Vicinity Motor Corp (VEV) 2022 Q1 法說會逐字稿

Good afternoon, and welcome to the Vicinity Motor Corp. First Quarter 2022 Earnings Call. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to the Chief Executive Officer, William Trainer. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone. I'm pleased to welcome you to today's first quarter 2022 corporate update conference call.

The first quarter of 2022 was highlighted not only by continued order momentum, but by strategic expansion of our North American distribution network with the addition of several exciting new dealers who placed orders for dozen of new vehicles, helping to drive penetration of our growing portfolio of all electric vehicles.

Our backlog for 2022 delivery grew to over USD 90 million, much of which is for electric vehicles, reflecting a rapid transition in product mix to meet the ever-changing needs of our transit customers. Our high-demand electric truck and electric shuttle bus market continued to expand to fill the gaps for periods of lower transit bus deliveries, with the first quarter seeing new orders for over 250 VMC 1200 EV trucks from Canadian automotive dealers.

We fortified our balance sheet in the first quarter, fully funding our nearly complete Ferndale, Washington facility. The focus of this facility is Buy America-compliant production, allowing us to further penetrate the U.S. market with an American-built offering. This raise, supplemented by our cash position and our CAD 20 million line of credit, has positioned us to significantly ramp up deliveries to our growing dealer base in the second half of 2022.

To penetrate for the robust growth ahead, we have taken steps to shore up our supply chain in this time of uncertainty. Chiefly, we have secured a 600-vehicle battery supply agreement with Proterra, a leading EV battery systems provider, supplementing our supply from various other providers such as BMW and Electrovaya. These steps are taken with the goal of eliminating any single point of failure within our battery supply chain, a common pain point that many EV manufacturers are facing.

That being said, we naturally are not immune to the pressures facing automotive suppliers today, and some level of near-term headwinds exist. In addition, to support our continued innovation efforts, as we further electrify our portfolio, we have appointed global automotive engineering executive, Dennis Gore, as Vice President of Engineering, bringing 35-plus years of experience from companies like Gillig Bus, Zero Motorcycles, Honda and Mitsubishi Motors, among others. His experience will prove absolutely invaluable as we grow our all-electric product offering.

On the investor relations front, we have remained extremely active in presenting at several leading automotive industry and investor conferences nationally, including the Advanced Clean Transportation Expo, which we just finished this past week, Planet MicroCap Showcase 2022, Winter Wonderland Best Ideas Conference, Stifel 2022 Transportation & Logistics Conference and the Canaccord Carbon & Energy Transition Conference.

While broader market, particularly in the EV space, has seen pressure in the recent market downturn, the fundamentals of our operations are extremely positive.

Now with that, I'll turn it over to Dan to review the financial results for our quarter ended March 31, 2022. Dan?

Thanks, William. Good morning, everyone. I will constrain my portion to a brief review of our financial results. Full breakdown is available in our regulatory filings and then the press release that crossed the wire after market closed today.

Please note that I will 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. In addition, all figures are in U.S. dollars unless otherwise stated.

Revenue decreased to $3.2 million in the first quarter of 2022 as compared to $21.5 million in the same year-ago quarter. The decrease in revenue is primarily driven by 6 deliveries versus 67 deliveries in the previous period.

Gross margin in the quarter ended March 31, 2022, decreased to $200,000, or 7% of revenue, as compared to $3.4 million or 16% of revenue in 2021. Gross margins were affected by product mix and the low volume of buses delivered. Shipping difficulties and global supply chain disruptions in the availability of chassis for our VMC Optimal products and certain bus components has delayed a large portion of expected deliveries during the end of 2021 and has continued into 2022.

Cash used in operating activities in the first quarter of 2022 totaled $5.1 million as compared to cash provided by operating activities of $2.9 million in the first quarter of 2021.

Net loss in the quarter ended March 31, 2022, was $2.9 million or $0.08 per share as compared to a net income of $1.6 million or $0.05 per share in the first quarter of 2021.

Adjusted EBITDA loss for the first quarter of 2022 was $2.1 million as compared to adjusted EBITDA of $2.1 million in the first quarter of 2021.

Cash and cash equivalents as of March 31, 2022, totaled $11 million as compared to $4.4 million as of December 31, 2021. During the quarter, the Company fortified its balance sheet through a $12 million financing to fund the Ferndale, Washington, facility in addition to being awarded a CAD 2.6 million non-repayable grant from a Canadian government foundation.

Our company is in a strong position. We have a strong balance sheet, are well positioned to executive and the fundamentals of our operations are very positive. However, in response to current supply chain challenges, we are revising our guidance for fiscal year 2022, which had been previously announced November 12, 2021.

Revenue guidance is being revised to a range of USD 70 million to USD 90 million. And EBITDA guidance is being revised to a range of USD 3 million to USD 5 million. Lack of availability of parts in the supply chain, shipping conditions overseas and availability of chassis for the VMC Optimal products have caused delays to our production timelines and externally affected our ability to meet previously stated figures.

Now 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, we will finalize foundation-building efforts as we prepare for significant growth in the second half to deliver upon our USD 90 million backlog, including the continued expansion of our dealer network, strengthening of our supply chain and ramp-up of production.

We continue to believe we are incredibly well positioned to create long-term value for our shareholders as we empower our customers to create more sustainable public transportation systems. I look forward to providing additional updates in the months to come.

And now, I'd like to hand it back to the operator to begin our question-and-answer period. Operator?

(Operator Instructions) Our first question comes from Chris Souther with B. Riley.

Maybe just on the lower guide here. Are you seeing any cancellations, or should we just think about the bulk of the activity shifting to really 2023? And maybe just framing the overall backlog, where do we stand as far as visibility between the 2022 guide and what's in store for 2023? And if you can do that by product line, it could be helpful for folks as well.

Okay. Dan here. Just quickly on this, so we're not seeing canceled orders right now. This is not demand-driven at all. This is supply-driven. What we're seeing is difficulty in obtaining some parts or, in some cases, we're waiting on some other parts as well, some new parts.

But from a product line perspective, we have no problems with our -- very few problems with our diesel and CNG buses. We're seeing it on the EV side of our business right now, specifically the VMC Optimal where we've cut our projections to about 1/3 of what we had before our projections. We're also the -- VMC Lightning, we've also cut back projections there for this year, and those -- some of those we're expecting into next year as well.

Got it. Okay. Maybe just on some of the key choke points here. As far as supply chain, you mentioned, the chassis availability for the Optimal. You've added Proterra for battery supplies. So it sounds like you're feeling better on that front. But just can you walk through what the other components that are big challenges right now? And as you relate it to this upcoming from China or other factors, I think, would be helpful.

Yes. It's Will here. Yes, what we're seeing is really what the industry has been seeing and why there has been a tremendous amount of redoing your guidance here. We see chip-related products that has been giving the bulk of the problems, and that's pretty much rampant throughout the industry. Anything that has a computer chip in it is seeing some kind of delay. We've tried to mitigate that by buying volumes and trying to hold more stock. But we still see some related issues there.

Okay. And then just last one, timing on -- can you provide any timing update on Ferndale? What needs to happen still when it comes to hitting production? And how should we think about CapEx shaping up for the remainder of the year here?

On the building itself, we're in good shape. The roof is on, the sides are on. We're actually seeing components going inside the building now. We have the paint booth installed. I think the crane is scheduled to go in here shortly. Parts are on site. So we don't see any real slowdown in getting the building completed.

We still will see the building looking like a finished building here coming up in the next month or 2. And then, of course, you've got to outfit it. But we pave in June. So you got to have everything pretty much wrapped up before you start paving, and that's where we see ourselves.

Our next question comes from Poe Fratt with Alliance Global Partners.

Yes. If you wouldn't mind just talking about the cadence for the rest of the year. If you look at the rest of your guidance, you're putting out -- it's EBITDA in the $5 million to $7 million range and then revenue in the $65 million to $85 million range roughly. Can you just talk about what kind of delivery expectations that are associated with those numbers?

Sure. Thanks, Poe. Dan here. Our guidance is actually $70 million to $90 million for revenue, and it's $3 million to $5 million for EBITDA. So Q1 was obviously pretty light in deliveries. Q2, we'll see more deliveries for Q2. We'll be closer to neutral for EBITDA for Q2. And then the bulk of our earnings will be in the last half of the year.

Great. Yes. And Dan, I was incorporating the first quarter actuals and taking -- netting them out of guidance to look at the rest of the year.

Okay, sorry, sorry.

No, that's all right. And then when you look at your expanded distribution network, anything additional that we should be expecting over the near term to fill out the distribution network? Or is that going to take a little bit of show me from the standpoint of, okay, we have Ferndale up and running, and we can actually deliver products to get people over the finish line there?

Yes. What we see coming up here is we've got a fairly healthy backlog right now. We'll be building that backlog out into 2023. And that's where we really see the Ferndale facility. We'll get the product delivered out of Ferndale this year. But we've got some inspections coming up here.

I think it's in June or early July, we've got the California team coming up to take a look at it for some bids we have on the go there to make sure that the facility is up to the standards that they're looking at, which will meet the standards there. And then we should see a pretty good order intake starting to come in for that 2023. 2023, the growth is going to be coming out of that factory.

Okay. And so when I look at your comment that some of the deliveries were pushed from '22 into '23, how should I be thinking about the early part of '23 relative to what's going to happen over the second half with '22? And maybe if you could even quantify that $90 million of backlog, what -- how much of that should be realized over the second half of the year or the rest of the year and relative to what would be potentially realized in '23?

Right. So I do want to avoid giving quarterly guidance for every quarter coming out. I can say that we'll be pretty heavily back-weighted -- back-end-weighted for the year. But our goal is to get out $70 million to $90 million in revenue this year. So that's where we are right now. Our backlog is actually a bit more than $90 million, but this is what we've -- that's what we're announcing right now.

(Operator Instructions) Our next question comes from Robin Cornwell with Catalyst Research.

My first question is really related to the Washington plant. Several points on that. One is, have you had -- I think I asked this question last time. But have you had any inflationary impact? We hear so much about cost jumping. And have you seen that reflected in your construction?

Dan here. No, we have not seen too much inflationary pressure. We saw some inflation coming at the beginning of the project, and we locked in some pricing. We prepurchased the steel back when it was cheaper at the beginning of the project, and we locked in the price of the building itself with the people that are building the plant. So the inflationary pressure has not really hit us right now. We're on budget, on time with this project.

The -- what's the labor situation like as to staffing the plant? Again, we hear so much about shortage of skilled labor.

Well, we've been working very closely with the economic development groups of the Washington state government down there. They've been really receptive to us, and they'll be actually helping us host a job fair. We're not anticipating to see the shortages. There's a very diversed skill set down in Washington. You've got -- you have Boeing and you've got a lot of other large corporations down there. So I think what we have to offer is pretty attractive, and we're not anticipating seeing any problems there.

Okay. And what do you anticipate production-wise for 2022 out of that plant-completed vehicles?

We are ramping up slower than -- you need to run some through and then ramp up. But I think we're in the neighborhood of 25 to 35 units is what we're starting off with.

And did your revision of the revenue include lower production out of the Washington plant?

It reflects overall everything.

Okay. And one clarification. When you diversified your battery supply with Proterra, so you've got 3 basic suppliers. How do you manage with the order flow? So you've ordered so many batteries from BMW, and they don't deliver. Are you saying that you can switch to Proterra? How does that work?

Yes, we can. We designed all of our own software in there to be able to take multiple types. But the BMW batteries that we have on order that we're producing, we have all those batteries in stock as we speak. But the Proterra batteries, we have a very secure long-term supply agreement with them. And being said, our Washington state factory is very close to where the battery manufacturing is right now. Their battery manufacturing is in California, very close deliveries.

This concludes our question-and-answer session. I would like to turn the conference back over to William Trainer for any closing remarks.

Thank you, operator, and I'd like to thank each of you for joining our earnings conference call. We look forward to continuing to update you on our ongoing progress and growth. If we are unable to answer any of your questions, please reach out to our U.S. IR firm, MZ Group, who would be more than happy to assist. Thank you all.

Finally, I'd like to remind everyone that statements made on today's call and webcast, 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.

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