GreenPower Motor Company Inc. (GP) Q3 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call revealed significant revenue decline and increased net loss, with lower gross margins due to inventory write-downs and higher production costs. Despite positive cash position and working capital improvements, the lack of clear guidance on production ramp and inventory alignment, along with management's unclear responses, contribute to negative sentiment. The Q&A section highlights challenges in production efficiency and charging infrastructure. Overall, the weak financial performance and uncertainties overshadow the optimistic guidance, leading to a negative outlook for stock price movement.
Key Financial Performance
Revenue (Q3 2024) $8.2 million, a decline of 36.3% from $12.8 million in Q3 2023 due to fewer vehicle sales (34 vehicles sold compared to 101 in the prior year).
Gross Profit (Q3 2024) $1.4 million, down from $2.2 million in Q3 2023, with a gross profit margin of 16.6% compared to 17.4% in the prior year. The margin decline was primarily due to an inventory write-down of $408,000.
Net Loss (Q3 2024) $4.6 million, compared to a loss of $3.4 million in Q3 2023.
Revenue (9 months ended December 31, 2023) $34.2 million, an increase of 40.1% from $24.4 million in the same period of the prior year, driven by the sale of 196 vehicles compared to 176 vehicles previously.
Gross Profit (9 months ended December 31, 2023) $5.4 million, up from $4.9 million in the prior year, with a gross profit margin of 15.7% compared to 20.1% previously. The margin was impacted by an inventory write-down of $408,000.
Net Loss (9 months ended December 31, 2023) $11.7 million, compared to a loss of $11.2 million in the same period of the prior year.
Cash (as of December 31, 2023) $4 million, an increase of $3.4 million since the beginning of the year, attributed to higher sales and improved collections.
Working Capital (as of December 31, 2023) $19.4 million, reflecting improvements in cash and liquidity.
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Operating Highlights
New Product Launch: Introduction of the new Mega BEAST, a 40-foot, 90-passenger, all-electric school bus with a range of up to 300 miles and V2G capabilities. Delivery of the first EV Star cargo refrigerated van to UC school in California.
Market Expansion: Delivery of 4 Type A Nano BEAST school buses, the first all-electric purpose-built school buses manufactured in West Virginia. Live orders for 102 Type D Mega BEAST, BEAST, and Type A Nano BEAST school buses, including an order from New York. Expansion of national efforts through new dealers and hiring more territory managers for the School Bus division.
Operational Efficiency: Shift from fulfilling orders from inventory to manufacturing vehicles pursuant to customer orders. Significant levels of finished goods inventory maintained to support dealer demonstrations and reduced competitive landscape.
Strategic Shift: Entered into a revolving loan agreement with Export Development Canada for up to $5 million to finance all-electric vehicle production.
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Risk or Challenges
Revenue Decline: GreenPower reported a revenue decline of 36.3% in Q3 2024 compared to the same quarter in the previous year, generating $8.2 million from the sale of 34 all-electric vehicles.
Inventory Write-down: An inventory write-down of $408,000 impacted the gross profit margin, reducing it from 21.6% to 16.6% for the quarter.
Losses: The company reported a loss of $4.6 million for Q3 2024, an increase from a loss of $3.4 million in the same quarter of the prior year.
Production Financing: GreenPower needs to secure a production financing facility to support increased school bus orders and changes in commercial vehicles.
Supply Chain Delays: Delays from customers in the delivery of EV Star Cab and Chassis have affected the commercial vehicle group's order fulfillment.
Competitive Landscape: The company noted a reduced competitive landscape, which may provide some relief but also indicates potential risks if competitors re-enter the market.
Economic Factors: The overall economic environment and its impact on customer orders and financing options remain a concern for the company.
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Guidance & Outlook
School Bus Group Progress: Delivery of 4 Type A Nano BEAST school buses, first all-electric purpose-built school buses manufactured in West Virginia. Production of Type D BEAST school bus commenced to fulfill orders.
Commercial Vehicle Group Developments: Delivery of 10 EV Star Cab and Chassis to a Canadian retailer, with plans to increase order book through new and existing incentive programs.
Production Financing: Entered into a revolving loan agreement with Export Development Canada for up to $5 million to finance all-electric vehicle production.
New Product Launches: Introduction of the Type D Mega BEAST school bus with V2G capabilities and a range of up to 300 miles.
Innovative Product Development: Delivery of the first EV Star cargo refrigerated van with dual batteries for increased resilience.
Revenue Expectations Q3 2024: Generated revenue of $8.2 million, a decline of 36.3% from the previous year.
Gross Profit Margin: Gross profit margin was 16.6%, down from 17.4% in the prior year, primarily due to an inventory write-down.
Future Orders: Live orders for 102 Type D Mega BEAST, BEAST, and Type A Nano BEAST school buses, with a qualified sales pipeline for 164 school buses.
Financial Position: As of December 31, 2023, cash of $4 million and working capital of $19.4 million.
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Shareholder Return Plan
Revolving Loan Agreement: GreenPower announced a revolving loan agreement with Export Development Canada for up to $5 million to finance all-electric vehicle production for certain customer orders.
Operating Line of Credit: GreenPower has an existing $8 million operating line of credit.
Standby Letters of Credit: GreenPower has a guarantee of up to $5 million of standby letters of credit provided by EDC.
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Key Q&A
Q:Can you provide insights on the production ramp for West Virginia and the delivery production profile for BEAST and Nano?
A:We can now manage runs of both the Nano BEAST and BEAST, which has changed our dynamics. We need a full cycle of the BEAST to understand throughput better, but we are adding people and growing production capabilities.
Q:What is your strategy for inventory management moving forward?
A:We plan to draw down existing finished goods while transitioning to manufacturing based on customer orders. There may be timing issues with higher-than-expected finished goods at month-end.
Q:How are you addressing the charging infrastructure for your electric school buses?
A:The availability of charging infrastructure is affected by utilities and customer expectations. The Nano BEAST is easier to deploy with flexible charging options, and we see improvements in charger installation.
Q:How well-matched is your inventory to anticipated near-term deliveries?
A:Our work in process aligns well with production flow, but finished goods need work to fully align with customer orders.
Q:Will gross margins improve in the coming quarters?
A:Yes, as we train employees and stabilize costs, we expect margins to improve.
Q:What are the prospects for expanding the $5 million revolver financing?
A:There is an opportunity to revisit the size of the financing as our business grows, but we feel the current size is appropriate for now.
Q:Is Workhorse in the mix for vehicle sales?
A:We haven't pointed out specific metrics for our customers, but we are working on future deliveries for cab and chassis.
Q:Review of Unclear Management Responses
A:Management did not provide specific metrics regarding Workhorse's involvement in vehicle sales, indicating a lack of clarity on that topic.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Chassis unit
EDC
Mega BEAST
Quiet Investor
School Bus
Toronto
Type Mega
battery
cab chassis
cargo
cash
charge
charger
charging
comment remark
congrats
couple quarter
customer order
cycle BEAST
delivery production
detail level
division
effort
financing
fulfillment
group
infrastructure
kind
loss
mix
production run
progress
sale vehicle
size
thought
utility
vehicle BEAST
work process
write
GP Transcript
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The earnings call revealed significant revenue decline and increased net loss, with lower gross margins due to inventory write-downs and higher production costs. Despite positive cash position and working capital improvements, the lack of clear guidance on production ramp and inventory alignment, along with management's unclear responses, contribute to negative sentiment. The Q&A section highlights challenges in production efficiency and charging infrastructure. Overall, the weak financial performance and uncertainties overshadow the optimistic guidance, leading to a negative outlook for stock price movement.
GP Report
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