Forza X1, Inc. (ticker: FX1) has announced a strategic pivot in response to the current economic climate and the decreased demand for marine electric vehicles (EVs). During the first quarter 2024 investor call, Joseph Visconti, Executive Chairman and Interim CEO, outlined a series of measures aimed at reducing cash burn and reassessing the company's future direction.
Despite a challenging market, Forza X1 continues construction on its North Carolina facility due to pre-existing financial commitments and potential shareholder value.
Key Takeaways
- Electric boat sales remain small compared to traditional combustion engine boats.
- The broader marine industry is experiencing a downturn, influenced by economic uncertainties.
- Forza X1 is slowing down testing and production, reducing monthly cash burn, and exploring strategic alternatives.
- The company is continuing investment in its North Carolina facility due to prior financial commitments.
- Forza is seeking joint ventures and collaborations to enhance market reach and product offerings.
Company Outlook
- Forza X1 is actively seeking strategic alternatives to maximize shareholder value with minimal financial risk.
- The company is exploring joint ventures with companies that have complementary technologies or market access.
- Collaboration with technology firms, especially those specializing in battery technology and propulsion systems, is a focus.
- Forza aims to confine resources, share risks, and capitalize on joint capabilities with other industry players.
Bearish Highlights
- The National Electric Vehicle Sector is mirroring a market slowdown in enthusiasm and demand for electric boats.
- Only 200 electric boats were sold in the United States in 2023, with 90% being small horsepower boats concentrated in California.
- Large motor manufacturers like Yamaha and Mercury have entered the marine EV space, intensifying competition.
Bullish Highlights
- Forza X1 has successfully reduced its burn rate from $600,000 per month to approximately $230,000, with a target to reach less than $150,000 as they exit Q2 of 2024.
- The company continues focused testing on the final beta iteration of its FX1 140 horsepower outboard motor.
Misses
- The consensus that electric marine vehicles would be adopted at a much faster rate has not materialized as expected.
Q&A Highlights
- Visconti thanked shareholders, stakeholders, and employees and promised continued updates through press releases and quarterly calls.
Forza X1, Inc. is facing a challenging market environment, with a notable slowdown in the marine EV sector. Still, the company remains committed to adjusting its business strategy to ensure long-term growth and success.
The construction of the Marion facility is progressing, and Forza X1 is actively exploring various avenues to leverage its technology and mitigate financial risks. The executive team is dedicated to finding the most viable path forward for the company and its shareholders.
InvestingPro Insights
Forza X1, Inc. (NASDAQ: FX1) is navigating through a turbulent period marked by significant challenges in the marine EV industry. To provide a deeper understanding of the company's financial health and market position, we turn to recent data and analysis from InvestingPro.
InvestingPro Data:
- Market Cap (Adjusted): 6.52M USD
- Price / Book (as of Q4 2023): 0.41
- Revenue (as of Q4 2023): 0.04M USD
InvestingPro Tips:
1. Forza X1 holds more cash than debt on its balance sheet, which could provide some financial flexibility in these trying times.
2. Analysts predict the company will be profitable this year, a critical factor for investors considering the company's capability to navigate through the downturn in the marine EV sector.
It is worth noting that Forza X1 is trading at a low Price / Book multiple, which could indicate that the stock is undervalued relative to the company's net asset value. This metric, coupled with the anticipated sales growth in the current year, may interest value-oriented investors.
Still, the company has been quickly burning through cash, and its valuation implies a poor free cash flow yield. These factors underscore the importance of the strategic measures outlined by Joseph Visconti to reduce cash burn and reassess the company's direction.
For those seeking additional insights, InvestingPro offers a comprehensive list of tips for Forza X1, which can be accessed at https://www.investing.com/pro/FRZA. To further enrich your investment strategy, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With 15 additional InvestingPro Tips available, investors can gain a more nuanced understanding of the company's prospects and position in the industry.
Full transcript - Forza X1 Inc (FRZA) Q1 2024:
Operator: Welcome to the Forza X1, Inc. First Quarter 2024 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 Joseph Visconti, Executive Chairman and Interim CEO of Forza X1 Incorporated. Before I turn the call over to Joseph, 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 other similar expressions. The company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operation, 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 its filings with the Securities and Exchange Commission which are available on the company's Investor Relations website at ir.forzax1.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 at ir.forzax1.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 formal presentation. Please note that only those who have dialed in via telephone may ask a question. Those listening via webcast will be unable to submit questions. [Operator Instructions]. At this point, I'd now like to turn the call over to Joseph Visconti.
Joseph Visconti: Thank you, Rob. Good morning. I want to welcome everyone to the call today. Thank you for taking the time out of your schedules. My name is Joseph Visconti, I'm the Executive Chairman and Interim CEO of Forza X1. With me today is also Forza's new Interim CFO, Mike Dickerson. During this call, I will update you on recent company developments and discuss Forza's current operations. As I alluded to during our year-end call in March, electric boat sales continue to be relatively small in comparison to boats with traditional outboard combustion motors. Across the board, the marine industry is seeing lower demand for recreational vehicles, influenced heavily by economic uncertainties and shifting consumer priorities. We have observed a noticeable market slowdown for the enthusiasm and general demand for electric boats, mirroring the broader trend we are witnessing in the National Electric Vehicle Sector. A data tracking company named SSI that tracks all boat registrations in the United States indicates that only 200 electric boats were sold in all of 2023, with a staggering 90% of them being a small horsepower electric boat primarily concentrated in California. The consensus was that electric marine vehicles would be adopted at a much faster rate than we were experiencing. Additionally, we've seen large motor manufacturers like Yamaha and Mercury enter the marine EV space with Suzuki likely to follow, these global engine manufacturers have likely committed significant R&D expenses to develop their own electric motors and competing head-to-head against Mercury, Yamaha and Suzuki will be extremely difficult. In response to these market dynamics, we have decided to slow down the pace of testing and production as we assess the future of the company. During this ongoing assessment, we are tightening the company's financial belt by reducing Forza's cash outlay. So far, Forza's burn rate has been significantly reduced from last year's trailing $600,000 a month to our Q1 burn approximately $230,000 per month with a target to reach less than $150,000 per month as we exit Q2 of 2024. By reducing our cash burn is necessary important step as we evaluate the challenges we face from current low demand for marine EV products and the slowdown of recreational marine industry as a whole. Even though we are pulling in the reins on the company spending, we continue to perform limited, but very focused testing on what we believe to be the final beta iteration of our FX1 140 horsepower outboard motor. Our team is exploring and open to all available options and opportunities with regard to our electric motor and our technologies. Additionally, we are continuing with our investment in the construction of our Forza 60,000 square foot facility on our 11 acre property located in Marion, North Carolina. Construction of the plant is going well. The exterior walls are currently being assembled with the roof to follow. The obvious question is why continue the construction of the North Carolina factory with current market conditions? And the answer is, while financial and contractual commitments on the building were made over a year ago and it would cost more to exit. We believe that completing the building would allow us to realize a better value for our shareholders than an unfinished building. Looking ahead, we are actively seeking strategic alternatives to leverage the technology we have developed over the past couple of years in a way that maximizes shareholder value with minimal financial risk. For example, we are exploring joint ventures with companies that have complementary technologies or market access. We are looking to align ourselves more closely with other players in the recreation of marine industry, these relationships would allow us to confine resources, share risks and capitalize on joint capabilities to develop new products or enter the markets more efficiently and integrate our electric propulsion system into a broader range of marine vehicles, enhancing our market reach. Additionally, we're always seeking to collaborate with technology firms, particularly those specializing in battery technology and propulsion systems. A successful collaboration can enhance our product offerings, efficiencies and performance, while sharing the development cost and risks. The Forza team's current priority is to find the best way forward through prospective opportunities and set the stage for Forza's future growth and success as a company. In the meantime, we are actively adjusting our business to minimize cash burn, pushing our final beta product forward responsibly and working towards completing the Marion facility. I want to thank you for attending today, and I'll now open the floor to any questions you may have.
Operator:
Joseph Visconti: Thank you, everybody. And again, I want to thank our shareholders, our stakeholders, our employees, and we will continue to update everybody through press releases and quarterly calls. Thank you again.
Operator: This concludes today's conference. You may disconnect your lines at this time. And we thank you for your participation.
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