Worksport Ltd
NASDAQ:WKSP
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Worksport Ltd
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Good afternoon, everyone. Am I coming through loud and clear? Anyone in the chat can say that you're hearing me loud and clear.
Perfect. Okay. Good afternoon, everyone. Welcome to Worksport's Quarter 3 2024 Earnings Call. I'm Steven Rossi, the Founder and CEO of Worksport, and I'm joined here today by our CFO, Michael Johnston. We'd like to thank everyone for joining us.
Worksport is a growing brick by brick. And today, we're pleased to share that we have experienced strong revenue growth this quarter as a result, among other things, strategic investments and operational achievements. Our financial and operational metrics signal a promising growth trajectory as we continue to scale our brand, release new products and expand into new markets.
We will be reviewing the financial results for the quarterly period ending September 30, 2024. These results were issued today at 4:00 p.m. Eastern and can be downloaded from the link provided in the chat.
At the end of today's call, our prepared remarks and presentation deck will be available for download at www.investor.worksport.com/earnings-call. Again, investor.com -- sorry, investor.worksport.com/earnings-call.
During this call, we will make forward-looking statements, including statements regarding our financial outlook for the fourth quarter and full year 2025. Our expectations regarding financial and business trends, impacts from the macroeconomic environment and our market position, opportunities, go-to-market initiatives, growth strategy and business aspirations and product initiatives and the expected benefit of such initiatives.
These statements are only predictions that are based on our current beliefs, expectations and assumptions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and change in circumstances that are difficult to predict and many of which are outside of our control. Actual results or events may differ materially. Therefore, you should not rely on any of these forward-looking statements.
These forward-looking statements are subject to risks and other factors that could affect our performance and financial results, which we will discuss in details in our -- which we do discuss in details in our filings with the SEC, including our annual report on Form 10-K and quarterly reports on Form 10-Q and other SEC filings. The forward-looking statements made in this earnings call are made only as of today's date. Worksport assumes no obligation to update any forward-looking statements we may make on today's webinar. And with that, let's begin.
We'll begin with a year-to-date overview of Worksport's foundational achievements in 2024, highlighting the significant milestones that have contributed to our strong growth trajectory. Following that, we'll delve into our Q3 financial highlights, focusing on key performance metrics, our surge in revenues and our strategic road map to profitability, increased revenues and sustained long-term expansion.
We'll share our insights on the current macroeconomic environment, emphasizing how we're uniquely positioned to capitalize on emerging opportunities. Then we'll present detailed highlights of Worksport's robust business-to-consumer and business-to-business segments, showcasing the strengths driving our market growth.
Next, we'll discuss our upcoming product launches and share an exclusive preview of what we believe will be groundbreaking innovations [Technical Difficulty] Energy that are set to redefine industry standards. We'll conclude with our ambitious visions for future growth, including insights into our initial revenue projections for Q4 and the 2025 fiscal year.
Three years ago, following our uplisting on Nasdaq Stock Exchange, we embarked on a strategic journey to establish a solid foundation for Worksport. This groundwork has not only enabled the significant growth we witness today, but also positions us strongly for future expansion. This exciting growth only started 10 short months ago in January of this year, where we began early-stage production ramp-up of our AL3 hard folding tonneau cover, proudly made in America in our state-of-the-art 150,000 square foot manufacturing facility where I speak from here today in Western New York.
In May, Worksport was awarded a $2.8 million innovation and growth grant by the state of New York, underscoring confidence in our vision and technological achievements. In June 2024, we reported a notable 275% increase in revenue quarter-over-quarter from Q1 2024, an achievement we're proud to have surpassed in Q3. September marked a pivotal moment as our R&D facility successfully tested our upcoming COR portable energy system to charge a Tesla Model 3 and we launched the alpha release of our COR and SOLIS products, signaling our progress towards entry into a sustainable energy market.
In Q3, we commenced sales to the U.S. government, unlocking potential for significant new growth in the future. We also initiated a carefully designed $2 million strategic cost savings program, which is not expected to impact our revenue or revenue growth. It's aimed at enhancing operational efficiency as we gear up for profitability. Furthermore, our IP portfolio continues to expand to protect our innovations and secure our future growth. Globally, Worksport has approximately 170 registered and pending patents and trademarks in its global IP portfolio.
With that, I'm pleased to hand over the discussion to Mike. He will provide commentary on the Q3 2024 financial results.
Thank you, Steven, and hello, everyone. Let's start with some exciting milestones achieved in Q3.
Worksport reports top line revenue of approximately $3.1 million, 581% year-over-year increase from Q3 of 2023's $458,000. This tremendous growth is driven by increased B2B and B2C sales across our customer segments. Worksport's growth momentum is further underscored by a 63% revenue increase from Q2 2024 to Q3 2024, building upon the notable 275% growth in Q2 2024 from Q1 2024 when production began scaling up.
This consistent upward trajectory highlights the effectiveness of our new sales initiatives and innovative products as well as the robust market opportunities ahead of us. The rapid expansion of Worksport's revenue not only reinforces our strong market position, but also signals a promising outlook for continued growth and our strategic push towards profitability.
So Q3's gross profit, $247,000. We enacted a strategic production slowdown in Q2 and early Q3, which allowed the plant to optimize and train workers and for Worksport sales to get ahead of production. This strategic aspect did lead to temporary margin erosion seen in this quarter. However, we project margins to significantly recover. Worksport's product margins have a strong outlook potential with product margins in our B2C segment expected to reach up to 51% and B2B white label margins targeting 25% to 40%.
The growth of our B2C and B2B white label segments is expected to increase revenues and further mitigate the impact of a lower-margin private label business. This shift positions us favorably for enhanced profitability and underscores our commitment to driving shareholder value through strategic product and market focus. Ultimately, we anticipate a significant improvement in gross margins in the near term.
Considering we began -- we only began early full-scale production 10 short months ago, we are now perfecting our systems and beginning to appreciate economies of scale founding volume and scale. With increased production, rising sales and the introduction of upcoming high-margin, high-demand product lines, we expect our gross margins to be notably stronger by this time next year.
Given the robust uptake of our white label and online sales channels, we're especially excited about the launch of our AL4 tonneau cover set to debut in late Q4. This innovative product is projected to have a measurable positive impact on our 2025 financials. We'll share more details on the AL4 later in the presentation.
Worksport's inventory remains robust with a healthy balance of approximately $6.1 million, consistent with Q2 2024 levels and strategically allocated between finished and unfinished goods. The strong inventory position enables us to continue production seamlessly with no anticipated supply chain concerns, ensuring our ability to meet rising customer demand without interruption.
Our sales channels are now fully operational experiencing increased demand that is exceeding the current production levels of Worksport. This positive dynamic allows us to transition to an ordering strategy based on projected demand forecasts, which will further optimize our cash flow and enable us to meet market demand more efficiently.
We believe Worksport is well positioned to leverage existing equipment facilities and inventory investments to meet current and anticipated sales growth for the remainder of Q4 2024 and into Q1 2025. Importantly, no significant equipment investments are expected in the near term, allowing us to capitalize on our assets and drive profitability.
Now back to Steve Rossi with a note on Investor Relations and our vision of profitability.
Thank you, Mike. Our Director of Sales stated, our sales went from $1 million all of last year to $1 million a month. And next year, our target is $1 million a week. We're excited to realize that dream and beyond as we continue to drive towards profitability and sustained growth. I'm thrilled to share insights on our path forward and the strategies fueling the progress.
We believe Worksport will achieve cash flow positivity next year with revenues in 2025 projected to be multiples of our anticipated year ending 2024 figures. Several upcoming catalysts are poised to drive the significant growth. The launch of our AL4 tonneau cover in late Q4, the most demanded type of hard cover in the market is highly anticipated.
With higher margins and strong market demand, we expect the AL4 to become the leading seller and to significantly bolster our revenues. We have begun taking preorders and expect early sales in late Q4 and ramp up in Q1 2025.
Additionally, the market beta release of our signature COR and SOLIS products, our portable energy system and solar truck bed cover is set to play a pivotal role in our growth for 2025 and beyond. These innovative solutions position us at the forefront of the clean energy revolution within the automotive accessory industry. Furthermore, Worksport is excited to announce that our subsidiary, Terravis Energy, is preparing to accept initial preorders for its state-of-the-art high-efficiency heat pump product line.
This advancement positions us to expand our presence in the growing energy markets, which we believe can contribute to our profitability over the coming years, subject to market conditions and continued execution of our strategy. By capitalizing on these upcoming catalysts, we are focused on accelerating our growth trajectory and strengthening our position within the industry.
Worksport's solid foundation is firmly in place and our growth trajectory is accelerating as we remain unwavering in our focus on achieving profitability. Our current production assets are optimized to produce over 200 tonneau covers per day, a target we are on track to reach within the upcoming quarters. If this production level is attained, we anticipate improvements in margins and sufficient capacity to achieve positive cash flow.
We have proactively prepared a plan to exceed production beyond 200 covers a day as market demand grows. Notably, we anticipate that the additional investment and time necessary to achieve this increased capacity would be relatively low. Worksport will provide a projected sales forecast at the end of this presentation and we'll continue to update investors each subsequent quarter.
Furthermore, the introduction of new product segments, including the COR and SOLIS portable power grid system and our subsidiary, Terravis Energy's upcoming high-efficiency heat pump positions us to expand our presence in the growing multibillion-dollar clean energy market. These innovative products have the potential to contribute to the profitability of Worksport as we continue to expand our market presence.
Additionally, we will continue to build sales by adding new SKUs every quarter, including new tonneau covers and anticipated variant models of the COR, enabling us to cater to a broader market and meet diverse customer needs. By continuing to scale up production and expand our product lines, we believe we can drive significant revenue growth, improve profitability and create value for shareholders. Back to Mike with commentary on Worksport's macro environment.
Thank you, Steven. From a macro perspective, pickup trucks continue to be the top-selling U.S. vehicles on the road. While the EV pickup truck market has experienced delays and waning sales interest, we believe that with improved infrastructure and technology, EV adoption will extend to pickups as well.
Worksport's SOLIS solar cover is designed for use of both current ICE vehicles and future EVs, aligning us to navigate without experiencing adverse effects of these market shifts. Additionally, we've observed the U.S. government's potential push for increased tariffs on imports from China, particularly on batteries by 2026.
We're positioning ourselves to leverage this change as a strategic advantage. We have started to explore next-generation COR batteries using U.S. technology and production. For the first generation of the COR, the company has partnered with an experienced manufacturing partner and look to provide an update on its production partner for the COR system in the near future. The portable energy market is growing rapidly with further development expected.
As mentioned earlier, Chinese competitors despite offering perceived inferior products are achieving over $1 billion in annual sales with a recent year-over-year growth rate of more than 300%. Being first to market with our solar cover and believing that we offer a strong portable battery system at an attractive price, we aim to capture both new market share and a portion of their existing market share.
We do not anticipate any projected disruptions or risks due to the recent U.S. elections. We remain confident in our growth trajectory. Our focus stays firmly on executing our strategy and delivering value to our shareholders. Back to Steve with insights on our B2B and B2C business segments.
Thank you, Mike. Worksport's branded B2B and B2C sales will be the future of the company. We're excited to share with you our latest TV commercial.
[Presentation]
Anybody listening can take a look at those videos on our YouTube channels. As earlier indicated, Worksport's business-to-consumer segment has experienced a significant surge in online sales, jumping from $21,000 in Q3 of 2023 to $1.59 million in Q3 2024. This dramatic increase signifies a substantial shift with online sales now accounting for 51% of our total revenue for the quarter compared to just 5% in the prior year. This exponential growth is expected to drive up brand awareness and positively impact our business-to-business operations.
Since initiating sales in March 2024, we're aiming to reach $1 million per month in business-to-consumer sales alone before the end of Q4. Currently, we offer 3 products with over 100 SKUs and we project an expansion of our product lineup to 6 or more products in 2025. This expansion aligns with our strategy to broaden market reach and meet diverse customer needs, further supporting our growth trajectory and enhancing shareholder value.
Following recent sales to a prominent federal entity, Worksport's strategic approach to government sales will be spearheaded by U.S. Ambassador, Ned Siegel, retired, one of our directors. We believe his involvement will enhance our ability to secure new sales with more government entities.
The white label business-to-business segment has shown early signs of growth for Worksport as well. In the past 4 months, Worksport has achieved over 200% growth in dealer account sales of our branded products. With over 17,000 targeted dealers across North America, this notable growth underscores the vast potential of our dealer network expansion.
We aim to bridge the gap between direct-to-consumer sales and small owner-operated dealers that are the fabric of local economies. We plan on supporting each dealer that supports Worksport and Made in America innovations by developing a network of -- that's cleverly named Worksport click-and-mortar, which signifies Worksport's ingenuity and bridging essential gaps between online shopping with local dealer level support. More on that to come early next year.
Additionally, we have recently announced our AL4 cover to key customers and several top-tier national U.S.-based distributors and are in discussions to preorder -- that are in discussions to preorder this AL4 tonneau cover. This further underscores strong market confidence in this highly anticipated product.
Furthermore, Worksport recently announced its first ever B2B order from a customer in Puerto Rico, marking a significant expansion into new territories and demonstrating the increase in international demand for our innovative solutions. We believe an effective business-to-business network will be active and in place within the first half of 2025. Worksport's white label business-to-business segment will not only be a revenue driver for next year, but it's also expected to have healthy margins and reoccurring sales.
The Worksport AL4, SOLIS and COR product lines are projected to be released in the near term. Here is a quick recap for new investors about our products. The first-to-market SOLIS solar tonneau cover. The highly anticipated first-to-market Worksport SOLIS Solar integrated folding cover represents a unique opportunity for Worksport to enter the clean tech markets. Starting with our rapidly expanding truck customer base, the patented SOLIS cover is designed to offer utility across a wide range of diverse applications.
Next, Worksport's COR modular portable energy system. When paired with the SOLIS cover, it creates a mobile nano-grid. The COR system can store up to 1,700 watt hours of energy and is fully modular, allowing for the addition of extra batteries. While the portable energy market is valued at $3.9 billion globally and it's growing rapidly, Worksport's COR battery is expected to feature a unique never-ending power hot swap capability.
We believe this feature will enable the COR system to penetrate markets far beyond just that of the pickup truck segment. The alpha release of the COR and SOLIS was initiated mid-September. We are currently hard at work testing these units in real market conditions and are preparing for beta release in 2025, tremendously exciting.
The AL4 is poised to become the crown jewel of Worksport's traditional tonneau cover business. We are thrilled to be on the verge of its launch and believe this premium product will support our growth in the expanding truck bed cover market. With its innovative design and superior features, we believe the AL4 has the competitive edge to strengthen our position within the industry.
Worksport initiated the alpha release of the COR and SOLIS in mid-September 2024, actively gathering real-world feedback to refine our products. Last month, we implemented strategic enhancements to the SOLIS cover projected to reduce consumer costs by up to $400 and expand compatibility.
Additionally, we develop new product -- we're developing new product variants with alternative specifications to broaden appeal across diverse customer demographics. We're excited to announce that the commercial launch of our COR and SOLIS system is anticipated for Q2 to Q3 of 2025.
Worksport's subsidiary, Terravis Energy has been developing behind the scenes. And despite a controlled operational budget through grants in the effort of the last 3 years, they have made some fascinating developments and we are thrilled to shed some light on that today. First, commercial sales order.
In Q3, Terravis achieved a significant milestone by securing its sales order for 17 EV charging stations from a leading global parking lot manufacturer. This accomplishment marks a promising advancement in Terravis' business development as the global EV infrastructure continues to expand rapidly. Upcoming product line.
Terravis is preparing to launch its highly efficient heat pump product line known as Aetherlux. With a global press release scheduled in the coming weeks, we believe that Aetherlux technology has achieved breakthrough results that will position it as a disruptive force in the $100 billion-plus heat pump market globally.
To further strengthen our competitive edge, initial trademark and patent assets have been filed with additional filings planned to enhance our intellectual property portfolio further. The heat pump market is substantial and has been experiencing steady growth. We believe the Aetherlux product line has the potential to make significant impact in this sector.
We have already hosted representatives from companies around the world at our R&D lab to meet with the Terravis team about this product. We are excited to share more detailed information about this in the coming weeks.
We are thrilled to announce that we are on track to exceed our previously issued revenue guidance of $6 million to $8 million by the end of the year 2024. For the year-end 2025, Worksport believes that its current product line alone will represent $20 million in revenues.
With the successful launch of an additional product line in late 2024 and 2025, we anticipate an additional revenue stream of up to $18.5 million from those product lines. Taking varying circumstances into account, we project overall revenues to be between $25 million and $34.5 million in 2025.
Our goal is to become cash flow positive in 2025 with a keen focus on earnings per share and EBITDA. We project sustained growth into 2026 and beyond. As always, Worksport will continue to update investors on forecasted guidance for current products and upcoming product launches.
With that, thank you so much for your attendance. We are very excited for the year ahead. If you haven't done so already, please sign up for our e-mails at investors.worksport.com and follow us on all social media platforms. Our handle is @Worksport Ltd on TikTok, Instagram and so on, all major media platforms.
Worksport is now opening the floor to questions and answers and we welcome live questions from the analysts attending the call, followed by those from general investors. Thank you.
On your Zoom webpage, you have an access for question and answer. If you do have any questions, please submit your questions there.
With that, we'd like to open the floor to analyst questions. Tate Sullivan, I see you have your hand up.
And starting with the 2025 revenue guidance from current projects -- products rather, $20 million and then with additional projects going up to $25 million to $34.5 million, is most of that incremental more than likely AL4? Or what are some of the variables in terms of the revenue mix for the new products in '25, please?
It's a good question, Tate. We think that the AL3 as our foundational product will do $20 million next year is our forecast. The AL4 will likely become a much larger revenue driver for us. But because it will be a new product and it will take time to develop the processes and perfect our ability to get them out the door and expand at a certain point, expand our production capabilities, we feel that AL3 -- the AL4, the new product will be a smaller portion of revenues next year. However, as I indicated, considerably or significantly larger portion of sales in subsequent periods.
And then at the [Technical Difficulty] you have a gross profit margin slide in the presentation showing the meaningful margin -- gross profit margin growth in B2C up to 51%. Is that on pricing? Is that on as you absorb the current operating level at your manufacturing facility? How do you achieve that growth, please?
It's through the economies of scale. So right now we pay all the cost of a fully operational factory capable of most of those, as we indicated in this presentation or this call, with no major or significant increases or expenditures -- increase in overhead or expenditures, we aim to achieve those revenues.
So what that means is we are already spending and therefore, have all the infrastructure, the human resources, the management team in place to achieve those targets without needing another factory or millions of dollars of additional inventory or equipment. So it's through essentially the economies of scale and then continuing to perfect our process and be able to make a perfect product faster.
I typically say metaphorically that the engine of a car is least efficient when it first starts. So we're just naturally gaining efficiency. And through the economies of scale, we expect that with no major expenditures that we'll be able to achieve those revenue targets and increase profitability because of the efficiencies and economies.
And last one before I turn over. Online sales greater than 50% of revenue. I think in the Q, you detail all the different portals that you're using. Is it evenly spread across Amazon, your own site and the others? Or is there one that's most successful for you?
Worksport's almost exclusively focused on driving sales presently. Well, let me answer this question properly, so it's not misunderstood.
For direct-to-consumer sales, the majority, if not, I would say, over 90% of those sales are on worksport.com. We're trying to avoid using platforms like eBay or Amazon, albeit very popular. Those platforms typically have been also littered with inferior imported products and products that we really just don't want to share catalog space with.
So we court and drive consumers to our website where we feel that we could really imply or bring the value and the craftsmanship that we put into our product, the love and care and the real spirit of Made in America can be -- that point can be driven. When we start trying to put sales on Amazon, we share the space with imported products that there's brands out there that make refrigerators and tonneau covers. So that means that there's no particular craftsmanship or care.
Lastly, I will say that although beta direct-to-consumer has been a big driver of sales recently, we -- as I indicated, we really want to work with the fabric of American business, which is local dealers. We will continue to build our dealer market. We will continue to treat those dealers that support us as members of our team and we will support the American economy and those dealers by driving sales to dealers.
So those that buy pickup trucks and want a tonneau cover can get local service. And that really is a circular economy that we feel is going to be very strong for us in the future. So direct-to-consumer sales have been our proof-of-concept and it's taken off. But now we're finding considerable interest on the dealer level and we'll continue to support American small businesses, of which there are 17,000 and growing that will support our product, we're going to support them. We're going to stand behind our dealers.
Turning the floor to C.K. Poe Fratt from AGP now.
Okay. Great. Can you just go back to the forecast or your guidance for 2025? Well, first of all, your previous guidance for '24 was $6 million to $8 million. You said you're going to beat that. What is the new guidance for revenue in '24?
Good question, Paul. I believe that [ Fran ] is on the call as well. He might be able to better answer on my behalf. But Fran, do you want to take -- do you want to answer or should I answer?
Sure. Thanks, Steve. We do anticipate to beat the upper end of the $8 million range with data -- new data still coming in as we're expanding product lines, new models and new channels. We're not comfortable yet providing a exact number and tell investors to look forward to the updated numbers coming out in the Q1 call. But we do anticipate there to be a beat, but not significant. So nothing much higher than $8 million.
So maybe $8 million to $9 million as far as a target for '24?
Perhaps -- potential for higher, of course.
Yes. I guess I just don't understand if you're going to -- if you know you're going to beat it, why not put out new guidance? But -- and then especially in the context that you're putting out '25 guidance for revenue. Can you just highlight for '25, you talked about the different components, AL3 and AL4 and then maybe potentially SOLIS and COR getting you to the upper end of that range. Can you talk about how your mix of B2B versus B2C will change in '25?
I know, Steve, you just talked about how you're going to focus more on B2B and dealer networks and that's going to be a bigger focus. But is it likely to change to like 25% B2C and then 75% B2B? Is that sort of a -- what's a rough mix for '25?
I think that it's fair to say right now at least it's 51%. So we said a lot in the earnings call, but what was softly said is that we're beginning to bet on Worksport and we're starting to phase out private label sales. And to be clear on those for anyone listening, what private label sales are is our product with somebody else's brand on it.
So right now 50% of our sales is online sales, worksport.com sales. And then a lot of the other 50% is Worksport product with somebody else's -- some other brand logo on it. So what we're going to be doing is we're going to be, as a policy, phasing out that type of business. We no longer -- we're betting on Worksport. We want to build our brand and we believe brand equity is critical for the future implied value of Worksport.
So what I think at the very least will happen is we will swap the 50% private label business for at least 50% business-to-business Worksport branded business so that every product that goes out the door proudly brandishes the Worksport logo. However, because we want to support American small businesses, that could be 60% of our business.
However, I think that once we start looking at 70% or 80% of our business being business-to-business, there's a concentration risk that we just don't have the appetite for. So keeping it as close to 50-50 as possible is our target and making sure that every product that goes out our door proudly brandishes the Worksport logo is our key goal for next year.
Great. That's helpful. And then if you look at your margin, you talked about the margin ranges for B2C and then also for B2B or private label, then shifting over to your branded product. When do you think that margins will kick in to where you'll be able to generate the ranges that you're talking about? Clearly, margin erosion hit in the third quarter. If you could maybe in the context to look -- give us an idea of what fourth quarter margins look like, that would be helpful too.
The moving target, we're continuing to make improvements in the way we manufacture things, looking at integration of automation, looking at mass manufacturing. So to give it a situational example, historically, we were using adhesives to bond certain parts of our covers together.
We've recently changed to use automation and automation system that's adhesive lists, a very clever cost saver and a time saver. However, we had to build it, learn it and perfect it, which was inefficient to begin with. As we launch the new product line, we'll continue to do these types of upgrades, these types of improvements so that we take short-term pain with longer-term gain involved.
I would expect that the margins will continue to -- they will trend upwards in Q4 and we'll probably retest where we were before at that 15%, hopefully 20%. But I don't see significant improvement until we're just focusing on building the heck out of these things, which would be after Q1 of next year.
So Q4 and Q1 are going to continue to be evolutionary quarters for us where we continue to invest in perfecting the product. And I believe that Q1 and beyond of next year will be -- will freeze the process and just work on improving it, on making it more efficient. Therefore, no more line changes. We're no longer taking out a glue station, again, back to the analogy of removing a glue station and replacing it with a glue-less station.
Everything will be frozen. And now all it is, is getting it is 6 to 7 minutes per tonneau cover off the line, but our ultimate goal is sub-5 minutes and then maybe improving through robotics and artificial intelligence to sub-4 minutes and the lights out processes. That would be Q2 and beyond next year. And that's where I think that we could start getting that "elbow room" of between 20%, 30%, 40%, upwards of 40% gross margins.
Okay. That's helpful, Steven. And then if you could just -- in the presentation, you alluded to that it's fairly low CapEx over the next couple of quarters. And then as you look to get beyond production capacity of 200 covers per day, you might have to invest or spend a little money on equipment. Can you just quantify that amount of capital that you'd have to put in to expand production?
Sure. So when we built the factory or at least tooled our factory, we tooled it anticipating expansion. So a lot of the initial capital expenditure that we paid out in the early years where we were really spending, a lot of that infrastructure is already in place, power, space infrastructure, some foundational infrastructures as well. So we've already spent in advance of the expansion.
The additional equipment is automated, therefore, requires -- could be robotically processed, if not requires 1 or 2-man operation and could be lights out. So it requires little human resource. And the equipment ballpark would be no more than $3 million to $3.5 million, which represents modest expenditure and that equipment would be subject to vendor financing at no interest. So what that also means is we would have up to 24 months, for example, to pay for the systems without experiencing any cost of capital.
So really a win-win in that we've already absorbed a significant amount of the expenses in layout and planning and then the equipment itself would be vendor-financed and installed while we almost could use the profits while using the equipment to pay for it without necessarily even having to use any of our own money, a very clever foresight by us and our management team.
Thank you both. Steve, we have some questions from the investors in the audience. A question from [ Will El ].
Will investors ever get a discount on company products?
We have to always maintain dealer level incentives. It's unfair for a dealer to have to sell a product, for example, for X dollars and then us sell direct to people for less. So to maintain the best integrity in the market, it's fair to say that our product is already -- for example, our AL3, the closest competing product made in America right now is $1,000. So it's already a discount. It's already a discounted product.
However, when -- we encourage anyone interested in referring or purchasing a product, we encourage those individuals to call us. Don't e-mail us, don't text us, don't online chat us, 1-888-554-8789, call, speak to our customer service and we'll make sure that we work with them to make them happy, whether it's a T-shirt or a hat or some sort of incentive, but the pricing is already a good price and we feel that it's only fair and equitable to maintain our manufacturer -- sorry, our minimum advertised price to the best of our abilities. We owe it to our brick-and-mortars that support us.
Oh, what I can say is our brick-and-mortar, our dealers -- for example, we have dealers in Michigan or in states all over and that's growing rapidly. Our dealers may be able to offer a better price than we can. So that's also an option. We may be able to refer those investors to a local dealer. So if an investor, for example, is in the great state of XYZ, we can refer them to a dealer who may be able to offer them a better price and maybe even free installation in these types of perks.
Thank you, Steve. We'll -- comments again. Thank you. I agree. There's another question from [ Carey R. ].
What is your plan to have more analyst and institutional coverage and ownership of the company?
Institutional ownership tends to be market cap-driven. So as companies become higher market caps, typically $100 million plus is where more institutions start to jump in at a market cap.
We feel that with a revenue multiple of 3 to 5x, depending on market conditions and innovations and all these types of things, we could -- where my target is a 9-figure valuation for Worksport. And so that's when I think more institutions will start buying Worksport and holding it. Although that -- those numbers are always going up, more institutions hold us every 90 days.
Analyst coverage, I mean, we want to be a feather in the cap. Tate has covered us since almost our -- since our uplisting and has been a great partner of us. Poe, who's on the call today, we hope to earn his coverage at some point from his great research division. And other analysts, we continue to build relationships with that's based on trust and transparency.
So I think that high tide sail all ships. And as we continue to execute, I think we'll become a great company and we'll be further covered by great analysts.
Thanks, Steve. A question from [ Lawrence B. ].
It appears that the $1 minimum price per share is close to -- it appears that the $1 minimum price per share to satisfy Nasdaq is going to be within reach. Do you guys feel like Worksport will go through the tough times that appear to be behind you without doing a reverse split?
So look, I think that we love Nasdaq Capital Markets having graduated from a smaller exchange, which is the OTC. However, we feel that the OTC as a market has come a long way as well. What I can say is we have no intentions of consolidating our stock or otherwise called a reverse split. We have a considerable amount of time to be able to cure those deficiencies, which we're starting to obviously look, things are looking a lot better for us to be able to do that.
So all I can say is we have no intentions of consolidations to shareholders. And strategically, as options on the table, to remain on the Nasdaq, we would have to consolidate if worse comes to worse in a year, we're still below $1. But an option also is to list on another exchange that doesn't have that requirement and avoid a consolidation, which is an option.
I'm not making any promises or guarantees, but we're going to continue to just bust our rear ends to build this business, which we've been showing. Execution shows up on the balance sheet, shows up on the revenue side. And next is margin improvement. So we're going to continue to grind as hard as we can to build this business.
And I feel that all the great things that us as executives and founders as well as early level investors like you guys all listening today, I think that there will be no other alternative but us just all being rewarded. Recalling that Home Depot just a number of years ago, like in the '90s was $4 a share. So a lot of companies were a low price and then they go up because they build. So we're focused on building and I think that the rewards will come inevitably as a result of the hard work.
Thanks, Steve. We have another question from [ Terry D. ] regarding the margins and how we plan to improve them. The question is a bit wordy. So rather than read it out, the answer on how we plan to improve profit margins and how we see and project the profit margins to increase is due to the foregoings of the margin erosion.
So as mentioned in the slides, we had margin erosion in Q2 and Q3 with low production and a fully functional factory. We believe that as Q4 and Q1 comes along, production is going to start ramping up furthermore and sales is also accelerating quite quickly.
We believe that around 200 covers a day, we will be exceeding the production capacity needed to be cash flow positive. And we think that most of that benefit will come just from eating the overhead. There will be further scale available to us as we scale to 300, 400, 500 covers a day.
And Steve, one last question from [ Michael G. ]. Can you speak to me more about the marketing of Worksport since the new commercial and other marketing efforts? Perhaps is it possible to see that commercial on television?
Sure. Yes. So we are -- I think -- let me open up my calendar. For all of those listening, I'm going to tell you right now 10:30 a.m. on TruckU on Motor Trend TV, a TruckU is a TV show on Motor Trend TV. There will be a segment on Worksport as part of our initial dip into television.
So anyone listening that has Motor Trend TV or access to Motor Trend TV in the U.S., watch TruckU at 10:30 a.m. on November 24 and you'll see a segment on Worksport and its tonneau covers, both AL3 and a first look at AL4. We primarily market online, where most shopping is initially done. Dealers, 17,000 dealers in America will be our agents, our sales reps with brick-and-mortar displays and knowledge of our product. So that's marketing.
And then we plan on continuing to market through social media avenues, which is part of what I already said, which is online as well as we discussed, we have a TV segment and we're going to be looking at primetime commercials as well, sponsorships of sporting events and these types of things.
But sponsoring TV commercials and sponsoring sporting events like football or NASCAR or these types of things are more an effort in branding. And branding drives brand recognition and doesn't always drive sales. So right now we're keenly focused on marketing initiatives that result in a sale versus acknowledgment of like, "Oh, I've heard this brand."
We don't want someone that doesn't have a pickup truck to know about Worksport yet. That's second stage. First stage is marketing to people that want our product. Second stage is brand awareness, which drives brand equity, which just drives value to more to the company and corporate side.
Thank you, Steve. With that, we'd like to end the question-and-answer period. If any investors do have further questions, they can e-mail us at investors@worksport.com or give us a call.
Steve, I'll pass it back to you for closing remarks.
Closing remarks are simple to all those listening. We're working our rear ends off. We're building a real business. We went from $1 million in a year to $1 million a month. Next stop is $1 million a week. And then we're not stopping. We're building a real business. This is a legacy company of Made in America, of ingenuity, of innovation and integrity.
We're going to innovate. We're going to integrate. We're going to get our products into broader markets. I say often that Sony as a corporation's first product was a rice cooker. Our first product is a tonneau cover, but it will not -- Sony's wasn't. It won't be our last product. We're going to continue to innovate in clean energy, clean tech, heat pump technologies with Terravis Energy and there's great things happening.
So we've only just begun. The best is yet to come. Stay tuned and just believe that management is working their rear ends off inclusive of me and my team to build this business and we're going to do amazing things.
Thank you very much. That is the end of this call. Have a great day, everyone.
Thank you, everyone.