GreenPower Motor Company Inc

XTSX:GPV

Earnings Call Transcript 2023-Q4

[Operator]

Hello, and welcome to the GreenPower Motor Company Fourth Quarter and Year End Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would like now to turn the conference over to Michael Sieffert, CFO. Please go ahead.

[Michael Sieffert, CFO]

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 financial results for the fourth quarter and 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&A filed on SEDAR and on EDGAR. In addition, these forward-looking statements relate to the date on which they are made. We anticipate 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 NDA filed on SEDAR and on EDGAR and is also located on our site at www.greenpowermotor.com.

I will now pass the call over to GreenPower’s CEO, Fraser Atkinson.

[Fraser Atkinson, CEO]

Thanks, Michael. This was a record-setting quarter for GreenPower as we recorded revenues in the fourth quarter of $15.3 million, more than 3.5 times the revenue of $4.3 million for the fourth quarter in 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 $39.6 million in the 2023 fiscal year, an increase of 130% over the previous year's revenue of $17.2 million, 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 an ATM or at-the-market offering. During the year ended March 31st, 2023, we had raised gross proceeds of $4.9 million, and in April, we raised another $520,000 with the ATM. We have not been on the ATM since that.

We have an $8 million line of credit with BMO. At year end, we are on our line of credit for $6.6 million and have $600,000 of cash in the bank, effectively giving us about $2 million of available funding. At the end of last week, we were not having to utilize any of the line of credit. In other words, we are completely off our line and had approximately $1.5 million of cash. So we have gone from available funding of $2 million at year end to approximately $9.5 million 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 Nano BEAST school buses with deliveries for the first orders for these utilizing current inventory.

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

[Brendan Riley, President]

Thank you, Fraser, and thank you everyone on the call today. Not only did we record amount of our battery electric vehicles, some of the first that we accomplished over the fiscal year, things were -- that we delivered our first new EV Star Cargo 22-foot fan. 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 BEAST.

So the firsts were important for us. Our Nano BEAST won an award last year at the STN Network, which is currently going on and deliveries of those have started. And as excited as I am about the 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've 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.

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 it's become a second hub for our after-sales and administrative report as well as providing sales for the Eastern and Midwest of the US.

School bus production training with our education partner, BridgeValley College, located 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. This is where four 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 GreenPower BEVs or battery electric vehicles, without changing the way a school district performs their existing operation.

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 strategic decisions on how we allocate to spend those resources on sustainable and profitable growth.

Now, I'd like to turn it over to Michael Sieffert, GreenPower's CEO who will cover the quarterly and year-end financial highlights.

Michael Sieffert

Thank you, Brendan. The 2023 fiscal year highlights included, we generated record revenues of $39.7 million which was an increase of 130% over the previous year's revenue of $17.2 million. Gross profit for the year was $7.3 million compared to $3.9 million 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 31, 2023, we reported deferred revenue of $10 million, which includes the current portion of $8.1 million. Working capital improved to $27.7 million at the end of the fourth quarter compared to $25.7 million at the end of the third quarter. We finished the year with inventory of $41.6 million and this included $31.9 million of finished goods inventory, which was primarily comprised of EV Star Transit Pluses, EV Star Cab and Chassis, EV Stars, EV Star Cargos, and BEAST and Nano BEAST school buses.

During the year, we closed the contracted lease purchase in May 2022, and in August, we took possession of this 80,000 square foot facility in South Charleston, West Virginia to 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 $4.8 million 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 $1.5 million term loan that has a maturity in May of 2050 and an interest rate of 3.75%.

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 revenues have declined from 133% in the first quarter to 36% in the fourth quarter. This demonstrates the improving operational leverage in our business model as revenues have steadily increased.

Inventory at March 31, 2023, was $41.6 million, which was 3.2 times our fourth quarter cost of goods sold. This was a significant improvement over the prior year, as inventory at March 31, 2022, was $32.3 million or 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.

We'll now open the call for Q&A. Operator, please open the call for questions.

[Operator]

We will now begin the question-and-answer session. [Operator Instructions] At this time, we will pause momentarily to assemble our roster. Our first question comes from Craig Irwin of Roth Capital Partners.

[Craig Irwin, Roth Capital Partners]

Good morning and I should start with the congratulations for the strong revenue result. Fraser, can you maybe give us a little bit more color on the West Virginia facility and the potential tempo of deliveries of both BEAST and Nano BEAST from that facility and then of course from inventory given that you do holds units or you did hold units coming to this calendar year?

[Fraser Atkinson, CEO]

Well, I'll start with the West Virginia and I think Brendan can probably provide some additional color commentary. But we had during the year or -- I shouldn’t say during the year, but more recently, we have undertaken our production of our Nano BEAST, which is the first production of those vehicles in the West Virginia facility and we're currently organizing to produce the larger Type D BEAST school buses in that facility as well. And that will be on the heels of first tranche of the Nano BEAST.

So ultimately over the course of this current fiscal year we're now in is 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. And I think we've been very successful in bringing it down to, as measured by what we sell in a particular quarter or 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 eight quarters to just over three quarters of effectively the inventory that we're holding.

So much, much better utilization of that inventory and that's a continued goal through the next year. And as a result of that, our -- that has significantly helped or assisted us with our available funding. Brendan, anything to add on the West Virginia?

[Brendan Riley, President]

No, Fraser. You did a great job. Thank you.

[Craig Irwin, Roth Capital Partners]

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 cab and chassis sales away from Workhorse. 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 color on the EV Star Cargo and Cargo Plus, what the market uptake looks like, what customers are saying with these now in commercial customer hands?

[Fraser Atkinson, CEO]

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 Claus Tritt, right now he has 42 live orders and 140 -- 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 cab and chassis to a 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.

And then on Workhorse, we're continuing to deliver vehicles and they have publicly announced that their W750 that utilizes the EV Star Cab and Chassis is now going through their production process and entering the market in terms of sales in their Q3. And so we -- 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.

[Craig Irwin, Roth Capital Partners]

Helpful. And so if I could ask a Workhorse-specific question, right? This quarter, 108 cab and chassis, up from 85 last quarter. The 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 will both go up and down over the next number of quarters? Should we see that build gradually? Any color on sort of the way we should model this for the course of your fiscal '24?

[Fraser Atkinson, CEO]

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 are, become our successes. And so we really need another quarter or two under our belt to see how that throughput is looking. But we -- I view them as a very strong partner in terms of any issues or the actual production flowthrough and things like that are -- 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's some significant upticks and we need to be adjusting our deliveries to accommodate that.

[Craig Irwin, Roth Capital Partners]

Understood. That makes complete sense. So last question for me before I jump back into the queue. Today is what, July 17th? And it's more than two weeks past the end of your first fiscal quarter for ‘24. 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 fourth fiscal quarter?

[Fraser Atkinson, CEO]

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 is -- it was a herculean effort by the finance team in particular. So that was kind the primary focus. And we really haven't had a lot of public communications on what were -- where we were at the end of June or where we are with both the commercial vehicle group and the school bus group with some of the key activities there. 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.

[Craig Irwin, Roth Capital Partners]

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

[Fraser Atkinson, CEO]

Thanks a lot, Craig.

[Operator]

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

[Tate Sullivan, Maxim Group]

Great. Thank you. Thank you, Fraser. You mentioned managing your cash position partly with inventory management, but also you have the $3 million deposit from the state of West Virginia, subsequent to your fiscal year-end on a $15 million order. What should we expect? Additional deposits with additional orders from the state of West Virginia or [counties] (ph) or was that just the starting order, please?

[Fraser Atkinson, CEO]

Well, it's a very significant order and in terms of the number. We didn't scan the marketplace to determine if this is the highest single order, but 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 in 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.

[Tate Sullivan, Maxim Group]

That's a great deposit number. And then on the 63 school bus orders and I think you mentioned before in your answer to the other question, so in the near term more Nano BEAST deliveries and then shifting to more BEAST deliveries? Is that fair? Did I hear that correctly?

[Fraser Atkinson, CEO]

Well, it really depends what the region is, and that the BEAST, which we can we can actually configure for up to 90 kids. That's the -- caters grade 6 level. The high school allows for fewer kids within the school bus because of this size differences, but the 90 is -- generally we're finding a lot of the orders 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 run. So that fits a very specific need and requirement.

The Nano BEAST is more like a Swiss Army knife. It really accomplishes a lot of different objectives. There's fewer number of passengers, its more -- is 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 IV 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 is with the wheelchair lift in the curbside rear of the vehicle.

And so that particular configuration is one that really accommodates all of the different requirements that the school district has, that the larger -- our larger Type D school bus can't necessarily accommodate. So that has a fit for totally different market. And 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 Type D larger school buses. 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.

[Tate Sullivan, Maxim Group]

Thank you. And last for me, you mentioned 42 live orders for EV Stars in configurations and 141 signed purchase orders. And I think you mentioned before, turning the -- switching those signed purchase orders to live orders depends on the voucher timing or is that not the case for all those signed purchase orders?

[Fraser Atkinson, CEO]

Some of them do have vouchers and principally New Jersey or the California HVIP. The -- but some of them are related to setting up delivery. So getting the agreed-upon delivery time. So we could have a specific vehicle, 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 cab and 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.

[Tate Sullivan, Maxim Group]

Okay. Thank you, Fraser. Thank you all.

[Operator]

Our next question comes from [John Abe] (ph) of American Research Media. [Operator Instructions] Go ahead, John.

[Unidentified Analyst]

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

[Fraser Atkinson, CEO]

On the school bus side, it is a mix, but there are more of the Type D than the Nano BEAST Type A.

[Unidentified Analyst]

So we'll see -- that's a large revenue infusion for the company if those in fact do transfer. So most of you inventory --

[Fraser Atkinson, CEO]

You're absolutely well, and not if they transfer, but when they transfer on to 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 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.

[Unidentified Analyst]

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?

[Fraser Atkinson, CEO]

Well, the -- I mean that's a great question, is that, Brendan in particular has talked about taking Lion Truck Body from a regional to a national player and 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's 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.

[Brendan Riley, President]

Yeah. It's -- 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 shift them to our dealers that do body assembly and the kits are designed for -- like a dealership to do that might have a body shop to do body assembly because the bodies 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 Lion Truck Body locations, but also to be able to have the products so it's -- in such a modular format, that it can be built and serviced and maintained even through our dealership network.

[Unidentified Analyst]

And in West Virginia, with the cost of living and the cost of labor being in the lowest -- one of the lowest percentiles, of any state in the United States, it just seems to me like it's a bit crowded to build all these different products in just 80,000 square feet. 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?

[Brendan Riley, President]

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 and -- 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 also.

[Unidentified Analyst]

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

[Fraser Atkinson, CEO]

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 and that price is in -- price sensitivity is incredibly high regardless of whether it's a new product or product has been around 100 years.

So we are taking our -- the approach in that market on a very measured basis, which is get the product out there, see what the uptick is, see how it fits in the supply chain, and that there's a leg 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, they are 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. And -- but the approach we're taking is very, very measured to make sure we -- that we understand where our product can have success before we're spending an incredible amount of money to move that forward.

[Unidentified Analyst]

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

[Fraser Atkinson, CEO]

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

[Unidentified Analyst]

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

[Fraser Atkinson, CEO]

No, it doesn't.

[Unidentified Analyst]

Well, thank you very much.

[Fraser Atkinson, CEO]

And if Claus is -- if Claus 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 3500 Sprinter, was kind of the go-to for the smaller recreational vehicles. So that's something that he has had experience with and with a product that had an awful lot of [success] (ph) as well.

[Unidentified Analyst]

He came out of Canoo. Is that correct?

[Fraser Atkinson, CEO]

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

[Unidentified Analyst]

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

[Fraser Atkinson, CEO]

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

[Unidentified Analyst]

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

[Fraser Atkinson, CEO]

Well, 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 itself when we're able to get it out door and have our earnings call.

[Unidentified Analyst]

Well, thank you very much, gentlemen, for fielding my call this morning. Congratulations in all your success.

[Fraser Atkinson, CEO]

Thanks, John, and all the best.

[Operator]

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

[Fraser Atkinson, CEO]

Yeah. Just to conclude our call, thanks for those that 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 has its own challenges as a sector as a whole. We've had some ups and downs and some extremes related to those. But our focus of -- 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. And as we've noted several times in 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 fiscal year, we were at over eight quarters in terms of that throughput. And at the end of this most recent fiscal year, we were at under four, just 3.2, 3.3. So that just illustrates the significant improvement that we made in that one area with our overall business model.

So look forward to providing updates in the marketplace in terms of our ongoing successes and look forward to being engaged 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.