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

Good day, everyone, and welcome to today's Greystone Annual Results Conference Call. [Operator Instructions] Please note this call is being recorded. Now it's my pleasure to turn the conference over to Brendan Hopkins. Please go ahead.

Thank you, Elvis. Thank you, everyone, for joining us today. We have a brief safe harbor, and then 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 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 Warren Kruger, CEO of Greystone.

Thank you, Brendan, very much. I appreciate that. Welcome, everyone, to the call today. I have with me today Marilyn Carter, who is our General Manager at the plant. She'll just be here in case there's any operational questions that people have later that I can't specifically address. I want to first start with a big, again, thank you. Thank you very much for being shareholders or thank you very much for looking at our stock and potentially being a shareholder. Last year, Greystone, I'm very happy with the year. I wish I could say I was clicking my heels happy. I'm very happy because, again, we had a steady Eddie year. We had over $57 million in revenue. We had $0.07 a share earnings. We -- our EBITDA was $10 million, and it was a good year. We paid down. I don't -- I just -- I'm going to review some of the things we talked about in previous quarters. What did you do? What kind of accomplishments did you have? Well, as you -- as those who have been shareholders for some time know that we are prepared. We spent a lot of money on equipment a few years ago. And so we do have capacity. That's one of the things I'll address here about sales in our pipeline. However, the last year, we created a lot of cash. We created $10 million, and I want you to know what we're doing with our money, what we're doing with your money. And we spent -- we had a preferred years and years ago, another Board member, myself, Bob Rosin, put in $5 million in a preferred just to keep the company up float. We paid on that preferred for years and years and years, and it paid a hefty dividend. We were paying at the time around 11%. So we're paying $550,000. And we created cash, and we talked about it at the Board level, and we said, let's this is the right thing to do is pay that back. And so we bought those preferred shares back from Mr. Rosin and myself, saved the company $550,000 in dividends. It was -- we were able to do that because of the good things that the company is doing, and that's creating cash. We also, unfortunately, last year had a fire. Some of you may or may not know about the fire on our website, if you go under Investors, you can scroll down and you can actually see a video that we've done comparing wood fires to plastic fires because there's rarely a plastic fire anywhere in the country. And that's one of the headwinds that we always face because we're fighting the wood pallet industry, and they have a very big lobby and they don't want us in the industry. So I encourage you to go and watch that video. It's very informative actually. So in doing so, we thought, okay, let's plan for our future, a parcel of land close to our 2 -- our 3 other facilities because where we had the fire is about 35-minute drive. It's just warehouse. We had pallets in the warehouse. So we bought for $1.8 million in cash, we bought some acreage very close to the facility. We are currently using that as a trailer storage. We're not going to build anything right now, but we're prepared because we are rebuilding the 25,000 square foot facility. We scraped the land, and we're rebuilding that facility. So -- but we do have within, I would say, half a mile from our locations. We have a new beautiful piece of property that we -- there is a building on the structure. We store a few of -- just a few small items in the building now, but that building will eventually be raised and we'll have manufacturing space that we can build in the future. We also paid we bought last year, the Board authorized a share buyback, and we bought 1 million -- we didn't get it all accomplished during our corporate year, but I'm happy to say, as of right now, we've bought back 1,009,000 shares, lowering our overall share count. And so everybody earns -- I mean everybody owns a little bit more now if you're a shareholder. We did that again because we said this -- we've got cash on hand. We like what we're doing here, and we're going to buy our own shares. Additionally, if you look at our debt, we just continue to pound down our debt, and it's -- we just -- we're focused on pounding down debt, creating cash, founding down debt. So that's where we are on the income statement balance sheet. I want to talk about what's important here and what's really important, and I've been laser-focused on is sales. And last year, as we talked about in the past, it seemed sluggish last year before the election. It just seemed that there weren't the buyers out there. Right after the election, we kind of have a spurt and that was good for our fourth quarter. We were really, really busy in our fourth quarter. But again, now there's a malaise it seems, and I don't know if it's a tariff malaise or -- but I talk to others in the manufacturing world, and they're suffering a little bit. It's almost like we're right on the edge of a big explosion, but it's just people continue to hold back. So that's bothered me a little bit because we have tens of millions, if not hundreds of millions of dollars in our pipeline. So we've got -- we had some new products last year that took off a nice 45-inch by 45-inch pallet that was -- it's a beautiful lightweight product that our customers were asking for. We had a brewery, a significant brewery that I won't mention their name right now because we are working with them, and we want to make sure that they have a new Keg pallet that we designed for them and we'll be rolling out, and I'll announce that as soon as we have some in the marketplace. And it's -- again, we work -- we have great engineering and great design minds that we work with. And so I think it's going to be something we're really going to be excited about. our business with one of our largest customers, IGPS remains very, very steady. It is -- they are a wonderful customer. We love working for them. Last year, we offered -- we do about -- we do quite a bit of business with them. But last year, they offered us a significant amount more. They had some sort of machine issue. They have another plant that they own that they produce a few pallets for, but they needed additional product last year, and we were happy to provide that for them. And so our sales were up during '24 with them. And it seems like they've -- it would seem on their income statement that it's flattened out, but it's just gone back to kind of a normal. However, we've filled that. We had a nice year with Walmart. We had $7 million of revenue with them last year. And I want to talk about that. It leads me to just the pipeline. I first called on Walmart in 2003. And so we didn't get any business with them for probably 15 or 16 years. And I don't know, we've probably done $15 million or $20 million of them now. And so my point is it sometimes is a frustratingly long sales cycle. But it is -- once we get the customer, it's a wonderful thing. Walmart actually had us -- helped us design a warehouse pallet that was a little different than what we had been selling them, and it's great. It's a lighter weight. It's got -- of course, it's got our standard good coefficient of friction, so there's no slippage, but it also has more ergonomically friendly handholds, and we've changed the bottom up where they were having some damage caused by fork times. So that product is being produced and it's going out. And there's also a big opportunity with that customer and others, we believe that in certain closed lanes where they may be using a chef now or they may be using white wood. There's an opportunity for sales to that customer, more sales. And we are -- on the technology side, we're using cellular technology. We can use Bluetooth much like an Apple tag, but -- and that works. But we've been using cellular technology that actually -- we put the cellular device inside the pallet, and we can track it anywhere in the country. And so the one thing about cellular is that you -- there's only a certain amount of energy. So you have to be very careful with the energy that you consume. And so we only ping it once a day. But with AI, AI is now managing this software where if it doesn't move, then it doesn't get ping, so it doesn't drain energy. So these batteries can last 5, 6, 7, 8 years. And so we're excited about that because now there's the mysterious disappearance when we go into a situation where we have an opportunity to be in a closed loop. Now that is more secure because these are assets. There's no doubt about it. And as a matter of fact, when we sell that asset to our customers, we -- when they do a fork does damage it, and that's where most of our damage comes from is fork times. When that damage does occur, we actually buy it back from our customers. So it's shocking. We probably bought back 500,000 pallets last year. And that's real green. I mean we -- when you talk about a green business, we're taking plastic and we almost use exclusively recycled plastic for many of our products. And then when we -- when they're broken, we buy them back and we push out the fiberglass rods if they have them, which provide bone structure for racking purposes. And we reuse the rods and we regrind and repelletize and reinject the plastic. So it's an exciting time. We are finally getting some traction on our extrusion side, which is just extruded lumber. It's hollow extruded lumber. We -- I also encourage you, if you've not seen the film on that, you might go to our website and on that same under Investors, you can scroll down and you can see the video of the robot manufacturing, the extruded pallet product. It's pretty cool. But Toyota has -- we are getting a good traction there. I've seen a lot of correspondence about Toyota pushing this product down to their vendor level, and we're getting orders. So I'm excited about that. We've had some other opportunities with big, big companies to look at this, and it's been slower, of course, as I mentioned, the sales cycle sometimes can be frustratingly slow. But we've got -- we've talked to Apple about this. And so we're excited about the extruded product. To our other injection line, we are working on some elephants, and we continue to hunt of smaller opportunities, but we are working on some very, very, very large opportunities. And the beautiful thing about us right now is we are positioned very, very well. We don't have a lot of debt, but we have a lot of capacity available. And we are working on that, right, as we speak. We've got. In the past, we use distributors, nonstocking and stocking distributors. And for the last 2 years, we've had boots on the ground out of our own corporate entity. And they're good boots, too. Ron Schelhaas, who I've worked with for almost 20 years, is out there, and he's worked within the Walmart system. He's worked within the Simplot system, which Simplot is a big potato company, and we make beautiful freezer pallets for them. So we also have a gentleman named Gary Morris, who's been working with us. Gary has been around this industry for 20 years. And it's -- I will tell you, for me, who I've been around since 2003 as well, it's really a nice feeling when you have people around you that understand the industry -- understand how hard the industry is and understand the huge opportunities within the industry. And I wanted Marilyn in here as well on the operational side because we work with our employees, and Marilyn has probably been with us 17 or 18 years now. So she -- and grew to be our General Manager. So she -- it's a wonderful story there. Anyway, that kind of gives you a broad background on the sales, year-end and where I see us going. But I will say we have to put on sales this year. We just have to -- because the money will -- earnings will drop from the sky if we get our revenue up. And we are out there daily hunting. So at this point, I'll open it up to questions. And hopefully, I can answer anything that you guys have to ask.

[Operator Instructions] And we have no questions at this time. Brendan, I'll turn the program back over to you for any additional or closing comments.

Brendan? Let me finish up, if I may, if Brendan is on mute. I just want to -- again, I want to thank our shareholders and know that you -- the team here we talked about this morning, we win as a team, and it's fun out there, and it's fun building something. And we just need to out there and sell now. That's it. That's -- we've got a wonderful operation. It runs very, very well. Great people. Many of our employees have been with us years and years and years. We have beautiful facilities. And of course, I have an open invitation for any of our shareholders at any time to come to Bettendorf, Iowa, see our Recycling Center, CR 2 manufacturing, our 260,000 square foot manufacturing centers. It's a pleasure and an honor to be CEO of this company.

And Brendan and Warren, we do have 2 questions queued up. Would we like to take those at this time?

Yes.

All right. Our first question is from Robert Littlehale.

Could you just give us a sense of what your incremental capacity is currently?

I could probably put an additional $40 million in revenue on just on our injection machines, and that's probably light, but that -- I'm trying to be conservative. I could add $40 million. And that's -- over time, we probably spent $68 million on equipment over the last 23 years. So we are prepared -- we only have now our debt, as you can see, when you see the balance sheet, it's really for a company this size is just de minimis. And we also on the extrusion line, we probably can put $5 million to $10 million there. So overall, it's a big number. It's $45 million to $50 million that we could add without adding another Warren, without adding another general manager without -- so you can see why our focus is so much now on not building but now going out and filling machines.

Was there insurance that backstopped you on the fire?

Yes, sir. Yes, sir. We did the numbers -- what was -- do you have any idea? I can't remember. Yes, we had full coverage. The facility that burned, it was -- it's out in the country. There's two 25,000 square foot facilities across the street from one another. And it's really, they're old, older warehouse type of facilities, and we had some sort of animal. They assumed it was some sort of animal that chewed on the lines and caught the building on fire. So that was -- because it was -- at night, there's no one around, and it started at night, and it went on for quite a while, and it's a testament to what -- like we talk about plastic pallets all the time. It's not like some giant inferno and the Lava is flowing down the mountain. It's not. They burn and they smolder and unfortunately, we had enough damage and we had to raise the building. But it was structurally -- the building was still there. And we -- I think we purchased those buildings for less than $200,000, $2.25 or something like that. And we put good money into them to -- but we had sufficient coverage that our new building will not -- we will not have really theoretically come out of pocket because the insurance will take care of the construction of the whole facility.

What's your current headcount?

175 full-time employees, and then we've got 30, which we would call leased employees. So we've probably got about 215 people.

Are they hard to find?

No, sir. It's actually -- we leased some when it was a little tougher after COVID, we leased probably 75 at one time, and that was -- that worked for us very, very well. But now that things have kind of calmed down, we are -- we do have job applicants that come through our facility. But it's funny because we -- a lot of our staff, it's a funny blue-collar company because we have great staff and so many of them have been here for years and years and years and years, and they have a 401(k) and they make good money and they're good workers. So we are very fortunate in that regard. And I'll take my hat off to the people I work with. We make it a nice environment. We have Christmas parties. We have Thanksgiving parties. We do things to try to bring our people together. So to answer your question, it's been much, much, much improved and easier. And right now, we haven't gone through another growth spurt. If we go through a growth spurt and we're filling equipment and we need volume, we will have trained people, trained operators. That will be great. What we'll need our line staff to work the -- pulling the pallets and putting the pallets together. And we can -- I'm very, very confident we can fill that capacity in a relatively easy fashion now.

There was some talk about uplifting. Is that sort of on the shelf at the moment? Or what...

No, it's something -- we're actually -- we're working with a few groups to make that a reality. So we think that we -- on the OTC level, I've gone to a couple of these small conference, small OTC type companies, I show up, and I think it's going to be all OTC companies, and it's kind of a meet and greet investors and so forth. And frankly, there's a lot of NASDAQ players there. And I'll talk to these NASDAQ companies about their valuation, and it's shocking to me how different it is on the NASDAQ versus the OTC, and that just goes to the -- there's so many people who can't buy our stock or prohibited from buying our stock because we're on the OTC. So it's something that we have discussed over the years, but the focus -- there's a focus on it now.

Next, we have Joe Russo.

So I just want to ask around capital allocation. You completed the buyback in the last year. So curious if you're thinking about re-upping that? And then just along the same lines, just your -- the outlook for CapEx this year.

We are not going to spend a lot of money. It will be maintenance CapEx this year, just really maintenance CapEx. Any capital expenditures will be for tools -- new tools for a specific customer. We're not even going to do any -- we've done some -- we still have a pallet last year. We think it's one of our better pallets. It's a mirror pallet that we really designed so that quick Crete, the concrete company, they have a real tough time in that industry because it's brutal. It's brutal. And we designed a product for that. And we just haven't gotten in front of the right people with that product, right? And it's -- now that we can put cellular technology in it, that might very well be that what pushes that product over the edge. But we're not going to spend any money on CapEx unless it's maintenance CapEx unless it's something like adding a tool, if we kick off a program with someone and we have 1 or 2 tools, we may need a backup tool just in case something happens. That's where we'd spend our money. We are going to continue to pay down debt, and we're going to continue to be prudent with our money. We -- there are -- we have discussed buying back more shares, frankly. And we'll manage our cash well on that, though, and be careful. One thing we are spending some money on, and I'm glad that we've continued this discussion because I have purchased cellular tracking technology, some cellular devices, and they're not inexpensive. So there will be some money spent there. But those will be recovered -- that money will be recovered because it's really -- it's a cost -- almost a cost of materials. And so we will be recovering that as those products go out the door.

Got it. That's great. I guess just a quick one. It sounds like for the year, there's some puts and takes on revenues. Obviously, we hope to get some new orders, new customers, but it sounds like IGPS might be a bit lower this year, maybe like Walmart's potentially a bit higher. Just curious like how you think like the baseline is for this year versus last, if you were to kind of put together. I know it's hard to say.

For me, it's disappointing because I have a sales -- I can put on a sales hat and I've done so and I've been a part of a lot of the sales over the years. And so I love that role. I love that. And I really -- I'm frankly a little disappointed that I haven't -- we really haven't dug in another, like I said, a big elephant. And we're working on that. One of the things is still -- and you're going to hear this for 23 years, you've heard this, there are still people who just will say, well, we need to have a fire retardant and FM approved fire retardant pallet. And it's -- you go from a using recycled material, now they want to know where your material came from and the lineage of the material and then you're adding chemicals into the material. And instead of having something that's $55, now you're at $90. And then, of course, then the sales go away because no one wants to spend the money. So it's -- and it's a misnomer again. And again, I go back to the film we did and it's on our website. That -- it's just -- it's something that FM and UL make a lot of money doing the testing, but it's something that is really if we could push that question out of the way, that would be a god sand.

Gentlemen, we have no further questions at this time. Brendan, I'll turn it back over to you for any closing comments.

All right. Great. Thank you, Elvis. Everyone, I appreciate you all joining us today. I would say that we have paid some lift service to the NASDAQ uplist over these past few quarters. And I can assure you that we are indeed working with some groups to facilitate that happening sooner rather than later.

Thanks, everyone. so very much, and we'll talk to you soon.

That concludes our meeting today. You may now disconnect.