MONTREAL — The Lion Electric Company (NYSE: LEV) (TSX: LEV) (“Lion” or the “Company”), a leading manufacturer of all-electric medium and heavy-duty urban vehicles, today announced its financial and operating results for the fourth quarter and fiscal year 2022, which ended on December 31, 2022. Lion reports its results in US dollars and in accordance with International Financial Reporting Standards (“IFRS”).
Q4 2022 FINANCIAL HIGHLIGHTS
- Delivery of 174 vehicles, an increase of 103 vehicles, as compared to the 71 delivered in the same period last year.
- Revenue of $46.8 million, up $23.9 million, as compared to $22.9 million in Q4 2021.
Gross loss of $4.8 million as compared to gross profit of $2.2 million in Q4 2021. - Net loss of $4.6 million in Q4 2022, as compared to net earnings of $28.3 million in Q4 2021. Net loss for Q4 2022 includes a $15.4 million gain related to non-cash decrease in the fair value of share warrant obligations and a $2.5 million charge related to non-cash share-based compensation, whereas net earnings for Q4 2021 included a $46.6 million gain related to non-cash decrease in the fair value of share warrant obligations and a $5.0 million charge related to non-cash share-based compensation.
- Adjusted EBITDA1 of negative $13.9 million, as compared to negative $7.5 million in Q4 2021, after mainly adjusting for certain non-cash items such as change in fair value of share warrant obligations and share-based compensation.
- Capital expenditures, which included expenditures related to the Company’s U.S. manufacturing facility in Joliet, Illinois (the “Joliet Facility”) and the Company’s battery manufacturing plant and innovation center in Mirabel, Quebec (the “Lion Campus’), amounted to $39.1 million, up $19.9 million, as compared to $19.2 million in Q4 2021.
Additions to intangible assets, which mainly consist of R&D activities, amounted to $21.3 million, up $11.6 million, as compared to $9.7 million in Q4 2021. - Closed a public offering of units in December 2022, pursuant to which the Company issued 19,685,040 units at a price of $2.54 per unit for gross proceeds of approximately $50 million; each unit consisted of one common share and one common share purchase warrant (a “2022 Warrant”), with each whole 2022 Warrant entitling the holder thereof to acquire one common share at an exercise price of $2.80 per share for a period of five years until December 16, 2027.
- Total gross proceeds from financing activities of approximately $116 million, consisting of offering of units (approximate gross proceeds of $50 million), issuance of common shares under the Company’s “at-the-market” program (approximate gross proceeds of $10 million) and borrowings under long-term debt instruments (approximately $56 million in the aggregate under the Company’s revolving credit agreement, loan with Investissement Quebec, loan with the Strategic Innovation Fund of the Government of Canada and new loan agreement with Finalta and CDPQ), as compared to approximately $64 million in the aggregate in Q4 2021.
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1 Adjusted EBITDA is a non-IFRS financial measure. See “Non-IFRS Measures and Other Performance Metrics” section of this press release.
FISCAL 2022 FINANCIAL HIGHLIGHTS
- Delivery of 519 vehicles, an increase of 323 vehicles, as compared to the 196 delivered in fiscal 2021.
- Revenue of $139.9 million, up $82.2 million, as compared to $57.7 million in fiscal 2021.
Gross loss of $12.9 million, as compared to gross profit of nil in fiscal 2021.
Net earnings of $17.8 million, as compared to a net loss of $43.3 million in fiscal 2021. Net earnings for fiscal 2022 includes higher gains related to non-cash decrease in the fair value of share warrant obligations and lower non-cash share-based compensation, as compared to fiscal 2021. - Adjusted EBITDA of negative $54.8 million, as compared to negative $27.6 million in fiscal 2021, after mainly adjusting for certain non-cash items such as change in fair value of share warrant obligations and share-based compensation.
- Capital expenditures, which included expenditures related to the Joliet Facility and the Lion
- Campus, amounted to $148 million, up $119.4 million, as compared to $28.6 million in fiscal 2021.
- Additions to intangible assets, which mainly consist of R&D activities, amounted to $79.1 million, up $42.7 million, as compared to $36.4 million in fiscal 2021.
BUSINESS UPDATES
- More than 950 vehicles on the road, with over 10 million miles driven.
- Vehicle order book2 of 2,468 all-electric medium- and heavy-duty urban vehicles as of March 9, 2023, consisting of 301 trucks and 2,167 buses, representing a combined total order value of approximately $575 million based on management’s estimates.
- LionEnergy order book2 of 317 charging stations and related services as of March 9, 2023, representing a combined total order value of approximately $6 million.
- 12 Experience Centers in operation in the United States and Canada.
- Completed in December 2022 the delivery of its first LionC zero-emission school bus built at the Joliet Facility and funded by the U.S. EPA’s Clean School Bus Program.
- Completed production of its first lithium-ion battery pack at the battery manufacturing plant in Mirabel, Quebec in December 2022 and transferred an additional portion of the battery production line from JR Automation’s facility in Troy, Michigan (where the Company previously produced and tested prototype battery packs) to the battery manufacturing facility in Mirabel in early 2023. Final certification of the first battery pack is expected in the first half of 2023, followed by a gradual ramp up of production in 2023.
- Completed in February 2023 a sale-leaseback transaction for the battery manufacturing building located in Mirabel, Quebec for a total purchase price of $21.5 million (C$28 million) and entered into a lease agreement for an initial 20-year term with subsequent renewal options.
- As of March 9, 2023, Lion had approximately 1,400 employees, of which approximately 300 were in its Engineering and R&D departments.
“We are pleased with our 2022 performance, as once again, despite external challenges, we delivered a record number of electric vehicles. In parallel, we produced our first electric school bus at our Joliet, IL manufacturing plant and we produced our first battery pack at our Mirabel, QC battery manufacturing facility, while efficiently managing our cash position throughout the year,” commented Marc Bedard, CEO and founder of Lion. “As we head into a new year, I would like to thank all our employees for their hard work and dedication. In 2023, we will continue to carefully manage liquidities while maintaining focus on investing the capital and resources required to accelerate the efficient ramp-up of our production, with a view to optimize our manufacturing footprint and drive long-term growth and profitability,” concluded Marc Bedard.
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2 See “Non-IFRS Measures and Other Performance Metrics” section of this press release. The Company’s vehicle and charging stations order book is determined by management based on purchase orders that have been signed, orders that have been formally confirmed by clients or products in respect of which formal joint applications for governmental subsidies or economic incentives have been made by the applicable clients and the Company. The order book is expressed as a number of units or a total dollar value, which dollar value is determined based on the pricing of each unit included in the order book. The vehicles included in the vehicle order book as of March 9, 2023 provided for a delivery period ranging from a few months to the end of the year ending December 31, 2025. Substantially all deliveries are subject to the granting of subsidies and incentives with processing times that are subject to important variations, and there has been in the past and the Company expects there will continue to be variances between the expected delivery periods of orders and the actual delivery times, and certain delays could be significant. Such variances or delays could result in the loss of a subsidy or incentive and/or in the cancellation of certain orders, in whole or in part. The Company’s presentation of the order book should not be construed as a representation by the Company that the vehicles and charging stations included in its order book will translate into actual sales.
SELECT EXPLANATIONS ON RESULTS OF OPERATIONS FOR THE FOURTH QUARTER AND FISCAL YEAR 2022
Revenue
For the three months ended December 31, 2022, revenue amounted to $46.8 million, an increase of $23.9 million, compared to the corresponding period in the prior year. The increase in revenue was primarily due to an increase in vehicle sales volume of 103 units, from 71 units (57 school buses and 14 trucks; 43 vehicles in Canada and 28 vehicles in the U.S.) for the three months ended December 31, 2021 to 174 units (139 school buses and 35 trucks; 160 vehicles in Canada and 14 vehicles in the U.S.) for the three months ended December 31, 2022. Revenues for the three months ended December 31, 2022 were impacted by continuing global supply chain challenges, which required the Company to delay the final assembly of certain vehicles and resulted in increased inventory levels, as well as challenges associated with the production ramp-up and the development of certain models.
For the year ended December 31, 2022, revenue amounted to $139.9 million, an increase of $82.2 million, compared to the year ended December 31, 2021. The increase in revenue was primarily due to an increase in vehicle sales volume of 323 units, from 196 units (151 school buses and 45 trucks; 134 vehicles in Canada and 62 vehicles in the U.S.) for the year ended December 31, 2021, to 519 units (409 school buses and 110 trucks; 471 vehicles in Canada and 48 vehicles in the U.S.) for the year ended December 31, 2022. Revenues for the year ended December 31, 2022 were impacted by continuing global supply chain challenges, which required the Company to delay the final assembly of certain vehicles and resulted in increased inventory levels, as well as challenges associated with the production ramp-up and the development of certain models.
Cost of Sales
For the three months ended December 31, 2022, cost of sales amounted to $51.5 million, representing an increase of $30.8 million compared to $20.7 million in the corresponding period in the prior year. The increase was primarily due to increased sales volumes and higher production levels, increased fixed manufacturing and inventory management system costs related to the ramp-up of future production capacity, higher raw material and commodity costs, and the impact of continuing global supply chain challenges and inflationary environment.
For the year ended December 31, 2022, cost of sales amounted to $152.9 million, representing an increase of $95.2 million, compared to the year ended December 31, 2021. The increase was primarily due to increased sales volumes and higher production levels, increased fixed manufacturing and inventory management system costs related to the ramp-up of future production capacity, higher raw material and commodity costs, and the impact of continuing global supply chain challenges and inflationary environment.
Gross Profit
For the three months ended December 31, 2022, gross profit decreased by $6.9 million, from a gross profit of $2.2 million for the corresponding period in the prior year, to a gross loss of $4.8 million for the three months ended December 31, 2022. The decrease was primarily due to the impact of increased fixed manufacturing costs and inventory management system costs related to the ramp-up of future production capacity, higher raw material and commodity costs, product mix, and the impact of continuing global supply chain challenges and inflationary environment, partially offset by the positive gross profit impact of increased sales volumes.
For the year ended December 31, 2022, gross profit decreased by $13.0 million to negative $12.9 million, compared to nil for the year ended December 31, 2021. The decrease was primarily due to the impact of increased fixed manufacturing costs and inventory management system costs related to the ramp-up of future production capacity, higher raw material and commodity costs, product mix, and the impact of continuing global supply chain challenges and inflationary environment, partially offset by the positive impact of increased sales volumes.
Administrative Expenses
For the three months ended December 31, 2022, administrative expenses decreased by $2.2 million, from $12.2 million for the three months ended December 31, 2021, to $10.0 million for the three months ended December 31, 2022. Administrative expenses for the three months ended December 31, 2022 included $2.1 million of non-cash share-based compensation, compared to $4.4 million for the three months ended December 31, 2021. Excluding the impact of non-cash share-based compensation, administrative expenses increased from $7.8 million for the three months ended December 31, 2021 to $7.9 million for the three months ended December 31, 2022. The increase was mainly due to an increase in expenses resulting from the expansion of Lion’s head office and general corporate capabilities in anticipation of an expected increase in business activities.
For the year ended December 31, 2022, administrative expenses decreased by $33.6 million, from $78.4 million for the year ended December 31, 2021, to $44.8 million. Administrative expenses for the year ended December 31, 2022 included $9.5 million of non-cash share-based compensation, compared to $56.7 million for the year ended December 31, 2021. Excluding the impact of non-cash share-based compensation, administrative expenses increased from $21.7 million for the year ended December 31, 2021 to $35.3 million for year ended December 31, 2022. The increase was mainly due to an increase in expenses reflecting Lion’s transition to being a public company in May 2021, an increase in expenses resulting from the expansion of Lion’s head office and general corporate capabilities in anticipation of an expected increase in business activities, as well as professional fees related to supply chain and strategic project optimization initiatives.
Selling Expenses
For the three months ended December 31, 2022, selling expenses increased by $0.9 million, from $4.8 million for the three months ended December 31, 2021, to $5.6 million for the three months ended December 31, 2022. Selling expenses for the three months ended December 31, 2022 included $0.4 million of non-cash share-based compensation, compared to $0.7 million for the three months ended December 31, 2021. Excluding the impact of non-cash share-based compensation, selling expenses increased from $4.1 million for the three months ended December 31, 2021 to $5.2 million for the three months ended December 31, 2022. The increase was primarily due to Lion expanding its sales force in anticipation of the ramp-up of production capacity, and an increase in expenses as a result of the opening and operations of new Experience Centers.
For the year ended December 31, 2022, selling expenses decreased by $4.7 million, from $27.7 million for the year ended December 31, 2021, to $23.0 million. Selling expenses for the year ended December 31, 2022 included $2.9 million of non-cash share-based compensation, compared to $14.4 million for the year ended December 31, 2021. Excluding the impact of non-cash share-based compensation, selling expenses increased from $13.3 million for the year ended December 31, 2021 to $20.1 million for year ended December 31, 2022. The increase was primarily due to Lion expanding its sales force in anticipation of the ramp-up of production capacity, and an increase in expenses as a result of the opening and operations of new Experience Centers.
Transaction Costs
Transaction costs of $13.7 million for the year ended December 31, 2021 were incurred in the second quarter of 2021 and related to the completion of the Business Combination pursuant to which Lion became a public company, and were mainly composed of legal, banking, and other professional fees. No such transaction costs were incurred in fiscal 2022.
Finance Costs
For the three months ended December 31, 2022, finance costs decreased by $2.1 million compared to the corresponding period in the prior year. Finance costs for the three months ended December 31, 2022 were net of $5.1 million of capitalized borrowing costs. Excluding the impact of capitalized borrowing costs, finance costs increased by $3.0 million compared to the three months ended December 31, 2021. The increase was driven primarily by higher interest expense on long-term debt, due to higher debt outstanding during the quarter relating to borrowings made under the Company’s revolving credit agreement, loan with Investissement Quebec, loan with the Strategic Innovation Fund of the Government of Canada and new loan agreement with Finalta and CDPQ, as well as an increase in financing costs related to the issuance of the 2022 Warrants, and an increase in interest costs related to lease liabilities, including for the Joliet Facility.
For the year ended December 31, 2022 finance costs decreased by $7.4 million, from $8.3 million for the year ended December 31, 2021, to $1.0 million. Finance costs for the year ended December 31, 2022 were net of $5.1 million of borrowing costs capitalized to the Lion Campus construction and to development costs. Excluding the impact of capitalized borrowing costs, finance costs decreased by $2.2 million compared to the year ended December 31, 2021. The decrease was driven primarily by lower interest expense on long-term debt, the non-recurrence of interest expense on convertible debt instruments that was repaid in fiscal 2021 and accretion expense on retractable common shares which were repaid on May 6, 2021, and the gain on derecognition of a financial liability (which occurred as a result of the agreement with a private company relating to the previous acquisition of dealership rights in certain territories in the United States maturing on May 7, 2022), partially offset by an increase in financing costs related to the establishment of the Company’s “at-the-market” program and the issuance of the 2022 Warrants and interest on lease liabilities, including for the Joliet Facility.
Foreign Exchange Loss
Foreign exchange losses for both periods relate primarily to the revaluation of net monetary assets denominated in foreign currencies to the functional currencies of the related Lion entities. For three months ended December 31, 2022, foreign exchange loss was $0.6 million, compared a loss of $2.3 million in the corresponding period in the prior year, largely as a result of a lesser weakening of the Canadian dollar relative to the U.S. dollar during the three months ended December 31, 2022, as compared to the three months ended December 31, 2021.
Foreign exchange losses for both periods relate primarily to the revaluation of net monetary assets denominated in foreign currencies to the functional currencies of the related Lion entities. Foreign exchange loss for the year ended December 31, 2022, was $2.0 million compared to a loss of $1.0 million year ended December 31, 2021, largely as a result of stronger weakening of the Canadian dollar relative to the U.S. dollar during 2022, as compared to 2021.
Change in Fair Value of Share Warrant Obligations
Change in fair value of share warrant obligations moved from a gain of $46.6 million for the three months ended December 31, 2021, to a gain of $15.4 million, for the three months ended December 31, 2022. The gain for the three months ended December 31, 2022, was related to the warrants issued to a customer in July 2020, and the public and private warrants issued as part of the closing of the Company’s business combination on May 6, 2021, and the 2022 Warrants issued in December 2022, and resulted mainly from the decrease in the market price of Lion equity as compared to the previous valuations.
Change in fair value of share warrant obligations resulted in a gain of $101.5 million for the year ended December 31, 2022, compared to a gain of $85.8 million for the year ended December 31, 2021, related to the warrants issued to a customer in July 2020, the public and private warrants issued as part of the closing of the Company’s business combination on May 6, 2021, and the 2022 Warrants issued in December 2022. The gain for the year ended December 31, 2022 results mainly from the decrease in the market price of Lion equity as compared to the previous valuations.
Net Earnings (Loss)
The net loss for the three months ended December 31, 2022 as compared to the net earnings for the corresponding prior period were largely due to the lower decrease in the fair value of share warrant obligations (resulting in a lower gain) discussed in “Change in fair value of share warrant obligations” above, a gross loss (versus gross profit in the prior period), higher administrative and selling expenses (excluding share-based compensation), and higher finance costs, partially offset by lower non-cash share-based compensation.
For the year ended December 31, 2022, net earnings increased by $61.1 million, from a net loss of $43.3 million for the year ended December 31, 2021, to net earnings of $17.8 million. The increase in net earnings for the year ended December 31, 2022 as compared to the year ended December 31, 2021 was largely due to lower non-cash share-based compensation, lower transaction and finance costs, and the higher gain on the fair value of share warrant obligations during discussed in “Change in fair value of share warrant obligations” above, partially offset by higher gross loss and higher administrative and selling expenses (excluding share-based compensation).
FINANCIAL REPORT
This release should be read together with the audited annual audited consolidated financial statements of the Company and the related notes for the years ended December 31, 2022 and 2021, and the related management discussion and analysis (“MD&A”) for the three and twelve months ended December 31, 2022, which will be filed by the Company with applicable Canadian securities regulatory authorities and with the U.S. Securities and Exchange Commission, and which will be available on SEDAR as well as on our website at www.thelionelectric.com.
