Kontrol Technologies Corp. (OTCQB:KNRLF) Q3 2022 Earnings Conference Call November 14, 2022 5:00 PM ET
Company Participants
Paul Ghezzi – CEO
Claudio Del Vasto – CFO
Conference Call Participants
Operator
Good day, and welcome to the Kontrol Technologies’ Third Quarter 2022 Earnings Conference Call. I am joined today by CEO of Kontrol Technologies, Paul Ghezzi; and CFO, Claudio Del Vasto.
Before we begin, please be reminded that certain statements and information included in management’s discussion and analysts and financial statements and presentations, including information related to future financial or operational performance and other statements that express the expectations of management or estimates of future performance constitute forward-looking statements.
For more information on the company’s forward-looking statements and risk factors, please reference the management discussion and analysts and our financial statements. For all public information filings, please visit the www.sedar.com.
Thank you. I would now like to turn the conference call over to Mr. Paul Ghezzi, CEO of Kontrol Technologies. Mr. Ghezzi, you may begin.
Paul Ghezzi
Hey, everyone and welcome to the Kontrol Technologies’ third quarter 2022 earnings conference call. I’m joined on the call today by our CFO, Claudio Del Vasto.
This was a very challenging quarter and we were impacted by a number of economic factors simultaneously, including tight labor markets, supply chain issues, lack of required materials, and ongoing material shortages. While our commercial and industrial service and solutions businesses performed in line with expectations, our operating subsidiary, Global HVAC and automation was most severely impacted. Adding to the overall market conditions, the rapid rise in interest rates has created volatility for new construction opportunities in the multi-residential sector.
I’ll provide an update on our business initiatives shortly, but first, I will turn the call over to Claudio for a review of our key financial metrics for Q3 2022.
Claudio Del Vasto
Thanks Paul. Revenues for the three months ended September 30, 2022, were $19.9 million, down 7.5% over the same quarter in the prior year. Revenues for the nine months ended September 30, 2022 were $75.6 million, up 161% over the same period in the prior year.
Due to impacts from COVID, ongoing supply chain challenges, material and labor cost increases, and rising interest rates, the company suffered losses for the three months ended September 30, 2022.
The company suffered a net loss of $5.2 million for the three months ended September 30, 2022. Net loss for the nine months ended September 30, 2022 was $2.4 million compared to net income of $1.4 million for the same period in the prior year.
Adjusted EBITDA loss for the three months ended September 30, 2022, was $4 million. Adjusted EBITDA for the nine months ended September 30, 2022, was $545,000 compared to adjusted EBITDA of $5 million for the same period in the prior year.
Gross profit for the 9 months ended September 30, 2022, was $12.7 million compared to $10 million over the same period in the prior year. As at September 30, 2022, the company was in violation of its financial covenants in the credit facilities. As a result, the company’s term loan was — I’m sorry, as a result, the company’s term loan has been classified as the current liability as at September 30. We are currently in discussions with the financial institution.
I’ll now turn it over to Paul to talk about the –.
Paul Ghezzi
Thanks Claudio. We now expect that the fiscal 2022 targets will not be met. The expected miss is primarily related to the acquisition of Global HVAC and Automation. Global’s large-scale operations focused primarily on the multi-residential and condominium market.
During Q3, Global was significantly impacted by ongoing COVID disruptions, material shortages, supply chain disruptions, labor shortages, and wage inflation. Collectively, these impacts caused a significant reduction in EBITDA and net income.
We are not pleased with the quarterly performance and have experienced almost every challenge of operating as a small company in the current environment, especially as it relates to fulfilling on larger projects delivered at Global HVAC and automation. Overall, we’re finding these challenges have persisted, and we anticipate they’ll continue into Q4.
We have seen some small improvements in supply chains in terms of inflationary pressure, but we don’t have a full view on that at this time. In addition, the number of new opportunities for large-scale projects have declined due to the rapid increase in interest rates, which has impacted demand from developers and builders for new multi-residential construction.
Our plan to improve operating performance includes reducing labor and site staff as quickly as possible without interrupting any projects, working closely with our customers on contract extras for material increases, and being very selective for any new projects that we take on in this challenging environment.
We are working very closely with our lenders in relation to the financial covenant breach, and we’ll provide further updates as we have them.
Thank you, everyone, for joining the call. You can reach us at info@kontrolcorp.com. I’ll now turn it over to the operator.
Question-and-Answer Session
End of Q&A
Thank you. Ladies and gentlemen, this does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.
Be the first to comment