Worksport Q2 2026 Earnings Call Transcript

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Provided by Quartr
August 11, 2026

Key Takeaways

  • Positive Sentiment: Q2 revenue reached a company-record $5.2 million, up 27% year over year and 58% sequentially, while gross profit rose 93% sequentially to approximately $1.6 million and gross margin expanded to about 32%.
  • Positive Sentiment: Operating leverage improved materially, with operating expenses falling 17% sequentially and operating cash use declining 58% to $3.4 million; management said it may achieve momentary operating cash-flow positivity in Q3 and remains focused on sustainable breakeven in 2026.
  • Positive Sentiment: The newly launched NEXUS tonneau cover generated approximately $1 million in sales within 10 weeks, with July-related orders approaching $1.5 million; two distributors, including multinational Meyer Distributing, were added during the quarter.
  • Neutral Sentiment: Worksport plans to convert its $12.1 million inventory balance into working capital by selling finished goods and moving toward just-in-time production; management said July cover sales were about 30% above production, while promotions may be used to liquidate older AL3 and AL4 inventory.
  • Negative Sentiment: Liquidity remains a significant risk: the company had only about $1.2 million in cash and $820,000 of revolver availability at June 30, and its 10-Q continues to disclose substantial doubt about its ability to continue as a going concern. Management is exploring financing alternatives but hopes to avoid raising additional funds for the remainder of 2026.
AI Generated. May Contain Errors.
Earnings Conference Call
Worksport Q2 2026
00:00 / 00:00

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Steven Rossi
Steven Rossi
CEO at Worksport

I was appointed CFO. Effectively start with some safe harbor statements. During this call, we will make forward-looking statements, including statements regarding our expectations for financial and business trends, our market position, our go-to-market growth initiatives, and our product programs and their expected benefits. These statements are predictions based on current beliefs, expectations, and assumptions. Because they relate to the future, they are inherently subject to uncertainties, risks, and change in circumstances that are difficult to predict and many of which are outside of our control. Actual results may differ materially, and you should not place undue reliance on them. These statements are subject to risks discussed in our SEC filings, included in our annual report Form 10-K and our quarterly report 10-Qs. They speak only as of today's date. We assume no obligation to update them, except as required by law.

Steven Rossi
Steven Rossi
CEO at Worksport

Any supplemental operating metrics discussed today should be considered together with, and not as substitute for, the underlying GAAP results. With that, let's kick off the agenda. Today we are going to review our 2026 scorecard in this quarter, Q2 or last quarter, the Worksport platform, liquidity and capital resources, financial review, inventory strategy, commercial execution, and 2026 outlook and cash flow framework. A lot to go through. Stay buckled in. We are going to go quick, and we are going to take questions at the end. We are entering a phase where scale efficiencies are becoming evident. In Q2 2026, quarter-to-date revenue grew sequentially by 58%, while total operating expenses declined by 17%, and cash used in operations also declined by 58%. Our results reflected improved operating leverage and a more efficient cost structure.

Steven Rossi
Steven Rossi
CEO at Worksport

We are beginning to generate revenue more efficiently and with a greater proportion of sales converting our operating cash flow. The following Q2 2026 results support our positive scaling dynamics. Point number one, net sales were approximately $5.2 million for the quarter. This is the strongest quarterly result we have had in Worksport history, up 27% year-over-year and 58% sequentially. Gross profit was approximately $1.6 million, up approximately 52% year-over-year, and 93% sequentially, with gross margins expanding to approximately 32% from approximately 26% in Q1 of this year. Operating expenses were approximately $5.5 million, down approximately 17% from Q1 2026. Operating expenses as a percentage of net sales declined from 128% to just 68% during the same time period. Net cash used in operating activities was approximately $3.4 million, an improvement of 58% from $8.2 million in Q1 of this year.

Steven Rossi
Steven Rossi
CEO at Worksport

The quarter also strengthened as it progressed. June was our strongest revenue month on record at approximately $2.1 million in sales, with monthly gross profit rising during the quarter to 35% in June alone. We believe June is a strong indicator of our ability to scale the business as it continues to expand both in the consumer direct and commercial reseller sales channels. This quarter, we focused on improving our operating cash burn, and we made good traction. Jennifer will provide more insights on factors contributing to our improvements. We will also speak to how do we intend to convert our strong operational progress into sustainable operating cash flow breakeven. What Q2 2026 established is that the cost base and the revenue line can move in opposite directions in the same quarter. Moving forward, we intend to continue targeting increased revenue with efficient cost basis.

Steven Rossi
Steven Rossi
CEO at Worksport

We continue to evolve into a diversified platform with multiple products serving multiple channels and generating multiple revenue streams. As we scale, we are mindful of prioritizing our organizational strengths. Our core economic engine is the hard-folding tonneau covers we proudly make in our ISO 9001:2015 certified facility in West Seneca, New York. We launched our newest tonneau cover, NEXUS, in the last quarter, Q2 of 2026. Our near-term growth levers include distribution onboarding, distribution reorders, expanding e-commerce, and conversion of inventory into working capital. We will continue making new product innovations for our products, and we are going to continue to pursue larger partnerships in our energy products. Our SOLIS solar tonneau cover COR portable energy system are an emerging commercial option that extends the truck bed from a covered platform into a mobile power system.

Steven Rossi
Steven Rossi
CEO at Worksport

And really excitingly, our AetherLux heat pump system, through our subsidiary, Terravis Energy, is a very exciting strategic opportunity that is expected to be certified within the second half of this year. We prioritize and emphasize operational excellence ahead of additional growth vectors. Our core business strategy must be executed with discipline, and our results in Q2 2026 support our commitment to the success of our platform. I will address liquidity directly, and then I will go through our recent business updates. At June 30, 2026, we held approximately $1.2 million in cash and cash equivalents. Separately, we had about $820,000 of remaining availability on a revolving line of credit, which is borrowing capacity, not cash. We reported an inventory balance of $12 million, which we expect to be a strong source for additional liquidity, and we will discuss this further below.

Steven Rossi
Steven Rossi
CEO at Worksport

Our Q2 Form 10-Q continues to disclose substantial doubt about our ability to continue as a going concern. While this disclosure reflects uncertainties associated with our current liquidity and capital resources, management has implemented a clear plan forward on revenue growth, margin expansion, disciplined cost management, and active analysis of additional financing opportunities. We remain focused on executing our strategy and strengthening our financial position. Our plan for closing the gap in the same period we are executing operational. Convert inventory into sales and cash, grow gross profit faster than reoccurring costs, cash costs, and improve marketing productivity. Our objective during the first half of this year was to strategically support growth initiatives that we believe will create value over time.

Steven Rossi
Steven Rossi
CEO at Worksport

Our strategy included funding working capital and operations to support scaling, and we are now well-positioned to convert inventory into working capital efficiently in the second half of this year. We continue to prioritize a reduction in our reliance on dilutive capital as our gross profit expands and operating cash flow improves. Our greatest source of liquidity inventory is being managed during the balance of this year. We are strategically producing our products to function in a just-in-time environment such that we maximize our use of raw materials while minimizing our concentration risk of inventory buildup. More on the subject to come. To align my incentives further with the stock, I elected to receive previously accrued and unpaid bonus compensation of $125,000 in stock at the market's closing prices.

Steven Rossi
Steven Rossi
CEO at Worksport

I continue to believe in the future of the company that reflects a strong value as we continue to actively target cash flow positivity. With that, I will hand the call to Jennifer.

Jennifer Kartychak
Jennifer Kartychak
CFO at Worksport

Thank you, Steven. Good afternoon, everyone. Net sales for Q2 2026 was $5.2 million compared to $4.1 million in Q2 2025 and $3.3 million in Q1 2026. Growth of approximately 27% year-over-year and 58% sequentially. First half net sales were $8.5 million or about 11,574 units. The shape of the most recently completed quarter matters as much as the total. Monthly net sales during Q2 2026 were approximately $1.4 million in April, $1.7 million in May, and $2.1 million in June, each month larger than the one before it. June 2026 was the strongest revenue month in our company's history. That progression reflected stronger production output, broader product availability, and channel execution rather than any single order. We sold 7,010 units, 2,957 through B2B and 4,053 units through B2C, generating approximately $2.3 million and $2.9 million of net sales respectively.

Jennifer Kartychak
Jennifer Kartychak
CFO at Worksport

Our mix between sales channels was consistent between Q1 and Q2 2026. The mix matters because B2B carries a lower gross margin but a materially lower marketing cost per unit, and the balance between the two is what determines both blended margin and cost efficiency. Having both channels gives us a direct customer insight and wholesale reach at the same time. Gross profit was $1.6 million, compared with $1.1 million in Q2 2025 and approximately $850,000 in Q1 2026, an increase of approximately 52% year-over-year and approximately 93% sequentially. Gross margin was approximately 32%, compared with 26% in Q2 2025 and approximately 26% in Q1 2026. Gross profit rose from approximately 26% in March 2026 to 35% in June 2026. The improvement was driven by higher sales volume, efficiencies in overhead absorption, and product mix. These gains offset higher input in landed costs, including tariff pressure.

Jennifer Kartychak
Jennifer Kartychak
CFO at Worksport

That is worth emphasizing. We expanded margin more than five percentage points against a rising cost base. Sustaining gross margin at its current run rate as volume increases and sales mix shifts is a principal objective for the back half of 2026. On to operating expenses and our net loss. Total operating expenses were about $5.5 million, up approximately 16% year-over-year. However, operating expense as a percentage of sales decreased nine percentage points year-over-year. In addition, operating expense decreased approximately $1.1 million or 17% from Q1 2026. Research and development expense was $214,000. AL4 and NEXUS have moved out of development and into production, which is why this expense caption fell $91,000, or approximately 30% year-over-year. Spend converted into product we are now selling. General and administrative expense was about $3.5 million, up approximately 15% year-over-year.

Jennifer Kartychak
Jennifer Kartychak
CFO at Worksport

As a percentage of net sales, G&A decreased by approximately seven percentage points year-over-year. Further, this expense caption declined by approximately $690,000 or 16% from Q1 2026. Sales and marketing expense was $1.7 million, up approximately 31% year-over-year. However, sales and marketing expense as a percentage of net sales only increased 1% compared with net sales increase of 27%. Further, this expense caption decreased approximately $449,000 or 21% from Q1 of 2026, the first evidence of a marketing discipline we committed to during our Q1 2026 earnings call. Net loss was $3.97 million compared with $3.73 million in Q2 2025 and $5.83 million in Q1 2026. That is a 32% sequential improvement and a 6% reduction in net loss year-over-year. Loss per share improved from $0.33 from $0.71 for the prior year quarter.

Jennifer Kartychak
Jennifer Kartychak
CFO at Worksport

This year-over-year comparison is the one that keeps our attention. Revenue growth alone has not yet outrun our recurring cost base. The sequential comparison is the one that shows the mechanism working. Our objective for the second half is straightforward, focus on gross margin expanding at a faster rate than operating cash requirements, creating a path to positive operating cash flow. Speaking of cash flow, net cash used in operating activities in Q2 2026 was $3.4 million compared with $8.2 million in Q1 of 2026 and approximately $3.1 million in Q2 2025, a 58% sequential reduction. For the first half of 2026, operating cash use was $11.7 million compared with $6.9 million in the prior year period, an increase of approximately 68%. The Q2 2026 bridge is straightforward. We begin with a net loss of $3.97 million.

Jennifer Kartychak
Jennifer Kartychak
CFO at Worksport

Approximately $1.1 million is related to non-cash items, principally share-based compensation and depreciation and amortization, leaving a loss before working capital movements of approximately $2.74 million. Working capital used approximately $555,000, a substantial normalization from the roughly $3.6 million consumed in Q1 2026 and the clearest sign that the balance sheet build phase is believed to be behind us. Cash and cash equivalents was $1.2 million at June 30th, 2026, compared with $567,000 at March 31st, 2026, and $5.9 million at December 31st, 2025. On to inventory. Inventory consists of raw materials that have already been purchased, work in progress, and finished goods. Converting this inventory into sales represents the largest internal source of working capital available to the company without the need to raise external financing. Net inventory was $12.1 million at June 30th, 2026, up $2.5 million from year-end.

Jennifer Kartychak
Jennifer Kartychak
CFO at Worksport

Inventory included approximately $6.6 million of raw materials, $4.6 million of finished goods, and $845,000 of work in progress. We are actively optimizing new production against growing sales channels and expect our materials and finished goods components to meaningfully reduce during Q3 2026. We are optimizing our inventory in the following initiatives. Number one, procurement. We are actively managing procurement requirements for our raw materials against our forecasted projections. First half 2026 procurement of approximately $8.1 million was front-loaded to support production requirements for expanding sales channels with approximately $1 million of those purchases still in accounts payable at June 30th, 2026. That spend, including the amounts outstanding at the end of Q2 2026, are now behind us. Number two, production. The process to manufacture our hard tonneau covers is managed against demonstrated sell-through and distribution reorder cadence rather than launch forecasts. Number three, fulfillment.

Jennifer Kartychak
Jennifer Kartychak
CFO at Worksport

Finished goods of approximately CAD 4.6 million or 6,800 covers is the balance most directly convertible in the near term. We manage fulfillment by product family and sales channel with the goal to sell more than what is produced in a given month. Working capital conversion is the measure we will report against. For our insight in July, we sold about 30% more covers than we made, and that continues to be the goal for the balance of Q3. We are prepared to take questions on inventory aging and the split between inventory supporting confirmed orders versus forecasted demand. Back to you, Steven.

Steven Rossi
Steven Rossi
CEO at Worksport

Thank you, Jennifer. NEXUS entered commercial production on April 13th, 2026, with sales shortly thereafter, making Q2 2026 its first quarter in our product portfolio. Its proprietary single-sided operation allows a person to secure and release the NEXUS tonneau cover without making laps around the pickup truck. Practical solution to a real complaint. The real-world utility of NEXUS creates a differentiated premium product for our customers. The product launch followed the shape you want to see. Following its introduction, NEXUS achieved $1 million in cumulative sales across all sales channels in just about 10 weeks. Margin contribution increased across both sales channels during Q2 of 2026. A product went from its first unit to contributing meaningful margin inside of a single quarter. The focus is now to maximize margin capture through manufacturing efficiencies and channel expansion, including established sales cadence.

Steven Rossi
Steven Rossi
CEO at Worksport

Into July, NEXUS sales continue to grow, with NEXUS-related sales orders commanding nearly $1.5 million. Two distribution partners were added in Q2 of this year, one at the end of April and the other one in June. Both distribution partners had orders fulfilled during the quarter. Meyer Distributing joined in June of 2026 as our first multinational distribution partner, bringing a substantially larger North American wholesale network serving dealers, installers, and aftermarket resellers. That is the widest wholesale access the company has ever had. Tri-State Enterprises began carrying our product, including NEXUS, and broadened our reach across four U.S. states. This matters because distributor-driven sales in our commercial channel, including repeat orders, expands our reach while reducing our blended market burden per unit. We plan to focus on creating distributor programs during the second half of this year that emphasize active order frequency.

Steven Rossi
Steven Rossi
CEO at Worksport

Our filing also describes conversations with three additional major distributors. We remain focused on achieving successful contractual arrangements to maximize our distribution network of nationwide U.S. dealers. I want to characterize those accurately. There are opportunities at present, and we will announce updates as they become available. Let's talk SOLIS. SOLIS integrates solar generation directly into a tonneau cover platform, the first of its kind. COR is a modular, portable energy system that pairs with SOLIS to operate on its own, or operates on its own, rather. Together, they extend the truck bed from storage into a power source. Both entered Q2 2026 with launch and certification work substantially complete. COR's UL and CSA certification package removes a real commercialization barrier and expands the set of distributors, retails, fleets, and commercial customers that can evaluate the system. SOLIS and COR did not represent a material share of Q2 2026 revenue.

Steven Rossi
Steven Rossi
CEO at Worksport

Our near-term objective is product-market fit and acquisition economics that do not require customer acquisition costs to rise in step with gross profit. We continue to develop federal fleet and OEM-oriented opportunities, and we assume no material revenue from them in our near-term plan. However, I can confirm that we believe we have made notable progress on that front. Let me repeat. I believe we had, and I can confirm that we believe that we have made notable progress on this front in commercializing both SOLIS and COR. Moving aside into Terravis Energy, we received U.S. patent number 12624872 during the quarter, covering heat pump systems architecture related to ZeroFrost and designed to reduce or eliminate conventional defrost cycle. Certification work is expected to continue in the second half, subject to testing and customary certification timing. AetherLux remains pre-commercial.

Steven Rossi
Steven Rossi
CEO at Worksport

No procurement decision has been made, and we do not rely on AetherLux revenue to achieve our 2026 operating plan. The next gate is third-party validation and certification. We will allocate capital to it against measurable milestones and nothing else. We believe we may hit momentary operational cash flow positivity within Q3 2026. This is huge. At this time, we are not providing guidance of specific calendar targets for sustained operating cash flow positivity, though we remain focused on reaching sustainable operating cash flow breakeven in 2026. Our priority is disciplined cash generation rather than optimizing around a single quarter. Rather than focus on a projected date, we believe investors should focus on the underlying drivers of operating cash flow. Our path to positive earning cash flow is straightforward: grow revenue, expand gross profit, maintain disciplined control over reoccurring costs, and convert working capital more efficiently.

Steven Rossi
Steven Rossi
CEO at Worksport

All of which we've shown that we can do in this past quarter. During Q2 of 2026, we made progress across all four areas simultaneously. Gross profit totaled approximately $1.7 million, compared to $4.5 million of cash operating needs before working capital, resulting in an operating cash flow gap of roughly $2.9 million before working capital movements. Working capital usage accounted for an additional $0.6 million during the quarter. Viewed differently, gross profit covered approximately 32% of our reoccurring cash operating requirements during the quarter. Closing the remaining gap can be achieved through some combination of higher revenue, sustained or improved gross margins, disciplined reoccurring expenditures, and improved inventory conversion. At a 35% gross margin and using our most recent run rate of $2.1 million of sales, quarterly revenue of approximately $12 million, $12.9 million would fully cover the current pre-working capital cost structure.

Steven Rossi
Steven Rossi
CEO at Worksport

Alternatively, if we expand our margin contribution by just 300 basis points and recognize approximately $9.3 million of quarterly net sales, reoccurring costs would need to decline by approximately $1.2 million per quarter for us to fully cover our reoccurring expenditures, assuming relatively neutral working capital. We offer these figures as a sensitivity guidepost rather than revenue guidance. The key takeaway is that the gap continues to narrow, and we believe the progress achieved during these quarters demonstrates a clear trajectory towards a self-sustaining cash flow positive operating business. Q2 of this year showed that Worksport can generate stronger revenues, expand margin, reduce operating expenses, and materially improve cash efficiency in the same quarter against a rising input cost basis. The combination results in a business which we believe is on its way to scaling successfully. We are aware that there is still work ahead of us.

Steven Rossi
Steven Rossi
CEO at Worksport

We must convert our inventory, expand our commercial distribution reach while maintaining gross profits that meaningfully contribute to our operations. This is a question of execution, and it is the right question to be judged on. We are committing to three things: convert inventory into cash, turn distributor access into repeat large orders, and grow sales volumes faster than operational cash requirements. On that, thank you very much for your continued interest in Worksport. This concludes our prepared remarks. Operator, please open the line for analyst questions, and our investor town hall call will follow.

Operator

Thank you. Worksport is now opening the floor for Q&A. We welcome live questions from any analysts on the call, and investors may submit the questions they have through the Zoom Q&A feature or by email to investors@worksport.com. Selected investor questions may be answered live during the town hall that immediately follows the end of this call. I see that Tate Sullivan from Maxim Group has his hand up.

Tate Sullivan
Tate Sullivan
Analyst at Maxim Group

Okay. Thank you. Thank you for having the town hall. First question on the inventory management. One of your slides showed in finished goods inventory, you have about 6,800 covers. Can you talk about how the pricing in the current tonneau cover market will work to get those 6,800 covers out the door? Or might pricing improve quarter-over-quarter? If so, on what channel too, please?

Steven Rossi
Steven Rossi
CEO at Worksport

Sure. Yeah. Most of the inventory that we have on hand was AL3, AL4. We have been finding good success in running small promotions on AL3. June was a small trial run on direct-to-consumer website sales, and we ran a small promo, and we liquidated a significant amount of inventory, which is great. We are going to offer incentives on reseller channels and online channels that make sure we satisfy both sides of our business, reseller and direct-to-consumer. As we burn through that inventory, we are going to, as we said in the call, we are going to focus on just in time to mitigate keeping too much inventory.

Tate Sullivan
Tate Sullivan
Analyst at Maxim Group

Thank you. Second for me is, in the quarter, sales and marketing expenses were about $1.7 million. Can you break that down going forward? Will you have more or less sales and marketing expenses on SOLIS and COR initiatives? Or now that you have more distributor relationships, will that number decline? Can you talk about that mix and outlook, please, for sales and marketing expenses?

Steven Rossi
Steven Rossi
CEO at Worksport

It's a difficult question because of the volatility of the underlying platforms. The biggest platforms are just really two. It's Meta or Facebook, which owns Instagram, and then Google. Those two networks are very volatile. They tend to get a little bit more expensive for us to remain competitive, in terms of, sorry, during the winter months, like the month of November, Black Friday. We're going to try to keep things. We outlined in this call that we're able to raise sales, I think it was the 17% or 18%, while sales and marketing only increased 1%. I may have those numbers wrong. I haven't committed them to memory yet. We think that sales and marketing will remain as much flat as possible while sales continues to increase because we're more efficient at how we market, and we're becoming much more recognized as a brand.

Steven Rossi
Steven Rossi
CEO at Worksport

But on the other side, we're prepared to invest more in sales and marketing to continue to grow sales if that's what we need to do. The answer to the question is, we're going to try to keep it sideways so that our sales increase while sales and marketing does not. However, if it means adding significant revenues, we will invest there because it's just going to get us to that cash flow breakeven and positivity that we want to sustain.

Tate Sullivan
Tate Sullivan
Analyst at Maxim Group

Okay. Thank you, Steven.

Steven Rossi
Steven Rossi
CEO at Worksport

You are welcome.

Operator

Thanks for, Tate. Steven, we have some questions here from investors on the call. One of the first questions is from Robert A. Speaking to tariffs and aluminum raw prices, could you comment on how that is currently impacting Worksport?

Steven Rossi
Steven Rossi
CEO at Worksport

Yeah. I read that question. Robert, great question, and one that when I look at my wristwatch, I can see my heart rate raising, not because of you, but because of the underlying frustrations I have. Look, the number one selling vehicle in America is the F-150. The average individual buying that is our farmer, our vet, our serving members, the average American. That vehicle in the past two or three years has gone from in the mid $30,000s to the high $40,000s. Why? Because that vehicle is made primarily with aluminum. I think the frame is steel, the body is completely aluminum. That is significant inflation that the American individual, the population, is paying for. The cost of aluminum has risen from approximately $1.30 a pound to double over the past few years, directly correlated to the tariffs that have been imposed by the current administration.

Steven Rossi
Steven Rossi
CEO at Worksport

It is not speculatory. It is something that anyone can see through the open LME and MWP markets. You are aware of it, of course. The rise in aluminum cost is not because demand is higher. In fact, demand for aluminum is quite weak and soft, at least within this continent. How it has affected things is it has reduced the. The NEXUS and the AL4 were meant to be very profitable. They were meant to be 40%, 50%. Do not quote me on it, but we engineered them to make significant margins. Making 35%, obviously, is, to us, still very healthy, but bronze medal. These products should be making us 45%, 55%.

Steven Rossi
Steven Rossi
CEO at Worksport

So how it's impacted us is it's not. I don't think it's held us back on our sales side of things, but it's impacted our ability to offer better pricing programs to our distribution partners, better incentives, deeper discounts during our Black Friday months for dealers and distributors. The last thing I'll say is the AL4 is something that we're not really that keen on selling through distribution because the margin isn't there because of the rising costs, and we don't want to raise our costs anymore of our product because that's just the American individual paying for inflation. So how it's impacted things is the margin is not quite as high, although I think that our sales are close to being where they should be except for us maybe not selling the AL4 through distribution as a result. But it's fine because the NEXUS is taking that demand anyway.

Steven Rossi
Steven Rossi
CEO at Worksport

We're seeing the same volume just through a different channel, if that makes sense.

Operator

Thanks, Steven. We do have a question here from an investor that submitted it via email. They were asking for specific clarity on item number three of the upcoming Worksport Annual General Meeting, AGM. To specify for all people listening, item number three was to approve, on an advisory basis, a proposal expressing shareholder support for the board of directors to consider declaring special dividends in connection with the sale of any business unit or material asset of the company, subject to applicable law and the board's fiduciary duties. Steven, could you provide some insight on why the company decided to include this for the upcoming AGM?

Steven Rossi
Steven Rossi
CEO at Worksport

We're working really hard to build a business. There has not been a business like ours that has done what we're able to do in as quick of a time as we're able to do it. The growing Worksport from zero, from 1 million to 8 million to 16 million to a run rate of 20s and hopefully 30s before the end of the year, in the short period of time that we've been able to do, has never been done before. As much as investors always have an appetite, like us, for more, we've broken all records than anyone in our industry. As a result, obviously, we're going to have a significant amount of interest as we grow in divesting. The opportunity's going to be there as we grow to divest ourselves of certain business units. Terravis Energy as a quiet subsidiary to Worksport.

Steven Rossi
Steven Rossi
CEO at Worksport

The public company is developing heat pump technology for a $150 billion market that is needed and does not exist. Once again, we're achieving on that business unit what hasn't ever been done before with a track record of execution behind us. As we grow, there may be an opportunity for divesting ourselves of a certain business unit, whether that's Worksport or Terravis or something that we haven't even done yet. If we were to look at it could be significant, and then if it is significant, there could be a special dividend to shareholders paid. What I will reference, if I can, and I'll ask for forgiveness versus permission, is that a competitor of ours, about a decade and a half ago, sold their business. Topline revenues were in the mid $50 million. EBITDA was marginal.

Steven Rossi
Steven Rossi
CEO at Worksport

They sold, just about a decade, a decade and a half ago, privately for about $120 million. Worksport's trending towards those same revenues, probably healthier margins, and we trade at a, what is it, Peron? Like a $16 million, a $10 million market. I haven't checked our market cap, but what I mean is the business underlying the stock is very valuable. If we see that there's an opportunity to capture that value through a divestiture, there's an opportunity, of course, no guarantees, that investors could receive a special dividend during that time. That's how that would work mechanically and the logic behind it, but there's no guarantees of any of it.

Operator

Thanks, Steven. I do have a question from Sri Arasha, he said, "Hi, big fan of SOLIS and COR combination for trucking. What are your plans to expand this to more general use and increase the potential market purposes?

Steven Rossi
Steven Rossi
CEO at Worksport

Good question. SOLIS, we're probably going to be looking at easel systems to be able to remove it from the truck and mount it anywhere, in a field, job site, campsite, these types of things. More universal mounting applications. We're still going to be focused on OEM integrations. More to come on that. We're still going to be focused on broader applications on the vehicle side of things. But the SOLIS, we're going to look at universal mounting solutions, which would be pretty easy for us. The COR, I can't say much about it, but we're going to look at more use cases for our battery blocks as well, so that people can integrate our batteries into other devices that consume electricity 36 and 48 volts.

Operator

Thanks, Steven. You spoke about tariff costs. Since tariffs were declared illegal, in this context, this is the question from the investor, but I think they're referring to the recent government mandate from the Supreme Court, talking about the legality of the tariffs. Their question is, will Worksport receive any money back like some other companies may have received?

Steven Rossi
Steven Rossi
CEO at Worksport

Good question. On the aluminum side of things, it's inflation. We didn't pay tariffs on our aluminum. We paid inflation on our aluminum because of the tariffs. There's unfortunately no one, and 350 million people are paying for it. No one's going to get any money back. Also, realistically, we were in a meeting with Toyota Corporation. Don't misread this. There was a seminar by Toyota. Not a business meeting, but there was a seminar, and even Toyota Motor Vehicles, one of the biggest car manufacturers in the world, during the seminar, was indicating that they don't believe that the reduction of tariffs will reduce the price of aluminum, because now the U.S. economy's absorbed that extra income.

Steven Rossi
Steven Rossi
CEO at Worksport

If you notice, I don't want to get into the political side of things, but on the inflation as a result of the tariffs, I'm not sure it's going to be reversed in a very short period of time. On tariffs that we did pay on imports from China, or foreign countries that are tariffed with the Section 301 tariffs, yes, we can apparently get some of these tariffs back. But I believe that the process is still very foggy, or unclear, and it's also not immediate. We're working with a consultant that'll help us with some of the tariffs that we paid, but because we're significantly American-based materials, majority of our product is sourced, the materials are sourced in America. We're just paying just brutal inflation for our material, and not tariffs.

Steven Rossi
Steven Rossi
CEO at Worksport

There's not much we can do about it, but anything that we did to pay tariffs on, we'll look to get the credit back for them, but it probably won't be this year.

Operator

Thanks, Steven. We have a question here from Shane C. I am going to direct this towards Jennifer. Jennifer, the question is, as you sell down inventory for cash, do you foresee any inventory shortfalls, or is that baked into the plan?

Jennifer Kartychak
Jennifer Kartychak
CFO at Worksport

Great question. In terms of our plan, we are forecasting a reduction in our finished goods inventory while we move closer to a just-in-time format, if you will, for the balance of the year. So we are well-positioned to be able to meet demand, as well as distribute, as we receive orders and we receive commitments from our customers.

Operator

Thank you, Jennifer. Steven, we have here two questions related to AetherLux. I am going to combine them because they are very similar. The question is asking if there is any way to accelerate AetherLux revenues. They believe that it might be far into the future. They are asking if it is, and they are wondering if Worksport has found a way to manufacture AetherLux products to get to the market faster. Are we working with a partner on that front, they are asking.

Steven Rossi
Steven Rossi
CEO at Worksport

Yeah, very good question. I will keep the answer brief, not because I want to hide from it, but I will keep things direct so I answer them not with word salad. Number one is Worksport has partnered with a very large manufacturer of heat pumps to manufacture our design, and the immediacy in which that we could receive finished AetherLux products post-certification is about 45 to 60 days. So I am not worried about that. The certification process is necessary, and there are a lot of certifications, AHRI, ENERGY STAR, UL, ETL, I think. So there are a lot of certifications. That process should conclude in the fall months of this year. So September, October, I would say probably October. Then after we are certified, 45 to 60 days is as early as we could see product.

Steven Rossi
Steven Rossi
CEO at Worksport

I could also say that we're working feverishly on some initial orders from various public or private sector businesses. What that means is it could be governmental or it could be private sector, but we are looking at orders to get the AetherLux on the balance sheet. We feel pretty optimistic that the product is everything we've said and more of what it's supposed to be in terms of a breakthrough product, and we think that the demand is going to be there. Also, you tend to judge. People judge based on history. I understand that we've had some black eyes as a business, but one thing that you should judge us on, too, is that when we say we're going to execute, we do. We said we're going to do SOLIS and COR. It took a little while longer. Very complicated products.

Steven Rossi
Steven Rossi
CEO at Worksport

We executed. They're in the market. You could buy them right now. AL3, AL4, HD3, NEXUS, execution, execution. No investor here should wonder whether we're going to execute on this product. We've shown nothing other than our ability to be able to execute on bringing products to market and then monetizing those products. I don't think it's a question of if, now it's just when, and our intention is to expedite the when, for within, let's say Q4 of this year, to get the product out and contributing to the balance sheet.

Operator

Thank you, Steven. We have a question here from Fred T. Could you walk us through the NEXUS ramp-up in any more detail, specifically perhaps an ASP by channel, margin profile relative to AL4, number of active SKUs, or a July versus August sell-through run rate, and whether NEXUS is expanding the market or cannibalizing AL4 demand? I think I'm going to point this toward Jen, because there's some levels of that question that we can't answer publicly. But Jennifer, do you understand the question, or would you like me to repeat?

Jennifer Kartychak
Jennifer Kartychak
CFO at Worksport

I would prefer if you repeat, please.

Operator

Okay. The question is about the NEXUS ramp-up, specifically, if we could comment about any of the following: ASP by channel, margin profile relative to the AL4, number of active SKUs for NEXUS, current July/August sell-through run rate, or whether NEXUS is expanding the market or cannibalizing the AL4 demand.

Jennifer Kartychak
Jennifer Kartychak
CFO at Worksport

Okay. Our margin is moderately more healthy on our NEXUS versus our AL4. With the introduction of the NEXUS, we were able to achieve our first $1 million in sales on the NEXUS, within a single quarter. It took us about 10 weeks from the initial production of our NEXUS product to securing that first $1 million, which is the best ramp-up rate that we've had to date on any of our product introductions. It's a great testament to the product itself and what it can deliver in terms of values to our end customers. That being said, the mix between NEXUS and AL4, I would say in general, they offer different opportunities to our customers. It really depends on what our customers are looking for in terms of a product. I think they both have benefit to them.

Jennifer Kartychak
Jennifer Kartychak
CFO at Worksport

In terms of the mix and the resulting impact of that, I would say it hasn't cannibalized. I do not believe that it will cannibalize our mix in general, with the introduction of the NEXUS. But, in general, we have seen and continue to see a healthy contribution to margin, not only in our B2C space, but also in our B2B space. It's just.

Operator

Right.

Jennifer Kartychak
Jennifer Kartychak
CFO at Worksport

A product in general that is not well. It doesn't have any natural competitors, if you will. I'm sure that Steven will be able to speak to that.

Steven Rossi
Steven Rossi
CEO at Worksport

Yeah. Jennifer answered the question brilliantly. ASPs are, I am allergic to acronyms typically, but I think that means average sell price, and the margin profile. Margin profile is strong. Average sell price is confidential, not because I do not want to answer it, but because we really do not want to speak to what channels pay. But we are uniformed and do have UPP, which means that everyone pays the same in a certain channel. A distributor pays distributor pricing, jobber pays jobber pricing, so that we are not giving unfair advantages to anybody. In generalities, we have I think 35 SKUs, and we are thinking about 8-foot bed applications, so that should increase SKU coverage and penetration on the products within this year, by about six, maybe a little bit less. So we are going to be in the 40s with the NEXUS.

Steven Rossi
Steven Rossi
CEO at Worksport

We have all the major A, B, and C movers, Ridgeline, Tacoma, Gladiator, and we are working, I think, on Colorado/Canyon, so the more obscure, less popular trucks. Yeah, so we still sell thousands of AL4s, thousands and thousands. So the demand is there, and it is not cannibalizing it, but it is offering something that just does not exist. So we think that AL4 markets, I think that the prop rod flip-up tonneau cover business is going to be challenged, come the end of the year, for various reasons. But, we have secured our success with the NEXUS. You know what? If we switch every sale of a prop rod tonneau cover to the NEXUS, all the better, because they are more profitable and they are just a better cover anyway.

Steven Rossi
Steven Rossi
CEO at Worksport

But I think that the prop rod AL4 type business is going to survive for the foreseeable future and be quite healthy for us. So we are okay either way, if that makes sense. Very good question, Fred T. But for the rest of the sensitive information, I would love to answer it, but we got to keep some numbers under our hat.

Operator

Thanks, Steven. I think one aspect that we can also highlight for investors listening to this call is we mentioned that in 10 weeks, NEXUS generated about $1 million in sales. Then I think, Steven, right at the end, you slipped in there that for July, NEXUS amounted to an order volume of $1.5 million in July. So to reiterate, $1 million for the first 10 weeks, and then $1.5 million for July, if that gives you an idea on what we are projecting for Q3, as well as the continued growth for NEXUS. The last question on the call today is from Gary B. I would like Steven to answer this. Steven, what is the avenue towards making this a million-dollar a week company in sales?

Steven Rossi
Steven Rossi
CEO at Worksport

Over $50 million a year in sales for us is not impossible. We just got to keep on working on bringing the COR and SOLIS deeper into market without spending too much money on that, on the marketing side of things, so that we are profitable on those sales. We just landed distribution within the last quarter, just recently. These relationships are new, and we need time to have them mature. There are 17,000, maybe even more, there is probably 18,000 dealers in America at this point that could sell our product, and it just takes time to get them acclimated to the product, get display stands, get sales reps out there, and get them moving the Worksport product line.

Steven Rossi
Steven Rossi
CEO at Worksport

I think it is just a bit of time, and you could see 1 million to 8 million to 16 million. We are hoping to hit at least a run rate in the $30-plus million range this year. That is significant growth. If you follow even similar growth, not even duplicative, it could be within the cards for next year, I think. Then upwards and onwards from there.

Operator

Thanks, Steven. I am going to sneak in one more final question from Ramesh D. Ramesh is asking if you see any reason to raise new funds for the rest of the year, or if you can give any profile on maybe the amount of funds that need to be raised. Jennifer, do you want to answer this one?

Jennifer Kartychak
Jennifer Kartychak
CFO at Worksport

Sorry, I was having trouble finding my mute button. In terms of our overall outlook for the remainder of the year, we are challenging ourselves, if you will, to see that we can see it through to cash flow positivity. Our plan is, if there is opportunity out there, certainly we will explore that with a potential investor. But for the balance of the year, we really would like to see ourselves stand on our own two feet. Steven, do you have anything else to add?

Steven Rossi
Steven Rossi
CEO at Worksport

No. Last year we raised, I think, over $20 million last year in cash that we needed to continue to fund the growth, and a lot of it ended up in inventory. This year we've raised significantly less. Our reliance on outside investor capital is already significantly lower than it was this time last year. It's going to continue to reduce. I think that's exactly it, is we're going to stand on our own two feet, which at that point puts Worksport in a very, very strong position that frankly, a lot of small companies like ours on the NASDAQ don't ever get the chance to achieve.

Operator

That does mark the end of this call. We ask any investors that have any further questions to email us at investors@worksport.com. We look forward to keeping you updated on our journey, as well as sharing more news and information as it happens. Thank you very much for your time and attention today.

Executives
    • Steven Rossi
      Steven Rossi
      CEO
    • Jennifer Kartychak
      Jennifer Kartychak
      CFO
Analysts
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