GREENPOWER MOTOR Co INC. annual report, Q4 FY2022

GreenPower Motor Company Inc. — FY2022 Form 20-F

Reporting period: Fiscal year ended March 31, 2022; this is an annual report, not a calendar-quarter filing. Financial statements are in U.S. dollars and prepared under IFRS. The company designs, builds and distributes all-electric commercial vehicles, including buses, school buses, shuttles, cargo vans and cab-and-chassis vehicles.

Financial performance and position

Metric	FY2022	FY2021, restated
Revenue	$17.24 million	$13.29 million
Gross profit / margin	$3.88 million / 22.5%	$3.58 million / 26.9%
Operating loss	$14.40 million	$7.79 million
Net loss	$15.01 million	$7.84 million
Basic and diluted loss per share	$0.69	$0.43
Cash used in operating activities	$20.34 million	$16.39 million
Cash used in investing activities	$0.54 million	$0.35 million
Cash provided by financing activities	$12.66 million	$31.52 million

• Revenue increased 30%, while gross margin fell 4.4 percentage points. Management attributed the lower margin to low-margin sales of vehicles coming off lease, a higher proportion of BEAST school buses, and a $153,798 inventory write-down.
• Expenses rose to $18.28 million from $11.37 million. Notable items included $5.77 million in share-based compensation, up from $2.10 million, and administrative fees of $5.81 million, up from $3.75 million.
• Cash and restricted cash was $6.89 million at year-end, down from $15.21 million. Inventory rose to $32.25 million from $12.46 million; accounts receivable was $2.92 million.
• Working capital was $31.58 million; total assets were $49.61 million, total liabilities $15.22 million, and shareholders’ equity $34.39 million. Deferred revenue was $6.51 million, primarily for buses invoiced but not delivered by year-end.
• The $8 million Bank of Montreal line of credit had $5.77 million drawn at year-end, leaving about $2.2 million of stated available liquidity, subject to margin requirements. It bears interest at the U.S. base rate plus 1.5%, is repayable on demand, and is secured by company assets and personal guarantees from two directors. The company reported covenant compliance.

Changes versus the prior comparable year

• Deliveries increased to 93 vehicles, compared with 74 in FY2021. FY2022 deliveries included 18 BEAST school buses and multiple EV Star models; the reported total also includes vehicles leased or previously leased and subsequently sold.
• Revenue mix shifted sharply: vehicle and parts sales were $13.71 million versus $3.46 million, while operating and finance lease revenue was $3.30 million versus $9.59 million.
• Operating cash outflow worsened by about $4.0 million, with a $20.9 million inventory cash investment partly offset by $6.4 million of increased deferred revenue. Financing cash inflow fell substantially from FY2021, which included the Nasdaq IPO and concurrent placement.
• The company issued 2.26 million shares through option and warrant exercises; no warrants remained outstanding at year-end. Shares outstanding at March 31, 2022 were 23,148,038.
• FY2021 and FY2020 revenue and cost of sales were restated for finance-lease accounting and cancelled-lease sales. The restatement increased both revenue and cost of sales by equal amounts and did not affect operating or net income, assets, liabilities, working capital or cash flow.

Outlook, commentary and key risks

• Management expects to expand production, hire additional employees and invest in working capital, and stated that additional capital would be needed in the near term. No quantified earnings, revenue or cash-flow guidance was provided.
• The auditor issued an unmodified opinion but highlighted material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern. Management says continuation depends on growing sales, achieving profitable operations and obtaining financing; it cites customer orders/backlog and the credit facility, but does not quantify the backlog in the supplied filing text.
• The company reported a material weakness in financial-reporting controls relating to finance-lease accounting and cancelled-lease revenue and cost-of-sales calculations. Management says it hired additional finance personnel and is implementing process and control improvements. The auditor did not attest to internal-control effectiveness.
• Government incentives are important to demand. GreenPower said most historical sales were in California and that CARB had stopped accepting new applications to the HVIP program pending new funding, negatively affecting sales prospects there. Three customers accounted for approximately 57% of FY2022 revenue, compared with 87% in FY2021; government vouchers represented about $2.97 million of FY2022 sales and lease proceeds.
• Other risks include supplier concentration, contract manufacturing and global shipping delays and costs, China-related tariffs, competition from better-capitalized manufacturers, product and warranty exposure, and ongoing operating cash burn. COVID-19 and the indirect economic effects of the war in Ukraine could also affect customers, suppliers and access to financing.
• Business developments include a West Virginia school-bus manufacturing partnership, with up to $3.5 million in employment incentives subject to hiring targets and up to $15 million of vehicle purchases agreed by the state. A May 2022 lease-purchase agreement covers an 80,000-square-foot facility; occupancy was scheduled for August 2022, with payments and possible loan forgiveness subject to the agreement’s terms.
• A February 2022 Workhorse supply agreement covers 1,500 EV Star cab-and-chassis vehicles for Workhorse-branded vans. The filing does not provide a clear delivery schedule or quantify expected revenue from this agreement.
• Unusual items included $365,278 of other income from forgiveness of a Paycheck Protection Program loan and $607,579 of asset write-downs. The company disclosed civil claims involving its former CEO and a former employee, which management did not expect to be material, although timing and financial outcome were uncertain.

Important facts for investors to verify

• Whether the reported backlog converts into timely deliveries and cash receipts, and the status and economics of the 1,500-unit Workhorse agreement.
• How much of the $32.25 million inventory and $6.51 million deferred revenue is deliverable, saleable and collectible, including any effects on future margins and cash flow.
• Availability and conditions of the demand-repayable credit line, future financing needs, and progress toward positive operating cash flow and profitability.
• Whether the finance-lease control weakness has been remediated, and whether subsequent filings show sustained control improvements.
• Funding availability for California and other vehicle incentive programs, customer concentration, and the effect of tariffs, supplier constraints and shipping costs on gross margins.
• Progress, costs, hiring targets, incentives and purchase commitments under the West Virginia facility arrangement.