On the heels of a notable decade of sales growth, Irvine-based ToughBuilt Industries Inc. is looking to balance its Wall Street reputation as it eyes a tenfold increase in revenue.
The Irvine-based provider of tools and accessories for the professional and do-it-yourself construction industries has seen revenue increase to $99.2 million for the year ended June 30, up 75% over a two-year period. That performance ranks No. 3 on the Business Journal’s annual list of fastest publicly traded companies under $99.9 million in sales (see list, page 30).
The company, which reported $1 million in sales in 2013, believes revenue can jump a lot more.
“We can take this company to $1 billion quite easily,” co-founder and Chief Executive Michael Panosian said on an August conference call with analysts.
“I’m not worried about growing, frankly. What I’m trying to balance is the well-being of the shareholders versus raising money versus getting financial vehicles.”
That hint about financial problems is evident on Wall Street, where ToughBuilt’s stock has fallen to 19 cents and a $7 million market cap as of last week (Nasdaq: TLBT).
China Background
ToughBuilt’s co-founders, Panosian and Joshua Keeler, have an extensive background in the tool industry in China.
Panosian in 2008 co-founded Pandun Inc., a manufacturer and distributor of tools and tool accessories in Asia and served as its CEO until 2012.
Panosian “has a deep knowledge of doing business in China where he managed a team of over 350 engineers, industrial designers and marketing professionals while stationed in Suzhou with his team for four years,” the company said on its website.
Pandun’s director of research and development was Keeler, who spent a decade from 2003 to 2012 working at three different companies in China designing and developing tools.
Keeler and Panosian incorporated their company in 2012 in Nevada originally under the name Phalanx Inc. before changing it to ToughBuilt in 2015. Its executives work out of a 15,000-square-foot facility at 8669 Research Drive in Irvine.
The company focuses on “state-of-the-art” tools for the construction industry as well as homeowners.
Among its 19 product lines are kneepads, tool belts, sawhorses, and landscaping tools. It sells its products on Amazon and retail chains like Ace Hardware USA and Lowe’s. It distributes in Europe, Asia and South America, in addition to the U.S.
The stock went public in late 2018, topping a split adjusted $8,000 a share, according to Nasdaq. At the time, it reported 3.7 million common shares.
Since then, it’s consistently raised money by issuing more shares, which totaled 15.8 million as of June 30. It’s also had to reduce the number of shares to remain compliant with Nasdaq’s rule for shares to be above $1 each; last year, it conducted a 1-for-150 reverse stock split.
In 2022, its revenue climbed 36% to $95.3 million. It also reported a loss of $39.3 million.
A big reason for that loss included a 38% rise in costs for metals, Chinese labor, tariffs and shipping. It also reported a 29% increase to $66.2 million for sales, general and administrative expenses.
It’s been investing in research, which jumped 62% to $11.3 million last year, by developing software applications to run on a mobile device related to the construction industry.
“Even as we introduce additional new products, we believe that a significant portion of our major new design work has been completed and we can begin to reap the rewards of what we have built to date,” Panosian said in August.
The big question is whether the company will survive long enough. Its cash on hand was $2.6 million as of June 30.
“The company has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations,” accounting firm Marcum LLP said in the company’s annual report.
“These conditions raise substantial doubt about the company’s ability to continue as a going concern.”
ToughBuilt did not respond to a Business Journal request for comment.
‘Almost There’
Its most recent conference call in August featured only one analyst, HC Wainwright’s Kevin Dede, who is forecasting sales will climb 15% this year to $109.8 million and then another 18% to $130 million next year.
While second-quarter sales grew a relatively modest 5.5% $18.9 million, CEO Panosian is still bullish, pointing to improving margins and how its net loss has fallen in half to $5.7 million.
The company this year has slashed its work force about 22% to 200.
Panosian predicted the company will be profitable in 2024.
“I’m very confident about growing,” Panosian said in August.
“We are almost there. Once we are profitable, I think we’ll be highly bankable and it will be easier from thereon.”
