Greystone Logistics, Inc. (PNK:GLGI) Q1 2024 Earnings Call Transcript
Greystone Logistics, Inc. (PNK:GLGI) Q1 2024 Earnings Call Transcript October 17, 2023
Operator: Good day, everyone, and welcome to today’s Q1 Results Call. At this time, all participants are in a listen-only mode. Later, you’ll have an opportunity to ask questions during the question-and-answer session. [Operator Instructions] It is now my pleasure to turn today’s program over to Brendan Hopkins.
Brendan Hopkins: Thank you, Anthony, and thank you everyone for joining us today. We just have a brief safe harbor and we’ll get started. Except for historical information contained herein, the statements in this conference call are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from forecasted results. With that said, I would like to turn the call over to Warren Kruger, CEO of Greystone Logistics.
Warren Kruger: Thank you, Brendan. Hi, this is Warren Kruger for those -- I really appreciate everyone joining today. We just wanted to discuss our last quarter and we can open up to other questions, but we are really pleased with our June, July, August numbers. I don't have to review those. Those came out in our press release, and you can go to the online and find those numbers. But I do want to just go over a few of the opportunities that we have and what we did last year that is positioning ourselves for the future. We did put in two brand new large tonnage machines. We need to fill those. And so we are working diligently to do so. And the opportunities with the new equipment, we've also expanded our reach with some new products.
We had a 44x56, which is for the bottle and canning industry. We had an old tool that we had, we outsourced to a structural foam company. That tool, I will say it was a good tool, but the product itself was not designed very well. We had issues with our -- the provide -- the manufacturer getting product out. We never knew what it was going to cost. It was very hard for us to price. So we bought a new injection tool for that particular market. And that would be like anything you have in your hand today, a bottle of water or a can, a Coke can, a beer can, anything like that. There's so much of that in America. It just always amazes me the insatiable nature of our economy. And so the bottling, canning industry, we've met with Ball and very large can manufacturer.
They wanted us to get involved in a more active way. So we are actually testing that product at Virginia Tech now. Virginia Tech and Michigan State, there are various universities across the country that do a wide variety of testing for the transportation industry. They're testing that, and they'll put on their racking's ability and all these kinds of tests that will help us long-term. Once we have that data, we'll be able to market that, not only to Ball, but to others such as our existing customer, Molson Coors, they buy as well. So it's a very good opportunity for us. We have a mirror palette that's coming, which is really -- it's the same on the top as it is on the bottom. And I know what these are -- may put you to sleep a little bit, but it's exciting because for the nut industry, for pecans, walnut, anything like that.
In the nut industry, they have a really tough time with existing pallets because their bags go up underneath existing pallets and they get stabbed with fork tines. And so I don't want to bore you with it, but we're excited about that product. That product also good for QUIKRETE, for concrete. Very, very rough and tumble industry. But QUIKRETE, we have had multiple discussions with a QUIKRETE manufacturer in South Texas. And they have tested some prototypes that we did. And with our new tool, we're hoping to do some rollouts. I want to talk about the beverage industry really seems to be really reaching out to us at this time. So I'm hoping over the next six months, we will have some additional beverage companies on board with us. We are excited about that.
Walmart continues to be a big opportunity for us. We have been producing for them. We stopped. There is a few things that Walmart wants us to look at doing to our product. They want us to put some handholds in there. And their associates -- they are very cognizant of their associates in making sure that ergonomically they are -- they have to lift a pallet that is done right. So we are looking at that and that opportunity with them. We have done a lot of business with them in the past, and I believe we are going to do a lot of business with them in the future as well. We have also our fire retardancy that we have talked about in the press and online before. We are doing some testing in the next week on three different fire retardant chemicals that we believe we have an opportunity to pass.
Copyright: kzenon / 123RF Stock Photo
This is a big deal. Why? Because Costco really wants fire retardancy in their -- any product that's in there, any plastic pallet that is in their facilities. And with Costco, those are suppliers that we would be feeding into Costco. And so the opportunity is huge. We previously had a fire retardant additive. It had decabromine in it, which is banned now. So we don't utilize that anymore at all for our own account. So we needed to find other opportunities. And it is a fine line. You can get it done, but it is also hard to sell a $125 plastic pallet. So we have to be very careful with the cost of the chemical additives that go in, and so forth. So I just want to bring you up to speed on where we are. We also bought an extrusion line to do extruded boards.
So these extruded boards can be any size. So if someone says to us, ''We need a 30x40 pallet and we are only putting 600-pounds on Board, rather than spending $300,000 for a new tool.'' We are able to make those with the extruded board. We have had -- when we bought the assets of this extrusion company, I was not pleased with the product that they were getting off the line. So we have been doing some things with the dies to make them a better product, a flatter product, because I want us to be proud of the product we put out, and I want our moves to be very, very accepting. So I anticipate that over the next quarter, we will have something to report to you in about 90 days, at least an update. And I'm hoping that we will be pleased and you will be pleased.
So with that, I want, really, Bill Rahhal to go over the numbers once again. And then we will open it up to questions, and we will be happy to answer anything you might have. Bill?
Bill Rahhal: Thank you, Warren. And good morning to everyone who is in attendance. I would like to focus just for a second on the balance sheet, on our financial position before I step into the earnings part, because I think that's an important part of where Greystone is going and our ability to be able to move forward. Despite all the -- we made substantial capital expenditures, as Warren mentioned, two new injection molding machines, the extruding machine. So we spent quite a bit of money preparing ourselves for this additional growth. And we believe that Greystone is well-positioned right now to take on this additional growth. When I look at our balance sheet, our working capital right now as of 8/31 was a healthy $5.8 million.
And for the size of the company that Greystone is, that's pretty significant. But the other issue is that, despite all the capital expenditures that we have made this past year, if you exclude our operating lease debt, which is about $5 million, which is basically the buildings that we lease to operate from, and you exclude the deferred taxes, our total debt, our current liabilities and long term debt is about a 1:1 ratio with our equity. So we are pretty well-positioned to be able to move forward. Moving on to our sales. Our volumes have returned which are pretty significant because the past three years have been difficult for everyone in the industry, because of rising prices. But our profits -- but our volumes have now gotten back to where they are.
Our margins, as you have seen were 23%, and that's phenomenal. It is been several years before we have been able to attain those kind of margins and we see those margins continuing for the rest of this year and trying to maintain those going forward. Our SG&A is up a little bit, but a lot of that increase is the additional travel and expenses that we're incurring with marketing our products, which as we mentioned, is aggressively being done. And so that is part of an effort that will continue to be ongoing the rest of this year to be able to build up that volume. Devising interest rates have not been -- while they have been expensive to a degree, up about $120,000 over the prior year, because we've been unable to manage our debt and keep our debt down, it's not been a killer for us.
So, we continue to see the debt not being an albatross across our net to be able to move forward. So having said all that, I'll turn it over to Warren.
Warren Kruger: Okay. Do you mind -- do we want to go ahead and open it up to questions, Brendan?
Brendan Hopkins: Yes. Operator, if we could start with the Q&A, please.
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Q&A Session
Operator: [Operator Instructions] We'll now take our first question from [Brad Boey].
Unidentified Analyst: I kind of have a three part question, Warren. Do you maintain a backlog or is it primarily short-term and ship? And if you do maintain a backlog, how would that compare to a year ago or even a quarter ago? And also I would assume not much of that would be a small percentage of your total backlog until your new machines come on?
Warren Kruger: Well, I'm glad you asked the question about backlog. I'll talk about two different things. I'll talk about pipeline and backlog. We are a very good about putting product in our warehouse. And what we do is we work on our really history and we look at what we sold historically. And I'll take for example, we have an intermediate bulk container pallet, which that's a pallet that they put 250 gallon bottles on top of in a cage. And that would be like for oil, for petroleum products, for peanut oil, for any of the chemicals that type of thing. And our pallet has a valve slot on it. Well, we know what we sell generally over the last five years. So, we will make -- we will manage our backlog by building inventory for those products.
So we may know, we're going to sell $0.25 million worth of that product statistically for the second quarter of the year. So we'd put that in inventory. And so if you consider that a backlog, it's almost historical knowledge, we do get guidance from some of our customers. Take for example, iGPS, iGPS is a very big customer. It's a leasing company. So if you go out into a Costco and you see a plastic pallet in the rack at a Costco, that's probably something we've produced. And I was in a water bottling facility last week and our product was everywhere. And that's where everyone is moving across the entire country. And why? It’s because number one, they're all the reasons you would think a plastic pallet would work, including our recycled nature of it, but for damage of products, for consistency and so forth.
So, back to the backlog, the guidance we get from iGPS on a go forward basis, quarter-to-quarter, we know we have -- actually, it's in -- it is a backlog, but it's with scheduled production. Same thing holds true for Molson Coors. We know what we're going to put out the doors historically for them during a period. And so we'll build inventory. And sometimes we will actually overbuild inventory, because we know that when they hit their high season, they'll want additional orders. But in our pipeline -- which is different than really our backlog, our pipeline, I will say it just continues to fill. And part of the frustration is some of our customers need new tooling. Well, tooling is, it's 120 days to 180 days out. I've got a 43x43 that I'm working on.
I've got a 43x37 I'm working on, I've got a -- I mean it's -- these customers, once you get them on board, they'll stay on board. But a backlog is really -- we handle backlog really by guidance from our customers, and then we handle our historical knowledge through our inventory. Did that help you at all, Brad?
Unidentified Analyst : Yes, it does. So it's more of the pipeline as opposed to backlog. In that pipeline, I assume there isn't much as far as using the new machinery.
Warren Kruger: Right now, we don't have anything scheduled for our new machinery. And of course for me, that's -- it lights a fire under all of us. We remember just a few years ago when we had zero machine time, and it worried us. It concerned us dramatically. And of course, everything happens for a reason. And some of the things that happened during 2021, '22, we lost some customers when we had to go up in pricing because of resin, and losing some, we lost some top line revenue. Yet we worked on our margins. And since that time now resin has fallen out of the -- just their bottoms fallen out of the resin market. I shouldn't say fallen out, but it's gone back to historical levels versus the craziness that went on in '21 and '22. So we have to replace with new customers and some of those old customers, we have to put back on. And some of our existing customers we're trying to gen up additional throughput just because they know now that we do have capacity.
Operator: We'll take our next question from [Colin McBurney].
Unidentified Analyst : I don't call into the earnings calls, but there were a few questions that would be helpful. I guess one like a -- maybe like at a very high-level. Can you just talk about like, how you think about like how many plastic pallets are made in the U.S. per year, and then like how many Greystone makes? And then just getting like a -- I mean, are you guys kind of biggest plastic pallet manufacturer in the country? And then if you could also just touch on like international competition, whether it's just too expensive to ship them, but yes, just kind of the high-level in the industry.
Warren Kruger: Well, there, I'll give you just real high statistical numbers. There are 2 billion pallets in America at any given time right now just floating around, whether that's wood or plastic, metal, whatever it is. And probably each year, 700 million to 800 million go in the system. And so of that 700 million to 800 million, if we're putting out 3 million pallets a year, you cans see that still 90% of those are wood. Rehrig Pacific is a big plastic pallet manufacturer, ORBIS is a big plastic pallet manufacturer. There are -- Cabka is another one that uses diaper scrap that make their products. So I would say that the opportunities for growth on the plastic pallet side are insatiable. And it's just -- it's time and money.
That's what all it is, because people used to say, I just can't afford it. And now what we're starting to hear is like, we've got to get away from wood. I can't tell you in the last three weeks I've heard that it -- I've heard it at a customer outside of Atlanta, two customers outside of Atlanta. They just have to get out of it. Now, a lot of people are trying to figure out how to do it in their own closed loops so that they can capture the pallet because it is an asset, a plastic pallet. If it costs $45 to $65, that's an asset. And it's -- you send it off to a customer and now you're relying on the customer to get back to you. So that's why people turn to pallet leasing, but they're also now trying to figure out how to do their own lanes and do it in a circular fashion so they can own their own product and create their own small pools.
I don't know if that helped at all, Colin.
Unidentified Analyst: Yes. That's great. And then, do you face international competition for plastic pallets, or is the shipping cost just too high that it doesn't -- you can't adjust price and making them booming in Asia? I mean maybe you can make them in Mexico. I think it was North America production. I think you guys said that…
Warren Kruger: We have produced in Mexico. We actually have a couple of tools down in Mexico, right now. And we have -- we just got a purchase order, we did from Mexico. So we are getting some out of Mexico. I do know PTM is a large manufacturer down in Mexico. We know those guys. We believe that in a competitive world, those pilots coming from China. It is unclear when you are going to get that product. It is unclear. And the transportation costs, level of playing field dramatically. And when we have inventory and someone calls us and we say, ''We can ship that. We will ship that out next Monday.'' It matters. And, of course, we do everything Applebee -- Bettendorf of Iowa or Applebee, our plant in Mexico, just because we want others to shoulder the burden of transportation costs.
But I would say, I don't really concern myself with the Chinese market. As I described, it's unstable in terms of when you are going to get those products. And then it even levels playing field.
Unidentified Analyst: Got it. Great. And then in terms of Rehrig and ORBIS, how would you see -- you said you are doing about 3 million new pallets per year. I guess, Rehrig and ORBIS would you say they're like similar or...?
Warren Kruger: They make so many other products and they just make so many other products. They make bins and crates and Coke crates, and we focus on pallets. I they are more expensive than we are. We really are focused on the recycled nature of our product. So historically, they are higher priced than us, which gives us a competitive advantage. And we do compete some time on price. Cabka is a very -- they are a tough competitor, and they have products that compete with us. Decade Products up in Michigan has a couple of pallets that they manufacture. So we do have some competition. But what we have when someone says, "I need 30,000 plus, and I need them right away." We have the capacity and the ability to do that. And where a barrier to entry in our business, it is just the capital costs.
You can't afford to spend -- buy a couple of machines, spend $6 million and just have a waiting around for product. We have done that because we have another 13 machines that are working. So we can be prepared to take someone. We bid on something this week that was a 140,000 units a year. And the guy said, ''Your $13 is too high.'' And I said, ''You know what? I got to make money.'' So I hope you find someone else to produce it on a 30 ton machine that costs $3 million. Because it is real. This is not a game. We got to make money.
Unidentified Analyst: That's great. And then I guess just kind of maybe last one on kind of competitive landscape. I mean, would you say that -- I mean, I don't kind of been to your operations and they are very impressive. Would you say, you guys take down kind of lower cost operations? They'd be giving you focus on maybe fewer product lines versus some of the competitors in the U.S., and such as new can you can manufacture higher quality pallets at a cheaper price, and -- yes?
Warren Kruger: I may not have understood totally your question.
Unidentified Analyst: Do you think your cost of manufacturing pallets is lower than your competition is because you do higher volume or you just focus on fewer product SKUs or something like that?
Warren Kruger: We have always focused on -- I wish that -- and perhaps we can do a better job of communicating the size of our recycling operation. But we probably use 60 million pound, 70 million pound of plastic a year right now, and we process a lot of that ourselves. So we have B-B lines, making big plastic B-Bs 24 hours a day and we grind, we probably grind 1 million old pallets that we buy back from people in the marketplace and so forth, we buy back. So we're grinding these things up and we’ve been making pallets a little B-Bs and then producing again. So it's a barrier to entry for someone who says, "Well, I can do it just as cheap." Well, maybe so, but we've been doing this for 20 years and we know how to grind 30, 40, 50 pound pallets and make something out of it and it’s our own equipment.
We're not outsourcing it to someone else. And it may cost $0.20 a pound for someone to B-B product out in the marketplace. On a 40 pound product, it's $8 and it's not costing us $8 to B-B our product because we own the equipment.
Unidentified Analyst: And I guess maybe last thing is, could you maybe just talk through the -- I guess the sales growth? I mean, I think we've spoken maybe offline about it, but just like to kind of better understand for people into the last, like four quarters revenue had been down. I think there were some change in kind of how you were buying pallets or something like that. But maybe you could just talk through that. Obviously gross margins were phenomenal recently. But maybe just talk through sales, maybe you could also touch on, I guess you did 61 million revenue last year. It sounds like maybe you guys could beat that this year or just kind of put a high level?
Warren Kruger: A high level, I would anticipate we will do that. We will beat that number. We -- I will say I've never had as much in our pipeline in terms of sales opportunity since in the last 20 years. It's very encouraging. My belief and what I've told our folks is, we've got to fill, we've gotten get to that a $100 million mark, and the only way to do that is fill equipment. And so as I said, there was a time when we didn't have this new equipment that we were laying off, and we really weren't just beating the bushes, we were paying down debt before we did our big capital push and brought in a new machinery. Now is the time and there the purse strings have opened up a little bit. Last year they started opening up and it really -- 1st of '23, they started opening up.
And I'm very encouraged about and not just small things, big opportunities that we have and big opportunities with existing customers also. So, I would say that on the sales front, look for us to continue to diversify and look for us to continue to work with existing customers, to grow with existing customers.
Unidentified Analyst: And actually, this very, very last probably, and just maybe you can comment on the NASDAQ listing. Is that something that you guys kind of see as imminent this year or early next year?
Warren Kruger: I would -- we continue to -- and that's may be something I should turn over to Bill. Bill has worked with our legal team to determine the correct route and timing for us too. We do know that there are so many investment firms that can't buy a dime of our stock because we're on the OTC and that limits us. But we also realize that we have to continue to perform and we need to continue to grow. And so that's what we want to do is continue to perform, continue to do, to make money and in the meantime, look at the best way for our shareholders to enjoy the benefits of that growth.
Bill Rahhal: And Warren, this is Bill and I would add to that. This is not a short-term process to be able to automatically jump to another exchange. It needs to be a well-thought out process to be able to do that so that when you do that, you've done it for the benefit of your investors and going forward, so that you've been able to prove something that you are a company that needs to be there. And so that's sort of the process that we're working through right now to be able to schedule these things need to happen. We need to get our sales out, as Warren talked about. We need to get our earnings per share back up. We need to get sales continue to grow. So they're just different factors. And then we also need to look at, how do we get there, and how soon do we do plan to do that, and how do we -- so there's just -- right now, the Board, along with Warren, we're looking trying to schedule all of these things out so that we can do them in an orderly fashion and get them done so that it's in the best interest of our investors as well as for the company.
Operator: We'll take our next question from [Richard Walker].
Unidentified Analyst : Thanks for taking my call. Nice quarter, guys. If I could, I'd like you to expand a little bit on what you were just talking about. You answered questions on sales growth potential in the future, which is great. Gross margins, they did go up to 23%, which is fantastic, but most of that was due to lower raw material costs, which obviously you do not control. As your sales expand and you utilize these machines more effectively and efficiently, can you expect an increase in gross margin? And can you ballpark any kind of number on that?
Bill Rahhal: Well, for 23%, we -- that's really, we are very happy about that. And in terms of controlling our pricing, we can a little bit on the raw material side. And what I mean by that is, we weighed -- part of our capital expenditure last year was on a new B-B line, because if you have to buy B-Bs in the marketplace, as I said, you can pay up to $0.20 a pound extra for a pound of plastic, and we did not have enough B-B capacity. So to help control those costs, we've added a -- I don't even know, but we added another line that can probably put out 5,000 pounds an hour. And it has helped us and we'll -- that will continue to help us keep our pricing low and keep our pricing competitive. And so we can control our raw materials a little bit. And so we've continued to do that. Our goal -- and that -- it was always been the 20% margin range. That's kind of where we wanted to be. So if we can exceed that then it's good for all of us.
Unidentified Analyst : Okay. I guess what I'm really asking is you've made the investments in the new machines anticipating growth, which is great. I'm sure growth will come. When it does, do you anticipate margins increasing at all because you've got your fixed costs, which aren't going to change, and in theory you'll be puffing out more product. You'd see margins going up from that at all?
Warren Kruger: Yes, I see your point. I'm sorry I missed that earlier and absolutely, I love volume. Volume solves a lot of issues and volume makes you look a lot -- you're a more shiny penny. So yes, because our fixed costs, I don't anticipate them going up substantially. And once you cover those fixed costs, you can really expand your margin. So I would think that we will have some margin expansion in just -- if we get the volume that I anticipate.
Operator: We'll take our next question from Anthony Perala.
Anthony Perala: I guess just, you had alluded to the trajectory of sales for the year a couple of questions ago, but just we're halfway through fiscal Q2 here. Any high level color on how it's shaping up, kind of trajectory versus fiscal Q1?
Warren Kruger: Yes. Again, I -- earlier I alluded to this. You want those customers to use what you already have, but in the big opportunities, such is not always the case. And so I think some of the volume and the opportunities we have, I see those happening towards the end of the year where I see -- in the next six months, what I see happening is, I believe that some of our existing customers will reorder and help us continue to fill machinery. And I believe that some of the new tooling we have. I failed to mention one tool that I was excited about years ago, and it had a very slow start and that's a 48x45 automobile pallet. It has the ability to put seat belts on there, so you can strap down goods in the auto industry. And we built our tool.
We were very excited about it. But again, these tools are $250,000, $350,000. And if you make a little bit of an error, it can cost you time and money. And our pallet did not nest, not nest, but when they were stacking other competitors' pallets with ours, they weren't stacking well. And so our connections in the General Motors and the Ford world suggested that we redo the bottom to nest in those, and that's what we have done. So that product is coming back to us and we will do a big push in the auto sector for that, at Tesla, General Motors, Ford and Toyota. So we will do that. Matter of fact, I am headed down to a Toyota call this week. And then I anticipate that, that 44x56, we had decent orders on our old 44x56, and it really wasn't that good at tool.
Now this is a really good tool. And I say, it wasn't a good tool. It wasn't a good design. The tool is fine. But the new design we have is really -- we worked with people in the industry, and we have a really good product. And I am excited about that. And the can industry, you can't even believe how many billions of cans are produced in the United States. And so they are all -- once we fill a machine with the 44x56, that's what I want to do. I want to put that on the machine and be able to produce that around the clock, throughout the year. We also have a couple of other products we brought on last year, 48x40 flat deck nestable, the top and the bottom, they are shipped together, and they are put together at the end of the -- when they arrive.
And that allows more product on the shipment. It is a lightweight product. We are getting some good feedback there. We are doing some testing there. We are excited about it. And we had a 45x45, same thing. It nets when it's shipped but that can be put together at the end. And both of those products are selling well. So that's what I see in the next six months is some of our existing tooling and new products filling some of our pipeline. And then at the end of the year, I anticipate some of these big things, we will have tooling done for them, and we will be able to start our next year in full scale with machinery in -- I mean, with tools in the machinery and producing.
Anthony Perala: Okay. That's very helpful. This kind of sounds like you have enough to fill up that capacity with new machines. And then my last one would just be, you mentioned, a couple of questions ago just that you are pretty confident being able to surpass last year's number of $61 million of revenue, given kind of where the costs are that should lead to a pretty net sizable amount of cash flow generated. Just I would be curious to hear some of your thoughts about priorities for that cash flow, as it comes in the door?
Warren Kruger: I would anticipate that we are going to -- there is a fine line. I mean I think some leverage is good. We were really pounding down debt a few years ago, and then we added the CapEx. I want to get back down. I want to pound down some debt a little bit. We have got -- it's kind of surprising. I looked at the cash report daily. It is refreshing to see a lot of cash on the cash report daily. But we are going to utilize some of that cash to pay down debt, because it is more expensive this year. I mean everybody on this phone realize this. I mean, these rates are -- we are paying 5 points, probably 4 or 5 points more than we were two years go or whatever. So we want to pound down the debt a little bit, and of course, it will save us interest costs and plus it will make us -- put us in a position that we can take advantage of opportunities that may arise.
Operator: We will now take our next question from [Robert Edwards]. Robert, your line is now open.
Unidentified Analyst: Great job. The website looks good. Question, did I understand that you said you are going to start refurbishing -- not refurbishing, but grinding down cans, aluminum cans?
Warren Kruger: No, no, no. We are -- in the -- our new -- it's not a new, I would say it's a new tool. It's a 44x56 inch mold, which is a -- it's designed for the PET, for the bottling industry, canning and bottling industry. And so it's just -- that's what we were talking about. It's just for the aluminum can industry so that they put their aluminum cans on these pallets and they use them in their facilities.
Operator: We'll now take our next question from [Robert Littlehale].
Unidentified Analyst: I have a couple of questions. People are anxious to get away from wooden pallets. Is it primarily the fire hazard or what is the impetus? Is that the main reason?
Warren Kruger: Well, Robert -- and I will tell you, for those who don't know. Robert has been -- I've talked to Robert for the last probably 15 plus years.
Unidentified Analyst: I think it's more like 20. Yes. It's been a long time, Warren.
Warren Kruger: All right. The hardest two things are, number one, it's sometimes people just look at price and they still want that, oh, I remember the old days when I paid $11 for a wooden pallet or $9 for a wooden pallet. I can't believe that I -- and so it's a price thing. And if they're going out of the loop, I can see it. So if you're going to spend $45 to $65 on one of our products, you want to hold onto it. So that's one is just figuring out who to maintain in your own closed loop. That's hard. The second thing that really -- if we get this fire retardancy hammered down, and it's not -- pricing wise, it doesn't put our product out of touch, that will open up the doors to really get more involved with -- on the Costco supplier side.
And so we're working hard on that. We've worked on it for years, but there's a renewed emphasis within our organization. We've got some creative solutions that we're testing. And I'm excited in that regard. Those are the two things. The fire retardancy limits us in some big opportunities. We've lost some things with some big companies that they say, well, our risk manager says we have to have a UL or an FM approved plastic pallet. A lot of that is forced down the throat of -- by the wooden pallet industry, the Wooden Pallet Association. Because if you're building 800 million wooden pallets a year, you don't want these little ankle biters taking some of your business away and they have a pretty good lobby. And I mean, how is it -- in my mind and anyone else's out there, how is it different for a plastic pallet versus a wooden pallet?
Wooden pallet, it lights on fire to lower temperature, burns, and even when it burns and is put out, it could reignite later. And what they always come back with is, well, if there's a plastic pallet fire, it can melt and move from place to place. So I think we're facing a lot of those types of hurdles. But what I hear in the marketplace now, I can't even tell. People say, we've got to get away from wood. It's just continue we hear it now more so than ever before.
Unidentified Analyst: Why would any competitor use virgin resin and not try to recycle like you guys do?
Warren Kruger: It's easier.
Unidentified Analyst: It's easier. Okay.
Warren Kruger: It's really nice to buy that. But right now, if you're buying virgin resin, it's $0.50 a pound. It's not really out of line. It's just easy. You can put color in there and say, we can make a blue palette for you, or a green or a yellow and people do like the color coating. And you can look -- we're kind of like Henry Ford, you can have any color you want as long as it's black. Because when you start -- I described it the other day to someone, he said, well, why can't you just change that color? I said, well, when you make -- when you have milk that you pour in a glass, if you put just a drop of chocolate in there, it turns a different color. And the more chocolate you put, the darker it gets. It's just that's what happens in our industry.
If you have -- if you try to use some virgin and you put just a little bit of the recycled material in it, it'll turn the pallet grey. So yes, it's just a virgin is just easier and they can get it in a rail car and they can -- it is easier. That's what I would say in my response.
Unidentified Analyst : In terms of transportation costs, you guys are on the Mississippi River, correct?
Warren Kruger: Yes.
Unidentified Analyst : Do you ship or receive recycled plastics off the Mississippi, or is that not -- that's not liable?
Warren Kruger: No, we do not. We never have, and I've never even heard anyone discussing trying to deliver it on the river. It would have to be coming down from Canada and I just don't -- they were up north. And I just never had any of those discussions with anyone.
Unidentified Analyst : Final question, on your website, Jon Ackerman has quoted as saying, “You have the best export pallet on the market.”
Warren Kruger: Yes.
Unidentified Analyst : Why did he say that?
Unidentified Company Representative : Well, number one, he sells for us, so he's a friend of ours. And his father, Marty Ackerman was a good friend of mine and was in the business for many, many years. And our pallet, we can put on a 44x56 two-part pallet. You can put 540 units on a truck, a 53 foot truck. With a nestable pallet, our export pallet, you can put 2,100 on. So people like that, because you can put a lot of product on a truck, and then it's a one-way product. It's only 17 pounds and it's really a pretty darn robust pallet and we can sell it at a reasonable price. We've actually lowered our pricing on that. We went way up because of resin costs in '21 to '22, and we've gone down over the last quarter and our volume is picking back up. We lost a substantial amount of volume there, because again, people were looking at price, price, price, and that's really a price-driven product, but it's a very, very sturdy and a very, very good product.
Operator: We'll take our next question from [Joe Russo].
Unidentified Analyst : Hey, Warren and team, congrats on the great quarter. I wanted to hit on EBITDA margins or the gross margins, however you guys want to talk about it. But I think there is the strongest quarter that you guys have ever put out, at least as far back as my model kind of shows. And it sounds like you guys think that those margins will stay up for the balance of the year. But I was hoping you could just talk about what's driving that? Is it the additional B-B capacity? Just maybe like what's different now versus in the past?
Warren Kruger: Bill, if you want to pipe in here, but I will say that in February, again, I hate to be -- I don't want to bore anyone, but in February of '21, there was a freeze in South Texas, they call it the Big Texas Freeze for five days. And it really closed down the polyethylene and polypropylene markets in the country, and it affected the recycled side of it. Because people that were be B-B-ing recycling and B-B-ing product, all of a sudden they could get $0.30 and $0.40 more a pound and to people who absolutely needed to have the plastic. And it drove our pricing up and our scrap was up. Everything was out of control. And of course we didn't have enough B-B capacity, so we were buying BB, some of the BB resin out there.
And it was -- although it was a recycled, we were paying way up for it. And it turned -- in about August of '22, it really turned hard. And then of course, we got our new B-B line up and running in about February of this year or March, maybe April, I don't know. So now we have a lot of capacity to make our own B-Bs, and we just feel like we will continue. We're working with a company, a large national -- international company. They are actually -- they have had a mandate to not get rid of any of their scrap polyethylene. And so we have been able to -- they want to use their polyethylene as a currency. And so we have been working with them. And it is a way for us to get resin for them at a lower cost, for them and for us. So we just think that more of this is out there.
And this recycling, we just don't talk about it. There is a lot green speak out there. We are the real deal. I mean, we are recycling plastic, and a lot of it. So I just think, Joe, that, because we have a new B-B line and we are really focusing on lower cost resin, we have a new buyer this year on the resin side, and I think we are doing a really good job. And I am proud of it. I am proud of our employees for what they are doing and how we are getting our plastic in the door.
Bill Rahhal: This is Bill. I would like to add to that also. We talk about lowering our cost of raw materials. Warren -- a large part of that is the internal operation to grind and to B-B that material that raw material that we get in that we have to prepare. So we have reduced our cost because of the volumes that we are doing. And that's part of that overall operating cost that we have that go into the pallet. So I think when we say we lower our raw material costs, it's not just what we are buying on the market. It is what we are buying that is unprocessed that we could bring in house and process it at much cheaper prices than we can buy a refined product on the open market. So it is sort of a combination of a lot of that. And so we have been able to look at to pull over cost to produce now, based on current basis.
And we work on our pricing, trying to be competitive with our competitors to be able to achieve these margins. And so because of the combination of both of those, we are able to set our pricing, which enables us to achieve these better margins.
Unidentified Analyst: Got it. That's great, and it makes sense. I just wanted -- hoping, like, to level a little bit based on your commentary. But it sounds like the next quarter, the 2Q quarter might be a little bit softer to some revs and volumes before we get to some of the pipeline opportunities, maybe like Walmart coming back and sort of like calendar 2024. Is that the right way for investors to just kind of think about the setup from here?
Warren Kruger: Joe, you have stated it well.
Unidentified Analyst: Okay, perfect. Thank you. I appreciate the questions.
Operator: [Operator Instructions]. We will take our next question from Joe Russo.
Operator: Actually, we have no further questions at this time. I would be happy to return the call to our host for any closing comments.
Warren Kruger: I just want to thank everyone today for joining the call. If -- at any time, my number is published, I am happy to take calls at any time, if someone wants an offline call. I just want you to know, we work hard every day for our shareholder base and we just thank you for being a shareholder.
Operator: And this does conclude today's conference. You may now disconnect your lines, and everyone have a great day.
