The Lion Electric Company (LEV) on Q2 2021 Results - Earnings Call Transcript

Operator: Good morning, ladies and gentlemen. Welcome to Lion's Second Quarter 2021 results conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.. As a reminder, this conference call is being recorded. I would now like to turn the call over to Isabelle Adjani, Vice President, Investor Relations and Sustainable development. Please go ahead, Ms. Adjahi. Isabelle Adjahi: Thank you. And good morning, everyone. Welcome to Lion's Second Quarter 2021 Resets Conference Call. . While this call we take best in English, we would of course be delighted to answer any questions in French during the Q&A session. . With me today are Marc Bedard, our CEO - Founder, and Nicolas Brunet, our Executive Vice President, and Chief Financial Officer. Before we begin, I would like to mention that during the call, we will make certain forward-looking statements regarding our future business expectations, which involve risks and uncertainties. Forward-looking statements are predictions, projections, and other statements about future events that are based on current expectations and certain material factors and assumptions and as a result, are subject to risk and uncertainties. Many factors could cause actual future events to differ materially from the forward-looking statements on this call. For more information about factors that may cause actual results to materially differ from forward-looking statements, please refer to our filings met today and to the risk factors contained in our front-end perspective dated May 5, 2021, filed with the and to the registration statement on Form F1 filed with the Securities and Exchange Commission and that they are effective on June 14th, 2021. You can also consult on the documents that we can find with the AMS and the ACC. Forward-looking statements only speak as of the day that met. Isabelle Adjahi: You are cautioned not to put undue reliance on forward-looking statements and we undertake no duty towards that information unless required by law. Finally, please note that we report in U.S. Dollars and under IFRS. Comments today may refer to certain non-IFRS financial measures, such as adjusted EBITDA, and certain performance metrics, such as the Company's Order Book, which are defined, further described, and in certain cases reconciled in our Earnings release and MD&A issued this morning. With that, I will now I'll hand the call over to Marc Bedard. Marc? Marc Bedard: Thank you, Isabelle. Good morning, everyone. And thank you for joining us this morning. If I have to provide the title for our Q2 conference call, it will be, despite the pandemic, Lion is delivering strong results and is executing its strategic plan in a very organized and timely manner. Let me first remind you who Lion is. We manufacture 100% electric trucks and buses, no hybrids. We are solely focused on electric technology. No fuel-cells, no C&G, no propane. Our vehicles are purpose-built for electricity. We don't do retrofits. There are mainly 3 key elements that I would like you to remember from today's Q2 results announcement. Number 1, we continue to see great momentum in client dialogues, which is translating into accelerated purchase orders and deliveries. Lion is one of the very few companies in the EV industry that is currently delivering vehicles and charging infrastructures while executing its growth plan. In our list of tier-1 customers, such as Amazon, IKEA, Canadian National Railways, Sobeys, Con Edison, Heritage, First Student, National Express, STA, LA Unified School District, keeps growing and continues to validate our unrivaled leadership in the market. Number 2, we continue to advance the development and commercialization of new platforms, and we are planning to launch 8 new models by the end of 2022, for a total of 15 all-electric models, the largest product lineup in the industry. Number 3, we continue to achieve the important milestone on our strategic plan, namely the construction of our Joliet, Illinois manufacturing facility with a capacity of 20,000 vehicles per year. The construction of our battery plant and innovation center, as well as multiple hirings across the Company. All of this is within our announced timeline, despite the pandemic. In a nutshell, we are building up the entire organization to continue to execute our strategic plan. All of this while benefiting from an unprecedented favorable legislative backdrop, both in the U.S. and in Canada. I will now provide an update on each of these items. And I will then pass it on to Nicolas, who will discuss our financial performance for the Second Quarter. Let me start by discussing our deliveries and purchase order book. During Q2, we delivered 61 vehicles as compared to 22 last year, an increase of 177%. These deliveries consisted of 13 trucks and 48 buses, 41 of these vehicles were delivered in Canada, and 20 were delivered in the U.S. I am pleased to see continued momentum in deliveries despite the impact of the pandemic. As important to us as deliveries are purchase orders, as they give an indication of upcoming deliveries and related revenues. As of today, our order book totals 965 all-electric vehicles, consisting of 703 buses and 262 trucks, representing a combined total order value of over $280 million. We expect that the majority of these vehicles will be delivered within the next 12 months. Great new client wins in the order book include customers, such as Green Mountain Power, Day & Ross, Zum, and Casella Waste Systems, just to name a few. The order book also includes a new order from Amazon for 15 Lion8 Tractor trucks. It also includes a repeat purchase order for 35 LionC buses from the Prince-Edward Island Provincial Government, positioning Lion as the lead electric OEM in this province with a total of 47 electric school buses. Let me be very clear, this is an Order Book, not a pipeline or a backlog. The continued momentum in our Order Book stems directly from our ability to leverage the full Lion Ecosystem that is tailored to electric vehicles ' fleet operators, as we have now been doing for many years. This includes the direct sales force that is highly specialized in EV s, complete infrastructure sales, and support through LionEnergy, as well as leveraging our Experience Centers network in our Grant Team. Speaking of grants, we continue to see an unprecedented favorable legislative backdrop to promote EV adoption, both in the U.S. and in Canada, with the 2 desires by government officials to support a cleaner environment through tangible EV grant programs. For example, our order book includes numerous school bus orders for which customers benefited from the $250 million subsidy program launched by Quebec and EQ last April. In fact, 16 buses have already been delivered under this revised program. As a reminder, under this program, customer benefits from a subsidy amounting from $100,000 to $150,000 per vehicle. What matters to us even more than the amount of the subsidy is the objectives set by the government. They committed to adding 2,600 new electric school buses on the road within the next 3 years. And to electrifying 65% of the next school bus fleet by 2030. Additionally, starting on November 1st, 2021, every new school bus registered in the province of Quebec will have to be an all-electric school bus. We are convinced that the subsidy program approach favored by the Quebec government is the right one to accelerate the transition to electric vehicles and that it will have a major impact on many other provinces and state legislations with respect to accelerated EV adoption. We also believe that Lion is uniquely positioned to deployed school buses as part of this program. And another notable EV incentive program you have all heard about is the California HVIP 1, which opened to new voucher-request lately with $96 million for the purchase of commercial electric vehicles to be registered and operated in California, and Lion is one of the leading applicants into the HVIP program. Earlier this week, the U.S. Senate passed the Bipartisan Infrastructure, Investment, and Jobs Act, which includes $5 billion of funding towards the replacement of existing school buses, with clean and zero-emission school buses. With this vote, we are getting one step closer to unprecedented funding for initiatives targeting a reduction in transportation emissions and charging infrastructures, which is very good news for our industry. Shortly after the end of the quarter, the California legislator and Governor Newsom signed a budget bill to further promote the adoption of zero-emission vehicles. Under this new bill, the allocation of $2.7 billion for zero-emission vehicles and their infrastructure, and dissipate budget in 2021, 2022 was authorized. This $2.7 billion in funding is intended to put 1,000 new zero-emission trucks, 1,000 new zero-emission school buses, and 1,000 new zero-emission transit buses on the state's road and will support the rapid growth of charging stations across California. Lion, being the electric school bus leader in California and in North America, and also adding an unparalleled lineup of electric trucks available now for delivery, is very well positioned to tap into this program and continue to deploy electric vehicles in California in a timely manner. Last, only 3 days ago, the Canadian Government further clarified the terms of its previously announced program and confirmed that through the zero-emission trends at fun it will be investing $2.75 billion over 5 years to support public transit and school bus operators plan for electrification. This much-awaited announcement will support, among other initiatives, the purchase of 5,000 zero-emission buses. Navigating this current environment requires a clear and thorough understanding of all the programs available. Over the years. Our Lion Grant Team has established lines of communication with key governmental buddies, providing grants and subsidies, including the MPQ, the California Energy Commission, and CARB, to name a few. Being able to support our clients throughout the whole process with our Lion Grant Team is one of the items that set Lion apart from the competition. Let me now spend a minute on other elements of the Lion Ecosystem. Our LionEnergy division, which has its customers with selecting, purchasing, project managing, and deploying charging infrastructure ahead of vehicle delivery, also continues to gain momentum. In less than a year of operation, it has already generated revenues of more than $500,000. As of today, the LionEnergy Order Book stood at 73 charging stations and related services, representing a total order value of approximately $1 million. This includes an order for 35 charging stations from the government of PI which we announced earlier this week. As a reminder, we are agnostic when advising customers on their infrastructure needs. And we are a reseller for different types of charging stations, including ABB, Charge Point, Slow Add Energy, Blink, and UV with a full lineup of level 2 and 3 charging solutions. Finally, a word on our experience centers, which are dedicated spaces where customers, policymakers, and other transportation industry stakeholders can drive our electric trucks and buses, learn about their specifications and advantages, meet our Lion sales representatives, discuss grant and subsidy assistance, receive vehicle training, and have existing vehicles serviced. We currently have 8 Lion experienced centers in operation and across North America and expect 4 new ones to be an operation in Virginia, Minnesota, Tennessee, and Vermont by end of the year. We are also simultaneously working at securing additional facilities to continue to expand our experience center network. Let me now provide an update on the execution of our strategic plan. First, our Joliet, Illinois manufacturing plant. I am pleased to report that the shell building of our 900,000 square foot facility is approximately 80% completed. We have pictures showing the plant in our Q2 2021, results in a slide deck that you can find on our website. Completion of the construction of the building is still planned before the end of this year. We have retained Colliers International as construction project manager, and Merkur as advisors to assist us with global project planning, as well as for the selection and commissioning of production equipment. As a reminder, our highly automated production facility will have a production capacity of 20,000 vehicles per year in full operation. It will be the largest dedicated production plant for zero-emission medium and heavy-duty vehicles in North America, and Lion's biggest footprint in the U.S.. It will give us the ability to meet increasing demand in the marketplace for "Made in America " zero-emission vehicles. Everything is going as planned and the initial vehicle production is expected to begin in the second half of 2022. Now, turning to our battery plant and innovation center. During the quarter, we officially announced that our battery plant and innovation center will be located at the YMX International Aero City of Nearabel, which is about 20 miles from our current manufacturing side near Montreal. This project is well underway. Works such as geotechnical work, environmental studies, and permitting are currently being performed while on-site construction has already begun, we have retained Pomerleau, a flagship corporation in the Canadian construction industry, as project manager and general contractor for the construction of the battery plant and innovation center. In parallel, we have also retained JR Automation, a Hitachi Company, for battery manufacturing automation and equipment selection. Here, again, I want to confirm that we are on track with the previously announced timeline and that the initial production of battery modules and packs is planned for the second half of 2022. Once fully operational, we expect an annual battery production capacity of 5-gigawatt hours enough to electrify approximately 14,000 of Lion's electric trucks and buses. Producing our own battery modules and packs will be a key strategic differentiator. And it should result in significant cost savings, provides full control over battery specs and dimensions, and remove key supplier dependency. The third element of our strategic plan relates to the Lion Team. We continue to improve our team on all fronts during Q2. As of today, our total headcount amounts to approximately 900 employees, of which approximately 270 in engineering and R&D. We also recently started the hiring process for the Joliet manufacturing plant and will update you on that process in the quarters to come. In our management team, Brian Pier, joined us as our Chief Commercial Officer, Francois Beaulieu, as our Vice President, Chief Information Officer, and Nathalie Giroux joined our leadership team as our Vice President, Chief People Officer. Last, I will officially like to welcome Mr. Lorenzo Roccia, who recently joined Lion's Board of Directors. Lorenzo was the Chairman of Transatlantic Holdings, an international financial holding Company. He also co-founded Power and Skyline Renewables. One of the largest energy renewable companies in the U.S.. We are looking forward to benefiting from Lorenzo's expertise. Before turning it to Nicolas to comment on our financial performance, I would like to briefly discuss our supply chain. like many other automated OEMs, we are currently being impacted by an increase in the cost of certain components required to build our vehicles. The discussed increase is mostly due to higher costs in the steel parts and harnesses and also in the freight costs in general. This increase adds a marginal impact on our bill of materials as of today. We are also impacted by longer lead times on several components. Our approach to minimize the lease and limit any cost increases is to overstock several key components. And we are grateful we adopted this philosophy even before the pandemic. Thanks to our long-term experience in EVs and to our vertical integration strategy. For instance, we currently have inventory on end, of over 1,000 battery packs with numerous additional shipments already scheduled for the rest of 2021 and additional significant quantities reserved for 2022 and also 2023. Additionally, our inventory of battery modules is sufficient to build approximately 240 additional Lion batteries. We also have several long-term agreements with other key suppliers. And in most cases, we have supplier redundancy for critical components. Our strategy of working in 2 markets, buses and trucks, serves us very well in this regard. Given the commonality of many components that can be used on most, if not all, of our models. Altogether, we have been able, so far, to maintain a good production rate with few production delays while experiencing a slight increase in our material and freight cost. We are confident in our ability to significantly reduce our cost base when the global supply chain situation returns to normal. With that, let me now turn the call over to Nicolas, who will comment on our financial performance. Nicolas Brunet: Thank you, Marc. Despite a volatile economic environment, I am pleased with the progress our team continues to make. There are a few elements I would like to highlight before I comment on our Q2, 2021 financial performance. First, as we close the transaction NGA - Northern Genesis Acquisition Corp. on May 6th, results presented for the second Quarter consolidate those of NGA, and are on a post-transaction basis. Second, the closing of the transaction has resulted or will result in the elimination of certain liabilities on our balance sheet and certain non-cash items on our P&L. Mainly as it relates to retractable common shares, convertible debt, and share-based compensation. I will further address these items in a moment. Let's now go into the details of our Q2 2021 performance. As mentioned by Marc, we delivered 61 vehicles in Q2 2021, including 48 school buses and 13 trucks. 41 of these deliveries took place in Canada, 20 in the U.S. This compares to 22 school buses delivered in Q2 2020. As a result, revenues for Q2 2021, we're at $16.7 million compared to $6.1 million in Q2 2020. Our gross profit with the 5% of sales or $900,000 down $100,000 as compared to $1 million in Q2 2020. The decrease is primarily due to the impact of increased fixed manufacturing costs related to the ramp-up of production capacity for future quarters and, to a lesser extent, to an increase in raw material cost. This is, of course, partially offset by the positive gross profit impact of increased sales volumes. Let me provide more granular information on this, as we believe that over the long term, once we are ramped up the run rate production, this will be a key indicator of our cap. As previously explained, we are significantly investing and preparing for sustainable long-term growth and profitability. Consequently, salary, benefit, and other overhead costs have and will continue to have an impact on our gross profit and related margin as we work to increase our capacity. This will be the case until we reach production levels that are commensurate with our cost base, in anticipation of recurring and increasing demand over the long term. Nicolas Brunet: To give you a better idea, we estimate that our overhead and direct labor costs on a per-vehicle basis are currently four to five times higher than the cost per vehicle that we expect to incur once we reach run-rate production. Marc Bedard: Nicolas, please let me chime in here with a comment on our gross margin. We have shown our ability to achieve a healthy gross margin in the past with our gross margin amounting to more than 30% in 2019. We are confident that we will return to industry-leading gross margins once our production reaches the targeted levels we are currently investing in. Nicolas Brunet: Thanks, Marc. Continuing with administrative expenses, they have increased by $48.9 million to $50 million primarily because of a significant increase in non-cash share-based compensation of $44.5 million and expenses reflecting Lion's transition to being a public Company. Last, costs related to the expansion of Lion's head-off capabilities in anticipation of an expected increase in business also had an impact. Net of share-based compensation, administrative expenses were $5.2 million. Selling expenses increased to $13.3 million, up to $12.5 million as compared to Q2, 2020, primarily because of a significant increase in non-cash share-based compensation of $10 million. Expansion of Lion sales force, as well as an increase in expenses associated with Lion Experience Centers. Net of share-based compensation, selling expenses were $3.3 million. Net loss for Q2 amounted to $178.5 million, inclusive of $99 million in a non-cash change in fair value of warrants obligation, $55 million in non-cash share-based compensation, and close to $14 million of transaction costs related to our combination with NGA and related . Adjusted EBITDA was negative $5.5 million compared to negative $0.1 million in 2020. Adjusted EBITDA includes adjustments for certain non-cash and non-recurring items which I just discussed, mainly changes in fair value of share obligation and share-based compensation, as well as transaction and other non-recurring costs. As I alluded to at the beginning of my remarks, the closing of the combination with NGA and related public listing has resulted in a number of changes in our finances going forward, which for the most part will simplify our reporting. Let me take a few minutes and explain these changes. The 18 million shares, which were previously treated as a liability due to a PutWrite (ph) by 1 shareholder, were reclassified to equity as the PutWrite was eliminated upon closing of the transaction. In relation to this, the accretion expense related to it, which was included in financing costs up to this quarter, will no longer be incurred. With the cash settlement option and the Company's stock option plan removed that closing, the liability for share-based compensation was remeasured to fair value at matrix 2021, with changes in fair value recognized in net earnings this quarter. The resulting fair value was transferred to contribute within shareholder's equity. Going forward, share-based compensation expense for existing options will no longer vary with the share price, and we, therefore, expect a significant reduction in such non-cash expense over the current quarter. With all convertible debts and all credit facilities we paid other than an $11 million loan backed by government subsidies for vehicle orders, we expect financing costs to decrease significantly in the next few quarters. Let's now discuss cash flow. Cash flow from operations for Q2 stood at a negative $40.7 million, inclusive of $19.7 million of changes in working capital, as we continue to scale the business and overstock, to mitigate any potential supply-chain issues, as Marc mentioned earlier. As well as $13.7 million of transaction costs related to the with NGA and related publicly. During the quarter, acquisition and intangible assets, which mainly consist of R&D activities amounted to $10.7 million up to $8.2 million as compared to $2.5 million last year. CapEx remained low at $3.3 million as compared with $400,000 last year. We expect CapEx to increase significantly over the coming quarter as we start purchasing who come in for the Joliet vehicle plant and the battery facility. Let me now speak to select balance sheet items. First, we ended the quarter with $354 million in cash and approximately $11 million in debt facilities. As previously announced, we entered after the end of the quarter into an agreement for a revolving credit facility of up to $100 million. Although we do not have an immediate need for it, its credit facility is available for working capital, capital expenditure requirements, and general corporate purposes, if and when needed. We continue to feel confident about our ability to realize our growth project with the liquidity currently on hand. Separately, we have added on our balance sheet the liabilities related to the NGA warrants, which were converted to Lion 1. Altogether, the warrant liability stood at $297 million on our balance sheet. This liability is expected to fluctuate from quarter to quarter based on Lion's share price with the change in valuation going through the P&L as a non-cash gain or loss. My last comment before turning the microphone over to Marc will be a brief one pertaining to our long-term financing solutions program. We believe that the ability to secure financing for our customers, purchase our electric vehicles is an important aspect to ease the transition to EV for our customers, as it is significantly smooth the cash flow profile and in many cases allows the customers to benefit from a favorable PTO from day one. We currently have attractive financing options tailored to EV's that we offer clients via partnerships with third-party. We are continuing to work on a more programmatic approach, not only for vehicle financing but also for the monetization of credit on behalf of our clients. We are in dialogue with both the private and public sectors, on both sides of the border, to that effect. We will update you as we progress towards building the client's financing solution, which will ultimately aim to further accelerate our purchase order book and pace of delivery. In conclusion, we are pleased by Lion's second-quarter results and expect continued growth in purchase orders, production, and delivery. Marc Bedard: Thank you, Nicolas, before we open the line for questions, I would like to insist on the fact that we are very excited by the trend we are seeing in orders and deliveries, as well as in the timely execution of our strategic plan. We have been able to achieve all of this while working in a very challenging environment because of the pandemic, and while becoming a public company. As previously mentioned, in the next few months, we will first, continue to focus on our customers and on working with fleet owners to provide them a turnkey solution and help them navigate the transition to electric in full confidence. Second, we will keep executing our strategic plan in a timely manner. Nicolas Brunet: We will finalize the construction of our Joliet, Illinois plant, and we will continue to advance the construction of our 5 gigawatt-hour per year battery assembly plant and innovation center. Third, we will keep attracting the best talent, make strategic hires, and the team to successfully execute our plan, to always be better, and always go faster. With that, let's now open the lines for questions. Operator: . Our first question comes from the line of Benoit Poirier with Desjardins. Benoit Morin: Good morning, Marc. Good morning, Nicolas, and congratulations on the quarter and also the ramp-up. Marc Bedard: Good morning . Benoit Morin: Yes. So looking at that term pipeline of deliveries, would it be fair to expect more deliveries in Q3 and Q4 versus Q2 or is there some seasonality to take into consideration? Nicolas Brunet: Yeah, that could certainly be what we were aiming for then than we were expecting a continued ramp-up in deals and deliveries as well. So no seasonality to think of right now, we're focused on continuing to grow. Benoit Morin: Okay. Perfect. And could you talk about the reliability or feedback on the trucks delivered so far in the first half, obviously, the Amazon fall on the order of very positives sign, but just curious to get the feedback on the trucks so far. Nicolas Brunet: Hey, Benoit, Nicky here. We're -- with relates to the Amazon, we're going to stick disclosing the purchase orders and deliveries. So we'll keep the dialogue on the trucks between them in our self obviously, it's an important relationship and in their operations is it will be about them to disclose. But obviously, we were pleased to announce a new order for the Lion 8. Marc Bedard: And then with respect to the other deliveries, we're getting very good feedback. It's a new -- it's obviously a new product with a technology we have been using for many, many years. You probably remember the commonality we have between our platforms, and I think this is serving us very, very well right now. Benoit Morin: Okay. That's great then. Last one for me. In terms of working cap, Nicolas, how should we expect the working cap evolution to evolve in the second half? Nicolas Brunet: Yeah, then we should expect to continue to invest in working cap. As Marc mentioned previously, the way for us to mitigate the term supply chain issues has been to overstock, and we've been doing that for a while. And this will continue. We're pleased to invest in working cap to allow for more deliveries, resulting more -- have more sales. So we do expect an increase there in the coming quarters and continue to be. Benoit Morin: Okay, perfect. Okay. Thanks for the time and I'll pass the line. Marc Bedard: Thank you. Nicolas Brunet: Thank you, Benoit. Operator: Your next question comes from the line of Jonathan Lamers with BMO Capital Markets. Jonathan Lamers: Good morning. Marc Bedard: Hey, Jonathan. Nicolas Brunet: Good morning, Jonathan. Jonathan Lamers: Yeah. On the recent U.S. State-Funded awards, including the California HVIP, how have Lion won rates so far? Is that something you can comment on? Marc Bedard: Yeah. Certainly, we'll keep commenting high level, Jonathan, it's -- there were two additional rounds of HVIP applications, one in June and one in August. I think they publish eventually the applications or? will let them speak the numbers, I will say we had a? very good two rounds with the application. We're very pleased. Lots of the current demand and it's a program that we think is very -- works very well, very efficient. Yeah, we're very pleased with the applications. Jonathan Lamers: When do you expect to learn the results of your partner's applications? Marc Bedard: In some cases, we have, and some of them have already been approved. And so yeah. We're -- it's an ongoing process, and as I said, we'll each get that publish the voucher, so we want to respect they're doing that and their timing. But, yeah pleased with the applications. Jonathan Lamers: Thanks. And in your last -- Operator: Go ahead. Jonathan Lamers: Sorry, how do you expect orders to build ahead of the new Joliet assembly facilities ramp? And a second part to this question, have you had any feedback from customers on the U.S. Senate Infrastructure bill? Will customers be waiting until the funds are available before placing second orders? Nicolas Brunet: Yeah, great. Great question, Jonathan. Which respect to the ramped up the -- we are -- we've hired a few months ago, Brian Churn as our Chief Commercial Officer, and it's going very well. You see the purchase -- well, you'd see the order book right now, 965 units, which is quite good, with sales over $280 million. So that's a very good rate now and that's despite everything that happened in the last year. Now, with respect to the orders for the trucks, for example, I mean, the people will see more and more of those trucks on the streets. And this is really helping us and this is what happened with the school buses as well. It's starting slowly and then there was a major ramp-up and we see various surges dialogue with these customers, and we see customers that are also very sophisticated in terms of the total cost of ownership analysis. We've been doing this for many, many years. And we understand that going electric and adding a smooth transition goes with making money with those trucks and buses, and you know our customers, they get that, and so we are seeing great momentum in those discussions, so really looking forward to building this order book, even quicker than we've been doing in the past. Nic, do you want to take control of the other question? The second question was about the infrastructure bill Jonathan? Jonathan Lamers: Just how customers are -- just if you have any feedback from customers on the Bill, I'm curious whether customers will wait until those funds are available before placing follow-up orders? Nicolas Brunet: I don't have any specific customer feedback on the Bill, I think everyone that's in the school bus space and everyone on the public sector around this is -- it's very clear that there will be very significant amounts deployed towards school bus electrification. We're pleased and it's not just the Bill, it's general support, and emissions that electrify school buses. Overall, it's a very positive Bill and program and I'd say that we don't -- we're seeing dialogue for electrification now, and we can't just turn the dial and make it happen at the snap of fingers, so the movement is happening and then parties are engaging now on their expectation. Jonathan Lamers: Thanks. I have one last topic if I can. Just on the battery pack and the new battery plant that's ramping. Marc Bedard: Yes. Jonathan Lamers: Marc, if you compare Lion's current small-scale battery pack assembly operations to the more automated operations you're planning for the large new battery plant, some investors are concerned about the potential challenges you might face as you ramp up a new plant. Marc Bedard: Sure. Yeah. We've been doing battery packs, Jonathan, as you know, for the last 6, 7 years. And I think again, this is serving us very well. And many of the key components within the battery pack we've been mastering for many, many years. And one of those is BMS. The battery management system, which is like the brain of the battery pack and we have our own. We'd been using our own BMS for many, many years. And this is what we will keep doing. So obviously, manufacturing our own battery packs using our own BMS, is kind of the same thing we will be using, but at a very high scale, and the big difference obviously, will be the number of units we will be manufacturing, and that's one of the reasons we partner JR Automation, it's actually Corporation. If you look at what they've been doing, most of the major battery plants, the biggest in the world, were involved, and at some point, they were doing the project management of those plants. So we decided to partner with the best people in the industry and we've been at this for a while now, and this is why we feel so good about the timing of that. It will be something like probably a bigger challenge if we will just start doing battery packs as some people, might be thinking of doing at some point. But since we've been doing this for 6/7 years, we feel great about that. Jonathan Lamers: Thanks for the comments. Marc Bedard: Thank you. Operator: The next question comes from the line of Michael Glen, with Raymond James. Michael Glen: Hey, good morning. So I just wanted to come back to the battery plant discussion because you see news flow regarding some of the investments that are going in right now. I mean, you're talking about billion-dollar investments being made by large companies to build the battery, manufacturing plants have scale. So how do you think about the cost profile of your facility once it's up and running? Do you feel confident that you're going to be able to continue producing at a competitive cost versus some of the new investments that are going in? Marc Bedard: We do, Michael, and it's a good question. I mean, we've had that question a few times in the past, and I think there's a little bit of confusion between what we're doing and what some other companies are doing. When you're talking about billions of dollars of investments, we're talking about companies investing in sales. So they will be manufacturing their own sales, which we will not be doing. We are buying the cells and as you know, putting them into modules and then modules into battery packs, which is quite different. So the budget that we have for the automation has of this battery facility is quite significant. As I said just earlier, we're doing business with the best, and state-of-the-art technology and many of those new technologies are proprietary components of Lion, so yes, our cost will be very good and obviously, we will be impacted by the cost of the cell. The cell is a major part of the overall cost of the battery pack at the end of the day. We really enjoy what we've been hearing and some of the investments in the U.S. in this regard. That cost on the as well, this is also going to increase the U.S. content into what we are doing, and we are pleased about that. Michael Glen: Have you indicated at all what type of cost savings, like if you quantified that at all, what type of cost savings you expect to achieve once the facilities are at run rate capacity? Marc Bedard: Yeah. No, absolutely. We did in the past, Michael, and we're thinking about cost-saving of about 50%. And so major, major cost-saving if we do compare with the battery pack that we've been buying from third-party suppliers. Michael Glen: Okay. And just circling in on Illinois the facility. And you've highlighted some supply chain shortages taking place. So we read about the supply chain shortages right now across so many areas. So how do you prepare yourself? Getting this plant up and running is obviously critically important for you. Do you have any concerns regarding your ability to take possession of the equipment necessary to get that plant up and running in that time -- in that -- it is a tight timeline that you're talking about. So I just wanted to get some insight into that. Marc Bedard: Yeah. Good question, Michael. And, again, I mean, we've been manufacturing electric vehicles for about almost 6 years now. And I think, again, this is helping us a lot. I mean, a new OEM trying to get into the market and all the processes to do the EV vehicles, I mean, that will not be easy since we've been doing this for many, many years, and since we are doing this, and we are also in a relationship with all of those suppliers, including all the tier-1 suppliers. I mean, I will not say it's like almost -- it's random. But I mean obviously, those suppliers are really looking forward. That's running and running at full-scale and that will be great. So now what we're looking at doing, to cost -- to cut that, you know, the freight end as well. And also to be more and more local is to build the local procurements. This is what we're doing now at the Montreal factory, and this is what we will be doing in Illinois as well. So we started that already. We started doing some hires in Illinois, so we will take the occupancy of the building before the end of the year, this year. This is great, and we are building the workforce at the same time that we are looking at local suppliers. Obviously, it's always a challenge that we don't want to, let's say, underestimate, but this is something we are doing on a daily basis and we've been doing for many, many years. Michael Glen: Okay. And then just some insight into the Experience Centers. You're talking about 4 additional. What exactly will these look like? How many square feet will it be? Will they include things like service bays? What are the -- are these strict sales centers? Just trying to get a sense of what they'll look like. Marc Bedard: Yes. Yes, absolutely, . I mean, We are extending quite quickly right now, we have 8, we will be to 12 before the end of the year and we're looking at many, many other states as well. So we're basically following our customers. You know, we're doing B2B and B2C. So a lot of the work, the maintenance work at the customer's request is being done by the mechanics of the customers. And any specialized work, we're doing this at the Experience Centers. So all the Experience Centers are EV-focused only. So that's the first thing with all the technicians and the mechanics having experienced in EV. We are doing drive at the experience centers, we are doing to service because while we're doing this service also, let's say, if anything happens with the battery packs or specialized components, we are doing this as well. And it's also a place where you can see all the models. So you can ride a lining truck, Lion's fix truck. You can ride the buses, as well. So even if you are in their means to buy a bus, but you are looking at the truck, and this is the kind of momentum we are building. When you're going into those places, it's really a place where you can drive all those EV s. And, obviously, when you are putting a truck and the bus on the road, you need to do some specialized maintenance at some point, especially with EV. I mean, you need to take care of everything if anything happens at some point and we want to make sure that this bus and truck will be back on the road within a few hours. This is what we have been doing for many years right now, and this is what we will keep doing. Jonathan Lamers: Okay. Thanks for the insights. I'll leave it there. Operator: Your next question comes from the line of Rupert Mario with National Bank. Rupert Merer: Good morning, everyone. Marc Bedard: Good morning. Rupert Merer: So the order book grew this quarter and could sustain a higher rate of deliveries. Can you comment on what drove the pace of deliveries in Q2? Is it customer schedule or is it your production capacity? And if its production capacity, how do you see that changing over the next few quarters? And what's going to pace the increase in your capacity? Marc Bedard: Let's talk about that. I mean, in terms of production capacity, I mean, we had a manufacturing capacity in Montreal of 2500 units per year right now. And there are mainly two things, driving the manufacturing capacity. It's a good thing -- it's a great thing that we can manufacture 2,500 units per year. And in terms of equipment -- there's two things. It's real equipment and all of the infrastructure, and also the labor needed to do that. And obviously, we are ramping up the labor as need be with the orders coming in and the schedule of deliveries, with the dialogue we have with our customers. Then we're ramping up the number of people we need to do that. And you probably remember at the beginning of the year, we had 450 people at Lion, right now, we're at 900 people. And we are ramping up pretty fast right now, 10 to 30 people a week, basically. And with the number of people that we have right now working in manufacturing, we're 2/3 of the way to reach the goal of 2,500 units. I'm very pleased to say that we can manufacture those vehicles and that we have 2/3s of the labor force to get to that 2,500 units capacity. It's great news, I don't know any other OEMs, that can say something like that. Now in terms of deliveries, yes, there were have been a couple of challenges as you guys have been seeing everywhere in the marketplace. To give you an idea, we have about 2,000 components on the electric bus and you need all of those components to deliver the buses and trucks. The good thing is that what we'd be doing for many years that we'd be overstocking inventory because of the -- because EV is still at the early stage. So we've suffered a little bit from that, but it's very well under control. Now, everything else we're doing around manufacturing those buses is cheap and this is why we called it the Lion Ecosystem because we need to make sure also that the charging infrastructure will be in place and depends at an impact on all of that. Not only with the supply chain, but also on the charging infrastructure, manufacturing, and well, I mean the good thing is that we are also overstocking the charging infrastructure. So we can deliver in a timely manner. And once you are controlling all of that, obviously, the client dialogue, and making sure this is the right timing for the customer. Well, everybody knows that a lot of the school districts were still closed in the last few months, so we had to deal with that. But, I mean, I think we were able to do very well having very close communication with our customers. So despite this pandemic, despite all of the issues we've been talking about, we've been able to deliver those 61 units, despite probably the worst crisis of the last 60 years. Benoit Morin: Great. Thank you. And you talked about your gross margins improve quarter-over-quarter, and you are going to look to drive those much higher in the future course. And I realize the Company is going to look very different in a few years, but I'm wondering if you can comment on your cost structure today? How much of your cost of goods sold is fixed operating costs? How much is variable? And what does that trajectory look like from here to get to your target margins? Do we see step changes or is this going to be more of a gradual evolution? Marc Bedard: Yeah, I can comment on definitely gradual changes that we see. The biggest cost items in the car are obviously the materials, material, but there's quite a bit of momentum there. As I mentioned before, we're on a per vehicle basis, the overhead and labor are much higher than where it will be at run rate. It's gradually that old. And that's because we're investing in the future of course so we don't have the detriment of current margins. We're ramping up for future production, which is the right? That's future production, and . So yes, expect gradual changes and just a better absorption of our fixed cost base as we go over time. Rupert Merer: But what percentage of your costs today would be fixed versus variable just put roughly? Marc Bedard: Yes. On a yearly basis, we pointed to that in the past, we talked about 25%. Now, the thing to keep in mind obviously, we're growing a fixed cost portion right now in investing in people in the overhead. And so it makes up both growing the fixed cost base and the same time, growing the delivery, and ultimately, we expect that this will result in much better absorption. Rupert Merer: Great. And then just one more, a quick one. You talked about momentum in your client dialogue, and we have seen the order book grow, of course, but you mentioned that the backlog and the pipeline are also evolving. I'm wondering if you can give us some color on how the backlog and pipeline are evolving, and any numbers you can give us, maybe on how bad that is growing relative to the order book. Marc Bedard: Yeah. For -- we cannot give any specific numbers. I can tell you, I mean, the momentum is very good, and you saw probably the list of the tier-1 customers we are dealing with. And it's so great, great customers that have a major impact on other customers as well. So we can not be as you know, that's a number we like to get real numbers. As I said at the beginning, this is really an order book. Pipeline or backlog could happen or could never happen. And you know the -- what we like about the order book is that this is confirmed and we will be making those deliveries. And so this is a real number, so every time we're talking about pipelines and backlog -- I mean, you never know, that might happen. That's might happen in a few years. So basically, our job is to convert that discussion with the customer into the purchase order and report this in the order book that we can communicate with you on a quarterly basis. Rupert Merer: Alright. Very good. I'll leave it there. Thank you very much. Marc Bedard: Thank you, Rupert. Operator: Next question comes from the line of Noaman Satya with Laurieton Bank. Noaman Satya: Hi, good morning, everyone. Marc Bedard: Good morning. Noaman Satya: My first question is on your -- it's more a clarification question, with regards to your order book. Marc, did you say that these are going to get delivered over the next 12 months, or is that going to take longer than to sell this order book? Marc Bedard: I said most of the order book will be delivered within the next 12 months. Noaman Satya: Okay. Marc Bedard: The majority of it. Noaman Satya: Okay. That's perfect. And secondly, just going back to the supply chain and delays and pricing pressure. I'm just wondering, the new plant that you're coming up with within Illinois and in Quebec, has any pricing or your cost estimates changed when you guys were getting into it, and how the market is evolving, or is that something that you are protected from with your partners? Marc Bedard: Well, let me maybe start with this. I think Noaman, the fact that we've been a lot of the major components that have been really helping us in terms of costs. So not only being able to make the deliveries to customers but also in terms of cost because we were protected from some of this crisis right now. And also, we do have a long-term relationship with the tier-1 suppliers. The idea where we are going, we are securing prices in pricing for the future as well. We see our tier-1 suppliers as being very good partners. Noaman Satya: Okay. That's fair. And just maybe the last one that's on the cost side. I know there is an element of operating leverage that's going to come in eventually. But just on the product side, when you guys are investing in R&D, has there been any progress apart from a battery within your trucks where you've reduced the cost or pretty much what it comes from operating leverage only? Marc Bedard: None of your answers, they recommend incomes obviously it comes from, you know, scaling up. But it also comes, you know, from the R&D are doing. I mean, I think, you know the number of people we have right now, like 270 over the 900 people we have. And this is -- we will keep growing that. Also well -- they're -- you know what they're doing. Obviously, we're doing some product developments. But most of the components we're using even on the new products, are taking the benefits of what we'd be doing in the last few years, but also always improving quality and always bringing them the costs. And those costs will be going down because of all the R&D that we are doing. And using state-of-the-art technologies that we are developing. So you're absolutely right. And also it's going to be coming from what we're doing in the battery plants. So the battery plant, we will be opening next year is one -- it will be a major cost-saving, as we said earlier because basically, we're taking control over the multiple -- and there's a lot of consuming the cell and the module we're taking control over the modules. So not only is it like better quality but also, we're bringing down the cost and we are managing the shortage of cells as well because we're going to -- as you know, we're going to the 21700 cylindrical cells. And we're getting right now, into a long-term supply agreement in this regard. So it's usually a mix of all of that, securing the supply, getting better products, but also shaving the costs. And this is what we're doing on a daily basis. And this is what we've been doing for many years. Noaman Satya: Okay. No, that's straight. And maybe I'll just ask one more. This is about Lion Energy. So you guys are recent -- some of these charges, I'm wondering if when you think of that part of the business, is that just to build up your order book and fostering that sort of transition to EV or is that the business way you guys are making some profits as well? Marc Bedard: Well, it is a mix of both because we are making a profit. We are definitely making a profit in this division, no doubt. And you're also right, I mean, the first goal of LionEnergy is to smoothen the transition for the customers. So to make sure that the charging infrastructure will be the right ones. First of all, at the right price for the customer and also install in a timely manner. And for all the new coming OEM or dealers in the marketplace that's a huge challenge just getting the charging infrastructure in time is a major challenge. So as Lion, we'd be able to secure a lot of stock from many of the key suppliers for our customers. And our customers are pleased with that. So we do have the stock. We do have also these -- the charging infrastructures to secure the deliveries. I mean, to make sure we will be able to deliver in the next 12 months as well. And this is making a huge, huge, huge difference. So LionEnergy, we're making a profit, but also we're smoothing the transition. Noaman Satya: Okay. Makes sense. That's it from me, and congrats on the good work that you're doing. Thank you. Marc Bedard: Thank you so much, Norman. Operator: Your next question comes from the line of Jon Lopez of Vertical Group. Jon Lopez: Hi, good morning. Thanks very much for taking the questions. Marc Bedard: Good morning. Nicolas Brunet: Hi Jon. Jon Lopez: I just had a couple of quick ones if I could. The first one, your CapEx was quite meaningfully below our model it sounded in your prepared remarks like some of this is perhaps timing-related, but excuse me, could you just speak to CapEx needs in the second half of this calendar year and then in 2022, as you ramp Joliet and as you ramp the battery factory in Quebec? Marc Bedard: We we're reiterating the same figures and put it up before. So a $130 million for the Joliet plants in Canada, a 185 for the battery plant here to call but out of this catch 185, a 100 is coming from the government density security. So call it on a net basis, 70 million US year net of that debt for the last. Now the CapEx has been lower -- yes it is a timing issue, so the CapEx you see there is really locked at the plants here in Saint-Jerome. we expect that in Q3, Q4, the CapEx will start on both plants. It will be a mix of deposits and commitments and expect that to be obviously lumpy given the type of equipment that we're of those will be in the big picture. Jon Lopez: Okay. Thanks, Yannick. And sorry, just, is it conceptually right to assume that 200 billion will be spent between now and the end of 2022, just given the factory timings? Marc Bedard: Yes, that's conceptually right, yes. Jon Lopez: Okay. That helps. And then, secondly, and I guess somewhat relatedly, it sounds like in the filings that most of the costs, like in Joliet in particular, are not yet flowing through your financial statements. How do we think about that? Is the OpEx profile changes perhaps in the second half of the calendar year, like what are the line items we should look for, and what kind of relative increases would you expect? Marc Bedard: Yeah, Jon, not much of it relates to the Joliet but this will be capital expenditures and we do have -- you're going to see on the balance sheet that they -- an asset and liability related to the lease engagements that we have there. But we don't expect that it will be open until the plant is operating, so don't expect much by way of the OpEx issue. Jon Lopez: Okay. I understood. And the last one I just wanted to come back to the gross margin quickly, I apologize, because I know you
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Lion Electric's Upcoming Earnings Report: A Detailed Analysis

  • Lion Electric (NYSE:LEV) is expected to report an EPS of -$0.13 and revenue of $33.7 million in its upcoming quarterly earnings.
  • Despite a negative P/E ratio of -0.43, the company's price-to-sales ratio of 0.32 suggests its stock is relatively inexpensive compared to its sales.
  • Lion Electric faces challenges in generating cash flow, with an enterprise value to operating cash flow ratio of -7.63, and is under legal scrutiny, potentially impacting investor confidence.

The Lion Electric Company, trading under the symbol NYSE:LEV, is set to release its quarterly earnings on February 26, 2025. Analysts predict an earnings per share (EPS) of -$0.13, with revenue expected to be around $33.7 million. Lion Electric specializes in manufacturing electric vehicles, particularly buses, and faces competition from other electric vehicle manufacturers.

Despite a negative price-to-earnings (P/E) ratio of -0.43, Lion Electric's stock is valued at 32 cents for every dollar of sales, as indicated by its price-to-sales ratio of 0.32. This suggests that while the company is not currently profitable, its stock is relatively inexpensive compared to its sales. However, the enterprise value to sales ratio of 2.39 shows that the company's overall valuation is higher relative to its revenue.

The company faces challenges in generating cash flow, as highlighted by an enterprise value to operating cash flow ratio of -7.63. This means that Lion Electric is struggling to convert its operations into cash, which is crucial for sustaining business activities. Additionally, the negative earnings yield of -2.32% further emphasizes the company's lack of profitability, indicating that investors are not receiving returns on their investments.

Lion Electric's financial health is also under scrutiny due to its debt-to-equity ratio of 1.06, which shows that the company has slightly more debt than equity. This could pose risks if the company is unable to manage its debt effectively. However, a current ratio of 1.12 suggests that Lion Electric has a modest ability to cover its short-term liabilities with its short-term assets, providing some reassurance to investors.

The company is currently under investigation by Bronstein, Gewirtz & Grossman, LLC, following a report by the Kennebec Journal. Federal agents visited Winthrop schools to investigate potential fraud related to Lion Electric's buses. This legal scrutiny, along with the Schall Law Firm's fraud investigation, adds to the challenges faced by Lion Electric, impacting investor confidence and the company's future prospects.

Lion Electric's Upcoming Earnings Report: A Detailed Analysis

  • Lion Electric (NYSE:LEV) is expected to report an EPS of -$0.13 and revenue of $33.7 million in its upcoming quarterly earnings.
  • Despite a negative P/E ratio of -0.43, the company's price-to-sales ratio of 0.32 suggests its stock is relatively inexpensive compared to its sales.
  • Lion Electric faces challenges in generating cash flow, with an enterprise value to operating cash flow ratio of -7.63, and is under legal scrutiny, potentially impacting investor confidence.

The Lion Electric Company, trading under the symbol NYSE:LEV, is set to release its quarterly earnings on February 26, 2025. Analysts predict an earnings per share (EPS) of -$0.13, with revenue expected to be around $33.7 million. Lion Electric specializes in manufacturing electric vehicles, particularly buses, and faces competition from other electric vehicle manufacturers.

Despite a negative price-to-earnings (P/E) ratio of -0.43, Lion Electric's stock is valued at 32 cents for every dollar of sales, as indicated by its price-to-sales ratio of 0.32. This suggests that while the company is not currently profitable, its stock is relatively inexpensive compared to its sales. However, the enterprise value to sales ratio of 2.39 shows that the company's overall valuation is higher relative to its revenue.

The company faces challenges in generating cash flow, as highlighted by an enterprise value to operating cash flow ratio of -7.63. This means that Lion Electric is struggling to convert its operations into cash, which is crucial for sustaining business activities. Additionally, the negative earnings yield of -2.32% further emphasizes the company's lack of profitability, indicating that investors are not receiving returns on their investments.

Lion Electric's financial health is also under scrutiny due to its debt-to-equity ratio of 1.06, which shows that the company has slightly more debt than equity. This could pose risks if the company is unable to manage its debt effectively. However, a current ratio of 1.12 suggests that Lion Electric has a modest ability to cover its short-term liabilities with its short-term assets, providing some reassurance to investors.

The company is currently under investigation by Bronstein, Gewirtz & Grossman, LLC, following a report by the Kennebec Journal. Federal agents visited Winthrop schools to investigate potential fraud related to Lion Electric's buses. This legal scrutiny, along with the Schall Law Firm's fraud investigation, adds to the challenges faced by Lion Electric, impacting investor confidence and the company's future prospects.