GreenPower Motor Company Inc.

Good day and welcome to the Green Power Second Quarter Earnings Conference Call. All participants will be in a listen-only mode. If 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. To ask a question, you may press star, then one on a touchtone phone. 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.

Thank you. This is Michael Seifert, Chief Financial Officer of Green Power Motor Company. I would like to welcome everyone to our call to discuss Green Power's results for the three and six month periods ended September 30th, 2023 and recent developments. I'm here today with our Chief Executive Officer, Fraser Atkinson, our President, Brendan Riley, Vice President Klaus 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 purpose 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 are 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 EDGAR, and is also located on our website at www.greenpowermotor.com. I will now pass the call over to Green Power's CEO, Fraser Atkinson.

Thank you, Michael. Over the years, we've talked about money and mandates driving fleet operators electrification strategies for medium and heavy duty vehicles. While money in the form of vouchers and incentives can have a near term impact on sales, it is our view that the longer term growth opportunities for the medium and heavy duty EV sector will be realized by those companies that are best positioned to take advantage of key mandates. On today's call, the Green Power team will talk about recent mandates that will drive demand for Green Power's commercial vehicle and school bus groups. Earlier this year, our focus has been on making the transition from utilizing our inventory to satisfy customer needs to the production of school buses in West Virginia. And we've expanded the production capabilities with Lion Truck Body, our in-house bodybuilder, to produce completed vehicles utilizing our own EV star cabin chassis. We achieved a number of milestones in the most recent period and completed key deliverables in order for us to achieve these longer-term strategic objectives. Green Power reported revenues of $26 million for the first half of the 2024 fiscal year, an increase of 125% over the revenue of $11.6 million for the first half of the previous fiscal year. For the quarter, we generated revenue of $8.4 million with deliveries of 31 vehicles, including a record 16 school buses, being a record for the company. Finally, with our financial position, we increased our cash by $1.4 million from the beginning of the current fiscal year, and we've maintained a strong working capital balance. I'll now hand it over to Michael for discussion on the financial highlights for the quarter.

Thank you, Fraser. For the three months ended September 30, 2023, Green Power generated revenue of $8.4 million, primarily from the sale of 16 Beast and Nano Beast and 15 EV Stars, which was an increase of 9.1% from $7.7 million of revenue generated in the same quarter in the prior year from the sale of four Beast and 50 EV Stars. Both quarters also included revenue from leases, parts sales and truck bodies. Gross profit was 1.2 million and gross profit margin was 14.6% compared to 1.6 million and 21% in the prior year's quarter. The margin decline was primarily due to higher parts inventory costs, lower margins that lie in truck body and delivery of new products. Sales general and administrative costs were 5.2 million compared to 4.7 million in the prior year an increase of 10.5% primarily due to the expansion of the company's operations and workforce in West Virginia and California, as well as an increase in allowance for credit losses, which was partially offset by lower share-based payments expense and lower product development costs. Green Power generated a loss for the quarter of $4.3 million compared to a loss of $3.6 million in the same quarter of the prior year. For the six months ended September 30th, 2023, Green Power generated revenue of 26 million, primarily from the sale of 162 vehicles in the current period, which was an increase of 124.5% from revenue of 11.6% in the first six months of the prior year, which was due to the sale of 75 vehicles and other sources. Gross profit was 4 million and gross profit margin was 15.4% in the six months ended September 30th, 2023, compared to 2.7 million and 23.1% in the same period of the prior year. The margin decline was primarily due to the same factors as during the recent quarter. Sales general and administrative costs were 10.5 million in the six months ended September 30, 2023, compared to 9.8 million in the prior year period, an increase of 7.1%, primarily due to expansion of the company's operations and workforce, an increase in allowance for credit losses and these factors were partially offset by lower share-based payments expense as well as lower sales and marketing costs. Green Power generated a loss for the six-month period of $7 million compared to a loss of $8 million in the same period of the prior year. As at September 30, 2023, Green Power had cash of $2 million, working capital of $24.2 million, and $1.4 million available on its operating line of credit. Improvements in the company's cash and available liquidity since March 31, 2023 were largely due to higher sales and due to a focus on collections, which led to lower levels of inventory and accounts receivable. Green Power was also able to lower its interest-bearing debt during the period as we remain focused on efficiently managing our working capital. I'll now turn it to Brendan Riley to discuss operations.

Thank you, Michael. In addition to sales and production, During this quarter, we have focused on the future, the future of meeting the customer demands facing our industry due to money and mandates. And in doing so, we have made preparations to ensure our customers, both school districts and commercial operators, that they have product options available to meet or exceed their demands in transportation of people and goods. The Green Power Manufacturing Facility in West Virginia is in production of the Nano Beast. It's our small school bus. And provisions have been made to start the manufacturing of the Beast in the next quarter. The first all-electric, purpose-built school buses will emerge from the West Virginia factory on December 13th, with four Nano Beasts being delivered to schools in West Virginia under the purchase made by the state. This is a monumental occasion. that sets the foundation for the future of production for Green Power school buses to be delivered to customers in the East Coast and the Midwest. The school bus team has also spent the quarter focusing on differing state requirements and regulations found in the state school bus procurement contracts to ensure that Green Power school buses are readily available and are purchasable to be bought by them. New York, California, Connecticut, Maine, Maryland, and others now have a level of requirements and incentives available to cause a transition from smelly and polluting diesel to clean and quiet all-electric buses. With production in California, West Virginia, and with contract manufacturing, Green Power is uniquely positioned to supply battery electric school buses in large quantities and in a timely manner. Another goal of last quarter was to move school bus inventory, and we've done just that. All of the inventory of our B-School buses have either been shipped to customers or have been allocated to orders. On the commercial side of our business, we've delivered our first airport ground support vehicle, the EV Star Hydrant truck. This is a purpose-built, all-electric, large aircraft refueling vehicle. The vehicle is operating at Vancouver Airport in Canada and is an example of how we provide our all-electric purpose-built technology in a variety of settings, from specialty vehicles like our hydrant truck to our box truck and refrigerated trucks, which are very standard in the market. Green Power is truly a one-stop shop for compelling zero-emission vehicles. The last topic I wanted to touch on is mandates. One example of a strenuous mandate looming is the California Advanced Clean Truck Regulation. This regulation will require 15% of certain fleets to be all electric by the next year, that's 2024, in order to operate in California. And that percentage goes up over time. This is an example of just one mandate of many that exists from coast to coast here in the USA. Green Power's commitment to provide a quality product in a timely manner to our customers is what we strive for. And that's what last quarter's preparations have been all about. Now I'd like to turn it over to our vice president, Klaus Tritt, who will discuss the activities in the commercial vehicle group. Take it away, Klaus.

Thank you, Brandon. Good morning, everyone. Brandon has set the stage for what I would like to spend a few minutes amplifying. Today, Green Power is positioned to meet the commercial needs of customers who want to make the transition to all electric vehicles in their fleet. Whether that desire is based on mandates, economic opportunity, or for environmental reasons, we have to cap chassis in stock to deliver a completed vehicle within 60 days, not the normal six to nine months customers face when dealing with multiple vendors. And with Lion Truck Buddy, Green Power can outfit that product to meet the customer's needs in a one-stop shop experience. Box trucks, stake beds, refrigerated trucks, specialty vehicles, you name it, we are prepared to move immediately for the customer nationwide. We have spent this last quarter preparing for this. We are prepared. for the demand of box trucks and cargo vans because of the California advanced clean truck requirements. And Green Power is positioned to help customers with grants and importantly supply vehicles that meet the $40,000 tax credit under the Inflation Reduction Act as the tax year comes to close. In addition to looking in the future We also complete delivery of 10 EV-star passenger vans in the Boston market during the quarter. These vehicles are being used there in an innovative approach to worker transportation, providing last mile solutions to get people safely to and from work. Our commercial dealer network continues to expand with appointments during the quarter in the Triangle in North Carolina, North Texas, and West Virginia. And recent trade show activity has further exposed the Green Power EV Star commercial line of products to new geographical locations and customers as well as dealers in other areas of the country. I would now like to turn it over to Michael Perez to further discuss school bus activities.

Thank you, Klaus. Good morning, everyone. Over this past quarter, we continue our work on completing certifications and meeting requirements for key states where we see the best opportunities to meet the demand of all-electric, zero-emission school buses. I was recently at the NAPT conference and trade show in Ohio where we launched our Megabeast Type D all-electric, purpose-built electric school bus, which has an industry-leading range of up to 300 miles from its 387-kilowatt-hour battery pack. the largest currently available in school bus transportation. We were also engaged with several high-quality prospects at the show in new geographic territories, including Ohio, Kentucky, Tennessee, and Virginia. This morning, we announced our first order for 25 megabits, the Montebello USD, in California through our dealer, Model 1, formerly Creative Bus Sales. utilizing vouchers from the HVIP School Bus Set-Aside Program and the EPA Clean School Bus Program. This first of a kind order will begin production immediately with deliveries targeted in late 2024. We also announced an order for 10B school buses for Garden Grove that we're already working on with deliveries scheduled over the next couple of quarters. In the past month, California Governor Gavin Newsom signed legislation requiring all new school buses in California be electric by 2035. With that action, California joined Connecticut, Maine, Maryland, and New York in mandating the switch to all electric, zero-emission school buses in fleets over the next four to 17 years. The new law makes California the leader in state funding for the transition to all electric school buses, with the switch projected to cost roughly $5 billion. We are working with Model 1 on dozens of orders utilizing funding from the HVIP School Bus Set-Aside Program, the $1.2 billion to be added in 2024, air quality management district funding, the VW Fund, and of course the EPA Clean School Bus Program. We are also very excited to announce very soon new orders that will be the first orders in new states, setting up continued momentum as we enter the new year. And now, I'll turn it back over to Frasier Atkinson.

Operator, at this time, if you could open the lines for our Q&A session.

We will now begin the question and answer session. To ask a question, you may press star and 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question today comes from Craig Irwin with Roth MKM. Please go ahead.

Morning, gentlemen. Thank you for . It's really nice to hear the West Virginia facility is starting to produce. You have orders already. Customers are waiting for the product. Can you maybe just help us shape potential orders in this December quarter for your Type A and Type C school buses from this facility? Is there any difference in pricing versus your legacy product and margins, I should say? And, you know, can you talk about the number of customers that are visiting this facility as you bring up production and, you know, the different school districts that are coming in for ride and drive before they make their final commitments?

Brendan, do you want to start?

Yeah.

Yeah, Craig, this is Brendan, and good morning. Your first question needs to be answered that the buses built in West Virginia are the same buses we build in California and anywhere else. It's not a new bus. There are some specification differences, but those are really minor changes that we make. Could be a different option that's added to it. Could be a different color in one place or another. stickers, things of that nature. But for the most part, the vehicles, at least from a certification perspective, they're essentially the same vehicle. The facility is fairly new. We've had dealers come through and do training. Customer visits are scheduled for this quarter. And again, I don't know if I can name any of them, so I probably won't, but we do have customers coming out for ride and drives and to tour the facility, including customers from West Virginia that are actually going to be receiving the buses under the West Virginia contract. For the first year, we'll be producing, again, first the 41 buses from the West Virginia contract. and any follow-on buses for the West Virginia contract as we've committed to the state to get those out first. As far as the pricing is concerned to the end user, the pricing is the same right now. And for margins, it is a new facility. We expect those to improve. And I don't think we're really announcing that number yet. But frankly, the market on the East Coast is just opening up for us. We've just been added to the New York State bid, and we are working on other places on the East Coast to start selling more vehicles into.

Excellent. Thank you for that. So EPA is slated to start releasing additional districts as far as the vouchers they're awarded in this year's funding program. Can you maybe... Help us understand the work you've been doing with different school districts and different dealers to support their applications to this program and what you feel about your overall competitiveness as far as voucher awards for customers that are likely to work with GreenPower.

Michael Perez, did you want to lead off on that?

Yes, of course. We work with several of our existing dealer network on producing webinars, producing materials, and producing any items that go to school districts within their territory to set up all of these applications that are being submitted for the EPA Clean School Bus Program. That can include demos, in-person demos, ride and drives, and anything else tailored to that region and that market.

And I'd add to that that Michael was at the NAPT conference that he referenced in our opening remarks and this past summer at STN, which is kind of like the big annual event for the school bus industry. And within each of those, the engagement was numbered in the hundreds in terms of contacts, discussions, We had a panel that, how many people were in attendance for that, Michael? At the STN panel? Yeah, so all of that is part of the people are waiting until a future date. They take advantage of the ride and drive opportunities at events like that where we have our vehicles and we're providing ride and drives at those conferences and trade shows. So that's a big part of it as well.

One last thing, we do provide assistance if any customers, dealers, or fleet partners are looking to submit for a grant. We provide assistance with any of the paperwork, making sure that, you know, if they need any help on how to fill it out, how to, you know, what all of our data is to populate those applications. We provide that whenever customers, dealers, or fleet partners need it.

Okay. Last question, if I may, before I hop back in the queue. Your cabin chassis product, you have one very large customer there. And from our prior conversations, I understand that the contract size in this market is likely to be much larger, potentially much more lumpy over the next couple of years. Can you maybe update us on market developments there? You do have a number of vehicles actually rolling out in the world now and different customers taking product. How is this impacting the overall tempo of conversations and potential customer activity?

Well, we have a large customer you're probably referring to had paused the intake of our cabin chassis, and I think that was in the August timeframe. Right now, where we sit, we have over 50 CCs that have available for delivery at the appropriate time. I think more importantly, part of what Klaus referred to in our opening remarks is, number one, he's got a number of orders and even a greater number of quotes just on the CCs. So we've got a rapidly developing market for our EV star cabin chassis. And we're also utilizing that for our Nano Beast, for our production with Lion Truck Body. So it really has a broad application and one that has really grown over the last two or three quarters.

Excellent. Well, congratulations on the progress, and I'll go ahead and hop back in the queue. Thank you.

Thank you, Craig.

As a reminder, if you wish to ask a question, please press star then 1 to be joined into the question queue. The next question comes from Tate Sullivan with Maxim. Please go ahead.

Hi. This is actually Justin Smith in for Tate Sullivan today. Kind of just following up on the last question, I was just wondering if you guys were able to provide any detail if you're still looking to deliver all 1,500 of those units to your larger customer in regards to the cabin chassis units?

Well, we don't give forecasts. We don't provide forecasts. Any guidance in that regard? And I think the answer that we had on the previous question would be the same in that we have vehicles or CCs ready right now. We have CCs that are in the queue that are being either completed or substantially completed that could add to that in the follow-on quarter in January and February. And that'll be something that we'll be working through over the next week or two in terms of this quarter and next quarter.

All right, great. Thank you. And then kind of following up on that as well, are you able to provide any information on when those units do start coming out? If you think your gross margin for those will be better or worse than the gross margin for your electric school buses that are going out right now?

Well, the higher volume contracts, we've had margin compression or the margin is lower due to a price that wouldn't be the same if we had a one-off or two-off. And the reason we do those is that as we are able to get deliveries that are consistent and continually ramp up volumes related to each of the products, whether it's a NanoBeast or a Beast or a cabin chassis, as we're able to get repeatable deliveries, that's where we're going to enjoy a higher gross profit.

All right, great. Thank you. That's it for me. Appreciate the insight.

Thank you.

The next question comes from Greg Lewis with BTIG. Please go ahead.

Yeah, hi. Thank you and good morning. I'm not sure if this question is more for Mike or Fraser, but, you know, clearly you've been walking through some of the challenges, you know, on the Sacramento margins and we're ramping West Virginia. You know, is there any kind of thoughts around what type of volume we need to be coming out of West Virginia in terms of bus sales? We think that starts to be margin accretive. Maybe I can start here.

Yeah, go ahead, Michael.

Yeah, just, you know, we haven't, just to be clear, you know, we haven't really, you know, talked through, you know, you know, margins of school buses coming from West Virginia. I would say that the margin compression that we saw this quarter specifically was, I'd say, more related to specific parts inflation as well as deliveries of new vehicles, like new products. So less to do with our school bus sales in the quarter. Our school bus sales this quarter actually generated a margin that was higher than the overall margin for the quarter, just to give you an indication. As that facility ramps up, certainly we would expect there to be, you know, better economies of scale. But at this point, we haven't broken that out, you know, specifically, Greg. So there's probably not a lot of additional detail I can cover. Fraser, I'm not sure if there's more you'd like to add there.

I think the, you know, we're just – getting organized to start the beast production with, you know, with the first vehicles for that side of the school bus group coming off the line, you know, in, you know, early spring of 2024, I believe is our targets. And with, you know, until we get through that first and second cycle and look at, you know, how we're going to to both ramp and manage our costs, we'll have a much, much better idea of where we are. The positive in that group is that both at the state level, like on the New York State contract that we're on that Brendan talked about and Michael Perez talked about, and the California programs and the school bus program, they all have price points. that are very supportive in terms of what our cost structure. In other words, before those, the vehicles were probably selling for a little less than what these mandates and incentives are providing.

That's super helpful. And then just following up on that, you know, clearly the initial buses rolling out of West Virginia are all going to West Virginia. You know, as we think about that, at what point is that a back end of 24, maybe calendar year 25 event when we start selling to non-West Virginia school bus municipalities or customers?

Well, we have had... we have had customers outside of West Virginia that are looking for the production out of West Virginia to fulfill their requirements. So, you know, we're already at a stage from a sales point of view in terms of identifying and quantifying, you know, what we're going to need to do for the East Coast. So that's why we Initially, we're looking at South Charleston facility as being predominantly fulfilling requirements we could see in the short term with West Virginia, but that's already expanding to other markets on the East Coast.

Okay, perfect. Thank you very much.

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

At the beginning of today's call, we talked about the importance of being positioned in the medium and heavy duty EV space to be able to fully benefit from key mandates. Green Power's strategy is to be able to take full advantages of two such mandates. For the mandates in five states to electrify school buses, including the two big markets of New York and California, number one, we have the full range of all electric school buses, including the recent launch of the Mega Beast for a second Type D along with multiple configurations for our Type A Nano Beast to fulfill almost all the requirements that school districts have. Number two, we have strong dealers in each of California and New York. Number three, we've spent the last two years locating a facility tooling and commencing with school bus production in West Virginia for customers up and down the East Coast. For the California advanced clean truck regulation that will require 15% of certain fleets to be all electric by next year, number one, we can build a completed box truck in 30 to 60 days compared to other outsourced bodybuilders that take at least six to nine months. And the customer doesn't have to deal with multiple companies. Number two, Green Power's innovation has brought a number of products to market, such as our refrigerated box truck. Number three, we have our own cabin chassis with the EV Star CC on hand, ready to fill customer requirements. And as Klaus always says within this space, we are truly a one-stop shop. In conclusion, we position ourselves for not one but two generational mandates that will drive growth for our school bus and our commercial vehicle groups. This concludes our call. We thank you for your support.

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