CA - Vicinity Motor Corp. (VEV) Q1 2023 Earnings Call Transcript
2023-05-15 22:49:05 ET
Vicinity Motor Corp. (VEV)
Q1 2023 Earnings Conference Call
May 15, 2023 04:30 PM ET
Company Participants
William Trainer - Founder and CEO
Danial Buckle - CFO
Conference Call Participants
Poe Fratt - Alliance Global Partners
Robin Cornwell - Catalyst Equity Research
Presentation
Operator
Greetings and welcome to the Vicinity Motor Corp. First Quarter 2023 Corporate Update 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 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 Trainer, Founder and Chief Executive Officer of Vicinity Motor Corp. William, the floor is yours.
William Trainer
Thank you, operator and good afternoon everyone. I'm pleased to welcome you to today's first quarter 2023 corporate update and conference call. The first quarter of 2023 was marked by significant momentum across all aspects of our business. With Ferndale, set to begin initial assembly operations in the coming weeks, truck deliveries from our Canadian facility underway, and new incentives making our products even more cost competitive with internal combustion vehicles.
We are nearing completion of a batch of 50 VMC 1200 vehicles as well as several transit buses at our Canadian facility for delivery in the second quarter. Seating products into the market and generating further demand with North American automotive dealerships alongside our partners at DSMA, a premier transaction originator and advisor in the North American automobile sector, helping to expand our North American dealer network for the VMC 1200.
Our EV offerings continue to gain traction amongst dealer and commercial partner networks, propelled by intense customer demand for commercial EVs, particularly in the Class 3 segment with the VMC 1200.
New government incentives for EV adoption such as the recent affirmation by Transport Canada that our VMC 1200 qualifies for a CAD40,000 federal rebate nationwide in Canada are helping to build interest and support from enterprise customers and government agencies as fleets seek to be part of our shared electrified future.
Our new US manufacturing campus in Ferndale, Washington has seen significant momentum as of late with construction complete, our power solution installed, our certificate of occupancy in hand, and key hires for the facility complete.
We simply need to fence our facility and we're mere weeks away from the onset of VMC 1200 production. From there, we'll ramp-up our production rate throughout the year, positioning us to achieve profitability during the second half of 2023.
In addition, as previously promised, we were successful in securing a Foreign-Trade Zone, also known as an FTZ status with the US Department of Commerce for our facility in Ferndale. Certification as an FTZ is a significant competitive advantage, positioning us to reduce, defer, and eliminate costs that typically occur for a business importing into the United States.
Operating as a certified FTZ will allow us to offer additional value to our customers by empowering an efficient and cost effective way to conduct business across borders, reducing import costs, while accelerating supply chain velocity.
Support the immediate term ramp up of Ferndale, we recently supplemented our $30 million VMC-specific credit facility with the Royal Bank of Canada and Export Development Canada with a further $9 million working capital credit facility with export development Canada fully funding our near term operations with non-dilutive debt financing.
In addition, our transit bus business has seen supply chains improve and to that, we have restarted delivery of transit buses to customers as of the spring of 2023. We continue to see strong demand for our Vicinity Classic bus line, proving out our established market leadership in the midsize heavy-duty transit bus space.
So, in summary, we have truly been executing on all fronts and positioning ourselves for a breakout second half. As we deliver against our incredible $150 million backlog.
Now with that, I'll turn it over to Dan to review the financial results for the quarter ended March 31st, 2023. Dan?
Danial Buckle
Thank you, William. Good afternoon everyone. I will keep my portion to a brief review of our financial results. Full breakdown is available in our regulatory filings and in the press release that crossed the wire aftermarket closed today.
Revenue in the first quarter of 2023 totaled $2.7 million as compared to $3.2 million in the first quarter of 2022. The decrease in sales was impacted by product mix, which was more heavily weighted to trucks in the first quarter of 2023.
Gross profit in the first quarter of 2023 totaled $0.5 million or 18% of revenue, as compared to $0.2 million or 7% of revenue in the first quarter of 2022. Gross margins were positively impacted by an adjustment expired warranty.
Cash used in operating activities in the first quarter of 2023 totaled $3.6 million as compared to $5.1 million in the first quarter of 2022. Net loss in the first quarter of 2023 totaled $2.4 million or negative $0.05 per share as compared to a loss of $2.9 million or negative $0.08 per share in the first quarter of 2022.
Adjusted EBITDA loss in the first quarter of 2023 totaled $1.4 million as compared to adjusted EBITDA loss of $2.1 million in the first quarter of 2022. Cash and cash equivalents as of March 31st, 2023, totaled $1.8 million as compared to $11 million as at March 31st, 2022.
During the first quarter, the company fortified its balance sheet through the closing of a CAD4 million private placement of convertible debentures with strategic investors. Supplementing this, as Will noted, the company's credit facilities were expanded by $30 million to support VMC 1200 production and as of this month, a further $9 million working capital credit facility.
We believe we are well-positioned for a high level of operational in 2023 with the fundamentals of our operations expected to further strengthen as we ramp deliveries throughout the year, allowing us to transition to profitability during the second half of 2023.
I'd now like to pass it back to William to offer some closing remarks after which we will begin our question-and-answer session.
William Trainer
Thank you, Dan. Our business is truly firing on all cylinders. With this significant momentum positioning us to transform to profitability in the second half of 2023.
With additional visibility into a strong initial traction in the second quarter. I am incredibly proud of the work our team has put in over the past several months to make all this possible.
As we move through 2023 and continue to execute against our key milestones, I believe that we've built the foundation of a business that can deliver value to its stakeholders and their communities for years to come.
And with that now, I'd like to hand it back to the operator for our question-and-answer period. Operator?
Question-and-Answer Session
Operator
Yes. Thank you. At this time, we will begin the question-and-answer session. [Operator Instructions] And the first question comes from Poe Fratt from Alliance Global Partners.
Poe Fratt
Yes, hi. It's Paul Fratt. Just a couple quick questions if I may. On the batch of 50 VMC 1200s that have been assembled, will those all be recognized -- the sales of those, will those all be recognized in the second quarter? And then maybe if you can give us an idea of the bus deliveries that we should expect in the second quarter?
Danial Buckle
Hi, Poe. Dan here. Yes, so, our goal is to try to get 50 trucks out in the second quarter. That's -- we're working pretty hard to get that out the door right now. I can't give you an estimate on buses quarter-by-quarter. I don't think we've even given that by the year right now. But we do see some positive developments there just with our buses being ready and getting to deliver. So, they will start to slowly trickle out throughout the rest of the year and work on reducing our backlog as much as possible year and as quickly as possible.
Poe Fratt
Okay, great. Well, I guess maybe if you could even try to give us a range for the full year then on the truck versus the buses? I think that in the past you've tried to do that, but maybe you have a little better visibility now?
Danial Buckle
I think for the trucks, I'd like to say that we are just getting our facility up and running for the trucks in Ferndale. And we just finished our financing for -- we just finished -- completing our $30 million financing with RBC and EDC and just recently in the last couple of weeks, completed our $9 million facility with EDC. And that's really got us running for the trucks to get trucks out as quickly as possible now.
We can actually start ordering all of the parts and ramping up, but it's tough to give range right now until we actually are delivering out of Ferndale and see how quickly we can ramp that up. I think let us deliver these first 50 and then we can tell you exactly how long it's going to take us to start delivering on the rest of the backlog, which is over 1,000 trucks.
For buses, we have over 100 buses in our backlog right now. We're going to get -- try to get as many of those as possible out this year. But I can't tell you exactly how many of those will get out.
William Trainer
But having said that, we have just stated that we're looking to be profitable here in the second half of this year. So, I think with the ramp up and the current financings that we've just completed, we're in a pretty good position to come out with a pretty good year.
Danial Buckle
Yes.
Poe Fratt
And maybe clarify, profitable on a net income basis, EBITDA basis, just to clarify--.
Danial Buckle
EBITDA.
Poe Fratt
Yes. Okay -- because I was modeling pretty positive in the second half for not only EBITDA, but even marginally profitable from net income standpoint. So, no real change there.
Danial Buckle
Right. So, yes, EBIT -- net income won't be until next year. So, we'll aim for that one next year. EBITDA positive, we're shooting for that for the second half.
Poe Fratt
And then when you look at your financing, you emphasize that you're fully funded. Can you just talk about addressing the maturity in the third quarter? I'm sorry, it's I think early fourth quarter that you have coming up.
Danial Buckle
Yes, I mean, we do have a maturity coming up in the fourth quarter. We don't really have anything to report on that at this point in time and yes, we will definitely be addressing that before the fourth quarter.
Poe Fratt
Okay, great. And then just one last one if I may. On the optimal JV cancellation, in the last call, you had talked about potentially recovering some of the initial investment in that. Can -- is there any update there or is it something that we're still going to have to wait until the sort of -- it works through the litigation process?
William Trainer
Yes, I think we got to wait and see how we're -- we stated we're in litigation on it and we really can't give an update on it as we're going through the litigation, but we are engaged.
Poe Fratt
Great. Thanks for your time.
William Trainer
Thank you, Poe.
Operator
Thank you. And the next question comes from Robin Cornwell with Catalyst Research.
Robin Cornwell
Hi. How are you? This is -- the first question I have is you're mentioning Will that you've got the initial, I guess staffing at Ferndale, and can you give us an idea what it remains for the staffing, like to get you fully productive for the second half? Is there quite a bit more staffing to be hired?
William Trainer
Well, the hardest thing to staff is actually your senior management. So, we've hired the senior management for Ferndale and we are going through some job fairs down there to get the production line people that we need and we're really not anticipating any issues there, but that's where we're at in the process. We do plan to be in production here in the second half.
Robin Cornwell
So, you are pretty confident that you can get the staffing to get you reasonably well producing in the second half?
William Trainer
Yes, we do. Yes.
Robin Cornwell
Another question I have is as your backlog increases, it's been nudging up now. Are those orders trucks or buses? Can you give us an idea of what demand you're seeing?
William Trainer
Yes. Dan, can you answer that?
Danial Buckle
Yes. So, the backlog of $150 million -- over $150 million. But it's a mix of buses and trucks. So, we don't really give us a breakdown, but if you look at our press releases in the past, our one truck order is over $100 million. So, that's -- right now it's mostly trucks. But we also -- yes, we're also seeing that the majority of it right now is electric vehicle.
Robin Cornwell
Right. So, it's still -- majority is electric to demand.
Danial Buckle
Yes.
Robin Cornwell
Okay. Now, the -- I guess it's an old question, but maybe you could address the supply chain again whether I know the trucks, it sounds a lot simpler, but what about the buses? Are we still having supply chain issues?
William Trainer
We have worked through a lot of supply chain issues on the buses, that's why we just need to get these 100-plus buses out that we have in the development or in the manufacturing stage right now. But it continues to -- we continue to see some problems on the bus.
And some of them come from areas, most people are having areas in the computerization of it, the computer chips. But we've seen problems with other things, some mechanical problems too that we couldn't get. I don't want to get into some of the suppliers, but some of the supply chain that we had there was really long-term supply chain and mechanical parts and we've seen problems with that too.
That's why to get ourselves into better for that, we see ourselves often to buy more and more parts and pieces and put them on the shelf in order to get ready to build these vehicles.
Trucks are a lot simpler, but you just have to look at them and see you've got like 3,000 line items on a bus, I think you got like 500 on a truck. So, there's a lot less line items to secure and bring in on a truck.
But having said that, we are seeing a lot of activity on the bus side right now for orders and bids that have been out. And I do believe here in the near future, we should have some nice announcements coming up on the bus side. There seems to be a lot more activity there.
As we come through COVID, there's a lot of -- on the transit bus side, there's a lot of ridership that wasn't coming back. And now we're starting to see some of that ridership pickup and a lot of the transit agencies are looking to start to purchase again, which is a very good thing for us.
Robin Cornwell
So, basically you're not really losing any orders, you're actually starting to build a bigger order book for the buses?
William Trainer
Yes, we are. Yes. Like I said, we see a lot more activity on the buses than we have particularly coming up in the last quarter. Last couple of quarters has been a lot more bid activity and I think that's -- a lot of our competitors are stating the same thing. So, we're starting to see some of the bus activity pickup. And I do think so--.
Robin Cornwell
So, the government funding is really starting to take effect?
William Trainer
Yes, it is. Yes. And not just -- like on the bus side, but there's some tremendous amount of incentives on the -- on that truck side too. I'd have to say the government is really pushing hard to see a lot of these diesel vehicles be converted into electric. Here in British Columbia, we see -- I think it's around a $40,000 rebate from the provincial government and plus a $40,000 rebate now from the federal government. That's a huge incentive we see that here. I think Quebec is very similar in their incentives. So, isn't -- the funding is finally starting to flow through.
Robin Cornwell
One last question, it's -- there's a lot of the discussion going on in industry ready for support really. On vertical integration, do you have any thoughts that you'd like to share?
William Trainer
Yes, we do. We're looking at things -- and this is part of the supply chain and this would be more towards the truck business. Some of the lead-times on -- when you're starting to put some of the attachments boxes and sort of on the back of it. So, we have been trying to diversify out and make sure that we've got the right amount of supply for the vehicles as they come in and need to get delivered.
Our business model is a little bit different. With the trucks, we look at a automotive based business model. So, a lot of the automotive dealers, they want to see the complete. They don't want to buy it like a normal truck yard would buy an incomplete vehicle and then send it out to have boxes or flat decks or whatever was going to go on the back of it, but it takes so much time.
The automotive industry wants to move a lot quicker. So, they want the vehicles coming in as a complete vehicle. They can actually stock in their yards and sell them in a quick fashion.
One of the other things that we've been building up is we have a very good relationship with some of some of the body manufacturers in particular the EAVX Group of Companies with their Morgan Group. They're a very major supplier for us as well.
Robin Cornwell
Okay, great. Thank you. That's all for me.
Operator
Thank you. And this concludes the question-and-answer session. I would like turn the floor to William Trainer for any closing comments.
William Trainer
Well, thank you, operator. And I'd like to thank each of you for joining us for our earnings conference call today. We look forward to continuing 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. Thank you.
Operator
Thank you. The conference has now concluded. Thank you for attending today's presentation and may we now disconnect your lines.
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Vicinity Motor Corp. (VEV) Q1 2023 Earnings Call Transcript