Good day, and welcome to the GreenPower first quarter of 2024 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I'd like to turn the conference over to Mr. Michael Sieffert, Chief Financial Officer. Go ahead.
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 results for the quarter ended June 30, 2023. I'm here today with our Chief Executive Officer, Fraser Atkinson, our President, Brendan Riley, Vice President, Claus Tritt, and Vice President, Michael Perez. 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. During the course of today's call, we may refer to certain non-IFRS financial measures. Reconciliation of these non-IFRS measures can be found in our MD&A, filed on SEDAR and on EDGAR, and is also located on our website at www.greenpowermotor.com. I will now pass the call over to GreenPower CEO, Fraser Atkinson.
Thanks, Michael. I want to start off with the events of a week ago when Proterra filed for Chapter 11 bankruptcy. The origin of Proterra was manufacturing all-electric, heavy-duty, 35 and 40-foot low-floor transit buses. Over the years, they expanded their business to become a tier-one OEM supplier for drivetrains and batteries to other EV OEMs. This included supplying Thomas Built school buses for their all-electric Type C Jouley, which competes with our Type D BEAST school bus. They also supply batteries for all-electric Type A school buses and for Class IV vehicles, which compete with our Type A school bus, the Nano BEAST, and various EV Star models, respectively. You might think that now would be a great opportunity for GreenPower with our all-electric low-floor transit style buses to aggressively pursue this transit sector.
We believe it is difficult to make money in the transit space, where the sales cycle is typically over three years. GreenPower's strategy for the past number of years has been focused on accessible markets with shorter sales cycles, where we can achieve economies of scale and can make money on the products we sell. On today's call, we have the leaders of our commercial vehicle and school bus groups to provide you with insight on our strategy to accomplish that. Turning to GreenPower, this was a record-setting quarter as we recorded revenues in the first quarter of $17.6 million, more than four times the revenue of $3.9 million from the previous year's first quarter, and delivered 131 GreenPower vehicles in the quarter, also a record. We also achieved significant operational improvements, which Michael will discuss next.
I want to comment briefly on our liquidity as we significantly improved our financial position in the quarter. The start of the quarter, we were on our line of credit, which is up to $8 million. We're on that line of credit for $6.6 million, and we were able to reduce that to $162,000 at the end of the quarter. Our cash position increased from $600,000 at the start of the quarter to $1.5 million of cash at the end of the quarter, providing us with $9.3 million of available liquidity at the end of the quarter to grow our business. I'll now hand it back to Michael Sieffert for discussion on the financial highlights for the quarter.
Thank you, Fraser. The financial highlights for the first quarter of the 2024 fiscal year include. We recorded revenues of $17.6 million in the first quarter, an increase of $13.7 million over the revenue of $3.9 million in the first quarter of the previous year. Our revenue was generated from the sale of vehicles, parts, finance and operating leases, as well as revenue generated at Lion Truck Body. Our cost of revenues in the quarter was $14.8 million, generating a gross profit of $2.8 million, or 15.9% of revenues, compared to a gross profit of $1 million, or 27% of revenues in the same quarter in the previous fiscal year.
The company's gross profit margin reduction was primarily attributable to higher shipping costs associated with the majority of sales to customers during the quarter that were outside of the state of California, as well as sales under a high-volume contract. We anticipate that the company's gross profit margins will vary over time due to changes in the sales mix, including changes in both customers and in products. Inventory was $34.4 million at the end of the quarter, which was a reduction of $7.2 million from the beginning of the quarter. Our finished goods inventory consisted of EV Star transit buses, EV Star Cab and Chassis, EV Stars, EV Star Cargo, as well as BEAST and Nano BEAST school buses. We remain focused on sales of finished goods inventory and efficient management of inventory, of our inventory levels.
Our deferred revenue at the end of the quarter increased to $11.4 million, which includes the current portion of $10.3 million. We finished the quarter with working capital of $26.1 million. This includes over $8 million of accounts receivable and cash of nearly $1.5 million. Moving to our SG&A. Our expenses were $5.3 million in the first quarter, which represented 30% of our revenue. This compares to $5.1 million in the same quarter of the prior year, which was 133% of that quarter's revenue. The reduction in this metric demonstrates GreenPower's effective management of expenses, as well as the operational leverage in our business model. This contributed to improvements in our bottom-line results compared to the same quarter in the prior year.
I'll now turn the call over to GreenPower's President, Brendan Riley.
Thank you, Michael. Here at GreenPower, we actually know who and what we are. To that end, we remain focused on our core mission of manufacturing desirable and compelling all-electric, purpose-built vehicles for the commercial vehicle and school bus markets. As we have shown again in this quarter, we are concentrating on the principles that put the company on a path to sustainable growth and profitability. Further developing and manufacturing our all-electric school bus and purpose-built commercial products, reducing lead times, and delivering the product to the customer, all on time and within budget. This work is not easy. GreenPower plans to stay on the path that we have shared with you all in the past and not be sidetracked by investments, business activities that aren't necessarily impacting or directly impacting growth and sustainable profitability.
To better understand our future, it's important to understand what our two business units are up to with some granularity. That's the reason for today's call. We've asked our executive leaders for each of these two groups to join us to provide an update on their highlighted activities. The first person I'd like to introduce is Claus Tritt, our Vice President for Commercial Vehicle Sales. Claus joined GreenPower in the past, December, with the task of strategically and tactically advancing our commercial vehicle business unit. He came to GreenPower with almost 37 years of automotive brand building and sales experience from both the OEM and retail perspective. Most of his career was spent with the worldwide side of Daimler and Mercedes-Benz commercial vehicle organization. Claus, to you.
Thank you, Brendan. Good morning, everyone. Today, I would like to focus on what sets GreenPower apart from other EV OEMs in the commercial space. The key is that GreenPower prides itself on being customer-centric with a one-stop shopping philosophy. This defines the commercial group sales strategy, which is built on four fundamental pillars. Pillar number one is our purpose-built product offerings, which fulfill the needs in the commercial and passenger transportation markets relative to pure vehicle requirements such as payload, cargo, and passenger capacity, range, low maintenance costs, as well as usability in respective target segments. We are also leveraging the expertise and know-how of our wholly-owned subsidiary, Lion Truck Body, to produce and further develop lightweight truck bodies for multiple applications. This partnership was shown during the quarter with the introduction of our EV Star Utility Truck at ACT Expo.
Working with Lion Truck Body allows GreenPower to offer a one-stop shopping approach and accelerates the ease of doing business with GreenPower for our customers. Pillar number two is GreenPower's commercial dealer network. During the quarter, we continued to develop what I call our phase I build-out, with the appointment of H.K. Truck Center with two sales and service locations in the state of New Jersey. In this phase, we are enlarging our dealer network in key markets for all electric commercial vehicles. We expect to have 15-20 full dealer points by the end of this fiscal and 30-35 next fiscal year, to not only support sales, but also enhance the service experience for our customers. Pillar number three is GreenPower's partnerships with fleet accounts and fleet management companies.
These partnerships provide an opportunity to develop new geographical markets and product offerings, as well as potentially new segments which we are not represented in at this particular point in time. Pillar number four is processes and services. GreenPower is fine-tuning, further developing, and in some cases, creating new processes and services to better support the customer centricity of the company. In closing, I am happy to report that presently, the commercial vehicle group has 46 active orders in different stages of the production process and 123 signed purchase orders for various models of the EV Star lineup. Brendan, back to you.
Thank you, Claus. Next up is Michael Perez, GreenPower's Vice President for our school bus group. Michael has been an important member of the GreenPower team for 5+ years. Previously, he spent more than a decade in the automotive industry with a focus on contract management. Michael's commitment to our company and professional growth, and his leadership have been critical in developing the nationwide strategy for our school bus team. Michael, take it away.
Thank you, Brendan. Good morning, everyone. I'd like to update you all first with an outlook on our school bus dealer network and plans to enter new markets by bringing on additional dealerships. With the recent addition of Kingmor Supply, representing the BEAST and Nano BEAST in the Commonwealth of Virginia, GreenPower currently has seven dealerships covering nine states and the D.C. We will continue to broaden the dealership network by focusing on experienced, well-positioned school bus dealers that can provide sales and service support to strengthen the GreenPower brand coast to coast. Key markets targeted for our next expansion efforts include Texas, Colorado, the upper Midwest, and the Southeast. As this expansion continues, we will be adding support for our dealers through our school bus team.
To that end, most recently, we announced that Zach Walsh has been named the Director of Eastern U.S. School Bus Sales. Our commitment to school bus innovation and safety, while focusing on differing state specification compliance, continues to be a focal point of this school bus team. During the quarter, we successfully delivered the first all-electric Type A school bus in Oregon, when Portland Public Schools, the largest school district in the Pacific Northwest, took possession of two Nano BEASTs. Subsequent to the end of the quarter, we have also delivered the Nano BEAST in the California market. These deliveries, and those of the BEAST to various markets, showcases GreenPower's ability to meet the evolving demands of the industry and various markets. Furthermore, GreenPower school buses have furthered integration with several school bus industry component favorites like Zonar Systems and First Light Safety during this quarter.
The quarter also marked the completion of GreenPower's most ambitious undertakings. GreenPower partnered with the state of West Virginia to implement a real-world pilot of the BEAST and Nano BEAST school buses in West Virginia. This pilot project was conducted over nine months in 18 county school districts, with more than 100 professional school bus drivers safely transporting students to and from school and extracurricular activities. During the pilot, three BEASTs and one Nano BEAST traveled more than 32,000 miles in differing conditions, warm and cold weather, sun, rain, snow and ice, mountainous and flat terrain, and lastly, rural and urban roads. The project culminated with a remarkable presentation at the STN EXPO Reno in July, where GreenPower and West Virginia officials shared the data and the findings from the pilot project.
In front of a packed audience, the panel shared information about range, driver, student, and community reaction, cost savings, charging infrastructure, and more. Suffice it to say that the bus was put to the test and challenged during this pilot project, and it performed in every case as it was asked. The GreenPower all-electric purpose-built school buses did exactly what they were expected to do, and the pilot clearly showed that they could successfully be operated in varying conditions with forethought, planning, and the appropriate charging infrastructure. Currently, the school bus group has 87 signed purchase orders for the BEAST and Nano BEAST school buses.
This includes purchase order received during the quarter from the, for 37 BEASTs and four Nano BEAST school buses from the state of West Virginia through our dealer, GreenPower of West Virginia, and the recently announced 15 BEAST school buses to the fifth largest school district in the nation, Clark County, Nevada, through GreenPower's regional dealer, RWC Group. With that, I'll turn it back to Fraser for a final word before the Q&A.
Thank you, Michael. To summarize, GreenPower had yet another record-setting quarter with record revenue and record deliveries. We will remain focused on our core mission of producing all-electric purpose-built commercial vehicles and school buses. Each of those groups within the company have developed and are implementing strategic plans to achieve those goals. With that, operator, please open up the call for questions.
Thank you. We'll now begin the question and answer session. To ask a question, press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. This time we'll pause momentarily to assemble a roster. First question will be from Craig Irwin, Roth MKM. Please go ahead.
Good morning, gentlemen. Congratulations on another strong quarter. I wanted to start off with a couple of questions about the, the backlog. We added up, it's 259 units. Can you clarify for us what portion of that is made up by anticipated deliveries to Workhorse?
Are you referring to the numbers that Claus referenced and in the commercial vehicle group?
The commercial vehicle group, the school bus group, the EV Stars altogether add up to 259 units.
That doesn't include any for Workhorse.
... So there's none for Workhorse. The actual backlog for delivery over, over the next, you know, many months, omits your largest customer, that's correct?
That. Well, it doesn't omit, it's just that, that would be in addition to. You're correct.
Perfect. Perfect. Then my next question on the backlog would be ASPs. About a third of the units come from the Beast and the Nano BEAST, if we're just counting individual units, and those tend to have materially higher pricing than the rest of your product portfolio. Can you maybe give us an idea what we should expect as far as ASPs in that backlog? Is this, you know, something more representative of what you had, you know, a little bit more than a year ago?
I'll, I'll start it off, and if Michael and Brendan want to add anything, is that we certainly expect the mix to evolve, where, you know, a number of quarters ago, we had one or two school bus school buses sold in a particular quarter. As Michael laid out, you know, we're now getting to a place where you will have consistent monthly deliveries of school buses that's going to be increasing that and changing the mix, the overall mix of sales. That's also true for the commercial vehicle group, as, you know, a number of the live orders and the signed purchase orders are, you know, also will be adding into that mix as well.
Understood. Understood. The gross margins had some fairly substantial quarter-over-quarter improvement versus your March quarter, obviously. You know, you did discuss on your last call how the mix of deliveries, the way that there was heavy contribution from, from large customers, you know, was a little bit of a headwind on margins. You know, it seems like, you know, that headwind might be coming off as mix is becoming more favorable. Would you anticipate, you know, some of the historic margins that we've seen in the past to be available for, you know, many of your contracts that you're signing today?
Our target, you know, if we're doing a one-off sale or, you know, just, one or two unit sale, you know, the team looks at, at a margin or gross profit, approaching 30%. Where we have volumes, where we, you know, with larger commercial customers, where we have initial deployments, those margins get compressed, and in some cases compressed significantly. You know, the mix is going to help improve that overall margin in terms of, you know, getting us into the low 20s or the mid-20s, as, you know, as a blend between the larger volume sales and the 1-offs. You know, longer term, that's, that's still the target for the company.
In the shorter term, you know, we do have compression from those, those, larger volume sales, as well as some of the initial sales that we're making in, in, new markets and new sectors.
Understood. That, that makes complete sense. My last question then would be about inventory. You generated a little over $8 million in cash from inventory in the quarter. Can you maybe give us the finished goods inventory, what the approximate breakdown is as far as the different units in there? What would you see as an ideal inventory level for the company, given that you're looking to facilitate rapid delivery to your customers over the next, you know, number of quarters?
Well, I don't think we have a or we've laid out our finished goods with a precise allocation in terms of, say, you know, school buses, you know, being the BEAST or the Nano BEAST, and then various models of the EV Star. In terms of the, the global number, you're quite right. You know, the team did a great job of, you know, really monetizing and managing the inventory.
This, this goes back to probably our call of one year, 1.5 years ago, where we talked about how we had to put up inventory, how we had to make investments in order to secure certain transactions, and especially, for example, in the school bus space, that, you know, without the ability to show that we could deliver in a timely fashion, it was challenging for us as a new entrant in the marketplace to be able to secure that level of orders. You know, now we're in a place where, you know, those orders are coming in.
We've got the signed purchase orders that we can deliver, and we're able to deliver out of inventory rather than telling customers that they can get their vehicles one year or 1.5 years from now. All of that, you know, has allowed us to, to monetize what we have there. In terms of an on, an ongoing or ideal target, we're probably pretty close as a ratio in that, you know, this quarter, our inventory, as measured by our cost of goods sold, was, I think, just over 2.2-2.3 times.
That's likely around an ideal target for us to get below two times, where we have the sales cycle in each of the commercial vehicle and school bus groups would be, you know, that would be an absolute top-end goal. Where we're operating right now is likely, you know, an ideal type of run rate.
Perfect. Well, congratulations on the success here, and thanks for taking my questions.
Thank you. Next question will be from Greg Lewis, BTIG. Please go ahead.
Yeah. Hey, thank you, good morning, everybody. Thanks for taking my questions. You know, Fraser or Mike, I was hoping for a little more color. Hey, it's great to see the gross, the gross profit profitability, you know, and it's interesting, as, you know, you guys definitely get very granular in the SG&A, so thank you for that. You know, I guess as I think about moving more towards, you know, like an EBITDA profitability, I mean, it looks like most of that, most of the loaded SG&A, it's probably trending higher as we continue to build out the business, add sales channels, kind of continue to ramp.
Any kind of color how you're thinking about, you know, I guess, meeting in the middle in terms of profitability, in terms of, you know, how we should be thinking about SG&A? Really this is gonna be about driving more, you know, more or more sales and just kind of, you know, how you're thinking about that in terms of run rates as we kind of walk towards that, that level?
Well, we, we have achieved a, you know. That, that's actually one metric that we do monitor and, and follow, which is our SG&A as a % of revenue. A year ago, that, that was over 100% in terms of our SG&A as a % of revenue. You know, at the, our year end of March 31st, it was 36%, and then the most recent quarter was 30%. We've seen a very steady decline in that metric as a measure of revenue. You know, that trend, you know, continuing into the twenties is what shows our, our path to profitability.
Okay, great. Then, just as I, as I think about, you know, the acceptance of, of, you know, the, the, you know, what you've been able to accomplish in West Virginia in a very short time. You know, we're, we're pretty bullish on the school bus market. It seems like everywhere we look, you know, it, it, it seems like that continues to gain momentum. Do, do we think there could be opportunities to kind of replicate what we did in West Virginia, maybe, I don't know, in, in, in another regional part of the U.S.? Is, is that, you know, you know, is, is that something that we could see here in the next couple of years?
Is that more, you know, maybe with the, with the West Virginia facility in, in production, you know, maybe now we're gonna kind of pivot back to, you know, looking to more ramp up the, the, the, the EV Star business?
Well, boy, that, that's got a lot of good questions in it. The West Virginia opportunity, I'll call it, came about as a result of us looking up and down the Eastern Seaboard for, you know, a suitable property and a partnership with all levels of government in that, you know, the state, the county, the city. You know, South Charleston, West Virginia, was exactly that kind of partnership that we were seeking, along with a great facility that was pretty close to production ready. We've got a number of people in our, our team that have extensive experience in the manufacturing space. You know, they likewise felt that, wow, this is, this is great for what we're doing.
That allowed us to expand from sort of a West Coast focus to also serving the East Coast. We're now at a stage where we can look more holistically at a national approach in terms of, you know, what do we need to do to accomplish that next step? It is something that we've been looking at and thinking about, you know, sort of post West Virginia. We still have a lot of work to do in West Virginia in order to, you know, to fully utilize that facility and to build great products that can help service the, the type of orders that we're securing and the national approach that we're, you know, we're now undertaking.
That, you know, long term, if there is a, an opportunity to expand the business in a similar fashion as we're able to accomplish in West Virginia, we, you know, that, that is on our radar screen to look at accomplishing. In the, the near term, we've got our hands full in terms of, you know, ramping up production in order to fulfill the orders that we have and the orders that are coming in from the commercial vehicle and the school bus group.
Okay. I did, Fraser, I did want to talk a little bit more around the West Virginia and, and, you know, and the ramp there and the, and the ability to find qualified hires to kind of staff the facility and continue to ramp. I mean, is there anything that GreenPower can do on the ground in terms of like, I don't know, like education, partnering with a community college or technical university to kinda get the people in a position where they're able to start up a GreenPower ready to work? I mean, it seems like, it seems like, you know, everywhere across the U.S., it's hard to find technical, qualified people.
Is, is that, is that something that we're, we're looking at, or, or we just think it's timing and, and we'll get there without, without GreenPower maybe having to take more of an active approach?
I'm gonna let Brendan cover this because he spent a considerable amount of time in West Virginia, not just South Charleston. Yes, we have spent, well, I'll just turn it right over to Brendan and let him outline what we're doing in the state.
Great.
Good morning, Greg, and, yeah, thanks, Fraser. Currently, Greg, we, we have a partnership with the BridgeValley College there in West Virginia. They're literally a stone's throw up the, really, up the hill from GreenPower, South Charleston facility. With that partnership, we actually have a training program that allows for new employees and existing employees to not just provide continuing education in areas of EV manufacturing and technology, but also initial... If we find applicants that might have interest in certain aspects of what we're doing at GreenPower, they can enroll in the college and really start working on a program that we've developed with them. The other thing that we've got is there's a very, very critical program by the state of West Virginia that actually helps offset these employees' salaries.
They could start working at GreenPower. The state of West Virginia will pay half of their salary while they're enrolled in this program, learning the skills to be, you know, highly developed GreenPower employees. Yes, we've actually done a lot of work hand-in-hand with this school. We've gone to some of our suppliers around the world. We have Constellium as a supplier, you know, where they supply us the, the material for the bodies that we build. We've actually traveled to various spots that actually integrate, build up the kits, do all this stuff.
This is critically important in our in our long-term strategy to make sure we've got not only employees that are, you know, that are capable and, and willing to, to work at GreenPower, but really employees that are trained from day one as real experts in in building our products. Also there's technology if they wanna work in other areas of the company besides manufacturing. There are courses to bring people up to speed on the state-of-the-art technology that we deploy.
Okay, great. That's great. Super helpful, everybody. Thank you for the time.
Thanks, Greg.
Thanks, Greg.
Thank you. Again, if you have a question, please press star then one. Next question will be from Tate Sullivan, Maxim Group. Please go ahead.
Hi. I thank you all. Brendan, just to follow up something from the press release, mentioned in the press release, Nano BEAST is now at full production rate, and then BEAST entering full production in 3Q, or what was that language referring to? What are those monthly production rates, if you can share?
Well, when we say full production rate, we mean build, right now, we can build a full vehicle and go. The rates are right now, since we're early days, they're gonna be a little slower. At the South Charleston facility, we, excuse me, we can build with the existing facility, the way it's built out, about a bus a day. That would be either a Nano BEAST or a BEAST. We've just completed validating the line, setting up the line for the Nano BEAST, which is done, and those vehicles are in final prep stages before we get them ready for delivery. The BEAST should be at that point here by, let's say, October, November, we'll have vehicles, you know, coming off the line just like the Nano BEAST.
Currently, it's a, a vehicle a day, is the, is what we target as the, as full production for that capacity.
The 87 active orders or signed purchase orders that you mentioned for the Beast, and going back, is, are, are some of those already in finished goods inventory, or is that separate? Separate.
Yes. Yes, yeah. Actually, half of those, I believe, are in finished goods.
Fraser, thanks for starting off the call with comments on Proterra. Probably brings the point of how you manage your supply chain, too. Do you have any exposure historically to Proterra in terms of battery packs or cells? I don't think you do, but if you could comment.
No, we don't have any direct exposure, whether it's drivetrains, systems, or even, you know, their energy group with their behind-the-meter battery storage, you know, for any of that aspect, and certainly not the batteries. No, we don't have any direct exposure. Having said that is, you know, this, you know, you know, in talking to some stakeholders over the past week, this isn't, this isn't a positive thing for the EV sector because everybody will be held under a greater level of scrutiny, and certainly our supply chain, you know, doesn't need to be any more nervous about EV OEMs than they already were.
It just, you know, requires us to to be on top of, you know, our, our own supply chain and make sure that, you know, they're comfortable with what we're doing and, and, how, how we're interacting with each other.
Thank you.
Thank you. This concludes our question-and-answer session. I'd like to turn the conference back over to Mr. Fraser Atkinson for closing remarks.
In closing, we are facing a number of challenges, including managing our supply chain, infrastructure requirements, principally around charging, timing of various funding programs, to name a few. At GreenPower, we have a first-class team who have the subject matter, expertise, and drive to address these challenges every day. We appreciate your support and look forward to providing you with further updates on our progress. Thank you and have a great day.
Conference is now concluded. Thank you for attending today's presentation. You may now disconnect.