Grande West Announces Second Quarter 2019 Results

VANCOUVER, BC / ACCESSWIRE / August 28, 2019 / Grande West Transportation Group Inc. (TSXV:BUS)(OTC PINK:GWTNF) (“Grande West” or the “Company”), a Canadian manufacturer of mid-sized multi-purpose transit vehicles for sale in Canada and the United States, announced today financial results for the second quarter ending June 30, 2019.

Second Quarter Highlights and Recent Developments

  • Bus revenue of $10,972,752 for the three months ended June 30, 2019 compared to $24,239,624 for the three months ended June 30, 2018
  • Aftermarket parts and other revenue of $906,109 for the three months ended June 30, 2019 compared to $1,054,670 for the three months ended June 30, 2018
  • Net loss of $434,507 for the three months ended June 30, 2019 compared to a net income of $1,991,450 for the three months ended June 30, 2018
  • Adjusted EBITDA of $347,468 for the three months ended June 30, 2019 compared to an adjusted EBITDA of $2,879,094 for the three months ended June 30, 2018 (see “Reconciliation of Net Earnings to Adjusted EBITDA”)
  • Deliveries of 25 Vicinity buses for the three months ended June 30, 2019 compared to 61 buses delivered for the three months ended June 30, 2018

Selected Quarterly and Periodic Information

The following table shows the financial results and liquidity of the Company for the second quarter ended June 30, 2019 and June 30, 2018.

The results of operations for these periods are not necessarily indicative of the results of operations to be expected in any given comparable period.

(unaudited)
3 months ended
June 30, 2019
$
3 months ended
June 30, 2018
$
Revenue
11,878,861 25,294,294
Gross margin
2,341,956 4,856,009
Net (loss) income
(434,507 ) 1,991,450
Basic and diluted earnings per share
(0.01 ) 0.03

The Company reports Q2 2019 results of 25 Vicinity buses delivered, revenue of $11,878,861, net loss of $434,507 and gross margin of $2,341,956, which was 20% of revenue. Results for the second quarter of 2018 were 61 buses delivered, revenue of $25,294,294, net income of $1,991,450 and gross margin of $4,856,009, which was 19% of revenue.

Backlog: Current total firm orders are for over 150 buses valued at over $55 million. Deliveries will vary from quarter to quarter to account for different build specifications, customer acceptance and revenue recognition.

Selected Liquidity Items

(unaudited)
June 30,
2019
$
December 31, 2018
$
Cash and cash equivalents
4,420,834 2,732,437
Working capital
16,372,602 16,921,864
Total assets
35,642,905 40,445,904
Non-current financial liabilities
2,669,504 2,404,022

Business Overview

Corporate Update

Grande West has delivered over 400 buses in the Canadian and U.S. markets and continues to deliver on its backlog of orders. The Company is the market leader in the mid-size bus category in Canada where it sells its Vicinity branded buses.

William Trainer, Grande West President and CEO, stated, “as previously announced, our main focus for 2019 and 2020 is on product line expansion and growing our backlog. We expect to achieve these goals through leveraging our strong engineering team and increased sales and marketing efforts in the U.S. The results for 2019 reflect the overall temporary softening of the market being realized in Canada for our industry. We continue to lead the market in Canada for new orders in our category and our pipeline for new potential sales in the U.S. has never been stronger. We have recently partnered with Spartan Specialty Chassis and Vehicles, a business unit of Spartan Motors Inc. (“Spartan”) to increase capacity and strengthen our manufacturing capabilities in the U.S. to facilitate the next stage of significant growth. After two consecutive years of record growth and significant achievements in many areas of our business, the outlook for Grande West growth remains very positive.”

We are fast tracking both our smaller crossover bus model and our electric propulsion system for our Vicinity buses. We will produce our first crossover bus, the Vicinity LT, before year end with delivered sales expected in 2020. Our first delivery of an electric bus is also planned for 2020.

Recent Developments

During the three months ended June 30, 2019, the Company delivered 19 buses to Quebec public transit customers. This is an important achievement for Grande West as Quebec is the second largest market in Canada with great potential for future orders.

In May of 2019, the Company announced it had entered into a vehicle assembly agreement with Spartan Specialty Chassis and Vehicles, a business unit of Spartan Motors Inc. (NASDAQ: SPAR), the North American Leader in specialty vehicle manufacturing and assembly for the commercial and retail vehicle industries, as well as for the emergency response and recreational vehicle markets.

Under the terms of the agreement, Spartan will manufacture Grande West’s Vicinity model buses, which will continue to satisfy the Federal Transit Administration’s (FTA) Buy America requirements and reduce potential tariff exposures. The Grande West Vicinity bus achieved best-in-class results from the FTA Model Bus Testing Program in Altoona, Pennsylvania, which measures structural durability and integrity, reliability, performance, maintainability, safety, noise, and fuel economy.

In August of 2019, the Company announced that William Trainer will assume the role, duties and responsibilities of CEO. Mr. Trainer founded the Company in 2008 and held the role of President and CEO through the development and initial high growth stages of the Company. Mr. Trainer had stepped down from the CEO position in February 2018 for personal reasons. Mr. Trainer replaces Jean-Marc Landry, who has worked with Grande West since 2013 as Vice President, Business Development before becoming CEO. The Company thanks Mr. Landry for his efforts over the past years and wishes him success in his future endeavours.

Outlook

Management expects to maintain its strong market segment leadership position in Canada and continue to make progress in the U.S. with private operators and public transit agencies. The external pressures to “right size” vehicles for its application and ridership levels along with the availability of funding and healthy economic conditions in Canada and the U.S. create an ideal environment for Grande West to prosper. Market conditions are right and the outlook for Grande West growth in the U.S. remains very positive.

In the last two years the Company achieved record revenues. We experienced a decline in the backlog during 2018 mainly due to lower order intake, which has impacted 2019 results. Bid activity during the first half of 2019 has been higher than the same period in 2018. We expect to see bid opportunities continue to increase throughout the year which should turn into revenue in 2020 and beyond. We are maintaining our strong leadership position in our market segment in Canada and we continue to make progress in the U.S. market. We received our first Buy America orders for delivery in 2019. Buy America orders are expected to increase during the last half of 2019 for deliveries in 2020.

Funding for transit in the U.S. and Canada is high and it is expected to remain high.

In the U.S. the Consolidated Appropriations Act was recently passed and continues historic funding levels with more than $16 billion for public transportation and intercity passenger rail. This legislation includes $13.4 billion for public transportation and $2.6 billion for intercity passenger rail grants and is $1.2 billion more than the previous FY 2019 FAST Act authorization levels.

In Canada in 2017, the federal government allocated $21.1 billion over 11 years to transit construction, expansion and rehabilitation.

Part of our strategic plan is to expand our product line by adding a 100% zero emission electric propulsion system to our existing Vicinity bus models and adding a smaller crossover bus model to our product lineup. The Vicinity electric bus will place Grande West in an excellent position to capture market share as the demand for zero emissions buses grows. Our crossover bus model will provide Grande West access to the high-end cutaway bus market segment. Municipalities of all sizes across Canada and the U.S. along with private operators in multiple sectors are looking for a more robust low floor accessible bus to replace their cutaways.

Aftermarket Parts sales are expected to continue to increase as Vicinity bus fleets get older and new vehicles are placed into service.

Tariffs and Surtaxes

Management continues to closely monitor negotiations and ongoing global trade discussions which may influence the Company. We are implementing purchasing, shipping and assembly modifications to best adapt to the current trade environment and by strengthening our U.S.-based operations and component sourcing.

Management currently expects an immaterial impact for 2019 for any market increases for our current deliverables. Any future component cost increases should be substantially recoverable through new RFPs or through producer price index (PPI) mechanisms in multiyear contracts.

Reconciliation of Net Earnings to Adjusted EBITDA

Management believes that Adjusted EBITDA is an important measure in evaluating the historical operating performance of the Company. However, Adjusted EBITDA is not a recognized earnings measure under IFRS and does not have a standardized meaning prescribed by IFRS. Accordingly, Adjusted EBITDA may not be comparable to similar measures presented by other issuers. Readers of this MD&A are cautioned that Adjusted EBITDA should not be construed as an alternative to net earnings or loss determined in accordance with IFRS as indicators of the Company’s performance, or cash flows from operating activities determined in accordance with IFRS as a measure of liquidity and cash flow. The Company defines and has computed EBITDA as earnings before interest, income taxes, depreciation and amortization, foreign exchange gains or losses, non-operating income and expenses, and share based compensation.

The following table reconciles net earnings or losses to Adjusted EBITDA based on the consolidated financial statements of the Company for the periods indicated.

3 months ended June 30, 2019 3 months ended June 30, 2018 6 months ended June 30, 2019 6 months ended June 30, 2018
(unaudited)
$ $
Net Comprehensive loss
(434,507 ) 1,991,450 (1,114,907 ) 2,411,659
Add back
Stock based compensation
224,900 371,541 446,150 677,277
Interest and finance costs
217,791 356,935 393,822 671,826
Foreign exchange (gain) loss
86,108 3,440 (34,455 ) 571,643
Amortization
253,176 155,728 505,351 249,841
Adjusted EBITDA
347,468 2,879,094 195,961 4,582,246

Additional information is provided in the Financial Statements and Management’s Discussion and Analysis at http://sedar.com/.

A conference call for analysts and interested listeners will be held on Thursday, August 29 at 11:00 AM EST. The call-in number is (844) 602-0380 or (862) 298-0970, the webcast can be accessed at https://www.investornetwork.com/event/presentation/53361. A replay of the call will be available for 30 days at the webcast link or by calling (877) 481-4010 and entering PIN# 53361.

About Grande West Transportation Group

Grande West is a Canadian company that designs, engineers and manufactures mid-size multi-purpose transit vehicles for public and commercial enterprises. Grande West’s Best-in-Class heavy-duty Vicinity bus is available in 27.5’, 30’ and 35’ models powered by clean diesel or CNG designed with affordability, accessibility and global responsibility in mind. It costs significantly less than a regular 40 foot transit bus, is more maneuverable, burns less fuel and emits less harmful emissions. Grande West is now offering a new product which is the first Crossover Vehicle in the transit space – a medium-duty, monocoque-designed rear engine vehicle for delivery in 2020.

The Company has been successful in supplying Canadian municipal transportation agencies and private operators with new buses and is receiving follow-on orders in many Canadian transit agencies. Grande West is compliant to Buy America certification, and along with ABG, its exclusive US distributor, is actively pursuing opportunities in public and private transit fleet operations that would benefit from Grande West’s vehicles.

For further information please contact:

Grande West Transportation

John LaGourgue
VP Corporate Development
Ph: 1-604-607-4000
jlagourgue@grandewest.com
www.grandewest.com

Neither the TSX-V nor its Regulation Service Provider (as that term is defined in the policies of the TSX-V) accepts responsibility for the adequacy or accuracy of this release.

Cautionary Note Regarding Forward-Looking Statements

This press release includes certain “forward-looking information” and “forward-looking statements” (collectively “forward-looking statements”) within the meaning of applicable Canadian securities legislation. All statements, other than statements of historical fact, included herein, including without limitation, statements regarding the use of proceeds from the Private Placement, are forward-looking statements. Forward-looking statements are frequently, but not always, identified by words such as “expects”, “anticipates”, “believes”, “intends”, “estimates”, “potential”, “possible”, and similar expressions, or statements that events, conditions, or results “will”, “may”, “could”, or “should” occur or be achieved. Forward-looking statements involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements.

Important factors that could cause actual results to differ materially from Grande West’s expectations include uncertainties relating to the receipt of final approval from the TSX-V; and other risk and uncertainties disclosed in Grande West’s reports and documents filed with applicable securities regulatory authorities from time to time. Grande West’s forward-looking statements reflect the beliefs, opinions and projections on the date the statements are made. Grande West assumes no obligation to update the forward-looking statements or beliefs, opinions, projections, or other factors, should they change, except as required by law.

SOURCE: Grande West Transportation Group Inc.

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