Vicinity Motor Corp (VEV) 2021 Q1 法說會逐字稿

Greetings, and welcome to the Vicinity Motor Corp., previously Grande West Transportation Group, First Quarter 2021 Corporate Update Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

Before we begin the formal presentation, I'd like to remind everyone that statements made on today's call and including those regarding future financial results and industry prospects, are forward-looking and may be subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the call.

Please refer to the company's regulatory filings for a list of associated risks, and we would also refer you to the company's website for more supporting industry information.

I would now like to hand the call over to William Trainer, Founder and Chief Executive Officer of Vicinity Motor Corp. William, the floor is yours.

Thank you, operator, and good afternoon, everyone. I'm pleased to welcome you to today's First Quarter 2021 Corporate Update conference call.

The first quarter of 2021 was a blockbuster quarter by any measure, having delivered an incredible 67 buses compared to 6 in the same year ago quarter, and 20% more buses than we did in all of 2020 combined.

This is a true testament to the unraveled value we bring to our transit agency customers. We are leveraging our strong momentum to accelerate the launch of our next-generation electric EV products, including our breakthrough Vicinity Lightning EV and our upcoming Vicinity Bolt EV, as well as other exciting to be announced EV opportunities we're pursuing in the background. The land grab for EV market share is underway, and we're well positioned to gain traction through our long-lasting partnerships with Tier 1 North American transit agencies.

Our world-class purpose-built EV design includes world-class technology partners, allowing us to integrate proven battery systems from components from Tier 1 suppliers like BMW. The development and production of a midsized, low floor, fully electric transit bus with proven, readily available technology that can accommodate up to 4 wheelchair positions is a large step forward for our company in the increasingly sustainably minded transit market.

The Vicinity Lightning EV has received its first orders with further indications of interest in additional customer orders expected shortly. 25 Vicinity Lightning EV buses are currently in the production phase to meet near-term anticipated demand. Our operations are running very smoothly. And we continue to refine our strategy to meet our new level of demand. We have strengthened our management team with the addition of respected Canadian Transit leader, Manuel Achadinha, as Chief Operating Officer, and initiated the development of our Washington State manufacturing plant and U.S. headquarters, with operations expected to commence in Q1 2022.

In his new role, Mr. Achadinha will drive innovation and efficiency to maximize our operations and engineering teams. Position the build of our Washington manufacturing facility to support optimal output and scale and increase overall productivity in the organization as we are poised to scale rapidly.

We have a solid U.S. growth strategy in place as our manufacturing facility there is spooling up. In order to grow our sales in a significant U.S. market, we've entered into a strategic distribution agreement with the ABC Group of companies, a leading provider of Motor Corp. and transit equipment in North America to distribute our Vicinity heavy-duty vehicles throughout the United States. This partnership will allow us to scale operational in this critical growth market and is more significant than many may realize.

In addition, recently, the state of New Mexico and the state of Washington have selected Vicinity buses in their state-wide purchasing contracts. That gives the state transit agencies the right to purchase directly from the company's diverse bus portfolio. We expect to see similar contract wins in other U.S. states in months to come.

Along with these strategic shifts, we have recognized the need to change our corporate name to better reflect our increasingly focus on the commercialization of our industry-leading Vicinity buses, particularly our new electric lineup. The updated name will bring together our sales and marketing branding with our corporate identity to take us forward as a major player in the North American public transit market space.

Now with that, I'll turn it over to Dan to review the financial statements for the quarter ended March 31, 2021. Dan?

Thanks, William. Good afternoon, everyone. I will constrain my portion to a brief review of our financial results. A full breakdown is available in our regulatory filings and in the press release across the wire after market closed today.

Please note, I'll refer to adjusted EBITDA and other non-GAAP measures. For the calculation of adjusted EBITDA and other non-GAAP measures, please refer to the Q1 MD&A, which is available on SEDAR.

Revenue grew 588% to $27.3 million in the first quarter of 2021 as compared to $4 million in Q1 of 2020. The increased revenue was primarily driven by the delivery of 67 buses in the quarter as compared to 6 buses in the first quarter of 2020. Gross margin increased to $4.3 million or 15.9% of revenue in the first quarter of 2021 as compared to a gross margin of $100,000 or 2.3% of revenue in Q1 of 2020. The margins in the first quarter of 2021 were positively affected by sales mix where 2021 delivery is generally having higher expected margins than those realized in 2020.

Net income for the first quarter of 2021 increased to $2 million or $0.07 per share as compared to a net loss of $1.7 million or negative $0.07 per share in Q1 of 2020.

Adjusted EBITDA for the first quarter of 2021 increased to $2.6 million, as compared to adjusted EBITDA loss of $1.3 million in the first quarter of 2020.

Working capital as of March 31, 2021, totaled $20.8 million as compared to $16.7 million as of December 31, 2020. Working capital has increased due to strong demand for the company's buses with ongoing liquidity provided by a robust first quarter revenues.

Financially, our company is in a strong position. We have a strong balance sheet, regain in profitability and the fundamentals of our operations are very positive. We remain well positioned for future growth and profitability.

I'd like to pass it back to William to offer some closing remarks, after which we will begin our question-and-answer session.

Thank you, Dan. Looking ahead into 2021, we are incredibly well positioned to create long-term value for our shareholders. We are intensely focused on delivering upon our robust 2021 order book, completing our U.S. manufacturing plant and increasing orders for our innovative Vicinity Lightning EV.

I expect to see robust year-over-year growth throughout the remainder of 2021, empowering our drive to create a more sustainable public transit system. I look forward to providing our shareholders with further updates in the near-term as we launch new products, announced new transit agency customers and successfully execute upon our business plan.

I thank you all for calling in. And now I'd like to hand the call over to the operator to begin our question-and-answer session. Operator?

(Operator Instructions)

Today's first question comes from Chris Souther with B. Riley.

So heading into the year, you talked about delivering over $40 million in revenue before the second half of 2021. So it appear to be more than on track there. But is that $40 million still a target we should be thinking about for the first half? And how should we think about the overall order book and where it stands, positioning further?

Yeah, I'll take that. Dan, here. Thanks for the question, Chris. Yes, I would say that we're on track to break $40 million for the first half of 2020 -- for 2021, sorry. But for the entire year, we're -- we haven't really given much guidance out there right now. But what we are saying is that we expect to deliver our 150 buses for the year.

Got it. Okay. And then maybe just on the first quarter mix from a geographic standpoint of the 67 buses. If you could kind of walk us through that? And then were there any Lightning to that shift in the first quarter? I'd be curious to what the timing is of, kind of, those initial shipments you guys have talked about with a few different customers.

Yes. No, we had no Lightnings in the first quarter. Our Lightnings are planned for Q4 of 2021. We did have almost all of our buses being sold into the U.S. this year or for the first quarter, but we did have -- we had a mix of probably 4 different customers in the first quarter.

Okay. That's helpful. And then the new Lighting orders, the 10 orders you were talking about, where does the order book stand now for that product, if you can share that? And what geography or the new lighting orders coming from? I'd be curious.

Yes. We've seen increased demand and customers asking inquiring on it from both sides of the border, actually. But the Lightning, we have 25 in production as we speak right now. Out of that 25, 15 of them are already presold. 10 of them are going -- actually, all 15 of those are going to U.S. customer, 1 to a university, and 1 into our dealer network down there, the other 10.

We have a lot of interest right now on the Canadian side. We have a nice large tender outstanding on the Canadian side as well that we should be able to give some clarity in definitely probably within the next 30 to 60 days.

No, that's helpful. And then there really seems to that future EV products potentially in the pipeline here. Can you provide any color there? Are these larger buses, smaller buses or some other end markets that you guys are looking at? Or is that something we should kind of wait and see for more infill?

Yes. We'll news release everything as it comes out. We've got a mix of customer base all over the place inquiring on these units right now. But we'll news release as the orders come in, Chris.

Okay. That's helpful. And then maybe just update on the U.S. facility progress and timeline there, that would be great to get, kind of, a snapshot where we stand and the time lines that we're looking at as far as getting that up and running.

Yes. We're still targeting to have the building completed by the end of this year in Q4. And then we'll probably put it operational in Q1 of next year. We still got to outfit it with some of the equipment that's got to go in there and whatnot. But I think we should be on track to actually have the bill being completed by Q4. And then, like I say, to get it operational will be Q1 next year.

Okay. That's very helpful. And just maybe the last one here on the Exro Technologies partnership. Can you talk about what key components you guys are looking to develop with them to source from them? And, kind of, what the time line would be for them to be designed into the Lighting? Or are they already designed into that vehicle?

No. We're looking at their technology. We're always looking to be a leader on the technical side. We will get some of their product that we can test here probably before the end of this year.

We're very excited about it because it has the capability to add another 20% to 30% of reduced power from the motor and giving you that further distance on it. So we're excited to get the technology in one of our vehicles and finish up the testing on it.

(Operator Instructions)

Today's next question comes from Bruce Chan with Stifel.

Just few left from my side here. We talked a lot about the EV buses, obviously, but just want to get some insights into the order book for the CNG buses. As you roll out your U.S. footprint, maybe you can share some color on what demand is looking like for those units.

Yes. Thanks, Bruce. It's Will here. Yes, we've seen a lot of interest on the CNG. The CNG is what they consider to be a near 0 product for emissions. So it's a very, very nice product to really transition ourselves into the EV market.

We have big plans for the EV and taking a big share of the market share. But as these customers are transitioning, we think that the CNG bus is a perfect fit for a lot of them. And as you've seen recently, we've had considerable orders for CNG in the last 30 days.

And at what point, just in terms of cadence, do you expect the orders to, kind of, switch over from CNG towards EV? Is there a real substitution going on between those 2 products? Or is that not really the case?

Yes. No, it is. Not all transit authorities or shuttle operators, or universities are going to take the EV in Year 1. A lot of them are talking between a 5- and a 10-year swap over before they can get their full fleet.

You got to remember that some of these buses are built for for a 12-year lifespan. So they're not going to take those off the road until the life is actually ran out of them and replace them with the EVs. But we've seen a tremendous support for the EV business recently.

When we talk about tailwinds, you've got a lot of funding capability coming up both on the Canadian side and on the U.S. side and is all driven towards trying to clean the environment and get get sustainable EV buses out to the market.

Great. And then you gave an update on the timeline for the EV Lightning, which is very helpful. Any thoughts on time line for the Light-duty Gas Units?

Yes, same thing. The Light-duty Gas Units are running through their through their certifications and whatnot, we would feel that they'd be ready for marketing early next year. We are bidding tenders on them right now. That's a very large market. And we see some transition going on in there, too.

Awesome. And then just one last question here. You talked a little bit about gross margins and the difference year-over-year being one of mix. Can you just give us a little bit more color on what specifically is driving that high gross margin this time around?

Sure. It's Dan here. I would say that the margins that you're seeing now are more normalized than the margins we had last year. In 2020, we didn't sell a ton of buses, but the mix was largely low-margin customers in Canada.

We had a legacy customer with margins that hover around the 10% mark. That was the majority of our sales for 2020. So the sales that you're seeing right now are more in line with what we would normally be selling and what we are seeing in 2018, 2019. And depending on the mix of products, we can do even better than we're doing right now for Q1.

As we scale.

Yes. As we sell more units, and as you start to see a shift into other products as well, as you start to see a shift more into the CNG and the electric side as well.

Got it. And then just one quick follow-up to that, if I may. The customer there, the low-margin customer, was that mostly a function of legacy or size of the fleet or maybe both?

It's both of those. That was a legacy customer. That was the tail end of a 5-year contract that we had with that customer. So that contract is over now. So we will see definitely increased margins in the future.

Ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to Mr. Trainer for any final remarks.

Thank you, operator. I'd like to thank each of you for joining our earnings conference call. We look forward to continuing update -- giving you a continued update on our progress and growth.

If we are unable to answer any of your questions, please reach out to our IR from the MZ Group. They'd have to be more than happy to assist you with any other questions. Thank you all.

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.