Phoenix Motor Inc. Q4 2022 Earnings Call

Welcome to the fourth quarter 2022 Phoenix Motors, Inc earnings Conference call.

My name is Emma and I will be your operator for today's call.

As a reminder, this call is being recorded and all participants are in a listen only mode.

All questions can be directed after the call to Phoenix I R.

I C R I N C dotcom.

It is now my pleasure to introduce Mark Hastings, Senior Vice President of corporate development and strategy.

<unk> of Investor Relations.

Thank you and welcome everyone to our fourth quarter earnings call I'm joined on the call today by Dr. <unk>, Our Chief Executive Officer, and Chris Wang Our Chief Financial Officer.

For those of you who are new to our story Phoenix Motor cars is headquartered in Anaheim, California.

Our goal is to be a leader in sustainable and zero emission medium duty transportation with a range of products available to our customers, including shuttle and transit buses school buses delivery band and work trucks.

We market our medium duty vehicles through our branch Phoenix Motor cars.

In addition, we also offer a full range of EV Chargers in electric forklifts as well as telematics solutions for fleets.

The infrastructure solutions and electric vehicle maintenance and service programs.

We are also currently developing a light duty consumer and commercial vehicle line, which will offer pickup trucks, Suvs and deliberate bands that will be marketed under our Edison future brands.

We are not in a pre revenue company like many others in our sector.

We were founded in 2003.

We delivered our first trucks nearly a decade ago and our vehicles have logged 4 million zero emission miles on the road.

As a result, we have a stable and loyal customer base and we offer our customers vehicles charging and telematics solutions and complete vehicle maintenance and service support.

Dr. Lin Cho, our Chief Executive Officer, who will speak next for those of you who don't know that yet he has a long history of success and default vehicle development Arena.

He has taken three different vehicles, all the way from concept through design production and into sales.

In addition, Dr. Lance as we affectionately refer to him has a particular expertise in mass production, which is one of the most important of the many attributes he brings to our company.

With that I will turn the call over to latch, who will say a few words about the progress we have made with our gen four vehicles.

<unk> of our third quarter call.

Thank you Mike.

Thank you for all your time today.

Very excited to report that they.

Being at the receiving the board of directors.

Well all of them for you.

Pro Bra and we haven't been.

At the ball.

Coating.

All implementation plan to bring Gen four to market it makes sense.

Yeah.

Coffee, Thanks, Jed Kelly and takeaway.

That will result.

Relative to your reported that.

We anticipate this Dod offer production for Gen four vehicles.

As well as well.

We achieved this summer.

Therefore, we expect full production to web two <unk> to 24 units a month.

Then at full production.

Should we expect EBIT to be achieved by year end.

We are excited because we expected that in for Ken.

Ken Cheng Jill.

Thanks.

These vehicles will benefit wrongful Catherine lie.

Model, which allows for lower cost and started production terms than we have.

And before we have a direct book.

The lives that design and production process.

<unk> has enabled us to ramp up production quickly and wait deals required production hours. In addition, Deadpool.

Bridget to Gen five.

We used to be able to see the company approved deals.

For those of you Cassie.

Thereby achieving test is independent.

A lower cost to add wafer decide rex mobility and increased customer.

That ship.

We look forward to providing more.

Yes.

Formation regarding our progress in the company.

Cortez ore Bulks are full and Devon by we get goes now turn the call back over to Chris <unk>, Our Chief Financial Officer.

Paul will discuss all four.

Fourth quarter and full year financial results after a beach.

We will take some time to provide additional information about <unk>.

All of that and update you on.

Or could that go and give us something.

So right now I would like to you talked a whole lot to Chief Finance officer creates along.

Thank you Dr land.

Turning to the fourth quarter.

Three months ended December 31, 2022, our net revenues were $1 8 million compared to $1 3 million for the same period in 2021.

This represented an increase of approximately 35%.

Results in the quarter benefited not only from the resolution.

Previously, we reported softer where related issues and the battery supply constrained, which delayed the delivery of some vehicles in the third quarter.

So from a forklift sales.

For the full year 2022, our net revenues.

$4 3 million and.

45% increase compared to the prior year.

Driven primarily by <unk>.

The increase in the sales of electric forklifts.

For the fourth quarter of 2022, our cost of revenues.

$1 5 million compared to $1 7 million in the year ago period.

Cost of revenues dropped by.

0.2 million.

Primarily due to lower our UBS.

Partially offset by an increase in the forklift sales.

For the full year of 2022.

Cost of revenues was $3 5 million quicker.

Which was unchanged compared to 2021.

Despite an increase in your revenues as we lowered costs are significantly higher than.

Electric vehicle business.

For the fourth quarter of 2022, our gross profit.

0.3 million.

Which improved significantly compared to a gross loss.

0.4 million.

During the year ago quarter.

The increase was.

Driven by shifting product mix and a significant improvement in your gross margins for our electric vehicle business.

For the full year 2022, our gross profit was <unk> 8 million, which was significantly improved compared to a gross loss of <unk> 6 million for the full year 2021.

The gross margin decline.

And that is gross profit divided by revenues.

<unk> from negative.

19%.

Positive 19%.

Driven by higher margins across all product categories.

Particularly.

Significantly improve the margin.

Electric vehicles from a negative 41% to positive 4%.

Increased margins are the survey is done the maintenance from 14% to 56.

6%.

And then.

Finally, the 15% margin.

Electric forklifts.

Selling general and administrative expenses or SG&A in the fourth quarter.

Were $4 8 million.

Compared to.

$7 5 million in a year ago quarter.

The decrease was mainly due to a onetime charge.

Future prototype development cost in Q4 2021.

For the full year 2022.

SG&A was 14 million compared with $13.

$8 million in.

In 2021.

A slight increase in operating expenses is primarily due to the increase in salaries and wages and costs related to a public.

Public company.

Totally offset by a decrease in research and development costs.

The increase in salaries and wages is driven by an increase in head count from 55 to 60 to beef up capacity.

During production.

And to prepare for unexpected production expenditure.

The decrease in research and development costs.

Flex our change of approach to product development.

Diamond with our asset light strategy.

Where we are.

Outsourcing a significant portion of these guy.

Engineering work for Gen four product.

Third party vendors and partners.

As a result of.

All of the factors just described.

Net loss for the fourth quarter of 2022.

$4 5 million compared to a net loss of $8 2 million in the prior year period.

The net loss for the full year 2022 was.

$12 7 million.

Which was an improvement compared to a net loss of $14 6 million for the full year 2021.

With that I will now turn the call back over to Mark who will provide a high level overview of our strategic plan.

Mark.

Thank you Chris.

To recap again, what we do in <unk>.

<unk> offering medium duty electric vehicles, we also provide a full offering of EV Chargers in electric forklifts.

In addition, we offer telematic solutions for electric vehicle fleets.

Infrastructure solutions and service and maintenance programs.

Our legacy all electric medium duty commercial vehicle line is marketed under the Phoenix Motorcars brand and includes shuttle and transit buses school buses delivery bands and work trucks and box trucks.

These are sold as complete vehicles as well as an electrified kit form for our customers and their body.

Phoenix Motorcars customers are sourced from a wide range of industries with applications, such as airport parking hotels campuses.

Cities municipalities ports and school districts.

We serve over 50 commercial fleet customers with whom we have deployed over 115 shuttle buses and trucks with a combined distance traveled a 4 million miles.

Today, we are manufacturing and selling our gen III vehicles.

We are excited to share that we will be starting production as well as achieving first delivery of our gen. Four vehicles. This summer literally right around the corner.

We are excited to be executing on our asset light business model as we expand in the coming years.

We feel that our asset light strategy is a differentiating characteristic for our company and the development of Gen. Four has seen the deployment of this strategy for the first time.

Our asset light model extends both upstream and downstream and our Gen core development.

Upstream, we have worked hard to cultivate partnerships and networks of suppliers across the industry and have leveraged their expertise experience and staffing.

These relationships have enabled us to bring this generation and will also allow us to develop future generations of our vehicles to market faster cheaper and with higher quality than we could ever hope to do by building the entire team on our own.

As an example, we have been working hard with IAA.

Arguably the Premier EV engineering firm in the world to bring Gen four to market in a matter of months not years.

We are also working with all time to introduce our leading edge Swappable battery systems to our genco alignment.

Likewise, we are extending our asset light strategy downstream to the production side of the business as well.

We are partnering with certain customers as well as with third party manufacturing and assembly facilities in order to scale our production cheaper.

Faster and more capital efficiently than we could ever hope to accomplish on our own.

We will highlight specific partners in the months ahead.

As part of this strategy, we are reconfiguring and streamlining our existing Anaheim manufacturing facility.

We will use this plant is a production center and a showcase facility and training Center, where our third party manufacturing partners will send their technicians to learn our standardized processes and procedures in order to ensure maximum efficiency and quality across our entire production network.

In addition to achieving faster time to market and lower development costs as a result of our asset light model.

Also achieving lower production and bill of materials costs compared to our gen. Three vehicles by utilizing standardized processes and procedures better designs for our components and sub assemblies and a streamlined supply chain process.

As most of you know two of the major hurdles that week and other similarly positioned EV manufacturers space, our first security of battery supply and second access to an adequate number of four <unk> hundred 50 chassis to meet our production and sales pipeline.

On the battery side, we have cleared the first hurdle with our Gen. Four development by securing a supply agreement with <unk>.

The world's largest EV battery maker for the long term procurement of Capex and related products for our Gen four vehicles.

We are also working on additional battery partnerships as well.

On the chassis side, we recognize that the medium duty market is heavily dependent on the supply of Ford chassis and as the industry continues to grow we foresee a supply shortage and are moving quickly to plan for our Gen. Five ground up design, which we expect to introduce.

During 2020 for.

This will help us clear the second hurdle as we achieve chassis independence with our Gen five vehicle lineup.

The development of our Gen five vehicle line, which will follow closely on the heels of Sop.

Production for Gen four well.

Benefit immensely from all the hard work, we're putting into the development of Gen. Four.

All of the benefits of our asset light business model, our partnerships and supply and production agreements will transfer directly to Gen five and.

In addition, most of the components and subassemblies that we have developed for Gen. Four will be used on gen five as well.

For these reasons, we view Gen four as a bridge to Gen five.

Our Gen four development will be profitable and carry high gross margins in its own right, but its true value will be unlocked as we apply the learnings and principles to our Gen. Five ground up chassis design that will ensure not only security of battery supply, but also chassis independence.

Two other features of our Gen. Five vehicles. In addition to battery and chassis supply security will be even lower costs than gen four and greater design flexibility to meet the needs of our customers.

We expect to produce our new chassis for far less than the cost. We are currently paying to acquire chassis.

And we will have the ability to customize our vehicle designs to meet specialized needs, while maintaining standardized processes and procedures.

Leasing our capacity to accommodate customer requirements and meet the evolving needs of the transforming electric vehicle market.

We look forward to sharing more about our gen four and Gen five vehicles in the coming quarters.

Telling you more about our exciting plans for our Edison future vehicles.

Edison in future will be a light duty offering with a solar powered component marketed for personal and commercial use in the form of pickup trucks, Suvs and delivery vans.

The Edison future pickup truck and band debuted at the 2021, La auto show to much fanfare and broader claim.

We expect to bring the Edison future vehicles to market sometime during 2025.

Our goal is to create a vehicle lineup that will have tremendous reliability and be cost competitive without subsidies.

Our ability to be cost competitive as a key focus as we seek to meet future market demands as the markets and EBIT technologies move from any emerging market base to a steadier state marketplace.

At its core.

Phoenix is an engineering focused company with patented technologies that address the market's need for the next generation of G of zero emission vehicles.

Have constructed our company to be flexible and asset light, we've talked a lot about our asset light model, which is logical since it is central to everything we do and something which sets us apart from other EV manufacturers.

We have an exciting road ahead with the launches of Gen. Four this year Gen. Five next year and Edison future in 2025.

But we are not developing these product lines as an academic exercise we are building a scalable business that endeavors to maximize returns on shareholders' capital, while also deploying industry leading technology.

We've put together a management team that season and established in the EBIT sector and incentivize to over achieve putting us in an excellent position to execute in a high growth zero emission commercial and consumer vehicle sector.

If you have any questions. Please direct them to Phoenix IR at ICR I N C Dot com.

Thank you to everyone who joined the call today, we really appreciate your interest in our company and look forward to sharing more of the Phoenix story and our progress in the coming quarters.

This concludes our call you may now disconnect.

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