Greenland Technologies Holding Corporation (GTEC) Q3 2021 Earnings Call Transcript

00:03 Good day, ladies and gentlemen. Thank you for standing by and welcome to the Greenland Technologies Third Quarter of twenty twenty one Earnings Conference Call. Currently, all participants are in listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. 00:28 Now, I will turn the call over to Julia Qian, Managing Director of Blueshirt Group Asia. Ms. Qian, please go ahead.

00:37 Thank you, operator, and hello, everyone. Welcome to Greenland Technologies third quarter of twenty twenty one earnings conference call. Joining us today are Mr. Raymond Wang, Chief Executive Officer; and Mr. Jing Jin, Chief Financial Officer. 00:37 We released the result earlier today. The press release is available on the company's IR website at ir.gtec-tech.com, as well as on Newswire Services. A replay of this call will be also available in a few hours on our IR website. 01:13 Before we continue, please note that today's discussion will contain forward-looking statements made under Safe Harbor provision of the U.S. Private Securities Litigation Reform Act of nineteen ninety five. Forward-looking statements involve inherent risks and uncertainties. 01:30 As such, the company's actual result may be materially different from the expectations expressed today. Further information regarding these and other risks and uncertainties is included in the company's corporate filing with the SEC. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. All the figures mentioned during the conference call are in the U.S. dollars. 01:55 With that, let me now turn the call over to our CEO, Mr. Raymond Wang. Go ahead, Mr. Wang.

02:04 Thank you very much, Julia. Good morning, everyone and thank you for joining us today. Our global team continues to make great progress, and I wish to start by thanking everyone at Greenland for their hard work delivering another great quarter. The third quarter is seasonally the slowest quarter for our business. And this year, we faced additional challenges such as material shortages, freight delays, and logistics variability caused by continued impacts of the global pandemic. 02:34 Yet despite these challenges, we have once again set a new third quarter company record by generating twenty three point one million dollars in gross revenue, which represents a thirty nine point seven percent year over year growth. 02:49 By reaching this milestone, we remain committed to our guidance, of ninety million to one hundred million year end gross revenue, which would set a brand new full year company record here at Greenland. And we remain optimistic with the growth of our core business. 03:05 However, we are witnessing a cool down of the China market with GDP falling from eighteen point three percent in the first quarter, down to four point nine percent by the third quarter with an expected full year GDP average of around six point eight percent for full year twenty twenty one. 03:24 As our result demonstrate, this has not impacted our business as global warehousing and manufacturing growth and demand continues to remain strong, but may impact the future performance of our core business, should the GDP trend continue to decline sharply or should it spread the global markets in the upcoming quarters. 03:46 The expansion of our business to the global market with having a new line of electric industrial vehicles are an important step in our strategy to mitigate risk and develop growth and long term value for our shareholders. Our search for the location of our first assembly plant is still ongoing. 04:04 The decision is currently between the states of Maryland, Virginia, and New Jersey with quality discussions in motion. As we settle on a location, I wish to remind everyone that the timeline of our assembly site does not delay our product launches and timelines and we will continue to manufacture full vehicles in our existing facilities overseas and ship them to the United States for commercial sale. 04:30 In addition to the assembly site, we are in progress of developing experience centers to allow interested prospects to be able to learn, operate, and purchase our industrial vehicles. As an industry pioneer of electric industrial vehicles in a market dominated by heavy emission combustion and equipment, it will be an important component in our sales strategy to offer firsthand experience for a buyer to truly understand and appreciate the capabilities, power and benefits of our clean and sustainable vehicles. 05:03 Our first experience center will be located in New Jersey, where our forklifts will be well positioned to support the rapidly growing warehouse manufacturing market, while also offering our loaders and excavators to the significant transportation and agriculture markets as well within the state. We are currently working with interior designers and architects to offer an attractive and appealing site and we hope to break on a location in the first quarter of next year. 05:32 As for our vehicles, after a brief shipping delay due to poor congestion, the first batch of our GEF-Series Electric Lithium Forklifts have arrived on U.S. soil as of last week, and are available for commercial sale. And I am extremely happy to report that we've already placed forklift sales orders and have several needs in the sales process, showcasing strong demand for this product line. New units are already in production to continue to meet this demand as we begin to capture market share. 06:07 Furthermore, our first GEL-1800, our all electric lithium powered one point eight ton rated load wheeled front loader has also arrived this week. It's currently undergoing our post shipping Q and A process and will be available for demonstrations and industry events by next week where we anticipate generating strong demand for the vehicle. 06:31 As for our GEX-8000, our all electric lithium powered eight ton wheeled excavator, our first unit is fully assembled past all QA checks and is simply awaiting a vessel for shipment to the United States. So, we're still on track and expect that to arrive on U.S. soil by the end of this year to the beginning January of twenty twenty two. 06:55 As I predicted during the last earnings call, the import challenges we have seen this year in the shipping and freight environments between China and the United States would begin to ease after October, and we've already begun to see this improvement. Shipping costs are half of what they were a month ago and continue to fall, while container availability continues to rise. This will improve our vehicle margins, delivery times and supply chain efficiency as we develop our foothold in the U.S. Market. 07:26 And I am very proud of what the Greenland team has accomplished this quarter and throughout the year. And I'm excited for the next phase of growth for the company as we launch our new product line of electric industrial vehicles, while expanding the business into new global markets. 07:44 Despite the global challenges, we continue to surpass our milestones every quarter and demonstrate our capability to improve our financial health, demonstrate operational excellence as we grow the company, and create value for our shareholders. 08:00 Now with that, let me turn the call over to Mr. Jing, to provide details into our third quarter financial performance. JJ, go ahead.

08:08 Thank you, Raymond, and thank you everyone for joining our call today. I will now go over our key financial results for the third quarter of twenty twenty one. For the full details of our financial results, please refer to our earnings press release and later the Form 10-Q filing on the SEC website. 08:26 Greenland’s robust performance in the third quarter of twenty twenty one demonstrates our strong competitivity in the addressing the increasing demands for advanced transmission products and mitigate from our supply . 08:41 The number of our transmission products sold increased eleven point six percent to thirty three thousand four hundred and seventy eight units from twenty nine thousand nine hundred eighty five units in the third quarter of twenty twenty. Fueled by our robust sales of transmission units, we generate revenue of twenty three point one million U.S. dollars during the quarter, representing a year over year growth of thirty nine point seven percent. 09:10 The increase was primarily due to the significant increase in our sale volume bothered by the ever growing demand this year. And the increasing supply despite global supply chain challenge. Additionally, our shift in the product mix was higher variable product, also proved to be a right move and a contributor to the year over year increase in revenues. 09:34 Total were eighteen million U.S. dollar up to thirty seven point one percent from the thirteen point one million in the third quarter of twenty twenty. The increase was primarily due to the increased volume of the transmission product sold, and the increase in raw material prices. 09:56 Compared to thirty nine point seven percent of revenue growth we are pleased to obtain a positive operation leverage of two point six percent even the material shortage and the supply chain disruptions. Along with the higher sales volume and the effective cost management, we continue to win this improvement in our probability. 10:21 Gross profit was five point one million U.S. dollars, an increase of fifty percent from three point four million U.S. dollars in the third quarter of twenty twenty. Our gross margin contributes an upward trend and reach twenty two point one percent up to one hundred and fifty basis points from twenty point six percent year over year, which was a result of transmitting product towards product of higher value and sophistication such as hydraulic transmissions. 10:59 We will also like to manage material costs through a strategic partnership and our capability to capture long-term growing demand. The total operating expense was three million U.S. dollars, an increase of one hundred and sixty two percent from one point two million U.S. dollars in the third quarter of twenty twenty. 11:26 Our operating expense as a percentage of total revenue was thirteen point two percent up to six point two percent points compared to seven percent in the third quarter of twenty twenty, primarily due to the increase in sales, consultancy, and the research and development expenses over the year. 11:48 Those expenses were carefully expanded to a product of long term business growth. Salary expenses in the third quarter was zero point five million U.S. dollars, an increase of ninety three point two from this prior year. The general and administrative expense was one point two million, up to two hundred fifty five point one percent from the third quarter of twenty twenty, due to the G&A expense incurred from the new financing activity, as the increased legal and the consultant fees associated with business planning and the project as Greenland operation. 12:27 Furthermore, we will further invest in high value and most product as well as electrified product such as a commercial EV, research and development expense rose one hundred and forty three point two percent year over year to one point four million U.S. dollar in the third quarter of twenty twenty, which account for six percent of the total revenue. 12:51 Driven by rapid growth in revenue, our net income surged one hundred and seventy two point five percent year over year to one point three million in the third quarter. At the end of September, our cash, restricted cash, and the cash equivalent reached fifteen point seven million U.S. dollars compared to twenty point five million as of the end of the June. 13:17 Based on our business situation and the market conditions, we maintain our revenue guidance range to between nineteen million U.S. dollars and the one hundred million U.S. dollars representing an increase of thirty five percent to forty nine percent year over year. With our sound financial position, we are confident to to the development of electrifying commercial vehicles. So, that concludes our prepared remarks. 13:45 So let's now open the call for the questions. Operator, please go ahead.

13:51 Certainly. We have the first question that is coming from the line of Rommel Dionisio from Aegis Capital. Please go ahead.

14:26 Good morning. Thanks very much for taking my question. Congratulations on the quarter. You guys have, I certainly appreciate your comments Ray about the – moderating in the growth, the deceleration of growth in China market, but your volumes remain so strong and included that's coming from market share gains. I wonder if you could just give us an update in terms of what's really driving that obviously your strong new products and move towards the premium end of the market, really driven significant gains over the last several quarters? But I wonder if you could just give us an update and really that continued market share growth, which obviously you posted in third quarter as well? Thank you.

15:07 Sorry about that. I was struggling with the mute button there. Yeah, absolutely glad too. So, especially with the global constraints in the environment with material shortages and supply side challenges, this is definitely a steam throughout the year that's impacting all businesses and all industries. 15:29 However, from a Greenland standpoint, it actually plays into the strength of our company. We have extremely robust manufacturing capabilities and a very established supply side with a fantastic team that has the tools and the capability and connections to be able to continue to meet the demands of our clients and be able to continue to provide our components, our core business at scale. And because this is a physician that our competitors cannot offer and maintain, it's actually help contribute to our phenomenal quarterly sales performance. 16:11 And this also lends itself to our vehicle production and expansion efforts as we push into the United States market with this line, tactically playing on the strength and advantages of our company that we've developed throughout that times since two thousand and six.

16:33 Thanks very much.

16:36 Thank you.

16:39 We have the next question this is coming from the line of Jeffrey Campbell from Alliance Global. Please go ahead.

16:46 Good morning, Raymond, and congratulations on the quarter. I just wanted to ask as the forklift effort is starting to really take roots. Have you designed to Greenland forklifts around a specific battery or can the forklifts work within this design by a variety of manufacturers?

17:09 Thank you, Jeff for the question. So, our forklift is designed around the battery that is currently utilizing. In addition, to our integrated drive train, which is a component that we produce specifically cater towards lithium powered forklift that integrates the speed reduction gear box, the driving axle, and the electric motor into a single unified package. 17:32 So, this forklift is designed primarily around our components, including this drivetrain and the battery itself.

17:41 Thank you.

17:48 The next question comes from Jeffrey Campbell from Alliance Global. Please go ahead.

18:14 Yes. Raymond, I thought to ask how you're targeting the upcoming demonstrations of the GEL-1800? It seems like that it’s a new market, but it seems like the low hanging fruit would be places where it takes place indoors, it seemed like the charging would be easier and solution from the ICEs would be negated?

18:38 Yes. You're absolutely right. We are going to market the GEL-1800 in industries that are well suited to support its charging needs. So, this does include indoor facilities, sensitive areas like urban settings, agriculture or property management and waste management centers or even transportation hubs such as ports, airports, things of that nature. 19:08 The key characteristic that all of these industries share is the equipment typically does not leave the property. So, it would be simple for a business to install a charging, a smart charging station to keep their vehicles operating, and that makes the logistics so much easier than having to procure and store diesel fuel. 19:31 And from a marketing standpoint, with these industries that we're targeting, we will be utilizing the GEL-1800 to attend trade shows for these specific sectors.

19:46 Okay great. Thank you.

19:53 The next question comes from the line of Rommel Dionisio from Aegis Capital. Please go ahead.

20:01 Yes. Thanks for taking my follow-up. Ray, you talked about and can you talk about some logistical challenges from a shipping standpoint. I just wondered, are you seeing any challenges from a component sourcing standpoint? Obviously, as you get more into the electric vehicle business, that's probably biotech components, I wonder if you're just seeing any shortages or delays there on the supply chain for the components for those products? Thanks.

20:29 Yes. A great question. So, just like the global environment is experiencing this year, yes, we are seeing material shortages both from a raw material standpoint, but then even from a supply standpoint for our suppliers as well for our component of business and for a EV business. 20:51 However, one of the things that we are extremely proud of is the success and adaptation of our supply side that continue to work with our suppliers to be able to acquire and procure the components that we need to be able to deliver and that's how we were able to be able to generate over thirty thousand transmissions this year. And be able to produce the electric vehicles that we have that have arrived in addition to the ones that we have in production. 21:29 Now, with that said, of course, it is going to be a continued challenge as the world continues to struggle with supply side constraints. However, we've been very well positioned to meet that challenge thus far, and we plan to do so moving forward to.

21:52 Great. Thank you.

21:56 The next one comes from the line of Jeffrey Campbell from Alliance Global. Please go ahead.

22:03 Yeah, this would be my last question. Thanks for allowing the follow-ups Raymond. One thing I curious about is your – you were saying that the forklifts are already getting off to a good sales start, it is the role that having a built-in charger in your forklifts is playing in these early sales. It would seem like to me that particularly for a workplace that's new to EV forklifts, not having to around with separate charges would be a tremendous value add.

22:36 Yeah. So, from the forklift standpoint, we've been graced with a number of various when the power the sales for the sale of our forklift. So, I use the same word twice. What we've been seeing is that number one, the concept of lithium power has already been demonstrated in various industries such as in passenger cars with Tesla. 23:09 So, already from a consumer end user standpoint, they already understand the capabilities of what lithium can do. And because there's very few offerings of lithium powered forklifts currently in the United States, that's been very supportive from a sales standpoint. 23:28 Secondly, we are pushing and driving a localized service and parts network here in New Jersey and the East Coast starting off to be able to support our clients, which is very important because as a company maintaining the operation of your equipment and fleet is critical and downtime can be a challenge. 23:55 So, we are employing a strategy where we are providing the right to repair our vehicles in the hands of our end consumers. So, we're going to make it very simple for them to be able to acquire the parts they need and the education and knowledge to be able to repair their vehicles to keep them up and running. 24:17 Thirdly, from a supply side standpoint, right now there's already a significant backlog for forklift sales, especially as warehousing and manufacturing continue to grow and locations switch over from retail to warehousing, the demand for forklifts to power the backbone of that growth is extremely high demand in the U.S. markets that's already been causing a significant backlog. 24:49 So the fact that we have our products ready ago has been playing to the success of our sales strategy. And the last piece that I wish to offer as well, because of the supply constraints, we have been seeing in the competitive landscape, price increases between ten percent to even thirty percent for both propane and lead asset forklifts to account for the challenges in supply side. 25:17 For us, as we are looking to launch our products, develop our brand, and start to capture market share, we are currently maintaining our advertised price, which range from twenty four thousand to thirty four thousand depending on the model, which is currently a fantastic deal, compared to competitive products. So, those four key elements are truly driving the success that we're seeing from a sales standpoint.

25:53 Thank you. Seeing more questions in the queue. Let me turn the call back to Mr. Wang for closing remarks.

26:02 Great. Thank you very much, operator. And everyone thank you so much for participating in today's call and for all of your support. We appreciate your interest and look forward to reporting on our next quarters number and progress in the upcoming months, but we have a lot going on here at Greenland that we're truly excited about, and we can't wait to continue to share our progress.

26:30 Thank you. Ladies and gentlemen, that concludes our conference call for today. Thank you all for your participation. You may disconnect now.