VEV - Vicinity Motor Corp. (VEV) Q2 2023 Earnings Call Transcript
2023-08-14 19:28:02 ET
Vicinity Motor Corp. (VEV)
Q2 2023 Results Conference Call
August 14, 2023 04:30 PM ET
Company Participants
William Trainer - Founder and CEO
Dan Buckle - CFO
Conference Call Participants
Poe Fratt - Alliance Global Partners
Robin Cornwell - Catalyst Research
Presentation
Operator
Greetings, and welcome to the Vicinity Motor Corp.’s 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 Trainer, Founder and Chief Executive Officer of Vicinity Motor Corp. William, the floor is yours.
William Trainer
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-winded 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 EV 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 adviser 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 3 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 mid-sized 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 U.S. 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 US$9 million credit facility -- for Ferndale facility from the Export Development Bank of Canada, complementing our previous $30 million facility for finance in 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 30, this backlog exceed US$150 million.
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 30, 2023. Dan?
Dan Buckle
Thank you, William. Good afternoon, everyone. I will keep my portion to a brief review of our financial results. The full breakdown is available in our regulatory filings and in the press release across the wire after market close 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 was 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 30, 2023, as compared to $14.9 million for the six months ended June 30, 2022.
Gross 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 gross 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. The 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 will begin our question-and-answer session.
William Trainer
Thank you, Dan.
During the quarter, our accomplishments, including the launch of our Ferndale manufacturing facility, improving margins, a growing sales funnel, and a record backlog that includes our transit bus line are 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 cost 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 are 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?
Question-and-Answer Session
Operator
[Operator Instructions] Your first question comes from Poe Fratt from Alliance Global Partners. Please go ahead.
Poe Fratt
Hi. Good afternoon. I have a couple of questions. First of all, with Ferndale starting up, what -- how many -- how many truck deliveries do you think you can get through that plant in 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?
William Trainer
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, do you want to add to that?
Dan Buckle
Yes. 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 delivering on that backlog, but that definitely won't be this year. It will be into next year -- into next year, at least. So, 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.
Poe Fratt
Okay. And maybe a better question. Is there going to be a low in truck deliveries in the third quarter as you transition to the U.S. manufacturing, or will you still be delivering trucks out of all the growth?
William Trainer
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. And we've got a pretty substantial backlog of over 1,000 vehicles. So -- but we will see a continuous ramp.
Poe Fratt
Okay. And then, maybe the semantics. But with the truck order -- or I'm sorry, the bus order that you got in May, the 42 busses, my impression was that that would help backlog move above $150 million more into the $165 million range. Is that just semantics, you're highlighting that your backlog is over $150 million?
Dan Buckle
Yes. Poe, 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.
Poe Fratt
Okay. And then, Dan, can you just talk about refinancing the debt that comes due in early -- in the fourth quarter? It looks like you might have sort of gotten enough cash in the bank to pay that down with cash. But can you just highlight sort of what's going to go on with the refinancing of that debt? And then also, should we get an update on the VMC Optimal situation as far as trying to claw back or get the $12.5 million back from Optimal?
Dan Buckle
Sure. So 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 pay it out or pay a portion of that. 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. We are -- it is an ongoing issue for us. We have 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.
Operator
Thank you. Your next question comes from Robin Cornwell from Catalyst Research. Please go ahead.
Robin Cornwell
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. Is -- and has there been any movement from customers either canceling the order or changing their orders?
William Trainer
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 are 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.
Robin Cornwell
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?
William Trainer
Yes. We are -- 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 -- to 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. We had a nice opening for new dealer introductions back east here, last couple of weeks, and the activity level has just been phenomenal on it. And we do expect to see more dealers signed and news releases out shortly on the new dealer network.
Robin Cornwell
And if I could ask, where do you plan to produce the buses? Are they -- is Ferndale going to be mainly the trucks, what? Where do the buses fit?
William Trainer
Well, the Ferndale facility was designed to run two separate lines in there. So, it'll be running a bus line and a truck line down there.
Robin Cornwell
Okay. So, you'll be planning on producing buses in Ferndale. So, will the -- is the plan to ramp up buses in like by Q4, or -- I know you're not fully ramped up yet, but what's kind of the plan for the bus?
William Trainer
Well, we have -- even the orders we've been taking, the new orders that we just took from the transit, I believe those have to be delivered by -- Dan, what’s...
Dan Buckle
Planning on delivering those in Q1 of next year.
William Trainer
In Q1 of next year. So, we should see a ramp-up on our bus deliveries coming up here pretty substantially.
Robin Cornwell
And in the Lafarge deal, what's the size of their fleet? They're going to plan on converting their fleet over eventually to the EV. Can you give us an idea of the size of that fleet? I'm not aware.
William Trainer
They're Canadian-wide, plus they're in the U.S. and 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 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 a 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.
Robin Cornwell
All right. Really, that's helpful. I'll look -- 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 that you were putting together a team inside to help maybe clients navigate through all the government support programs. How effective has that been?
William Trainer
Extremely effective. 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 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 programs. So, when you look at -- when we look at BC here, we have a manufacturer suggested retail price on the vehicle of [150 for 9]. 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.
Robin Cornwell
That's impressive. And finally, any problems with batteries -- originating or purchasing batteries?
William Trainer
No. We have multiple battery suppliers. I see that Proterra has run in some difficulty but they weren't a major supplier of ours at all. We looked at their battery initially, but thank God, we went in a different direction. So, we don't see any battery issues ourselves personally.
Operator
Thank you. That concludes our question-and-answer session. I'd now like to turn the call back over to Mr. William Trainer for his closing remarks.
William Trainer
Thank you, operator. And 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 as we continue our rapid pace of operational execution. 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 assist. Thank you.
Operator
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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Vicinity Motor Corp. (VEV) Q2 2023 Earnings Call Transcript