Greenland Technologies Holding Corp (GTEC) 2021 Q3 法說會逐字稿

Good day, ladies and gentlemen, thank you for standing by, and welcome to the Greenland Technologies third quarter of 2021 earnings conference call. Currently all participants are in listen-only mode. (Operator Instructions) As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time.

Now, I will turn the call over to Julia Qian, Managing Director of The Blueshirt Group Asia. Qian , please go ahead.

Thank you, operator, and hello, everyone. Welcome to Greenland Technologies' third quarter of 2021 earnings conference call. Joining us today are Mr. Raymond Wang, Chief Executive Officer' and Mr. Jing Jin, Chief Financial Officer.

We released earnings results early today. The press release is available on the company's IR website at ir.gtec-tech.com, as well as on 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 provision of the US Private Security 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 filing with the SEC. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. All the figures mentioned today during the conference call are in the US dollars.

With that, let me now turn the call over to our CEO, Mr. Raymond Wang. Go ahead, Mr. Wang.

Thank you very much, Julia. A good morning, everyone, and thank you for joining us today. Our global team continues to make great progress, and I wish to start by thanking everyone at Greenland for their hard work delivering another great quarter. The third quarter is seasonally the slowest quarter for our business. And this year, we faced additional challenges such as material shortages, freight delays, and logistics variability caused by continued impacts of the global pandemic.

Yet despite these challenges, we have once again set a new third-quarter company record -- a record by generating $23.1 million in gross revenue, which represents a 39.7% year-over-year growth. By reaching this milestone, we remain committed to our guidance of $90 million to $100 million year-end gross revenue, which would set a brand-new full-year company record here at Greenland.

And we remain optimistic with the growth of our core business. However, we are witnessing a cool down of the China market, with GDP falling from 18.3% in the first quarter, down to 4.9% by the third quarter with an expected full-year GDP average of around 6.8% for full year 2021. As our results demonstrate, this has not impacted our business as global warehousing and manufacturing growth and demand continues to remain strong but may impact the future performance of our core business, s hould the GDP trend continue to decline sharply or should it spread to the global markets in the upcoming quarters.

The expansion of our business to the global market with our new line of electric industrial vehicles are an important step in our strategy to mitigate risk and develop growth and long-term value for our shareholders. Our search for the location of our first assembly plant is still ongoing. The decision is currently between the states of Maryland, Virginia, and New Jersey with quality discussions in motion. As we settle on a location, I wish to remind everyone that the timeline of our assembly site does not delay our product launches and time lines, and we will continue to manufacture full vehicles in our existing facilities overseas and ship them to the United States for commercial sale.

In addition to the assembly site, we are in progress of developing experience centers to allow interested prospects to be able to learn, operate, and purchase our industrial vehicles. As an industry pioneer of electric industrial vehicles in a market dominated by heavy emission, combustion, and equipment, i t will be an important component in our sales strategy to offer first-hand experience for a buyer to truly understand and appreciate the capabilities, power, and benefits of our clean and sustainable vehicles.

Our first experience center will be located in New Jersey, where our forklifts will be well positioned to support the rapidly growing warehouse and manufacturing market, while also offering our loaders and excavators to the significant transportation and agriculture markets as well w ithin the state. We are currently working with interior designers and architects to offer an attractive and appealing site, and we hope to break [there] on a location in the first quarter of next year.

As for our vehicles, a fter brief shipping delay due to port congestion, the first batch of our GEF-series lithium-powered forklift have arrived on US soil as of last week and are available for commercial sale. And I am extremely happy to report that we've already placed forklift sales orders and have several [leads] in the sales process, showcasing strong demand for this product line. New units are already in production to continue to meet this demand as we begin to capture market share.

Furthermore, our first GEL-1800, our all-electric lithium-powered 1.8-ton-rated load wheeled front loader has also arrived this week. It's currently undergoing our post shipping Q&A process and will be available for demonstrations and industry events by next week, where we anticipate generating strong demand for the vehicle.

As for our GEX-8000, our all-electric lithium-powered 8-ton wheeled excavator, our first unit is fully assembled past all QA checks and is simply awaiting a vessel for shipment to the United States. So we're still on track and expect that to arrive on US soil by the end of this year to the beginning of January of 2022.

As I predicted during the last earnings call, the import challenges we have seen this year in the shipping and freight environments between China and the United States would begin to ease after October, and we've already begun to see this improvement.

Shipping costs are half of what they were a month ago and continue to fall, w hile container availability continues to rise. This will improve our vehicle margins, delivery times, and supply chain efficiency as we develop our foothold in the US market.

And I am very proud of what the Greenland team has accomplished this quarter and throughout the year. And I'm excited for the next phase of growth for the company as we launch our new product line of electric industrial vehicles while expanding the business into new global markets.

Despite the global challenges, we continue to surpass our milestones every quarter and demonstrate our capability to improve our financial health, demonstrate operational excellence as we grow the company, and create value for our shareholders.

Now with that, let me turn the call over to Mr. Jing to provide details into our third-quarter financial performance. JJ, go ahead.

Thank you, Raymond. And thank you, everyone, for joining our call today. I will now go over our key financial results for the third quarter of 2021. For the full details of our financial results, please refer to our earnings press release and later t he Form 10-K (inaudible) website.

Greenland's robust performance in the third quarter of 2021 demonstrates our strong competitivity in addressing the increasing demands for advanced transmission products and mitigate supply chain risks. The number of our transmission products sold increased 11.6% to 33,478 units from 29,985 units in the third quarter of 2020.

Clearly, by our robust sales of transmission units, we generate revenue of USD23.1 million during the quarter, representing a year-over-year growth of 39.7%. The increase was primarily due to the significant increase in our sale volume brought by the ever-growing demand this year and the increasing supply, despite global supply chain challenge. Additionally, our shift in the product mix towards higher value products also proved to be a right move and contribute to the year-over-year increase in revenues.

Cost of goods sold were USD18 million, up to 37.1% from the $13.1 million in the third quarter of 2020. The increase was primary due to the increased volume of the transmission products sold and the increase in raw material prices.

Compared to 39.7% of revenue growth, w e are pleased to obtain the positive operational leverage of 2.6%, even the material shortage and the supply chain disruptions. Along with the higher sale volume and the effective cost management, we continue to witness improvement in our profitability.

Gross profit was USD5.1 million, an increase of 50% from USD3.4 million in the third quarter of 2020. Our gross margin contributes an upward trend and the reach 22.1%, up to 150 basis points from 20.6% year over year, which was the result of meeting product mix towards products of higher value and sophistication such as hydraulic transmissions. We will also like to manage material costs through our strategic partnership and our capability to capture long-term growing demand.

The total operating expense was USD3 million, the increase of 162.8% from USD1.2 million in the third quarter of 2020. Our operating expense as a percentage of total revenue was 13.2%, up to 6.2% points compared to 7% in the third quarter of 2020; primarily due to the increasing sales, consultancy fee, and the research and development expenses over the year. Those expenses will calculate (inaudible) long-term business growth.

Selling expenses in the third quarter was USD0.5 million, an increase of 93.2% from the prior year. The general and administration expense was $1.2 million, up to 255.1% from the third quarter of 2020. Due to the G&A expense incurred from the new financing activity and the increased legal and consultancy fees associated with business planning and the project as Greenland expands operations.

Furthermore, we will further invest in higher value and more sophisticated product as well as electrified product such as a commercial EV. Research and development expense rose 143.2% year over year to USD1.4 million in the third quarter of 2020, which accounted for 6% of the total revenue.

Driven by rapid growth in revenue, o ur net income surged 172.5% year over year to $1.3 million in the third quarter. At the end of September, our cash -- restricted cash and the cash equivalents reached USD15.7 million compared to $20.5 million as of the end of the June.

Based on our business situation and the market condition, we maintain our revenue guidance range to between USD90 million and USD100 million, representing an increase of 35% to 49% year over year. With our sound financial position, we are competent to (inaudible) of electrifying commercial vehicles.

T hat conducts our prepared remarks. So let's now open the call for the questions. Operator, please go ahead.

(Operator Instructions) Rommel Dionisio, Aegis Capital.

Good morning. Thanks very much for taking my question. Congratulations on the quarter. Y ou guys -- I certainly appreciate your comments, Ray, about the moderating the growth, the deceleration growth in China market, but your volumes remain so strong and clearly that's coming from market share gains.

I wonder if you could just give us an update in terms of what's really driving that, o bviously, your strong new products and move towards the premium end of the market, it's really driven significant gains here over the last several quarters, but I wonder if you could just give us an update -- really that continued market share growth, which obviously you posted in third quarter as well? Thank you.

Oh, sorry about that -- struggling with the mute button there. Yeah, absolutely glad to. So, especially with the global constraints in the environment with material shortages and supply side challenges, t his is definitely a theme throughout the year that's impacting all businesses and all industries. However, from a treatment standpoint, it actually plays into the strengths of our company.

We have extremely robust manufacturing capabilities and a very established supply side with a fantastic team that has the tools and the capability and connections to be able to continue to meet the demands of our clients and be able to continue to provide our components our core business at scale. B ecause this is a position that our competitors cannot offer and maintain. It's actually helped contribute to our phenomenal quarterly sales performance.

And this also lends itself to our vehicle production and expansion efforts as we push into the United States market w ith this line. It's by tactically playing on the strengths and advantages of our company that we've developed throughout that time since 2006.

Thanks very much.

Jeffrey Campbell, Alliance Global.

Good morning, Raymond, and congratulations on the quarter. I just wanted to ask as the forklift effort is starting to really take root, have you designed the Greenland forklifts around a specific battery? Or can the forklifts work with units designed by a variety of manufacturers.

Thank you, Jeff, for the question. So our forklift is designed around the battery that is currently utilizing, in addition to our integrated drive train, which is a component that we produce specifically catered towards lithium-powered forklift that integrates the speed reduction gearbox, the driving axle, and the electric motor into a single unified package. So this forklift is designed primarily around our components, including the drivetrain and the battery itself.

Thank you.

(Operator Instructions) Jeffrey Campbell, Alliance Global.

So, Raymond, I thought to ask how you're targeting the upcoming demonstrations of the GEL-1800? It seems like that's a new market, but it seems like the low-hanging fruit would be places where work takes place indoors; seem like the charging would be easier. (inaudible) from the [ICs] would be negated.

Yes, you're absolutely right. We are going to market the GEL-1800 in industries that are well suited to support its charging needs. So this does include indoor facilities sensitive areas like urban settings, agriculture or property management and waste management centers, or even transportation hubs such as ports, airports, things of that nature. The key characteristic that all of these industries share is the equipment typically does not leave the properties.

So it would be simple for a business to install a charging -- a smart charging station to keep their vehicles operating, and that makes the logistics so much easier than having to procure and store diesel fuel. And from a marketing standpoint, these industries that we're targeting, we will be utilizing the GEL-1800 to attend trade shows for these specific sectors.

Great. Thank you.

Rommel Dionisio, Aegis Capital.

Yes, thanks for taking the follow-up on. You know, Ray, you talked about -- and Jing, you talked about some of the logistical challenges from a shipping standpoint. I just wondered, are you seeing any challenges from a component sourcing standpoint? Obviously, as you get more into the electric-vehicle business that's probably prior to components, I wonder if you're seeing any shortages or delays there on the supply chain for the components for those products? Thanks.

A great question. So just like the global environment is experiencing this year, y es, we are seeing material shortages, both from a raw material standpoint, but then even from a supply standpoint for our suppliers as well for our component business and for our EV business. However, one of the things that we are extremely proud of is the success and adaptation of our supply side teams that continue to work with our suppliers to be able to acquire and procure the components that we need to be able to deliver.

And that's how we were able to generate over 30,000 transmissions this year and be able to produce the electric vehicles that we have that have arrived, i n addition to the ones that we have in production.

Now with that said, of course, it is going to be a continued challenge as the world continues to struggle with supply side constraints. However, we've been very well positioned to meet that challenge thus far, and we plan to do so moving forward.

Great. Thank you.

Jeffrey Campbell, Alliance Global.

This will be my last question, and thanks for allowing the follow-up, Raymond. One thing I was curious about is you're saying that the forklifts are already getting off to a good sales start. Is it the role that having a built-in charger in your forklifts is playing in these early sales? It would seem like to me that particularly for a workplace that's new to EV forklifts, not having to go around with separate charges would be a tremendous value add.

Yeah, s o from the forklift standpoint, we've been graced with a number of various winds that power the sales for the sales of our forklifts. Sorry, I used the same word twice. What we've been seeing is that number one, the concept of lithium power has already been demonstrated in various industries such as passenger cars of Tesla. So already from a consumer and user standpoint, they already understand the capabilities of what lithium can do. And because there's very few offerings of lithium-powered forklifts currently in the United States, that's been very supportive from a sales standpoint.

Secondly, we are pushing and driving the localized service and parts network here in New Jersey and the East Coast starting off, to be able to support our clients, which is very important because as a company, maintaining the operation of your equipment and fleet is critical and downtime can be a challenge. So we are employing a strategy, where we are providing the right to repair our vehicles in the hands of our end consumers. So we are going to make it very simple for them to be able to acquire the parts they need and the education and knowledge to be able to repair their vehicles to keep them up and running.

Thirdly, from a supply side standpoint, right now, there's already a significant backlog for forklift sales, especially as warehousing and manufacturing continue to grow. And so location switchover from retail to warehousing, the demand for forklifts, the power, the backbone of that growth is in extremely high demand in the US market that's already been causing a significant backlog. So the fact that we have our products ready to go has been playing to the success of our sales strategy.

And the last piece that I wish to offer as well; because of the supply constraints, we have been seeing in the competitive landscape, price increases between 10% to even 30% for both propane and lead acid forklifts to account for the challenges and supply side. For us, as we are looking to launch our products, develop our brand, and start to capture market share, w e are currently maintaining our advertised price, which range from $24,000 to $34,000 depending on the model, which is currently a fantastic deal compared to competitor products.

So those four key elements are truly driving the success that we're seeing from a sales standpoint.

Thank you. Seeing no more questions in the queue. Let me turn the call back to Mr. Wang for closing remarks.

Thank you very much, operator and everyone, thank you so much for participating in today's call and for all of your support. We appreciate your interest and look forward to reporting on our next quarter's number and progress in the upcoming months. But we have a lot going on here at Greenland that we're truly excited about, and we can't wait to continue to share our progress.

Thank you. Ladies and gentlemen, that concludes our conference call for today. Thank you all for your participation. You may disconnect now.