Q4 2021 XL Fleet Corp Earnings Call

On the opportunities in front of us.

Most of them, but most of all.

I am motivated by the work we have ahead of us to deliver long term value to all XL fleet stakeholders, most notably our customers partners and our shareholders.

With that as a backdrop I'd like to share a little bit about what I have been focused on since joining XO fleet exactly 90 days ago.

My initial goal.

Has been to take a comprehensive look at the entire XL fleet business.

Joining I spent considerable time meeting with leaders across our business and assessing the offering operating strategy and growth opportunities to ensure that we're maximizing value for all of our stakeholders as part of the strategic review I visited each of our core facilities and spend time with the teams there to help me Bill.

A holistic view of our business.

Well the strategic review remains ongoing I'd like to share a few early observations and actions.

First it is clear that <unk> has diversified our solutions portfolio substantially since going public 15 months ago issues related to chassis availability and other supply chain friction did impact our ability to sell electrified drivetrains in 2021.

As we experienced similar challenges as many other companies across the automotive industry.

However, the weakness we experienced in this part of the business was partially offset by our investment in XL grid business in particular.

Acquisition of World Energy efficiency services last year has given XO fleet, an entirely new set of capabilities and open up new market opportunities.

In order to better capitalize on the unique characteristics and opportunities in each of our product lines. I recently promoted Mike can hurt to Chief Technology Officer, and general manager of our power drive business.

Mike is an accomplished an engineer and innovation leader and I will be working very closely with him and his team as we focus on formulating and executing our strategy moving forward.

Kelly.

<unk> will continue in their role as vice President and general manager of our grid business.

<unk> in the World Energy team have done a great job of integrating into the broader <unk> fleet organization and it provided a valuable source of diversified revenue for the company I look forward to.

Continuing to grow that business moving forward.

The second priority of mine has been to narrow the company's operational focus in order to more effectively execute on our strategy going forward.

This effort involves focusing our resources on what we consider to be the most profitable areas of our business, both near term and long term as part of this process I have determined that we will selectively reduce some of the aspects of XL fleets hybrid offering by limited to the platforms and applications that are most scalable and provide the most substantial.

Turn on investment for both XO fleet and our customers.

As part of that is narrowly focused we have recently taken some actions to align our team.

With our near term needs.

As part of this we have eliminated 51 positions across the organization.

Among other things this difficult, but necessary action ensures that we are operating in the most efficient way possible.

Next.

<unk> focused on preserving cash and maintaining our strong financial reserves as we focus our business.

We exited the fourth quarter with approximately $352 million of cash on the balance sheet.

This cash which was raised as part of our go public transaction completed in December 2020 positions us with significant financial flexibility.

Yes.

Most importantly, I remain intent on identifying transformational M&A opportunities that will enhance shareholder value while setting the stage for long term growth, resulting from the global needs for decarbonization.

In summary.

<unk> taken actions to align our team right size, our business focus on cash preservation with an eye on transformational M&A.

It is important to emphasize that my strategic review remains ongoing this assessment, which requires time will inform and define our path forward.

With that I'd like to turn it over to Mike <unk> to provide an update on operations and near term opportunities.

Thanks, Eric I'd like to begin by echoing the message shed by Eric regarding the importance of assessing all opportunities to help set the business up for long term success.

One very recent example of that approach was demonstrated in our recent announcement that XL fleet has been selected as one of the two finalists for a pilot program being run by the department of defense to develop anti idle technology military applications.

Our team remains hard at work in developing this technology and we look forward to advancing through the process and updating the market on the program status as we were able to.

Separately. The team is currently assessing opportunities to deploy the same or similar technology to applications outside of the potential award.

We believe that could be a range of commercial variations that are possible for this technology.

Partnering with companies customers and perhaps fleets as they work to decarbonize and deliver sustainability across the businesses.

In addition, as we recently announced XO fleet.

<unk> received an executive order from the California Air Resources Board in order to sell electric refuse truck, we are jointly developing with cub tender into the California market.

We made significant progress on what will become the company's first all electric commercial application.

Look forward to being able to commercialize the product once it is ready for production.

We remain optimistic that will happen by the end of 2022 as previously stated.

As part of streamlining our business and narrowing focus on the most profitable opportunities we've decided to not move forward with our investment in the now related to the electrification of refrigerated trailers with that I'd like to turn things over to Colleen to discuss our XL grid business.

Thanks, Mike our acquisition of World Energy efficiency services completed in May brought significant diversification and expansion of our service offerings and set a strong foundation for our evolving excellent grid strategy.

The World Energy team performed better than expected in 2021, achieving $25 million of revenue for the full year with $7 $7 million in the fourth quarter. It is important to highlight that world energy does experience some seasonality, which typically includes higher revenues during the fourth quarter due to sales cycles in other <unk>.

<unk> in the market.

The team continues to demonstrate their ability to execute effectively and efficiently as evidenced by the completion of 637 energy service projects throughout the year.

We were excited to achieve our first cross sell project between excess fleet and World energy during the quarter. This project included 12 charging station to power 10 Ford F series pickups.

Axon fleet plug in hybrid electric drive systems that apex clean energy deployed and it services fleet earlier this year.

This project is a great example of the significant opportunity provided as fleets transition to electric triggering new needs related to EV charging.

We recently expanded our footprint into New York, specifically central in Upstate New York and look to capitalize on the growing demand for electrification and decarbonization opportunities in this region.

Looking ahead, we see significant opportunities for further organic and inorganic growth and we are actively pursuing opportunities.

Which includes world energy as project.

Backlog of approximately 200 projects at the end of the year.

XL fleet is committed to investing in the growth of the world energy business and are expecting to grow the team by approximately 25% in 2022.

I'd like now to turn it back to Eric.

Yeah.

Thanks Colin.

As we recently announced we have appointed Chris Goldner as our interim Chief Financial Officer. Following the resignation of Cielo Hernandez from her position as CFO to pursue other opportunities. We appreciate the contributions CLO since joining in April of last year and wish her success in her future endeavors.

Extremely confident and Christmas ability to lead our finance organization. During this period of transition Chris brings more than two decades of financial leadership experience, including significant experience with public companies and public accounting and <unk>.

His appointment Chris served as XL fleets corporate controller volume has joined in August .

We have a process underway to identify a permanent replacement and confident in our ability to bring on strong talent to drive advancement in change across the XL fleets.

Now, let me turn it over to Chris to walk through the financials.

Thanks, Eric.

Revenues for the fourth quarter of 2021 totaled $8 million.

Compared to $3 2 million in the third quarter of 2021, and $10 9 million in the prior year period.

Revenue in our XL grid division totaled $7 7 million, which.

Which was driven exclusively by projects in our world energy business.

Revenue from the sale of drive systems in the fourth quarter of 2021 totaled approximately $300000 compared with approximately $600000 in the prior quarter and approximately $10 9 million in the fourth quarter of 2020.

We reported gross loss for the quarter of approximately $1 $6 million compared with gross profit of approximately $700000 last quarter and gross profit of approximately $2 million in Q4 of last year.

Adjusted EBITDA totaled negative $14 6 million.

Compared to negative $14 2 million in the third quarter of 2021 and negative $1 8 million in the prior year quarter.

Research and development costs totaled $3 3 million.

SG&A totaled $15 9 million up from approximately $12 7 million last quarter and $2 $8 million in the fourth quarter of 2020.

On a full year basis.

We reported total revenue of $15 $6 million, including $12 $8 million from XL grid, and $2 8 million from the sale of drivetrain systems.

As a reminder, world energy contributed approximately seven five months of financial performance. Following the <unk> acquisition on May 17th 2021.

For the full year and including the portion of the year, we did not own world energy.

This generated approximately $25 million, which was slightly ahead of plan and triggered the pro forma performance based earn outs announced as part of the acquisition.

At December 31, we had cash and cash equivalents of $351 7 million compared to $329 6 million at the end of 2020.

I'll now pass it back to Eric.

Thanks, Chris.

Well I'll tell you it's been a busy three months and we have a lot of work ahead of us, but I'm motivated by the product.

To a successful outcome I value the collaboration that I'm, having throughout our company and the contributions and focus from all of our leadership and team members.

I know they share my motivation and urgency to execute our strategy and achieve our goals on behalf of all XO fleet stakeholders.

We look forward to providing further updates on our strategy and vision in the coming months.

With that I would now like to open up the lines for Q&A. Thank you.

We will now begin the question and answer session.

Ask a question you May press Star then one on your touch 10.

If you are using a speaker phone please pickup your handset before pressing the keys.

And anytime you question, that's been addressed and we would like to withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

Again, if you have a question. Please press Star then one.

As there are no questions. This concludes our question and answer session I would like to turn the conference back over to Mr. Eric <unk> for any closing remarks.

You must for participating in today's call and for your interest in XL Sweet everybody have a great day.

Okay.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.