GreenPower Motor Company Inc.GPNASDAQ
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Operator: Good morning, and welcome to the GreenPower Motor Company, Inc.'s Third Quarter Earnings Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. And I would now like to turn the conference over to Michael Sieffert, CFO. Please go ahead.
Michael Sieffert: Thank you. This is Michael Sieffert, Chief Financial Officer of GreenPower Motor Company. I'd like to welcome everyone to our call to discuss GreenPower's financial results for the three and nine months ended December 31, 2024, and to provide an update on GreenPower's operations and manufacturing. 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 discussed by these -- 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 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. For additional information on the results of operations for the period ended December 31, 2024, you can access the financial statements and MD&A posted on GreenPower's website as well as on sedarplus.com or filed on EDGAR. I will now pass the call over to GreenPower's CEO, Fraser Atkinson.
Fraser Atkinson: Thank you, Michael, and good morning, everyone. We appreciate you joining our call to review GreenPower's operations and discuss the results of the third quarter. As I look at the financials of the third quarter, I'm encouraged with the improvement in our gross profit. GreenPower has from quarter-to-quarter being one of only a handful of EV OEMs that have enjoyed a gross profit with the sale of its products. We knew there would be a reduction in that overall percentage as the West Virginia facility got fully up to speed. Now that we are reaching higher output at the South Charleston facility in West Virginia, as Brendan will discuss, we expect that gross profits will improve over time. Since the election last November, the market has seen some uncertainty. While political wins are still shaking out, clearly, the demand for all electric school buses across the nation has never been greater. A survey conducted recently by Highland Electric Fleets found that 65% of parents would prefer their child ride on an electric school bus than a diesel-powered one. The survey captured data from parents of children aged 5 to 17 who ride a school bus. Data showed support for electric school buses largely tied to parents' concerns about their children's health. In fact, 89% of parents rank air quality and a safe and healthy commute to school among their highest concerns. And research shows that all electric school buses are less likely to produce harmful emissions than diesel-emitting school buses. The growing demand for electric school buses is also rooted in the school bus driver shortage nationwide. First Student, a leading private contractor of school transportation, reports that school districts are using the deployment of electric school buses to attract and retain drivers. They prefer the smoother ride, the quiet nature of the vehicles and the reduced behavioral issues seen among students. These are two reasons why electric school buses make sense and a-third is grid resiliency. As GreenPower focuses on B2G, which is vehicle-to-grid options among deployments, electric school buses are becoming the answer to creating grid stability in communities. We will have more on this on future calls. GreenPower is the only EBM -- OEM that has a purpose-built Class IV Type A school business with our Nano BEAST and the larger Type D school bus with our BEAST, providing a cleaner and safer transportation options for student transportation. While exact incentive programs at both the federal and state level will go through changes, the support for this mode of transportation will continue and funds will be there to support the transition from dirty school buses to clean school buses. GreenPower has continued to prepare its operations for this growing demand. I'll now turn it over to Brendan Riley, GreenPower's President.
Operator: Hello, Brendan. If you are speaking, your line may be muted.
Brendan Riley: Good morning. Thank you, Wyatt.
Operator: No problem.
Brendan Riley: Thank you, Fraser. GreenPower spent the quarter continuing to increase its output from the West Virginia manufacturing facility. As a result of the work that we did during the quarter, we are now set to deliver one BEAST per week from the South Charleston facility with the production increasing to two units per week by April plus the Nano BEAST production. This will allow us to better meet the timely demand for orders on the East Coast from places like New York and West Virginia. To support this growth, we strengthened the leadership of our production team with the addition of James Redd as our new West Virginia production manager. Working alongside Vice President of Production, Wendell White, James has been instrumental in laying the groundwork for an increase in production output by focusing on the first shift productivity and by adding a second shift to the plant, positioning GreenPower to meet rising demands and to scale efficiently. On the West Coast, GreenPower finalized its plans to expand its California manufacturing footprint into one facility located in the Inland Empire of the L.A. Basin, consolidating our operations from three separate locations and five different facilities spread out through California into one plant that's larger and allows for higher quality, greater cost savings and increased efficiency. Having California operations under one roof will provide for better collaboration between our engineers and our production staff. It will also provide an opportunity for GP Truck Body to grow exponentially as it builds closer working relationships with the manufacturing team at GreenPower. Moving operations to Riverside also gets us closer to a larger customer base, provides us with better and more efficient access to suppliers and provides us with a city partner that is dedicated to supporting local companies. All in all, we remain focused on the manufacturing objective, increased output in a more efficient manner that increases gross profit. These efforts are just the beginning of our story; dedication to continuous improvement of our cost, our quality and our output. Now, I'd like to turn the call back over to Michael Sieffert to discuss the quarterly earnings specifics.
Michael Sieffert: Thank you, Brendan. For the three months ended December 31, 2024, GreenPower generated revenue of $7.2 million, a 35% increase over revenue generated during the prior quarter. Our cost of sales for the quarter was $6.2 million, generating a gross profit of approximately $1.05 million or 14.6% of revenues. Revenue was generated from the sale of 13 BEAST Type D all-electric school buses, one Nano BEAST Type A school bus, from the sale of 14 EV Star model vehicles, as well as revenue from leases from the sale of parts and from our truck body division. GreenPower's gross profit improved in the third quarter compared to the first two quarters of the year due to contributions from BEAST and Nano BEAST sales in California and Oregon, and from the sale of various EV Star models across the country. This improvement was partially offset by lower-than-target gross profit margins from the truck body division and from West Virginia new manufacturing operations and sales. Going forward, management has taken steps to reduce its overhead costs through the consolidation of its California operations into a single facility. This -- the move into a single facility will bring manufacturing, sales, engineering and truck body manufacturing under one roof. This consolidation started in January, and we expect these efforts will continue through the beginning of this summer and lead to improved management oversight, lower G&A expense and contribute to improvements in gross profit margin over time. In West Virginia, management continues to work on improving manufacturing throughput and managing costs in order to improve the financial results of this division. For the quarter ended December 31, 2024, compared to the quarter ended December 31, 2023, sales, general and administrative expense costs declined by $443,000 or 7.8%. The reduction in these expenses was primarily due to reductions in professional fees, share-based payments, salaries and administration, as well as from recoveries and allowance for credit losses, which were partially offset by increases in other expenses. We continue to utilize the EDC revolving credit facility to fund production during the quarter, with approximately $1.2 million in available liquidity on the facility at quarter-end. In addition, GreenPower continued to use EDC-backed letters of credit to fund production payments with nearly $3.9 million in capacity for additional letters of credit to support continued short-term production funding. Both the revolving credit facility in the letters of credit continue to be an important source of capital to fund GreenPower's manufacturing investments. In October, we completed an underwritten offering of 3 million common shares, raising gross proceeds of $3 million. The net proceeds from this offering are being used for the production of all electric vehicles, including B school buses and EV Star commercial vehicles, product development, with the remainder, if any, for general corporate purposes. Finally, we continue to receive important and much needed financial support from GreenPower's Directors and Officers during and after the quarter. We'd now like to open up the call to any questions from the listeners.
Operator: [Operator Instructions] And the first question will come from Craig Irwin with ROTH Capital Partners. Please go ahead.
Craig Irwin: Good morning, and thanks for taking my questions. So first, I should say, in this environment, this is a really solid quarter. You beat my expectations consensus. It's definitely a great way to start calendar 2025. So, I wanted to ask specifically about the different opportunities for fiscal support for your customers out there. I understand that a lot of your backlog, a lot of your bookings in this last year have been focused on things that are funded by state-level programs, particularly California and Oregon, you mentioned, we expect those to remain strong. Can you maybe comment a little bit about the mix as far as state funding? And then, can you update us on federal funding? Have you been able to get the checks from EPA for your customers? What are you hearing about the opportunity for some of these grants that were not fully executed to potentially be resolved? Is this freeze and unfreeze that happened around the funding potentially going to impact the trajectory this year, or are you comfortable enough with sort of the state-level funding and things where you already have certainty?
Fraser Atkinson: Well, I'll break that down into federal and state level, Craig. And at the federal level, it's so fluid that we really need more time to see how this would all shake out. And we have had a number of our dealers that have been successful in drawing down some of the funds from the Clean School Bus Program. But in terms of the -- who's going to be able to fully complete the contracts that are in place between the EPA and dealers or our dealers, we're going to need more time to see how all that shakes out. At the state level, speaking first on California, their funding plan for 2025 differs from the past and that their focus is on those areas and sectors that struggle to get incentives or funding for their particular program, which actually bodes well for the smaller fleets that are seeking commercial vehicles like our Class 4 EV Stars or the school bus space. And they -- on the school buses, the zero-emission school bus initiative that had $500 million or has $500 million, $375 million of which is for the purchase of electric school buses is that the applications or that program closed at the end of November, so that's funding that's going to be used to deploy electric school buses through this year and well through next year as well. So, there's strong support in California. And then, in New York, of course, there is the New York School Bus Incentive Program, and that has -- initially, it was $300 million, and they topped it up with an additional $200 million. So, there is $500 million to support adoption of electric school buses in the state over the next few years.
Craig Irwin: That's really good. Well, I'm glad to hear there's green shoots. To change gears a little bit, in the December quarter and the third fiscal quarter, your general and administrative expenses were $2.9 million. I mean that was up from the $2.2 million in the preceding quarter and $2.3 million in the year ago quarter. Now, Fraser, I know you and Michael and the team there is pretty frugal. You don't usually spend on things unless there's a direct return. Can you maybe talk us through the sequential increase, $2.2 million to $2.9 million? Were there any one-time items in there? Is this maybe related to some of the hiring and some of the consolidation of your operations that you're going through? Any color there would be helpful.
Fraser Atkinson: Well the -- sorry, go ahead, Michael.
Michael Sieffert: I was going to say -- thanks, Craig. I would say the primary driver of the increase year-over-year would be definitely headcount. We do anticipate, though, going forward, that some of the salary expenses will be reducing over time as a result of some of the consolidation that we're undertaking in California. And there certainly is a focus on our other operations as well in terms of managing that salary cost. So Fraser, yes, please go ahead, if there's more you'd like to add there.
Fraser Atkinson: No, I think that covers it.
Michael Sieffert: Okay.
Craig Irwin: And are there any specific charges related to the consolidation or any lease exit expenses or things like this that you might be able to estimate for us at this time? Or will these basically be non-cash and expense when incurred?
Michael Sieffert: Yeah, the expenses I would characterize as definitely SG&A, things like transportation and additional services related to moving some of the property, plant, equipment between locations and inventory, things of that nature. But there aren't any one-time charges to speak of anything significant in the nature of breaking leases or anything like that.
Craig Irwin: Excellent. And last question -- sorry.
Michael Sieffert: I was going to say, overall, very straightforward. Sorry, Craig. Go ahead.
Craig Irwin: Yeah. So, last question for me is the EV Star, I was pleasantly surprised that we've continued to see a gradual improvement in sales there. Can you maybe frame out for us the sales prospects for '25? What do these look like right now? Is this a business where you feel like you're gaining traction as you look at a business like away from where you did business over the last couple of years? Are there any specific end use cases we really need to look at closely to understand why we are seeing this improvement?
Fraser Atkinson: Brendan, do you want to start or...
Brendan Riley: Yeah. Thanks, Craig. This is Brendan. Good morning to you, and good morning to all those on the call. The EV Star, we've had a lot of interest lately in actually vocational applications for the vehicles. A lot of the fleets have some number of electric vehicles right now across the entire country that they're basically evaluating and figuring out where they fit in their operations, which is typical if you look at adoption cycles. So, we continue to sell, have follow-on orders for customers that have started to electrify their fleet. And now, we're starting to see some of the vocational. What we mean by vocational vehicles, we're talking about a garbage truck would be a vocational vehicle, a fueling truck, vehicles that have one purpose outside of basically pickup and delivery and then actually do some work might have steps involved in the vehicle itself and how they're operated. So, the electrification in our space is a medium-duty fleet size vehicles where we really think that electrification makes a lot of sense and can pencil very quickly. You have meaningful payload in a meaningful range and you don't have a price point that will kill you. On top of the fact that the vehicles don't tax the grid as much as the larger vehicles that are out there. So, the answer to your question from my perspective, Craig, is, yes, we are seeing this kind of wave of the follow-on orders people have bought some to try them out. We're getting now follow-on orders. We're starting to look at other places that will be electrified, need to be electrified. On top of that, in places like California where we're getting close to the mandates, for larger percentage of electrification, especially among the municipalities and other fleets, we are seeing renewed activity in the acquisition or the -- getting information about these vehicles. So, we are very bullish on the EV Star line commercially. Again, the beauty of our EV Star line is that not only do we leverage it for commercial vehicles, we also leverage the same product essentially for our school bus. So, it really allows us to, in a way, double dip in two different sectors with the same product.
Craig Irwin: Excellent. Well, thank you for that. Congratulations on the momentum here. I'll go ahead and hop back into the queue.
Operator: [Operator Instructions] Our next question comes from Tate Sullivan with Maxim Group. Please go ahead.
Tate Sullivan: Thank you. Fraser and Brendan, can you give some comments on how the -- how many electric school buses are on the road actively transporting students now, your electric school buses? And how has performance been? How is the feedback from customers in terms of ranges and charging? Are parts replacement has all been as you expected, please?
Brendan Riley: Fraser, I can start, and then maybe you could follow on. So, GreenPower has taken a very, very conservative approach to deploying our battery electric school buses. We deploy them where we believe they'll have the best opportunity for success from the weather, the terrain and the operators. So, of the, let's say, the 100 vehicles from West Virginia, we've delivered about 10 of those so far. But now we're starting to deliver one a week and soon two a week, and we should have those delivered here, all entirely delivered relatively soon. Those are doing great, and we're expecting to expand that deployment and continue to do great. As far as places like California, where we've been delivering for a while, I think Fraser's got the exact numbers of the vehicles that have been deployed in California, but we have a strong backlog, and we're delivering those at a regular run rate. And those, knock on wood, have been very solid deployments with very satisfied customers and, in often cases, really giving us follow-on orders. Our strategy now moving forward is going after the places where we see the vehicles having meaningful partner, an excellent atmosphere for deployment. Also with the infrastructure in places we have markets that we're moving into. Arizona has been strong for us. Oregon has been strong for us. We're expecting some activity in Washington state here. So, Tate, to be perfectly honest, we're very -- we're in a measured way, in a sustainable way, we're deploying our school buses in places where we believe they can be successful. And Fraser can, I'm sure, give us some more specifics, or Michael, on the total exact number.
Fraser Atkinson: I think I'd add that to your point, Brendan, that the deployment in order to support and have a long-term plan in place with various geographic areas, you've got to have a strong service and support network. So, pushing out parts supply through our dealer network and our support network as well as building out our service desk are part of those requirements to help the end customer with the adoption of electric school buses.
Tate Sullivan: Okay. Great. Thank you for that. And then, there were some -- in the MD&A document some comments on increasing your gross profit margin from here. And can you talk about what drives throughput in your truck body division? I believe it's linked to an acquisition from a couple of years ago. At this point, is it Europe, mostly your vehicles? Is it -- can you talk about that?
Michael Sieffert: Yeah, I can touch on that. Go ahead. Yeah. So, I can talk about that. So, the truck body division, I would say, the split is primarily third-party vehicles that, that division is building truck bodies on. What we've seen in that division, if we go back three years ago, there was a lot of demand for that type of work across the industry. And so, the market dynamics at that time were such that if we took one of our cabin chassis to a competitor to have a body built on it, we may have a wait time of over nine months, nine to 12 months. And as you can appreciate, that type of wait time would have a negative impact on our customer sales experience. And so, the acquisition at that time made a lot of sense and really helped us prioritize our truck body needs for our particular vehicles. What we found is that if fast forward to today, there's actually overcapacity in the sector. And as a result, there's frankly, less demand for these builds than we've seen in the past. And as a result the throughput, it was just not there that we anticipated. So, as part of the consolidation that we're doing, we will be closing that location that we had for the truck body division. We will be consolidating that into all of our operations, and we do anticipate that there'll be measured efficiencies from doing this, because building truck bodies, we certainly have the in-house expertise. We have the employees who can handle this. And by folding that into our other operations, we just see a number of efficiencies from that.
Tate Sullivan: Does the gross profit margin depend more on the efficiencies would you say, Michael, from consolidating California operations, or also it relies on the higher risk throughput on the truck...
Michael Sieffert: It's really the higher throughput that will be driving this. The consolidation of the operations will have an impact. But that's the primary focus. This consolidation as well as the efforts that are happening in West Virginia. So that throughput will certainly -- as that improves over time, we anticipate that they'll be a measured improvement here in the gross profit margin.
Tate Sullivan: Okay. Thank you, all.
Operator: With no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to Fraser Atkinson for any closing remarks.
Fraser Atkinson: Thank you. We continue to see strong mandate supporting the adoption of our all-electric vehicles combined with an evolving landscape of incentive programs to support this adoption. We continue to work on the throughput in West Virginia with the result in increase in sales and improvement with our gross profit. Finally, we're very excited about bringing all of our operations in California under one roof in Riverside, as this is not only going to provide operational efficiencies, but more importantly, having all of our team, our production, engineering, technical, support, bringing them all together provides for a much stronger collaboration and team approach to producing high-quality products for the marketplace. Thank you for your continued support, and this ends today's call.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.