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spk07: Hey, and welcome to the Green Power Motor Company third quarter earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. And to withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Michael Seifert, Chief Financial Officer, please go ahead, sir.
spk06: Thank you. This is Michael Seifert, the Chief Financial Officer of Green Power Motor Company. I'd like to welcome everyone to our call to discuss Green Power's third quarter financial results for the period ended December 31st, 2020. I'm here today with our Chief Executive Officer, Fraser Atkinson, our President, Brendan Riley, and our VP of Sales and Marketing, Ryan Chatterley. 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 CDAR and on EDGAR. In addition, these forward-looking statements relate to the date on which they're made. We anticipate that subsequent events and developments may cause the company's views to change. Green Power 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 CDAR and on ICAR, is also located on our website at www.greenpowermotor.com. I'll now pass the call over to Green Power's CEO, Fraser Atkinson.
spk05: Thank you, Michael. Before we start, I'd like to extend a heartfelt thanks to our entire team at Green Power who have worked tirelessly over the last three quarters under incredibly difficult circumstances to reach the aggressive operational milestones we put forward. Their effort has been tremendous. Based on where we are now, we can see signs of recovery this spring, and we are incredibly well positioned as a company to take full advantage as the environment begins to normalize. In the fall, we increased production of our EV stars, including passenger and cabin chassis, and our all-electric purpose-built school bus, the Beast. At that time, we entered into production for 20 EV stars per month, representing potential revenue of over $8 million on a quarterly basis, and five school buses representing potential revenue of more than $5 million on a quarterly basis. In response to a growing pipeline and significant growth opportunity for all electric school buses, in January, we doubled our production of these school buses to 10 per month. This takes us to potential revenue of approximately $75 million per annum, with the next increase in production taking us to a potential revenue of $100 million. while we work in parallel with our supply chain to further accelerate our production from these levels. The first of these EV stars will be available this spring and the first of these Beast school buses this summer. With deliveries to customers and the recognition of revenue, you will see the results of these efforts in our financial statements over the coming quarters. During our second Fiscal quarter ended September 30, 2020. We complete our uplisting of the company shares on the NASDAQ capital market and IPO for gross proceeds of over $37 million. During the third fiscal quarter, the balance of convertible debentures were converted into shares of the company, as well as loans were repaid from proceeds from exercise warrants. This has cleaned up our balance sheet, further improving our shareholders' equity, and eliminated almost all of our interest costs. This time, I'll pass the call back to Michael Seifert, GreenPower's CFO. Thank you, Fraser.
spk06: The three-month period ended December 31, 2020. GreenPower recorded revenues of $2.4 million and cost of revenues of $1.5 million, generating a gross profit of over $900,000, or 37.9%. Revenue was generated from the sale of our first EV star cargo plus to the city of Vancouver, one EV star plus and one EV star to ABC bus, our dealer in the state of New York, and 14 EV stars for which the company provided lease financing and which were accounted for as finance leases, as well as revenue from existing finance and operating leases. We achieved a gross profit margin that was higher than our target this quarter due to the sale of three vehicles in the quarter where sales commission on these vehicles was accounted for in SG&A. For the nine-month period ended December 31st, 2020, Cream Power recorded revenues of over $7.5 million and cost of revenues of approximately $5.1 million, generating a gross profit of $2.4 million for 32.1% of revenues. Revenue was generated from the sale of 52 EV stars for which the company provided lease financing, and which were accounted for as finance leases, from the sale of one all-electric school bus to creative bus sales, one EV Star Cargo Plus to the City of Vancouver, one EV Star Plus and one EV Star to ABC Bus, from the sale of spare parts to a transit customer, as well as revenue from existing finance and operating leases. We finished the quarter with finished goods inventory of approximately $2.2 million, comprised of eight EV Stars, two EV Star cabin chassis and one all-electric school bus, one EV350, and charging stations, as well as work-in-process inventory with $7.1 million, which included five EV250s, 20 B-school buses, and 58 EVSTARS of various models, as well as parts inventory. As Fraser mentioned, we continue to significantly ramp up our production across products with a focus on our EVSTAR platform and our B-school buses. We're currently producing EVSTARS at a rate of approximately 20 per month, and B, school buses at a rate of 10 per month. This increased investment in inventory has been funded by proceeds from our NASDAQ uplisting, and we ended the quarter with ample liquidity to continue on this path, including over $31.3 million in working capital, $21 million in cash, and an undrawn line of credit. We continue to see a significant number of our warrants exercise, totaling over $4.2 million for the nine months ended December 31, 2020. Proceeds for more exercises were used to repay over 1.9 million in high interest loans during the third quarter, which will significantly reduce our cash interest expense going forward. In addition, during the quarter, all of our remaining convertible debentures were converted into equity. We ended the quarter with very little interest-bearing debt outstanding and expect that our cash interest expense will be less than $10,000 per quarter while leverage remains at these levels. Cash costs during the quarter increased to approximately 1.9 million, due to increased staffing levels, higher selling expenses, and increases in other general administrative expenses, as we continue to build out our infrastructure and resources to continue to grow our business, and we anticipate the cash costs will continue to increase over time. I'll now pass the call over to Ryan Shatterley, Green Power's Vice President of Sales and Marketing, to discuss our recent sales activity.
spk01: Thank you, Mike. Our sales efforts continue at a brisk pace and our pipeline has strengthened considerably as a result despite the pandemic backdrop. We expect this trend to accelerate as we continue expanding our sales team, much as we did this quarter with new hires to cover both the Southeast and Midwest regions. We have a strong demonstration schedule set for the coming months and now have additional assets in place we can leverage to get green power units in front of prospective buyers. During the period, we continue to take the steps necessary to position the company for an aggressive ramp as we move deeper into 2021. A good example is the recent inclusion of the EV Star, EV Star CC, EV Star Plus, and cargo models being added to the New York VIP program. In addition, we also delivered our first EV Star and EV Star Plus to our distribution partners at ABC Bus in New York. We see the New York market as a massive opportunity over the coming quarters, and these two demonstration units will be available for prospective customers going forward through the ABC sales team. Additionally, we received a pre-award letter from Grant Transit in Washington for our first Buy American compliant order and first successful low-no application. As we have stated over previous quarters, we will seek to leverage all available means of EV funding, including numerous programs outside the state of California, and I think we will continue to see Green Power's sales footprint expand considerably as a result. Our Beast all-electric school bus is ideally positioned to benefit from the aggressive stance of the new administration, has taken on the electrification of 480,000 school buses by 2030. As Fraser mentioned at the top, we are ramping our production with the school bus based on the feedback that we are getting from recent demonstrations. There is an unprecedented level of excitement and a real sense of urgency in this segment, and we have high expectations that school systems begin to normalize. The level of support from both the federal and state level is expected to be tremendous, and we anticipate additional grant funding to open up in the very near future, further accelerating sales opportunities within our pipeline. The fact that Green Power can put units on the road in 2021 and ramp volumes aggressively into 2022 and beyond gives us significant early mover advantage with a proven purpose-built EV school bus. Finally, we are producing a second fully autonomous AV star in partnership with Peron Robotics and First Transit to be used in a nationwide demonstration tour, which I will be spearheading in the next couple of months. First Transit, excuse me, at this point, I would like to pass the call over to Brendan Riley, president of Green Power Motor Company.
spk03: Thank you, Ryan. And it's really a pleasure to be presenting to you today. And thank you, everyone who's on the line today. Today is undoubtedly one of the most significant days in Green Power's history, as just moments ago we announced a major agreement with Forest River, a Berkshire Hathaway-owned company. We're going to be supplying them with EV Star Cab chassis within their supply chain. This agreement with Forest River allows Green Power to exponentially expand our effective reach into the shuttle and RV market with recurring business. We have one touchpoint to focus on, and that plays to our strength, which is designing and building and delivering EVs. Forest River will be building their shuttle and RV bodies and putting them onto our vehicle, distributing and supporting these vehicles through their network of sales, parts, service, which is their proven strength. Quite simply, Forest River is the most respected high-volume manufacturer in their space. They've delivered over 100,000 units today. The significance of this agreement for green power cannot be overstated. Forest River has approximately 27 different business lines, encompassing a wide variety of vehicles and trailers of many types, many of which are well-suited to potentially utilize green power's all-electric cabin chassis. While the initial agreement is a multi-year, 150-unit agreement, There is tremendous opportunity and potential to expand beyond this, given Forest River's depth, breadth, and position as a leader in this space. I think it's also important to note that deliveries are expected to begin within the next two months and accelerate thereafter. Our goal at Green Power is to seek out the best of breed partners that can leverage the value of our EVSTAR platform, and that is exactly what we've accomplished with this agreement. We could not be more excited to be working with Forest River. While this is monumental news, I don't want to overshadow the great progress we've made across a variety of Green Power product lines. Our team, the best in the business, has worked tirelessly to position the company for significant growth from our electric school buses to our EV star cargo and beyond. We have long said there's great value in our potential to leverage our purpose-built eVSTAR platform. I think today's news further validates that statement. With that, I'd like to turn over this call to the operator, Chuck, for Q&A. Thank you all.
spk07: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 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 2. We'll pause momentarily to assemble our roster. And the first question will come from Chris Souther with B Reilly. Please go ahead.
spk02: Hey, guys. Congratulations on the Forest River announcement. Could you provide a bit more context on and background on how long this discussions were held with these guys and what the process was as far as testing and why you think I guess the RV market is particularly well suited for electrification here?
spk03: Yeah, so this is Brendan. Thank you, Chris, for that question. Ryan and I started talking to Forest River as earlier than last summer, we actually brought out some vehicles to them and actually left behind one of our cab chassis for them to really investigate properly. So this has been an ongoing relationship that really started months and months ago. And it took, I would say, approximately four months to fully develop. do believe that our vehicles are not only a good candidate for their RV line, but for the shuttle bus line. You know, the RV line will be more of a niche product, and we would see them, you know, for people that, you know, don't go traveling across country in RVs, maybe local trips or people that are interested in doing EV-style trips where you would stop at a charger and charge up, you know, and travel maybe for 150 miles. But the way we see it, this is a burgeoning market, and Forest River is the leader in the RV space, the leader in the shuttle bus space. They really are our target customer, and we're just so excited about moving ahead with them. Please stay tuned for more updates as we get further along in our relationship. Thank you, Chris.
spk02: That's great to hear. It makes sense. So can you talk a bit about the exclusivity that is mentioned in the release? that you guys would be the sole provider of electric solutions for them? Is it exclusive on the other end where you wouldn't go after other RV-type manufacturers, or am I kind of missing the boat there?
spk03: It's exclusive both ways for the address products.
spk02: Got it. Okay, that's great. And then maybe shifting gears, you know, around the ramp up in deliveries that you're talking about. You mentioned, you know, the 75 million rate, which it sounds like, you know, exiting the June quarter, we'll have that for both of the vehicles. You know, what would you need, and you had mentioned, you know, a next leg of 100 million kind of annual run rate. What would you need from a visibility standpoint to, you know, be talking about raising the production for that next leg? Is that something you're looking at, you know, this year, you think? And is it, you know, a certain number of customers that you're in advanced discussions where you'd be talking about doing that, or how should we think about that?
spk05: Well, that's a great question. I'll start it off, and then... Other members of the team may pick up the thread from there. So at a high level, the $75 million of the potential revenue run rate that you referred to is really where we are now in terms of what we see with the orders that we're working on, with the pipeline, with the activity level, and so on. And so the next leg up, if you will, is really will be a byproduct of another significant deal or another couple of deals where we're pressed to fulfill all of the potential requirements that we see in the ensuing number of quarters, at which point in time we'll be stepping up to the next level and then so on and so forth as we move forward. remind you on our approach or our DNA has always been to move this forward on a measured basis and not on one hand get ahead of ourselves but on the other hand have inventory that is available to be delivered when we have deals that are near in and once again the Forest River is a great example in that the plan is to deliver six cabin chassis this quarter so without an increased production plan as we have been working through over the past year and a half, two years, we wouldn't have been in a position today to be able to do that.
spk07: Our next question will come from Greg Lewis with BTIG. Please go ahead.
spk09: Hey, thank you. Thank you. And good afternoon, everybody. Um, I just wanted to follow up a little bit on, on the forest river in terms of the exclusivity that you mentioned. Um, I'm not really interested in, in, in the RV side. I'm interested in the mini bus side. Um, you know, I guess I'm curious, like kind of how we should think about that, that 150 number. Um, you know, As I go through the Forest River website, I mean, it looks like they have like six to nine shuttle bus divisions. Is there any kind of way, any kind of color? Are we focused on one of those specific brand models? Any more color around that you're able to share with us right now as we try to understand, you know, is there opportunities to build on that 150 number? You know, maybe before the three years is even up, if there's customer acceptance, just trying to understand a little bit more about the potential for this partnership.
spk01: Yeah, this is Ryan. Ryan Shatterly, Vice President of Sales and Marketing. So the total cutaway bus market here in North America, so the U.S. and Canada, is It's about 13,000 units a year. Forest River builds and delivers 9,000 StarCraft cutaway buses per year. And their dealer is Creative Bus Sales. And Creative Bus Sales delivers somewhere between 5,000 and 6,000 of Forest River's market share. So there is a strategy moving forward. We have not gotten that out into the market yet. but essentially they're going to be building six units immediately. Those units are going to be going to key accounts. Based off those key accounts, we'll start developing forecasts, and yes, so the answer to your question is this has a lot of legs, and we do expect it to take off relatively quickly. As Brendan mentioned, based off of our first meeting with Forest River, them seeing the EV Star Cabin chassis, they opted to take it literally after the first meeting. Integration has already worked its way down the line, and we expect to have a first article here very shortly, and then begin distributing the next five out across the country based off of Forest River's guidance.
spk09: Okay, yeah, that was super, super helpful. Thank you for that, and good luck. My other question was around, I mean, and there's a couple of ways to ask it, I guess, you know, whether we want to talk about the margin, but like the gross profit margin getting higher, but really, I guess it's around the average selling price for those 17 vehicles. I mean, it doesn't sound like we had a larger school bus in there. It sounded like it was really just different variants of the EV star. So just kind of curious, what kind of drove, what looks like, based on the revenue I'm looking at, what kind of mix drove that average selling price higher? So this is Mike Sievert here.
spk06: I can take this for you. So really the primary driver of that is that there was a selling commission, which actually is accounted for in SG&A, It was over $100,000 related to those sold units. And so if that was included in cost of sales, we would have had growth profit margin that was in the low 30% range, which is much closer to what people are used to seeing. So I think this is really more of an accounting question as opposed to any real change in sales mix. However, the one thing to highlight, and I think we've said this consistently, is that On our larger volume sales, we typically do expect for margins to be lower. And because the three sales this quarter were smaller number of units, those profit margins were slightly higher as a result of that. But all in, it was definitely within range.
spk09: Super helpful for that. Thanks. And then I just wanted to squeeze another one in because it seems like You know, you're really ratcheting up the sales effort here. You know, you mentioned the hiring into the different regions. Is there any way to kind of match your sales strategy versus potential incentives? Like if I want to think about where Green Power wants to focus its efforts, are you kind of looking at, you know, obviously we're in California, but as we think about broadening out across the U.S., Should I be trying to track state incentive programs for their buses as kind of a way to think about where we're targeting? I'm just trying to understand as I think about as you kind of go across North America, like how you're targeting and realizing that each market has its own limitations or constraints or issues that need to be addressed.
spk01: So this is Ryan. Yes, you're exactly right. And because of that, we've actually upped our efforts and our resources in terms of grants and contracts and a grants and contracts administrator who is, you know, full time is helping customers not only fill out grant paperwork, but also make sure that our dealers are well educated, given the fact that Creative Bus Hills has 17 locations throughout the U.S., which is, you know, represents really significant coverage, and pair that with the three states that ABC has. We are constantly sending out available funding mechanisms to sales reps, general managers across the country. Our salespeople's responsibility is to make sure they understand these grants and programs as well and start targeting more surgically customers that would be able to leverage those. whether it's a requirement for a disadvantaged community or some sorts like that. So the answer to your question is yes. We can't have somewhere everywhere there's a grant, but we can have somebody on top of where they all are and make sure that the sales force that we have throughout the country, which is over 100 individuals representing Green Power, that they all know and fully aware of everything that's available within their region.
spk08: All right. Hey, super helpful. Have a good night, guys. Thanks. Thanks, Craig.
spk07: Again, if you have a question, please press star, then one. Our next question will come from Tate Sullivan with Maxim Group. Please go ahead.
spk04: Hi. Thank you, and thanks for the detail on Star River, too. Just a couple to start on the electric school bus market. Ryan, you mentioned some New York market vouchers. Are these new programs for you? So you mentioned, can you just give more detail there that you mentioned earlier in the remarks?
spk01: The New York NYSERDA program as well as the New York Clean Truck Program, it's going by NYVIP. It's basically a voucher program, very similar to California's HVIP program. And essentially what it does is, you know, the first phase of this required a scrapping of a 2009 or older model vehicle. with a gross vehicle weight rating of over 14,000 pounds. Green Power Motor Company, we just became eligible for it within the last 30 days or so. There are some requirements that they have to meet, NHTSA, Buy America compliance, and then you also have to have a brick and mortar within the area. So we had to make sure that we met all those prerequisites. We did. We went through Their evaluation, it took a little bit more time than we had expected, but with everybody at the NYSERDA program working from home, we did as good as we could, and we ultimately got the result that we were after.
spk04: Great. Thanks. And you mentioned additional grant money for electric school buses. When you say grant, are you relating to... I mean, charitable foundation money or is it federal grant money that may come through eventually? What are you referring specifically to?
spk01: My apologies. Those are funding mechanisms put forward by the state that generally come on a first-come, first-served basis for entities that qualify, whether they're public or private. The funding amounts are a little bit different. But irregardless of who's buying it, the vehicle manufacturer has to go through a process in order for them to determine whether or not you're eligible. Green Power did meet that criteria, and we did successfully complete all the prerequisites.
spk04: Okay, thank you. Those are the last follow-ups for me. Thank you all.
spk07: The next question will come from Robert London with London Family Trust. Please go ahead.
spk00: Yes, I'd like to ask if the company could comment on the EV credits. that will now be available in California for buses, medium and heavy duty buses.
spk03: Yeah, this is Brendan Riley, the president of Green Power Motor Company. Bob, for actually buses, there's a different program for buses. The EV credits right now is for truck products and it allows us to Actually, every 2021 model year, truck, bus, any product that we sell that's Class 4 and higher, we start getting credits for these. You're probably familiar with Tesla Motor Company collecting close to half a billion dollars last year on their EV credits alone. California Air Resources Board has now expanded the program to include medium and heavy-duty vehicles. So the way it's going to work in 2024, every vehicle manufacturer that sells vehicles more than 500 units into California, that would be trucks and other medium and heavy-duty vehicles, is going to be required to have a certain percentage of their sales be EVs. And what they're going to need to do is they're going to need to start buying credits and stockpiling credits so they're not fined. Because if they sell too many vehicles that aren't EVs and don't have enough EVs to offset them, they start getting fined. And that's what Tesla's been doing. They've been capitalizing on this program to other manufacturers who sold too many internal combustion cars and not enough EVs. Tesla's actually sold their EV credits, which is all they generate. So, uh, we, uh, expect those to, we can start banking them model 2021 year moving forward. We get to have that, those credits in our, essentially our bank account, uh, for 10 years. And, um, as, uh, we get closer and closer to 2024 companies are going to start buying and trading these credits. So, um, the fine right now is 17,000 set at $17,000 per credit. and like our school bus is worth two credits. Typically, that's the bottom of the, at least it has been in the past, it's the bottom of the price for each one of those credits that they sell them for, like Tesla's been selling theirs for, I believe it's $7,000 of credit. That is the bottom of the fine. So we anticipate that as an additional revenue stream and will give us leverage to be able to sell those credits As the fully transferable, bankable, saveable, we expect a good deal of income to come from those that Tesla has been enjoying over the past years. Thank you. That's a very exciting part of the future for EVs here in California. I'd also like to add that there are 15 other states that are looking at enjoying this program and would... likely have the same program in effect over there, so we would have reciprocity with those states and California, and those credits would be available for people selling vehicles in those states also, not just California. So we're excited that this could really mean a big amount of revenue to our bottom line just from these credits alone. Thank you.
spk07: This concludes our question and answer session. I would like to turn the conference back over to Fraser Atkinson for any closing remarks. Please go ahead, sir.
spk05: Well, thank you everyone for participating on our call today. And as Brendan has outlined, we're really excited about the Forest River opportunity going forward and seeing that expand over the course of even this year alone. One thing I would like to add, and I think it's on Ryan's comments, kind of got cut off there, but in terms of the demonstration tour that he will be spearheading this year on our AVSTAR, fully autonomous EVSTAR, is that one of the partners, First Transit, is one of the largest transit solution providers in the country. So this tour will have a a number of aspects to it. First off, being a first-to-market fully autonomous Class 4 vehicle, as well as really showcasing that vehicle with a leader in terms of transit solutions across the country. Looking for a lot of exciting feedback on that tour When Ryan gets that going over the next or in a couple of months time But overall if you do have any other questions feel free to reach out to any of us. We're very easily accessible in terms of contact information through our website and We are very excited in terms of moving our business forward and over the next quarter or two and As discussed, we have a lot of activity hitting the accounts in spring and summer of this year, so we are looking at really distinguishing ourselves as an EV manufacturer. So with that, that concludes our Q3 earnings call, and thanks to everyone for listening in.
spk07: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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