Vicinity Motor Corp (VEV) 2020 Q1 法說會逐字稿

Greetings. And welcome to Grande West First Quarter 2020 Financial Results Conference call. (Operator Instructions)

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, John LaGourgue.

Thank you [Brad] Good morning. I'm pleased to welcome everyone here to our call this morning for our first quarter financial results. I've got the CEO William Trainer and CFO Dan Buckle here with myself. 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 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 a constitute a solicitation of any offer to purchase or subscribe for securities. The sole purpose of this call is strictly for information.

And with that, I will turn it over to Dan to review the financial results for the quarter.

Thanks, John. Good morning, everyone. I will spend some time going through some specific highlights for our 2019 first quarter results before William provides us with an update on the overall business, how we are dealing with current COVID-19 pandemic, and where things are headed for the remainder of 2020. For the sake of this call, I'll round figures to the nearest 1,000. 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 Q1 MD&A, which is available on SEDAR.

We have deliveries of 6 Vicinity buses during the first quarter of 2020 compared to 10 buses in Q1 of 2019. Bus, aftermarket parts and other revenue for the first quarter of 2020 was $3,967,000 compared to $5,733,000 in the first quarter of 2019. Our gross margin for these sales was [$92,000] or 2% of revenue for the current quarter compared to the gross margin of $1.340 million or 23% of revenue for Q1 of 2019. Gross margin for the current quarter was lower due to fixed cost allocations over a lower number of buses as well as the deliveries of our first Buy America buses. Our margins for Buy America buses will increase over time, similar to the evolution of the Canadian margins, [where] excluding overheads have increased nearly since 2017.

Adjusted EBITDA loss for the quarter was $1,278,000 compared to an adjusted EBITDA of $151,000 in Q1 of 2019. We had a net loss of $1,730,000 for the 3 months ended March 31, 2020, compared to a net loss of $680,000 from 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 Will to elaborate on this a bit more and to provide a corporate update and business overview.

Thank you, Dan, and good morning, everyone. It's only been a few weeks since our last call and the message is the same. We are executing on our plan to deliver a minimum of 150 buses this year. This should bring us into a very positive financial position by year-end, and we are on track. Our shop is operating at full capacity, preparing 34 buses for delivery acceptance to BC Transit. Our overseas operations facility is in full production. We do see light at the end of this corona crisis. Our sales teams have been notified that some of the RFP tenders that were to be released in Q1 are now getting the clearance to be issued. Many transit authorities were funded for their purchases prior to the crisis, and now will be placing orders for the replacement units. We do operate a new business model that utilizes global manufacturing practices, and this now has proven to be an advantage in our market space.

Our USA's manufacturing partner is still idle but has plans to reopen soon. Our supply team is currently able to provide us with the necessary components for production and aftermarket part sales. Grande West remains well positioned to serve our customers. Credit lines remain active, allowing the company the access to capital.

Overall, the North American market is opening for business, and we're excited to get our sales team back on the road. We have over 450 Vicinity buses in operations and now more than ever, our midsized Vicinity bus makes sense.

As communicated in our past call, the real excitement is with our new Vicinity LT. The first units are now rolling off the assembly line, and we should be able to start our across Canada tour in July. Customers are lining up to see this product. It is a winner. The cutaway market is 3x to 4x the size of the heavy-duty bus market. And our Vicinity LT is designed to dominate this market. It's vastly superior and priced competitively, and we see a runway of producing over 1,000 of these units per year. The heavy-duty transit buses can be maintained to operate for 20 years. The CAD/AVL has a limited life of 3 to 5 years and cannot economically be maintained to operate past this. Operators need to replace this vehicle and the Vicinity Light will be their choice. We are excited. Please check it out on our website. I'll now turn it over to John.

Thanks, Will. We'll be taking questions now. [Brad], can you open up the line?

(Operator Instructions)

Our first question today comes from Kurt Soost of Capital Find Partners.

Well, Will and John. My questions are centered around what I consider to be a game-changing announcement for the company, the $40 million order in the U.S. on February 7. Sort of a series of questions that I think are all together. What it took to crack such a significant order in the U.S.? Why the stock market is not understanding what the significance of this order is? It seems that the stock is down about 50% in market cap since you made this announcement. There seems to be some question around the confidence in how secure that order is. And what measures are the company taking to tell our story in the U.S.?

Well, thank you for the question. That order was worked on for a long period of time. We have a close relationship with the Alliance Bus Group, and to get an order of that size, a 92 bus order, is pretty significant. You need to have the trust in the customer, you've got to show that you can maintain the product, deliver the product and have a product that's going to operate for a very large operation like this. And we've passed all of that criteria. The customer that bought it, we're not naming names so who the customer is for competitive purposes and just [NBA], we can't announce who the customer is. But it is a very large operator, and I think that, that's really going to open up the market for us in that segment. Our bus is very competitively priced and operates extremely well. The customer is excited to get the product as the U.S. has been shut down fairly hard. The customer needs the product and is a leaning for it. I hope that answers most of the questions. Did I miss anything there, John?

Yes, that's on that side. And then, I guess, he's talking about looking for the exposure. In the past, we've attended quite a few U.S. days' conferences, investment conferences that have worked for us. And obviously, things have changed a little bit here. So we're just evaluating our best opportunities to meet with new potential investors and share the story currently.

Well, thank you very much. Very excited about the future of Grande West, especially in the U.S. market. Now that you've had a way of penetrating into a market that I know you've looked to break into for a long time, and surprised that the market hasn't recognized this incredible achievement in my opinion.

(Operator Instructions)

We have a question from [Jeff Cowell], a private investor.

Thanks for the update. I had a couple of questions. I'll go ahead with 1 and jump back into the queue for now. But on the finished goods component, I saw something in the financials, pertaining to $14.2 million in that category. My question is, how many buses does that represent? Have they already been sold, not delivered? And how many of those -- maybe you can talk a little bit about sort of what size buses those are? What types they are?

Yes. Thanks for the question, this is Dan here. So I don't want to get into the actual number of buses that we have in the finished goods inventory. We do expect to work our way through those buses during this year. We did have a slowdown a little bit when the COVID hit, particularly with some private customers that have -- definitely we will spread out when those will be delivered. And we do have a higher carrying cost with our U.S. production as well and the U.S. inventory. But yes, there is $14.2 million there, and when it's called a finished goods that for us is a bus that's drivable. It doesn't have filing in and it's a bus that's 100% complete. So there is still some work being completed on those buses. But as I say, our intention is to trough that to bus inventory.

Okay. Let me ask 1 more question then. Working capital, a little over $11 million, including just under $3 million in cash. Are there any kind of restrictions on that working capital? Do you feel that, that's a sufficient enough amount of resources to execute on your plan for the balance of this year?

Yes, that's a great question. And that's, I think a question that every company is asking during this pandemic. And it's -- I will say this that we have great support from our bank right now. And I have been looking pretty diligently with them, growing free cash flow, modeling just to ensure that we have the liquidity that we need. And they've been very -- a very good partner in helping to free up liquidity within the current credit facilities. But now the way we're looking at we're fanning out is that we do have the liquidity that's necessary right now. And it's -- right now, it's obviously interesting for every company.

But yes, definitely right now, we think we're really going to come out as a fairly strong company with the number of actual fixed orders that we have. Particularly, we're looking to -- a fairly large order right now that we'll be delivering fairly soon as Will alluded to. And then the 92 bus orders at the end of the year, but this definitely will help us all with liquidity.

Okay. So again, you're confident that you're in a good position right now that you don't have to -- I know you did a small debenture raise recently, but you feel that, that's sufficient for the foreseeable future, what you have on your availability?

Yes, right now. Yes.

And one more question. Can you talk some more about the Buy America? You indicated that you've delivered or you have 5 orders or maybe delivered 5, I'm not sure about that. And then something about receiving further orders for -- I believe it was 13 buses? I'm not sure if I got that correctly. I'm curious if you can sort of just clarify that as well as maybe talk about whether the -- these are the same customer? Or are there some new customers in those numbers? If you could just expand on that, I'd appreciate it.

Thanks, Jeff. I'll take the question. Yes. No, Buy America, we did say, we got 5 units delivered to customers in the U.S. We have a couple more that will -- that should go out shortly. The stall with the COVID in the manufacturing facility down in the U.S. has definitely slowed down our USA Buy America deliveries. You're correct in stating that we do have some more units, I think, it is approximately 13 units to deliver. But we need to get the U.S. up and functioning fully at this point in time.

So we are expected to deliver those units, but we need full operation up in the U.S. and it's -- we're in that Michigan area and Michigan is 1 of those farthest hit areas. The factory was just starting to open back up, which we're excited for and then along comes some other cases, and they had to shut down. So hopefully, within the next 30 days, we -- we're hoping to see some clarity on getting that up and running. But no, the first 5 units getting delivered is a major milestone for us, getting acceptance to the customers, getting the units actually to meet the criteria for the Buy America, and we're on track with the other ones. Hopefully, that answers your question.

(Operator Instructions)

There appears to be no additional questions at this time. I'd like to turn the call back to John LaGourgue for closing remarks.

Great. Thank you so much. I just would like to say thank you to everybody that joined us today in this call. If you have any further questions, you know where to find me and the team. And we'll be looking forward to seeing you for Q2.

Yes. Thank you very much.

Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.