Greenland Technologies Holding Corporation Q1 2023 Earnings Call
Good day, ladies and gentlemen, thank you for standing by and we warmly welcome you all to the Queensland Technologies first quarter 2023 earnings Conference call.
All participants are in a listen only mode.
Conduct a question and answer session and instructions will follow at that time.
As a reminder, we are recording today's call. If you have any objections you may disconnect at this time.
I'd like to turn the call back to Justin Tommy Investor Relations Director of <unk>. Please proceed.
Thank you operator, and Hello, everyone welcome to Greenland Technologies' first quarter 2023 earnings conference call.
<unk> us today is Mr. Raymond Huang Chief Executive Officer.
We released results earlier today. The press release is available on the company's IR website at Chi Tak Dutch tax dotcom as well as from Newswire services. A replay of this call will also be available in a few hours on our IR website.
Before we continue please note that today's discussion will contain forward looking statements made under the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 1995.
Forward looking statements involve inherent risks and uncertainties as such the company's actual results may be materially different from the expectations expressed today.
Further information regarding these and other risks and uncertainties is included in the company's public filings with the SEC the.
The company does not assume any obligation to update any forward looking statement, except as required under applicable law also please note that unless otherwise stated all figures mentioned during the conference call are in U S dollars with that let me now turn the call over to our CEO Mr. Raymond Huang. Please go ahead Mr. Wang.
Thank you, Josh and good morning, everyone and thank you for joining us today I will be handling a majority of this call is my CFO Ching Ching has lost his voice and there's no condition to contribute to today's call.
I'd like to start by thanking our global team for continuing to drive the business during a difficult global market and continuing to develop a more efficient operation as.
As expected and stated during our last earnings call. Our component business continues to recover from global market conditions in the first quarter.
This is due to the current market conditions in the material handling and manufacturing industry in China as Oems recovered and ramp up from the countries zero tolerance policy.
Now China's manufacturing PMI has fallen to $49 five this year, which is below our estimates of 50.3, showing a slower recovering on the fears of a global slowdown however, based on feedback from our clients in the component business and our internal estimates we still stand by.
Or are we still standby our forecast that our business will normalize and grow especially in the second half of this year.
The material handling industry continues to grow with demand, reaching all time highs our Grand view research recently increased their forecast for the global forklift market to a compound annual growth rate of 13.2% through 2030 with a greater shift towards electric forklifts due to increased image.
Regulations around the world.
As a market leader in the forklift drivetrain and transmission industry. This market growth will reflect on our own metrics and results.
As displayed in our results, we continued to improve our margins through product innovation lower costs and operational efficiencies.
<unk> margins are up 320 basis points to 24, 9% compared to last year.
These improvements will further contribute to a successful 2023 as the market recovers and accelerates later this year.
Switching to a heavy electric industrial heavy machinery business, we continue to make strides laying the foundation for the company. We recently recruited a new Chief operating Officer, Dana Hopkins, who has really hit the ground running and is developing the infrastructure we need to succeed.
It has always been our responsibility as a pioneer to educate the heavy machinery industry on the advantages of electric compared to traditional fossil fuel systems and we continue to see great success in this area.
We have more and more organizations signing up for pilots and demos of our product.
Heavy participated in three industry trade shows this quarter alone, where we were met with tremendous interest at each one.
Speaking with attendees and learning how our products can improve their operations always fuels my perspective that the demand for electric heavy equipment is there and heavier on the right path to capture this opportunity.
But I understand that heavy needs to move in advance faster towards their milestones. So we will adapt our strategy accordingly.
As we develop and deploy our network of authorized service providers, we will incorporate our new referral incentives to leverage their network to uncover and close new opportunities.
This will increase the effectiveness of our sales personnel with warm leads and opened new doors.
Heavy will explore new markets for our product line that can benefit from clean operations industries, such as property maintenance landscaping and utility companies to name a few.
This also lends itself to exploring new market territories, both domestically and internationally that possess significant opportunity and we will be doing so in a prudent and calculated manner as to not take us away from our focus on establishing.
Our presence in the mid Atlantic region of the United States.
We have received interest in our products from companies in these industries at various trade shows and we will begin to expand our marketing to target them Accordingly.
Have you has also received a lot of feedback expressing interesting other heavy machinery they would benefit greatly from electrification. These opportunities are worth.
Further research and market study and May lead to an expansion of our product line sooner than we originally planned.
I am proud of the work that the G. Tech team has accomplished there's still more work to be done and milestones to be achieved and I believe we are on the right track to reach those goals.
And with that let me dive into the financial results for the first quarter of 2023.
As always please refer to our earnings filings for full details of our financial results.
So for the first quarter 2023, total revenue was $22.1 million U S. D. A decrease of 24% from $29 3 million a year ago, largely due to logistical and supply chain challenges, resulting from the initial wave of Covid cases, following the end of China's zero.
Covid policies and significant pent up travel demand during this year's Chinese new year holiday.
In addition revenue was impacted by a stronger dollar relative to the Chinese yen on an RMB basis, excluding the impact of the foreign exchange total revenue decreased by about 18% from the previous year.
And we sold 36841 transmission products.
Product units, sorry, compared with 41902 units in the first quarter of 2022.
Our cost of goods sold fell 28% to $16 6 million in Q1 2023.
Primarily due to lower sales volume gross profit was $5 5 million compared with $6 4 million in Q1 2022.
However, driven by a strategic transition ingredients product mix towards our higher value component and more sophisticated products like hydraulic transmissions, our gross margin rose 320 basis points to 24, 9% from 21, 7% a year ago.
Meanwhile, total operating expenses increased 5% year over year to $3 1 million.
The company has focused on significantly streamlining costs over the past year, which is mostly offset increases in research and development investment and marketing activities related to the company's expansion.
Our income from operations was $2 4 million compared with $3 4 million in Q1 2022.
Net income was $2 5 million compared with $2 9 million in Q1 'twenty to 'twenty two.
As of the end of March our balance sheet remains strong with $15 4 million cash on hand, an increase of 125% from a year earlier with solid financials and sound growth strategies. We are confident in our ability to grow both the core transmission business as well as our heavy division as we didn't.
Liver significant value for our shareholders.
And with that that concludes our prepared remarks I'm going to open the call up for questions. So operator. Please you may go ahead. Thank you. We will now begin the question and answer session. If you'd like to ask a question. Please press star one one telephone and wait for a name to be announced if you'd like to cancel request you can also press star one.
Ken.
There'll be a short silence Walt questions being collected.
First questions comes from the line of Theodore O'neill from Litchfield Hills Research. Please go ahead.
Good morning.
Congratulations on the good quarter.
Thank you.
So I think you were saying on the call, but as you experienced slower growth in China can you pivot your resort more resources towards heavy.
Yes, we can and we actually have been part of our focus right. Now is expanding the team are accelerating the expansion of our team and talent to be able to execute on our vision.
This is very important for us to be able to properly capitalize on the opportunities that we've been on covering so we have been investing further in that aspect of it and we.
Anticipate further investment as well also a little sooner than we had initially planned.
Both our marketing efforts, our sales and marketing efforts and an hour territory expansion.
Okay.
And you mentioned gross margin.
Improvement here from from product mix does that reflect on on anything permanent.
And then related to that do you have any pricing pressure in this in that channel.
A great question so.
A big portion of the AR product switchover towards our higher margin is actually based on the shift in the market towards lithium powered forklifts in particular.
Our highest margin yet most expensive transmission that we offer is our drivetrain units, specifically cater towards lithium powered forklifts and because on a global scale. Our Oems in the market is switching over to lithium that's been really driving our product and <unk>.
Right now, it's actually a premier products still I'm, just like with our traditional both hydraulic and that transmission to support the fossil fuel.
Forklifts, we've always been the premier product from a cost standpoint, but that has not driven away our clientele.
Thank you very much.
Given the questions one moment for the next question.
Okay.
The next question comes from the line of World now Johnny So from <unk> capital. Please go ahead.
Hi, good morning.
<unk>.
Raymond I know you were involved in on the heavy side with some pilot programs, United rentals, and so forth and you also presented at the I believe a trade show in New York recently I Wonder if you could just share with us some of the initial feedback to the extent that you can on some of these pilot programs as well as the trade shows have been attending thank you.
Absolutely so with our United rentals pilots they have truly been enjoying the equipment they've been getting a lot of positive feedback and their sales teams have always been excited to travel over to the location, where it store it to learn more about it and see how they can introduce that to their clientele and its gone so well.
Wow that's the.
The company United Rentals has both a requested an extension of our pilot and a additional products as well to demo right now they have R. G. E. O 5000 are along our largest and most popular unit.
But our G O 5000, we've been getting so much demand for.
For our product line for both.
Product demos and pilots that we actually are.
<unk> fling around our inventory to be able to properly meet that demand.
It's been a little more of a challenge than we anticipated logistically to supports this influx of requests for our products across both New Jersey, Maryland, and Delaware, and New York and Pennsylvania, just name a few.
But what we're doing now is instead of catering towards individuals singled demos, we are actually looking to initiate a campaign, where we do more a product demo days to invite multiple organizations at once.
With an opportunity to be able to drive experience our equipment to utilize it to move some material truly fill it out and coupled that with a stronger and smoother sales upper operation and process, we hope that'll be a more effective use.
Of our equipment to generate sales.
Okay, and maybe just a quick follow up I know, you're a 54000 square foot facility in Baltimore.
Eventually produce over 500 units annually I think you were targeting first units roll off in the second quarter. The Assembly line relatively similar is that still on track yet we are still on track for that are the first units will be.
M. A G E X 8000, which is our electric excavator and a G. O 5000 are our largest and most popular front later.
Great. Thank you Ramon and then by the way one of them was shot chin.
J J a.
Quick recovery. Thank you. Thank you very much thank you very much.
He will be glad to hear that thank you.
Thank you for the questions. The next question comes from the line of Graham Mattison from water Tower Research. Please go ahead.
Hi, good morning Robin.
A quick question on the quarter, so I mean that.
First quarter financial results and certainly the best quarter, you guys had in the last three.
So it looks like things are recovering in the Chinese market are you still seeing a quarter three and quarter four to be the banner quarters than you thought before and what gives you that confidence.
Yes, I do still see the third and fourth quarter being the strongest of the year for us and I still am optimistic that 2023 will be a banner year for our core component business that is primarily.
Due to the trend that I outlined last earnings call, where the zero Colette Covid policy lifting in China was truly devastating.
To the entire.
The region.
But particularly in the manufacturing sense and it caused a big.
GAAP.
In the production cycle for a lot of the Oems that at that time or even just trying to come.
Come back from shutdowns and aggressive.
Policies to try to control the pandemic.
So majority of our clients were has been overcoming a lot of bumps and bruises.
And their operations at the end of 2022, but the demand is there it's stronger than ever they are still revving up and ready to go and it's just part of their ramp up cycle. So.
So because of that it's not a fast process for them to get everything up and running so quickly but the flow is.
Beginning to normalize as we're seeing in our results and as they ramp up then our deliveries will execute and we've been ready to go.
Yeah.
Great.
And then coming out of the Covid Lockdowns do you see any changes in the competitive positioning and competitive landscape of the market for the transmission business.
Initially we did so during.
I'd say end of 2021 through mostly 2022.
We started to see a shift of our sales start to move outside of China.
Still a majority was in China, we're talking a switch from a few percent, let's say from about 96% at the beginning of 2022 two.
Ah 90, 192% are towards the middle.
So we were seeing some trends that's a lot of Oems are trying to shift their manufacturing outside of the country of China.
However, now that <unk>.
The manufacturers are starting to ramp up and I think that because of challenges that they experienced in the international markets, we still needed more time investment and expertise to ramp up their manufacturing opportunities, we're actually seeing it come right back.
So right now again, a majority of our sales are entirely to Chinese Oems are right around the 97% 90, 798% again.
Alright, Great and then one last question and.
And that's great, but the feedback that you're getting at the trade shows.
We're talking to people can you just walk us through the sort of process. There when you get the potential customer coming in and saying, they're really interested in it. What's the next step is that they come and do a demo or do you get a product on their site.
Give some sense around how long the sales cycle. It typically is in the industry.
Yep.
So these it's difficult to compare to industry average sales us cycle because for the heavy industrial machinery industry. It's actually just led by a very small handful of players with very strong brand recognition.
So besides let's say, it's almost similar to politics for certain classes of machinery, either go one brand or another brand.
Yes.
So because of that they have a much faster.
Sales process, and it's focused more on delivery and service.
Now for our side, we have to overcome the big challenge of educating and getting people comfortable with the brand new technology, but that actually is driving a lot of the interest that we see in the trade shows because people will double take every time when they see our machinery and then learned.
It's electric and then they they get a buzz with questions.
How long does that last how do you charge it.
Yeah.
How much does it cost and these are the questions that.
Really showcase the advantages and benefits of our product line. So it gets them very excited now our traditional sales process that we're pursuing.
Is from the interest that we received we would.
<unk> a demo on the client's site.
To get provide them with an opportunity to be able to utilize the vehicle see the power really envision how it can support their operations and.
And go from there, but the challenge was from a logistical standpoint, this was expensive and slow.
We were doing a multi day demos. So in many cases are an asset would be at that prospect site for a week plus.
While we have others waiting in the line.
For example, just last week, we were at the New York Fleet show in Queens, New York and from that show, we actually walked away with.
Over two dozen requests for Dan was Empire pilots from organizations around the New York City area.
So if we were to do it one by one we're finding or is this too slow. So we're changing it up and now we're actually looking to do more of a group demo in pilot for just a few hours or onsite demos for no longer than a day.
Got it and then as the one question that in as you're starting to roll more equipment off the line beginning in <unk> will that help that demo process, yes, yes. It will it will.
As it stands right now our entire fleet is dedicated to demos and we still have a pipeline right now of over 100 different organizations that are waiting for their turn for the vehicle.
There are machines I'm sorry.
Got it all right great I'll jump back in queue. Thank you very much.
Thank you for the questions.
Thank you for the questions.
Seeing no more questions in the queue, let me turn the call back to Mr. Wang for closing remarks.
So everyone I just wanted to thank everyone again for participating in our call and continuing to follow the progress of our company. We're on the path for great things, though it may not reflect in our stock value I still strongly believe that our company is.
Is.
Ah possesses significant value for our shareholders and the opportunity in the timing where that will become recognized is surely coming down the line. So I just want to thank everyone again for participating on our call I want to thank my team for continuing to work. So hard every day to deliver this value to our share.
Holders and I hope everyone has a fantastic rest of your day.
Thank you all again this concludes the cole you may now disconnect.
Yeah.
Okay.
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