Aluula Composites (TSX-V: AUUA): Fusing High Performance and Sustainability in Next-Gen Materials
Summary
Company Overview: Aluula Composites, listed on the TSX Venture as AUUA, specializes in creating high-performance, sustainable materials using a patented process for ultra-high molecular weight polyethylene composites.
Strategic Focus: Following a 2023 RTO and a strategic refocus in 2024, Aluula divested its Ocean Rodeo subsidiary to concentrate on becoming an ingredient brand targeting premium outdoor markets and larger commercial applications.
Product Differentiation: Aluula's materials are unique due to their glue-free, molecular-level fusion, offering advantages in strength, durability, and recyclability compared to traditional materials like polyester and nylon.
Market Penetration: The company is expanding from wind sports into bags, tents, and commercial applications, with a focus on premium brands and co-branding opportunities to enhance market visibility.
Financial Performance: Aluula maintains financial discipline with recent gross margins of 40-45%, emphasizing both growth and margin stability as it scales operations.
Intellectual Property: The company protects its innovations through a combination of patents and trade secrets, ensuring a competitive edge in the material science space.
Growth Strategy: Aluula aims to leverage its first-mover advantage and differentiated product offering to capture larger market shares in both consumer and industrial sectors.
Challenges and Risks: Key challenges include competing against established commodity-based products and navigating the complexities of scaling operations while maintaining financial discipline.
Transcript
This podcast is forformational purposes only and is not provided as financial, legal, or any other advice. The information is not investment advice or an offer to buy or sell any securities or make an investment. The views expressed by guest speakers are their own, and any reference to third party products, services, or information does not constitute an endorsement thereof by SNN or its affiliates. SNN expressly disclaims all liability for any individual's use of the information presented in this podcast. Welcome to the due diligence series here on the Planet of Microcap podcast. I'm your host, Robert Craft. My guest on the show today is Sage Bman, CEO of Alula Composits, publicly traded company, the symbols AUA on the TSX Venture. Alula is focused on revolutionizing material science. Founded in 2019, the company has developed a patented process for producing ultra high molecular weight polyethylene for short uh WPE composits without glues fusing at the molecular level to create materials that are lighter, stronger, more durable and fully recyclable. This monomaterial design has also enable circularity and addresses the growing demand for PFAS free solutions. The company first gained traction in Windsports through its Ocean Rodeo subsidiary. But following a 2023 RTO and a 2024 strategic refocus under Sage's leadership, Alula divevested Ocean Rodeo to concentrate on becoming an ingredient brand. Today, Alula is targeting both premium outdoor markets, packs, tents, wind sports, and larger commercial and industrial applications where strength, durability, and recyclability are key. Alula will be presenting at our conference in Toronto, the Planet of Micro Cap Showcase on October 21 through 23. And I invited her on to discuss the science behind Alula's glue-free composits, the strategic pivot from Ocean Rodeo to ingredient branding, long but improving sales cycles for adoption, differentiation from commodity materials like polyester and nylon, expansion plans into higher volume industrial applications, financial discipline with recent margins of 40 to 45%. With that, please enjoy my conversation with Sage Barman, CEO of Alula Composits. Sage, thank you for joining me today. How you doing? >> Doing great. It's good to be here. >> Absolutely invite. >> Yeah, absolutely. It's great to have you. And you know, look, I'm looking forward to meeting you in person at our upcoming event in Toronto. And uh yeah, this was look, I've been meaning to invite you on the pod earlier, but what was funny is like the first time you Alula had registered for the event. I'm like, who what is this? Like what is going on here? And you know, had never heard of Alula before. What is happening in this company? And uh and then when we got on that first call to like who are what's going on? I was like, she was like, "Oh, yeah. Well, there's one investor I I you know, there's one investor, Meredith, she recommended." I was like, "Wait, say no more. Here we go." Um but uh but all jokes aside, you know, I thought, look, the company's now been profiled on Micro Cap Club. I think it's it's it's been talked about a little bit. So, wanted to have you on to really just, you know, hear everything from from Sage's mouth on what's going on with. So, >> yeah, it's great. >> So, my first question I'd love to ask you, and I ask this to everybody on here, is uh can you start us off with that one line that best describes Alula? >> One line. Isn't it always hard to condense it into one when you want to say so much? Um, Alula is revolutionizing the material science space where you can combine high performance and sustainability in the same product. >> Just writing it down real quick because it's probably >> then I know you're going to say how >> revolution the material. All right, great starting point. Here we go. Um, like I always write it down too cuz like that usually ends up being the title of the pod of like oh revolutioniz the material science space. Oh, that's interesting. How are they doing that? Um, but let's take a look at the company's history. You know, when was the company founded and then what was what was the original thesis? And then maybe catch us up as well. Give us some the key important dates and all that. >> Yeah, absolutely. >> Um, so an interesting startup phase 2019. A couple of guys that are obsessed with wind sports, kites and wings are looking for a way to make a material that is stronger and lighter. uh one is a chemist, one's an entrepreneur and they mess around in a garage for a while and they come up with this product um and they try it out and it's amazing. They start building this product and selling it into the company called Ocean Rodeo. So Ocean Rodeo is actually the first company that had a Lula product and they were running that company, Ocean Rodeo. They started to realize um a lot of people were winning races, doing new tricks with it. they started to realize that there's something really uniquely there. So, Alula was started with that new material revolutionizing the space in the wind sport space. What can we do with it? Um, Alula went through an RTO in 2023, which you know, I've got my own feelings about RTO's. They're always challenging on the other side of it. um but enjoying a challenge. I came in in the start of 2024 and uh at that point the company had been public through the RTO for a little while and I kind of came in to look at the operations of the organization stabilized and really went through a bit of a refocus, a strategic assessment and a refocus during 2024. Um so your point of you hadn't heard of us that's absolutely true. We put our heads down. It was really about stabilizing the foundation about clarifying where the value was going to come from for the future. Uh we divested some non-core assets. So 2024 was a housekeeping you know let's get everything stabilized. Um during that time was really fortunate to be able to build a new team. We have a fantastic executive team. Uh really all of us believe in the fact that we've got a product that's truly differentiated in the market. No one else can do what we can do. uh we've got the IP estate to back that up um and we've got traction with brand partners to be able to bring it to market. So uh coming into 2025 we started to say okay let's go let's start proactively focusing outwards. We hadn't done any proactive outreach and sales. It had all been inbound. uh we're seeing good revenue growth uh with that but you know the product is truly differentiated in the market and once we felt comfortable that uh that strategic refocus got us looking in the right directions with the right team um now we're really ready to to build and grow so it's an exciting time >> very good and thank you for that full overview that's perfect so >> I think the obvious first question here anybody asking is really wanting to better understand at least for me is that differentiation you know in the material you know, how are we revolutionizing the material science space? So, love to hear what makes you unique and different compared to >> currently what's on the market. The I think I I think I was doing some research like the glue versus the actual stitch. You >> you got it. You got it. You can answer that question. >> No, no, no, no. You >> No, it's um So, there's a product that's been known in the high performance space for quite a while called ultra high molecular weight polyethylene. And I know that's a mouthful. You'll sometimes hear me abbreviated as uh um what it is is a very strong polymer. Uh the benefit of ultra high molecular weight is that again you have strength and lightness. So you can have a very thin, very light material that's really strong. The challenge that everybody's had with it is that polyethylene is really hard to get things to stick to it. So this is great in some applications but really challenging if you want to make a multi-layer composite. So some other companies out there like Daea, they will glue another layer on top of the ultra high molecular weight. So you get the strength from that internal core. Then they glue another layer to get waterproofing or to get some other performance metric from it. What Alula has is we have a uh patent around the product and the process to be able to create that combined product or composite uh without the use of any glues. So, we're actually fusing at a molecular level. Well, my uh chief scientific officer would probably cringe. It's not exactly molecular, but you you what I'm saying. Um so, we're fusing without glue. So, you get the kind of uh combined value of those products coming together. So, it is one of those things where it's a 1 plus 1 equals three. By being able to really customize uh the strength of the ultra high molecular weight, which films you're putting in and what combination, you can come up with products that are quite differentiated in the market. Um, and by not having that glue, it also means that it is entirely polyethylene. So, it's a mono material and you can recycle it at the end of its useful life. Um, and that's a big differentiator. >> Absolutely. So when you're talking to your either current customer base or potential customers, whether you're looking to license the tech to various brands and or they're just I think you guys have your own branded stuff too, right? Come correct me. >> Not anymore. So part of the strategic refocus uh we did sell off the assets of Ocean Rodeo. Got it. Um and that decision was taken because we didn't want to be in competition with our customers. We wanted to be a materials vendor to them. Um and we are an ingredient brand. So, we do co-brand with customers when they put products out. Uh, and you can see our product, right? So, Arcter has a backpack in the market. Uh, that's a Lula material. There's a number of other ones and it's quite visible when you're looking at it. So, uh, we do co-brand when we go to market, but we don't any longer own our own brand aside from the Ola corporate brand. >> 100%. So, I mean, what when you're talking to your potential customer base or target customers and brands and whatnot, you know, I think they obviously see, okay, great. Like, this is stronger, but I I'm curious as to what that conversation is kind of like cuz I'm sure on one hand they're thinking themselves, well, >> all right, we have this other solution that maybe might I'm assuming here maybe might be cheaper and also for them they're like, hey, if it the glue doesn't stay on as long, okay, that means they got to come back and buy more, right? you know, I I'm so I'm just kind of curious as to what their mindset is. Obviously, they want the best possible material for some of the stuff they're selling, but at the same time, they have that mindset, too. >> Yeah. Yeah. It's an interesting question because I think uh we fit very well. We're a premium product and that comes with a premium price point and that sells well to premium brand partners who are selling into that premium price category, right? Like there's a number of categories we're in where we the Alula enabled product is the highest pric product in that category and I'm great with that. I think that's a fantastic thing. The reasons why those brand partners are making that decision one comes down to longevity. So without that glue degragation, you can have a tent that lasts multiple seasons as opposed to only lasting one and losing its waterproofing after one. Uh you don't need PFAS coating on it, right? It's all in there as a mono material. You also have a completely different way to be able to construct. So those other materials and most of the materials in the market, you're using tapes or sewing to be able to uh construct your tent or backpack or whatever it is that you're making. With Alula materials, you can actually weld. And by welding those seams, you get waterproofness, strength, durability, extra lightness because you're removing another step. Um, and that ability is something that's not seen in any of the competitive products. So that ability to weld and create a completely different construction technique is really something that's quite unique as well. So yeah, you'll end up with a super light, super strong end product that is a premium price category that's extra durable and then has that benefit of being able to construct it in a completely different way. I'm just curious. I mean, is there any potential product line that you've come across that has been difficult to make using Galula pro composits or >> Yeah, I'm just curious. >> Yeah. Um, we've talked to it a little bit in the length of the sales cycle, right? So, in some applications, we're going in and we're replacing a commodity product like a nylon or a polyester. And if you apply those same construction techniques, it's not going to work very well. So there's this learning phase when we're working with a product brand and also the manufacturing partner to be able to say how do you actually if you want to sew it how do you sew an alula material if you want to weld how do you weld that alula material because there is a learning curve once the manufacturer and the brand partners see that then it's like a light bulb goes off right you start looking at different ways to innovate different ways you could optimize your manufacturing um but there is a steep learning curve to get there and it's new right this is a whole new way to manufacture that um has been used again in composites but not necessarily in some of the areas that uh we're selling our material into. Um so there is a learning curve. It is important that our partners have a really deep expertise on the R&D side. Um and those are the ones that are calling right. They understand the benefits of welding and you don't have to weld. So even if you are sewing, you're going to sew it a little bit differently. Your uh how how you thread it and what your seam structure looks like is going to be different than a standard material. This is going to be a dumb comment, but you know, can you start getting into the wets suit market and come up with something to replace neoprene? Is that >> no stretch? Like now that's the one of the benefits is that our material is quite stiff, right? >> Yeah. Yeah. >> So I imagine the discomfort >> for sure. >> You're going to have to test it for us. >> That was that like I said, it was the dumbest comment of all time. That's good. So, um, another question is, love to hear, um, maybe some examples of brands that you I I don't know. I'm pretty sure you can publicly talk or you tell me if you can publicly talk about any of the brands that you're working with. Love to hear what that cycle was like to, you know, introduction, testing, then now, all right, we're we're locked in. Let's go. >> Yeah. Um, so we've talked in our MDNA about the sales cycle, right? And the sales cycle usually the initiation of contact is pretty quick. Then we get a sample package to them, small hand samples. Uh then they validate whether the material hits their specs that they're interested in. And usually that's warp, we weight, those types of things. Um and then they'll order a slightly larger amount of material yardage to be able to uh actually try it out. Then they'll go into field testing. So they'll order a next larger amount of quantity. They'll build their product, you know, a few of them, get them out in the field and get that real feedback. uh and then they'll move into commercialization. So uh in our investor deck that's on our website, you'll see that we've noted brands that have announced their commercialized products with Alula. There's a whole lot more that are still in that development pipeline. They're either field testing or still building their commercial order and haven't brought it to market yet. Um but we disclose of course when the brand discloses and there are a few circumstances where we've disclosed during the R&D phase. One example is ARC's um which we can talk about which is uh just completing its R&D phase um and then we also have a R&D partnership with Michelin who's uh testing the materials as well. So, the standard sales pipeline is kind of a two-year. Um, I think that will get better as we go on because the 2-year is really the early adopters, right? Arctic is a great example. They started working with Alula really early. Um, and so they were really kind of paving the way for themselves and for their manufacturing partner on how to work with the material. So, it was all new. Now, once you've done it once, you've built the construction guides, it's easier to onboard a factory after that. Um, but we have some innovative brands like that that are the first in their industries using it and then that usually takes a little bit longer, but each time after it's a little bit quicker. >> Absolutely. So also want to talk a little bit about the I mean I want to come back to that too but um having to do with IP you know um >> how what specifically is protected by patents and then versus trade secrets and you know how how just >> you can't help but think also just like how do you protect like the this is you know I think every time I think of recently I've been like it's like Gortex you know like you have all the other companies and then they're like oh with made with Gortex. It's like how do you continue to keep that going? I'd love love love to your thoughts. >> Yeah. So, um I agree with your analogy. You know, it's 2025. There's time for a new choice. Um but I think really there's there's two pieces. So, I think what you hit on is two pieces. One is your commercial strategy, right? We're first to market. Us building the brand equity and those sticky relationships with our customers really, really matter. And that's why we insist on co-branding with our partners so that that helps get the Alula brand out there. So in those high-erforming expensive products, you're seeing the Alula brand and you start to associate it with that premium experience. And then I think the second piece is the IP estate and IP estate I look at. So I look at that first that commercial that's our corporate brand. That's an asset that we're building that's going to have value, right? And that value is going to increase. The other asset that we're really focused on building is our IP estate. Um and that's defensive but also um again building an asset. And I look at that in a few different ways. One is clearly your patents. Those patents are disclosed to the public, right? So there's always a degree of complexity um as to what you patent and what you keep trade secret. And with our process, it's an art as much as it is a science. Um if it was easy, people would have done it years ago, right? And people have tried. You know, in the academic literature, it's been talked about for a while. Um, but you know, it takes a bunch of stubborn Canadians to put the time in because they're obsessed with that performance to get it across the line to make it technically feasible. So, we do have IP estate around those core areas, but we do also maintain a decent amount under trade secrets. So, you know, when we started the conversation, we talked about how our materials multiple layers. Those multiple layers can be changed based on what you're trying to get from a performance perspective. So, do you want stiff or do you want lighter or do you want ultra waterproof or do you want to hold helium? Do you want to hold gases? Um, and then we can tweak those outer layers based on those performance criteria. There's a lot of trade secret that goes into kind of that formulation. And then there's also a lot of trade secret that comes into that construction technique, right? We've had a lot of years of learning as to how to optimize our material both from the manufacturing process and then when it comes out and we're actually selling it to customers how to help them get the most out of it. Um and our responsibility um and I say our because we're all shareholders too is to ensure that we keep building that portfolio. We have to keep growing that IP estate and trade secrets. We also have to do it because we need to stay in front of the market. So I hope competition comes in. I I I think competition recognizes that you've got a good product. I know they'll have a headache getting to that point because it takes a lot of work with our product. Um but we are first mover. We will always know more because of that and we will keep pushing those innovation boundaries and stay in front of it and as you said build those two pieces its brand value and its IP and trade secrets that kind of product portfolio back end too. I'm kind of curious also from you know with I mean you mentioned the founders like they wanted better material this and that I mean were others within let's say the sailing industry was there this critical need of just like hey like there has to be a better way to you know fuse get these material composits together for elasticity strength you know better performance like was was that conversation currently going on be even before that >> not really and I Honestly, there's a number of industries that are pretty stagnant from a technology innovation perspective, right? And they're quite content with what they've been working with for the last 20 years. And you use the Gortex example. I'd say it's similar in that space as well, right? In the material science space, it feels like we've been somewhat stagnant, but there's a ton of really interesting things happening in the material sciences right now. And a lot of it is driven by that sustainability need, right? to have something that is PFAS free that can be fully circular is not a nice to have anymore. It's a need to have. And so I think those types of industries, they're recreational sports, right? It's a luxury to be able to have and they like the coolest, hottest, sexiest thing that does amazing things, but in the long run is it kind of a live or die situation. I think what we found is that some of the industries that we've come into by bringing those innovations in they went whoa this can have a material impact on performance right and and I think that was welcome and it shifted a price point you know products sell for a higher price than the competitive products in those categories because of those performance benefits um but I don't think they knew that they wanted it until it showed up and honestly I think if you're driving real innovation if you're really pushing those boundaries. What do we say we're revolutionizing the material science space um then I think you're going to be before in some categories the market knows that they want it. >> Got it. All right. So that that that answered that question. So it was more like all right this you know this will last me longer and then almost afterwards it was like oh this is actually performing way better you know silo went 10 knots faster. I don't know. I don't sell. >> Well, and if you ask anyone who does kites and wings and who is into wind sports, if they've used an Alula product beside a standard Dacron or, you know, again, they're the commodity based materials in that space, they will say that they feel the difference, that stiffness, that responsiveness, that strength. Um, it is tangible in those products. So, >> so I mean, you know, going on the website under the products, you know, you have outdoor wind sports sailing. So as part of the strategy like all right we understand that we're you know these are recreational sports it may not be liver diet but like you know people are recognizing performance so that's good we're trying to get even more part market penetration there but what's the plan for the the non-recreational sports side of the business you know you have commercial there tell us more >> yeah um so this is part of the that I love about this business is that we can do a diversified market right so our go to market approach is performance outdoor which we've talked about So those that's going to an end consumer. That's the person who's buying it at the end. Uh bags and packs, tents, wind sports equipment, sailing equipment. Um they're great and those are also fantastic co-arketing avenues, right? It really helps get our name and our brand out there. And then we look at other applications like the commercial and industrial space. Those are going to take longer to get into, but they're going to be much larger markets. They're going to be higher growth markets. they're going to be slightly less price sensitive and you're going to sell more volume. We sell meters of material, right? When you distill it all down, that's what we're selling is meters of material. And so in the commercial and industrial categories, there's a higher probability we're going to sell more meters of material, right? So I love the performance outdoor category. I think it's fantastic for marketing. It's fantastic for our brand and it's fantastic use of our product. Um, but from a revenue perspective, the commercial and industrial applications longer term are really going to be it's not sexy, you know, it's not going to be talked about a lot, but hopefully that's what's driving up that um revenue line. I think there's also like wind sports was our first market. So that's our most saturated, our most penetrated, and our most stable. The next market we went after was bags and packs. So that's our second most, right? You see in that sales cycle those are starting to ramp and those are starting to come online at a commercial level and then we made the move into tents that's next and then commercial and industrial. So there's kind of this long tail on our revenue growth. When I said that we're just getting started, that's why the early markets that we've penetrated first with the wind sports and then second is bags and packs and bags and packs is still early and then the commercial and industrial applications. Very exciting markets but definitely very early for us. >> Absolutely. So can you give us an update on where we're at then on the you know on the commercial side with you penetration into the industrial? Yeah, sure. Um, we don't give guidance. Uh, but what I can give is a couple examples. So, we've talked publicly to the fact that a company called Aircas is, uh, has been testing in R&D. They've just went through a milestone. Uh, Alula Products to use as kites in front of cargo ships. So, Airs is owned by Kaline, which is one of the largest cargo shipping companies globally. They are trying for a 20% fuel reduction by using a kite as a supplementary fuel source effectively. So we put that in the wind power category in our commercial and industrial uses. For context, um they're building 600 square meter kites, right? That's huge. And it's also multiple layers of alula material. So you've got thousands of meters going into each of those kites. Um those applications are really exciting. There's a lot of cargo ships in the world. And if you can drive a 20% fuel savings, that's very attractive. And then you also get a regulatory market that's mandating a reduction in fuel use and decarbonization, right? So you get these outward pressures. You're seeing a lot of innovation in that market. And then you're seeing other products that just can't do it. So you need to resist UV. You need to deal with sun exposure with uh saltwater exposure. And then you have to be super light and super strong. So in those types of markets, Alula is really differentiated. It would be very hard for any other product to be able to do it. So those markets are really exciting. Just as one example, >> very good. Who so other than you know just legacy materials that folks are using for all the various use cases here, who is your primary competition right now when it comes to advancing the material sciences here? Yeah, there's a number of uh kind of early startups that are in the space, but I think on a day-to-day basis, we probably compete with uh a company called Daea, who I've mentioned. They're owned by a company called Aviant, uh who's a public company. Um and uh Daineea was bought a few years ago by Aviant. Um and they are probably one of the leading ultra high molecular weight polyethylene suppliers into the performance outdoor space. and they have a big presence as well in ballistics category for uh body armor and things like that. Um Honeywell also has patents in the space predominantly in the body armor side. Um and then we deal with the the incumbents right the standard dacrons, polyesters, nylons, the kind of older materials that are standard and have been standard for decades. Um, and so that from a competitive perspective is really do you want a high performance product that's very differentiated or are you comfortable staying in the kind of normal what you know category? >> Very good. All right. Now, here's my favorite question I like to ask anybody on here. So, you know, you're just getting started, you know, with with the dog and pony show. You actually I mean, yeah, >> I think our event might be the second event that you you're going to be doing. >> Yeah. So, I mean, but I'm sure you've had a number of conversations with various investors already and getting after it and stuff like that. So, you know, once people kind of have, you know, their head wrapped around the story a little bit, like really get what would you say are still some of the most frequently asked questions that you get where people are so like, I'm not totally sure, I don't totally understand this aspect of the business, you know, love to answer that here. Any of those frequently asked questions. >> Yeah. Um I think one which again completely understandable because of the stage and phase that we're in. We don't give guidance. So putting together the picture of revenue expectations is somewhat challenging for a company of our stage and phase. Um I am personally kind of a an underpromise and overd deliver. I'm not a promoter and so I think the market has to have a chance to get to know me and get to know the company to understand that and that only comes with time, right? Um, and so I think that's challenging for Alula in the stage that we are because there's not a lot of that operational history. Um, and there's not a lot of guidance being given. So it's hard to close that gap as to expectations. So I understand that. Um, I think there's uh questions that come around I think people are mostly excited about the product. They see the value once they start to understand what it is and how differentiated it is in the market. Uh, there's questions about the look and feel of the product. The product does look different and it does feel different. I might have actually I usually carry it around in my bag. I'm not sure how well it'll translate over the camera, but let's see if I can find it here. So, here's one example. This is um one of our tent materials, right? You can hear it. It's a little bit crinkly. You can see it like it's got kind of that organic look and feel to it. Um and I see it's plastic, but organic in the textural elements to it. And some people want the standard look and feel of a nylon or a polyester, right? And so we do get questions about that and my my challenge there is if you want nylon and polyester buy nylon and polyester. I love the fact that alula looks different. I think it fits into those categories but it's a relevant question and I think the noise and the hand feel that comes up. Um and then I think probably the last one is around uh governance and the board and experience in capital markets because I think that evolution through an RTO into a public company and into a growthbased public company, right? We're trying to drive revenue and um margin at the same time. Um and we're doing it fairly aggressively for a company of our age and the governance in that aspect matters. So I think people are kind of digging into the board and how we structure and function as a company and how the board works with the executive team. So all all good questions um and the right ones to be asking as I would on the other side. >> Absolutely. So my other favorite question here just to play devil's advocatey as always >> um is you know what what would you say are some of the company's downside risks other than execution? And that's the obvious one, but what what would you say are some of the other um downside risks or folks should really be aware of when it comes to >> just putting together their Alula thesis? >> Yep. Uh so I'll do like the blanket statement of the unpredictability of the economy generally and tariffs and all those kind of things. You know, I think none of us are immune to that instability globally right now. So we'll just get that off the table. Um, I think that we are a small company playing against the big boys, right? And that always requires mindfulness and strategic approach in that, you know, I kind of said fairly clearly that we're selling against commodity- based products. Commodity- based products are produced by large multinational enterprises. So, uh, we last year did just over six million Canadian revenue. um we are competing against the big boys and that always comes with some risks. Um yeah, I think that's probably I think deal structuring and terms and the way that we work with our partners is really important. We have to find the right way to be collaborative. Um there's always going to be disagreements in long-term partnerships. I think that's healthy and navigating that. It's a pretty important area of focus for the business. So I those are probably the ones that I'd be thinking about. a small player in a big player space. >> Absolutely. All right. So, I have to ask about financials. Again, I'm sure you getting questions about that as well as the company is ramping. You know, we're >> there's a few things here, but do you want to address some of the recent financials and I I know you don't give guidance, but you know, how you expect to, you know, continue to turn around, maybe get to cash flow, u free cash and all that. >> Yeah. Yeah. I think um a couple things I'd point out. So, uh, Q2 is our last financials that were released. Our Q3 will come out shortly, uh, towards the end of September. Um, in Q2, I think what you see is the result of the strategic refocus in 2024. Um, so you're seeing revenue growth, but you're also seeing gross margin within a range. So, we have given guidance that we expect our gross margin to be in that 40 to 45% range. And that's a pretty big evolution from where it was when I first started. Um, and I think it goes back to uh the comment I made earlier that we are prioritizing growth, but we're also prioritizing margin, right? And you have to in today's day and age. I want us to be a very aggressive growth company, but we're not going to do it if we can't self- sustain. We're not going to do it if we can't pay our bills steady and repeated. Um, so that is a very much a priority for us and that's shown in that guidance. It's also shown in how we manage our offics. So, we're pretty tight and stringent on our office and that is done with that same intent, right? I've got a couple levers that we can pull operationally on a day-to-day basis and depending on the variability of the revenue and how that's coming through because your gross margin's fixed to your revenue, right? There's not a lot of leverage you pull there, but I've got some I can control on opex. And I think we've been very tight um on that control of opex because of that prioritization. So I think when you look at our financials, you see diversification of customer base. You see a growth in revenue and trends heading in the right direction. You see gross margin within that range and heading in the right direction and stabilizing there. You see an operational focus and that operational rigor on opex. Um and those components are pretty key for us as we continue to grow. Uh clearly a business like ours you can't double in size immediately, right? We are manufacturing a physical product. So that takes long-term strategic planning. That takes staffing ramp up. It takes a little bit of time to be able to have that growth. And I think having that stable foundation to be able to put that growth on top of is absolutely essential. And I think when you look at our historical financial filings in the last few quarters, that's what you're seeing. You're seeing that stabilization and ensuring that the foundation's ready to support that growth. >> Very good. Okay. We you've answered a lot of questions here today. You know, like I said, we we or I don't know if I said it, but we're we covered quite a bit. So, you know, I think my final question I'll just throw by you here now, you know, from from what you can tell us and in your opinion, >> where would you like to see the company in three to five years, you know, and what do you think will be the inflection points that'll get you there? >> Yeah. Um, we have very clear and specific internal targets that I would really like to be able to share with the market, but we won't. um because we we know that very clearly. We have aggressive growth plans. Um we do feel in 2025 and beyond that there is absolutely space for a replacement product that is PFAS free, that is waterproof, that does change the premium product categories that we're competing in. Um so we're building for that growth. We're building to be able to accommodate the customer interest that we see because that product is so differentiated. Um, and we've got the high performing team to be able to execute that. And I think when you look at our executive team, you see that we've got the right people in place. So, we've got pretty detailed um, and aggressive growth plans. And I think that's really part of, again, I said it earlier, we're all shareholders, right? And we have made a choice to be able to come and work with Alula because we really believe in the product. Um, and I think that ability to grow a product like this is because it is unique. uh it's right product, right time in our mindset. And so I think that growth is really the top priority is how can you do that at the same time as being margin focused, right? Of course, because you have to. Um but yeah, we've we've got some pretty pretty big goals. >> Excellent. Well, Sage, that I think this was a great place to end it. Uh where can our audience go and find more information on Alula Composits? >> I'd say the website alula.com is great. Um, of course with the advantage of AI these days, you can get a lot of info from uh chat boards and people's personal opinions about how they're working. Um, and then you know your website. >> Not that I not that I did. I was going to say not that I did that by all means to prepare. No way. Yeah. Did not. Let me close out. >> No, nobody. >> No, let me just close out a couple of tabs here. Exactly. Free screen. The patent's easy. But honestly, I think also, you know, you've built and microap club has a great community that seems to be having a great discussion off of a fantastic research report done by Meredith and we don't endorse. It's not ours at all, but there's some great information starting to come out about Alula cuz as we said, we haven't been telling our story yet, but we're starting to. So, it's nice to be able to share it with people and have a few people who have been hearing about it, who believe in it as well, and they're starting to share the story, too. So that's a a exciting time to be in. >> Absolutely. Well, Sage, this was great. Thank you so much for joining me today. Really do appreciate it. Good luck. Stay safe and I'll I'll see you in Toronto. >> See you in the end of October. >> Thank you. >> Great. Thank [Music]
Aluula Composites (TSX-V: AUUA): Fusing High Performance and Sustainability in Next-Gen Materials
Summary
Transcript
This podcast is forformational purposes only and is not provided as financial, legal, or any other advice. The information is not investment advice or an offer to buy or sell any securities or make an investment. The views expressed by guest speakers are their own, and any reference to third party products, services, or information does not constitute an endorsement thereof by SNN or its affiliates. SNN expressly disclaims all liability for any individual's use of the information presented in this podcast. Welcome to the due diligence series here on the Planet of Microcap podcast. I'm your host, Robert Craft. My guest on the show today is Sage Bman, CEO of Alula Composits, publicly traded company, the symbols AUA on the TSX Venture. Alula is focused on revolutionizing material science. Founded in 2019, the company has developed a patented process for producing ultra high molecular weight polyethylene for short uh WPE composits without glues fusing at the molecular level to create materials that are lighter, stronger, more durable and fully recyclable. This monomaterial design has also enable circularity and addresses the growing demand for PFAS free solutions. The company first gained traction in Windsports through its Ocean Rodeo subsidiary. But following a 2023 RTO and a 2024 strategic refocus under Sage's leadership, Alula divevested Ocean Rodeo to concentrate on becoming an ingredient brand. Today, Alula is targeting both premium outdoor markets, packs, tents, wind sports, and larger commercial and industrial applications where strength, durability, and recyclability are key. Alula will be presenting at our conference in Toronto, the Planet of Micro Cap Showcase on October 21 through 23. And I invited her on to discuss the science behind Alula's glue-free composits, the strategic pivot from Ocean Rodeo to ingredient branding, long but improving sales cycles for adoption, differentiation from commodity materials like polyester and nylon, expansion plans into higher volume industrial applications, financial discipline with recent margins of 40 to 45%. With that, please enjoy my conversation with Sage Barman, CEO of Alula Composits. Sage, thank you for joining me today. How you doing? >> Doing great. It's good to be here. >> Absolutely invite. >> Yeah, absolutely. It's great to have you. And you know, look, I'm looking forward to meeting you in person at our upcoming event in Toronto. And uh yeah, this was look, I've been meaning to invite you on the pod earlier, but what was funny is like the first time you Alula had registered for the event. I'm like, who what is this? Like what is going on here? And you know, had never heard of Alula before. What is happening in this company? And uh and then when we got on that first call to like who are what's going on? I was like, she was like, "Oh, yeah. Well, there's one investor I I you know, there's one investor, Meredith, she recommended." I was like, "Wait, say no more. Here we go." Um but uh but all jokes aside, you know, I thought, look, the company's now been profiled on Micro Cap Club. I think it's it's it's been talked about a little bit. So, wanted to have you on to really just, you know, hear everything from from Sage's mouth on what's going on with. So, >> yeah, it's great. >> So, my first question I'd love to ask you, and I ask this to everybody on here, is uh can you start us off with that one line that best describes Alula? >> One line. Isn't it always hard to condense it into one when you want to say so much? Um, Alula is revolutionizing the material science space where you can combine high performance and sustainability in the same product. >> Just writing it down real quick because it's probably >> then I know you're going to say how >> revolution the material. All right, great starting point. Here we go. Um, like I always write it down too cuz like that usually ends up being the title of the pod of like oh revolutioniz the material science space. Oh, that's interesting. How are they doing that? Um, but let's take a look at the company's history. You know, when was the company founded and then what was what was the original thesis? And then maybe catch us up as well. Give us some the key important dates and all that. >> Yeah, absolutely. >> Um, so an interesting startup phase 2019. A couple of guys that are obsessed with wind sports, kites and wings are looking for a way to make a material that is stronger and lighter. uh one is a chemist, one's an entrepreneur and they mess around in a garage for a while and they come up with this product um and they try it out and it's amazing. They start building this product and selling it into the company called Ocean Rodeo. So Ocean Rodeo is actually the first company that had a Lula product and they were running that company, Ocean Rodeo. They started to realize um a lot of people were winning races, doing new tricks with it. they started to realize that there's something really uniquely there. So, Alula was started with that new material revolutionizing the space in the wind sport space. What can we do with it? Um, Alula went through an RTO in 2023, which you know, I've got my own feelings about RTO's. They're always challenging on the other side of it. um but enjoying a challenge. I came in in the start of 2024 and uh at that point the company had been public through the RTO for a little while and I kind of came in to look at the operations of the organization stabilized and really went through a bit of a refocus, a strategic assessment and a refocus during 2024. Um so your point of you hadn't heard of us that's absolutely true. We put our heads down. It was really about stabilizing the foundation about clarifying where the value was going to come from for the future. Uh we divested some non-core assets. So 2024 was a housekeeping you know let's get everything stabilized. Um during that time was really fortunate to be able to build a new team. We have a fantastic executive team. Uh really all of us believe in the fact that we've got a product that's truly differentiated in the market. No one else can do what we can do. uh we've got the IP estate to back that up um and we've got traction with brand partners to be able to bring it to market. So uh coming into 2025 we started to say okay let's go let's start proactively focusing outwards. We hadn't done any proactive outreach and sales. It had all been inbound. uh we're seeing good revenue growth uh with that but you know the product is truly differentiated in the market and once we felt comfortable that uh that strategic refocus got us looking in the right directions with the right team um now we're really ready to to build and grow so it's an exciting time >> very good and thank you for that full overview that's perfect so >> I think the obvious first question here anybody asking is really wanting to better understand at least for me is that differentiation you know in the material you know, how are we revolutionizing the material science space? So, love to hear what makes you unique and different compared to >> currently what's on the market. The I think I I think I was doing some research like the glue versus the actual stitch. You >> you got it. You got it. You can answer that question. >> No, no, no, no. You >> No, it's um So, there's a product that's been known in the high performance space for quite a while called ultra high molecular weight polyethylene. And I know that's a mouthful. You'll sometimes hear me abbreviated as uh um what it is is a very strong polymer. Uh the benefit of ultra high molecular weight is that again you have strength and lightness. So you can have a very thin, very light material that's really strong. The challenge that everybody's had with it is that polyethylene is really hard to get things to stick to it. So this is great in some applications but really challenging if you want to make a multi-layer composite. So some other companies out there like Daea, they will glue another layer on top of the ultra high molecular weight. So you get the strength from that internal core. Then they glue another layer to get waterproofing or to get some other performance metric from it. What Alula has is we have a uh patent around the product and the process to be able to create that combined product or composite uh without the use of any glues. So, we're actually fusing at a molecular level. Well, my uh chief scientific officer would probably cringe. It's not exactly molecular, but you you what I'm saying. Um so, we're fusing without glue. So, you get the kind of uh combined value of those products coming together. So, it is one of those things where it's a 1 plus 1 equals three. By being able to really customize uh the strength of the ultra high molecular weight, which films you're putting in and what combination, you can come up with products that are quite differentiated in the market. Um, and by not having that glue, it also means that it is entirely polyethylene. So, it's a mono material and you can recycle it at the end of its useful life. Um, and that's a big differentiator. >> Absolutely. So when you're talking to your either current customer base or potential customers, whether you're looking to license the tech to various brands and or they're just I think you guys have your own branded stuff too, right? Come correct me. >> Not anymore. So part of the strategic refocus uh we did sell off the assets of Ocean Rodeo. Got it. Um and that decision was taken because we didn't want to be in competition with our customers. We wanted to be a materials vendor to them. Um and we are an ingredient brand. So, we do co-brand with customers when they put products out. Uh, and you can see our product, right? So, Arcter has a backpack in the market. Uh, that's a Lula material. There's a number of other ones and it's quite visible when you're looking at it. So, uh, we do co-brand when we go to market, but we don't any longer own our own brand aside from the Ola corporate brand. >> 100%. So, I mean, what when you're talking to your potential customer base or target customers and brands and whatnot, you know, I think they obviously see, okay, great. Like, this is stronger, but I I'm curious as to what that conversation is kind of like cuz I'm sure on one hand they're thinking themselves, well, >> all right, we have this other solution that maybe might I'm assuming here maybe might be cheaper and also for them they're like, hey, if it the glue doesn't stay on as long, okay, that means they got to come back and buy more, right? you know, I I'm so I'm just kind of curious as to what their mindset is. Obviously, they want the best possible material for some of the stuff they're selling, but at the same time, they have that mindset, too. >> Yeah. Yeah. It's an interesting question because I think uh we fit very well. We're a premium product and that comes with a premium price point and that sells well to premium brand partners who are selling into that premium price category, right? Like there's a number of categories we're in where we the Alula enabled product is the highest pric product in that category and I'm great with that. I think that's a fantastic thing. The reasons why those brand partners are making that decision one comes down to longevity. So without that glue degragation, you can have a tent that lasts multiple seasons as opposed to only lasting one and losing its waterproofing after one. Uh you don't need PFAS coating on it, right? It's all in there as a mono material. You also have a completely different way to be able to construct. So those other materials and most of the materials in the market, you're using tapes or sewing to be able to uh construct your tent or backpack or whatever it is that you're making. With Alula materials, you can actually weld. And by welding those seams, you get waterproofness, strength, durability, extra lightness because you're removing another step. Um, and that ability is something that's not seen in any of the competitive products. So that ability to weld and create a completely different construction technique is really something that's quite unique as well. So yeah, you'll end up with a super light, super strong end product that is a premium price category that's extra durable and then has that benefit of being able to construct it in a completely different way. I'm just curious. I mean, is there any potential product line that you've come across that has been difficult to make using Galula pro composits or >> Yeah, I'm just curious. >> Yeah. Um, we've talked to it a little bit in the length of the sales cycle, right? So, in some applications, we're going in and we're replacing a commodity product like a nylon or a polyester. And if you apply those same construction techniques, it's not going to work very well. So there's this learning phase when we're working with a product brand and also the manufacturing partner to be able to say how do you actually if you want to sew it how do you sew an alula material if you want to weld how do you weld that alula material because there is a learning curve once the manufacturer and the brand partners see that then it's like a light bulb goes off right you start looking at different ways to innovate different ways you could optimize your manufacturing um but there is a steep learning curve to get there and it's new right this is a whole new way to manufacture that um has been used again in composites but not necessarily in some of the areas that uh we're selling our material into. Um so there is a learning curve. It is important that our partners have a really deep expertise on the R&D side. Um and those are the ones that are calling right. They understand the benefits of welding and you don't have to weld. So even if you are sewing, you're going to sew it a little bit differently. Your uh how how you thread it and what your seam structure looks like is going to be different than a standard material. This is going to be a dumb comment, but you know, can you start getting into the wets suit market and come up with something to replace neoprene? Is that >> no stretch? Like now that's the one of the benefits is that our material is quite stiff, right? >> Yeah. Yeah. >> So I imagine the discomfort >> for sure. >> You're going to have to test it for us. >> That was that like I said, it was the dumbest comment of all time. That's good. So, um, another question is, love to hear, um, maybe some examples of brands that you I I don't know. I'm pretty sure you can publicly talk or you tell me if you can publicly talk about any of the brands that you're working with. Love to hear what that cycle was like to, you know, introduction, testing, then now, all right, we're we're locked in. Let's go. >> Yeah. Um, so we've talked in our MDNA about the sales cycle, right? And the sales cycle usually the initiation of contact is pretty quick. Then we get a sample package to them, small hand samples. Uh then they validate whether the material hits their specs that they're interested in. And usually that's warp, we weight, those types of things. Um and then they'll order a slightly larger amount of material yardage to be able to uh actually try it out. Then they'll go into field testing. So they'll order a next larger amount of quantity. They'll build their product, you know, a few of them, get them out in the field and get that real feedback. uh and then they'll move into commercialization. So uh in our investor deck that's on our website, you'll see that we've noted brands that have announced their commercialized products with Alula. There's a whole lot more that are still in that development pipeline. They're either field testing or still building their commercial order and haven't brought it to market yet. Um but we disclose of course when the brand discloses and there are a few circumstances where we've disclosed during the R&D phase. One example is ARC's um which we can talk about which is uh just completing its R&D phase um and then we also have a R&D partnership with Michelin who's uh testing the materials as well. So, the standard sales pipeline is kind of a two-year. Um, I think that will get better as we go on because the 2-year is really the early adopters, right? Arctic is a great example. They started working with Alula really early. Um, and so they were really kind of paving the way for themselves and for their manufacturing partner on how to work with the material. So, it was all new. Now, once you've done it once, you've built the construction guides, it's easier to onboard a factory after that. Um, but we have some innovative brands like that that are the first in their industries using it and then that usually takes a little bit longer, but each time after it's a little bit quicker. >> Absolutely. So also want to talk a little bit about the I mean I want to come back to that too but um having to do with IP you know um >> how what specifically is protected by patents and then versus trade secrets and you know how how just >> you can't help but think also just like how do you protect like the this is you know I think every time I think of recently I've been like it's like Gortex you know like you have all the other companies and then they're like oh with made with Gortex. It's like how do you continue to keep that going? I'd love love love to your thoughts. >> Yeah. So, um I agree with your analogy. You know, it's 2025. There's time for a new choice. Um but I think really there's there's two pieces. So, I think what you hit on is two pieces. One is your commercial strategy, right? We're first to market. Us building the brand equity and those sticky relationships with our customers really, really matter. And that's why we insist on co-branding with our partners so that that helps get the Alula brand out there. So in those high-erforming expensive products, you're seeing the Alula brand and you start to associate it with that premium experience. And then I think the second piece is the IP estate and IP estate I look at. So I look at that first that commercial that's our corporate brand. That's an asset that we're building that's going to have value, right? And that value is going to increase. The other asset that we're really focused on building is our IP estate. Um and that's defensive but also um again building an asset. And I look at that in a few different ways. One is clearly your patents. Those patents are disclosed to the public, right? So there's always a degree of complexity um as to what you patent and what you keep trade secret. And with our process, it's an art as much as it is a science. Um if it was easy, people would have done it years ago, right? And people have tried. You know, in the academic literature, it's been talked about for a while. Um, but you know, it takes a bunch of stubborn Canadians to put the time in because they're obsessed with that performance to get it across the line to make it technically feasible. So, we do have IP estate around those core areas, but we do also maintain a decent amount under trade secrets. So, you know, when we started the conversation, we talked about how our materials multiple layers. Those multiple layers can be changed based on what you're trying to get from a performance perspective. So, do you want stiff or do you want lighter or do you want ultra waterproof or do you want to hold helium? Do you want to hold gases? Um, and then we can tweak those outer layers based on those performance criteria. There's a lot of trade secret that goes into kind of that formulation. And then there's also a lot of trade secret that comes into that construction technique, right? We've had a lot of years of learning as to how to optimize our material both from the manufacturing process and then when it comes out and we're actually selling it to customers how to help them get the most out of it. Um and our responsibility um and I say our because we're all shareholders too is to ensure that we keep building that portfolio. We have to keep growing that IP estate and trade secrets. We also have to do it because we need to stay in front of the market. So I hope competition comes in. I I I think competition recognizes that you've got a good product. I know they'll have a headache getting to that point because it takes a lot of work with our product. Um but we are first mover. We will always know more because of that and we will keep pushing those innovation boundaries and stay in front of it and as you said build those two pieces its brand value and its IP and trade secrets that kind of product portfolio back end too. I'm kind of curious also from you know with I mean you mentioned the founders like they wanted better material this and that I mean were others within let's say the sailing industry was there this critical need of just like hey like there has to be a better way to you know fuse get these material composits together for elasticity strength you know better performance like was was that conversation currently going on be even before that >> not really and I Honestly, there's a number of industries that are pretty stagnant from a technology innovation perspective, right? And they're quite content with what they've been working with for the last 20 years. And you use the Gortex example. I'd say it's similar in that space as well, right? In the material science space, it feels like we've been somewhat stagnant, but there's a ton of really interesting things happening in the material sciences right now. And a lot of it is driven by that sustainability need, right? to have something that is PFAS free that can be fully circular is not a nice to have anymore. It's a need to have. And so I think those types of industries, they're recreational sports, right? It's a luxury to be able to have and they like the coolest, hottest, sexiest thing that does amazing things, but in the long run is it kind of a live or die situation. I think what we found is that some of the industries that we've come into by bringing those innovations in they went whoa this can have a material impact on performance right and and I think that was welcome and it shifted a price point you know products sell for a higher price than the competitive products in those categories because of those performance benefits um but I don't think they knew that they wanted it until it showed up and honestly I think if you're driving real innovation if you're really pushing those boundaries. What do we say we're revolutionizing the material science space um then I think you're going to be before in some categories the market knows that they want it. >> Got it. All right. So that that that answered that question. So it was more like all right this you know this will last me longer and then almost afterwards it was like oh this is actually performing way better you know silo went 10 knots faster. I don't know. I don't sell. >> Well, and if you ask anyone who does kites and wings and who is into wind sports, if they've used an Alula product beside a standard Dacron or, you know, again, they're the commodity based materials in that space, they will say that they feel the difference, that stiffness, that responsiveness, that strength. Um, it is tangible in those products. So, >> so I mean, you know, going on the website under the products, you know, you have outdoor wind sports sailing. So as part of the strategy like all right we understand that we're you know these are recreational sports it may not be liver diet but like you know people are recognizing performance so that's good we're trying to get even more part market penetration there but what's the plan for the the non-recreational sports side of the business you know you have commercial there tell us more >> yeah um so this is part of the that I love about this business is that we can do a diversified market right so our go to market approach is performance outdoor which we've talked about So those that's going to an end consumer. That's the person who's buying it at the end. Uh bags and packs, tents, wind sports equipment, sailing equipment. Um they're great and those are also fantastic co-arketing avenues, right? It really helps get our name and our brand out there. And then we look at other applications like the commercial and industrial space. Those are going to take longer to get into, but they're going to be much larger markets. They're going to be higher growth markets. they're going to be slightly less price sensitive and you're going to sell more volume. We sell meters of material, right? When you distill it all down, that's what we're selling is meters of material. And so in the commercial and industrial categories, there's a higher probability we're going to sell more meters of material, right? So I love the performance outdoor category. I think it's fantastic for marketing. It's fantastic for our brand and it's fantastic use of our product. Um, but from a revenue perspective, the commercial and industrial applications longer term are really going to be it's not sexy, you know, it's not going to be talked about a lot, but hopefully that's what's driving up that um revenue line. I think there's also like wind sports was our first market. So that's our most saturated, our most penetrated, and our most stable. The next market we went after was bags and packs. So that's our second most, right? You see in that sales cycle those are starting to ramp and those are starting to come online at a commercial level and then we made the move into tents that's next and then commercial and industrial. So there's kind of this long tail on our revenue growth. When I said that we're just getting started, that's why the early markets that we've penetrated first with the wind sports and then second is bags and packs and bags and packs is still early and then the commercial and industrial applications. Very exciting markets but definitely very early for us. >> Absolutely. So can you give us an update on where we're at then on the you know on the commercial side with you penetration into the industrial? Yeah, sure. Um, we don't give guidance. Uh, but what I can give is a couple examples. So, we've talked publicly to the fact that a company called Aircas is, uh, has been testing in R&D. They've just went through a milestone. Uh, Alula Products to use as kites in front of cargo ships. So, Airs is owned by Kaline, which is one of the largest cargo shipping companies globally. They are trying for a 20% fuel reduction by using a kite as a supplementary fuel source effectively. So we put that in the wind power category in our commercial and industrial uses. For context, um they're building 600 square meter kites, right? That's huge. And it's also multiple layers of alula material. So you've got thousands of meters going into each of those kites. Um those applications are really exciting. There's a lot of cargo ships in the world. And if you can drive a 20% fuel savings, that's very attractive. And then you also get a regulatory market that's mandating a reduction in fuel use and decarbonization, right? So you get these outward pressures. You're seeing a lot of innovation in that market. And then you're seeing other products that just can't do it. So you need to resist UV. You need to deal with sun exposure with uh saltwater exposure. And then you have to be super light and super strong. So in those types of markets, Alula is really differentiated. It would be very hard for any other product to be able to do it. So those markets are really exciting. Just as one example, >> very good. Who so other than you know just legacy materials that folks are using for all the various use cases here, who is your primary competition right now when it comes to advancing the material sciences here? Yeah, there's a number of uh kind of early startups that are in the space, but I think on a day-to-day basis, we probably compete with uh a company called Daea, who I've mentioned. They're owned by a company called Aviant, uh who's a public company. Um and uh Daineea was bought a few years ago by Aviant. Um and they are probably one of the leading ultra high molecular weight polyethylene suppliers into the performance outdoor space. and they have a big presence as well in ballistics category for uh body armor and things like that. Um Honeywell also has patents in the space predominantly in the body armor side. Um and then we deal with the the incumbents right the standard dacrons, polyesters, nylons, the kind of older materials that are standard and have been standard for decades. Um, and so that from a competitive perspective is really do you want a high performance product that's very differentiated or are you comfortable staying in the kind of normal what you know category? >> Very good. All right. Now, here's my favorite question I like to ask anybody on here. So, you know, you're just getting started, you know, with with the dog and pony show. You actually I mean, yeah, >> I think our event might be the second event that you you're going to be doing. >> Yeah. So, I mean, but I'm sure you've had a number of conversations with various investors already and getting after it and stuff like that. So, you know, once people kind of have, you know, their head wrapped around the story a little bit, like really get what would you say are still some of the most frequently asked questions that you get where people are so like, I'm not totally sure, I don't totally understand this aspect of the business, you know, love to answer that here. Any of those frequently asked questions. >> Yeah. Um I think one which again completely understandable because of the stage and phase that we're in. We don't give guidance. So putting together the picture of revenue expectations is somewhat challenging for a company of our stage and phase. Um I am personally kind of a an underpromise and overd deliver. I'm not a promoter and so I think the market has to have a chance to get to know me and get to know the company to understand that and that only comes with time, right? Um, and so I think that's challenging for Alula in the stage that we are because there's not a lot of that operational history. Um, and there's not a lot of guidance being given. So it's hard to close that gap as to expectations. So I understand that. Um, I think there's uh questions that come around I think people are mostly excited about the product. They see the value once they start to understand what it is and how differentiated it is in the market. Uh, there's questions about the look and feel of the product. The product does look different and it does feel different. I might have actually I usually carry it around in my bag. I'm not sure how well it'll translate over the camera, but let's see if I can find it here. So, here's one example. This is um one of our tent materials, right? You can hear it. It's a little bit crinkly. You can see it like it's got kind of that organic look and feel to it. Um and I see it's plastic, but organic in the textural elements to it. And some people want the standard look and feel of a nylon or a polyester, right? And so we do get questions about that and my my challenge there is if you want nylon and polyester buy nylon and polyester. I love the fact that alula looks different. I think it fits into those categories but it's a relevant question and I think the noise and the hand feel that comes up. Um and then I think probably the last one is around uh governance and the board and experience in capital markets because I think that evolution through an RTO into a public company and into a growthbased public company, right? We're trying to drive revenue and um margin at the same time. Um and we're doing it fairly aggressively for a company of our age and the governance in that aspect matters. So I think people are kind of digging into the board and how we structure and function as a company and how the board works with the executive team. So all all good questions um and the right ones to be asking as I would on the other side. >> Absolutely. So my other favorite question here just to play devil's advocatey as always >> um is you know what what would you say are some of the company's downside risks other than execution? And that's the obvious one, but what what would you say are some of the other um downside risks or folks should really be aware of when it comes to >> just putting together their Alula thesis? >> Yep. Uh so I'll do like the blanket statement of the unpredictability of the economy generally and tariffs and all those kind of things. You know, I think none of us are immune to that instability globally right now. So we'll just get that off the table. Um, I think that we are a small company playing against the big boys, right? And that always requires mindfulness and strategic approach in that, you know, I kind of said fairly clearly that we're selling against commodity- based products. Commodity- based products are produced by large multinational enterprises. So, uh, we last year did just over six million Canadian revenue. um we are competing against the big boys and that always comes with some risks. Um yeah, I think that's probably I think deal structuring and terms and the way that we work with our partners is really important. We have to find the right way to be collaborative. Um there's always going to be disagreements in long-term partnerships. I think that's healthy and navigating that. It's a pretty important area of focus for the business. So I those are probably the ones that I'd be thinking about. a small player in a big player space. >> Absolutely. All right. So, I have to ask about financials. Again, I'm sure you getting questions about that as well as the company is ramping. You know, we're >> there's a few things here, but do you want to address some of the recent financials and I I know you don't give guidance, but you know, how you expect to, you know, continue to turn around, maybe get to cash flow, u free cash and all that. >> Yeah. Yeah. I think um a couple things I'd point out. So, uh, Q2 is our last financials that were released. Our Q3 will come out shortly, uh, towards the end of September. Um, in Q2, I think what you see is the result of the strategic refocus in 2024. Um, so you're seeing revenue growth, but you're also seeing gross margin within a range. So, we have given guidance that we expect our gross margin to be in that 40 to 45% range. And that's a pretty big evolution from where it was when I first started. Um, and I think it goes back to uh the comment I made earlier that we are prioritizing growth, but we're also prioritizing margin, right? And you have to in today's day and age. I want us to be a very aggressive growth company, but we're not going to do it if we can't self- sustain. We're not going to do it if we can't pay our bills steady and repeated. Um, so that is a very much a priority for us and that's shown in that guidance. It's also shown in how we manage our offics. So, we're pretty tight and stringent on our office and that is done with that same intent, right? I've got a couple levers that we can pull operationally on a day-to-day basis and depending on the variability of the revenue and how that's coming through because your gross margin's fixed to your revenue, right? There's not a lot of leverage you pull there, but I've got some I can control on opex. And I think we've been very tight um on that control of opex because of that prioritization. So I think when you look at our financials, you see diversification of customer base. You see a growth in revenue and trends heading in the right direction. You see gross margin within that range and heading in the right direction and stabilizing there. You see an operational focus and that operational rigor on opex. Um and those components are pretty key for us as we continue to grow. Uh clearly a business like ours you can't double in size immediately, right? We are manufacturing a physical product. So that takes long-term strategic planning. That takes staffing ramp up. It takes a little bit of time to be able to have that growth. And I think having that stable foundation to be able to put that growth on top of is absolutely essential. And I think when you look at our historical financial filings in the last few quarters, that's what you're seeing. You're seeing that stabilization and ensuring that the foundation's ready to support that growth. >> Very good. Okay. We you've answered a lot of questions here today. You know, like I said, we we or I don't know if I said it, but we're we covered quite a bit. So, you know, I think my final question I'll just throw by you here now, you know, from from what you can tell us and in your opinion, >> where would you like to see the company in three to five years, you know, and what do you think will be the inflection points that'll get you there? >> Yeah. Um, we have very clear and specific internal targets that I would really like to be able to share with the market, but we won't. um because we we know that very clearly. We have aggressive growth plans. Um we do feel in 2025 and beyond that there is absolutely space for a replacement product that is PFAS free, that is waterproof, that does change the premium product categories that we're competing in. Um so we're building for that growth. We're building to be able to accommodate the customer interest that we see because that product is so differentiated. Um, and we've got the high performing team to be able to execute that. And I think when you look at our executive team, you see that we've got the right people in place. So, we've got pretty detailed um, and aggressive growth plans. And I think that's really part of, again, I said it earlier, we're all shareholders, right? And we have made a choice to be able to come and work with Alula because we really believe in the product. Um, and I think that ability to grow a product like this is because it is unique. uh it's right product, right time in our mindset. And so I think that growth is really the top priority is how can you do that at the same time as being margin focused, right? Of course, because you have to. Um but yeah, we've we've got some pretty pretty big goals. >> Excellent. Well, Sage, that I think this was a great place to end it. Uh where can our audience go and find more information on Alula Composits? >> I'd say the website alula.com is great. Um, of course with the advantage of AI these days, you can get a lot of info from uh chat boards and people's personal opinions about how they're working. Um, and then you know your website. >> Not that I not that I did. I was going to say not that I did that by all means to prepare. No way. Yeah. Did not. Let me close out. >> No, nobody. >> No, let me just close out a couple of tabs here. Exactly. Free screen. The patent's easy. But honestly, I think also, you know, you've built and microap club has a great community that seems to be having a great discussion off of a fantastic research report done by Meredith and we don't endorse. It's not ours at all, but there's some great information starting to come out about Alula cuz as we said, we haven't been telling our story yet, but we're starting to. So, it's nice to be able to share it with people and have a few people who have been hearing about it, who believe in it as well, and they're starting to share the story, too. So that's a a exciting time to be in. >> Absolutely. Well, Sage, this was great. Thank you so much for joining me today. Really do appreciate it. Good luck. Stay safe and I'll I'll see you in Toronto. >> See you in the end of October. >> Thank you. >> Great. Thank [Music]