Mission Ready Solutions Inc. (MRSH) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Mission Ready Solutions conference call. [Operator Instructions] I would now like to hand the call over to your speaker today, Glen Akselrod. Please go ahead.

Thank you, and good afternoon, and welcome to the call today, where management of Mission Ready Solutions will cover some of the company's recent developments. To introduce our speakers, first, we have Jeff Schwartz, President and CEO of Mission Ready. Jeff has led Mission Ready Solutions as President and CEO for the past 3 years, during which time he has presided over exponential revenue growth as a result of strategic acquisition of Unifire and the ability to assemble a highly qualified team with a common vision for the future. And then we will hear from Marcus Treiber, the company's Chief Operating Officer. Marcus is a former Marine and our resident expert in all things related to personal protective equipment and government contracting. Marcus has spent over 20 years -- Marcus has over 20 years of experience in the industry as a project officer for the United States Marine Corps and as an industry executive. Please note that some of the information you will hear during our discussion today may consist of forward-looking statements, including those regarding revenue potential, future business outlook and market data. Actual results or trends could differ materially from our forecast. Mission Ready assumes no obligation to update any forward-looking statements or information, which speaks as of their respective dates. How did a small-scale product manufacturer go from annual revenues of a few million dollars to $100 million in booked orders in just over 1 year? And where did this company -- where will this company be a year from now? Management will endeavor to answer these questions, explore the driving forces behind the sales growth that began in 2019 and discuss the strategies being implemented to build further momentum and ensure that the top line revenues translate to healthy and sustainable bottom line revenues as well. Jeff, please take it from here.

Thanks, Glen. I really appreciate that. Guys and gals, I really appreciate you joining us this afternoon. Looking forward to speaking with you and kind of explaining more about where we're at and what we're doing as a company. As you can tell from Glen's comment about the $100 million, that is we're a transformative company really being able to move forward and growing how we do business, but most importantly being able to solidify the business for the future. So if you look at it, in 2018, the company was a CAD 5 million company. And now this year, we'll exceed over CAD 100 million in delivered sales. And so if you look at the transition of going from '18 to 2020, it's a wonderful opportunity for us to have built this business and been able to move forward and grow the business for the future. Our sales strategy, once we acquired Unifire, really was taking the biggest part of Unifire and the success of Unifire short term and utilizing that as our tool to move forward. So in other words, building on the core and building out. So when you look at what's happened to us so far, we went really aggressive last year around the TLS contract for about 4 or 5 months. We knew that if we did that, then it would give us a catapult to move into 2020, which it has. And so we've been strengthening the company month-by-month as we move along, going after other opportunities and other things that we can do to build off of the TLS contract. We've tried to continue to be nimble. We seem to be able to move and talk -- or be able to move and build the business. Marcus will talk about some of the things he and his team have been working on. And then also building other opportunities around the TLS contract and other contracts, being able to book distribution business. We've started that in building and making that successful. Other contracts like FEMA and GSA -- and we'll talk a little bit more about GSA a little further on in the conversation, there were a couple of questions around GSA and next step. Open market, an open market opportunity in the government is much -- is a big opportunity for everybody to be able to move forward and win contracts. That's something we're really looking forward to continue to expand on. Our commercial distribution sales, that's a new avenue for us. We started really focusing on that recently. And I think the future of that business is going to be extremely exciting on how we're able to build the business. So how do we get there? How do we do these things? It really was more than anything, it's really bringing in the right people, guys that had great experience in the government world but also had great business relationships that have allowed us to continue to build on the business. And so as we move forward as a company, we continue to see these opportunities just building stronger and stronger. Yes, will the contract side be a significant piece of our business in and going forward? 100%. Well, we're going to build on that to strengthen the inner core of the company as we move the business forward. Again, let's go back $100 million in sales -- excuse me, in delivered sales for this year. That's as of right now. That means if we don't sell anything else the rest of the year, that's where we're going to be. So you can imagine going into the busiest part of our year, starting in June, July, August and September, where we can go, things we can do. And so we're working diligently to be ready for that date. One of our challenges has been to -- as we grow the business, and you can imagine with our growth, is the capital need. So we're really refining some of that moving forward with the partners we currently have but also refining in some things that we need to do to be stronger as we move forward, so again right people and being able to move the business forward. When you look at our capital needs, again we have to understand, growth at this level is hard to keep up with, with limited capital. But guess what, we're going to be able to do it. We'll show that in the near future. So again, opportunities as we move forward as a company. Unifire acquisition was extremely important to us, made a really big opportunity for us to grow this business quickly. And we see that there's other opportunities to continue to do that, and we'll talk more about that in just a minute. So the TLS contract, I mentioned that a little bit and how that affects us. And so when we look at the TLS contract, currently, as everyone knows, I think we are in a situation with DLA, we're trying to mitigate that situation. We currently are trying to work through the channels, the right channels, to be able to put ourselves in a much stronger position than we have been. But again, currently, I just want to remind everybody, every day between now and the end of this bridge contract that we're under and going forward, we'll be able to bid on -- we're bidding contracts every single day, again contract worth $4 billion. We continue to see opportunities on a daily basis that include, which is a little different for us, some PPE opportunities. And so again, as the business grows, we've got a lot of strategies that we put in place to be able to continue to move the business forward. And for us, everybody in the company is extremely excited about where we're going. And to hit that $100 million milestone in a couple of years -- or actually a year and a few months is extremely exciting. And so -- but we believe that, that number can continue to grow. So again, that's the company, where we're at today. And I'm going to ask Marcus to talk a little bit about some of the other projects and things that we're working on to give you guys a little bit better idea of where we go in the future. But again, look at the numbers, understand the numbers and understand the effect that it can have on our shareholders going forward. So Marcus?

Good afternoon, everyone. This is Marcus Treiber. I'm the COO of Mission Ready, and I appreciate your time again on the phone call with us this afternoon. I want to thank Glen for putting this together. And thank you, Jeff and Terry and our Board, for continuing to support what we're doing down the operational level of Mission Ready and Unifire. So as Jeff spoke earlier about, we have lots of things going on with the SOE TLS program. We also have lots of stuff going on in a lot of other aspects to the company. One thing from me to all you shareholders, we set off on the Unifire purchase April of last year. We did a presentation to probably a lot of the people on this call, and we talked a lot about SOE and TLS and because we were trying to bring everyone up to speed with that. But I don't want anyone to ever think that we were trying to be a one-trick pony and that anyone inside Mission Ready, to include our Board, sat there and said, "Okay, we've got this nice, cool SOE TLS contract and we're just going to sit back and see what we can do across that." Absolutely not. We all took a mission of trying to grow the business in as many different directions as possible, and we all started putting in all the processes and all the components and all the right people to grow the business and continue to drive that. So Unifire is a backbone to what Mission Ready is. And Unifire allows us to reach into the vast distribution network that they had already established and allow us to grow that distribution network and then grow also how we partner with different companies out there to provide those products with us being the belly button and pushing those out through different partnerships, to lots of different customers. Under no stretch of anyone's imagination did we think that we could touch every single person that we needed to touch down here in the U.S., international, abroad, all of it. We couldn't get to everybody we needed to. And we needed to form some partnerships to get that done. Recent news releases kind of backed that up as us accomplishing or beginning to accomplish that task. And we plan on growing that bit of our business quite a bit over the next upcoming years. There is so many customers down here and so many different inside tracks that you have to be able to run in the contracting mechanisms that just going it alone and facing the storm by ourselves, sure, we could be moderately successful. But forming those partnerships really, really made a lot of that possible for us, and we will continue to grow that. One thing, obviously, we had a news release go out that we've -- with the COVID pandemic here and worldwide. But obviously, here in the States, it's been pretty ugly. We had to react to that. We put the bones in place to be able to react to any situation. That's one of the things that operationally as a company we had to have go forward. Are we going to deploy troops somewhere? Is the world going to change in a moment's notice? And in every one of our experiences, we've had to respond to the 9/11-type issues or hurricane or whatever the case is. So we were already formulating our plans in how we react to things and building different relationships to be able to react to that when obviously the world decided to catch a pandemic. So we were in a good place to react to that. It definitely was challenging for Mission Ready and Unifire in the initial phases of this because the U.S. government took their gloves off and said, "Hey, guys, you can bring in product basically from anywhere in the world, to include China." So that is obviously a different ocean that we don't swim in on a day-to-day basis in our standard government contracting business. Luckily for us, we had a lot of good relationships. John Stone, Skip Church, Jeff, myself, the whole team really pulled together to understand how we do find these people, how do we vet these people and how do we make sure that we can get product and provide things on different wins that we had across all of our multiple contracts that we currently have, and let's go find some new contracts as well. So we put together those teams to do that. We've partnered with some risk mitigation folks. And we learned a whole lot about the China market and the overseas market of production of PPE in a very quick time. And we absolutely noticed that FEMA, who is already a customer of ours across SOE contract, the TLS contract, they needed vast sums of things and they needed them yesterday. So we were able to navigate the contracting process with FEMA. I think all of our investors saw that in our recent award that we have of I think it's CAD 24 million with an option to bump that up again if FEMA executes that option, which we fully expect that they will. The good news is, since we had done our homework on the upfront side of this, we were able to get the product, and we are getting the product and we will be delivering it to FEMA quickly on things that they need every day. So it was a definite win for the company. It was a definite win for our team. And it was a definite thing that backstopped really all the efforts that we had. So working together inside Unifire, inside Mission Ready and all our partners in the space to really locate these suppliers and to be able to get a direct award of this magnitude from FEMA is a huge success for us. And it really goes a long way. The win is awesome. But as soon as these products are delivered, that will be even better. And it proves yet again that Mission Ready and Unifire are a teammate for people as they go forward into whatever they need to get their job done. One thing in regards to what we've done with the COVID-19 team, there are literally hundreds of opportunities presenting itself every day across all the different contracts that we have. And our team is being responsive to many, if not all, of these on a daily basis. We see that not changing profile. So when we are turning in things to FEMA directly and they're asking for, "How many can you give me in December of this year," kind of reading our crystal ball a little bit, but we think that the federal government, at least here down in the U.S., if not worldwide, is really positioning themselves to need large volumes of these PPE supplies for quite some time. Obviously, that can change on a moment's notice. But none of us are biologists or anything like that. But just looking at what they're predicting on having to use, we think that this PPE in the COVID-19 business is going to be here for a while. And we think that we're well on our way to establishing ourselves as a plank holder in supplying some of these things back. I know a lot of the investors, we all read the news, we all look at different things, there's gigantic companies out there that are supplying these things to FEMA as well. And we definitely take pride that we are a small business. We're under that 500-employee mark and that we're able to provide these things to FEMA. So definitely a big award for us and definitely something that we see growing as this continues. We saw the GTED purchase order that we announced last week. And that was CAD 5.5 million. So that's the Grand Traverse Band of Ottawa and Chippewa Indians. They are a what is called a Super 8(a) company down here. It's not an official designation. It is just kind of government folk slang, I guess. But it's an American Indian-owned company. And they're great guys. They're definitely aggressive about what they do. They have lots of business units underneath the company. And they have a unique ability to go into places that Unifire and Mission Ready cannot. So we have enjoyed growing and building that partnership and then seeing some fruit from that labor already. And we expect that to continue to grow and just build out over time. A lot of people think that when you form a partnership, it's just, "Let's be advantageous and take advantage of whatever the situation is at the time." One thing that Jeff, myself and our legal team has been very solid about, there's -- we have a responsibility really to the shareholders and also the taxpayers down here in the States to get the stuff at a fair price and make sure that things are handled on our side, that we never have any issue with price-gouging or anything like that. So that's one of the things when we start talking to partners, we work very hard to ensure that there's 100% transparency through the entire process and that everybody wins, to include the customers. So we're going to continue pushing that out with GTED. We think that they are going to be a good long-term partner for us for many things. They do not have a division of the company that acts as a distributor. And from all the conversations that Jeff and myself have had with them, they don't want to get into the distribution business because they're too busy doing other things. But they like to partner with us and be able to offer all the different products that we can bring to bear to some of their contracts and some of their customers that are unique to them because of that Super 8(a) status. We're pushing very, very hard, driving all these bids and all these actions. We think that all the COVID-19 response team work is going to really fall to our bottom line. This is work that obviously we had not planned on. We -- no one can predict these things happening. And to the scale of this thing, we want all this stuff to fall to our bottom line. So we didn't have to go out and hire an army of people to build this COVID-19 team. We were able to source that internally and reprogram some people's day-to-day operational activities to provide the response that we needed and then fall back into the Unifire backlog to establish some stuff. And that's one thing that Jeff and I talk about very frequently is how do we mitigate cost as we grow business. So it's very easy to go out and hire 50 guys, 100 guys, whatever, and [indiscernible] all the profit while you're trying to build business. So we've done a great job of holding that down, holding down our cost and then really taking the ability to pull all these wins and put them down to the bottom line of the company. So Jeff talked a little bit about the government buying season, the June 1 to September close being the time when the government spends 75% of their money or whatever that true number turns out to be. One thing that I absolutely want to point out on the call is that we predict that the government is absolutely not going to stop buying, one, COVID-19 supplies; but two, all the requirements that were in existence for fiscal year 2020 inside the federal government, they still exist. They didn't go away. That money was not taken from Peter to pay Paul. We can talk a long time about where the U.S. government finds a lot of their money. But at the end of the day, the COVID-19 is an added funding line on top of everything else that had to happen. And I think it's important that shareholders and people that care about Mission Ready, they understand that. They're still spending money. Yes, did the process slow down in the initial part of the COVID-19 pandemic as basically the entire U.S. government had to transition to working from home? Absolutely, have slowed down a little bit but not greatly. And most of our contracts and most of our customers, we're still talking to those guys on a daily basis, and we've seen things just uptick higher. So all the current things that the government needs to function are still going to be brought across all these contracts, the SOE, the GSAs, all that kind of stuff. If anything, you're going to just see more money flowing towards these contracts and more opportunity for Mission Ready and Unifire and our team to be successful. When I talk about our team, I think it's super important, we talked about GTED on this call. But we have more partners that we work with. We have more people that represent our team and that work with us on a daily basis to grow the business. And I think it's very important for me also to point out that, that's not just Unifire business. We work through some great partners to do a lot of great things. Some of these things are pointed right towards PTFM, some of these things are PTFI things. We work every day trying to build the right relationships to bring as many opportunities into this house and this Mission Ready team as possible. So one thing that we're also saying that I want to point out to everyone on the call is that the SOE contract has traditionally just been used for the types of equipment and things that we see go across the SOE. Even though it is very broad, if you've been in the game for a little while, you kind of get a flavor for what's sliding across the contract. And as a result, you don't expect to see a whole lot of different stuff. We do see some oddballs, but not too often. Although with the COVID-19 full pandemic, we are starting to see the PPE items come across the SOE contract as well. So that is a definite change from what we saw or what we predicted happening with that contract, and it's a good change. It's not something that's going to slow things down for us. It's not things that are going to hurt us. We just think it's going to be a lot more opportunity for our combined team to get things done and win some additional awards that we weren't predicting or seeing. Well, that kind of sums up the COVID-19 stuff that we're doing. It's important for me that everybody understands that when Unifire was purchased, we were not going to be a one-trick pony. Never, never, never in our minds were we going to sit back and just relax and not attack this contract. We knew that we had to diversify Unifire as a company and Mission Ready as a whole across as many avenues as possible and to as many different lanes of business as we could, commercial business, business-to-business business that we didn't have before. We knew we had to rebuild a lot of different alliances and a lot of different customers direct into some legacy buyer business and things like that. So we're very happy that we have accomplished that in a small scale and that we will continue to accomplish that on larger and larger scales as time goes by. And once again, it's super important to me to thank all the shareholders on the call for sticking with us and allowing us to provide that and get that diversification built into this company. No one wants to have a single-shot thing. Obviously, Jeff talked a little bit about us being on the SOE $4 billion bridge contract right now. Anyone who knows us also knows that we're in the protest phase with the DLA 10-year contract that's on the backside of that. We previously reported that we believe we have a meritorious claim. That has not changed. We still believe that we have a meritorious claim. We have the best lawyer down here in D.C. to work with us. And we do that a lot on a seemingly daily basis. And then we have only gotten stronger as time progresses. We think we're good. I think we have a meritorious claim. And we hope to someday soon be back in a position to come and announce to you guys whatever the determination is. But we're very positive on our side. And we think that, that's just the lay of the land. So I don't have anything more. We super appreciate you guys joining us, and I'll pass it back over to Glen.

Thanks, Marcus, and thanks, Jeff. So in the press release, we asked our audience to submit some questions. We've had a number that have come our way. So I'll just read them in order and then either one of you guys can answer. So the first question is how is the company responding to the need for personal protective to combat the pandemic from a structural and strategic perspective?

Right. So obviously, guys, I got to wax poetic a little bit about this before. And instead of stating everything over again, I just want to say we've already taken a lot of steps to position ourselves to be a PPE provider, not only for the federal government but down to the state and local level as well. I think that's the key is that if you would have asked me this a year ago, I'd say, "Hey, we're going to get in this market and provide for the federal space." But fast-forward a year, I think we're providing this to the state and local level right now, and we're going to continue that push as time progresses. And the need continues to present itself across those different levels of buying activities down here in the U.S. and also up there in Canada.

Super. Thank you. Next question, what are some of the steps being taken to reduce operational costs and achieve profitability?

Yes. Glen, I'll take that one. And so folks, what we're doing is we really have gotten, over the last 12 months, people positioned and also looked at facilities. And so we have shuttered a facility and have folks working from home. That's one of the ways we've done it. We've reduced some headcount in the company to be able to continue to move forward. But also as we do that, we're focused on sales and driving sales. So we're not going to replace an employee that we reduced within the sales-driven opportunity. And so that's really the focus. The big guys, and what's hitting us hard right now is really the cost of capital. And so I can tell you that everybody within Mission Ready, the Board of Directors all the way down through all of our employees, we're diligently looking at ways to reduce our capital cost. And we think right now, we've got a couple of really good opportunities that we're working on that I think can help us to do that. And so once that happens, again, I think a lot of that is just going to drop directly to the bottom line. I think the other thing to look at also is just the sheer volume of orders and sales that we're going to deliver against. I think we're at a point where a lot of things are going to drop to the bottom as we win new business. So again, for us, it's exciting times and being in the position we're in, and we think we've done a really good job at controlling costs.

Super. Thanks, Jeff. Next question, Do you intend to hire additional salespeople?

Glen, I'll take that. Absolutely. We intend to grow our sales arm of the business as much as we can support. I think that alluding to Jeff's point, right, the cost of money is expensive. We don't just hire people just to hire people and put them at a desk. And I think one thing also, hiring additional salespeople, I think one thing that we've done over the last year is to go back inside Mission Ready, Unifire, PTF. Everyone is a salesperson. And if you're not a salesperson, we don't want you as a part of our organization. So we wanted to 1,000,000% completely revamp the way that Unifire was internally amongst itself and how they thought about themselves. And I think that we've gone a long way to accomplishing that goal, and I think we have a long way to go. But bottom line, this Mission Ready organization and groupings of companies, if you're not thinking about sales in every aspect of what you're doing, either accomplishing a sale, completing a sale, delivering on a sale or building a team to go after different sales, we don't want you on the team. And that's the message from the top-down. And I think it's been a good message, and I think it's hit our employees and I think it's hit our bottom line. And I think that from my perspective, to when I try to talk to shareholders or anybody else in the company, I hope they understand that we're aggressive. We're salespeople. We have a sales organization. And we have something to sell, and we're going to do it every single day.

Thank you, Marcus.

And Glen, just one comment there. [ John ] had a strategy since he came to work for the company and now we're just continuing to build on what John calls verticals and so forth with the government. And for us, right now, it's capital. Having that capital will allow John to really build and get some things really accomplished and continuing to build on those peripheral-type items, to include the TLS contract. So the sooner we're able to pull that capital together and reduce our -- some of our capital costs, then we will be in a much better position in being able to bring on those people that can make a difference in sales.

Super. Thanks for that added color, Jeff. Next question, what is the status of the GSA MAS schedule consolidation? And what is the plan to build the company's revenue through its GSA schedules?

Yes, so I'll take...

Go ahead, Jeff.

Glen -- I'm sorry, Marcus. But hey, so guys, the GSA MAS schedule, we have been working definitely to move that forward. The COVID virus has actually slowed that a bit. But I can tell you all of our schedules are currently in several phases or in different phases within the three-part phase of getting us into that Multiple Award Schedule program. So we're trying to take advantage of as many as we can. I do know that at this point in time, we've got millions of products teed up to go into the GSA schedule or in the GSA schedules. And we have a gentleman that works for us that runs the GSA program and does a lot of other things for us. But again, that guy really knows GSA, kind of moved GSA forward. So we're waiting, hopefully, in the next couple of months, some closure to this. I know they originally had planned on having it closed by the end of this -- at the end of June. And we're hoping they'll get it closed very soon. But we don't think it's going to be at the end of June, probably more along the lines of end of July. But again, GSA MAS schedules will allow us to affect the business in a lot of different ways. And Marcus talked about the different vendors and so forth that we're working with. Those guys are teeing up to be able to put on -- or we're teeing up to put on our GSA schedules. And just this afternoon, Marcus and I had a conversation with Honeywell about being able to bring them, put their products on our schedules and so forth. So exciting to work for big companies like that, and I think we'll continue to do that.