Worksport Q3 2025 Earnings Call Transcript

Quartr
Provided by Quartr
November 13, 2025

Key Takeaways

  • Positive Sentiment: Q3 net sales were $5.0M (up 61% YoY and 22% sequential) and gross margin expanded to 31.3% (from 7.9% a year ago), with management targeting ~35%+ by year‑end and 35–40% for 2026.
  • Positive Sentiment: The HD3 tonneau is in production and the Solis solar tonneau and Core portable power system launch on Nov 28, 2025, with an initial limited rollout (~1,000 Core units + 900 batteries) representing a near‑term ~$2.5M revenue opportunity and larger scaling planned for 2026.
  • Neutral Sentiment: Liquidity includes $3.8M cash, $3.3M available on the credit line and total indebtedness reduced to $2.9M, but YTD operating cash use was $11.2M (Q3 burn ≈ $4.3M); management expects financing need to decline as it targets operating cash flow positivity in Q1 2026.
  • Negative Sentiment: Management reiterated risks including ongoing net losses and "going concern" language in the 10‑Q, reliance on external capital, tariff and supply‑chain exposure for some components, launch/adoption and margin execution risks, and equity/warrant overhang.
AI Generated. May Contain Errors.
Earnings Conference Call
Worksport Q3 2025
00:00 / 00:00

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Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

Good morning, everyone, and thank you for joining Worksport's quarter 3 2025 earnings call. I'm Steven Rossi, Chief Executive Officer and founder of Worksport Limited. With me today is our Chief Financial Officer, Michael Johnston. Today, we'll walk through our financial performance, operating progress, liquidity position, and how these results align with our strategy to build a high-margin, scalable platform in truck accessories and clean tech-enabled power solutions. We will be reviewing the financial results for the quarter ended September 30, 2025, which we filed earlier today in our Form 10-Q and can be accessed on our investor relation website at investors.worksport.com/hashtagreports. Once again, investors.worksport.com/hashtagreports. At the end of today's call, both our prepared remarks and the accompanying presentation deck will be available for download as well. After these remarks, we will open the line for questions from attending analysts. On that, let's begin. First, safe harbor statements.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

During this call, we will make forward-looking statements, including statements regarding our financial outlook for the full year 2025 and 2026, our expectations regarding financial and business trends, impacts from the macroeconomic environment, our market position, opportunities, go-to-market initiatives, growth strategy, and business aspirations, our product initiatives, and the expected benefits of such initiatives. These statements are only predictions that are based on our current belief, expectations, and assumptions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that may be difficult to predict, and many of which are outside of our control. Actual results or events may differ materially. Therefore, you should not rely on any of these forward-looking statements.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

These forward-looking statements are subject to risk and other factors that could affect our performance and financial results, which we discuss in detail in our filings with the SEC, included in our annual report on our Form 10-K and quarterly reports on Form 10-Q and other SEC filings. The forward-looking statements made in this earnings call are made only as of today's date. Worksport assumes no obligation to update any forward-looking statements we may make on today's webinar. Here's today's agendas. On today's call, we will cover Q3 2025 key performance outcomes, production scaling and operational execution, tariff environment and cost management, Solis and Core commercial launch roadmap, R&D next steps, including Aetherlux, cash and capital strategy, 2025 to 2026 outlook and path to cash flow positivity, and key takeaways, as well as some Q&A. With that, let's move into our numbers.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

Michael, walk us through the Q3 2025 financial highlights.

Michael Johnston
Michael Johnston
CFO at Worksport Limited

Thanks, Steve. Q3 was another solid step forward in Worksport's growth journey, the third consecutive quarter of growth. Net sales reached $5 million, representing a 61% growth year over year and 22% sequential growth from Q2's net sales of $4.1 million. Gross margin continued to expand, 31.3% this quarter compared to 7.9% in Q3 of last year and 26.4% in Q2 of 2025, demonstrating the impact of operational efficiencies and a stronger product mix. Our net loss of $4.9 million reflects an ongoing expansion of product offerings and commitment to investing in scaling our manufacturing ahead of commercialization milestones. While our revenues and margins are getting stronger, we continue to invest in growth in brand and corporate awareness. We believe it will position us to reflect operational cash flow positivity and profitability in 2026.

Michael Johnston
Michael Johnston
CFO at Worksport Limited

We ended the quarter with $3.8 million in cash and an additional $3.3 million available on our line of credit. Total working capital was $6.3 million. Importantly, total indebtedness reduced to $2.9 million, down from $5.3 million at year-end 2024, a meaningful strengthening of our financial stability. Overall, Q3 demonstrates that our revenue growth and margin expansion are structural, with some future-facing expenditures. In Q4, our expenditure profile is projected to begin transitioning from investment mode toward long-term profitability. Worksport's growth is being led by the rapid scale-up of our U.S.-made tonneau cover production. Q3 net sales reached $5 million, up from $3.1 million a year ago. Year-to-date sales are $11.4 million, more than double the $5.6 million for the nine months ended September 30, 2024.

Michael Johnston
Michael Johnston
CFO at Worksport Limited

Our strength this quarter came from strong continued growth from the AL4 hardcover, which launched in late Q1 of 2025, expanded relationships with several national distributors and major national retail auto chain, continued growth in our dealer, jobber, and e-commerce channels. Our performance this fiscal year represents a recurring and diversified revenue base, not a single-channel surge. With new product launches and revenue streams entering the mix in the months ahead, we believe Worksport is on a path toward profitability in 2026. More on the upcoming product lines later. Gross margin is one of the clearest proof points of our strategy. Q3 gross profit was $1.6 million, a 31.3% margin, up sharply from 7.9% in Q3 of 2024 and 26.4% in Q2 this year. Year-to-date gross margin is 26.7% compared to 10.5% in 2024. Key drivers of this include higher production throughput and fixed cost absorption in our U.S.

Michael Johnston
Michael Johnston
CFO at Worksport Limited

Production facility, a higher volume or higher value product mix with maturing and emerging sales channels, and greater operational efficiency as processes mature. We're now operating solidly in the 30% plus margin range, setting the stage for future operating leverage. We expect margins to approach 35% by year-end with continued improvement targeted for 2026. We remain committed to achieving near-term operational cash flow positivity. In Q3, operating expenses totaled $6.4 million, compared with $4.2 million in Q3 of 2024 and $4.7 million in Q2 of 2025. The increase mainly reflects growth investments and marketing costs tied to the AL4 product launch and our Regulation A offering. We completed our offering in October 2025. Operationally, we supported 60% revenue growth from Q3 of 2024 to Q3 of 2025, while increasing G&A expenses only 20%. This shows improved scalability and cost discipline, and this path includes the following factors.

Michael Johnston
Michael Johnston
CFO at Worksport Limited

Breakdown of the operating expenses for Q3 of 2025. R&D spend was $300,000, lower year-over-year as we move past Core tonneau cover development. G&A was $3 million, which supported higher volumes, compliance, and facilities. Sales and marketing was $2.4 million, the main driver of our gross spending, and this was focused on channel activation, brand marketing, and investor awareness. Professional fees were $700,000 and included advisory, compliance, and stock-based compensation items. Our operating loss was $4.8 million, compared with $3.9 million in Q3 2024 and $3.6 million in Q2 2025. This investment in Q3 will partly carry into Q4 before reaching the tail end of our investment phase as we position the company for stronger leverage going forward. For the first nine months of 2025, our cash position reflects disciplined investment and growth financing activities.

Michael Johnston
Michael Johnston
CFO at Worksport Limited

Our net cash use in operations was $11.2 million, compared to $8 million in the same period last year. Our Q3 operating cash burn was approximately $4.3 million, slightly higher than Q2 as we completed major production and marketing initiatives. We also incurred one-time expenses related to the RegGate marketing efforts. Our investing cash outflow is $485,000 and is represented mainly spending on machinery, tooling, and tangible assets. Our financing inflows were $7.1 million. This is from warrant exercises, the issuance of Series C preferred stock and warrants in connection with the RegGate units offering, net repayments on revolving credit facility, and the issuance of common stock. With respect to long-term debt, we continue to improve our leverage profile while managing our obligations. As of September 30, 2025, our total indebtedness, current and long-term, equaled $2.9 million, which is down from $4.8 million on December 31, 2024.

Michael Johnston
Michael Johnston
CFO at Worksport Limited

Our revolving credit facility had a balance of $1.6 million, and our other-term debt had a balance of $1.3 million. Availability on a revolving credit facility, we've got $3.3 million unused, which provides additional liquidity and flexibility to support our strategic priorities. Our path to profitability is becoming clearer each quarter, supported by stronger unit economics and upcoming revenue catalysts. Our gross margin is now consistently above 30%, up from under 10% last year, showing true structural improvement in profitability generated from production activities. Our operating leverage, while year-to-date revenue is up more than 60%, G&A expenses have risen only by 20%, signaling scalability across our product offerings. On a revenue scale, applying our current margins to an annualized sales run rate approaching $20 million positions us meaningfully closer to break-even.

Michael Johnston
Michael Johnston
CFO at Worksport Limited

Importantly, much of R&D investment over the last few years is now at the finish line, with the HD3 tonneau cover line launching in Q4 and the Solis and Core systems set for commercial orders in late 2025. These are not cost centers anymore; they are our next revenue engines. As these products enter production and sales channels, we expect sustained gross margins in the 35%+ range, continued expense efficiency, and a clear trajectory towards cash flow positivity in 2026. We are building this profitability bridge step by step, product by product. We anticipate Worksport's need for cash provided by financing activities to decrease in 2026, given our projected path to cash flow positivity. Now, back to Steven for key insights into business operations.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

Thanks, Mike. In Q3, we built a scalable ISO 9001 certified manufacturing base. Q3's 31.3% gross margin is the financial proof of that operational capability. It is expected to only improve from here. We produced 2,499 tonneau covers by hand in a four-week stretch from early to late July 2025, more than double our March 2025 total monthly output. In Q4, we expect to increase production by another 50% compared to Q3. An increase in production will benefit our margins and selling the demand we have meticulously invested in creating the market over the last year. We achieved, without proportional headcount increase, validating process efficiency. In Q3, margins confirmed better utilization of our U.S. production facility, improved fixed cost absorption, continued focus on quality, and throughput sufficient to support national distribution and dealers. Let's talk a bit about our tonneau cover business, our profit engine.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

After years of strategic investment, our hard-folding tonneau cover division is now Worksport's near-term economic engine. They're made in the U.S.A. with rising brand recognition and multi-channel distribution. We have proven ability to increase margins with scale, 35%+ gross margins at current volumes, with margins projected to grow even further. As production scales, our tonneau cover division can absorb a significant share of fixed cost overhead, reduce reliance on external capital, and generate cash to fund clean tech initiatives. The tonneau cover product offering provides the financial backbone on which Core and Solis and Aetherlux are being built, giving Worksport a strong and self-funded foundation for growth. Now, let's talk a little bit about tariffs and how we're managing them. We continue to operate in a dynamic tariff trade environment. We all know this.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

While tariffs remain a headwind, they are manageable, and in the tonneau cover market, increasingly serve as a competitive tailwind for Worksport. First, U.S. manufacturing advantage. The majority of tonneau cover production value is U.S.-based, reducing exposure compared to our import-heavy competitors. Cost containment. Historical 5%-10% material cost pressure has been offset through efficiency gains, scale-driven overhead absorption, and pricing discipline. This is through domestic pricing inflation. Our competitive position. Tariffs often impact imported competing products more severely, while our domestic footprint, brand marketing, and product quality is a clear differentiator, especially if trade frictions continue. Core and Solis considerations. While some components are globally sourced for Core and Solis, tariff exposure is modeled into our pricing and margin forecasts, with flexibility to adjust and mix pricing as needed further. Further to this, the November 10, 2025 tariff suspension provides additional near-term relief and validates our proactive planning.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

The thing everyone's been waiting for. Let's talk a little bit about Solis and Core. From investment to revenue pipeline. As of October 21, 2025, the Worksport HD3 tonneau cover is now in production, with initial sales expected to begin to B2B customers in November 2025, followed by sales to online customers later this year. Sorry, I wanted to talk. We're going to talk about Solis and Core. Let's talk about HD3 first, which we just did for a second. The HD3 is a heavy-duty tonneau cover designed for commercial and fleet applications. Building on the AL3, it features upgraded materials, seals, and latching for maximum durability. While available through all channels, its primary focus is driving growth in our wholesale and B2B channels, adding a new revenue stream and completing our U.S.-made tonneau cover lineup.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

We're very, very excited about the HD3 and what it's going to do for our B2B business channels. Innovation pipeline, our Solis and Core. After years of engineering, tooling, certifications, and partnership investments, Solis and Core are now set to be released for orders later this month. What has been pure operating and capital expense is expected to become a visible, high-margin revenue stream beginning in late Q4 2025 and scaling through 2026 and beyond. Let's highlight some of our most recent announcements. First, the official launch date for the Solis solar tonneau cover and Core portable power energy system is now November 28, 2025. Customers will be able to place initial orders with expected delivery in late December or early January 2026. The Core starter kit is priced at $949, which includes the Core inverter hub as well as one Core battery.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

The Solis system starting price is at $1,999 and will go up as high as $2,499 depending on the model size or bed size of your truck. Our initial rollout plan for the Core is 1,000 Core units plus 900 additional battery packs with a limited Solis release representing a roughly $2.5 million in near-term revenue opportunity with significant scaling planned through 2026. In terms of strategic positioning, Solis is a margin-accretive product leveraging our tonneau cover expertise to enter into the premium solar tonneau cover market channel. Core is a modular portable energy system designed as a recurring revenue platform, driving stable cash flow positive sales across work, overlanding, emergency, and industrial markets. Together, these two platforms transform Worksport from a single product channel manufacturer in a somewhat niche market into a multi-market clean tech company with recurring scalable revenue potential.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

Let's talk a little bit about R&D and our next steps. In 2026, we aim to transition R&D from heavy foundational build to commercial optimization and platform leverage. What this means is we're going to switch from all the operational expenses relating to heavy R&D and developing new products to perfecting those new products and being able to increase margin and efficiencies. For Solis and Core, we're planning to finalize launch execution and early customer feedback loop, optimize bill of material and logistics for margin enhancement post-launch, explore rapid scale cost savings, and expand integrations and form factors based on usage data, expanding the Core platform for multiple product lines. For tonneau covers, we're going to grow the HD3 product and launch an HD4 equivalent cover labeled internally as the Worksport B2. We expect this B2 cover to be extremely well received in all markets.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

More details will come in later in 2026. Incremental product improvements to maintain quality, compatibility, and margin strength. Aetherlux. We're going to advance pilots and partnerships, including evaluations with leading institutions to validate performance and use cases, finalize and select manufacturing partners, and focus spend on projects with clear commercialization paths and potential for 2026 impacts and beyond. A little bit about operating leverage and the roadmap there. Bringing it together, our operational model priorities for 2025 and 2026 are as follows. First, we're going to obtain and sustain 35% gross margins. We're going to get this. We're going to get this by maintaining manufacturing efficiency and pricing discipline. We're going to slow our operational expense OpEx growth as a percentage of net sales, especially in sales and marketing, and we're going to treat Q3's elevated spending as a peak investment, not the new baseline.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

We're going to improve working capital turns by monetizing existing inventory and further align production scale with growing demand. We're going to layer new products into our existing cost-stabilized offerings: tonneaus, Solis, Core. We're going to share the infrastructure that we've built and we're spending on and amplify our leverage. Our priorities support our transition from capital-funded mindset to operations-funded growth. A little bit about risk management and mitigation. We are clear-eyed about key risks. Ongoing net loss and going concern language in our 10Q reflect reliance on external capital and execution risks, tariff and supply chain volatility, particularly for globally sourced components, and launch risks that we see for Core and Solis: timing, adoption, and margin realizations. Equity and warrant overhang impacting shareholder perception. This is how we're going to mitigate them. We're going to tighten our spend to initiatives with measurable ROI.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

We're going to maintain and selectively use diversified capital sources, and we're going to stage clean tech production and inventory to complement demand signals, communicate transparently about milestones and capital deployment. Given the continued growth and healthy margins in our tonneau cover business, we are very confident in our ability to manage tariff-related cost inflations while advancing towards near-term cash flow positivity and maintaining our 2026 profitability target. I'm going to pass it back to Mike with our updated fiscal year 2025 outlook and guidance.

Michael Johnston
Michael Johnston
CFO at Worksport Limited

Thanks, Steve. As far as our 2025 revenue framework is concerned, in Q3 of 2025, we had an ARR of $20.4 million, substantially up from $8.5 million in 2024. Q4 of 2025 is expected to benefit from continued tonneau growth and channel expansion. Initial Solis and Core orders commencing November 28, 2025, with early but measured contribution. We project year-end revenues of $17-$21 million, and that depends on when the revenue recognition for the Core and Solis happens. Our 2026 revenue growth drivers, we believe the base case for our U.S. tonneau cover net sales will be $27-$35 million next year. Further, we believe Solis and Core product lines can lead to additional net sales in the tens of millions. We will update our shareholders on guidance after this product is rolled out later this year.

Michael Johnston
Michael Johnston
CFO at Worksport Limited

In 2026, we'll have the full year impact of the U.S.-made tonneau platform cover sale with 35%-40% target gross margins and first full-year commercialization of the Core portable power system and Solis solar tonneau covers. Selective progress on Aetherlux is as a complementary clean tech platform aligned with defined technical and commercial milestones and our focused OpEx discipline. OpEx growth below revenue growth to unlock operating leverage. Our path to cash flow positivity. Our target is that operating cash flow becomes positive during Q1 of 2026. The first half of 2026, driven by the stable 35% gross margins. Increasing sales will lead to higher utilization of existing manufacturing and distribution infrastructure with no major step-up in fixed costs. Our tighter control of G&A, sales, and marketing professional fees with the spend tied to measurable ROI.

Michael Johnston
Michael Johnston
CFO at Worksport Limited

Our launch of HD3, Solis, and Core product lines are new margin sources. Now back to Steve with our concluding remarks.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

Thanks, Mike. We have built a high-margin U.S. manufacturing platform with rapid revenue growth. We have established national distribution, and that is growing, and we have positioned Solis, Core, and Aetherlux on top of that foundation. Our focus now is precise, disciplined execution towards sustainable cash flow and profitability. We are seeing here on the charts Worksport's revenue growth, Worksport's margin growth, and Worksport's new product set to improve 2026 profitability.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

Thanks, everyone. This concludes our prepared remarks. Operator, please open the line for questions.

Operator

Kate, I see you have your hand up. Scott, yeah, thanks for joining us today both. You guys are always great to join in, and I love your questions. I'm going to start with you, Kate. Yeah, go ahead.

Thank you. Thank you, Steven. Can you talk about the tonneau market for tonneau covers in general in the United States? Are you seeing total demand growth in the market versus are you taking share? To start, please, Michael Johnston.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

Yeah. So we're seeing, you know, we're still seeing, we're still getting bits of information from the market. We're seeing that we're taking, the market's still very healthy. We're seeing a slight shift into smaller trucks, different SKUs. So we're pivoting, and that's what's really good as a domestic manufacturer because we could literally make whatever's selling the day that we need to sell it, for instance. In terms of the market, usually when there's difficult times, things start to sell less. However, in our market, when we have geopolitical issues and other small issues that are happening or other issues happening within our economy, what we see is we just see a shift of what types of trucks are sold, not the amount of them. We're still seeing the tonneau cover market in that $3 billion plus range, maybe a bit more.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

We're just seeing a shift to different applications that we make. In fact, the different applications that are being sold more of are actually higher profit for us. It's actually quite a benefit. Everything still is healthy as it was two or three years ago, and I feel that the market's primed for a strong 2026 in terms of growth within the economy in the U.S. specifically. I think that we're going to be able to capitalize on that.

Thank you. I saw on your 10Q a mention about working with on the OEM sales channel, but related to the Core and Solis too, can you leverage your existing distribution, your sales channels for the tonneau covers for Solis and Core? Will it be a different type of distribution, maybe starting more online? Can you comment on that, Tanya?

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

Yeah, yeah. No, great question. We're going to start online. We're going to start direct-to-consumer. That way we get that feedback loop with no broken telephone, no other way to say it. We started with our beta testers. Those are individuals that we work with. Now we're going to open it up to, instead of select individuals, the broad consumer market. We have a significant amount of interest on the dealer side. We just presented, we just had a booth at the SEMA show in Las Vegas. Some of it's available on our socials like Facebook and Instagram where Worksport posts. We used Twitter and LinkedIn more for investor stuff. Anyone that goes follow us on Instagram and Facebook at Worksport LTD, and you'll see some videos. We had these booths powered by our new energy products. There was a significant amount of interest.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

I think that we could leverage. We're just going to be strategic in when we do so so that it's accretive to the target.

Okay. Thank you very much.

Operator

Thanks, Tate. Scott, good morning.

Good morning, guys. Thanks for taking my questions. Steven, I was hoping that you might be able to give us a little bit of insight into your visibility on demand for Solis and Core. The language around the opportunity in 2026 is pretty robust. Any kind of color you can give us there, I think, would be very helpful.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

I think that the demand for the Solis is going to be bigger than what I had otherwise believed. Me as the leader of the company, I'll always have to be a blend of optimism and pessimism. With that in mind, I think that a new product that the likes of which has never existed is always a difficult path. I believe that that's going to be true. I think that it's going to be difficult and challenging to market and to attract customers for the Solis. I also believe that what we've been able to launch in terms of an offering price at $1,900 is almost a no-brainer.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

I think that the average consumer, when they look at something as a 2%, 3%, or 4% of the cost of the truck expense while offering such measurable amounts of benefit, I think that it becomes a no-brainer. I think that the Solis is poised to possibly become a trending item, something that becomes a trend, almost like a fashion accessory for your truck. Like, look what my otherwise analog accessory can do. It could power our battery generator, the Core, or any battery generator. When it's only a little bit more than other tonneau covers, other tonneau covers in our other competing tonneau covers are $1,500. For an extra $400, $499, you get a Solis.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

I think the demand, as we market it and we message what it does and how meaningful that is for individuals, I think that that's going to be very, very popular for us. The Core is nebulous because the market is so big. What we've been able to do with the Core is tap in from, you got to think, Scott, that the tonneau cover market is a subset of a subset of a subset. It's an individual that has a license that buys a truck that needs a tonneau cover and then that wants ours. It's a very, very niche market. Still, we're seeing massive growth there. The Core is literally for anybody anywhere, any demographic on a global scale.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

I think that when you look at that, it becomes nebulous because now it's a much broader market to market to, so it could become expensive there. I think that as we look at explaining how innovative our Core is and integrating the Core into other products that we plan on speaking about more next year, I think that we know that one of our competitors, which was a foreign company, foreign-produced, foreign-owned company, did about $1 billion. We think that even a percentage of that market, without the massive CAGR we're seeing, I think that the Core market could be highly accretive to the balance sheet. In fact, I think that our clean energy division of the business could become bigger than the tonneau cover business within a period of time.

Great. I appreciate all that added color, Steven. That was helpful. My second question, just on margins, clearly you guys have made a ton of progress there. I'm curious, what is just volume-driven in that improvement versus actual improvements in the manufacturing and production process?

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

That's a good question. We have the best, well, Worksport is around 100 people, and everybody working at Worksport is beneficial. Our engineering team is a shout-out, and our management team, our leadership team in general, has a lot to do with being able to find cost efficiencies without the phrase we use in the market, which is thinning the product out. Thinning means using a thinner aluminum or a cheaper plastic or a cheaper carget. We haven't, we've in fact increased the robustness of our product, but we've been able to find efficiencies through keen purchasing, leveraging demand and volumes. The biggest, I would say, 60%-70% of the cost saving is just overhead absorption. When we started making our tonneau covers, our hours per unit, how many man-hours it took to make one unit, ranged between four and six hours per unit.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

Yesterday, or on an average day today, we're kissing below two. When you look at the cost of domestic labor in the $20-$30 an hour range, that's significant. We think that we can get that labor component down even more. What we're fighting against, Scott, is domestic inflation. We're significantly U.S. Our paint comes from the 48 states, our aluminum, everything that most of what our product is made out of is sourced domestically. Even though the tariffs are for foreign products, we've been seeing a lot of domestic inflation. Once that eases, which it will eventually, whether it's a week, a month, a year, a decade from now, we're going to see even better bill of material cost savings.

Great. Are we kind of capped out at around 35% on the current product mix? Or when a year from now, are we talking about pushing 40% going into 2027?

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

It's going to be, there's going to be two different things that, so first off, we may reduce discounts as the brand becomes more popular. Right now we have a Black Friday sale. That sale is just us reducing our margin in essence. That's what all sales are, to sell more. We're finding ways of being able to attract customers. There's marketing costs that are going to decrease while our branding increases, our brand recognition increases, operational efficiencies. As we become a more popular brand, well-faceted in the marketplace, we could be more selective on sale price because I think that the value will be driven by the product's quality and our name brand to begin with. All of those in aggregate, I think that we could see higher than. In times, our targets are 50+% margin.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

It is going to take a lot of hard work.

Great. I appreciate the added color, guys. Congratulations on all the progress.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

Thank you, Scott.

Operator

Thank you, Scott. Steve, we have three more questions from the audience in the Q&A bubble. The first question is, if someone was to order the Solis and Core on the November 28th release date, when would they reasonably expect to receive the product?

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

Great question. The Solis is made to order. It is made domestically here within our facilities in the U.S. It will be, yeah, mostly made to order. We may stock some. It is all handmade, white glove service. We are thinking that it will be one or two weeks for us to make the product, test the product, package it, and then the concierge service with respect to having it delivered to you. We are not just going to throw it on a USPS truck and wave it away. It is a concierge white glove experience with the Solis. You have your own dedicated team for support and install and these types of things, even though it is very easy. The Solis should be a couple of weeks depending on our availability for the photovoltaic panels and that supply chain there.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

The Core, our first batch, our 1,000 batch of tonneau, sorry, of Core units is expected to arrive in December. The reason why we're offering them for sale in late November is just because we expect significant demand. We want to make sure that we have everyone's name in the hat that wants to be a part of it. The Core is interesting again because you can buy multiple batteries. It's the only of its kind that offers a fully modular system. The Solis, to recap, should be a two-week lead time, handmade. The Core should be shipping sometime in late December, mid to late December, depending on the receipt of the products through our contract manufacturer.

Operator

Thanks, Steve. And then we have another question about sales to the international market. Are we looking at international markets such as EU or Middle East?

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

We had recently at the SEMA show in Las Vegas, the biggest automotive show in North America, we had an unprecedented amount of sales from interest in sales in Latin America, which we didn't expect. We knew that the market was strong. We didn't know it was that strong. It looks like we're going to continue to focus our growth geocentric. What that means is closer to home than further. I think that we're going to start looking at the Latin American, like Puerto Rican and Central and South American markets. First, that should be relatively not easy, but it should be quick because we know everyone we need to know there to set up distribution. Then we're going to look at European Union and the Middle East for mostly the Core products.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

We feel that portable energy systems and small home power systems are going to be very, very strong there. We have also been looking at over the past years the Australian market, which is big for both all of the product lines we sell, inclusive of the unit of the heat pump.

Operator

Thank you. Another question on the heat pump specifically. When do we expect it to go into production?

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

I want to underline the amount of excitement that we all have internally about the Aetherlux because it's so revolutionary and it's revolutionary within such a large and growing market. I mean, there's really like a trident of amazing things that are happening here. It's revolutionary. The market is existingly large and it's also growing massively for heat pumps. We're very excited about that. We have production intent or pre-production intent prototypes working. We're building additional prototypes for additional testing. That's what November and December looks like. We're working with contract manufacturers to start looking at manufacturing the product. I'm broad in my wording because obviously we can't disclose non-public information, but our intention is to begin manufacturing the product as quickly as possible once we've tooled it, tested it, and certified it.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

We, the company, want exactly what the shareholder wants, which is that date to be as close to today as possible. The answer to the question is as fast as possible. We want the same things as every shareholder and investor does. The UL certification alone could be three- to six months. Tooling and supply chain could be significant time drags. We are much smarter today than we were a year ago, having done this now, executed on similar initiatives like the Core. We are going to keep it as tight as possible.

Operator

Thanks, Steve. I think it's important to mention that we'll continue to deliver transparent updates to investors as we get better alignment on the timeline and the progression on certification. Stay tuned for that. We have one other question regarding the Core battery system. How much extra miles it would enable a truck to be charged, say the electric truck is out of energy? I can take that question, Steve. I think the answer to that question is just mathematical calculation. Each battery is about 1 kWh of energy. You can have easily about four batteries in your truck system. If your, let's say, electric truck is 50 kW, that would provide 4 out of 50, almost an 11% range boost. Could be 30 mi, 40 mi, depending on the efficiency of your truck.

Operator

The answer is 4 kWh.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

Yeah. We also want to be clear to state that the Solis itself is not presently configured to recharge or directly integrate into an electric truck. So the Solis will charge battery systems, and the battery systems can be used for level one charging of the trucks, which is relatively slow, but it'll get you enough power to get out of a difficult situation where you might be out of energy on the side of the road, for instance. We have not yet integrated the Solis directly with an EV manufacturer, although that is a cog on the wheel for us.

Operator

Thank you, Steve. There are no other questions on the Q&A box. Any other investor that does want to ask questions about our Q or future progress, please do email us or call us at our line. We thank you very much for attending this call.

Steven Rossi
Steven Rossi
CEO and Founder at Worksport Limited

Thank you, everyone.

Executives
    • Michael Johnston
      Michael Johnston
      CFO
    • Steven Rossi
      Steven Rossi
      CEO and Founder
Analysts
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