Vicinity Motor Corp
XTSX:VMC
Earnings Call Analysis
Summary
Q4-2023
In Q4 2023, the company's revenue jumped to $5.1 million from the previous year's $2 million, largely driven by 11 bus deliveries. Annual revenue saw a modest rise to $19.1 million from $18.5 million, with margins improving due to a shift towards more profitable electric trucks. Gross loss for the quarter improved to $0.4 million from $0.6 million. Operating cash use increased to $5.7 million from $3.9 million. With $125 million in backlogged orders and enhanced production capacity aiming at up to 1,000 buses or 6,000 trucks annually, the company is optimistic. Inventory levels rose to $23.3 million, expected to convert to cash as backlog orders are fulfilled. The company plans to deliver 100 buses and has over 200 trucks ready for sale, with ongoing production expected to enable about 325 truck sales in 2024. Quebec incentives delayed some Q4 sales, but these issues have been resolved, indicating potential for rebound in 2024.
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Greetings, and welcome to the Vicinity Motor Corp. Fourth Quarter and Full Year 2023 Corporate Update Conference Call. [Operator Instructions]. 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 turn the call over to William Trainer, Founder and Chief Executive Officer of Vicinity Motor Corp. William, the floor is yours.
Thank you, operator, and good afternoon, everyone. I'm pleased to welcome you to today's fourth quarter and full year 2023 corporate update and conference call.
The fourth quarter of 2023 was focused on the build-out of our VMC 1200 dealership network across Canada, and deliveries of our VMC 1200 electric trucks and transit buses. During the quarter, we sold 11 transit buses to eager customers as well as invoice dealership customers for an additional 71 VMC 1200 electric trucks in December 2023, which we expect to recognize in the first half of 2024.
To meet the growing demand during the quarter, we recently announced several new VMC 1200 dealership partners in Canada, including VMC Laval in Laval, Quebec, Peninsula VMC Truck Center in South Toronto, Shift EV trucks in West Toronto and Jack Carter VMC trucks in Southern Alberta. These new EV-specific dealerships expand the VMC 1200 sales and service coverage in strategic markets across Canada. Each partner has exceptional experience and expertise in the automotive market and fleet services, making them well suited to help fleet operators seamlessly transition to an all-electric future.
For our company, the VMC 1200 carries a healthy margin profile and year-round purchasing habits of the differentiated customer base helps us to smooth the traditional revenue lumpiness of our established transit bus business. The VMC 1200 provides an ideal entry into the underserved commercial EV market for dealerships and customers are attracted by the extremely competitive price point, inclusive of tax incentives.
In addition to delivering immediately cost savings and contributing to carbon emission reductions, the VMC 1200 is further reduced through Canadian federal and provincial rebates. It qualifies for a federal rebate nationwide of CAD 40,000 from Transport Canada. Recently, it was approved by the Quebec Minister of Transportation and Sustainability and Mobility in Canada for the VMC 1200 to be included in its EV development program to further electrification of commercial freight and heavy vehicle transportation industry within Quebec. This CAD 85,000 incentive represents an exciting opportunity to attract attention and lower costs for new buyers who are considering making transition into EVs.
We have continued to seek new partners and opportunities for the Vicinity Lightning EV transit bus. We partnered with automated driving software platform provider ADASTEC to create an SAE Level-4 automated variant of our upcoming Vicinity Lightning EV transit bus, which will be called the Vicinity Autonomous Lightning EV for the North American market.
Over the last year, we have worked closely with ADASTEC, recognizing our leader -- leading position in the industry to formalize our partnership agreement while jointly pursuing opportunities to deploy automated solutions. The collaboration marks a substantial leap in realism of transportation with a strong emphasis on automated, connected and shared solutions, driving innovation, accessibility and sustainability. The partnership brings together our expertise in medium-duty accessible, fully electrified low-floor transit vehicles with ADASTEC SAE Level-4 automated driving software platform. Together, we aim to revolutionize the mobility sector and make a lasting impact on communities and passengers.
To this end, we will jointly deploy initial Vicinity Autonomous Lightning electric transit buses at Michigan State University in Buffalo Niagara Medical Campus in mid-2024, making history as the one and only full-sized automated bus deployed on public roads in the U.S. to transport passengers within their communities.
ADASTEC partnership has allowed us to accomplish exciting new applications for our all-electric Vicinity Lightning bus, powering the next-generation public transportation system of forward-looking organizations nationally. Our transit bus business continued to provide a solid reoccurring customer base with strong order momentum for the Vicinity Classic transit bus. A new purchase order from Autobus Quebec for Vicinity Classic buses to service the city of Joliette, Quebec, and follow-on purchase orders to service smaller communities around the South Shore of Montreal, once again, demonstrating our position as a market leader in the Canadian mid-sized heavy-duty segment.
Our transit buses continue to play an important role in our backlog, providing an important pillar, while we concurrently grow our electric vehicle business. As supply chains have improved, we restarted delivery of transit buses to our customers as of Spring 2023 with 11 delivered in the fourth quarter of 2023. 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, continued to ramp production during the quarter to tackle the fulfillment of our robust order backlog, which as of December 31, exceeded USD 125 million, the vast majority of which are for electric vehicles. The facility is designed to meet our current and future production needs with annual capacities of up to 1,000 buses or 6,000 VMC 1,200 electric trucks.
As we stand today, we are aggressively building out our VMC 1200 dealer network continent wide and are ramping up production in our Ferndale manufacturing campus. Our Vicinity Lightning next-generation electric bus continues to attract attention from industry players as our classic bus line continues to drive sales as a leading Canadian supplier in the mid-sized heavy-duty bus market.
In summary, with improving margins, a growing sales funnel, and a strong backlog, we are executing across our product line and positioning Vicinity for a sustainable growth in 2024 and beyond.
Now with that, I'll turn it over to Dan to review the financial results for our quarter and year ended December 31, 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 in the fourth quarter of 2023 increased to $5.1 million as compared to $2 million for the fourth quarter of 2022. Revenue totaled $19.1 million for the year ended December 31, 2023, as compared to $18.5 million for the year ended December 31, 2022. The increase in revenue was primarily driven by the sale of 11 bus deliveries in the fourth quarter as compared to 11 trucks in the same year-ago quarter.
We invoiced dealership customers for an additional 71 VMC 1200 all-electric trucks in December 2023, which are expected to be recognized as revenue in the first half of 2024.
Gross loss in the fourth quarter of 2023 improved to $0.4 million or negative 9% of revenue as compared to a gross loss of $0.6 million or negative 28% of revenue. In the fourth quarter of 2022, gross profit totaled $2.1 million or 11% of revenue for the year ended December 31, 2023, as compared to $0.4 million or 2% of revenue in the year ended December 31, 2022. The higher margins realized in 2023 are mainly a result of a product mix that has increasingly shifted towards electric trucks, which generally have a higher margin profile as compared to transit buses.
Cash used in operating activities for the fourth quarter of 2023 totaled $5.7 million as compared to $3.9 million in 2022. Cash used in operating activities for the year ended December 31, 2023, totaled $24.7 million as compared to $9.1 million in 2022. Net loss in the fourth quarter of 2023 totaled $9.1 million or negative $0.20 per basic and diluted share as compared to $3.8 million or negative $0.08 per share and diluted share in the fourth quarter of 2022. Net loss for the year ended December 31, 2023, improved to $16.6 million or negative $0.37 -- $0.36 per share as compared to $18 million or negative $0.45 per basic and diluted share in the year ended December 31, 2022.
Adjusted EBITDA loss in the fourth quarter of 2023 totaled $3.2 million as compared to $1.4 million in the fourth quarter of 2022. Adjusted EBITDA loss for the year ended December 31, 2023, totaled $6.9 million as compared to $7.4 million in the year ended December 31, 2022. Cash and cash equivalents as of December 31, 2023, totaled $2 million as compared to $1.6 million as at December 31, 2022. We believe we are well positioned for a high level of operational execution in the quarters ahead as we ramp production at Ferndale and continue to deliver against our robust over $125 million backlog. Taking a look at our balance sheet, we had $23.3 million in inventory as at December 31, which we expect will be converted into cash as we deliver against our backlog in the coming quarters.
I'd like to now pass it back to William to offer some closing remarks, after which we will begin our question-and-answer session.
Thank you, Dan.
During the quarter, our accomplishments included continued diversification of our dealer network across North America, ramping up production in our Ferndale manufacturing campus, a growing sales funnel and a strong backlog that includes continued strength from our transit bus line. The increase in adoption of commercial EVs is being driven by government incentives, corporate sustainability goals and declining cost of ownership, and our EV lineup is growing dealer network, capitalizing on this transition to be a commercial EV supplier choice of many.
As we move into 2024, we 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 now with that, I'd like to hand it back to the operator to begin our question-and-answer session. Operator?
Thank you, William.
[Operator Instructions] Our first question comes from the line of Robin Cornwell with Catalyst Research.
I guess one of my questions is, is there any issue with the government's slowing or being very slow with their funding and giving, I guess, your clients difficulty to get confirmation so that they can purchase the various vehicles?
Well, it's taken a little while to get into the system for the incentives, particularly in Quebec. We're well established right now in BC. There's about a $92,000 incentive program, inclusive of the federal incentive in the BC area. And in Quebec, we're at $85,000 now. But yes, it has taken a while to get those put in place. And now that they're in place, they seem to be working.
And I guess there was -- I think I picked up an article that Calgary had an order backlog, which is your client, but is there still, I guess, a backlog in supply for the buses?
Well, the Calgary, which you're referring to there is Calgary transit order of some electric vehicles. We're just finishing up that order now, and we will be delivering those this year to Calgary. It has taken a lot longer than we anticipated. But there's been a lot of bumpiness in the supply chain on the bus side.
Great. You had mentioned that the last time. So that has improved somewhat now?
Yes, it has, now.
Okay. And so is the -- back to the Ferndale -- is Ferndale pretty well fully staffed or that's still an ongoing project?
It is still an ongoing project. We're lightly staffed there. We are looking to increase the staffing capability down in Ferndale, but we are -- the doors are open there.
Okay. So can you give us any idea of deliveries for 2024?
I don't give a lot of guidance, but what I can say is that we have 100 buses to deliver that are all in the queue to go out this year in 2024. To date, I think we -- you can see on our inventory levels, we have a lot of inventory built up. That is related mostly to the truck side. And we do have -- I think, Dan, you can probably tell the numbers that we have?
Yes. So we had just over 200 trucks at year-end that we could -- that we're either ready to sell or close to being ready to sell. Since then we've produced another bunch of trucks. So I think if you look at what we had at year-end plus production till date in 2024, we could sell about 325 trucks. We're still looking at producing more, obviously, for the year, but that's the current inventory levels. And some of those have been sold in 2024 as well.
Right. So 325 trucks potentially this year, and does that -- sorry, I wasn't too sure if that was all Ferndale?
No, it's not all Ferndale. Quite a bit of that goes through Ferndale though.
The majority went through Ferndale.
Next question comes from the line of Poe Fratt with Alliance Global Partners.
Yes. Just a follow-up on the last question. So Dan, I think I heard you say that the 125 trucks have been produced in the first quarter. We're effectively done with the quarter. So is that a...
We had -- we had -- at the end of the first quarter, we had, let's say, we had 210 at year-end. So yes, then we had another 115, 116 that were produced during the quarter.
And is the 115 trucks produced a reasonable run rate for the next couple of quarters? Or can you give me a flavor on what's going to happen there?
Well, honestly, we could ramp that up to way more than 115 per quarter when we're actually going at full run rate. I think the important thing now is to bring down the inventory levels and then we'll produce as needed.
We're bringing more dealers online, Poe. It's our intention to have 10 dealers in Canada, a minimum of 10 dealers in Canada. I think we've got -- what do we have now, Dan?
We have 6.
We have 6 that are onboarding right now. And each of those dealers are supposed to be doing a minimum of about 100 trucks a year.
So we've got to ramp that up to get our 10 dealers established here on the Canadian side. And we've already started looking for -- prospecting for dealers in the U.S.
So you don't have any dealers up and running in the U.S. yet?
No. We're just looking at that now.
Got you. And then can you help me understand the 71 that were invoiced? Are those in inventory? Are they in part of that 210 in inventory or are those essentially deferred revenue. I mean -- I apologize. I had no time to look at the financials, just given how close they were released to the actual call. So help me understand why the 71 weren't delivered. They were just invoiced?
Yes. So they're invoiced. And the majority of those are dealers who are just putting their -- the final touches on their floor plans to be able to pay for the trucks. And then we have to put the bodies on the trucks as well before we can deliver them. But generally, we sell the cabin chassis to the dealers and then we upfit the bodies after that.
But in the context in the second quarter, I think you delivered 34 trucks, in the third quarter, you delivered 26 and then you delivered none in the fourth quarter from a revenue recognition standpoint?
That's correct. .
Yes. Unfortunately, those dealers could not have their floor plan set up in time.
Even the one that was up and running, they didn't sell anything in the fourth quarter?
So in the fourth quarter, that's when we were working on the Quebec incentives as well.
They weren't in place at that point in time. They are now.
That dealer was in Quebec. And waiting for those incentives to finalize.
Yes, it's Pioneer, right? I mean....
No, that one's -- that was not Pioneer.
No. Okay. So is the dealer up and running now?
We have multiple dealers.
Lussier in Quebec.
Can you help me understand why the backlog went down from the third quarter? It was $150 million plus. And now it's $125 million. And can you give me an idea of the mix of backlog? You said you had 100 buses potentially in that backlog number, it sounded like.
Yes. I mean we're trying to not give the absolute precise number here of the backlog just because we're dealing with Canadian dollars and U.S. dollars and they do fluctuate and we don't have everything -- yes, we have other items in the backlog as well, but the backlog is still closer to that $150 million mark than the $125 million. It's over $125 million. The split right now it's about 2/3, just over 2/3 trucks right now in that backlog. And we have just over 100 buses in the backlog.
Okay. And we're -- just -- so there were no cancellations that led to that decline in backlog, it was all currency related?
No, it's currency-related and deliveries throughout the quarter as well. So we did deliver some buses, but we're kind of hovering around that $150 million mark. And just to be safe, we're saying $125 million plus at this point.
Yes. I guess, though, the bus deliveries would have been in the, what, $5 million range. So that or even maybe $4 million, but your backlog went down $25 million plus.
It didn't go down $25 million. It's greater than $125 million. We're not giving precise numbers on the backlog.
And the comfort level that $125 million of backlog will be realized in 2024? What's your comfort level on that?
We're not giving that out right now, Poe.
That's helpful. What -- how about the refinancing. Now you have -- you're in a sound position to really get to the table on the refinancing. What -- can you just help me look at what you're going to see on the refinancing side over the next couple of quarters?
Sure. So right now, we are in the renewal process with RBC and EDC on our main facility. That is up for renewal right now. They've extended the terms while they're in the approval phase to April. We may extend that again for another period or I don't think we'll have it renewed in the next few days. But there's no indications there that we're not renewing that facility. It takes time, unfortunately, with the entities we're dealing with and getting the approvals processed. That's going to be the main financing that needs to be renewed. That's really our operating line.
Yes, that's the working capital line. But what about the sub debt? I think that there's a tranche of the sub debt that's due in April, another 25% of that is due in July and then the rest in October. What's going to happen to the April part?
That's correct. So yes, we'll be -- yes, we'll talk to those lenders. And either we will refinance that or we'll pay that. That's in discussion.
This concludes our question-and-answer session. I'd now like to turn the call back over to Mr. William Trainer for his closing remarks.
Thank you, operator.
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 will be more than happy to assist. Thank you again.
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.