This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk00: An answer session will follow the formal presentation. As a reminder, this conference is being recorded. Before we begin the formal presentation, I'd like to remind everyone that statements made on today's call and webcast, including those regarding future financial results and industry prospects, are forward-looking and may be subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the call. Please refer to the company's regulatory filings for a list of associated risks, and we would also refer you to the company's website for more supporting industry information. I would now like to hand the call over to William Treanor, founder and chief executive officer of Vicinity Motor Corp. William, the floor is yours.
spk02: Thank you, operator, and good afternoon, everyone. I'm pleased to welcome you to today's third quarter 2021 corporate update conference call. The third quarter of 2021 was instrumental in our foundation building for 2022, having secured exciting new lines of business, namely EV chassis sales alongside EAVX and low floor electric shuttle bus sales through our new partnership with Optimal EV. While revenues from our transit bus business are at times irregular, and see some periods of lower deliveries, as illustrated with this quarter. For our financial guidance we've released, we're on a trajectory to realize over $140 million in revenue next year, marking what will be a record-breaking year for vicinity by any measure. Our entry into the high-demand electric truck and shuttle bus market is expected to fill the gaps for periods of lower transit bus deliveries in the future. We are leveraging our strong momentum to accelerate the launch of next generation electric vehicle products, including our breakthrough Vicinity Lightning EV and our new VMC 1200 Class 3 truck. The S1 and E1 cutaway product lines from our strategic partner optimal ev and finally ev sales for upfitting into next generation municipal and delivery vehicles alongside eavx our strategic partner and business unit of north american commercial automotive leader jb point dexter the land grab for ev market share is well underway and we are positioned to gain traction through our long-standing partnerships with North American transit agencies and a continent-wide dealer network. Given the capital needs to fully fund our Washington State manufacturing facility and these exciting new business lines, namely our exclusive North American distributor agreement with Optimal EV and our strategic collaboration for chassis sales alongside EAVX, we've made significant moves towards fortifying our balance sheet in recent months, as well to support some of these exciting new growth initiatives, supplementing our $20 million line of credit with a $10.3 million debt financing and proceeds from a U.S. $17 million underwritten public offering. To support our 2022 financial guidance for revenues of at least $140 million and adjusted EBITDA of at least $10 million, numbers which we believe are conservative and provide room for significant potential upside driven by our continuously strong North American sales momentum, we have appointed respected commercial transportation veteran Brent Phillips, as our Senior Director of Sales in North America. Brent is an incredibly well-networked and talented individual, a perfect example of our ability to create a Tier 1 organization and setting up for an accessible future. We attended key investor industry events in this quarter as well, namely the FNN Network Summer Virtual Event, the H.G. Wainwright 23rd Annual Global Investing Conference, and the LD Micro Main Event on the investor side of things, as well as the CALAC 2021 Autumn Conference and Expo and the APTA Transform Conference and Expo on the industry side, both significant industry trade events where we're showcasing our newest, most advanced products for customers potential customers to familiarize themselves with. Now, with that, I'll turn it over to Dan to review the financial results of this quarter ended September 30th, 2021. Dan? Thanks, William.
spk01: Good afternoon, everyone. I will constrain my portion to a quick review of our financial results. Full breakdown is available in our regulatory filings and in the press release across the wire after market closed today. Please note, I'll refer to adjusted EBITDA and other non-GAAP measures. For the calculation of adjusted EBITDA and other non-GAAP measures, please refer to the Q3 MD&A, which is available on CDAR. Revenue decreased 67% to $2.9 million for the three months ended September 30, 2021, as compared to $8.9 million in the three months ended September 30, 2020. The decreased revenue was primarily driven by the delivery of six buses in the corridor. as compared to 20 buses in the third quarter of 2020, reflecting low order intake during the first nine months of the pandemic and delivery delays related to shipping and the global supply chain challenges for certain parts currently experienced in the industry. Revenue grew 128% to $49.3 million for the nine months ended September 30, 2021, as compared to $21.6 million in the nine months ended September 30, 2020. The company delivered 119 buses for the nine months ended September 30th, 2021 as compared to 49 buses for the nine months ended September 30th, 2020. Gross loss totaled $0.7 million or negative 24.9% of revenue in the third quarter of 2021 as compared to a gross profit of 0.6 million or 6.3% of revenue in the same year ago quarter. Gross profit increased to $5.7 million or 11.6% of revenue for the nine months ended September 30th, 2021 as compared to gross profit of $1.2 million or 5.3% of revenue for the nine months ended September 30th, 2020. The margins for the three months ended September 30th, 2021 were negatively affected by the sales of higher than average cost buses and inventory. and the sales of fewer buses compared to the prior year period. The gross profit in the nine months ended September 30th, 2021 was positively affected by sales mix with 2021 deliveries generally having higher margins than those realized in 2020. Net loss for the third quarter of 2021 was 4.8 million or 16 cents per share, negative 16 cents per share. As compared to a net loss of 1.3 million, or negative five cents per share in the same year ago quarter. Net loss for the nine months ended September 30th, 2021 was 3.1 million as compared to a net loss of 3.8 million for the nine months ended September 30th, 2020. Adjusted EBITDA loss for the third quarter of 2021 was $3.5 million as compared to an adjusted EBITDA loss of 0.7 million in the same year ago quarter. Adjusted EBITDA loss for the nine months ended September 30, 2021 was $0.5 million, as compared to an adjusted EBITDA loss of $2.4 million for the nine months ended September 30, 2020. Cash and cash equivalents as at September 30, 2021 totaled $5 million, further fortified through the addition of $10.3 million in debt financing. and the proceeds from a U.S. $17 million public offering subsequent to quarter end. Working capital, as at September 30, 2021, totaled $16.4 million, as compared to $16.7 million, as at December 31, 2020. Our company is in a strong position. We have a strong balance sheet, are well positioned to execute on our robust 2022 financial guidance, and the fundamentals of our operations are very positive. we remain well positioned for future growth. And now let's pass it back to William to offer some closing remarks after which we'll begin our question and answer session.
spk02: Thank you, Dan. Looking ahead into 2022, we are incredibly well positioned to create long-term value for our shareholders. We are intensely focused on delivering upon our robust 140 million 2022 revenue guidance. completing our U.S. manufacturing plant, and securing new purchase orders for our ever-expanding line of electric vehicles, addressing the needs of an increasingly diverse customer base as we empower their drive to create a more sustainable public transportation system. I look forward to providing our shareholders with further updates in the near term as we launch new products, announce new customers,
spk00: successfully execute on our business plan I thank you all for calling in and now I'd like to hand back to the operator to begin our question and answer period operator we will now begin the question and answer session to ask a question you may press star then one on your touchtone phone if you are using a speakerphone please pick up your handset before pressing the keys to withdraw your question please press star then two Our first question today comes from Chris Souther with B. Riley.
spk04: Hey, Liz. Thanks for taking my question here. Maybe we could just start on the visibility on the 2022 targets, the $140 million. You know, you gave a breakdown of some of the units you're expecting between, you know, Optimal, the BMC 1200, the Lightning, and the Classic, you know, Maybe you can just touch where we are from an order book standpoint on those units. So are there any areas where you still have some work to do between now and the end of next year to kind of hit those numbers or how fully booked is that?
spk01: Sure. Dan here. So if we're looking at next year, we do have some good visibility already into next year. Our backlog is definitely increasing. We don't have all of these orders in hand yet, but if we're looking at our backlog right now, you know, it's near 90 million already for the backlog. Where we know that we're getting orders still is on the truck side. We're budgeting for 200 trucks next year, and that's probably light from where we think it's going to go. But that's where we do still see some orders coming in, and the lead time for trucks is a lot lower. Same with the optimal EV products. The lead times will be a lot lower. But we're well on our way to achieving that target and hopefully beating it by a significant margin.
spk04: Got it. Okay. Yeah, I mean, the 100-year order for the truck will certainly kind of move that needle. So, you know, I guess the truck and you know, the optimal would be the two areas from a unit standpoint where you think there's the most upside. And then I'm curious, you know, on the optimal, you know, what is the initial activity and speaking with your customers about that? Been like thus far, I recognize it's only been a month, but I'm curious, you know, in the press release you quoted, you know, firm orders and LOIs that are consistent with a month ago. So what is the initial feedback been there?
spk01: Well, I mean, initial feedback on the Optimal product, I'll let William talk in a second, but we were just at APTA here and showing the Optimal product, and people are excited. They're extremely excited.
spk02: We had a very good showcase here with the Optimal. I think it probably generated a lot of attention, probably. We look at the customer base and who is coming through looking at it. It definitely was high on everybody's regard to get in and take a look at that vehicle. We really like the vehicle. It's an easy manufacturing, a very short manufacturing timeframe. We're set up extremely well in Elkhart, Indiana. The production levels that we could actually get at a factory are 6,000 to 8,000 units per year. It's quite amazing. The actual people looking at it, we had great feedback.
spk04: That's great to hear. And then, obviously, Bruce did the balance sheet here. How should we be thinking about capital and working capital needs through the ramp over the next few months and quarters? How much cushion do you think is baked in kind of currently to get towards cash flow positives next year?
spk01: Yeah, that's a good question. Obviously, we're seeing a lower second half than we had for the first half. that's directly related to just lower intake that happened during the first nine months of COVID. The backlog is there now. And when we are producing for sales, we're producing profitably for all new orders. So it's, you know, we don't really see being cashflow negative for too long here. This is definitely going to be a cashflow positive year in 2022, as you can see with our $10 million EBITDA projections. So, you know, I'm not too concerned there from a liquidity perspective. I still have not drawn on our $20 million ABL. So liquidity here is fine right now.
spk04: Okay. And then just last one, you know, one thing with kind of, you know, transit side customers, you know, any kind of update you can provide on Where momentum is from those customers? Are people waiting for some of this infrastructure spending to start to have more visibility? I'm curious. Are conversations starting to heat up here as COVID starts to improve? Where do we stand?
spk02: We feel we're in just the perfect position here right now. Funding has increased. It's at record highs. We've got the transportation bill that's just finished being passed in the U.S. here, which is really targeting billions and billions of dollars towards the cleaner, greener transit vehicles. On the Canadian side as well, we see 5,000 vehicles, 1,000 vehicles a year being funded through greener initiatives. So we're positioned extremely well. I think, you know, if we really had to look at the market, coming out of the pandemic and coming out of some lower riderships on the transit side, you know, a mid-sized bus now really makes better sense than it ever has in the life of the vehicles. You know, there's a lot of people, a lot of talk from the transit authorities that were coming through the show here where we're right-sizing and funding's in place. So We're just well-positioned, I think, to grab a lot of this business that's coming out.
spk01: Yeah, I should say, too, that we showed the vicinity lightning for the first time at APTA, and the excitement around that was huge. We're definitely poised to have a lot more lightning sales coming in the near future.
spk04: Oh, it's great to hear. I'll let you know. Thanks. Oh, go ahead. Thank you.
spk00: Our next question comes from Bruce Chan with Stifel.
spk03: Hey, good afternoon, Will, Dan, John. Thanks for the time here. Just a couple questions left from my side. You gave some great color on, you know, what we should be looking for next year, and I know we're still focused on building the foundation, but when you think about 4Q, you know, what are your expectations for deliveries? Are we going to be seeing, you know, maybe more of the same as what we saw this quarter? Are we going to see some improvements, some deterioration, you know, maybe just some color there?
spk01: Sure. Dan here. It will be slightly better than the third quarter. So we're still, we guided before that we were looking to do 130 buses for the year. We're at 119 right now. So that's, you know, that guidance still stands.
spk03: Okay, got it. That's helpful. And then just thinking about the P&L next year, you know, we have that, I guess, if you do the math, 7% bogey for, you know, EBITDA margins at the end of the year. But thinking through, you know, some of the expense line items, you know, labor inflation, you know, some of your R&D efforts, working on that Washington facility, where do you think some of the opportunities are, you know, to potentially get better than that? And where are some of the risks that might put that EBIT number in question?
spk01: I can tell you that SG&A has gone up from the past. If you compare this year's SG&A to last year's SG&A, it's not really apples to apples because we did have a pandemic in full swing last year with no travel. We had government assistance on the salary side. But we're also ramping up our staffing right now to be ready for the increased demand and to actually address our sales network a little more. So I would see the SG&A going up for the future. I would say that it would top out at $800,000 to $900,000 a month, which would be $2.4 to $2.7 million a quarter for next year. So that would be the largest increase that we would see on the cost side.
spk03: Okay, that's helpful. And are you having any problems finding people to, you know, staff up, you know, facilities and kind of prepare yourself for growth next year?
spk01: No, not right now. I mean, you just hired Brent, as we announced, which was a very big addition to our team. So we will probably step up on the sales side as well to increase our exposure now in the U.S. and now that we have the optimal product as well. But that's probably where we would look to increase. And for our plant in Washington, we don't foresee a ton of issues there. While we're in the process of hiring a U.S. production manager right now, And oh, apparently we have. So that's hot off the presses. We have hired, started to hire there. So yeah, we're starting and that's the first step to filling that plant and getting the right people in place.
spk03: Okay, awesome. And I imagine you're still on track for that sort of mid-2022, you know, startup on that Washington facility?
spk02: That's correct. Yeah, we see the factory actually, you know, the building being completed sometime towards the end of this year, and then we just need to outfit it with the specialized equipment to get into production.
spk03: Okay, so units will actually be rolling off the floor by mid-22, at least?
spk02: Yeah, we're hoping to have it up by Q2, get some production running.
spk03: Okay, terrific. And then just, you know, one final question here. You all have made some great progress with the product portfolio this year, a lot of big changes. You know, when you think about the product's white space and, you know, your current offering, you know, where do you see opportunity? Are you pretty complete at this point? Or, you know, is there potential to kind of move into some parallel segments? I imagine you're not going sub-Class 3, but, you know, maybe some kind of higher classes. Any thoughts there?
spk02: Yeah, you know, we are, right for now, we're just focused on that mid-size and below. That's where we believe, you know, this optimal partnership really rounds out our portfolio. You know, we're selling that vehicle in the same customer base that we were selling our existing vehicles into. And we're just staying focused on that mid-size at this point in time. We really want to dominate that mid-size market
spk03: Okay, great. Well, that's all for me. I appreciate the time and hope you all have a great weekend. Great, thanks. Thanks, Bruce.
spk00: This concludes our question and answer session, and I'd like to turn the call back over to Mr. William Treanor for some closing remarks.
spk02: Thank you, operator. I'd like to thank each of you for joining our earnings conference call. We look forward to continuing to update you on ongoing progress and growth. If you're unable, If we were unable to answer any of your questions, please reach out to our IR firm, the MZ Group, who would be more than happy to help you and assist. Thank you.
spk00: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.
Disclaimer