During Greystone Logistics' recent Q3 earnings call, CEO Warren Kruger provided an overview of the company's performance and future prospects. Despite facing some challenges, including weaker-than-expected results due to supply chain timing issues, the company is looking forward to improvements with the arrival of a new tool. The implementation of this tool and retooling initiatives, such as the automobile pallet for major clients like Tesla (NASDAQ:TSLA), General Motors (NYSE:GM), and Ford (NYSE:F), are expected to bolster performance.
CFO Brice Dille reported earnings of $0.09 per share over the past nine months, aided by a $3.2 million government employee retention credit. Without this credit, earnings still showed improvement from the previous year. Revenues stood at $46 million, compared to $44 million in the comparable periods. Additionally, the company plans to initiate a share buyback program by the year's end and is optimistic about the future, despite a recent warehouse fire and ongoing supply chain challenges.
Key Takeaways
- Supply chain issues led to weaker-than-expected performance in the last three months.
- A new tool expected within 30 days may improve future performance.
- Greystone is collaborating with major automotive companies and has retooled its automobile pallet.
- The Nestable business segment is experiencing growth.
- Earnings of $0.09 per share were reported for the past nine months, partly due to a $3.2 million government credit.
- Revenue increased to $46 million from $44 million in the comparable periods.
- A share buyback program is anticipated to start by the end of the year.
- Greystone is responding to a recent warehouse fire, with no significant operational impact expected.
Company Outlook
- The company is optimistic about overcoming current challenges and returning to growth.
- Greystone anticipates increased gross margin percentages over 20% as it focuses on driving sales.
Bearish Highlights
- Recent warehouse fire damaged a portion of the building, but operations continue with alternative arrangements.
- Supply chain timing issues have affected the company's recent performance.
Bullish Highlights
- New tool arrival and automobile pallet retooling for major clients are expected to drive improvements.
- The Nestable business segment is showing growth.
- A three-year contract with Walmart (NYSE:WMT) is expected to significantly impact the business.
Misses
- The company's gross margin has been low but is expected to improve.
Q&A Highlights
- Delays in receiving a tool from Walmart were discussed.
- Expansion of the sales team and adjustments to the extrusion line in Austria are underway.
- Toyota (NYSE:TM) has shown interest in the made-to-order pallets produced in Austria.
- The recent fire incident is being settled with the insurance company and should not significantly affect operations.
Greystone Logistics (ticker not provided) continues to navigate a complex market environment but maintains a positive outlook for the coming year. The company is taking steps to address its challenges and capitalize on new opportunities, such as its relationship with Walmart and other retailers. Shareholders are encouraged to engage with the company as it moves forward with its strategic plans.
InvestingPro Insights
Greystone Logistics has demonstrated resilience in the face of recent market challenges, and real-time data from InvestingPro provides further insight into the company's financial health and stock performance. With a current Market Cap of $32.52M, the company's valuation metrics indicate that it is well-positioned in terms of investment potential. The P/E Ratio stands at 8.38, reflecting an attractive valuation compared to industry peers. Furthermore, the company's Adjusted P/E Ratio for the last twelve months as of Q3 2024 is 9.26, which suggests that investors have confidence in Greystone's earnings capabilities moving forward.
In terms of stock performance, GLGI has seen a strong return over the last year, with a 1 Year Price Total Return of 64.29%. This impressive figure highlights the company's ability to generate shareholder value over time. Additionally, the InvestingPro Fair Value estimate of $1.32 USD indicates that the stock may currently be undervalued, providing a potential opportunity for investors.
InvestingPro Tips for GLGI reveal that the company has been profitable over the last twelve months and that its liquid assets exceed short-term obligations, which is a positive sign of financial stability. Notably, the stock has taken a hit over the last week, with a 1 Week Price Total Return of -14.81%. This short-term volatility may present a buying opportunity for investors who are bullish on the company's long-term prospects.
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Full transcript - Greystone Logistics (GLGI) Q3 2024:
Operator: 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. [Operator Instructions] And as a reminder, today's call is being recorded. [Operator Instructions]. It's now my pleasure to turn the conference over to Brendan Hopkins. Please go ahead.
Brendan Hopkins: 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 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 and future periods to differ materially from forecasted results. With that said, I would like to turn the call over to Warren Kruger, CEO of Greystone Logistics.
Warren Kruger: 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 months. The last three months have been a little weaker than what I would have hoped for. We have a very large retailer in America, that we’d had the tool about a month ago, but supply chain timing has not really benefited any of us in the manufacturing sector. It's taking longer to get tooling, equipment, and so forth. We do have a tool that should be here in the next 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 I'm very optimistic about that as well. We're also looking to buy, our Nestable business has been up some, and we're excited about that. 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 not only earnings but retain employees. The credit we got really did help us retain our employees. It was something that benefited all of America, I think, and most certainly affected us. But it skewed our numbers somewhat. Our numbers are good this year. They are 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 Brice Dille, who will go over the numbers for us.
Brice Dille: Okay. Quickly, for the nine months, we made $0.09 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 $0.09 compared to the $0.16, if you took out the $3.2 million, 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. 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 $0.13. But if you take the effect of the $3.2 million out, and really, the quarter sales was stronger, earnings were about flat. And if you have any follow-up questions about employee retention credits, we can always answer that. But effectively, everybody knows this on the call. If the government gives them money, you retain your employee, and you got an employee retention credit. So when you look at EBITDA for the nine months. 2024, it's essentially $9.6 million, I call it $10 million.
Warren Kruger: Hey, Brice, let me stop you for a second. Tommy, can you do something in the background for us?
Brendan Hopkins: It's someone talking in the background on Brice's line, I think.
Brice Dille: I don't think it was on my line. Was there a question that somebody was asking?
Warren Kruger: No, it's just there was some background. Brice, I'm sorry to interrupt you.
Brice Dille: Yeah, I did hear that background noise. Did everybody -- was everybody able to catch the earnings per share and the sales and net income figure?
Warren Kruger: I could catch it, so if we need to follow up with questions later, we can do so.
Brice Dille: Okay.
Warren Kruger: I'm going to take it back from Brice at this point. We're trying to get in rhythm here. Can we open it up to go ahead and ask questions and answers?
Operator: Yes, thank you. [Operator Instructions] And we'll take our first question from Anthony Perala.
Anthony Perala: 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 budget. 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?
Warren Kruger: Yes, that's correct. It was Walmart as our customer, and 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 -- it started with 2020, and then it just rolled forward, and then we had the -- supply chain was just upside down. Our price went up on our -- 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 goes in, it should be going right on the clock for the foreseeable future. We also -- there's some other things. The 44x56 beverage pallet we had, it's a pan, it's for TT bottles [ph] and cans. That’s best product is now in the marketplace, and we're getting good interest there, as well as I mentioned the automobile pallet. And our standard business, our 48x40 business is strong, continues to be strong. Our Nestable 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, yes, 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.
Anthony Perala: Yeah, it does. That's helpful, and you had said just that you expect the tool kind of in the next 30 days here and be able to get that line running?
Warren Kruger: Yes, absolutely.
Anthony Perala: Okay. And then just one more here and jump back in the queue, but any update on the share 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?
Warren Kruger: Yeah, I believe, I anticipate that we'll start that 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've authorized a million dollars worth of stock buyback. And so as we see opportunity, we will buy that stock.
Anthony Perala: Okay, excellent. I'll jump back in the queue. Thanks.
Operator: And we'll take our next question from Eric Nickerson [ph].
Unidentified Analyst: Yeah, just curious about the 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?
Warren Kruger: Employee Retention Credit.
Unidentified Analyst: Say that again, please.
Warren Kruger: Employee Retention Credit, ERC.
Unidentified Analyst: Employee Retention Credit.
Warren Kruger: 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 a credit back from the government. And that payment was made in the third quarter of last year, and it was approximately $3.2 million.
Unidentified Analyst: Was that a direct payment, or was it a reduction of taxes owed, or what form did it come in?
Warren Kruger: It was a direct payment.
Unidentified Analyst: Okay, yeah, that's all I needed. Thanks. Thanks very much.
Warren Kruger: Thank you, Eric.
Operator: And we'll take our next question from Robert Littlehill.
Robert Littlehill: Hey, Warren.
Warren Kruger: Hello, Robert.
Robert Littlehill: Yes, sir. How are you doing? Well, a couple of quick questions. The tool that you hope to have delivered in 30 days, is that an expensive piece of equipment?
Warren Kruger: It’s $300,000.
Robert Littlehill: $300,000, okay, 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?
Warren Kruger: 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 bootstrap 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 Schelhaas, who was our Plant Manager. He went through a series of issues and got a new hip finally. And he is the one who leads the charge with Walmart and some of our other retailers. So he's out there full-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 Honda (NYSE:HMC) and Toyota. So he's very well-versed in the pallet industry, and we have him on full-time as well. So we've got now more bootstrap actually worked for Greystone as opposed to just stocking and non-stocking distributors. So we are excited about that. And we're generating a lot of direct calls directly to 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 is actually -- has expressed interest in that again. They tested this product in a different form 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’ve 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, I'm sure 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.
Robert Littlehill: Thank you, Warren.
Warren Kruger: Robert.
Operator: And we'll take our next question from Brian Webb [ph].
Unidentified Analyst: Hi, yeah, thanks for taking the question. I'm wondering if you could provide some guidance on gross margin percentage going forward. Thanks.
Brice Dille: 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.
Unidentified Analyst: Got it. Thank you.
Operator: [Operator Instructions] And we'll go now to Anthony Perala.
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.
Warren Kruger: Yes, sir. We have some storage area. Our manufacturing facilities, we have 260,000 square foot manufacturing facilities that are in Bentendorf 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 Comiche [ph], 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. No, there's no hydrants 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 keep inventory so that when they order, we're ahead of the game. The fire started with an electrical fire, we don't know even to this day. We haven't gotten the final fire report, but it was not an accelerant of any type. It was just an electrical fire that, in a weird way, I think it's going to help us long-term. Because one of our --with the fire didn't burn the building down, but it burned pallets on a portion of the building. And it burned 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 there. In the meantime, we have inventory across the street. And we have space across the street, so we can’t move inventory out there. So we'll have some sort of split with the insurance company, I would anticipate, in the next 30 to 60 days. And we'll build that facility back, or 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 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's always an issue with what happens in a plastic pallet fire. Well, we now know what happens in a plastic pallet fire. And if that were 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 in finally getting over this issue that plastic pallets are more dangerous than wooden pallets.
Anthony Perala: That makes a lot of sense. And then one last one here for me. 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 this 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 pretty a meaningful three-year contract that you've signed in the last six months here.
Warren Kruger: It's about [Indiscernible], but this remember is just one DC. And the efficiency of plastic pallets is, it's deniable. And there are many of 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.
Anthony Perala: Excellent. That's all for me. Thanks again.
Warren Kruger: Yes, sir. Thank you.
Operator: 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.
Warren Kruger: 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.
Operator: And this concludes today's conference. We thank you for your participation. You may now disconnect.
Brice Dille: Thank you.
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