Good day, ladies, and gentlemen. Thank you for standing by, and we warmly welcome you all to the Greenland Technologies Fourth Quarter and Full Year 2022 Earnings Conference Call. Currently, all participants are in listen-only mode. [Operator Instructions]. As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. Now, I will turn the call over to Yujia Zhai, Managing Director of the Blueshirt Group. Mr. Zhai, please proceed.

Thank you, operator, and hello, everyone. Welcome to Greenland Technologies fourth quarter and full year 2022 earnings conference call. Joining us today are Mr. Raymond Wang, Chief Executive Officer; and Mr. Jing Jin, Chief Financial Officer. We've released the results early today. The press release is available on the company's IR website at ir.gtec-tech.com, as well as on Newswire Services. A replay of this call will be also be available in a few hours on our IR website. Before we continue, please note that today's discussion will contain forward-looking statements made under the Safe Harbor provision of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual result may be materially different from the expectations expressed today. Further information regarding these and other risks and uncertainties is included in the company's public filings with the SEC. The company does not assume any obligation to update any forward-looking statements, except as required by law. Also please note that unless otherwise state, all figures mentioned during this conference call are in U.S. dollars. With that, let me now turn the call over to our CEO, Mr. Raymond Wang. Please go ahead, Raymond.

Thank you. Good morning, everyone and thank you for joining us today. We have a lot to go over. But before I get started, I want to begin by thanking my team for their persistence and dedication to delivering results for the company despite a challenging global environment. We continue to be impacted by lingering pandemic regulations, but still managed to deliver strong results for 2022 and maintain our market leadership in our industry. Starting with our core component business, so we produced and delivered 129,686 drivetrain units in 2022, representing $90.8 million in revenue, of which 27,542 drivetrain units were in the fourth quarter, resulting in $19.1 million in revenue. Though lower than last year's results, I am proud of our performance that maintains our position as market leader in our industry. Market recovery has been slower than anticipated in the fourth quarter after China loosened their pandemic restrictions which impacted our business. Furthermore, the weakened UN had a material impact on our financial results representing over half the negative performance of our revenue year-over-year growth. Given these challenges, I believe the worst has passed us. We have already seen a strengthening market in the beginning of 2023. China is pushing for economic recovery with new loans in January rising over 17% year-over-year to just under ¥5 trillion. This has driven purchasing an industry as we support such as logistics and manufacturing, as they seek satisfy the supply gap built up in 2022. In addition, 2023 forecasts indicate a stronger yen by the end of the year, which will support our financials. These factors will result in a banner 2023 year for Greenland's component business, particularly in the third and fourth quarters. Now 2022 illustrated the vulnerability of Greenland's dependency on the Chinese yen. To address this foreign exchange…

Thank you, Raymond. And thank you everyone for joining our call today. I will now go over our financial results for the year 2022 and the fourth quarter. For the full details of our financial results, please refer to our earnings press release. For the full year 2022, the total revenue was US$90.8 million. So, 8% From US$98.8 million in 2021. Primarily due to the lower sales volume as a result of the pandemic shutdowns in China as well as the negative volumes change impacts from a stronger dollar. We sold 129,686 units of transmission products compiled with 141,431 units in 2021. All in RMB basis. Excluding the impact of the foreign exchange, total revenue decreased by about 3.7% from a year ago. Our cost of goods sold decreased 10% to US$71 million in 2022. Primarily due to low sales volume, gross profit was $19.8 million, a slightly increase of 1.2% from $19.6 million in 2021. Gross margin was 21.8% up 200 basis points from the 19.8% in 2021. As a result of the strategic shifts in Greenland's product mix towards higher value and more suspected products such as hydraulic transmission. Meanwhile, total operating expenses increased 22% year-over-year to US$13.9 million as we continue to invest in HEVI infrastructure, talent, and technology as part of our expansion. Our income from operation was US$6 million, compared with US$8.3 million in 2021. Net income was US$6.6 million compared with US$7.3 million in 2021. We ended the year with a strong balance sheet with $16.3 million of cash on hand. Given our strong financials and a significant growth potential, we believe Greenland's character market capitalization does not accurately reflect our true value. Next, I will briefly walk you through on financial results for the fourth quarter of 2022. The total revenue was $19.1…

Thank you. [Operator Instructions] First question is from the line of Graham Mattison from Water Tower Research. Please go ahead. Your line is open.

Hello, everyone. Thanks for taking my call. So it looks like 2022 played out, much like you talked about on the call a year ago, where you said it would expect better margins and choppy revenue. If you look into 2023, what's going to be the bigger driver for you? Is it backlog that sort of accumulated over the course of the prior year or is it a recovery in China in terms of the market?

Good morning, Graham. That’s is a great question. I actually think that both are going to weigh significantly into the 2023 forecast. The reason being is because there is still a big gap in the demand that will have to be filled with the backlog. But because the month, the money the funds have just truly begun to open up at the beginning of the year. It's going to cause a little bit of a timeline gap before it really starts hitting. So, I think that we'll really start seeing it ramp up in Q2 of 2023. And then it's just going to go gangbusters from there.

Thanks, great. And then can you get a little bit more color on the higher margins in terms of what was driving that, and your move towards higher quality products? And then as you look at it at 2023, is there room for the gross margin to improve further?

So from a product standpoint, we have a integrated drive train units that is actually specifically catered towards the power of lithium product and electric forklifts. And this is a product that has been a flagship development that we've been pushing across our clientele to meet the demand of OEMs to support the demand for lithium powered forklifts on a global scale. Markets like China have been leading the world in it where the adoption right now is probably about three out of every four forklifts. But there's still a lot of opportunity across the globe, such as in the United States, where, though electric forklifts still representing over 50% of forklift sold a still a majority are lead acid. So there's a significant opportunity across the globe and OEMs that are trying to meet this. And as such, we've been getting a lot more than option in demand for these integrated products, which is wonderful for us because this product integrates the speed reduction gearbox, the electric motor and the driving axle into a single package. And from our manufacturing standpoint, we actually have the highest margin is out of all of our components sold today through that product. So this is a significant driver, the push from our standpoint for sales to meet this demand. And it's not a area that we see slowing down. So that's definitely a big driver for improved margins from a product standpoint and the core components business. Now, I think that there's still opportunities for larger gains on the margin upfront for us to expand this particular product to cover a larger range of material handling vehicles, such as larger scale outdoor forklifts or even greater applications in let's say the commercial electric EV industry as well. Things that we are actively exploring, but nothing to announce just yet in earnest.

Great. And then one last question, then I'll jump back in queue. That's great news about the progress you're making in terms of the demos with the HEVI product. Can you talk about some of the customer feedback that you're hearing so far? And then, if they were, if somebody were to place one of these flagship orders. How would that roll out, if the first production is coming in 2Q? Would that be, the order would it be, typically would these be like over a year or minutes? How should investors think about that in terms of timing?

So initial feedback has been extremely positive, extremely positive. These demos and pilots are something that we drive and encourage, because there's always a lot of concern and doubt for new technology on whether it's strong enough, or whether the battery can provide enough life to get the job done. And our units are truly designed for that. So there's no better way for us to prove it than to get it into the hands and to get people behind the wheel of the equipment. And feedback has been extremely overwhelmingly positive. So, we've been extremely glad but what we've hearing and what that means for the overall business as well. And for the delivery for next steps. So let's take a company like United Rentals, for example, the way that we see it playing out is after the initial demo phase, then it'll transition to a full on pilot, where you are will purchase between, let's say, 50 to 150 units of our particular product, to do a full deep dive, 12 months pilot study on our product live in market to get a better understanding of profit margins, maintenance costs, the Scotiabank. And if that pilot proves positive for their business overall, then they would proceed to nationwide or global distribution, which is definitely something that we would be in favor of. And from a delivery standpoint, our Baltimore, Maryland site is prepared to complete the first finished product in Q2 within actually the next few weeks. However, it does not represent our only manufacturing capability. We still have our assembly sites overseas, where our product right now both the components and the assembly are being done today. And we would have the capability to support a larger order in the 50-unit, 100-unit scale from that site, and in combination with our Baltimore, Maryland sites together. And we can do probably about 200 units with a six-month turnaround time.

We'll now take our next question. And this is from the line of Theodore O'Neill from Litchfield Hills Research. Please go ahead.

Thank you, very much. Raymond in your prepared remarks, you said you're going to train people to repair and maintain the machines and I'm talking about the HEVI subsidiary and all these questions I have. For the early adopters of your machines. How do you address the service issue for them?

Yes. So today, we it's all about empowering our clientele. Since we're doing a direct sales model, we're selling straight from OEM to the end consumer. We are not reliant upon catering to a dealership network. And what this provides us the opportunity to do is we're able to actually promote the clients right to repair our equipment when they purchase it. And this is truly been disruptive and supportive and a big advantage for the HEVI brand, as we introduce it to various companies. And from a servicing standpoint, this provides choice for the client. So should that company have their own team of mechanics have the necessary equipment to perform a particular service need maintenance, need or repair, then they are able to do so with our full support and blessing. So, let's take for example, if they needed to replace or remount it's higher, instead of being dependent on working with a HEVI dealer and paying costs that can be upwards of over $1,000 per tire, they can actually work with their local tire supplier will give them all the specs, if they so desired, we will sell them our own OEM tire, and then they can handle that replacements with our blessing and education. Now should that company then not have the equipment expertise or desire to conduct that service, then this is where our approved service providers would come into play. So we would be able to offer a list of established shops that we've established a relationship with, that we've trained them on our equipment that they can get in contact with to perform that repair. And with our distributed assembly model, the reason why the HEVI business is focused on the Mid Atlantic area is to support that approved service provider models. We can provide that part to that shop, either same day or no more than one -- one business day. So, this way, keeps the shopper engaged and keeps them supplied to be able to provide that service to that client. And then the third option is to be able to provide direct support from our team of technicians, right out of our distribution sites and assembly sites, just like in Baltimore, Maryland and then in New Jersey.

And as those first machines roll off the assembly line in Q2, how should we think about how much of it goes into demo pool? How much goes into pilot sales and how much goes into regular commercial sales?

[indiscernible] I am not able to hear you, is your line on mute?

No. Can you hear me?

Yeah, I can hear the participant asking a question. I'm not sure to speak is answering. We can't hear you at the moment.

Pretty much off the line. I just tried to connect with him. Sorry about this. Just give me sec.

Thank you.

Raymond, your mic is doesn't work. We cannot hear you. But I can hear you. I saw you writing right now.

Hello, can you hear me?

We can now. Thank you.

Great, terribly sorry, everyone. I'm not sure what happened there. To reiterate the… Actually, I did I was able to hear the question. So just to restate my answer in response to it. So right now, we've been receiving so much demand and interest into our product that I've dedicated our entire inventory of electric HEVI equipment to support demos in pilots. And we're actually fully booked all the way into May at this stage, which is a wonderful problem for us to have. And what is going to come out it's going to be a matter of timing because we're right on that precipice of crossing that first adopter phase. Our brand is getting established to the comfortability that we are going to be able to start converting these interests into direct product sales. And then our production capabilities are going to meet either the need for both the demos or the products, whichever is coming first, from a timeline standpoint.

Okay. And one more question. If you have a strong demand for the machines, and you end up having building some part of it in your plants in China, and then bringing it over here and assembling it into a finished unit, is there any issue with tariffs in that transfer of part of the equipment?

At this stage, the tariffs would remain the same at roughly 25% for equipment. However, are Baltimore, Maryland sides, we're actually in process right now of getting it SEC designated, which will help support the overall duty and tariffs scenario for any product coming into that site for assembly.

Thank you, very much.

We'll now take our next question. This is from the line of Rommel Dionisio from Aegis Capital. Please go ahead.

Yes, thank you, and good morning. I wonder if we can just couple of points about -- ask about a couple of the things China Business. Could you discuss pent up demand? I mean, obviously, with these restrictions having been in place for so long, I wonder if you could just talk about, how much pent-up demand there potentially could be, as well as your market shares. I mean, it's obviously been a challenging market. But you seem to have held up relatively well, perhaps better than the rest of the market. I wonder if you could just discuss those market shares in China as well. Thank you.

Absolutely. So, from a market share standpoint, with what we've seen in Q3. I would actually admit that we were expecting a much faster rebound to close that gap in the fourth quarter of the year to even drive our performance even higher than what we've delivered. Now, from a timing standpoint, some of the volatility that we've witnessed in the market, such as the drawback of the Chinese community and supply side after the listing of their pandemic restrictions. Further delayed the drive back into the business to capture to fulfill with this gap into the later end of the fourth quarter. And in addition to that, as well, because it's been so long, under these pandemic restrictions, is taking a bit longer for our clients, the forklift OEMs to bring their, to ramp their operations back up to speed again, to meet it. So, we were a little too optimistic, we thought that they would be able to move fast enough for the fourth quarter. But this is something that we're going to see that's going to continue to drive performance as they ramp up to fulfill that gap isn't there's been pent up for so long into the Q1 and the remainder of the year for 2023. Now for the market share standpoint, that's absolutely correct. Our balance sheet will show that even from a supply standpoint, we've had our own challenges with the volatility in the market and these restrictions, but we were at an advantageous position where we had a majority of the raw material and components in our facilities on decks that we were able to deliver to the clients as necessary. And we're continuing to drive that forward. It's going to take about another quarter to normalize to get back into the flow with our pipeline for both the raw material coming in, and our finished products going out but we will anticipate normalization in the end of Q1.

And just to follow-up on that point on the supply chain. Are you also seeing in the benefit of lower freight costs as well and perhaps components as the supply chain gets better? Thank you.

Yes, we are, we absolutely are. One thing that was a also a little surprising on our end, in a prior earnings call, I was showcasing that our sales of drive train units were beginning to shift into the global space. So, we're starting to see just a slight decrease of our sales performed in China versus the global markets. And because of that, we were keeping a very close eye on freight charges going outside the country of China. However, we've started to see that actually claw itself back. So now the sale is performed to meet demand is continuing to rise back up into China and reduce down on the global side. I think that this is just a evidence of the challenges that the pandemic and supply and logistics challenges have had on a global scale, where countries that were trying to move away from globalization are struggling to ramp up their manufacturing capabilities to satisfy their needs and all the other challenges, we've addressed the call. So, they're so integral live back on the manufacturing strength in China. Now, with that said, from a Greenland standpoint, I think that it's important for us to further diversify the markets of our core components business. One of the purposes of HEVI was to further diversify our entire business model. So it's not entirely dependent upon the core component, manufacturing in one specific region. So, we need to be a little more aggressive and not just rely on HEVI to do that diversification, but also explore opportunities with our core component business as well.

Great. Thank you, very much.

Thank you. See no more questions in the queue. Let me turn the call back to Mr. Wang for closing remarks.

Wonderful. I just wanted to thank everyone for all of your questions, and all of your support in our mission with Greenland. We have significant opportunity, growth potential and value that is requiring patience as we pioneer the electrification of the industrial HEVI equipment sector. But we have all the right capabilities, infrastructure and technology to be able to capitalize on the first mover advantage in this space in the United States market. And we are extremely optimistic that we will be successful in our mission to penetrate the market capture market share, and to be able to deliver on building value for both Greenland and their shareholders. And with that, I just want to thank everyone for joining our call this morning and I hope you have a wonderful day.

Thank you all again. This concludes the call. You may now disconnect.