Greystone Logistics Inc

Good day, everyone, and welcome to today's Greystone Logistics Q3 results. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask a question during the question and answer session. You may register to ask a question at any time by pressing star 1 on your telephone keypad. You may withdraw yourself from the queue by pressing star 2. And as a reminder, today's call is being recorded. I will be standing by if you need any assistance. It's now my pleasure to turn the conference over to Brendan Hopkins. Please go ahead.

Thank you, and thank you everyone for joining us today. We have a brief safe harbor, and 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, 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 Logistics.

Thank you, Brendan. I appreciate everyone being here today at the call. We look forward to taking questions a little later. I just want to talk a little bit about the last three months and the last nine. The last three have been a little weaker than what I would have hoped for. We have a very large, we have one of the three tailors in America that we had the tool about months ago, but the supply chain timing has not really benefited any of us in the manufacturing sector. It's taking longer to get tooling, equipment, and so we do have a tool that should be here in the next 30 years. 30 days and that tool, I would doubt will stop running for the foreseeable future. We also have retooled our automobile pallet and of course we are now out with Tesla, General Motors, Ford. We're showing that product and very optimistic about that as well. We're also looking to buy, our Nestable business has been up some and we're excited about it. In terms of the last nine months, there's a little bit of confusion with the retained earnings credit we got from the government that helped, they're not retained earnings for employees, the credit we got. That really did help us retain our employees. It was something that benefited all of America, I think, and most certainly it affected us, but it skewed our numbers somewhat. Our numbers are good this year. They are under a little bit under projected. I anticipate that we'll get back on track very soon. So I look forward to the questions a little later and right now I want to turn it over to Bryce Dilley who will go over the numbers for us.

Okay. Quickly, for the nine months, we made nine cents a share. And as Warren was indicating, the previous nine months, we had a 3.2 million employee retention credit. That comes back from the COVID days. That was 3.2 million. So when you look at the earnings per share, the nine cents compared to the 16 cents, if you took out the 3.2 million dollars, the nine months was substantially better than the previous nine months. And if you look at the revenues for those comparable periods, it was 46 million compared to 44 million. So, and then if you look at the quarter over quarter, that employee retention credit was in the third quarter of 2023. So if you look over the quarter by quarter results, you have one chance per share compared to the 13th quarter. But you take the effect of the 3.2 million hours and really the quarter sales were stronger earnings or about flat. And if you have any follow-up questions about employee retention credit, we can always answer that. In fact, everybody knows this on the call. If the government gives them money, you retain your employee and you get employee retention credit. So when you look at EBITDA for the nine months, 2024, it's especially

9

.6 million. I call it 10 million.

Tommy, can you do something to fix that background noise?

Someone talking in the background on Bryce's line, I think.

I don't think it was on my line. Was there a question that somebody was asking?

No, it's just that there was some background, Bryce. I'm sorry to interrupt you.

Yeah, I did hear that background noise. Did everybody, was everybody able to catch the earnings per share and the sales and that income?

I could catch it. So if we need to follow up with questions later, we can do so. Okay. I'm going to take it back from Bryce at this point. We're trying to get in rhythm here. Can we open it up to go ahead and put questions and answers?

Yes, thank you. At this time, if you would like to ask a question, please press the star 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2. Once again, it is star 1 to ask a question, and we'll pause for just a moment to allow everyone an opportunity to signal. And we'll take our first question from Anthony Paralla.

Hey, Warren. Thanks for taking my questions here. Just if you could give some color. I'm not sure if this is the one you mentioned in the earlier part of your remarks, but a large retailer. I know last call you had mentioned some delays on the Walmart shipment, wanting to get some ergonomic handles and some other specifications there. Just if you could give an update on where that's at and if that was the one you had mentioned in your prepared remarks.

That's correct. It was Walmart as our customer. We anticipated we would have that mold sometime in February or early March, and here we are in April and we still haven't received it. We make our tooling overseas, and it's generally over the last 20 years, it's been always six months faster than making it in the United States, and it's relatively more reasonable as well. And so it's just that they've had their own set of issues over there. And I think it all kind of comes back from the, started with 2020 and then it just rolled forward and then we had the supply chain was just upside down. Our prices went up on our heads and it sounds like excuse after excuse, but it's the reality of it. And we look forward to getting that tool in because it's a wonderful new product. And like I said, once that tool is in, it should be going right to the clock for the foreseeable future. We also, there's some other things, the 4456 beverage pallet we had, it's a pan, it's for ET bottles and cans. That product is not a market space and we're getting good interest there, as well as I mentioned the automobile pallet. And our standard business, our 4840 business is strong, continues to be strong. Our Nestle business continues to be strong. We're getting lots of requests for proposals now. And it's been kind of a funny feeling, the election, we've had people saying, yep, we're going to order, we're going to order, we're going to order, and then they're off ordering. So we're a little bit confounded by that. But anyway, I hope that helps with your question, Anthony.

Yeah, it does. That's helpful. And you had said you expect the tool kind of in the next 30 days here to be able to get that line running? Yes, absolutely. And then just one more here and jump back in the queue. Any update on the shared buyback? It was mentioned last quarter. I'm just curious on what kind of point in the process we are on that authorization and maybe implementing it sometime this year? Yeah, I believe, I anticipate

that we'll start that at year end. And so our year end, of course, is May 31. And I still anticipate that we'll be doing that. And we can look forward to, I think, we're going to authorize a million dollars worth of stock buyback. And so as we see opportunity, we will buy that stock.

OK, excellent. I'll jump back in the queue.

Thanks. And we'll take our next question from Eric

Nickerson. Yeah, just curious about that. Government credit, one more time, that you got last year, was that from forgiveness of a paycheck protection program loan or was it something else? Employee

retention credit.

Say it again, please.

Employee retention credit, ERC. Employee

retention credit.

Yeah, so they did have a program for PPP money. But after the fact, if you retained employees during the COVID period, you were able to get credit back from the government. And that payment was made in the third quarter of last year. It was approximately $3.2 million.

Was that a direct payment or was it a reduction of taxes owed or what form did it come in? It was a direct payment. OK, yeah, that's all I needed. Thanks. Thanks very much. Thank you,

Eric. And we'll take our next question from Robert Littlehill. Hey Warren.

Hello Robert.

Yes,

sir. How are you doing? A couple of quick questions. The tool that you hope to have delivered in 30 days, is that an expensive piece of equipment?

It's $300,000.

$300,000, OK. But obviously strategically important. And then the other question is, in the last quarterly call, you talked about beefing up your outreach, your new business efforts. Could you touch on that in terms of bringing us up to date on how that's going?

I'm so glad you mentioned that because that was something I wanted to focus on, Robert. We actually in the past, we've used, Greystone started, kind of bootstrapped a long time ago. And we used to use just stocking distributors and non-stocking distributors. So I'd be out there selling, but we really didn't have sales people to speak of that were on our payroll. In the last year, we've changed that up dramatically. We've taken someone who I've worked with for 18 years, Ron Scalhass, who was our plant manager. He went through a series of issues and got a new hip finally, and he has a road. He is the one who leads the charge with Walmart and some of our other retailers. So he's out there for the time on the payroll. He has an assistant that helps him as well. Then we have another gentleman named Gary Morris. When we picked up the extrusion line, and I'm going to speak to that in a moment. When we picked up that, Gary was the founder of that idea and worked on that idea for many years and sold a lot of the extruded plastic to Berry Plastics and had that Hanson and Toyota. And so he's very well versed in the pallet industry, and we have him on full time as well. And so we've got now more boots for the ground. We've actually worked for Grayson as opposed to just stocking and non-stocking distributors. So we are excited about that, and we're generating a lot of calls, direct calls to directly the customers. So we will be having a lot more of our customers as opposed through a distributor. Now in terms of the extrusion line, we are making our dye adjustments in Austria on that equipment. And the Austrian dye that we're making for, it's an extruded part. This part will look more like just a traditional wooden pallet. And this, we've been testing it in Austria. I anticipate that, again, we're probably behind schedule on that as well, but I've seen some parts that they've put down, and I would think in the next four to six weeks we'll have that dye in. So we will be making pallets that are made to order, more made to size. And Toyota has actually expressed interest in that. Again, they tested this in different forms some time ago, and it's a lightweight product that can be used as an export size. So we're excited about that. But no, to answer your question, we really have more boots on the ground now, full time, pounding on doors. So we're excited about that and excited about the results. I will say in the pallet business, nothing happens quickly, as Robert, as you know, more so than any other. You've seen this for the last 20 years. And you just keep knocking on those doors, and now we've got more boots to help us do that.

Thank you,

Warren. Robert.

And we'll take our next question from Brian Webb.

Hi, thanks for taking the question. I'm wondering if you could provide some guidance on gross margin percentage going forward. Well, I will say our gross margin has been awful. What happens with us is sales really, once you cover your fixed costs, dropping sales really affects our margins. And so we really need to drive our top line. And I would think that that margin, I don't think, I know that that gross margin as a percentage would go up over that 20% mark. And that's where we need to be. And that's where we're striving to be.

Got

it. Thank

you. And once again, a star one for questions. And we'll go now to Anthony Perala.

Hey, Warren, sorry, just a couple additional ones here. In the 10-Q, there's a disclosure about a warehouse fire. Any details you could give on that and just the kind of time to resolution there would be helpful.

Yes, sir. We have some storage area. Our manufacturing facilities, we have two 60,000 square foot manufacturing facilities that are in Benton Dwarf across the street from one another. We also have a recycling center, a 50,000 square foot recycling center about two miles from there. In addition to that, we have storage in a town called Comanche, Iowa, and that's 35 minutes away from our manufacturing facility. It's out in the country. We bought two 25,000s built that are across the parking lot from one another. And those are older facilities. They are not sprinkler facilities. There are no, there's no heightens out there. It's really in the middle of the country. So we've been using these for storage for some time. And we have a lot of our customers that we inventory, we keep inventory so that when they order, we're ahead of the game. We had the fire started with an electrical fire. We don't know even to this day, we've gotten the final fire report. But it's kind of a, it was not an accelerant of any type. It was just an electrical fire. That in a weird way, it's, I think it's going to help us long term because one of our, so with the fire, it didn't burn the building down, but it burned pallets on a portion of the building and a portion of the building. So we have the fire adjusters and we've been in touch with the insurance company. And so we're well on our way to eliminating any of that there. In the meantime, we have inventory across the street and we had space across the street so we can move inventory out there. So we'll have some sort of spent with the insurance company. I would, I would anticipate in the next 30 to 60 days and we'll build that facility back. We'll build another facility. And so it's really more of an inconvenience than it did anything else. It was a sad event. But like I said, in a weird way, it might help us because we always fight this fire issue with many of our customers. And so we're going to be in touch with UL and FM as we've worked for the years. There are always, there's always an issue with what happens in a plastic pallet. Well, we now know what happens in a plastic pallet fire. And if that would have been a warehouse full of wooden pallets, half the county would have seen it. So we think that that'll help us with FM and UL and finally getting over this issue that plastic pallets are more dangerous than wooden pallets.

That makes a lot of sense. And then one last one here for me. I think I feel like the Walmart contract that we've talked about today already and on last calls almost kind of, I don't think, I didn't realize it at first. But I think looking back at my notes from last call, characterized it as a three year kind of renewal or new contract. I'm just curious if you could put some context into maybe like dollar impact over a given year on this contract. If it's similar to your previous Walmart contract, is a different scope than the previous work you've done for Walmart. Just any kind of dollars you could put on what I think is probably a pretty meaningful three year contract that you've signed in the last six months here. It's about four and a

half million dollars a year, but this, as I remember, is just one DC. And the efficiency of plastic pallets is, it's unriable. And there are many automation facilities are all going to plastic pallets because they need the consistency and the longevity of the product. So we anticipate that we won't just have the one DC they'll be working with. We anticipate that we'll have an opportunity at many other DCs. Excellent.

That's all for me.

Thanks again.

Yes, sir. Thank you.

And it appears we have no further questions at this time. I will now turn the conference back over to the presenters for any additional or closing remarks.

I just want to thank everyone for being on the call today. And I want you to know that we work every day for our shareholders and we love what we do and we anticipate that we will have a good finish to our year. And we're going to start off our new year in a great fashion. So thank you for being on the call. And if anyone ever has any questions, email me or call me directly. Thank you so much.

And this concludes today's conference. We thank you for your participation. You may now disconnect. Thank you.