VivoPower International PLC (NASDAQ:VVPR) Fourth Quarter 2022 Earnings Conference Call August 29, 2022 5:00 p. m. Eastern Time
Participating companies
Kevin Chin – Executive Director
Operator
Have a nice day and thank you for being here. Welcome to VivoPower International PLC’s fiscal year 2022 results conference call. [Operator Instructions] Please note that today’s lecture is recorded. Now I would like to turn to today’s speaker, Kevin Chin.
Kevin Chin
Thank you, Victor and welcome everyone to the FY22 effects call for VivoPower International PLC. We’ll move directly to slide 2, which is the executive summary. So, simply put, we have made significant strategic progress over the past 12 months. however, we have had to continue with some headwinds, adding the lingering COVID effects of our Australian business as well as the exchange rate.
So let’s go through the key points. First, profits declined to $37. 6 million, basically due to strict COVID lockdowns, which we looked at in the past in the half-year results, which unfortunately also dragged on in most periods in the past 6 months and resulted in delays in paintings. for our corporate today. In addition, there has been a sharp fall in the exchange rate since 2022 at constant exchange rates. Our earnings decreased 3% year-over-year.
In terms of gross margin, this includes discontinued operations. They decreased from $4. 7 million to $1. 6 million for the same reasons I mentioned above. to interstate allocations in Australia. Our GP margin decreased by 4% compared to 16% year-on-year. And this, in turn, reflects the increase in fulfillment prices, the increase in the prices of the origin chain, as well as the extra cost of Bluegrass’ sun allocation. Bluegrass’ adjusted preventive maintenance margin for cost overruns was 9% for FY22 and discontinued operations were 10%.
EBITDA, adding discontinued operations, declined to a loss of $10. 4 million compared to a loss of $1. 4 million last year. Our operating losses increased to $14. 6 million from $4. 8 million last year. Again, this was driven by FX, the relief in cashing in on the lockdown era in the early part of the year, the cost overruns of bluegrass’ sun project. We moved forward with the budgeted increases in the expansion of operating expenses for the hyperscale of Tembo’s business.
As for our cash balance, at the end of the year it was $1. 3 million, down from $8. 6 million last year. However, after the balance sheet date, we replenished that amount to $8. 9 million due to the sale of the non-core business sets as well as the retention score we made in July. In terms of using money over the course of the year, we were judicious in terms of how we invested the money to scale and develop Tembo products. That said, we incurred, as I mentioned, $1. 9 million in unique Bluegrass sun prices that were unplanned and out of our control.
We have implemented a number of strategic transformation projects despite significant disruptions in our distribution partner network. We have expanded it to 6 continents and 50 countries, with EV commitments and orders expanding to over 8,000. Most importantly, we have entered into an announcement design agreement with Toyota Australia with priority for the development of the ottawa battery conversion kit.
Let’s move on to slide 3. This is a summary of the year, as well as an update of some of the announcements we’ve made in the past, making it significant strategic and operational progress despite the wins I mentioned. Key achievements come with the definitive agreement with Toyota Australia, as well as GHH and Bodiz, and the achievement of record levels of solar force response contracts. By going more accurately despite the previous announcements and updates on them, we got the entirety of the U. S. solar product portfolio. The U. S. first quarter and turned to the Power-to-X strategy for a forced virtual asset extraction operation of renewable energy to become a spin-off. This is suspended for the time being due to market conditions. So, obviously, there’s been a lot of mining development. We put that on hold first.
Other updates, we have executed a letter of intent to obtain one hundred percent GB Auto, but on a consensual basis to terminate this letter of intent as well as the distribution agreement and this is only because Tembo is now directly established in Australia and we will continue with the direct sale by our own rights. With this, GB Auto remains an esteemed and trusted spouse as well as an entrepreneur. We will also work with them in terms of [Technical Difficulty]. Elsewhere, as I mentioned, we have now established subsidiaries and business sets for Tembo in key markets globally. This aims for a long-term priority in terms of large-scale meetings and production functions in key markets around the world close to our customers. This does not require you to assemble and manufacture in the Netherlands and ship it to remote locations in Australia, Asia or Africa for that matter. So that’s a genuine goal.
Let’s move on to the next slide, just in terms of the key goals that we set at the beginning of the fiscal year in July of last year. We have fulfilled thirteen of the 18 goals that we are waiting for in terms of those that are still pending, fulfilling us and our production has not yet been executed. It is a complicated time with logistics and supply chain issues around the world. As mentioned, this could tend to increase production from Poland to St. Kitts around the world. So we didn’t produce or ship any kits, but they weren’t successful at the level of progression in terms of volumes. The other domain where we’ve had slips to the right is in SES trading sets, so we have feasibility studies for Tottenham. That said, in terms of building, our engineering and sales teams, we don’t have a lot of technical tricks on the EV side. I mean focus our resources and our attention. That said, after the end date, we did make some joint venture investments to further increase our capabilities, adding an investment in a mining and energy garage company called Green Gravity.
On the next slide, it’s a quick update in terms of equipment. Therefore, we have focused for the last 6 months on redesigning the team for the next phase of strategic execution and our policy of our strategy in this regard has 3 objectives. Number one is the targeted control equipment; two, functions in operations, products, engineering, meetings and market factory. We also seek to strengthen our protection quality progress only in Tembo features. And we also outsourced the middle office and the back office to help us evolve, but an effective level. Among the most sensible hires we made this year, Alun Evans joined Tembo as Quality Manager; Nathan McCormick as Tembo’s director of functional safety and director of testing; and Jean Diego Banon, who is with me on today’s call as VivoPower’s Enterprise Implementation Manager, also recently joined.
Key promotions, Matthew Nestor had become head of global partnerships. He succeeds Matt Cahir, who was instrumental in bringing VivoPower and Tembo to where we are today, however Matt will be leaving to focus on non-public issues and Matthew Nestor will take over and has actually been instrumental in driving all the partnerships we have today. Gary Challinor has been promoted to the organization’s lead coo and has done a wonderful job, particularly in regards to the relationship with Toyota, as well as helping to internationalize Vivo in terms of mindset and focus. And Iain Folley has been promoted to financial controller in the Asia-Pacific region. This is where we see Aevitas’ operations in particular. Therefore, it has an effect on growth.
Let’s move on to the next slide. As I mentioned, we are our B Corp and once again we have been identified for our leadership in global impact. Importantly, we have been named one of the most productive B Corp governments through B Lab UK. And that’s very important as a group.
Let’s move on to page 7, let’s dig a little deeper into the numbers. So, regarding the Aevitas part, you see a breakdown between discontinued and retained operations, which come with the millions [Technical Difficulty] profit account of the fast-growing solar segment and all that in terms of the next slide.
Thus, Group GP has decreased, as you can see, from $0. 3 million to $1. 3 million, which includes the $1. 9 million in cost overruns in the Bluegrass project.
Moving on to the next slide. It is enough to break down the extra P
If you take a look at last year, which was less affected by COVID, you can see that operations continue [indistinguishable] millions, or about 18%. And as discussed at the previous conference, we started promoting the – which includes Sun’s electrical responses business unit in Australia, so it stands. Tonote, the numbers of P
Next slide, I need to move on to the details. It just shows a reconciliation with the underlying EBITDA of the net loss, but we had several of them, adding coins.
On the next slide, page 10, I’ll deal with that.
Go to the balance sheet on page 11. Therefore, allocation investments increased from $12. 5 million to $16. 4 million, which includes intangible progression prices that were capitalized in December and December. As mentioned, our money balance decreased from $8. 6 million to $1. 3 million, but after the balance sheet date, it replenished [Technical Difficulty] millions. Now, in terms of net debt, it has gone from $14. 5 million to $27. 3 million. Distributor pro forma $19. 7 million after the balance sheet date and its maximum in terms of debt is attributable to [Technical Difficulty] which, as discussed above, is also a very favorable shareholder.
Go to the individual business units. First, for Tembo, we made significant progress during the year, but deliveries were negative. The outlook remains very positive. Every day we are approached by other people looking to convert it and we give it, as mentioned, from the point of view of concentration, precedence to the launch rate at the beginning of calendar 23, and we plan to increase the production of those kits for late.
We are very focused on continuing to execute with respect to our microtariffs and implementation in the market. We know the U. S. The U. S. market in Southeast Asia to free up those market drivers. In addition, what we are also doing is opportunistically recruiting world-class electric vehicle skills due to continued workforce discounts at many other electric vehicle companies. The capital we raised enough to balance once would not have been possible. they are taking credit from the markets and other EV players to raise them to our skill base.
A breakthrough in the Middle East, recently, is that we discovered a memorandum of understanding with the Jordanian state company, which reaches 1,000 electric cars and our presence in the UAE last year is done earlier.
As far as Toyota is concerned, this news partnership and we have worked with their 300 credit team and to achieve the mutual goals we have set ourselves in the Australian blockades protected through Aevitas have had a huge impact on our results, however, the outlook is very positive. An invaluable pipeline of more than 23 gigawatts of solar agricultural products is being built lately. And this is supported by the choice of a new comment at the federal point in May 2022, very favorable to more renewable energy or Australia.
So, we’re experiencing a race to green, so to speak, in Australia, a very old race to the 19th country. And our goal is for our Solar Electric Solutions business to generate revenue in excess of revenue that we don’t have [indistinguishable] In terms of compound annual expansion rate, this Electric Solutions Business has grown 57% year-over-year since fiscal 2019, and we have a very strong portfolio with significant opportunities that are sought after and provide a contribution beyond what we allow.
We must concentrate on the mining sector. It complements Tembo EV as well as other entities. Therefore, we are seeing a developing number of SCS opportunities with the fleet of small consumers from concerns and passions that have now revolved not only in the EBIT of critical force on site badges, management, force storage, microbatteries as well. Therefore, we aim to expand our functions through partnerships and joint ventures.
And as we move forward, we have made initial investments and brought a source of income to Australia focused on money. And it will help expand our features as well as the changes. As far as Caret is concerned, we have created more prices. during the year through progression activities, however, there is more to come from the inflation relief law, which is very positive for Caret Solar. There is renewed interest in knowledge infrastructure, adding asset extraction, and we are seeing increased interest in partnerships involving our various solar projects. And so, despite the correction in virtual asset mining that we have had for the past six months, we are still looking with our expert power, although the timing is appropriate, when it comes to the investor. In general, the plan is to divide this business unit and reinvest the proceeds in electric cars, as well as in the RCS.
With respect to FY23 and our key goals, we focused on the large-scale gathering and production of electric vehicles. I’m not going to overlook each and every detail here, but there are 18 details we’re fighting over and the micro-factory is a key detail and a key catalyst for expanding the meeting and production. Just to tap on page 17, on the monetary parts, the end of the fiscal year. So we have a forged deployment [ph] up to training 23 So we were given 1,000 new kits in terms of EV details with a public company, as I mentioned before. However, we have closed the NOI after the truck because our wishes are very much focused on the Australian Federal Reserve and the Arctic, which we also electrify. But even commitments of resources and time. We want to focus on Toyota Australia as well as [indistinguishable], which is what the top distributors and consumers are.
Of course, we execute strategic transactions for our money balance at $8. 9 million by divesting the non-core sets and trading on the Nasdaq. We capitalize on opportunities towards the higher worlds on the electric vehicle front and take credit for the many electric cars that are falling with other companies. We need very few who are still in hiring mode, yet we do so in very selective and judicious assets. Most importantly, we have also achieved significant ESG certifications and awards with the product. We have reoriented the post. -COVID offshore GB relationship, as mentioned, it is about terminating the distribution agreement and the charter and getting GB Auto, but they are still highly valued and privileged and outsourced. And last but not least, we have engaged with advisors in relation to the existing spin-offs. The law on reducing inflation is really positive. And we are looking to create Caret as a parent company Tembo VivoPower. That’s all about our prese nation
Q&A session
A-Kevin Chin
The next query is that the demand for the Series 70 is the best matched with the chain of origin and [Technical Difficulty] still influencing how GB Auto and the Series 70 have effects on their production. Have there been discussions with Toyota to produce only the following to drive downsizing of facilities? Is it something like this that is helping Toyota ship the 70 series faster and is it imaginable with processing production? Yes, a correct query. So clearly, Toyota is the gatekeeper in terms of releasing cars into cars. And when it comes to the 70 series, I guess I’ll say with our deck covers. We are comfortable in terms of what you must have to meet the needs, specifically in Australia, where most of the demand is coming from at the moment. And we will continue to work closely with Toyota to mutually ensure that those goals are met. So, at the moment, we don’t see a problem in the short term. And I think in the medium term, we all expect the supply chain and semiconductors to come under stress, especially in semiconductors. So, in the short term, we don’t see a genuine problem, in the medium term, yes, it depends on the chain of origin.
The next query is, can you verify or deny the expansion of Tembo kits during testing?And that, I think, came out a pretty rational a few months ago. Again, without there being any kind of breach of trust, we haven’t issued to deny it, or any other part involucrada. Oui. Je I think we’re very confident in our Tembo kits. And to say that once Land Cruiser has it inside, it becomes a very tough animal. The speech is incredible. And for those off-road, driving like me. They will appreciate the effect of EV for [Technical Difficulty].
The next query is when you plan to buy stocks, I made a commitment that you may not have been able to, fortunately, because I discussed that we’ve had for a maximum of the last six months where we’ve had deals and transactions and our deals that have been overdue in terms of being able to announce volume. So, I committed my salary to credits and we are in an open window. I hope we buy [technical difficulty]. Therefore, it has a meaning. And as I mentioned before, this is a very long resolution that the team is very determined to deliver effectively to consumers and that has an effect on materialization.
Kevin Chin
Those were the key questions. I think we will conclude on that basis. Obviously, if you have any questions, feel free to reach out to the shareholders of the line we have committed to building now. And thank you for joining the call.
Operator
This concludes the convening of today’s convention. Thank you for participating. You can now log out. Everyone, have a day.