GreenPower Motor Q4 2023 Earnings Call Transcript

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July 17, 2023

There are 6 speakers on the call.

Operator

Hello, and welcome to the Green Power Motor Company 4th Quarter and Year End Earnings Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would like now to turn the conference over to Michael Seifert, CFO, please go ahead.

Speaker 1

Thank you. This is Michael Seifert, the Chief Financial Officer I would like to welcome everyone to our call to discuss Green Power's financial results for the Q4 year ended March 31, 2023. I'm here today with our Chief Executive Officer, Fraser Atkinson and our President, Brendan Riley. During today's call, We may make comments or statements about our future expectations, plans and prospects, which may constitute forward looking statements for the purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995 and applicable Canadian securities laws. Actual results may differ materially from those indicated by these forward looking statements as a result of various important factors, including those discussed in our quarterly interim results and MD and A filed on SEDAR and on EDGAR.

Speaker 1

In addition, these forward looking statements relate to the date on which We anticipate subsequent events and developments may cause the company's views to change. GreenPower disclaims any intention Also, during the course of today's call, we may refer to certain non IFRS financial measures. Reconciliation of these non IFRS measures can be found in our I will now pass the call over to GreenPower's CEO, Fraser Atkinson.

Speaker 2

Thanks, Michael. This was a record setting quarter for GreenPower As we recorded revenues in the Q4 of $15,300,000 more than 3.5 times the revenue of $4,300,000 For the Q4 and the previous fiscal year, and we delivered 123 GreenPower vehicles in the quarter, which was also a record. The growth and deliveries for the year were equally impressive as we generated record revenues of 39 point $6,000,000 in the 2023 fiscal year, an increase of 130% over the previous year's revenue of 17,200,000 And we delivered 299 GreenPower vehicles compared to 93 vehicles in the previous year. One of the most frequent questions we hear from stakeholders is how is GreenPower's cash position? In September 2022, we put in place ATM or at the market offering.

Speaker 2

During the year ended March 31, 2023, we had raised gross proceeds of $4,900,000 And in April, we raised another $520,000 with the ATM. We have not been on the ATM since then. We have an $8,000,000 line of credit with BMO. At year end, we are on our line of credit for $6,600,000 and have $600,000 of cash in the bank, effectively giving us about $2,000,000 of available funding. At the end of last week, We were not having to utilize any of the line of credit.

Speaker 2

In other words, we are completely off our line and had approximately $1,500,000 of cash. So we have gone from available funding of $2,000,000 at year end to approximately $9,500,000 at the end of last week. Presently, the Commercial Vehicle Group has 42 active or live orders and 141 signed Purchase orders for various EV Star models, which excludes our workhorse activity. So this is our commercial vehicle group over and above that particular contractual arrangement. The School Bus Group has 63 active orders or live orders and additional purchase orders for our Beast and NanoBee School buses with deliveries for the first orders for these utilizing current inventory.

Speaker 2

I'll now hand it over to Brandon for discussion on the operations.

Speaker 3

Thank you, Fraser, and thank you everyone on the call today. Not only did we record record amount of our battery electric vehicles, Some of the first that we accomplished over the fiscal year things We delivered our first new EV Star Cargo 22 Foot Van. We delivered a large order of our EV Star CCs To Workhorse, the first ones of that order started. And we also delivered the first of our Nano Beasts. So the first were important for us.

Speaker 3

Our NanoBees won an award last year at the FTN network, which is currently going on. And deliveries of those have started. And as excited as I am about our record sales and deliveries of our compelling EV products, The work does continue with the bringing of our new West Virginia production facility online and the building of our national dealer network and after sales network. Government incentives, both federal and local, Are higher now than they have ever been. For example, government funding for GP beast, Nano Beast and our commercial EV star line Has now gone national and has moved GP from being just a regional player in California or the West to being a national one.

Speaker 3

We've added dealers across the country for our school buses and for our commercial EVs That are the right fit for our customers' needs and that are the leaders in their respective areas of responsibilities. These dealers are inspired to sell and support all of GreenPower's compelling products. Our West Virginia production facility is already building school buses and become a second hub for our after sales and administrative report as well as providing sales in West Virginia is progressing. A large number of employees have already started attending classes that we co developed with the school. Yesterday, at the Transportation Network Conference in Reno that I had mentioned previously, that goes on in Nevada every year at this time, We presented the results of our school bus pilot project in West Virginia.

Speaker 3

This is where 4 of our battery electric school buses were operated at different School properties throughout the state on a rotating basis. The pilot project has proven to be so wildly successful, Actually, the most wildly successful pilot project I've ever been involved with on the EV space. And this product shows that our beast and our nano beast can perform In all different types of terrain, weather and operating environments. And again, it proves that you can operate green power beats Maintaining our competitive advantage is paramount as we balance expanding our production, sales and support, while keeping our costs down. To this end, we continue to nurture the funds entrusted to us by the investors and make responsible yet Now I'd like to turn it over to Michael Seifert, GreenPower's CEO, who will cover the quarterly and year end financial highlights.

Speaker 1

Thank you, Brendan. The 2023 fiscal year highlights included, We generated record revenues of $39,700,000 which was an increase of 130% over the previous year's revenue of 17,200,000 Gross profit for the year was $7,300,000 compared to $3,900,000 in the prior year. This sales increase Was driven by record vehicle deliveries of 299 vehicles for the full year compared to 93 in the prior year. As of March 30 1, 2023, we reported deferred revenue of $10,000,000 which includes the current portion of $8,100,000 Working capital improved to $27,700,000 at the end of the 4th quarter compared to $25,700,000 at the end of the 3rd quarter. We finished the year with inventory of $41,600,000 and this included $31,900,000 of finished goods inventory, which was primarily comprised During the year, we closed the contract of lease purchase in May 2022.

Speaker 1

And in August, we took possession of this 80,000 square foot facility in South Charleston, West Virginia, manufacture all electric school buses as well as other electric vehicles. This was the primary driver of the significant increase in our right of use assets over the year, which increased to $4,800,000 from $100,000 at the prior year end. We completed the acquisition of Lion Truck Body, a truck body manufacturer located in the Greater LA area, And this was primarily funded with an assumption of a $1,500,000 term loan that has a maturity in May of 2050 And interest rate of 3.75 percent. Over the course of the 2023 fiscal year, the growth in our business and revenue, as well as operational enhancements have led to improvements in our cost structure and inventory utilization. Selling, general and administrative costs As a percentage of revenue, we have declined from 133% in the Q1 to 36% in the 4th quarter.

Speaker 1

This demonstrates the improving operational leverage in our business model as revenues have steadily increased. Inventory at March 31, 2023 was $41,600,000 which was 3.2 times our 4th quarter cost of goods sold. This was a significant improvement over the prior year as inventory at March 31, 2022 was 32,300,000 For 8.7 times, our quarterly cost of goods sold for the quarter ended March 31, 2022. As inventory represents the largest single financial asset of the company, increasing inventory turnover allows us to more efficiently utilize our financial resources. More efficient use of our inventory remains a key focus area for management.

Speaker 4

We'll now open the

Speaker 1

call for Q and A. Operator, please open the call for questions.

Operator

We will now begin the question and answer session. Our first question comes from Craig Irwin of ROTH Capital Partners.

Speaker 3

Good morning. And I should start with the congratulations for the strong revenue results. Fraser, can you maybe give us A little bit more color on the West Virginia facility and the potential tempo of deliveries of Both the beast and NanoBeasts from that facility and then of course from inventory given that you do hold units or you did hold units coming to this calendar year.

Speaker 2

Well, I'll start with the West Virginia, and I think During the year, but more recently, we have undertaken our production of our NanoBees, which is the first production of Those vehicles in the West Virginia facility and we're currently organizing to produce the larger Type The Beast school buses in that facility as well and that will be on the heels of the first tranche of the NanoBees. So Ultimately, over the course of this current fiscal year we're now in, the objective is to be building both And having the first of those off the production line and into our Sales deliveries. So that's kind of the first step. And our objective when we first Undertook that facility was to get it up to a place where we could build 50 to 60 per month or a run rate of In the magnitude of 600 to 700 plus in that facility. On the inventory, the I think this is, as Michael just commented, is one of the key operational goals that we achieved during the year, which was really to not just continually build inventory, but to manage our inventory with respect to our deliveries.

Speaker 2

And I think we've been very successful in bringing it down to as measured by What we sell in a particular quarter, what the throughput is on our cost of goods sold is our inventory has Gone from the beginning of the last fiscal year to at over 8 quarters to just over 3 quarters of effectively the inventory that we're holding. So much, much better utilization of Inventory and that's a continued goal through the next year. And as a result of that, that Brennan, anything to add on the West Virginia?

Speaker 3

No, Fraser, you did a great job. Thank you. Perfect, perfect. Thank you guys. Next question I wanted to ask is, this is an important quarter for you guys because you already have Solid record with Workhorse, but it seems like you're starting to get cabin chassis sales away from Workhorse.

Speaker 3

I was hoping you could give us a little bit of color on sort of what the pipeline looks like there as far as the deliveries that are happening and what you feel about the Sales momentum right now. And then also if you could give us some color on the EV Star Cargo and Cargo What the market uptake looks like, what customers are saying with these now in commercial customer hands?

Speaker 2

Well, as we I'll deal with the latter part first. As we had noted in our press release And in the earlier comments with our this earnings call is that the Commercial Vehicle Group, which is headed by Right now, he has 42 live orders and over 140 signed purchase orders. And that's for our cargo van and box trucks And some customers that are working with us to build out a cabin chassis to an end product like a box truck. So he has a really strong mix in terms of the orders that we have and that's A huge step up from where we were a year ago. So that's looking particularly strong on that side.

Speaker 2

And then on Workhorse, we're continuing to deliver vehicles and They have publicly announced that their W750 that utilizes the EV Star cabin chassis Is now going through their production process and entering the market in terms of sales in their Q3. And so looking ahead, we need to ensure that We're supporting their activity and the sales activity and their production levels in order to achieve their goals.

Speaker 3

So if I could ask a Workhorse specific question, right? This quarter, 108 cabin chassis, Up from 85 last quarter, vast majority, almost all of that going to Workhorse. How do you how should we think about the potential tempo of deliveries under this agreement that you have with them? Is this something that We'll both go up and down over the next number of quarters. Should we see that build gradually?

Speaker 3

Any color on sort of the way we should model this for the course of your fiscal 'twenty four?

Speaker 2

Well, it's still I would characterize it as early days with regards to their activity and their throughput. So we're obviously reliant on what their Successes become our successes. And so we really need another quarter or 2 under our belt to see how that throughput is looking. But I view them as a very strong partner in terms of Any issues or the actual production flow through and things like that are Yes, there's good communication within the group. So we have a good feel for what we need to do or what we'll need to adjust if there There's some significant upticks and we need to be adjusting our deliveries to accommodate that.

Speaker 2

Understood. That makes complete sense. So last question for me before I jump back into the queue. Today is what July 17th,

Speaker 3

and it's more than 2 weeks past the end of your 1st fiscal quarter for 2024. I know you guys are going to be extra careful, given the challenges you had in your year end audit. But are there maybe any high level metrics You can share with us like total number of deliveries or any other color that you can give us About the success you had in this quarter and how this is continuing on top of what you saw in the 4th fiscal quarter?

Speaker 2

Well, unfortunately, we're we the focus was to get this completed as If your reference to the auditors were we did make a change during the year to upscale to a firm that was well recognized across North America and working with them and getting this filed at the end of last week It was a herculean effort by the finance team in particular. So that was kind of the primary focus and We really haven't had a lot of public communications on what we're where we were at the end of So we expect to be back in a position where we can be communicating with our stakeholders and getting our next quarter out As quickly as possible, so we can be talking about all those kind of metrics.

Speaker 3

Understood. Well, congratulations on the obvious traction that you're seeing. So thanks for taking my questions. Thanks a lot, Craig.

Operator

Our next question comes from Tate Sullivan of The Maxim Group. Go ahead.

Speaker 5

Great. Thank you. Thank you, Fraser. You mentioned managing your cash position partly with inventory management, but also You have the $3,000,000 deposit from the state of West Virginia subsequent to your fiscal year end on a $15,000,000 order. Should we expect additional deposits with additional orders from the State of West Virginia or counties or was that just the starting order, please?

Speaker 2

Well, it's a very significant order in terms of the number. We didn't scan the marketplace to determine if this was the highest single order, but it's Certainly one of the more significant orders within the school bus space for electric school buses that is. And so we want to do a good job Producing the vehicles for that order. And it also gives us the ability to be scaling our West Virginia facility as we do not Just that order, but other orders that are being generated within the region. So it's I would say, we'd love to see a follow on order, but we're pretty happy about producing vehicles pursuant to that order over the next number of quarters.

Speaker 5

That's a great deposit number. And then on the 63 School Bus orders and I

Speaker 3

think you mentioned before in

Speaker 5

your answer the other question. So in the near term more nano beast deliveries And then shifting to more beast deliveries, is that fair or did I hear that correctly?

Speaker 2

Well, it really depends what the region is In that, the beast, which we can actually configure for up to 90 Kids, that's the K-twelve grade 6 level. The high school Allows for fewer kids within the school bus because of the obvious size differences, but the 90 Generally, we're finding a lot of the orders are around 84 seats in terms of configuration of that vehicle. And that's An important metric in terms of what the school districts need to manage for their morning and their afternoon runs. So That fits a very specific need and requirement. The NanoBeasts is more like a Swiss Army knife.

Speaker 2

It really accomplishes a lot of different objectives. Yes, there's fewer number of passengers. It's more nimble and flexible. And even in the charging infrastructure, generally, Level 2 charger will accommodate that particular vehicle. Most of the sales of the Type A Class 4 vehicles, which is the Space that the Nano Beast is directed at, and I think the number is around 80% of the sales For the Type A school buses as with the wheelchair lift In the curbside rear of the vehicle.

Speaker 2

And so that particular configuration It is one that really accommodates all of the different requirements that the school district has that the larger Our larger Type DB school bus can't necessarily accommodate. So that Has a fit for a totally different market. A good example of that is that if you're on In Manhattan or in the Financial District of New York City, you'll see an awful lot of Type A school buses on the road and very few of the Type C or And that just it's more suitable for that environment and school districts Where they can effectively integrate that particular vehicle, that's kind of the go to for that environment.

Speaker 5

Thank you. And last for me is, you mentioned 42 live orders for EV Starz and configuration 141 signed purchase orders. And I think you've mentioned before, switching those signed purchase orders to live orders depends on the voucher timing Is that not the case for all those signed purchase orders?

Speaker 2

Some of them do have vouchers and principally New Jersey or the California HVIP, but some of them are related Setting up delivery, so getting the agreed upon delivery time. So we could have a specific vehicle and even a VIN number attached to the signed purchase order with the customer and funding attached through a voucher program and their Delivery is hasn't been set as they're waiting for a charging station to be installed or they're waiting for To get their own internal organization around The various training that we put in place with the delivery and deployment of vehicles. So it really is a mixed bag. And then as well, there's in the case of where we're building out a cabin chassis to say a box truck or More sophisticated box truck with lift gates or something like that, then that takes additional time to complete that before a delivery date can be set.

Operator

Our next question comes from John Abbe of American Research Media. Go ahead, John.

Speaker 4

Good morning, gentlemen. Thank you for taking my call. You mentioned that you have A lot of standing inventory. Considering the fact that you advanced so many buses to greater bus sales in California, Is most of that inventory Type A or Type B?

Speaker 2

On the School Bus side, it is a mix, but there are more of the Type D, then the NanoB's Type A.

Speaker 4

So we'll see that's a large revenue infusion for the company If those in fact do transfer.

Speaker 2

So most of the inventory Yes, absolutely. Well, and not if they transfer, but when they transfer Pursuant to these orders. So the final finishing relative to the lettering on the side, the numbering for that particular school district is sort of the final end of the completion of the vehicle, but Yes. The majority of cost that has gone into that beast has already we've already paid for it in full, sitting in inventory. So we're effectively monetizing that inventory as we get these deliveries off our books.

Speaker 4

And Lion Truck Body, in your statement, it looks like they're located in Torrance, California, A suburb of Los Angeles, are they going to be relocating to West Virginia?

Speaker 2

Well, I mean, that's a great question is that, Brennan in particular has talked about Taking Lion Truck Body from a regional to a national player and your products like the refrigerated box truck That's the kind of vehicle that can be a national product and create much more of a national brand for Lion Truck Body. And if that's the case, there is certainly an opportunity to perhaps have a second location for Lion Truck Body and West Virginia could be a logical consideration for that, but I think we're going to be pretty busy in West Virginia building School buses in the near term.

Speaker 3

Yes. Fraser, if I may add real quickly, this is Brendan speaking. John, that's a very good question. The LION truck body product line is in the process of being completely made into kits also. So not only can we assemble those kits in places like West Virginia, but we can also ship them to our dealers that do do body assembly and the

Speaker 1

kits are designed for like a

Speaker 3

dealership to do. And the kits are designed for like a dealership to do that might have a body shop to do body assembly because the body is not only get shipped regionally by the dealers, but they also require body service and repair regionally. So the thought is also not only having The possibility of other line truck body locations, but also to be able to have the product so it's in such a modular format That it can be built and serviced and maintained, even through our dealership network.

Speaker 4

And in West Virginia, with the cost of living and the cost of labor being in the lowest one of the lowest percentiles On an interview, Brendan Riley, which was released on April 18, was talking about looking for a second facility In the state of West Virginia, is that something that you're still looking into?

Speaker 3

John, this is Brendan again. We're looking at additional facilities In multiple locations, West Virginia has been a very good partner to us and we've had amazing success to date With our West Virginia facility, both in human resources and our partnerships and found it to be a very business friendly environment. And we are considering a second location in West Virginia, but we're also considering location with those that we're looking at The second location attributes that we're looking at for West Virginia, we're also looking for that in other locations

Speaker 4

At the EV convention in India, Jupiter wagon featured a GP product, I think it was an EDSTAR. How is that joint venture working with Jupiter?

Speaker 2

Well, I'll start off on this one. So we do have our A right hand drive model of our EV Star platform that is Targeted for that, not just that market, but there's other markets that can utilize such a product. India is a very different market than most in that price sensitivity is Incredibly high regardless of whether it's a new product or a product that's been around 100 years. So we are taking our the approach There is a lag within their delivery model that doesn't exist in North America. It's almost like The last yard within the last mile and so there's nuances like that that Significantly impact on what the usability of our kind of vehicles, which are medium duty.

Speaker 2

They're not light duty. Our products are medium or heavy duty. So the EV Star has a place in their supply chain that is probably a little further up than where it would be within the delivery model within North America. So In short, we are working with them. We do have resources in India that are working with Jupiter.

Speaker 2

And but the approach we're taking is Very, very measured to make sure that we understand where our product can have success before we're spending an incredible amount of money to move that forward.

Speaker 4

In your Forest River adventure, do we have any update in regards to Forest River and your cabin chassis that you're delivering to them?

Speaker 2

There are no updates. And Forest River preceded What we are doing with Workhorse have preceded the acquisition of Land Truck Body where we have working with Land Truck Body on specific Models in the marketplace. So to some extent, we've kind of supplanted the original goal or objective with Forrester Group. Otherwise, there's no update in terms of what we're doing with them.

Speaker 4

Does your agreement with Forest River preclude you from working with other RV manufacturers?

Speaker 2

No, it doesn't.

Speaker 4

Well, thank you very

Speaker 2

much, Klaus. And if Klaus is on the line, who heads our commercial vehicle group, He used to work at Daimler and of course with the Mercedes trucks, he's got decades of experience in Selling and distributing their various models and they had a their 3,500 Sprinter was kind of the go to for the smaller recreational vehicle. So that's something that he has had experience with and with a product that had an awful lot of excess as well.

Speaker 4

He came out of Canoo, is that correct?

Speaker 2

He was at Canoo for a period. That's correct.

Speaker 4

And I think during his time when he was at Canoo, didn't they secure a contract with Walmart for 4,500 units?

Speaker 2

I believe you're I think that number is right, but otherwise, I would need to go back and CEO confirm what they've said in the public domain. But I suspect you've already done that, John.

Speaker 4

And Lastly, I noticed your next quarterly is scheduled for just a month from now. So I guess I would I'm assuming that that means that there's a lot of good news on the horizon if you're only Having your reporting a month apart, are we looking possibly at an acceleration of receivables in the next month?

Speaker 2

Well, we feel the overall management of our working capital is, As we're communicating on our year end call that if you look at where we were at the year end to where we are Effectively now is that I think we've done a great job on collecting the receivables and monetizing our inventory and Managing that cash flow in a fashion that has allowed us to significantly increase our available funding. But other than commenting on where we are up to now, we'll let the quarter speak for

Speaker 4

Well, thank you very much gentlemen for fielding my

Operator

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

Speaker 2

Just to conclude our call, thanks for those who were on the call and those that are listening afterwards on our Pre recorded webcast. We really appreciate your support. The EV sector that we operate in It has its own challenges as a sector as a whole. We've had some ups and downs and some Streams related to those, but our focus in terms of the business has been on the fundamentals in terms of Building a strong product line and building strong relationships with customers and partners. And more recently, we've made significant strides in terms of operational goals.

Speaker 2

And as we've noted several times on the call, We've improved our available funding and have access should we require it to additional funding that will help fuel the growth that we see with our business plan. And most importantly, we made a conscious decision several years ago to go from production pursuant to custom orders to where we were building more along an inventory with targeted sales goals. And I think this past few quarters has shown The success of that strategy where we are now getting a significant throughput in terms of our cost of goods sold as a measure against our inventory. And as Michael noted, at the beginning of this We are at over 8 quarters in terms of that throughput. And at the end of this most recent fiscal year, we are at to under 4, just 3.2, 3.3.

Speaker 2

So that just illustrates the significant improvements that we've made in that with our stakeholders on our next earnings call. Bye for now.

Operator

The conference has now ended. Thank you for attending today's presentation. You may now disconnect.

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GreenPower Motor Q4 2023
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