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 third quarter of fiscal year 2023, which ended on September 30, 2023. Lion reports its results in US dollars and in accordance with International Financial Reporting Standards (“IFRS”).
Q3 2023 Financial Highlights:
Record revenue of $80.3 million, up $39.4 million, as compared to $41.0 million in Q3 2022.
Record gross profit of $5.4 million as compared to a gross loss of $3.8 million in Q3 2022.
Delivery of 245 vehicles, an increase of 89 vehicles, as compared to the 156 delivered in the same period last year.
Net loss of $19.9 million in Q3 2023, as compared to net loss of $17.2 million in Q3 2022. Net loss for Q3 2023 includes a $3.4 million gain related to a non-cash decrease in the fair value of conversion options on convertible debt instruments, a $0.2 million gain related to non-cash decrease in the fair value of share warrant obligations and a $1.3 million charge related to non-cash share-based compensation, whereas net loss for Q3 2022 included a $7.6 million gain related to non-cash decrease in the fair value of share warrant obligations and a $2.7 million charge related to non-cash share-based compensation.
Adjusted EBITDA1 of negative $3.9 million, as compared to negative $15.1 million in Q3 2022.
Capital expenditures, which included expenditures related to the Joliet Facility and the Lion Campus, amounted to $16.2 million, down $13.2 million, as compared to $29.4 million in Q3 2022. See section 8.0 of the MD&A entitled “Operational Highlights” for more information related to the Joliet Facility and the Lion Campus.
Additions to intangible assets, which mainly consist of R&D activities, amounted to $15.0 million, down $3.2 million, as compared to $18.2 million in Q3 2022.
The Company closed on July 19, 2023 concurrent financing transactions for aggregate gross proceeds to the Company of approximately $142 million, extended the maturity of its senior credit facilities by one year to August 11, 2025, and terminated its at-the-market equity program which was set to expire in July 2024 and will therefore no longer make any sales thereunder.
Business Updates:
More than 1,600 vehicles on the road, with over 19 million miles driven (over 30 million kilometers).
Vehicle order book2 of 2,232 all-electric medium- and heavy-duty urban vehicles as of November 6, 2023, consisting of 268 trucks and 1,964 buses, representing a combined total order value of approximately $525 million based on management’s estimates.
LionEnergy order book2 of 129 charging stations and related services as of November 6, 2023, representing a combined total order value of approximately $4 million.
12 experience centers in operation in the United States and Canada.
Began to manufacture initial LionD units in Joliet, Illinois and Lion5 units in Montreal.
Commercial production of the LionA and LionM is being delayed
As of November 6, 2023, Lion had approximately 1,500 employees.
“We are pleased with our performance in the third quarter of 2023, as we posted record revenue and gross margins, and our revenue year-to-date has more than doubled compared to last year,” commented Marc Bedard, CEO – Founder of Lion. “As we approach the end of the year, we continue to relentlessly focus on all the elements that will enable us to reach our profitability objectives,” concluded Marc Bedard.
Select Explanations Of Results Of Operations For The Third Quarter Of Fiscal Year 2023
Revenue:
For the three months ended September 30, 2023, revenue amounted to $80.3 million, an increase of $39.4 million compared to the corresponding period in the prior year. The increase in revenue was due to an increase in vehicle sales volume of 89 units, from 156 units (108 school buses and 48 trucks; 140 vehicles in Canada and 16 vehicles in the U.S.) for the three months ended September 30, 2022 to 245 units (220 school buses and 25 trucks; 132 vehicles in Canada and 113 vehicles in the U.S.) for the three months ended September 30, 2023.
For the nine months ended September 30, 2023, revenue amounted to $193.1 million, an increase of $99.9 million compared to the corresponding period in the prior year. The increase in revenue was due to an increase in vehicle sales volume of 319 units, from 345 units (270 school buses and 75 trucks; 311 vehicles in Canada and 34 vehicles in the U.S.) for the nine months ended September 30, 2022 to 664 units (593 school buses and 71 trucks; 518 vehicles in Canada and 146 vehicles in the U.S.) for the nine months ended September 30, 2023.
Revenues for the nine months ended September 30, 2023 were negatively impacted by delays in the processing and granting of subsidies, which resulted in the postponement of deliveries of vehicles which were ready for delivery. In addition, revenues were impacted by challenges associated with the production ramp-up and the development of certain models.
Cost of Sales:
For the three months ended September 30, 2023, cost of sales amounted to $75.0 million, representing an increase of $30.2 million compared to $44.8 million in the corresponding period in the prior year. For the nine months ended September 30, 2023, cost of sales amounted to $189.5 million, representing an increase of $88.2 million compared to $101.3 million in the corresponding period in the prior year. The increase for both periods 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 inflationary environment.
Gross Profit (Loss):
For the three months ended September 30, 2023, gross profit was $5.4 million compared to a gross loss of $3.8 million for the corresponding period in the prior year. The improvement in gross profit was primarily due to the positive impact of increased sales volumes, favourable product mix, and higher manufacturing throughput, partially offset by higher raw material and commodity costs, higher inventory management system costs related to the ramp-up of future production capacity, and the impact of continuing inflationary environment.
For the nine months ended September 30, 2023, gross profit was $3.5 million compared to a gross loss of $8.2 million for the corresponding period in the prior year. The improvement in gross profit was primarily due to the positive impact of increased sales volumes, favourable product mix, and higher manufacturing throughput, partially offset by higher raw material and commodity costs, higher inventory management system costs related to the ramp-up of future production capacity, and the impact of continuing inflationary environment.
Administrative Expenses:
For the three months ended September 30, 2023, administrative expenses increased by $0.8 million, from $12.2 million for the three months ended September 30, 2022, to $13.0 million for the three months ended September 30, 2023. Administrative expenses for the three months ended September 30, 2023 included $1.0 million of non-cash share-based compensation, compared to $2.0 million for the three months ended September 30, 2022. Excluding the impact of non-cash share-based compensation, administrative expenses increased from $10.2 million for the three months ended September 30, 2022 to $12.0 million for the three months ended September 30, 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.
For the nine months ended September 30, 2023, administrative expenses increased by $3.6 million, from $34.8 million for the nine months ended September 30, 2022, to $38.5 million for the nine months ended September 30, 2023. Administrative expenses for the nine months ended September 30, 2023 included $3.6 million of non-cash share-based compensation, compared to $7.4 million for the nine months ended September 30, 2022. Excluding the impact of non-cash share-based compensation, administrative expenses increased from $27.5 million for the nine months ended September 30, 2022 to $34.8 million for nine months ended September 30, 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.
Selling Expenses:
For the three months ended September 30, 2023, and the three months ended September 30, 2022, selling expenses were approximately the same at $5.2 million. Selling expenses for the three months ended September 30, 2023 included $0.3 million of non-cash share-based compensation, compared to $0.7 million for the three months ended September 30, 2022. Excluding the impact of non-cash share-based compensation, selling expenses increased from $4.6 million for the three months ended September 30, 2022 to $4.8 million for three months ended September 30, 2023. The slight increase was primarily due to higher sales commissions related to higher revenue, partially offset by lower marketing costs.
For the nine months ended September 30, 2023, selling expenses decreased by $0.8 million, from $17.3 million for the nine months ended September 30, 2022 to $16.5 million for the nine months ended September 30, 2023. Selling expenses for nine months ended September 30, 2023 included $1.2 million of non-cash share-based compensation, compared to $2.5 million for nine months ended September 30, 2022. Excluding the impact of non-cash share-based compensation, selling expenses slightly increased from $14.8 million for the nine months ended September 30, 2022 to $15.3 million for nine months ended September 30, 2023. The slight increase was primarily due to higher sales commissions related to higher revenue, partially offset by lower marketing costs.
Finance Costs:
For the three months ended September 30, 2023, finance costs increased by $6.2 million, from $1.5 million for the corresponding period in the prior year, to $7.7 million for the three months ended September 30, 2023. Finance costs for the three months ended September 30, 2023 were net of $1.6 million of capitalized borrowing costs. Excluding the impact of capitalized borrowing costs, finance costs increased by $7.8 million compared to the three months ended September 30, 2022. The increase was driven primarily by higher interest expense on long-term debt, due to higher average 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, interest 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.
For the nine months ended September 30, 2023, finance costs increased by $9.3 million, from $1.8 million for the corresponding period in the prior year, to $11.1 million for the nine months ended September 30, 2023. Finance costs for the nine months ended September 30, 2023 were net of $4.8 million of capitalized borrowing costs. Excluding the impact of capitalized borrowing costs, finance costs increased by $14.1 million compared to the nine months ended September 30, 2022. The increase was driven primarily by higher interest expense on long-term debt, due to higher average debt outstanding during the nine months ended September 30, 2023 relating to borrowings made under the Revolving Credit Agreement, the IQ Loan, the SIF Loan, and the Finalta-CDPQ Loan Agreement, interest and accretion expense as well as financing costs related to the Convertible Debentures and Non-Convertible Debentures issued in July 2023, 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 Battery Plant. In addition, finance costs for the nine months ended September 30, 2022 included a gain of $2.1 million on derecognition of the financial liability 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.
Foreign Exchange Loss (Gain):
Foreign exchange losses (gains) relate primarily to the revaluation of net monetary assets denominated in foreign currencies to the functional currencies of the related Lion entities. For the three months ended September 30, 2023, foreign exchange loss was $2.9 million, compared to a loss of $2.1 million in the corresponding period in the prior year, related primarily to the impact of changes in foreign currency rates.
For the nine months ended September 30, 2023, foreign exchange gain was $0.1 million, compared to a loss of $1.4 million in the corresponding period in the prior year, and related primarily to the impact of changes in foreign currency rates.
Change in Value of Conversion Options on Convertible Debt Instruments:
For the three and nine months ended September 30, 2023, change in value of conversion options on convertible debt instruments was a gain of $3.4 million, and was related to the revaluation of the conversion options on the Convertible Debentures issued in July 2023.
Change in Fair Value of Share Warrant Obligations:
Change in fair value of share warrant obligations moved from a gain of $7.6 million for the three months ended September 30, 2022, to a gain of $0.2 million, for the three months ended September 30, 2023. The gain for the three months ended September 30, 2023 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 $86.0 million for the nine months ended September 30, 2022, to a gain of $11.9 million, for the nine months ended September 30, 2023. The gain for the nine months ended September 30, 2023, was related to the Specific Customer Warrants, the public and private warrants 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 Earnings (Loss):
The net loss of $19.9 million for the three months ended September 30, 2023 as compared to the net loss of $17.2 million 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, the change in value of conversion options on convertible debt instruments, and higher finance costs, partially offset by higher gross profit.
The net loss for the nine months ended September 30, 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, the change in value of conversion options on convertible debt instruments, higher finance costs, higher administrative expenses (excluding share-based compensation), partially offset by higher gross profit, and lower non-cash share-based compensation.
Conference Call:
A conference call and webcast will be held on November 7, 2023, 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 592776. 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 third quarter financial report, including the unaudited condensed interim consolidated financial statements of the Company as at and for the quarter ended September 30, 2023, and the related management discussion and analysis (“MD&A”), which will be filed by the Company with applicable Canadian regulatory securities 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.
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.
