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spk00: Welcome to the fourth quarter 2022 Phoenix Motors Inc. Earnings Conference Call. My name is Emma, and I will be your operator for today's call. As a reminder, this call is being recorded, and all participants are in a listen-only mode. All questions can be directed after the call to phoenixir at icrinc.com. It is now my pleasure to introduce Mark Hastings, Senior Vice President of Corporate Development and Strategy and Head of Investor Relations.
spk03: Thank you and welcome everyone to our fourth quarter earnings call. I'm joined on the call today by Dr. Lance Cho, our Chief Executive Officer, and Chris Wang, our Chief Financial Officer. For those of you who are new to our story, Phoenix Motorcars is headquartered in Anaheim, California. Our goal is to be a leader in sustainable finance. and zero-emission, medium-duty transportation with a range of products available to our customers, including shuttle and transit buses, school buses, delivery vans, and work trucks. We market our medium-duty vehicles through our brand, Phoenix Motorcars. In addition, we also offer a full range of EV chargers and electric forklifts, as well as telematics solutions for fleets, EV infrastructure solutions, and electric vehicle maintenance and service programs. We are also currently developing a light duty consumer and commercial vehicle line, which will offer pickup trucks, SUVs, and delivery vans that will be marketed under our Edison Future brand. We are not a pre-revenue company like many others in our sector. We were founded in 2003. We delivered our first trucks nearly a decade ago and our vehicles have logged 4 million zero-emission miles on the road. As a result, we have a stable and loyal customer base, and we offer our customers vehicles, charging and telematic solutions, and complete vehicle maintenance and service support. Dr. Lance Cho, our Chief Executive Officer, will speak next. For those of you who don't know Lance yet, he has a long history of success in the full vehicle development arena. He has taken three different vehicles all the way from concept through design, production, and into sales. In addition, Dr. Lance, as we affectionately refer to him, has a particular expertise in mass production, which is one of the most important of the many attributes he brings to our company. With that, I will turn the call over to Lance, who will say a few words about the progress we have made with our Gen 4 vehicles since the time of our third quarter call.
spk02: Thank you, Mark, and thank you for all your time today. I'm very excited to report that since receiving the Board of Directors' approval for our GEM4 development program, we have been hard at work executing on our implementation plan to bring GEM4 to market cost-efficiently and quickly. As a result, I am proud to report that we anticipate the start of a production for GEM4 vehicles, as well as first delivery to be achieved this summer. Furthermore, we expect GEM4 production to ramp to 20 to 24 units a month when at a full production. which we expected to be achieved by the end. We are excited because we expected the M4 to be a game changer for Phoenix. These vehicles will benefit from our asset-like business model, which allows for lower cost and shorter production times than we have had before. We have a direct port a standardized design and production process, which has enabled us to run the production quickly and reduce required production hours. In addition, Gen 4 will serve as our bridge to Gen 5, which will see the company produce its own purpose-built chassis, thereby achieving chassis independence at a lower cost and with desired flexibility and increase the customer satisfaction. We look forward to providing more detailed information regarding our progress in the coming quarters for both our Gen 4 and Gen 5 vehicles. Now, turn the call back over to Chris Wang, our Chief Finance Officer. who will discuss our fourth quarter and full year financial results, after which we will take some time to provide additional information about our products and update you on our current growth and development plans. So right now, I would like to pass over to Chief Financial Officer, Chris Wong.
spk01: Thank you, Dr. Lenz. Turning to the fourth quarter, for the three months ended at December 31st of 2022, our net revenues were $1.8 million compared to $1.3 million for the same period in 2021. This represented an increase of approximately 35%. Results in the quarter benefited not only from the resolution of the previously reported software-related issues and the battery supply constraint, which delayed the delivery of some vehicles in the third quarter, but also from forklift sales. For the full year 2022, our net revenues were 4.3 million, a 45% increase compared to the prior year, driven primarily by an increase in the sales of electric forklift. For the first quarter of 2022, our cost of revenues was 1.5 million compared to 1.7 million in a year-ago period. Cost of revenues dropped by about 0.2 million, primarily due to lower costs for EVs, partially upset by an increase in forklift sales. For the full year 2022, our cost of revenues was 3.5 million, which was unchanged compared to 2021, despite an increase in revenues as we lowered the cost significantly in our electric vehicle business. For the first quarter of 2022, our gross profit was $0.3 million, which improved significantly compared to a gross loss of $0.4 million during the year-ago quarter. The increase was driven by a shift in product mix and a significant improvement in the gross margin for our electric vehicle business. For the full year 2022, our gross profit was $0.8 million, which was significantly improved compared to a gross loss of $0.6 million for the full year 2021. The gross margin defined as gross profit divided by revenues rose from negative 19% to positive 19%, driven by higher margins across all product categories. Particularly, it significantly improved the margin on electric vehicles from a negative 41% to positive 4%. Increased the margins of the service and the maintenance from a 14% to 56%. And finally, the 15% margin of electric forecasts. Selling general and administrative expenses or SG&A in the first quarter were 4.8 million compared to 7.5 million in a year ago quarter. The decrease was mainly due to a one-time charge of the estimate future prototype development cost in Q4 2021. For the full year 2022, our SG&A was $14 million compared with $13.8 million in 2021. The slight increase in operating expenses is primarily due to the increase in salaries and wages and costs related to being a public company, partially offset by a decrease in research and development cost. The increase in salaries and wages is driven by an increase in headcount from 55 to 60 to beef up capacity in engineering, production, and service, and to prepare for an expected production expansion. The decrease in research and development costs reflects our change of approach to product development in alignment with our asset-light strategy, where we're outsourcing a significant portion of design and engineering work for Gen 4 product to third-party vendors and partners. As a result of all the factors just described, the net loss for the fourth quarter of 2022 was $4.5 million. compared to a net loss of 8.2 million in the prior year period. The net loss for the full year 2022 was 12.7 million, which was an improvement compared to a net loss of 14.6 million for the full year 2021. With that, I will now turn the call back over to Mark, who will provide a high level overview of our strategic plan. Mark. Thank you, Chris.
spk03: To recap again what we do, in addition to offering medium-duty electric vehicles, we also provide a full offering of EV chargers and electric forklifts. In addition, we offer telematics solutions for electric vehicle fleets, EV infrastructure solutions, and service and maintenance programs. Our legacy all-electric medium-duty commercial vehicle line is marketed under the Phoenix Motor Cars brand and includes shuttle and transit buses, school buses, delivery vans, and work trucks and box trucks. These are sold as complete vehicles as well as an electrified kit form for our customers to add their body to. Phoenix Motor Cars customers are sourced from a wide range of industries with applications such as airport parking, hotels, campuses, cities, municipalities, ports, and school districts. We serve over 50 commercial fleet customers to whom we have deployed over 115 shuttle buses and trucks with a combined distance traveled of 4 million miles. Today, we are manufacturing and selling our Gen 3 vehicles, but we are excited to share that we will be starting production as well as achieving first delivery of our Gen 4 vehicles this summer literally right around the corner we are excited to be executing on our asset light business model as we expand in the coming years we feel that our asset light strategy is a differentiating characteristic for our company and the development of gen 4 has seen the deployment of this strategy for the first time our asset light model extends both upstream and downstream in our gen 4 development upstream we have worked hard to cultivate partnerships and networks of suppliers across the industry and have leveraged their expertise, experience, and staffing. These relationships have enabled us to bring this generation and will also allow us to develop future generations of our vehicles to market faster, cheaper, and with higher quality than we could ever hope to do by building the entire team on our own. As an example, We have been working hard with IAT, arguably the premier EV engineering firm in the world, to bring Gen4 to market in a matter of months, not years. We are also working with Alton to introduce our leading edge swappable battery systems to our Gen4 lineup. Likewise, we are extending our asset light strategy downstream to the production side of the business as well. We are partnering with certain customers as well as with third-party manufacturing and assembly facilities in order to scale our production cheaper, faster, and more capital efficiently than we could ever hope to accomplish on our own. We will highlight specific partners in the months ahead. As part of this strategy, we are reconfiguring and streamlining our existing Anaheim manufacturing facility. We will use this plant as a production center and a showcase facility facility, and training center, where our third-party manufacturing partners will send their technicians to learn our standardized processes and procedures in order to ensure maximum efficiency and quality across our entire production network. In addition to achieving faster time to market and lower development costs as a result of our asset-light model, we are also achieving lower production and bill of materials costs compared to our Gen 3 vehicles. by utilizing standardized processes and procedures, better designs for our components and sub-assemblies, and a streamlined supply chain process. As most of you know, two of the major hurdles that we and other similarly positioned EV manufacturers face are, first, security of battery supply, and second, access to an adequate number of Ford E450 chassis to meet our production and sales pipelines. On the battery side, we've cleared the first hurdle with our Gen 4 development by securing a supply agreement with CATL, the world's largest EV battery maker, for the long-term procurement of K-Paks and related products for our Gen 4 vehicles. We are also working on additional battery partnerships as well. On the chassis side, we recognize that the medium-duty EV market is heavily dependent on the supply of Ford chassis And as the industry continues to grow, we foresee a supply shortage and are moving quickly to plan for our Gen 5 ground-up design, which we expect to introduce during 2024. This will help us clear the second hurdle as we achieve chassis independence with our Gen 5 vehicle lineup. The development of our Gen 5 vehicle line which will follow closely on the heels of SOP, or started production, for Gen 4, will benefit immensely from all the hard work we're putting into the development of Gen 4. All the benefits of our asset-light business model, our partnerships and supply and production agreements, will transfer directly to Gen 5. In addition, most of the components and sub-assemblies that we have developed for Gen 4 will be used on Gen 5 as well. For these reasons, we view Gen 4 as a bridge to Gen 5. Our Gen 4 development will be profitable and carry high gross margins in its own right, but its true value will be unlocked as we apply the learnings and principles to our Gen 5 ground-up chassis design that will ensure not only security of battery supply, but also chassis independence. Two other features of our Gen 5 vehicles, in addition to battery and chassis, supply security will be even lower costs than Gen 4 and greater design flexibility to meet the needs of our customers. We expect to produce our new chassis for far less than the cost we are currently paying to acquire chassis, and we will have the ability to customize our vehicle designs to meet specialized needs while maintaining standardized processes and procedures, increasing our capacity to accommodate customer requirements, and meet the evolving needs of the transforming electric vehicle market. We look forward to sharing more about our Gen 4 and Gen 5 vehicles in the coming quarters and to telling you more about our exciting plans for our Edison Future vehicles. Edison Future will be a light-duty offering with a solar-powered component marketed for personal and commercial use in the form of pickup trucks, SUVs, and delivery vans. The Edison Future pickup truck and vans debuted at the 2021 LA Auto Show to much fanfare and broad acclaim. We expect to bring the Edison Future vehicles to market sometime during 2025. Our goal is to create a vehicle lineup that will have tremendous reliability and be cost competitive without subsidies. Our ability to be cost competitive is a key focus as we seek to meet future market demands as the markets and EV technologies move from an emerging market base to a steadier state market base. At its core, Phoenix is an engineering-focused company with patented technologies that address the market's need for the next generation of zero-emission vehicles. we have constructed our company to be flexible and asset-light. We have talked a lot about our asset-light model, which is logical since it is central to everything we do and something which sets us apart from other EV manufacturers. We have an exciting road ahead with the launches of Gen 4 this year, Gen 5 next year, and Edison Future in 2025. But we are not developing these product lines as an academic exercise. We are building a scalable business that endeavors to maximize returns on shareholders' capital while also deploying industry-leading technology. We've put together a management team that's seasoned and established in the EV sector and incentivized to overachieve, putting us in an excellent position to execute in a high-growth, zero-emission commercial and consumer vehicle sector. If you have any questions, please direct them to phoenixir at phoenixir. icrinc.com. Thank you to everyone who joined the call today. We really appreciate your interest in our company and look forward to sharing more of the Phoenix story and our progress in the coming quarters.
spk00: This concludes our call. You may now disconnect.
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