Worksport Q2 2025 Earnings Call Transcript

Key Takeaways

  • Positive Sentiment: Record quarterly net sales of CAD 4.1 million, up 114% year-over-year, and gross profit surged 173% to CAD 1.08 million as margins expanded for the third consecutive quarter.
  • Positive Sentiment: Operating cash usage improved 19% sequentially to CAD 3.1 million, net loss narrowed to CAD 3.73 million, and the company closed Q2 with CAD 1.39 million in cash plus CAD 4.6 million of undrawn credit capacity, supporting a path to cash-flow positivity by late Q4/early Q1 2026.
  • Positive Sentiment: US manufacturing capacity is scaling efficiently, with daily output rising from 50 units at the start of 2025 to 115–130 units in July and a single-day record of 160 units, targeting 200 units per day by late Q3 for greater cost absorption.
  • Positive Sentiment: The innovation pipeline remains on track: the heavy-duty HD3 cover launches in Q3, Solace (solar-integrated tonneau cover) and CORE (portable power station) are set for Q4 rollout, and AetherLux heat pumps have moved from lab to commercial testing with significant inbound interest.
  • Negative Sentiment: Tariff-related pressures have raised domestic material costs by 5–10%, posing headwinds to unit economics even as management works to offset these increases through operational efficiencies.
AI Generated. May Contain Errors.
Earnings Conference Call
Worksport Q2 2025
00:00 / 00:00

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Steven Rossi
Steven Rossi
Founder & CEO at Worksport

Good afternoon, everyone, and thank you for joining WorkSports quarter '2 twenty twenty May. I'm Steven Rossi, chief executive officer of WorkSports, and with me today is our chief financial officer, Michael Johnston. This quarter represents another significant step forward in our growth story. We achieved record quarterly revenues, meaningfully expanded our gross margins, and continue to build the operational commercial foundation that will carry us through the rest of 2025 and beyond. We will be reviewing the financial results for the quarter ended 06/30/2025, which were filed earlier today in our form 10 Q and can be accessed in our investor relations website at investors.worksport.com/reports.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

At the end of today's call, both our prepared remarks and the accompanying presentation will be available for download. After these remarks, we will open the line up for questions from the attending analyst. So with that, let's begin. Safe Harbor statements. During this call, we will make forward looking 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 positions, opportunities, go to market initiatives, growth strategies and business aspirations and product initiatives, and the expected benefits of such initiatives.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

These statements are only predictions that are based on our current beliefs, expectations, and assumptions. Because forward looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in our circumstances that may be difficult to predict and many of which are outside our control. Actual results or events may differ materially. Therefore, you should not rely on any any of these forward looking statements. These forward looking statements are subject to risk and other factors that could affect our performance and financial results, which we will discuss in details in our filings with SEC, including our annual report on Form 10 ks and quarterly report on Form 10 Q and other SEC filings.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

The forward looking statements made in the earning 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. So with that, on today's call, we're gonna cover, 01/2025 performance highlights, financial and operational. Two, growth and market expansion insights and updates, including dealer network, ecommerce, b two b, and b to b initiatives. Three, innovation pipeline, progress on our HD three, the Solace, the Core, and Aetherlux.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

Four, we're gonna cover current operations, production scaling, cost management, and operational readiness. And on number five, we're gonna update our 2025 guidance, revenues, margins, cash flow targets, and capital priorities. With that, let's move into the numbers. Michael, walk us through the two the q two twenty twenty five financial highlights.

Michael Johnston
Michael Johnston
CFO at Worksport

Thanks, Steve. Q two twenty twenty five is our highest revenue quarter in company history. Net sales reached $4,100,000 representing 114% year over year growth compared to $1,920,000 in 2024 and an 83% sequential increase from 2025. This growth was driven by the continued ramp up of our flagship AL4 premium tonneau cover, expanding dealer adoption and order frequency and sustained strength in e commerce sales across our direct to consumer channels. Gross profit for the quarter rose 173% to CAD1.08 million compared to CAD396000 in 2025.

Michael Johnston
Michael Johnston
CFO at Worksport

Gross margin improved under 800 basis points to 6.4%, up from 17.7% in Q1 and 15.4% in Q2 of last year, marking our third consecutive quarter of market margin expansion. This sustained improvement reflects continued operational efficiencies and a favorable mix of new B2B and B2C sales. Operating expenses were $4,700,000 up modestly from 2024 is $4,210,000 but essentially flat compared to Q1's $4,650,000 despite significantly higher revenues. Within the operating expenses, sales and marketing increased to $1,310,000 supporting dealer growth and digital marketing campaigns. General and admin declined to $2,450,000 from $2,990,000 in 2025, showing early results from cost discipline.

Michael Johnston
Michael Johnston
CFO at Worksport

We know this occurred while production went up nearly 100%. Our belief is that the G and A of the company will not increase proportionally with exponential revenue growth. R and D was down $300,000 down significantly year over year due to prior year development peaks. Our operating loss improved to CAD3.62 million for Q1 versus CAD4.26 million in Q1 and CAD3.91 million in Q2 of last year. Net loss for Q2 narrowed to CAD3.73 million from CAD4.46 million in 2025.

Michael Johnston
Michael Johnston
CFO at Worksport

We remain committed to achieving our near term operational cash flow positivity. While the Tonneau Cover division is currently our sole revenue generating unit, We believe it can sustain the broader corporate structure, including R and D for Core and Solis, the EtherLuxe product line and general corporate expenses. This outlook is further supported by our expectation that Core and Solis will transition from R and D expenses to revenue generating products later this year. Since we believe that general corporate expenses will not increase proportional to business growth and profitability, a true path to cash flow positivity in the near term is possible. Cash and cash equivalents ended the quarter at $1,390,000 compared to $5,080,000 on 03/31/2025.

Michael Johnston
Michael Johnston
CFO at Worksport

However, at the end of Q2, 4,600,000.0 was the available borrowing capacity on our credit facility. Operating cash usage in Q2 was approximately $3,100,000 19% improvement from Q1's $3,840,000 cash outflow. Accounts receivable increased in line with higher dealer sales volumes, while inventory remained stable at $5,880,000 approximately 90% in raw materials and 10% finished goods. In Q1, inventory stood at $5,700,000 with a sixtyforty split between raw materials and finished goods. Reduced finished goods share reflects demand consistently outpacing production. Later in this report, we will outline the steps being taken to expand production capacity to meet this growth. We're happy to share these steps have been successful thus far. Our inventory profile positions us to fulfill ongoing dealer and e commerce demand without requiring significant near term investment. Our long term debt excluding amounts repayable in the next twelve months declined to 2,090,000.00 compared to 4,780,000.00 as of 12/31/2024, and 2,700,000.0 as of 03/31/2025.

Michael Johnston
Michael Johnston
CFO at Worksport

Of special note, on 08/01/2025, the company submitted a $3,000,000 purchase order and placed a deposit with an established manufacturing equipment supplier for additional machinery with delivery delivery currently as early as 2026 at the company's discretion. This occurred with extremely favorable financing terms of the manufacturer. It's not expected to place a cash flow concern to the business. This additional equipment is expected to meaningfully increase production capacity at the company's West Seneca, New York manufacturing facility, enabling the company to meet anticipated customer demand more efficiently, improve operational throughput, and support future revenue growth. However, management emphasizes that expects that WorkSports' current equipment and supply chain can allow the company to generate positive cash flows from operations.

Michael Johnston
Michael Johnston
CFO at Worksport

Now back to Steven for key insights on business operations.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

Thanks, Mike. Beyond the financial numbers, q two marks the foundation of what we can expect for the year ahead. I'd like to highlight some of the key milestones we achieved that are setting the stage for our future. Our growth engine continues to accelerate across both b to b and b two c channels. Dealer network, b to b growth.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

In q two twenty twenty five, we added two national distributors to our dealer network. In April, we added Patriot Auto Group, which brought with them 200 dealers under the Worksport dealer network. In June, we added another national distributor with access to approximately an additional 250 dealer accounts. At full activation, WorkSport estimates that our distribution network as of q two can support over 21,500,000 in repeatable annual revenue alone, not including business to consumer direct sales via our online platforms, driven by ongoing B2B traction and demand for our premium American made tunnel covers. Importantly, this figure reflects revenue potential at current dealer size, a number that management expects to grow meaningfully as dealer onboarding continues through the second half of this year, which is expected to bring significant demand with fall being among the busiest seasons for our product among customers.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

With more than 450 new accounts added year to date, up from 94 at the end of last year, WorkSports US dealer network is expanding rapidly with new accounts joining weekly. Ecommerce. Direct online sales via both our website both via our own website remain at a high remain a high margin growth driver for and accounted for over 50% of total unit volumes in the quarter. Online sales continue to grow at rapid paces. From this ecommerce and b to b growth, WorkSport posted three months of consecutive record sales in q two twenty twenty five.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

April, we did 1,200,000.0. May, we did 1,280,000.00. In June, we did 1,600,000. In June, we already had an internal run rate of 19,200,000. We expect the revenue increase will continue every quarter.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

Each month, that gross margin improved. This is why we are extremely excited for Q3 and Q4. Notably, Black Friday and December holiday sales are expected to bring significant demand later on this year. Our strategy remains focused on giving local retailers and dealers the tools, margins, and product quality quality that they need to succeed, creating a long term mutually beneficial relationship that drives volume for Work Sport. We mentioned previously demand continues to outpace production.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

We are proud to report that our US manufacturing facility here where I sit from in West Seneca continues to scale efficiently. We are targeting 200 units per day production by late Q3 compared to approximately 50 units a day at the start of this year. This quadrupling of daily throughput will drive significant fixed cost absorption benefits and push gross margins towards our late twenty twenty five target of 30% plus. Recruitment and training of our skilled assembly technicians have kept pace with our production ramp up, supported by the implementation of lean manufacturing practices to streamline workflows and reduce waste. In July 2025, average daily production was approximately 115 units, climbing to around 130 units in the later half of the month.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

We also achieved a record single day high output of 160 units, setting a strong foundation for Q3 and beyond of this year. Let's talk about the HD three. On track for q three q three of this year launch with production already scheduled, the HD three is a heavy duty tonneau cover designed for commercial and fleet applications. Building on the AL three, it features upgraded materials, seals, and latching for maximum durability. While available through all channels, its primary focus is driving growth to our wholesale and b to b segments, adding new revenue streams, and competing and completing our US made tunnel cover lineup.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

Let's talk a little bit about Solas. Beta testing has commenced with select customers for the Solas Solar integrated tunnel cover. The redesign announced later late in 2024 is delivering anticipated cost savings and expanding compatibility with third party portable power systems. We remain on track for a q four launch. A little bit about Core.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

The Core portable power station is nearing mass production readiness. Core's modular design enables integration with Solis or standalone use targeting job site, overlanding, and the emergency backup markets. The WORKSport CORE is projected to launch at the same time as the Solis cover. CORE and Solis together function as WORKSport's portable nanogrid. In 2025, this system was selected by a multi billion dollar US construction agency for pilot project for fleet use.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

Testing and use is ongoing. Together, Core and Solis position WorkSports within the fast growing, broader, portable energy market, a space the company believes will be a key to long term profitability. Talk a little bit about AetherLux. On 02/11/2025, we introduced AetherLux, a cold climate heat pump featuring two industry first innovations. First, zero frost, no defrost cycles.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

Continuous operation without the traditional defrost interruptions that reduces efficiency in freezing conditions. And ultra low temperature performance. The AetherLux operates in ambient temperatures as low as negative 59.6 degrees Fahrenheit, which is about 51 degrees Celsius, far beyond the capabilities of typical commercial heat pumps, enabling its use in extreme arctic environments. Since the launch of Aetherlux, we have attracted significant interest from major global corporations, federal governments, and numerous distributors, with inbounds inbound inquiries potentially surpassing hundreds of millions of dollars in potential revenue opportunities. In q two twenty twenty five, TerraVise Energy, our subsidiary company, had achieved numerous milestones on this disruptive technology.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

It has advanced AetherLux heat pumps from lab testing to commercial testing, initiated manufacturer selection for product certification, continued R and D optimization of Zero Frost technology, and began evaluating strategic business opportunities. Management believes Aetherlux could have a meaningful impact on Worksport's 2026 balance sheet, supported by its position in the $123,000,000,000 global market. Intellectual property. WorkSport holds a robust and growing portfolio of nearly 200 issues issued, registered, and pending patents, designs, and trademarks. We believe our intellectual property protects our innovations and branding, strengthening our competitive positions and helping us address potential challenges in the market.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

Tariffs. While we while our current revenue generating tunnel cover line is manufactured within The US, US, with approximately 90% or more domestically sourced components, recent tariff related pressures have contributed to a five or 10% inflationary increase in our costs, including WorkSports domestic material costs. To date, these increases have been offset by operational efficiencies that have lowered per unit cost. While WorkSports management team has outlined several alternative strategies as well to offset the effects of inflation as a result of tariffs, and remain confident that these strategies will only prove to increase long term profitability once domestic material price inflation eventually and inevitably subsides. For upcoming products, particularly those incorporating sole solar cells and lithium ion batteries sourced international, the potential impact of tariffs may remain less uncertain.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

However, we know that such products cost pressures affect our competitors equally, and in some cases, more severely, especially where their reliance on global supply chains is greater than ours. Given the continued growth and healthy margins in our tunnel cover business, we are 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 gonna pass it over to Mike with our updated financial fiscal year 2025 outlook and guidance.

Michael Johnston
Michael Johnston
CFO at Worksport

Thanks,

Michael Johnston
Michael Johnston
CFO at Worksport

Steve. We reaffirm our full year 2025 gross revenue target of at least $20,000,000 Based on Q2 results and current order momentum, we remain confident in meeting this goal supported by continued dealer adoption, production growth, and the successful launches of HD3, Solis and Core in the second half of the year. Gross margins have exceeded initial forecasts and are expected to rise each quarter reaching our 30% target by year end. Operating expenses are projected to grow at a slower rate than revenues enhancing operating leverage. Despite tariff related headwinds, we are targeting operational cash flow breakeven by late Q4 twenty twenty five or early Q1 twenty twenty six.

Michael Johnston
Michael Johnston
CFO at Worksport

While the successful launch of CORE and Solis could accelerate profitability in 2026, we believe our CORE Tonneau cover business alone can drive us into profitability next year. We view Core, Solis and Aetherlox as significant profitability enhancers in 2026. Current expectations are $2,000,000 to $3,000,000 in revenue from the first batch of Core and Solis, with Aetherlux anticipated to deliver a meaningful positive impact to the 2026 balance sheet. More detailed projections will be provided in Q4 of this year. As of 06/30/2025, we have access to approximately $6,000,000 in total liquidity consisting of our $1,390,000 in cash and cash equivalents, 4,760,000.00 in unused capacity on our revolving credit facility.

Michael Johnston
Michael Johnston
CFO at Worksport

In addition, we hold $5,880,000 in inventory, providing a strong foundation to support ongoing sales growth without significant near term investment in working capital. Cash used in operating activities improved meaningfully in Q2, declined to approximately CAD3.1 million compared to CAD3.84 million in Q1. This 19% improvement reflects both higher gross profit and disciplined expense management. We expect further efficiencies in the second half of the year as production continues to scale. We expect to spend moderately in the 2025.

Michael Johnston
Michael Johnston
CFO at Worksport

Key expenses will relate to the final tooling of the Corusolis and increased production growth in The U. S. Factory. Most of our required equipment for Tonneau cover production is already in place, although management has invested in additional equipment for growth in 2026 with zero interest payment terms offered by this vendor. This would allow WorkSports to essentially double its production throughput without significant cash outlay or interest expenses in 2026.

Michael Johnston
Michael Johnston
CFO at Worksport

We also continue to make progress on Regulation A crowdfunding offering, which has been highly successful in attracting new retail investors to the Workspace shareholder base. This offering has enhanced our shareholder base, increased trading liquidity and strengthened market visibility. We're announcing today that we expect to close this Reg A offering at the August 2025. If we achieve the full $10,000,000 allotment, management believes the company will be fully funded for the remainder of 2025 and into 2026. While we consider opportunistic access to capital markets, our intent is to limit further notable equity dilution.

Michael Johnston
Michael Johnston
CFO at Worksport

We aim to leverage the company's existing outstanding warrants, which are exercisable in the $4.50 to $6.70 range as a potential source of growth capital for 2026. This approach is aligned with our path forward towards cash flow positivity and eventual profitability. Management believes that as we execute in Q3 and Q4, the market will better recognize the company's intrinsic value creating the potential for these warrants to be exercised at prices that benefit both shareholders and the company. Importantly, we believe that the successful execution of our operational and growth initiatives will enable the company to approach near profitability without requiring capital beyond the targeted $10,000,000 from the current Regulation offering. We further believe access to efficient debt tools will be available as we approach cash flow positivity.

Michael Johnston
Michael Johnston
CFO at Worksport

Finally, we would like to highlight that we review AetherLux, our proprietary cold climate heat pump technology as a significant strategic asset whose value is not currently reflected in our share price. We believe that as the market gains greater awareness of its potential applications and commercial opportunities, this technology could represent a meaningful source of long term shareholder value. Now back to Steve with our concluding remarks.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

Thanks, Mike. Q two of this year was a pivotal quarter for WorksBoard. In just one quarter, we increased revenue by 83% while improving gross profits by a 173% compared to the prior quarter. We also decreased operational loss by 15%. We believe that in q three, this growth in revenues this will grow our revenues and decrease our operational loss.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

We're optimistic about cash flow positivity and profitable cash flow within 2026. Our priorities for the remainder of 2025 are clear. First, we're gonna scale production to meet demand while maintaining quality. Second, we're gonna launch the h t three, Solace, and CORE successfully and on schedule. Third, we're gonna continue to expand dealer relationships and deepen ecommerce reach.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

Fourth, we're gonna continue innovation leadership in both automotive accessories and clean energy. Five, we're gonna create increased brand awareness utilizing key media and influencers. And six, we're gonna execute with discipline towards cash flow positivity. I wanna thank our employees, partners, leaders, and shareholders for their continued support and commitment. We're building a company with the potential to lead at the intersection of automotive and clean energy, and q two showed that our strategy is working.

Michael Johnston
Michael Johnston
CFO at Worksport

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

Faran Ali
Faran Ali
Senior Business Consultant at Worksport

We're just now opening the floor for Q and A, starting with the analysts. We welcome live questions from analysts attending the call. Investors attending the call are encouraged to type their questions in the Q and A section of the Zoom or email us at investors@worksport.com. We will get back to you. I see a hand up from Scott Buck. Go ahead, Scott.

Scott Buck
MD & Senior Technology Analyst at H.C. Wainwright & Co., LLC

Yeah. Hi, guys. Thanks for taking my my questions. Steven, I I guess my first question is on gross margin. Where are the incremental gains coming through the remainder of the year?

Scott Buck
MD & Senior Technology Analyst at H.C. Wainwright & Co., LLC

Is that entirely volume driven? And how should we think about volumes for some of the new products that you have coming out, here in 3Q and 4Q?

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

All good questions. In terms of the new products and volumes, are you are you looking like broad picture like SolaceCore, HD three, or or specifically like this? Okay. Okay. Sure.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

So gross margins. So, yeah, obviously, we have I mean, I I I don't know why it's not more broadly broadcast yet, but we definitely have domestic inflation. So that's that's taking small bites out of our out of some of the gross margin. But what we're doing is we're offsetting it, you know, with with operational efficiencies. So in in essence, the the the the the human interaction or the human the the the the hours per units required to make 50 tunnel covers or a 100 tunnel covers a day is really what what we see in some of the s g and a or or overhead absorption side of things.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

So in essence, economies of scale mostly through efficiencies in production is where we're gonna see the most margin uptake. So to put it into dollars and cents, you know, right now, we're somewhere between three to five hours of human interaction to make one of our tunnel covers. We should be able to get that down to two to four. And, you know, when you look at, you know, the salary underlying that that that human element, you know, that's a meaningful dollar savings per unit. But also just just yesterday, we we kicked off an optimization program for our more expensive materials, the aluminum sheet and aluminum extrusion.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

And on some particular tunnel cover models, we were able to see almost $20 in cost savings or elimination of scrap from the production or inefficiency in the production of that particular unit, some of our our best selling units. So the intersection of being smarter and how we make them and being faster and how we make our products is really where we're gonna see a significant amount of savings. So that's gonna get us into that 30 plus percent while the inflation's kind of nipping at our at our heels. But I think that inflation, it always tends to kind of go it's it's corrected. And, you know, when some of these raw material costs come down, I think that we're gonna see a a really strong positive from all this and and margins will exceed, you know, what what we were thinking. Great. Does that answer the the the margin question?

Scott Buck
MD & Senior Technology Analyst at H.C. Wainwright & Co., LLC

Yes. It does. Nice, Steve.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

Sure. Okay. And then in terms of Core and Solis, so the HD three will go into normal production, you know, for our factory capacity ceiling, you know, this year is anticipated to be plus 200 units produced per day. You know, the the the HD three will fit into that somehow. So whether that's 200, you know, in a day, once a week, we don't think it's gonna be the biggest seller because it's gonna be a new product, so it's gonna take some time.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

But, you know, the the HD three will will fall into production of our hardcovers, so it'll fit in the production scheduling of a ceiling of about 200 covers per day within September, October. And that that could be a mix of a l three, HD three, or a l four. A l four, I think, is gonna continue to be the number one volumetric seller for us, but h d three is gonna pack a pretty powerful punch. When we go into solace and core, the solace is is gonna be produced somewhere in the in the batches of 250 to 500. It's gonna be probably our starting run.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

I think it'll have a ceiling of about a thousand this year. And then the core, we're planning on producing somewhere around a thousand initial units. And we're gonna plan on producing about 3,000 batteries. Because we expect that, you know, consumers some of the some of the most inventive parts of the cores, the consumers can buy more power to go to go do more before having to stop and charge. So for all intents and purposes, I think that the the core is is gonna be a big revenue driver, but then the battery uptake, I think, is is gonna be pretty exciting for us too.

Scott Buck
MD & Senior Technology Analyst at H.C. Wainwright & Co., LLC

That's that's really helpful. Core and Solace, aren't there any sales in your current 25 guide, or is that pure covers at this point?

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

I think I think we would yeah. Go ahead, Farron. Yeah.

Faran Ali
Faran Ali
Senior Business Consultant at Worksport

The the 20,000,000 projection as shown on this slide is made from tonneau covers. We say $20,000,000 plus factoring in a 2,000,000 to $3,000,000 estimate for slowest and core. With the changing tariff environment and volatility, we think it's safer to just keep the number at $20,000,000 and we look forward to updating investors in Q3 and Q4.

Scott Buck
MD & Senior Technology Analyst at H.C. Wainwright & Co., LLC

Okay, perfect. And then on distribution, do your distributors buy and hold inventory? I just want to try to understand revenue cadence through the second half of the year, whether or not there are people buying inventory ahead of the 4Q holiday season and we see some of that in Q3? Or just curious what the dynamics are there.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

Yes. No. Absolutely. Huge amount of it. Actually, we just it was funny.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

I I was speaking to our shipping and receiving one of the clerks here this morning, and they were they were, you know, loading the the they're loading a full truck this morning, and they're, you know it it started with a a skid, you know, to a to a distributor. Distributors will start with opening orders that are strong but modest, and now it's like full trucks. So distributors our distribution, in fact, even our dealers are stocking significant volumes of our products. And and as the product becomes more widely adopted and known, those those volume orders continue to go up. So, you know, putting it tactically, you know, it started as skids, now it's now now we're looking at trucks in terms of volume out out.

Scott Buck
MD & Senior Technology Analyst at H.C. Wainwright & Co., LLC

That's great. That's great. And and then one last one, if I can squeeze it in. On, Atherlux heat pump, is the long term intent to manufacture and sell under the WorkSport brand, or are there opportunities to potentially sell the technology or even license to to other folks?

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

Oh, boy. You're you're gonna make me rosy cheeked on that one. So the the conversations we've when we launched Solace, you know, the inbound interest from OEMs was fairly strong, and and we were pretty proud of that. We we we had so we had a fairly strong expectations of launching AetherLux in terms of inbound interest, you know, from from, you know, small brands. The the quality of inbound interest that we had relating to the AetherLux in looking at the technology were from, frankly put, the some of the largest companies in the world.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

And when we speak with those companies, obviously, there's, you know, collaborative opportunities like, hey, you know, can we make it with you? But then there's also the potential for these companies to have a position of acquisitions. You know, we don't know. We can't forecast, but we'll management will always evaluate opportunities that that are drive the most shareholder value and and bring success. But, you know, one of the one of the the companies we spoke to does have a very strong track record of acquisitions and m and a.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

So, you know, we can't rule that out, but we're obviously gonna do the best what serves Worksport the best.

Scott Buck
MD & Senior Technology Analyst at H.C. Wainwright & Co., LLC

Great. Well, I appreciate it the added color, guys, and congrats on all the progress.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

Thank you, Scott. Tate Scott. Hey, Tate. How are you?

Tate Sullivan
MD & Senior Research Analyst at Maxim Group

Hey. Hey. Can you hear me okay?

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

Sure can. Loud and clear.

Tate Sullivan
MD & Senior Research Analyst at Maxim Group

Oh, great. Great. Thanks. Thanks for the updates too. The units per day, you put in some metrics in terms of where you are in terms of production units per day.

Tate Sullivan
MD & Senior Research Analyst at Maxim Group

Can you talk about total units produced in February or where you you were at the end of two q in terms of units per day?

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

Varon, you just went through that with with us this morning. Did you did you have those numbers for for the months?

Faran Ali
Faran Ali
Senior Business Consultant at Worksport

We we produced roughly 46, 4,700 units at the end of q two. We note that in July, we produced 2,500 units in one month. So we do believe that the production from q two to q three will expand by another 50%.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

That was 4,700 units for the month, right, Farron?

Faran Ali
Faran Ali
Senior Business Consultant at Worksport

47 for the q two and then 2,500 for the month of July. Understood.

Tate Sullivan
MD & Senior Research Analyst at Maxim Group

Okay. Thank you. And then on can you get on the reg a offering, is it is it structure so it's structured as preferred equity, but then can you the the warrants attached? Can you talk about the structure a bit, please?

Faran Ali
Faran Ali
Senior Business Consultant at Worksport

The Reg A offering is structured as a preferred share that's available and targeted to predominantly retail investors. The goal of the offering is to offer a preferred equity instrument that's designed for long term investors that believe in the story. We incentivize investors to hold by offering them an 8% dividend attached to the preferred share, and they get a warrant that's priced above the market at $4.5 We believe as the company executes that the warrant will be a powerful tool for potential upside, and the dividend is a nice incentive to continue holding the stock. Now investors are able to convert the pref to a common share and have access to a really trading common via that, but they do give up on the dividend by doing so.

Tate Sullivan
MD & Senior Research Analyst at Maxim Group

Understood. And and the increase in the shares outstanding from June 30 to to to mid August, is that probably from some of those reg a participants converting to common? Is that fair?

Faran Ali
Faran Ali
Senior Business Consultant at Worksport

We've seen a mixture of conversions. We have seen a large number of investors that do continue to hold, and there are and there have been some larger investors that do convert.

Tate Sullivan
MD & Senior Research Analyst at Maxim Group

Okay. And Steven, on the heat pump opportunity, you noticed it's sort of implying that you could have meaningful revenue in '26. Is it a faster commercialization process for the heat pump than, let's say, the Solace cover and core? Can you talk about that, please?

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

Yeah. It's it's our company's, you know, evolution in terms of how we bring things to market. We learned a lot of lessons from the core, you know, and and we're applying all of the lessons we learned from the production of the core, like getting it this far, and it's taken quite some time. And I I but we we we've we've taken everything we learned from from getting the core to market, and we've applied it to AetherLux. So now we're we're a lot more lean and we're a lot more efficient in being able to get things to market.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

We understand testing. We understand rules, regulations. We understand design, supply chain, you know, in in production. Ultimately, the Aetherlux, if Work Sport was to produce it, which is the intention as of right now, if we're we're able to it's not gonna be Work Sport. It'll be Theravist that that produces as a subsidiary.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

You know, it'll be outsourced manufacturing, but we're a lot smarter and we got a lot of deep connections in terms of, obviously, power electronics, you know, sheet metals, all the all the parts that we need. Most of the parts we need are are we we've established those relationships and we've learned a lot. So, yeah, to to answer the question is is we're we're just we're just smarter.

Tate Sullivan
MD & Senior Research Analyst at Maxim Group

Okay. Thank you all.

Faran Ali
Faran Ali
Senior Business Consultant at Worksport

Thank you, Tate. Thank you, Scott. Steve, we do have some questions from retail investors attending the call. I noticed to investors that I have answered some questions via chat, and we will answer some questions live here.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

I could see them wrong. I could I could read some of them. Or if you wanna read them, go ahead.

Faran Ali
Faran Ali
Senior Business Consultant at Worksport

Yeah. Sure. I'll read it. A question from Troy M. Analysts see a 240% upside from current price levels.

Faran Ali
Faran Ali
Senior Business Consultant at Worksport

What do you think investors are underestimating about Worksport's business model, scalability, and or clean energy positioning that could drive value further from where it is today?

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

So I think that predominantly WorkSports displays itself. Like, when when you go when a new investor, you know, picks up on worksport, they go to worksport.com and they see Tonneau covers. So I think that, you know, really deep diving into where where we're going to be and where we started is is where the maybe the the loss in translation comes. I think that an an investor that's that's looking at, you know, crypto opportunities or AI opportunities is looking for something exciting. I think energy is probably gonna be well, if you look at crypto, the the the the crypto is is all about hashing, and hashing is all powered through computers, and computers are all powered with energy.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

So if you look at the base commonality, think energy is gonna be our future, and that's what we're betting big on with WorkSport. But it's not clearly apparent when you visit, you know, worksport.com without diving into our investor section. So we're gonna continue to improve our messaging, continue to court new investors. We're gonna shift our investor relations focus to journalistic coverage and outreach so that we can have various high visibility publications kind of summarize who we are a little bit easier for investors to to understand. Today, we had a USA Today article, I believe, that came out that summarized the company very well.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

So I think that we're just we're just augmenting how we present the company and and driving that value proposition is that, you know, I think energy is gonna be the biggest thing in the future of biggest economy in the future, and I think that will be a big part of it.

Faran Ali
Faran Ali
Senior Business Consultant at Worksport

Thanks, Dave, for that answer. We have another question regarding the rollout of higher margin products like AL four, Solis and Core. Could you walk us through how these innovations contribute to unit economics and margin expansion? Should we model the ramp up later this year?

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

Yeah. So a l four was just launched earlier this year, and it's just getting into market now, and it's already exceeding our revenue. So it started as, like, zero, the a l four, and it's a by far highest margin product. So it it we we started with nothing in terms of sales, and now it's actually outpacing all other sales we have dollar dollar for dollar on a day to day basis. So we're gonna continue to focus on obviously the highest margin sales for us that'll serve the the company best.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

And then of course, Solace and Core will start as a direct to consumer product, which will be, you know, fairly strong or enviable margins. So I I think that we're gonna continue to I I think that it's difficult to explain it, but we're gonna continue to focus on selling higher order value items. So our a l three is what we started with and it was a $700 price tag. The a l four is a $1,100 price tag. The Solace is gonna be closer to $2,000, and the Core with two batteries is gonna be closer to over $2,000.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

So so I think that we're gonna sell a lot of items that have a higher order value, so that'll represent very very nicely in terms of our gross sales. But with the Solace and Core being high margin direct to consumer primarily, we'll also represent ourselves in high profit. And there's there's two different types of ways of looking at profit. One of my mentors many many many years ago when I first started my business said you can't take percentages to the bank. And what I what I understand by that statement is 30% of a dollar is 30¢, and that's nothing.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

But when you start looking at high margin percentages in terms of a $2,000 sale, you know, the core, for example, let's say it's 30 percent, 30% of $2,000 is rough math is $600. If we if we repeat those sales tens or hundreds of times a day, that's very meaningful for for shareholders alike in WorkSports. So if that answers the questions, we're gonna be focused on higher order values at high margins, which are gonna be highly beneficial, and it's not yet realized in in the in the balance sheet.

Faran Ali
Faran Ali
Senior Business Consultant at Worksport

Thank you, Steve. We have a question regarding the quality of the solar cells and panels. A investor has personally purchased solar cells and panels from different popular brands and has found quality concerns. Their question is where are we producing our units to ensure that our finished product is dependable and high quality?

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

So it's a it's a trade secret on where we get our panels. We we went through somewhere somewhere, I'm gonna estimate, but I I think it was around between 25 to 50 different solar manufacturers across the world from wafer cells to to panel assemblies. So solar solar panels are are are made from from wafers or cells individually, and and the cells usually come from like SunPower or other manufacturers around the world. So it's it's it's getting the best out there. What we've settled on, it's a trade secret in terms of who the manufacturer is and where they're coming from.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

Unfortunately, we looked at a lot of US based cell manufacturers and panel manufacturers and they just didn't pass our testing. So the panels are coming from the East side of the world, not China. But the panels that we're using are also used on various space stations. So NASA agrees that these cells are the these panels and cells are the best out there. So there's no better quality than the panels and cells we're using when they're they're used also again on the on some of the space stations out there.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

And we're highly selective and that's for taking Solas to market, that was probably the biggest time delay for us is finding the best solar cell and panel manufacturers.

Faran Ali
Faran Ali
Senior Business Consultant at Worksport

Thank you, Steve. We had a question about battery chemistry of CORE. At that at the current moment, the battery chemistry is a trade secret. We will reveal the specs of the unit as the unit comes closer to launch later this year. We had a question about government contracts or any of your products, specifically the hardcovers, the heat pump, or the solution core.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

So, yeah, obviously, government and OEM contracts are always something that I think won't come to us naturally. So we've done business with government entities, and we're we're well connected within various government agencies through our boards of directors and through just our our business connections. So we'll continue to work with various federal and local agencies, OEMs, which wasn't part of the question, but they're always correlated. We'll obviously keep those conversations coming. We gotta do what's best for WorkSports in terms of, you know, working with companies that'll that'll give us revenues, but of course, at margins that we need.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

So government contracts are we've we've sold our hardcovers to government agencies. Yes. Do we have contracts? Not necessarily contracts, but open kind of order relationships. Solis have gone to various private businesses that are fairly large.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

Core, we're not there yet, but we're gonna get there pretty soon. And the heat pump, we're not there yet either, but it's all a work in progress.

Faran Ali
Faran Ali
Senior Business Consultant at Worksport

And I will add that, Michael, the the heat pump product has the largest potential for government contracts, and we did press release about two weeks ago that, we're in discussions with some governments about that technology. A question from James C. With all the good news today, could you comment on the stock price and recent action?

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

It's very difficult. You know, we've seen similar volatility in our stock during previous earnings releases, I think the last three or four, or at least the the the the quarters of this year. You know, we we we have no idea. A lot of times when our stock is volatile, we're busy in meetings and and on the production floor working. We're not, you know, behind a trading desk or doing anything.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

So it's, you know, the the secondary market for shares in a company, which is what Nasdaq and IC is in essence is and brokers, is really up to, you know, investors and and traders and stuff like that and and how they how they trade and and what shorting or whatever may happen is is the least in control of the company. So all we all we're focused on is putting more products in boxes and getting those boxes out the door in terms of volatility in the stock price. That's up to the to the to the traders. And and, you know, we we have no real control. All we could do is continue to execute on the business side.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

But, yeah, it's we're the the the company's, you know, net assets are are worth a significant amount plus patents plus intrinsic growth and value, so there's there's a strong upside here. But, you know, when when when stocks go down, you know, it just it's it's because of, I guess, traders or or the the open market.

Faran Ali
Faran Ali
Senior Business Consultant at Worksport

And, James, the only thing we'll add also to to the question about stock price stock price volatility is going forward, the company does believe that the warrants that are in play between $4.50, $6.70 may come to fruition, and and that means that we believe that the company stock price is not matched to where we see the intrinsic value of the company. We think that our assets, growth, our margins improvements, intellectual property is undervalued. We And believe that as Q3, Q4 and AetherLux core slowest come out, the stock's overlying health will be better reflected into its price. Next question. And I'm gonna take two more questions, Steve, here.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

Okay.

Faran Ali
Faran Ali
Senior Business Consultant at Worksport

Next question is, what is your plan to increase analyst coverage of the stock?

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

So, you know, earned coverage is is important. There's a lot of paid research out there, which we try to avoid. Although there are very good firms, I I think that, you know, our our dollars should go into into selling more and making more versus some of the analyst coverage. So we're we're gonna continue to work with, you know, some of the analysts that that that are well known and and and reputable, to cover the story earned. But that's that's an iterative process.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

Meeting various, you know, research firms and speaking to analysts is is a is a very it's a it's a relationship that needs to be built and has to be trust, and and the analyst has to believe that that the company is worthwhile. So so we're gonna continue to to meet new research partners and continue to try to find organic coverage, but it just it's it's it's it's gonna take, you know, time like like all the other things that we do.

Faran Ali
Faran Ali
Senior Business Consultant at Worksport

Thanks, Steven. Last question for today. When exactly is the first Solace plus core set expected to be shipped? What stage are we on? What else is left to do before we hit the market?

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

Yeah. Good question. So Solace, we made, we made a handful and we sold them. So the beta program, alpha was like internal testing. That was done.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

That's where we redesigned it and made some changes. Beta testing is when we actually sold units to select users. We've had really good feedback. One you know, I just found out this morning that one guy was able to to put a good amount of miles recharged from his Solis into his truck with a level one charger connected to the core. That was really cool to hear.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

So betas, you know, we had some revenues from it, and and then now that that goes to full release. So full release, we've ordered solar panels to be manufactured. We're gonna be making, I think, somewhere around 200, but we're probably gonna up that closer to 500 units. And that should be sometime you know, the the panels have to be made and shipped, and then we have everything else to make the covers here at this factory that I'm in today at our factory. So that should be, you know, the the within the second half of this year.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

Where it is is is anyone's guess, but I I would expect in q four, probably, like, maybe October, November. But that's the solace. The core UOL certification, there was 10 tests. We passed nine of them. We're on the last test now.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

And once we pass that test, we can go into and get UL certification. We can go into production. So we have you know, we're 90% of the way there until in terms of UL. Once we pass UL, we can go into production. And and, again, it's it's production.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

We've got most of the components ready. It's getting into production of the first thousand units and, and then stocking them. So that should all happen within the share. If there's any challenges, it might be geopolitical issues, which I doubt, but more maybe relating to the testing process and time it takes to get you know, UL certification is is the most prestigious certification, so it it it does take time.

Faran Ali
Faran Ali
Senior Business Consultant at Worksport

Thank you very much, Steve. And Mike, Scott, and Kate, thank you for attending analysts. And we'd like to thank all of our investors today for their time and attention. This marks the end of the q two twenty twenty five call. Have a great day.

Steven Rossi
Steven Rossi
Founder & CEO at Worksport

Thank you, everyone.

Executives
    • Steven Rossi
      Steven Rossi
      Founder & CEO
    • Michael Johnston
      Michael Johnston
      CFO
    • Faran Ali
      Faran Ali
      Senior Business Consultant
Analysts
    • Scott Buck
      MD & Senior Technology Analyst at H.C. Wainwright & Co., LLC
    • Tate Sullivan
      MD & Senior Research Analyst at Maxim Group