Greystone Logistics, Inc. (GLGI) Earnings Call Transcript & Summary

Good day, everyone, and welcome to today's Greystone Logistics Q3 Results Conference Call. [Operator Instructions]. 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 Kruger.

Well, hello, everyone, and thank you very much for joining the call today. We've -- as you -- most of you know, you've probably seen the Q 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 million -- almost $14.316 million ] for the quarter with an EBITDA of $3 million. We're at $6.78 million in EBITDA for the 9-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, they were -- 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. We've got -- I have got 3 or 4 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 we are -- I will tell you, we are working very diligently out there in the marketplace to accomplish our goals. And we want to -- we need momentum. We have been relatively flat on the revenue side and the earnings side, which is not a bad thing because we -- it's good to make money. But we are working very diligently to fill machinery now because we did put in a lot of new machinery, and we have yet to fill it. And that's -- 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 of other items on the financial side I need to mention. In the article, I mentioned that we -- in the press release that we 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, $1 million in cash to buy back shares. And as of last week, we purchased back 620,052 total shares. So we are trying to do exactly what we say we're going to do. And with that, I'll open it up to questions.

[Operator Instructions]. Our first question today comes from Anthony Perala.

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 it speaks a lot to where you 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 parting with that cash. But just kind of curious what went into that decision?

Well, we had $5 billion to $6 billion cash on hand. We are -- our paydowns -- 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, before we -- a couple of years ago, before we did the equipment add-on, I mean, we were 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 -- for the company, it creates a free cash of another $550,000. And we were probably -- the money was sitting in an account, maybe getting 3% or 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 it was time for that to happen. I've been told many, many times over the years that, yes, 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 I think you mentioned at the top of your comments that Q4 has started off pretty robustly here. I'm curious, it's a pretty uncertain environment, a lot has changed on the kind of macro and tariff front just in the last 10 days here. I'm just -- when you're out talking with customers and companies, people 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. And 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 -- it will affect them, particularly the Chinese imports. And so I don't know what -- 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. Just as a last one here. How many of Walmart's import DCs do you have pallets in today?

Five.

Our next question comes from Eric Nickerson.

Warren, I'll just reiterate what the previous fellow said where there's 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 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 the 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 took over -- I was an investor in '19 -- or excuse me, 22, 23 years ago, I was an investor. I invested $1 million, then $2 million and 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, okay? I was losing $10,000 a day in 2003, okay? This is real money back then. It's real money today. So I was -- 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, that 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 -- it's -- when I acquired it, it had a public shareholder base. Didn't I was -- that's not me that set it up. The company has 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 it the head above water. In '99 as [indiscernible], about 5 years after I took over less than 5 years, we got Coors Brewing, okay? I had to buy the mold for Coors Brewing $300,000 out of my pocket to get that mold, okay? 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, that was -- we've done that. 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 leaseback, however, you want to look at it. We are in those buildings. The company couldn't afford to have those buildings, and I'm glad that our shareholder bought the buildings. So we're happy to be in those buildings. Other transactions, my brother sells some pallets for the pallet. That's something that's not going to go away, continues to sell pallets. I 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 [indiscernible] 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 if 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, I -- when I took over in 2003, my salary was $240,000. I deferred half of it for 5 years, okay? Finally got that paid back. There was no interest on that money that I deferred for 5 years. I've had one pricing -- one salary increase in 23 years, okay? 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 will -- I appreciate your comments. And no one works harder for the shareholders than me, and I will take those to heart. And if I have to -- 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.

Congratulations again on getting the preferred stock out.

Our next question comes from [ Adam Posner. ]

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 capacity -- 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, 40,000 pounds a piece -- and you just -- 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. 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 we -- 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 when 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 have customers out there they may know about. Believe me, we are following up on anything and everything because my goal is to build the machinery. And that's what we need to do. That's what I've told my -- all my associates that I work with. They are well aware of this. For years, we didn't have any -- we didn't have sales. I was kind of the sales guy. We used broker -- we use stocking and nonstocking distributors. Today, we have full-time people out there. We have full-time people, Ron Skellhos, who worked for -- 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 was the -- who actually developed the extrusion line really is well, very knowledgeable in this industry and has some fabulous things in his pipeline. So what we need to do is convert that 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 one. 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.

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?

Yes. The conversion was at $1.50.

Okay. That's a good reason. And in your last conference call, I think I remember 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. That's it. Keep up the good work.

Okay. I didn't mean to be, Brad. I just -- I was going to have a long solely and I just -- it's going to be -- it's -- I like what I'm seeing. I like what I saw in March. How about that? Not March, excuse me. Yes, it was March. I want to make sure I have my months right. Yes, I like what I saw in March, right?

Our next question comes from [ Robert Littlehale ].

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 the water section go over and you'll see the water a lot of times be on plastic. You -- statistically, if you -- 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. So -- and we love it that they're our customer. 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 are 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, I say 10,000 pallets at $55, it's a lot of money. And a company then it's -- 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, we'll -- if it's in your facility or if it's in a tight closed loop, or it's -- 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 from many of them that say, yes, we'd be interested in financing that pool of pallets for that specific customer. So we're trying to get more aggressive in that regard just because we want to put our pallets out there. 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 are. I don't know if that helps, Bob. That's kind of our thought process.

Okay. Yes, that's very helpful. Question number two, uplisting?

Yes, sir. That is -- we -- I will say I've got -- right in front of me, I've got like the last 5 years of our financials and our earnings and 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 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 cost of being on the NASDAQ. And so we -- it is in -- 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. Yes, sir, I'm glad you said that. We're going to -- there's a conference in 10 -- gosh, 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've never been to one. And Brendan Hopkins, who is our -- handles the IR for us, he had suggested I go. And it was very interesting for me because there are 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 then there are also sit down 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 4x or 5x more than ours. So it opened my eyes a little bit, and I do believe that in this world, in the public world, you have to be in a spot where you get exposure. If you're -- if a tree falls in force, no one hears it, then it really happen. 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, we need to be -- most certainly, we need to consider moving to a different exchange.

And finally, repopulating the office of the -- your office of finance, where -- what's your thinking there?

I'm glad you mentioned that, Bob. We're still outsourcing that. We have -- our long-time controller for 23 years is still with us. We hired 2 different CFOs after our CFO of 22 years, retired. It was -- 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 personnel, as we all know, sometimes you think, gosh, this is the best marriage ever. And it really -- then 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, 2 different folks on our Board, and he had done good work and so forth. And I think that industry-wise, he never just -- he just didn't grasp it. So I am trying to be very, very, very, very cautious and prudent I'd like to have -- theoretically, I'd like to have someone that's useful, 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. And -- 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.

[Operator Instructions]. 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. We -- I truly -- I'm so proud of the product line that we have. I'm so proud of the people that 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 potential customers site. And then we met with -- in Arlington, Texas, drove back over to Arlington, Texas and met -- had lunch with 2 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 these are things we do every single week. We're always trying to get that next customer and that next opportunity. So I enjoy what I do. And if anybody has any suggestions or ideas for me any time, you're happy to reach out to me. And most certainly, 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 6 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. Would you -- can you elaborate on that a little bit?

Well, I think I have -- I've kind of tippy-toed around it, but we are -- 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.