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spk00: 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.
spk04: 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.
spk02: 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.
spk04: Thank you, Dan. During the quarter, our complements, including the launch of our Ferndale manufacturing facility, improving margins, a growing sales funnel, and a record backlog that includes our transit bus lines, our positioning vicinity, for a transition to positive adjusted EBITDA in the second half of 2023. Market fundamentals continue to support our business strategy with government incentives, corporate sustainability goals, and declining costs of ownership, all pointing to surging EV adoption rates. I am incredibly proud of the work our team has put in over the past several months to bring Ferndale Production Facility online, and we're looking forward to the grand opening ceremony in September. As we move through the second half of 2023 and continue to execute against our key milestones, I believe that we will have built a foundation of a business that can deliver value to its stakeholders and their communities for years to come. Now with that, I'd like to hand the call back to the operator to begin our question and answer session. Operator?
spk00: Thank you, William. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Poe Fratt from Alliance Global Partners. Please go ahead.
spk01: Hi, good afternoon. I have a couple questions. First of all, you know, with Ferndale starting up, how many... How many truck deliveries do you think you can get through that plant, the third quarter and the fourth quarter? And then also, what should we be expecting from bus deliveries? I know that you highlighted that you delivered one in July. How many more can you deliver in the third quarter and the fourth quarter?
spk04: Well, we have an incredible backlog there, Poe. We're going to do everything we can to deliver as many as we possibly can out of the facility. The facility itself can take thousands of vehicles, so we just got to execute and get busy with it. Dan, you want to add to that?
spk02: Yeah, I mean, I don't want to put a number on how many we think we can deliver. We're just getting the plants running right now with the first trucks going through the facility. We should know more in the next coming months. We do have a large backlog, as Will said, so we will be working towards Bring towards delivering on that backlog, but that definitely won't be this year. It'll be into next year at least. I can't give you numbers right now and guidance on that yet, Poe, but we're getting closer to being able to provide actual guidance.
spk01: Okay. Maybe a better question. Is there going to be a lull in truck deliveries in the third quarter as you transition to the U.S. manufacturing? or will you still be delivering trucks out of Alder Grove?
spk04: No, we see a continued ramp up. We've got 34 in this quarter. We expect a heck of a lot more in the next quarter. We've got a pretty substantial backlog of over 1,000 vehicles. But we will see a continuous ramp.
spk01: Okay. And then maybe it's a semantics, but With the bus order that you got in May, the 42 buses, my impression was that that would help backlog move above $150 million more into the $165 million range. Is that just semantics as far as you're highlighting that your backlog is over $150 million?
spk02: Yes, you're correct. It's over $150 million. I hate to give an exact number of our backlog because some of it's in Canadian dollars, some of it's in U.S. dollars, and we have FX fluctuations. But you are correct. It's over $150 million.
spk01: Okay. And then, Dan, can you just talk about refinancing the debt that comes due early in the fourth quarter? It looks like... you might have gotten enough cash in the bank to pay that down with cash. But can you just highlight what's going to go on with the refinancing of that debt? And then also, could we get an update on the BMC Optimal situation as far as trying to claw back or get the $12.5 million back from Optimal?
spk02: Sure. Yes, the debt that is coming due in October is on the horizon. We've started discussions on that debt and are determining what the best path is going to be there, whether we refinance it or not. pay it out or pay a portion of that out. Hopefully we have some news on that in the next coming month or so or two months. And with VMC Optimal, there's no new news to provide on that right now. It is an ongoing issue for us. We have a court case coming up on that, so we can't really comment too much. but that won't be dealt with until early in 2024. Okay, great.
spk01: Thanks for the color.
spk00: Thank you. Your next question comes from Robin Cornwell from Catalyst Research. Please go ahead.
spk03: Thank you. Good afternoon. I guess my first question is, Is the composition of your backlog changed much in the last six months? You've been getting new bus orders, but you've got the one big truck order, and now you have the Lafarge deal. Has there been any movement from customers either canceling the order or changing their orders?
spk04: No, we haven't seen any cancellation of orders at all, Robin. A lot of the customers are just waiting for delivery of their vehicles, which we're executing on now. The Ferndale facility is going to help us out greatly, both on the trucks and on the buses, getting that backlog taken care of.
spk03: Is the Ferndale plant fully staffed, or how is the staffing going as to finding people, And I guess looking forward to maybe Q4, are you fully staffed in order to meet your production schedule?
spk04: Yeah, I wouldn't say we're fully staffed, but we are staffing up every day here. We're adding more to it. Our goal is to get... get most of the people trained so that we can run the line at full capacity. Right now, it is in a ramp-up mode, and if we have to supplement that with what we have up here in Canada, we will. We do see, particularly on the truck side, we will be adding considerable more dealers coming up here. A nice opening for new dealer introductions back east here the last couple of weeks. The activity level has just been phenomenal on it. We do expect to see more dealers signed and news releases out shortly on the new dealer network.
spk03: If I could ask, where do you plan to produce the buses? Are they is Ferndale going to be mainly the trucks what we're where do the buses fit well the Ferndale facility was designed to run two separate lines in there so they run in a bus line and a and a truck line down there okay so you'll be planning on producing buses will be in Ferndale so will be the plan to ramp up buses by Q4, or I know you're not fully ramped up yet, but what's kind of the plan for the bus?
spk04: Well, we have, you know, even the orders we've been taking, the new orders that we just took from the Transdev, I believe those have to be delivered by, Dan, what is the date?
spk02: We're planning on delivering those in Q1 of next year.
spk04: In Q1 of next year, so we should see, you know, a ramp up on our on our bus deliveries coming up here pretty substantially.
spk03: And in the Lafarge deal, what's the size of their fleet? If they're going to plan on converting their fleet over eventually to the EV, can you give us an idea of the size of the fleet? I'm not aware.
spk04: They're Canadian-wide, plus they're in the U.S. and then they're global as well. So they've been pretty excited about it. Their initial purchase was two vehicles to put them into a test facility here, which is going on right now, one in one of their pits and one on one of their highway operations. And it's going well. They expect to get the test finished off and have some orders in before the end of the year for 2024 deliveries, and then they really want to see a major impact in their fleets by 2025 and have the majority of their fleets converted over. Vehicles that they run, I'm not quite sure of the exact numbers, but I think they run into the thousands of vehicles.
spk03: All right, really. That's helpful. I'll try to get some more information on that because that could be extremely sizable order for you. And finally, I guess back on the topic we had discussed once before, you were putting together a team inside to help maybe clients navigate through all the government support programs. How effective has that been?
spk04: extremely effective. You know, it's good that you brought that up. The incentive, so here in Canada, we see a $40,000 federal incentive that the Transport Canada, I do believe, or the feds have. And that's province, right through all the provinces in Canada. But some of the other provinces, they're running their own incentive program. So when you look at When we look at BC here, we have a manufacturer suggested retail price on the vehicle of $154,900. The BC incentives, full incentives when they come in are approximately $92,000 off of that price. The Quebec has approximately $98,000 as incentives off. So what we're seeing is that it makes the vehicle less expensive than a comparable diesel or gas vehicle. So it's really exciting.
spk03: That's impressive. And finally, any problems with batteries originating or purchasing batteries?
spk04: No. We have multiple battery suppliers. I see that Proterra has ran into some difficulty, but they weren't a major supplier of ours at all. We looked at their battery initially, but thank God we went a different direction. So we don't see any battery issues ourselves, personally.
spk03: Okay. Okay, that's great. Thank you very much. It's all for me.
spk00: Thank you. That concludes our question and answer session. I'd now like to turn the call back over to Mr. William Traynor for his closing remarks.
spk04: Thank you, Operator. And I'd like to thank each of you for joining our earnings conference call. We look forward to continue to update you on ongoing progress and growth as we continue our rapid pace of operational execution. If we are unable to answer any of your questions, please reach out to our IR firm, the MZ Group, who would be more than happy to assist.
spk00: Thank you. Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may now disconnect your lines at this time and have a wonderful day.
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