Q1 2025 GreenPower Motor Co Inc Earnings Call
Speaker Change: [music]
Speaker Change: [inaudible]
Speaker Change: and Paul Kuntz.
Speaker Change: Good day, and welcome to the Green Power Motor Company First Quarter Earnings and Update on Green Power Sales Pipeline conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2.
Speaker Change: Please note this event is being recorded. I would now like to turn the conference over to Michael Sieffert, Chief Financial Officer. Please go ahead.
Speaker Change: Thank you. This is Michael Sieffert, the Chief Financial Officer of Green Power Motor Company.
Speaker Change: I would like to welcome everyone to our call to discuss Green Power's financial results for the period ended June 30, 2024, and provide an update on Green Power's sales pipeline.
Speaker Change: I'm here today with our Chief Executive Officer, Fraser Atkinson, and our President, Brendan Riley.
Speaker Change: 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 Harbour provision under the Private Securities Litigation Reform Act of 1995 and applicable Canadian securities laws.
Speaker Change: Actual results may differ materially from those indicated by these four looking statements as a result of various important factors including those discussed in our quarterly interim results and MD&A filed on CDAR and on ITGAR.
Speaker Change: In addition, these forward-looking statements relate to the date on which they're made.
Speaker Change: We anticipate that subsequent events and developments may cause the company's views to change. Green Power disclaims any intention to obligate or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Speaker Change: Also, during the course of today's call, we may refer to certain non-IFRS financial measures. Reconciliation of these non-IFRS measures can be found in our MD&A.
Speaker Change: For additional information on the results of operations for the period ended June 30, 2024, you can also access our audited financial statements and MD&A posted on Green Power's website as well as on www.cdar.com or filed on EDGAR.
Speaker Change: I'll now pass the call over to Green Power CEO, Fraser Atkinson.
Fraser Atkinson: Thanks, Michael, and good morning, everyone.
Fraser Atkinson: I'm pleased to report that since our most recent quarter, green power has turned an important corner.
Speaker Change: Our most recent quarter is non-indicative of where our business is positioned today.
Speaker Change: While uncertainty over state regulations and federal incentives combined with other global economic factors slowed some EV markets earlier this year,
Speaker Change: The increase in orders, end quote, green power is now experiencing shows that the demand for all electric vehicles is still there and that the market is rebounding with significant growth potential.
Speaker Change: We have the inventory and the production to meet the increased demand. Consequently, we see a step up in our revenue from our most recent quarter through each of the remaining quarters this fiscal year.
Speaker Change: Earlier today, we announced deliveries of our all-electric Purpose-Built school buses in California, with follow-on deliveries over the next few weeks in California and Oregon.
Speaker Change: This activity complements our recent announcement on sales on the East Coast. Brendan will discuss our activities in the school bus sector in more detail later on this call.
Brendan Riley: We have seen a significant uptick in the past few months with our sales pipeline for Green Power's all-electric commercial vehicles.
Brendan Riley: including 28 specialty vehicles for deployment in Canada which would utilize our current inventory of EV star cabin chassis.
Brendan Riley: This represents inventory we have in our books, generating cash flow requiring little additional cash outflow, markedly improving our liquidity.
Brendan Riley: We've also received orders for EV-Star passenger vans in a variety of seating configurations and EV-Star Plus.
Brendan Riley: cargo class vehicles consisting of more than 20 vehicles. We anticipate delivering most of these vehicles by the end of this calendar year.
Brendan Riley: Many of these orders and quotes have follow-on orders providing exponential growth with our sales pipeline.
Brendan Riley: Now, an observation on our competitive landscape. Our go-to-market strategy consists of the horizontal market for medium-duty class four vehicles where we have our own all-electric cabin chassis.
Brendan Riley: passenger vans, shuttle buses, and a range of commercial vehicles, as well as the vertical market for school buses with our Class 4 Type A all-electric NanoBeast school bus and our heavy-duty Class 8 Type D Beast all-electric school bus.
Brendan Riley: Over the past year, there has been an interesting trend in that the number of EV OEMs with medium-duty platform electric offerings
Brendan Riley: have been dwindling as measured by the eligible vehicles listed on California's H-VIP incentive program.
Brendan Riley: There are fewer Class 4 Type A school buses, fewer Class 4 passenger vans, and fewer Class 4 commercial vehicles listed on the program.
Brendan Riley: We believe this trend will continue over the short term.
Speaker Change: California has introduced legislation requiring roughly 10% of new purchases of class 4 vehicles by fleet operators to be zero emission, creating demand for Green Power's EV Star line of commercial vehicles.
Speaker Change: This requirement will increase to 75% over the next 10 years, amounting to a multi-billion dollar annual market opportunity.
Speaker Change: We believe this increased demand will flip the supply-demand in favor of EV OEMs within the medium-duty Class IV space, and that we are starting to see the early days of this new dynamic.
Speaker Change: I'll now hand it over to Brendan for discussion on operations.
Brendan Riley: Thank you, Fraser, and good morning everyone on the call.
Speaker Change: Two years ago this month, Green Power took possession of its manufacturing facility in West Virginia.
Brendan Riley: That decision to manufacture there was based on the need to increase the company's production capacity well beyond California to the East Coast.
Brendan Riley: today.
Brendan Riley: The Pipeline of Green Power All-Electric Purpose-Built Zero-Emission School Bus Orders
Brendan Riley: has more than 30 vehicles slated for delivery in California and Oregon over the next 90 to 120 days.
Brendan Riley: These orders complement
Brendan Riley: The 88 school buses previously announced for the East Coast.
Brendan Riley: So the East-West strategy of manufacturing and delivering products nationwide, as the company envisioned two years ago when the West Virginia plant was added, is coming to fruition as planned.
Brendan Riley: Today, according to the listings under the California HVAC program, Green Power is the only school bus OEM that is manufactured in all electric
Brendan Riley: Purpose-Built Class 4 Type A School Bus
Brendan Riley: and an all-electric Type D school bus.
Speaker Change: Well that has significant impact on incentives in California.
Speaker Change: is also notable from a market standpoint nationwide.
Speaker Change: Combining this fact with our unique production capabilities on both the East and West Coasts, Green Power is perfectly poised to take full advantage of the mandates which have been implemented in many states.
Speaker Change: and take advantage of the more than $8 billion in monies from state and federal level.
Speaker Change: All of which are impacting the transition to and deployment of all electric school buses.
Speaker Change: During the quarter, Green Power has called upon
Speaker Change: has been called upon to service an EV product expert.
Speaker Change: and Thought Leader in the National Discussion on EB School Bus Deployment.
Speaker Change: During STN-Indy and STN-Reno, I personally had the opportunity to make the presentations on the contemporary materials and methods and systems and structures.
Speaker Change: for EB School Bus Safety.
Speaker Change: In Reno, Green Power was also asked to participate.
Speaker Change: in a discussion on preparing for the 2030
Speaker Change: mandates and the increased regulations coming on diesel with a focus on how to prepare for the change via electric products. We also participated in a roadmap conference at the WRI, that's the World Resource Institute.
Speaker Change: looking at the barriers to 100% zero mission school bus deployment and how to overcome them.
Speaker Change: Later today, leading national organization impacting policy related to the deployment of zero-emission vehicles in general, ZETA, that's the Zero Mission Transportation Association, has asked me to participate in a discussion on the economic impact and workforce implications of the EV industry.
Speaker Change: Before closing, I want to amplify Fraser's comments on the commercial side of Green Power's business.
Speaker Change: Much like the East-West production strategy on school bus production.
Speaker Change: that makes us more nimble.
Speaker Change: and more able to respond to market demands and changes.
Speaker Change: our combining effort, excuse me, our combining offering of school buses.
Speaker Change: and commercial vehicles provide the flexibility to weather the conditions Fraser mentioned having occurred in early 2024.
Speaker Change: We have filled our pipeline, increased our quotes.
Speaker Change: that have seen an increase in commercial demand.
Speaker Change: Just yesterday I was at a ride and drive in Oakland.
Speaker Change: with CARB, CalSTART, and our dealers.
Speaker Change: where I noticed a much higher interest level compared to earlier in the year.
Speaker Change: Lastly...
Speaker Change: As it relates to our commercial products, during the quarter we introduced a very modern refrigerated box that utilizes our EVstar cabin chassis.
Speaker Change: This refrigerated box is called the EVstar Reefer X.
Speaker Change: It's a modern design and look that complements the modern EV platform.
Speaker Change: The EV Star Reaper X is purpose-built, fully customized with a lighter body to allow for increased payload, runs off of high voltage, and is considered one of the most energy efficient and is now becoming one of the more desirable EV refrigerated boxes.
Speaker Change: Designed to serve amid the last-mile refrigerated delivery and catering applications, the EV Star Reefer X moves goods that need to be temperature-controlled, such as frozen foods, flours, pharmaceuticals.
Speaker Change: all doing that Mizzou remission method.
Speaker Change: The vehicle's body features one interior wall structure and allows for seamless sanitation, consistent insulation,
Speaker Change: throughout the entire vehicle and a much longer life.
Speaker Change: Now I would like to return the call to Michael Sieffert.
Brendan Riley: Thank you, Brendan.
Michael Sieffert: For the three months ended June 30, 2024, Green Power generated revenue of $3 million with a cost of sales of $2.8 million, generating a gross profit of approximately $222,000.
Speaker Change: Our lower-than-anticipated gross profit margin this quarter was primarily related to overhead costs incurred on the limited throughput in West Virginia and from lower realized gross profit margins on sales of prior model year inventory.
Speaker Change: We expect the gross profit margins will increase when throughput improves in our West Virginia facility Which will improve the allocation of a plant overhead on a per unit basis
Speaker Change: Turning to our liquidity, we raised gross proceeds of $2.3 million before fees and expenses in a unit offering during the quarter.
Speaker Change: And we continue to utilize our operating line of credit and revolving credit facility with EDC to fund investments in working capital.
Speaker Change: We ended the quarter with nearly $2 million in available liquidity on the EDC revolving credit facility, and we've continued to utilize the facility to push forward production for existing sales contracts since quarter end. This facility continues to be an important source of capital for our company.
Speaker Change: We finished the quarter with nearly $14 million in working capital, including $33.7 million in inventory, of which $13.4 million was finished goods.
Speaker Change: many of the opportunities we're currently working on.
Speaker Change: involved.
Speaker Change: Sales of existing finished goods inventory, which only require very limited additional capital outlays.
Speaker Change: Finally, we've been fortunate to have the continued support from Green Power's directors and officers, who have provided important and much-needed financial support for our company over time.
Speaker Change: I'll now pass the call back to Fraser for some final remarks.
Fraser Atkinson: Michael will open the lines for the Q&A.
Fraser Atkinson: And I'll provide a summary at the end.
Fraser Atkinson: Thank you.
Fraser Atkinson: operator.
Michael Sieffert: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.
Michael Sieffert: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time we will pause momentarily to assemble our roster.
Michael Sieffert: and Paul Kuntz.
Michael Sieffert: Thank you.
Michael Sieffert: Thank you.
Michael Sieffert: [inaudible]
Speaker Change: and Paul Kuntz.
Speaker Change: [inaudible]
Speaker Change: Our first question comes from Craig Irwin of Roth Capital Partners. Go ahead, please.
Craig Irwin: Good morning and thanks for taking my questions.
Craig Irwin: I wanted to maybe unpack a little bit the
Craig Irwin: the Book of Orders in hand. So in your press release today, you said 28 cabin chassis that are going into Canada.
Speaker Change: I guess 20 EVstar cargo plus and passenger vans.
Speaker Change: and then 30 school buses for California and Oregon.
Speaker Change: With what's going on in West Virginia, different areas of the country, you know, my intuition leads me to think you've got an order book quite a bit bigger than the 78 units that you're calling out directly. Can you maybe update us on a gross number or, you know, a range that you think is fair based on, you know, orders in hand or commitments in hand that might be matched with EPA vouchers or HFIP funding?
Speaker Change: Well, that's a multi-part question, so let's start at the top there for you, Craig. On the specialty vehicles and the passenger vans, in many of those we have follow-on orders.
Speaker Change: We've been working with them to place the initial order and then there's a follow-on order for a like or similar number of vehicles.
Speaker Change: and the follow-ons don't have the...
Speaker Change: You know the full set of approvals that would you know where we would put it at the top of ourselves pipeline so it would be
Speaker Change: lower down in terms of the probability as we would need to deliver the first tranche and then move on to the second phase or, in even one case, the third phase for orders that a particular customer is looking for.
Speaker Change: So the attributes in the second and third tranche aren't quite the same as the first one, but you know, the magnitude of the follow-on is, you know, is greater than what we're looking at in the first tranche for the specialty vehicles and the passenger vans.
Speaker Change: Understood, understood. So, you know, to ask the question simply, you called out some specific numbers in your release.
Speaker Change: Is it credible to say that there's a much broader pipeline than the 78 units you identify? That, you know, we could have a multiple of that in interest?
Speaker Change: And that's what I was saying. Okay. Excellent. Excellent. Thank you for that clarification.
Speaker Change: So then, you know
Speaker Change: This is a lumpy business, quarter-to-quarter, you know, deliveries are difficult to predict, very difficult. Can you maybe talk us through what you would see as a natural margin now for your products?
Speaker Change: Does this differ dramatically between
Speaker Change: Cabin Chassis, and the EV Star.
Speaker Change: Cargo Plus, and then the school buses. Do we see sort of, you know, richer products on the gross margin side and products that are?
Speaker Change: that are less profitable, how should we think about, you know, potential gross margin progression later on this year?
Speaker Change: Well, traditionally our...
Speaker Change: are gross profit as being in the high teens, 16, 17, 18% on a quarterly basis.
Speaker Change: I think Michael articulated the impact of the current quarter that when you have just a handful of vehicles going through a large facility as we have in West Virginia.
Michael Sieffert: You know the allocation of the plant overhead
Speaker Change: has a limited number of vehicles that absorb that overhead. So as we increase throughput, which we are doing right now, we're currently working through the 37 school bus orders in West Virginia.
Speaker Change: facility looks a whole lot busier today than it does three, four months ago. So consequently that we see that as having a favorable impact on that allocation which improves or increases our gross profit over time.
Speaker Change: Understood, thank you. Then last question for me, in your in your remarks you indicated that you know some of the units you expect to deliver can be served out of inventory.
Speaker Change: that there's a number of vehicles that are finished in inventory. Can you update us on the finished vehicles in inventory? What type of vehicles are these? Can you maybe share the number of the different types?
Speaker Change: I'll let, I'll let, I'll provide the over overarching comment, the first part of your question. I'll let Michael.
Speaker Change: speak to the metrics within the finished goods inventory, but for those vehicles, like a specialty vehicle, like a box truck that we would build on our EVstar cabin chassis or
Speaker Change: similar type vehicle or even the reefer that that Brendan talked about that was recently launched. All of those are built on our own EVstar cabin chassis.
Speaker Change: and we have an inventory of those.
Speaker Change: Consequently, you know, that inventory is fully paid so that
Speaker Change: allows us to crystallize or utilize the inventory and generate cash flow with little or no cash outflow.
Speaker Change: Understood
Speaker Change: So this is Mike here. Hi Craig. So in terms of our finished goods inventory, the largest category right now would be our EVstar cabin chassis, although that's a category that is depleting quite rapidly, which is a positive.
Speaker Change: thing due to the sales that we've seen over the last
Speaker Change: over the last little while. So we anticipate that that's going to be declining over time. We also have
Speaker Change: approximately or over 40 EV stars of various types. That does include second-hand vehicles that we have repossessed or have been returned after lease.
Speaker Change: And then the other major categories would be our nanobeasts. We have over 10 of those. And we have received additional beasts since quarter end. So at quarter end, we didn't have...
Speaker Change: Many beasts available for sale, but since quarter-end we have received additional beasts that we're now in the process of delivering.
Speaker Change: Excellent. Well, it's good to hear the customers are showing increased enthusiasm. I'll go ahead and hop back in the queue. Thank you.
Craig Irwin: Thanks, Craig.
Craig Irwin: Our next question comes from Tate Sullivan of Maxim Group. Go ahead, please.
Tate Sullivan: Hi, thank you. Brendan, did I hear you mention more state subsidies in West Virginia as production increases or have you already received those subsidies or have to apply for any? Can you cover that landscape, please?
Speaker Change: I'm sorry, Kate, I couldn't clearly hear your question.
Speaker Change: Do you have available subsidies in West Virginia as production increases?
Speaker Change: We do. We have numerous subsidies in West Virginia. On top of subsidies, we enjoy with our
Speaker Change: with the state for training employees where the state actually covers.
Speaker Change: cost of new hires that go through the Green Power and Bridge Valley training program.
Speaker Change: We have tax subsidies, we have multiple subsidies in West Virginia that we'll be able to continue to take advantage of over the next few years.
Speaker Change: Up to and including the fact that our building in West Virginia is essentially a rent-to-own option where the state has purchased the building and we are buying it through the lease payments.
Speaker Change: Have you already received actual checks from the government, or does that come as you increase production, or is it offsets to taxes? How do most of those work?
Speaker Change: That would be a question for Michael Sieffert to answer, I believe, on whether we've received the physical checks or if they're credits.
Speaker Change: end customer for a lot of the units that we're selling. So we are clearly selling to school districts, but the state itself has supported those sales and it has also supported, very importantly, some pilot projects which have helped us.
Speaker Change: develop and improve our vehicles as well as, you know, prove their ability to operate in some of the challenging conditions that exist there. So you have mountainous terrain, you have winter conditions, and so all of that has been helpful. And as Brendan mentioned, we do have a
Brendan Riley: lease back on a facility there, which again, that is the facility that we've
Speaker Change: And then finally, we have received support from the state in the form of training our workforce. And so, you know, we're employing, I think, currently over 40 individuals at that point.
Speaker Change: And the state has been supporting, importantly, some important training for those staff.
Speaker Change: We would characterize this as a great relationship and one that I think works well, you know, certainly for our company but, you know, hopefully the state sees benefit in terms of employment that we're offering there.
Speaker Change: We have received checks.
Speaker Change: With the 80 orders on the East Coast, are all of those school buses destined for West Virginia or have you increased your state footprint for school buses since starting production in the West Virginia facility?
Speaker Change: I believe that includes some orders that will be going into New York.
Speaker Change: Correct.
Speaker Change: And then last for me, Michael, did you say $2 million of availability at the end of the quarter on the EDC facility? That's correct. Approximately $2 million. I mean, it's on our balance sheet of slightly, a drawn balance of slightly over $3 million a quarter.
Speaker Change: and it's a 5-9 facility.
Speaker Change: Thank you all.
Speaker Change: Thank you.
Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to Fraser Atkinson, Chief Executive Officer, for any closing remarks.
Fraser Atkinson: Thank you. To recap, we have seen a significant uptick in the past few months with our sales pipeline for Green Power's all-electric school buses, EVstar passenger vans, and specialty vehicles, which utilize our current inventory of EVstar cabin chassis.
Fraser Atkinson: The latter represent the inventory we have in our books, generating cash flow requiring little additional cash outflow, markedly improving our liquidity.
Fraser Atkinson: Many of these orders and quotes have follow-on orders providing exponential growth with our cells' pipeline.
Fraser Atkinson: We have the inventory and the production to meet the increased demand. Consequently, we see a step up in our revenue from our most recent quarter through each of the remaining quarters this fiscal year.
Speaker Change: Thank you all for your support, and this ends today's call.
Speaker Change: and Paul Kuntz.
Speaker Change: and Michael McCarty. Thank you. Thank you. Thank you. Thank you.
Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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