Greenland Technologies Holding Corporation Q1 FY2023 earnings call

• Thanked the global team for driving the business during difficult market conditions. - The component business is recovering from global market conditions, with the expectation of normalization and growth in the second half of 2023. - The material handling industry is growing, and Greenland is positioned to capitalize on the market growth as a leader in the forklift drivetrain and transmission industry. - Margins have improved through product innovation, lower costs, and operational efficiencies. - HEVI recruited a new Chief Operating Officer, is developing infrastructure, has pilot programs with positive feedback from organizations like United Rentals, and will adapt its strategy including introducing a new referral incentive and exploring new markets for its product line.

In the first quarter of 2023, total revenue of Greenland Technologies was $22.1 million, a decrease of 24% from the previous year, mainly due to logistical and supply chain challenges and a stronger dollar relative to the Chinese yen. Excluding the impact of foreign exchange, total revenue decreased by about 18% from the previous year. The company sold 36,841 transmission product units in Q1 2023, compared with 41,902 units in Q1 2022. Cost of goods sold fell 28% to $16.6 million in Q1 2023. Gross profit was $5.5 million, while gross margin rose 320 basis points to 24.9% from 21.7% in Q1 2022 due to the strategic transition in product mix towards higher value components. The HEVI electric industrial machinery business is in the process of laying infrastructure, with pilot programs and trade show participation, but faces logistical challenges in meeting the demand for product demos and pilots.

• Stands by the forecast that the business will normalize and grow, especially in the second half of 2023. - HEVI will adapt its strategy, including leveraging a new referral incentive, exploring new markets such as property maintenance, landscaping, and utility companies, and expanding marketing efforts. - Anticipates further investment in sales and marketing for the HEVI division to capitalize on opportunities.

• Logistical and supply chain challenges resulting from the initial wave of COVID cases and significant pent-up travel demand during the Chinese New Year holiday. - The stronger dollar relative to the Chinese yen impacting revenue. - Logistical challenges in meeting the influx of requests for product demos and pilots for the HEVI products.

Q: Could you pivot resources more towards the HEVI business?

A: Yes, the company is focusing on expanding the team and accelerating execution, with further investment in sales and marketing activities.

Q: Feedback on HEVI pilot programs and trade shows?

A: United Rentals has enjoyed the equipment, requested an extension of the pilot and additional products to demo, but faces logistical challenges in meeting the demand for product demos across multiple locations.

Q: Are the units from the 54,000-square-foot facility on track to roll off in Q2?

A: Yes, the first units, including the GEX-8000 electric excavator and GEL-5000 front loader, are still on track to roll off in Q2.

Q: Are the third and fourth quarters expected to be banner quarters?

A: Yes, confident that the core component business will recover and the third and fourth quarters will be strong.

Q: Changes in the competitive position of the transmission business after COVID lockdowns?

A: Initially, sales started to shift outside China, but now with manufacturers ramping up, sales are mostly back to Chinese OEMs.

Q: What is the sales process for HEVI products?

A: It's a faster sales process in the HEVI industry due to few dominant players, but requires educating customers on new technology. Now shifting from individual demos to product demo days to be more effective.