The Lion Electric Company Q1 2023 Earnings Call
Good morning, ladies and gentlemen, and a warm welcome to the line.
First quarter 2000, Twenty's, Great result conference call.
At this time all participants are in listen only mode. A brief question no question will follow the formal.
Presentation as a reminder, this conference call is being <unk>.
Got it.
I would now like to turn the conference call iPhone.
Mr. Paul <unk>.
Vice President of Investor Relations and sustainable development.
Please go ahead Mitch.
Good morning, everyone. Welcome to Alliance first quarter 2023, <unk> <unk>. So there is a question of your colleagues did exactly that.
Thank you.
Today, I'm here with Mike <unk>, our CEO funder, and Nicola <unk>, our EVP and CFO .
Please note that our discussion may include estimates and other forward looking information and that our actual results could differ materially from those implied in any such statements.
We invite you to review the cautionary language in this morning's press release and in our MD&A, which contains important information regarding various factors assumptions and risks that could impact our actual results.
That let me turn it over to Mark to begin Mark.
Thank you Lisa and.
Good morning, everyone.
We are pleased to share with you today, our Q1 results and can report that line is showing great progress.
A strong foundation to execute our plan.
There are three main item is we won't be talking about today number one.
We continued our sequential growth in vehicle production and deliveries announcing today, our sixth consecutive quarter of delivery growth.
Number two.
Manufacturing operations at both our Joliet vehicle plant and our battery factory are now underway and will gradually ramp up over the course of the year and number three.
With production ramping up in all three of our plants. We are focused on achieving profitability and are putting the right elements in place to achieve this key objective.
We will now provide color on each of these items.
Before we open the line for questions.
Let's begin with deliveries in the orders.
During the quarter.
We delivered 220 vehicles.
This is the sixth quarter in a row of sequential growth and vehicle deliveries.
We delivered more vehicles in Q1.
And then we did in all of fiscal 2021, the year in which we became a public company. We now have more than 1100 vehicles on the road in real life operating conditions.
Our purchase order book currently stands at 2565 vehicles.
For a total order value of $625 million. It includes orders for 2270 Electric school buses.
We secured 289 orders in the EPA Clean School bus program representing.
Representing a total order value of approximately $105 million.
And we are working to obtain additional orders from award these web paint expansions from EPA.
Nicholas will provide further details regarding this program, including the upfront payments that have been made and are expected to be made by the EPA. I'm also pleased to announce that the EPA recently released guidelines for the second run of the Clean School bus program, which I will discuss in a moment.
Our appeal book also includes orders for 295 electric trucks, and our lines and energy Peel book amounts to approximately $6 million for charging infrastructure and related services.
We realize that the electric truck market is still in its early stage, but the recent unveiling of our alliance <unk> chalk that firsthand model with our own lion batteries at the upcoming commercialization of our <unk> tractor later this year should position <unk> very well in the truck industry.
Coming back to the EPA program in addition to the $920 million.
<unk> was awarded in round one.
<unk> recently announced that it is awarding $400 million in competitive grant funding for the replacement of the existing school buses with clean and zero emission school buses for the second loan fund.
Funding is expected to be up to $395000 per vehicle inclusive of charging infrastructure and all applications must be submitted by August 22nd of this year.
Besides the EPA program.
Various levels of government continues to implement more stringent GHT emission targets legislation and subsidy programs to accelerate TV adoption, both for zero emission buses and medium and heavy duty trucks.
And the U S federal level.
The EPA recently announced new <unk> standards for heavy duty vehicles.
When finalized.
These rules will lead to 50% of buses, including school buses and 25% of long haul tractor trailers to be electric by 2032.
At the state level.
Important in laws and regulations are being adopted that will continue to accelerate the shift to the electrification of its transportation sector for example.
Carb recently adopted.
Advanced clean fleets rule, which is expected to add an unprecedented impact on zeb adoption in California on.
Under this new rule, all trucks, performing drayage operations will need to register with Carb and starting next year only zero emission vehicles can be registered.
Federal fleets and high priority fleets will either need to purchase only.
Starting in 2024 or alternatively meet.
Meet zeb targets as a proportion of total fleet starting in 2025.
In the case of box trucks in school buses.
Disproportion of VEB is set to 10% of fleet in 2025, 25% in 2028 and growing to 100% by 2035.
In combination with the advanced clean track regulation Carb expects the ACF removal to result in over 500000 medium and heavy duty zero emission vehicles in California in 2035, and close to $1 7 million by 2050.
I've seen in the past.
We expect that many other states will follow cards leadership and adopt similar regulation.
In addition to regulation, we continue to see great momentum in subsidies and incentives programs with billions of dollars available across the U S and Canada to support fleet electrification.
With our product lineup focused on ever been the range and our growing production capacity.
We believe we are ideally positioned to benefit from all of these programs and we will continue to closely monitor them on behalf of customers.
Which takes me to an update on the Joliet factory in the battery plant.
During the first quarter.
We focused on the ramp up of electric school bus production in Joliet as we continued to install school bus working stations equipment with a targeted manufacturing capacity of 2500 buses per year by the end of the year.
This allowed us to continue to manufacture alliance units for customer deliveries also.
We should proceed with the official Grand opening of our Joliet plant during the summer.
As for our battery plant.
Did the Grand opening and unlisted analyst for an onsite meeting a few weeks ago.
We installed additional equipment as we continue to ramp up the production of Lion battery packs with an objective of bringing our production capacity to one seven gigawatt hour on an annual basis by the end of the year.
This will be enough to power approximately 5000 of our vehicles and a mix of school buses and trucks.
Certification of the first of our two battery pack models is expected in Q2 of this year, followed by a gradual ramp up of production during the rest of the year.
We will gradually integrate our lion battery systems into our different vehicle models, starting with alliance <unk> diesel buses and alliance five trucks.
Also we currently have over 3800, BMW battery packs in inventory to perform a smooth transition to our own batteries throughout the year.
Now a few words on our St Your own plant.
The operational improvements made in the prior years.
Owed us to continue to increase our production cadence no major capex is required to achieve our production capacity of 2500 vehicles at scale.
<unk> of 1000 school buses and 1500 trucks.
Let me now address our focus on profitability.
In parallel to ramping up operations at our three plants, we are focused on our path to achieving profitability.
The unit level economics are healthy and alliance model works well at scale.
As we produce and sell more vehicles and expand on our vertical integration strategy such as the lion batteries at that where one battery plant.
We are confident that the lion model should be.
Generates attractive margins.
The capex investments to bring our total capacity to 5000 vehicles, including batteries will be completed by the end of this year, a very significant milestone for alliance.
We have also put in place measures to contain costs at all levels of the company to minimize as much as possible the timeline to profitability.
Our entire organization is aligned towards achieving this goal.
Nicolas will now further discuss our financial performance for Q1.
Nicolas.
Thank you Mark I will start with our financial highlights for the first quarter I will then comment on Q1, Capex and conclude with our liquidity position.
During the quarter, we delivered 220 vehicle consisting of 207, Boston at <unk>, 13 trucks, which translated into revenue of $54 7 million.
Compared to $22 6 million in Q1, 2020 to a 142% year over year growth in revenue.
215 of the vehicles delivered in Q1, we delivered.
And in the U S.
This was our sixth consecutive quarter of sequential growth in vehicle deliveries.
We posted gross margin of negative 4%.
Significant improvement.
The 10% margin in Q4 of 2022.
If we remove the impact of noncash share based compensation SG&A amounted to $17 5 million in Q1 as compared to $12 6 million in the same period last year.
The increase was mainly due to an increase in expenses as we expand our head office and general corporate capability and sales force in anticipation of the ramp up our production capacity.
Adjusted EBITDA was negative $14 5 million for Q1 as compared to negative $11 3 million for the same period last year.
During the quarter Capex amounted to $23 1 million, including $6 million incurred for the Joliet plant at.
$14 million incurred for the line Kevin.
As previously signaled.
2023, Capex for the Joliet plant underlying campus are expected to amount to $65 million.
A $45 million for the line in Canada, and $20 million of the Joliet vehicle plant.
We expect Capex to drastically decreased next year as we expect to have by year end, a combined production capacity of 5000 vehicles at our Canadian and U S vehicle plant and a production capacity of one seven gigawatt hour.
At our battery pack enough to power approximately 5000 vehicle and a mix of school buses and trucks.
Any future investments towards further capacity expansion will only take place when justified by the order book and importantly, our liquidity profile.
As a reminder, we expect that approximately 55% or approximately $25 million of the $45 million and capital expenditures to be incurred in 2023 for the Lion cabinet will be financed through the federal and provincial loan secured for such purpose.
Okay.
Additionally, the intangible asset, which mostly consistent R&D amounted to approximately $16 5 million.
Compared to $15 million last year.
Let me now say a few words on our liquidity and capital resources.
In Q1 gross proceeds from the exercise of the over allotment option for the December 2022 unit offering generated $7 $5 million.
We also completed a sale leaseback transaction for the battery plant building their bell raising gross proceeds of approximately $21 million.
We raised $4 $6 million under our ATM program.
$6 3 million on our government loans.
Yeah.
As of the end of Q1, we had an immediate liquidity position of $57 million.
And our cash position of $36 million.
And $21 million availability on our ABL credit facility.
We were also a $10 million on the government loans for capital expenditures incurred after March 31, 2023 underlying cabinet.
Also.
209 purchase orders were obtained in connection with the EPA Clean School bus program.
Directly through vouchers filed by line and to a lesser extent to application made by free agents, which were converted to purchase orders of line.
These purchase orders represent a total value of $105 million.
For approximately a third of these orders clients have requested an extension to the EPA, mainly due to challenges remain.
Okay.
Construction work.
As Mark mentioned, we are also working to obtain additional orders from awardee, we have obtained extension from the EPA.
Upfront payments I mean, EPA program have already covered with over $10 million haven't been seen from the EPA since the end of the quarter.
As applications with respect to other orders are processed by the EPA. We expect to also be able to receive other upfront payments from the EPA.
Lastly, at the end of the quarter capacity of approximately $90 million for maintenance for issuance.
Yes.
To conclude I will reiterate that we will continue to closely monitor market conditions, and our liquidity and capital requirements and resources.
We're also continuing to explore and evaluate different financing opportunities with a view to raise additional capital and strengthening our financial position in the upcoming months.
With that I will pass it back to mark for concluding remarks.
Thanks Nicholas before.
Before we open the line for questions.
Let me conclude by saying that we are pleased with our Q1 performance and we expect this gradual growth in orders sales and production to continue.
We will keep building on this momentum and on our objective to achieve profitability.
You for your time this morning.
Operator, we will now open the line for questions.
I just want to ask you to limit to the.
The number of questions.
To allow other participants to ask that question.
Of course go back into queue. If you have any follow up questions.
Thank you if you'd like to ask a question. Please press star followed by one on your telephone keypad.
If you would like to withdraw your question. Please press <unk>.
As a reminder, questions are limited to two questions only.
Still have a question.
We ask you to kindly make join me Keith.
Our last question comes from the line, Chris <unk> of B Riley. Your line is now open. Please go ahead.
Yes.
Thanks for taking my questions here.
Maybe you could just kind of.
Quantify how many extensions you think are out there for the first round of the EPA.
Agents that Youre looking at.
Potential solutions.
Maybe just on the EPA strategy for the second.
How do you think the bundling of the ball and charging infrastructure.
Do you think pricing will become more of a factor here, where customers will be looking to open up additional funds for charging infrastructure.
Okay, great. Thank you Oswald I'll take this one so in terms of.
The broader.
Extensions as part of the EPA program, it's something we're in the process.
Trying to find out.
We believe it could be a significant number that are still out there for <unk>, but don't have all the facts right now in our case in the case of the clients that we work with we're talking about a third of the.
The orders are a third of the clients that requested an extension.
Recall that in total we're talking about close to 2400.
Unit vouchers for electric buses that were awarded so it's something that.
That we're working on right now in terms of the second round, but I'd say the second round is $395000.
Total assets for both the vehicle and the charging infrastructure.
Essentially the same amount, but it's not as prescribed meaning in the first round. It was 375 for the button in 'twenty for the charging infrastructure now theres, a little bit more flexibility in terms of allocating the amount.
Also say that it's a completely different program in the first round, we were talking about <unk>.
Our rebate right, where it was essentially.
While the subsidy to purchase the vehicle it.
It was targeting a really broad audience there were over 400 awardee as part of the program.
And the word cap.
Applicant was capped at 25 units Max in the second round, it's a competitive grant process.
A pretty detailed scoring system in there.
And there is both minimums and Maximums for school districts larger school districts, we're talking about minimum 15 maximum of 50 units and for the third party applicants that have the aggregate at least for school boards, we're talking about a minimum of 25 and a maximum of 100. There is also a big focus on <unk>.
Emerging third party funds as part of this overall.
Should also specify that the EPA indicated that they expect to.
The award of 25 to 50 applications as part of this competitive grant process.
It's a more complex application, but I'd say its more aligned with what we've done in the past in terms of data.
Got it.
Hopeful maybe on.
On the path to profitability, we saw some progress.
And gross margins in the quarter with some additional volumes can you walk through whether.
Yes, we should expect the cadence of fixed costs over the next couple of quarters to come on as you ramp <unk>.
Juliet.
Or whether we could expect continued steady improvements there with some of the additional volume.
Yes, I'd say on that look we think the model works well at scale, it's something we've said in the past.
Certainly to be the case.
There is a.
Sure.
A potential improve.
Improvements related to the unit mix as we.
To deliver more units in the U S. As we have more of.
We have more of those price increases that come in in the deliveries.
We think volume will help at the on the margin side of things at the same time I think you identified correctly there can be some volatility related.
The timing of the cost of the Joliet facility as well as the battery plant but were as.
As Mark mentioned that is clearly a focus for us to continue to improve on the margin side of things.
Okay. That's helpful. Thanks, John .
Thank you.
Thank you. Our next question comes from the line of Mike.
D. A Davidson your line is now open. Please go ahead.
Yeah.
Okay. Good morning, and thanks for taking my question.
Just a follow up.
Question real quick about your profitability comments there Nick.
Maybe a bit maybe a better way I can ask some more.
How far do you think you are how many quarters, where do you think you are from being breakeven on a gross margin level.
I'll just start there.
Yes.
Good morning, Mike.
Well we are.
Profitability is really a key objective for all of us at.
And then the way to get there as well the first step is really a positive gross margin and then the positive EBITDA and the ultimate goal is the free cash flow.
Free cash flow positive. So we feel that as Nick was saying earlier, our model scales very well and one of the reason for that is because the models. We are building our purpose built.
For electric so with respect to with respect to volume.
We don't need a very significant volume to achieve this this this profitability. So this would be and we spoke about the material margins in the past.
We are very healthy so let's say that this this model as we have right now.
Where does very well in terms of your own and also that we were ramping up in Joliet. This is going very well I think we're very focused on on school buses and getting to this first phase of.
2500 school buses of manufacturing capacity, we feel pretty wise and we feel that right now the manufacturing capacity ramp up is very well aligned with the ramping up that we're expecting also on the purchase order site.
That's great and perhaps my other question also a follow up on your comment there Mark I guess I would like to know a little bit about the cadence of the ramp up from here.
It sounds like you've got increases in Q2, and probably Q3 Q4 sequentially. So im kind of curious is there a quarter, where there's a large step change in that.
Russian volumes are there because youre.
Bring up more at Joliet, we've got a large credit source.
At some point.
This year.
Sense as to how how steep that.
That might be over the next couple of quarters would be appreciate it.
Yes.
No. Thank you, Mike we feel that it's going to be gradual.
This quarter was the sixth consecutive quarter of growth and for US, it's really growing from one quarter to the other that's the that's the name of the game.
We have a very strong foundation and we will keep building like that so I don't believe in a switch that you or Jeff turning on and off and then you can increase by thousands of units.
In my mind. This is totally unrealistic. So you can expect this growth.
To keep going in Q2, and then Q3 into Q4 as well. This is exactly what we're expecting and this is very well aligned also with our customer request.
We need to make sure we're delivering electric vehicles.
Is is something that we need to plan ahead. So you need to plan the delivery of the vehicle at the same time that you are planning the charging infrastructure installation as as well. So all of this is very well aligned with the lion ecosystem that we have.
Okay I appreciate the color.
Leave it there thank you.
Thank you Mike.
Thank you.
Our next question comes from the line of birds Meera of National Bank. Your line is now open. Please go ahead.
Hi, Good morning, everyone first just just to follow up on that last question.
I think you had five deliveries in the U S. In Q1, how many of those were produced in Joliet.
And given that you plan to be at a capacity of 2500 by the end of this year.
Is that a number that you think you.
Youll physically have the capability to do by the end of this year.
Okay.
Hey, good morning, Rupert with respect to the manufacturing capacity of 2500 units.
The capex by the end of this year as.
We will as being fully invested.
And.
It's after that it's the ramp up of the labor that we need to do so when we are saying we have the manufacturing capacity up to 2500 units. We do have the equipment to manufacture at 2500 units and we will make sure that we align.
The labor with the forecasted delivery. So we're not saying that we will get that pay us before the end of the year, but we will be ready.
To be at that pace.
Yes.
The order book.
Is is there and it's.
Obviously, the customers are requesting those buses in this industry at this time as well so I think I think we need to.
To be sure on to be aligned on this thing.
Yes.
Yes.
But I will just add.
Still at moderate.
Modest volumes in Q1, as we're ramping up.
Not providing the split the exact split of the units but.
It's.
And wrap up phase and as Mark mentioned, we expect it to continue to ramp up over the year.
Okay, Great and can you remind us in your order book how many.
Sales.
Orders are available for sale this year.
And in Canada, and the U S.
Yes, the order book the composition. It goes all the way up to 2026, but what we've said in our disclosures that.
The bulk of or the product that <unk> of that is delivered from now to the end of 2025.
Obviously the.
Substantially all of the orders are related to some subsidy programs some of which include the.
Is that ETF in fact, a big portion of that ETF in some of these applications are still pending approval.
So we're we're working to get those approvals, but I don't have the specific breakdown I gave you for this year.
Okay, Great, Yeah, I guess I'd better to get there. Thank you.
Thank you.
Thank you.
Question comes from the line.
Craig Irwin Roth and K Ann Your line is now open. Please go ahead.
Good morning, and thank you for taking my questions.
So I wanted to see if we could maybe dive into.
Gross margins a little bit more from a from a qualitative perspective.
So when we look at the big components in gross margins materials labor and overhead can you comment whether or not you are still seeing cost escalation on materials.
If youre getting more efficiency on your purchases.
Okay.
That's something that has generally stabilized and.
<unk> content per bus.
It's possible or bus and truck, that's possibly coming down the way one would expect that your volumes.
Then on the labor.
Your comment about the number of hours per client envelope bus.
And you're right.
Proportionate.
Labor versus where you would be.
Obviously hired a head to head.
Rotate.
A ramp that we expect to go on for a couple of year.
And to really train the workforce ideally.
But if you could if you could talk maybe the.
The man hour approximate that.
That would be helpful.
And then the overhead.
If we look at the.
Ed.
Adjusted.
The facility.
Okay.
Would it be fair to assume that those profitably with mark.
Do.
Do we fully.
Does the P&L yet.
Overhead will be carrying for both the Joliet facility in the future.
Yes, Hi, Greg Mark here.
Thanks for the question.
Let me just echo qualitatively.
Those items in terms of material I'd say the mix in terms of.
Cost pressure, we're still seeing some inflationary pressure, but at the same time, we are starting not only to see some of that but we're starting to see that we have a good.
The sites on.
The benefits of our cost out program that we've been talking about for a while so I would say.
There is some some good opportunities for us to bring the cost down and it's something that we need to achieve and we're working out through the quarters, but it's becoming more and more tangible.
And the dialogue with suppliers.
It was about containing costs only or containment cost increases in the past, it's become more and more about going back to the previous prices and reducing.
Reducing the cost in some instances.
Some more.
Clinical.
Technological items.
<unk> a more long term.
A couple of years type thing significant.
Our cost out opportunity, but that will take some time, but I'd say overall on a material certainly theres been a change in the dialogue and the relationships, where we see some some important opportunities.
To bring costs down in a number of places so there's certainly room there in terms of labor what I'd say is right now our workforce.
To bring costs down in a number of places so there's certainly room there in terms of labor what I'd say is right now our workforce.
Is it.
Yes.
Not where we want it to be in terms of productivity at the hours per vehicle one of the principal reasons for that is all the development activities that we have in the <unk>.
The new platform that we're launching in the.
The new production line that that we're ramping up and so certainly not as important cost wise is the limit.
Bill of material, but there are some opportunities there, but we expect that this will.
Improve really once we've gradually and once we've launched the new platforms that we're bringing to market. This year and then finally on the overhead.
Looked at.
It's probably the biggest issue in terms of weighing on gross margin, it's fixed overhead <unk> overhead cost absorption.
I would say that we have a cost base today that is reflective of much more than just our St. Jerome plant.
And we will absorb that over more volume.
As we scale up both Sandro and.
Joliet plant.
They're likely to be some increases in the overhead as we ramp up joliet, but not.
Anywhere close to proportional to volume, meaning we already incurred.
Cost and great proportion.
And Sandra wrong.
To manage it to operate.
For the two production plants.
Excellent. Thank you for that.
No.
Okay.
My next question is really the.
The velocity of sales into the North American market.
You've done an excellent job capturing voucher support.
Customers in the school districts out there.
Two.
Procure vouchers from 88 programs.
Can you really talk about the tempo.
A potential build freeze into north American market and should.
Should we expect.
Back end loaded.
Outfitters.
You really see those deliveries closer to sort of.
Mid 2024.
Or.
It's possible that we see.
The uptick on the rates.
And.
Is that facilitated by some of the heavy pricing we've seen from other Oems in the market.
Look in terms of.
The EPA units, which is I think what you were referring to.
And correct me if thats the case.
Case, but the deliveries can go all the way to October 2024 I.
I want to make it very clear that our objective is to deliver those units as soon as clients are ready to take them and we think we can.
We can deliver them well before that in general our clients are looking to get those units.
The first phase of the EPA was about getting purchase orders and we are still working at that as I mentioned I think there is an opportunity to do more but really what's going to be most important is going to be the cadence of deliveries and the quality of the product that's delivered.
And so it's our objective to do much.
Much sooner than 2024.
Same time, we use the word gradual quite a lot and expect that the cadence of those deliveries will be gradual but we do I mean, we had very few units delivered on the U S. The purchase order book has proportionately become more U S driven than it was in the past few quarters and it's our intention for that mix.
To change over time all of that.
<unk> quarters.
Hey, Greg What's your question on UK versus where you were alluding to trucks is one.
It would be useful to know on for John spent on school bus.
That's what everyone is watching right now.
My next question is going to be on track.
Sure.
Okay.
And you talked you Craig I think there was another part to your question on pricing look I mean.
Yes, I would say, we think we can be very competitive when when we need to.
Digital apply it can apply well to that second round of the EPA, which talks about leveraging sort of third party funding essentially we feel the EPA is asking for a group to do more with less and we can do well we've done competitively quite well in the Canadian market as well.
It probably hasn't been as much of a factor in the in the first round.
Yes, so we expect that to.
Become an increasing focus and we think we're well prepared for that.
Thank you and if I could ask the truck question that I have so please go ahead with the lines.
The line six in the line or both are both shipping and in customers' hands.
That's usually a pretty good thing for the potential.
Potential orders.
And.
Real world experience tends to.
No.
The quality of those customer interactions.
Could you maybe give us some color around that and then.
Great.
It seems that that's for sure.
Could have outsize.
Stimulus funding.
Great.
The less attractive work.
But as far as not in your frame both class five and class eight planned for this year could.
Could you talk about flexibility to address.
Substantial support for class Board out there.
We would consider.
Thank you Kurt Thank you for taking the question.
Thank you Craig it's not for us.
Our clients are now.
Craig we feel that class five.
Which is a medium duty.
Where we have many options for the customers.
We'll cover a lot of the a lot of the market for most of those.
Those operators, what really matters is that we can drive those trucks.
Without.
These special driver's license and they can do a lot with this class five and it's also the payload that matters and you can have a lot of payload with this class. This classified so we've decided to go with the.
Five point now class four I mean, you are getting very close to the market.
Lighter chalk.
Where it's really crowded.
Right now and this is a market that we've decided to stay away from and we feel that the medium duty and heavy duty is really a market, where there's a lot of potential and very few Oems.
Apps are proposing purpose built trucks right now so we're one of the the only Oems out there.
That are proposing to our customers purpose built electric trucks, so huge market on classified Youre, absolutely right, we delivered class six and class eight and for many of those operators.
Our looking at electrifying the old fleet or most of the fleet and.
It's almost let's say pilots where them right now.
But.
This is this is going well I mean discussions with with the truck operators I mean, we really see it.
<unk> increased interest and Craig you probably saw.
As well the ECS that we were talking about earlier, we feel this is a game changer.
New regulation in California, and when we're looking at the past.
Like with the <unk>.
Sort of states and Canadian provinces, we will follow what California is doing and with ECS. It's it's a major game game changer, where the starting in 2024, so it's really tomorrow I mean, it's.
Early next year.
Operators will have to start buying electric electric trucks in.
In California, we were expecting this to happen and and this is this is finally happening and we feel this is a real game changer. So when youre looking at the product lineup, we have classified that as we are.
We unveiled last week and the class a tractor that we will be on dealing by the end of the year as well with the classics and the class eight straight body as well we have a full lineup of products for those operators and we feel it's very promising.
Thank you if I could just squeeze one in.
No.
Can you remind us approximate number of customers that are operating your line fixture line eight trucks and the total size of the fleet.
That's rolling right now.
Yes, we have.
Sure.
About 125 to 160 trucks out there with with clients I mean, the bulk of clients that purchased that are less than 10 units.
Thank you very much congratulations on the progress here.
Q.
Thank you Craig.
Thank you our next one.
Comes from the line of Thomas Chen of BMO capital markets. Your line is now live Okay go ahead.
Yes.
Okay, great. Thank you good morning.
First question I had is related to the clean plus program.
I'm just wondering 98.
Purchase orders that a third are requesting.
Some delay.
With the EPA.
Like what length of delay.
We're talking about here.
Let them out there.
Yes.
Say, a third of clients I'm really referring to the number of units.
<unk>.
And the delays go all the way to the latest EPA allowed us August 15th.
And some of the clients have.
They don't all go to August 15th and those delays were largely related to having the appropriate.
Contracts for the installation of charging infrastructure.
Just a matter of.
Are figuring that out and so I'd say the extension go anywhere from.
And have made all the way to the August .
Yes.
Got it okay.
And then my last question is apologies if I missed this earlier.
But were any of the bus deliveries in this quarter.
What you've been awarded so far from the first round and can you talk a little bit about how you expect.
He was very strong holdover director to here as it relates particular too.
The Queen that program. Thank you.
It really just.
Very small number of units from the EPA program.
So it hasnt kicked in materially.
What you May have heard me answer.
Before around the timing of the programs the program allows for delivery and all other requirements around that.
Scrapping of selling a diesel bus and whatnot to be done by October of 2024.
We're working with clients to time those deliveries, but our objective is to.
To deliver faster than the deadline I mean.
Mentioned in one of the prior questions. The first the first phase of this was about getting the purchase orders for the second phase about timely deliveries of quality vehicles at the same time client has to be ready to take on the vehicle and what this would be a positive experience, but the bottom line as well.
We're going to look to do these deliveries.
As rapidly as possible.
Got it okay. Thank you.
Thank you Danny.
Okay.
Thank you. Our next question comes from the line of Stan.
No.
Barclays. Your line is now open. Please go ahead.
Hi, Good morning, Thank you and apologies if I missed this earlier I jumped.
Jumped on late but just wanted to ask.
On the Capex side I think.
Recently, the Canadian government.
Budget is allowing for some traditional tax credits for clean Tech manufacturing.
Which would be.
A pretty nice offset on the Capex piece. So maybe you can just talk about if there's any further clarity here and what offsets you might have on capex.
Yeah, Hey, Dan.
Yes, so in the federal budget, there is theres discussion of a.
On the investment tax credit I believe a 30% for.
For investments related to EV manufacturing battery manufacturing and the version that we have seen that.
It refers to investments that take place after <unk>.
Generally refers 2024, so it's something as you would imagine we are very much looking into.
At the very least it could.
It could be an option for future expansion at the same time one thing we've made very clear. This morning is that post our 2023 Capex plan. Our intention is to drastically reduce capex and we don't plan to build capacity expansion until number one is justified by the order book and number two importantly that it's at.
Works with our liquidity situation and so it's something we're looking into right now.
We would want this to apply of course, our current investments, but they're not.
Sam that we're counting on just given the timing restrictions I just talked about.
Got it thank you and then.
Again apologies.
If you.
If you mentioned it earlier, but if you could just address within the order book.
Obviously buses buses are up but trucks are down. So maybe you could just talk about some of the movements within the order book on the truck side.
Yes, good morning, good morning, Dan.
Yes.
Slower than expected to.
To be honest, but at the same time, what we're seeing right now is very exciting we.
We have trucks out there we have.
Our customers and we do have a full lineup.
Purpose built.
Roxanne with Dion dealing last week of the alliance side, we see we see increased.
Interest.
And we feel it is going to be exactly the same thing with the <unk> tractor as well a lot of the market is expecting the line they track via truck to be to be to be launched before the <unk>.
At the end of the year. So we feel the timing is.
Finally, working for US right now and if you remember our it's worth you know on the school bus side. It took about five six years to really take off.
With the.
The supply chain crisis in the Covid and I'll describe this within the last few years.
We feel that this this period is.
Is starting now and.
We think this is exciting and I was referring to the the Acs.
Earlier, and as I was telling Craig I mean, this is really a game changer in our in our opinion. So there is some subsidies.
There is some subsidies on the USA theres a lot of subsidies on the Canadian side.
And now we're seeing this new regulation.
Taking up as well and this is great and this is really going to help us I mean only in California.
Carbon is saying that the ACS group, we are expecting to have over 500000 Z Evs on the road just in California by 2035 and over $1 7 million.
Ceb's.
By <unk> by 2050, so now the Oems.
Don't have any choice then offering.
As EEV in California, and as Ive used really it's going to be electric or its Idaho gem and <unk>.
With respect to electric with the purpose built full lineup of trucks that we.
We are right now we feel we're very well positioned to capture some of this market.
Great and if I could just get a squeeze a follow up.
On that just to clarify what is the typical timing of an order cycle from.
The fleet, meaning.
We've seen.
Yeah Paul.
And.
Just how long does it typically take for fleets to then slow in orders and for those orders to eventually convert to.
Production.
It's always it's always a first order that takes.
A lot of time, and especially on the truck side.
The fleet operators were talking to a lot of them. They are very large fleets and.
Well it takes a lot of planning two to electrify youre asleep and it's really a team work between the operator and OEM too to make sure that that while the right specs are on the vehicles, but also the right charging infrastructure are being selected and are being installed.
In the timely in a timely manner as well so it takes some time to do a good job and.
You probably remember I mean are we are thinking it's really I mean for us to adapt to <unk> to the operator and not.
The other way around.
So the first the first order is takes always.
Longer and and Thats one of the reason you see so many repeat orders on the school bus site and that's <unk>.
That's the reason why the order book is.
Is growing very well also we expect the same thing to happen on the truck side and we are working on the initial order for a lot of those truck operators as we speak right now.
Great. Thank you.
Thank you.
Our next question comes from the line of Michael Graham.
Yes, Jordan capital. Your line is now open. Please go ahead.
Good morning, and thank you for taking my question.
So quite a supply chain issue with your press release mentioned that you still had some continued issues.
Maybe just an update versus last quarter was what sections I've been through what has gotten more difficult than that.
Any updates on that front. Thank you.
Yes, good morning, Michael Thank you.
Yes, it's still supply chain.
Challenges I mean, we're not we're not done with with those challenges at this point, it's a lot better than it was in the past, we're still expecting to have those supply chain issues for the the rest of the the rest of the year you probably remember.
The way, we've been able to deal with this and one thing we've done and I think very well is the redundancy of suppliers.
We've been doing this because of the supply chain crisis, but we've also been doing that because of our expansion into the United States. So right now we have a lot of suppliers on both sides of the border and for most of the components. We had at least two suppliers and sometimes more than two suppliers as well.
So we feel that this will still be a challenge for the remaining of the year, but it's becoming less and less of an issue.
Perfect that helps a lot and maybe just on the liquidity front youre cash did drop in the quarter and the timing on the upfront payments for the EPA lots until August and maybe some other delays from Canadian stimulus what would you see would be your pecking order of.
In terms of liquidity, what would you prefer in terms of maybe issuing shares in the ATM or the other options become available. Thank you very much.
Yes look I would say just first on the liquidity Michael we finished at $67 million at the end of the quarter or 36 of cash of $21 million available under our credit facility.
We're over $10 million on the government loans for the campus at the end of the quarter and that's since collected half of that we received $10 million in payments. We also collected 7 million Bucks as part of an R&D subsidy program.
Certainly the EPA orders are expected to help with the $105 million.
And value in total.
Recall that about.
Third for a third of those declines are requested extensions that can go all the way to August .
We expect to continue to receive some of those payments you asked about specific timing EPA to talk to them and they stated in the program objectives to fund 60 days after.
The process the order it usually takes a little bit of time.
To get this program going so were pretty happy that it has started already and then in terms of additional sources. We have as you mentioned the CAD $100 million of government loan.
Which we expect to fund about 25 million USD of our on campus. This year and then we have about.
About $90 million remaining on our ATM program I said that during the prepared remarks, we will continue to monitor market conditions, our liquidity our capital requirement.
And we will evaluate different financing opportunities with a view to raise some capital and trying to financial position in the upcoming months that said I can't give you a precise answer on.
<unk> an instrument that will say, we feel we have.
Significant.
Runway.
But the.
We'll be we'll be mindful of dilution will be mindful of flexibility, but I can't be more precise than that at this stage. There is theres going to be a lot of varying factors.
Thank you very much for the color much appreciated.
Okay.
Thank you Michael.
Thanks, Steve.
So no additional questions at this time all conference Buckeye Isabella.
Thank you very much.
Uh huh.
Thank you.
Okay.
Today.
Thanks, Matt.
You may ask them.
Thank you.
Yes.
Ladies and gentlemen.
The conference. Thank you for joining you may now disconnect.
Okay.
Yes.
Yeah.