Vicinity Motor Corp (VEV) 2020 Q3 法說會逐字稿

Greetings, and welcome to Grande West's Third Quarter 2020 Financial Results. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, John LaGourgue, Vice President of Corporate Development. Thank you. You may begin.

Thanks, Doug. Good morning, everyone. I'm really pleased to welcome you today for our call. Today, we'll be going over our financial results; a corporate update; and most importantly, our Vicinity Lightning EV launch. For those of you that are not on the webcast to see slides, you can go to vicinitybus.com. And there's a link to the presentation on the top right. There's a button there for you.

Today, I've got our CEO, William Trainer; our CFO, Dan Buckle; myself; and I'm also pleased to have our Chief Operating Officer, Jonathan Leskewich, here for the first time.

Before we get started, I need to notify our listeners of forward-looking statements. This call will contain forward-looking statements, which reflect the expectations of management regarding Grande West's future growth, results of operations, performance and business prospects and opportunities. The words believes, anticipates, plans, expects, intends, projects, estimates and similar expressions are intended to identify forward-looking statements. These forward-looking statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of this presentation. Such forward-looking statements are based on a number of material factors and assumptions. This call does not form part of any offer of securities or constitute a solicitation of any offer to purchase or subscribe for securities. The sole purpose of this call is strictly for information.

I will now turn it over to Dan to review the financial results for the quarter.

Thanks, John. Good morning, everyone. I'm going to quickly go over some specific financial highlights for the 2020 third quarter, before William provides us with an update on the overall business and where things are headed for the remainder of this year and into next year.

For the sake of this call, I'll round figures to the nearest thousands. I'll also refer to adjusted EBITDA and other non-GAAP measures. For the calculation of adjusted EBITDA and other non-GAAP measures, please refer to the Q3 MD&A, which is available on SEDAR.

For the third quarter of 2020, we had deliveries of 20 Vicinity buses compared to 0 buses delivered in Q3 of 2019. Bus aftermarket parts and other revenue for the third quarter of 2020 was $8,921,000 compared to $1,605,000 for the third quarter of 2019. Our gross margin for these sales was $565,000 or 6% of revenue for the current quarter compared to a negative gross margin of $41,000 or negative 2.5% of revenue for Q3 of 2019. Although these margins are higher than the previous year, they mainly represent sales to BC Transit, which is a legacy contract with a discounted price. These are the last sales in this contract, which ends in 2021.

Adjusted EBITDA loss for the quarter was $674,000 compared to adjusted EBITDA loss of $1,768,000 in Q3 of 2019. We had a net loss of $1,309,000 for the 3 months ended September 30, 2020, compared to a net loss of $2,111,000 in the comparative period of 2019. We were happy to announce that after a quarter end, we were able to renew our $20 million rolling credit facility, which has better terms and ensures our ongoing liquidity needs are met.

Our upcoming deliveries for the rest of this year and next year generally have higher expected margins than those we've realized so far in 2020. Product mix, pricing and margins before allocating any overheads are expected to be more in line with those realized in 2018 and 2019.

Financially, our company is in a great position right now. Our balance sheet is strong with very few long-term liabilities, and our liquidity is not an issue. Overall, the fundamentals of our operations are still very positive, and we remain positioned well for future growth and profitability.

Now I'll pass it along to Will to elaborate on this a bit more and to provide a corporate update and business overview.

Thank you, Dan. Good morning, everyone, and thanks for joining in. I'm happy to state that Grande West is gaining significant momentum, and substantial growth is about to happen. I can honestly say we have never before had such a clear and precise picture for the success of the company. For example, we have over $50 million in orders to deliver from now until the end of Q1 2021. Manufacturing is going well. We have strengthened and expanded our global supply chain, and it's working better than ever. Operations are running very smoothly. I'm pleased to announce we have successfully implemented our new Siemens PLM operating system. This is an operating engineering platform that brings Grande West to a Tier 1 OEM level. This system allows us to control projects and develop new product much like the newest Vicinity electric bus. We have just completed our capital raise, which was oversubscribed. This is impressive in itself.

So in saying that, I'd like to thank everyone who participated and for their continued support. This capital will allow Grande West to bring to market the very best EV in our market segment. It will also fund Grande West for our state of Washington manufacturing and much needed USA headquarters.

We have a solid U.S. strategy in place. In order to grow our sales in the U.S., we've ramped things up a bit. We'll expand our dealer network substantially and take a greater control of the sales and manufacturing processes in the U.S. This starts with our USA headquarters and our new manufacturing assembly facility in the state of Washington. We selected a location in Washington that is a 30-minute drive from our Langley location. It is central to the Bellingham International Airport. This will work well for customers' delivery and acceptances.

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environment government funding has remained strong and has actually increased in transit, both in Canada and in the U.S. Reason is possibly that the necessity for social distancing requires more buses. Both countries have approved emergency funded for transit for operations and new bus purchases.

In Canada, dedicated funding of $1.8 billion for public transit has been included in the safe restart program. Also, the Canadian government had provided a $1.5 billion fund to achieve the goal of having 5,000 new electric transit buses on the road by 2025.

In the U.S., the Federal government has awarded $25 billion in emergency funding grants to public transit systems. Also approximately $15 billion was announced as part of the Heroes Act, providing additional transit funding. And then, of course, there's a standard [vast] programs from the FDA.

Grande West is now positioned perfectly to accommodate all of these requirements for new bus funding. Part of our strategic plan has been to expand our product line by adding the Vicinity LT models to our existing product lineup. Our smaller LT buses will provide Grande West access to the high-end cut-a-way bus market segment. This market has over 20,000 buses in annual sales. Municipalities of all sizes across Canada and in the U.S., along with private operators in multiple sectors, are looking for a more robust, low-floor accessible bus to replace their cutaways. And due to the success of our HT model, which now has over 500 units operating successfully, we have a proven market acceptance.

Our Vicinity LT answers this new demand and should capture a great part of this market segment, both in gas and our new electric vehicle. Currently, our parts revenue is approximately $800,000 per quarter, and this as well as residual parts revenue coming from new products will naturally increase as the buses come off warranty.

And now the big excitement news is our new electric vehicle, the Vicinity Lightning. This is game-changing. We took our time, researched the market and the customers' need -- needs, then brought in the best of the industry-leading elite to help us design and bring to market a superior electric vehicle, thus the Vicinity Lightning. It's powered by BMW award-winning i3 technology supplied by LION Smart, and we're pleased to state that BMW is proud to have Grande West display their EV signature on the rear of our bus.

The engineering of this electric bus is provided by hofer powertrain of Germany, the same company who has worked to electrify vehicles for BMW; Porsche; Volkswagen; Audi; and one of my favorites, Lamborghini. This is a world-class company, and they have a proven track record. They are thrilled to have the opportunity to work with us, and we are equally excited about the future. Our Vicinity -- our electric Vicinity bus will be validated by world-class partners. The components in our bus were chosen for their automotive proven track records. This electric bus is a game changer for Grande West, and we're years ahead of the competition with this product. It has been projected that we could see sales of over 1,000 EVs in the near future.

And let's not forget, we also have the light gas model, the Vicinity Light. This model, although not near as sexy perhaps as the electric model, is still projected to produce orders bypassing that of the EV in certain communities.

So in ending, we're extremely excited and we're focused on our 2021 order book. I can state, we'll have some exciting news coming. I thank you all for calling in. And now I'll pass it on to John to introduce to you our Chief Operating Officer, Jonathan.

Thanks, Will. Yes, so we've got Jonathan Leskewich, who joined the company a bit over a year ago, maybe 1.5 years. And he's just done a tremendous job, and now he's been in the role of Chief Operating Officer. He was working with [Translake] for about 16 years before joining us. So he's got extensive experience in the transit space. So he's going to go through the product presentation. So if you're online, you'll see the slides. Go there. And if not, as I mentioned, you can see the PDF at vicinitybus.com, and then there's the presentation.

So with that, I'll turn it over to Jonathan for the presentation.

Hello. Good morning, everyone. I hope you've managed to click on the presentation. You can follow along. So I'm just on the first slide here. And I was thinking, it's been a -- it just seems like a couple of years ago that I was working on diesel buses, wondering if hybrids are really going to take off and when battery electrics were going to hit the market. And now I actually get today to present to you the Vicinity Lightning, which is not only a bus of Grande West but something that I got to codevelop as well.

Second page. So what am I going to talk about today? Well, let me talk about the design, customer benefits, the dimensions, technical specs, powertrain components, the batteries and of course, charging infrastructure. So pretty much everything you really want to know about this bus.

So what did Grande West do when we looked at the design? You heard that William hinted at what we were doing. And I can tell you one thing we didn't want to. We didn't want to take our Vicinity heavy-duty model and simply put batteries on the roof and stick an electric motor in the back. We wanted to do something more than that. We wanted to offer our customers something from the ground up. We strongly believe here that an EV bus should be designed from the start as an EV bus. So what does that really mean?

Well, we use commercially available components throughout. These are components that are sold in high volume, hundreds of thousands. This increases their reliability. We also took a step back and looked at our partners. We researched them, and we found great industry-leading partners that are at the top of their game.

Now we didn't just do that. We put the batteries in the floor. That was the keystone of the design, and we also switched over the wheels to 19.5-inch and switched to hydraulic disc brakes as well. This means that our customer focus, which is community shuttles, paratransit, universities, airports, are going to have a lot easier time maintaining and developing and working with the bus.

So what are some of the customer benefits? Well, the first one is this bus is full air-ride suspension. And what I mean by that is the axles were developed to be air ride. These are not axles that we switched over from spring suspension. They're full air ride. That means a lot smoother, pleasant ride for both the driver and the passengers.

We also developed the frame from the ground up. It means we were able to make it lighter. That gave us a really high passenger-to-weight capacity of 37 passengers. This also gives you a longer service life, simplified maintenance and just a great design overall.

Looking at the dimensions. I'm on Page 5 now for those following along. You can see that the bus is 28 feet long. You can have 4 Mobility Aid positions in it. Now it's very flexible because it is a low-full, low-floor design. So you can switch the Mobility Aid positions for forward-facing seats and you can also add a rear door, if you want.

So some of the highlights. Like I said before, it's available in a 1- or 2-door model. Now it also comes with a 6:1 entrance ramp and it's fully ADA compliant right through. We took the wheel wells and we pushed them out. Our smaller front axle enables us to give a wider space in the front of the bus. That means access to the passenger compartment is great.

A little bit on the batteries, I'm on Page 7 now, for those following along. The batteries are -- there's 3 in the floor, and they're between the front and rear axle, and there's 1 more battery in the back. This means the bus has great weight distribution and handling characteristics. Now these 4 batteries together will give you a range of about 200 kilometers, but you can also expand it to 300 kilometers.

So now here's where the design gets pretty smart. Like William mentioned, hofer designed our powertrain. So what does hofer do? Well, one of the keystones of their technology is they put all the main electronics in 1 single box. This simplifies the design, it simplifies the wire routing, it simplifies the maintenance on the box. Now this single box also powers our T-Drive Brusa motor at 295 horsepower.

Upfront, you have a Parker/Vansco Dash. This will be familiar to some of you. It provides nice, easy-to-read dial gauges for the driver when he's scooting around town and then also has an intuitive touchscreen that is easy to use as well. Now we coupled this with Parker Power Steering because Parker's -- their power steering unit is one of the most reliable in the industry, and I myself have had a lot of experience with it. Now the backbone of the bus actually is all Parker/Vansco electronics, too, which is very familiar to the North American market.

I'm on Page 10, for everyone following along. With the AC or the Climate Control of the bus, we also took a step back. Conventional buses typically have a rooftop unit that provides heating and cooling to the passenger seat compartment. Now that also provides heating and cooling to the driver, but the driver, he only gets cooling when the passenger compartment is cooling. Now I've driven a lot of buses myself, and this can be somewhat of a bother. So I wanted this bus to be different, and I wanted us to have heating and cooling like a passenger car or a shuttle. So what we did is we included a front box that has air conditioning as well. This means the driver has full control of its own temperature upfront.

The Brusa Motor is also another win for us. It's a midsized motor. It has high power-to-weight ratio density. And it's a higher RPM motor that gives 295 horsepower and 923-foot pounds of torque. This is a very efficient motor. We chose this with hofer because it was their recommendation for the size of our bus.

And like I said before, here's the brains of the bus. This is on Page 12. It's the hofer powerHUB. And it contains all the major electronics. Now that includes the onboard AC 22-kilowatt charger; includes the DC fast charging; and it even includes the 250 amp, 24-volt DC/DC converter. Now this unit is all weather and sealed, and it even includes the distribution in fuses. This just really makes the design very simple.

Page 13, you'll see a picture of the battery. Why do we choose BMW batteries? Well, because they've produced 500,000 EV vehicles worldwide. They can produce up to 70,000 batteries annually. That means we can get them. When people order the bus, we'll be able to get all the batteries we need. Also, there's safety features on every system level, and they're very compact and lightweight. Plus, this is completely sealed all-weather design. This is the type of battery you would want to use in the floor of the vehicle.

A little bit more detail on the batteries on Page 14. As you can see, it's a 42.2 kilowatts for the batteries. One of the highlights here is that these batteries are direct to refrigerant cooled and heated. That means there's no glycol hoses or any sort of mess to deal with there. That also makes the batteries a lot more compact and lightweight.

So you might be wondering how fast the Vicinity Lightning can charge. While Level 2 charging is 5.5 to 6 hours, now that's with the onboard AC chargers, so that requires very little infrastructure or you can use a podium style DC fast charger for 2.5 to 3 hours of charging. Now both charging methods are done with the CCS 1 combo charger, which is the industry standard across North America. We just wanted to keep it really simple.

We're very proud of our partners, hofer, LION Smart and of course, the batteries by BMW. And I was glad to be able to give this presentation to all of you today. Thank you.

Thanks a lot, Jonathan. So with that, I think we'll open up for Q&A. Doug?

Thank you. (Operator Instructions) It appears that we have no questions in the queue today. I'd like to hand the call back to management for closing remarks.

All right. Well, I'd just like to thank everybody for joining us here today. I think in the scheme of things, if you look at where we're going as a company, the new vehicle is really going to shake up the market, I believe. I also think that our imminent backlog of $50 million here in the next few months is quite compelling, especially if you look at comparables out there in the market. Will, would you like to close up with anything?

Yes. Well, thank you, everybody, for joining in today. As you can feel, we're very excited about what we have on the goal here, and we thank you all.

Thanks, Doug.

Thank you.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.