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

Good day, everyone, and welcome to today's Greystone Q4 Results Conference Call. [Operator Instructions] Please note, this call is being recorded, and I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Brendan Hopkins. Please go ahead.

Thank you, and thank you, everyone, for joining us today. We have a brief blue sky statement, and then we'll start. So 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.

Hello, everyone, and thank you so much for being on the call. These are the times that I wish that there was better news to present to you, but the news is the news. And you've all gone through our 10-K, and you can see we had a very difficult year ending May 31. And again, I'll go back and I'll rehash the history so that those who don't know will have a fresh idea of what happened. We had an 11-year relationship with a company called iGPS. We started with them with 1 mold, 1 machine, and we went up to about 1.2 million pallets per year. And it was in October last year, I got a call and they said today is our last day after 11-year relationship. Well, it was most certainly unexpected because we were grinding about 400,000 broken pallets a year and reprocessing that resin. And these are things that are not easy to do. They're difficult. You have to have the equipment, you have to have the knowledge, you have to have the personnel. And then you have to have the equipment to reprocess it, to put it in a BB form to reutilize it. And it's great because that's the world we live in. It is exactly as we present ourselves. We take waste plastic and we make new products. So it was a wonderful thing. And we never anticipated that they would leave us. In fact, they did. They've decided to go out of the growth mode and go into just a more like reap what they've sown type of mode. And they did have an operation to produce pallets down in Dallas, Texas. So they dropped off about 800,000 pallets a year in their growth plans. So that left us in a situation that presented us -- we had to jump on it. And we laid off about 140 people in December, and we have pared back dramatically. The good news is we immediately reached out to our bank, IBC Bank. They've been a fabulous -- we've had a fabulous relationship with them over time. We said, hey, we need to go immediately into interest only for 2026 for the year, and they agreed to do so. And part of what you'll see in our 10-K is everything is current. Well, our auditors make us show everything is current. But in fact, we're paying interest only and our banker has been gracious enough to say, why is it all current when it's not due until the date of the note. But in fact, the auditors, the way we're structured is they have to put it all as current. So we feel comfortable with our banking relationship. We feel comfortable with our plan. Let me just go to the financials. As you can see, we're off about $30 million. And that $30 million, it matters. Once you cover those fixed costs and you put on the sales and everything drops to the bottom line. And so we have had really a tough year filling that void. And so I anticipate that it will be in calendar year '27 before we're really fully back on board. We've had numerous discussions. We have a relationship with multiple firms that we're doing projects with now that will add revenue. We have a keg pallet for Yuengling that we have produced and Yuengling said that they couldn't take it in the summertime, but I anticipate we'll be selling to them in the fall. Walmart, we've had a $50 million relationship with Walmart over the last 5 or 6 years. We continue to provide pallets to the Walmart system, but we are behind our schedule with them. And there was some leadership change at the top at Walmart. And our contact who I had for about 20 years, a gentleman named Bill Greetan, he retired. And so we've been dealing with new folks. But all that being said, our team at Greystone continues to work diligently every day to fill the sales volume. And what we have done is, during the period of time that iGPS was our customer, we were prohibited from going out and leasing pallets. We are now in full-scale mode. We are tracking and tracing pallets and doing that in multiple areas. We have a firm out of Philadelphia that's been a wonderful partner that is -- they have their own tracking and tracing program, and they're testing our pallet with multiple customers. We have another firm out of California that they're testing our product with track and trace and their own track and trace program, and that's been quite enlightening. We have another big leasing program that we've quoted on, and I anticipate that in the next 90 days, that will come to fruition. It's a large Midwestern company that's been using pallet -- wood and pallets for years, and they generate plastic and they know that they should be on plastic, and I anticipate that happening. We also have a double-decker pallet that we have designed. It's the same on the top as it is on the bottom. It will take -- we're doing some of this in the concrete industry, and we've been tracking and tracing pallets that can carry the concrete. And it's been quite successful. And we also anticipate that we'll continue to get some more of that business. Be that as it may, we have to replace revenue. And that's our focus right now is replacing revenue and managing our expenses and our capital. We've really limited any capital expenditures except for maintenance CapEx. So I'm proud of what our internal staff is doing in the Bettendorf area. And our new equipment in Palmyra, Missouri, we've had some of that subleased. It was empty equipment, and we've subleased it so that we could get some revenue off of those machines. And again, I look forward to opening it up to questions because all I can do is answer your questions and say that we're working very hard every day for you. So at this time, I'd be happy to answer any questions that our shareholders might have.

[Operator Instructions] Mr. Kruger, it appears there are no questions at this time. I'll turn the conference back to you.

Well, I will -- I mention to anyone on the call, and there's quite a few that we have on the call this morning, I am available every day for my shareholders to talk to. And so if someone wants to ask questions offline and ask about our capabilities, what our strategic plan is on the sales side, I'd welcome those calls. And if everyone has a pencil in hand, I want to make sure that you have my mobile number so that you can reach me at any time. And that's 918-231-0616.

And Mr. Kruger, we did have a participant signal. We'll go ahead and take that question from [ Eric Nickerson ].

I had some conversations with Brendan where he's mentioned that you guys are doing some sort of sideline work, grinding plastic or grinding pallets for other companies. I'm sorry, I don't recall the details of that too well. But apparently, it's a revenue generator. I wonder if you'd like to mention that.

Yes. Thank you for mentioning that. Years ago, when we got into this business, we had kind of a 3-legged stool and we were -- one, we were going to make and sell pallets; two, we were going to make and reprocess and sell resin. And then three, we were going to lease. Well, we took care of the leasing by getting iGPS as a customer. So we took care of that leg of the stool. We already had the -- manufactured the pallets. So we had that leg of the stool. And the third leg of the stool was selling excess plastic resin in the marketplace. We did that for many, many years. We processed and sold excess resin. But as we grew, we consumed everything we used. We consumed it all. So that was -- we really didn't generate any revenue from selling excess resin. When we knew we were going to have this issue, we contracted to grind and granulate a large quantity of plastic. And then we've also been contracted with to provide BB services to make usable BBs for the customer. And that has helped on the revenue side, and we are continuing to do so, and we are continuing to solicit business. As a matter of fact, I talked to someone today that -- that's funny that you brought it up. I talked to someone today out of St. Louis that said that they had large quantities of plastic that they reprocess, they outsource. And so it was one of those -- we'll be happy to quote on that and do that because we have the capabilities and the equipment to do so. I really appreciate that you mentioned that.

Okay. Well, good. Still we have some time. So maybe you could add some color to another comment. So you lost iGPS back in December [indiscernible] $30 million of revenues. It's been, what, 6 to 9 months since then. Have you been able to identify all of the -- where are those people that they're not selling to getting their pallets now?

Well, iGPS is a leasing company. So they were a growth company, and they're really the only large plastic -- there are 3 large pallet rental companies in America, a wooden pallet company called CHEP owned by Brambles of Australia, another company called PECO, P-E-C-O. And those companies really -- they'll go to Procter & Gambles of the world or whomever and they will say, how many pallets do you need and they'll provide wooden pallets on a per-rent per-use basis. And iGPS entered that market probably -- oh, now it's been 13 or 14 years, a long time ago. And they are really the largest plastic pallet leasing company, but they were in a growth mode for years and years and years. So a lot of opportunity to do that on that side, and people do want to lease plastic versus wood. And so -- but they are owned by a private equity company, and they were generating a lot of cash, but they were pouring all their cash back into growth and pallets. And what they've done is they've said, okay, we're not going to pour all our money now into growth. We're going to pour it into -- we're going to retain some of that money, and we're just going to go into a maintenance mode, and we're going to mow the grass we already have, and we're not going to grow any new fields right now. So that's where they are. So the opportunities haven't gone away, but they're not putting on as many customers as they were now. And that allows people like other leasing companies, other folks that want to do leasing in that world that allows them to enter and have an opportunity. So they haven't gone away. But in this world, in the pallet world, anyone [indiscernible] it's a long sales cycle.

Yes. But I guess the thrust then of your revenue recovery mode is to try to become another big player in leasing. Am I right?

That's one aspect of it. Yes. We think the leasing -- we think there are opportunities for pallets in the leasing industry. Most certainly, iGPS has proved that.