Vicinity Motor Corp (VEV) 2020 Q2 法說會逐字稿

Greetings, and welcome to the Grande West second 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. Thank you. You may begin.

Thanks, Doug. Good morning. I'm pleased to welcome everyone to our 2020 second quarter financial results. Today, we have William Trainer, our CEO; Dan Buckle, our CFO; and myself here for the call. 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 -- oh, I already said that. 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 turn it over to Dan to review the financial results for the quarter.

Thanks, John. Good morning to everyone. I will spend some time going through some specific highlights for our 2020 second quarter results before William provides us with an update on our overall business, how we are dealing with the current COVID-19 pandemic and where things are headed for the remainder of 2020. For the sake of this call, I will round figures to the nearest thousand. I will also make reference to adjusted EBITDA and other non-GAAP measures. For the calculation of adjusted EBITDA and other non-GAAP measures, please refer to the Q2 MD&A, which is available on SEDAR.

We had deliveries of 23 Vicinity buses during the second quarter of 2020 compared to 25 buses in Q2 of 2019. Bus aftermarket parts and other revenue for the second quarter of 2020 was $8,702,000 compared $11,878,000 in the second quarter of 2019. Our gross margin for these sales was $497,000 or 6% of revenue for the current quarter compared to a gross margin of $2,341,000 or 20% of revenue for Q2 of 2019. Gross margin in the current quarter was lower due to product mix for specific customers and a loss of $275,000 that was recorded on the sale of 8 buses sold to a customer for marketing and liquidity purposes at the start of the COVID-19 pandemic.

Our gross margin for Q2 of 2020 would have been 12% of revenue, excluding this sale.

Adjusted EBITDA loss for the quarter was $478,000 compared to an adjusted EBITDA of $348,000 in Q2 of 2019. Excluding the loss on the sale of 8 buses, our adjusted EBITDA loss would have been $203,000 for the current quarter. We had a net loss of $795,000 for the 3 months ended June 30, 2020, compared to a net loss of $434,000 in the comparative period of 2019. 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 William to elaborate on this a bit more and to provide a corporate update and business overview.

Thank you, Dan. Good morning, everyone. Overall, our 2020 message remains the same. We are executing on our plan to deliver a minimum of 150 buses this year, barring any unforeseen difficulties that we cannot predict. This should bring us in a very positive financial position by year-end. And we are on track. We've also taken every precaution we can to ensure a COVID-free and safe workplace as our shop is operating at full capacity. We are delivering buses weekly. BC Transit is accepting the 34 buses from their previous orders. Everything is going well right now. We're also processing other Canadian orders in our Langley location for deliveries this year.

Our overseas production facility is in operation, and we are in production of approximately 100 buses. We can process this through our Langley facility, and this will produce the 150 deliveries that we're talking about for this year. We are very much back-end loaded for these deliveries and Q4 will be our biggest quarter.

Although the pandemic has slowed down some of our planned deliveries in 2020, we fully expect to have all -- we fully expect to have delivered all of the buses on our balance sheet by Q2 of 2021. This allows for a greatly increased cash position. And builds a stronger relationship with our credit facilities, allowing us to move forward without financial constraints as our order book grows.

We do see light at the end of the corona crisis. Many transit authorities have now received their funding that was promised prior to the crisis and have now started releasing our RFPs. Our sales and bid teams are responding to these tenders, and we should see awards shortly. We do operate a lean business model that utilizes global manufacturing practices, this has now proven to be an advantage in our market space. Our USA manufacturing facility is still idle as we need to send our Canadian staffing down to assist in the build process, and with the border still closed, we have not been able to regain full manufacturing at this time. We do have customers in the USA waiting for their orders.

Our supply chain is currently able to provide us with necessary components for production and aftermarket part sales. Grande West remains well positioned to serve its customers.

We see our aftermarket part sales growing quarter-to-quarter, with margins averaging 30% to 40%. Credit lines remain active, allowing the company access to capital. Liquidity is good. Overall, the North American market is opening for business, and we're excited to see our sales teams back on the road. We have over 450 Vicinity buses in operation now. And now more than ever, our Vicinity midsized bus makes sense.

Many customers have expressed interest in 100% electric-powered Vicinity buses. We are pleased to announce that we have finalized an electric propulsion system to power our buses, and we should see our first electric Vicinity in by Q1 2021. We are also working on closing the first order from a customer for these vehicles.

As stated in our past call, the new Vicinity Light has been produced and is getting ready for shipment to our Langley office. This bus is a winner. Our Vicinity Light is designed to dominate a market with over 20,000 annual sales. We see a runway of over 1,000 per year for this vehicle. We are focused on our 2021 order book, and we should start to see some announcements shortly.

I thank you all for calling in. And I'll now pass it back to John to open up for any questions you may have.

Thanks. Well, we'll get going here. Doug, could you open us up for questions, please?

(Operator Instructions) Our first question comes from the line of Donald Ross with Leede Jones Gable.

Could you expand a little bit more on the liquidity question, your available funds, which I think were tight earlier in the year, and just as to how you have sold previously held inventory to help that situation. Could you elaborate, please?

Sure. Dan?

Sure. Yes. So as with everybody out there, when the pandemic hit, our first concern was liquidity. We worked directly with our bank right away to ensure that we could handle anything that came at us due to the crisis. So we performed a weekly cash flow with the bank and looked at ways to free up room in our credit facility. At this point in time, we're fine from a liquidity perspective. We don't see any issues for the remainder of the year and getting through our large orders. And once we've delivered on everything for this year, we'll be in a positive cash position moving forward with pretty good operational results. The buses that we did sell, the 8 buses, we originally thought that we had some customers, some private customers, those orders were delayed. So we quickly found a new home for those buses. It is a new customer for us. So it was great from a marketing perspective to get our buses in the door. Obviously, the new customer, which we enjoy having, and it brings new parts business to us and hopefully, future orders. At the time, it was definitely I think the right decision to make, just to ensure that we did have enough liquidity in an unknown situation.

Could you comment further on inventory and how progress is to getting that down to sustainable levels?

Absolutely. It's -- inventory looks high right now on the balance sheet. We did have -- we definitely did have some delays in orders as soon as the pandemic hit. Nobody seemed to be willing to take, especially from the private side, nobody wanted to be taking inventory buses at that time when they weren't sure of their own liquidity. So we did see some delays in some orders. But what we see right now, as William mentioned before, is by the end of Q2 2021, we should have no inventory left on our books, and we're talking about just bus inventory. We'll still obviously have some parts inventory and some demos, but our inventory level should be quite a bit lower. And the inventory level that you see right now for -- at the end of Q2, that also includes our bus order that we're delivering right now. So it is inflated a little bit.

Our next question comes from the line of Kurt Soost with Capital Fund Partners.

Will and John, I just wanted to see if you guys could expand a little bit on how you're progressing with the electric bus market? Obviously, I'm seeing lots of action and lots of talk about electric buses in North America. And just wanted to get your view on the state of the market in North America?

Well, thank you, Kurt. Yes, we have had a lot more inquiries and interest in our 100% electric propulsion for the Vicinity lineup. And as I stated earlier there, we have finalized a propulsion system for our Vicinity buses. And we're moving forward with actually producing some of them right now. And we should have our first electric Vicinity in by Q1 of 2021. I am sure that we're going to see some news releases come out on some of the partnerships and whatnot that we've put together, I can't elaborate on that at this point. But we should have some nice news releases coming out on some of the partnerships that we put together. We're really, really excited about the propulsion system that we have in this vehicle.

Yes. And Kurt, John here. I think another addition to that is like this is going to be -- the first electric vehicle we're building is on our LT size. So basically that 28-foot. So the price point is going to be extremely competitive. And it's really -- as Will talked about, it's really a winner for the market. So we're really excited about getting that into the market here.

I appreciate that. You mentioned that you're receiving or the transit authorities have now received their money and they're putting in their RFPs. Are you seeing specific requests for electric buses in those RFPs?

We see some, yes. The ones that I was talking about prior here was, we had quite a bit of tenders that were coming out, which are still for the diesel models that were in the works prior to the COVID pandemic and now they're fine again in the release. So it's been a while, but we're excited about it. That's what's building our order book for 2021.

Excited to learn more about the electric bus.

Thanks, Kurt.

Thanks, Kurt.

(Operator Instructions) There are no further questions in the queue. I'd like to hand the call back to management for closing remarks.

Great. Well, thanks to everyone for joining us here this morning. I think we're building on a second half of 2020 that's going to be extremely exciting and really serve the balance sheet here. So we look forward to talking to you next time. Thank you.

Thanks, guys.

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.