Proterra, end-to-end Heavy Electric Vehicle manufacturer.

Overview/TLDR;

1. Proterra is a Manufacturer of Electric Vehicles, EV Drivetrains, charging solutions, fleet management software for Medium/Heavy Duty Vehicles, with their primary products being busses currently.
2. They have a 15+ year history of actually manufacturing vehicles and their drivetrains. They have 2 factories in the United States (very relevant later) that have produced over 650 vehicles that have been on the road for a combined 20 million miles.
3. They offer everything, the vehicle, ongoing maintenance, charging solutions, every part of the "operating a bus" process.
4. Existing partnerships and contracts with major manufacturing companies and large customers. No speculation is needed to say that Proterra is well positioned in the current climate of "Electrify Everything!", and has a large first-mover advantage in the American Electric Transit market.
5. Jobs Plan/Infrastructure Deal. If you think this is a big deal for electric vehicles, Proterra is a great choice to cover the Commercial/Transport Vehicle market thanks to existing contracts/partnerships.

1- Business Breakdown

• This business arm is aimed at developing and selling their battery packs and drivetrains to other companies. They have existing partnerships and contracts with several world class companies in the medium and heavy-duty vehicle market like VanHool (Coach Busses), Daimler (Big one, More info below), and Komatsu (Heavy Construction) with hundreds of vehicles already on the road and 20 million miles already driven with their products.
• Daimler actually co-led the investment in the initial $450 Million PIPE as an anchor investor for $185 million. I think it goes without saying that this indicates a high level of trust in Proterra as well as interest in the products they make.
  • This is incredibly relevant, as Daimler is among the largest vehicle manufacturers in the world, who sold ~520k vehicles in FY 2019.
  • Daimler and their subsidiaries make products that span the entire spectrum from Thomas Built school busses to Freightliner Custom Chassis (Literally the supplier at one point of UPS and Fedex trucks.) To Freighliner Vans (The chassis the iconic Mercedes Sprinter is built on)
• Recent notable additions to this list include;
  • Volta Trucks, a manufacturer of Class 7 delivery trucks (Think of your average UPS or Fedex truck).
  • Lightning Motors, a manufacturer of electric delivery vans.

• Proterra already has contracts with over 100 Public and Private transportation authorities totaling over 650 electric busses that have driven a combined 20+ million miles to date. Source, Page 12
• 450 Vehicles are currently backlogged, this number is not including the recent contract signed with Miami-Dade county.
• Proterra’s current customers operate a combined total of 30% of the US Transit Bus fleet.
• If we assume that their current customers are included in the 85% of the 70k transit busses that need to be electrified still, that gives us a potential of 22,334 busses and associated infrastructure with minimal cost of acquisition. (7/9/2021 Prospectus, pg 91)
  • (70,000 total transit busses/.30 = 23,334 busses operated by current customers)
• Delivered 50% of the electric transit busses delivered from 2012 to 2019 (7/9/2021 Prospectus, pg 91)

• This is the division that rounds out the "total package", charging solutions for their electric vehicles and buses.
• 80% of Proterra Transit customers (the people who buy their busses) also install Proterra Energy charging solutions.
• Universal Chargers, can be used to charge anything complying with SAE standard CCS1 - Industrial Dispensers.
• Expected to provide the highest margin and most “Sticky” revenue stream

2- Primary Products

• Battery Packs -
  • Rugged, high powered battery packs purposefully engineered for medium and heavy duty applications. Proterra markets and designs these for OEM’s that build anything from Class 3 to Class 8 medium to heavy duty vehicles, as well as industrial and mining equipment.

• Fleet-Scale charging solutions

• Proterra Apex "The Proterra APEX Connected Vehicle Intelligence System is a cloud-based data platform, offering historical and real-time performance information about your battery electric vehicle fleet, to optimize bus and charging operations and reduce costs."

• ZX-5 Electric Transit Bus
  • Record Holding EV range. (319 Miles on one charge)
  • 20 million service miles already.
  • ~50% market share of the electric transit bus market in the US.
  • Current backlog will keep their factories working at capacity until early 2022, with no additional contracts or customers.

• Its all Buy America act compliant.
  • Battery Factory in City of Industry, CA.
  • Transit Bus factories in Greenville, SC and City of Industry, CA.
  • 75% of Total materials in the Busses are sourced from the US.

3- Executive Teams

Other Notable Investors/Board members

4- Financials

• Their internal projections expect positive EBITA in 2023 (1/21/21 Merger Presentation, slide 39)
• Internal projections expect positive net cashflow by 2024
• 2025 EBITDA Margins of ~20% and Gross Margin of ~25%

• An increase of profit margins from 4% today to 25% by 2025.
• Backlog as of their 4/8/21 presentation represented $750 Million dollars in revenue, with an unspecified breakdown of divisions.
• Projected 2020-2025 CAGR of 68%

Growth and catalysts

• Proterra delivered 50% of the electric busses sold from 2012 to 2019
• “Current sales efforts are focused on the 400 largest Public Transit agencies in the US that combine for 85% of the 70,000 transit busses in operation.” (Prospectus, pg 91)
• Approximately 25k of these must be “zero-emissions” by 2040
• Proterra has a track record of being able to shrink margin costs, which is a pivotal part of their plan, and expected growth.
• Customers are already receiving federal grants that are going towards the purchase of Proterra transit busses, as well as the purchase of busses and shuttles electrified with Proterra Powered battery/drivetrain tech (Source: PR Newswire)
  • The current Secretary of Energy is a former board member of Proterra and Biden recently took a video tour of one of their manufacturing facilities.
• Additional partnerships and customers not necessarily factored in to the financial report released when the merger was announced.;
  • The partnership with Komatsu will likely draw in more customers, as Komatsu is a large player in the heavy industrial space and is a strong sign of the trust in Proterra’s products.
  • Biden administration clean energy initiatives aren’t necessarily featured in the April dated investor presentation, as an “infrastructure bill” was even less definite than it is currently.
• 22,334 busses need to be purchased by their current customers to achieve 100% electrification

5- Conclusions

1. Those with connections to existing, legacy companies that can leverage their reach and capital into market share.
2. Companies with existing products and customers to aid in selling their product
3. Truly disruptive companies

Sources

1. https://www.proterra.com/company/
2. https://ir.proterra.com/home/default.aspx
3. https://www.proterra.com/proterra-powered/
4. https://ir.proterra.com/financials/sec-filings/default.aspx (Primarily the Prospectus filed 7/9/2021)