Greystone Logistics Inc

OTC:GLGI

Earnings Call Transcript

[Operator]

Good day, everyone, and welcome to today's Greystone Logistics Q2 Results Conference Call. [Operator Instructions] Please note this call is being recorded, and I will be standing by if you should need assistance. It is now my pleasure to turn the conference over to Brendan Hopkins. Please go ahead, sir.

[Brendan Hopkins, executive]

Thank you, and thank you all for joining us for our Q2 results. We have a brief safe harbor, and then we'll be getting started on the call. Except for historical information contained herein, the statements in this conference call are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from forecasted results.

With that said, I would like to turn the call over to Warren Kruger, CEO of Greystone Logistics.

[Warren Kruger, executive]

Thank you, Brendan. Hello, everyone, and welcome to the call.

First off, I'd like to start with my friend and investor, [ Joel Marcus ], unfortunately passed away, and he's a great friend of ours. And many of you may or may not have known him, but he's a really good person and very bright guy. And I'm just -- I'm sorry that we won't -- he won't be able to participate with him anymore.

So -- and after that, let me talk about what's going on with Greystone. I've been disappointed in the first 6 months top line, but we are -- as I mentioned last quarter, things are falling into place as I wanted them to.

Our extrusion, we've actually sold some of our extrusion line, which is the hollow lumber that we re-fabricated and made into a -- what looks like a wooden pallet, but it's a hollow plastic extruded pallet. And Toyota has -- we are still awaiting a good-sized order from Toyota. So we're excited about that. I was with Gary Morris, who runs that end of it, this week in Indianapolis. And he has a lot of other opportunities that are now working. He's actually at the plant in Jasper today. So he was also in Jasper, Indiana. He also is -- we've done some things with Berry Plastics, and he was there yesterday at Berry. And Berry wants to take all their plastic from their operations, the waste plastic, and they want to put it back into plastic pallets. And we've been doing some of that for them, and they're going to -- it looks like they're going to increase that with us. So that's fun in that regard.

I also mentioned last quarter that we were waiting on some good news from our Walmart, and we've been filling some import facilities. Well, I'm pleased to say that we have another import facility in California that we have been supplying for. We supplied some. We went out there December 15 and got a purchase order for a relatively less than $0.5 million. But we started there, and I just got an e-mail today that they're going to get on a regular schedule of taking units out there. So we're excited about that. It's a big, big, big import facility, and so we're excited to continue to work with Walmart. They've been a fabulous customer, and I think we're going to do -- continue to do a lot more with them.

We have been waiting for a can and bottle pallet that we made a tool that came in, and I've mentioned this previously. The tool was -- there was some adjustments that need to be made, so we had to send it back overseas to make those adjustments. That tool is back in, so we are now -- and it's a large pallet. It's a 44 by 56 pallet for aluminum cans and PET bottles, that type of product. And so we have -- we've had some people waiting for us to have the tool back, so I think that we'll start getting some orders on that product as well this -- in the second half of the year.

We've -- our big customer, iGPS, they're a big pallet leasing company. So as you know, if you go into a Costco and you see a plastic pallet, that's a rented pallet, and that's one that we've manufactured for iGPS. They've been a good customer, and they continue to be a good customer. They're a good group. They have a good model. And I -- my only push with them is I'd like them to take another $1 million a month from us. So I'm working on that as well.

Again, I'm sorry about the softness of the first half of the year. There is a lot of movement within the industry. It was really almost -- as I've said in the past, it was a weird year, soft year. No one was spending money. And I will tell you that it's been busy.

And I had a call from a consultant who took us into Nestle on December 18. So it's weird, rarely do I go on calls from December 15th on. And in this call, there were probably, oh gosh, a dozen people associated with him either online or in the room. So there, Nestle is just looking to do something. Again, they want to get away from wood.

I was at a closure company up in Indianapolis yesterday. The closure company -- again, they send 300,000 pallets out a year on wood. And they're -- again, they're ready for a change. So we were talking about how best to serve them and what type of product they need and could they do a closed loop.

And in this world of -- I think a lot -- we'll see a lot more closed loops within organizations where we manage a small pool for them. Not like an open pool like iGPS but a closed pool.

But other than that, we feel good about our operations. We got a beautiful new rating for our safety and efficiency, so we're excited about that. I'll put out a press release on that. And operationally, I'm happy.

I mentioned Mexico in my press release, and we have got some orders from Mexico, and we're considering moving a piece of equipment down to Mexico. We manufactured under contract down there 2 years ago. And it was -- we did okay, but I was a little -- I just wasn't satisfied with the supplier we had. And I've got someone who would operate our own equipment down there if we decide to send some down there because we have some opportunities with AB and Constellation Brands. And those are the type of people you would move equipment for because they need pallets on an ongoing basis.

Other than that, I'd love to open it up for questions and be happy to answer anyone's question they may have.

[Operator]

[Operator Instructions] Our first question comes from Anthony Perala.

[Anthony Perala, analyst]

Just 2 quick ones for me. Could you -- in the press release, you mentioned some of the weakness due to a customer who hit their annual budget in the fourth quarter. Could you just speak a little bit more to that? And then maybe how you expect business to trend with that customer maybe throughout calendar 2025 and into 2026?

[Warren Kruger, executive]

Well, I'm glad you asked. It's a great question. That actually is iGPS. We have a contract with them to provide a certain number of pallets, and that's where I'd like to get another $1 million a month out of them. We are -- once we cap out on our PO, they really don't have any more budget money to spend. Just like so many people, they're pretty rigid. They don't -- just because we can make it, they won't buy it if it's not in the budget. So anyway, that's the one I was mentioning.

[Anthony Perala, analyst]

Okay. Excellent. And then just could you clarify -- it was mentioned in the press release with the new CFO arrangement with Forvis. But could you clarify, on the share buyback, if you started buying back in December? Or if it was a 30-day wait period from the day that was mentioned in that press release? I was a little confused.

[Warren Kruger, executive]

Another great question. And we have started buying back shares, and we'll report that on a quarterly basis. And then anything -- any large blocks that we buy, we'll also put out a press release on any large blocks. But we won't on the -- the small stuff that we're buying back, the small numbers, we'll put that out in our Q. And we'll put the numbers that we bought back on our next filing.

[Operator]

And our next question comes from [ Michael Gustisus ].

[Unknown Attendee]

I might -- I was looking to take a slightly different approach, if I could. I was wondering if I could make a few statements and ask you to either affirm those or correct them.

[Warren Kruger, executive]

Yes.

[Unknown Attendee]

Okay. Great. Thank you. The stated goal of $60 million in sales looks like it might be a little bit tough to reach now after the first 6 months. But how close -- or do you think you're going to come pretty close to that number? Maybe not quite reach it, but come fairly close?

[Warren Kruger, executive]

Yes, I do. We have one I didn't mention. We have a big customer that's been -- that had purchased through us over the years, that we have a $5 million PO with them that will -- that's just -- it's new, so that will come in the -- at least, the latter 2 months of our year. So I think we'll be -- I think that, that $60 million is achievable. So yes, we're going to work hard to get there.

I mean, with this new Walmart order and the other one and some of those things we have in the pipeline, yes, we may very well hit that. And I have to fill up. That's -- really, with this new equipment we put in over the last couple of years, I've mentioned it before. I'm -- my -- what I'm doing with -- and we have boots on the ground now.

We are out there, and we are actively -- in the past, we used stocking and non-stocking distributors, and we didn't have that much capacity. And now that we've put in and spent the money on the capacity, we are literally out there pounding the pavement, and we are going to fill equipment. That's what we're going to do.

[Unknown Attendee]

That's awesome. Thank you very much. And the next one and the last one was, can you tell me how much of a -- I feel like there's a big push towards plastic with tech companies and the use of automation to move pallets. They have to be precise. Can you just kind of elaborate a little bit on what the demand is and what the market is right now going from wood to plastic?

[Warren Kruger, executive]

Yes, I can. I will say that all of this automation -- and there is so much automation going on now. It's amazing. But there's good and bad with automation for us, just so you know, okay? On the good side, when I get an order, like I did -- we did Trinchero Family Estates, which is Sutter Home Wines, they're the second-largest winery in America. We did it about 8 years ago. We put 70,000 units in their totally automated facility. No human touches their pallets or their product. It's just amazing. And of course, they haven't broken one after -- since 7 or 8 years because it's never -- it's the fork truck, it's the human element that damages these things. So it's not in an open loop, where it can get pushed off a truck or stabbed with a fork tine or stolen.

And so those things are good. And so I -- we're going to see a lot more of those opportunities as warehouses go to automation and they have to -- they can't have wood pieces, wood chips falling down. So that's really what we're seeing with Walmart. It's Walmart is cleaning their -- Walmart gets it. I mean they are a good group, and they understand that consistency and so forth is very, very important and cleanliness. So the answer to your question is there is -- and I can't give you a number, but I will tell you that it's millions and millions.

The way I look at things, CHEP, who's a rental pallet company that rents wooden pallets, CHEP is owned by an Australian firm. And they have -- they rent and have in their inventory in the United States over 100 million pallets that they just rent, and they're a blue wooden pallets. You'll see them in the marketplace.

Well, where I am in my world is those -- one day, those 100 million pallets will be plastic pallets and not wooden pallets. And it's just -- it's heading that way. And it is a -- it's not a sprint, but it's a marathon. And we are positioned very, very well for that marathon. And so -- and we want to accommodate people.

I like to have a lot of new products so I can fill up. It's nice to have. If I have 50 molds and every mold gives me $1 million to $5 million, I'll be a happy camper. And so to answer your question, it is unfillable at this point. It's really -- there's all kinds of room out there. I can't even give you a guesstimate on how many units are out there other than what I just did with the CHEP example.

[Operator]

Our next question comes from Robert Littlehale.

[Robert Littlehale, analyst]

Could you just give us a little more color as far as the sales side of the business? I mean I know you like to sell, and you've been so successful through the years. But who do you have around you? And just can you kind of talk about how your sales team approaches new opportunities?

[Warren Kruger, executive]

Yes, Robert. And you were there in the early days, where we didn't have -- I mean, we didn't have any excess money. And that's why we originally set up stocking and non-stocking distributors because it was a way for us to -- I would go out and work with them, and I didn't have to have boots on the ground.

And over the years, in the last 22 years, I tried to have salespeople that -- and I was -- I didn't succeed. I had poor success. And what's happened in the last 2 years has been my plant manager, Ron Schelhaas, who's worked with me for 18 years and is a fine human being, he had a hip issue that prevented him from spending a lot of time on floor.

So we have a new general manager, and he is -- Ron has been working with me out in the marketplace. And he's the one who has a -- he just is so good with customers. He's so good with Walmart. He's so good with Simplot. He's just really good. So he's really helped me a lot.

Then I mentioned a gentleman named Gary Morris. Gary has been in this industry for 20 years. He's the one that we bought his equipment that was extrusion equipment he developed. And it is -- if you haven't seen it, if you'll go to the website, go to greystonepallets.com, our website, and go in the Media section. And if you'll go, there's a video about -- if you scroll down in the Investors section, you'll see our robotic facility in Jasper making those parts. And my point is with Gary, he understands injection. He understands thermoforming. He understands extrusion. And he also has customer experience and context within the industry. So we have -- in this world, these are long sales cycles, and he has some things. He has a bottler that he has, I think, that we're going to build a new tool for. He has another big company in Atlanta that it's really a massive opportunity. And when I say massive, anything 50,000 plus is good. When you go over 100,000, 200,000, those are really, really good opportunities those -- because those can fill a machine for kind of 1 to 2 years kind of thing.

So Bob, to answer your question, those guys are really helping me out, and it's been -- it's really been a reprieve. We are also working -- I have an investment in an extrusion company, and that extrusion company is -- there's 2 companies, TriEnda and Penda. And they have -- they're a -- they have a lot of salespeople. They have a lot of boots on the ground. And we've started working more hand in glove with them. It's been separation of church and state between the 2 of us, but we are starting to use their salespeople. And their salespeople will say, well, as an example, the customer I was with yesterday, they couldn't use a thermoform pallet because they needed a base of some type. And thermoforms are more 2-dimensional pallets. They're not 3-dimensional, so they don't generally have bottoms. And so they said, hey, they turned that over to us. So that's one where they'll win and we'll win, should we be fortunate enough to get the customer.

So my sales bases has really -- it's growing. And I have another gentleman I was on the phone with today that we're talking about going to work with us also because he's got tremendous experience in this industry. And it's a hard -- it's a long sales cycle and it's a hard cycle. But just to answer your question, Bob, those guys are really helping out, and we're starting to see the fruits of their labors.

[Robert Littlehale, analyst]

The other question I had, you mentioned Nestle and they finally said, we have to get away from wood. In sort of delineating the reasons why they want to get away from wood, what did they tell you? What did they say? What was the motivating factor in their minds?

[Warren Kruger, executive]

One thing about wood, the problems associated with it don't go away. So when you read on our website, we put bullet points for why plastic pallets are better. It really is -- it's true that when you hit a -- if you go into a Costco or a Sam's and you see wood on the floor, you see those pallets and you'll see the broken lead edges.

And I will tell you, when you go to these distribution centers and they're using these automated guided vehicles, and they hit wood that's broken off, it stops the vehicle. It stops the process. It really becomes a pain. And then the nails really -- nails kind of inch out, and then they'll cut the bottom of box, and goods will go on the floor. It just is amazing. It really happens, and it's not like it doesn't happen.

And then there, you also have there with wood, wood can be contaminated. Yesterday, I talked to a gentleman, and he said, we had these wooden pallets in a 250,000-square foot facility and they got moldy. And he said, we had to disinfect. We had to take all of those out of there and disinfect the entire facility.

So these are real things that happen in real life. And eventually, people get tired of doing it the same way they've always done it. And so that's why we're seeing the shift -- continue to see the shift from wood to plastic.

[Operator]

[Operator Instructions] And at this time, there appears to be no further questions. I'll turn the call back over to our presenters for closing remarks.

[Warren Kruger, executive]

Well, I just want to thank everybody for being on the call. And I'm excited about the next 2 quarters and about the calendar year 2025. There are a lot of -- there's just a lot of things going on in our industry. And it just takes that one little push to get another $12 million a year or $24 million a year and $36 million a year.

And I most certainly -- I mean, I just -- we need to head towards that $100 million revenue marks, and that's where we want to go. We want to get there. We want to continue with our momentum. We may -- we're going to continue to look at sales opportunities. And if there are growth in acquisitions, we'll look at small acquisitions as well. We'll look at partnering up with people to move our product.

And hopefully, ideally, we'd like to continue to look at our listing and what we need to do to potentially up-list. So I appreciate everybody being here. Brendan, do you want to close with a few comments?

[Brendan Hopkins, executive]

No, I think we covered everything. I mean I would say, there would be one question that wasn't asked that I'll probably get, which you might as well answer now.

I know we've been engaged in looking for a new CFO. Just wondering if there's any updates as to how that process is coming along, if there's any candidates in the pipeline, that type of thing.

[Warren Kruger, executive]

Well, I'm glad you mentioned that. I will say that this -- we went through 2 -- we had a longtime wonderful good friend, Bill Rahhal, who was my friend for a quarter century. And he finally said at 83 years old, he said, Warren, my wife just doesn't want me to do this anymore. And he was such a wonderful CFO and such a good friend.

And then we stumbled a couple of times trying to replace him. And this Forvis, what we did with Forvis is we need to make sure our filings are done promptly and correctly. And that -- they're a big firm across America. And I feel very comfortable with them in getting our Qs and our Ks filed.

On the financial side, our -- we continue to generate good numbers internally. We have good security and monitoring of what we're doing on the accounting front. And right now, we're going to use Forvis as a CFO overview or they're going to -- CFO questions, they review our financials, they look at them, they make suggestions. And I like the arrangement.

I do believe that we will find the right person, but I am not going to rush into it. Greystone is a -- it is not -- we don't make 1,000 parts. We have 25 to 30 different SKUs. And it's a -- we have a good system in place, as I mentioned, and we have good oversight. And so I'm comfortable right now staying where we are with Forvis. And then when the right candidate arises, and they will, we will bring them on board.

[Brendan Hopkins, executive]

Okay. That's it. I guess, keep up the good work, and I'm looking forward to the second half of this year, showing the promise that it seems to be.

[Warren Kruger, executive]

Great. Great. Thanks, everyone, so much.

[Operator]

This does conclude today's Greystone Logistics Q2 Results Conference Call. Thank you for your participation. You may now disconnect, and have a great day.