Greystone Logistics Inc

Good day, everyone, and welcome to today's Greystone Logistics Q3 results conference call. At this time, all participants are in a listen-only mode. Later, you'll have the opportunity to ask questions during the question-and-answer session. You may register to ask a question at any time by pressing star 1 on your phone. Please note this call is being recorded, and I'll be standing by should you need assistance. Now, it is my pleasure to turn the conference over to Brendan Hopkins. Please go ahead.

Thanks, Elvis, and thank you all for joining us today. We have a brief safe harbor, and then we'll get going. 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 the CEO of Greystone, Warren Krueger.

Well, hello, everyone, and thank you very much for joining the call today. As most of you know, you've probably seen the queue that was filed last week, and then we had a follow-up press release this morning. And I'll briefly just go over it. We had a nice quarter. We had $14,315,000, almost $316,000 for the quarter, with an EBITDA of $3 million. We're at $6.78 million in EBITDA for the nine-month period. As a lot of you may know, and most of you do know, our year runs June 1 through May 31. So we're in our fourth quarter, and we've started off robustly. I'm very happy about where we are. In the press release, I anticipate much of the same as the third quarter. I'll regress, though. I'll digress. to the previous year, we did have a recessionary period during last year. It just felt that we couldn't get orders in. People weren't ordering as usual. So June, July, August, September, October, for us, they were quite weak. We thought quite weak. And it picked up after the election and has gone well since. We feel good about that. We feel good about what we're seeing in the industry. Walmart has been a big customer for us and a very nice opportunity. And it's all about consistency, getting rid of the wood and the dust and the splinters and the infestation and the wood chips on the floor with the automated guided vehicles and Really, these things that I've been talking about for 20 years, it's reality today. It really is happening in front of our eyes. We are testing cellular devices inside our pallets where we can track and trace and find them anywhere in the country at any time just by pinging them once a day. I've got three or four bids out there right now for leasing pallets in that type of environment. where we would provide the pallet and we would tell the customer where it is and they would pay us on a pallet as a service basis. So we're excited about that also. We have many new products that I've been disappointed in that haven't hit the sales momentum yet. And we have a beautiful new can pallet and a double-sided pallet. But I will tell you, we are working very diligently out there in the marketplace to accomplish our goals. We need momentum. We have been relatively flat on the revenue side and the earnings side, which is not a bad thing because it's good to make money. But we are working very diligently to to fill machinery now because we did put in a lot of new machinery and we have yet to fill it. And the sound of silence on machinery is a deafening sound. So we're working diligently to fill that. That kind of gives you a global picture of where we are. There's a couple other items on the financial side I need to mention. In the article I mentioned in the press release that we'd authorized $2.1 million. We have now redeemed the entire preferred piece in our company, which is a $5 million piece. We've redeemed that now, so we've retired that preferred piece. That piece has been around a long time. That allowed our company to survive in the early days and to grow, and that was owned by another board member and myself, so that has been redeemed. Additionally, as many of you may or may not know, we have the board authorized last year a million dollars in cash to buy back shares. And as of last week, we purchased back 620,052 total shares. So we're trying to do exactly what we say we're going to do. And with that, I'll open it up to questions.

At this time, we'll open up the question and answer session. If you'd like to ask a question, please press star one on your phone now, and you'll be placed into the queue in the order receipt. You may remove yourself from the queue at any time by pressing pound and one. Again, to ask a question, press star one. Our first question today comes from Anthony Peralla. Hey, Warren.

Nice to chat with you again here. First off, just congrats on getting the preferred taken out. I think that's a big step in the life cycle of the company. And like you had mentioned, it was key in survival at one point, and I think speaks a lot to where you've brought the company to this point, that it can now be taken out of the capital structure and sends a good signal to investors going forward. On that specifically, I'd just be curious. I think they did have a conversion feature I'm curious kind of the puts and takes maybe that went into the decision to take it out in cash. On one hand, you could say maybe it speaks to kind of confidence in the path going forward that you're okay with partying with that cash. But just kind of curious what went into that decision.

Well, we had $5 million to $6 million cash on hand. We don't have that much debt, if you look at our balance sheet, and we're paying down aggressively. As a matter of fact, a couple years ago, before we did the equipment add-on, we really had pounded down a significant amount of debt. So we continue to do so, and we were paying about $550,000 a year in interest, and I have to say I was benefiting from that, and as was my other board member. And we just decided that that's a, uh, for the company, it creates a free cash of another $550,000. And we were probably, we were, the money was sitting in an account, maybe getting 3% or four. I don't even know what it was getting. It was, but it was most certainly wasn't 11%. And we just thought that that was a good show of confidence. And, uh, it was time for that to happen. I've been told many, many times over the years that, yeah, we don't, we're unsure on that preferred and so forth. So we just took that out of the equation. Okay.

Excellent. And good to hear that, you know, I think you mentioned at the top of your comments that Q4 has started off pretty robustly here. I just I'm curious, you know, it's a pretty uncertain environment, lots of change on the kind of macro and tariff front just in the last 10 days here. I'm just, you know, when you're out talking with customers and companies, people just making decisions out there in the economy, just how they're feeling, just overall how your customers are feeling and how you think the rest of this fiscal year unfolds.

I feel really good. Most of our businesses here in the United States, I mean, that's one of the advantages we have over, let's just say, pallets from China. That could come in, but people don't make pallets in China and then ship them over and then get them to California and then ship them across the country because freight is the leveler. And when you ship pallets, you're shipping a lot of air. particularly when you have a 20- or 40-foot sea container. It limits the amount of products you can put in there just because pallets take up space. And so we feel good. Most of our business is in the United States. We have a little in Canada. We have some in Mexico. But we are not concerned about that. It's de minimis. And what I don't know about are things like our customer Walmart. Walmart They are a huge, huge importer of product, and it clearly will affect them, particularly the Chinese imports. And so I don't know how that's going to play out for us because we have been filling their import DCs with plastic pallets, and so it may slow things down, frankly. I don't know the answer to that yet. But over the next quarter, I should get a better indication. And during our next call in 90 days, perhaps I'll have a better picture for you.

Fair enough. This is the last one here. How many of Walmart's import PCs do you have, Allison, today?

Five.

Excellent. I'll jump back in the queue. Thanks. Thank you. Our next question comes from Eric Nickerson.

Hi, Warren. I'll just reiterate what the previous fellow said with his happiness at seeing that preferred stock go away. I feel the same way, and I'm looking here at the queue as an outside analyst, and the thing that jumps out at me is all the rest of the related party transactions. I mean, you've got customers and suppliers and Assets are owned by related parties, and there's a lot of it. And I'm sure you realize that's probably one of the hard things for an analyst to get a handle on is related party stuff. So the question is, do you have a plan going forward to continue to chip away at how much related party assets and ownership and transactions you have in the company?

Eric, I'm glad you asked that question. I was an investor 22, 23 years ago. I was an investor. I invested $1 million, then $2 million, then $3 million. All of a sudden, I had $4.5 million. I was told my money was gone. So I jumped in in 2003, and I did $600,000 in sales that year. I was losing $10,000 a day in 2003. This is real money back then. This is real money today. So I had to do certain things to keep it alive. We bought a $12.5 million firm after that $4.5 million. I had to tattoo the entire debt on that $12.5 million to acquire that. It made the Miller Brewing Pallet. So my tattoo has been on every loan on this company for 22 years. All right? So I have put money in over the time to keep it alive. I'm doing this for – when I acquired it, it had a public shareholder base. That's not me that set it up. The company had been around since 1967. So to keep it alive, we bought buildings from the company. We bought equipment from the company. We did everything in our power to keep the head above water. In 1909, let's see, about five years after I took over, less than five years, we got Coors Brewing. I had to buy the mold for Coors Brewing, $300,000 out of my pocket to get that mold. So, well, I needed to get that back from the company. So as you can see, as a small company grows, this is how it grew. And so the $5 million piece, we've done that. uh the the building is now the buildings are not owned by me they're owned by one of our board members but let me tell you we're not moving buildings and it's just basically call it a sales lease back however you want to look at it we're we're in those buildings the company couldn't afford to have those buildings and i'm glad that our shareholder bought the buildings so you know we're happy to be in those buildings uh uh other other uh transactions My brother sells some pallets for the pallet. That's something that's not going to go away. He continues to sell pallets. Don't know what else to tell you there. And I'm not sure what other related party transactions there might be. You might help me there because I did put a significant amount of money.

I'm fine with what I'm hearing. And I understand that's how companies get it going and get it growing. And I don't have any argument with any of that. All I'm asking is, as the company continues to mature, are you looking for ways to transform those related party situations into unrelated party situations? And it's not that that's okay. I mean, I'm fine with it because I have a lot of confidence in what you're doing.

Well, let me tell you, when I took over in 2003, my salary was $240,000. I deferred half of it for five years. Finally got that paid back. There was no interest on that money that I deferred for five years. I've had one salary increase in 23 years. I make $360,000 a year. I don't know. It's not a lot of money, $360,000 a year. I get paid for some of the investments I made to keep the company alive, which keeps me alive, okay? So I appreciate your comments, and no one works harder for the shareholders than me, and I will take those to heart. And I'll take it to the board next quarter and I'll say, do we need to restructure something in a different manner? But I'll get the opinion of others as well. Okay?

I'll do that for you. Congratulations again on getting the preferred stock out.

Thank you.

And that's all I have for questions. I'll go back in the queue.

Thanks so much.

Our next question comes from Adam Posner.

Hey, Warren. Always great to talk with you. Congrats on clearly another solid quarter with a lot of progress, particularly in this environment and some great initiatives that have already been mentioned. I was wondering if you could comment a little bit on, and you mentioned this at the start of the call, but sort of your production capacity and kind of where you guys are producing at with everything that you have in place right now and how much that can sort of expand with everything that you've spent and sort of what you have right now.

Well, thank you, Adam, very, very much. I appreciate that. We have, and I'll break it down, I believe that we can put on $40 million worth of revenue with very, very limited capex. We have the equipment to do so, and we have many of the molds to do so. We may have to have a few more molds. Molds are about $300,000 to $400,000 in that range. These are big molds. They're 40,000 pounds apiece. They're And I just have one customer that I may need to tweak their mold and buy them a new one. But the opportunity is hundreds of thousands of pallets. So I may make that move just based on some of the testing that we're doing. So we can put on about 40 million pallets. We've got our extrusion line that's really, we're selling some of the extrusion. We probably have, I don't know, I don't know how many quotes we have out in the marketplace for the hollow lumber extrusion pallet that we bought some years ago. And I anticipate, I really continue to anticipate once it starts there with customers, it will just go on and on. It's one of those types of products that just, You'll buy it, and then you'll rebuy it. So I'm excited about that. That's probably $10 million anyway. And then on our injection machines, we probably have $30 million anyway of capacity. And I'm happy to anyone who has customers out there they may know about. Believe me, we are following up on anything and everything. because my goal is to fulfill the machinery. And that's what we need to do. That's what I've told all my associates that I work with. They are well aware of this. For years, we didn't have sales. I was kind of the sales guy. We used stocking and non-stocking distributors. Today, we have full-time people out there. We have Full-time people, Ron Skelhaus, who was our plant manager for 18 years, he's out there every single day. And he is our Walmart connection. He's unbelievable with customers. We've got another gentleman named Gary Morris, who actually developed the extrusion line, really is very knowledgeable in this industry and has some fabulous things in his pipeline. So what we need to do is convert that pipeline pipeline into production. And that's, I will tell you, it takes longer, always takes longer than what you anticipate. I will say that.

Fantastic, Warren. Thank you so much. And thank you for everything that you do to enhance value for the shareholders. You bet, Adam. Thank you for calling. Thank you.

Our next question comes from Brad Bullock.

Congratulations, Warren, on a good quarter. Just most of my questions have been answered, but I'm curious on the conversion of preferred, why you didn't convert to common. Was there a reason for that?

Yeah, the conversion was at $1.50.

Okay, that's a good reason. And in your last conference call, I think, I remember it as Q3 would be good, and it is, and Q4 will be great. Do you still stand by that comment?

I stand, yes.

All right. Good. All right, that's it. Keep up the good work.

Okay. I didn't mean to be curt, Brad. I just... I was going to have a long soliloquy, and I just, you know, it's going to be, it's, I like what I'm seeing. I like what I saw in March. How about that?

Okay.

Thank you. Not March. Excuse me. Yeah, it was March. Yeah, I want to make sure I have my months right. Yeah, I like what I saw in March, right.

All right. Thank you, Warren.

Our next question comes from Robert Littlehale.

Hey, Warren. Hi, Bob. Can you just elaborate a little bit further in terms of how the pricing works on leasing of pallets?

Yes. Well, just for everyone, for this industry, if you go into a Costco right now, if anyone goes into a Costco... And you see a plastic pallet. You'll see wood pallets. You'll see blue wooden pallets. You'll see red wooden pallets. And you'll see white, just plain white wood pallets. And then you'll see plastic pallets, particularly over in the water section. Go over and you'll see the water a lot of times be on plastic. Statistically, most of those pallets we manufactured, Greystone manufactured, under contract for a company called IGPS. IGPS is a – and those blue pallets you see and the red pallets you see out there, those are all rented pallets. They're leased, so they go out to Procter & Gamble or Niagara Water or whoever the customer is, and they deliver pallets to be used on a per-trip basis. That's how that business, that industry works. IGPS is a fabulous customer for us. Love them. They're great. I can't say enough nice things about them. They're a quality company. They work hard. They try hard. And we love it that they're our customers. But we've had many of our customers that have reached out to us and said, hey, how can we, we have a closed loop. We have a tight closed loop. Would you be interested in helping us in that? And so what we're doing is we're looking at what that cost is. Many times it's cost that prevents them from doing so. So let's just say it would be 10,000 pallets. Well, if they have 10,000 pallets at $55, it's a lot of money. And a company then, a lot of times it comes down to just writing the check and not having it in the budget. So we are aggressively going out and saying, hey, guys, if it's in your facility or if it's in a tight, closed loop, or we would be interested in on a per-day basis, per-month basis. We don't want to be on the logistics side. We don't want to pick up the pallets out in the marketplace. We don't want to compete against our customer out there, IGPS. But what we want to do is we want to make it, our pallets, our products, more readily available to potential customers. And it always seems like... Oh, we can't afford that. And we're trying to turn it around to say you can't afford not to. That's what we're trying to do. And we have, I will say, I've been talking with many, many financial institutions about the ability to finance some of these things with specific customers. And there's a lot of positive feedback for many of them. that say yeah we'd be interested in in financing that pool of pallets for that specific customer so we're trying to get very more aggressive in that regard just because we want to put our pallets out there and and we know a lot of people want to have plastic and again it may they say oh it's not in our budget and so forth so that's where we're i don't know if that helps bob that's that's kind of our thought process okay yeah that's very helpful

Um, question number two, uplisting.

Yes, sir. That is, I mean, we've, I will say I've got right in front of me, I've gone on like the, the last five years of our financials and our, our earnings, our EBITDA and so forth. And it's been steady. As I said earlier in the call, it's been steady. And I believe that we have a lot of momentum right now, but I think some of this momentum needs to really come to market. I mean, come to bear. We need to start having some really good things happening. And I think that when we have a little bit more sales momentum would be the time that we'll be looking to uplift. I do believe, I truly believe that that we don't, this company as a public company does not get eyes on it like it should because it's OTC. And so we have talked about uplisting many, many times. And it is really, I think, prudent, a prudent decision. But I think it's a timing decision too, making sure you have enough cash on hand making sure your balance sheet is in order, making sure that you know the real costs of being on the NASDAQ. And so it is a part of our board discussions every quarter.

In terms of visibility, do you have conferences that you're speaking at in your future?

Yes, sir. I'm glad you said that. There's a conference in 10 days, I think, in Las Vegas I'll be going to. And let me tell a quick story. I went to one of these investor conferences last year, and I'd never been to one. And Brendan Hopkins, who handles the IR for us, he had suggested I go. And it was very interesting for me because I've been probably, I don't know, 70 plus companies represented there and you meet potential investor groups and so forth. And you sit down, you do a presentation and there are also sit down, uh, presentations. And I talked to many people there and I was surprised that there were so many people that were on the NASDAQ that were also there, but they were very small companies. not making any money yet. They were on the NASDAQ and their value is about four or five times more than ours. So it, it opened my eyes a little bit. And I do believe that if in this world, the public world, you have to be in a spot where you get exposure. You know, if you're, if a tree falls in the forest, no one hears it, then it really happened. And so that's, We have a lot of people who watch our stock and who are investors, and I appreciate that. But I think that to get exposure, most certainly we need to consider moving to a different exchange.

And finally, repopulating your office of finance. What's your thinking there?

I'm glad you mentioned that, Bob. We're still outsourcing that. Our longtime controller for 23 years is still with us. We hired two different CFOs after our CFO of 22 years retired. I will say that The former CFO and myself made the first decision on the CFO. He was a local guy up in the Quad Cities area up in Iowa. And it was a great interview, great everything until we got there. And then the personality, as we all know, sometimes you think, gosh, this is the best marriage ever. And it really, when you live together, it doesn't work exactly the right way. And that's kind of how it worked there. He didn't... It was a different... Culturally, he didn't fit in with our associates. And our second one was, again, someone that had been utilized by our board members, two different folks on our board, and he had done good work and so forth. And I think that industry-wise, he just didn't grasp it. So... I'm trying to be very, very, very, very cautious and prudent. I'd like to have, theoretically, I'd like to have someone that's youthful, someone that has perhaps come up through the accounting side in an auditing fashion, understands work on public companies, wants to stick in and around the Quad Cities area because of family reasons. And I'm looking for that. But I don't want to do anything that is a knee jerk. I want to get it right. And so that's what I'm doing. I'm trying to get it right.

Well, thank you. Thank you very much, Warren. Yep. Great to hear from you. Great to speak with you.

Once again, everyone, press star one for a question. We have no further questions at this time. Warren, I'll turn the conference back over to you for any additional or closing remarks.

I just want to thank everybody for being a part of this and be an investor in our company. We do work very hard for our shareholders, and we care. I truly am so proud of the product line that we have. I'm so proud of the people that work work with us and for us. It's really a joy. And I love what I do. And I love getting out there. And yesterday, I was down in Palestine, Texas at a potential customer's site. And then we met in Arlington, Texas, drove back over to Arlington, Texas, and had lunch with two outside they're not outside sales but they have their own resin that they're providing and we're making product for them and they've sold some and you know these are things we do every single week we're always trying to to get that that next customer and that next opportunity so I enjoy what I do and if anybody has any suggestions or ideas for me anytime you're happy to reach out to me and most certainly I'll I will take all comments to heart. So thanks again for being a part of the meeting. Now I'm going to turn it back over to Brendan to see if he has anything to close out with.

Well, I do have one thing. I know in a conversation we had about six weeks ago, you were fairly excited about finding a whole new sort of sector within the Walmart infrastructure above and beyond just their distribution centers. Can you elaborate on that a little bit?

Well, I think I have. I'm kind of tippy-toed around it. But we believe there are opportunities with many, many, particularly some of the smaller DCs. It's all about fitting within budgets and how you can – create value without them spending any other money. And so that's what we're working on. And I've just tippy-toed around that. I just didn't want to beat that drum too loudly.

Fair enough. That's all I had. Thank you all for joining us and more great things to come.

This concludes today's Greystone Logistics Q3 Results Conference Call. Thank you for your participation. You may now disconnect.