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Toughbuilt Industries, Inc (TBLT)·Q3 2022 Earnings Summary

Executive Summary

  • Q3 2022 delivered a sharp inflection: revenue rose to $30.2M (+76% YoY) and the company posted net income of $0.539M ($0.05 EPS), driven by broader distribution, product launches, and stronger Amazon sales .
  • Gross margin of 26.1% declined vs 31.6% in Q3 2021 due to higher input/labor costs and mix, but SG&A fell to ~$14.7M vs ~$15.2M last year, reflecting shipping and marketing cutbacks .
  • Management reiterated confidence in profitable growth, targeting profitability in 2023 and expecting revenues to “continue to increase rapidly” as new categories and partnerships ramp .
  • Wall Street consensus (S&P Global) for Q3 2022 was unavailable; therefore beats/misses vs estimates cannot be determined. Estimates unavailable via S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Returned to profitability: Q3 net income of ~$0.539M ($0.05 EPS) vs a ~$9.0M loss in Q3 2021, reflecting revenue scale and cost controls .
  • Distribution and product expansion momentum: new agreements across Ace Hardware (U.S.), Germany, Great Britain, Sodimac (South America), and Sears Mexico; launches across striking tools, handsaws, measuring/marking, and utility knives .
  • Management confidence: “We are uniquely positioned with top retailers around the world… building upon our successes,” and “committed and confident in our ability to maintain our growth position,” signaling sustained execution .

What Went Wrong

  • Margin compression: Q3 gross margin at 26.1% vs 31.6% in Q3 2021 amid higher materials and labor costs (China) and category mix; Q3 COGS rose to $22.3M from $11.7M YoY .
  • Elevated R&D: Q3 R&D increased to ~$2.8M (vs ~$1.6M in Q3 2021) as the company invests in new tools; beneficial for long-term, but near-term weight on operating efficiency .
  • Limited visibility on formal guidance and estimates: No quantified quarterly/fiscal guidance ranges and unavailable consensus impeded a clean “beat/miss” framework; management broadly targets profitability in 2023 and faster revenue growth .

Financial Results

MetricQ1 2022Q2 2022Q3 2022
Revenue ($USD Millions)$17.2 $17.9 $30.2
Diluted EPS ($USD)$(14.04) $(9.45) $0.05
Gross Margin %17.4% (derived from $3.0M gross profit / $17.2M revenue) 27.9% (derived from $17.9M revenue / $12.9M COGS) 26.1%
COGS ($USD Millions)$14.2 $12.9 $22.3
Operating Expenses ($USD Millions)$18.4 $17.3 $14.7
Net Income ($USD Millions)$(12.1) $(12.1) $0.539
QoQ/YoY ChangeQ1 2022Q2 2022Q3 2022
Revenue YoY Growth %+40% +12.8% +76%
Revenue Seq. Growth %—+4.1% (derived: $17.9 vs $17.2) +68.7% (derived: $30.2 vs $17.9)
EPS Seq. Change—Improvement vs Q1 ($(9.45) vs $(14.04)) Improvement vs Q2 ($0.05 vs $(9.45))

Estimates Comparison (S&P Global):

MetricQ3 2022 ActualQ3 2022 ConsensusSurprise
Revenue ($USD Millions)$30.2 N/A (Unavailable via S&P Global)N/A
EPS ($USD)$0.05 N/A (Unavailable via S&P Global)N/A

Segment Breakdown: Not disclosed; company reports consolidated results across product categories .

KPIs

KPIQ1 2022Q2 2022Q3 2022
Amazon.com Gross Sales ($USD Millions)$3.4 $3.54 $3.91
Working Capital ($USD Millions)$22.5 (as of 6/30/22) $22.5 (as of 6/30/22) $28.5 (as of 9/30/22)
Cash ($USD Millions)$2.1 (as of 6/30/22) $2.1 (as of 6/30/22) $1.6 (as of 9/30/22)
Accounts Receivable ($USD Millions)$15.0 (as of 6/30/22) $15.0 (as of 6/30/22) $23.4 (as of 9/30/22)
Inventory ($USD Millions)$40.2 (as of 6/30/22) $40.2 (as of 6/30/22) $40.0 (as of 9/30/22)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
ProfitabilityFY 2023Targeting profitability in 2023 Targeting profitability in 2023 Maintained
Revenue GrowthFY 2022“Expect to grow approximately 25% in 2022” “Expect revenues to continue to increase rapidly” (no numeric update) Maintained (no numeric update)
SG&A TrendFY 2022 and beyondSG&A to increase at a lower rate; flattening as business matures SG&A down YoY in Q3; expect lower-rate increase as scale builds Maintained / Improved execution
Shipping/Logistics CostsFY 2022Implementing direct import ordering; negotiating improved shipping rates Supply chain disruptions not expected to materially affect operations in FY22; inventory sufficient Maintained / Operational confidence

No tax rate, OI&E, margin, or dividend guidance disclosed .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2022)Previous Mentions (Q2 2022)Current Period (Q3 2022)Trend
Supply ChainNegotiating improved shipping rates; direct import ordering to reduce costs Leveraging partner logistics; diversified manufacturing across geographies Disruptions not materially affecting operations; confident for remainder of FY22 Improving operational resilience
Distribution ExpansionBuilding global sales platform; targeting 70k doors long-term Ace Hardware launch; expansion in Europe; Latin America buildout New retailers in Germany; GB expansion; Sears Mexico; Sodimac (Peru/Colombia) Accelerating channel breadth
Product Innovation5–10 new lines per year; internal design/engineering scale 93 products on Amazon Italy/Germany; auto-reloading utility knife Launches in striking tools, handsaws, measuring/marking, utility knives Sustained cadence of launches
Amazon/OnlineQ1 Amazon gross sales up 41% YoY to $3.4M Q2 Amazon gross sales up 41% YoY to ~$3.54M Q3 Amazon gross sales $3.91M, +28% YoY Consistent growth driver
R&D ExecutionR&D ~$2.5M; investment to support new tools R&D elevated with continued development R&D ~$2.8M; continued investment for category expansion Higher spend to fuel pipeline

Management Commentary

  • “We are thrilled to announce strong results for the third quarter of 2022, with the entrance into three large global markets with the launch of our striking, cutting and measuring lines… We remain focused on delivering profitable growth and are targeting profitability in 2023.” — Michael Panosian, CEO .
  • “Revenues… were approximately $30.2 million, an increase of 76% compared to the same period in 2021… primarily due to… recurring sales orders… introduction and sale of new soft good product… and an increase in sales through Amazon.” — Martin Galstyan, CFO .
  • “We are uniquely positioned with top retailers around the world… Amazon.com sales continue to be a leading growth driver due to repeat orders… we executed on all three [growth buckets] in the third quarter.” — Michael Panosian, CEO .
  • “Supply chain disruptions… have not had any material adverse effect on our operations [YTD], and we do not currently anticipate that… will have a material adverse effect… for the remainder of fiscal year 2022.” — Michael Panosian, CEO .

Q&A Highlights

  • The Q3 2022 transcript provided prepared remarks without a published Q&A section; no analyst Q&A exchanges were available in the document set reviewed .

Estimates Context

  • Wall Street consensus estimates for Q3 2022 (Revenue, EPS) were unavailable via S&P Global for TBLT; as a result, formal beat/miss determinations cannot be made. Estimates unavailable via S&P Global.

Key Takeaways for Investors

  • Profitability inflection: Q3 delivered positive net income and EPS, a notable shift from losses earlier in the year, supported by scaled revenue and SG&A discipline .
  • Powerful distribution flywheel: Multiple new retail partnerships and regional expansions should sustain revenue momentum, particularly as product breadth widens .
  • Amazon remains a reliable growth lever: Q3 gross sales on Amazon rose 28% YoY to $3.91M, indicating continued traction in e-commerce channels .
  • Margin watch: Gross margin slipped YoY to 26.1%; monitor mix, input/labor costs, and the impact of direct import/logistics improvements on margin recovery .
  • Investment in innovation: Elevated R&D spending underpins expansion into adjacent categories, potentially increasing shelf space and repeat orders over time .
  • Liquidity and working capital: Working capital improved to ~$28.5M; AR and inventory levels indicate capacity to support growth while converting sales into cash .
  • Near-term trading: Narrative catalysts include profitability achievement, rapid distribution wins, and product launches; absent consensus, price reaction will hinge on trajectory and execution signals rather than formal beats .