24.7 million for the prior period. Cost of goods sold increased in 2021 over 2020 primarily due to industry-wide supply chain disruptions, which have led to historically higher shipping costs as well as inventory builds in the fourth quarter and increases in cost of materials. Selling general and administrative expenses for the three months ended December 31st, 2021 were approximately $19.9 million compared to $12.2 million for the same period last year. Selling general and administrative expenses for 12 months ended December 31st, 2021 were approximately $58.4 million compared to $29.9 million for the 12 months ended December 31st, 2020. SG&A expenses increased in 2021 over 2020, primarily due to hiring of additional employees, increased use of independent contractors, and increases in marketing and advertising related to new product lines. Research and development costs for the three months ended December 31st, 2021 were approximately $1.6 million compared to $790,000 in 2020. Research and development costs for the year ended December 31st, 2021 were approximately 10 million compared to 5.1 million in 2020. We expect to maintain similar levels of R&D costs as the company continues to develop new tools for the construction industry. In the fourth quarter of 2021, we had a net loss attributable to common stockholders of approximately 14.5 million or a loss of 9 cents per diluted share. In the full year of 2021, we had a net loss of $37.5 million compared to $17.3 million in the prior period. The net loss is mainly attributable to the build-out of our design and engineering team and inflated shipping costs. As of December 31st, 2021, the company's diluted weighted average commerce shares outstanding totaled $122 million. Following the quarter end, we completed a registered direct offering for net proceeds of approximately $5 million, the proceeds of which will be used for working capital purposes. Although management is exploring alternative capital raising options, the team determined that due to the market's volatility and the company's low cash position from inventory buildups in Q4, it was opportune time to support its cash position. As of December 31st, 2021, Tuftsville's cash position was $7.4 million. We expect our cash position to increase in the first quarter as we collect on our accounts receivable and translate our inventory into sales. This cash flow, in addition to the recent capital raise, will be sufficient to support our near-term revenue growth. I will now turn the call back to Michael for his final remarks. Michael?
spk03: Thank you, Martin. Before I open the call for questions, I would like to reiterate the tremendous market opportunities that exist at Toughbuilt and the infrastructure we have in place to capitalize on those opportunities. Right now, the top retailers around the world are selling Toughbuilt products and we continue to expand to new retailers and strengthen our existing relationships. Through our growing amazon.com sales and repeat orders from our strong retail base, we are seeing increased demand for top-billed products across professional contractors and DIYers globally. As demand for our products increase, we continue to expand our capabilities and are currently in a position to launch 5 to 10 product lines every year. To capture additional international e-commerce demand, we will be offering top-billed products on Amazon in Europe and Latin America. As we look ahead, our future revenue opportunities can be broken into three buckets, expanding existing relationship with retail partners, adding new retail partners and introducing new products. The revenue opportunities are dependent on one another, but ultimately driven by end users recognition of our brand and innovations. For example, When we onboard a new retail partner, the first order typically includes a selection of portion of Tuffbill's catalog of numerous SKUs. As underlying consumer demands for the product grows, the retailer is likely to expand the number of products offering in their stores or made available online to their customers. Furthermore, as we introduce new products, that are differentiated from their current offerings, our existing retail partners are more likely to expand their offerings to include those newest items. The result of this process and positive customer experiences is increased revenue on recurring basis for the long term. To us, this demonstrates the longevity of Tufffield's products. Even our oldest products are still increasing in revenue year over year with peak revenue potential ahead of us. We are building something great at Tuftsville and I truly believe that we have the potential to disrupt the entire home improvement industry. I, along with the entire Tuftsville organization, including our best in class design engineers that work on never before seen prototypes for home improvement, have full confidence in our ability to operate and design unlike any other company in the world. With that, I would like to turn over to our operator to begin the question and answer session.
spk00: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Please note, we ask that you please limit yourselves to one question and one follow-up per person. One moment please while we poll for questions. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Michael and Martin, we appear to have questions from a few private investors. Will we be taking those questions?
spk04: Yes.
spk00: Okay, our first question is from Syed Hassan, a private investor. Please proceed with your question.
spk01: Mr. Chairman, I'm very much interested in your company's potential and your stewardship. I'm an 84-year-old guy. I put all the money for my grandchildren. Only one question I have. When do you think we will become truly profitable. Meaningful profitability will be achieved when. Thank you for your thoughtful answer.
spk03: Thank you, Mr. Hassan. This is Michael C. of Tough Build. I appreciate your investment and your support in Tough Build. We are very aware of being profitable. I'm hoping that within the next year or two we can achieve profitability, sir. The goal here is to create meaningful profitability. That means enough profitability that we don't have to raise too often at least, and we need to build our platform of people so that I can put out enough profits products and cover the global landscape. After that, I'm going to stop hiring. We're not trying to make a 100,000-person company. I just need to complete the sales platform and the product development platform so that we can put out products fast enough and enough of them to get us to a green profitability. meaningful profitability we can cut back today and become profitable but that profitability will not sustain meaningful growth for the company so that's why we are you know raising from time to time is just to complete those two platforms okay can I have one follow-up question then I'm done thank you for your very thorough answer can I ask the follow-up question mr. chairman
spk04: Sure, please go ahead.
spk01: Yeah, my follow-up question, sir, is I read your, I'm very much interested in your company. In your mission statement or your vision statement, you used two very, very profound and meaningful promise that those two words are emerging growth. Could you explain to me what does it mean? You said your tough build is an emerging growth company or an entity. I understand a little bit, but you have been very much active in transnational and multinational, and you spend a lot of time in China. And China is going to be a very important competitor. So could you kindly explain for me, I'm an old man, and to our other investors, explain the concept of emerging growth company versus an ongoing regular company.
spk03: Sure. And emerging growth company, what I meant, at least in my view of the language, is really we are up and coming, fast growing company. Once we Once we create these platforms that I'm speaking about, the sales and development platforms around the world, you will see a rapid launch of numerous lines of products, which in turn will generate much bigger revenues. And when we are saying we are emerging company, that's what I mean. We are becoming, our flywheel is becoming bigger and faster. And once that flywheel is at full force, So instead of launching a few product lines a year and generating revenue, by that time we will have a lot more retailers around the world and launch hopefully 10, 20, 30 lines of products a year, which will generate a completely different level of revenue.
spk01: Okay, thank you, sir, for your good and thorough answer. I wish my company and your leadership produced some results for us. I appreciate your answer. Thank you.
spk03: Thank you. We are working day and night to be able to do that, sir.
spk01: Keep it up, sir. Thank you. I'm obliged. Bye-bye.
spk04: I appreciate it. Thank you. Thank you.
spk00: Our next question is from Kevin Deedy of HC Wainwright. Please proceed with your question.
spk05: Thank you. Hi, Michael. Hi, Martin. Thanks very much for taking my question. Curious about a couple of things. Michael, you mentioned switch up and distribution. How long do you think it takes to implement that, and do you see it hindering or, I don't know, just help me understand how you see it helping the, I guess, the flow of goods into the U.S. and other sales locations?
spk03: Sure. As far as manufacturing is concerned, we obviously started in China. We are in around six countries currently, and we are trying to do more nearshoring where possible. Please understand that expertise is necessary. The idea of Bringing factories home or doing nearshoring or going other places, it's all well and good, but the expertise and the quality and the craftsmanship of that factory must be available, plus components, plus raw materials. So not every company is set up. to provide all those details for a meaningful manufacturing. If we are not careful, the price of goods will be much higher because either they're missing the components they have to import from China or materials or their infrastructure is more expensive or shipping is through the roof. So we are gradually taking steps. Gradually doesn't mean slowly, but the world also has to catch up with China before we can fully implement a full international manufacturing base. I hope that answers your question.
spk05: Yes, it helps. Can you talk to your SKU count now and your retailer count now and where you expect those numbers to be at the end of the year
spk03: Currently we have over 350 SKUs and launching a lot more products. The reason we are launching products is because the professional demands a wide spread of product lines. They don't want to go buy a screwdriver from such company and a drill from another company. That's not how they operate. They want quality, innovative products. So we have about 350 SKUs. Retailers buy into it. Then we get recurring orders. And once the doors are open with each retailer, then we constantly introduce new lines and new products. So even the smallest account becomes a meaningful account down the line. let alone the big box retailers. So that's basically how we are trying to increase our portfolio and widen the offering to the professionals and serious DIYers.
spk05: Okay. Thanks, Michael. But can you give us hard numbers on the number of retail partners you have and expect to have at the end of the year and where your due count goes at the end of the year?
spk03: Sure. The second part of the question was how many retail. We have currently something over 15,000 doors that we are servicing over 110, 120 different customers around the world. And we are trying to get to thousands and thousands of more doors. There's approximately 120,000 targeted retail doors with over 350 to 400 customers that are in our target. And then the third part of the question, which is how many SKUs. We will be adding many lines of products throughout the years. This year, we will be launching minimum 5 to 10 lines. Some lines have 10 SKUs. Some lines have 72 SKUs. So on average, I don't want to give a guidance because of the world situation. It's kind of... hit and miss to the exact detail, but we should be launching about five to 10 new lines of products. So we will be adding another four or 500 pieces of products.
spk05: Okay. Thank you, Michael. I need to turn the call over to other people, but I'll hop back in the queue.
spk04: Okay. Thank you, Kevin.
spk00: We have reached the end of the question and answer session. I will now turn the call back over to Michael Panosian for closing remarks.
spk03: In closing, I want to thank our employees for giving Tough Build all their efforts and turning Tough Build into a quality first brand that customers can rely on. and remaining dedicated to our mission even through this pandemic and difficult time of distribution globally. I'm excited for what 2022 has in store for us and very confident in our ability to grow the company and get it to its profitability down the line.
spk00: This concludes today's conference. Thank you for your participation and you may disconnect your lines at this time.
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