KULR Technology Group Inc (KULR) 2020 Q3 法說會逐字稿

Welcome, everyone, to the KULR Technology Group third quarter 2022 earnings call. Before I begin this call, I would like to read the safe harbor statement that covers this call. This call does not constitute an offer to sell or solicitation of offers to buy any securities of any entity. This call may contain certain forward-looking statements based on KULR's current expectations, forecasts, and assumptions that involve risks and uncertainties.

Forward-looking statements made on this call are based on information available to the company as of the date hereof. KULR's actual results may differ materially from those stated or implied in such forward-looking statements due to risks and uncertainties associated with their business, which include the risk factors disclosed in their form 10-K filed with the Securities and Exchange Commission on March 28, 2022.

Forward-looking statements include statements regarding the company'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 other similar words.

All forecasts are provided by management on this call are based on information available at this time, and management expects that internal projections and expectations may change over time. In addition, the forecasts are entirely on management's best estimate of KULR's future financial performance given their current contracts, current backlog of opportunities and conversations with new and existing customers about their products and services. KULR assumes no obligation to update the information included on this call, whether as a result of new information, future events or otherwise.

I'm your host for this call, Stuart Smith. And with me on the call today are Michael Mo, CEO of KULR Technology Group; Keith Cochran, President and COO of KULR Technology Group; and Simon Westbrook, CFO for KULR Technology Group. Later in the call, the company will field questions from a panel of analysts that are currently covering the company.

With that, Michael, I'd like to turn the call over to you.

Thank you, Stuart. This is Michael Mo. I apologize for my voice today, I'm a bit under the weather. I'm pleased to report that Q3 was an inflection point for KULR as we reached record revenue of $1.39 million. We ended the quarter with $15.2 million cash on the balance sheet. We're well positioned to build a leading energy management platform to accelerate the global transition to a sustainable electrification economy.

As we have communicated to our shareholders throughout the year, we're making significant investments in our people and infrastructure to prepare and accelerate the growth (inaudible). We have doubled down in manufacturing in automation infrastructure in North America in Q3 with 4.46 million vendor deposits compared to 2.15 million in Q3 of 2021. We expect the trajectory of investments to moderate as we inch to our next growth phase to monetize all investments that we have made.

As we enter into the monetization and growth phase of our business, our gross margin profile will fluctuate in the range of 30% to 50% in the coming quarters. This is a function of us engaging different customers with a wide range of products and services during the quarter. Aerospace and DoD customer engagements would typically have higher gross margin profile, whereas mass market commercialization products will drive more top-line growth. We expect close margin to monetize or try to normalize in 2023, as our customers in multiple market segments enter [morning] production.

As we prepare for [bonding] production of our customers for the remainder of 2022 and into 2023, we nearly tripled our inventory deposits in Q 3 to $1.03 million compared to $309,000 a year ago in quarter and $691,000 in Q2 2022. We expect inventory level by the end of Q4 to increase from current levels.

The KULR sales and marketing team expense is customer engagements through direct sales and manufacturing reps. KULR has over 300 customer engagements by the end of Q3 with some of the world's largest industrial and commercial companies. As we continue to expand our relationship with these major partners across our product portfolio, we expect to cross-sell and upscale our total solutions package to these customers.

In September, KULR received approval from Department of Transportation to increase the energy level in three special permits from 2.1 kilowatt hour to 2.5 kilowatt hour, expanding usage for (inaudible) product. KULR will utilize a permit upgrades to support our recently awarded project with one of the three largest [auto writer lasting] companies in the world for the safe (inaudible) of storage of lithium-ion batteries.

Through a partnership with (inaudible), KULR has access to best in class lithium-ion battery cells with high power and energy to build battery modules with the highest safety rating. As part of the strategic relationship, KULR has access to over 700 megawatt hours of energy battery capacity to further strengthen our production and supply chain localization initiatives within North America.

The current securing (inaudible) supply accelerates our ability to provide total solutions to high-value customer applications, with revenue potential that could exceed $350 million annually in five years. We're very excited about the upcoming Consumer Electronics Show, CES, in January 2023. This is the largest electronics show in the world. We plan to showcase three new products.

First is KULR Vibe. As you know, we recently completed the Vibetech acquisition. KULR is expanding ourselves as a vertically integrated energy management company focused on sustainable energy solutions. The new product, KULR Vibe is a [candid] a solution with learning algorithm to utilize data from sensors to reduce vibration for more energy efficient system. We demoed KULR Vibe with a new customer interface, wireless sensors, and run on new AI platform. This new architecture will allow us to provide to scale up from TOT helicopter applications, to mass market industrial motors and renewable energy applications such as [wind farms].

We're also showcased CellCheck in full operation on a new cloud computing platform with the (inaudible). We will unveil a new energy storage product that integrates audio capabilities for terrestrial and space applications, with a highest safety rating and in-depth monitoring capabilities.

Next, Keith Cochran will show you more on the KULR Vibe acquisition and operational updates for the quarter. Keith, please.

Thanks, Michael, and thanks for those joining our call today. We appreciate you. First off, I will share what I tell our team almost every day. It's a great time to be a KULR. Our team is highly energized as we head into the close of the year. I feel the true sense of accomplishment coming from the team as we deliver into production multiple products the team have been working on the last two years. One platform that we are particularly proud of is the deployment of our automated lithium-ion 18650 and 21,700 battery cell testing capability, which meets the performance requirements of the very complex NASA work construction 37.

KULR will have the only fully automated test system capable of meeting or construction 37 to deliver high volume testing of battery cells, required for all main missions by NASA and many other DoD branches. The system will launch operation in December, and KULR begin shipping fully tested cells in January of 2023.

Another exciting platform recently acquired is KULR Vibe as Michael had mentioned. The incredible technology uses artificial intelligence with a self-learning algorithm to provide precise calculations to balance any device that spins or rotates, thereby virtually eliminating vibrations. Whereby was originally created to fix track and balance problems for military helicopters. And we will continue to expand its service offering in the near future.

However, I think many will ask how this relates to KULR's mission of supporting renewable energy. Let me explain that. The reality is that vibrations kill energy and performance by creating friction and impedance. When you devices based on a battery technology, it's imperative that vibrations are eliminated to maximize battery life and increase performance. KULR Vibe recently balanced the motors and blades of a mission critical drone to demonstrate the benefits of the technology. The results were a 23% increase in battery life and a lift increase of 45%. Same motors, same blades, just KULR Vibe optimized.

I would also like to share that in July, KULR completed ISO 9001 certification, demonstrating our commitment to operating at the highest level of quality and performance by utilizing a certified quality management system. The team did a tremendous job of preparation and delivered the certification with zero nonconformance findings.

Lastly, KULR has been able to recruit and maintain high-quality talent in support of our growth during a period of very tight labor markets and intense competition for that talent. We are very thankful for the dedication of our team. And as I said, it's a great time to be a KULR. And with that, I'd like to turn it over to Simon Westbrook for financial comments.

Thanks, Keith. I'm going to provide some financial comments on the third quarter this year versus the third quarter last year. Firstly, from a revenue point of view, we reported revenue of $1.39 million in the current quarter compared to $601,000 in the quarter ended September 30, 2021. This was an increase of 132% as a result of increased shipments following the improvement in supply constraint issues last year.

Our selling, general, and admin expenses increased to $4.4 million in the third quarter of 2022 from $3.1 million in the corresponding quarter of the prior year. The 40% increase in SG&A expenses was due to additional marketing and advertising expenses, consulting fees and noncash stock-based compensation paid to employees and consultants, and expansion and kicking out our new office and production facilities.

R&D expenses increased 122% from $482,000 in the third quarter of 2021 to $1.70 million in the third quarter of 2022, reflecting a combination of headcount, and new and automated test and production equipment, continuing our investment in in-house manufacturing and assembly facilities that was begun in the last quarter of 2021.

Our loss from operations increased 56% from $3.1 million in the third quarter of 2021 to $5 million in the third quarter of 2020. The $1.8 million increase in operating loss included increases in payroll, travel, advertising and multi expenses, professional fees related to the introduction of new accounting systems, and research and development projects.

Our net loss increased by 80% from $3.1 million in the third quarter of 2021 to $5.6 million in the third quarter of 2022. And the net loss per share for the third quarter to '22 was $0.05 as compared to $0.03 for the comparable period last year.

Finance related costs increased by $814,000, largely due to a one-time charge related to the $1.5 million financing and retirement of the remainder of the $5 million promissory note. As a result, we now have no debt outstanding. The EPS would have been a net loss, both $0.04 per share, excluding this one-time charge.

As September 30 this year, the company reported cash balance of $16.2 million compared with $14.9 million at September 30, last year. This leaves us well positioned to expand operations, support new business, and consolidate our manufacturing operations in the US to ensure greater control over logistics in the face of continuing worldwide uncertainties.

Now back to you.

Thank you, Simon. And that does conclude our opening statements by management. We're going to move on to the Q&A session. Once again, we're joined by several analysts who are currently covering the company, but one of them, Jake Sokalsky, Managing Director, Senior Research Analyst at Alliance Global Partners is unable to connect with us at the moment. However, we did receive his questions in advance.

So here's his first question. As the focus on higher energy density batteries increases, do you expect to seek expanded permits for safe case?

Yes, I'll take that. Yes. As you know, the automotive and some industrial applications are making their batteries higher energy capacity. And also meantime, making them more modular. So we're working on expanding this product line to accommodate higher energy capacity upto 10 kilowatt hours.

Very good. And I'm now moving on to a question regarding Vibe technology. You recently announced the acquisition of Vibe Check. Should we expect top line growth from this to show up in 2023?

Yes, Stuart, I'll take that. This is Keith Cochran. Absolutely. Now we're in the final sign-off of a long-term agreement to support a large commercial aviation company with KULR Vibe services. You can look forward to that announcement once the documents are fully executed, which should be sometime during this quarter. Additionally, we have many engagements underway to support funded DoD projects. We're currently working to secure that business also during Q4.

Thank you, Keith. And here's the next question from Jake. We've seen the drone industry start to mature and become more widely adopted, and battery safety should be a primary focus here. Should we expect additional partnerships in this vertical over the near-term?

Yes, I'll take that as well, Stuart. As I shared in my remarks, we're in the midst now of the full-scale launch of KULR Vibe. And the results have been nothing short of astounding to those that have witnessed the demos. Accordingly, we're in conversations down to finding service agreements with those potential customers. Additionally, we are in discussion to incorporate Cell Check, TRS, and provide battery pack design and architecture in the drone industry to dramatically increase the safety of (inaudible).

Theodore O'Neill, Litchfield Hills Research.

Yes, I am. Thank you.

Go ahead with your question, Theo.

Right, you can hear me?

Yes, we can.

Can you give us an update on the planned rollout of your customers' commercial drone production schedule? Or some sort of milestones over the next 12 months for that program?

Yes, we can't comment specifically on any specific customer's drone production schedule. But what we can say is that for unveil a energy storage product that can be used for large commercial grounds ,that is fast charging, high charge rate or high discharge rate with KULR Vibe capabilities embedded in the battery together with Cell Check. Kind of what Keith just talked about. And this will be integrated unit, and we expect that to be the central power and the intelligence unit for the year. And that, we expect to demo that in [CS2023] and I see design wins in 2023, the next 12 months.

So I understand you your customer wants to protect what their plans are. But is there is there any possibly there will be revenue out of this in the next 12 to 24 months, can you even say that much?

Yes, there is.

Okay. Thanks very much.

Thank you.

Thank you, Theodor. And now we're going to move to an analyst from Taglich Brothers were joined by Howard Halpern. Howard, are you on the line? Howard Halpern? Howard, are you on the line?

Yes, I am. I'm pinch hitting for John. John is that typically they want to ask more questions, but he is out available today. But he did leave me with a broad question. You've put a lot of work in this year, but can you really flesh out what the key elements you have put in place to drive with significant revenue growth next year and over the next five years to, I guess, reach your goal of $350 million potentially in the next five years?

Yes. Howard, thanks for your question and appreciate that. I'll take this one, Stuart. Yes, there are four areas of products. We have a hard line of [sight] on that will drive our top line in early 2023. Those areas are KULR (inaudible), our TRS materials, our automated lithium-ion battery testing service and the use of our allocation of lithium-ion cells for [male] cell. We are expecting further top line pickups from KULR buying as it ramps its customer base throughout the year. We further have new product announcements coming in Q1, which we're also very excited about. I think that is the base platforms that we have in place today. They're really foundational to the company and we will expect to see a pretty significant revenue growth in 2023.

OK, OK, thanks. And keep up the great work guys.

Thanks so much, Alan. Appreciate it.

Gentlemen, that concludes our question and answer portion as well as our comments from Management that wraps our call for the day. I'm going to turn it over to our operator now who will close out the call.

Thank you ladies and gentlemen. This does conclude today's conference call and webcast. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day, and thank you once again.