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spk04: Good day ladies and gentlemen. Thank you for standing by. Welcome to the Greenland Technologies first quarter of 2021 earnings conference call. Currently all participants are in listen-only mode. Later we will conduct a question and answer session and instructions will follow at that time. As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. Now I will turn the call over to Juliet Chen, Managing Director of Blue Shirt Group Asia. Chen, please proceed.
spk01: Thank you, operator, and hello, everyone. Welcome to Greenland Tech Knowledge first quarter of 2021 earnings conference call. Joining us today are Mr. Raymond Huang, Chief Executive Officer, and Mr. Jingjing, Chief Financial Officer. We released the result early today. The press release is available on the company's website at www.gtech-tech.com. as well as from Newswire Services. A replay of this call will be also available in a few hours on our company's website. Before we continue, please note that today's discussion will contain forward-looking statements made under the State Harbor Commission of the U.S. Private Security Determination Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the expectations expressed today. Further information regarding these and other risks and uncertainties is included in the company's property filing with SEC. The company does not assume any obligation to update any forward-looking statements except as required under favorable laws. With that, now let me turn the call over to our CEO, Mr. Raymond Huang. Go ahead, Mr. Huang.
spk05: Thank you very much Julia. And welcome everyone to Greenland Technologies' first ever earnings call. Now this is a routine that we will continue as part of our mission to provide greater communication and transparency into our business strategy and our performance with shareholders, investors, and interested parties. So let me just start with a quick overview of our business. Greenland Technologies Holding Corporation is a market leader in the development and manufacture of transmissions and drivetrain components for material handling vehicles with a focus on forklift trucks. Founded in 2006, we have focused on the material handling market in China and established our brand over the years with high-quality innovative products, a strong established supply chain, robust manufacturing capabilities, and a dedication to supporting our client needs and building long-term relationships. Currently, we are the largest independent drivetrain supplier for forklift trucks in China with over 35% market share, and a clientele that includes the biggest forklift OEM players in the game, such as Toyota, Lindy, Heli, Hansa, and Doosan, just to name a few. We meet the needs of our clients by leveraging our established supply chain and state-of-the-art 600,000 square foot manufacturing facility in Shaoxing, China that can produce over 200,000 transmission units and 3 million precision gears annually. Now, with the strong demand for forklift trucks in China due to government spending on infrastructure and an increase in warehouse construction activity, we have achieved our highest revenue and transmission drive trains delivered in a single quarter in the history of our company. In the first quarter of this year, Greenland has delivered 36,986 transmissions and drive trains and generated a revenue of $24.6 million. And we are confident that demand for forklift trucks will continue to remain strong in China throughout 2021 which will contribute to the success of our core product line. Now here at Greenland our strategy and culture is based on two core principles. Number one operational excellence and number two innovative product offerings. A disciplined management of operations and structural costs allow us to deliver a high volume of exceptional quality products at a competitive price. This is combined with innovative product offerings that cater to shifting trends in the market to make our clients more successful in their business. We cultivate innovation through a team of dedicated professionals that have amassed 108 registered patents for proprietary systems, components, and manufacturing techniques as of the end of last year. This innovation is ingrained in our culture at Greenland Technologies since the very beginning when we started with the manufacture of high quality precision gears. This evolved to transmissions for forklift trucks, then drivetrains for forklift trucks and other material handling vehicles. And last year, we announced our commitment to developing products for clean energy powered vehicles. with the launch of our integrated drive train that is specifically catered for lithium-powered forklift trucks. This product is designed to simplify the development and manufacture process for OEMs to enter the lithium forklift market quickly. And we have seen strong initial sales and adoption of this product line with over 2,000 units delivered monthly. With the early success of this new product, combined with the performance of our core product line, I estimate that we will achieve between $80 to $90 million in gross revenue by the end of the year. And this year, we announced the next evolution of our product line with the development of all electric industrial vehicles. We will be a pioneer in this emerging market with our first product, the GEL1800. This is an all-electric wheeled front loader with a 1.8 ton loading capacity. powered by a 141-kilowatt-hour lithium battery. This vehicle will be closely followed by an 8-ton electric excavator and our own line of lithium-powered forklift trucks. They are currently in pilot production right now and will be commercially available in the fourth quarter of this year. Just like our product evolutions to meet market trends, We also need to adapt our business model to capture growth opportunities and continue building value for our shareholders. As a result, we will begin expanding our operations beyond China by entering the global market. And our new line of electric industrial vehicles will be the tip of the spear as we extend our operations abroad. We're going to be focusing on entering the United States market due to a favorable environment of government support and the adoption of clean energy technologies. Our electric vehicles will be assembled in the United States and marketed to industries that are best suited to benefit from the advantages of electric powered products, such as urban settings, sensitive areas near hospitals, schools, and parks, property management, waste and recycling management, and livestock agriculture. So with our exceptional historical performance highlighted by this quarter, strong initial adoption of our integrated drive trains, and the expansion of our business to the global market with a new line of electric industrial vehicles, there's a lot to be excited about here at Greenland Technologies for 2021 and into the future. So I just want to thank everyone at Greenland for working hard and staying committed to the success of the enterprise to achieve a record quarter. Now, without further ado, let me turn the call over to our CFO, Mr. Jingjing, who's going to provide more insight into our financial performance. Jingjing, the call is yours.
spk03: Thank you, Raymond. And thank you, everyone, for joining our call today. I will now go over our key financial results for the first quarter of 2021. For the full details of our financial results, please refer to our earning press release. We have achieved outstanding results in Q1 this year. Total revenue was $24.6 million, an increase of 149% year-over-year. The increase was preliminary due to the significant increase in our sales volume. We have seen robust growth in the industrial sector with solid demand increases. The numbers of the transmission sold increased nearly 130% to 36,986 units from 16,099 units in the first quarter of 2020. Costs of accrued sold were $19.5 million, an increase of 145% from $7.9 million in the first quarter of 2020. The increase was primarily due to the increased volume of the transmission product that we sold. Gross profit was $5.1 million, an increase of 165% from US$1.9 million in the first quarter of 2020. As we continue to improve our productivity, maximize factory capacity, reduce material costs through large purchases, we generate 20.7% of gross margin, 1.2 percentage point higher than from 19.5% in the quarter of 2020. The total operating expenses were $2.2 million, up 21% from $1.9 million in the first quarter of 2020. Since our revenue year-over-year revenue growth was 149%, we have significantly improved our operating efficiency by only increased 21% of our operating expenses. From the view of other dimensions, operating expenses as a percentage of total revenue was 9.1%, a decrease of 9.7 percentage point, compared to 18.8% in the first quarter of 2020. As we are interested in sales and distribution network to support higher growth, The selling expenses in Q1 were $0.38 million, up 74.9% year-over-year. The general administrative expenses were $0.9 million, a decrease of 15% year-over-year, as we have been recklessly optimizing our management functions and enhanced process automation. In Q1 2021, our R&D expenses increased 70% to $0.96 million from $0.56 million in Q1 2020. As a market leader in transmission and drama chain segment, we continue to innovate our product and solution to lead the next phase of our growth. With rapid growth in revenue and improved operating efficiency, we were able to generate impressive net income growth of 645% from last quarter, reaching $2.4 million in this year. The current assets on our balance sheet as of March 31st, 2021 were $121.3 million. We are greatly confident that Greenland technology is well positioned to lead the growth of our sector. Now, let me offer some insights of the financial guidance for this year, 2021. To be conservative, our current revenue guidance for 2021 excuses the industrial EV revenue. We expect it to generate $80 million to $90 million of revenue, representing an increase of 20% to 35%. As Raymond shared with you earlier, we are planning to launch the industrial vehicle in Q4 2021. The pre-booking of the EV will be in the middle of May. We will provide you with the status updates in the national link call. That concludes our panel remarks. Let's now open the call for questions. Operator, please go ahead.
spk04: Certainly. To ask a question, you will need to press star 1 on your telephone. To withdraw a question, please press the pound or hash key. Please stand by while we compile the Q&A roster. Once again, to ask a question, it's star 1 on your telephone. Thank you. We have our first question from the line of Craig Irwin from Roth Capital Partners. Please go ahead.
spk06: Good morning. The 35% market share number that you shared is definitely an impressive number. Can you qualify this for us? Is this on electric forklift drivetrains, or does this maybe include a slightly broader category of sort of small industrial equipment? Can you maybe just give us a description of what exactly you're looking at to derive the 35% number?
spk05: Absolutely, absolutely. So this is Ray. Craig, thank you very much for your question. So that number is actually That number is actually based off of forklift trucks being produced and sold in the Chinese market. They consist of both electric and internal combustion power. So it's not just limited to electric forklifts. And it does not incorporate other material handling vehicles such as light utility vehicles or anything of that nature. That 35% is specific to forklift sales in the U.S. regardless of power.
spk06: Wow. Okay. That's a little better than I thought it was. I thought this was in electric, so that's a nice clarification. So then of the 37,000 electric transmissions you delivered in the March quarter, how many of those went to international customers? Or maybe a different way to ask this question is, what percentage of revenue is generated outside of China today?
spk05: Yep, absolutely. That's a fantastic question. So currently, over 95% of our sales are in the China market. One of the winning strategies for our business has always been focus, and we specifically targeted the Chinese market since the very beginning. Now, this focus and dedication is actually what allowed us to become the market leader and largest independent drive train supplier for forklift trucks in China. But now that we've accomplished this milestone, we need to begin to extend sales to the global market, such as the United States with our expanded product line. So by 2022, I'd say, we're going to start seeing a shift towards global sales.
spk06: Understood. Understood. So then the growth there that you're achieving in China is really impressive. Can you maybe talk about what's driving that growth? Is that the Chinese industrial recovery or, Is it maybe the adoption of electric drivetrain technology by more forklift OEMs, maybe customers? Can you maybe give us a little color to help us understand this tremendous year-over-year growth?
spk05: Yes, absolutely. And that's a great question. You framed it perfectly. Because right now, because of the strong demand in China, the forklift industry is just skyrocketing. So for OEM sales, other large players in the game such as Toyota or Lindy, they're actually seeing growth of about 40 plus percent in the Q1 quarter because of the strong demand in the Chinese market for forklift trucks. Just like I said earlier, it's because of China's investment in the infrastructure and also its drastic increase in warehouse capabilities throughout the region. Now, you mentioned specifically about electrification of forklifts, and I'm really happy you did. Because right now, China is the leading, leading sales of forklift trucks in the world. They represent over 40% of all forklifts sold globally that happens in China. And China, you're seeing a drastic adoption of electric forklift trucks. So they're moving away from internal combustion, from propane, and they're switching over to electric. And most important to note, lithium battery forklift sales have grown dramatically. It actually grew by 186% year over year, and currently it represents 25% of all electric battery forklifts sold. So not only is it shifting towards electric forklifts as a whole, but it's also shifting away from lead acid and moving quickly into the lithium battery focus. And we saw this trend coming, which is why we actually developed our integrated drivetrain specifically for the lithium-based forklift, because we saw the trend that it would shift quickly over, transition out of lead acid into lithium. And that's actually the reason why we're seeing some strong initial sales for our integrated drivetrain products, because OEMs now, they're seeing that trend, and they want to get to market as fast as possible to be competitive and capture market share. So with our products, we help give them that boost and head start.
spk06: Thank you. Thank you. So I wanted to ask for a little bit more color on your plans for the electric loader vehicle you're going to introduce in the fourth quarter. how much do you think it's going to take as far as investment to launch the product? And is this maybe a China or U.S. product or international, European? And do you have some potential projections on units or sales that you think are a reasonable target for the company?
spk05: Mm-hmm, mm-hmm. Absolutely. So the beta phase consisting of research, development, and design for our industrial electric vehicles, that's already been completed with its cost factored into our Q1 results. Actually, Qingqing went over the R&D spend, and you saw there was a 70% increase there. That was actually a big component of it was our electric vehicles. And initial deployment of our pilot production is going to be minimal. The initial spend is going to be probably about $150,000 to $250,000. However, when we transition to full-scale production involving the deployment of assembly facilities, we expect to invest between $2.5 million to $5 million based upon product interest and regional needs. And based upon the timelines, we expect to see sales results in about 2022. Our marketing is going to target U.S.-based corporate government organizations where our industrial electric vehicles are going to be well-suited. So I mentioned earlier warehouses, large property management companies, waste management, mining, and livestock agriculture. Our vehicles, we are committed to expanding into the United States. Focus is key to our business model. So these vehicles are going to be assembled in the United States on U.S. soil. The way we're going to be doing that and the reason why we're able to launch this product with a relatively minimal spend is because we're actually going to be utilizing an asset light distribution model. So what we're going to do is we are going to leverage our strengths in China with our established supply lines and our manufacturing capabilities to manufacture the core components for the vehicles. From our China facilities, We're going to ship them over to the United States into – I'm calling them micro-assembly facilities in the United States, and we're first looking at the East Coast right now. So these sites are going to be responsible for the final assembly and quality assurance checks to make sure everything is good to go. So the final assembly is going to be performed in the United States, and then we will distribute them from there.
spk06: Great. Last question I may ask. I'm pretty new to GTHC like I guess most people on this call. Can you maybe describe your current manufacturing footprint in China? What is the utilization and what are the capabilities both today and flexibility for expansion as demand grows?
spk05: Absolutely. So right now, I mentioned earlier that our facility is a little over 600,000 square feet in space. Currently, we are utilizing about 450,000 square feet for our facility. And we moved into this facility in 2019. We own it 100%. We bought the land and we created the space. So it's entirely ours. And this is a state-of-the-art facility. We have hundreds of top-of-the-line machines such as CNC machines, milling, lathe, all top quality because our focus is on developing a premium product. We're not trying to win the low-price game and try to push things out. We've earned the trust of our clients by focusing on quality and consistency over time. And right now, our facility is able to generate over 200,000 drivetrain systems and 3 million precision gears annually. However, with that said, because of this massive growth in demand in forklifts in China, and because of our expansion as well into the global markets, we already see the need for additional manufacturing. So we are in process right now of expanding our facilities to utilize the entire 600 square foot space. And that will improve our production capabilities.
spk03: Yeah, and also in addition to women's comments on as women said before we we have the capacity of 200 200,000 Transmission products for the capacity right now. So this year we are expected to go over 100,000 at least the 100,000 transmission products so far. So let's say right now our capacity still give us the room about like 30% to 40% room to growth of the products in terms of the products.
spk06: Thank you, Raymond Jing. I look forward to following progress over the next several quarters. Thank you.
spk05: Thank you very much for your question.
spk04: Thank you. We have our next question from the line from Agis Capital. Please go ahead.
spk00: Good morning. Thanks for taking my question and congratulations on the quarter. You know, you had such strong momentum on the top line, on the revenue line during the quarter. I wonder if you could just characterize, you know, how much of that was, you know, sort of pure organic growth in the market and orders from customers as opposed to catch up from, the impact of COVID. Obviously, when we look at the first quarter of a year ago, you were impacted by the COVID slowdown and some of the mandatory quarantines and so forth. So, yeah, just how much of what you saw, the strong momentum you saw, not just in the first quarter, the fourth quarter as well, was sort of that sort of pure organic growth in your business and your core business as opposed to catching up from COVID? And maybe a two-part question because it sort of dovetails with that question. You know, as you look at your guidance for the remainder of the year, $80 to $90 million, that would probably imply some moderation of that sales level on a quarterly basis for the next couple of quarters, for the next three quarters. And is that due to this sort of catching up or just maybe being a little conservative this early in the fiscal year? Thanks.
spk05: Great question, Rahm. Well, thank you very much for asking it, and good morning, sir. So let me start with the performance of our core product line. So yes, this quarter has been record sales, and we're very, very happy and proud of it. But this performance, this success that we've earned is not just because of a catch-up of existing quarters because of the COVID environment. And the best way I can illustrate that is just going through our historical numbers. So fourth quarter, we produced about 35,000 transmissions. And at that time, that was our most successful quarter. So we're actually breaking records quarter after quarter. But even before that, so Q3, we produced over 26,000 transmissions. Q2, 28,000. And this is during the height of COVID. Now for these quarters, Q2 and Q3, those represent growth – I'm doing rough calculation in my head by about 40% and 50% year-over-year growth in those quarters. And that's during the height of COVID. So in terms of whether our growth is organic, I would say – that especially during the challenging environment of COVID, especially in China, the nation was shut down. We had to close our facilities even for the first quarter of that year. Our ability to rebound quickly and deliver and meet the needs for our clients really demonstrated our worth to our clientele, and that continued to earn us additional business. In addition to our innovative products that we released, those all contributed to the bottom line. So, yes, the market is definitely favorable in our industry, and we have enjoyed some of that organic growth. A core component of it, I believe, is based on our handling and ability to still deliver quickly after the effects of COVID, even during the height of it.
spk00: That's great. Maybe just one follow-up, if I could. We obviously see raw material prices rising on a global basis, and yet your margins are so strong. Could you maybe just talk through some of the moving factors there on the strength of your gross margins? I think it was 20.7% in the quarter, so obviously good progress there from fourth quarter. So is that just increased efficiencies offsetting? the rising raw materials, are you able to also pass through some maybe modest price increases to help offset those rising raw materials? Thanks.
spk05: Yeah, great question. And actually, just to provide a further context and color on your question to the group, so in China, for the raw material market, since January of this year, raw materials have been rising, and The core material that directly impacted our business was steel. So since January, the price of steel has increased by 40%. And this definitely produced a challenge for us. Our procurement managers were working night and day to even just secure and procure sources for more steel to keep our production going. But they worked so hard and their dedication to the business allowed them to actually achieve to source that steel and continue our production without hindering it or slowing down which is fantastic. And this actually turned out to be a blessing in disguise because we actually opened up new supply chains and further strengthened our supply chain capabilities with these new relationships. that's going to extend into the future. So I've been very happy about that one. And as for the actual price of steel itself, I actually find that this price increase is going to be a short-term situation, primarily due to two actions that the Chinese government is going to impose in the very near future, very near future. Number one, China is going to ban the export of steel outside of the country just to preserve the local supply to make sure it's being used for Chinese production. That's number one. And then number two, they will be removing all tariffs for the importation of steel into the country. And because of these factors, I actually anticipate that the price of steel is going to drop down dramatically. And we actually, should that occur... we expect to see our margins to get even better because the margins that we've reported are during those difficult environments. But that's actually why our clients love us. It's because we're able to solve these factors during difficult situations. We're quick to adapt to the market and continue to provide value and support their businesses.
spk00: Great. Well, thank you, Ray. And as Craig Irwin mentioned a minute ago, we certainly look forward to future conference calls. Thanks so much.
spk05: Thanks for your question.
spk00: Thank you.
spk04: Thank you. We have our next question from the line of Eva Sun from Valuable Capital. Please go ahead.
spk02: Hi. Good morning, everyone. I have a question that what are the main reasons of the key drivers that you are entering into the EV industry? And which companies do you think are your main future competitors in this market? Thank you.
spk05: Good morning and thank you very much for your question, Eva. So currently in the electric industrial vehicle market, there is no market leader or major player. It is an untapped market where Greenland, we're going to be a pioneer in establishing this opportunity. And as a market leader in critical drive components of material handling vehicles, we have the expertise and knowledge. Coupled with our established supply chain and state-of-the-art manufacturing facility, we have the capability to produce the next generation of clean energy industrial vehicles. And to be clear, there are large tier one companies that have electric industrial vehicles in pilot phase. However, these companies, as market leaders with a portfolio of fossil fuel powered products, they have no incentive to commercially produce these vehicles as it would only serve to cannibalize the sale of their traditional products. So we here at Greenland's We are not burdened with a legacy product line to hinder our focus and the deployment of electric industrial vehicles. And because of these three key factors, they contribute to a phenomenal opportunity to evolve our company from a key component manufacturer to a full-on electric vehicle manufacturer. And that's just going to create a lot of value for our shareholders. So that's actually why we're entering the EV market, industrial markets. And you actually had a second question, and I apologize actually. I did not catch that. I'm sorry. Could you repeat that?
spk02: Sure. My question is which companies do you think are your key competitors in this market?
spk05: Great question, great question. So at Greenland we have three core businesses with our product expansion. We have our transmission and drive train components, we are going to be deploying our own line of lithium-powered electrical forklifts and the industrial electrical vehicles. So for transmissions, our main competitor is actually first-party manufacturers from Tier 1 companies that are looking to handle the manufacture of transmissions themselves for their own products. Outside of that in the third-party space, the very large company ZF, they are a competitor. However, in our market, we are still the leader. As for electric forklifts, particularly in the U.S. market where we're going to be targeting, the main competitor is going to be the Raymond Corporation, the Toyota subsidiary. They actually have significant market share and are expanding rapidly in the electric forklift space. So they're going to be our main competitor in the U.S. market. And as I mentioned earlier, for the industrial EVs, there's no real market leader right now. There's only small emerging new companies. a small company based out of Germany and a small company based out of the United States, out of Texas. However, their products are extremely small scale. They're more for residential usage even. So we don't look at them as a like competitor. Our product is servicing a completely different clientele and market. Thank you. Of course. Thank you for your question.
spk07: Thank you.
spk04: Thank you. Once again, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. Thank you. Thank you. It's approaching the end of conference time. Shall you have any questions, please contact us by email or phone call. Let me turn the call back to Mr. Wong for any closing remarks. Sir, over to you, please.
spk05: Sure, Adrian. Thank you very much. So first off, I really want to thank all of you for joining the call to learn a little bit about our company and being interested in performance and our success. I'm super excited as you can probably hear throughout the call my voice of how well we're meeting the market conditions and in the growth opportunities as we expand into new markets. I do want to thank everyone for joining our very first earnings call. It is my mission to increase the transparency and communication into our business with interested parties. So this will be a continued routine, and we will explore other avenues to provide more information to you all. So thank you so much, everyone, for joining. Thank you for all of your support, and I look forward to reporting to you again next quarter on our progress.
spk04: Thank you. That concludes our conference for today. Thank you for participating. Thank you all.
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