Q1 2021 Northern Genesis Acquisition Corp Earnings Call
Good morning, Ladies and gentlemen, welcome to Alliance first quarter 2021 results conference call. At this time, all participants are gonna listen only mode. A brief question and answer session will follow the formal presentation at that time, if you'd like to ask a question. Please press star one on your telephone keypad.
And she would like to Victor on your question. Please press the pound key.
As a reminder, this conference call is being recorded average I'd like to turn the call on virtue is simple.
<unk>, Vice President Investor Relations and sustainable development. Please go ahead Ms.
Hi, Jackie.
Okay.
Thank you and good morning, everyone Bosworth demand when it comes to lie on first.
On a 2021 and besides conference corner, we have and you and of course you. All today for next year that is definitely off did you put me and mess than standard young.
With me today are Mark <unk>, our CEO funder, and nickel and Abilene that our executive Vice President and Chief Financial Officer.
Before we begin.
I would like to mention that during two day school, we will make certain forward looking statements regarding our future business expectations, which involve risks and uncertainties.
Forward looking statements are predictions and projections and other statements about future events that are based on current expectations and shut in about the other factors and assumptions and as a result.
Subject to risks and uncertainties.
Many factors could cause actual future events to differ materially from the forward looking statements made on this quarter.
For more information about factors that may cause actual results to materially differ from forward looking statements. Please refer to our findings Mitch today.
And to the risk factors contained in our final non offering prospectus.
On SEDAR on May six 2021.
And two other findings made on SEDAR and with the Securities and Exchange Commission, including our registration statement on form S. Four.
Forward looking statements speak on me as of the debt damage you.
You are cautioned not to put undue reliance on forward looking statements.
We undertake no duty to update this information and.
As required by law.
Finally.
Please note that we reported in U S dollars and under Ifr race.
Our comments today may refer to certain non <unk> financial.
<unk> financial measures.
Such as adjusted EBITDA and certain performance metrics.
Such as the company's other book, which are defined further described.
And and shut in case, its rico side and now.
Earnings release, and MD&A issued this morning.
With that I would now and Dakota Virtu market bid on.
Mark Thanks.
Thank you Lisa Good morning, everyone. My name is Mark Bedard, I am the CEO and founder of line and electric.
Thanks for joining us today on Lyons first conference call as a public company. This is the start of a new chapter and Lions history. As we became the first manufacturer of all electric medium and heavy duty urban vehicles to be listed on both the NYSE and the T ethics.
There are mainly three key elements that I would like you to remember from two these Q1 results announcement number one.
We successfully completed our public listing and related private placement for a net trace of approximately $490 million, which is available to support our key growth initiative.
Number two.
And there's a strong momentum with clients. Despite the continued impact of COVID-19.
We are seeing a positive trend and our order book with accelerating deliveries as shown by the significant order of 260 school buses that we announced earlier this morning and number three we continue to execute on our strategic plan, we announced the building of a U S based large scale.
20000 electric vehicles and manufacturing capacity per year plant and Joliet, Illinois, We also announced the construction Avi I only automated five gigawatt hour per your battery plant, which we announced with both the Prime Minister of Canada Research, we don't and the Premier of Quebec, Mr logo.
Battery plant and the capacity to provide batteries for approximately 14000 lie and vehicles per year.
We opened two additional experience centers and we ensured that sustained growth in our employee count alone with many strategic hires I will provide an update on each of these items and then pass it on to Nicholas Green, There, who will discuss financial performance from Q1, 2021 first for those.
And the view, we don't know what's yours, a very brief summary of lion.
Volume is a well established leading manufacturer of all electric medium and heavy duty urban vehicles benefiting from over 10 years of all electric vehicle R&D and manufacturing experience and targeting a total addressable market a tam of over $100 billion per year, and the U S and Canada.
We put 20 and at the center of everything we do and.
And today, even if we just started delivering our trucks within the last few months, we already count multiple tier one clients such as Amazon Pri group Ikea, So base and can eat and national Railways and the truck sector and student Transportation of America National Express first you there.
And trends Dev L. A unified School district twin river's kill this Montreal Airport and say game just to name a few and the bus sector.
And as their E V strategic partner, we pride ourself for offering our clients turnkey solutions for all aspects of their fleet electrification, including vehicle selection and specs right and drives on our trucks and buses.
Charging infrastructure selection and rent support training and ongoing maintenance and telematics we.
We create design and manufacturer all electric class five to class eight commercial urban trucks, and all electric buses and many buses for the school para transit and mass transit segments. Today, Ryan is approximately 390 real vehicles on the road with over 7 million.
Miles driven are vehicles other favorable total cost of ownership as compared to diesel vehicles.
All along and vehicles are purpose built for electric.
With our own chassis bus body and truck cabin and proprietary battery system technology we.
We have seven purpose built electric truck and bus models available for purchase today with eight new models and development with our first deliveries of line six and long and they trucks now behind US we expect to add 10 types of vehicles on the road by the end of 2021 and.
As we expect to add this year, the Lion day school bus and the Lion they'd bucket and tractor trucks too.
Our portfolio also we plan to start delivering five additional new types of vehicles by the end of 2020 two mainly the line five.
The lion and five and six utility the lines and seven the Lion, a boom truck and the Lion electric ambulance.
Our existing manufacturing facility near Montreal as currently a capacity of 2500 vehicles per year. We also recently opened and you Assembly facility close to our current manufacturing plan that will enable us to optimize vehicle production. This plant will be used for the manufacturing of our alliance.
And lion and many buses.
Let's now come back to the purpose of the call and discuss the three main items I highlighted at the beginning first our public listing we successfully became a publicly traded company on both the NYSE and the T effects on Friday may 7th.
The proceeds of the public listing, including and the private placement and net of transaction fees.
Amounted to approximately $490 million, which will be largely used to accelerate our growth plan.
There are approximately 188 million outstanding common shares of Lion.
Our ownership structure consists of approximately 70% ownership by legacy line and shareholders, 20% ownership by former public Northern Genesis shareholders, and spec sponsors and approximately 10% and by the pipe investors and.
We'd like to thank our board members for their contribution and dedication to iron and will also like to welcome our new directors, Ian Robertson and trigger a rep from northern Genesis.
Now, let me address the purchase order book in.
And the last few months customers feedback has continued to be very positive and level of interest from fleet owners continues to increase we keep moving from outreach to concrete discussions on specs and total cost of ownership energy requirements and delivery timelines there.
And this dialogue already translates into accelerated orders and we feel this is just the beginning.
Our order book continues to gain momentum with truck orders from large fleet owners, including an order for 100 trucks from price group to be delivered over 2020, one and 2020, two and initial truck orders from sizable fleet owners.
Such as Ikea is logistic partners second closet and.
And Metro supply chain group, So base every pitch con Edison and many others on.
On the bus side, we have seen the dialog with fleet operators accelerate.
Despite continued headwinds from the pandemic just this morning.
We were pleased to announce that we secured an order of 260 school buses from your leading school bus operator with deliveries to take place from the second half of 2021 to the first half of 2020 three.
And this represents lie and largest order to date also.
We secured an initial order from early unified School district for ton lie and sees the second largest school district, and the United States and in other one of up to 60 units from Gupta gang over a period of five years.
We have clearly seen and acceleration of dialogue with the largest school bus fleets, who are increasingly turning to fleet electrification.
With the announcement of very important government subsidies and funding programs in recent months combined with the reopening of schools in key markets such as California.
We expect a continued acceleration of the school bus order book, mainly and the second half of 2021 and I will discuss the regulatory environment and a few minutes.
Altogether as of me 14, 2021.
Our vehicle order book stood at 817, all electric vehicles, consisting of 290 trucks and 608 buses representing a combined total order value of over $225 million.
Most of these orders are expected to be delivered within the next 12 months.
Let me now spend a minute on Q1 deliveries, which are important as directly linked to revenues the.
Deliveries, which had slowed down last year and great part due to COVID-19 and.
And begun to regain momentum near the end of last year as witnessed by our Q4, 2020 results, where we delivered 46 vehicles in Q1, 2021 which is traditionally a seasonally low quarter in the school bus space, We delivered 24 vehicles as compared to two dream.
The same period last year Q1, 2021 deliveries included our first deliveries of fixed line and they trucks. In addition to 18 school buses.
I am also very pleased to say that during the last few weeks 10 licensee trucks were delivered to Amazon.
Let me also add net selling and electric truck or bus and selling a diesel one is totally different and this is the reason we have decided several years ago to put together our direct sales model with no boundaries between Lyon and our customers.
This model is working very well and clearly distinguished Lion as a strategic partner to our clients. This is translating into tangible results and this is promising to be very successful that direct sales model is tailored to provide a smooth transition to electric for the fleet operators.
First lie and energy are division, which assists customers with selecting purchasing project managing and deploying charging infrastructure ahead of vehicle delivery is gaining significant momentum when we launched it our objective was to facilitate the average transition journey to our customers today.
Today, we have a current order book of 76 charging stations and related services that represents a total order value of over $800000. We.
We were also pleased to announce during the quarter that we have signed a reseller agreement with flow at energy, which adds to the charge point E. B B B T C power Blink and UV charging infrastructures, we are currently offering to our customers.
And as a reminder, we are agnostic when it comes to their recommendation of charging infrastructure and seek to offered the equipment that is the most adapted to the needs of our clients.
Second.
Our lion brand team is busier than ever working with customers and potential customers in identifying and applying for grants and subsidies as we are seeing new attractive funding programs being put in place on both sides of the border. This team, which operates at the forefront of policy and evolving.
E V ecosystem is Eileen knowledgeable of programs on subsidies that can apply to our clients helps our customers navigate this complex environment to leverage and secure funding for them.
And the last few months.
We have witnessed a true desire by government officials to support the cleaner environment. Most recently a few announcements were made in that regard prison violence clean energy plan targeting the electrification of at least 20 per cent of the 500000 plastics buses in the United States there.
And we sent announcement by Mayor Bill de Glasgow to electrify and 100 per cent of the New York School bus fleet by 2035. This is without mentioning programs such as the E. C. T adopted by carbon, California, which sets clear requirements on manufacturers to sell zero emission trucks and buses 40.
And other states and Washington D. C. I've also announced their intention to put similar programs in place I am pleased to report that with the deliveries in California, We have already started accumulating credit towards the ECT program and we expect to eventually monetize these credits.
And also <unk> 2030 planned for a green economy, dedicating 250 million Canadian dollars over the next three years to electrify approximately 2600 school buses and starting with model year 2023, New diesel bus purchases will no longer be illegal and Quebec.
Even if the debt Tcl calculation is favorable in many cases with our line and vehicles those incentives make it easier for the fleet operators to electrify their fleets.
Third.
Shortly after the end of the quarter, we opened two additional experience centers, one in Jacksonville, Florida, and the other ones and turbine, Quebec, our state of the art Eileen Ovadia of experience centers are the first fully electric service centers in North America.
These dedicated spaces are essential locations, where prospective customers policymakers and other transportation industry stakeholders can test and drive our vehicles learn about their specifications and advantages meet Eli and styles representative gift charging infrastructure assistance.
And discuss grant and subsidy with our experts receive training for drivers and maintenance specialist and have existing vehicle service.
Last but not least.
We can also provide long term financing solutions to facilitate the purchase of our vehicles by our clients smooth and the transition to electric and in many cases.
Benefit from a favorable T feel from day one as.
As you see we are more than just a manufacturer of electric vehicles, and we firmly believe that electric transportation will be a major catalyst for improving our society environment and above all our quality of life.
Let me now provide and update on our strategic plan and the way we are executing our plan first let me address our U S manufacturing plant.
We recently announced that we will operate our eye volume state of the art vehicle production plant and Joliet, Illinois, where the construction of our plant is well underway. This plant will be eylea automated with the production capacity of 20000 vehicles per year.
The new facility for which a long term lease has been secured will be the largest production site for zero emission.
Medium and heavy duty urban vehicles in the United States. This plant will give us the ability to meet the increasing demand in the marketplace for made in America zero emission vehicles.
Our 900000 square foot new facility will enable us to gain significant additional production and capacity close to our U S customers, while reducing production and delivery cost.
LT ramp up as expected and the second half of 2021 and our first vehicles will roll off the production line and the second half of 2020 two.
And this will represent an initial and investment at least $70 million. It should at first and a minimum of 745 clean energy direct jobs to the region over the next three years.
Now, let me give you an update on our battery plant.
Last March we announced the construction of our battery plant intended to result in a highly automated plant assembling proprietary lie and battery modules and packs with an annual capacity of five gigawatt hours enough to electrify 14000 Museum and AVG T lie and vehicles on and <unk>.
And you'll basis.
Funding of the battery plant was announced during the quarter to the effect that approximately 100 million Canadian dollars and funding support will be provided from the Canadian federal government and from the Quebec government 30 million of which is expected to be forgiven.
Subject to lie on meeting certain specific conditions.
We are still in the process of finalizing the specific location, which we will announce this coming quarter.
We remain on track for the selection of our contractor and the second half of 2021 and the commencement of construction of the facility and the first half of 2020 two and for the initial production of battery modules and packs and the second half of 2020 two.
Producing our own battery modules and packs should result in significant cost savings provide full control over battery specs and dimensions and remove key supplier dependency.
Okay.
Let me take a few minutes here to address potential sell shortage, which and the last few months has been a topic of discussion in our industry. Brian has not been impacted by this potential and industrial shortage, we have a multi sourcing strategy for batteries and battery components with multiyear supply agreements with B M. W.
LG Chem and Romeo power.
And we also have been building our own battery packs for years.
Furthermore, we always maintain a L P level of battery inventories.
Which combined with scheduled and reconfirm deliveries minimize the risk associated with a potential shortage of battery materials.
While we remain vigilant, we do not expect.
A battery shortage will impact our operations in the near future.
Now turning to staffing.
We continue to improve our teams on all fronts as of May 14, our total head count exceeded 650 employees of which over 200 and engineering and R&D.
And our management team.
Isabelle Ajay joined Us as VP Investor Relations and sustainable development.
And passwords, you kept joined as VP, Chief legal officer and corporate Secretary.
Bill brings over 25 years of experience and I are with companies such as double USP and extra and pharma.
Software brings over 20 years.
And I have experience at C D PQ, Allen and Overy and Simmons and Simmons.
We also added new key strategic members to the team Roku Mirza tester and.
As senior Vice President product development and vehicle and January Rocco tasked with product development as well as the management of engineering projects brings over 20 years of engineering experience, mostly in debt transportation and industrial for companies, such as Tesla Ford and Toyota.
You will collaborate with Philip Leblanc, who has played a key role and the development of products and will now be vice President innovation and advanced and generating Vin.
Vince Spadafora is joining us today as vice President financial reporting.
Vince with joining from Guild, and activewear as more than 15 years of experience and publicly listed companies. He will oversee all aspects of financial reporting and related compliance.
And last but not least Brian pattern.
And will join US on June 7th as Chief Commercial Officer.
Ryan will play a key role and our growth by expanding to new markets building on long standing relationships with existing clients, while developing new accounts and expanding market share Bryan is an experienced executive leader with a demonstrated history of working and logistics fleets financials.
Services and electrification industries. He comes to us from XL fleet, where he led the development of the commercial team is previous work experience also includes element fleet management and GE capital, where he served as senior Vice President of South at both of these companies with that.
Let me now turn the call over to Nicholas who will comment on our financial performance.
Thank you Mark.
I am thrilled at the progress our team has made in parallel with the public listing process, which lasted over six months on.
All of this done and unprecedented pandemic environment.
Given the early May close day, each of N G E and lie and completed Q1 2021 independent entity.
As I discuss Q1, my comments will cover lines results only.
Sales presented for Q2 will however, consolidate and G and beyond the post transaction basis.
Before I discuss Q1, I would like to briefly discuss our fiscal year 2020 results as we did not get the opportunity to comment on numbers, which were disclosed as part of our public filings for the transaction.
Like companies from both sectors fiscal 2020 was a very unusual year as the pandemic put significant pressure on our operation our clients and our suppliers.
And the situation was evolving our first objective was to ensure the health of our employees and their families of our client and of the communities and which we operate.
Our second objective was to implement tailored business continually plan aimed at supporting our clients and business partners and they were navigating these unprecedented times.
Despite the circumstances, we also aim to maintain a high pace of vehicle R&D to continue to advance our various platforms and technology.
As of today, most of our office people have been working remotely for over a year.
Adapted our business processes, and we believe we are well positioned to accelerate our growth as the economy continues to recover.
Let's take a more detailed look at key highlights for fiscal 2020.
We delivered 80, all electric urban vehicles in 2020 All Alliance High School buses.
For the year, we posted revenues of $23 $4 million down 24 per cent compared to $30 $7 million and fiscal 2019, primarily due to the impact of COVID-19 on our operations and on our clients.
Our gross profit for fiscal 2020 amounted to $3 1 million or 13% of revenue versus $10 $1 million or 33% of revenue in 2019.
The reduction in gross margin is mainly a result of bus deliveries and less vehicles and plan while at the same time, increasing our manufacturing capacity and that's that fixed expense component of our gross margin in order to grow the business.
SG&A amounted to $65 million of which $55 million is a noncash expense related to a revaluation of existing management stock options.
Net of the noncash stock option expense SG&A expense amounted to approximately $10 million per year.
Adjusted EBITDA for the year was negative $4 $3 million compared to positive $3 $9 million and 2019.
The EBIT reduction in 2020 was largely due to continued fixed cost investments and scaled the business with deliveries and revenue not following the same pace due to a large extent to the pandemic.
In parallel we continue to prepare for future growth, we invested a record amount of $16 $5 million and acquisitions of intangible assets, which is largely R&D as we are actively developing eight additional vehicle while at the same time continuing to develop our battery technology.
All in all we have delivered a good year and 2020.
Despite the turbulence caused by the pandemic, we made significant investment and the execution of our strategic plan and we were able to secure funding to support why and long term growth.
Let's now turn to Q1 and 2021 performance.
And that's typically a slower quarter and the school bus space from a seasonality standpoint, and our sector remains affected by COVID-19, but we are seeing signs of improvement.
We delivered 24 vehicles, and Q1 2021, including 18 line and see school buses.
And fixed line eight trucks.
22 of these deliveries took place and Canada.
This compares to a total of two school bus deliveries in Q1 2020.
As Mark mentioned, we also delivered 10 line six trucks to Amazon after the end of the quarter we.
We have therefore now delivered both our first slide eight headline fixed drugs.
Revenues for Q1, 2021 were up $6 $2 million compared to $1.2 million and Q1 2020.
Our gross profit for Q1, and 2021 amounted to negative $1 8 million versus negative $1 1 million and Q1 and 2020.
The negative gross margin is related to lower volume in Q1, which do not fully offset the fixed cost portion of our cost base and on the Fei.
<unk> pricing mix as well as the fact that we produced our very first trucks during the quarter.
Administrative expenses amounted to $6 $3 million for the quarter of which $3 $1 million is a noncash expense related to existing management options.
On a cash basis and administrative expenses amounted to approximately $3 $2 million for the quarter.
Selling expenses amounted to $4.4 million for the quarter of which $2 $1 million is a noncash expense related to existing management options.
On a cash basis, selling expenses amounted to approximately $2 $3 million for the quarter.
Adjusted EBITDA for Q1 stood at negative $5 9 million compared to negative $3 million and Q1 of 2020.
Q1, 2021 acquisition of intangible assets, which is largely R&D amounted to $6 $5 million more than double last year's amount as we continue to accelerate the development of our vehicles and battery technology.
As of today, our order book stands at 817 units consisting of 209 trucks and 608 buses for a total value of over $225 million.
Most of these orders are expected to be delivered in the next 12 months.
Our order book also includes 76 charging stations and related services.
And I think a combined total order value in excess of $800000.
Based on what we see and the market and the trend experience and that we anticipate continued momentum in the order book.
Let me now discuss the impact of our public listing.
As Mark mentioned earlier, our public listing and the related private placement and resulted in the cash in flow of approximately $490 million.
Proximately $90 million of the proceeds were used to repay outstanding credit facilities, including our revolver and term loan and convertible debentures with the remainder at cash on our balance sheet.
We therefore had debt facilities of approximately $12 million with approximately $400 million of cash on the balance sheet immediately following closing.
In order to provide maximum flexibility. We also expect subject to market condition to put in place a new syndicated credit facility and we hope to announce something to that effect shortly.
The closing of the transaction and our transition to a public company will result, and the elimination of certain liabilities on our balance sheet and non cash items on our P&L related to retractable common shares convertible debt and management options.
Now turning to the year ahead, we expect the electrification of medium and heavy duty free and the continued to gain momentum driven both by the will of large fleet owners and electrify their fleet and by attracted government programs aimed at accelerating fleet electrification.
We expect these favorable sector trends to help with the continued acceleration of our order book and our pace of delivery.
At the company level, we will aim to improve the conversion rate of advance client dialogue into orders continued to increase vehicle production rate and accelerate delivery.
In light of the COVID-19 situation.
And we're relatively recent entry in the truck market and our transition to a public company.
We do not anticipate providing any short or long term financial guidance in the foreseeable future.
Going forward, we however, expect our disclosure to discuss industry trends.
Men's and Lions orders and delivery.
The launch of new vehicle.
Key milestones on our battery plant and U S vehicle facility.
Progress with experience centers and.
And company head count and key senior hires.
I will now pass it back to Mark for concluding remarks.
Thank you Nick we are pleased with the expansion of our business. The continued validation of our technology and our market position.
And the next few months.
We will focus on first.
And you focusing on our customers and working with fleet owners to provide them a turnkey solution and help them navigate the transition to electric and full confidence this should translate into order book growth and accelerated deliveries.
Ken.
Executing of our strategic growth projects, we will continue to advance our 20000 vehicles per year U S vehicle factory and our five gigawatt hour per year Battery Assembly plant.
<unk> continues to attract the best talent make key strategic hires and strain and the team to successfully execute on our growth strategy.
Before we turn to Q&A I would like to thank the fantastic team at client our achievements today reflect the daily or the work of each and every team member we are entering the most exciting chapter of our story and we are all committed to continuing our success.
Accelerating our growth.
And I have always been saying we.
And we hope to have the support of investors, who are with us for the long term. We can appreciate the incredible opportunities within the electric vehicle commercial space and the need to progress at the pace that allows us to maintain our significant first mover advantage, let's now open the lines for questions.
Yes.
Thank you at this time, if anybody would like to ask a question cash press star one on your telephone keypad and your next question. Your first question comes Shanghai on play a from Chardan. Your line is open.
Hey, good morning, Marc Good morning, Nicholas Congrats for the the latest development.
Yeah.
And you just completed the delivery of the 10 trucks to Amazon could you may be discharged about and Nick with respect to Amazon.
Sure Good morning, and why this is a this is mark.
Absolutely. So yeah, we successfully delivered the first and units within India within the last few weeks and.
Yeah. So the decision obviously is the Amazons decision and that means with the for the future, but we are ready to deliver and EMA as many trucks says and we would like to be delivered.
Okay, and with respect to Eric and Theres been a great announcement for the purchase of five trucks and potential for 10 and 100 additional orders could you talk maybe about the timing around the validation program.
Yeah, the validation program for the first five units will.
And we'll be before the end of this year and you said it I mean, if they are satisfied with the performance of those five units than the ABA and option two two by 100 additional units and this is a mix of line six and on a unit.
Okay, and with respect to our refuse trucks and Mark any update on the progress of the pilot program with waste connection and could you maybe provide color about the potential markets are fortunate DS and the waste industry aside Eric there Jim waste connection.
Sure sure, but no other refuse truck Patel.
Potential is huge as everybody knows there will be will.
We'll be delivering the.
The the first units to waste connections within the within the next few months and.
Yeah, we're in negotiation and I mean with with many many customers.
And the this is as you know this is a.
This is a real full electric.
And it's shrunk, meaning this is an electric buddy on on our electric truck and you can do the full day of operation over 1200 stocks.
On the on the single charge that would be the customers are are.
Looking forward I mean, 222 to do some right and drive on this on this shrunk and.
Two two to two starts and new purchasing goes trucks.
Okay, that's great color and last one for me could you talk about the expected ramp up in headcount and SG&A for 2020 one.
Sure well and then it has to do with manufacturing capacity.
And obviously and what's good is net we do have and manufacturing capacity of 2500 units per year right now in our and R. R.
Actual.
Plant in and Montreal. So this is this as good as you guys know and we made the announcement of the Illinois plant also debt. We are starting the ramp up of the building within our within the last few months and before the end of the year and the full of the the first I'm sorry, the first buses.
And trucks will be rolling off the line.
And the H two of 2022. So we are ramping up the number of employees were a little bit to over 650 employees right now and we are hiring all the debt that the best resources.
I mentioned earlier and also the.
Significant significant hires we have made and that in the last few months as well. So this could go even though it's a very significant number.
Within within the next 18 months, depending on the order book.
Okay. That's great color. Thanks for the time I'll get back into queue.
Thank you and one.
And your next question will come from Jonathan Langer, and <unk> from BMO capital market. Your line is open.
Good morning, congratulations on the public listing and capital raise.
I appreciate that you're not going to be updating your guidance going forward, but would you be able to comment on how actual order activity year to date as compared to your expectations and more importantly, your ability to meet the targets you laid out and the prospectus.
Sure Nick.
Hey, Jonathan and Nick here.
Speak with you.
Look I mean, we we announced this morning.
On the purchase order book at 817 units.
Most of these units and we expect we'll be deliberate and the next 12 months.
And this is where we also announced debt.
And the extent of the.
The other Kpis that you will have and we'll report on that front and so and I will I will leave it at that.
Okay, and I'm curious it seems like customer demand near term shifts.
Shifting a little bit in favor of school buses from trucks.
Relative to maybe what you put out before is how can you comment on how easy it is to adjust the assembly lines to produce more school buses and fewer trucks or vice versa. I believe the underlying chassis are fairly similar.
The Ara, Jonathan and you probably remember that underneath a school bus you have the.
Our client set and truck chassis, so you're absolutely right I mean, we can do when we're saying we have a manufacturing capacity of 2500 units per year right now, it's a mix of school buses buses and trucks and we can do you know all of them and it could be you know and mix of any of those models and.
Same thing with the 20000 units manufacturing capacity and Giants.
Illinois, and total let's say, it's a manufacturing capacity of 23000 units.
Shifting I mean, you said you know shifting from school buses to trust and then we see a lot of enthusiasm on the truck side as well and I think and what happened on the school bus side and that we've been working in this market for many many years, we delivered our first units over five years ago as as you might recall on and then the prison.
By then and.
The Prime Minister Trudeau came up.
The subsidy same thing and in Quebec, and many many other provinces and states.
Right now so it seems like everybody recognizes the value of carrying our kids in electric school buses.
And to US I mean, this has been and you know like a slam dunk and meet for many many years on the old market of school buses is going electric prison bite and said that at least 20% over the next few years will be converted to two electric and they're investing the money into this old school buses, obviously is a great great market.
And that a lot of people were between us and understating it few years ago.
But turning to the truck market I mean, no huge enthusiasm I mean the debt.
We arent Ami regular income tax would be with the customers. We are doing right and then drive.
And we got that Big order from the price route for a 100 unit and addition to you know all the other orders and I mentioned earlier.
Earlier, and we are in negotiation with many major fleet everywhere in the United States and and Canada. So I would say you know the whole market is is I think going and electric and school buses I mean, it is now and electric trucks I mean, it is now as well, but obviously, we're just at the.
Beginning of it. So it takes you know a little bit more time, but the old market is very excited about using electric trucks and buses.
Okay. Thanks for that and just on this order from first student are you able to share with us anything about how long that order took to develop.
And whether there could be future opportunities with <unk>.
Sam or other large contractors and the U S going forward.
There are many opportunities right now Jonathan is an order for 260 buses.
And as buses will be used and.
And in Quebec. So this is only and opened the Quebec.
Operation of AR.
For student.
And <unk>.
The other fleet of about 750 buses. So it's about third of the of.
Pursue them fleet, and and Quebec debt will be electrified. So this is this is very exciting the ebb and using 16.
Our buses for a for a few years now and.
The we're upgrading those buses and the the border Juno and additional 10 and now they are they are ordering and additional 264, a total of over 280 buses.
And their fleet within the next day or lets say 18 two.
220 months and it seems like you know what pursued and it is doing.
We feel that many school bus operators will be will be doing the same thing, none and not only in Canada, but in the United States as well you probably know that we made very significant deliveries and California as well.
We won that RFP and less than two years ago, and we have people on the ground over there with two experience centers and.
And California, one one and L. A and one in Sacramento, and so were very well established with our eight experience centers across the.
The United States, and Canada and meet to service those.
Those buses and trucks and we are opening a lot of experience centers as well and so we do see a lot of enthusiasm and very very excited about what's the first unit is doing with us.
Great and I'm and I'm, sorry to follow up on this but just on lead times.
Like how do those compare for these large baas customers to the private truck customers.
Jonathan you mean on the truck side.
Well on products and on.
And just how long it takes to.
And negotiate.
Oh, Yeah, the agreement and.
Get to the point of you know get get from this point of the.
Discussion with the clients, who actually putting on order and your backlog no share. Thank you Jonathan Yeah. You you asked me that question earlier well, what's the you know, what's the pursuit and Nissan it's an ongoing relationship and discussion because they're already using or are electric or electric buses and so I would say you know it's it's.
Really not.
Really I mean like negotiation and on the longest case, it's upward and for many of them, it's like ongoing discussions and operating on.
Operating those.
And that was the buses so it really depends you know from one customer to the other but few for new customers usual EDI and like to do right and drive which they do.
And with volume because we are we have vehicles on the ground. They can we can do some writing on drugs, which is great. So it could go you know from from a few weeks to us and many months.
Okay I'll pass the line and thanks for your comments.
Thank you.
And your next question will come from John Lopez from vertical group. Your line is open.
Oh.
Hey, good morning, how are you.
Yeah. Good morning, John were very good how are you.
Great. Thanks, so much for taking the time.
Hum.
So my first question I'm wondering can somebody provide us a backlog figure as of calendar Q4 that kind of seems like the Kpis you guys are gonna maybe rely on here is there any way we could get the historical trending for that.
Hey, John.
Thank you.
We were at over 300 units at the end of Q4 and just.
And figure out with.
Deliveries and all that.
The number of purchase orders, we secured from year to day Jan to adhere to day little bit over 530.
Gotcha, Okay. That's really helpful. Thank you Nick.
My second question just about production.
And I believe you guys produced.
I think I saw the disclosure of like a little over 40 vehicles and the quarter.
Sorry, again is there a way you could offer us that figure for calendar Q4, and what I'm really trying to figure out here is a bridge on the gross margin side. So said differently I would expect you guys probably produced a comparable amount of vehicles and Q4 and again in Q1, even though the deliveries dropped do I have that right and if I do kind of how does the gross margin trend realm.
To that.
And so relatively speaking roughly speaking I think that's correct I don't have the Q4 production.
With me right now John in terms of growth margin.
<unk> Q4 were around.
18%.
Gross margin.
Larger and also related to the number of sales on the diesel sales.
We had.
Which was 46.
Okay. Okay, I got you I'll follow up with you on that one.
And sorry, I'm on my very last question here just relative to.
What I think you guys are saying on the backlog I guess the expectation is most of the most of the units will be delivered kind of over the next 12, but but then on the other hand it sounds like the.
The first student order.
Probably extends out a bit beyond that.
So I guess my question here is if I take those two customers they seem like they're pretty sizable percentage of the backlog or are you comfortable that most of that gets delivered and the next 12 or should we really be thinking most of this is like over the next 18 to 24.
Yeah, I'll start and thanks, again and so so for.
And for first students were were going all the way to H, one and 2023.
Right. So when you talk to customers I guess, the second one was with price.
Yeah, sorry, exactly yeah, yes, yes.
And there will be.
And in part this year and and part next year, a little more weighted towards this year, but yeah, so that and.
And the calendar.
Calendar years, Okay, alright, great that that really helps thanks. So much guys. Thank you John and good luck.
And your next question will come from Rupert and Mary Yang from National Bank. Your line is sales Fang.
Good morning, everyone. Congratulations on on reporting the first quarter and thanks for taking the questions.
Getting back to the.
Gross margins and can you discuss your your sales strategy. How you are setting the E. S. P. Today and how much of your manufacturing costs would you say are fixed cost versus other variable costs.
And.
Sure well good morning, good morning, Rupert and a great great to talk to you well with respect to the.
And you do to the ASC, obviously, you know we do other strategy of you know.
Pricing and.
The D C. I mean, we expect will go down with time as we're passing and all the cost savings to the customers like we've always said and this is why we're investing so much money.
For example, during the day battery factory, where most well above 40% on the behalf of and electric vehicle.
Is.
Is it within the.
On the batteries and now with respect to the gross margin, yes, so with respect to the portion of the fixed cost debt.
Fix versus variable things and keep in mind, Rupert it'll change on a quarter by quarter with volume, but when you look at it on a on a full year basis, we estimate about a quarter.
And last one five percentage.
The cost base about the gross margin levels.
Yes.
Okay, great and so looking at.
And your current day, ASC and your backlog and give a sense for what your breakeven point is on on sales.
Current pace current price.
Yes, it's not a.
The bigger we will be putting out per se, but.
Look if you look at our Q.
Q4 of 2021.
And keep it on EBITDA.
Okay. Thank you and I look back.
And I'll cover it again.
And so our guidance.
And I've talked a little about the cadence of orders over the next 12 months just wondering if the cadence determine on.
Only by the debt.
Timing requirements on your customers or.
Some of that's the right and you were able to ramp production on our U.
Are you ramping production are you fully able to deliver at the rate of 2500 units per year today.
And <unk>.
There's no issue.
Rupert and with the ramping up but on.
And I mean, our manufacturing capacity of 2500 units.
Right now obviously, we need to ramp up you know the the number of employees, which we do I mean.
And.
And as needed and so really it's really net.
A challenge in this regard, let's keep in mind that you know, we're working very very close to our customers with volume of energy and this is where you know for many customers for many clients. This is where the debt challenges, sometimes we need to make sure that the infrastructure is ready on day.
And so what we do I mean as soon as possible, we start working with them to make sure that they can keep doing what theyre doing great their business and we can take care of the project management of the charging infrastructure and as we said earlier, we are resellers do you know of many brands as well and we do that so.
It could take a few months to get them organized through the project management, depending on the size of the day deliveries as well and we're working very close to the customers. So when we're delivering for example, lithium three months from now on those three months I mean, we'll be busy taking care of the operation and making sure that the.
All of the infrastructure will work very well when we will deliver the vehicles.
And thank you and then let's just finally I was wondering if you can give some more color or or any metrics on the sales pipeline that we can track going forward.
<unk> talked a little about quoting activity and how it's evolved and maybe you can give us some more color on that and and how your conversion rates have been evolving as well congratulations on sales.
Yeah, and it's going very well I mean, we've been ramping up our sales.
Sales team as well we have about 50 and go use now and are in our sales team. So.
I mean, having those discussions with customers and the fact that they can do rides and dry.
On our on our products and on our vehicles I mean is.
It is great. So.
And that would be the conversion rate I mean, I think will be very very good and the customers. Obviously, we are in relation with the day.
Well the first thing for them is the great news that we share with them. Most of the time is that the total cost of ownership works very well in most of the of the cases and this is like yes. This was on the path like a well.
Hidden secret let that.
Let's see that and we're doing the calculation with them with their own.
Our assumptions and when they see that we can do the project management of the charging infrastructure as well they can talk to customers.
We're the leader and the electric school buses and in North America, we would like to speak with the other customers and now that we just started.
And doing the delivery on.
On the on the truck side as well I mean, we see an acceleration and and closing the orders absolutely.
Thank you I'll leave it there and get back into cash.
Sure. Thank you Oliver.
And your next question comes from Michael Glen from Raymond James Your line is open.
Hey, good morning.
So I guess my first question just in terms of the U S facility first production targeting towards the end of 2020 two when I listened to it it feels it feels like and aggressive timeline to get to that point I'm.
And I'm just curious how much buffers have you put into that timeline and are you comfortable you have all the supply chain you needed setup surrounding that production ramp and to get all the equipment delivered.
And time in order to make that production happens.
Absolutely Michael well. This is a great question and no need for anybody that will open at factory, where they do not have a lot of electric and.
Manufacturing experience I mean, this will be challenging I mean for long and its totally different we've been manufacturing those.
And those vehicles I mean for more than five years, now and working on them on more than 10 years. So it's a huge difference. So we are already doing business with all the tier one suppliers and.
We do other insurance manufacturing capacity of 2500 units so and.
And if you take a look at the building as well the building I mean, he is very well on their way right. Now if you look at the pictures and then where some of you I know some of you guys have been able to see it.
And being able to go on site as well very very exciting I mean, this building is very well on their way and we will take we do the occupancy of this.
Building on within the within the next few months with the ramp up of the building before the end of the year. So no I mean the.
The the first units will rollout.
H two.
The 2020 two no no doubt and in my mind and everything is in place the supply chain is already in place with what we're doing.
Youre welcome and me to visit.
Our current factories and we do have a lot of experience so for anybody else and.
That is not used to do that that will be challenging but for long and we've been doing this for many years that Michael.
And what are some other big when they think about what that line and looks like I mean, what are some of the significant.
Manufacturing type items that you need to get into it get into the facility to make the production happened.
Is it robotic method, just labor or what is it exactly.
That makes up what you just said I mean subjects on.
It's a mix of robotics and and.
And labor, we are starting to hire.
The the people as we speak we announced the debt.
And the Joliet facility only a weighted.
Other week ago and.
So we just started and you know the hiring.
Process, so ramping up the labor and the good thing is net Johnny and is that this is one of the reason which selected Julien.
With the labor and also the specialized.
Labor that debt.
We will meet at some point.
Robotics, I mean is it.
It's a good point as well I mean, we are looking you know what that manufacturing I mean that.
At the great pace.
Obviously, so I'd say, it's a mix of it's a mix of all of that.
Okay, and just circling back on to Amazon can you give an idea like up debt of the trucks that have been delivered up to now the use case that they're being put through and any any sort of feedback you're getting from the customer are there tweaks that have to be made to the platforms to to get there.
More aligned with the customer.
And what Amazon needs.
Yeah. Michael this is a really a private discussion with.
With with Amazon and so I mean, we were able to see that we delivered the chalk but debt.
And the usage, what we are doing with it.
It's a private minor a matter between the two companies.
Okay. Okay. Thank you for taking the questions.
Thank you and find out and asking a question from today will come from bank and wildfire from day Jackie Your line is open.
Yes.
Could you talk maybe about the overall pricing environment and see these days and we've seen as we've seen some favorable announcement related to government subsidies are mark.
Yeah Yeah.
And then there has been and a great.
Announcements on the on.
On subsidies.
And we're saying you know even if the total cost of ownership works on most cases.
The operators I mean at some point meet them out to do a smooth transition to electric and <unk>.
You you saw what's happening on.
On the school bus side, the school bus side with prison and buy them and said he wants to electrify and where 20% of debt 500000, plus school buses in the U S. This is great Mr true though.
Said that he is looking at replacing 5000 buses and candidates and mix of transit buses and school buses with electric school buses within the next five years.
The mayor Deblasio mention.
Mentioned.
These debt before 2035 once to electrify you mean that the fleets and.
And new yard D E C T.
Graeme also in California, but also that many other states are looking to two to apply and their own state also so theres a lot of money right now and the the people see the benefit of going and electric and I think with day late to see as well is you know this.
Total cost of ownership being so good right now at this point, but you know debt will improve with the higher.
Demand over the next couple of years.
And this is great I mean, we're very excited about all the money that is coming in to make a smooth transition for the operators to electric and and also you know the government a payback debt came up you know with over $200 million for a for a school buses and great Great News.
Okay. Thank you very much again.
Thank you Manuel.
This brings us to the end of our Q&A session I turn the call back over to Isabella Zhao for closing remarks.
Thanks, everyone for joining the call today, we look forward to continuing the discussion with you and feel free to.
And to call me contact me for any follow up question Humana on day.
This is a nice day. Thank you.
Thank you everyone and this does conclude today's conference call you may now disconnect.
Okay.
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