Q1 2022 GreenPower Motor Company Inc Earnings Call
[music].
Good day and welcome to the clean power Motor Company's first quarter earnings Conference call. All participants will be in a listen only mode should you need assistance. Please as many countries specialists that question start N V E L F.
After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone and to withdraw your question. Please press Star then two.
Please note this event is being recorded.
I'd now like to turn the conference over to Michael Sheaffer. Please go ahead.
Okay.
Thank you. This is Michael Sheaffer, Chief Financial Officer of Green Power Motor Company I would like to welcome everyone to our call to discuss <unk> financial results for the period ended June 32021.
I'm here today, with our Chief Executive Officer, Freezer Atkinson, our President Brendan Riley and our VP of sales marketing Ryan Chairman during.
During today's call, we may make comments or statements about our future expectations plans and prospects, which may constitute forward looking statements for the purposes of the safe Harbor provision under the private Securities Litigation Reform Act of 1995 and applicable Canadian Securities laws.
Actual results may differ materially from those indicated by these forward looking statements as a result of various important factors, including those discussed in our quarterly interim results and MD&A filed on SEDAR.
Excellent.
In addition, these forward looking statements relate to the date on which they are made.
We anticipate that subsequent events and developments may cause the company's views to change green power disclaims any intention or obligation to update or revise any forward looking statements whether as a result of new information future events or otherwise I will now pass the call over to Green powers.
Apologies also during the course of today's call. We may refer to certain non <unk> financial measures reconciliation of these non <unk> measures can be found in our MD&A on SEDAR and Edgar and there is also located on our website at Www Dot group Dot.
I will now pass the call over to Green power CEO for <unk>.
Yeah.
Thank you Michael.
Thanks, all to all for joining our earnings call.
Following my opening remarks, Michael will cover the financial highlights for the quarter Brent.
Brendan will speak about our operations and Ryan Chatterley will join us for the Q&A.
Our plan since our NASDAQ IPO last fall remains on track and firmly in place as.
As we had anticipated we experienced a substantial increase in sales pipeline activity. This summer as the economy reopens and various incentive programs came back online.
We expect this surge to achieve our objective of obtaining positive cash called this calendar year.
With that momentum to continue into 'twenty 'twenty two.
The sense of urgency when it comes to the topic of climate change is crawling greater by the day and the wave of mandates and supportive funding continues to grow.
Earlier this year there were numerous announcements around goals for the adoption of zero emission medium and heavy duty buses in particular with school buses and transit buses.
With the recent passage of the infrastructure Bill there will be funding available to support these lofty goals.
Put this into context in order to get to the 20% target for zero emission School buses 100000, 500000 school buses will need to be replaced or 8000 of the 40000 school buses that are sold each year starting now.
We started the monthly production of our Beast Schoolbus last fall and the first of these are scheduled for delivery pursuant to customer orders in the next month.
And more importantly, we will have inventory to meet increased demand this fall.
We will circle back with more details on operations momentarily, but first I'll pass the call back to Michael Seaford Green power CFO to cover our quarterly financial results.
Thank you for you Sir.
For the quarter ended June 32021, Marine power recorded revenues of $2.7 million and cost of revenues of $1.8 million generating a gross profit of 850000 or 32%.
Revenue increased 17% compared to the first quarter of prior year and was generated from the delivery of five <unk> stars to four sugar 14th E V stars to Green commuter for which Green power provided lease financing one start to harbor air which can be used as a shuttle between the airlines various locations.
For which green card provided lease financing and once <unk> starts with a learning disability society, greater Vancouver produces and mobile classroom.
We finished the quarter with completed vehicle and charger inventory of approximately $6.2 million comprised of 70 restart transit plus 42 E V. Starr cabin chassis five stars and <unk> 350, and charging stations, we continue to invest in production of EV starters, and B school buses and as a.
June 30, we had approximately $12.5 million in vehicles underproduction inventory that is primarily comprised of our various models of EV stars and or beef type D School buses, which we expect to deliver later this summer.
We've continued to invest.
Inventory since the quarter end and now have approximately 300 vehicles at various stages of production.
We have ample liquidity to continue on the current rate of production was $31.3 million in working capital as of quarter end, including $9.1 million in cash and Undrawn line of credit strong balance sheet with total assets of $40.9 million and total liabilities of less than $4 million.
We continued to manage costs, while we scale up our business and cash costs for the quarter when were $197 million during the quarter compared to approximately $2.3 million in the prior quarter.
Dissipate the cash costs will continue to increase over the course of the year.
We invest in our North American infrastructure and increased staffing models.
In summary, there's three financial key financial highlights for the quarter first we continued to maintain our gross profit margin at 30% or better.
Second we've increased working capital by half a million dollars and have ample liquidity to continue to invest in growth.
And three our cash costs held steady at $2 million during the quarter, while our inventory decreased by 50% over the quarter and over three times compared to last year I will now hand, it over to Brendan for some operational details.
Thank you Michael.
My name is Brendan Riley again, president of Green Power Motor Company.
We've accomplished a tremendous amount recently green power Motor company as we expand our production capabilities and build inventory.
We now have over 300 vehicles in various stages of production.
Or are completed and inventory.
Which has been a massive undertaking.
But our team has stepped up to the challenge.
I'm extremely proud and I can't say enough about what they've done.
Current production capabilities right now of 50 units per month.
We expect that to continue an upward trajectory over 100 vehicles or 100 units per month over the next year.
Our supply chain remains robust with no material interruptions.
While we have been successful in bringing some of the costs out of the equation.
You've been unfortunately hit by higher shipping costs with summit, which somewhat offset those gains that.
That being said our goal is to increase aggressively driving down.
<unk>.
Each unit cost on an absolute basis, especially when we hit greater economies of scale, we expect our cost to reduce the prices to the customers reflecting that reduce cost.
Alright.
While incentives and mandate.
We will continue to aggressively drive adoption over the foreseeable future.
Our end objective over time remains to produce an EV that can completely on a standalone basis compete when it comes to price.
Other vehicles that are being sold in the markets Evs and non Evs and we continued making progress on that front.
During the quarter, we delivered our first by Green power cab chassis used for schirmer.
Our technical teams are collaborating.
Today and into the future working to finalize the bidding process at Forrester Bruce facility with expected completion sometime in September and our plans include scheduled Altoona test shortly thereafter.
Now the Altoona test not only opens up the federal funding for transit property.
But also serve somewhat of a buyer's guide to those purchasing vehicles, knowing what their in store for with a lifetime of this vehicle.
Our purpose built television star Shine the last time that all together with a score of 92.2.
The highest score any medium or heavy duty vehicle ever tested of any type.
We're obviously excited to get this forest river vehicle covered by the Altoona test.
Open up the transit market.
This is also very exciting time for our type D school by the.
The Beast.
As we have our Grand unveiling at the Act Expo later this month.
These units.
Have about a two to three quarter build time and our first units from production increase last fall are rolling off the Assembly line with an initial customer delivery later this month and more to follow in September.
A strange you mentioned at the top.
The funding for various mandates to solidifying rapidly and we are excited to be putting wheels on the ground today and moving forward.
And that continues excuse me that concludes our prepared remarks, operator, please open the floor for Q&A.
Okay.
We will now begin the question and answer his question to ask a question you May Press Star then one on your Touchstone Pony.
If you are using a speakerphone please pick up your handset before pressing the keys.
Brian Your question has been addressed and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble the roster.
Yeah.
Our first question comes from Greg Lewis with <unk>.
Please go ahead.
Yes. Thank you.
Everybody.
Yeah, Brandon you kind of talked loosely about.
Those are some of the shipping challenges that that we're seeing in the market.
As you think about the progression of the build out and congratulations on the gradual scaling up you've been doing in I guess it sounds like we're going to be targeting a 100 units.
You know at a certain point on a monthly basis within the next 12 months.
As we think about these lead times for for Quint.
How how are we how are we thinking about that like should we expect that progression over the next 12 months to kind of be slow and then accelerate in the back half of you know I.
I guess, and you know and like and sort of the last.
Quarter of that year target or is it something where we're just going to gradually see the company would be able to ramp production more steadily.
Yes, Greg that's a really good question and that's exactly the issue that we're struggling with.
I think industry wide is theirs.
Convergence.
Of weird things happening at once.
Supply chain issues are definitely something that we expect to effect.
Really everybody in the industry into next year.
And possibly beyond mostly when it comes to the semiconductor components.
Little pieces parts that go into some of our controllers.
And in burgers and things of that nature.
We've been able to stay ahead of that by.
Placing large orders early on.
Sometimes paying for them.
Having those either dedicated to us or in our inventory.
So those have been in short supply, but even other weird components have had some supply chain issues and we don't know what those components are all going to be.
Do you expect.
Little hiccups here and there, but very short term supply chain issues.
Which may affect a month or two of production at least for marine power ship.
Shipping is a is another issue not just <unk>.
Shipping Ocean shipping air shipping, but even interstate shipping.
They're it's.
It was just a bigger demand than we have the ability to take care of the shipping so it's driving up costs and sometimes delay.
Vehicle deliberately or <unk>.
Production schedules things of that nature.
We don't.
Or what what we stated in this.
In our MD&A is and.
And what we stated on the earnings call here today is that we will have the capacity to build those vehicles.
We anticipate that those vehicles will be.
We'll be buildable and deliverable.
Again, you know what their supply chain issues, you know all bets are all COVID-19.
It's ugly head again and the entire.
Supply chain shut down or customers shut down.
So it's a.
Greg I wish I had some very clear and concise things to tell you, but I think right. Now. These are the best projections are the best ideas of what we'll have available to us.
What we will be able to do based on today.
No Brian that was super helpful.
Craig.
Yeah.
Sorry to interrupt Craig It's Frazer speaking is that in Europe in the context of your question for.
What we are doing in terms of building up to 100 a month.
In the event that we need to be producing product at a magnitude of that number we have span had been spending a fair amount of time over this past year at looking at how we would accomplish that and whether that's through partnerships whether that's through.
Other means of production beyond what we're doing right now we do have a sort of a.
Mid term strategy, if you will how that will help.
Move us in terms of.
Moving out of just that incremental growth that you've just described because.
You all if if the demand takes off we have to be in a position to be able to handle.
To handle that demand.
Yes, no absolutely.
Absolutely and then and then.
Also wanted to ask.
You know about that.
The transit bus business.
It's interesting right I mean, I think people think a lot about <unk>.
The commercial side and it's kind of been this.
This e-commerce locked down acceleration in demand, but it's interesting because we're kind of green power fits in the market.
It's almost like a more of a reopening trade as campuses go back to work and people start flying in.
As we think about that transit bus market I feel like from like one of the previous calls you talked about.
Transit.
In L. A.
Transit bus system operating at like 20% capacity.
Realizing that.
I guess Covid is still a touch and go.
Touch-and-go environment with Covid.
Is there been any falling or pick up in interest maybe from some of these corporate campuses or cities.
Around.
<unk>.
Thinking about how they're going to approach their demand for transit buses I mean wow its already August of 'twenty. One so I guess, we're already looking ahead towards 2002.
Has there been any kind of change in tone from some of these potential customers. Some of these potential customers, but that that'll probably be ordering buses.
I guess at a certain point.
Yeah. This is a this is Brian shuttered Lee Vice President of sales marketing I'll go ahead and take that one.
You're absolutely spot on.
The demand.
The peak in interest over the last 90 days in Silicon Valley as well as the Pacific Northwest.
Between Portland and Seattle.
Some of the largest companies in the world really are just starting to put there.
Put dates on when their campuses are going to be opening back up and I would say between the beginning of September and a very if you have data towards towards the end of the year.
You're going to see many of these folks.
Starting to bring people back therefore, right off the bat enhancing their need for you know for transportation a lot of the companies right now are running pilot programs and figuring out exactly how many vehicles they need to deploy so many of those companies are in the due diligence phase.
Figuring out exactly what their needs are going to be and that's certainly kept us busy over over the last 60 days.
Okay, Great. That's it for me guys. Thank you very much.
Thanks, Greg.
Our next question comes from Chris Souther with <unk>. Please go ahead.
Hey, guys. Thanks for taking my question.
First one on the Forest River.
Can you talk about any feedback from the original five that you shipped to them.
Timing about tuna and talk about.
Where do you see that potential with that customer.
The announcement earlier this week they had with a competitor in the space.
Do you see that announcement is limiting your potential for expansion beyond the 150 order or.
Could you also get an order in the thousands from them.
I'm curious how you see.
That relationship is kind of a.
A bake off between your two technologies or is it different vehicles within their fleet that potentially be addressed between the two of you.
Chris This is Brendan I don't think we've got the details of what that.
What that order with the competitor that you mentioned.
Our yet so I don't know that we can really comment on.
What's going on again, it seemed to be powertrains for larger vehicles.
Our arrangement with the voice drag right now is for class four.
E D star platform vehicles.
So again I would have to wait maybe get some details and maybe get back to you on that.
But we're moving ahead with our Altoona testing, which is really the.
That's going to be the.
The real income module.
Our vehicles being.
The.
The vehicles of choice for the transit properties and others that rely on Altoona.
Basically you know seal of approval, but.
At this point, we are you know we can only speak for ourselves.
We anticipate once we have.
Fully integrated vehicle.
Later this summer Ah that.
We anticipate orders coming in.
Can't speak about them, yet because they're not in hand, but.
We're again, keeping our head down and making sure that we deliver the best products.
The market and help <unk>.
I still believe.
There are components onto our vehicles.
Okay got it so maybe just you talked about the pipeline acceleration here, but curious can you share any numbers around the order book from this acceleration that we've seen and where it stands today.
I am not.
Sharing any any any orders that we have not announced yet.
All I can say is hold on to your seats.
There's going to be some big announcements, but that's all I can say.
Okay got it.
Maybe just didnt kind of the near term here.
Given kind of.
Indication that positive cash flow by year end and you've got quite a few vehicles that are in various stages of inventory and kind of finished goods just kind of curious.
What is kind of the cadence that we should expect as far as the inventory build that we've seen.
Over the last couple of quarters to see them starting to see kind of a match between.
Deliveries versus production.
That's something we're still looking at is like third and fourth quarters.
Excuse me September and December quarter kind of starting to starting to align as far as the production and deliveries that kind of a good way to think about where do you see the next couple of months here.
Absolutely and to put this into context.
You'll have a quarter that we just are complete.
Completed and filed had just over 20 vehicles in the quarter.
And there weren't any school buses and we've been spending a considerable amount of time and our resources since last fall.
Building the production end.
That are part of the numbers that you were just referencing earlier and the first of those vehicles.
The delivery start within the next month and we'll be doing a full on bill.
The vehicle on August 31 September 1st at the Act Expo so.
That's a good example of the activity that we've been busy on the resources we've been using.
To build up that inventory that will now just be kicking in.
In the September and then more fully with the December quarters.
Okay. Okay. No that's very helpful. I'll hop back in the queue. Thanks, guys.
Thank you.
Our next question comes from Craig Irwin with Roth Capital Partners. Please go ahead.
Hi, good morning, and thanks for taking my questions.
So.
I was kind of surprised that this wasn't handled in your prepared remarks, right and I know, it's a tricky tricky issue.
Given that you you never really want to bite the helping hand.
But there as you know.
Among the companies actually delivering quite there's a lot of future deliveries, but among the companies actually delivering there seems to be a conversation that's growing.
About the pending H with vouchers dependent pending New York vouchers.
The expected benefit from the the infrastructure plan, putting near term deliveries on pause.
Having customers wait and see where they get the.
The best potential support.
For being early adopters of medium and heavy duty Evs.
And the other opportunities for infrastructure to <unk>.
Support larger growth over the longer run.
Can you maybe frame out for us.
Whether or not this is something you're seeing as well.
And.
How you think this is likely to be resolved over the next cut.
A couple of quarters.
Greg persistent Brendan and I'm sure. The other guidance will will chime in here, but.
The again these incentives.
Theres two sides of them one as people wait for them.
Like you said in the rollout isn't always the smoothest.
There's a lot of people still working remotely so very hard for things to get prompt processed in a timely fashion as far as these incentives are concerned.
Approval and there are a lot.
Ice adoption piece piece to cross.
During the approval process.
So.
We see these incentives as helpful at least now in the short term.
Don't forget we've got a huge.
Infrastructure Bill here that appears to be.
Getting across the finish line.
That will.
Or any of these programs that we've seen so far so we are seeing actually more and more incentives for more.
The better.
But again, Craig keep in mind.
From our perspective.
We're focusing on making sure our vehicles are compelling.
Even when these incentives are removed we can't tell you when that's going to be but we're preparing for that time.
No, we're very grateful for the incentives and it.
It's not about not biting the hand that feeds us but.
There are some adopters that would not be early adopters without those incentives and we.
And we think that at least today and into the near term future.
Incentives are.
Not only beneficial, but possibly even necessary for certain sectors to adopt.
Okay. Thank you for that.
The other question that I, just wanted to ask directly right.
Is can you reassure us that you would never have felt the inventory unless you had incredible customer nature.
You would ship these two when all the boxes get checked I mean, I think you probably even had the customer names in the soft orders long before you ordered these from these vehicles from your suppliers and started putting them on your balance sheet, but if.
If you could sort of talk us through this process.
And tell us sort of what the.
Finished goods inventory is now that's that's available for delivery if we do see some of these.
Items that are that are putting the brakes on the market clear I mean do we do we have a slug of orders that go out very quickly or does this just ramp over time.
Well I'll start with a sort of a high level comment on the.
And in terms of the product mix.
We're dealing with a range of products from 25% to 40 quarters.
Yeah.
A lot goes into the decisions, we have to make on which models that we build up and so as we have previously disclosed our focus was on select models within the EV Star platform, an RP School bus.
So on the EV star platform to the extent that we build out our cabin chassis. Those are portable if you will in terms of their they they're easily.
Hilltop to EV start cargo pluses to the R. E V Starr.
Plus.
And so theres a variety of follow on models that we can utilize that same platform and so our buildup was very mindful off if we can't place. These all in this fashion.
And we can build them out to satisfy the demand and requirements with some of the other models within that platform. So that's really the.
The great part of having that platform has been able to.
To have the flexibility to deploy across.
Numerous models on the Beast School bus.
Yeah, all the each time that we have looked at increasing our production has been based on you. All are you all key market indicators and some of the that numerous a ride and drive events that Ryan has been conducting for the better part of a year. So that's been based on a combination of.
Specific market information along with all.
All of the customer orders. So we do have in hand, along with the sales pipeline. So.
There isn't a particular factor that has driven the production decision but.
In all cases, we certainly been.
Factoring in what we have as well as what we see in the short term.
That we were in a position to fulfill.
And Craig This is Mike here I can get a specific question about finished goods at the end of the quarter. We had over 50 units in finished goods and <unk>.
Brendan Fraser said, we anticipate our school buses are going to start to.
Position still liver.
Later, this month or this quarter and so that that ramp up that we began in call it seven or eight months ago. After our IPO in the U S.
Those those vehicles are really going to start to deliver at a much higher cadence over the coming months.
Okay. So just just to clarify the 50 units are fully built ready for customer delivery or at least nearly ready for customer delivery is that correct.
Some of those are.
Cabin chassis and as freezer mail there all of those they are all ready to go yeah, yeah, Okay excellent.
That's very helpful. Thank you so much that's reporting five days ago.
There are 45 days ago yeah.
How many of them have been deliberate I mean can you tell us sort of roughly at this point in the quarter have you delivered several many a few.
We haven't announced but we certainly will be doing so before the before the quarter.
Okay. So how many how many are physically still in.
In your possession I guess just a question.
We don't have we don't track that are announced that at this stage, but that's certainly something that we're looking at doing in the near term.
Excellent well thank you so much.
Thanks, Greg.
As a reminder, if you have a question. Please press Star then you wanted to be joined into the queue.
Next question comes from Tate Sullivan with Maxim Group. Please go ahead.
Hi. Thank you you mentioned the act Expo a couple of times journey, but will this be the first step.
Upon demonstration of the beef sticker I thought you were already out there with the Beast or can you just explain that.
The benefits of this on daily.
So this is Ryan shetterly everything that we hadn't delivered up to date has been the 36 and a half foot variant.
This is going to be the industry's first purpose built type D 90 passenger.
Our admissions school bus and this will be the first time that that we're going to be taking it to a trade show.
And then chip can you review the comments about the the order for the for the Beast or when it potentially now is this you said pursuant to customer order, but then I thought you said that maybe it's already ordered to beef that you might be able to deliver Hollywood how will it work because it's just not the customer.
Yeah no. The so the first the first several tranches of vehicles, which had been announced in previous.
Releases are all accounted for so we will have vehicles deployed in.
And delivering to end users that we've already announced a N.
And I am USD.
A few others right out of the gate and the expectation there internally is that those vehicles are in those customers' possession in the next 45 days or so.
Thank you all.
Thanks Pete.
This concludes our question and answer session I would like to turn the conference back over to Frazer I couldn't say for any closing remarks.
Thank you everyone for joining us and has this has been a topic.
Our discussion Aye Aye.
We'd like to point out that the act Expo the particulars of our participation. We are a gold sponsor at the event that's being held at the long Beach Convention Center on August 31.
In September 1st so if you're in the greater Los Angeles area and able to attend either days.
Right.
I'll play you'd be able to come by our booth, which is right at the entrance.
And we will have our EV star with the side.
A R Beast School bus and R. E V Starr cargo plus all and a.
At the at the Act Expo Saul it's really <unk>.
Great opportunity to see our vehicle in the unveiling of our school bus that we've talked about on this call.
So once again, thank you for.
For listening to our earnings call and we look forward to providing updates and dire.
Or are the exciting times ahead of us with a lot of the mandates and the incentives that are coming on stream.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.