Phoenix Motor Inc. (PEVM) Earnings Call Transcript & Summary

Hello, everyone. This is Craig Brelsford with RedChip Companies. Thank you for joining today's event with Phoenix Motor, which trades on the NASDAQ under the ticker PEV. With us today, we have Denton Peng, Chief Executive Officer of Phoenix Motor; Jose Paul, Chief Commercial Officer; Lewis Liu, Chief Operating Officer; Tony Zhou, Chief Technology Officer; and Michael Yung, Chief Financial Officer. We will begin with a presentation in a moment, and then we will answer your questions. [Operator Instructions] Please allow me to read the safe harbor statement. This call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements pertaining to future financial and/or operating results, along with other statements about the future expectations, beliefs, goals, plans or prospects expressed by management constitute forward-looking statements. Any statements that are not historical facts should also be considered forward-looking statements. Of course, forward-looking statements involve risks and uncertainties. I now turn this webinar over to the Phoenix Motor team. Gentlemen, please go ahead.

Thank you, Craig, and thank you to everyone for joining us on the call today. I'm excited to share our story with you. At Phoenix Motor, our mission has always been clear, leading the way in zero-emission all-electric transportation solutions. Over the past 3 years, we have pioneered in the industry, becoming one of the largest manufacturers of medium and heavy-duty electric vehicles in the United States. Our vehicles have accumulated more than 6 million all-electric miles, saving over $30 million in fuel costs. These efforts have directly resulted in a reduction of over 6 million pounds of carbon emissions. Today, we offer a broad line of medium and heavy-duty electric vehicles from shuttle and school buses to utility trucks and more. We are not just building vehicles. We are shaping a cleaner, quieter future for transportation. But our vision extends beyond just electric vehicles. They continue to evolve. Phoenix Motor is transforming from an EV manufacturer into a technology-driven leaders that integrate artificial intelligence, automotive mobilities and next-generation electrification solutions. We are pioneering in the future of commercial transportation by developing smart self-driving solutions that will redefine mobility in the coming years. As we continue to drive innovation and growth, we are excited to share that 2024 is shaping up to be the transformative year for Phoenix Motor. We expect to achieve record revenue of approximately $30 million to $31 million, a tenfold increase from 2023. Even more importantly, we anticipate reporting positive net income, making a major financial inflection point for our company. Looking ahead, we are projecting further expansion in year 2025, with net revenue expected to reach between $40 million to $50 million. These milestones highlight the strength of our growing order book, expanding production and increasing demand for zero-emission commercial transportation. With that, let's dig deeper into how we are continuing to drive innovation and growth. Our first quarter 2024 acquisition of one of the largest zero-emission bus manufacturers in the U.S. significantly enhanced our capabilities, positioning us as a leader in the electric transit bus market, with 1,200 buses delivered and a 40% market share in North America. We envision a world where clean, quiet transportation is accessible to all. Our focus remains on delivering sustainable, efficient solution for both medium and heavy-duty vehicles from public transit to last-mile delivery. We built an unmatched foundation of expertise over the past 2 decades. Our vision for the future is not just about electrification. It's about intelligence, self-driving electric mobility through advanced artificial intelligence driving automation, cutting-edge vehicles, connectivities and fleet intelligence. Phoenix model is positioned to lead the next renovation in transportation. We are actively developing autonomous driving technologies, with a focus on application in public transit, last-mile delivery and the commercial fleet operations. With deep expertise in artificial intelligence, sensor fusion and real-time data analytics, we are working to bring fully automatic and electric commercial vehicles to the market. Our mission is clear, to be driving the force in electrifying commercial transportation for a sustainable future. Our team have over 100 years of combined experience in electric vehicles and clean energy industries. I bring over 20 years leadership in solar battery storage, EV and charging infrastructures. The other key members of our team including Michael Yung, our Chief Financial Officer, with 20 years -- 25 years of financial leadership, bring a wealth of experience in corporate finance, including his time in UBS and Pingtan Marine. Dr. Lewis Liu, our Chief Operating Officer, who has spent over 30 years in electric vehicles and e-mobilities, previously [Technical Difficulty] Business Development and Strategy at Karma Automotive and KPMH; Jose Paul, our Chief Commercial Officer, with over 20 years automotive experience, has held senior roles at FedEx and Frost & Sullivan; and Tony Zhou, our Chief Technology Officer, who have over 20 years experience in autonomous driving and artificial intelligence. This leadership team is dedicated to executing our vision, drive innovation and ensuring Phoenix Motor remains a leader in developing next-generation of autonomous artificial intelligent powered electric vehicles, setting the stage for smarter, safer and more efficient transportation. With a strong leadership team in place, we are well positioned to capitalize on the significant opportunities ahead. To give you a close look at our commercial strategy and market initiatives, I now hand it over to our Chief Commercial Officer, Jose Paul. Jose?

Thank you, Denton, and good afternoon, everyone. We doubled our manufacturing footprint in 2024, with the acquisition of the largest transit bus manufacturer in North America. We now have 2 strategic locations that provide us with a coast-to-coast presence and the ability to efficiently serve customers nationwide. On the West Coast, our Anaheim, California, facility serves as the hub for our medium-duty vehicle production and headquarters. The facility has been instrumental in delivering our next-generation shuttle buses, trucks and utility vehicles. Our East Coast facility in Greenville, South Carolina, has historically been dedicated to the production of heavy-duty transit buses. Going forward, this facility gives us the flexibility to scale both our medium and heavy-duty lines to meet the increasing demand for zero-emission vehicles across the country. As you look at the evolution of Phoenix EV, it is clear that we have consistently been at the forefront of innovation in the electric vehicle industry. We started delivering all-electric vehicles over a decade ago. And since then, each milestone has built on our commitment to lead in zero-emission transportation. In 2014, we delivered our first all-electric shuttle, the ZEUS 300, to the Los Angeles Air Force base, and this is a pivotal moment that set the stage for our growth in the medium-duty vehicle segment. By 2018, we have won the prestigious EPA-SCAQMD grant, enabling us to deploy 29 all-electric shuttle buses to key airports in Southern California, a major leap in expanding our fleet of zero-emission vehicles. And fast forward to 2022, we made a significant step by becoming a publicly traded company on the NASDAQ, providing us with the platform to accelerate our growth and scale our operations. And as we have just covered, in 2024, our acquisition of Proterra's transit bus operations has not only expanded our manufacturing capabilities, but also solidified our leadership in the zero-emission heavy-duty transit bus market. Throughout the last decade, we've built a strong foundation with each of these milestones. We have furthered our mission of delivering sustainable transportation solutions to customers nationwide. As you can see here, our transit buses are already being used by many of the most prominent transit operators across North America. Additionally, our buses are available on various state and federal contracts, simplifying the purchasing process for transit agencies and allowing them to easily acquire our zero-emission vehicles. One of the most telling indicators of our success is our strong and growing customer base. We proudly serve over 200 customers across North America, with over 1,300 vehicles delivered to date, and our buses are in operations in 43 states and provinces, a testament to the trust we've built across the continent. We are particularly proud that 70% of our orders come from repeat customers, a clear signal of the reliability and the value that Phoenix EV brings to their operations. At Phoenix EV, we are proud to support domestic manufacturing through our Buy America compliance. Our transit buses are manufactured with the majority of key components sourced locally and final assembly takes place in our Greenville, South Carolina facility. And this ensures that our vehicles meet federal requirements, making them eligible for government funding programs, which is critical for many of our customers. We also offer Buy American compliant options, providing a seamless procurement process for transit agencies and other entities looking to maximize their federal and state funding opportunities. At Phoenix EV, we focus on one thing, electric vehicles, and we've been doing it for over 20 years. Unlike traditional manufacturers, electric is all we do, and this singular focus has allowed us to build unmatched expertise in both medium and heavy-duty vehicles from transit buses to commercial trucks. Our vision is simple; clean, quiet transportation for all. And with decades of experience in electrification, we are confident in our ability to continue delivering best-in-class zero-emission solutions that meet the evolving needs of our customers. As you can see here, Phoenix EV offers a wide range of all-electric vehicles from heavy-duty transit buses to shuttle buses, utility trucks, school buses and more. And this diverse portfolio allows us to meet the needs of a broad spectrum of customers, all while supporting their transition to zero-emission transportation. The transit bus segment is rapidly transitioning to zero-emission powertrains to meet goals of reducing greenhouse gas emissions by 50% by 2030. Various states, including California, have mandated the switch to zero-emission transit and airport shuttle operations. And importantly, the transit agencies are supported with consistent funding with over $1 billion allocated annually towards low and zero-emission transportation. I'll now pass the call over to our Chief Operating Officer, Dr. Lewis Liu, to go into further details about our product portfolio.

Thanks, Jose. Good afternoon. I will begin with sharing a look at our flagship ZX5 heavy-duty transit bus. The ZX5 is built on a fully-integrated, heavy-duty technology platform designed to deliver superior performance and durability. At its core, the bus features an advanced composite body made from lightweight, durable carbon fiber reinforced material, ensuring strength without compromising efficiency. The high-efficiency drivetrain is a game changer, delivering 5x efficiency of diesel with industry-leading horsepower and acceleration. Charging is made simple with Universal Level 3 charging capabilities, allowing for faster, more flexible operations. and powering it all is the heavy-duty battery pack that's built with commercial-grade, high-density technology, ensuring reliable and long-lasting energies for our customers. The road-proven ZX5 is engineered with advanced carbon fiber reinforced composite material that makes it both efficient and durable while ensuring the highest level of safety. These materials are strong yet lightweight, providing bus with excellent impact resistance, critical for long-term durability and operational safety. Additionally, the composite is non-conductive and rush resistant, which do not need -- which not only enhances safety, but also significantly reduces maintenance needs, ensuring the ZX5 stay on the road longer with fewer complications. As a purpose-built vehicle, the ZX5 includes optimized battery placement that enhances both safety and performance. The battery are placed underneath and outside of the passenger compartment, separated by a sealed bulkhead below the bus floor. This strategic placement keeps the battery out of the common crash zones, significantly improving safety. Additionally, the lower position of the battery helps create a lower center of the gravity, providing greater vehicle stability and smoother, more reliable ride for both passengers and operators. Next, let's turn our attention to our medium-duty vehicle, which plays a critical role in serving a wide range of industries. As you can see, Phoenix EV offers a diverse lineup of all electric medium-duty vehicles built to meet the demand of everything from delivery services to vocational work tracks. At the core of medium-duty vehicle line is our new fourth-generation all-electric drivetrain, the Gen 4. This advanced drivetrain represents the latest in electric vehicle technology, delivering greater efficiency, performance and reliable across our medium-duty lineup. Our Gen 4 all-electric drivetrain for the Ford E-450 chassis is powered by lithium-ion HV batteries, offering up to 131 kilowatt hour of capacity and delivering an impressive 165 miles of operating range, ideal for a wide range of commercial applications. It also features DC power distribution with building power options for additional equipment, making our vehicle adaptable to different industries needs. To maintain optimal performance and battery health, the Gen 4 includes an advanced cooling system and ensure efficiency even in demanding conditions. Charging is flexible and fast, supporting both J1772 Level 2 charging at 19.2 kilowatt hour -- kilowatts and CCS Level 3 fast-charging, capable of going from 15% to fully charged in under an hour. Additionally, the drivetrains' DC to DC converter and the motor assembly are designed for modular AC and DC power options, ensuring optimal performance and durability for our medium-duty weight vehicles. Our medium-duty vehicle lineup is the largest all-electric suite available in the market today. As you can see, a wide range of customers from various industries are already utilizing our vehicles, providing the versatility and reliability of our medium-duty solutions. These partners are a testimony to the trust our customers place on Phoenix EV for their zero-emission transportation needs. We understand that transitioning to an electric fleet can be complex. So, we provide comprehensive support to help our customers get their vehicle on the road quickly and efficiently. We offer data collection services, including GPS tracking, route analysis and tools to help identify optimal layovers. Our vehicle configurations are tailored to customer needs with options for vehicle models, energy and storage capacity and drivetrain setups. We also provide charging configuration, helping customers choose the right charging solutions, system sizing and charging type for their specific options -- operations. And for those needing financial solutions, we offer purchase and lease options and guide our customers through procurement method to make the transition as smooth as possible. Finally, our wide range of services, including telematics, data analytics, fleet transitioning services and training and more, ensuring that our customers are fully equipped to manage their new electric fleet. Our extensive service includes technical training dedicated to preparing customers' maintenance and operations workforce for the transitioning to electric vehicle. We offer a wide range of training options from classroom instruction and hands-on training and on-site training and even virtual classroom sections. And to further support our customers, we have regional field services representatives available to help maintain your fleet and ensuring continued reliable operations. I will now turn it over to our Chief Technology Officer, Tony Zhou, to go into further details on our technology vision and roadmaps. Here we go, Tony.

Okay. Thank you, Lewis. Thank you, Craig. So, I'm Tony Zhou. I'm the CTO at Phoenix Motor. My mission is leading transformation from EV manufacturing to technology-driven leader in autonomous mobility. Today, I will go through that how our advantage that EV platform, AI-driven autonomy and ISO grade, the ADAS safety system will make Robobus a reality, EV foundation and the transition to autonomy. Phoenix model has been pioneered for zero-emission transportation, and now we are taking next step to autonomous mobility. Robobus is our vision for the future. Our proven advanced EV platform is one of the best platform for self-driving capability. We integrate ISO-grade ADAS safety system to enable safety, intelligent, autonomous, operational. So the battery placement, the safety for autonomous driving, safety is a core pillar of both EV and autonomous technology. Our design, it ensures reliable at every level, smart EV system and for the AI-driven autonomous. So our intelligent vehicle architecture is designed for seamless AI integration, drive-by-wire, connect diagnostic at real time to monitor that the transportation gives the status. V2X communication, introduced that to Robobus and autonomy capability. What's exactly Robobus? Robobus is not all-in autonomous vehicle. It is a fully connected AI-powered mobility solutions. The AI-driven, the perception and predict AI decision-making fleet integration. So all the function feature, it is ISO grade. So the intelligent safety features will build the block of the full autonomous operation. The AI-driven sensor fusion for autonomy, to achieve full autonomy, Robobus leverage multiple sensor and AI system. The intelligent sensor fusion enable safety and efficiency for autonomous driving. Autonomous driving, drivetrain and battery software stack, that Robobus operate on the cutting-edge AI software architectures, perception layers, the planning and control layers and operation layers. So the software stack will ensure full autonomous and adaptable to transit experiments. Safety, fail safe mechanism. So our design will ensure safety, reliable. The safety is our top priority in autonomous driving development. All the ISO grade, the fail-safe architecture design is including all kind of redundancy, real-time remove the monitor, to monitor the bus by control centers, also with a self-diagnostic AI design as well. So, those technologies are advanced in the redundancy system and guarantee a safety transition to driverless operations. Our development plan and road map for full autonomous transit. So end of 2005, the development advanced L2+ for all our commercial EV lineup. In 2026, we launched semi autonomous Robobus that's called L3 in the control environment. In '27, we're going to release full-scale autonomous Robobus development, L4 for both urban and freeway system. Phoenix model transforms EV manufacturers to high-tech, the leader in the autonomous bus industry. So, a combined state-of-the-art EV platform, AI-driven autonomous and ISO grade safety system, we're going to create a future substantial intelligent transportation. Robobus will redefine the urban mobility in the future. Thank you for your time. I will pass to our CFO, Michael Yung, to walk us through our financial outlook. Thank you, everyone. Michael, please.

Thank you, Tony. In Q3 2024, Phoenix Motor continued its trajectory of strong growth, achieving revenue of $4.77 million, over 1,500% increase year-over-year from $0.18 million in Q3 2023. This marked another quarter of significant revenue expansion as we scale our operation and strengthen our market position. Our gross profit for the quarter also saw substantial improvement, reaching $1.12 million compared to a gross loss of $5,000 in the same period last year. This reflects the increased efficiency in our operation and higher margin contribution from our transit segment. While our net loss for Q3 2024 was $5.59 million, we are making strategic investment in scaling production, advancing key initiatives that will drive long-term profitability. Importantly, our total equity has improved significantly, reaching $14.9 million, up from negative equity position of $4.84 million at the end of 2023. 2024 was a transformative year for Phoenix Motor. We are forecasting record revenue in the range of $30 million to $31 million, a tenfold increase from 2023. Even more significant, we're anticipating reporting a positive net income in 2024, marked a major financial milestone for the company. Our momentum doesn't stop there. We expect 2025 to reach between $40 million to $50 million as demand for zero-emission commercial vehicle continue to grow, and we are expanding production capability, allow us to serve even more customers. Those results and projections underscore the long-term strength of our business, and we remain confident that Phoenix Motor is positioned for substantial success in the rapid growing commercial EV market. Thank you all for your continued support and for joining us today. We're now ready to take your questions.

[Operator Instructions] Let me start off with this one. Phoenix Motor has seen incredible revenue growth over the past year. Can you share what's driving this momentum and how you plan to sustain it in the years ahead?

Okay. I will take that question. As I said earlier, we are continuing to execute on our strategy, and we have continued to fulfilling our current backlog. We have over $200 million in backlog, and we are just continue fulfilling our high-margin transit bus business. And we are -- as we continue to learn our business and as we continue to focus on cost savings, we expect our growth to continue to move for this year, 2025. That's why we are expecting a double-digit growth for 2025 compared to 2024. Thank you.

We would love to buy some buses, heavy-duty ZX5s. How many sales reps do you currently have nationwide?

I can take that. Yes, I can take that. I mean, what we're doing right now is we -- these are essentially large, high involvement process of purchasing. So, what we have is we have a sales team, and then we also have a customer success team who work very closely with the customers in terms of specking out each of the buses. As you would know, the process of specking out a bus is significantly detailed. So the customer success team, once we have an order, we would actually work with the customer success team, which is based in Greenville and spec out your bus in detail and deliver the bus based on your specific requirements. We do have an order backlog, which is significant. So right now, the lead times are looking like anywhere between 1.5 years or more. So, that's where we are right now in terms of deliveries for new orders.

I would like to add on top of that. Thank you, Jose. As we continue to focus on strategy, we have signed new contract in the last 24 months -- in the last 12 months, and we will continue to sign new contracts. And as Jose said earlier, we have over -- almost 80% of repeat business. Our focus today, as everybody knows, the marketplace out there for the EV is extremely challenging. So, our focus is on reducing costs, get the current order out as fast as possible. Right now, the new order that we take, it will take up to 24 months before we deliver it. Our competitor is up to 36 months. So, we are focusing on it. And we -- our sales -- we have plenty of sales for us for the next 2 years just to be able to fulfill what we have currently. So thank you.

Gentlemen, can you elaborate on the company's strategy for scaling production and meeting the increasing demand for zero-emission vehicles?

Lewis?

Yes. Let me pick up on this first. I think Jose can come in and make additional comments on. First of all, in speaking with the demand generation and because of this unique business model, it's heavily dependent upon FTA's funding for the transit agencies from various cities throughout the nation, right, to continue to place orders with us. And there is limited competition in the market, right? So, combined with the other 2, so there are 3 valid suppliers on the electric buses out there in U.S. And looking inward, as far as operation, we recently right-sized the workforce and also implemented the flex operation, that means to make the operation more flexible and efficient rather than carrying a huge overhead. And that particular initiative will continue. And next to that is going to be streamlining the supply base. So, we intend to make more efficient on our supply base by looking at the second source of supply and also for the service parts for the buses out there, either on a warranty or out of warranty, they need the parts. And then we are actually putting a strategy. We call that open service to include some other channels for the service parts to come into play rather than traditionally. We only rely on one channel. So, we implement multiple channels on the service parts to actually enhance the parts supply to get the buses fixed. In total, the demand generation and the supply to satisfy the demand, actually, we try to balance that. We are kind of lucky in the end that we have some firm orders we try to deliver. And this is -- the key focus is from operational perspective to deliver those buses ready in the queue and also reduce the costs to the -- continue to improve the cost structure. So, that's from operations side. Jose, anything else you want to add on the demand generation?

No, I think you covered it, Lewis. Thank you. Appreciate it.

Phoenix, how do you plan to work through the $200 million of backlog that you've mentioned? How long does it currently take to build a ZX5 bus?

Lewis, do you want to take that one?

Yes. So I can start off. Again, we're lucky we have a huge backlog. But on the other side, definitely, we're facing the challenges to get those buses out the door. So, we have this VPP process internally to look at all the backlogs and prioritize each different programs according to the availability of the parts and also the material through the supply base. And currently, we are still ramping up the production level from the bankruptcy, which is a year ago, and then we're still ramping up to that. And again, as I mentioned, we actually implemented the flex operation. That means we're able to take up more volumes on the production line, depends upon the ramping up of the production rather than stay on the fixed level of production. So that's one way to do it. The other way is we actually increase the supply base and also the partners to work with. And we're still in the stages of basically revitalize the supply base, right, from the bankruptcy mode to pretty much like a normal mode of supply on the parts we need to build the buses. I think the third side is definitely to improve the efficiency on the production floor to make sure we can efficiently to produce the buses in the less time required and in a sense, to increase the capacity and also the throughputs. I think I'm going to stop here. And anything else, other team members to add?

Okay. We'll move on to the next question. Compared to your competitors, what makes Phoenix stand out? And is there anything your competition is doing where you could improve on?

Yes, I can answer that, Craig. I think the primary differentiator for Phoenix today is the ZX5 bus is the only purpose-built electric bus out there. It was designed from the ground-up to be an electric vehicle. So it is not unlike our competitors' vehicle where an existing internal combustion vehicle was modified to essentially fulfill the demand for electric buses. And I think that's the biggest benefit for Phoenix. And we have the most number of electric miles out there on a transit bus. We have a significant number of deployments. And there's a lot we are learning from that as we look at how can we improve the vehicle. And like Lewis mentioned, I mean, since acquiring the business, a lot of focus has been on, okay, how do we improve, be it in terms of existing specific components, improving efficiency and also improving the aftersales support, which we are offering out there. In terms of what we could improve, I would say that's an area where we could potentially do better, which is providing better aftersales support, being a smaller company, which is focused only on electric, the resources we have and the network we have is limited. So, that's something which we are looking to focus on in the next year and forward. And I would say that's probably one of the biggest areas we could really learn from our competitors in how to kind of scale and provide the best experience for our customers. The other factor which differentiates us, I would say, is that we also have a very strong product in our medium-duty cutaway bus, which is something which a lot of transit agencies use. And there is significant demand in that market. So when customers -- there are customers who are looking at our products today and saying, okay, how do we kind of integrate the large transit bus, the 44, 35-foot buses and also a cutaway bus. So, I think that's a huge advantage for Phoenix. And I think you've seen in today's call, a lot of focus on what the future is going to look like. And that's one of the things which being a smaller company, being a technology-focused company, we are a lot more nimble, and we are able to accommodate and integrate new technologies. We are seeing a demand from agencies to deploy autonomous buses and demonstrate the utility of autonomous buses and Phoenix is determined to be at the forefront of that motion, and we are looking to kind of strengthen our capabilities in that space. And those are all the things, which kind of really differentiates Phoenix as compared to our competition today.

Yes. Just adding a point, what we can learn from the other competitors. Tesla definitely is leading on the EV sectors. They are focused on residential consumer. They are focused on C. Phoenix is more focused on the business to -- go to [ B or 2T ]. Most of our customers' business are on commercial and government. So -- and I think if you see then, what we learned from Tesla, of course, they are technology driven and we follow this step. And before Tesla made profit, they focused 2 decades in the U.S. market, build very proven products for U.S. market. And then they go to international market. Then the company started to become profitable and the company increased 500x on value. I think Phoenix also have already developed a proven platform for last 2 decades, both from -- platform from Phoenix Motor and Proterra, platform spend multibillion dollars for both platforms, integrate to Phoenix EV. So, I think the next phase we can learn from Tesla is definitely we will go to use our products, can go to internationally, then we definitely become like Tesla. After company goes internationally, they will be very, very profitable, both on the supply chain and also market size. So I think also for Phoenix EV, we have a very unique product for ZX5, I think also -- not only U.S. market and the international market is also very, very interesting, our products. I think next step is to we can learn from something like Tesla for it to moving a company as a tech company, but also moving the company internationally. We also get a lot of international resource. Recently, we have reduced the company in Hong Kong for future internationally, focus on using international resource for international market. This is something we are planning for the company to do and learn from our competitors. Thank you.

Yes. One more thing to add. By looking at the manufacturing capabilities, I think because of the purpose design of this Proterra bus, especially on the body, right, it is the advanced composite body. So, that means we don't need the stamping process, right, because there's no metal frame and metal covers, right, so comparing to the other 2. So there's a question of what are differences from the other competitors, right? So they are -- the other 2, they are all built on the buses body, the bus body on the metal frame, metal structure and cover parts, right, the body. And they have to go through the stamping process, forming and also the e-coating, which we don't need all of that, right? So, we have the composite body and it's rust-free, right, so -- and also non-conductive. We're getting to the service. You don't have to wire some kind of special suit, right, to perform the services because ore body is not conducting electricity, right? So it's pretty safe for the maintenance and services. So, that's the elements we're looking at it as one of the key differentiator. That's what I want to add it in. That's one. The second thing is we do have the initiative to basically focus on the powertrain, the e-powertrain, right? So from medium-duty weight to the heavy-duty buses. That means if we integrate those 2, and then that means it's going to be easy for the services and continue to consolidate the costs, right? So the cost factors should be -- stands out better. So that's the second. Third point is lots of transit agencies, they're looking at the micro commuter, which is the medium-duty weight shuttle buses to bring the customers, all the riders from their -- where they live to the key bus stations. So for us, we offer not only the transit buses, but also the electric shuttle buses, which perfectly fit into that application as called micro commuter. So there's one-stop shopping to get the micro commuter and also the transit buses from one supplier. And then that will reduce the complexity and service cost of the transit agency. That's all I'll just add.

So this is Tony Zhou. I'm CTO for the company. I would like to add it here another -- that new technology. As our Chief Officer, Denton mentioned, we want to transform our EV sector, the company into autonomous driving bus, the company, which is what we call the Robobus. We're going to integrate all the new AI related, the newest technology, which is our autonomous bus. That's in our 3-year plan already. So, we are not really the EV company. You see, if you compare with Tesla, with other competitors, Tesla is more brighter, that function feature is FSD. We're going to deliver that sort of FSD for our -- that the commercial bus as well. That's the difference which compared with others. This is also -- I have 20 years experience from the GM until Lucid Motors is deliver mass production experiments. I would like to bring all my experiments to working with my team to try to build that most advanced AI-driven autonomous bus, we call the Robobus. Thank you.

Remember, the autonomous bus initiative actually, is on the agenda. I've seen some of the attendees actually are very, very much involved in that so-called APC, right? So, we definitely like to be on the forefront of the autonomous bus, even though it just started. But as the leading technology and also as a technology-driven company, we definitely want to be -- we want to be forefront on that end and to support the APC and also the autonomous drive buses. If you think about it, this is a perfect -- the autonomous bus is a perfect application for the transportation, right, because it's a fixed route and it's easy to plan and it's a perfect application for the autonomous drive. As Tony just mentioned, one of the reasons we got Tony on board is to provide the leadership on the autonomous drive. Actually, the technology out there is pretty mature, right? So, we just need to get the buses fully equipped with that particular functionality. But the autonomous bus is not the end. It's a start. It's the starting point, right? So, there's a whole bunch of things which we can do by utilizing the data collected from buses or routes and also the passenger -- the ridership, whatever, so to support the ridership and also to improve the efficiency of fleet operation for transit agencies. So, there's wide ranges of technology innovations in this particular industry. And then we -- definitely, we would like to be part of that and to support the transition from the current state to the smart transit.

Autonomous driving, exciting new frontier for Phoenix Motor. What makes your approach to self-driving technology unique compared to others?

Okay. I'm Tony Zhou. Let me take this question. So, our unique, it is what we call the drive-by-wire technology. This means let us to control, which is double layers to control the vehicle. That's the one thing we are different than others. The second, we induce that AI technology to the real time, the double layers that the decision maker, lane change decision maker, auto break decision maker. Even we are using AI technology, real-time data communication through that infrastructure through the V2X, which is real-time diagnostic of all the conditions for all the driving training, all the autonomous, the sensor fusion, make sure the system is working very healthily and also we design that is fail-safe, the protection, the mechanism. This is the highest grade. It is defined by Department of Transportation, we call the ISO grade. All our function feature rely on that redundancy system design. One system fail and that system will kick in. So the safety is our top priority. Also, we are to ensure our autonomous driving unit. It has also have a EV platform. This is the 2 components for our transit buses. It will make it everything, is that development -- is development in our road map. Everything it is -- we can see we're going to bring the functions -- the 2 main parts we were going to generate, integration together to make more safer and smooth bus for the future, that's the transportation industry.

Do you have a bids and proposals team? We have a huge RFP coming. Who do we contact for heavy duty?

Yes. I think at the moment, you can contact me directly, Chief Commercial Officer. As we mentioned previously, we are in the midst of rightsizing teams. So, we are essentially becoming more efficient. So, I think the current person to contact would be me, and then we can address any requirements that you have.

Jose, let me just make clear that the person who wrote that can write an e-mail right now and send it to [email protected], and I will forward it to Jose and you'll get your answer. Thank you very much.

Thanks, Craig.

Based on the $200 million U.S. backlog and ramping up production to fulfill this backlog, what are your plans to significantly increase your working capital requirements to fulfill these U.S. product deliveries?

Okay. I will address that, while Denton will add into it. We are working on raising capital to the capital market. Because of the bankruptcy when we purchased Proterra, the entire accounting team did not exist. We couldn't do their financials because we couldn't do their financials by GAAP accounting standard, even though our accounting are audited, but they will be considered non-audited until after we file our K, which we expect to file our K shortly. So once that K is filed, all our financials will be considered audited, and this will allow us to have our registration statement in place and allow us to go into the capital market continue to -- allow us to go into the capital market to seek capital. But we have other ways that we are looking at. As an example, you can always do PIPE. There's always a debt we could borrow, but we are exploring all possibilities. Thank you.

Yes. And just also I want to highlight the company is now, most of our operations rely on the operating cash flow. So, we are very few company of EV company that really highly rely on the operating cash flow. Last year, we have a very strong cash flow. And also, we still have quite a little bit of inventory of products, especially bus. So this will generate maybe a large cash for us for this year, the company. So, I think from operation, from our inventory to turn to cash, we will be generating lot of cash for us this year. Of course, we are keeping an eye on the capital market. And this year, after we file the 10-K for April time, then we should also have qualified to doing some new registration. Of course, it depends on the market. But from operation side, we are very good on operating cash flow, and this is what we've done last year. And this year, we have much better line of sight on the operation and our supply chain have improved a lot compared to last 2 years and also our selling cost will be reduced. And we see a very healthy gross margin. Last year, we had a profit year first time. And I think this year, our operating cash flow will be -- definitely, will be very strong. We will finish our current backlog order of $200 million. But in the meantime, we try to open eyes to get a different strategy to get operating finance. We are talking in different way like deal finance, like also operating finance and to try to get more operating finance to get delivery orders and try to get more than $200 million backlog orders to be fulfilled and to have more production. So in this case, now we are very conservative, have a forecast of this year for $40 million to $50 million revenue. If we can get more capital, I think our revenue will continue to grow more than that because we have capacity to produce more.

Given the recent stock price decline and NASDAQ compliance concerns, can you provide a clear road map on how Phoenix Motor plans to improve financial stability, secure long-term growth and enhance shareholder value without resorting to excessive dilution?

Okay. Go ahead, Denton.

Li first, yes.

Okay. As we continue to grow our business, as Denton mentioned earlier, which is that we are one of the few companies still operating using our cash flow from operation. And like everything else, manufacturing in the U.S. is a complicated business and we are focusing on reducing costs, executing strategies. The last thing we want to do is to dilute shareholders' value. That's the last thing we like to do to ourselves as well. But due to the circumstances that we're facing, we may have to go to the capital market and raise capital. But as of this moment, we are focusing on using the cash flow from the operation. We have actually an asset that will allow us to sell as soon as we can. And with that, we'll be able to have even more cash flow comes in, so that would continue helping operation and helping shareholders and reduce dilution and continue to enhance shareholders' value.

Yes. The company definitely will focus on improving operation to generate more cash flow and also use our inventory to generate cash. So, I'm gong to use this one to more operation, to deliver more products to our customers and improving the company profitability and freeze a little bit of forecast. And also in the meantime, as mentioned, we will be using the international resource for international market and use our current platform. I think it will also bring us additional revenue and also additional profitability in the future.

Can you speak to the type of batteries used and who supplies them, North America or overseas?

We have -- I think that we have 2. One, we have -- most of our supplies for transit buses is made in U.S. For some commercial, they're not required by America. We have some who buy the battery from overseas.

What drivetrain and transmission are you utilizing for your heavy-duty ZX5? Are you still offering the DuoPower option?

Lewis?

Jose, do you want to jump in first?

Yes, I can do that. Yes, the DuoPower option was the older version. We've now moved to what is called the ProDrive. We find it is a lot more reliable and more efficient for our customers. So, we have actually moved on to what is called the ProDrive system, not the DuoPower anymore.

Yes. For the ProDrive system, I think we continue to improve the overall liability of the system. So, we're still improving that.

How are you dealing with some of the recent supply chain issues? Seats and batteries seem to be difficult across the industry.

Let me take that. Yes, this is a true statement. Definitely, the seats has pretty much long lead time. And also for each transit agencies, they have different configurations on the seats, the stations, things like that. Again, this are the challenges across over the industry, right? So, our competition has the same challenges. But that doesn't mean there is no other way to deal with it. Again, as I mentioned earlier, for the supply chain, one of the strategy is to have the backup, right? So to work with the backup suppliers for the seats, for the other long lead items, that's one. The second thing is we're in the middle of the implementation of the ERP system. Since the bankruptcy, we don't have the system, the formal ERP system. The system is gone. Once we have an ERP system, formal system and then we're able to plan better on the long lead items, like whatever mentioned here, seats, and that will improve quite a bit. The third is the strategic partnership programs. We recently just kicked off, and we can continue to drive that program in order to improve the lead times. There's a few options to us, right? So if we see, there's big batches of program. I mean, big batches, meaning many buses in one program and then we can stagger that into different waves of production schedule, and then we're able to chunk it into the smaller or frequent shipments from suppliers. That means we're actually cutting the lead time, right? So, we can place order ahead of time. And then in a matter of weekly or -- not weekly, weekly is too ideal, but maybe monthly delivery and then we're able to cut the lead time in that sense. So, there's quite a few programs in the supply chain we intend to improve and intend to improve the lead time -- overall lead time.

Thank you, everyone, at Phoenix, and thank you to our many attendees for this long webinar, which we feel was worth it because of all the interest out there. We'll take this final question, gentlemen. How many new customers or new orders of additional heavy-duty transit buses have you received since purchasing Proterra's transit bus segment?

Okay. I could take that and Jose, you can add into it. We recently received a contract from a East Coast utility company. That contract totaled $22 million. We also received few smaller sized contracts for our share of bus business. We are continuing to grow. As we said, we will be, going forward, try our best to get our bus build as quickly as possible because there's only 3 electric bus companies that's approved by the Federal Transit authority. We are 1 of the 3. The other 2 guys' lead times is even longer. So, there isn't that many manufacturers out there. At the same time, like everyone said, the supply chain issue, it's not just for us. It's for everybody else, but we do have some inventory that we could use. And at the same time, whatever we need to build early, we will get it done. So, we are continuing to receive new contracts, and we have -- a lot of our contracts are repeat customers. So, we will continue to work with our existing customers and move the company forward. Jose, do you have anything you'd like to add?

Yes. I think the only thing I would add is, I mean, I think you covered what we're doing. I mean, in addition to the contract, which Michael mentioned, which we just received since the acquisition, there are 2 additional contracts, which we closed -- actually 3 additional contracts, 3 different customers for the heavy-duty buses. And then we continue to ramp up on the medium-duty side. I think over the last year, we've basically signed purchase orders with about 15 to 20 new customers just in the last year, so on the medium-duty side. So, I think orders continue to grow. I think like Michael mentioned, the focus is on executing right now because it's not a demand problem. We just need to accelerate our deployments.

Thank you very much to the Phoenix team for answering those many questions. For more information about Phoenix Motor, reach us at RedChip, 1-800-REDCHIP, or at that e-mail address I gave earlier, [email protected]. Please also visit RedChip's excellent Investor Information page for Phoenix Motor. It's phoenixmotorinfo.com. There, you can view and download the Investor Presentation and fact sheet and sign up for news alerts on Phoenix. RedChip is excited to announce the launch of RedChat, our advanced AI assistant designed to empower investors with instant in-depth insights on 4,000 small-cap and micro-cap stocks. Try it now on phoenixmotorinfo.com, for example, or go to red.chat. Watch Small Stocks, Big Money, RedChip's program featuring exciting small-cap companies every Saturday at 7:00 p.m. Eastern on Bloomberg. Join RedChip's next webinar with Fathom Holdings on Thursday, March 13, at 4:15 p.m. U.S. Eastern. Register for all RedChip's webinars at redchip.com/events, where you can also view an archived version of today's webinar. Thanks again to our many participants today, and thank you, Phoenix.