Q2 2023 Phoenix Motor Inc Earnings Call

Welcome to the second quarter 'twenty twenty-three Phoenix Motors, Inc. Earnings Conference call. My name is Brianna and I'll be your conference operator for today's call.

As a reminder, this call is.

All participants are in a listen only mode.

After the Speakers' remarks, there will be a question and answer session.

I would like to ask a question at this time, Please press star one.

Yeah.

It is now my pleasure to introduce Mark Hastings, Senior Vice President of corporate development and strategy and head of Investor Relations. Please go ahead.

Thank you Briana and welcome everyone to our second quarter 2023 earnings call.

I will be joined for the Q&A session. After the call today by our Chief Executive Officer.

For those of you who are new to our story.

It's motor cars is headquartered in Anaheim, California.

Our goal is to be a leader in sustainable and so you already mentioned medium duty transportation with a range of products available to our customers, including shuttle and transit buses school buses delivery vans and work trucks.

We market our medium duty vehicles to our brand Phoenix motor cars.

In addition, we offer a full range of EV Chargers in electric forklifts as well as telematics solutions for fleet EV infrastructure solutions and electric vehicle maintenance and service programs.

We are also currently developing a light duty commercial vehicle line, which will offer pickup trucks delivery band and Suvs, which will be marketed under our Edison future.

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

We were founded in 2003.

And our first trucks, nearly a decade ago and our vehicles have logged more than 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.

For those of you, who do not know CEO dentin and yet he has a long history of more than 20 years in the renewable and clean energy and transportation space.

He was a pioneer in the solar business is founded and led several New York stock Exchange and NASDAQ listed public companies, we will hear from Vincent later.

I would first like to say a few words about the progress we've made with our Gen four vehicles and other exciting company developments.

Next I will spend a couple of minutes discussing our second quarter financial results.

And then we'll wrap up by providing a high level overview of our strategic plans.

The Phoenix team has been working diligently to bring gen four to market efficiently and cost effectively and quickly with the start of production expected to be achieved this year.

Furthermore, we expect Gen for production to ramp fairly quickly to 20 to 25 units per month in the first half of next year.

We continue to expect Gen for it to be transformative for Phoenix.

Gen four will benefit from our asset light business model, which allows for lower costs and shorter production times than we have ever seen before.

We have designed a standardized production processes, which will enable us to ramp production quickly and reduce production hours.

In addition, gen four will serve as the bridge to Gen. Five which will include our own purpose built chassis. Once gen. Five is in production, we will have achieved chassis independence.

At a far lower cost per chassis than we are currently paying and with greater design flexibility.

We are also growing our retrofit solutions business, which enables our customers to take existing internal combustion engine vehicles off the road and retrofit them with clean burning zero emission drive systems, lowering the customer's carbon footprint and saving them thousands of dollars per vehicle per year.

And operating expenses.

We look forward to providing more detailed information regarding our progress in the coming quarters for not only our gen. Four and Gen. Five vehicles, but also a retrofit solutions business and many other exciting opportunities that we're pursuing.

So turning to the financials.

For the three months.

For the three months ended June 32023, our net revenues were $1 $2 million.

Compared to $1 5 million for the same period in 2022.

This represented a decrease of 23%.

Results in the quarter benefited from a significant increase in electric vehicle sales, which.

It resulted in a revenue increase of nearly 80%.

This increase was however, more than offset by a considerable decline in revenue from the sale of electric forklifts.

I would like to provide a little more context to the revenue decrease and like to point out that over half of our deliveries in the recent quarter were leases to a large repeat customer.

These leases being classified as vehicle sales than our total net revenues would have been about $1 million higher.

Or a total of $2 2 million, which would represent an increase of nearly 50% versus the year ago period.

Our cost of revenues in the second quarter was $1 $2 million essentially the same as in the second quarter of 2022.

Gross loss in the second quarter of this year was $61000 compared to gross profit of $325000 during the year ago quarter.

The decrease was driven by a decline in the gross margin from forklift sales.

Partially offset by an improvement in the gross margin generated by the sale of electric.

Vehicles.

SG&A expenses in the second quarter were $3 1 million compared with $2 3 million in the year ago quarter.

The increase was primarily due to increases in payroll expenses.

As a result of all the factors just described.

Net loss for the second quarter of 2023 was $3 2 million compared to a net loss of $2 million in the prior year period.

Now please allow me to recap what we do and highlight some of our strategies to increase shareholder value in the quarters and years ahead.

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 bans and work trucks and box trucks.

They are sold as complete vehicles as well as an electrified kit form for our customers to add to their truck body.

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

Municipalities.

Sports and school districts.

We serve over 50 commercial fleet customers to whom we have deployed over 125 shuttle buses and trucks with a combined distance traveled of more than 4 million miles.

We are nearing SLP or startup production for our fourth generation.

Interaction drive system over the next few months Gen. Four will see the first application of our asset light business model.

We feel that our asset light strategy is a differentiating characteristic for our company.

Our asset light model extends both upstream and downstream and our Gen four technology.

Upstream we have worked hard to cultivate partnerships and networks have 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 and more cost effectively and with higher quality than we could ever hope to do by building the entire team on the ground.

As an example, we have been working hard with high tea arguably the premier EV engineering firm in the world to bring Gen four to market in a matter of months not years.

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

We're partnering with certain customers as well as with third party manufacturing and assembly facilities in order to scale, our production faster and more capital efficiently and we could ever hope to accomplish on our own.

We'll 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 showcase facility and training center or <unk>.

Third party manufacturing partners will send their technicians to learn our standardized processes and procedures 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. We are also achieving lower production and bill of materials cost compared to our gen. III vehicles, utilizing standardized processes and procedures better designs for our components and sub assemblies and a stream.

Your line supply chain process.

As an example of our improved design architecture, our Gen. Three system had over 450 individual parts and components.

With our new Gen. Four vehicles, we have reduced that number to 70.

So to reiterate we've gone from 450 parts to 70 as a result of better front end development and design and a streamlined supply chain for our components and sub component assemblies.

As most of you know two of the major hurdles that we and other similarly positioned EDI manufacturers face are.

First security of battery supply.

Access to an adequate number of forge E $4 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 the ATL the world's largest EV battery maker for the long term procurement of K packs 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.

Sure.

This will help us cleared the second hurdle as we achieve chassis independence.

The development of our Gen. Five vehicle line, which will follow closely on the heels of S. O P. For Gen. Four will benefit from the work we've put into the development of Gen. Four.

The benefits of our asset light business model, our partnerships and supply and production agreements will transfer directly to gen. Five.

In addition, the components and sub.

And sub assemblies that we have developed for Gen. Four will be used in gen five as well.

These reasons, we view Gen four as the bridge to Gen five.

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

Two other positive 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, which will increase our ability 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. Bob vehicles in the coming quarters and to telling you more about our exciting plans for Edison future as well.

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

The Edison future pickup truck and delivery band debuted at the 2021 L. A auto show to much fanfare and product line.

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

A retrofit solution business is gaining traction and we are fielding inquiries from both existing and new potential customers as fleet on a scramble to find new innovative ways to modernize and lower the carbon footprint of their fleets are.

Our solutions offer a lower cost and quicker way for these operators to achieve their goals.

At our core Phoenix as an engineering focused company with patented technologies that address the market's need for the next generation of zero.

Zero emission vehicles.

We have constructed our company to be flexible and asset light.

We have talked a lot about our asset light model, which makes sense into the central to everything we do and something which we feel 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.

We are building a scalable business that endeavors to maximize.

Returns on shareholders' capital, while also deploying industry leading technology.

We put together a management team seasoned and established in the EV sector, putting us in an excellent position to execute and high growth zero emission commercial vehicle sector.

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

We now have a few minutes to answer your questions.

Rihanna.

Yeah, Mark at this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad.

Okay.

Okay.

Being no live questions I will turn the call back over to Mark.

Great well, we look forward to speaking with you again in coming quarters.

Do you have any questions in the meantime, please email me at IR at Phoenix, Motorcars Dot com.

And I will get right back to you we look forward to answering your questions and to.

Developing a program that creates shareholder value and building building an exciting business in the years ahead. Thank you so much.

Yes.

This will conclude today's conference call. Thank you for joining US you may now disconnect.

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