Greystone Logistics Inc

Hello everyone and welcome to the Q2 results call. At this time all parties are in a listen-only mode. Later you will have an opportunity to ask questions. To ask a question press star 1 on your phone keypad. If you'd like to remove yourself from the queue press star 2. Again that is star 1 to ask questions. Please note that this call is being recorded and I will be standing by if you need anything. I would now like to turn the conference over to Brendan Hopkins. Please begin.

Thank you and we have a brief safe harbor and then we'll get started. Except for historical information contained herein, the statements in this conference call are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from forecasted results. With that said I would like to turn the call over to Warren Krueger, CEO of Greystone.

Good afternoon everyone and thank you so much for joining the call. I want to just report, I hope everyone has read our press release. I won't be repetitive. Our press release, I'm going to have Curtis Krueger, our new CFO, kind of review the numbers for us here in a minute. But I just want to tell you about the general state of condition of our company. We are positioned very, very, very well right now. We have, there's a couple things that for me as a CEO are concerning and that's sales, sales, sales. And I'm, two years ago we were all, we were concerned about oh my gosh we don't have enough equipment, we're worried and so forth. And now we've got some empty equipment so we're working on it. Some of those things are self-imposed and some of them aren't. We've had some barrel issues with a couple of our machines. We've been working with Cincinnati Millicron on those issues. We have Walmart that has been a wonderful customer for us. We've probably done in excess of $15 million in revenue over the years total with them. And this year we met with them and they wanted to, for one of their import facilities, have a little different, some tweaking. So we've put off manufacturing any product for that particular import DC. And we have a new pallet being manufactured at our mold maker in Taiwan. And it's exciting. It has some ergonomically, it's more favorable for the Walmart associates. It's got a little lower weight and it's got some interesting little changes we made. We've also designed it for the future so we can drop cellular devices inside the pallet and remove it. We can, when the battery goes low, we could remove it. So very interesting design. I'm excited about it. But we won't see that revenue hit for about 75 to 90 days. We are excited. Simplot is a big customer, big in the potato industry, and we've been producing for them. Our big customer, IGPS, there were also a little bit, we don't know if they'll add additional volume for us like they did last year. So we have a great relationship with them and we've been discussing that. And most certainly, we'd like to add a little bit more volume there. Along those lines, we've got some new products that I've mentioned in the past. But I will say that our 4456 can and bottle pallet has been tested at Virginia Tech, tested out very, very well. Ball container, we've talked to them and so we'll be out with Ball and some of the other bottle and can users. So that product will be hitting it. We'll be putting samples out across America. We have a mirror pallet that will soon be done. It's the same on the top as it is on the bottom. That's for the peanut industry, the nut industry. It allows super sacks to be stacked. It's a great product. We have an automobile pallet 4845 that we've had. We had some issues with it in terms of not being able to stack correctly with existing 4845s in the General Motor and Ford system. So we've made tweak that product and we're actually putting the mold back together. And there is demand for that 48 by 45. So those are some of the things we're working on right now. And before we go further and I take questions, I'd just like to have Curtis kind of review our quarter. Curtis? Thank you, Warren. Good

morning, afternoon, depending on your location and welcome. I'm going to start off by reiterating my predecessor's comments that our balance sheet remains in strong position and can support not only current sales volume, but future growth. Diligence remains an important part of how we're managing our finances. Moving specifically to a few things I want to highlight. Working capital continues to show strength currently at seven million dollars at the end of the quarter.

And it's strengthened

over the first quarter around four million. So cash is very strong for us at the moment. Interest and debt payments in the last quarter remain a little under a million dollars, which is comfortable and supports the capacity we have available to the sales team. Roughly 300 plus thousand is interest and the remaining is a reduction in debt. So we're pushing our debt down at a comfortable rate as well. Interest rates, while still high compared to some historical time periods, have not had an adverse impact on our operation. And inventory remains at five million in comfortable support of the current sales volume. On the income side, sales volume split slightly from Q1 offset by decreases in the cost of recycled resin, resulting in a slight degradation in sales over Q1. Margins, however, improved by over by about three percent over Q1, due primarily to cost of resin offset late in the quarter by reductions in sales price necessary to remain competitive with alternatives. FG&A continues to increase over Q1 related to transitions cost of the Nucleus Omi and continued support of the recently established dedicated sales resources. These and other impacts resulted in a decrease in net income of a little less than 800 thousand.

To you, Warren. Thank you very much. I did want to mention one of the one of the thing that might come up. We about three quarters ago, we purchased an extrusion line to make plastic hollow lumber. This was equipment that was going up for auction. I'm I am extremely excited about that. We're we're in our lane. We're not getting out of our lane. It is a plastic lumber. It's for those sizes that we may not have. And it's Toyota has had an extreme interest in that as has Apple. So we're we're excited about that also. I might mention before we go into the question and answer session that because of the our confidence in our company, our board directors authorized me to periodically buy back stock up to a million dollars over the next year. So we are we are very bullish on our company. We know that we need to grow. We've got that. We've got to add sale. Mention our press release. We've got in addition to people myself, who's always been the really the sales arm. We really have added two strong, strong individuals who I've known one I've known for 18 years, who was our was our general manager, plant manager here. He's unbelievable with customers. He's out there. He works with Wal-Mart extremely well. He works with Simplot extremely well. And we have another gentleman, Gary Morris, who came from the extrusion side, knows the pallet business, been in this industry for 20 years. And he will also manage the extruded lumber pallet that we will produce after the first quarter calendar quarter of 2024. With that said, I'm ready for any questions we may have

to ask a question. Press star one on your phone keypad and to remove yourself from the queue. Press star two. Our first question comes from Russell Valentine.

Yeah, good news about you being able to buy more stock. Last time I talked to you, you were had the you were involved also and you were optimistic that it was going to move higher. We were having problems getting it over a dollar a share, but we're there now and maybe you can get up to two here down the road. But my question is, what's the chances of getting new contracts from other grocery stores besides just the Wal-Mart?

Well, the grocery store is a funny industry that actually the grocery industry doesn't even use injected pallets. They actually use thermal form pallets and thermal form pallets. It's a if we if you know the difference in the process injection, we melt the plastic and we inject it into a mold. The molds cost about three hundred thousand dollars to five hundred thousand dollars depending on what you you buy. So you don't change the design much. The thermal form pallets are made of sheets of plastic and they're put in an oven basically and pulled down over the top of a mold and either in a single sheet or twin sheet fashion. And it's those are used quite a bit in the grocery industry because they're they stack inside one another. So really for Wal-Mart, our our pallets in the Wal-Mart system are going into their .C.s to displace the wood in the .C.s. And those are three dimensional pallets. Those have full picture frame bottoms, much like you would see if you go to a Costco or a Sam's and you see the pallets that are in the shelving in there. They have a full picture frame bottom and that's to allow them to be stacked and to go down roller systems and so forth. So I don't think our grocery store growth can be can be substantial unless it's unless it's for in their warehouse facilities. But most certainly in the stores, they don't use our type of pallet.

OK, one more question. I don't see too many press releases. I just see, you know, when the quarterly reports are coming out and things like that, when we get new contracts, do we put out any press releases or anything?

I would you know, that's a good point. And I'm glad you brought it up, Russell. We are not one to put out information for information sake. And we probably I'm most certainly you wouldn't criticize me if I had more news out there rather than less. So I'll take that as a good information piece. And if we have new news come out, we will make it a priority to get to communicate with our shareholders a little bit better. How's that?

Sounds great. Appreciate all the things you do for the company. Look forward to the future. Good luck. Thank you.

Again, to ask a question, press star one on your phone keypad. Our next question comes from Anthony Perala.

Hey guys, thanks for taking my questions here. And welcome Curtis on your inaugural call here. First off, I'd be curious Warren, just kind of some more color on the added sales associates. Curious if maybe this takes you takes a little bit off your plate or kind of what they'll be targeting in their first six months on the job here, whether it's existing relationships, new relationships. So more color on that would be helpful.

Good. Well, the first gentleman, Ron Scalhous. Ron and I are great friends. I've been working together for 18 years. Ron worked in the slip sheet industry for probably another 15 years before he was in the injection industry. He knows this business backwards and forwards. He had some health issues during the last couple of years and we talked about how his value was. And he always excelled when he was out there with me on the road. People love him. You go into a warehouse and you sit around and you talk about warehouse things. I mean, and it's warehouse chat and he is the king of warehouse chat because he's seen it all. And so he is very, very helpful. He's over the years. He would go up to Miller Brewing when we go up there and he he helped when we were putting a keg palette together for Miller Brewing. And he so he loves it. He's out on the road and he's bringing in he's already bringing in things. He is really our Walmart point person. He's working with one in the Midwest. He's also working with one on the West Coast. We're also have some other opportunities within their organization for different types of products. So we we love them as a customer and he's going to work that side of it. And additionally, I mean things that come in he's already had one thing leads to another and he's getting he's getting people to say, hey call Ron on that. The other gentleman I mentioned Gary, we bought this extrusion equipment. It was probably three to four million dollars worth of extrude of extrusion equipment and dyes and so forth. Robotic robotics and it it's really impressive. They just ran out of cash in a raw at the wrong time. They ran out in 2020 and when everything shut down, it was a very difficult period of time for them. Gary's been in this business. He developed this product. He knows the industry. He knows he's worked with Toyota. He's worked with Berry Plastics and what he brings to the table is just that it's relationships. And so for example, Berry Plastics is a very big industrial company and he has a tremendous relationship with them. And because of that relationship, we've been able to provide products for them since he's come on board. And we're also doing some things to help them be green. We are taking some of their excess scrap plastic. They have a mandate to not not trash any waste or really sell any waste. They want to use it internally. So we're helping them use it internally by making their own pallets for them across America. So that's a very big opportunity for us and he's working that. Additionally, he's working with the Toyota and one that I have on board that he'll be a point person is Apple. And the beautiful thing about this extruded lumber is you can make it any size. It doesn't have to be a $300,000 mold to make a new size. So if someone wanted something like a 24 by 36, we could make that just by cutting the boards differently and welding them to a different size. So I hope that helps you on describing what the two are going to be doing in the very near future.

Yeah, that's very helpful. Another I'll do two quick ones here and then jump back in the queue in the press release you reference. A new tool order that's under a three-year contract with a customer. Just any more detail you could provide there. Yeah, that's

a Walmart. That's the Walmart I mentioned.

Oh, that's the Walmart. Okay. And you say that's probably 75, 90 days before that gets in kind of into the system and realized. Yes, sir.

Yes, sir. It's just, you know, it's just if you order a mold a tool in the United States or equipment nowadays, it's a it's a year. It's crazy.

Yeah, but

we we make ours overseas and have been over this this mold maker many times in Taiwan and they're great people are good friends. Of mine now and they make a quality product and they do it in a relatively speedy fashion. So they had steel on order for another product and we displaced that and we put that order in front. So they're working on that as we speak.

Okay, so that's probably a second half of fiscal 24 pipeline. Any updates on the fire retardant palette progress? I know that's how you guys have been working on.

I'm glad you said that I had a meeting this morning. I was with some people from a potential customers here and it's big customers. I can't mention their name because they they mentioned me not mention their name. So but the potential for them is very large. They talked about fire retardancy and that they're almost to the point where they say, you know what? We will we'll just go by all the local fire marshals stack everything less than four feet high or and make sure that the sprinkler systems are correct because the fire retardancy we failed in multiple tests over the last 90 days. And I it really is we can we could get it done. But we just can't afford to spend fifty dollars making our fifty fifty five dollars a product fire retardant. It just doesn't make any economic sense for anyone. So we continue to pursue opportunities. We have a Israeli company that has some fire additive that they're sending our way and we'll we'll we'll put that in. We'll see what the cost is and we'll run potential. We run quarter pallet test to start with not full pallet test and that gives us an indication of whether we'll pass. So unfortunately, I don't have any great news on that side.

It's good color either way. I have a few more, but I'll jump back in the queue and let someone else ask some questions here.

Again, to ask a question, press star one on your phone keypad. Our next question comes from Joe Russo.

Hey, Warren. Hey, guys. How are you? Appreciate the appreciate the question and congrats on the quarter. I just hit on the Walmart and you talked about it here, but just wanted to check on the state of that. What I feel like it slipped maybe a little bit the timing of when they might be in just wanted to see what has to happen now. You get in terms of you getting them. Getting the mold and then did they need to, you know, like test the product further once once they get their hands on it just want to get a sense of.

No, but we were just tweaking. Truly, we're making it. We listened to what they we met with them. There were a few issues. I can tell you what the issues were. They their associates when they're doing a part picking, they still there's there's a lot of human intervention when they're at their import facilities. And so they periodically people will lift pallets and put them in a stack and not over their head, but they lean down. They just needed better ergonomics. They needed more hand hole. So the people could put their hands in. They needed also one side of their the palette the crew on the bottom the the cross members on the bottom. They wanted to eliminate two of the cross members on the bottom because that's where they were seeing internal damage. They actually had some some hand jacks that they had difficulty with our our getting in our particular 4840 product that they had been buying. They wanted it to easy more ease of access. So we did all these things made these changes for them. They're very happy and we'll hit the ground running. We it won't be I can tell you that this product be ready to go when it when it gets in our facility.

That's great. And I just was curious like is there potential for this to be a bigger? Piece of revenue for you guys than it was prior the the prior part you're making for them.

Yes, I believe so.

Okay, that's great. And then I congrats on announcing the the share buyback authorization. I guess I just wanted to kind of understand your like philosophy about how you might want to put that money to work is is it? Probable that you guys want to be patient and wait for you know, kind of the you know, the right price or just just wanted to hear how you guys are thinking about it.

Well,

one

of my I have all these little quirky little sayings that just because I'm my 67 years and one of them is fast cash makes fast friends. And so if someone comes to me and says hey, I have 50,000 shares or 100,000 shares or whatever and you know, and I'm here's what I want to do. I'd rather sell them with discounts sell them all at once or something. Those are the kind of opportunities that that we're looking for. We've had that happen in the past and I just want that authorization to be out there so that makes it easy for us to do.

Perfect. No, that's that's great. That's it for me, but I appreciate all the answers and

thanks

Joe.

Again to ask a question. It is star one on your phone keypad. We have another question at this time from Anthony Perala.

Thanks guys. Just a couple more here. I'm just halfway through fiscal Q3 here. Just be curious on how any commentary you can give on the fiscal third quarter then how the pipeline shaping up for the rest of this year.

I there is a little weakness this quarter. We are I I know that I will I will be I am not as pleased exactly at this moment where we are going through this quarter. So I don't want to put in throw any cold water on it. But most certainly it's we've had a couple of things on the sales side that have not happened like putting the Walmart office one of them additional revenue from other customers. There have been a couple of oddball things that just this quarter have kind of come confounded me. I do see the fourth quarter coming in strong just because of what we have in our pipeline. And then we have a customer relationship management report that we that we put in potential revenue and sales and our pipeline is there's a lot in our pipeline. And it's just sometimes in this sale the sales cycle just sometimes is long. You know for me that the first time I called on Walmart was probably 18 years ago and it took 15 years to get a contract. So I mean I don't think this is this is a business that takes you know you just have to be diligent and stay out in front of it. The customer we had in today they 60 days ago they were going to order up some some product. Well here we are today. They wanted to get into the facility before they ordered it up and we had them here. I can't even believe they came in but they came in on this cold day and and we had a nice dinner last night and we talked today and we talked about the volume potential. It's the volume potential is huge but it's just getting them getting that that that first step. And then after that each step is another and they've got a lot of opportunity for volume because they're a very large US customer.

That's great color and then I'd be curious just with this recent cold snap in Texas if there's any risk of HDP prices spiking again here just kind of your thoughts on that input to your process in business.

Well I'm glad you mentioned that because never in my wildest dreams that I think the freeze in Texas in February of 2021 would have such a dramatic impact on the polyethylene and polypropylene market in the United States because I've been in this business for some time. So I was very surprised what happened and it did affect generally the recycled prices just don't go up and down that they're they're steady. There's

movement

but they're not sharp movements and after that when polyethylene became really shut down the industry then the pipe industry went from more recycled plastic and divergent and it shot prices up. So I'm glad you mentioned it. I am not as concerned right now. We have a pretty good volume of recycled material. We got our extra pelletizing line that I talked about in previous years that pelletizing lines up and running so we can pelletize a lot more product. Our grinding capacity is really good. We actually have extra grinding capacity available so we can take more parts and pieces in here and that'll keep our pricing long term in check. I believe much better than in 2021.

Okay, that's good to hear and then one final one here. Sorry for dragging on it, but I think on the last call you had loosely said that you expected fiscal 24 revenues to be higher than fiscal 23. Is that still something that you see as as possible as you look to the second half of the year in the pipeline?

We're we're we're putting the pedal to the metal. I anticipate that will be I see the long term, you know where we are long term. I know that our numbers are are going to go. I'm reluctant now to say I'm just going to surpass last year's numbers, but I do think our margins are are much more favorable. So let's I want to talk more about margins and top line, but I do. I recognize that we continue to have to fill sales and I've got to get some of these new products out and in people's hands and get the .O.s coming in the door. So my goal is to surpass. And I can't I won't give you any guarantees.

I think thanks for all that all the answers and colors you provide and look forward to catching up again after next quarter.

Thank

you, Anthony. Again, if you'd like to ask a question, press star one on your phone keypad at this time. We currently have no questions in the queue.

Well, we do if we

might want to wait a minute or two to see if anyone else has a question, but I just appreciate I really appreciate our shareholders. We work hard every day. This is Curtis is now getting in the rhythm up here. He really he had some help this this queue,

but

there's a lot of work involved in a lot of things that he learned that I think will help him in the next quarter. And we feel good about we feel good about a lot of things and we just hope for a really nice finish to this year. And I know twenty five is going to be a fantastic year.

At this time, we do have an additional question. We have a question from Anthony Perala.

I'm sorry to you, sir, that you there weren't on those a good closing statement, but just we didn't mention at all. Are there any questions on a potential uplifting? I'm just curious on the team's thoughts on that. I know you've been you've done a lot of work on what the right route might be in the next couple of years. But just curious on where we sit today.

Well, we've talked about it. We actually we talked about in our board meeting last time and I will say one thing where we are now. We are we're positioned well in our mark. We do things on a timely basis. We get our reports in. We're very diligent about that. We don't want we want to cross our T's and dot our I's and we've talked about the the costs involved in uplifting. And one of the things we're concerned with is the size of our company and the costs right now that would be associated with uplist. Listing and we we don't want to get in a situation where it be smarter to send money back to our shareholders than spend money just so that we can be on a different exchange.

Our next question comes from Russell Valentine.

Yes, we were talking about uplifting. I've been in the market for like 50 years and I have seen so very few companies do well on a reverse split. That just doesn't hardly ever happen. So I am happy where we're at. They're not requiring you to have the price high enough to uplist because the reverse splits never work out. So I'm happy with the answer you gave and I hope you consider that. Thank you.

Again, if you'd like to ask a question, it is star one on your phone keypad at this time. It appears we have no further questions in the queue.

Well, great Brendan. Do you have anything to close with?

No, just thank everyone for the time they spent with us and please have confidence in us to continue to grow this company and grow this market cap and see the full potential for this year evaluation.

Thank you very much everyone. Appreciate it.

This concludes today's program. You may now disconnect your lines.