GreenPower Motor Company Inc (GP) 2024 Q3 法說會逐字稿

Good day and welcome to the GreenPower Motor Company third quarter earnings conference call. (Operator Instructions) 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.

Thank you. This is Michael Sieffert, Chief Financial Officer of GreenPower Motor Company. I would like to welcome everyone to our call to discuss Green Power's results for the three and nine month periods ended December 31, 2023 and recent developments. I'm here today with our Chief Executive Officer, Fraser Atkinson, and our President, Brendan Riley.

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 provision under the Private Securities Litigation Reform Act of 1995 and applicable Canadian securities laws and 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 EDGAR.

In addition, these forward-looking statements relate to the date on which they are made. We anticipate subsequent events and developments may cause the company's views to change GreenPower. GreenPower disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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 filed on SEDAR and on EDGAR and is also located on our website at www.GreenPowerMotor.com.

I'll now pass the call over to Fraser Atkinson, GreenPower CEO, to discuss highlights for the quarter.

Good morning, and thank you for joining GreenPower's quarterly earnings call today. Our school bus group continued to make great strides in the third quarter. We achieved a significant milestone with the delivery of four Taipei Nano BEAST school buses that were the first all-electric purpose-built school buses manufactured in West Virginia.

Immediately following that delivery production of the Type D BEAST school bus began in the West Virginia plant, which in the immediate term, will fulfil current quarters for 38 beast school buses in West Virginia and prepare the production team for the men, the mixed manufacturing of BEAST'S and Nano BEAST at the facility to meet the projected demand.

Presently, we have live orders for 102 of our Type D the mega [BEAST. BEAST] and Type A Nano BEAST school buses, including our first order from our dealer in the state of New York. We also have a qualified sales pipeline for 164 GreenPower school buses.

On the commercial vehicle side of the business, we had deliveries this quarter that included 10 EV Star cab and chassis. The Canadian unit of a global retailer called up the vehicle for fulfilment of their orders to customers in the greater Toronto market. Having said that, our Commercial Vehicle Group with EV Star Cargo and EV Star passenger vehicles is several quarters behind the school bus group. In terms of its order book, we expect to achieve similar growth with live orders, purchase orders and a qualified sales pipeline by leveraging new and existing incentive programs as well as third party relationships.

We've had delays from customers with deliveries of our EV Star cab and chassis with inventory ready to go we are now working on scheduling deliveries for these. Collectively, these will create a robust commercial vehicle group, which combined with the school bus Group, will uniquely position GreenPower in the medium and heavy duty EV sector.

Over the past few years, we've maintained significant levels of finished goods inventory. We don't need to maintain these levels due to stocking orders from dealers who can provide demonstrations and ride and drives to their customers along with a reduced competitive landscape. This is allowing us to ship from fulfilling orders from inventory to manufacture in vehicles pursuant to customer order, how is GreenPower going to finance an increase in school bus orders and changes with our commercial vehicles instead of a traditional facility, we needed to secure a facility focused on production financing.

This morning, we announced that we've entered into a revolving loan agreement with Export Development, Canada or EDC for up to $5 million to fund all electric vehicle production for certain customer orders, allowing for multiple advances over a two-year period with repayments when vehicles are delivered, the revolving nature of the facility provides the flexibility to fund multiple orders and offers incremental capital in addition to GreenPower's existing $80 million operating line of credit and the guarantee of up to $5 million of standby letters of credit provided by EDC.

I'll now pass the call to Michael Sieffert for Green, our CFO, to discuss our financial results for the quarter.

Thank you, Fraser. For the three months ended December 31, 2023, GreenPower generated revenue of $8.2 million, primarily from the sale and lease 34 for all-electric vehicles, which included 13 Vista Nano BEAST school buses. This is a decline of 36.3% from the $12.8 million of revenue generated in the same quarter in the prior year from the sale of 101, all-electric vehicles, which included one Nano BEAST. Both quarters also included revenue from leases, part sales and truck bodies.

Gross profit was $1.4 million and gross profit margin was 16.6% compared to $2.2 million and a gross profit of 17.4% in the prior year's quarter. The margin declined in the current quarter was primarily due to an inventory write-down of $408,000, which was included in cost of sales. The gross profit margin for the quarter would have been 21.6% without the inventory write-down. GreenPower generated a loss for the quarter $4.6 million compared to a loss of $3.4 million in the same quarter of the prior year.

For the nine months ended December 31, 2023, power generated revenue of $34.2 million, primarily from the sale of 196 vehicles in the current period, which was an increase of 40.1% from revenue of $24.4 million in the first nine months of the prior year, which was from the sale of 176 vehicles. Gross profit was $5.4 million and gross profit margin was 15.7% in the nine months ended December 31, 2023, compared to $4.9 million at a gross profit margin of 20.1% in the same period of the prior year.

Inventory write-down of $408,000 included in the current year period reduced the gross profit margin by 1.2% from 16.9% to 15.7%. The power generated a loss for the nine month period of $11.7 million compared to a loss of $11.2 million in the same period of the prior year. As at December 31, 2023, GreenPower had cash of $4 million, which was an increase of $3.4 million since the beginning of the year. And working capital was $19.4 million. Improvements in the company's cash and available liquidity since March 31, 2023 were largely due to higher sales and due to a focus on collections, which led to lower levels of inventory and accounts receivable.

I would now like to turn the call over to GreenPower's President, Brendan Riley, to highlight some of the innovative achievements GreenPower reached during the quarter.

Thank you, Michael and good morning to you all. As Fraser mentioned, the continued strides being made by our school bus division. This and in our effort to help eliminate some highly polluting diesel school buses. We have been expanding our national efforts through the addition of new dealers and have hired more territory managers to support both our school bus end customers and dealerships alike.

A major technical accomplishment of this division during this quarter was the introduction of the new Mega BEAST. It's our newest all-electric purpose-built school bus. We launched the Type D Mega BEAST school bus to meet the demands from school districts requiring V2G and longer range. This 40 foot 90 passenger type, the zero-emission school bus delivers class-leading range of up to 300 miles on a single charge. This is all due to the 387 kilowatt hour battery pack.

It's V2G capabilities allow for more stable electric grid and community sustainability can areas which is deployed. I'm pleased to say that the market responded immediately to the introduction of our product and our California dealer model one just placed an order for 25 Mega BEAST for the Montebello school district. Just two weeks after we made the announcement of this product. Our commercial vehicle division has also produced a new innovative product during the quarter.

GreenPower delivered its first EV Star cargo, refrigerated van, you see school in California with dual batteries for increased resilience and continual [E-true] cooling for the cargo area. It has diamond plate floor and FDA spec interior area that is smooth. And allows for easier cleaning and sanitation for any of the refrigerated goods. In the next few months, we are expecting more innovation from this group from the cargo transportation space.

At this point, we would like to now open up the call to any questions.

Thank you. (Operator Instructions)

Greg Lewis, BTIG.

Yes, thank you and good morning, everybody, and thanks for taking my questions. Fraser I was hoping to talk a little bit more about West Virginia.. Congratulations on getting some of those orders out the door in terms of the production ramp, you mentioned the ability to go dual line of BEAST and the Nano. Any thoughts of how we should think about over the next few quarters, what those deliveries on that delivery production profile could look like and just as we think about that remaining on. So although the BEAST class D buses to West Virginia, is that order, do we need to get that order of the way before we start selling buses into New York? Or is that are we going to expect those gone? They'll be coming off the line concurrently?

Well, first of all, thanks for the quality. The the multifaceted questions are Greg. First off, the our initial thought was that we would really only be positioned to do one of the Type A or the Type C being the Mega BEAST to the BEAST in West Virginia, but we're now at a place that having gone through the full cycle with the Nano BEAST and well into the first tranche for the type the beast that we believe we can do both.

And we certainly have the capacity to manage our runs of bulk, but both of those vehicles, so that that has changed the dynamics in terms of our expectation or the throughput. We're going to need what a full cycle of the BEAST as we have done with the Nano BEAST as the first production run, you run into all of the various start up issues and so on in terms of each of those, right. And so that's all we're going through right now. And once we get this production line through and we're starting into the third and the fourth it runs, if you will, we'll have much better visibility on what that throughput would be. But we continue to add people and grow the production crew. So the capabilities are increasing by the month.

In terms of the priorities, we've got the orders from New York and certainly the expectation is orders from additional states on the East Coast. Is that all of those or substantially all of those will be fulfilled out of West Virginia and the ordering of that will depend on.

Yes, really what we're focused on in terms of the production line at that point in time. So for example, if we are the third or the fourth production line or run is Nano BEAST. And we have more natural base outside of the state of West Virginia, then that will end up being the mix of the deliveries and the sales so far? Yes, for that particular period.

Okay, great. And then I did have a question on inventory. I know it was good to see that come down and you made some comments in the prepared remarks around maybe a little bit more of the build to order on. Is there any kind of way we should be thinking or any kind of guidance you can give us and how you're thinking about inventory management and are we going to be maybe for the next couple of quarters, we're going to be able to kind of whittle that whittle down that some of that inventory on with, I guess, improving our cash conversion?

Well, there may be a timing issue where we end up with at the end of any particular month or by extension a quarter or year end, where we have a higher than expected finished goods simply because that's what's come off of the production line. And we haven't delivered and recognized revenue and sold it sitting in finished goods inventory.

But the plan is certainly over the next few quarters that we can continue to utilize existing finished goods level and drive that down while we're yes, moving from fulfilling customer orders from inventory to where we are into manufacturing production pursuant to customer orders. So that's the plan over the next few quarters. And the facility we announced this morning, as you know, is a big part of helping us transition or pivot to that approach.

Okay. Great. Thank you very much.

Craig Irwin, Roth MKM.

Good morning. First I'd like to say congratulations on the strong backlog and the progress with BEAST and the Nano BEAST and the Mega BEAST. So it's nice to see everything coming together.

I wanted to ask specifically, if you could talk about how you're working with your customers on charging infrastructure. There's a conversation out there about the installation of charging infrastructure being a pinch point for the acceptance of the school buses about the ability to actually site some of these fleets being restricted because of utility timelines for new infrastructure. And, you know, is there really maybe an advantage for the Nano BEAST as far as near term volumes and given the I given the complexities of adopting this technology?

Well, I'll let Brendan get into some of the details on your first question, but at a high level, the I'm glad you mentioned the word utility because it's not just the perception is that the availability of chargers or the hardware side of the charging infrastructure is the pinch point. It's really in large part and the utilities. And it's also the expectation of customers that are looking at data, our vehicle to grid solutions and a broader implementation than simply acquiring and running school buses are all electric school buses. So there's a lot of dynamics that are in play that have affected the timing on on that side of our deployment.

As far as the mix of products that we have brought to market is that you're quite right that the Type A. Nano BEAST, which is built on our EV Star platform and by extension utilizes a lot of the same parts and components, which provides for ease of deployment also is easier to deploy in terms of the infrastructure side as one can use a level two charger or a DC fast charge.

And so it really has a lot of flexibility in that if the vehicle can or the Type A Nano BEAST can be charged between a morning one in an afternoon run and still have sufficient battery capacity to do an evening event or activity run, then then we'll it's a lot easier to install that Level two charger, but if they they need to get a much faster type charge that we have, the flexibility of installing a Level three charger for that vehicle.

And on that, I'll turn it to Brendan, who can provide a little bit more visibility on the on your first question regarding charging infrastructure.

Thank you Craig for the very thoughtful question and good morning. This is Brendon Riley. The and part of our strategy was, of course, to have the three different battery sizes from the get-go. We have a car size, battery and EV Star Line of vehicles, which Nano BEAST is built on. That allows us to charge very easily at level two overnight charging the same kind of charging you have in your house, the same charging I had in my house and with the BEAST, again, we've got a 200 kilowatt hour battery.

You can do overnight charging on level two, but you're really pushing it a total limit. And then the Mega BEAST was really designed for those DC fast charging available and to have an interest in using the vehicle for all of its efforts to bring students to and from school and David G. So you've got really and have leftover to be meaningful to the grid and have some normal access to the battery storage on the vehicle.

Now that the marketplace has change more slowly than we hoped, but has changed due in part, there are a lot more companies able to install chargers, utilities are trying to get ahead of the curve, a lot better these days. And we do see improvements also including the availability of charging [EBSC]., which is electric vehicle support, equipment chargers and related equipment.

But the main thing we're seeing right now is we mentioned our pipeline, some of that pipeline, our orders that the customers are waiting to figure out how they're going to do charging. I think they've got the money and the ability to buy, but they're waiting until they have their charging figured out. So I think you're going to see kind of a fast uptake on charging capabilities, installation charging for the chargers. We are having more companies involved in that space and I think they're becoming more efficient and better at it and it's all in the chargers.

Thank you for that. So my second question is about working capital. You guys have done a really good job managing working capital and generated a decent amount of cash there over the last few quarters. Um, can you maybe describe for us how well matched the inventory of work-in-process or finished goods is to anticipated near term deliveries, would you expect working cap capital to be a positive contribution to cash? And in this current quarter?

I'll turn the details over to Michael. But at a high level, our work in process is fairly well aligned with the production flow that matches the fulfilment to customer orders as opposed to production to inventory, whereas we have been over the last few quarters and will continue over the next couple of quarters to realign our finished goods to match that. So you're at a high level of finished goods, need some work to go to fully align and the rest in terms of work in process and to some extent, our fit our parts supply that we sell separately as well to customers is better aligned with where we are right now with our strategy on manufacturing.

Yes, just to add a couple of very quick points. I think it really has been a focus of the Company over the past nine to 12 months to focus on inventory and bringing that down to a level that is better matched to sales. But I think the other thing to point out, Craig, is that with the facility that we announced this morning of $5 million, that earmarked for funding production. And so that is really focused on funding that inventory growth. And we anticipate, given our current order book that a lot of that will be used towards us electric school bus, our order book fulfilment.

Understood. So my last question, if I may. On gross margins in the quarter from the historic averages quite a bit higher. So is it fair for us to maybe consider, you know, the early production of some of these BEASTs and Nano BEAST units. To be, may be it may be a lower margin because of greater man hours to complete and other factors in there and that we could see those trend up over the next couple of quarters. As far as the overall gross margin levels. Is that fair?

That is very, very, yes,

yes. Go ahead, Brandon.

And that's very fair training. Getting employees up to speed of cost money. It's an investment and you're going to see the margins continually improve. Also, we're starting to see some stabilization of our costs as I go from materials, raw materials and so on. So we should see a good shrinkage in our costs and an increase in our GP.

As you know, in terms of extraordinary and I create the had the Michael and his team Section two commented on the one-time charges that we had made, which which in part relates to your previous question, that has where you're realigning our business and working capital and chain and changing the mix in terms of finished goods and work in process as we have incurred some one-time impairment costs on our inventory as we make that transition so that we expect is a short term proposition as we get into a continuous production flow where the inventory is aligned with all of that, then yes, that's going to help the margins as well.

Excellent. Well, congrats on the on the progress here. We look forward to watching the continued steps forward. Thanks

Thanks.

John Gay, Quiet Investor.

Good morning, guys, and congratulations on the continued progress I assessed by the numbers of vehicles sold that the workhorse is not in the mix by much if any, is that true? And if so, how do we look upon that? so call contracts? Hello?

Sorry, I cut out there. The Well, we don't we haven't pointed out specific metrics for our customers over the last number of quarters, and we did comment in our earlier remarks that while we have not had, yes, some cabin chassis deliveries. We are currently working on that schedule in terms of future deliveries for our cab chassis. So there's been a short-term pause and we expect to have that resume and yes, in the not-too-distant future.

Okay. Thank you.

Greg Lewis, BTIG.

Hey, thanks and good morning and sorry to hop back in. But what I did want to understand, I thought it'd probably be good to understand. So congrats on the $5 million revolver on further different hurdle rates, i.e., they could be achieved where you could come back and expand that maybe to $8 million on just as we kind of get through it as we get production going, I would think you'll probably outgrow that $5 million number. And Mike, any thoughts around that?

Well, first, I could either go ahead, Michael.

I was going to say first of all, we are very appreciative of the support from EDC. We think this is a very efficient and well-priced facility for the company. But to answer your question, yes, there certainly is the opportunity to revisit this in terms of size over time as our business grows and we can certainly look to and upsize this. But for the time being, we feel this is a good size for the company and will definitely be put to use and given the orders we have in place, Fraser, do you have any that?

Well, that's a good summary that lien out.

Understood. It just seems like pretty good attractive financing so yes, hitting that building out on that and then expanding that would obviously be super super positive for the company. Hi, guys. Thanks very much.

Thanks, Craig.

Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Fraser Atkinson for any closing remarks.

In closing, we delivered the first for Type A and Nano BEAST school buses manufactured in West Virginia to [Forrest Kerr] industrial districts in the state and started production of our larger Type DB school buses. We delivered 10 EV Star cab and chassis to the Canadian unit of a global retailer who will update the vehicles for fulfillment of orders to their customers in Toronto.

We delivered the first EV Star cargo refrigerated van to a California University, and we launched the Mega BEAST with twice the battery capacity of the BEAST, providing a range of up to 300 miles on a single charge we made significant progress while increasing our cash position by $3.3 million from the start of the fiscal year. Subsequent to the quarter, we secured $5 million of production financing from EDC, who have also guaranteed $5 million of standby letters of credit, which vastly improves our manufacturing capabilities. Thanks for your support. This concludes the third quarter earnings call for GreenPower.

And thank you, sir. The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect. Take care.