Vicinity Motor Corp.

Greetings and welcome to the Vicinity Motor Corp second quarter 2023 earnings conference call. At this time all participants are in a listen only mode. A question and 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 on 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.

Thank you. Thank you, operator, and good afternoon, everyone. I'm pleased to welcome you to today's second quarter 2023 corporate update conference call. The second quarter of 2023 was marked by significant momentum across all aspects of our business operations, highlighted by the initiation of production at our state-of-the-art U.S. manufacturing campus in Ferndale earlier this month. The long-awaited achievement is of special importance for our VMC 1200 all-electric trucks that are proving to be an incredible success. The vast majority of which will be produced at the new facility going forward. During the second quarter, we successfully made 34 deliveries of our Canadian assembled VMC 1200 trucks to our eager customer base. Customers are attracted to this compelling product by an extremely competitive price point, inclusive of all incentives. In addition to delivering immediate cost savings, and contributing to carbon emission reductions, the VMC-1200 qualifies for a federal rebate nationwide from Transport Canada, which can be further supplemented by additional incentives at the provincial level. The new government incentives for ED adoption are helping to build interest and support from enterprise customer and government agencies as fleets seek to be part of our shared electrified future. We continue to work closely with our partners at DSMA, a premier transaction originator and advisor in a North American automotive sector, to add new North American auto dealers to distribute our VMC 1200 trucks, and we'll be announcing new dealers shortly. Our EV offerings continue to gain traction amongst dealer and commercial partner networks, propelled by intense customer demand for Class III commercial EVs, which is an underserved market. Customers, including most recently Lafarge Canada, the country's largest provider of sustainable and innovative building materials, are choosing the VMC-1200 to electrify their truck fleet and reduce their carbon footprint. This milestone represents Lafarge's commitment to leading the way in adopting electric vehicles in the industry. As Lafarge continues to expand its fleet, we expect additional VMC vehicles will be integrated throughout 2024. For our company, the VMC-1200 carries a healthy margin profile and will play a big part of our profitability going forward as it helps to smooth out traditional revenue lumpiness of our established transit bus business. We expect margins to improve as we ramp up our Ferndale facility, which is better suited for mass production. In the transit bus business, we continue to see strong demand for our vicinity classic transit bus line, which carries a strong legacy of North American market leadership in the midsize heavy duty segment. In Q2, global mobility leader Transdev ordered 42 vicinity classic buses for their fleets. As supply chains have now improved, we've restarted delivery of transit buses to our customers from our backlog. We believe our ability to offer both legacy and next generation electric vehicles in a variety of classes and configurations positions us to address an incredibly wide variety of customer needs. Our new US manufacturing campus in Ferndale, Washington initiated production earlier this month, and we expect to hold a grand opening ceremony in mid-September with Governor Jay Inslee. We are now working to ramp up our production rate throughout the year, positioning us to achieve profitability during the second half of 2023. The facility is designed to meet our current and future production needs for the foreseeable future. With a new $9 million credit facility for Ferndale facility from the Export Development Bank of Canada, complementing our previous $30 million facility for financing VMC 1200 production, we now have a greater financial flexibility to invest in Vicinity's next phase of growth. With the manufacturing facility now ramping up, we are prepared to tackle the fulfillment of our growing order backlog more successfully, the vast majority of which are for electric vehicles. As of June 30th, this backlog exceeded 150 million US dollars. In summary, we've truly been executing on all fronts and positioning ourselves for a breakout second half as we deliver against our incredible backlog. Now with that, I'll turn it over to Dan to review the financial results for the quarter ended June 30th, 2023. Dan? Thank you, William.

Good afternoon, everyone. I will keep my portion to a brief review of our financial results. A full breakdown is available in our regulatory filings and in the press release that crossed the wire after market closed today. Revenue totaled $4.8 million in the second quarter of 2023. as compared to $11.7 million in the second quarter of 2022. The difference in revenue is primarily driven by a change in product mix represented by 34 truck deliveries in the second quarter of 2023, as compared to 34 buses delivered in the second quarter of 2022. Revenue totaled $7.5 million for the six months ended June 30th, 2023, as compared to $14.9 million for the six months ended June 30th, 2022. Growth profit in the second quarter of 2023 totaled $1.6 million or 33% of revenue as compared to $1 million or 8.7% of revenue in the second quarter of 2022. The growth profit was positively affected by an adjustment for expired warranty claims of $0.4 million during the quarter. Excluding the warranty adjustments, gross margin totaled 23% in the second quarter of 2023. Gross profit totaled $2.1 million, or 28% of revenue, for the six months ended June 30, 2023, as compared to $1.2 million, or 8% of revenue, in the six months ended June 30, 2022. The gross margin for the six months ended June 30, 2023 was positively affected by expired warranty of $1.1 million during the period. Excluding these adjustments, the gross margin for the six months ended June 30, 2023 would have been 12%. Cash used in operating activities totaled $9.1 million in the six months ended June 30, 2023, as compared to $0.2 million in the first half of 2022. Net loss in the second quarter of 2023 was $0.7 million, or $0.02 per share, as compared to $3.8 million, or $0.10 per share, in the second quarter of 2022. Net loss for the six months ended June 30, 2023 was $3.1 million, or $0.07 per share, as compared to $6.7 million, or $0.18 per share, in the six months ended June 30, 2022. Adjusted EBITDA loss in the second quarter of 2023 totaled $0.4 million, as compared to $1.2 million in the second quarter of 2022. Adjusted EBITDA loss for the six months ended June 30, 2023 was $1.7 million, as compared to a loss of $3.3 million in the six months ended June 30, 2022. Cash and cash equivalents as of June 30, 2023 totaled $7.3 million, as compared to $1.6 million as at December 31, 2022. Supplementing this, as Will noted, the company's credit facilities were expanded by $30 million to support VMC 1200 production and in May, a further $9 million working capital credit facility. We believe we are well positioned for a high level of operational execution in 2023 with the fundamentals of our operations expected to further strengthen as we ramp deliveries throughout the year allowing us to transition to positive adjusted EBITDA during our second half of 2023. I'd now like to pass it back to William to offer some closing remarks, after which we'll begin our question and answer session.