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

Hello, everyone. This is Craig with RedChip Companies. Thank you for joining today's event with Phoenix Motor, which trades under the ticker PEVM. We will get started in a moment. Before we do get started, let me introduce all of the people on today's webinar. With us today we have Denton Peng, the 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 our presentation, as I said, in just a moment, and we're going to answer your questions. (Operator Instructions) Before we begin, 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 fact should also be considered forward-looking statements. Of course, forward-looking statements involve risks and uncertainties. I now turn the webinar over to the Phoenix Motor team. 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 or electric transportation solutions. Over the past 20 years, we have pioneered in the industry, becoming one of the largest manufacturers of medium- and heavy-duty EV in the United States. We have accumulated more than 60 million electric miles, saving over $30 million in fuel cost. Today, we offer a broad line of medium and heavy-duty EV from transit bus, shuttle bus and school buses to delivery trucks and more. We are not just building EV, we are shaping a cleaner, quieter future for transportation. Phoenix EV extends beyond just EV as we continue to evolve. Phoenix Motor is transforming from an EV manufacturer into a technology-driven leader that integrates artificial intelligence, autonomous driving, mobility, and next-generation electrification solutions. We are pioneering the future of commercial transportation by developing smart self-driving solutions that will redefine mobility in coming years. As we continue to drive innovation and growth, I'm excited to share that 2024 was a transformative year for Phoenix Motor. At the end of May, we expect to report our record revenue of approximately $30.7 million to $31.2 million from year 2025 -- 2024, sorry, a tenfold increase from 2023. Even more importantly, we anticipate reporting positive net income, making major financial inflation points for our company. Looking ahead, we are projecting further expansion in year 2025, with revenue expected to reach between $40 million and $50 million. This milestone highlights the strength of our growing order books, expanding production, and increasing demand for zero emission commercial transportation. With that, let's dive deeper into how we continue to drive innovation and growth. Next page. At Phoenix Motor, we are not just leading the change in zero-emission EV today, we are committed to molding the future of transportation. Our mission is clear. To be a driving force in electrifying commercial transportation for sustainable future. Next page. Our teams have been working very closely with our new engagement auditor, and we will file a 10-K by end of this month. Next page. We have 2 brands. The first being Phoenix EV, which acquired combined 2 brands, Phoenix Motorcars and Proterra, which follow our American Manufacturing for American Market strategy, a4a, with focus on medium-duty and heavy-duty and autonomous commercial EV with production and R&D in California and South Carolina. Next page. Our second brand is EdisonFuture which follows the i4i strategy, International Resource for International Markets. We have established EdisonFuture International in Hong Kong to expand operations globally. We are targeting various markets, including Europe, Middle East, especially Latin America and Caribbean market, to expand sales and service. Next page. Our team has over 100 years of combined experience in EV and clean energy industries. Today, I bring a leadership team with me. Michael Yung, our CFO, with 25 years of financial leadership, brings a wealth of experience in corporate finance; Dr. Lewis Liu, our Chief Operation Officer, who has spent over 30 years in EV and e-mobilities; Jose Paul, our Chief Commercial Officer, with over 20 years of automotive experience; and Tony Zhou, our Chief Technology Officer, who has over 20 years' experience in autonomous driving and artificial intelligence. This leadership team is dedicated to executing our vision, driving innovation, and ensuring Phoenix Motor remains a leader in developing the next generation of autonomous driving, artificial intelligence-powered EV, 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 will now hand over to our Chief Commercial Officer, Jose Paul. Jose?

Thank you, Denton. As you can see here, Phoenix EV offers a wide range of all-electric vehicles from heavy-duty transit buses to shuttles, 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. At Phoenix EV, we focus on one thing, electric vehicles. And we've been doing so for over 20 years. And we are proud to support the domestic manufacturing efforts with our Buy America compliance initiatives. One of the most telling indicators of our success is our strong and growing customer base. We are proud to serve over 200 customers across North America with more than 1,300 commercial vehicles delivered to date. and our buses are in operations in 43 states and provinces, a testament to the trust we have built across the continent. And we continue to build on our strong order backlog for both transit buses and the full range of medium-duty EVs, including shuttle buses, school buses and trucks. In a major recent milestone, Phoenix EV has been awarded a contract by the California Department of General Services, and this award covers 3 important categories, the 35-foot battery electric buses, 40-foot battery electric buses, and the electric cutaway shuttle buses. And this contract is not just a win in terms of credibility. It allows public agencies across California to purchase our electric vehicles directly without the need for additional competitive bidding. And that ease of procurement gives us a meaningful edge and opens up a broader pipeline of opportunities as transit agencies and municipalities seek reliable zero-emission solutions. And we are confident this contract will help drive increased order activity in the coming quarters. We also had a very successful presence at the Advanced Clean Transportation Expo in Anaheim from April 28 to 30. ACT Expo is one of the most influential clean transportation shows in North America and we were are proud to showcase our 2 flagship offerings, the Phoenix EV ZX5 battery electric transit bus, and our fourth-generation medium-duty electric chassis. And both the platforms drew strong interest from fleet operators, integrators, and transit stakeholders. Our team had productive conversations with existing and potential customers and key suppliers and also some strategic partners. The engagement we saw affirms that our product road map is aligned with market needs and that our Phoenix EV brand is being recognized as a serious player in commercial fleet electrification. Looking forward, we're continuing to expand our reach beyond the U.S. market. We are especially focused on growth opportunities in Latin America and the Caribbean, where governments and transit agencies are accelerating their shift to sustainable mobility. The region presents a compelling market for electric transit driven by rising urban air population, high fuel prices, and access to global climate finance mechanisms. Cities like Santiago, Bogota and Sao Paulo are leading this transition, deploying some of the largest electric bus fleets outside of China. More importantly, demand is growing across medium-sized cities as well, many of which are looking for affordable proven solutions to modernize their fleets. Phoenix EV is well positioned to meet this demand. Our vehicles offer a strong combination of performance, flexibility and total cost of ownership, and our transit buses and shuttle platforms are well suited to the environmental and operational requirements of these markets. We are currently engaged in early-stage discussions with regional partners to explore distribution and other support models that will enable us to cater to these markets at scale. As you heard before, we have set up EdisonFuture International in Hong Kong to start our international business, and we hope to see results in the coming quarters. This follows the a4a strategy, which focuses on the American market and the i4i strategy for international markets as discussed previously. I'll now pass the call over to our Chief Operating Officer, Dr. Lewis Liu, to go into further details on our product portfolio.

Thank you, Jose. Let me first elaborate a little bit more on the benefits of our key products and services. I begin by sharing a look at our flagship ZX5 heavy-duty transit bus. The ZX5 is purposefully built electric bus with a full integrated heavy-duty technology platform designed to deliver superior performance and durability. The road proven ZX5 is engineered with advanced carbon fiber reinforced composite material, which is lightweight, nonconductive, and rust resistant that make it both efficient and durable while ensuring the highest level of the operation safety, significantly reduce maintenance needs, ensuring the ZX5 stays on the road longer with fewer complications. The high-efficiency drivetrain is a gamechanger, delivering 5x the efficiency of diesel with industry-leading horsepower and acceleration. Charging is made simple with universal Level III charging capability allowing for faster, more flexible options. The heavy-duty battery pack are placed underneath and outside of the passenger compartment separated by the cell buckets below the bus floor. This strategic placement keeps the battery out of the common crash zone, significantly improving safety. Additionally, the lower positioning of the battery helps create a lower center of gravity, providing greater vehicle stability and a smoother drive, more reliable ride for both passengers and operators. Next, let me turn our attention to our medium-duty vehicle line, 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 demands of everything from delivery services to vocational work tracks. As a core of our medium-duty vehicle line is our fourth-generation electric drivetrain, the Gen 4, built with the most popular, mature and industry-proven E450 chassis. And the advanced Phoenix designed e-drivetrain represents the latest in electric vehicle technology, delivering greater efficiency, performance and reliability across our medium-duty lineup. With 165 miles operating range, ideal for a wide range of commercial applications. We understand that transitioning to the electric fleet can be complex. We provide comprehensive support to our customers to get their electric conversion more effectively and quickly. We offer data collection services, including GPS tracking, rock analysis and tools to help identify optimal layovers. Our vehicle configurations are tailored to customer needs with options for vehicle models, NH storage capacity, and drivetrain setups. We also provide the charging configuration, helping customers choose the right charging options. And for those needing financial solutions, we offer purchase and lease funding opportunities and guide our customers through procurement methods to make the transition as smooth as possible. Finally, our wide range of services include telematic data analysis, fleet transitioning training, and more, ensuring our customers are fully equipped to manage their new electric fleet. Currently, the entire operations have been integrated into one operation to support the overall strategy of A4A and I4I and to establish foundation for the global operation expansions. We have one operation team and management framework, production planning execution system. We shifted our operational focuses on efficiency and quality improvements, management and cultural transformation, and is well positioned to line up operations to support the global expansions. Created one value system, which is 4Ds. That is delight customer, depend on each other, deliver results, and develop people. Transforming the company culture to focus on delivering value aligned with customers' needs. With teamwork and right skillsets, deployed lean concept, right size the workforce, continue to reduce the fixed costs, and make the operation more efficient with the least fixed capital needed. We reactivated and extended to the global supply chain with renovated supply chain strategies, renegotiated major supply contracts, strengthened supplier relationships, increased focus on reliable suppliers at home and global supply base. We started to implement quality management systems to have the closed-loop PDC quality issue management system to improve product and process quality and stay competitive in the marketplace. We have already integrated Gen 4 production with the transit bus in Greenville with one manufacturing process management system that is the VGO factory and one PLM system for the entire Phoenix EV production portfolio. We created flex operation process to manage the production resources according to the changes of production mix and labels. The continued deployment of one operation will make our operation adaptable to extend our footprint, footprint expansion to support the A4A and I4I strategy. I will now pass the call over to the Chief Technology Officer, Tony Zhou, to go through some of the further details on our autonomous driving and other technology initiatives.

Okay. Thank you, Lewis. Hello, everyone. Good afternoon. I'm Tony Zhou, Chief Technology Officer at Phoenix EV. Over 20-plus years leading autonomous driving program from R&D to mass production at a major global OEM with a focus on safety, technology and innovation. Next slide. Strategic milestones since March. Since our last webinar, we have taken concrete steps in our transition from the EV manufacturing to a leading autonomous mobility platform provider. Partnership with ADASTEC finalized. This marked the formal launch of our autonomous driving bus program with a clear milestone, full development of our Level 4, that's Robotransit, by early 2026. Autonomous driving software integration, we are actively working with multiple advanced software providers to ensure our Robotransit platform achieved the highest active safety integrity level, safety certification and system robustness. Next page. Engineering progress on our Robotransit. Phoenix EV engineering team is now fully mobilized for the next phases of the Robotransit integration. Driving, steering wheel control integration with ADASTEC is complete. Phoenix Motor to integrate the driving train controller, enable the cam baster, control the driver, regain the brake and service and braking. Resident engineering team from ADASTEC were on site in our Greenville location soon to accelerate the development. Internally training program launched, preparing the Phoenix EV engineering to take a full OEM responsibility for autonomous driving system development. Next page. Advance the battery strategy. We have successfully completed the validation of our new battery platform. Exploring the conversion from 6-battery pack to 4-battery pack configuration, which may improve the cost efficiency and the vehicle packaging. Review our supplier, A/AAA and AA grade battery proposal, sharing the technique, the feedback with the supplier chain for long-term plan. Next page. Tooling strategy and ZX5 localization for international market. We are coordinating cruise function review to ensure our tool sets meet long-term needs of our autonomous driving bus production line. Our ZX5 international version development in collaboration with overseas partner is currently in progress. This marks the first step towards expanding our EV and autonomous drive footprint internationally. Next slide. Talent strategy and vision. Aggressively recruiting the global talent in AI, autonomy and battery systems, driving toward our long-term vision to driving clean, intelligent and safe Robotransit solution globally. In combination with our EV foundation, AI driving autonomy, and the top-tier engineering talent, the Phoenix EV evolving into the next-generation mobility tech company. Next slide. In just the past 2 months, since our last update, we launched major partnership, initiated the engineering team integration, progressed international expansion, and reinforced our -- the technique foundation. Year 2025 is the execution year. By early 2026, we are targeting the commercial launch of the autonomous driving Robotransit, building in the Phoenix approved EV architecture and cutting-edge artificial intelligence and autonomy as well. Thank you for your time. Now I'm going to pass on to our Chief Financial Officer, Michael Yung, to walk you through our financial outlook. Thank you, everyone. Michael, please.

Thank you, Tony. 2024 was a transformative year for Phoenix Motors. We expect to file our results for 2024 by the end of May and we are currently forecasting record revenue in the range of $30.7 million to $31.2 million, a tenfold increase from 2023. For 2024, our gross margin is estimated to be between $7 million to $8 million versus a loss of $276,000 in 2023. Even more significant, we anticipate reporting a positive net income in 2024, making a major milestone for the company. Our momentum doesn't stop there. We expect 2025 revenue to reach between $40 million to $50 million as demand for zero-emission commercial vehicles continue to grow and our expanded productivity capacity allows us to serve even more customers. On April 8, we received a notice from NASDAQ of deficiency in our filing of our AGM and $1 minimum bid price. We had completed our AGM on May 2, we received a notice from NASDAQ of our compliance with our AGM. Our 1-for-5 reverse split has been approved and will be completed shortly. On April 30, we received a notice of deficiency in our 10-K. We hired a new auditor March of this year. This had delayed our 10-K filing. We are expected to have our 10-K filed by the end of the month. This will help us regain our NASDAQ listing. 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. On June 4, we will have a webinar to discuss our 10-K. Thank you all for your continued support and joining us today. We are now ready to answer your questions.

Thank you very much, Phoenix Team. We are now going to take your questions. Press the Q&A button and type in your question if you wish to write your question. You may also use the Raise Hand button and then I will unmute your line and you can speak to the Phoenix team. I'll give everyone a moment here to consider any questions they may have for Phoenix Motor. We have one. This week, you've announced that California has awarded Phoenix Motor a DGS, Department of General Services, statewide contract for zero-emission buses. Phoenix, what does this milestone mean for Phoenix EV?

Thanks, Craig. I can answer that. This is Jose, Chief Commercial Officer. The California DGS contract is the one which is used by a lot of cities, municipalities, and transit agencies who are based here to procure vehicles, particularly zero-emission vehicles, and not go through a formal separate bidding process because they can piggyback over on the state contract. Historically, this contract has been used by not just transit agencies, but some of our customers, including some universities and other cities to procure buses. This really helps Phoenix essentially present a streamlined process. We are in ongoing discussions with various potential customers in California and having the ability to purchase off a contract just makes it so much more attractive for them. Bottom line, I think we would see increased order volume from this contract. And in turn, increased revenues. And historically, for both Phoenix and for Proterra, the California DGS contract has been a source of significant orders for both the shuttle buses, transit buses and actually the trucks, too. I think it's a significant one for us to secure more orders in the future.

I think -- this is Lewis. I'll just add to whatever Jose just mentioned. This is clearly demonstrating the market has full confidence on Phoenix EV's products and services regardless of the climate change, the political environment, whatever. California is still moving ahead and Phoenix has its own products, which are superior, and services as well and moving ahead, and they have full confidence on us. I'd just add that comment.

Does anyone else from Phoenix wish to comment? All right, we'll move on to the next question. What is your time line to achieve positive operating cash flow?

I will take that question. As we continue to build our vehicle, we are continuing to reduce costs as we continue to work with new vendors assessing our costs. For us, 2025 we are hoping by the end of the year, based on our rightsizing the company as of today, we are hoping to have a -- by the end of the year to be able to achieve positive cash flow.

Let me add to Michael. Are you done, Michael?

Yes.

Let me add a few points. One, we see the major cash flow come from either selling the product and the services, right? As far as the products, from operational perspective, we continue to drive the costs down. As I mentioned earlier in our presentation, we actually implemented the lean concept. The reason being doing that is try to squeeze out all the waste throughout the operation, not only the production floor, but other functional areas as well. And then by continuing doing so, we actually squeeze the fixed costs and other variable costs down to the minimum. And then that is the continuous improvement process, right? We continue to drive the costs down, and also, as far as the supply chain perspective, we actually reactivated the current supply chain at home. And also, we will tap into the global supply chain as well. All of those efforts which we actually started, I call that the renovated supply chain strategy, is basically combine both home and broad in order to provide even competitive costs to us to build the buses and also -- or semi -- medium-duty trucks, right? That will continue to drive down by doing so, increase the profit margin, and create cash flow. This directly supports whatever Michael just mentioned, so to turn everything cash flow to the positive by the end of the year.

Anyone else from Phoenix wish to contribute? Next question. Does Phoenix Motor currently have any sales or partnerships in Canada?

We don't have -- I mean, we do have existing customers we have acquired through Proterra. Some of the larger transit agencies in Canada do operate our vehicles, and we provide them service and aftermarket support. But we do not have a formal partnership for sales at the moment in Canada. We continue to discuss with various transit agencies and other associations which are Canadian focused and we're also talking to customers, including some airports, about potential opportunities there directly from here.

Thanks, Jose. What is the ballpark CapEx spend required in 2025 to achieve the target $50 million in revenue for 2025?

For us, the CapEx we're going to need in order for us to complete the $50 million, as Lewis mentioned earlier, we currently have 9 completed buses sitting in our lots that we are in process of selling. That alone will allow us to be able to achieve our $50 million because those 9 buses will be sold in the neighborhood of between $12 million to $15 million. At the same time, we also have a few other buses that are also in our possession that we could sell that's already completed. With additional funding, we could achieve actually a much higher number. With the current, what we currently have on hand alone, we should be able to achieve those numbers. Thank you.

Thank you. Does anyone else from Phoenix wish to comment? Next question. You also have issued shares recently. Do you expect to issue more equity or debt in the near future?

Okay. I can answer that question. Are we looking to issue more shares? As soon as we complete our A, we have -- we will be able to sell shares in the open market. The executive team will discuss how we could use that platform if we have further M&A or expect to increase production. Those are some things that are in discussion, but we haven't taken into extensive conversation yet because currently we're focusing on producing the bus. We have a lot of exciting things going on from autonomous bus to getting the latest battery technology into our system. And at the same time, we are expanding to Asia, so we will be eventually looking into the capital market to do some fundraising for our M&A. Thank you.

Yes. But in short term, I want to highlight, we don't think the company will issue any new shares at the current price. Because the current price, I think totally we believe is under the value. Because as current, a real bus averages about $1.2 million and our market cap is just a few buses. Even our inventory of bus is much higher value than the total company current share price. I don't think the company will have an intention to issue any new shares at the current price. In the meantime, the company, the Board have approved up to $5 million of share buyback plan. If the share price is at this level, I think the company, when the market and [indiscernible] also the window open, I think that the company is still at the current level of the share price, the company definitely will be able to buy back less shares than in current situation. But definitely, the company will not issue the shares at the current price level. But of course, as Michael mentioned, we have a lot of plan to expansion of business and growing business to next level. And of course, when time to time we monetize the capital markets and when the price is suitable, then we consider of course to use the funding to grow the company. But definitely, the company will not issue shares at the current price level.

15 PM U.S. Eastern. Phoenix Motor's leadership team will discuss the company's fiscal year 2024 financial results. Register for that June 4 webinar at redchip.com/events, redchip.com/events. Scroll down to the webinar of June 4, 2025, and click the register button. Thank you to our many participants today, and thanks to the Phoenix team.