Mace Security International Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 21, 2023

There are 5 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Mace Security International Second Quarter 2023 Earnings Call. Session. Please be advised that today's conference is being Recorded. I would like to now hand the conference over to your first speaker, Mr. Rem Vazinkas.

Operator

Please go ahead, sir.

Speaker 1

Thank you, Shelly, and good afternoon. Joining me on the call today is Sanjay Singh, the Chairman and Chief Executive Officer of Mace. Please visit corp.mace.comundernewsroom where you can find additional materials, including the Q2 2023 financial statements, the OTC quarterly reports for the 2nd quarter ended June 30, 2023, as well as our Q2 2023 financial overview presentation. Before proceeding, I would like to point out that certain statements and information in this conference call constitute forward looking statements and are based on management's expectations and information currently in the possession of management. When used during our conference call, the words or phrases such as will likely result are expected to, will continue, is anticipated, estimated, projected and intended to or similar expressions are intended to identify forward looking statements.

Speaker 1

Such statements are subject to certain risks, known and unknown and uncertainties including but not limited to economic conditions, limit of capital resources and disruptions in domestic international supply chains. Such factors could materially adversely affect Mesa's financial performance. That could cause Mesa's actual results for the future periods to differ materially from any opinions or statements expressed during this call. I will now turn the call over to Sanjay for some comments about the quarter.

Speaker 2

Thank you, Rem. Good afternoon. The second quarter was very challenging. Net sales declined by approximately $200,000 or 11.5 percent when compared with Q2 2022. The majority of the decrease came from one customer.

Speaker 2

This has been the case for the last 18 months. Orders from Dollar General and direct to consumer and international customers nullified some of the overall decrease, netting to a 11.5 percent decrease. The inventory levels of this one customer stated before were about $1,200,000 most of last year. That has dropped to $675,000 at the end of Q1 and it's now at roughly $400,000 We saw a slight uptick in orders from this customer in Q2. We announced the completion of our restructuring that was initiated in Q1 2022.

Speaker 2

This involved cost reductions, revenue expansion in specific segments that are relatively less impacted by inflation, improvement in operating efficiencies to nullify cost increases and a targeted working capital reduction. Those actions resulted in an adjusted EBITDA and helped reduce losses in Q2 2023 by $267,000 when compared with Q1 of 2023. The adjusted EBITDA loss was a negative $283,000 for the quarter ended June 30, 2023, compared with a loss of $550,000 in the quarter ended March 31, 2023. We lowered SG and A costs in Q2 2023 by 11% when compared to the same period in the prior year. From a preceding quarter perspective, Mace achieved growth of 5% in its e commerce platform sales, 3 17% in sales to international channel customers and 2 70% in sales to business to business customers versus the Q1 of 2023.

Speaker 2

We encountered technology issues on our e commerce platform that had an impact on sales on mace.com and caused it to be lower than that in Q1 2023. However, sales on Amazon Seller Central grew by 44% in Q2 2023 compared with Q1 of 2023. We shipped Dollar General's back to school order in Q2 2023. We expect incremental revenues from the addition of Dollar General, new product expansions at 3 other existing retailers. Separately, we expect additional revenues effective September 1, 2023 from our fee based training new line of business.

Speaker 2

From a cost perspective, monthly cost reduction opportunities of $150,000 were identified and actions were taken. From a financing perspective, we are in due diligence with 2 commercial finance companies to arrange a $2,000,000 to $2,500,000 line of credit facility. This is our top priority. We closed our extension of our 5th Third Life credit in July. Also in July, we closed a $590,000 non brokered private placement of unsecured convertible notes with Board members and shareholders.

Speaker 2

Our critical areas of focus are operate through a positive EBITDA level, secure funding identify and execute on new sales and product opportunity increase gross profits through cost productivity reduce SG and A costs that are not revenue generating and lastly use excess inventory to reduce cash inventory purchases. I will now turn the call over to Rem to comment on the Q2 2023 financial results.

Speaker 1

Thank you, Sanjay. Our Q2 2023 net sales were 1,800,000 a 12% decrease from $2,000,000 in our Q2 sales of 2022. Retail sales decreased 24%, international sales increased 88%, business to business sales increased 41% and our e commerce platform sales increased 20% compared with the same period in 2022. Gross profit for the Q1 2023 decreased $269,000 or 34% from our Q2 2022 results. Our margin rate in the Q2 2023 was 30%, down 10 points from margin rate of 40% for the same quarter of 2022.

Speaker 1

Margins decreased in the Q2 2023 over the Q2 2022 due to decreased sales volume, unfavorable channel sales mix, higher freight and component costs due to inflation and lower plant efficiencies, the effect of which was partially offset by lower manufacturing overhead. SG and A expense for the Q1 2020 decreased by $128,000 to $1,100,000 or 60% of net sales. The decrease in SG and A expenses is attributable primarily to a $51,000 reduction in salaries and related benefits, $60,000 decrease in advertising expense and a decrease of $25,000 in legal and professional expenses. Our lower sales volume and higher manufacturing costs resulted in a net loss for the quarter of $629,000 which was down from a net loss of $452,000 in the Q2 of 2022. 2nd quarter adjusted EBITDA was a loss of $283,000 down $167,000 from an adjusted EBITDA loss of $116,000 in the Q2 of 2022.

Speaker 1

The decline in the bottom line is primarily attributable to lower revenues. Our borrowing stayed constant during the Q2 of 2023 at $1,500,000 Cash decreased to $377,000 at June 30, 2023 compared with cash of $431,000 at March 31, 2023. As mentioned previously, with the supply chain delays experienced in 2021 early 2022, we had inventory orders that were in progress and could not be halted without a financial cost or implications and future inventory order fulfillment. As such, we currently have a lot of our cash tied up in convertible and saleable inventory. Inventory decreased by 158,000 compared to December 31, 2022 as the company focuses on reducing its inventory levels.

Speaker 1

I'll now turn the call back to Sanjay for some additional comments before we take questions.

Speaker 2

Thank you, Ram. We are targeting $3,800,000 of new business in the second half of twenty twenty three and three new product and service offerings in the back half of this year. Revenues from those opportunities will be key to our financial results for 20 22. We're going to be laser like focused on the goals I described earlier. A quick reminder, we will not address The company has retained financial and legal advisers to assist with this process.

Speaker 2

At this time, I will stop and open the lines for questions. I would ask each caller to limit themselves to one question with one follow-up to allow everyone a chance to participate. If we have additional time, we'll try to get you back into the queue. Shelly, please open the line for questions.

Operator

If you are using a speakerphone, please make sure that your mute function is turned off to allow your signal to reach our equipment. Our first question is coming from Andrew Shapiro. Your line is open.

Speaker 3

Hi. I have several questions. I'll ask 2 areas real quick and then get back up and let others in the queue and I'll rejoin. But regarding your working capital line of credit with the 5th Third that's expiring at the end of December. Have you paid it down?

Speaker 3

I know it's fully drawn as of the end of of the June quarter with additional sales and shipments out. Have you paid it down at all? Are what is the latest status of your prospective lenders due diligence and the timing of a commitment letter in closing with 1 or more of these new lenders to understand if you're going to get the refinancing done basically in another 10 days or so by September 1st or you're going to pay the 5th Third line down to 1,250,000?

Speaker 2

We are targeting to pay the loan down by September 30, 2023 Or sooner. We're right in the middle of a field exam and an inventory appraisal. So we're just 3, 4 weeks away from coming to a close in that process At a minimum. So the target date is to pay down the loan by September 30 to 5th 3rd.

Speaker 3

Right. The 5th, 3rd has, I believe you have a requirement or you're going to get hit with another $50,000 fee To bring that loan down by September 1, which is in another 10 days or you have to pay do you not have to take that loan limit down to $1,250,000 by September 1 or is that September 30?

Speaker 2

That's September 30.

Speaker 3

Okay. All right. Secondary question here, I want to understand here regarding Dollar General, which was given as one of the excuses for sizable maintenance of the inventory. I know that you built up the inventory ahead of time. But On the last quarterly call in May, you expected DG shipments in June July for back to school promotions.

Speaker 3

We're now here near the end of August. Schools started in some states. Were more of the shipments to DG booked in June or were they booked in July? And can you provide any sell through information or insight on if When do you expect restocking the orders from DG?

Speaker 2

The Dollar General back to school shipped in Q2, so before June 30. Those inventories are out in stores. What we are seeing is we have data that shows that our products are selling well in the stores that are carrying our products. Our products have not made it to all the 10,000 stores, mostly because of store personnel turnover or store personnel shortage.

Speaker 3

Okay. Now can we expect to see further reduction of inventory levels then in the present Q3 if you ship most of this DG out in June rather than July?

Speaker 2

We're going to see reductions in dollar general inventory recurring orders and as the products are made available in stores. We have data that shows that our products have not made it to all the stores. So we can't predict the timing, but we are working very closely with the Dollar General team to get this back on track. So we do expect to see reductions in inventory once that recurring weekly EDI orders start coming through.

Speaker 3

Okay. I have other questions. I'll back out, but please let me back in later here.

Operator

Our next question is coming from Ken Phyl with Phyl Capital Management. Your line is open.

Speaker 4

Thanks. Hey, Rem. Hi, Sanjay. Thanks for having this call. Really appreciate that.

Speaker 4

Question about the gross profit margins. We lost 10 points of gross profit margins and we're almost 2 months now into Q3. Are you starting to see some of those 10 points Returning?

Speaker 2

The reason for The 10 point drop were two reasons. Our efficiencies on the plant floor were impacted adversely because of consumption of inventory and production levels being lower than normal. It was a fixed overhead leverage issue. The second was one of our channels had lower margins. And when your sales shrink, those things rise up and the impact is seen even more.

Speaker 2

Now the good news is we're in the middle of Q3. We're not seeing those trends To that level of extent of 10% drop.

Speaker 4

Great. That's good to hear. One other question and I will back out to give somebody else a chance. Are you having any sourcing and or delivery issues of pepper spray manufacturing components? Seems like in some of the past calls, we were talking about things that were kind of delayed or having trouble getting them delivered in time.

Speaker 2

So we are seeing the same issues. They're not as critical as they were say about a year ago. The new thing that we are seeing is vendors provide dates and then they're off by 3 weeks sometimes. And for the domestic ones, it's usually related to personnel. And for the international ones, it's just production delays, production runs.

Speaker 2

There's a variety of reasons that have been given to us.

Speaker 4

Okay, great. I'll back out. Thanks.

Speaker 2

Thank you.

Operator

Our next question is coming from Howard Rosenkrantz with Value Advisory. Your line is open.

Speaker 1

Hi, guys. I was just going to ask you about the gross margin, so that was addressed. The Dollar General, what is the price point at Dollar General vis a vis your other price points at other retailers?

Speaker 2

It's a smaller spray, so it's $6.99

Speaker 1

Okay. Are you giving up a lot of margin on that? I guess you're giving up a lot of gross margin dollars.

Speaker 2

The annual volumes are projected to be about a bit north of 1,200,000 So we are nowhere close to those volumes at the moment because of the reason I stated earlier. Our products are not in all of the 10,000 stores, let alone the 18,000 stores that they have. Our targeted margins are normal retail level margins. Our costs ran a little bit higher. So we are working on reducing those costs.

Speaker 1

Okay. And you mentioned that I tuned them just a few minutes late. You mentioned there were 2 other things or 3 things that you guys are doing to get things better. I'm sorry, could you just repeat those 3?

Speaker 2

Yes. So we're targeting Improving our cost of goods sold. So both our procurement costs, Yes, as well as our labor efficiencies. Right. And also using inventory rather than using cash to buy inventory.

Speaker 2

So we're looking at using some of our excess inventory.

Speaker 1

Okay. Okay. And I think this is the first time you've provided guidance. I appreciate that. So thank you for that.

Speaker 1

I'll back out. Thank you.

Speaker 2

You're welcome.

Operator

Our next question is coming from Andrew Shapiro with Lawndale Capital Management. Your line is open.

Speaker 3

Hi, thank you. A few more questions here. You gave some insight here about a large customer who had a $1,200,000 of inventory last year. They dropped their inventory down to $675,000,000 in Q1. They didn't do as much customer business with you further because they dropped that inventory from you down to 400 you said, But it was an uptick in orders here in Q2.

Speaker 3

Do you Feel that this is just an inventory level adjustment? Or are they getting out of certain KUs from you and are you losing share with this customer?

Speaker 2

So based on the data that we have seen, this is happening for all the players in our industry in terms of a reduction of inventory. We don't have obviously our insights on what our competitor inventory levels were sitting in Amazon Warehouses. But we can clearly see that the SKUs that have That Amazon is sitting on inventory of, those are the ones that we are not seeing replacement purchase orders for because they have too much of it. And the ones that they don't have inventory for, they are placing those orders. So that answers sort of that question.

Speaker 2

In terms of are we losing market share, we reduced our ad spend on Amazon Vendor Central because all we were doing is spending money on ads for our items to be consumed out of inventory. And we tried different tactics for a few months, it did not move the needle with or without those ads. Now that could have resulted in some sales, but it's very hard to prove that, that it did.

Speaker 3

Okay. And regarding your supply chain issues, which it's still a little bit surprising since others are overcoming these of supply issues, but you had talked about the desire to onshore more of the company's supplier and logistics. Can you describe any success that you are achieving in on shoring more of the company's supplier and logistics?

Speaker 2

Yes. So we've identified the SKUs we want to onshore. We're sitting on a lot of inventory. We have to get through that existing inventory first without adding new, but we are working on it. We work on it every quarter, and we are going SKU by SKU and identifying alternative options.

Speaker 2

But in terms of a ready full fire that is that will happen once our inventories existing inventories are consumed.

Speaker 3

Okay. And you did have and said that you had some sales shortfalls in the past few quarters regarding certain products that hadn't arrived from Asian vendors, one of those being stun guns. And you did your first batch of shipments that you said were going to arrive in May, did they indeed Arrive and ship to address backlog and have the backlog issues fully resolved or there are still more sales backlog that you could satisfy if you'd get the product?

Speaker 2

So in terms of backlog, we reduced it by more than 50%. We did get those stun guns and then we got more orders of those stun guns. Unfortunately, it's a 4 week lead time, a 4 month lead time. So when demand starts increasing, That's the issue we faced and we've tried various algorithms to address it. So the backlog is down, the guns are right.

Speaker 2

We actually have more guns going out this month actually by the end of this month.

Speaker 3

So if it's a 4 month lead time and we've talked on past quarters about and you've mentioned this as an excuse for sales shortfalls is that this is an impulse purchase, Yet we're dealing with 4 month lead times and this is also a purchase that can be spurred by a spike up of social unrest issues, which obviously come on unplanned and have a spike up type of motivational thing. If that were to occur, How do how does Mason, how do you address and satisfy something like this? Or are these sales that just get lost to customers, Not customers, competitors who have a stronger balance sheet and can maintain such inventory?

Speaker 2

We have a domestic vendor that we have partnered with to satisfy short lead time demands. And then we also have increased our economic order quantity of the inventory that we carry on some of these types of products.

Speaker 3

Well, that's what isn't that what got us into some of these cash flow issues already is that we've ordered A lot of bunch a lot of stuff in both before and inventory did.

Speaker 2

And we need

Speaker 3

to work this inventory down to deal with and address your financing issues. I mean, it's kind of a catch-twenty 2. Which way are you guys leading in terms of addressing this?

Speaker 2

Well, it's I mean the excess inventory we are carrying Is across the board because of increased lead times that occurred during 2020 2021, most of the inventory that we are discussing right now that is excesses was purchased in Those two time periods. And what I was describing was the items that have a longer lead time that our candidates for things the social unrest and things like that for very specific items we have increased our optimal inventory and it is reviewed every single month. We have too much. We look at demands. We go back 6 months.

Speaker 2

We go back 90 days.

Speaker 3

All right. Can you explain your table on Slide 10 of this quarter's presentation, which sets forth your second half and full year second half twenty twenty three and full year 24 sales targets and pipeline. What do these definitions mean? And can you kind of explain a little bit more about that slide and what you are, I guess, one is kind of targeting and one is Kind of projecting, albeit it is a forward looking statement.

Speaker 2

The new business target column shows items that we have made significant progress on. And in our evaluation, Those look like strong possibilities of resulting in additional sales. The new business pipeline is exactly what it is. It's a pipeline. So for example, The second half of twenty twenty three, the pipeline is about 3,050, out of which 844,000 has been accounted for, that we are have a strong possibility of securing their business.

Speaker 2

While the new business pipeline is being worked to increase the hit rate out of that pipeline. In the same way, the new business target for 2024 between all the different channels are roughly $7,000,000 These have been worked on. As you can see, the retail segment is the one that is the majority of that number. These ones have been worked on in 2023 And we have had meetings with these folks. We are much further along.

Speaker 2

So that column represents a greater than 75% probability of landing it. And the last column, 2024, represents opportunities that we have been working on, but they represent a smaller chance of Landing in 2024, because we're not that further along. And there are I don't know. There are probably about 50 retailers that we are talking about here.

Speaker 3

Okay. I have more questions. I'll pack out again, but please come back to me.

Operator

Our next question is coming from Tim Thail with Thail Capital Management. Your line is open.

Speaker 4

Just one more question Sanjay. You talked about 3 new products later on in the year. Could you maybe give us a flavor of what those are going to look like?

Speaker 2

Yes. So the very first one is, It's a dog leash with an air horn, okay? And this is the one that we've, I think, talked about in prior quarters. It took forever for us to Get the product in the States. So that is the first one.

Speaker 2

The second one is on September 1, We're going to launch our training program. That's our partnership with U. S. Law Shield. They had some technology issues that they've been working through for the last few months.

Speaker 2

While we've tested it, The curriculum works and we're going to go live September 1. And this is a this could be a Significant opportunity for both companies. The third one, It consists of existing products that are being re branded. And then the ones that you see, there's another one called Project SG. I can't really discuss it because we have not solidified our agreement.

Speaker 2

These are all co branding deals. But this is aimed for the direct to consumer as well as the base business, not retailers.

Speaker 4

Okay. Intriguing. Thank you, Sanjay. I'll be back on.

Speaker 2

Thank you.

Operator

Next question coming from Andrew Shapiro with Lawndale Capital Management. Your line is open.

Speaker 3

Great. So when you referred to Project SG and all that, that's what on Slide 12, right? Right.

Speaker 2

Okay.

Speaker 3

So Slide 12 has got all those new things. And Are these products part of your forecasting in Slide 10? Or are they entirely or partially in addition to Slide 10's target and pipeline incremental revenues.

Speaker 2

They are included In Slide 10. So some of the expansion in other words, just to summarize, some of the expansion in revenues Those come from these new products and services.

Speaker 3

All right. And when you have the U. S. Law Shield, it wasn't clear to me because you kind of referred to that there had been EDI or other issues in the past on this. Is U.

Speaker 3

S. Law Shield separate and incremental to your co branding Legal Heat. In other words, your co branded training thing with Legal Heat, this is just one customer or one product line you're rolling out or is U. S. Law Shield a new name for Legal Heat?

Speaker 2

U. S. Law Shield owned Legal Heat. They sold Legal Heat a few months ago to another training company based out of Florida. But with the sale came those conditions and obligations and the partnership with Mace.

Speaker 2

So we are working with U. S. Law Shield and Legal Heat to offer this training.

Speaker 3

So in a sense, you have 2 partnerships, 1 with a new buyer. Is that right?

Speaker 2

Well, the way the partnership was done was we just have 1. I mean, from a contractual perspective. It's with U. S. Rothschild, but we are working with their team, their marketing team.

Speaker 2

The entire technology is owned by U. S. Law Shield. The access to instructors will come from Legalease and their parent entity. Okay.

Speaker 2

That's just got way bigger.

Speaker 3

Right. Legal heat just got way bigger. No, but they didn't enter into this agreement with you initially. They had to assume the agreement when they bought legal heat from U. S.

Speaker 3

Loss shield. Is the arrangement exclusive? Is your relationships With the new owner or buyer of legal hit on good or improving terms? Or Are we subject to that eventually kind of going by the wayside?

Speaker 2

It's exclusive. So our agreement was with Legal Heat. Legal Heat was owned by U. S. Law Shield.

Speaker 2

Our agreement now is with U. S. Law Shield directly.

Speaker 3

Okay. And so when you referred last quarter that you expected initial revenues as early as late Q2. This new offering on September 1, is that off delayed initial offering or was there any revenues in Q2?

Speaker 2

There were no, there weren't any revenues. That's all that testing was done in the last 90 days The technology issue was Okay.

Speaker 3

So September 1 is the initial rollout of what you were going to be rolling out with Legal Heat. And when we See and ask you about this in the future, we should be asking about U. S. Law Shield, not really asking you about legal heat?

Speaker 2

That is correct.

Speaker 3

Okay. Just trying to understand the product line and the offering. Regarding your another co branding you've announced and introduced, on the last call you said you had Q1 orders for your vehicular perimeter defense system co branded with F3 with a component in backlog that would get resolved and shipped in the recent Q2. Did this happen and about what level of sales from this new product line was part of your Q2 revenues? And what has been the feedback and indications of success on those systems that you have now delivered?

Speaker 2

So the products that were being sourced and assembled, we did have those supply chain issues. And then we also had a testing issue for 1 of the components. All those have been corrected. We have We are in production. We now have to mobilize the appropriate levels of sales In Q3, sales in Q2 were minimal.

Speaker 3

Okay. But they you are selling them now in Q3, we're almost done with Q3, you are selling some products and are they ramping up?

Speaker 2

It's ramping up. It's been slow. The directive is to ramp it up significantly.

Speaker 3

And what's the initial feedback from those who have purchased them?

Speaker 2

Very positive feedback.

Speaker 3

Okay. And you announced a distribution agreement with a public company Surge Pays and its huge network of corner stores, bodegas and gas stations to focus on that sector of the market that you had not previously have penetration in. And you said on your last call in May that you're expected to see initial orders here in Q2 or I should say in the Q2 that's been completed. Can you discuss your experience so far with implementing this new distribution channel and if indeed you received and fulfilled orders?

Speaker 2

We did not receive orders. So, so far, we missed our commitment on this one. And it's the feedback that we're getting is that the because their search pages are is a partner of ours They have all products loaded in their system. They have to do the full rollout, but it's In terms of purchase orders, we haven't seen any. It's been 0.

Speaker 3

Now are they obliged to do any marketing of your products for you? Are you planning and do you feel there's a return to be had from marketing spend to create demand pull of this product in their market or not?

Speaker 2

Well, the marketing is done by them. They know their customers well. They're acting as or the distributor of our products essentially. And so the marketing is on there and we haven't spent a cent on marketing from our side. Now the idea was to 1st, get enough data point of sale data to understand who the buyers are and then figure out Other ways to accelerate it, but we're not there right now.

Speaker 3

Okay. And you're not really on hooks Of these stores yet then since you've made no sales in the other catalog?

Speaker 2

Yes. It's We are not under host. That's correct. Okay.

Speaker 3

On the Q4 earnings call in early May, You said your program with NAPA was on hold until they overcame certain concerns of retailing pepper spray to prevent underage purchasing and other issues given the fact that they have a decentralized almost franchisor like system. Here we are in August.

Speaker 2

Do you

Speaker 3

have any new learnings and if you consider Napa still on hold or a Gone opportunity.

Speaker 2

It's still on hold.

Speaker 3

Okay. What additional focus and opportunity, if any, do you see for MACE in the private label field business that MACE previously had sized, but had picked up last quarter, which might have just been in bear spray fill.

Speaker 2

We have a couple of sizable opportunities And that's one of the items that is listed in that column on Page 10. We're actually working on one that is sizable. There are Many, many private label opportunities that we are seeing and they're soliciting Mace.

Speaker 3

So these are these old customers that you had separated from that are coming back?

Speaker 2

It's brand new.

Speaker 3

Brand new. Okay. Your slide presentation had your e commerce platform sales up 20% from prior year, but you also mentioned in your script that nace.com had technical problems. What technical problems did you encounter and have they all been overcome?

Speaker 2

Yes. So there were 2 technical problems. Shopify is the platform we use that they had a site wide update. And it basically was not allowing certain products to be purchased on-site on the site. So we had to work through that.

Speaker 2

So that was one. Another time, there were people's credit cards that were not getting processed so they couldn't place orders. So all this sort of came up in the middle of the quarter And yes, those have all been resolved now.

Speaker 3

Okay. I have more questions. I'll back out into the queue. Please come back to me if we got time.

Operator

And question coming from Andrew Shapiro with Lawndale Capital Management. Your line is open.

Speaker 3

Okay. I may take this over the goal line here. You cited on the Q1 call that there were new product expansions at 2 other existing retailer accounts customers to provide incremental revenues. In this Q2 slide deck, you refer to expanded SKUs now at 3 existing retailers. Just wanted to confirm, I'm assuming, but perhaps maybe better news is it's not.

Speaker 3

But are the 3 existing retailers to expand SKUs inclusive of the last quarter's 2 retailers?

Speaker 2

It is. And as of today, it's now 4. Okay. That's good. That's good.

Speaker 2

Yes.

Speaker 3

Q3, okay. Did any of these new SKUs ship in Q2 or are they shipping now in the present quarter?

Speaker 2

Some shipped in Q2 and some will ship in Q3 and onwards.

Speaker 3

Okay. And did you do you have and can you provide some sell through POS experience and if and when you expect restocking orders?

Speaker 2

These orders are placed on a typically on a weekly basis. That's the frequency with most of the retailers.

Speaker 3

Okay. And so then you should have some decent sell through POS experience because you're getting restocking orders?

Speaker 2

Yes. All the extensions are selling through fairly well. It takes time for Retailers to for the sell through sort of materialize because it takes a little bit of time. So typically it's 90 days is a good time period.

Speaker 3

Now, you mentioned on the last call and hopefully it starts addressing some of the sales fall off that occurred, especially since you were in 2 departments and got scaled back to 1 with turnover and buyers. Did the new product videos for walmart.com that you said were to roll out soon after last quarter's call get rolled out? And was there any impact or improvement in their POS sales results from that? And additionally, have you presented your different product offerings to their buyers and what was the feedback or status from the new presentations. Are you digging back into that client and expanding your relationship or no luck?

Speaker 2

I can't comment on the latter, Andrew, but I can tell you that the product videos were all made and rolled out to the buyer at Walmart. It's Spending a decision from them when those will be uploaded to their website. It takes some time. That's how what we're finding that.

Speaker 3

Okay. Yes, it certainly does. Q2 sales internationally were up in from the prior year. To what extent was this a 1 or more bulk multi period shipment versus ongoing recurring quarterly levels?

Speaker 2

Yes. These are some of these are new customers, some of these are existing older customers. This is mostly a result of the unrest that you're seeing in specific countries, whether it's Europe or South America, that's what's driving it.

Speaker 3

Okay. And On the Q1 call, you and I discussed the possibility of rolling out a training and certification program for the educational market vertical. Has that initiative moved forward in the past 3 months since our call?

Speaker 2

No. Good

Speaker 3

afternoon. On the Q1 call regarding one of the additional co branding opportunities we discussed, You said that to move forward development of the new out of home personal safety product being sourced from China, You had to get the delayed components in the building. Did they ever arrive? And what's the status of the development of this new product? Or is that the dog leash with Airhorn?

Speaker 2

That's the garbage.

Speaker 3

Okay. So it's here. Good. And What amount of success do you feel Mace has had in addressing other new vertical markets such as hospitality, real estate agents, security guard markets, healthcare institutional, etcetera.

Speaker 2

We've had a fair amount of success in the hospitals and hotel segment.

Speaker 3

Okay. That's all I have today. Thanks. And is this the same presentation, these slides that you'll be doing on the Annual Meeting tomorrow?

Speaker 2

Yes. Okay. Good to know. Thank you. Thank you.

Operator

There are no additional questions at this time. So I'll turn the conference back to you for any additional or closing remarks. Oh, sorry, one more just dropped in. Okay. Question is coming from Ray Reyes at Abi Investments.

Operator

Your line is open.

Speaker 2

Hi, Sanjay, it's Ray. Sorry, I was on the call really late, but Did you give any update with respect to the credit line where we are with that? I did. So we are We had a field exam last week and we're reading on some additional diligence questions And the inventory appraisal is about to that process is about to start as well. Okay.

Speaker 2

So, do you have any sense as to when we might Call it the deal. Yes, yes. So we are targeting September 30. Okay. To pay off the 3rd line.

Speaker 1

Okay. All right. Thank you.

Speaker 2

You're welcome.

Operator

And there are no additional questions at this time. So I'll turn the conference over to you for additional or closing remarks.

Speaker 2

Okay. Well, thank you very much for jumping on this earnings call. I look forward to connecting tomorrow as well.

Speaker 1

Bye bye.

Operator

This concludes today's call. Thank you for your participation. You may now disconnect.

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Earnings Conference Call
Mace Security International Q2 2023
00:00 / 00:00
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