GreenPower Motor Company Inc

XTSX:GPV

Earnings Call Transcript 2022-Q4

[Operator]

Good day and welcome to the GreenPower Corporate Update and 2022 Fiscal Year End Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Michael Sieffert, Chief Financial Officer. Please go ahead, sir.

[Michael Sieffert, Chief Financial Officer]

Thank you. This is Michael Sieffert, the Chief Financial Officer of GreenPower Motor Company. I would like to welcome everyone to our call to discuss GreenPower’s corporate update and financial results for the period ended March 31, 2022. I am 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 annual results 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 provide a brief summary of our results for the year ended March 31, 2022. Recorded revenues of $17.2 million for the year ended March 31, 2022 represented an increase of over 30%, with restated revenue of $13.3 million for the previous fiscal year. Revenue for the year was generated from the 93 vehicle sales, including 18 BEAST school buses, 11 EV Stars, 4 EV Star Plus and 21 EV Star CCs as well as 1 EV Star and 10 EV Star CCs for which we provided lease financing and 28 EV Stars, which had previously been on lease and these leases were canceled and the vehicle subsequently sold.

Our cash, including restricted cash at year end, was $6.9 million. We ended the year with $32.3 million of inventory compared to $12.5 million at the previous year end. Our gross profit margin for the fourth quarter was negatively impacted by several one-time costs that push GreenPower’s gross profit margin below our 30% historical run-rate. Briefly, for the quarter ended June 30, 2022, we delivered over 20 vehicles, including 3 BEAST and the remainder, were a mix of EV Stars, EV Star Cab and Chassis, EV Star Plus and EV Star Cargo.

I will now pass the call back to Brendan Riley. Brendan, please go ahead.

[Brendan Riley, President]

Good morning, everybody and thank you today. Some very interesting things that I’d like to discuss today. First and foremost is our Workhorse deal. We are under contract with Workhorse for 1,500 EV Star CCs, which we are selling to Workhorse. Workhorse is putting their own custom very compelling body on these vehicles, adding some of their own telematics and other features that were core supplies and then they are selling these vehicles to the step van market. This is compelling on many levels, but I think most importantly, this is business that GreenPower was not addressing previously. We have not had a plan to enter the step van market. It’s also leveraging the sales of working power sold to vehicles once to Workhorse and now Workhorse is selling these vehicles into the marketplace and supporting the vehicles in the marketplace including contributing [Technical Difficulty] vehicles. So, we really believe this is, I don’t want to say sound business, but that’s kind of a good way of looking at it. This was not part of what typically we would normally do in a business transaction where we would launch the vehicles, train customers, support them. We have got one touch point and that is Workhorse, which really makes this deal very, very compelling to us and hopefully to the market.

The school bus sector has really been a very, very attractive area for us lately also, not only did we introduce our Nano BEAST, which [Technical Difficulty] here, which is a type A kind of smaller school bus in addition to our BEAST. But the announcement of the new infrastructure law which this year alone has already enabled a lot of schools to start buying zero-emission school buses at no cost to them, which includes offsets for infrastructure and other training and other things that make this a very, very compelling space for GreenPower right now.

Currently, we have got a lot of money in California. We have got money on the federal level states such as New York and Colorado have announced large amounts of money in this space. GreenPower has rest the national market by expanding our dealer base across the entire country. We will have some announcements very shortly on some additional dealers, but that will be an address to the national market and how we are going to penetrate all these various states with our school bus product.

And then lastly, we have got something very exciting and that’s that GreenPower was able company delivering on the New Jersey VIP program. It’s kind of a clone or a program that’s planned in very much in the spirit of the California HVIP program and this is for the New Jersey area. This program is again very generous and we have started to deliver. I believe we have got 7 deliveries already under this program and they are just starting now. We are very excited to take advantage of the opportunities in New Jersey for that.

And with that, I will pass it to Fraser Atkinson.

[Fraser Atkinson, Chief Executive Officer]

So, Brendan provided an overview on the Workhorse arrangement. And I think one of the key aspects of this is that Brendan in particular and the team have been working on this for almost the better part of the year and our first delivery start this month. So we are literally getting our first set of the EV Star CCs as we refer to our Cab and Chassis, which is the picture on the left there and delivering the first tranche to Workhorse, which they will integrate with the product that they brought to market that they branded as the W-750.

And I believe they have two models of this vehicle. So, that’s what they will be selling to their customer. The overall transaction is for 1,500 EV Star CCs, as we previously disclosed. And it’s important to note that there is – that works out to just an average in excess of $200 per quarter for the next seven quarters that relates to that agreement. And as noted on this slide, this is one of the largest medium or heavy-duty EV transactions in that it’s not one of these up to a certain number. This is for 1,500 EV Star Cab and Chassis. So, it’s very exciting for the company, but in particular, given that we are now entering into the delivery phase and the first few months will be bringing it up to that average that we note here, but it will be a fairly quick progression in terms of getting to that average of 200 a quarter.

Brendan talked about the school bus, the BEAST, was our second iteration of our Type D electric school bus and that’s the largest school bus. And there is a Type C and a Type D, the Type C is the one with hood the Type D is the 1 that looks like a more of a transit flat front. We like the Type D. It’s the driver has great sight lines in terms of any kids that walk in front of the bus. The vehicle is maximized in terms of being – for the seating configuration. So, we really have an industry leading vehicle with – for this size of vehicle that can accommodate up to 90 passengers. The Nano BEAST is the smaller vehicle, the Type A electric school bus and it comes in two models. This one is shown without the curbside rear ADA door, the disability that would have the disability left for wheelchair, mobility aid and that’s the second model that we have for this vehicle.

Next slide. So, our sales strategy a year or 2 years ago, we would – you would look at GreenPower and see that we had sort of a broad umbrella in terms of our sales and marketing that really was trying to address multiple sectors and multiple industries all with the same or similar sales and marketing strategy. We determined that for certain sectors both for the truck sector that the cabin chassis for the Workhorse deal that we previously talked about or for the school bus that you needed a dedicated focus. You needed the resources, the product infrastructure that really was specific to that particular sector. So, we have a group led by Joe Angeli and Michael Perez that are focused in this area. And the approach is to build a network and the network consists of a combination of dealers as well as getting on state contracts to ensure the maximum outreach into each of the particular markets. And each state is different. So, you can’t have a one-size-fit-all approach across the nation. You have to address each of the requirements state by state. So, it’s a fairly lengthy process to put the pieces of the puzzle together.

What’s going to drive the school bus sector is – and we talk about the funding, but it’s both funding and mandates or money and mandates as we like to talk about. And the Environmental Protection Agency program, which was introduced or talked about for at least a year, went live at the end of May and the application process closes on the first tranche of $500 million for this year, with another $500 million slated for the next 4 years. And this year’s funding is currently open in terms of the application process. EPA has said it will close August 19. They will be issuing award letters through September and OEMs and the purchasers can start to deliver vehicles as early as October of this year. And we believe we are one of the few companies that has inventory of both our Type D BEAST and our Type A Nano.

So, the funding is up to $375,000 for the BEAST, which is in the picture on the top right there and then the Nano BEAST, which was the smaller vehicle we saw in the previous slide. The other funding – significant funding source is that California introduced through their HVIP program, a school bus set-aside fund, that’s $130 million this year and $130 million in the next 2 years. They opened it at the end of March for 90 days, which took us through to the end of June and we are now just working through the various applications that have been submitted and waiting for approval letters at which point in time we can commence some early deliveries in the current quarter we are in, which is July to the September quarter.

Lastly, on the dedicated sales group, we have announced a number of dealer agreements and states that we have a specific footprint or sales effort in and as Brendan said, stay tuned, we have a number of other dealers that we hope or expect to complete shortly given the timeline on the EP application process, so we can ensure that those applications are submitted and included with the consideration for the funding.

Next slide, please. So, it’s one thing to get the sales. The other thing is you have got to be able to produce products. On the EV Star Cab and Chassis, we previously disclosed that we have the capability or capacity to go up to 200 a month. And so having the ability to doing $600 a quarter, we can certainly do the 200 that are plus that are needed in terms of the ultimate run-rate on Workhorse in terms of the Cab and Chassis that are needed for the truck opportunities as well as our for our own needs as we use that EV Star platform or the Cab and Chassis platform for our EV Star Plus and for our Nano BEAST. But on the school bus side, we are going to be building this product in West Virginia. And previously, we had announced an arrangement with the state of West Virginia for the acquisition of a facility that the picture of the building in the top right hand corner there. I was out there last week with the team. Brendan is going to be out there next week with the team. And we are proud to say that we take occupancy of this place on August 1.

The current tenant that’s in that building, I must say won’t quite be ready to be – they won’t be gone on August 1. So we have worked with them just to have flexibility in being able to get some of the initial things we need to accomplish in that building starting at the end of last month through this month. And so as a result of that, we are planning to bring 10 of our EV Star Cab and Chassis next week into the facility, so that we – in August, we are ready to go with the first tranche of our production for the Type A Nano BEAST. Ultimately, the goal is by the end of next year is to have production up in the range of 40 to 50 school buses per month or annualized at around 500.

Just a quick recap on the deal is that the State of West Virginia in conjunction with the City of South Charleston, which is literally connected to the City of Charleston itself, that they purchased that building and our deal is to – that we have lease payments of $50,000 a month that start next spring. So, we have a nice little holiday that allows us to get up and running and get product flowing out of the facility. And then we also get two different levels of forgiveness on that funding or purchase price and so such that there is an initial $1.3 million forgiveness on an initial employment level and then every 100 employees thereafter, another $500,000 that is applied against this. Ultimately, when it’s fully paid through either the forgiveness on employment levels or payments of the lease payments is that then the building is GreenPower is building outright. And so that’s why we refer to this as a contract of lease purchase, lease ultimately leads to the ownership of the building.

Next slide, please. And the third component that Brendan talked about was the vouchers. And the vouchers, according – there is a couple of points here that you might find of interest is that according to California Resources Board is that from inception, GreenPower has the second highest redemption of vouchers. So, our challenge with the program is that in the past 2 or 3 years, it has opened and been sold out literally same day. And so, it has made it very, very difficult to try and make – to have any prolonged sales effort when a program is only available 1 day a year.

So, this particular year though, when they introduced it on March 30, they took – they had reduced the amount of the voucher per vehicle. And so we have found that there is still available funds in certain pockets and for certain size of fleets. And so it’s much more of a robust sales tool like the program was 4 or 5 years ago. And so we – and secondly, Brendan referred to the New Jersey program that we were the first OEM to receive a reimbursement of the voucher. I think we are collectively a little surprised with that. In that, we had a number of vouchers to deliver off of. But for various reasons, we thought that at least one or two other companies would have been ahead of us. So, two great validations in terms of how we are able to leverage these state programs.

In terms of where we are today, we have 70 approved vouchers for these – just these two programs without any school buses. So, any of the school buses either on vouchers, which there are a handful or for school bus set-aside funds, which we haven’t released yet, isn’t in these numbers, but we have 70 approved vouchers on the two state programs, representing or amounting to $5.7 million, representing sales of $8.9 million and pending approval for 28 vouchers. So, if we combine these numbers, that’s $13 million of sales that is supported by $7.7 million of vouchers.

And as I have said, both programs were seeing the ability to refresh these, these vouches as we are delivering on the one end, we are able to refresh and increase our get additional pending approval or pending vouchers that ultimately become approved vouchers. Within this mix, there is a fairly significant number of both approved and pending vouchers for our 22-foot cargo. The numbers that Michael alluded to at the beginning of our program here, talked about the number of the EV Star Cargoes and this is our 22-foot model, not the 25-foot. And we expect to deliver 30 and most of those 30 will be in this month, early part of August through – that will be part of our September 30 quarter.

And our – as we go to our last slide, the summary that we’d like to leave you with is historically with the numbers that Michael outlined for you from our year end was 93 vehicles that generated $17.2 million. So, the way to look at our business is that we have got Workhorse that is just starting deliveries in the next week or two. And over the next one or two quarters, we get up to that in excess of 200 a quarter for an annualized of 800 for the year. By the end of next year, we expect to have our West Virginia facility with plus or minus 500 vehicles on the school bus side. And the vouchers, we continue to see that contributing to a significant number of Marian deliveries. So, the sum of all those three provide for an annualized number in excess of 1,000 vehicles within the next year. And we – it’s not that we will achieve that a year from now. We will be seeing that exponential growth hit in the September 30 quarter and in particular, in the December 31 quarter. So, we believe that, that will get us through to – from where we are today into positive cash flow, which is something that will decouple us from really the rest of the EV OEMs that are in the medium and heavy-duty equipment or vehicle space. And that’s being a big part of the core focus of the group is that really focusing on the business and getting the business to positive cash flow as opposed to having other aspects of the business to talk about that have an impact on the business years from now. All of the hard work that the team has done over the past couple of years, is now coming into play with some significant delivery starting in this month that we are in now, which is part of the reason we wanted to do the corporate update now to really give the sense of a refresh of the business in the quarter that we have just started.

Before turning it to the Q&A, we did announce an acquisition this morning. There was a small cash payment and assumption of the very favorable obligations. The acquisition is of a company called Lion Truck Body that is headquartered in Southern California. It’s actually not that far from Long Beach, which has some advantages in terms of components and the like that we bring through Long Beach from time to time. The Lion Truck Body is and Brendan was onsite yesterday just tending to sort of final closing matters. And I know there is a lot of excitement on both sides. The Lion Truck Body folks who have done traditional bodies, when I say traditional on diesel, gasoline-powered and the like vehicles is they are very excited of doing a lot more work on all electric vehicles.

But what this does for us is that it expands our ability to better support the truck business. We have truck customers that are waiting the better part of 4, 5 or 6 months to get a body on our EV Star Cab and Chassis. The Instagram account for Lion Truck Body shows cubes and refrigerated vehicles and the like that they say they have done in a matter of a week or 2 weeks. And if we can even get it so that our vehicle can do a turn in under a month, we will be able to provide a service that nobody else is getting right now in terms of getting electric vehicle with the body that they want for their particular business that is done in a timely fashion as opposed to having to wait for and deal with supply chain issues.

And Brendan, did you have anything else to add on the acquisition? I know I have missed a lot of really key points.

[Brendan Riley, President]

Great, thank you. Pardon me, folks, I have got some allergies kicking in and the cough coming up. So, I beg your pardon in advance. The real, I think, compelling part of this acquisition besides what Fraser talked about as far as lead time is that the EV truck body space is fairly new and really developing. And all the truck bodies in the space have been developed for legacy vehicles that have internal combustion engines. And to that end, they were developed differently. It’s been – and if you look at the Workhorse product, which is a perfect example, their W-750 is incredibly compelling, because it’s a new body design, specifically for an EV and that makes – it’s not like you are just retrofitting a legacy diesel vehicle with batteries and electric motors, you are actually starting from scratch and changing the whole concept making it a much more compelling, longer lasting, more efficient, what have you proposition. With the Lion Truck Body, what really fascinated me with the company from Day 1 is Lion Truck Body had already developed a line of aluminum truck bodies, lightweight truck bodies, very efficient refrigerated units specifically to save weight, increased production time, and make the bodies more long lasting. And that’s something that the truck body based in general, which is the legacy business hasn’t been advance very quickly. So I could go to any of the wonderful truck body companies out there and get a body, but not exactly the body I wanted for an EV material-wise, design wise, so on and so forth. And the EV space is a space of small incremental improvements, so we continue to advance. And all of these improvements cumulative – are cumulative and make a big impact. But it takes a lot of effort to make these small improvements. And acquiring this company really gives us an opportunity to make truck body specifically for EVs, GreenPower or even our competitors, if they would like our body at some point. Thank you, Fraser.

[Fraser Atkinson, Chief Executive Officer]

Can you hear me? Okay, before getting into the Q&A, one question that Michael, Brendan and I have heard and with our stakeholders. So I’ll ask a question of us – and Michael and Brendan can sort of add to this comment. But one of the questions is being, well, where are you going to get cash to fund all this business? And the answer is really – I mean, there is many layers to this. But a big part of our financial requirement will be defined this fall. We don’t know how many deals we’re going to get on either the school bus satisfied fund yet for the EPA. But the EPA program is structured such that the deliveries that can start in October, you get 2 years. So we have lots of time to spread that out. But we also have inventory. So on some of the initial deals where they have – they can get the infrastructure in place quickly in terms of charging and everything else, we can make those deliveries. And we believe we’re one of the few, if not the only one with both the A and the D that can do that.

The second thing is that – the – as we talked about through this presentation is that we’re now delivering at a level that completely is at a totally different level than we’ve seen in any previous quarter. The highest number of vehicles we’ve ever delivered before is 44 in a court in the history of this company. We have a good shot at doing that this month. And let alone that through August and September, when the school buses really kick in is that, that’s just going to accelerate in the December quarter and the March quarter thereafter. So that’s the second point to make.

And the third is that as we’ve said on the last couple of earnings calls, we can see that this working capital requirement is on the horizon. So Michael, in particular, but as a team, we have been engaged and talking to and discussing various traditional financing with asset-based lenders and the like that are not necessarily requiring any equity where there is a traditional debt type financing. So if there is anything that we can communicate on that front at this juncture. But all I can refer to is our previous exercise that we went through 2 or 3 years ago, where our member that I sat along with a couple of other members of our team at one of the conference and being peppered on some recent announcements that we’ve made and everybody felt that while you’re going to have to go to the market and raise money. I said, no, that’s not the only alternative for us. And at that time, 6 weeks later, we announced that we had secured a $5 million facility from a traditional bank. No equity, a decent financial structure for the company, and it really helped elevate the company to the next level.

So we plan our business in terms of what we need, not just on a month-by-month basis, but over the next 2, 3 years. So as such, the combination of the inventory that we enjoy now that has a significant amount of finished goods that is – will be converting into invoices and cash is really kicking in, in this month of July, coupled with the – once we see where we are with the program this fall, then we can layer that in, in terms of what our financial requirement is and how we’re going to roll that out with our customer base. So it’s I think from a capital markets point of view, what we can do to decouple ourselves from the rest of the pack, which all seem to be moved in more or less the same direction on a given day is the delivery of vehicles and getting the business to positive cash flow. And that is what we see in the next two quarters.

[Brendan Riley, President]

Fraser, you mentioned earlier the Nano BEAST and the BEAST and it’s one thing we found, and I’ve been traveling coast-to-coast with that vehicle with Joe, Angeli and Michael Perez and our school bus team, you really see the difference between our products and all the legacy products and even the converted legacy products, which are basically the market right now for electric school buses besides ours. And those would be a traditional school bus that’s been modified to accept batteries and electric traction motor.

And when we travel coast-to-coast basically in the U.S. and going through these different districts meeting with different dealers and oftentimes the regulators to decide on the specifications, you really see how compiling our product is on a product basis compared to what is out there with competitors. The features we have the fact that we’re purpose-built on both platforms, our incorporation of the aluminum, very lightweight, get stronger body components, some of our compelling design differences, including a higher floor, keeping the passengers out of the crash zone making a fully flat floor.

So seating is more fungible and we’ve got better ability to add ADA accessibility and what have you without having to worry about humps on the floor and things of that nature. When you compare what we’ve got, what’s out there, it really is a shot in the arm for everybody, including the team and people are just wowed by our products. And that’s one thing we haven’t really discussed on this call is we’ve got not only a path to manufacture products, deliver products that I would consider superior to competitors. But our products, I also believe are superior to our competitors and which really gives us the trifecta of what we need in this space to differentiate ourselves from the entire class that we’re in.

[Fraser Atkinson, Chief Executive Officer]

Sorry, Michael, is if there is no questions, then we can wrap up our – go ahead.

[Michael Sieffert, Chief Financial Officer]

I’ll just pass it over to the moderator. It does look like we have one question in the Q&A queue. So moderator, could we please go ahead with that one question. And if want to prompt further questions that would be great.

[Operator]

Yes, sir. [Operator Instructions]

[Michael Sieffert, Chief Financial Officer]

Thank you.

[Operator]

And the first question will come from Tate Sullivan with Maxim Group. Please go ahead.

[Tate Sullivan, Maxim Group]

Hi, thank you all. Michael, to start just with the quarter that ended in March, an increase in deferred revenue by about $6.5 million. Is that related to the Workhorse contract? And can you review the public details of the Workhorse contract, how much they have to deposit ahead of deliveries? And should we forecast those deposits going forward, please?

[Michael Sieffert, Chief Financial Officer]

Yes. So there was a large upfront deposit. I don’t believe we mentioned previously exactly how much that was. But when you look at that deferred revenue number that you just quoted, that’s almost entirely that Workhorse deposit. And so what that does represent is a deposit for the entire contract. So you will see that slowly deplete over the term of the contract, which is to March 2024. However, I think when you’re looking at that contract, the right way to think of it is as Fraser said, on average about 200 units per quarter. And so that’s going to be scaling up quite rapidly. So we do have first deliveries starting in July but 200 per quarter is the right way to think of that contract.

[Brendan Riley, President]

Just add to that, Tate, is that – sorry. Just to add to that is we’ve disclosed no financial terms, but Workhorse, it was either Bob or Rick on one of their calls, did disclose that they had made and the initial deposit was $6.5 million.

[Fraser Atkinson, Chief Executive Officer]

Yes, that all ties, yes.

[Tate Sullivan, Maxim Group]

Okay, perfect. And you mentioned Fraser that – I mean, in the contract, it’s four, 1,500 units, but is there some variability potentially to that from Workhorse – excuse me, in terms of the timing that they take those deliveries. Is that dependent on customer orders on their side or can you talk about timing of delivery or is there contracted already?

[Fraser Atkinson, Chief Executive Officer]

Well, there is a mechanism that allows for a variance on a monthly basis and then that variance is made up over the next several months. So if you look at it, if you drew a line and said, okay, this is what the agreed on number, it could fluctuate up and down a little bit, but it will all get to ultimately the endpoint of March 2024 with 1,500 vehicles.

[Tate Sullivan, Maxim Group]

And Brent, I think as you – or Fraser, maybe you gave details on the New Jersey HVIP program or being very similar to the California program. Is that mostly the demand that you’ve seen from the New Jersey voucher program mostly for EV stars at this point or for buses or both? Can you comment on that if possible?

[Fraser Atkinson, Chief Executive Officer]

Sure. I’ll start and Brendan can weigh in. But it is one of the best in terms of certain classes of vehicles. So California is more favorable with some types and New Jersey is better on others. But on the New Jersey side, the – I’d say the majority of what we have either approved or even in pending relates to our 22-foot cargo. So the deliveries that we stated in our presentation today, a big chunk of those through the next month are going to be for the 22-foot cargo into New Jersey. And the nice part about that is that we are seeing refresh. I think it was more than 10 in just the past month for the collective programs and we haven’t been – had that ability to continually sell off a voucher program for, I’d say, almost 4 years.

[Brendan Riley, President]

Yes, that’s exactly right, Fraser. And what Fraser means by refresh is that this program continues to be available out there. There still are funds on the New Jersey VIP program and it allows – it’s allowing for continuing sales where HVIP would, as we stated earlier, in some cases, be out of funds in a matter of hours. So it was Christmas for an hour when HVIP came out and for the New Jersey VIP program, it is the gift that keeps giving.

[Tate Sullivan, Maxim Group]

Okay, thank you all.

[Fraser Atkinson, Chief Executive Officer]

Thanks, Tate.

[Operator]

[Operator Instructions] Our next question will come from Greg Lewis with BTIG. Please go ahead.

[Greg Lewis, BTIG]

Hey, thank you and good morning, everybody. I did have a question first around the decision to bring in Lion Truck. Obviously, they were a supplier. I guess as we think about building out the business, longer – medium, we will say, the medium-term. Are there opportunities for you – for GreenPower to continue to kind of acquire other suppliers or maybe even other companies that would kind of make GreenPower more of an integrated OEM?

[Fraser Atkinson, Chief Executive Officer]

Absolutely, that opportunity exists. And as it relates to – I’ll start this off and Brendan can certainly elaborate further. But the Lion Truck Body is something that we needed to do. I mean it was quite simply that the truck dealers that we’re engaged with, not just in California, but across the nation, are looking at – when they buy a Cab and Chassis, they are going to do something with it. They very rarely just turn around and sell it to a customer. They are buying it to then engage or get quotes from multiple different body builders and get the body built. What we’re encountering is that the initial deals that we have been doing the time line is up to 6 months in terms of getting the quote, getting the specs, getting it built, getting it delivered. And then as Brendan says, and this is one of the keys as they build it out as if they are building it on to a traditional ICE platform. It’s not the body that they are building isn’t necessarily integrated with our Cab and Chassis for an EV. So that, I think, is one of the key things that we see in this Lion Truck Body is that this will be integrated instead of the truck body company getting an integration manual from us and then working it through is it will be more of a push approach for us dictating exactly how that integration works. And I think that will help accelerate the adoption of the bodies for the EV platform. So in other sectors, going back to your initial part of the question, to the extent that, that opportunity will exist in other areas of our business, the answer is absolutely, this is something of interest – but we’re not interested in overpaying for something that we can just build out in due course. So it’s – whether you buy or you build is always a question you have to go through on both sides, but this particular deal, it hasn’t – it’s very cost effective, if you will, in terms of the price to GreenPower and gets us into the game right away in terms of not having to build up and sustain a cost that would be a multiple of this has caused us to get into.

[Greg Lewis, BTIG]

Great. And then...

[Brendan Riley, President]

Greg, can I just give a – an anecdotal example here of a product that we are working on delivering the first up with Lion Truck Body. So refrigerated trucks, you probably know they have a box on the back with a refrigerated unit, and people usually use those to distribute food anything that requires cold storage, what have you in the delivery space, well, that’s an attractive space and it’s ubiquitous across the country, actually, across the world, people want to ship stuff, keeping it fresh and cool. Traditionally, when people – when companies built refrigerated units, they would have to use low voltage refrigerators, which worked with internal combustion vehicles. In our case, our vehicles run at high voltage. That’s the fuel of our vehicle is the high voltage. So we’ve been able to develop a product with an integrated high-voltage refrigeration unit, increasing the efficiency of this product about 20%. This means lower cost of products. This means lower cost of manufacturing in some of the components that goes into it. It means longer range of the vehicle and it just means lower operating cost of the vehicle long-term. Those are the types of developments that you can do when you own it, even though there is a very small addressable market, the other – hopefully, what we can bring out by owning this truck body company is now a new generation of body specifically tailored to electric trucks. We think that it will actually move the industry. And just so you know, Greg, we still intend on continued use of other truck body companies throughout the country. It’s a very regional business. It’s not like we’re doing this instead of that. This is in addition to other options.

[Greg Lewis, BTIG]

And then just following up on that, I guess, obviously, Lion had more customers beyond GreenPower. Does GreenPower now planned to be third-party provider to other companies with Lion or is that something now where this is going to be primarily for GreenPower vehicles only?

[Brendan Riley, President]

No, there is enough capacity to continue to take care of the legacy customers also the continuing customers. And we intend to keep satisfying them as Lion Truck Body has in the past.

[Fraser Atkinson, Chief Executive Officer]

And historically the majority of their revenue was generated from third party. There is very little on a historical basis, so as in their numbers that related to a GreenPower sale. We’re going to be incremental.

[Greg Lewis, BTIG]

Okay. And then just one more for me, I mean, clearly, we’re in a build ramp heading into – we’re in the kind of the season for school bus deliveries. Is there any way to kind of think about the ebb and flow of inventory and working capital, I guess, for Mike, as we think about like on a seasonal basis, i.e., should we be thinking about inventory peaking around your fiscal year-end and then kind of moving lower throughout the year before then picking up, I guess, heading in the winter? Is that kind of a way to think about it or are we kind of in a trajectory where at least the growth is in front of us. So it’s just going to kind of keep building higher?

[Fraser Atkinson, Chief Executive Officer]

So, I think I’ll start this, Michael, that the biggest impact that we can have on that is the throughput. And what we’re doing in West Virginia, which won’t have an immediate impact, but over the course of the next year, we will have a significant impact as we see that cutting our total cycle time in half. So if we can take a production cycle that was 6 to 8 months and turn it into 3 to 4 months, that’s what accelerates our inventory in response to that question. And that’s the biggest impact, the faster we can increase our production. So what we’re doing on the Workhorse deal, which will get better and better over the next couple of years on Cab and Chassis. Likewise, with the initially Nano BEAST and ultimately, the BEAST is increasing or reducing the production time will allow us to turn that inventory that much faster and get to a lower inventory level in relation to the cost of goods sold number.

[Michael Sieffert, Chief Financial Officer]

Yes, I would echo that. And the one thing I would add is just in terms of your question in terms of seasonality, I think seasonality would be something that we would expect to see when we’re at a more steady state just given the rapid growth that we see over the business over the next couple of years, I don’t think you’re going to see that seasonality that you spoke about. Further Fraser’s question, what we are seeing right now is in certain core categories where we are seeing a lot of significant demand. We’re seeing fairly rapid depletion of finished goods. And so yes, I think to Fraser’s point, overall, you are going to see quicker turns. And – but definitely, you are not going to see inventory ramp at the same rev as cost of goods sold or as sales.

[Greg Lewis, BTIG]

Okay, great to hear it, guys. Thank you very much for the time and have a nice weekend.

[Fraser Atkinson, Chief Executive Officer]

Thanks, Greg.

[Operator]

The next question will come from Steve Emerson with Emerson Investment Group. Please go ahead.

[Steve Emerson, Emerson Investment Group]

Well, this is following up on Greg’s inventory question. What kind of ratio of inventory to revs, do you think is appropriate, let’s say, end of ‘23, end of ‘24 as component deliveries normalize and availability improves and then as a corollary, Fraser, you mentioned you’re seeking hard asset lending? How much are you seeking and I would imagine traditional low-cost industry finished goods or inventory financing should be pretty available.

[Fraser Atkinson, Chief Executive Officer]

Michael, I’ll start then. So on the – I think the answer we gave Greg is really without getting into future financial numbers because we have not issued guidance and our position is till we hit cash flow, positive cash flow, we’re – and given all the supply chain issues and other things that we battled over the last couple of years, that’s probably been a good call. But until we’re at that point, it’s hard to give us hard ratios but it really does come – the inventory in relation to cost of goods sold is impacted by the repeat deliveries to existing customers. So whether it’s a workhorse, whether it’s existing vouchers or the school bus, which we’ve been holding inventory for the school bus sector. So, if I can take a quick aside on that, what I mean is, late last year, early part of this year when Brendan, Michael or Joe were talking to school bus customers, they were often looking at the programs and saying, well, the beds are going to come out with some money for the, so I am going to win. And we had that with the school bus set aside fund in California. We had that with the Fed. Now those programs are open. But they are not approved. So, we are now waiting for their approval letters to get out and the next tranche will be what deals that we secure, either in California specifically or off the EPA program this fall, can we move quickly relative to the infrastructure that they are putting in place at either a fleet operator or a school district. And so we have the initial inventory for a number of those early deliveries. And so as California, we are going to push to get some delivered this summer and the EPA will be this fall. And that will help change the dynamic between the inventory we are holding and the cost of goods sold right out of the gate, same thing with Workhorse. Brendan and the team have been working on building up. We didn’t just sign the deal and announced the deal, I believe at end of February, early March with Workhorse. Brendan and the team were working on supply chain and securing aspects of that, which end up in the work in process in our inventory. So, that is the first part of the relief of that is the deliveries that we talked about in this presentation that are occurring this month. I know Brendan this week was showing a number of things that he is organizing for those deliveries. So, it’s pretty exciting for us that sort of the culmination of all those not just months, but quarters of work that are reflected in an inventory. So, with Workhorse deliveries and in effect, liquidating the inventory we have been holding for our folks that were simply waiting for take advantage of programs you are going to see us rightsizing our inventory and leading to a better mix between the inventory we have and the cost of goods sold. So, without getting into ratios, that’s probably the best explanation I could give you, Steve, on that part of the question.

[Steve Emerson, Emerson Investment Group]

Okay. Let me take you a little further. One analyst is using an estimated $40 million in inventory March ‘23 versus revenue of $26 million which to me sounds absurd and then the following year, $51 million inventory for $46 million revenues, which, to me, again, is totally absurd when normal manufacturing, you think no more than 90 days of inventory or inventory in the out year going from $53 million to $15 million. So, that makes all the difference on financial viability and any better color or again, a question of how much inventory financing, do you believe it’s appropriate that you are seeking?

[Fraser Atkinson, Chief Executive Officer]

Well, I think Michael can get into the details of the numbers you said it, but if I understood those $26 million of sales if we just for illustrative purposes, said the cost of goods sold is $20 million and have $40 million of inventory, that suggests that there is like 2 years. That makes no sense at all. But what does make – what we have said on this call is that with the Workhorse, the September 30, quarter that we are in right now is the initial ramp and into the December and subsequent quarters where we are getting into the 200 a quarter, which is a simple math of 1,500 in the order divided by the seven quarters that the deliveries relate to is more than 200 a quarter. So, you factor that in per quarter, along with school buses that have sort of a similar type ramp, some initial deliveries this summer for these various funding programs and then increasing this fall is you layer that on along with the vouchers. That’s a totally different run rate than what you have just outlined.

[Michael Sieffert, Chief Financial Officer]

Yes. So, Steve, just very quickly, this is Michael Sieffert. I would echo what Fraser just said. And to your questions in regards to financing, I am going to say what we have said on prior calls and that we are in discussions with a number of different parties. Those would be traditional banks as well as other non-bank financing groups, which at this point, we are not able to speak to specifics. And certainly, when we have something that we can discuss in more detail, we would be happy to speak to this on the market. But at this point, it’s premature.

[Operator]

The next question will come from John Hope [ph] with American Research. Please go ahead.

[Unidentified Analyst]

Good morning gentlemen. Fraser mentioned the capacity of manufacturing 500 buses in a year and that 350,000 that’s $175 million in revenues. Could we be seeing revenues in excess of $200 million a year, a year or 2 years from now?

[Fraser Atkinson, Chief Executive Officer]

That’s – I like the way you have framed that, John. That’s – and the only correction I would make is that you would need to blend in the A with the D. So, if you took the way that Brendan and Mike and I look at this is that our MSRP on our Nano BEAST is under 300 or Type D is over 300. But if you have a mix of As and Bs in any given period then on average, 300,000 number is a fairly reasonable number to apply. So, 500 in terms of our target by the end of next year on an annualized basis, times that 300,000 would be $150 million of revenue per annum. So, absolutely – and just on school buses, not on any other business that we have in front of us.

[Unidentified Analyst]

Governor of Justice of West Virginia announced a new steel state-of-the-art factory, is there going to be an incentive for GreenPower to use West Virginia suppliers. And will such steel factories help you with your supply line?

[Fraser Atkinson, Chief Executive Officer]

Well, you should go with either myself or Brendan on our next trip because where we are in the car, we are like, oh, we are dried by some of these – I mean there are some big facilities there. The stamp, which is risk across the street from us, in World War II, they manufacture almost all the ammunition for the various U.S. services. So, there are some big facilities there, and there is several that we have our eye on once we get established and once we get built up. Going back to Governor of Justice’s comments, it’s a great state. Every time we are there, it just reaffirms our decision to not just have a facility there, but more importantly, a partnership with somebody who is going to really help us. When we did the DC event, we have to give a nod to Joe Manchin’s office and Senator Capital’s office that they were super helpful in helping us get that set up, which brought so many different parties, including both parties from both sides of the aisle into an event that resonates with everyone that has, in particular, school children. So, getting back to the governor, he is a big fan of what we are doing and he really sees the need to push the kind of business and industry that we are in.

[Brendan Riley, President]

Yes. And John, we are currently customers of Constellium. We use Constellium aluminum for the bodies of all of our school buses. And there is a Constellium facility that sells, manufacturers, the aluminum that we use in our – in the building of our school buses in West Virginia. So, the answer is yes, we are already going to be leveraging some West Virginia manufacturing.

[Unidentified Analyst]

Can you gentlemen please comment about the Jupiter Wagon agreement in India? Jupiter just announced that they have gotten a significant contract for the infrastructure for mass transit system. Do you have any comments to your new relationship with them?

[Fraser Atkinson, Chief Executive Officer]

Well, I will make one other – Brendan can speak to the – I mean we are very actively involved in getting our right-hand drive [indiscernible] to their market and the initial demo. So, I will let Brendan speak to that. But the other thing to add is that they just went public on the Indian market. So, they really increased their profile. And so what you have just referenced along with their capital market strategy is all new in relation to when we originally entered into a relationship with them to move forward our right-hand EV Star Cab and Chassis.

[Brendan Riley, President]

Yes. And Fraser just really hit the nail on the head. We are still working on the vehicle specifications, finalizing the build and setting up demonstrations for the first vehicles, the prototypes that are going out in the market to demonstrate. I expect to have an update through the market soon. We just don’t have that information right now.

[Unidentified Analyst]

Do we have an update on the Forest River deal?

[Brendan Riley, President]

The Forest River deal is we – Forest River has purchased five of our vehicles. They have not completed the integration of a new body onto the GreenPower Cab and Chassis when that integration is complete and testing validation goes on, we will see where that goes. But right now, we are still working with Forest River on fully integrating. They had to develop an entire new bus body for our cab and chassis. So, that is I think has taken longer than at least we had hoped, but I will update you as soon as I have more visibility on where that relationship is going.

[Fraser Atkinson, Chief Executive Officer]

But I think it highlights our acquisition of Lion Truck Body that it’s not – you just can’t take an existing body and throw it on an EV platform. It just doesn’t work that way. And so they have kind of learned the hard way because they thought, well, we will just take our start graph body and put it on the seat. It doesn’t work. And so they didn’t abandon the project. They took a step back and said, okay, we have got to do a proper integration. Our team has been involved with them throughout that process. So – but we have taken the approach that we will tell the market that when they have got the five done and what next steps there will be when they have got the five done.

[Unidentified Analyst]

And my last question is also a statement. I want to congratulate you on your fundamentals being bicoastal in manufacturing plants in Portugal as well as in West Virginia and being able to reach out into the marketplace and diversify your product line and offer CCs to even the people like Workhorse. My last question is, is the institutions are they recognizing your increase in fundamentals? And is the institutional interest in the GreenPower stock increasing?

[Fraser Atkinson, Chief Executive Officer]

No, they don’t recognize it. But yes, we have seen a significant uptick in our conversations. And we do, from time-to-time, deal, non-deal road shows and the various web – utilizing various web services and attending conferences. But the last couple of months have seen a very renewed interest in what we are doing is people can see that our company is going through a transition from what we have the quarterly deliveries to a different model in the coming year. Back to your comment about the manufacturing, as I appreciate your comment in that regard and also the fact that what we are doing is we have a view that if you build a manufacturing facility and spend hundreds of millions of dollars, at the end of the day, that’s coming from shareholders. Your – a big chunk of that is going to come from the equity market. So, Brendan and I, we spend a lot of time looking for a factory-ready facility that could build a decent number of units. But the key is we can do that same thing somewhere else too. So, what we are – this creates a center of excellence for school buses. It gives us an East Coast distribution. The State of West Virginia is literally south of the State of New York, which has almost 50,000 school buses out of the 485,000 in the nation. So, all those things speak to how the location we have chosen there, but also the building and the partnership we can also, in due course, do that elsewhere. And ultimately, in a number – a year or 2 years down the road, that same sort of approach can be duplicated outside of North America.

[Unidentified Analyst]

I have one last question for you. I believe it was in 2021, Fraser was asked a question in regards to battery and range of battery. And I believe Fraser – excuse me, I am not trying to put words in your mouth, but I believe you said something along the lines that we want to find the best quality battery with the best range that’s on the market. Are your vehicles being set up to where you could just replace those longer distance battery in them?

[Fraser Atkinson, Chief Executive Officer]

Well, I will start and Brendan can expand on this, is that we use a chemistry LFP, lithium ferrous phosphate. Coincidentally, Tesla, which has traditionally used a lithium-ion approach with their batteries when they hit the market in China, with their Model 3. They determined that their cost structure was upside down with their approach and what did they do, they went to LFP for their Model 3. So, it’s stable. It gives a great charge, discharge curve in turn, and it gives the charging cycles that we need. It’s still a little heavier than some of the other chemistries. But frankly, Brendan and I, every time we talk to people, talk amongst our group. I just – we are always happy with the approach we have taken with the underlying chemistry. In terms of who does manufacture those is, for us, it’s key to make sure that we buy a lot of cells that go into the two packs that are – make up our 118 kilowatt hours that go into our EV Star platform. And so it’s absolutely critical that they have the same. The more they are the same, the more reliable they are going to be and the more reliable the charging and discharge is going to be as opposed to having one or two cells that are off are out of spec in terms of the voltage. Now you have a problem from day one. And we have learned that in terms of our own experience with some deployments where you work it back and you determine that that the consistency of the spec was off on one or two cells that are – that we install in our battery packs. And I think Brendan and I won’t name all the different team members, but there is one in particular that works with Brendan that they have just done a great job of managing supply chain so that our cost on the battery cell side just hasn’t exploded which some of our competitors have encountered as you can see in their numbers or their cost of goods sold is equal to their revenue and they are not able to generate a GP. So, there is a lot that goes into the decision, but it’s – the truism that we stick to is that having a really highly reliable battery cell that is consistent with each cell that we bought.

[Brendan Riley, President]

Yes. And John, Fraser is exactly right. It’s the reliability factor, you can have – you can talk about range all day long. But in the commercial space, the vehicle has to charge and discharge efficiently and reliably. And before we make any changes to what’s really working well, we have to do a very involved validation. So, we are validating higher capacity, which is higher energy density and higher power density batteries. But we have not made a decision to change that battery yet because we have not validated it to the point where we are comfortable. Just to give you an example, we have EV Stars that are already pushing 200,000 miles with losing less than 5% of initial battery capacity. So, we have EV Stars that are getting to a very old and well used that are in the field that are run every day. And basically, they are either on the charger or driving customers, making money for somebody. And that is, from my perspective, so compelling from a cost and reliability standpoint, that it’s going to take a lot for us to make any quick changes. We don’t want to chase the range dragon as they call it in our space. We really want to make sure that we follow reliably, safely all the most. But to answer your question, yes, we do have a form factor and a platform where we can add, just pop in a different pack. The battery management system is in the pack and up those in and have longer range that is a possibility and something we could do.

[Fraser Atkinson, Chief Executive Officer]

Yes. Just – you didn’t ask this question, John, but just to extend the discussion from the actual battery and what that means translating it to the real world application is that our EV Star platform is – it could address other classes, but it addresses the Class IV market, and that has a growth volume weight or GVWR of 14,300 pounds of 6,500 kilos. So, that’s sort of your top level. The curve weight, if I put it for it down here is a number that gives you – before we put anything on as far as the body on that EV Star Cab and Chassis platform gives us 7,900 pounds to work with. And so you put more batteries on that 7,900 is less or that’s the trade off, our competitors, they don’t have a platform or a chassis that they built from scratch that is a clean sheet or a skateboard design that optimizes all of that sort of stuff. It’s in many cases, in the school bus space, for example, most of our competitors are buying E450 from Ford that is competing with our Type A Nano BEAST. We build our body with an aluminum frame, it’s very lightweight, and it’s got a better strength, it’s safer. And so we put a body on that gives you, at the end of the day, a maximum capacity where we can have a wheelchair lift with a rear curbside door with different seating configurations. We don’t have to worry about limiting that. We can do all that in our Nano BEAST and still be within that growth volume weight with the number of passengers that we are able to offer. So, that’s the combination that we are able to deliver with the EV Star platform is we can give the combination of range as well as the payroll.

[Unidentified Analyst]

Well, speaking of quality, I believe it was 2 years ago when GreenPower had their bus Altoona rating. And I believe 2 years ago, you were the highest-rated Altoona rated bus from all your competitors. I believe you are 10 points higher or maybe it was 8 points higher than your closest competitor. Even though it’s been 2 years, does anybody have a higher Altoona rating on their best than GP?

[Fraser Atkinson, Chief Executive Officer]

I haven’t looked recently. But I know…

[Brendan Riley, President]

I check regularly. I still believe we are the highest score that they published, so far of any medium or heavy-duty bus of any type. Thank you for that John.

[Unidentified Analyst]

Well. Thanks both. I think you have so much dug going on in your company and it’s interesting when I see these other rating agencies, they don’t seem to look at the entire picture and your breadth and depth of your business model. And so I appreciate your time gentlemen. Thank you for answering all my questions. Congratulations on your increase in fundamentals and you guys have a great weekend.

[Fraser Atkinson, Chief Executive Officer]

Thank you, John. And I note that we had no other questions, which is great because we have a hard stop shortly. But we appreciate everybody who participated as well as listened in on our call. And I think collectively, we can say stay tuned. We have a number – can’t wait to be updating our stakeholders in terms of those initial deliveries and the successes we see on the various school bus activities as well. So, once again, we really appreciate our shareholders and stakeholder support.

[Brendan Riley, President]

Thanks everyone.

[Michael Sieffert, Chief Financial Officer]

Thank you.

[Operator]

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.