Phoenix Motor Inc. (NASDAQ:PEV) is a designer, assembler, and integrator of electric drive systems and light and medium-duty electric vehicles (EVs). The company operates through its wholly-owned subsidiaries, Phoenix Cars LLC (PCL) and Phoenix Motorcars Leasing LLC (PML), serving a diverse range of commercial and government fleet customers.
Business Overview
Phoenix Motor's core focus is on developing and integrating its proprietary electric drivetrain technology into various vehicle platforms, primarily the Ford Econoline Chassis (E-Series). The company's medium-duty commercial EVs cater to a wide array of applications, including shuttle buses, utility trucks, service trucks, flatbed trucks, walk-in vans, and cargo trucks. Since its inception in 2014, Phoenix Motor has been working to establish itself in the EV market, delivering its first commercial EV in the same year.The company's product portfolio includes not only its own branded electric vehicles but also a range of material handling equipment, such as all-electric lithium-ion forklifts and pallet jacks, sold under the Phoenix Motorcars brand. This diversified offering allows Phoenix Motor to serve a broad spectrum of commercial fleet customers, including airport shuttle operators, hotel chains, transit fleet operators, seaports, last-mile delivery fleets, and large corporations.
Financial Performance
For the fiscal year ended December 31, 2023, Phoenix Motor reported annual revenue of $3,122,000, a decrease of 3.2% compared to the previous year. The company's net loss for the year was $20,645,000, with an annual operating cash flow of -$3,652,000 and an annual free cash flow of -$3,745,000.In the latest quarter, the company's revenue stood at $288,000, a decrease of 29.6% compared to the same period in the prior year. The net loss for the quarter was $2,711,000. Phoenix Motor's quarterly operating cash flow was -$2,542,000, and its quarterly free cash flow was -$2,654,000.
Quarterly Highlights
During the third quarter of 2023, Phoenix Motor's revenue breakdown was as follows: sales of EVs $0, lease of EVs $70,000, sales of forklifts $103,000, and other revenue $115,000. The decrease in revenue was primarily due to a decline in lease rental and maintenance sales, as the lease terms were ended for some customers during the quarter.The company's gross margin for the quarter was -2.0%, a significant decrease from the 30% gross margin reported in the same period of the previous year. This was mainly attributable to lower margins for forklift and service sales, as well as increased other costs.
Operating expenses for the quarter were $2,531,000, a decrease of 34.2% compared to the third quarter of 2022. The reduction in operating expenses was largely due to a decrease in salaries expenses as a result of layoffs and other cost-cutting measures, partially offset by an increase in research and development expenses.
Liquidity and Capital Resources
As of September 30, 2023, Phoenix Motor had cash and cash equivalents, and restricted cash of $436,000. The company's working capital deficit stood at $2,353,000, and it had an accumulated deficit of $37,228,000. These factors raise substantial doubt about the company's ability to continue as a going concern.To address these liquidity challenges, Phoenix Motor is pursuing various strategies, including reducing workforce and overall SG&A and operating expenses, expanding strategic partnerships to outsource design and engineering work, implementing working capital initiatives, and continuing to explore capital market opportunities through public or private stock offerings, debt financings, and potential federal and state incentive funding programs.
Risks and Challenges
Phoenix Motor faces several risks and challenges that could impact its future performance. The company's operations have been affected by industry-wide supply chain disruptions and component shortages, leading to longer lead times and increased costs. Additionally, the company's ability to scale production and meet customer demand is heavily dependent on its access to funding and capital resources.The competitive landscape in the EV market is also intensifying, with established automakers and new entrants vying for market share. Phoenix Motor's success will depend on its ability to differentiate its products, maintain its technological edge, and effectively manage its costs to remain competitive.
Regulatory changes and government incentives play a crucial role in the EV industry. Any shifts in policies or the availability of subsidies and tax credits could significantly impact the demand for Phoenix Motor's products and the company's financial performance.
Outlook and Guidance
While Phoenix Motor has faced various challenges, the company sees potential growth prospects in the EV market. The Inflation Reduction Act of 2022 has introduced new tax credits and incentives that are expected to drive increased adoption of commercial EVs, particularly in the medium-duty segment that Phoenix Motor serves.The company is actively pursuing strategic partnerships and exploring new product development opportunities to strengthen its competitive position. Phoenix Motor is also focused on improving its operational efficiency, streamlining its supply chain, and enhancing its financial position to navigate the current industry landscape.
However, the company has not provided specific financial guidance for the upcoming fiscal year due to the ongoing uncertainties and volatility in the market. Phoenix Motor's ability to execute its growth strategy and improve its financial performance will be crucial in the coming years.