Greenland Technologies Holding Corporation (NASDAQ:GTEC) Q3 2023 Earnings Call Transcript

Greenland Technologies Holding Corporation (NASDAQ:GTEC) Q3 2023 Earnings Call Transcript November 20, 2023

Greenland Technologies Holding Corporation misses on earnings expectations. Reported EPS is $-0.07 EPS, expectations were $0.06.

Operator: Good day, and thank you for standing by. Welcome to the Greenland Technologies Reports Third Quarter 2023 Unaudited Financial Results Conference Call. At this time all participants are in a listen-only mode. After the speakers presentation there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Josh Centanni, Investor Relations Director. Please go ahead.

Josh Centanni: Thank you, operator. And hello, everyone. Welcome to Greenland Technologies’ third quarter 2023 earnings conference call. Joining us today is Mr. Raymond Wang, Chief Executive Officer; and Mr. Jing Jin, Chief Financial Officer. We released results earlier today. The press release is available on the company's IR website at gtec-tech.com, as well as from Newswire services. A replay of this call will also be available in a few hours on our IR website. Before we continue, please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties.

As such, the company's actual results may be materially different from the expectations expressed today. Further information regarding these and other risks and uncertainties is included in the company's public filings with the SEC. The company does not assume any obligation to update any forward-looking statement except as required under applicable law. Also, please note that unless otherwise stated, all figures mentioned during the conference call are in U.S. dollars. With that, let me now turn the call over to our CEO, Mr. Raymond Wang. Please go ahead, Mr. Wang.

Raymond Wang: Thank you, Josh. Good morning, everyone, and thank you for joining us today. We've achieved another outstanding quarter here at Greenland, and we could not have done it without the dedication of our global team. Greenland delivered on our mission to increase efficiency and operational excellence in the business as evident by our growth in sales, margins, and balance sheets. Product deliveries are up 10% with margins up 30% year-over-year. We are extremely proud of our success in developing and driving innovative products for our clients that generate industry-leading margins for the business. As expected, most of the financial performance is generated by our transmission and drivetrain business. One of the core drivers of our increased margins is the development and distribution of our new product line of industry-leading drivetrains that award us with a 40% to 45% profit margin.

Our margins will continue to grow as this product line ramps across our client portfolio. In addition, we have expanded our product line with drivetrains to support equipment in new markets, such as outdoor heavy machinery and military applications, and has led to our $20.8 million in accounts receivable, which is up 45% year-over-year. Greenland has been able to successfully navigate the volatile geopolitical environment due to our global clientele of OEM equipment companies. We have seen an increased demand for products to replace lost equipment and increased inventories by brands able to operate in areas of conflict. Now the primary risk for us for the remainder of the year at Greenland is the weakening yen to the dollar. Year-to-date, the yen to dollar has fallen 8% from 6.7 to 7.3. That's a lot.

However, even with the haircut off the top, we are still on track to generate over $90 million in revenue for the year. And this truly showcases the strength and growth of our core business that will continue into the new year. Heavy continues to make process -- progress as we pioneer electric heavy machinery market here in the United States. We are very proud to win the Port of Baltimore Bid to support their efforts to electrify their port equipment with our GEL-5000 all-electric front loader. We have a solid pipeline of opportunities generated through our sales process with additional leads nearing closing which we will report when signed. Now as a pioneer in this industry of electric heavy machinery, it is our responsibility to discover the right sales strategy to win adoption.

An aerial view of a large harvesting field, with a fleet of vehicles in the distance.

And there's no other player to reference in our market. Heavy continues to stay nimble by exploring new strategies to accelerate the sales process. And I am confident that with our culture of discovery and innovation, we will lead to successful market penetration and expansion. The heavy authorized service provider model continues to show promise in adoption and positive feedback from companies interested in joining our network given its unique structure. The ASP model requires no inventory or financial investment and creates a new revenue stream for member companies with the equipment and capability to support our heavy machinery. We will appropriately align expansion of the heavy ASP network with the progression of our sales activity to ensure that our clients have access to top tier service and support.

Now, last quarter, I announced the formation of Heavy Energy, a new business line dedicated to providing power solutions to the growing network of DC powered products across America. Heavy Energy will solve the challenge of adopting DC powered equipment such as electric school buses, garbage trucks, and recent passenger cars and vehicles without having to install traditional DC charging stations that is very expensive and can take months to deploy. We're not yet ready to share additional details at this stage. However, I can say that Heavy Energy shares the same vision as Heavy Corp in delivering a US-made and certified product to the US market. Now, it is no secret that I feel Greenland is significantly undervalued given our operational performance.

Our sales performance and market share continues to grow with new product lines creating significant growth opportunities for the business. We have amassed over $21 million in cash, up 32% year-over-year, and have many tailwinds to propel us to success in the following quarters. Unfortunately, our efforts have not appropriately reflected in our valuation. And the GTEC board and I will continue to explore opportunities to address this disparity, to realize the proper share price for our company and long-term shareholders. Now, I am proud of the work that the GTEC team has accomplished. We still have much to do and milestones to achieve, but I believe we're on the right track to succeed for the company and their shareholders. Now with that, let's dive into the details of our financial performance.

JJ, if you can take it away.

Jing Jin: Thank you, Raymond. Thank you, everyone, for joining our call today. I will now go over our financial results for the third quarter. For the full details of our financial results, please refer to our earnings release that was issued today. For the third quarter, our revenue was $21.8 million, up 0.2% from $21.7 million a year ago. The increase in revenue was primarily an increase in the company's sales volume driven by increasing market demand. On a constant currency basis, excluding the negative foreign exchange impact from a stronger dollar, revenue increased by approximately 4.6% as compared to the year prior. The total cost of goods sold was approximately $57 million representing a decrease by approximately $1.4 million due to the decrease in production cost.

Greenland gross profit was approximately $6.3 million, representing an increase by 30.3% as compared to quarter three last year. Further, as Ray mentioned, our strategic focus on higher value products and efficient manufacturing continues to pay off. In Q3, our gross margin increased 28.7% compared to 22.1% in Q3 [2022] (ph). Our outstanding performance underscores our industry leadership and the success of our business strategy. Total operating expenses rose 26.5% to $3.4 million as compared to the three months ended September 30, 2022. This was primarily due to the increase in the shipping fee, the company's R&D investment in higher value and more sophisticated products and investment into our heavy line of business. The combination of those results drove strong profitability during the quarter.

Our Q3 income from operation was $2.8 million, up 35% from the same quarter last year. Our balance sheet remains strong as we end up the quarter -- the cash and the cash equivalents of $21.5 million, up 32.2% from $16.2 million for the same quarter last year. Our robust cash position provides us the substantial operational flexibility and empowers us to sustain investment in our heavy line business. As we look forward, we project a positive earnings outlook for the remainder of 2023. We are optimistic about achieving sustained financial growth and delivering value to our shareholders. Our unwavering commitment to implementing efficient business strategy, ensuring operational efficiency, and addressing the dynamic needs for our customers reinforce our confidence.

That concludes our prepared remarks. Let's now open the call for questions. Operator, please go ahead.

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