(FRZA) on Q3 2023 Results - Earnings Call Transcript
Operator: Welcome to the Forza X1 Inc. Q3 2023 Investor Call. As a reminder, this call is being recorded and all participants are in a listen-only mode. Your speaker for today's program is Jim Leffew, CEO and President of Forza X1, Inc. Before I turn the call over to Jim, please remember that certain statements made during this investor call are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements on this call other than statements of historical facts, including statements regarding the company's future operations and financial position, business strategy and plans and objectives of management for future operations are forward-looking statements. In some cases, forward-looking statements can be identified by terminologies such as believes, may, estimates, continue, anticipates, intends, should, plan, expects, predict, potential or the negative of these terms or similar expressions. The company has based these forward-looking statements largely on our current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks and uncertainties and assumptions described including those set forth in our filings with the Securities and Exchange Commission, which are available on our Investor Relations website at ir.forza1.com. You should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur. Finally, this conference call is being webcast. The webcast will be available on our Investor Relations website at ir.forza1.com for at least 90 days. Audiocast quality is subject to your equipment available bandwidth and Internet traffic. If you experience unsatisfactory audio quality, please use the telephone dial-in option. A question-and-answer session will follow the presentation. Please note that only those that have dialed in via telephone may ask a question. Those listening via webcast will be unable to submit questions and must call in instead. [Operator Instructions] I will now turn the call over to Jim Leffew.
Jim Leffew: Thank you, and good morning. I would like to welcome everyone to the call today. I'm Jim Leffew, CEO and President of Forza X1. Today, I'm going to do a brief overview and update for milestone accomplishments in Q3 of 2023 and then open up for Q&A. The Forza X1 engineering team continues to push forward with the mission of designing, developing and manufacturing sustainable electric boats that address one of the largest segments of the recreational marine space: the 20 to 24 foot sport boat market. Our fully integrated zero emission electric boats are designed for use on saltwater intracoastal waterways and freshwater rivers and lakes so that owners can enjoy a full day of boating, doing the things they love on the water: cruising, fishing, pulling the kids on the tube, anchoring on a sand bar or docking at a waterfront cafe to enjoy the day with friends and family. At present, the team is focused on the production of our fiberglass F22 electric boats in addition to creating a high-quality electric pontoon offering. We are in small batch production on the fiberglass vessel and we now have two exciting versions: a center console and a brand-new dual console that we just launched last month. We are currently building one boat a month as we continue with our extensive testing protocol and we will ramp up to two per month as we officially begin production for retail use in early 2024. From there, we will advance our rate of production in accordance with market demand. As we have previously announced, our F22 has reached speeds of up to 40 miles per hour. The F22 has been designed to utilize a 100-kilowatt hour lithium batteries combined with our own electric outboard capable of peak instantaneous power of over 180 horsepower. This is enough power and battery for you and your family to spend a comfortable day on the water, traveling up to 50 miles in a variety of operating or cruising speed. The F22 features a beautiful Garmin user interface that displays all of the pertinent operating characteristics of the boat and also has a remarkable downloadable telematics app for remote monitoring and diagnostics and location tracking capabilities. The F22 can be charged very simply with an off-the-shelf Level 2 or 240-volt charger. If you keep your electric boat in a marina, you can buy a $30 plug and use it to charge your F22 using the oxide shore power. Similarly, if you use a trailer with your boat, you can recharge your driveway with a drier type outlet from your garage. A recharge can take approximately 6 to 10 hours depending on the state of charge of your battery and you're ready for the next day. Quarter three of 2023 was a very busy one for Forza X1. Some of the highlights of our third quarter are: in July, Forza X1 hosted an electrified launch event at the Ben Hotel in Downtown West Palm Beach, where we introduced our F22 fiberglass boat to the market. We had nearly 200 people in attendance, including marine EV industry leaders and influencers and shareholders and individuals to place initial orders for our electric boats. Our event can be viewed on our YouTube channel under the Forza X1 launch event. The boating media community was well represented and the event resulted in some great press, including articles from International Boat Industry, IBI news, Boating Magazine, Soundings Trade Only and boattrader.com. In August, at the invitation of Polaris Marine, Forza X1 presented two electrified demonstration pontoons, including a Bennington and Godfrey, two of the leading brands. and we showcased these at their dealer meetings at Lake Wawasee in Syracuse, Indiana. Over the course of two weeks, we demonstrated the units and successfully ran over 50 test runs with a variety of Polaris dealers, owners and management. The products were very well received, and you can see a video about that event by searching for Bennington Electric Boat with Forza X1 on YouTube. In Q4, we will continue with the next phase of that project to enhance the Godfrey model at our own 4 North Carolina test facility where we will trial our 300 peak horsepower motor and retrofit the pontoon with a smaller and more powerful single lithium-ion phosphate battery. And finally, in September of Q3, we are excited to announce that we closed out the initial clearing and grading project funded by a state and county grant and received our 11.3 acre site in Marion, North Carolina, where our new Forza factory will design. Because of an additional funding round Forza X1 completed in June of this year of over $8 million, we will be able to build this plant without the need to finance the mortgage or acquired debt. Full construction is now underway and expected to last for approximately 10 months. To date, all of the structural seal and rebar has been delivered, and the 60,000 square foot pad is being prepped for concrete and footer work. The building will be capable of producing 500 boats annually or more and will serve as the technology and fabrication center for Forza X1. As you can see, it was a very productive quarter for us, and the fourth quarter started off with a bang as well. Forza X1 had a great showing at the Fort Lauderdale Boat Show a few weeks ago, and we noted enthusiastic interest in our product. In fact, many people streamed into the booth to ask questions and signal their interest in buying a new Forza in 2024. The excitement was palpable and our booth was well represented with the professional sales staff of OneWater Marine. As many of you know, OneWater Marine, one of the largest boat dealers in the United States with over 100 locations, has placed an initial order for 100 units of our F22 boats. This initial 100 boat order should generate approximately $12 million in revenue for our company. At the Fort Lauderdale show, we solidified an agreement to present two of our bots at one of OneWater's premier location in Southern California for demonstration in sales in early 2024. California is, by far, the state with the largest number of current consumers of electric boats in the United States, and we are thrilled to enter that market in the spring of next year. Now turning to some financial updates. As of the end of September 30, 2023, our company has cash and securities of approximately $15.1 million, and our cash burn was $1.1 million for the quarter. This $1.1 million covered all salary expenses, prototyping, boat production and inventory purchases. Again, I'd like to thank you for joining the call today, and I will now open up for Q&A. Thank you.
Operator: At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question today comes from Raj Maheshwari of Charlestown Capital. Please proceed with your question.
Raj Maheshwari: Hello, Jim. Congratulations on the launch of the North Carolina facility. I wanted you to just sort of visualize what 2024 looks like in terms of deliveries. You mentioned earlier that you will be producing two electric boats a month, correct?
Jim Leffew: Yes, Raj. First of all, thanks for the question, and we appreciate your interest in Forza X1. You've been here since the start. And we are really excited to get underway with our production for retail use. Currently, we are building at a rate of about one per month as we prototype. As soon as January rolls around, we are going to increase that to two per month. We're going to get our demonstration units out in California, and we should start ramping up from there. We expect to be at some boat shows in early 2024. As you know, we have a number of deposits, and we have a 100 boat order from OneWater and we expect to slowly ramp up. As we continue to build our facility in North Carolina, we will supplement the early production at one of our fiber glass facilities in Tennessee and Florida, and we will build out the electric components in the North Carolina plant and finish the boats in North Carolina. So we expect to go from two boats a unit per week at the beginning of the year. And toward the end of the year, we could be operating at a much higher rate, depending on the amount of orders that come in and finishing up our North Carolina facility. Does that answer your question?
Raj Maheshwari: Yes, sir. Thank you. So am I to assume that the exit rate of 2024 is going to be, what, about three, four boats a week?
Jim Leffew: Yes. That's what we have in our planning right now, and we should be able to hit that.
Raj Maheshwari: Excellent. One final question from me, and then I'll leave the floor for any others. What about -- how are you doing in terms of the battery testing, the battery finalization issues and so forth?
Jim Leffew: Yeah. We have -- battery technology is changing and changing fairly rapidly. So we are experimenting with a number of different batteries. We have a new battery and I can't speak to the name of the companies we're dealing with right now because we're operating under an NDA. But we are quite satisfied with where we are with the battery technology. As it gets better and safer and the battery management systems continue to develop, we feel like the -- and as the power density goes down and we also see sort of a loosening up of the cost structure of some of these batteries, we feel like as time goes on, they will become more and more appropriate to compare to internal combustion offerings. And we're really excited with where we are with the battery technology at this time.
Raj Maheshwari: Thank you.
Operator: [Operator Instructions] Our next question is from John Cass of JAC Capital (ph). Please proceed with your question.
Unidentified Participant: Good morning. Can you discuss the time line with Polaris and any other potential deals of that sort?
Jim Leffew: Yeah. Sure. So as you're aware, we started speaking with Polaris in the second quarter of last year. They -- Polaris, of course, owns Bennington and Godfrey pontoons. I believe they're the number one and number three pontoon companies in the U.S. They got us a Godfrey free in June of last year. We built that out and electrified it. They got us a Bennington in July, and we built that one out in about two weeks. We had great support with the folks at Polaris. We had a great set of dealer meetings in August at the facility in Indiana. Polaris is very methodical and they do not introduce new technologies without making sure they do their due diligence. So we are continuing to work with them. And my understanding from their innovations group is they want to make sure the technology is robust before they introduce it to their public. But we are in a very good position with them. As I stated, we will be getting the Godfrey boat back to our North Carolina facility and we will be changing out the batteries with a different style of battery, a smaller, more powerful battery that overall will be a lighter weight than what we put in at first, and we'll be trying our 300-horsepower motor on that. So we will continue to prototype, iterate and improve those products over the next few months. And I can't speak for exactly what Polaris is thinking, but I think we're in a good position with them. We've got a great relationship. We've even spoken to them about doing a couple of other of their brands, and we'll see where that goes. But I think we're in a great position with that.
Unidentified Participant: Excellent. Congratulations. And can you give me a rough estimate about the two models that you mentioned just now about the average units they've sold over the last few years?
Jim Leffew: I think your question goes to the average sales for a 22-foot center and dual console. Was that what the question is?
Unidentified Participant: Yeah, because if you sold them a kit, your revenue would be -- the average price of the kit, which I was told at one time was $50,000 times the number of units that they would need. So I'm just trying to get an understanding of how big is the unit opportunity to sell them these kits for those two models that you just mentioned.
Jim Leffew: I see. Okay. So this is with respect to Polaris as well. So yeah, you could -- we have not done the math with them. We've done some sort of map and math. If they sell 15,000 units a year and we were over the course of time be able to get 5% or 10% of that selling the units, $50,000 would be a good approximation of a unit cost for our systems once we get to scale. So you could do the math from that. They've done extensive research into early adopters for EV electric boats. And again, that's sort of a confidential study that they've done. So there is some speculation involved with how many internal combustion engine-type customers will switch over to electric. But we feel like it's a compelling opportunity for us, and we're in it for the long haul.
Unidentified Participant: Great. Well, good luck. And are you discussing this potential selling kits to other boat manufacturers as well?
Jim Leffew: Yes, we are.
Unidentified Participant: Well, good luck, and will look forward to updates.
Jim Leffew: Thank you very much.
Operator: There are no additional questions at this time. I would like to turn the call back over to Jim Leffew for closing remarks.
Jim Leffew: Yes. As you can see, we're in a great position. We have a very hard working team. We're excited about the future, and we're going to keep working as hard as we can to get our products to the market as soon as we can. Obviously, we want to do it in the most responsible way. And we have lots of protocols we have to follow to make sure our products are introduced at the proper time. We appreciate everyone's support, and thank you again for joining us on the call today. Have a great day.
Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
