Q1 2022 XL Fleet Corp Earnings Call

General Manager of Excel Grid.

Our call this afternoon includes statements that speak to the company's expectations, outlook, or predictions of the future, which are considered forward-looking statements. These forward-looking statements are subject to risks and uncertainties, many of which are beyond our control, which may cause our actual results to differ materially from those expressed in or implied by these statements.

Statements that speak to the company's expectations outlook or predictions of the future which are considered forward looking statements.

These forward looking statements are subject to risks and uncertainties many of which are beyond our control, which may cause our actual results to differ materially from those expressed in or implied by these statements.

We undertake no obligation to revise or update any forward-looking statements except as may be required by law. We refer you to Excel Fleet's disclosures regarding risk factors and forward-looking statements in today's earnings release, our annual report on Form 10-K , and our other Securities and Exchange Commission filings.

We undertake no obligation to revise or update any forward looking statements, except as may be required by law.

We refer you to XL fleets disclosures regarding risk factors and forward looking statements in today's earnings release, our annual report on Form 10-K, and our other Securities and Exchange Commission filings.

A copy of our press release has been posted to the investor relations page of our website for reference.

A copy of our press release has been posted to the Investor Relations page of our website for reference the non-GAAP financial measures discussed in this call are reconciled to the U S. GAAP equivalent and can be found in the press release that we issued this afternoon.

The non-GAAP financial measures discussed in this call are reconciled to the U.S. GAAP Equivalent and can be found in the press release that we issued this afternoon. With that, I will turn the call over to Eric Tech.

With that I will turn the call over to Eric attack.

Thanks, Stacey and thanks to everyone for joining us on the call. This afternoon.

Thanks, Stacey, and thanks to everyone for joining us on the call this afternoon.

I'd like to begin today by highlighting an exciting recent addition to our leadership team. On April 11th, we are pleased to welcome

I'd like to begin today by highlighting an exciting recent addition to our leadership team on April 11, we are pleased to welcome.

Don Klein as the Chief Financial Officer of XL Plate. Don brings more than 25 years of public company finance and accounting experience and has a proven track record with relevant industry.

Don climb as the Chief Financial Officer.

Please.

Don brings more than 25 years of public company finance and accounting experience and has a proven track record with relevant industry experience.

Most recently, Dan served as a chief financial Officer of power solutions International a publicly traded company and leader in the design engineering and manufacturing.

Most recently, Don served as the Chief Financial Officer of Power Solutions International, a publicly traded company and leader in the design, engineering, and manufacturing of emission-certified engines and power systems.

Emission certified engines and power systems.

I was privileged to have worked closely with them during my time at Navistar, where Don spent nearly a decade and.

I was privileged to have worked closely with Don during my time at Navistar, where Don spent nearly a decade.

And prior to his departure, he served as the company's assistant corporate controller. I'm excited to partner closely with Don in his new role, and I'm confident in his ability to lead our finance organization while helping deliver value to all Excel stakeholders. Roughly 60 days ago, we stated that we would identify a high caliber CFO , and I'm proud to have delivered on that commitment. We have a great team in place today, and I'm confident that we have the right people to advance our growth in Excel.

And prior to his departure served as the company's assistant corporate controller I'm excited I'm excited to partner closely with Tom in his new role and I am confident in his ability to lead our finance organization, while helping deliver value to all <unk> stakeholders rougher.

Roughly 60 days ago, we stated that we would identify a high caliber CFO and I'm proud to have delivered on that commitment.

Have a great team in place today, and I am confident that we have the right people to advance our growth and execute.

Separately, as recently announced, Todd Hines has stepped down from his role as president and member of our board of directors. On behalf of Excel fleet, we'd like to thank Todd for a service and appreciate his many contributions to Excel fleet since founding the company more than 13 years ago.

Separately as recently announced Todd Haynes has stepped down from his role as President and member of our board of directors on behalf of XO fleet, we'd like to thank Todd for his service.

And we appreciate his many contributions to XO fleet since founding the company more than 13 years ago.

The company is built on Todd's sustainability focus mission and our team remains focused on building upon this vision as we pursue new opportunities in decarbonization. Additionally, I look forward to working with Todd in this new capacity as chair of our advisory board.

The company is built on pod sustainability focused mission and our team remains focused on building. Upon this vision as we pursue new opportunities and de carbonization.

Additionally, I look forward to working with Todd and his new capacity as chair of our Advisory Board.

As we laid out last quarter, I spent my initial 90 days performing a comprehensive review of the business.

As we laid out last quarter I spent my initial 90 days performing a comprehensive review of the business.

From my initial review, I identified several near-term opportunities and actions related to people, technology, and resources.

For my initial review identified several near term opportunities and actions related to people technology and resources.

As part of this, we made the difficult decision to resize our team and resources to better align with our near term needs.

As part of this we made the difficult decision to resize, our team and resources to better align with our near term needs.

This decision was part of a process to narrow the focus of our offerings, the applications and solutions that made it the most strategic and financial sense for Excel fleet over the long term. I'm very appreciative of the strong base of talent that we have in place today. They're patients during this time of transition and there are many contributions to driving success at Excel fleet.

This decision was part of a process to narrow the focus of our offerings to the applications and solutions that made the most strategic and financial sense for XL fleet over the long term.

I'm very appreciative of the strong base of talent that we have in place today their patients. During this time of transition and there are many contributions to driving success at XO fleet.

I'm proud to say that we have already seen benefits from our actions. In particular, I spent a substantial amount of time with our newly organized drive team business led by Mike Kenhart.

I am proud to say that we are already seeing benefits from our actions in particular I spent a substantial amount of time with our newly organized drivetrain business led by Mike Ken here.

I've been impressed with the changes Mike has made thus far and I'm very optimistic about all that Mike and his team are executing and pursuing.

I've been impressed with the changes Mike has made thus far and I'm very optimistic about all that Mike and his team are executing and pursuing.

As we laid out last quarter, part of our strategy included the pursuit of transformational M&A. In the last couple of months, my team and I have implemented a process to institutionalize this effort, including the formation of an investment committee comprised of senior leaders and members of the board. This committee meets on a weekly basis to review and discuss potential M&A opportunities.

As we laid out last quarter part of our strategy included the pursuit of transformational M&A in.

In the last couple of months my team and I have implemented a process to institutionalize this effort, including the formation of an investment committee comprised of senior leaders and members of the board.

This committee meets on a weekly basis to review and discuss potential M&A opportunities.

As noted last quarter, we are taking a fresh and wide look at opportunities that benefit from the long-term growth resulting from the global need for decarbonization.

As noted last quarter, we are taking a fresh and way to look at opportunities that benefit from the long term growth, resulting from the global need for de carbonization.

Thus far, our committee has assessed opportunities related to vehicle electrification, transportation decarbonization, renewable energy generation, and energy efficiency.

Thus far our committee has assessed opportunities related to vehicle electrification transportation decarbonization renewable energy generation and energy efficiency, we continue to search for strategic transactions and these and other areas of the broader decarbonization and energy transition ecosystem I.

We continue to search for strategic transactions in these and other areas of the broader decarbonization and energy transition ecosystem.

I believe that we are a very attractive company and potential partner in large scale M&A given our established presence in the decarbonization space, a strong cash position, deep corporate knowledge and a public listing. We look forward to providing further updates.

Leave that we are very attractive company and potential partner in large scale M&A given our established presence in the de carbonization space, a strong cash position deep corporate knowledge and a public listing.

We look forward to providing further updates as appropriate.

With that, I'd like to turn it over to Mike Kennard for a brief discussion of our drivetrain business.

With that I'd like to turn it over to Mike <unk> for a brief discussion of our drivetrain business.

Thanks, Eric starting with a high level view of the market, we have seen signs of supply chain improvements even since our last quarterly call a few months ago.

Thanks, Eric. Starting with a high level view of the market, we've seen signs of supply chain improvement, even since our last quarterly call a few months ago.

Our team is in active discussions with municipal customers and other prospects as budgets continue to reset as we emerge from the worst of the pandemic-induced budget freezing.

Our team is in active discussions with municipal customers and other prospects as budgets continue to reset as we emerge from the worst pandemic in juice budget freezes.

While we continue to deal with delays related to chassis delivery, we are seeing less customer chassis cancellation.

And while we continue to deal with delays related to chassis delivery.

Seeing less customer chassis cancellations.

Market conditions have begun to improve and we are also closely monitoring supply and demand dynamics resulting from recent COVID-19 outbreaks in certain regions of the world.

Market conditions have begun to improve and we are also closely monitoring supply and demand dynamics, resulting from recent COVID-19 outbreaks in certain regions of the world.

As we previously discussed Excel fleet was selected as one of the two finalists for pilot program being run by the department of defense to develop anti hydro technology from the tree applications.

As we previously discussed, Excel Fleet was selected as one of the two finalists for a pilot program being run by the Department of Defense to develop anti-hidal technology for military applications.

We continue to make progress and to date have achieved two of the four milestones in this process. We look forward to providing further...

Continue to make progress and to date have achieved two of the four milestones in this process.

We look forward to providing further updates as we were able to.

Last quarter we highlighted that we have been assessing opportunities to deploy similar technology in applications outside of this potential DoD award. Our team has been working diligently to integrate anti-idle technology. I'm pleased to report that we now have working prototypes of vehicles that combine the new anti-idle technology with our hybrid system.

Last quarter, we highlighted that we have been assessing opportunities to deploy similar technology in applications outside of this potential Doj Award a team has been working diligently to integrate ntis technology I'm pleased to report that we now have working prototypes of vehicles that combining <unk> technology with our hybrid systems there.

We're in active discussions with customers about this latest technology offering, which has been met with excitement and enthusiasm for customers in applications that seek efficiency and sustainability, whether on the move or static.

We are in active discussions with customers about this latest technology offering which has been met with excitement and enthusiasm for customers and applications that seek efficiency and sustainability, while on the move from static.

Finally, we continue to advance our all-electric refuse truck being jointly developed with CurbTender. This will be XL Fleet's first all-electric commercial application.

Finally, we continue to advance our all electric refuse truck being jointly developed with Cup tender.

This will be XL fleets first all electric commercial application.

We are excited to formally unveil and showcase the all electric quantum refuse with our partner curb tender at Waste Expo 2022. This solution is the first of three pre-series vehicles and we remain on track to deliver completed units to customers by the end of this year.

We are excited to fully unveiled and showcased the all electric quantum refuse with our partner Cook tender at waste Expo 2022.

This solution is the first of three pre series vehicles, and we remain on track to deliver completed units to customers by the end of this year.

With that, I'd like to turn things over to Colleen Cuthbert to discuss our Excel grid business.

With that I'd like to turn things over to clean covered to discuss our XL grid business.

Thanks, Mike. Our world energy business continued to perform well, generating $4.2 million in revenue during the first quarter. This reflects the seasonality related to utility-based programs, which typically experience higher volumes in the third and fourth quarters.

Thanks, Mike our World Energy business continued to perform well generating $4 $2 million in revenue during the first quarter. This reflects the seasonality related to utility based program, which typically experienced higher volumes in the third and fourth quarters are.

Our team continues to work closely with a range of customers across the spectrum of energy efficiency projects.

Our team continues to work closely with a range of customers across the spectrum of energy efficiency projects.

During the quarter, our World Energy team completed 139 projects across a range of project types, including efficiency as well as EV charging.

During the quarter, our world Energy team completed 139 projects across a range of project type, including efficiency as well as EV charging.

Importantly, a portion of our projects completed this year reflect our key customers, showcasing our ability to identify new ways to partner with our customers as they pursue greater sustainability across their business.

Importantly, a portion of our projects completed this year reflect our key customers showcasing our ability to identify new ways to partner with our customers as they perceive greater sustainability across their business.

We're pursuing new growth opportunities in our recent expanded footprint in New York. Our team is also pursuing a number of exciting opportunities, resulting from the increased focus of carbon reduction by New England utilities. One great example of this is the use of heat pumps as a replacement for delivered fuel and electric heating systems as utilities incentives for those programs have increased significantly this year.

We are pursuing new growth opportunities in our recent expanded footprint in New York. Our team is also pursuing a number of exciting opportunities, resulting from the increased focus of carbon reduction by new England utilities. One. Great example of this is the use of coupons as a replacement for delivered fuel and electric heating systems.

Utilities incentives for those programs have increased significantly this year.

From a customer trend perspective, commercial and industrial small business energy efficiency customers remain a core focus for our world energy business.

From a customer trend perspective, commercial and industrial small business energy efficiency customers remain a core focus for our world energy business.

The team has also recently increased its focus on the medium and large commercial, industrial, and municipal customer segments.

The team has also recently increased its focus on the medium and large commercial industrial and municipal customers segment.

In fact, approximately 22% of all projects signed in the first quarter were for medium and large customers, up from 14% in the same period last year.

In fact, approximately 22% of our project signed in the first quarter were for medium and large customers.

From 14% in the same period last year.

As we noted on the last quarterly earnings call, we are investing in the growth of our world energy business.

As we noted on the last quarterly earnings call. We are investing in the growth of our world energy business we.

We have been successful in attracting new, quality talent to the organization, having already hired half of the team members needed to achieve our targeted 25 percent annual growth in team size this year. Our project backlog is approximately 130 projects at the end of the first quarter, reflecting the strong momentum we expect through the remainder of the year and beyond.

<unk> been successful in attracting new quality talent to the organization, having already hired half of the team members needed to achieve our targeted 25% annual growth and team size this year.

Our project backlog was approximately 130 projects at the end of the first quarter, reflecting the strong momentum we expect through the remainder of the year and beyond.

Now, let me turn it over to Don to walk through our.

Now, let me turn it over to Don to walk through our financials.

Thanks, Colleen. I'm excited to be speaking with you all today, and my first learning is called the CFO of Excel fleet. Given the changes that Eric mentioned to the structure of the organization, and how we'll manage and evaluate operational performance going forward, the company made a change in its segment reporting in the first quarter of 2022. The company will now report second results for Excel grid and drivetrain to separate reportable segments.

Thanks, Colleen I am excited to be speaking with you all today in my first earnings call as CFO of XL fleet gives.

Given the changes and Eric mentioned to the structure of the organization now, we'll manage and evaluate operational performance going forward. The company made a change in segment reporting in the first quarter of 2022. The company will now report segment results for XL grid in drivetrain as separate reportable segments.

With that said, let's begin the consolidated financial results for the quarter.

With that said, let's begin the capital financial results for the quarter.

Revenues for the first quarter of 2022 totaled $4 8 million compared to $8 million in the fourth quarter of 'twenty, one and approximately $700000 in the prior year period.

Revenues for the first quarter of 2022 totaled $4.8 million compared to $8 million in the fourth quarter of 21 and approximately $700,000 in the prior year period.

We reported gross loss of the quarter of approximately $400,000, compared with a gross loss of $1.6 million last quarter and gross loss of approximately $700,000 in the first quarter of last year. The gross loss of the quarter included a non-cash charge of $1.5 million, the write down of kit inventory for systems no longer sold.

We reported a gross loss for the quarter of approximately $400000 compared with a gross loss of $1 $6 million last quarter and gross loss of approximately $700000 in the first quarter of last year. The gross loss for the quarter included a noncash charge of $1 $5 million the write down of kit inventory for systems no longer sell.

Selling general administrative expenses for the first quarter of 2022 totaled $11.7 million compared to $15.9 million last quarter and $8 million in the first quarter of 2021. SG&A expenses for the quarter of 2022 included approximately $500,000 in legal fees related to class action complaints and the previously disclosed SEC investigation.

Selling general and administrative expenses for the first quarter of 2022 totaled $11 7 million compared to $15 $9 million last quarter and $8 million in the first quarter of 2021.

SG&A expenses for the quarter of 2022 included approximately $500000 in legal fees related to class action complaints and the previously disclosed SEC investigation.

adjusted even a total negative 11.3 million dollars compared to negative 14.6 million dollars in the fourth quarter of 2021 and negative 9.9 million dollars in the prior year quarter.

Adjusted EBITDA totaled negative $11 3 million compared to negative $14 6 million in the fourth quarter of 2021 and negative $9 9 million in the prior year quarter.

In the first quarter, we recognized an $8.6 million non-cash impairment of Goodwill resulting from a decrease in the company's market cap during the quarter.

In the first quarter, we recognized an $8 $6 million noncash impairment of goodwill, resulting from a decrease in the companys market cap during the quarter.

As a result of restructuring actions, taking the right size of team in certain areas of our operations, we recognize charges totally in $2.5 million. These included the $1.5 million non-cash write-down of kit inventory previously mentioned, an $800,000 severance charge with $700,000 of that paid in the quarter and $100,000 of accelerated amortization.

As a result of restructuring actions taken to right size of team in certain areas of our operations. We recognized charges totaling $2 5 million. These included the $1 $5 million noncash write down of kit inventory previously mentioned, an $800000 severance charge was $700000 of that paid in the quarter and 100000.

And accelerated amortization.

In addition, we recognize $700,000 of severance charges with the departure of a former CFO and president with approximately $500,000 paid in the quarter and the remaining to be paid over the next two quarters.

In addition, we recognized $700000 severance charges with the departure of our former CFO and president with approximately $500000 payment in the quarter and the remaining to be paid over the next two quarters.

As of March 31st, 2022, we had cash and cash closings of $333 million compared to $352 million at the end of 2021.

As of March 31, 2022, we had cash and cash equivalents of $333 million.

Compared to $352 million at the end of 2021 cashews.

Cash use and operations for the quarter was $19.1 million, which included $7.7 million items that were not reflective of expected cash flows for the remainder of the year. These include dispersants of $2.7 million for annual payments of certain items, primarily the company's annual insurance renewal and the payments of the annual incentive bonus for 2021.

Cash used in operations for the quarter was $19 1 million, which included $7 $7 million of items that were not reflective of expected cash flows through the remainder of the year. These include disbursements of $2 $7 million for annual payments of certain items, primarily the company's annual insurance renewal and the payments of the annual incentive bonus for 2021.

$2.3 million primarily related to contingent consideration for previously completed acquisitions.

$2 $3 million, primarily related to contingent consideration for previously completed acquisitions.

Approximately $700,000 of cash payments for previously mentioned rightsizing actions.

Approximately $700000 of cash payments for previously mentioned right sizing actions.

$1.5 million of the incremental payroll prior to those actions and certain retention payments, and finally approximately $500,000 of severance payments for the former president and CFO . As previously discussed, our focus remains on the most efficient uses of capital, including M&A, where our search is centered around businesses in the ecosystem resulting from the growing need for decarbonization.

$1 5 million of incremental payroll prior to those actions in certain retention payments and finally, approximately $500000 severance payments to the former president and CFO as previously discussed our focus remains on the most efficient uses of capital, including M&A, where our assertion centered around businesses in the ecosystem results.

From the growing need for decarbonization.

Turning to our segment results revenue in our grid segment totaled $4 2 million compared to $7 7 million in the prior quarter segment loss for our XL grid segment was $1 4 million.

Turning to our segment results, revenue in our Excel Grid segment totaled $4.2 million compared to $7.7 million in the prior quarter. Segment loss for our Excel Grid segment was $1.4 million compared with the segment loss of $500,000 in the prior quarter. Excel Grid's results reflect the seasonal nature of the business with lower activity in the first quarter.

Compared with a segment loss of $500000 in the prior quarter XL grids results reflect a seasonal nature of the business with lower activity in the first quarter.

Revenue in our drivetrain segment totaled approximately $600000 compared with approximately $300000 in the prior quarter and approximately $700000 in the first quarter of 2021.

Revenue in our drivetrain segment totaled approximately $600,000 compared with approximately $300,000 in the prior quarter and approximately $700,000 in the first quarter of 2021.

Segment loss of our Drivetrain segment was $5 9 million, which included a noncash charge of $1 5 million for the write down of key inventory for systems no longer sold compared with a segment loss of $8 8 million in the prior quarter and a segment loss of $3 $6 million in the first quarter of 2021.

Segment loss for a drive chain segment was $5.9 million, which included a non-cash charge of $1.5 million for the write-down of key inventory for systems no longer sold, compared with the segment loss of $8.8 million in the prior quarter, the segment loss of $3.6 million in the first quarter of 2021.

I'll now pass it back to Eric for a few closing comments before opening it up for Q&A.

I'll now pass it back to Eric for a few closing comments before opening it up for Q&A.

Sure. Thanks, Dan.

As I know that last quarter, a lot of work remains ahead of us. I'm encouraged by the many positive signals across our business.

As I noted last quarter a lot of work remains ahead of us I'm encouraged by the many positive signals across our business.

and I'm confident we have the right team in place to help deliver value on behalf of all Excel Fleet stakeholders. With that, now let's

I am confident we have the right team in place to help deliver value on behalf of all XO fleet stakeholders.

With that now, let's open up the lines for Q&A.

Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchstone phone. If you are using a speakerphone, please pick up your hands before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily

With that Amy Dan. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

At this time, we will pause momentarily to similar Robertson.

Okay.

As we've seen no questions at this time I would like to turn the conference back over to Eric <unk> for any closing remarks.

As we see no questions at this time, I would like to turn the conference back over to AgiTech for any closing remarks.

Okay.

Thank you everybody really appreciate you listening in today and hope that you continue to follow Excel fleet on our journey To deliver value to all of our stakeholders, especially our shareholders. Thanks again

Thank you everybody really appreciate you listening in today and hope that you continue to follow <unk> lead on our journey to deliver value to all of our stakeholders, especially our shareholders. Thanks again.

Okay.

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

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

Okay.

Okay.

Thank you.

Thank you.

Sure.