Q2 2022 GreenPower Motor Company Inc Earnings Call
Good day and welcome to the Green Power Motor Company, Inc. Second quarter earnings call.
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I would now like to turn the conference over to Michael Seafood Green Point's Chief Financial Officer. Please go ahead.
Thank you. This is Michael <unk>, the Chief Financial Officer of Green Power Motor Company I would like to welcome everyone to our call to discuss Green power its financial results for the period ended September 32021.
I'm here today, with our Chief Executive Officer, Frazer Atkinson, President Brendan Riley and her VP of sales marketing Brian federally 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 purpose of the safe Harbor provisions under the private Securities Litigation Reform Act of 1995, and applicable Canadian and U S 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 and on Edgar.
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 used 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.
Well.
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.
SEDAR and on Edgar and is also located on our website.
I will now pass the call over to Green Power's CEO Fraser Atkinson.
Okay.
Thanks, Michael and thank you all for joining our call today.
Following my opening remarks, Michael will cover the financial results for the quarter and Brendan will speak to operations a.
A year ago, we embarked on a major shift from manufacturing vehicles pursuant to cost tomorrow orders to producing certain models to a stage, where the finishing as dictated by customer requirements in order to accelerate our production.
Production to sales to delivery.
Our team has been up to the task, where we are close to getting our inventory to where it needs to be to support a much higher growth level with our plans and Brendan will discuss this in more detail on this call.
We are very excited with the announcement this week, where we've entered into an OEM agreement with autonomous vehicle technology provider around robotics.
We will be working with perone to integrate the lidar radar optical sensors wiring harnesses and so on that they require for their 20 system at the manufacturing stage to enable an autonomous vehicle or what we are branding as our E V Starr being and autonomous vehicle EV stars.
Sure.
Iran has also shown a strong commitment by buying additional EV stars that they are currently converting to Avi stars as well as hiring sales and marketing staff to promote the stock very exciting times for our collective organization.
Our expenses in the quarter include significant investments to <unk>.
Tate our growth plans, let's discuss a few of these.
During the quarter, we filed a 200 million dollar shelf prospectus. This is not for any short term needs as we are well funded as illustrated by the increase in our working capital over the last six months.
This is to address long term opportunities for example, Ryan in the sales team mainland to transformative order to shelf allows us to access capital quickly to fund any working capital requirements.
Number two we achieved a significant milestone with the launch of our Beast type D. All Electric school bus had <unk> Paul in long Beach on August 31, 2021.
As well as our first deliveries to school districts in Southern California.
We also had first deliveries to an end customer with our EV star cabin chassis as well as our <unk> Star plus now.
Number three we significantly expanded our sales infrastructure and network.
And lastly, we have over 100 approved vouchers for eligible vehicles listed on the California each get.
New Jersey, Gip, NBC Soobee rebate programs.
We will circle back with more details on operational progress momentarily, but now I'll pass the call to Michael Seaford Green powers CFO to cover our quarterly financial results Michael.
Thank you Fraser.
For the quarter ended September 32021, Green power recorded revenues of $4 4 million in cost of revenues of $3 $5 million generating a gross profit of $950000 or 21, 5%.
The gross profit this quarter was lower than our target of 30% primarily due to the sale of 28 vehicles that were previously on lease at a gross margin below 20% and.
And first time sales of the two B school buses and the sale of 10 E V stars cabin chassis to an end user.
The remaining four vehicles were sold at a gross margin above 30%.
We continue to target a gross margin of up to 30% and believe this will be achievable in normal course, however, we may experience lower than target margin quarters from time to time when the majority of sales are either vehicles coming off lease or when we're making high volume sales to a single customer.
As Frazer mentioned the majority of the increase in expenses. This quarter was attributable to investments in our product roadmap and in our sales and business infrastructure, our expanding business and geographic footprint has caused certain increases in certain costs, such as insurance travel marketing and professional fees with the largest increases attributed to.
<unk> to payroll.
Over the past year, we have benefited from a significant reduction in our interest and accretion expense and we currently have virtually no interest bearing debt and only one tranche of warrants are meeting all of which are owned by insiders.
We finished the quarter with over $31 3 million in working capital, which included approximately $8 million in cash and restricted cash and $22 8 million in inventory, which was comprised of over $8 4 million in finished goods and $14 4 million in work in process inventory representing over 300.
30 vehicles in various stages of completion and production at quarter end.
We continued to be well capitalized to meet our capital needs in the near term.
I'll now hand, it over to Brendan Riley Green powers President for some operational details.
Thank you Michael and welcome to all those on the call today I'm Brendan Riley the president of Green Power Motor Company.
During the quarter and subsequent to the quarter end.
We have continued to aggressively build inventory accelerate our delivery schedule and significantly expand our distribution capabilities.
All the while investing an additional new product development, leveraging our EBIT star platform.
We have long stated that.
We expect to see a significant ramp in deliveries in late summer and early fall and we're right on target and are at the very early innings of what we anticipate to be a substantial revenue ramp.
Several factors are contributing to this expectation.
We continue to successfully leverage not only California's HVAC program, but other similar incentive programs on the east coast and in Canada, which are providing a very healthy backlog indeed.
We are expecting additional programs to come online here in the very near future throughout North America, and our inventory position, which includes EV stars.
Stars Cargos EV start transits EV Star cabin chassis, EV $3 50, and B School buses. These will allow us to meet the associated demand that will accompany these programs.
At the end of the quarter.
We have over 70 units in finished goods inventory and nearly 260 units in various stages of production.
The final step in this multi year process to bring the Beast All electric school bus stands for battery electric automotive student transportation.
Was completed with the receipt of our $2 92 card.
From the California Highway patrol.
This is the official acceptance of this vehicle in regards to both safety and accessibility and will allow us to accelerate the delivery of these units, which we expect to be meaningful a meaningful contributor to the revenues in the current and future quarters.
While we are excited about the acceleration in deliveries, we continue to invest in design and creation of new product categories that leverage our EBIT star platform.
We are pleased to have been honored by Metro magazine with the innovative solutions Award.
In recognition of our work with Corona Robotics, and Jacksonville Transportation authority to develop and deploy our fully autonomous 80 star.
This is positioning green power for the future and remains a priority.
Additional products will be immediately commercial application.
In various stages of design and development.
In sum.
This is a very exciting time for the company.
As we increasingly put substantial numbers of green power Evs on the road not only are we putting units on the street. We are doing so serving some of the most recognizable brands in the country.
These prestigious end users along with increasing volumes of repeat orders of our existing customer base speak volumes about the value proposition compelling nature of the stars align.
This concludes our prepared remarks today operator, please open the floor.
Q&A.
Thank you.
We will now begin the question and answer session.
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At this time, we will pause momentarily to assemble IRA J.
Our first question comes from Greg Lewis with <unk>. Please go ahead.
Yes, Thank you and good morning, everybody and thanks for taking my questions.
Guys I guess in the prepared remarks.
When we talk about margins it seems based on the comments that it was maybe more about product mix than it.
Maybe some challenges.
And then I guess, we were kind of expecting on the supply on the supply chain and other inflation that we're hearing a lot about could you kind of provide a little bit more color in terms of what youre seeing in the supply chain and inflation in and really how we should think about the product mix drive the margins.
This is.
Start with sorry go ahead.
I'll start very briefly with the product mix and then just pass it over.
Either Brent or know if rates are to discuss supply chain, but in terms of the product mix you have the biggest contributor here was really the fact that we had 28 vehicles coming off lease apologies I had some noise in the background.
Yes.
The sales the sales mix was there.
The primary and secondary was new products are on the first quarter and sometimes the second any new product model, we have always has.
All of those are initial.
Gross profit compression, but usually rebounds.
Yes, the next quarter or certainly the next second quarter.
And this is brendan referring to the supply chain.
And inflationary pressures on the vehicles.
As it stands right now green power is able to manage those both on the shipping side and the product cost side.
You were.
Actually going through inventory that was purchased a long time ago and parts that were purchased a while ago, we don't really expect huge pressure.
But we'll keep you guys posted right now it looks as though cost may increase a few percentage points.
Attributable to shipping and some increased.
Cost of goods, but as it stands right now we believe it's perfectly manageable and we.
We don't see it affecting our.
Our gross profit moving forward.
That's great to hear and I guess, that's probably a function of you guys being in the process of ramping up starting I guess earlier this year.
I did want to touch a little on the peroni robotic saw announcement.
You know I I guess, a couple of things to think about there. One is this something that that you know.
<unk>.
Two companies are joined together to work on to kind of.
Get something in place so that when customers are ready.
Green power and Peroni are ready to go or is this something where customers are actually.
Trying to push the two companies forward that deliver a real solution.
This is this is Ryan shattered, let me take that.
Literally just stepped off the floor of apt or just a couple of days ago, where.
The Jacksonville Transit authority vehicle was there and and in service for for everybody to ride.
Guys I've been to a lot of trade shows over the last 10 years in transit and I've never seen the type of excitement for.
With transit agencies.
Transit historically and I've said this several times is very conservative by nature, but when these guys start getting excited about emerging technology and I was just talking about it right. There's a ton of people on the floor talking about what theyre going to do over the next 18 months and likely well beyond that.
For them to for them to get on a vehicle and write it autonomous Lee.
It was an absolute eye opener for many many of these folks so youre going to see apt.
Apt rewarded Jacksonville Transit authority to Green power and Perone Robotics project with the innovation project of the year.
You're starting to see these major organizations take notice and they're they're all very very excited about it they think that there is.
<unk> going to be a very very high demand for it and you're starting to see that with some of the recognition that these projects are getting they are not just one offs or not just science projects.
These are tangible physical vehicles in operation right now.
And Greg This is Brendan and Ryan is exactly right about the transit operations.
Really looking at the <unk> Star.
<unk> AAV star product.
The other aspect of it is that.
The EV stars on our platform.
Stars share most parts with each other over 95%.
Parts commonality and structure commonality.
And not only is this applicable to moving people around.
But our <unk> C. A cab chassis can be used for delivery purposes as a truck step van service vehicle, that's delivering parts all types of different applications.
And that the perone Tony system.
Incorporated into the <unk> platform allows us to take this fungible vehicle and sell it into all of the sectors that can leverage or interested in leveraging.
Autonomous transportation for goods or or people. So we really see it as also the stepping stone now to goods movement autonomously, which is it sensibly even a larger.
The opportunity for the market then then moving around people.
Okay, Great and then just one more for me Brendan.
Brendan you mentioned stepping stones.
It was good to see.
The.
<unk> stars getting in the hands of some I guess public companies I think you referenced fortune 500 in the press release I guess, yes, I guess my question around that is.
Were those deliveries were those kind of hey, we'll take one and kind of kick the tires and see how it works or those initial deliveries ones that already are our customers already have placed additional orders that we can see here sooner.
Rather than later.
So this is this is Brian I'll go ahead and take that one as well.
Per the press release, we did deliver vehicle to the to a fortune 500 company and since then that same company has placed a follow up wondering taken an additional four I'm sorry three units. One is actually currently in transit as we speak.
No. This was these were the first medium heavy duty I think they have some electric bikes running around their campus.
But no.
No. This is their first electric vehicles that will be moving any of their employees.
On or around campus are in this particular region.
Okay, that's great to hear it looks like it looks like that that the customers with the campuses that had been hurt from Covid are finally getting back to work and moving forward. So hey, great to hear and look forward to continuing to watch have a great day guys.
Thanks, Greg Thanks, Craig.
Our next question comes from Tate Sullivan with Maxim Group. Please go ahead.
Oh hi. Thank you. Thank you Al you mentioned about 100 approved vouchers.
California as I saw the New Jersey, you mentioned, Canada, how many other states do you have vouchers and ended with a long approval process to get an approved list for those vouchers.
So the this is Brian the states are that what was mentioned there'll be only current actual voucher programs. Many other locations have different incentives, but New York, New Jersey, California D C with the CV program, they actually referred to those as vouchers and amongst those four.
You know, it's obviously a blend across the board there.
But that doesn't mean, we're not working outside of the state we got some pretty good news from our East Coast East Coast States. This past week.
Paul orders, but we're starting to see those orders kind of pop up the way they were popping up in California, five years ago, right Onesies and Twosies. This is the way. It starts a lot of these states have been looking at California, and seeing what is the performance and reliability and durability Gonna look like what it's Green power Motor company support going to look like.
And we built quite a referenced sheet and we look forward to utilizing and leveraging those references in order to create more demand here in the very near future.
And can you get as a follow up can you give us. An example of how you help customers navigate the voucher processes that part of the normal sales procedure yeah, absolutely for many of these guys even the even the ones you would expect to have a good beat on exactly what the process should look like.
We've got deep breaths grants coordinator and director of grants and contracts I think of the industry Michael.
Michael <unk> who's done a great job at managing our managing these processes, while wearing multiple hats and assisting on the sales fronts are attending.
Tradeshows in order to get customers familiar with what these processes look like I'll give you. An example, if somebody is interested in the project I'll call me will kind of project out figure out what they're looking for we'll turn that over to the contracts and grants team belden.
They will then take their information figure out what it is they qualify for and then walk them through the process.
Times, you'll get customers, who have done it before and when you get those type of customers, it's a little bit more turnkey they kind of know how to navigate but then you'll get folks who have absolutely never even never.
Never seen form and that's where Michael and Eric I come into play and they've done just a bang up job and we're super proud of them.
Great. Thank you and moving onto the beach deliveries and looking at your history.
Announcements with the Beast.
In September you announced you delivered 1% Santa Maria School District, and then back in November 2020, I think it was the thermal Lido School district.
In inventory right now how many school districts are you delivering beast to repeat.
Deliveries did the same district.
We will repeat deliveries we've got it in theory, we've got two orders with thermal Lido thermal Lido wasn't order they utilized two different two different grant programs.
The Butte County Air quality control District Grant and then the VW mitigation. So technically those are two purchase orders. However, we are working with creative bus sales on those orders and they've placed a blanket order for four beast.
For the <unk> product.
And then as far as Santa Maria goes that was our first 40 foot variant of the electric school bus that green power builds.
And that per the press release press release I'm, sorry received the 292 certification, which is you know kind of one of the it's a major milestone major objective that we needed to meet in order to get some of these other school districts to be comfortable with moving forward with us it's all a process and it takes time.
It takes more time than we would all like.
But it is a process and we're doing our best to get these things closed out in an efficient and timely manner.
Okay. Thank you.
Okay, and if you'd like to ask a question. Please press Star then one.
Our next question comes from Chris <unk>.
B Riley. Please go ahead.
Hey, guys. Thanks for taking my question here, maybe you can start with an update on Forest River, where are we on the timing for potential follow on orders with that.
Our customer there.
So are we.
We've our engineers engineers do have been going back and forth over the past several months.
This past week, we've had a major breakthrough with those guys in terms of.
You know the initial next steps we don't have a we don't have an update in terms of a follow up order, but I can tell you that theres been some very important Ah Ah agreements made in terms of the integration process and are we.
We actively met with those with those folks over at <unk> here in Florida.
And I look forward to continuing that partnership and making strengthening it and showing those guys and the rest of the industry that we are the only purpose built product that's going to meet the needs of the transit industry.
Yes, and Chris This is Brendan it's a very good question.
Since our vehicles, an entirely new platform for Forest River.
One of the first new platforms in years for the company to actually put their body on.
Integration does take a bit so it's a we're still in the process of finalizing the integration.
And the final spec.
<unk>.
The Forest River variant.
The EBIT star.
Chassis, so it might be a little bit longer and then we'll go through some testing and validation and design and then we anticipate it.
If all goes as we expect follow on orders.
Okay got it so maybe kind of early next year is kind of the timing is what we should be looking at then between kind of the integration process testing and the like or is it longer than that.
That's probably a good guess, but right now that's just a guess on our you know what.
Blocks of hiccups come along the way, but I can tell you from my perspective.
The integration is going very well and we don't see any.
We don't foresee any issues during integration and we've we've already integrated our cab chassis with box trucks various multiple box.
Box builders and.
We've had.
No real issues with those integrations, it's a little more complicated when you're moving around people and you've got more systems on board and those are the things that we're getting are all hammered out.
Okay, that's great to hear.
You called out in the MD&A additional sales upcoming with team.
Should we assume a similar sales of leased vehicles that were previously to green commuter.
Do you ever sense.
Many of those we should expect in the December quarter end.
Or what is kind of the.
Runway with a lean there for you.
Previously leased vehicles should we expect the majority to be kind of unwound and sold to those guys over the next few quarters or so what is the visibility there.
So it's a much smaller number than that as far as this quarter in terms of deliveries. We're capping out an original original order that was placed on earlier on in the year.
One way with Jim It's absolutely incredible Paul group as their CEO is a very very <unk>.
Instrumental player in this game he's he's willing to take some risks that he's got a great vision.
We think that there is a lot of potential there to partner with him and many many different deployments.
There has been some additional recent activity that we have conveyed to the market.
But as soon as everything gets finalized.
We.
Expect a press release on that when everything comes together.
Okay, and then last one here for me.
Inventory is now at 7% completed vehicles 2016, various stages of production.
Okay.
You mentioned that you've got 100 orders with each fit and other programs.
I'm, just trying to get a sense of the timeline to sell through the completed vehicles.
What should we be thinking about for said steady state inventory.
<unk>.
Timing around kind of cash flow positive.
<unk> previously been targeting kind of in the December quarter or are we still on track there or is it kind of pushed out.
Anything you can give as far as visibility of selling out the inventory with matching up with that.
100 <unk>.
Arent voucher program.
Yeah, Let me let me just add one little thing to that so we talked about the blend of vouchers that we've currently got.
And yeah, you know that that.
That are approved.
All of those are one thing that we've noticed about the New Jersey ZIP program and then the and then the New York. Our VIP program is once those vouchers are approved there's still a process behind that that that takes some time those guys are still ironing out many of the details that are going to be that are going to be a part of.
That program.
So that's it.
Vehicles that are ready to go we.
We may not have all the documentation that is a that is needed in order to officially make the delivery. The deals are done the vouchers are approved.
However, there is still you know.
Some formalities that are those two particular programs have to go through.
And right now nobody has sold more than us on either a I'm sorry on the New Jersey program.
And with that I'll turn it over to Michael seafood or Frazier in terms of inventory.
Yes, so the in terms of the flow through Chris we're expecting that the over 70 of the majority into the current quarter with any lag.
Any any remainder if you will into the.
The March 31st so the next two quarters, including the current one we're now in.
As well as.
At least one if not a couple of the tranches that are just moving through the back end of the production or in progress as Brendan.
Referenced earlier so.
So.
We're looking at volume over the back half of the current fiscal year.
Certainly at a scale that is much much higher than what we.
We've reported the last two quarters.
Okay I think the other thing to talk about is that with that the mix, we'd expect a mix that as you know the majority of which is sales as opposed to the.
The lease financing that is that has come off into a particular cell with the lower margin shortly.
So it's really a combination of both that increase as well as a an.
And the mix in terms of the contribution on the gross profit.
Okay. That's very helpful I'll hop into queue. Thanks, guys.
Yeah.
This concludes our question and answer session I would like to turn the conference back over that for Asia.
Any closing remarks.
Thank you everyone for dialing into our earnings call for our second quarter.
As you can see we're very excited about.
The development of our business.
Couple of things that we didn't talk about is that with the recent infrastructure Bill that's being passed.
And other.
Incentives that we haven't talked about our approach has been to build a business that isn't built on an expectation or programs.
Programs that are haven't been enacted.
So to the extent that the infrastructure bills ultimately provide significant funding for schools for transit.
And for other modes of transportation those will all be bonuses to have for our company.
Without the passage of them. What we've described today is the plan that we're on in the business. So we're going to build with significant growth. So stay tuned for the announcements are supporting that and once again, thanks for your support.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.