Q2 2022 Lion Electric Co Earnings Call
Okay.
Good morning, ladies and gentlemen, welcome to learn Electric's second quarter 2022 results Conference Coke.
This time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference call is being recorded I would now.
Ill turn the call over to Isabella Zhao Vice President of Investor Relations and sustainable development. Please go ahead Mr. Johnny.
Good morning, everyone.
Why he's got two Lions second quarter 2022 results conference call.
When you have that called for Austin here for Nick.
Definitely you'll see the gyms can mess with Dominion front you did the deal.
Today, I'm here with Mike <unk>, our CEO funder.
Nicola will lead our EVP and CFO .
Please note that our discussion will could estimates and therefore, what little inflammation, which are actually pre tax could you be far from in the future.
We invite you to read the cautionary language in this morning's earnings release and in our MD&A.
Guarding the various factors assumptions and risks that could cause our actual results to differ.
With that let me turn it over to Mark to Big evening.
Mark. Thank you for you that Donna and good morning, everyone.
We are very proud of our results in the second quarter of this year.
In terms of vehicle deliveries and execution of our growth initiatives.
As we navigate through those challenging times.
We relentlessly focus our China Jack activities on accelerating return on investment.
With the ultimate goal of increasing deliveries to our customers while at the same time, increasing our manufacturing capacity and are based.
Consistent with the EV market adoption.
To do that.
We leverage both the strength of our alliance ecosystem and experience we have accumulated over 14 years of operations.
This enables us to ensure that our investments are aligned with the underlying fundamentals impacting our industrial operations as well as our liquidity profile.
In addition to discussing our Q2 'twenty two operational and financial performance, we will explain the actions we will implement to support our growth strategy and accelerates the return on investment.
There are three key elements for today's call.
First our supply chain continues to improve so does the pace of our vehicle deliveries, we delivered the highest quarterly number of vehicles ever.
105 deliveries in Q2.
This is the result of a more stable manufacturing rhythm.
Where we see continued growth in the number of finished vehicles being produced and we expect our manufacturing operations to continue to improve in the upcoming quarters.
Second our Joliet plant and our battery factory are advancing as per schedule.
And we remain on track to start manufacturing U S build vehicles and lung and batteries by the end of the year.
That being said with the view to focus our strategic activities to accelerate return on investment and ultimately manage our capital resources, we decided to adjust the cadence of our capital spend for the Joliet facility.
Our goal being to align capex with projected deliveries, we will reduce 2022 spend to focus on reaching commercial production for the electric bus production lines in Joliet.
Third with many long time expected EV programs in both the U S and Canada, now being deployed or to be deployed in the near future.
We expect global demand to significantly accelerate and are more than ever ready to support customers in their transition to EV.
We will elaborate on each element during the call.
Yeah.
Let's begin with vehicle deliveries.
We delivered 105 vehicles in Q2 the.
Number ever for a quarter. This represents an increase of 72%.
Compared to 61 vehicles in Q2 of 2021.
Also.
Growing number of our customers in Q2 dealt with lion capital to secure financing solutions, making it easier for them to access financing solutions tailored to the EV product on a timely basis.
Let me now provide an update on our supply chain.
For both critical and non critical components the challenges experienced over the past year are decreasing.
Even if they are not yet fully reverted to pre pandemic levels.
As we remain extremely vigilant and to avoid any disruption and this still fragile environment.
Continued to proactively.
I'll turn the suppliers specifically.
We have increased the number of suppliers from which we source raw materials and components by more than 15% over the last 12 months one of the biggest hurdles. We are nevertheless, currently facing is the upwards inflation pressure for some of our commodities and for transportation cost with Chad and as expected.
Continue to have a negative impact on our product cost.
And we have begun rolling out near term price increases in certain markets.
To preserve our unit level gross margins on.
On the battery front, we have over 3000, <unk> inventory and we expect to continue to receive additional impacts until the end of the year.
Thus, ensuring a smooth transition to our own battery pack production in 2023.
Let me now discuss our U S factory, and our battery plant and our priorities for the foreseeable future.
Like most companies we spend the last few months navigating through the current challenging kind of make environments and have decided to put additional focus on what we will generate revenue in the short term with a goal to accelerate return on investment and accumulate manage our capital resources the concrete actions we're putting.
In place are the following.
We adjusted the planned cadence of our capital spend at the Joliet facility.
Go online get further with projected deliveries and therefore decided to initially focus exclusively on bus production.
<unk> will continue to be manufactured in Canada in the near term, where we have ample capacity to meet near term demand.
As a result.
The installation of some of the equipment and other capital expenditures at the Joliet facility has been pushed beyond 2022.
This includes an equipment aimed at supporting truck production, while further increasing bus capacity towards full scale production specifically.
Reducing the amount of total capex expected to be incurred for the full year and the Juliet plant in 2022 by $35 million.
From $115 million to $80 million.
While the estimated cost to build out the Joliet facility to its full capacity remains at $150 million.
<unk> of the fill buildout will be continuously reassess.
The same line of thought.
Staffing of the Johnson plant is being adjusted to align our focus on short term production needs.
Most of the management and back office employees have been hired and on the manufacturing front, we will hire the number of employees required to begin our bus production ramp up towards the end of 2022.
We will then scaled yet count overtime.
Just on demand for our vehicles.
With respect to the line campus with a view to better leverage our available space and maximize cost efficiency in this environment, a very expensive and the rare square footage renting cost we have decided to use a portion of the innovation center that was initially planned for in general offices.
For warehousing capabilities on the temporary basis, starting early next year.
A portion of the innovation center will still be used as planned for test and certification of our vehicles and batteries.
As well as for vehicle prototype production.
While there are no changes to the expected capex.
Approximately 100 million to be ensured in total in 2022 for the Lion campus.
We will hear again focus on the battery plant.
Which will have a significant impact on our short term revenue and accelerate returns on investment the timing of the full build out of the innovation center will therefore be continuously reassess.
I will now discuss the advancement of each plant in detail, starting with our U S manufacturing plant and Juliet.
Construction work is progressing well during Q2.
We continue to install school bus Assembly stations and manufactured alliance units for the purpose of working stations set up an employee training we.
We expect the installation of school bus production stations to be substantially completed near the end of the year and we remain on track to start the commercial production of buses also by the end of the year.
This will enable us to meet the demand for our electric school buses stemming in part from the $5 billion EPA program.
Let me stress that while our current focus is on ramping up near term production in a capital efficient manner.
Our long term expected annual capacity in Joliet remains unchanged.
At 20000 vehicles per year.
Now I'll turn it over to the line of campus.
During the quarter, we substantially completed the shell of the battery plant building, we expect the <unk> award to be largely completed by the end of Q3 and production of battery packs to begin towards the end of the year.
The innovation Center building.
Foundation work is being completed and Theres still structure is advanced to approximately 90% completion.
In parallel.
Testing of both our battery packs and assembly line are progressing as planned.
We continued to produce additional prototype battery packs at Jr. Automation facility in Troy, Michigan.
Photo pipeline has been in operation. The battery packs are currently undergoing testing and certification and we expect this certification effects factory acceptance production equipment at Jr. Automation facility as well as production of our battery packs at the factory to be completed by the end of this.
This year.
Now turning to orders.
Our appeal book amounts to $590 million consisting.
Consisting of 286 trucks in 2071 buses for a total of 2357 vehicles substantially all of them being conditional on the grant of subsidies and incentives.
Long awaited subsidies.
Which are finally being launched on both sides of the border should accelerate the transition to EV and we believe that this momentum will positively impact our booked on that note. We are pleased to announce that our order book includes the first order for Lion influences.
Our vehicles, we developed in partnership with our members and for which we see great potential.
With respect to electric buses, we are seeing more and more interest from Canadian customers as reflected by recent orders, including several repeat orders during Q2 the.
The Canadians ETF program continues to generate increased interest from large school bus fleet owners as a reminder, under this program. The federal government is dedicating $2 75 billion Canadian dollars to support public Transit and school bus electrification.
Most recently on the truck side, the Canadian Federal government announced the launch of the incentives for medium and heavy duty zero emission vehicles program.
Indicating 547 5 million Canadian dollars over the next four years.
The objective of this program is to promote the adoption of medium and heavy duty zero emission vehicles.
Under this program electric truck buyers can receive up to $150000 in subsidies for electric truck.
Even more interesting is that the funding can be combined with provincial incentives as an example.
Both the federal and provincial incentives, such as <unk> and Nash program.
<unk> six truck is eligible for subsidies of up to $244000, which has a material positive impact on the tcl since launch mainly trucks have benefited from this program and we continue to see increased interest from customers.
In the U S.
The $500 million first phase of the announced $5 billion EP program opened in may translating into Amtrust event, the customer interest and dialogue.
We are confident that the positive impact of this program will materialize on the order book once orders can formally be placed by the operators and school districts. Starting next October as per the program rollout procedures in the meantime, mainland U S customers are putting orders on hold awaiting final grant applications.
As a reminder.
This program will award up to $375000 for zero emission school bus priority districts, while other school districts can receive up to $250000 per school bus.
As further rules of the program infrastructure installation and vehicle delivery must take place no later than October 2024.
We believe that we are ideally positioned to serve eligible customers.
Given our leadership in the industry, our alliance ecosystem, our close relationships with the largest operators in school districts and of course, our upcoming Joliet plant, where we will manufacturer made in America on electric vehicles.
Still in the U S.
We were also pleased to see that the inflation reduction Act is on this path in.
In the next couple of weeks.
This legislation once border.
We will significantly increase federal funding to clean Oems.
And it will represent the single biggest climate investment in U S history.
The act currently includes over $60 billion to increase domestic production of clean energy and transportation technologies.
And $1 billion, specifically for clean heavy duty vehicles.
Including school buses and garbage trucks.
Last on the Alliant energy front.
Our order book consists of 226 charging stations.
Representing a total order value of approximately $3 million.
Our order book has also been impacted by the postponement of commercial production and delivery of some of our models, mostly the <unk> and <unk> models.
This resulted in some deals being canceled due to funding being inspired and and the removal.
Of certain orders from our order book.
Given that the postponement might create uncertainty relating to the payment of subsidies.
That said, we are in dialogue with customers and agencies to find alternative arrangements to be able to preserve those orders.
Let me finish by providing an update on our vehicle rollout.
As we look back into the last few months supply chain challenges with pressure, both on manufacturing and development activities.
We achieved some important milestones this quarter in the development of new models, including the first prototype units of ammonia in a school bus.
The school bus the Lionsgate bucket trucks, and the Lion tractor truck despite.
Despite this important progress supply chain challenges and delays ensured that the test centers.
<unk>, our commercialization timeline, mostly for the land and the <unk> models.
And to a lesser extent or certain other platforms that will be commercialized in the first half of next year. Instead, then by the end of this year.
This is further detail.
In our MD&A.
With respect to the alliance team.
Our head count now amounts to approximately 3900 employees include.
Including more than 300 engineering and R&D professionals.
Recent key hires include seen they've done as vice President truck sales for the U S market and Dominic Beckman as Vice President marketing and communications for the U S as well.
He brings 20 years of sales and operations leadership experience to lion, including at electromechanical and General Motors.
While Dominic joins us from <unk> trucks, Toyota Group company.
Before turning it on to Nicholas I would also like to officially welcome Mr. <unk>.
Sarcoma and Mr. Dave Parker.
Recently joined <unk> Board of directors.
Let Ashok is the operating partner has Janet next 360 capital partner.
She previously held several executive leadership positions at Harley Davidson and price there as for <unk>.
U S Chief Sustainability officer, and Vice President sustainable workplaces at General Motors. He also held several leadership positions at Dell and Intel Corporation.
They both have been appointed to the board as independent directors, and we look forward to working with them.
Cliff will now further discuss our financial performance and our expected spending for the remainder of 2022.
Thank you Mike.
We posted record deliveries and revenues in the history of our company in the second quarter of 2020.
Not only did we post growth as compared to last year, but we also posted sequential growth in deliveries for the third straight quarter.
In Q2, we delivered 90 buses at 15 trucks for a total of 105 vehicles translating into revenues of $29 5 million for the quarter.
Of these unit 91 in Western Canada, and the remaining <unk> in the U S.
This compares to 61 units in Q2, 2021 and to 84 units in Q1 2002.
The average selling price of these vehicles was slightly higher than in Q1, which is mostly a reflection.
Despite setting a new quarterly record this quarter, we believe the number of units delivered though could be significantly below what we can achieve with our current resources and manufacturing ramp up investment.
We posted negative gross margin $3 5 million, reflecting increased fixed manufacturing and storage costs.
The positive impact of increased sales volume was mainly offset by increased manufacturing and inventory management system costs related to the ramp up production capacity for future quarters, and the impact of continuing global supply chain challenges.
Continuing with administrative expenses, they amounted to $11 7 million, including $2 6 million and noncash share based compensation.
If we exclude share based compensation. This represented an increase of $4 million as compared to the $5 2 million in Q2 2021.
At a more modest <unk> 9 million increase as compared to Q1 2000.
The increase mostly it was up some additional expenses in the context of the expansion of lion's head office capability as well as professional fees related to supply chain and strategic project optimization.
Selling expenses amounted to $6 7 million, including viewpoint of $8 million noncash share based compensation.
If we exclude share based compensation. This represented an increase of $2 6 million as compared to the $3 3 million in Q2, 2021, and a $1 $5 million increase as compared to Q1 2020.
The increase compared to last year was primarily due to line expanding at Salesforce in anticipation of the ramp up production capacity and an increase in expenses because of the opening and operations of next year.
During Q2, we recorded a $2 $1 million gain related to the balance sheet removal of a financial viability related to previously acquired dealership right that we had acquired from a private party and for which all payments expired on May seven 2022.
We maintain all dealership rights associated with this acquisition, but we will not incur any related costs in the future.
Now turning to adjusted EBITDA, It was negative $14 4 million for Q2.
Adjusted EBITDA for the quarter was mostly impacted by gross margin.
So a lesser extent by sequential increase in SG&A.
Let me now spend a few minutes on our expected capital spend.
As previously mentioned, we believe that our balance sheet provides us with runway and flexibility as we continue to focus on achieving our growth project and ramping up our production.
We remain very focused on the prudent management of our cash resources and implementing actions to support our growth strategy sell rate return on investment.
This will positively impact our capex.
Firstly for the Joliet facility, we expect to incur a total capex of $80 million in 2022.
$35 million reduction versus the $150 million previously.
As of June 32002, we had incurred capex of approximately $36 million in the plan for 2022, including.
Approximately $22 million during the second quarter.
As Mark mentioned this investment is expected to bring us the commercial production of school buses and Juliet by the end of 2020.
The Lion campus, we continue to expect to incur approximately $100 million of total capex in 2022 of which approximately $39 million has been incurred this year as of June 30.
Again this amount is expected to lead us to production of battery packs by the end of the year.
While the total cost estimates for the full build out of the Joliet facility headline Capex remained unchanged the timing of the full build out of that facility and the related capital spend will be dependent upon prevailing economic conditions, the demand environment for the company's products and the company's growth and liquidity profile.
Depending on our liquidity profile, we expect to further review the cadence of our investments is to take additional measures to optimize our required production capacity in light of projected delivery and to monitor our liquidity.
Let me now turn to our balance sheet and liquidity profile.
Our cash position amounted to $83 million as of June 32012.
We also have access to a committed revolving credit facility of up to $200 million subject to borrowing base, which was estimated to translate into total availability of approximately $75 million as of June .
Lastly, we have access to support from the Canadian Federal and Quebec government.
Of up to approximately $100 million Canadian dollar in connection with the build out of the line.
As of June $33 $7 million was drawn on the provincial level.
We expect to perform our first draw on the federal loan during the third quarter.
As of today, we estimate that approximately $40 million.
The capex to be incurred in 2022 underlying cabinet will be funded through the government support subject to the related claim process and timing.
At the end of the quarter, our debt amounted to approximately $14 million, which includes the first provincial loan drop that I just mentioned.
Despite our current runway and liquidity.
To seize opportunities that may become available to raise additional capital.
This can be performed overtime through the $125 million at the money equity program, which we established late in Q2 and for which no amounts have been raised yet.
Or through other financing transactions.
With that I will pass it back to mark for concluding remarks.
Thanks Nicholas.
Before we open the lines for questions. Let me conclude by stressing that we are pleased with the momentum we built over the past months and we aim to further accelerate our growth in terms of vehicle deliveries and manufacturing vehicle output.
We are focused to accelerate return on investment.
While reducing 2022, capex and protecting liquidity without compromising our long term growth.
The incentives.
I've reached an unprecedented level with the recent announcements in the U S and Canada and as we play an integral role in helping our customers meet their ghd reduction targets and their overall ESG mission, we believe more than ever before.
That we are exceptionally positioned to capture our share of the medium and heavy duty EV market much faster than most of the other Oems.
Hey, everyone.
Operator, we will now open the line for questions I, just wanted to ask you to limit to two.
The number of question to ask to allow other participants to ask a question you kind of of course go back into the queue. If you have any follow up questions.
Maybe you'd like to answer that can you that star one to ask a question today.
Our first question comes from Michael <unk> from D. A Davidson. Please go ahead.
Good morning, and thank you.
I wanted to start off by touching on the battery plant and the strategy for batteries going forward.
You had announced.
Hey, Barry supply agreement with another with an outside provider I think it was last year.
Providers now about to be acquired and its about two.
Is it some other contracts, which presumably would include yours.
Have you ever saw the opening soon which is great.
But other companies that are using that other suppliers have announced that they want us to have a dual source battery strategy.
Maybe discuss.
The acquisition of this third party supplier the Lion and kind of your plan does it makes sense given supply chain to have a very robust multiple battery supplier strategy going forward.
Yes. Good morning, Good morning, Michael This is mark.
Yes, so we feel more than ever before the strategy put in place.
In the last few years is the right one.
We've been talking about vertical integration, we've been talking about cost savings and we feel that everything we'd be doing exactly what needed to get done. So you alluded as agreed.
The agreement.
With the third parties. So as you know this.
This agreement is.
Public.
It is.
It has been publicly disclosed in the last few years. So just a reminder, it's a long term agreement.
We've entered into in 2021.
Five year.
Agreements.
As we were thinking back then.
We are expecting to generate about $234 million.
Revenue for over five years.
And as you probably remember also led to disagreements convenience for the supply of our backup of those batteries for the alliance tractor model.
So this is one thing I just wanted to make sure you know, it's well understood speaking of our battery factory.
Very well.
You, probably remember <unk>, we will have a five gigawatt hour.
Manufacturing capacity. This is this is going very well the first metric.
We will be manufactured this year.
And.
We're talking about battery packs for the trust.
Mostly.
To start with so again no delays we are on.
Absolutely on schedule.
Okay. Okay.
I also wanted to ask about the cadence of production going forward here I know you don't give guidance typically.
We are entering a bit of a tricky point in line with history as the new facilities open and then we have the supply chain issues could you just confirm with US let us know whether you feel like you'll have a little bit better.
Production in Q3 versus Q2, and then Q4 versus Q3.
The trajectory here.
Yes.
If you remember in Q1, we had.
84 deliveries under the client.
This Florida, so obviously, it's going the right way.
There has been some supply chain challenges and those supply chain challenges will remain.
That being said I mean, we are the pace of our manufacturing is getting better and better.
Just sending US earlier. This morning, we have a better rhythm in everything we're doing so in a nutshell I mean supply chain is well everything takes a little bit longer with the suppliers. So what used to take a couple of months is now many many times like we do at like four months.
Months later, when receiving those clients and now is being considered.
The supply and the procurement.
So all in all I mean, it's going well.
Still challenging and.
But we expect that the next quarters, we will keep increasing so you are right we are not providing.
Providing guidance, but we see growth in manufacturing and we see growth in deliveries as well.
Thank you that's great color I'll pass it along.
Thank you Mike.
The next question comes from Craig Irwin of Roth Capital Partners. Please go ahead.
Hi, good morning, Thanks for taking my question.
So.
The notable improvement in gross margin performance this quarter, it's nice with the increased volumes, obviously better conversion of overhead.
Can you maybe help us unpack.
What's the additional expense burden is that you're carrying.
I know you could have made it.
These vehicles.
Without building out your new facilities and if we were to maybe just look at the.
The historical performance, where you have had margins in the 38.
How do you feel about the the.
The Nashville margins on these products, so I guess the variable margins.
Excluding these additional expenses that youre incurring for growth.
Yeah, Hey, Greg next year.
Gross margin was negative $3 5 million.
This quarter.
So.
We are very much impacted by our expenditures towards growth ultimately.
What's really important and I think you're bang on what's what's impacting gross margin is that investment in.
Scaling up our production and ultimately our delivery a good example of this is we're incurring storage and transportation costs for the.
Inventory.
That could be spread across much more.
<unk> right as we're wrapping up and weaker the totality of those costs and so ultimately it's a matter of fixed cost absorption. When you look at the results and isolated in one quarter, where we've taken a lot of comfort of course.
In what what I'd like to call the unit level.
Economics of the unit level margin.
We have a what we believe is a very healthy.
Margin over the bill of material and when we look at with a.
At a production rate that's more reflective.
Certainly increased usage of the capacity of our client.
Feel that it's a model that scales really well.
You will also have picked up in Mark's remarks.
We rolled we started rolling out this quarter, some price increases, which will help as well that's a matter of protecting ourselves and the current inflationary environment.
But.
I won't give specific figures, but ultimately it's all about fixed cost absorption.
For the quarter and looking at long term, just having unit unit level margins that we think scale there.
Excellent. Thank you for that so as a follow up.
We're very clear about the healthy margin over the build materials and Thats, what we would expect if we look sort of at the historic performance.
Are you.
The way you set up the company.
So your major competitor in electric school buses has made.
<unk>.
Fixed price commitments underwater right, they've had let's say, 25% pricing and they still don't have a clear line of sight on making profit on the buses that there that they are selling today.
They have to deliver buses, where they wrap them in dollar bills.
Onboard materials can you just remind us how you price your buses.
And whether or not you see this 25% price increase from your major competitor as an opportunity or if you are likely to be a lot more of a metered in the way you approach things given your long term commitment to customers.
Yes, yes.
It's a good question Craig.
The order book that we have.
On a fixed price basis, so the any price adjustments that we make going forward would be for new orders.
We.
That said we.
When I talk about the unit level economics working well.
It certainly applies to.
The upcoming deliveries and the order book and so yes, we view.
Price increases from competitors certainly is.
And.
Unity for us at the same time, we aim and we are able to we believe be very nimble in how we tackle.
Price increases we have a direct sales force, which is obviously much much easier to roll those through but they would be for post what's in the order book today.
Greg maybe this is mark maybe just one additional comment on Europe . You are to your question I think we are seeing the benefits of the vertical integration we've been doing for all of those years.
We've been talking about this for years and we've been doing it and we've been building the foundation.
For many many years, we see the benefit of what we're doing we believe we can be the lowest cost manufacturer and see what's happening in the market right. Now is proving that we're doing the right thing and also I think the focus on <unk> makes a huge makes a huge difference I mean this is what we're doing we are in the business we're not.
I mean, everything CMG propane diesel E. Like some other companies are doing so when you focus on something.
You usually get better and this is what we are doing and also I think our customers do you see the benefit of the Lions ecosystem. So.
Buying a bus you want to make sure it's going to be delivered on a timely basis. They wanted to make sure they will be getting the charging stations as well at a fair price installed.
At the right location obviously.
At the right time and this is exactly what we can offer so it's not only like buying.
Equally Bonnie.
Lyanne experience and I think it makes a huge difference.
Thank you for that and congratulations on the delivery side.
Traction it's impressive progress.
Thank you Greg.
The next question comes from Rupert <unk> from National Bank Group. Please go ahead.
Yeah.
Hi, good morning, everyone.
With me joining deliveries capex.
With the reduced Capex in Joliet, what are you, giving up in terms of capacity initially and maybe can you talk to us about.
What you expect your production capacity to be at the end of the year and how quickly can you ramp up production.
Yeah. So so yes with respect to Gilenya basically we're focused on.
On delivering our order book and the order book is.
It's very much what we have.
More school buses right now and we have trucks and we are building in the truck.
Pipeline and the charter book, while we do that.
We do as truck capacity in Montreal significant truck capacity Montreal decision we've made.
As to whats coming from Capex and John that to focus on electric school buses meeting all the models.
Electric school buses the type C. This ICD.
The site Aes.
<unk> is one and also the O&M.
Which is the <unk>.
The MFS CV in the showroom the shuttle bus as well so thats basically what <unk> will be doing at the beginning so again to remain very focused and delivered made in America buses.
For our U S customers, so very exciting and we will start.
By the end of this year.
The first and the first of all buses.
<unk> will be manufactured in John that this is great and the line was not so good for the second part of your question was that about the Julian Thanks review them in fracturing capacity with a battery pack.
With the Gilead factories. So if we think about the numbers you've given us for the Quebec production facility historically, you've talked about maybe 800 unit per year capacity.
Youre ramping up to is there an equivalent number how we should be thinking about joliet with the new Capex plan what's the.
How much capacity are you building with the new Capex plan.
Yes sure.
The good news rubric.
There is nothing has changed with respect to the full scale when are we going to be a 2000 20000 units. So it's a mix of trucks and buses, but we want to make sure like where cash conscious we want to make sure also that we're ramping up manufacturing capacity. According to the through the order book So right now the order book, we have in the order book.
We are expecting.
We will not be impacted so there will be no delays in delivering our vehicles because of the because of the capex push that we are doing so we have all the capacity we need.
Julian to manufacture everything so we're not getting into all the specifics of the number of units.
We we deliver or we can deliver but we do have the capacity to deliver.
On the order book that we're expecting.
Okay, great. Thanks, and then on the capital needs I know you talked about this.
Little in your prepared comments. So I'm wondering if you can give a little more color on liquidity.
What we should anticipate as far as debt draw down goes over the next few quarters.
And maybe any plans you may have to access the ATM.
Yes.
Yes, I'll take this one Rupert.
As you saw the.
Compared with you heard rather in the prepared remarks.
We're taking action.
Thats focused on liquidity of course that includes the reduction in the <unk> to Capex that we just talked about and the.
Obviously, the same mindset will apply going forward I E to match.
And with expected demand.
And where we get sort of an immediate return if you will or near term returns.
In terms of liquidity profile with continued provides us with flexibility we have the $83 million of cash on hand as of today we.
We have a committed $200 million.
Walgreens facility that its borrowing base.
And that does today.
$75 million of that would be issued could be volatile.
Right away.
The figure that we expect will continue to increase over time.
And then in terms of the government loans recall, we had the $80 million government loans for the project here in connection with the campus.
And we expect that as the spend that we're going to do this year $40 million of that will be.
Unlocked if you will subject to the obviously the process and the timing to that.
That money.
With all that said and even with that flexibility with explaining this morning that we'd look to seize opportunities to raise additional capital. This can be done through the $125 million ATM.
We put in place and for which which remains untapped as of today and ultimately the timing and the quantum.
Any raise will be dependent on market conditions and the opportunities, we see and that's really how we're thinking about it as of today.
Excellent thanks for the color.
Yes.
Thank you.
The next question comes from Michael Glen with Raymond James Michael. Please go ahead.
Hey, just a couple of questions on the on the truck program in Canada does that program have a made in Canada.
Stipulation within it.
Good morning, Michael No it doesn't.
Yes.
Okay.
And then just in terms of the.
The capital needs can you indicate what your working capital is.
As expected to look like through the back half of the year.
Not in great detail, Michael but when you think about it we're going to continue we plan to continue to.
The ramp up obviously.
Our production and our deliveries that's the objective.
And.
We want to make sure that we're well stocked for batteries.
We plan to continue to invest in working capital in the coming quarters.
Okay, and the inventory investment that you've been making so far year to date, we should expect that to continue around the same levels.
Well, yes, given that we're we want to make sure we're well stocked in batteries and the current supply chain environment part of this strategy.
Very well in the enterprise.
Yes, we do when I speak of the working capital it's mostly from.
Inventory standpoint.
That we expect to use cash flow.
Okay. Thank you.
Thank you Michael Thank you.
As a reminder, that star one on your telephone keypad to ask a question.
Our next question comes from Mark Neville from traders Mark. Please go ahead.
Right.
Hey, good morning.
Good morning, guys.
Good morning, So just first on the <unk>.
Juliet.
In terms of the equipment that you deferred is there is there.
Certain time we.
We will need to make a decision on whether or not you're going to accept.
That equipment.
Yes.
We are.
Basically this is with respect to the trunk.
Mostly the truck equipment market. So so we have.
We have a lot of time in front of us so relationship.
With our suppliers.
It's great, but yes, there is a timeline at which we need to make decisions at some point, obviously, if we want those equipment to be too.
<unk> to be installed and Jonathan.
Okay and is that sort.
Near term or is it 2023, I'm just trying to get a sense for what sort of.
Something like that would need to be well.
Yes, we're good to adapt I mean with the increase in the order book.
So right now as I was saying earlier I mean, we do have a lot of capacity in.
And the Montreal country for trucks and while the goal is to install those truck equipment I assume thats needed in.
And Johnny So, we're pretty well prepared and we have.
Truck experts as well to take care of that but we just want to make sure that we are following the basically even though the ramp up of the <unk>.
Order book, but yes, it could be done on a near term basis, yes.
Okay understood.
And just in terms of the lion campuses or to make sure I'm understanding this correctly.
So youre still going sort of full steam ahead on the battery assembly capacity.
It's not really clear sort of what youre, referring in terms of the full build out.
Yes.
Clarify whats all outlets.
Sure Mark.
Two buildings.
At the lung cancer is the first one is the battery factory. The battery factory is key and everything we're doing part of our vertical.
Vertical integration strategy. This is where we are saving costs, we're controlling it under the old battery technology. So this is amazing.
We've made the decision years ago to do that because there is no way, we will be able to manufacture those toward the end of the year. We will not have made that decision years ago. So every time, we are going full steam into this.
First batteries before the end of the year. So this is amazing so basically what were pushing out a little bit with respect to the innovation center. So the innovation Center you probably remember this is Warner.
Sickly.
For our engineering resources, so right now we have mainly.
<unk> for the engineering resources and a lot of them are working concerning your own. So it's really the place where all of them are almost all of them will be we'll be together, we do have a tech center as well and we do as a trend.
Where we can test our vehicles, so basically the track.
Is there I mean.
It's all hours so it doesn't change anything with respect to the testing.
We will be doing we will still be doing that so basically all of the testing. It's three we will also be building the prototypes in displaced as it was planned. So basically you know everything that will we will basically again.
A return on investment on the short term medium term basis, we're still doing it but we've decided basically to use.
Generating offices.
For awareness.
For warehouse capacity I mean, right now the square footage everywhere is going to to the roof. As you probably know and it is very close to our operations. So we decided on a short term basis to use it as a as a warehouse.
For warehouse capacity. So that's really a change we're doing and obviously, we are able to push some.
Some capex because of them and just capex was mostly.
Little bit Dino for some equipment, but mostly for the building of the engineering offices.
Okay understood and then maybe just one last question is just predict.
In terms of the revolver.
Just curious.
My understanding was that you had full access to them.
In terms of the incremental $125 million, just how do you get access to that.
It really is.
Sure.
What I would say a traditional <unk>.
Boeing based ABL facility, so it's a matter of margining.
On the receivables and the inventory and so how do we get access to it is as we continue to scale up to have more receivables have more inventory.
Yes, the way it works.
Okay, but was there a change or was it always.
It was at all.
Okay.
It's always been.
Our borrowing base, yet as mentioned that assets.
Yes.
Yeah, Okay alright. Thanks.
Thank you.
We have no further questions. So thanks to the management team for any concluding remarks.
Well, thanks, everyone for joining us today, we really look forward to continuing the discussion with you and feel free to contact us for any follow up especially layouts.
You have like that.
Thank you this concludes today's.
This concludes today's call. Thank you very much for your attendance you may now disconnect your lines.