Greenland Technologies Holding Corporation (NASDAQ:GTEC) Q1 2022 Results Earnings Conference Call May 16, 2022 8:00 AM ET
Julia Qian - Managing Director of Blueshirt Group Asia
Raymond Wang - Chief Executive Officer
Jing Jin - Chief Financial Officer
Conference Call Participants
Rommel Dionisio - Aegis Capital
Good day ladies and gentlemen, thank you for standing by. And welcome to the Greenland Technologies First Quarter 2022 Earnings Conference Call. Currently all participants are in a 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.
Now, I will turn the call over to Julia Qian, Managing Director of the Blueshirt Group Asia. Ms. Qian. Please proceed.
Thank you, operator, and hello, everyone. Welcome to Greenland Technologies first quarter 2022 earnings conference call. Joining us today are Mr. Raymond Wang, Chief Executive Officer and Mr. Jing Jin, Chief Financial Officer. We've released the results early 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.
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 1995. Forward-looking statements involve inherent risks and uncertainties. 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 filings with the SEC. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Also please note unless otherwise state, all the figures mentioned during this 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.
Thank you very much, Julia. And good morning, everyone. And thank you for joining us today. Let me start the call by thanking my team at Greenland Technologies for their hard work and contributions to another record quarter. Their commitment to delivering results and overcoming obstacles for the benefit of our company and our shareholders is the reason for a history of long term profitable growth.
Now the first quarter was a very successful quarter for the company with record Q1 revenue generation of $29.8 million and in units delivered. Despite significant global challenges such as COVID related shutdowns and China disrupted shipping and supply chains, and high logistic and material costs, our teams have continued meeting client demand and accomplish our best ever first quarter transmission deliveries of 21,902 units.
Now the success of our component business this quarter and throughout last year has been a reflection of the effective execution of our strategies. However, this year continues to introduce new and unpredictable challenges that impact the overall global market that may impact our business in the immediate term, such as COVID, related shutdowns, supply constraints and the geopolitical instability in Eastern Europe.
Though our facilities have not been directly impacted, COVID related shutdowns may affect the ability of our suppliers and clients to operate their own facilities, resulting in an impact to production and sales.
We will continue to do what we can to maintain full production capability and continue to deliver innovative solutions to our clients to help maintain their business during these challenging times.
Now, the component business still accounts for a majority of our business revenue. Regarding our electric industrial heavy equipment business, we have sold nearly three dozen units of industrial equipment. Unfortunately, our electric industrial equipment deliveries have been impacted by supply interruptions and components shortages that have lengthened the delivery wait times longer than we expected.
Fortunately, we've remained on track with the establishment of our first assembly site in Maryland. In fact, we recently announced that we have executed the lease for a site in Baltimore County, Maryland, and we will secure the location in mid-June. We expect the site to be operational in July.
It's going to take a few quarters to get the site running at full steam, but when it does, we expect the facility to produce over 500 heavy industrial units per year and thus improving our equipment delivery times.
Our press - our prospective clients have also been facing longer installation times for onsite charging stations to power electrical equipment such as ours. This has added additional pressure to our sales process to close outstanding leads. As a result, we have been actively exploring opportunities with both domestic and international charging solution OEMs to improve local availability, enhance education, and to support a simpler process for on site charging installations. We will have more to share shortly.
In the interim, we have placed a greater emphasis on our sales team to secure paid equipment reservations. And despite these challenges, interest in our equipment remains strong, as business continues to embrace the benefits of electrification of their industrial equipment, primarily driven by sustainable environmental awareness and rising fossil fuel costs.
This demand will continue to grow as additional legislation is passed introducing a stricter environmental governance policy requirements, such as the upcoming SEC at NASDAQ environmental reporting requirements, and new consumer incentives, such as Maryland's recently passed Clean Cars Act of 2022 that offers a state grant to subsidize 20% of the purchase price for electric industrial heavy equipment such as ours.
We applaud Maryland Governor Hogan, Senate and House for their leadership and commitment for a cleaner, healthier environment and economy. And we expect other states to follow their example and adopt similar programs. And these policies will further strengthen our efforts to convert the industrial vehicle market to a cleaner and more sustainable alternatives.
And we have recently launched a new brand for our clean industrial heavy equipment division HEVI, H-E-V-I, HEVI. HEVI will replace Greenland Machinery and provide better clarity between our components and industrial EV business. In addition, HEVI is a better reflection of our business philosophy, mission and culture with an American bison emblem that embodies both the strength and power possessed by our equipment, and a symbol of America's beauty, nature and recovery of what was almost lost. The launch of HEVI initiates a marketing campaign that will raise brand awareness across online, print and in-person channels.
Our stock price has been depressed year-to-date, but I strongly believe it does not accurately reflect the value and growth potential of our business, as illustrated in our results.
Our fundamental business continues to grow despite a challenging environment and our electric industrial equipment business continues to progress on track and open new growth opportunities for the business.
Despite the volatility of recent markets and global constraints, Greenland is well positioned that continue delivering value to our clients and shareholders into the long term.
And with that, let me turn the call over to our CFO, Jing Jin to provide greater details into our financial performance. The floor is yours, JJ.
Thank you very much. And thank you everyone for joining our call today. I will now review financial highlights for first quarter of 2022. We are encouraged with our results, we call it again a challenge by the global headwinds impacting all aspects of our business.
We achieved 19% year-over-year revenue growth in the first quarter to US$29.3 million, with 19 percentage year-over-year net income growth and a 30% increase in our cash balance. This brings us added competency and flexibility, as we continue to prioritize investments in R&D innovation and revenue generation. We expected the global headwinds will remain - over the near term.
But we believe longer term Greenland is well on track for the market share gains in the electric - electric industrial vehicle market, while creating a significant value for the shareholders.
Along with the increase in sales volume, our cost of goods sold rose 18% to US$22 million. Gross profit was US$6.4 million, an increase of 25% from US$5.1 million in the first quarter of 2021.
Gross margin gained 100 basis points to 21.7% from 20.7% in the prior year, as the company executed its strategy shift towards higher value and more sophisticated products, such as hydraulic transmission products.
Total operating expenses increased 33% to US$3 million, as we continue our investment in pursuing higher revenue levels and target long term growth. Despite increase, we held operating expense at 10.2% of total revenue, which was only up 1.1% points from the previous year.
Within that, selling expense increased 6 - 9 percentage to US$0.6 million. General and administrative expense increased 40% to US1.3 million and research and development expense increased 13% to US$1.1 million.
We then generated income of US$3.4 million from operations, up 18% from the first quarter of 2021. Leveraging our strong sales and effective expense management, net income was 2.9%, I am sorry, US$2.9 million, an increase of 19% from US$2.4 million in the prior year.
Looking ahead, we remain committed to executing our long term business strategy to capture growth in the electronic industrial vehicle sectors and drive higher revenue and profit levels.
That concludes our prepared remarks. Operator, we can now open for the call for the questions.
Thank you. [Operator Instructions] I show our first question comes from the line of Rommel Dionisio from Aegis Capital. Please go ahead.
Good morning. Thanks very much for taking my question. You know, despite all the challenges you guys are facing on a macro basis, I mean, 19% top line growth, really stellar performance? I wonder if you – I know, you touched on it in the prepared comments. But I wonder if you could just give a little more granularity in terms of that, you know, the key drivers behind that growth? I mean, you're gaining market share, I presume in China, affect [ph] the supply chain management? What do you guys doing so much better than the competition to gain market share, to manage that supply chain, despite all the headwinds you guys are facing? Thanks.
Sure, absolutely. JJ, let me take that one. And then you can add on if necessary…
But good morning, Rommel. So, from our position as market leader in our component space, this has actually afforded us the luxury to have stronger, more established relationships with our supply partners, that our competitors are not able to just create overnight. And this has been very strong, our long term relationships, working with our partners to navigate the obstacles that have presented themselves thus far, such as the global pandemic and working with them to be able to address pricing concerns and being able to source raw material and components.
We work together hand in hand with our suppliers to be able to overcome these and we're extremely proud of that. But this, from a macro standpoint, this has definitely been a very challenging year with very - with many unexpected twists and turns along the way. But we will continue to work hand in hand with our suppliers to ensure that we can meet the demands of our clients where we can.
Okay. Maybe just a quick follow up if I could, Maryland sounds like it's up. And it's very much on track to get up and running here in the next few weeks actually. See, just one question there, labor, I know that's been fairly tight in the national basis, could you just maybe little commentary on the labor situation there. If you're guys are - the hiring is on pace to get to where you need to be to, here in the next few weeks and months? Thanks.
Of course. One of the reasons why we selected Maryland was their strong support network and a talented workforce available in the Baltimore County area in particular, that we're setting our first site at. And we actually are working hand in hand with the Department of Labor of Maryland to be able to staff our facility and meet the needs from a labor standpoint.
We have had initial talks on that front and it's actually been very strong. Well, from a candidate standpoint. And what we've been seeing is the labor market in 2022, overall, has been an improvement in the US compared to 2021. Though labor costs are still at a very high rate, overall, labor force looking to actually work is there and significantly improved.
So though the costs are high, we are getting a large number of applicants and through partnership with the Department of Labor of Maryland, and as it's happened to their networks through various universities, colleges, technical schools, and recruiting agencies, we're very optimistic that we'll have no concern meeting our labor needs for Maryland.
Great. And thanks congratulations on the quarter.
Thank you. [Operator Instructions] Thank you. Seeing no more questions in the queue. Let me turn the call back to Mr. Wang for closing remarks.
Sure, thank you very much. And everyone, I just want to thank everyone on the call for participating today, and for your continued support. I'm going to repeat some comments that JJ and I made during this call. But in closing, I just want to emphasize that the first quarter of this year was a very strong quarter for us for agreement with 19% year-over-year revenue growth, a 19% increase in net income and a 30% increase in our cash balance.
And this growth demonstrates the capabilities and value we have here agreement. And we have made significant process in our manufacturing strategy, new product introductions, our re-branding efforts, and the build out to future revenue generating, our teams and divisions, which demonstrates our commitment and our capability to stay on track for long term growth for the company.
And while the global headwinds are expected to remain challenging throughout this year, we are focused on these long term goals. And Greenland is on track to become the market leader in the electric industrial - industrial vehicle market. And this is a massive growth opportunity for our company and for our shareholders. So we appreciate everyone's continued interest and look forward to continue to update you with our progress as we move forward into our next quarter. But for that, I just want to say thank you very much for joining today's call.
Thank you, all again. This concludes the call. You may now disconnect.