Good day, ladies and gentlemen, thank you for standing by. Welcome to the Greenland Technologies First Quarter of 2021 Earnings Conference Call. Currently, all participants are in 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 Blueshirt Group Asia. Ms. Qian, please proceed.

Thank you, operator, and hello, everyone. Welcome to Greenland Technologies first quarter of 2021 earnings conference call. Joining us today are Mr. Raymond Wang, Chief Executive Officer; and Mr. Jing Jin, Chief Financial Officer. We released the result earlier today. The press release is available on the company's website at www.gtec-tech.com, as well as on Newswire Services. A replay of this call will also be available in a few hours on our company's website. Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions 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 results 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 filing with the SEC. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. With that, now let me turn the call over to our CEO, Mr. Raymond Wang. Go ahead, Mr. Wang.

Thank you very much, Julia, and welcome, everyone, to Greenland Technologies' first-ever earnings call. Now this is the routine that we will continue as part of our mission to provide greater communication and transparency into our business strategy and our performance with shareholders, investors, and interested parties. So let me just start with a quick overview of our business. Greenland Technologies Holding Corporation is a market leader in the development and manufacture of transmissions and drive train components for material handling vehicles with a focus on forklift trucks. Founded in 2006, we have focused on the material handling market in China and established our brand over the years with high-quality innovative products, a strong established supply chain, robust manufacturing capabilities, and a dedication to supporting our client needs and building long-term relationships. Currently, we are the largest independent drive train supplier for forklift trucks in China with over 35% market share and a clientele that includes the biggest forklift OEM players in the game, such as Toyota, Linde, Heli, Hangcha, and Doosan, just to name a few. We meet the needs of our clients by leveraging our established supply chain and state-of-the-art 600,000 square foot manufacturing facility in Shaoxing, China, that can produce over 200,000 transmission units and 3 million precision gears annually. Now with the strong demand for forklift trucks in China, due to government spending on infrastructure, and an increase in warehouse construction activity, we have achieved our highest revenue and transmission drive trains delivered in a single quarter in the history of our company. In the first quarter of this year, Greenland has delivered 36,986 transmissions and drive trains and generated a revenue of $24.6 million. And we are confident that demand for forklift trucks will continue to remain strong in China throughout 2021, which will contribute to the success of our core product line. Now here at Greenland, our strategy and culture are based on two core principles. Number one, operational excellence; and number two, innovative product offerings. A disciplined management of operations and structural costs allow us to deliver a high volume of exceptional quality products at a competitive price. This is combined with innovative product offerings that cater to shifting trends in the market to make our clients more successful in their business. We cultivate innovation through a team of dedicated professionals that have amassed 108 registered patents for proprietary systems, components, and manufacturing techniques as of the end of last year. This innovation is ingrained in our culture at Greenland Technologies since the very beginning when we started with the manufacture of high-quality precision gears. This evolved to transmissions for forklift trucks, then drive trains for forklift trucks and other material handling vehicles. And last year, we announced our commitment to developing products for clean energy powered vehicles with the launch of our integrated drive train that is specifically catered for lithium powered forklift trucks. This product is designed to simplify the development and manufacture process for OEMs to enter the lithium forklift market quickly. And we have seen strong initial sales and adoption of this product line with over 2,000 units delivered monthly. With the early success of this new product, combined with the performance of our core product line, I estimate that we will achieve between $80 million to $90 million in gross revenue by the end of the year. And this year, we announced the next evolution of our product line with the development of all electric industrial vehicles. We will be a pioneer in this emerging market with our first product, the GEL 1800. This is an all-electric wheeled front loader, with a 1.8 tonne loading capacity, powered by a 141-kilowatt hour lithium battery. This vehicle will be closely followed by an 8 tonne electric excavator and our own line of lithium powered forklift trucks that are currently in pilot production right now and will be commercially available in the fourth quarter of this year. Just like our product evolutions to meet market trends, we also need to adapt our business model to capture growth opportunities and continue building value for our shareholders. As a result, we will begin expanding our operations beyond China by entering the global market. And our new line of electric industrial vehicles will be the tip of the spear as we extend our operations abroad. We're going to be focusing on entering the United States market due to favorable environment of government support and the adoption of clean energy technologies. Our electric vehicles will be assembled in the United States and marketed to industries that are best suited to benefit from the advantages of electric-powered products, such as urban settings, sensitive areas near hospitals, schools and parks, property management, waste and recycling management, and livestock agriculture. So with our exceptional historical performance highlighted by this quarter, strong initial adoption of our integrated drive trains, and the expansion of our business to the global market with a new line of electric industrial vehicles, there's a lot to be excited about here at Greenland Technologies for 2021 and into the future. So I just want to thank everyone at Greenland for working hard and staying committed to the success of the enterprise to achieve a record quarter. Now without further ado, let me turn the call over to our CFO, Mr. Jing Jin, who's going to provide more insight into our financial performance. Jing Jin, the call is yours.

Thank you, Raymond, and thank you, everyone, for joining our call today. I will now go over our key financial results for the first quarter of 2021. For the full details of our financial results, please refer to our earnings press release. We have achieved outstanding results in Q1 this year. Total revenue was $24.6 million, an increase of 149% year-over-year. The increase was primarily due to the significant increase in our sales volume. We have seen robust growth in the industrial sector with solid demand increases. The number of transmissions sold increased nearly 130% to 36,986 units from 16,099 units in the first quarter of 2020. Cost of goods sold was $19.5 million, an increase of 145% from $7.9 million in the first quarter of 2020. The increase was primarily due to the increase in volume of the transmission products that we sold. Gross profits were $5.1 million, an increase of 165% from $1.9 million in the first quarter of 2020. As we continue to improve our productivity, maximize factory capacity, and reduce material costs through large purchases, we generated a gross margin of 20.7%, 1.2 percentage points higher than the 19.5% in the first quarter of 2020. The total operating expenses were $2.2 million, up 21% from $1.9 million in the first quarter of 2020. In our revenue, year-over-year revenue growth was 149%. We have significantly improved our operating efficiency by only increasing operating expenses by 21%. From the view of other dimensions, operating expenses as a percentage of total revenue were 9.1%, a decrease of 9.7 percentage points compared to 18.8% in the first quarter of 2020. As we are expanding our sales and distribution network to support higher growth, the selling expenses in Q1 were $0.38 million, up 74.9% year-over-year. The general and administrative expenses were $0.9 million, a decrease of 15% year-over-year, as we have been relentlessly optimizing our management functions and enhancing process automation. In Q1 2021, our R&D expenses increased by 70% to $0.96 million from $0.56 million in Q1 2020. As a market leader in transmission and drive train segments, we continue to innovate our product and solution to lead the next phase of our growth. With rapid growth in revenue and improved operating efficiency, we were able to generate impressive net income growth of 645% from last quarter, reaching $2.4 million this year. The current assets on our balance sheet as of March 31, 2021, were $121.3 million. We are really confident that Greenland Technologies is well positioned to lead the growth of our sector. Now, let me offer some insights on the financial guidance for this year 2021. To be conservative, our current revenue guidance for 2021, inclusive of the Industrial EV revenue, is expected to generate $80 million to $90 million of revenue, representing an increase of 20% to 35%. As Raymond shared with you earlier, we are planning to launch the industrial electric vehicle in Q4 2021. The pre-booking of the EV will be in the middle of May. We will provide you with the status updates in the next earnings call. That concludes our prepared remarks. Let's now open the call for questions. Operator, please go ahead.

We have our first question from Craig Irwin from ROTH Capital Partners. Please go ahead.

The 35% market share number that you shared is definitely an impressive number. Can you qualify this for us? Is this on electric forklifts drive trains? Or does this maybe include a slightly broader category of sort of small industrial equipment? Can you maybe just give us a description of what exactly you're looking at to derive the 35% number?

Absolutely, absolutely. So that number is actually based off of forklift trucks being produced and sold in the Chinese market that consists of both electric and internal combustion power. So it's not just limited to electric forklifts. And it does not incorporate other material handling vehicles such as light utility vehicles or anything of that nature. That 35% is specific to forklift sales in China, regardless of power.

Okay. That's a little better than I thought it was. I thought this was in electric. So that's a nice clarification. So then of the 37,000 electric transmissions you delivered in the March quarter, how many of those went to international customers? Or maybe a different way to ask this question is, what percentage of revenue is generated outside of China today?

Absolutely. That's a fantastic question. So currently, over 95% of our sales are in the China market. One of the winning strategies for our business has always been focus. And we specifically targeted the Chinese market since the very beginning. Now this focus and dedication, it's actually what allowed us to become the market leader and largest independent drive train supplier for forklift trucks in China. But now that we've accomplished this milestone, we need to begin to extend sales to the global market, such as the United States, with an expanded product line. So by 2022, I'd say we're going to start seeing a shift towards global sales.

Understood. So then the growth there that you're achieving in China is - it's really impressive. Can you maybe talk about what's driving that growth? Is that the Chinese industrial recovery? Is it maybe the adoption of electric drivetrain technology by more forklift OEMs, maybe customers? Can you maybe give us a little color to help us understand this tremendous year-over-year growth?

Yes, absolutely. And that's a great question. You framed it perfectly. Because right now, because of the strong demand in China, the forklift industry is skyrocketing. So for OEM sales, other large players in the game such as Toyota, or Linde, they're actually seeing growth of about 40 plus percent in the Q1 quarter, because of the strong demand in the Chinese market for forklift trucks. Just like I said earlier, it's because of China's investment in infrastructure and also its drastic increase in warehouse capabilities throughout the region. Now you mentioned specifically about electrification of forklifts, and I'm really happy you did. Because right now, China is the leading sales market for forklift trucks in the world. They represent over 40% of all forklifts sold globally that happen in China. And you're seeing a drastic adoption of electric forklift trucks. The movement is away from internal combustion from propane, and the switching over to electric. Most importantly to note, lithium battery forklift sales have grown dramatically. They actually grew by 186% year-over-year and currently represent 25% of all electric battery forklifts sold. So not only is it shifting towards electric forklifts as a whole, but it's also shifting away from lead acid and moving quickly into lithium battery focus. We saw this trend coming, which is why we actually developed our integrated drive train specifically for lithium-based forklifts. Because we saw the trend that it would shift quickly over, and that’s actually the reason why we're seeing strong initial sales for integrated drive train products, because OEMs now are seeing that trend and they want to get to market as fast as possible to be competitive to capture market share. With our products, we hope to give them that boost and head start.

So I wanted to ask for a little bit more color on your plans for the electric motor vehicle you're going to introduce in the fourth quarter. How much do you think it's going to take as far as investment to launch the product? And is this maybe a China or U.S. product, or international, European? And do you have some potential projections on units or sales that you think are reasonable targets for the company?

Absolutely. So the beta phase consisting of research, development, and design for our industrial electric vehicles is already completed, with its costs factored into our Q1 results. Actually, Jing Jin went over the R&D spend, and you saw the 70% increase there. That was actually a big component of it with our electric vehicles. The initial deployment of our pilot production is going to be minimal. The initial spend is going to be probably about $150,000 to $250,000. However, when we transition to full-scale production, involving the deployment of assembly facilities, we expect to invest between $2.5 million to $5 million based upon product interest and regional needs. And based upon the timeline, we expect to see sales results in about 2022. Our marketing is going to target U.S.-based corporate government organizations, where our industrial electric vehicles are going to be well suited. So I mentioned earlier, like warehouses, large property management companies, waste management, mining, and livestock agriculture. Our vehicles, we are committed to expanding into the United States. Focus is key to our business model. So these vehicles are going to be assembled in the United States, on U.S. soil. The way we're going to be doing that, and the reason why we're able to launch this product with a relatively minimal spend is because we're actually going to be utilizing an asset-light distribution model. So what we're going to do is, we’re going to leverage our strength in China with our established supply lines and our manufacturing capabilities to manufacture the core components for the vehicles. From our China facilities, we're going to ship them over to the United States into what I'm calling macro assembly facilities in the United States. And we’re first looking at the East Coast right now. So these sites are going to be responsible for the final assembly and quality assurance checks to make sure everything's good to go. The final assembly is going to be performed in the United States, and then we will distribute them from there.

Great. Last question, if I may. I'm pretty new to GTEC, like I guess most people on this call. Can you maybe describe your current manufacturing footprint in China? What is the utilization? And what are the capabilities, both today and flexibility for expansion as demand grows?

Absolutely. So right now, I mentioned earlier that our facility is a little over 600,000 square feet in space. Currently, we are utilizing about 450,000 square feet for our facility. We moved into this facility in 2019. We own it 100%. We bought the land and created the space. So it's entirely ours. This is a state-of-the-art facility. We have hundreds of top-line machines, such as CNC machines, milling, lathes, all top quality. Our focus is on developing a premium product. We're not trying to win the low-price game and push things out. We've earned the trust of our clients by focusing on quality and consistency over time. And right now, our facility is able to generate over 200,000 drive train systems and 3 million precision gears annually. However, with that said, because of this massive growth in demand for forklifts in China, and because of our expansion, as well as the global markets, we already see the need for additional manufacturing. So we are in the process right now of expanding our facilities to utilize the entire 600,000 square foot space. And that will improve our production capabilities.

Yes, and also in addition to Raymond's comments, as Raymond said before, we have the capacity of 200,000 transmission products for the capacity right now. So this year, we are expected to go over 100,000 - at least 100,000 transmission products so far. So let's say right now our capacity still gives us the room about 30% to 40% room for growth in terms of the products.

We have our next question from Bryan from Aegis Capital. Please go ahead.

Congratulations on the quarter. You had such strong momentum on the top line, on the revenue line during the quarter. I wonder if you could just characterize how much of that was sort of pure organic growth in the market and orders from customers as opposed to catch up from the impact of COVID. Obviously, when we look at the first quarter of a year ago, you're impacted by the COVID slowdown and some of the mandatory quarantines and so forth. So, yes, just how much of what you saw, the struggle in momentum you saw not just in the first quarter but fourth quarter as well, was sort of that sort of pure organic growth in your business and your core business as opposed to catching up from COVID? And maybe a two-part question, because it sort of dovetails with that question. As you look at your guidance for the remainder of the year, $80 to $90 million, that would probably imply some moderation of that sales level on a quarterly basis for the next couple of quarters for the next three quarters. And is that due to this sort of catching up? Or are you just maybe being a little conservative, this early in the fiscal year?

So let me start with the performance of our core product line. So yes, this quarter has been record sales. And we're very, very happy and proud of it. But this performance, this success that we've earned is not just because of a catch up of the existing orders due to the COVID environment. The best way I can illustrate that is just going through our historical numbers. So in the fourth quarter, we produced about 35,000 transmissions. At that time, that was our most successful quarter. We're actually breaking records quarter after quarter. But before that, in Q3, we produced over 26,000 transmissions; Q2, 28,000. This is during the height of COVID. For these quarters, Q2 and Q3, those represent growth of about 40% and 50% year-over-year in those quarters, and during the height of COVID. In terms of whether our growth is organic, I would say especially during the challenging environment of COVID, especially in China, the nation was shut down, and we had to close our facilities even for the first quarter of that year. Our ability to rebound quickly and deliver and meet the needs for our clients really demonstrated our worth to our clientele. That continued to earn us additional business. In addition to our innovative products that we released, those all contributed to the bottom line. So yes, the market is definitely favorable in our industry, and we have enjoyed some of that organic growth. A core component of it, I believe, is based on our handling and ability to still deliver quickly after the effects of COVID, even during the height of it.

That's great. Maybe just one follow-up if I could. We obviously see raw material prices rising on a global basis, and your margins are so strong. Could you maybe just talk through some of the moving factors there on the strength of your gross margins? I mean, the 20.7% in the quarter. So obviously good progress there from the fourth quarter. So is that just increased efficiencies offsetting the pricing of raw materials, or are you able to also pass through some maybe modest price increases to help offset those rising raw materials?

Great question. And actually, just to provide a further context and color on your question to the group. So in China, for the raw material market since January of this year, our raw materials have been revising and the core material that directly impacted our business was steel. Since January, the price of steel has increased by 40%. This definitely produced a challenge for us. Our procurement managers were working night and day to secure and procure sources for more steel to keep our production going. But they worked so hard and their dedication to the business allowed them to source that steel and continue our production without hindering it or slowing down, which is fantastic. This actually turned out to be a blessing in disguise, because we opened up new supply chains and further strengthened our supply chain capabilities with these new relationships that will extend into the future. I've been very happy about that one. As for the actual price of steel itself, I actually find that this price increase is going to be a short-term situation, primarily due to two actions that the Chinese government will impose in the very near future. Number one, China's going to ban the export of steel outside of the country, just to preserve the local supply to ensure it's being used for Chinese production. That's number one. Number two, they will be removing all tariffs for the importation of steel into the country. Because of these factors, I anticipate that the price of steel is going to drop dramatically. Should that occur, we expect to see our margins improve even more, because the margins that we reported are during those difficult environments. That’s why our clients love us; we're able to solve these factors during difficult situations. We're quick to adapt to the market and continue to provide value and support to the businesses.

We have our next question from Eva from Valuable Capital. Please go ahead.

I have a question to ask. What are the main reasons or the key drivers that you're entering into the EV industry? And which companies do you think are your main future competitors in this market?

So currently, in the electric industrial vehicle market, there is no market leader or major players. It is an untapped market. We agree that we're going to be a pioneer in establishing this opportunity. As a market leader in critical drive components of material handling vehicles, we have the expertise and knowledge. Coupled with our established supply chain and state-of-the-art manufacturing facility, we have the capability to produce the next generation of clean energy industrial vehicles. And to be clear, there are large tier one companies that have electric industrial vehicles in pilot phases. However, these companies, as market leaders with a portfolio of fossil fuel powered products, they have no incentive to commercially produce these vehicles, as they would only serve to cannibalize the sale of the traditional products. So we agree, we are not burdened with a legacy product line to hinder our focus on the deployment of electric industrial vehicles. Because of these three key factors, this presents a phenomenal opportunity to evolve our company from a key component manufacturer to a full-on electric vehicle manufacturer, which is going to create a lot of value for our shareholders. So that's actually why we're entering the EV market, the industrial market. You actually had a second portion, a second question. I apologize; I did not catch that. Could you repeat that?

Sure. My question is which companies do you think are your key competitors in this market?

Great question. So at Greenland, we have three core businesses with our product expansion. We have our transmission and drive train components. We are going to deploy our own line of lithium powered electrical forklifts and the industrial electric vehicles. For transmissions, our main competitor is actually first-party manufacturers from tier one companies that are looking to manage the manufacture of transmissions themselves for their own products. Outside of that, in the third-party space, there's a very large company, ZF, which is a competitor. However, in our markets, we're still the leader. As for electric forklifts, particularly in the U.S. market, where we're going to be targeted, the main competitor is going to be the Raymond Corporation, a subsidiary of Toyota. They actually have significant market share and are expanding rapidly in the electric forklift space. So they're going to be our main competitor in the U.S. market. As I mentioned earlier, for the industrial EVs, there’s no real market leader right now. There are only small, emerging new companies. There’s a small company based out of Germany and a small company based out of the United States, out of Texas. However, their products are extremely small scale, more for residential usage. So we don't see them as like competitors. Our product is servicing a completely different clientele and market.

Thank you. It's almost time to wrap up the conference. If you have any questions, please reach out to us via email or phone. Now, I’ll hand the call back to Mr. Wang for any closing remarks. Please go ahead, sir.

Sure, A.J. Thank you very much. First off, I really want to thank all of you for joining the call to learn a little bit about our company and for being interested in our performance and success. I'm super excited, as you can probably hear throughout the call, about how well we're meeting the market conditions and in the growth opportunities as we expand into new markets. I do want to thank everyone for joining our very first earnings call. It is my mission to increase the transparency and communication into our business with interested parties. So this will be a continued routine, and we will explore other avenues to provide more information to you all. So thank you so much everyone for joining. Thank you for all of your support. I look forward to reporting to you again next quarter on our progress.

Thank you. That concludes our conference for today. Thank you for participating. Thank you, all.

Thank you.