MONTREAL, Canada – 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 first quarter of fiscal year 2023, which ended on March 31, 2023. Lion reports its results in US dollars and in accordance with International Financial Reporting Standards (“IFRS”).
Q1 2023 Financial Highlights:
Delivery of 220 vehicles, an increase of 136 vehicles, as compared to the 84 delivered in the same period last year.Revenue of $54.7 million, up $32.1 million, as compared to $22.6 million in Q1 2022.
Gross loss of $2.3 million as compared to gross loss of $0.9 million in Q1 2022.
Net loss of $15.6 million in Q1 2023, as compared to net earnings of $2.1 million in Q1 2022. Net loss for Q1 2023 includes a $5.8 million gain related to non-cash decrease in the fair value of share warrant obligations and a $1.4 million charge related to non-cash share-based compensation, whereas net earnings for Q1 2022 included a $21.5 million gain related to non-cash decrease in the fair value of share warrant obligations and a $3.8 million charge related to non-cash share-based compensation.
Adjusted EBITDA1 of negative $14.5 million, as compared to negative $11.3 million in Q1 2022, 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 $23.1 million, down $11.8 million, as compared to $34.9 million in Q1 2022.
Additions to intangible assets, which mainly consist of R&D activities, amounted to $16.5 million, up $1.5 million, as compared to $15.0 million in Q1 2022.
Completed a sale and leaseback transaction for its battery manufacturing building located in Mirabel, Quebec for a total purchase price of $20.9 million (C$28 million). Concurrent with the sale, Lion entered into a lease agreement for the Mirabel battery manufacturing building.
Total aggregate net proceeds of $36 million in the quarter from the sale and leaseback of the Mirabel battery manufacturing building ($20.5 million), offering of units ($7.1 million), issuance of common shares under the ATM program ($4.6 million), and from borrowings under the IQ Loan (as defined below) of $6.3 million, partially offset by net repayments of $2.5 million under the Revolving Credit Agreement.
Business Update:
More than 1,100 vehicles on the road, with over 10 million miles driven.
Vehicle order book2 of 2,565 all-electric medium- and heavy-duty urban vehicles as of May 8, 2023, consisting of 295 trucks and 2,270 buses, representing a combined total order value of approximately $625 million based on management’s estimates.
LionEnergy order book2 of 347 charging stations and related services as of May 8, 2023, representing a combined total order value of approximately $6 million.
12 Experience Centers in operation in the United States and Canada.
Began commercial production of LionC zero-emission school buses at the Joliet Facility.
Officially inaugurated the battery manufacturing factory that will produce lithium-ion batteries for medium and heavy-duty vehicles in Mirabel. Certification of the first battery pack is expected in the second quarter of 2023, followed by a gradual production ramp-up in 2023. The first Lion batteries will serve to power the LionC and LionD school buses and the Lion5 trucks.
As of May 8, 2023, Lion had approximately 1,400 employees, of which approximately 300 were in its Engineering and R&D departments.
“We are pleased with our Q1 2023 performance, as we increased the number of vehicles delivered for the sixth quarter in a row,” commented Marc Bedard, CEO – Founder of Lion. “With manufacturing operations at both our Joliet vehicle plant and our battery factory now underway, we are focused on achieving profitability and are putting the right elements in place to achieve this objective,” concluded Marc Bedard.
Select Explanations on Results of Operations for the First Quarter of Fiscal Year 2023:
Revenue:
For the three months ended March 31, 2023, revenue amounted to $54.7 million, an increase of $32.1 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 136 units, from 84 units (72 school buses and 12 trucks; 80 vehicles in Canada and 4 vehicles in the U.S.) for the three months ended March 31, 2022 to 220 units (207 school buses and 13 trucks; 215 vehicles in Canada and 5 vehicles in the U.S.) for the three months ended March 31, 2023. Revenues for the three months ended March 31, 2023 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 March 31, 2023, cost of sales amounted to $57.0 million, representing an increase of $33.4 million compared to $23.6 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.
Gross Profit:
For the three months ended March 31, 2023, gross loss increased by $1.3 million, from a gross loss of $0.9 million for the corresponding period in the prior year, to a gross loss of $2.3 million for the three months ended March 31, 2023. The increase in the gross loss 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 March 31, 2023, administrative expenses increased by $2.0 million, from $11.0 million for the three months ended March 31, 2022, to $13.0 million for the three months ended March 31, 2023. Administrative expenses for the three months ended March 31, 2023 included $1.0 million of non-cash share-based compensation, compared to $2.8 million for the three months ended March 31, 2022. Excluding the impact of non-cash share-based compensation, administrative expenses increased from $8.2 million for the three months ended March 31, 2022 to $12.0 million for the three months ended March 31, 2023. The increase was mainly due to an increase in expenses, including higher headcount, resulting from the expansion of Lion’s head office and general corporate capabilities in anticipation of an expected increase in business activities.
Selling Expenses:
For the three months ended March 31, 2023, selling expenses increased by $0.5 million, from $5.4 million for the three months ended March 31, 2022, to $5.9 million for the three months ended March 31, 2023. Selling expenses for the three months ended March 31, 2023 included $0.4 million of non-cash share-based compensation, compared to $1.0 million for the three months ended March 31, 2022. Excluding the impact of non-cash share-based compensation, selling expenses increased from $4.4 million for the three months ended March 31, 2022 to $5.5 million for the three months ended March 31, 2023. The increase was primarily due to Lion expanding its sales force in anticipation of the ramp-up of production capacity and higher sales commission expenses associated with higher sales volumes.
Finance Costs:
For the three months ended March 31, 2023, finance costs increased by $0.2 million from $1.2 million for the corresponding period in the prior year, to $1.4 million for the three months ended March 31, 2023. Finance costs for the three months ended March 31, 2023 were net of $1.7 million of capitalized borrowing costs. Excluding the impact of capitalized borrowing costs, finance costs increased by $1.9 million compared to the three months ended March 31, 2022. 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 Revolving Credit Agreement, the IQ Loan, the SIF Loan, and the Finalta-CDPQ Loan Agreement, as well as an increase in financing costs related to the over-allotment option exercise of the 2022 Warrants, and an increase in interest costs related to lease liabilities, including for the Mirabel battery manufacturing facility.
Foreign Exchange Loss:
Foreign exchange gains and/or 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 March 31, 2023, foreign exchange gain was $1.2 million, compared a loss of $0.9 million in the corresponding period in the prior year, related primarily to the impact of changes in foreign currency rates.
Change in Fair Value of Share Warrant Obligations:
Change in fair value of share warrant obligations moved from a gain of $21.5 million for the three months ended March 31, 2022, to a gain of $5.7 million, for the three months ended March 31, 2023. The gain for the three months ended March 31, 2023, was related to the warrants issued to a customer in July 2020, the public and private warrants issued as part of the closing of the Business Combination on May 6, 2021, and the 2022 Warrants issued under the December 2022 Offering, and resulted 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 March 31, 2023 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, higher administrative and selling expenses (excluding share-based compensation), partially offset by lower non-cash share-based compensation and the impact of a foreign exchange gain compared to a foreign exchange loss in the corresponding prior period.
Conference Call:
A conference call and webcast will be held on May 9, 2023, at 8:30 a.m. (Eastern Time) to discuss the results. To participate in the conference call, please dial (226) 828-7575 or (833) 950-0062 (toll free) using the Access Code 973203. An investor presentation and a live webcast of the conference call will also be available at www.thelionelectric.com under the “Events and Presentations” page of the “Investors” section. An archive of the event will be available for a period of time shortly after the conference call.
Financial Report:
This release should be read together with our 2023 first quarter financial report, including the unaudited condensed interim consolidated financial statements of the Company as at and for the quarter ended March 31, 2023, and the related management discussion and analysis (“MD&A”), 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.
Annual Meeting of Shareholders:
This year, the Company will be holding its Annual Meeting as a completely virtual meeting, which will be conducted via live webcast on May 30, 2023, at 11:00 a.m. (Eastern Time). All shareholders, regardless of their geographic location, will have an equal opportunity to participate at the virtual Meeting at https://web.lumiagm.com/475248000. To access the online Meeting platform, participants will need an Internet-connected device, such as laptops, computers, tablets or cellphones.
The Company’s management information circular and notice of annual meeting of shareholders relating to the Meeting are available to shareholders on Lion’s website at www.thelionelectric.com in the Investors section, under Events and Presentations, and have been filed on SEDAR at www.sedar.com and EDGAR at www.sec.gov.
About Lion Electric:
Lion Electric is an innovative manufacturer of zero-emission vehicles. The company creates, designs and manufactures all-electric class 5 to class 8 commercial urban trucks and all-electric buses and minibuses for the school, paratransit and mass transit segments. Lion is a North American leader in electric transportation and designs, builds and assembles many of its vehicles’ components, including chassis, battery packs, truck cabins and bus bodies.
Always actively seeking new and reliable technologies, Lion vehicles have unique features that are specifically adapted to its users and their everyday needs. Lion believes that transitioning to all-electric vehicles will lead to major improvements in our society, environment and overall quality of life. Lion shares are traded on the New York Stock Exchange and the Toronto Stock Exchange under the symbol LEV.
