Envirotech Vehicles, Inc. (EVTV) Q1 2022 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to Envirotech Vehicle, Inc. First Quarter 2022, Earnings Call. All lines have been placed in a listen-only and the floor will be open for your questions and comments following the presentation. [Operator Instructions] At this time, it is my pleasure to turn the floor over to Jane Belodeau of IMS, Investor Relations. Jane, the floor is yours

Thank you Tom. And once again, good day and welcome to Envirotech's first-quarter 2022 earnings call. With me on the call is Phillip Oldridge, Chief Executive Officer, and Christian Rodich, Chief Financial Officer. I'd like to begin the call by reading the safe harbor statement. All statements made on this call with the exception of historical facts maybe considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although Envirotech believes that the expectations reflected in such forward-looking statements are reasonable on the basis of current expectations, Envirotech can make no assurances that such expectations will prove to be correct. Also, these forward-looking statements are subject to a number of risks, uncertainties, and assumptions and other factors that could cause actual results to differ considerably from Envirotech's current expectations due to changes in operating performance, technical and economic factors, and other risks and uncertainties disclose in Envirotech annual report on Form 10-K, quarterly reports on Form 10-Q, and other reports filed by Envirotech from time-to-time within securities and exchange commission. Any forward-looking statements including in this earnings call, are made only as of the date of this call. Envirotech does not take -- does not undertake any obligation to update or supplement any forward-looking statements to reflect new information, subsequent events or circumstances except as required by law. Envirotech cannot assure you that projected results or events will be achieved. With that out-of-the-way, I'll turn the call over to Phillip Oldridge, Chief Executive Officer, please go ahead, Phillip.

Thank you so much and welcome everybody. While they gave you some color around our continued progress in the first quarter on our year-end call, just a few weeks ago, I wanted to take this time to provide a brief update now that we've officially closed out Q1, 2022. We've achieved several milestones throughout the first quarter, including increased revenues and new partnership agreements and progress with our new U.S.. based manufacturing facility. First-quarter revenues improved significantly to slightly more than $1.1 million with an increase reflecting the sale of 12 Vehicles during the quarter generated in closed internally. We're also seeing higher sight-seeing, heightened activity with our above approvals from state incentive programs like the New Jersey 0 emissions program and the New Jersey zip. As I mentioned before, our foreign network and our status and [Indiscernible] is approved. And we've received the where receiving the vendor incentive program New Jersey's zip. Part of our business and -- and our continued business been a major driver of our considerable growth in sales -- both in sales numbers, both sequentially and year-over-year. The favorable legislative incentives related to EV adoption at the federal, state, and local levels are providing us with ample opportunities and we're focused on driving sales growth and this favorable environment. To meet this growing demand for our vehicles in the first quarter, we've placed an additional order for 100 classified cabin chassis trucks and an additional 100 Class 4 vans. We expect the deliveries of these vehicles to begin in late Q2 and early Q3, and continuing monthly throughout the year end with final assembly to take pace at our 580,000 square-foot manufacturing facility in Osceola, Arkansas. This order is especially exciting for us as we've been focused on offering classified trucks to our customers, and they are currently in very high demand. While we expect delivery of these vehicles to begin in late Q2 and continue through the end of the year, supply chain issues remain a factor across the entire industry. With that being said, we are enthusiastic about the high demand that we're seeing for our vehicles and we look forward to adding these classified trucks and additional bands into our inventory. Shifting to our manufacturing facility in Osceola, I'm happy to report that we've successfully completed the first phase of our renovations within the office facility, and we're moving forward within the next phase of construction. This facility represents a tremendous step forward in our growth -- in the growth of our company and positions us to be one of the only EV companies with a manufacturing facility in the United States. Osceola is well situated close to a major interstate and the Mississippi River which provides us with a variety of options to efficiently transport vehicles to our customers. The area also provides us with a robust business climate and highly capable workforce as we look forward to staffing the facility with close to 800 employees over the next few years. This is an exciting time for both our company and the EV industry, and we're intent on capitalizing on the opportunities we're seeing as a premier provider of zero emission electric trucks and vans. As we move through 2022, we're optimistic about our prospects energized by what's on the horizon for Envirotech Vehicles. At this point, I'd like to turn the floor over to our CFO, Christian Rodich, who will briefly walk you through the first quarter financials. Christian?

Thank you, Phil. Good afternoon, everyone. Sales were $1,108,500 for the three months ended March 31, 2022, compared to $470,793 for the three months ended March 31, 2021, an increase of 235%. The sales increase was primarily related to the sale of 12 Vehicles here in the first quarter of 2022 versus five vehicles in 2021 over the same period. Total net operating expenses for the first quarter of 2022 increased by approximately $2.4 million compared to the first quarter of 2021, which increase included approximately $1.6 million of non-cash charges related to stock-based compensation expense and depreciation expense. Net losses in the first quarter of 2022 were approximately $2.5 million compared to a net loss of approximately $659,000 in the first quarter of 2021. As of March 31, 2022, the company had cash, cash equivalents, restricted cash, and marketable securities of approximately $9.1 million, total liabilities of approximately $961,000 as compared to $12.9 million of cash, cash equivalents, and restricted cash and marketable securities, and liabilities of approximately $1.6 million as of December 31, 2021. Working capital at the end of the quarter, March 31, 2022, was approximately $21 million as compared to working capital of approximately $21.5 million at the end of last year, December 31, 2021. That concludes my remarks for today. We can now open the call up for questions.

Thank you very much. Ladies and gentlemen the floor is now open for questions. [Operator Instructions] If listening on speaker phone today, we ask to please pick up your handset while asking your question to provide optimal sound quality. [Operator Instructions] Please hold a moment while we poll for questions. And the first question today is coming from Frank Jones, from Barlow Capital. Frank, you may go ahead.

Thanks, guys. First of all, congrats on the progress. I was just -- so my first question is, could you provide a little more color as to who the end customers are for the vehicles that you sold during the quarter?

Sure. This is Phillip. I think we can do that. Actually, I think probably Sue Emry, our Vice President, would probably be best for that. Sue, can you just shed a little color on that?

Absolutely. So first quarter sales deliveries, one went to a municipal airport authority here in state of Arkansas and we had several go-to a California based company that does upholstery, as well as several Vehicles went to a solar -- national solar company located in Utah. And then we had some go as well to local new jersey public library.

Great. Okay.

A few of them.

Awesome. And then just second question. So obviously fuel prices have been very high recently. Has the increased prices impacted interest in your vehicles, and are you seeing more opportunities in your pipeline?

Sure. Absolutely. This is Phillip, and that's a great question. And the answer to that question is yes. More and more people -- I think now that they see -- and especially as we've got a lot more vehicles out and they see the reliability of them, more and more people are now coming with that question. And in many cases, we're finding that the price difference and the variation in price between a diesel powered vehicle which would run in the mid to upper 60s fully loaded compared to an electric vehicle which would run into 90,000 range, the operating costs of that diesel vehicle if it's averaging a 100 to a 150 miles a day burning between 10 and 15 gallons of fuel, it actually -- the fuel burn alone more than covers the price different. So we're really starting to see a lot of calls about that, a lot of turn that way. And of course, now that we're manufacturing a lot more vehicles and our numbers are coming down, we're expecting a substantial drop in our pricing of $10,000 plus dollars before the end of the year. So yeah, I think we're going to see a lot of a lot of customers going that way.

Great. All right, that's helpful. Thank you. That's it for me. Congrats on the quarter, guys. Thanks.

Thank you.

Thank you. And your next question is coming from Dave Hannon. Dave, you line is live. Please go ahead.

Thanks very much. Hi, Phil and team. Congrats on progress directionally. I think it looks good. We always want more but directionally moving in the right direction, so that's good. I've got like three or four questions and I'm hoping we can just kind of zip through them. The first topic for me is is the litigation and I the disclosure, particularly in the annualized thought was really good and helpful. But I'm always looking for more. It's the dispute with GPV that for me have greatest concern. I think frankly for both sides, it's an overhang and I don't think investors like it. I think potential customers probably have concern. I think strategics or even in that right acquirer would look at it on both either side and have issue. I think needs to be put to bed. So my question is there anything you can share with u, maybe it's subsequent to quarter something current that helps us understand what's the likelihood or willingness that we see this resolved in either arbitration or somehow concluded altogether?

Great question. So Green Power did reach out to us earlier this year and with an attempt to settle the agreements. And albeit that I can't get into all of the ins and outs a bit, we did agree to settle with them and then in the 11th hour, they came back with some what we would consider to be a non - negotiables. On our side they -- it was never part of the agreement to begin with and then then the 11th hour they've added -- tried to add those back, which we had told them we weren't going to do. So we did file our defense in the case that they had filed against us, which is -- and, actually, the case he filed against us down here in the U.S. which is just an exact mirrored image of the one they already filed in Canada three years ago, so I don't think that's really going anywhere for them. We're hopeful, at the end of the day that we would be able to come to some terms and some form of settlement, but it needs to be exactly that, right? It needs to be a blend of both sides of the fence, and right now, in our opinion, we thought we had that. And then, like I said, in the 11th hour, it turned, so yeah. It's -- let's put it this way. both sides are talking, so -- and in terms of the other legal disputes that were hangover from automotive from the previous ones, those have all been settled and pretty much put to bed. So really the only one that's outstanding is the GP1 and them. And I think that we're confident that it doesn't serve anybody at the end of the day. So I think that ultimately it will be settled. So I think there's just a little bit of ego attached to it right now. I hope that answered your question.

Yes, it is a sensitive subject so I respect -- I appreciate your commenting on it as much as you did. My second question has to do with the financing, and I obviously, I recognize and respect that you may not be able to disclose or say much, but we're staring at a -- up to $50 million raise, we're staring at a $0.27 quote, sub $100 million market cap amidst this financing, whatever you can -- can you give us any sense of your view and the Board's philosophy on dilution because it's a bit spooky obviously, up to $50 million relative to your market cap. And then tied to that is are you considering others, your debt financing on the table, are you looking at possible strategics or other ways to basically finance this exciting, but aggressive build-out.

Yes, great question. Obviously there's a reverse split coming, so we need to tighten the stock. In terms of the debt financing, we have been offered debt financing right now, we've received approval for up to $250 million in an industrial bond for our expansion, which is very exciting, and then after we do the reverse split and we're not sure what that's going to look like just yet because we're still pricing that, and so -- and there will be a concurrent financing that will come with that. When we say up to $50 million, it doesn't necessarily mean that that's what we would take. For those of you that have been around me for many, many years, you'll -- I'm not one of those guys that likes to raise money for the sake of raising money, and I think if you look at our financials and you look at our current cash position today, what we raised almost two years ago and what we're sitting with today, what we have in inventory and stuff, our burn rates are very low and we're very, very conservative in the way we do things. So on the flip side of that, we've all seen some things that have been with the large count things that are going on, and the most recent announcements from Canoo and some of the others, I'm very, very, very grateful, and I think we all are as a company here that we're not a company that has a skateboard, We are probably one of the only companies that is fully homologated and we're through USDOT, we're through NITSA, we're through FMVSS, and we have the EPA certification on approval, and we have our own bin number. So we're a far cry from when you hear many of these other guys touting their stories about their right around the corner. We all know, and especially after the company, we know that if you were -- if you had your vehicle ready to more and you're ready to go would take you to years if you knew what you were doing to get through homologation and get certified, so we're very grateful. We actually have wheels on the ground, vehicles on the road. And we most recently completed homologation of our right-hand drive vehicles, so yes. I think we're very excited, and I think we have a lot of opportunity here for not only to erase debt rather than having dilutions from our stock, but I think that with the reverse split, our stock will become tighter and a lot more value, and so we're excited about that. And we're starting to see some strong deliveries now. Finally, we got through the last of this Omicron stuff, or praise God, let's hope that that's the case, and we're starting to get back into the delivery side of things. We've got great vehicles in inventory, we have another 200 in production that are coming that we have sales for. So yeah, we're very excited and -- so I wish I could shed a little more light for you there, Dave, but I know I just can't at this exact moment, but we have a lot of interest where we're being -- we have a lot of people that want to fund. They're looking forward to the up-list. So we just have to kind of put opinion in what it is we want to do.

So you actually you touched on a couple of my other questions. I didn't have to you ask me. I just got you talking. So that's very helpful. On the reverse split subject, I was going to ask you, what are we waiting for? So did I understand that correctly, that in conjunction with this deal, you're basically in a put that to bed? To achieved the uplift?

That is correct.

Okay. Alright. Which by the way, hands-down -- is a positive. The opening the door to institutional and ultra-high-net-worth investment community on Nasdaq is materially better, obviously than hands down it's the right costs. So that's good. You also touched on the right-hand side, the right side drive vehicles. One of my other question was going to be, the truck, what can you share that gives us kind of a bit of a real-time snapshot on what the potential gain you'd like to take this to the next level? The singles are great, but you're going to -- we all know you need that game changing headline. Some kind of what you mentioned. On the last call you mentioned the post office and the 10 units that they they broader tested I'm not sure. But can you give us any sense of what is -- what you've got in the pipe -- either in the pipeline or with the prospects you're working on, that will give us that game changing hurrah moment, okay, this is real?

Sure. While the post office is a good example, we all know that the post office handed out a $1.7 billion contract to a company that was providing them left-hand drive vehicle and gas powered vehicles and was going to try to attempt to make at least 20% of those electric over the next two years. So -- and if you've been following the news, several states have filed lawsuits against that United States postal service in conjunction with that award. And so we feel very confident, we look in the market and we look around the market and I can tell you right now, there is nobody in North America that has a right-hand drive vehicle that is homologated and would have bin number and he threw EPA, I'm on the road except for us. So we're very excited about that and we're just starting to get that out into the marketplace now. Like I said in the past, we're changing our ways more, and we've done a great job at building a good cross-section of vehicles, and we've done a lousy job of letting people know who we are. So I truly believe we're the most undervalued EV company in the states today. And my reasons for that is because we're one of the very few that actually has vehicles that are licensed and certified and homologated on the road. And so -- and we are the only company in North America that can now manufacture a right-hand drive, and this homologated in right hand-drive. So we're very, very excited about that. And then not just on the United States postal service, but we are now receiving some inquiries. Everybody knows and I think it's fair to say that the toughest build in the world is USDOT, and to be California compliant is -- that's it. If you are compliant with USDOT and you meet all the requirements of California, that's the toughest build in the world. So to have a vehicle that is a right-hand drive vehicle that is not only through USDOT, but it's also California compliant, it opens the doors to numerous countries in Europe, and we're already starting to see a little bit of sales activity now where people have found out that we actually have a right-hand drive vehicle and we're able to build it in that capacity. So that was a huge milestone for us. It took us a while to get there, but we did pull it off and we paid for its entire -- all the engineering, anything out of operating capital over the last 18 months. And so we're very excited. So I think -- not just will it provide us an opportunity to be competitive in the U.S. postal services bids, but it opens the doors to us now into the European markets.

Okay. Thank you, Phil. My last question is regarding ProGreens. I guess my question is simply what's going on, and are there any other potential entities that, for whatever reason, are being considered to either share or utilize the plant? And I will just thank you for taking my questions, again. Congrats on all the progress. I'll step back and then listen to your answer. Thanks so much, guys.

Yeah. Another great question, Dave and I guess that's a question that's been asked by a number of people that are paying attention to the market. And so I think that for someone like yourself, you're looking at sort of what we're doing as a company. And so I guess I can answer your question this way. We are underway with pro greens and we will not make any further advancements on that until such time as we do the reverse split and we're up listed to the Nasdaq. But it is our intention to start manufacturing batteries here in the Osceola plant. We have in our sites. Another company that is in the solar business and we're in discussions with them right now. And where we would also manufacture solar panels within this facility on site and people say, wow, what, what's that on the about? Well, quite simply put if you look at everybody in the space and all of that, 1000 vans sold to Amazon and 1000 vehicles here in 1000 vehicles there. And I mean, we hear the stories everywhere. The simple fact is, first of all, we all know that that's not true and second of all, we know that not only use it not true, but it's not even possible. And the reason for that is, is because if somebody came to us tomorrow and said, hey, we want to buy a thousand vehicles from you, great. But how are we going to charge them? Where is the infrastructure to make that happen? And that infrastructure simply doesn't exist. And so we are working very diligently and very hard right now with a number of different states to get that infrastructure in the ground with ESS, Electric Storage Systems, in the ground, charging infrastructure across the stat, and then in addition to that, a further EV platform that would allow for renewable energies from the solar side and getting that infrastructure in the ground ESS. We all know that the most stable power source in the world is a battery, and if you need to charge 50 or a 100 vehicles at a time, pulling that off the grid all at one time just doesn't work. So we've got a very robust program to say the least that will go around our future sales, if not just our commercial vehicles, but later this fall, and I'm going to share with everybody now we are unveiling our school bus. We have a school bus that's built already. We're very excited about that. And so rather than running around trying to sell one-off here and there, we're going to be attacking the fleet markets, and when we attack those fleet markets with the school bus, we're going to be not just showing up with the school bus platform, but with a charging platform, a renewable platform and some ESS that goes in the ground. So we could literally -- as the company, we are looking to become a one-stop shop for the entire infrastructure and what it takes to power up commercial vehicles like that. And I can say with the utmost confidence that nobody, and I mean nobody is looking at the market that way right now.

All right. Thanks very much, Phil. And if I -- your IR team I heard is on the call at the beginning there. Can you guys update the -- like I assume you're up marketing with the deck in hand with on this financing? Can you update the site with -- like the latest and greatest is -- it's from August, right? There's a ton of progress. It's nice to see the whole thing in one big package.

Yeah, I think we can do that and we'll have the guys that work on that. We'll have IMS and get that updated and we'll get it out there for everybody.

All right. Thanks so much on all the progress, guys. Thank you.

That's great. Well, thanks, Dave. And, ladies and gentlemen, if there is no more other questions at all, if there's nothing else pending, I'd like to thank everybody for joining us and let you know that I look forward to speaking to you next quarter. And God bless all of you. Thank you.

Thank you, ladies and gentlemen, this does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.