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 second quarter of fiscal year 2024, which ended on June 30, 2024. Lion reports its results in US dollars and in accordance with International Financial Reporting Standards (“IFRS”).
Q2 2024 FINANCIAL HIGHLIGHTS:
Revenue of $30.3 million, down $27.7 million, as compared to $58.0 million in Q2 2023.
Delivery of 101 vehicles, a decrease of 98 vehicles, as compared to the 199 delivered in Q2 2023. Less vehicles were delivered due to the impact of the timing of EPA rounds and the continued delays and challenges associated with the granting of subsidies related to the ZETF program. Deliveries were also impacted by a slowdown in the Company’s production cadence due to the integration of its Lion MD batteries onto its vehicles and the continued ramp-up of production of the Lion5 and LionD platforms.
Gross loss of $15.2 million, reflecting higher manufacturing costs due to the introduction of new products and to the impact of lower sales volume, as compared to gross profit of $0.4 million in Q2 2023.
Net loss of $19.3 million, as compared to net loss of $11.8 million in Q2 2023.
Adjusted EBITDA1 of negative $20.6 million, as compared to negative $9.7 million in Q2 2023.
Additions to property, plant and equipment of $1.3 million, down $17.8 million, as compared to $19.1 million in Q2 2023.
Additions to intangible assets, which mainly consist of vehicle and battery development activities, amounted to $10.6 million, ($9.4 million net of government assistance received), down $7.3 million as compared to $17.9 million in Q2 2023.
BUSINESS UPDATES:
More than 2,100 vehicles on the road, with over 28 million miles driven (over 46 million kilometers).
Vehicle order book2 of 1,994 all-electric medium- and heavy-duty urban vehicles as of July 30, 2024, consisting of 190 trucks and 1,804 buses, representing a combined total order value of approximately $475 million based on management’s estimates.
LionEnergy order book of 394 charging stations and related services as of July 30, 2024, representing a combined total order value of approximately $9 million.
12 experience centers in operation in the United States and Canada.
Commercial launch of our Lion8 Tractor truck at the ACT conference in May
Successfully completed the final certification for heavy duty Lion battery packs, which will be integrated into our Lion8 Tractor trucks.
On July 31, 2024, the Company announced an action plan (the “Action Plan”) intended to streamline its operations, further align its cost structure with current demand and improve its liquidity position and ability to reach its profitability goals. The Action Plan includes the following actions and initiatives:
A reduction of the Company’s workforce by 30% (representing approximately 300 employees) across Canada and the United States and impacting all areas of the organization, which is expected to be implemented over the upcoming days and will result in mostly temporary lay offs (such initiative being expected to result in annualized costs savings for the Company of up to approximately $25 million, assuming that employees temporarily laid off are not re-hired).
Adjusting the Company’s truck manufacturing operations in light of a lower market demand than initially anticipated for all-electric trucks, including by introducing a batch-size manufacturing approach for trucks directly aligned with the Company’s order book;
The creation of a new product line through which the Company will sell its battery packs to third parties.
A process to optimize usage of the Company’s facilities, including the potential sublease of a significant portion of its Joliet Facility and certain experience centers throughout Canada and the United States; and the implementation of an overall efficiency improvement plan to further reduce other operational expenses, such as third-party logistics costs, consultant costs, and other selling and administrative expenditures.
On July 30, 2024, the Company and the lenders under the Revolving Credit Agreement agreed to certain accommodations relating to the temporary inclusion of additional assets in the borrowing base until August 16, 2024.
“Despite the important challenges the electric vehicle market is currently facing, Lion has been able to realize major headway in the recent rounds of the EPA program, which should bring significant positive momentum to our company, and also made important progress in the last quarter, such as the commercial launch of our Lion8 Tractor and the certification of our LionBattery HD pack” stated Marc Bedard, CEO-Founder of Lion. “Transition to electric is taking longer than initially expected, but transportation electrification is here to stay. It is with that mindset that we have put together an action plan to adjust our cost structure to enable us to continue to support the increasing electric school bus demand and maintain our leadership position, while allowing us to keep supporting the truck operators in their electric transition and focus on our profitability objectives,” he added.
SELECT EXPLANATIONS ON RESULTS OF OPERATIONS FOR THE SECOND QUARTER OF FISCAL YEAR 2024
Revenue
For the three months ended June 30, 2024, revenue amounted to $30.3 million, a decrease of $27.7 million, compared to the corresponding period in the prior year. The decrease in revenue was due to a decrease in vehicle sales volume of 98 units, from 199 units (166 school buses and 33 trucks; 171 vehicles in Canada and 28 vehicles in the U.S.) for the three months ended June 30, 2023, to 101 units (95 school buses and 6 trucks; 84 vehicles in Canada and 17 vehicles in the U.S.) for the three months ended June 30, 2024. The decrease in vehicle sales volume was primarily attributable to the impact of the timing of EPA rounds and the continued delays and challenges associated with the granting of subsidies related to the ZETF program, as well as the impact on the Company’s production cadence due to the integration of its Lion MD batteries onto its vehicles and the continued ramp-up of production of the Lion5 and LionD platforms.
For the six months ended June 30, 2024, revenue amounted to $85.8 million, a decrease of $27.0 million, compared to the six months ended June 30, 2023. The decrease in revenue was due to a decrease in vehicle sales volume of 122 units, from 419 units (373 school buses and 46 trucks; 386 vehicles in Canada and 33 vehicles in the U.S.) for the six months ended June 30, 2023, to 297 units (279 school buses and 18 trucks; 249 vehicles in Canada and 48 vehicles in the U.S.) for the six months ended June 30, 2024. The decrease in vehicle sales volume was primarily attributable to the impact of the timing of EPA rounds, the continued delays and challenges associated with the granting of subsidies related to the ZETF program, as well as the impact on the Company’s production cadence of the integration of its Lion MD batteries onto its vehicles and the continued ramp-up of production of the Lion5 and LionD platforms.
Cost of Sales
For the three months ended June 30, 2024, cost of sales amounted to $45.5 million, representing a decrease of $12.1 million, compared to the corresponding period in the prior year. The decrease was primarily due to lower sales volumes, partially offset by increased manufacturing costs related to the ramp-up of the new products (LionD, Lion5, and the Lion battery packs).
For the six months ended June 30, 2024, cost of sales amounted to $112.1 million, representing a decrease of $2.4 million, compared to the six months ended June 30, 2023. The decrease was primarily due to lower sales volumes, partially offset by increased manufacturing costs related to the ramp-up of the new products (LionD, Lion5, and the Lion battery packs).
Gross Profit (Loss)
For the three months ended June 30, 2024, gross loss increased by $15.6 million to negative $15.2 million, compared to positive $0.4 million for the three months ended June 30, 2023. The gross loss was primarily due to increased manufacturing costs related to the ramp-up of the new products (LionD, Lion5, and the Lion battery packs).
For the six months ended June 30, 2024, gross loss increased by $24.5 million to negative $26.4 million, compared to negative $1.8 million for the six months ended June 30, 2023. The increase in the gross loss was primarily due to increased manufacturing costs related to the ramp-up of the new products (LionD, Lion5, and the Lion battery packs).
Administrative Expenses
For the three months ended June 30, 2024, administrative expenses decreased by $1.5 million, from $12.5 million for the corresponding period in the prior year, to $10.9 million. Administrative expenses for the three months ended June 30, 2024 included $0.4 million of non-cash share-based compensation, compared to $1.6 million for the three months ended June 30, 2023. Excluding the impact of non-cash share-based compensation, administrative expenses decreased from $10.9 million for the three months ended June 30, 2023, to $10.5 million for three months ended June 30, 2024. The decrease was mainly due to a decrease in expenses and a lower headcount, both resulting from the workforce reduction and cost reduction initiatives implemented in November 2023 and April 2024, partially offset by higher professional fees.
For the six months ended June 30, 2024, administrative expenses decreased by $3.4 million, from $25.5 million for the six months ended June 30, 2023, to $22.1 million. Administrative expenses for the six months ended June 30, 2024 included $0.7 million of non-cash share-based compensation, compared to $2.7 million for the six months ended June 30, 2023. Excluding the impact of non-cash share-based compensation, administrative expenses decreased from $22.8 million for the six months ended June 30, 2023, to $21.3 million for six months ended June 30, 2024. The decrease was mainly due to a decrease in expenses and a lower headcount, both resulting from the workforce reduction and cost reduction initiatives implemented in November 2023 and April 2024, partially offset by higher professional fees.
Selling Expenses
For the three months ended June 30, 2024, selling expenses decreased by $1.2 million, from $5.5 million for the three months ended June 30, 2023, to $4.3 million. Selling expenses for the three months ended June 30, 2024 included $0.1 million of non-cash share-based compensation, compared to $0.4 million for the three months ended June 30, 2023. Excluding the impact of non-cash share-based compensation, selling expenses decreased from $5.0 million for the three months ended June 30, 2023, to $4.2 million for three months ended June 30, 2024. The decrease was primarily due to streamlined selling related expenses, including lower headcount and marketing costs resulting from the workforce reduction and cost reduction initiatives implemented in November 2023 and April 2024.
For the six months ended June 30, 2024, selling expenses decreased by $3.3 million, from $11.3 million for the six months ended June 30, 2023, to $8.0 million. Selling expenses for the six months ended June 30, 2024 included $0.1 million of non-cash share-based compensation, compared to $0.8 million for the six months ended June 30, 2023. Excluding the impact of non-cash share-based compensation, selling expenses decreased from $10.5 million for the six months ended June 30, 2023, to $7.9 million for six months ended June 30, 2024. The decrease was primarily due to streamlined selling related expenses, including lower headcount and marketing costs resulting from the workforce reduction and cost reduction initiatives implemented in November 2023 and April 2024.
Restructuring Costs
Restructuring costs of $1.4 million for the three and six months ended June 30, 2024 are comprised mainly of severance costs related to the workforce reduction announced on April 18, 2024. No such restructuring costs were incurred for the three and six months ended June 30, 2023.
Finance Costs
For the three months ended June 30, 2024, finance costs increased by $10.3 million, from $2.0 million for the three months ended June 30, 2023, to $12.3 million for the three months ended June 30, 2024. Finance costs for the three months ended June 30, 2024 were net of $0.4 million of capitalized borrowing costs, compared to $1.4 million for the three months ended June 30, 2023. Excluding the impact of capitalized borrowing costs, finance costs increased by $9.3 million compared to the three months ended June 30, 2023. The increase was driven primarily by higher interest expense on long-term debt, due to higher average debt outstanding during the second quarter of fiscal 2024 relating to borrowings made under the Revolving Credit Agreement, the IQ Loan, the SIF Loan, the Finalta-CDPQ Loan Agreement, and the Supplier Credit Facility (as such terms are defined below), interest (including interest paid in kind with respect to the Convertible Debentures) and accretion expense as well as financing costs related to the Convertible Debentures and Non-Convertible Debentures issued in July 2023, and an increase in interest costs related to lease liabilities. Finance charges for the three months ended June 30, 2024 included non-cash charges of $5.5 million related to interest paid in kind with respect to the Convertible Debentures and accretion expense.
For the six months ended June 30, 2024, finance costs increased by $19.5 million, from $3.4 million for the six months ended June 30, 2023, to $22.9 million for the six months ended June 30, 2024. Finance costs for the six months ended June 30, 2024 were net of $0.7 million of capitalized borrowing costs, compared to $3.1 million for the six months ended June 30, 2023. Excluding the impact of capitalized borrowing costs, finance costs increased by $17.1 million compared to the six months ended June 30, 2023. The increase was driven primarily by higher interest expense on long-term debt, due to higher average debt outstanding during the first half of fiscal 2024 relating to borrowings made under the Revolving Credit Agreement, the IQ Loan, the SIF Loan, the Finalta-CDPQ Loan Agreement, and the Supplier Credit Facility (as such terms are defined below), interest (including interest paid in kind with respect to the Convertible Debentures) and accretion expense as well as financing costs related to the Convertible Debentures and Non-Convertible Debentures issued in July 2023, and an increase in interest costs related to lease liabilities, including for the Battery Plant. Finance charges for the six months ended June 30, 2024 included non-cash charges of $11.0 million related to interest paid in kind with respect to the Convertible Debentures and accretion expense.
Foreign Exchange Loss (Gain)
Foreign exchange loss (gain) relates primarily to the revaluation of net monetary assets denominated in foreign currencies to the functional currencies of the related Lion entities. For the three and six months ended June 30, 2024, foreign exchange loss was $1.0 million and $3.5 million respectively, compared to gains of $1.8 million and $3.0 million for the three and six months ended June 30, 2023, respectively, related primarily to the impact of changes in foreign currency rates (impact of changes in the Canadian dollar relative to the U.S. dollar).
Change in Fair Value of Conversion Options on Convertible Debt Instruments
For the three and six months ended June 30, 2024, change in fair value of conversion options on convertible debt instruments resulted in a gain of $12.5 million and $23.2 million, respectively, and was related to the revaluation of the conversion options on the Convertible Debentures issued in July 2023 resulting 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
Change in fair value of share warrant obligations moved from a gain of $6.0 million for the three months ended June 30, 2023, to a gain of $13.3 million, for the three months ended June 30, 2024. The gain for the three months ended June 30, 2024 was related to the Specific Customer Warrants, the public and private Business Combination Warrants, the 2022 Warrants, and the July 2023 Warrants, 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 moved from a gain of $11.7 million for the six months ended June 30, 2023, to a gain of $20.1 million, for the six months ended June 30, 2024. The gain for the six months ended June 30, 2024 was related to the Specific Customer Warrants, the public and private Business Combination Warrants, the 2022 Warrants, and the July 2023 Warrants, and resulted mainly from the decrease in the market price of Lion equity as compared to the previous valuations.
Net Loss
The net loss of $19.3 million for the three months ended June 30, 2024 as compared to the net loss of $11.8 million for the same period prior year was mainly due to the higher gross loss and higher finance costs, partially offset by the impact of the reduction in administrative and selling expenses as well as higher gains related to non-cash decrease in the fair value of share warrant obligations and the conversion options on convertible debt instrument.
The net loss of $41.0 million for the six months ended June 30, 2024 as compared to the net loss of $27.4 million for the same period prior year was mainly due to the higher gross loss and higher finance costs, partially offset by the impact of the reduction in administrative and selling expenses as well as higher gains related to non-cash decrease in the fair value of share warrant obligations and the conversion options on convertible debt instrument.
Continued Listing Standard Notice from the New York Stock Exchange
The Company also announced that on July 17, 2024, it received notice (the “Notice”) from the New York Stock Exchange (the “NYSE”) that, as of July 16, 2024, it was not in compliance with Section 802.01C of the NYSE Listed Company Manual because the average closing price of the Company’s common stock was less than $1.00 per share over a consecutive 30 trading-day period.
In accordance with applicable NYSE rules, the Company notified the NYSE of its intent to regain compliance with Rule 802.01C and return to compliance with the applicable NYSE continued listing standards.
The Company can regain compliance at any time within a six-month cure period following its receipt of the Notice if, on the last trading day of any calendar month during such cure period, the Company has both: (i) a closing share price of at least $1.00 and (ii) an average closing share price of at least $1.00 over the 30 trading-day period ending on the last trading day of the applicable calendar month.
The Company is considering all available options to regain compliance with the NYSE’s continued listing standards, including, but not limited to, taking actions that are subject to shareholder approval no later than at the Company’s next annual meeting of shareholders.
The Notice has no immediate impact on the listing of the Company’s common stock, which will continue to be listed and traded on the NYSE during such cure period, subject to the Company’s compliance with other NYSE continued listing standards. The Common Stock will continue to trade under the symbol “LEV,” but will have an added designation of “.BC” to indicate that the Company currently is not in compliance with the NYSE’s continued listing requirements. If the Company is unable to regain compliance during the cure period, the NYSE may initiate procedures to suspend and delist the Common Stock
Furthermore, the Notice is not anticipated to impact the ongoing business operations of the Company or its reporting requirements with the U.S. Securities and Exchange Commission.
CONFERENCE CALL:
A conference call and webcast will be held on July 31, 2024, at 8:30 a.m. (Eastern Time) to discuss the results. To participate in the conference call, please dial (404) 975-4839 or (833) 470-1428 (toll free) using the Access Code 940640. 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 the 2024 second quarter financial report, including the unaudited condensed interim consolidated financial statements of the Company and the related notes as at June 30, 2024 and for the three and six months ended June 30, 2024 and 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. Capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the MD&A.
NON-IFRS MEASURES AND OTHER PERFORMANCE METRICS:
This press release makes reference to Adjusted EBITDA, which is a non-IFRS financial measure, as well as other performance metrics, including the Company’s order book, which are defined below. These measures are neither required nor recognized measures under IFRS, and, as a result, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company’s results of operations from management’s perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of the Company’s financial information reported under IFRS. Lion compensates for these limitations by relying primarily on Lion’s IFRS results and using Adjusted EBITDA and order book on a supplemental basis. Readers should not rely on any single financial measure to evaluate Lion’s business. Adjusted gross profit (loss) and adjusted gross margin (loss), as defined in section 4.0 entitled “Non-IFRS Measures and Other Performance Metric” of the Company’s MD&A for the years ended 2023 and 2022, are not presented in this press release as the inventory write-down recorded by the Company in connection with its decision to indefinitely delay the start of commercial production of the LionA and LionM minibuses did not have an impact on the Company’s results for the three and six months ended June 30, 2024 and 2023.
Adjusted EBITDA:
“Adjusted EBITDA” is defined as net earnings (loss) before finance costs, income tax expense or benefit, and depreciation and amortization, adjusted to exclude restructuring costs, share-based compensation, change in fair value of conversion options on convertible debt instruments, change in fair value of share warrant obligations, foreign exchange (gain) loss and transaction and other non-recurring expenses. Lion uses adjusted EBITDA to facilitate a comparison of the profitability of its business on a consistent basis from period-to-period and to provide a further understanding of factors and trends affecting its business. The Company also believes this measure is useful for investors to assess the Company’s profitability, its cost structure and its ability to service debt and to meet other payment obligations. However, readers should be aware that when evaluating Adjusted EBITDA, Lion may incur future expenses similar to those excluded when calculating Adjusted EBITDA. In addition, Lion’s presentation of these measures should not be construed as an inference that Lion’s future results will be unaffected by unusual or non-recurring items. Readers should review the reconciliation of net earnings (loss), the most directly comparable IFRS financial measure, to Adjusted EBITDA presented by the Company under section 13.0 of the Company’s MD&A for the three and six months ended June 30, 2024 entitled “Results of Operations – Reconciliation of Adjusted EBITDA.”
Order Book:
This press release also makes reference to the Company’s “order book” with respect to vehicles (trucks and buses) as well as charging stations. The Company’s vehicles 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 programs, subsidies or 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 as further explained under “Pricing” in section 10.0 of the Company’s MD&A for the three and six months ended June 30, 2024 entitled “Order Book”. The vehicles included in the vehicle order book as of July 30, 2024 provided for a delivery period ranging from a few months to the end of the year ending December 31, 2028, with substantially all of such vehicles currently providing for deliveries before the end of the year ending December 31, 2025, which corresponds to the latest date by which claims are required to be made according to the current eligibility criteria of the ZETF, unless otherwise agreed by Infrastructure Canada. In addition, substantially all deliveries are subject to the granting of subsidies and incentives with processing times that are subject to important variations. 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. Also, there has been in the past and the Company expects there will continue to be variances in the eligibility criteria of the various programs, subsidies and incentives introduced by governmental authorities, including in their interpretation and application. 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. See the section below for a full description of the methodology used by the Company in connection with the order book and certain important risks and uncertainties relating to such methodology and the presentation of the order book.
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 school buses. 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.
