GreenPower Motor Company Inc

XTSX:GPV

Earnings Call Transcript 2021-Q4

[Operator]

Good morning, and welcome to the GreenPower Motor Company Fiscal 2021 Earnings Call. [Operator Instructions] Please note, this event is being recorded.I would now like to turn the conference over to Michael Sieffert. Please go ahead.

[Michael Sieffert, CFO & Secretary]

Thank you. This is Michael Sieffert, the Chief Financial Officer of GreenPower Motor Company. I'd like to welcome everyone to our call today to discuss GreenPower's financial results for the year ended March 31, 2021. 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 purpose 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 statements and MD&A filed on SEDAR and on EDGAR. In addition, these forward-looking statements relate to the date on which they are made. We anticipate that subsequent events and developments may cause the company's views to change. GreenPower disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.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 MD&A filed on SEDAR and on EDGAR, and is also located on our website at www.greenpowermotor.com.I will now pass the call over to GreenPower's CEO, Fraser Atkinson.

[Fraser Atkinson, Executive Chairman & CEO]

Thank you, Michael, and thank you for joining us today. Before Michael and Brendan weigh in on our financial results and company operations respectively, I wanted to take a moment and review some of the mandates and financial programs serving as growth drivers for our company. While GreenPower now has many sales opportunities that do not require any incentives, we continue to pursue every opportunity for those which do to leverage our sales potential.First, let's look at several mandates. Number one, at the federal level, the new Clean Buses for Kids program plans to electrify 20% of the country's 500,000 yellow school bus fleet. Last year, we increased our production to 5 school buses per month, which we increased to 10 per month in this fourth quarter.Secondly, corporations with significant fleets of passenger and delivery vehicles are setting electrification targets now. We entered into an agreement with Forest River to supply our EV Star Cab and Chassis so they can manufacture an all-electric cutaway to address a number of these opportunities.Third, leading airports such as LAX have announced that shuttles or buses operating on their property must be zero-emission vehicles before 2030. This quarter, we delivered 5 EV250 30-foot all-electric buses for shuttle operations at LAX airport.Then there are the financial programs. VW mitigation funds are supporting the purchase of all-electric school and transit buses, along with numerous state programs. GreenPower's vehicles are listed, among others, on the New York, New Jersey, British Columbia and Canada and California HVIP programs.On June 8, the California HVIP program opened up its voucher program. And in less than 3 hours, $84 million in vouchers have been fully allocated for over 900 vehicles, which the results have not been officially announced. In the meantime, according to the California Resource Board, that oversees the HVIP program, prior to the last allocation, GreenPower has the second highest amount of vouchers for current OEMs and has the highest ratio of deliveries out of the top 3 OEMs. In conclusion, we've seen significant sales activity across these programs, and we expect that trend to continue as new programs and new mandates at various stages of implementation come to fruition.I'll now pass the call to Michael Sieffert, GreenPower's CFO, to go into further detail on our quarterly financial results. Michael?

[Michael Sieffert, CFO & Secretary]

Thank you, Fraser. For the quarter ended March 31, 2021, GreenPower recorded revenues of $4.4 million and cost of revenues of $3.2 million, generating a gross profit of over $1.2 million or 26.7%. Revenue increased 76% compared to the fourth quarter of the prior year and was generated from the delivery of 5 EV250s, which are being deployed for passenger shuttle service at LAX airport and for which GreenPower provided lease financing, and from the sale of 30 EV Stars that were previously on lease with another customer and as well as from the sale of parts and from interest income on financial leases.For the year ended March 31, 2021, GreenPower recorded revenues of $11.9 million and cost of revenues of approximately $8.3 million, generating a gross profit of $3.6 million or 30.1% of revenues. Revenue was generated from the sale of 33 EV Stars and the lease of 35 EV Stars and 5 EV250s from sales of chargers and parts and from interest income from leasing.We finished the quarter with finished goods inventory of approximately $2.4 million, which was comprised of 7 EV Star Transit Plus, 7 EV Star Cab and Chassis, 2 EV Stars and an EV350 as well as charging stations. We continue to invest in production of EV Stars and B.E.A.S.T. school buses and ended the quarter with approximately $10 million in work-in-process inventory, which was primarily comprised of our various models of EV Stars as well as B.E.A.S.T. Type D school buses, which we expect to begin to deliver this summer. We have ample liquidity to continue on the current rate of production with $30.8 million in working capital, $15.2 million in cash, an undrawn line of credit as well as a strong balance sheet with total assets of $39.6 million and total liabilities of less than $3.5 million.We continue to scale up our business for the increased sales activity that we anticipate. We have hired several seasoned professionals in operations. And going forward, we will continue to hire additional staff in areas, including sales, service, engineering, QA/QC, operations, finance, production planning, project management and procurement. We continue to manage costs carefully while we scale up the business. Our cash costs for the quarter were just over $2 million compared to approximately $1.9 million in the prior quarter.As we continue to build out our infrastructure and resources to continue on our growth trajectory, we anticipate that cash costs will continue to increase over time.I'll now pass it over to Brendan for some operational highlights.

[Brendan Riley, President & Director]

Thanks, Michael, and good morning, everybody. This is Brendan Riley, the President of GreenPower Motor Company. Recently, we made considerable progress towards our goal of integrating the EV Star platform and more specifically, EV Star Cab and Chassis with major final stage manufacturers as we deliver our first 5 units to Forest River.Forest River, as some of you may know, is the market leader in the cutaway market and a market leader in the RV market with over 10,000 traditional internal combustion units sold annually into a 15,000-unit total addressable market for their Starcraft model alone. The Starcraft model remains our initial focus and integration is ongoing today.Later this summer, we anticipate the start of Altoona testing, which will cover this unit. This will further open access to federal funding for transit properties as Altoona testing is a requirement. And for those of you who aren't familiar, GreenPower, our product, EV Star, has passed Altoona just prior to the pandemic in March of 2020, with the highest score in Altoona history of any medium- or heavy-duty vehicle, the second highest of any vehicle of any type.We are continuously assessing our sales pipeline in an effort to align our production capabilities with future demand. In doing so, just this month, we've further increased our production rate of EV Stars with additional increases expected in the very near future. Our production ramp began in the fall of 2020 and those units are now just starting to roll off of bar line, putting GreenPower in an ideal position as the economy reopens and customer demands for EV solutions rapidly solidifies.Part of that increase late last fall and early this year was to expand the production of our B.E.A.S.T. That's our Type D, all-electric school bus, the largest school bus for seating capacity produced today. I'm pleased to say that we expect our first units to roll off the production line this summer, next month, actually, for immediate delivery to customers before the end of the summer.Based on market feedback, additional production increases are again further likely in the near future. Collectively, the combination of HVIP window opening backup on June 8 of this year, having expanded level of inventory available for customers, making our first material deliveries in the B school bus this summer, an ongoing relationship with Forest River are all pointing to a very strong second half of the year here at GreenPower.With that, I'd like to hand it over to Chad, our operator, to open up Q&A. Thank you.

[Operator]

[Operator Instructions] And the first question will come from Chris Souther with B. Riley.

[Christopher Curran Souther, Research Analyst]

So on the -- in the quarter, you mentioned in the release, 30 vehicles sold to Zeem. I assume those were previously leased through Green Commuter. Are those guys still taking deliveries on their order backlog? And how much -- how many orders do you have left in the backlog with them? And maybe you could just talk a little bit broader on the overall backlog? Understanding there's some -- it sounds like there's some uncertainty with how many orders you'll be able to get through that HVIP program.

[Fraser Atkinson, Executive Chairman & CEO]

So, well, Michael, did you want to address the sort of the leasing arrangements front in terms of our financial? And then I can sort of talk about where the HVIP program is. And then Brendan can address the sort of the customer relationship side of that question. There's a lot of elements to your question there, Chris.

[Michael Sieffert, CFO & Secretary]

Yes. No, absolutely. So Chris, Green Commuter remains a great partner for us. As you know, they operate basically a shuttle service within the Greater LA area, where they'll lease out to other companies, both on the -- for primarily things like employee shuttle services and the like.During the pandemic, like most businesses, the volume of business went down. However, we do anticipate that as things are starting to open up now that, that volume is going to continue to increase. So these vehicles were sold, I would say, really opportunistically. We have a customer who needed them. They found them temporarily surplus to their needs. But we do still have a significant backlog with Green Commuter. We anticipate that we will be delivering to them in the coming months. And going forward, I believe, our backlog is still over 100 vehicles with Green Commuter. So I'll pass it over to Fraser maybe to address some of the other elements. Go ahead, Fraser.

[Fraser Atkinson, Executive Chairman & CEO]

Yes. On the HVIP side, the -- as I noted in my earlier comments, the program reopened on June 8. They were sold out in less than 3 hours by our estimation based on what they were publishing on their website that day. And they have announced or when they announced that the first tranche of funding that they've made available on June 8 that sold out that it provided funding for over 900 vehicles.What one needs to appreciate is that in the past, they got a handful of voucher request in any given day so to get a request for not just the over 900 vehicles, but presumably even more in a matter of half a day does take some time to sort out, which we expect will be the case long before they open up a second tranche, which will be at 10 a.m. on Tuesday, August 10 to make the second tranche of $83 million available.So the -- all we're in a position to do is, at this time, stay tuned and we'll make the announcements at appropriate time. Otherwise, the program, we've had a lot of success in the past, and this is certainly a program that we're well familiar with.

[Christopher Curran Souther, Research Analyst]

Understood, and that's helpful. So maybe just with the June quarter closing the week, what was production and deliveries in kind of the current quarter that's finishing up here? If you could provide that, I think it would be helpful for people. And then, yes, just -- maybe just start with that then.

[Fraser Atkinson, Executive Chairman & CEO]

So we haven't announced where we're going to be. So we've got a few days today and tomorrow to close out the June 30 quarter. But what we're trying to focus the -- our efforts on is the deliveries that will be occurring through the summer that will really help ramp up the September 30 and the December 31 quarter. So we hope to and we'll get out the numbers as soon as practical will be as possible. And otherwise, we haven't given guidance or any indication as to what those numbers would be.

[Operator]

[Operator Instructions] The next question will come from Jacob Green with BTIG.

[Jacob Matthew Green, Research Analyst]

Just to touch on the backlog again. With the Forest River 150 vehicles, were you able to deliver that? I think it was 6 that were originally guided in that quarter. And do you have any more clarity on the pacing for the remaining orders?

[Brendan Riley, President & Director]

Hi, Jacob. This is Brendan with GreenPower. Thanks for the question. Jacob, the -- we actually delivered 5 units to Forest River so far, and we announced those. Those are currently being integrated with their Starcraft body, and we are waiting to complete that integration before we really have an idea of what our run rate will be. And we haven't mentioned what our run rate will be. We expect it to start a little slow, like these 5 units and then go from there.But I think you can imagine if the product is successfully integrated, which we have no doubt, given Forest River's experience that -- and with the addressable market and just with demand in places like California alone, we expect a significant number of EV Star Cab and Chassis integrated with the Forest River body actually built on a regular run rate and on a regular basis.

[Jacob Matthew Green, Research Analyst]

Sure. Absolutely. And then a couple of months ago, there was a lot of talk about the new Buy America from this administration and movement unrestricted on making the percentage a little more strict, I believe it was 50%. Where does GreenPower fall within that if it were pushed from 50% to say 70%, 80%, would you still be eligible? Can you give any color there?

[Brendan Riley, President & Director]

Certainly. So right now, the Buy America percentage for the transit vehicles is actually already at 70-plus percent, and we're able to meet that. Much higher than 70% would be pretty difficult because there are some products and components that are sourced internationally, Europe, Asia, Latin America and other places, to be perfectly honest.It is a pretty global market, especially automotively speaking. And we don't believe that it would be realistic, not just for GreenPower, but for any other manufacturer in our space to really increase it to more than where it is now at 70%. And no, we've not been given any guidance yet from the current administration as to any changes in the Buy America program for any products.

[Operator]

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Fraser Atkinson for any closing remarks.

[Fraser Atkinson, Executive Chairman & CEO]

Thank you. Just in closing, we expect to see the first deliveries of the increased production of our EV Star starting in the next few weeks. And as Brendan noted, the first of our B.E.A.S.T. school buses later this summer, which will positively impact our September 30 quarter and the full run rate from our current production in our December 31 quarter.As we stated in our press release, we believe that we are on track to achieving our goal of attaining positive quarterly cash flow by the middle of our current fiscal year. We realize that this call is early today. So if you do have it -- if you're listening to this on a prerecorded call at a later time or date, feel free to follow up with any questions by calling Brendan, Mike or myself. Thank you, and have a great day.

[Operator]

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