Greenland Technologies Holding Corporation

Good day, ladies and gentlemen. Thank you for standing by, and we warmly welcome you all to the Greenland Technologies First Quarter 2023 Earnings Conference Call. Currently, all participants are in a 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'll turn the call over to Josh Santani, Investor Relations Director of Greenland. Mr. Santani, please proceed.

Thank you, Operator. And hello, everyone. Welcome to Greenland Technologies' first quarter 2023 earnings conference call. Joining us today is Mr. Raymond Wang, Chief Executive Officer. We released results earlier today. The press release is available on the company's IR website at gtech-tech.com, as well as from Newswire Services. A replay of this call will also be available in a few hours on our IR website. Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation 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 public filings with the SEC. The company does not assume any obligation to update any forward-looking statement except as required under applicable law. Also, please note that unless otherwise stated, all figures mentioned during the conference call are in U.S. dollars. With that, let me now turn the call over to our CEO, Mr. Raymond Wang. Please go ahead, Mr. Wang.

Thank you, Josh, and good morning, everyone, and thank you for joining us today. I will be handling a majority of this call as my CFO Jingjing has lost his voice and is in no condition to contribute to today's call. I'd like to start by thanking our global team for continuing to drive the business during a difficult global market and continuing to develop a more efficient operation. As expected and stated during our last earnings call, our component business continues to recover from global market conditions in the first quarter. Again, this is due to the current market conditions in the material handling and manufacturing industry in China as OEMs recover and ramp up from the country's zero-tolerance policy. Now, China's manufacturing PMI has fallen to 49.5 this year, which is below estimates of 50.3, showing a slower recovering on the fears of a global slowdown. However, based on feedback from our clients in the component business and our internal estimates, we still stand by our forecast that our business will normalize and grow, especially in the second half of this year. The material handling industry continues to grow with demand reaching all-time highs. Grandview Research recently increased their forecast of the global forklift market to a compound annual growth rate of 13.2% through 2030, with a greater shift towards electric forklifts due to increased emission regulations around the world. As a market leader in the forklift, drivetrain, and transmission industry, this market growth will reflect on our own metrics and results. And as we are ready to capitalize on this demand with our advanced components for all forklift and material handling systems. As displayed in our results, we continue to improve our margins through product innovation, lower costs, and operational efficiencies. Gross margins are up 320 basis points to 24.9% compared to last year. These improvements will further contribute to a successful 2023 as the market recovers and accelerates later this year. Switching to our heavy electric industrial heavy machinery business, we continue to make strides laying the foundation for the company. We recently recruited a new chief operating officer, Dana Hopkins, who has really hit the ground running and is developing the infrastructure we need to succeed. It has always been our responsibility as a pioneer to educate the heavy machinery industry on the advantages of electric compared to traditional fossil fuel systems, and we continue to see great success in this area. We have more and more organizations signing up for pilots and demos of our product. Heavy participated in three industry trade shows this quarter alone, where we were met with tremendous interest at each one. Speaking with attendees and learning how our products can improve their operations always fuels my perspective that the demand for electric heavy equipment is there, and heavy is on the right path to capture this opportunity. But I understand that heavy needs to move and advance faster towards our milestones, so we will adapt our strategy accordingly. As we develop and deploy our network of authorized service providers, we will incorporate a new referral incentive to leverage their network to uncover and close new opportunities. This will increase the effectiveness of our sales personnel with warm leads and open new doors. HEVI will explore new markets for our product line that can benefit from clean operations. Industries such as property maintenance, landscaping, and utility companies, to name a few. This also lends itself to exploring new market territories, both domestically and internationally, that possess significant opportunity. and we will be doing so in a prudent and calculated manner as to not take us away from our focus on establishing our presence in the mid-Atlantic region of the United States. We have received interest in our products from companies in these industries at various trade shows, and we will begin to expand our marketing to target them accordingly. HEAVY has also received a lot of feedback expressing interest in other HEAVY machinery that would benefit greatly from electrification. These opportunities are worth further research and market study and may lead to an expansion of our product line sooner than we originally planned. I am proud of the work that the GTEC team has accomplished. There is still more work to be done and milestones to be achieved, And I believe we are on the right track to reach those goals. And with that, let me dive into the financial results for the first quarter of 2023. As always, please refer to our earnings filings for full details of our financial results. So, for the first quarter of 2023, total revenue was $22.1 million USD. a decrease of 24% from 29.3 million a year ago, largely due to logistical and supply chain challenges resulting from the initial wave of COVID cases following the end of China's zero COVID policies and significant pent-up travel demands during this year's Chinese New Year holiday. In addition, revenue was impacted by a stronger dollar relative to the Chinese yuan. On an RMB basis, excluding the impact of the foreign exchange, Total revenue decreased by about 18% from the previous year. And we sold 36,841 transmission products, product units, sorry, compared with 41,902 units in the first quarter of 2022. Our cost of goods sold fell 28% to 16.6 million in Q1 2023. primarily due to lower sales volume. Gross profit was $5.5 million, compared with $6.4 million in Q1 2022. However, driven by a strategic transition in Greenland's product mix towards a higher value component and more sophisticated products like hydraulic transmissions, our gross margin rose 320 basis points to 24.9% from 21.7% a year ago. Meanwhile, total operating expenses increased 5% year over year to $3.1 million. The company has focused on significantly streamlining costs over the past year, which is mostly offset increases in research and development investment and marketing activities related to the company's expansion. Our income from operations was $2.4 million compared with $3.4 million in Q1 2022. Net income was $2.5 million compared with $2.9 million in Q1 2022. As of the end of March, our balance sheet remained strong with $15.4 million cash on hand, an increase of 125% from a year earlier. With solid financials and sound growth strategies, we are confident in our ability to grow both the core transmission business as well as our heavy division as we deliver significant value for our shareholders. And with that, that concludes our prepared remarks. I'm going to open the call up for questions. So, operator, please, you may go ahead.