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 third quarter of fiscal year 2021, which ended on September 30, 2021. Lion reports its results in U.S. dollars and in accordance with International Financial Reporting Standards (“IFRS”).
Q3 2021 Financial Highlights
- Delivery of 40 vehicles, an increase of 30 vehicles, as compared to the 10 delivered in the same period last year.
- Revenue of $11.9 million, up $9.3 million, as compared to $2.6 million in Q3 2020.
Gross profit of negative $1.2 million, down $0.7 million, as compared to negative $0.5 million in Q3 2020. - Administrative expenses of $10.0 million, which include $4.5 million of non-cash share-based compensation expense, were down $16.7 million as compared to $26.7 million in Q3 2020.
- Selling expenses of $5.2 million, which include $1.5 million of non-cash share-based compensation expense, were down $3.9 million, as compared to $9.1 million in Q3 2020.
- Net earnings of $123.0 million in Q3 2021 as compared to a net loss of $38.6 million in Q3 2020. The net earnings for Q3 2021 includes a $138.4 million gain related to non-cash decrease in the fair value of share warrant obligations and $6.0 million related to non-cash share-based compensation.
- Adjusted EBITDA1 of negative $8.8 million, as compared to negative $2.8 million in Q3 2020, after adjusting for certain non-cash and non-recurring items such as change in fair value of share warrant obligations, share-based compensation, and other non-recurring expenses.
- Acquisition of intangible assets, which mainly consist of R&D activities, amounted to $9.5 million, up $5.1 million, as compared to $4.4 million in Q3 2020.
- As of September 30, 2021, Lion had $317.8 million in cash, and access to a committed revolving credit facility in the maximum principal amount of $100 million, as well as support by the Canadian federal and Quebec governments of up to approximately C$100 million (amounting to approximately C$50 million each) in connection with its battery manufacturing plant and innovation center projects.
Business Updates
- More than 450 vehicles on the road, with over 8 million miles driven.
- Vehicle order book of 2,024 all-electric medium- and heavy-duty urban vehicles as of November 10, 2021, consisting of 261 trucks and 1,763 buses, representing a combined total order value of approximately $500 million. This includes 1,000 school buses related to the conditional purchase order from Student Transportation of Canada, a subsidiary of Student Transportation of America, for which a funding application has been submitted under Infrastructure Canada’s Zero Emission Transit Fund program.
- LionEnergy order book of 187 charging stations and related services as of November 10, 2021, representing a combined total order value of approximately $2.5 million.
- 7 Experience Centers in operation in the United States and Canada, and 7 additional ones expected to be open by the end of the year.
- Approximately 90% completion in the construction of the shell building of the 900,000 square-foot Joliet, Illinois manufacturing facility, with Lion expected to take possession by the end of the year.
- Construction advancing as planned at the Mirabel battery plant/innovation center.
As of November 10, 2021, Lion had approximately 950 employees, of which approximately 270 were in its Engineering and R&D departments.
“Although global supply chain challenges have impacted our ability to manufacture and deliver complete vehicles in Q3, we continued to see strong momentum in the shift to electrification of medium and heavy-duty transports, as evidenced by dialogue with potential customers translating into tangible engagement on multi-year, large scale fleet electrification,” commented Marc Bedard, CEO and founder of Lion. “While we expect global supply chain headwinds affecting many sectors to persist in 2022, we are taking tangible actions to mitigate the impact this will have on our production and performance. These tangible actions include increasing supplier redundancy, selectively sourcing raw materials on behalf of our component suppliers, increasing in-house fabrication of certain parts, and re-designing certain sub-assemblies. Looking forward, we remain focused on maintaining our first-mover advantage and continuing to advance our flagship projects that are the foundations of our long-term growth. That is the best way for us to deliver long-term value for our customers and our shareholders.”
Select Explanations on Results of Operations
Revenue
For the three months ended September 30, 2021, revenues amounted to $11.9 million, an increase of $9.3 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 30 units, from 10 units (all school buses; 7 vehicles in Canada and 3 vehicles in the U.S.) for the three months ended September 30, 2020 to 40 units (28 school buses and 12 trucks; 28 vehicles in Canada and 12 vehicles in the U.S.) for the three months ended September 30, 2021. Revenues for the three months ended September 30, 2021 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.
For the nine months ended September 30, 2021, revenues amounted to $34.8 million, an increase of $24.9 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 91 units, from 34 units (all school buses; 19 vehicles in Canada and 15 vehicles in the U.S.) for the nine months ended September 30, 2020, to 125 units (94 school buses and 31 trucks; 91 vehicles in Canada and 34 vehicles in the U.S.) for the nine months ended September 30, 2021.
Cost of Sales
For the three and nine months ended September 30, 2021, cost of sales amounted to $13.2 million and $37.0 million, respectively. This represents an increase of $10.0 million and $26.5 million, respectively, compared to the corresponding periods in the prior year. The increase compared to the corresponding prior periods was primarily due to increased sales volumes and higher production levels, increased fixed manufacturing costs related to the ramp-up of production capacity for future quarters, and the impact of continuing global supply chain challenges.
Gross Profit
For the three months ended September 30, 2021, gross profit decreased by $0.7 million, from negative $0.5 million for the three months ended September 30, 2020, to negative $1.2 million for the three months ended September 30, 2021. For the nine months ended September 30, 2021, gross profit decreased by $1.6 million (to negative $2.1 million), compared to the corresponding period in the prior year. The decrease for both periods is primarily due to the impact of increased fixed manufacturing costs related to the ramp-up of production capacity for future quarters and the impact of continuing global supply chain challenges, partially offset by the positive gross profit impact of increased sales volumes.
Administrative Expenses
For the three months ended September 30, 2021, administrative expenses decreased by $16.7 million, from $26.7 million for the three months ended September 30, 2020, to $10.0 million for the three months ended September 30, 2021. The decrease was primarily due a significant decrease in non-cash share-based compensation of $20.8 million, partially offset by an increase in expenses reflecting Lion’s transition to being a public company, and the expansion of Lion’s head office capabilities in anticipation of an expected increase in business.
For the nine months ended September 30, 2021, administrative expenses increased by $37.6 million, from $28.6 million for the nine months ended September 30, 2020, to $66.2 million for the nine months ended September 30, 2021. The increase was primarily due a significant increase in non-cash share-based compensation of $26.6 million, as well as an increase in expenses reflecting Lion’s transition to being a public company, and the expansion of Lion’s head office capabilities in anticipation of an expected increase in business.
Selling Expenses
For the three months ended September 30, 2021, selling expenses decreased by $3.9 million, from $9.1 million for the three months ended September 30, 2020, to $5.2 million for the three months ended September 30, 2021. The decrease was primarily due a decrease in non-cash share-based compensation of $6.0 million, partially offset by the impact of Lion expanding its sales force, and to an increase in expenses associated with Experience Centers.
For the nine months ended September 30, 2021, selling expenses increased by $11.4 million, from $11.6 million for the three months ended September 30, 2020, to $22.9 million for the nine months ended September 30, 2021. The increase was primarily due a significant increase in non-cash share-based compensation of $6.0 million as well as to Lion expanding its sales force, and an increase in expenses associated with Experience Centers.
Transaction Costs
Transaction costs of $13.7 million nine months ended September 30, 2021 were related to the completion of the Company’s business combination and plan of reorganization with Northern Genesis Acquisition Corp. (the “Business Combination”) and were mainly composed of legal, banking, and other professional fees.
Finance Costs
For the three months ended September 30, 2021, finance costs decreased by $1.6 million compared to the corresponding period in the prior year as a result of a significantly lower amount of average debt outstanding during the period as a result of certain debt repayments or reclassification to common shares of these related debts, which occurred on May 6, 2021, as part of the closing of the Business Combination.
For the nine months ended September 30, 2021 finance costs increased by $1.5 million, compared to the corresponding period in the prior year. The increase was driven primarily by an increase in borrowing costs due to an increase in the amount of average debt outstanding and an increase in interest expense on convertible debt instruments, partially offset by lower accretion expense on retractable common shares. These costs were incurred up until the respective repayments or reclassification to common shares of these related debts, which occurred on May 6, 2021, as part of the closing of the Business Combination.
Foreign Exchange (Gain) Loss
Foreign exchange gains and losses for all periods presented relate primarily to the revaluation of net monetary assets denominated in foreign currencies. Foreign exchange gains for the three and nine months ended September 30, 2021, increased by $2.1 million and $1.0 million respectively, compared to the corresponding periods in the prior year, largely as a result of a weakening of the Canadian dollar relative to the U.S. dollar during such periods of 2021, as compared to the comparative periods of 2020.
Change in Fair Value of Share Warrant Obligations
Gains on change in fair value of share warrant obligations increased from $0.4 million for the three months ended September 30, 2020, to gains of $138.4 million and $39.2 million, respectively, for the three and nine months ended September 30, 2021. The significant gains for the three and nine months ended September 30, 2021, were 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 Business Combination on May 6, 2021, and resulted mainly from the decrease in the market price of Lion equity as compared to the previous valuations.
Net Earnings (Loss)
The net earnings for the three months ended September 30, 2021 as compared to the net loss for the corresponding prior period were largely due to the decrease in the fair value of share warrant obligations, and lower share-based compensation (included in administrative and selling expenses).
The higher net loss for the nine months ended September 30, 2021 as compared to the corresponding prior period was largely due to higher administrative and selling expenses (including share-based compensation) and transaction costs, partially offset by the decrease in the fair value of share warrant obligations.
Reconciliation of Adjusted EBITDA
Adjusted EBITDA for the three and nine months ended September 30, 2021 includes an expense of $0.7 million and $1.6 million, respectively, relating to the procurement of D&O insurance on terms reflecting the public company status of Lion, which is materially higher than the expense incurred in prior periods when the company was a private company.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.
