GreenPower: Getting Definitive With Cash Flow Breakeven Expectations

| About: Greenpower Motor (GPVRF)

Summary

I update readers as to a key data point I missed in an update from early-November.

GreenPower significantly understated its expectations for buses sold to LOI partner ADOMANI for full year 2016.

ADOMANI states an expected offtake of buses from GreenPower of more than double the figure released by GreenPower in its SEDAR filing.

While this doesn't change my overall analysis this does greatly embellish my conclusions that GreenPower should be cash flow breakeven during full-year 2016.

I wanted to update readers as to some new information I've come across regarding GreenPower Motor Co. (OTCQB:GPVRF), a unique technology play that I initiated in late October 2015. My last update, published in early-November, broke out for readers a press release issued by GreenPower regarding a (at the time) new LOI the company had signed with ADOMANI, Inc. ADOMANI, for those unfamiliar, is a commercial vehicle sourcing and selling organization that "provides complete zero-emission electric and hybrid vehicle solutions to school bus and medium to heavy-duty fleet operators" on a national basis. You can imagine GreenPower locking up a LOI for 20 buses (to be delivered by Q3/16) was a meaningful event - especially considering it only takes a few buses for GreenPower to get to cash flow breakeven. This is where today's "update-update" will focus.

As it turns out, ADOMANI had issued a press release covering the LOI as well - only, admittedly, I missed this at the time of draft and publication the first time around. As a result, I also missed a major data point that doesn't change my analysis of the LOI, as stated prior, but does reinforce and embellish it quite a bit. Remembering that GreenPower had noted in its press release detailing the LOI that it had "entered into an LOI (with ADOMANI) "to which it has agreed to produce 10 EVS 01M (Type A) all-electric school buses and 10 EVS 03 (Type C) all-electric school buses with delivery expected in the third quarter of 2016 (SOURCE: GPVRF SEDAR filings)," it's very interesting to note that ADOMANI states in its press release that "ADOMANI will bring 50 GreenPower zero emission school buses into the state in 2016 and an additional 100 in 2017. The arrangement between ADOMANI and GreenPower allows for additional bus sales in the future and the opportunity to expand into new states." Yes, that's quite a difference. As in more than double what GreenPower had stated in its press release. Considering ADOMANI is the offtake partner I'm going to lean into its statement a little harder than I'm into GreenPower's (likely being conservative in that it's a public company and that it is the production partner).

Now, financially what does this do for GreenPower? Well, it simply magnifies what I had stated prior. GreenPower noted in its PR that "the aggregate purchase price for the 20 buses is more than U.S. $4 million." Using simple math - and this assuming no volume discount or volume derived breakpoints to average pricing - this would mean that GreenPower should derive in the ballpark of U.S. ~$10 million in revenues from the 50 buses noted by ADOMANI. Understanding that the payment schedule of the underlying cash flows, or put another way the cadence of when GreenPower takes in the cash from the sales, will not be in uniform (or in lockstep) with when the buses are actually sold, this should still almost guarantee that GreenPower is at least cash flow breakeven during 2016. This is an excellent starting point for building what I'll refer to as "overlapping cash flows" or put simply an aggregate cash flow intake per period that will bring GreenPower to cash flow breakeven. Getting to cash flow breakeven is maybe the single most important milestone for a micro cap to reach. This, of course, stops the micro cap from needing to participate in punitive dilutions at low share prices (generally) and small valuations.

Again, while mostly a reiteration of what I've stated in prior analysis I did find this update to information material enough to deserve a reader update. I reiterate my bullish stance on the company. I continue to be impressed with GreenPower and I continue to be impressed with how management has been keeping expectations in check while executing on the road map given in the company investor deck. I remain confident that GreenPower will be a tech story worth owning over the next 6-8 quarters.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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