Release Date: April 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Total revenue increased 146% year over year to reach a record $9.8 million.
- Total number of customers increased from 36 to 53, indicating a growing customer base.
- Product sale revenue increased 161%, showing strong demand for KULR's products.
- Engineering Services revenue increased 17%, demonstrating the company's expertise and value in services.
- KULR has built an industry-leading technology platform for battery safety and thermal management, positioning it well for future growth.
Negative Points
- The company experienced significant shareholder value erosion during equity financing.
- KULR had to reduce its workforce by 15% due to capital access difficulties.
- Gross margin for 2023 was 37% versus 59% in 2022, reflecting a decrease in profitability.
- The company had to manage operations closely with customers and partners due to limited ability to grow the business.
- Revenue in the fourth quarter was down sequentially from the previous quarter, potentially impacted by cash and operational constraints.
Q & A Highlights
Q: What inventory management strategy is KULR looking at as safe case sales ramp on the back of the eVTOL contract announcement?
A: Shawn Canter, CFO of KULR, mentioned that their contract manufacturing partners hold buffer raw materials inventory and have capacity to support demand on short notice. KULR will hold minimal finished goods inventory to support small orders and have their supply chain ready to quickly fill large orders as they come in. This strategy is aimed at supporting customers while improving cash flow.
Q: Do the recent award permits from the Department of Transportation for the safe transportation of EOL and DDR batteries have a specific timeframe that they are active for? Also, can you touch on some areas the new permit opens the door to?
A: Michael Mo, CEO of KULR, explained that the safety special permit is good for three years. The new permit gives OEM customers and logistic partners more flexibility on the number of devices that can fit into each safe case and safe sleep for business purposes. They are working with top logistics and shipping companies to use these solutions for OEM customers. As they explore more, they find new applications for safe case use, such as in automotive OEMs and EV production, which are expected to be good revenue drivers going forward.
Q: Can you prioritize for us, if possible, the timeline for recent projects or contracts with global space innovators, leading automakers, the Army, Lockheed, and H55 to turn into recurring revenue and how big those markets might be?
A: Michael Mo highlighted that KULR starts with service contract revenue, which leads to future product revenue growth. The timeline for these contracts to turn into recurring revenue varies, with some projects like H55 ramping up after three years of service contract revenue. The Army telecom contract started 18 months ago and is now delivering prototypes. KULR is shortening the design cycle for customers, providing faster time to market, which is why they choose KULR. Each customer has different life cycles and product ramp-up cycles, but KULR is setting the stage for strong future growth.
Q: Who is the online marketplace aimed at, and who would be buying online versus negotiating a contract directly?
A: Michael Mo stated that the online store is for both B2B and B2C customers. They are receiving inquiries from apartment complexes, hazardous materials teams, and consumers about safety. The online store is a scalable way to interface with customers directly. KULR is also working with online and offline distributors for hazardous materials safety and dangerous goods industry, with more business partnership announcements expected in the future.
Q: How much focus can now be put back to strategic growth after getting debt off the balance sheet, and how did the debt impact the ability to get product out the door in the fourth quarter?
A: Michael Mo acknowledged that the outstanding debt throughout 2023 and early 2024, which has now been paid off, was very consuming for management and limited access to capital. This impacted KULR's performance in the second part of 2023, leading to workforce cuts and program prioritization. Now that the debt issue is resolved, the management team can focus on business growth. KULR is proud of the team's execution on technology, infrastructure, and operations, leading to significant growth in customer engagements and revenue per customer.
Q: What type of visibility does KULR have into new contracts for when deliveries will be, and how much lead time do they usually have?
A: Michael Mo explained that engineering service contracts are getting shorter, with some deliveries happening within nine months. The timeline from design to ramp-up is typically 12 to 18 months. Customers starting in 2023 will ramp up in 2024, and customers from the end of 2023 will go into pilot productions in 2024 and 2025. KULR is working to shorten the design cycle and provide faster time to market for their customers.
