Name: Transportation & Logistics Systems, Inc. Q1 2020 Earnings Call
Start: 2020-06-02T00:00:00.000Z

Executive Summary

Q1 2020 revenue was $8.64M, up vs Q1 2019 ($5.80M), but down sequentially from Q4 2019’s $10.0M; gross profit was $0.78M; net loss was $(3.45)M; diluted EPS was $(1.79) .
Management undertook restructuring: settled ~$1.8M of merchant credit advances and a $1.1M senior secured note, and reduced annualized admin/operating expenses by ~$1.0M; subsidiaries secured PPP loans totaling ~$3.45M to support payroll and rent/utilities .
Customer concentration remained extreme: Amazon accounted for 97.9% of Q1 2020 revenue and 93.9% of accounts receivable; subsequent to Q1, Amazon notified it does not intend to renew the DSP agreement, which management expects would have a material adverse impact .
Leverage and financing complexity weighed on results: interest expense was $3.05M, default-related principal increases were recognized ($1.39M), and derivative liabilities rose to $13.98M, highlighting capital structure risk .

What Went Well and What Went Wrong

Revenue growth vs prior year: Q1 2020 revenue increased to $8.64M from $5.80M in Q1 2019 amid elevated ecommerce volumes during COVID-19 .
Amazon support during the pandemic: “Amazon has provided additional financial support to implement an hourly pay rate hike for our van drivers and raised our allowance for leased vans,” supporting operations and capacity .
Cost actions and balance sheet moves: management implemented ~$1.0M in annualized overhead cuts and settled ~$2.9M of high-cost liabilities to improve the financial foundation .

Sequential slowdown and margin pressure: revenue fell from $10.0M in Q4 2019 to $8.64M in Q1 2020; gross profit was $0.78M against cost of revenues of $7.86M .
Heavy financing costs and default effects: interest expense was $3.05M in Q1 2020, and note defaults triggered a 30% increase in principal totaling ~$1.39M recorded as interest expense .
Elevated derivative and dilution overhang: derivative liabilities increased to $13.98M; warrants outstanding expanded significantly intra-quarter due to price-protection mechanics (as detailed in notes), contributing to shareholder dilution risk .

Metric (USD)	Q3 2019	Q4 2019	Q1 2020
Revenue	$7,759,451	$10,000,000 (management disclosure)	$8,635,060
Cost of Revenues	$6,293,699	N/A	$7,855,749
Gross Profit	$1,465,752	N/A	$779,311
Net Loss (Continuing Operations)	$(11,360,914)	N/A	$(3,453,338)
Diluted EPS (Continuing Ops)	$(1.10)	N/A	$(1.79)
Interest Expense	$2,339,508	N/A	$3,046,727
Derivative Gain/(Expense)	$(981,244)	N/A	$144,839

Notes:

Q4 2019 revenue disclosed in the Shareholder Letter; other line items not separately reported for Q4 in filings reviewed .

Segment breakdown and KPIs:

Item	Q3 2019	Q1 2020
Operating Segments	Single segment (deliveries for online retailers; line haul)	Single segment
Amazon Revenue Concentration	99.1% (9M 2019)	97.9% (quarter)
Amazon AR Concentration	80.0% (as of 9/30/2019)	93.9% (as of 3/31/2020)
Weighted Avg Shares (Basic/Diluted)	11,247,054 (Q3)	12,353,129 (Q1)

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY/Q2 onward	None provided	None provided	Maintained (no formal guidance)
Margins	FY/Q2 onward	None provided	None provided	Maintained (no formal guidance)
OpEx	FY/Q2 onward	Not formally guided	Management executed ~$1.0M annualized reductions (disclosed operationally)	Operational cuts disclosed
Capital/Financing	FY/Q2 onward	Not formally guided	PPP loans secured: $3.45M aggregate; future forgiveness application expected	New disclosure

Topic	Previous Mentions (Q3 2019, Q4 2019)	Current Period (Q1 2020)	Trend
Ecommerce demand/COVID impact	Expansion drove $7.76M revenue in Q3; ramp into holiday season; $10.0M revenue in Q4; cash constraints emerged	Operations remained active; increased online purchasing; Amazon supported driver pay and van allowance	Demand supportive; operational strain moderating
Cost discipline/restructuring	Elevated OpEx and financing costs in Q3; impairment in 2019	~$1.0M annualized overhead cuts; debt settlements; consultant-led turnaround plan	Improving cost focus
Financing/dilution risk	High interest/derivative expenses; complex notes and warrants with down-rounds	$3.05M interest expense; defaults triggered principal increases; derivative liabilities $13.98M	Still adverse
Customer concentration (Amazon)	~99% of revenue in 9M 2019	97.9% in Q1; subsequent notice of non-renewal (DSP) from Amazon	Deteriorating outlook post-Q1
Legal/regulatory	Limited in Q3 filings	Multiple legal matters and contingencies disclosed (Elrac, BMF, SCS; derivative action)	Elevated legal overhang

“Amazon has provided additional financial support to implement an hourly pay rate hike for our van drivers and raised our allowance for leased vans.” (John Mercadante, April 9, 2020 Shareholder Letter) .
“We believe the positive impact of these initial cost-savings measures and our now laser sharp focus on operating margins will be reflected in our 2nd quarter financial results.” (Shareholder Letter) .
Press release noted 2019 revenue more than doubled, while aggressive growth carried significant debt and costs; management undertook measures to improve the balance sheet and cost structure post year-end .

No Q1 2020 earnings call transcript was furnished in the company filings reviewed; therefore no Q&A highlights are available [ListDocuments returned no earnings-call-transcript within 10/01/2019–06/30/2020].

Wall Street consensus (S&P Global) for TLSS Q1 2020 EPS and revenue was unavailable; attempted retrieval returned data-limit errors and no estimates, consistent with limited coverage of micro-cap OTC issuers.*

*Values intended to be retrieved from S&P Global.

Q1 2020 showed YoY revenue growth but sequential decline from Q4 2019, reflecting post-holiday normalization and ongoing cost pressure; gross profit of $0.78M suggests limited pricing power and high delivery costs .
Capital structure remains a core risk: $3.05M interest expense, default-related principal increases, and $13.98M derivative liabilities point to ongoing financing burdens and potential dilution .
Customer concentration is extreme; post-quarter Amazon’s intended DSP non-renewal is a material risk to the last-mile business and could drive major estimate resets and strategic pivot urgency .
Management’s restructuring and PPP funds provide near-term liquidity relief and OpEx reductions; watch for Q2 evidence of margin improvement and debt remediation progress .
Trading implications: heightened event risk around Amazon arbitration/outcome, legal matters, and any capital actions; near-term price volatility likely tied to contract visibility and balance sheet updates .
Medium-term thesis depends on diversifying customer base, reducing financing complexity, and stabilizing margins within a single operating segment focused on ecommerce logistics .