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. With us today, we have Denton Peng, Chief Executive Officer of Phoenix Motor; we have Jose Paul, Chief Commercial Officer; and we have Michael Yung, Chief Financial Officer. We will begin with a brief presentation in a moment, and then we will answer your questions. [Operator Instructions] Before we begin, please allow me to read the safe harbor statements. 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 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 thrilled to share our financials and operational highlights from the fiscal year 2024 and our strategic outlook for 2025. Our extensive lineup now includes electric transit buses, shuttle and school buses, utility truck and delivery van. Beyond manufacturing, we are evolving into a technology-driven company by integrating artificial intelligence, autonomous mobility and advanced electrification solution into our products. Year 2024 was truly transformative. We significantly expanded our product portfolio through the strategic acquisition of Proterra's transit bus business, enhancing our heavy-duty electric buses offerings. Our revenue surged nearly 900% year-over-year to $31.1 million, reflecting strong market demand and successful execution across the company. We achieved profitability with a net income of $7.9 million and remarkable turnaround from a net loss of $20.6 million in the prior year. Additionally, our gross profit improved to $7.1 million and our gross margin expanded to -- dramatic to 23.6%. Operationally, we launched the world's first wireless charging medium-duty shuttle in partnership with InductEV and introduced our fourth-generation driving train. We also strengthened our leadership team, enhanced our financial position by raising capital, reducing debts and initiate a share repurchase program. As we look ahead, we are confident in our trajectory for year 2025, we are projecting revenue to grow to between $40 million and $50 million, driven by continuous innovation, a robust order book and increased market adoption of our EV product portfolios. I want to reiterate the compelling investment that Phoenix Motor represents. Our journey has been marked by the consistent innovation, strategic growth and a steadfast dedication to transforming commercial transportation through electrification. I will now pass the call over to our Chief Commercial Officer, Jose Paul, to provide updates on our commercial strategies. Jose?

Thank you, Denton. I'll give a quick summary of our recent focus and successes. Phoenix has grown to proudly serve over 200 customers with more than 1,300 vehicles operating in 43 states and provinces, a testament to our customers' trust and the reliability of our products. We are continuing to strengthen our product offerings, both in the U.S. and also globally. In the U.S. market, we were recently awarded the California Department of General Services contract for both our ZX5 transit bus and our medium-duty shuttle buses. We also recently secured an order for 5 Phoenix Z-400 electric shuttle buses from Los Angeles County. These electric shuttle buses will enhance our transit options for residents living in the Los Angeles County Development Authority public housing sites, offering a more sustainable way to connect. Our commitment to domestic manufacturing through our Buy America program and compliance strategically aligns with federal funding programs, enhancing our competitive advantage and simplifying procurement for transit agencies. Internationally, we are especially focused on growth opportunities in Latin America and the Caribbean markets, where government and transit agencies are accelerating their shift to sustainable mobility. The region represents a compelling market for electric transit driven by rising urban air pollution, high fuel prices and access to global finance mechanisms. And Phoenix EV is well positioned to meet this demand. We've established an expanded product portfolio under the EdisonFuture brand, covering transit buses, vans, coach buses and also light-duty EVs targeted at commercial applications. We are planning an EF product portfolio unveiling event at our Anaheim facility in July. And we're also engaged in early-stage discussions with regional partners and potential customers to explore distribution and support models that will enable us to serve these markets at scale. As mentioned previously, we have set up EdisonFuture International at Hong Kong to start international business, and we hope to see results in the coming quarters. The external regulatory environment globally is favorable and with various government mandates and incentives accelerating the shift to electric transportation, Phoenix Motor is exceptionally well positioned to benefit from these tailwinds bolstered by our comprehensive product offering. Our strategic focus is a key driver of profitability and positions Phoenix Motor at the forefront of next-generation transportation technologies, including autonomous vehicles and AI-driven fleet management. These innovations further solidify our leadership and create long-term growth opportunities for us. I'm also happy to share that we will have a Greenville factory open day in the middle of June. And if anybody is interested in visiting our facilities, please contact us or RedChip. I'll now pass the call over to our Chief Financial Officer, Michael Yung, for a deeper dive into the financial details.

Thank you, Jose. Fiscal 2024 marks an exceptional year of financial progress and operational expansion for Phoenix Motors. As Denton mentioned, our total revenues surged nearly 900% reached $31.1 million compared to just over $3 million in 2023, driven significantly by our strategic acquisition of Proterra transit bus unit. This acquisition alone contributed $30 million in new revenue, underscoring our strengthened market position in electric transit bus segment. Our gross profit improved dramatically, reaching $7.1 million, a substantial turnaround from a gross loss in the prior year. Our gross margin expanded significantly to 23.6%, highlight our ability to effectively manage costs and capitalize on higher-margin opportunity, particularly through rapid inventory turnover following the acquisition. Notably, our net income reached $7.9 million, marking a significant milestone as we transition from the substantial loss the previous year. This improvement underscore our successful operation integration effort, enhanced product efficiency and strategic financial management throughout 2024. Additionally, we made substantial improvement in our liquidity and equity position. We successfully raised $11.1 million through a private placement and secure additional loan financing and significantly strengthened our balance sheet. Our total equity grew to $10.3 million, a considerable improvement from a negative equity position at the end of 2023. Looking ahead, the continued growth in demand for zero-emission commercial vehicle, combined with our expanded capacity, improved financial strength, position Phoenix Motor strongly for substantial success, and we are confidently project revenue between $40 million and $50 million in fiscal 2025. Thank you all for your continued support. We are excited about the future and confident in our path ahead. We'll now open the floor for your questions.

Thank you very much, Michael and the team. [Operator Instructions] Gentlemen, how many employees in June 2025 are working at the Greenville, South Carolina plant?

I will answer that question. Currently, we have approximately about between 60 to 70 employees in the Greenville, South Carolina plant.

Have you purchased back any shares to date?

Okay. I'll answer that. As of this moment, we have not repurchased any share yet because we -- there were some restrictions for us to purchase shares as of this moment.

Are there any updates on getting listed back on the NASDAQ?

Yes. We have spoken with NASDAQ and the 3 items that they were looking for, have all been completed today. The reason that we have not -- the reverse split, we are hoping to have it completed last week. The reason we have not been reverse -- we have not been back on the regular NASDAQ is because FINRA as of today, normally take 10 days to do the reverse. And as of right now, it's taking them over 3 weeks. So as soon as FINRA finished reviewing the document, we should be back on the regular NASDAQ.

Are there any updates about strengthening the company's cash position?

We are always looking to strengthen the company's cash. We currently have 9 buses sitting in our lot, that's completed buses, we are aggressively trying to sell these buses. At the same time, we are always looking at the capital market, either debt offering, equity offering and possibly a combination of both. So if Denton want to add something, please go ahead.

Yes, definitely, we will try to increase our liquidity -- our inventory definitely to get more and more cash and position. And Craig, we still have a lot of orders, trying to finish in order to get more cash in. This is definitely that our first priority. We have still a big backlog of orders, and we have still a big inventory of firm parts and inventory parts.

A person who is new to the story, the Phoenix story wrote in, I did not hear that Phoenix has a consumer model only buses. Did I miss that? Do they have a consumer model? For the new investors out there, gentlemen, could you give an overview?

Yes, we are a commercial EV company. So most of our customers is for B. We have to B. If you're Tesla, most of business to C and for Phoenix is really the business to B. So most of our business model is building for the electrification, the EV business to business governments and to most of the B2B business. We have no consumer products at the moment.

You mentioned the backlog. What is the number? What is the current number when it comes to the backlog?

As of right now, our current backlog is north of $100-plus million.

The net income in 2024 was positive, this personalize because of a onetime $50 million purchase gain from the Proterra acquisition. Your actual operations posted a loss of more than $30 million. Can you explain how this acquisition positions Phoenix for profitability and how investors should view this accounting gain in relation to your core business fundamentals?

Sure. As you could read our operating loss, we do have an operating loss, but we have a net gain due to onetime inventory purchase. That's where the net gain come from. Our net loss, a lot of them has to do with -- after the acquisition of Proterra, January of 2024, there were a lot of write-downs that allow us to write things off. So that's why there's a lot of write-down from the inventory impairment charges or depreciation to all the legal expenses to diligent expenses. So those were accumulated. A lot of those are onetime charges. So going forward, we do not expect to see most of that. And then as we continue to execute on our strategy, we expect and hoping to have a positive cash flow in the near future.

Yes. We also want to highlight, last year, our gross margin expanded to 23.6%. So our gross margin growing and we have more shipment and also a lot of expenses will be reduced this year. So our operational expenses will be reduced and then also the management doing that from the supply chain. All these efforts will be definitely improving our profitabilities and also this make us company to more and more on the profitability. Last year, we have onetime gain, it's true. But also we have also onetime expenses.

How much does the bus weigh?

I can take that. The ZX5 bus, it's rated for 42,000 pounds GVWR and our medium-duty vehicles are rated for 14,500 GVWR.

How do you reconcile your ambitious plans with your limited cash runway and recurring operating losses?

I'll take that one. The FDA had made a change in what they so-called progress payment. So what a progress payment is, every contract that we do, majority of our contracts as soon as we bring the bus online, we get paid 25%. So we are doing everything we can to utilize the cash that we could receive once we bring the bus online and at the same time, selling parts that we currently have in inventory. And the biggest thing is we also have a lot of buses sitting online -- sitting in a lot that we want to try to sell. So with all of that stuff, yes, there -- as a small company, ongoing concern is always there. But like we said earlier, 2024 was a transitional year for us and 2025 is an execution year. So we are focusing on executing. Denton mentioned earlier, we have lots of parts that help us dramatically reduce the cost, but I think our gross margin for 2025 will even improve because we already are focusing on reduced costs because when we acquired Proterra, we learned a lot of things. They overpay for a lot of things and then a lot of things just didn't make any sense. So we are focusing on the cost reduction and then raising capital and get whatever product we have already built, so as quickly possible and continue to move this company forward.

[Operator Instructions] Has there been any interest by any institutions, gentlemen? The writer did not elaborate on what an institution would be, but you can guess.

Like everything else, we are doing webinar. We're talking to everybody. We're talking to individual investor, institutional investor. We are always talking to some investors. So as of today, we don't have any major -- at least not in my knowledge that we don't have any major institutional positions.

This person added in taking an equity position, he added that detail. That was what he was interested in, an equity position.

The institutional does not tell us that they add position unless it's over 5%. So we will not be able to answer those questions, if any institutional had a position in our company.

What gives Phoenix a shot at surviving against competitors such as Ford, BYD, et cetera, which have, of course, stronger balance sheets, larger dealer networks, et cetera?

Well, we are not Ford, we are not BYD. We don't compete on consumer market. We compete strictly on the commercial side of the business. As of today, we are 1 of the 3 vendors that's approved by Federal Transit Authority to build Made in America transit buses for the transit agencies, for the airport, for the university. So our competition are limited to 2 other ones. There may be other coming in. But as of today, we only have 2 other ones. And the demand for the EV buses are so great and there's not enough -- there isn't enough OEM out there today just to meet -- the 3 OEM today does not meet the demand for the EV buses. Even if they add another 3 more in there, we're still probably not going to be able to meet the EV buses, the commercial vehicle bus segment. So for us, it's not about competing. It's not about competition. For us, it's all about executing our strategy and deliver the bus as quickly as we can.

How is Phoenix addressing the ongoing support for legacy products? Many customers are complaining about a lack of parts and support.

I'll take that one. When we acquired Proterra, we learned a lot of things after we acquired Proterra. The legacy buses that are owned by Proterra had a lot of issues. We have a lot of customers want us to fix their buses and get things repair. And at the very beginning, we did try to do that. And we realized that we put new parts into some of these -- all these legacy buses, it does not make sense just to put a new parts in there and wait for it to break down. So we are working -- our engineering teams are working with our vendors to try to dive deep down into what is the root causes of some of these gearboxes or some of these things that breaks down. So that once we figured out what the issue is, we could engineer the correct product and send it back up to the customer, and we won't have this issue anymore. So there is a lot of legacy issues out there that from the old company that we are trying to fix. And a lot of these fix is not overnight. It takes weeks and months for the engineering team to be coordinating with our vendor and trying to figure out what the problem is because you do have to remember something, our product are sold around the country. We have buses sold in Chicago, where winter time, they go down to minus 20 degrees. And we have buses that we sell to California, that's 100 degrees with dry heat. And we have buses that we sell to Florida that is 100 degrees high humidity. So all those issues that has to be defined before we just keep putting parts in there and keep replacing them because the objective is not keep replace, putting new parts in there, watch the break down and keep replacing it. So we are working closely to get all those legacy issues fixed and engineering takes time. This is an electric vehicle. It's not an overnight thing. So that's why right now, we are working closely with some of our customers and letting them understand that we need to find the root cause and fix it. And we have figured out some of the root cause, and we are trying to engineer the correct way to replace some of these stuff.

What is the standard powertrain and battery warranty for the California market?

Yes, I can take that. I mean, again, it depends on the product for the ZX5 product, the standard powertrain warranty is 2 years and the battery warranty is 6. On the shuttle buses and the medium-duty vehicles on the Z-400, we have a 5-year warranty on the batteries and a 3-year warranty on the powertrain.

Phoenix team, I know you did mention regaining your NASDAQ listing. However, we keep getting questions about it. Perhaps these people joined late. Could you give as full an update as possible on getting back on the NASDAQ and off the OTC market as these many questioners have asked.

Okay. I'll repeat myself. The NASDAQ required us to do 3 things, file our -- do a reverse split to gain $1 compliance to file our K and do our Annual General Meeting. All 3 has been done today. The reason we have not been reversed back to NASDAQ is because for us to be able to reverse, we have to submit all the paperwork to FINRA. FINRA is another agency of NASDAQ. And you normally speaking, take them 10 days. It has been more than 15 days, and we're still waiting for them to fix, to review it and approve it and allow us to reverse and move back on to the NASDAQ. And we already had a meeting discussion with the NASDAQ consultant about this stuff. And so everything is in their hand. We're just waiting for FINRA to approve it, so we could -- hopefully, we could move everything back up to the regular NASDAQ.

We'll give everyone just a moment or 2 for any final questions for the Phoenix team. And we'll just take this final question here, gentlemen. Do you have a 5-year business plan that is shareable?

As of today, we do not -- we have a strategic business model for the management to focus on what we need to do for the next 1, 3 and 5 years, but we do not have any public information on our next 1, 3 and 5 years. But you also have to remember, we are -- this business that we're in the commercial EV business is a fast-changing business. Today, our customers are focusing on autonomous driving. A year ago, nobody was focusing on autonomous driving. So we have to start reinvest ourselves, reinvent ourselves. So things change. So we have to learn to adapt. And we know that the autonomous driving -- autonomous mobility is coming. So the management is learning what the market needs and focusing on the market wants and at the same time, continue to build a bus that satisfy our customers' need.

Thank you very much, Michael. If anyone else from the Phoenix team has any final words, please speak now. Otherwise, I'll go into the outro. All right. Thank you very much, Phoenix team, and thank you very much to our many participants. As the team was saying, in the next few weeks, there is going to be an open day in Greenville. For more information, please write us at [email protected], or call us at 1800REDCHIP and ask about Phoenix Motor. We'll get you the information as soon as we have it. Please visit RedChip's 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. And Phoenix Motors next webinar could be in the next few weeks. Please continue to watch redchip.com/events for information on future webinars, not just for Phoenix, of course, but also for all RedChip clients. That's redchip.com/events. Thank you to all of our many participants today, and thank you very much, Phoenix team.

Thank you.

Thank you.