Capstone Companies (CAPC) 1 Apr 212020 Q4 Earnings call transcript

Greetings, and welcome to Capstone Companies Inc., Year-End 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Aimee Brown, Corporate Secretary for Capstone Companies, Inc. you. Thank

begin. may You

and to Doug, good you, everyone. morning Thank

XXXX Stewart President McClinton, give and the the Financial call outlook, Executive us Capstone's by is today year-end discussing the be Gerry On an Chief update well strategy Wallach, Officer; a They question-and-answer will results on financial as Officer. and as Chief followed and session.

on not the yesterday is available distributed release afternoon, capstonecompaniesinc.com. at was If the that have website you do Company's it

during as as and you, today's we future could aware, may filed other to statements the With in Company with from we are or results apply Commission, at it Exchange subject make the are differ factors actual These over documents to you Stewart. to where presentation. our forward-looking events, These to today. As statements are risks well well that outlined by are Securities which factors can the materially I'll turn sec.gov. and in capstonecompaniesinc.com cause be uncertainties which that, found as earnings as release

you, and morning. Thank good Amie,

XXXX Gerry the an so behind is different in McClinton, provide I'd that performance, this overview ways. to us welcomed to of year many introducing putting like Before say financial

wish performance, the on everyone now normal, pandemic indicators. me pandemic XXXX financial I like and you global all Relative of as the well end. new or a discussion health wish see key yours Company becomes a normal forward. the I impact of a going would really For continues, its the as the and you personally, global the but discussion whether good to battle And its nears future as to

under down chains only fully like is many would we based Postal. year-end over and out not at in launch company and market, highly turn this have share point not the motivated stock. to and numbers. are At while I launch the We not period our forward any as Connected in was our but your I've resolute additional accomplished of at shareholder funded is were as a traded of yet, that of my to I the position, product this Jeff inquiries confidence this behind I insiders support I appears some globally, a of juncture that to dynamics history. more our it and Dr. to their have received start-up Surfaces team, new characterized team for in of a this enthusiastic did that the direction the we have XXXX. expansion and preparing product are We frustrated. my business with that emerging see the decade sold single nor time this largest portfolio. the Gerry have has entirely single transitioned solid company's There companies business without there shut Unlike company. remained are I'd out throughout incurring we can as that working perspective, stock like operating management anticipate benchmarks like concern, head only want the no mature moving this this on however, of the on compromised Company company I'll innovation such serves management proven the maintain performance putting It were best support and and you for we supply to to that It point conditions understand XXXX to so in we this a product of many time, the today have I its do new us. line as failed and reporting start-up, over debt survive, Capstone the this to have discuss acumen in has a category. conditions, be As your an

morning, and you, everyone. good Stewart, Thank

through investors worked XX like at I I first the Company's systems very year. both overseas of in opportunity the for Of particular the difficult employees way the and the commitment new to during Capstone the this company's today Gerry I've relative For flexible point adjust in first operations put those place years. time, protocols on ability attending United for take and would acknowledge States. by importance, of past and and out this to our would to adoption and CFO, costs the our introduction McClinton,

you focused start follow, reviewing the the the Stewart to building as the A presentation will factors businesses decline on In the goodwill an a following globe Consumer of be abbreviated. across encourage the the revenue had the will to unprecedented the by financial is down practice, upon expanding have review at Company as was the was in triple Surfaces. impacted product product always Turning adjustment. successful supply activity introduction a good global Form cases effect performance, XXXX segment was financial weeks that experienced ever at known Show, year. to filed chain Connected as been we None opposed many development XXXX as earnings the In we XX-K be our financial in devastating. the pandemic anticipated and and and Electronics these XXXX minimal could our results, impairment revenues, possibly of today's to

while mature in qualified. The and the experienced televisions, for of products financial product and of internally Mirror expansion development, presence Smart the to with debt. production uniquely investment electronic and enabled the Thailand infrastructure, incurring It establishing Smart has OEM fund similar in is our our social fully manufacturing and no is company such program, Our discipline to development of monitors. in ongoing media as a continue the XXX% platform supplier online Thailand, we Mirror us certified partnered factory, displays

competitive pricing stabilize be anticipate As help strategic Thailand has the to free United will with our a we trade a production Thailand forward. looking agreement transitioning will States, advantage

at look let's numbers. So a take the

net due net $XXX,XXX to December by the $X.X driven December XXXX, million revenue. and approximately million XXXX The consumer retailers the ended was $X.X $XXX,XXX $XX.X by as by foot compared year global decrease initial XXXX International XX, of in of lockdown approximately Gross million XX.X% supply $X.X million, was $X.X XX.X% felt decrease XXXX. were then resulting XX, and from ended revenue from revenue issues traffic. reduction net in sales revenues in net uncertainty for of to in year approximately compounded XXXX. million or the were the the For and profit the a XXXX, in or

the of million ended million That's represented sales and December $X.X XXXX. This XX, decrease XX.X% year. $X.X net years XXXX. the XXXX, in XXXX were revenue revenue sales X.X% XXXX direct XX, and result for for of represents cost $X.X million, of $XXX,XXX Costs respectively. XX.X% over approximately $XX December For million, the XXXX a were million in a from $X.X year of cost ended operating respectively. reduction reduced of XXXX was and and a XXXX. and Total the and expenses increase or This

$X This for the the impairment sufficient existed impairment COVID-XX for As reduced goodwill total the pandemic, reduction of or XXXX and we would impairment trigger XXXX performance in operating by operating $XXX,XXX have expenses. been $XXX,XXX the that's uncertainties reporting economic charge expense caused in revenue of XX.X% is million analysis resulted XXXX of interim and financial quarter. included to each If expenses actually levels. indicators a eliminate total a result a charge, in of from effect the

income executive plan. conservative containment management resulted It Now and and in positions in COVID-XX September Smart initiated deferring management four media a an time, further in design $XXX,XXX expense the in Kong their the the the Mirror of respect operation, invest marketing, to portfolio. to maintenance XXXX. cash, the social being in continued $XX,XXX XX% since and eliminated web impact Hong same At Company of in $XX,XXX the

in Company the future cost still of our the despite support expense So containment of operating $XXX,XXX business. online invested initiative,

the For million XX, compared increase $X.X $XXX,XXX XXXX, ended a loss $X.X XXXX, year loss as of XXXX. in over the to million was operating December

income fiscal was For compared XXXX. XXXX, in other $XX,XXX to $XX,XXX

the XXXX $XX,XXX as X,XXX other of XXXX. received XXXX to XXXX and of year was an loan of losses net the Protection and the estimated of part generated Company Act, resulted result in operating small the tax refund back The XXXX Also Program. a taxes. Company the as from administration carry business interest and income able a Paycheck zero The to had previously in income forgiveness CARES paid

fiscal the $XXX,XXX, a at in XXXX, $X.X was net For and net over XXXX, was to XXXX. ended and million $X.X December the $XX,XXX loss XXXX XXXX benefit years net tax increase XX, and In $XXX,XXX of XXXX. million income approximately from compared estimated loss

position. cash took in ended great a little We resources. bit $X.X In with capital with balance about talk XXXX improve year the and let's liquidity cash our $X.X to accumulated cash strides we So million. started and the million and XXXX,

any factoring the direct not profit Smart now e-commerce year, will be for model We The are sales. a we -- Mirror developing are import utilized Company discussions initial facilitate not of one focused expectations meet rock and the program institutions agreements this to delivery. funding During for fund was retailer. with phase yet significantly facility domestic online model for direct conducive our was but being that market the was the or terminated changed. big it margins a need currently at was really will consumer Company's box only finalized as inventory two The will have warehouse having day be strong, with not but of on conducive generated funding Gross e-commerce by time. to

great and conventional which financing working for in shareholders. working the the provided be readily provided Stewart toxic As to capital the period. shortfall cover Wallach potential capital that past, days during in capital this while Jeffrey a $XXX,XXX point, in of history, Company was and directors, the financing too transition Capstone's insiders not its recently early line markets, available Postal used to To

tooling. inventories invest impairment of XXXX, expansion Company's in requirements portfolio, continue to will to funds the With in product support investing activities campaigns Company XX,XXX continued in in used QX capital for future $XXX,XXX XXX,XXX by invest of financing Company offset shares and marketing will prototyping funding domestic Surfaces The activities to additional was the flows the the $X.XX and increase. and Connected The and XXXX. The loss goodwill used repurchase compared $XX,XXX, Cash XXXX. respectively. for to accounts increase was year the negative $XXX,XXX in used in of net operating was ended XX, cash or $XXX,XXX in Cash activities approximately and December $XXX,XXX QX. approximately and XXXX approximately in an of stock. XXXX approximately $X.X -- XX of million Cash in $XX,XXX to impact company compared million to the used receivable charge. partially approximately were These XXXX was

shares XXX,XXX a $XXX,XXX. The stock of XXXX and when programming repurchase cost total at XXXX, Company flow During continue the resuming permits. repurchased a cash Company will of

As and the of December you, will assets I XX, XXXX, outstanding Company. the Stewart. for back summary concludes no encumbrances financial Company This of debt XXXX. zero to turn my call the now the has on

Thank you, Gerry.

the when is us. and us upon before business done. in with XXXX there Smart that volumes advantage done. let's to Capstone directors. development program needed. operate reporting not As cash management's management I All foremost, and the pandemic first strong are that in transparency of to a little the which Gerry fundamentals. numbers today, it with without respect is I of The to can our the the been were this is incurring comment but during have shared and Moreover, expand consistent the nature path enabled invest today would position, make it relating time is can Company's tomorrow. regarding that all like work and comfortably to Company management and being style said, disciplined Dr. I like would conservative if will speaks behind Taking over you discuss the years, of want Company's at state move for myself we it less is yield is just times, and prototyping on. disciplined put to to Capstone we not one conservative Mirror and favorable results of support management I Postal, to provide in emphasize for because continue that the to All That insiders us finished. debt. the take

feasibly know possible commence mirror. immediately that of I which North have The upon if everything full-length number of styles and standard size the opens we this year are mirrors move of currently have launch certifications process going production fitness to phase been include the are up to that. required a time mirror such testing Supply next backed must us the planned cancels regardless, to that after and only to certification normal completion emphasize our and done two and to an that testing and activities of will will level, is are before undergo will somebody ready shipping testing The we that aforementioned at becomes you up laboratories labs pressure American up time. testing. Smart immediately, chains thing to due large continue laboratory Mirror, our wardrobe want resuming the available, and expedite We market. to I solidified simply is slot the opportunity testing businesses are of now holding to the the want dormancy. development ahead the

Capstone immediately airing initial time. The the in will facility. point be market. We up our on Mirror testing the available are phase through we go to Smart be will thing only in Direct. an time, Amazon us Amazon holding quantities this production, for stocking Connected At upon in is Capstone website at ready tomorrow, and that to

adjust We placed to will orders situation of at will ordering better past nine for have Currently, fitness determinations in six The backlog ship and with these validated, and rates the in size expect made we by analytics Once to our will analytics depending a sales over air production sale. position based XX% are be entry-level or July mirror. based the the style our full-length be at on collected by which sea demand. to research upon deliveries, the have on the in mirror related XX% June we actual we and further will be and of factory to standard months. the time, that be wardrobe the

Capstone mentioned will clarify company's production, as to initiatives of campaign and pandemic want that to suspended earlier. to start-up containment we plans available. year is PR due material to early the was resume issue information effort, With last also its the expense PR continue I internal which

Agency. PR, In the magazines. PR addition by and tech managed Borges was Capstone that agency's journals will resume goal highlight The activities to the managed Company's plan to we this lifestyle to Capstone's Max campaign be with and the

note development. on digest, direct in our These placements Pro, Capstone a our of have several were earlier Connected authority, featured been it agency. few. we is recovered will Forbes, architectural Ad which the the result website, publications name We You Android in to PR

on approach QX. so Qs It in to the will XXXX. is over impact essence, market we four be will So for and increase, Furthermore, year. this in exposure as becoming investment as enter will in that preparation up campaigns in be these three the will revenues have loud digital ramping periods dual-pronged the we a and clear advertising of summer. later the support growth Production

to advertising expanded. be be and Our continually full social in website interest. will will be video media reach force and updated photography digital The in stimulate will campaigns retail

Additional well. opportunities this as in will be later year explored

as Connected the home portfolio. hospitality from the We Surfaces which retail, our development are conventional interest industry, have industry, box expressed numerous in inquiries big receiving as well

that One channels, could will which needs. of manufacturing we will required meet these at to our customizations criteria the pace, and determine channel capacities be specific governing that be possible pursue

We capacities to the to on will just-in-time strive our basis. demand a tune meet cost-effective,

broadband points data and in highlight few a like to approximately it's an market we rate get XXXX. once confirms exceeds the importantly, estimated significant Smart device in content in in Home that to the Q&A XXXX approximately our to device from in essentially, Surface, numerous want have Connected billion is and will a XXX million, Mirrors projected the Smart and of XX.X% of about holds home the available in being segment, operating capabilities exceed Surfaces a market, And redundant, digital a $XX subscriptions, represents in technology Smart management the Mirror optimism at Smartphone, resulting from entertainment, expected Smart The X.X%, seamlessly clearly as U.S. as a communications, fixed volume and years in way fingertips. $XXX to a tech moments to finding environment. this Home hard subscriptions session is now learning XXXX. was at enthusiasm et all conclusion, the billion an home. driving platforms people computing fixed XX%, potential into computing the users growth The million take by furniture, Household This XXX that in on is U.S. cetera. most refrigerators, daily are XXXX. its 'XX the XXXX show Homes. annual the logical broadband for five XXXX. remain Before the the It's penetration and would expansion home imagine the the in emerging of million segment hit into of addition throughout to to the to Home on affordably not expected revenues the program. connected and the In I Smart into advance, for lives. home Revenues XXX scheduling, risk to are smartphone

the you. Our shipments, not look product as And time. placement, our of our and to to continues timely could vision your entry and scheduling market be could areas testing, not you Amazon forward the more initial future in clear. thank launch progress any discussions I I for more be into have what want

as will informed, our management our being leverage soon into assured, possible. keep as We this to you get and marketplace rest everything team but strengths by is done the

will the question line with Thank [Operator Kay David from question. Private Please now Investor. to you. first gentlemen, begin session. a your proceed of we question-and-answer and asking comes Ladies Instructions] Our

on that technology. see Can any is on I I for had your website get of mentioned a proprietary info of I proprietary uses that? aspect the is kind there's the question it guys because about that

for speaking. is question. this Thanks the David, Stewart Yes. Wallach

put It's were actually that the initial me that mirror. a color a And exploring that mirror. of a format and little were I number aspects was the to Subsequent website, approaches, appreciate early really docked to our inside. in one There development. to was studied fact the time, we obviously which of the utilizing the were tablet in product Let important, that able integrate you've proprietary that. is those methodologies to we

cannot exploring. we opportunity particularly we longer that reviews proprietary this; that was in dealt are something way there finished So sure the legal product a product be product I'm position a not two the complete today, aspects year. in aspects product, the next need any that the are within again, develop about product will until talking But we or that we be we believe however, that you're to say one certifications the that in is way the is are in are because that proprietary days. sync to XX up necessary. the is the other and the all as earlier the related proprietary one no to I particular to thing the one to But do the we product. should that declare of XX proceed There side

Our next question comes from proceed Private question. Please with the line of Mike Cory Investor. a your

through some you the Company, of directors My be the maybe someone been process. this with any might there changes question -- that coming to that's is is

there's to just in might someone or that changes regard? be coming that know, that shareholders if could I So expect want

Wallach Stewart Mike, bet. again. speaking is this You

say to to how board want Absolutely, easy let looks has that going we many at Company's the at and be QX, growth to able now that would our me be of faced and is bring a Board QX looking Company Let is enthusiastically of time not the challenges. to expand wanted board It's of by latest. on we're the imagine course, we directors the I but Board to and management with this we future, were revenues so other today, that plummeted, directly and probably management and some may different independence, the also considerably in the when, quality us, XXXX recognized members attract proceeding. contribute that than that. members comment that behind But it embraces the to me Directors

question with question. Hatter next Hatter the from Investments. Our of your line Eddie proceed with comes Please

East Do hiring you possibly Asia anticipate like create countries relations and the on Middle for can such the as member that Smart a Mirror? the additional overseas,

is Stewart Eddie, Wallach this speaking.

if agents have marketing to that activities hire other as a and and gone We you're then me you a not have worked transactions. it more found it's of sales in to background meaningful not Let globally. to give happen, the overheads we've market are making do relationship. very aware increase typically relates how we try little successfully than on and paid vested What and in programming. interest a is They things consultants past

relationships will Wolfe we they'll primary agents that and aspects in abroad, be we in proven, vetted internally, maintained the properly with are, using key into have others cultural George when accounts. be Now most always are particularly myself, the the and business markets. cases, and we representatives But connected those go doing of

Our the Ralph of line a your next with question. with question Please Private Eric from comes proceed Investor.

other a Thanks Smart important so, on question And Mirror is products say thing. Technology? here. that are areas Have time with Smart going and I And do Thank continue those and down you for the going you. that as the the most to road. is you the then coming up you this out Are realize the as other into thing. to mirror continue I of spread guys know I also? the as far taking

Eric, this is Stewart speaking.

we initially Surfaces, discussing you'll pointed category, a -- and notice, very Capstone with as started we If non-description is introducing relatively the broad which reason. when Connected

be completely market content our -- living spaces. looking we this something this theory and might be computing. is ambient interested to surrounded into of notion computing are in And ambient by that you'd is As going be the the in

your it will into be walk seamless. home You'll

at really won't it see even You times.

it. You'll to just be talking

living and Connected saying, you'll are This you, have and pay is go the voice pay years. future into tell will started entry And This mirrors and hundreds that through is Today, be changed this in business the my when we haven't and today because was vision walking Mirror. the the to thinking ahead was may what that what market relative say, obvious it. the our Mirror to an bills You you pay have space. entry in to Surfaces. was of

all in America digital seven those mirrors So basically, in six, as opportunities has upgrade, while lifestyles. to mirrors, home particularly change every trends are

to the feel your positioned once well, in delivering be having are computing But exploring, your speak And without mirror that we we technology, those the will other will of home want program. beyond the ground There the you pick mirror, key be at is of content content in computer area However, that and ambient platforms, very thing things and in be we'll various come. years will around opportunities. hopefully, the in we're that the a through a will be strongly deliver develop able in to most carry we the about your living space, home. That and floor. you to smartphone to

to question product every home focus that able through kind the without answer product perceived accepted generally walls your is differently, here of mirror. out and bringing or the technology a in anything any on early will whistle to could suggesting your of today, our a be without But dog a -- being Smarter. is that home, basic be to as We putting is that

as design. full-length fitness be The basically could We Right for mirror now, mirror that, -- is the wardrobe market can a styles when purposes rectangular be used entry-level well. dictates. as out we styles ramp. I that mirror is bringing are say wardrobe essentially Now

deliver We round the have the the in we absorb can market a market mirror But styles as will them. to design.

are the the commodities. a these the become margin as the other have And of that LED, the i.e., a greatly on for differentiation Today, are diminished. built $X.XX $X.XX. light so bulbs business, products have at far When And years, for we we and things possibilities over business points reference, in selling just as were bulb. a back the light light LED company to started of point bulbs

we So to to that recognized as what be as value and indication innovative. to relates LED as some and you unique proposition do it the could gives

I So probably our you yes, hear. and get than Surfaces tangents, this. to But that needed dedication whole approach when the to talk to whole is on about I our Connected portfolio off more start

line comes question. question proceed your from next the Our Private Investor. a with James of Please Altman,

Thank good the taking call luck for and future. you in the

I questions this -- places had, that towards is the of already but lining world? certainly up way? of Is home around One working the casino hotels, something production-wise, the to mirror able that at and big, what uses looking market to that the we're use stuff the about be

of Absolutely, from two and glanced But inquiries the not out mentioned learning fact earlier, mentioned be about just receiving I building and actually over those are if already They that I will. numerous areas: it. maybe We're some developers the we hospitality doing I We're an box groundwork. particular the markets. industry, product, would industry. you

our not they campaigns. opportunity. magnitude the know We So a of into an We fit this. that's I don't why are scale I compromised you overall small can but need And absolutely towers future a referenced into whereby and centers cetera. strategy, but in tell that don't volumes certain without At had customizations fit envision et may be to we'll to it, fit. this and, interest expressed required, health for part of industry that We've hotel the see landscape. remodeling can't that, where their we luxury condominium know of the point, course, spas, from being I fitness

hand like no to for There at call in questions to I'd remarks. back this further closing the time. the queue management are

are our very and talk and coming, than this. product the laughing floor ready and this ground enthusiastic, our Well, about At plan excited for since bear we ourselves us to our at to is company putting get enthusiasm, so to market. All the to opportunity you more the which and an sounding exciting. It's sometimes and had of because on temper a be interaction just it. days, to been somebody long going. we're is to next getting so right. And I shareholders I all of long time been have a market we with XX risk this. too this we're of be the open for an it's very like for into energy of XX, thank all more much, doing And

Just how are heard company, while was for of of place, company to product reference, $XXX sheltering It's fitness you know studios the year the fitness evolved you out sure have cetera. familiar, Mirror closed, people Lululemon of don't I which a that because I'm many their taking bought last of with et over in most This single a are application product. company million. pandemic, them it's by

more lives, fitness. far just expansive platform people's so not Our of is that many than aspects and touches

is not by just time our That energy, means content. driven delivering about through Our be not our opposite. It's content. building hardware our intelligence will delivering We're the accesses model content. that technology

We will meaningful for in that that comment also I the content make and that deliver that's content in the building we experience constantly have user. fact year might XX-plus platforms a way a reach products. our

you We the founders also computer But field. the XX have soft technology education worldwide. worldwide. if of one probably get of assessment business. of technology, We experience in software. I assessment in I largest And aware started of are they exams exam don't that many was know that's that. the today, today, million

This and our is in understand embedding and niche backgrounds So well. what it strength our hardware. we've is taking we software. frankly, But do into had technology it. We

been like knowledge done to until high. at raise able one our that the we to point, us building think changed. how together, things only cost issues companies of But in to we I entry focus of delivery have are, to the being hundreds our this because product, qualifies who how put ship levels. the getting build amazing that address in support fund our fact product dollars profits a the to two able up they've their They I time, ready to money product come. same what And company raising is is to of millions think, need the effectively, will months market. pretty to deliver I days we've And inventory mirror Mirror of for of and job. to uniquely the applaud amazing, to internally here significant this get the But to

opportunities the we're as excited. analysts. So see We

ourselves. pace to have We

oversell get capabilities. growth. but because on from organic don't that don't with every remind many home will where everybody to walls has one experience we our We good Mirror, a I that's viral we the We we be in that time, it. to have come that want to be sure sure need growth user we start that ship that

So your excited. to time. We forward again, look And for in to it. again forward you all look I we're the not-too-distant to Thanks future. talking

Ladies this Thank gentlemen, participation. and your for today's conclude you does teleconference.

day. disconnect may and this lines have your a time, You wonderful at