Worksport Ltd (WKSP)·Q3 2014 Earnings Summary

Executive Summary

• TruXmart (now part of Worksport/WKSP via FNHI) delivered strong top-line growth in Q3 2014 year-to-date: nine-month revenue rose 40% to $0.484M, with gross profit margin improving to 29% from 24.5% YoY, reflecting favorable mix toward online channels .
• Net loss widened modestly to $(0.0299)M YTD, driven by higher G&A (professional fees for going public and SEMA spend) and freight as online volumes scaled; gross margin expansion partially offset Opex inflation .
• Strategic inflection: FNHI completed a reverse acquisition of TruXmart, establishing Worksport’s operating platform; fiscal year-end changed to Dec 31, new auditor appointed, and management/control shifted to Steven Rossi (CEO) .
• No formal guidance or earnings call transcript was issued; consensus estimates from S&P Global were unavailable for WKSP at this time, limiting beat/miss analysis (S&P Global data unavailable).
• Channel concentration is a key driver and risk: online retailers accounted for 54% of sales YTD 2014, with one retailer at 43% of total sales; distributor sales were 34% of sales .

What Went Well and What Went Wrong

What Went Well

• Mix shift and margin improvement: Gross profit as a percentage of sales rose from 24.5% to 29% YoY in the nine months ended Sept 30, 2014, underpinned by online sales growth and pricing discipline .
• Product innovation pipeline: Three new products debuted at SEMA (Forte: steel hard-fold cover; Quad-Fold: four-section vinyl wrap; Roll-Up: low-profile with smart latches), reinforcing differentiation and patent-backed features .
• Scaling online channel: “Presently, our largest volume customers are online retailers… accounting for 54% of our total sales in 2014 through September 30, with one of them accounting for 43% of total sales,” demonstrating scalable direct-to-retail logistics and higher margins .

What Went Wrong

• Inventory constraints limiting distributor traction: Management noted struggles to maintain sufficient inventory to fully and quickly fulfill warehouse distributor POs; mix skewed to online as a result .
• Opex inflation and event spend: G&A rose 48% YoY for the nine months (professional fees +$43.5k for going public; shipping/freight +$27.5k; sales/marketing +$38.7k including ~$44.5k prepaid SEMA costs), pressuring earnings despite revenue growth .
• Concentration and supply chain risk: Reliance on two China manufacturers and third-party distribution, exposure to FX, and absence of product liability/recall insurance present operational and financial risks .

Financial Results

Income Statement – Nine Months Ended (USD)

Income Statement – FY (USD)

Channel & Customer Mix KPIs (Nine Months Ended)

Balance Sheet KPIs

Manufacturing Capacity (Non-Financial KPI)

FNHI Standalone (Pre-Acquisition) – Context Only

Guidance Changes

No formal guidance was provided in filings or press releases for Q3 2014 .

Earnings Call Themes & Trends

No Q3 2014 earnings call transcript was found for WKSP/FNHI. Themes are drawn from MD&A and risk disclosures.

Management Commentary

• “Presently, our largest volume customers are online retailers… accounting for 54% of our total sales in 2014 through September 30, with one of them accounting for 43% of total sales and 81% of our online sales.”
• “General and administrative expenses for the nine months ended September 30, 2014 were $170,100… Professional fees increased $43,500… Shipping and freight increased $27,500… Sales and marketing increased $38,700… [SEMA] cost of approximately $55,000 of which $44,500 was prepaid by September 30, 2014.”
• “The TruXmart Forte is the world’s first completely solid folding tonneau cover to be constructed using powder coated galvanized steel.”
• “We… have struggled to maintain sufficient inventory levels to allow us to fully and quickly fill warehouse distributor purchase orders… In the future, with funding, TruXmart can maintain a stronger inventory level…”

Q&A Highlights

No earnings call transcript or Q&A was available for Q3 2014 for WKSP/FNHI. No call-related guidance clarifications or tone assessment could be performed.

Estimates Context

• Wall Street consensus (S&P Global) for Q3 2014 EPS and revenue for WKSP/FNHI was unavailable; our attempt to retrieve consensus returned errors (S&P Global data unavailable).
• As a result, we cannot assess beats/misses versus Street for this quarter.

Key Takeaways for Investors

• Revenue trajectory is positive (+40% YoY YTD) with demonstrated gross margin expansion to ~29%; sustainability hinges on maintaining pricing and mix toward online channels .
• Profitability remains constrained by Opex growth (public company costs, freight, marketing) and inventory limitations; near-term lever is working capital to support distributor orders .
• Customer concentration is high (one online retailer at 43%); diversification of accounts is a key risk mitigation priority .
• Manufacturing and FX risks are non-trivial given reliance on two China-based suppliers; any disruption could impact availability and costs .
• Product innovation (SEMA launches, patent license) provides medium-term differentiation; commercialization success will depend on distribution breadth and marketing ROI .
• Corporate transition (reverse acquisition, new auditor, governance changes) sets the foundation for future reporting but introduces integration and execution risks in the near term .
• With no formal guidance or Street coverage, near-term trading will react to operational milestones (new account wins, inventory normalization, insurance coverage updates) and any disclosures on scalability plans .

Sources

• FNHI 8-K (Results of Operations and Financial Condition; Super 8-K with TruXmart acquisition) filed Dec 17, 2014 .
• FNHI 10-Q Q1 2014 and Q2 2014 (pre-acquisition context) .