Q4 2023 The Lion Electric Company Earnings Call

Good morning, everyone welcome to the line electrics, both quota in physical 2023 results comforts cool.

Operator: Good morning, everyone. Welcome to Lion Electric's fourth quarter and fiscal 2023 results conference call. At this time, all participants are in a listen-only mode.

This time, all participants alright, I'll 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.

Operator: A brief question and answer session will follow the formal presentation. As a reminder, this conference call is being recorded. I would now like to turn the call over to Isabelle Adjahi, Vice President, Investor Relations and Sustainable Development. Please go ahead, Ms. Adjahi.

Now I'd like to turn the call over to Isabella Jai Vice President Investor Relations and sustainable development. Please go ahead <unk>.

Good morning, everyone.

Isabelle Adjahi: Good morning, everyone. Welcome to Lion's fourth quarter and fiscal 2023 results conference call. Bienvenue à la conférence téléphonique sur les résultats financiers du quatrième trimestre et de l'exercice 2023 de Lyon. Today, I'm here with Marc Bedard, our CEO and funder, Nicolas Brunet, our president, and Richard Coulombe, our chief financial officer. 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 statement. We invite you to review the cautionary language in this morning's press release and in our MDMA, which contains important information regarding various factors, assumptions, and risks that could impact our actual results. With that, let me turn it over to Marc to begin. Thank you, Isabelle. Good morning, everyone.

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With that.

Let me turn it over to Mark to begin.

Mark.

Thank you Isabel good morning, everyone.

Marc Bedard: We will be discussing our Q4 results in a moment, but I first want to address our 2023 performance and highlight some of our achievements. 2023 has without a doubt been a challenging year for the whole lead industry, including for Lions, but it has also been a year of significant progress for our company.

We will be discussing our queue for results in a moment alright.

But I first want to address our 2023 performance and highlight some of our achievements.

2023 at without a doubt being a challenging year for the whole lead industry, including for alliance.

But it has also been a year of significant progress for our company.

First.

Marc Bedard: We saw a significant increase in delivery. Resulting in revenue growth of 81% for the year, in addition to achieving positive adjusted growth margins. We also completed the construction of our vehicle production facility in Joliet and our battery plant in Mirabel and started production at both facilities. We now have the infrastructure in place, including the production line and equipment, to achieve a production capacity of up to 5,000 vehicles per year and a battery production capacity of 1.7 gigawatt hours, enough to power 5,000 of our vehicles. With this significant manufacturing infrastructure in place, we do not plan to make any significant investments in gross capex for the foreseeable future. We also obtained certification for our MD battery pack, which powers our Lion 5 trucks today and will be integrated shortly into our Lion Seaschool bus. This represents a significant milestone in the execution of our vertical integration strategy. And last but not least,

We saw a significant increase in deliveries.

Resulting in revenue growth of 81% for the year. In addition to achieving positive adjusted gross margins.

We also completed the construction of our vehicle production facility in Joliet, an hour battery plant in Mirabel.

And started production at both facilities.

We now have the infrastructure in place, including the production line and equipment to it.

Chiba production capacity of up to 5000 vehicles per year.

And battery production capacity of 1.7 gigawatt hour and half to power 5000 of our vehicles.

With this significant manufacturing infrastructure in place, we do not plan to make any significant investments and gross capex for the foreseeable future.

We also obtained certification four hour MD battery back.

Which powers are lined five trucks today and will be integrated shortly on our alliance fiscal buses.

This represents a significant milestone in the execution of our vertical integration strategy.

And last but not least.

Marc Bedard: We started the commercial production of the Lion Disco bus and the Lion 5 truck, and we are planning to start the commercial production of the Lion 8 tractor this summer. With our vehicle lineup nearly completed, and with significant production infrastructure in place, we are well positioned to capture market share in the medium and heavy-duty EV space. Let me now comment on our Q4 results. During the quarter,

We started the commercial production of the Lion D. Schoolbus underlying five truck and we are planning to start the commercial production of the Lion a tractor this summer.

Which one were vehicle lineup nearly completed and with significant production infrastructure in place, we are well positioned to capture market share in the <unk> space.

Let me know comment on our queue for results.

During the quarter.

Marc Bedard: We delivered 188 vehicles, leading to 29% revenue growth over Q4 2020. Despite maintaining a positive adjusted gross margin during the quarter, the 188 vehicles we delivered are below our expectations. This is mainly explained by Theresa.

We delivered 188 vehicles, leading to 29% revenue growth over Q4 2022.

Despite maintaining a positive adjusted gross margins during the quarter.

The 188 vehicles, we delivered or below our expectations.

This is mainly explained by two reasons.

Marc Bedard: First, we incurred delays in the initial deliveries of the Lion B-School buses and the Lion 5 trucks. As we wanted to ensure optimal quality of these vehicles, which were the first ones going to customers, and as a result, initial deliveries were pushed out to Q1 and Q2 of this year. And second, our Q4 deliveries and the pacing of new orders were significantly impacted by the substantial delays incurred by the Canadian government with its Zero Emission Transit Fund program, the ZETF, since several Canadian school bus operators are still waiting for official approval to start receiving The continued uncertainty and delays around the ZETF program have had a major impact on the momentum of electric school bus deliveries in Canada.

First.

We incur delays in the initial deliveries of the Lions vs School buses and the Lions type trucks.

As we wanted to ensure optimal quality of these vehicles, which were the first ones go into customers and as a result initial deliveries were pushed out to Q1 and Q2 this year.

And second.

R Q for deliveries and the pacing of new orders were significantly impacted by the substantial delays encouraged by the Canadian government, which at zero emission in Transit Fund program does the Dts.

Since several Canadians called bus operators are still waiting for an official approval to start receiving it were electric buses.

The continued uncertainty and delays around as Eddie Teare program at a major impact on momentum of electric school bus deliveries in Canada.

Marc Bedard: The Canadian federal government and our clients currently work to evaluate and process sizable applications for school bus deployment that were filed several months ago. As a result of these delays and its impact on our world liquidity, we are taking immediate action by temporarily laying off approximately 100 employees, mostly impacting our night shift production workforce in St. Jerome. We will reassess our production needs on a regular basis in the upcoming month, mainly depending on the pace of the ZDTF project's approval and deployment before turning it over to Nicolas and Richard to provide more detailed insights into our commercial operations and financial performance. Let me reiterate that with our 1850 vehicles on the road, which have driven 22 million miles in real operating conditions, and considering everything we have achieved over the past 15 years, we believe we are in an exceptional position for continued success. Our main objectives are effective liquidity management and achieving profitability by remaining agile and actively focused on cost control. We will continue to proactively improve the quality of our vehicles and increase our sales technician service coverage to maximize customer experience and uptime with our vehicles.

Canadian Federal government and our clients currently work to evaluate and process sizable applications for school buses deployment that were filed several months ago.

As a result of these delays and its impact on our liquidity. We are taking immediate action bite importantly, laying off approximately 100 employees.

Mostly impacting our night shift production workforce in Saint Jerome.

We will reassess our production leads on a regular basis in the upcoming months.

Mainly depending on the pace of desert ETF projects approval and deployment.

Before turning it over to Nikolas and Richard.

More detailed insights into our commercial operations and financial performance let.

Let me reiterate that with our 1800 50 vehicles on the road that have driven 22 million miles in real operating conditions and considering everything we have achieved over the past 15 years.

We believe we are in the next section opposition for continued success.

Our main objectives are ineffective liquidity management, and achieving profitability by remaining agile and actively focused on cost control.

Further.

We will continue to proactively improve the quality of our vehicles and increase our field technician service coverage to maximize customer experience and uptime with our vehicles.

Nicholas.

Thank you Mark I will start by addressing Q4 in fiscal 2023 delivery then discuss the order book and conclude with an update uncertain subsidy program.

Nicolas Brunet: Thank you, Marc. I will start by addressing Q4 and fiscal 2023 delivery, then discuss the order book, and conclude with an update on certain subsidy progress. Starting with deliveries, we delivered 188 vehicles in Q4, consisting of 178 school buses and 10 trucks. 107 vehicles were delivered in Canada and 81 in the U.S. However, our school bus deliveries in Canada were impacted by the inability to deliver under the Canadian VET ETF program, for which a number of our clients are in discussions with the government to obtain satisfactory approval under the program. Furthermore, as previously explained, we experienced some delays in the first deliveries of the Line 5 trucks and the Line D school buses, which further impacted delivery For fiscal 2023, we delivered 852 vehicles compared to 519 in 2020.

Starting with delivery, we delivered 188 vehicles in queue for consisting of 178 school buses and 10 trucks.

107 vehicles were delivered in Canada, and 81 in the U S.

Our school bus deliveries in Canada were impacted by in the ability to deliver under the Canadian Betty T. F program for which a number of our clients are in discussions with the government and satisfactory of approval under the program.

Furthermore, as previously explained we experienced some delays and the first deliveries of the line five truck and the line the school buses, which further impacted results.

For fiscal 2023, we delivered 852 vehicles compared to 519, and 2022, 64% increase on a year over year.

Nicolas Brunet: 64% increase on a year-over-year, Now shifting our focus to purchase, The order book currently stands at 2,076 vehicles, consisting of 1,791 school buses and 285 trucks, representing approximately $500 million. In addition to the challenging economic environment, the decline in the order book is in part attributable to the timing of certain subsidy programs, which are beneficial in the long term, but can cause some volatility on the quarter to quarter, For example, EPA awarded in January close to a billion dollars of grant funding for purchase of clean school buses. But purchase orders cannot yet be placed under the program's parameters, and hence are not reflected in, As previously announced, Lion was awarded a grant for 97 school buses and related charging infrastructure in this round, representing a total of $38 million for which we are working with the school district to obtain formal purchase orders, once allowed by the, There is a significant potential for additional opportunities for Lion in connection with this round, as we estimate that 70% of units were awarded directly to school districts, financial entities and third-party contractors.

Now shifting our focus the purchase orders. The order book currently stands at 2076 vehicle consisting of 1791 school buses and 285 trucks, representing approximately $500 million.

In addition to the challenging economic environment. The decline in the order book is in part attributable to the timing certain subsidy program, which are beneficial in the long term, but can cause some volatility on a quarter to quarter basis.

For example, EPA awarded in January close to a billion dollars of grant funding for purchase of Green School buses.

But purchase orders cannot yet be placed under the program's parameters and hence are not reflected in the order button.

As previously announced line was awarded a grant for 97 school buses and related charging infrastructure in this room, representing a total of $38 million for which we are working with the school district that pain formal purchase orders one allowed by the E. P. A.

We see significant potential for additional opportunities for lion in connection with this route as we estimate that 70 per cent of unit were awarded directly to school districts financial entities in third party contractors we.

Nicolas Brunet: We are in dialogue with a number of these parties towards the potential deployment of Lion School. We are also very encouraged by customer engagement with applications for the most recent rebate round of the EPA program, which closed on February 14th. EPA expects to award at least $500 million under this round, with results to be announced. Now that the applications for the EPA's latest rebate round have closed, we are hopeful to see more momentum in a number of state-level programs, including in California, Colorado, and New York, among others.

You are in dialogue with the number of these party towards the potential deployment of lines Goodbye.

We are also very encouraged by customer engagement towards applications for the most recent rebate round WK program, which closed on February 14th.

E P. A expects to award at least $500 million under this round with results will be announced in April.

Now that the applications for <unk> latest rebate round are closed we are hopeful to see more momentum and a number of state level programs, including in California, Colorado, and New York among others.

Nicolas Brunet: On the truck side, we are particularly excited by two trucking programs. First, EPA's Clean Ports Program, which was launched yesterday, is expected to allocate up to $2.6 billion towards zero-emission port equipment and infrastructure, including dreyage trucks. The application deadline for this program is set for May.

On the truck side, we're particularly excited by two trucking programs from the.

First dpa's clean ports program, which was launched yesterday.

Is expected to allocate up to $2.6 billion towards zero emission port equipment and infrastructure, including grades truck.

The application deadline for this program et cetera may 20th.

Nicolas Brunet: Second, the EPA's Clean Heavy-Duty Vehicles Program, which is expected to allocate $1 billion towards the deployment of Class 6 and Class 7 clean trucks, is expected to start in the early spring of 2020. With Line 5 and Line 6 in commercial production today, and with the start of commercial production of Line 8 tractor truck scheduled for mid-2024, we believe we are very well positioned for our customers to benefit from such funding. In summary, the grant environment combined with customers' strong appetite for electric vehicles is very promising for the long term, despite causing some volatility in the short term, which we expect to persist for at least the next. I will now turn it over to Lisha to discuss our financial, Shop. Thank you, Nicolas.

Second E P. A screen heavy duty vehicles program, which is expected to allocate $1 billion towards the deployment of classics and crossed seven clean truck is expected to start in early spring of 2024.

With the line five in line six and commercial production today with the start of commercial production of the Lion a tractor truck scheduled for mid 2024, we believe we are very well positioned for our customers to benefit from such fund.

In summary, the grants environment combined with customers strong appetite for electric vehicles is very promising for the long term, despite causing some volatility in the short term, which we expect to persist for at least the next few months.

I will now turn it over to the shop to discuss our financial performance Yeah sure.

Thank you and the color I will start by commenting on queue for result, and then comment on fiscal 2023, I will then discuss our liquidity position and provide color for 2000 2004, starting with you for performance revenue amounted to $60 for a million dollars representing at 29% increase year over year.

Richard Coulombe: I will start by commenting on Q4 results and then comment on fiscal 2022. I will then discuss our liquidity position and provide color for 2020. Starting with Q4 performance, revenue amounted to $60.4 million, representing a 29% increase year-over-year. Despite lower than expected sales volume, we posted an adjusted gross margin of 1.3%, which excludes the $9.8 million inventory write-down related to the Lion A and Lion M vehicles as compared to an adjusted gross margin that was negative 10.2% for the corresponding quarter in 2020. Our SG&A expenses, which amounted to $16 million, decreased from 33% of revenue in Q4 2022 to 27% of revenue this year, reflecting our disciplined approach to cost management.

Despite lower than expected sales volume, we posted adjusted gross margin of 1.3%, which excludes the nine $8 million inventory right down related to the line a and line EM vehicle as compared to an adjusted gross margin that was negative 10.2% for the corresponding quarter 2022.

Are <unk> expenses, which amounted to $16 million decrease from 33% of revenue in Q4, 2022% to 27% of revenue. This year, reflecting are disciplined approach to cost management.

Richard Coulombe: Our Q4 results included an impairment of intangible assets and property, plant, and equipment of $36 million related to our decision to indefinitely delay the start of our commercial production of the Lion A and Lion M vehicles. We had a significant improvement in adjusted EBITDA, which was negative $6.3 million for the quarter, as compared to negative $13.9 million in Q4 2022, resulting from improved adjusted gross profits and decreasing... Q4 CapEx amounted to $13.7 million, a significant decrease as compared to $39.1 million in Q4 2022, marking the end of our growth CapEx. On the development front, we continue to see a reduction in spend as we bring new platforms into production. Additions to intangible assets mostly related to vehicle and battery-related development amounted to $17.8 million, down $2.5 million as compared to $21.3 million in Q4 2018.

R. Q for results included an impairment of intangible assets and property plant and equipment of 36 million related to our decision to indefinitely delay startup our commercial production of the lion a an item vehicles.

We had a significant improvement and adjusted EBITDA, which was negative $6 3 million for the quarter as compared to negative 13 $90 million in Q4, 2022, resulting from improve adjusted gross profit and decreasing costs.

Q for Capex amounted to $13.7 million, a significant decrease as compared to $39.1 million in queue for 22, marking the end of our growth Capex.

On the development front, we continued to see a reduction in spin as we bring new platforms and production.

Additions to and that intangible assets, mostly related to vehicle and battery related development amounted to $17.8 million down $2.5 million as compared to $21.3 million in queue for 2022.

Now turning to fiscal 2023 performance for fiscal 2000, twenty-three revenue, which amounted to $253 $5 million increase by 81% as compared to $139 $90 million in 2022 work.

Richard Coulombe: [inaudible] Worth mentioning, revenue generated in the U.S. more than tripled as compared to 2022 and accounted for over a third of our revenue for the year. We achieved positive adjusted gross margins for the year, with an adjusted gross profit of $4.3 million, or 1.7% of revenue, as compared to an adjusted gross loss of $12.9 million, or a negative 9.3% of revenue, in 2020. Adjusted EBITDA amounted to negative $34.3 million for the year, as compared to negative $54.8 million in 2022.

Worth mentioning revenue generated in the U S more than tripled as compared to 2022 and accounted for over a third of our revenue for the year.

We achieved positive adjusted gross margins, where the year with adjusted gross profit of $4 $3 million or 1.7% of revenue.

Compared to an adjusted gross loss of $12 $90 million or negative 9.3% of revenue in 2022.

Just that he did that amounted to negative $34.3 million a year as compared to negative $54.8 million in 2000 2000 to this as a result of our revenue growth and effort and optimizing our cost structure.

Richard Coulombe: This is a result of our revenue growth and our effort in optimizing our costs. Turning to our liquidity position, we ended the year with 93 million of available liquidity, consisting of 30 million in cash and 63 million of immediate borrowing capacity on our revolver. It is important to note that inventory investment made over the last two years to achieve production ramp-up has been a significant driver of cash outflow. With the bulk of our ramp-up occurring during the supply chain crisis, we have built a significant inventory of raw materials on the balance sheet. With the supply chain now easing, such a large inventory position is no longer required.

Turning to our liquidity position, we ended the year with $93 million of available liquidity, consisting of $30 million in cash and $63 million of immediate borrowing capacity on a revolver. It is important to note that in venture investment made over the last two years to achieve production ramp up has been a.

Significant driver of cash outflows.

With the bulk of our ramp up of carrying during the supply chain crisis, we have built significant inventory of raw material on the balance sheet with supply chain now easing such large inventory position is no longer required.

Richard Coulombe: Furthermore, we have a number of finished vehicles on hand, which could be deployed rapidly, particularly in the event that a certain customer obtains satisfactory approval from the ZETI. We therefore anticipate that inventory reduction will positively contribute to liquidity in 2024 with a targeted inventory reduction of $50 to $75 million. Looking ahead to 2024, our focus remains on driving growth in orders and deliveries while diligently controlling costs. As previously mentioned, the ramp-up of the Lion D, the Lion 5, and the Lion batteries, as well as the upcoming launch of the Lion 8 tractor, will put short-term pressure on our growth margin, particularly in the first half of the year. We anticipate that CAPEX will be lower than $10 million, consisting largely of maintenance CAPEX.

Further we have a number of finish vehicles on hand, which could be deployed rapidly, particularly in the event that certain customer of things satisfactory approval from the Zed ETS.

We therefore anticipate that inventory reduction with positively contribute to liquidity in 2024, with a targeted inventory reduction of $50 million to $75 million.

Looking ahead to 2024, our focus remains on driving growth and orders and deliveries while diligently controlling costs.

As previously mentioned the ramp up the Lions.

<unk>, five and ally and batteries as well as the upcoming launch of the Lion a tractor will put short term pressure on our gross margin, particularly in the first half of the year.

We anticipate that capex will be lowered and $10 billion, consisting largely of maintenance capex.

Similarly vehicle and battery development spending will be reduced by approximately 30% as compared to 2023 and the amount to approximately $45 million as the development of new product nears completion and vehicles are brought to market.

Marc Bedard: Similarly, vehicle and battery development spending will be reduced by approximately 30% as compared to 2023 and amount to approximately $45 million as the development of new products nears completion and vehicles are brought to market. We remain committed to tight cost management and a concerted effort to reduce working capital, particularly focusing on reducing inventory levels. Last, we will continue to monitor our liquidity requirements, including a significant reduction in unrentry, and will stay appraised of potential opportunities to strengthen our balance sheet to ensure financial resilience in the face of evolving market conditions. In summary, while we have made significant strides in our financial performance, we remain vigilant in navigating the challenges and opportunities that lie ahead, united by our commitment to sustainable growth and financial caution. Back to you, Marc. Thank you, Richard.

We remain committed to tight cost management, and a concerted effort to reduce working capital, particularly focusing on reducing inventory level.

Alas, we will continue to monitor a liquidity requirements, including a significant reduction in <unk> and will stay appraised of potential opportunities to strengthen our balance sheet to ensure financial resilience in the face of evolving market conditions.

In summary, while we have made significant strides in our financial performance, we remain vigilant and navigating the challenges and opportunities that lies ahead guided by our commitment to sustainable growth and financial cautiousness.

Back to humor.

Thank you Richard.

Before we open the lines for questions let.

Let me conclude by reiterating that while we expect the current environment to continue to result in volatile order flow and deliveries for at least the next few months we.

We remained very enthusiastic about our future and totally committed to leveraging all investments made over the last 15 years to reach our ultimate objective, becoming profitable and free cash flow positive.

Marc Bedard: Before we open the line for questions, let me conclude by reiterating that while we expect the current environment to continue to result in volatile order flow and deliveries for at least the next few months, we remain very enthusiastic about our future and fully committed to leveraging all investments made over the last 15 years to reach our ultimate objective of becoming profitable and generating free cash flow. Until then, we remain fully committed to taking appropriate measures to safeguard our liquidity. Thank you for your attention this morning, and let's now open the lines for questions. Operator, we are now opening the lines for questions. I just want to ask you to limit the number of questions asked to two to allow other participants to ask questions. You can, of course, go back in the queue if you have any follow-up questions.

Till then we remain fully committed to taking appropriate measures to safeguard our liquidity.

Thank you for your attention this morning, and let us know open the lines for questions.

Operator will now open the lines for questions.

Just wanted to ask you to need two two.

A question.

To allow other participants to ask that question.

Of course go back into the queue. Thank you for.

Put up questions.

Thank you if you would like to ask a question. Please press start one on your telephone keypad now if you would like to withdraw your question. Please press star too.

First question comes from <unk> Tomorrow from National Bank. Please go ahead.

Operator: Thank you. If you would like to ask a question, please press star one on your telephone keypad. Now, if you would like to withdraw your question, please press star two. Our first question comes from Rupert Merer from National Bank. Please go ahead. Hi, good morning, everyone. If we can start with the ZETF funding, I'm wondering if you have any visibility from the government on the timing for when they could release some of that ZETF. Yeah Rupert, this is Marc.

Hi, good morning, everyone.

Robert.

If we can start with the Z E. T. F funding I'm wondering do you have any visibility from the government on the timing for when they could.

Released some of that set ETF fundings.

Yes. This is this is March let me start by saying that the beginning it in government that we need great partner over the years and we all know that they are supporting electric stations in Canada.

Marc Bedard: Let me start by saying that the Canadian government has been a great partner over the years, and we all know that they are supporting electrification in Canada. One example is that their target is to get 35% of the total medium and heavy-duty vehicle sales by 2030 to be 35%. So that's a lot, and it's exactly aligned with what the ZDTF is supposed to be doing. But there have been a lot of delays. I understand right now there is a lot of ongoing dialogue with potential customers, and we're also in dialogue with the ZDTF at the same time. And, as you know, it's a major part of our purchase order book as well. So I think everybody is on the same page, and there has been a lot of volume on their end.

And one example is that their target is to get 35% of the total medium and heavy duty vehicles cells.

But by 2030 to be to be 35%. So so so that's that's a lot and it's exactly aligned with Dts.

It's supposed to be doing so there has been a lot of delays I understand right now there is a lot of ongoing dialogue with.

The potential customers and we were also in dialogue with the <unk>.

The same time and as you know.

It's a major part of our purchase order books.

As well so I think everybody is on the same page and.

There has been a lot of volume on there and this is what I'm getting in there are terms negotiations.

Marc Bedard: This is what I'm getting, and there are negotiations for terms as we speak, but we're very enthusiastic about the outcome of that. We feel it is obvious that this is going to go through at some point, and we're looking, we're really looking forward to that. So we're staying tuned, we're a good partner, and we feel that we're well-listened to as well. Do you believe that when they finish this process, they will come up with a framework that allows for all of the funding to move forward in fairly short order, or is it going to be more of an approval?

As we speak but we're very enthusiastic about the outcome of that.

We feel this is obvious.

This is going to go through at some point and we're looking.

Really looking forward to add to that so we're saying June were a good partner and we feel that we're well listen as well.

Do you believe that when they when they finish this process that they come up with a framework that allows for <unk>.

All of the funding to move forward in fairly short order or is that going to be more of an approval of.

Marc Bedard: Well, we all hope the same thing, that the grant will be in such a form that it will be very easy for the operators to apply and get their funding, and maybe that was part of the issue. So, I cannot talk about the future, but I know that $2.75 billion is a lot of money to invest in them, understanding as well that transit buses are included there. But in all the discussions we've had in the past, it was very clear that a lot of that money would go for school buses as well, and we have yet to see that. So, I'm looking forward to it. All right, very good.

Aw grants on a case by case basis.

Well, we all hold the same thing that the.

The grim.

Will be in such a form that will be very easy for the the.

The operators to to apply and get their funding and maybe you know that was part of the issue. So I can not talk about the future, but I know that too.

$2 75 billion.

Is a lot of money to invest for them understanding as well that you know.

The buses are included in there, but in all the discussions we've had in the past I mean, it was very clear that a lot of that money will go no further school buses.

As well and we have yet to to see that so looking forward to it.

Alright, very good secondly, if we can we can talk about inventory so encouraging to hear that we could bring that down 50% to $75 million, what what's an appropriate amount of inventory for the company in the long run.

Richard Coulombe: Secondly, if we can talk about inventory, it's encouraging to hear that we could bring that down to 50 to 75 million. What's an appropriate amount of inventory for the company in the long run? And what are the opportunities to further bring that down and maybe to more of a just-in-time model? Or, can you discuss what sort of inventory level you think you need to hold in the future? Are there any critical components that, absolutely, you can't move to more of a just-in-time moment? It's Richard here.

And what are the opportunities to to further bring that down and maybe two more of a just in time model or if you can discuss what sort of inventory levels, you think you'd need to hold in the future there any critical components that.

Absolutely.

You can't move to more of a just in time model.

Richard Coulombe: I'll take that one, Rupert. Obviously, we feel that, as I said earlier, our inventory is in a very challenging supply chain environment. And right now, as I mentioned earlier, we don't need to have or carry the buffers that we've been carrying in the last couple of years. So right now, we are very focused on reducing inventory levels to healthier levels. It's hard to say what the timing and optimal inventory in the current context is, that's exactly what Marc just described. So our goal is to really monitor our order books and make sure we have the appropriate level of inventory to deliver based on our customer needs. So that's what we're focusing on. Like I said, right now, we are really focused on reducing our inventory. We mentioned 50 to 75 million. This is obviously raw material.

I think I'll take that one that recruiters.

Obviously, we feel about that earlier, our adventure in a very challenging and also by chain environment and right now as long as I mentioned earlier, we don't need to advertise bumper is that we've been carrying in the last couple of years. So right. Now we are very focused on reducing an entry level to healthier levels.

Hard to say what did the timing and not the modem <unk>.

<unk> in the current context, that's perfect with Smart just described also our goal is to really.

Not really monitor are already works make sure we have the appropriate level that amendment inventory to deliver based on our customer needs. So so that's what we're focusing on.

Like I said right now we are really focused on reducing our eventually we mentioned 60 to 75 million.

Is the raw material is also finished goods that we could deliver it by quickly as stomach visa gift application in particular are approved.

Richard Coulombe: It's also finished goods that we could deliver quite quickly if some of these dedicated applications, in particular, are approved. So that's the short-term view for 50 to 75, and we'll take it from there afterwards. A quick follow-up to that, so you're now producing your own battery packs, and I know you do have some batteries and battery packs in inventory. With that, do you anticipate that you'll be running your own battery production at a reasonable level in the coming quarters, or do you hold back on your own battery pack production while you work off? No, we are starting to integrate our own battery packs into our vehicles, Rupert. So you're going to see some Lion 5 deliveries, and they are equipped with our Lion battery and the pack.

The short term view that 50 to 75 and what they get another afterwards.

Just a quick follow up to that so you're you're not producing your own battery packs and I know you do have some batteries and battery packs.

An inventory with that do you anticipate that you will be.

Running your own battery production.

At a reasonable level in the coming quarters or or do you hold back on your own battery pack production, while you work off the inventory.

No. We will we are starting to integrate our own battery packs on our vehicles.

So if you are you are going to see some London five delivery.

And are.

Are equipped with our alliance battery MD packed so those are the first vehicles with our battery packs that being said, though I mean, obviously.

Richard Coulombe: So those are the first vehicles with our battery packs. That being said, though, obviously, using the 1,000 BMW battery pack that we have in stock right now is also top of mind. And this is part of what Richard has been talking about. Production, as well. So it's really a mix of taking down this invention and upping the manufacturing in Maribel.

Using the the 1000.

B M. W battery packs and that's what we have in stock right. Now is all sorts of mine and this is part of what Richard has been talking.

Deduction as well so it's really a mix of taking down disinvent.

The the manufacturing and in Maryville.

Okay very good I'll leave it there thank you.

Richard Coulombe: Okay, very good. I'll leave it there. Thank you. Thank you. Thank you. The next question comes from Kevin Chiang from CIBC. Please go ahead. Hey, good morning, everybody.

Thank you. Thank you.

The next question comes from it Kevin Chang from CIBC. Please go ahead.

Hi, good morning, everybody. Thanks for thanks for taking my question.

Nicolas Brunet: Thanks for taking my question. Maybe I'll ask you about, I guess, how you think about your sales strategy as you look to, you know, build out your vehicle book. I appreciate, you guys have been generally more conservative in how you frame your backlog or your order book size versus maybe some of the other companies out there, but you know, but it is down three quarters in a row. You have, you know, a significant amount of excess capacity. It seems like it would make sense to find a way to kind of ramp up failures here to leverage better fixed cost absorption. That seems like that could work.

Maybe I'll ask about.

How do you think about your sales strategy look too.

We'll build out your.

The vehicle bulk.

Appreciate it.

You guys have been generally more conservative in how you how you frame the <unk>.

Backlog is it going to order both sides versus maybe some.

Some of the other companies out there, but it is down.

Three quarters in a row.

You have a significant amount of excess capacity it seems like it would.

Makes sense to find a way to kind of ramp up.

Sales here to leverage et cetera, fixed cough absorption.

Seems like that.

That could work and then maybe as a as a follow up.

Nicolas Brunet: And then maybe as a follow-on, do you need the freight lift session? I'm more open to buying some of the non-school best vehicles you have in the market. Just wondering how much the freight recession might have impacted the dialogue over the past year, just given where the freight economy is in 2023. Hey, Kevin, Nick here.

Do you need a recession soon.

<unk> some of the the the non school best vehicles, you have at the mortgage is wondering how much the great recession might've been practical.

Dialogue over the past you know just just for the fate economy wasn't 2023.

Kevin next year I'll, let me start by addressing I had trouble understanding the second part of your question, but let me start with the first part.

Nicolas Brunet: Let me start by addressing the second part of your question, but let me start with the first part. On the order book side, you know, obviously, the order book is a point in time, and it's not necessarily reflective of the ongoing client dialogue. And what I, you know, I alluded to this in the, Especially on the bus side, there's significant volatility caused by the timing of the subsidy program. I mean, when you look at it, there are unprecedented amounts being deployed toward electric school buses. Specifically, the EPA, a great example, allocated close to a billion dollars, an amount that was doubled from the initial plan in the grant round of the second phase, if you will, of the $5 billion program that was allocated in January.

On the the.

The order book side.

Obviously, the order book at that point in time, and it's not reflective of necessarily have really the ongoing client dialog and what I alluded to this and that.

Especially on the bus side, there is significant volatility caused by the timing of the subsidy program when.

When you look at it there are unprecedented amounts being deployed towards electric school buses.

Specifically the HD.

I mean, that's a great example, allocated close to $1 billion, an amount that was doubled from the initial plan and.

And the grant round.

The second phase if you will of the $5 billion program that was allocated in January.

Nicolas Brunet: As we announced, there are about $38 million in units that were directly allocated to our applications for our clients, of course. And there's a lot of dialogue as well; at 70% of that round, close to 2,000 vehicles are allocated to free agents. But the program does not yet allow anyone to place purchase orders, and that won't be available. It won't be allowed until April, we expect.

As we announced theirs.

About $38 million of Unix network.

Directly are located through our applications for our clients of course, and there's a really.

The number of dialogue as well as 70% of that sounds close to 2000 vehicles are obligated to free agents, but the program does not.

Yet allows anyone the place purchase orders and that won't be available I won't be allowed until we expect April and so this is a great amount of money that are coming in that space all for.

Nicolas Brunet: So this is a great amount of money that is coming into the space, all for enthusiastic buyers of electric school buses, but they can't show up in the order book just yet. At the same time, the EPA just closed on Feb. 15 applications for $500 million back to the voucher round this time, and this is another situation where we see a lot of client enthusiasm toward applying under the program. Ultimately, they are looking to purchase electric school buses with an EPA subsidy, but this is not yet reflected in the order book.

Do the ethic buyers of electric school buses, but the cat show in the.

The order books just yet.

Time, the EPA just closed on 10 15 applications for.

Again $500 million back to the voucher around this time and this is another situation, where we see a lot of client enthusiasm towards applying under the program and.

Ultimately looking to purchase with DJ subsidy Electric school buses, but not yet reflected in the order books same you look at the <unk> right. There's clearly a lot of enthusiasm in the program half of the order book for us as tight in there.

Nicolas Brunet: Same, you look at the ZEPF, right, there's clearly a lot of enthusiasm for the program, half of the order book for us is tied to it, there's a large number of applications that we know of that clients are making on their own, and they're awaiting the outcome of that. And so, you know, these subsidy programs, when you take a, let's say, medium-term timeframe, they're very exciting, they will drive very significant volume, we believe, but in the short term, they cause the volatility that we're discussing this morning. So things are going in the right direction without a doubt, but there's volatility in the short term caused by the specificity of those. I appreciate it. If you don't mind, Kevin.

Big number of applications that we know of that are <unk>.

Clients are making on their own and they are awaiting the outcome of that and so.

The subsidy programs when you pick up a let's say a medium term timeframe.

Very exciting they will drive very significant volume, we believe but in the short term they caused the volatility that we're discussing this morning.

So.

Things are going in the right direction without a doubt, but there is volatility in the short term caused by really the specificity of those subsidy program.

If you don't mind.

Particular part.

Nicolas Brunet: If you could repeat the second part of the question, I will. For sure. So if I look at some of the products, you know, you've launched, like line five and line six, those seem to be a little bit more, maybe tied to the freight economy, people using those vehicles to deliver goods. And last year and parts of 2022, we did go through, and are going through, a freight recession. I was just wondering how much that might have impacted customer dialogue, right? Like if a shipper is facing, you know, a 10% to 15% decline in volume, are they also talking about transitioning the fleet to electric, or is that a conversation that might have gotten pushed out until the freight economy looks a little bit better? Yeah, that's a good question.

Part of your question about muscles.

Mmm.

For sure. So if I look at some of the products.

Launch like the line five line six those seem to be a little bit more.

Maybe tied to the.

Economy.

Using those vehicles to deliver goods in the last year and parts of 2022.

We did go through and I'll go into a slight recession, just just wondering how much that might've impacted customer dialogue right with a shipper is taking about 10, 15% decline in volume.

Are they actually are the off the table also talking about transitioning to sleep.

To electric or is that a conversation about might've got pushed out until the <unk> economy.

A little bit better.

Yeah. That's a good question without a doubt we're operating in a more challenging economic environment for purchasers of trucks worshippers as you said.

Nicolas Brunet: Without a doubt, we're operating in a more challenging economic environment for the purchasers of trucks, for shippers, as you said. At the same time, we see that clients are increasingly realizing they will need to transition to zero emissions. The dialogue is really split, I would say, between some of the smaller operators looking to do a few, you know, a handful of units to try out the product. They will benefit, of course, from some of the subsidies, particularly here in Canada. And we also have dialogue with much larger players that are looking to figure out the solution at scale.

At the same time.

We see the clients are increasingly realizing they will need to transition to zero emission.

The dialogue is really split I would say between some of the smaller operators looking to do a few.

A handful of units that the trial of the product they will benefit of course from some of the subsidies, particularly here in Canada.

And we also have dialogue with much larger players that are looking to figure out the solution at scale. That's what I mean, when I say, we realized we will need to do this transition certainly during the the most active use of.

Nicolas Brunet: That's what I mean when I say they realize they will need to make this transition. And certainly, during the most active years of shipping itself, this dialogue was a little pushed aside because of the need to focus on the current operation, maximize profitability. And so we've seen a return of that dialogue.

Shipping it sounds like this dialogue was a little pushed aside because of that.

To focus on current operation maximize profitability and so we've seen a return of that dialogue it's not.

Nicolas Brunet: It's not, you know, tomorrow's demand, but it's the big demand that will drive the market. When you think about it, the truck, the electric truck market, is still in its total infancy. There are less than 1500 all-electric trucks registered in North America as of December 2023. We're one of the few players that has critical scale. We're part of this dialogue with the large and the small operators, and actually, we're the fourth largest player when you look at registration. So we're encouraged by the dialogue. Subsidies will help. We don't think they're as needed in the truck as they are in the school bus space, but they will help.

Tomorrow, the man, but it's the big demand that will drive the market. When you think about it the trucks. The electric truck market is still at its total insurgency, there's less than 1500, all electric trucks registered in North America as of December 2000, 2003.

We're one of the few players that has critical scale were part of this dialogue with the large and the small operators.

And actually with a <unk>.

Fourth.

Largest player when you look at the registration.

So we are encouraged by the dialogue subsidies will help we don't think they're as needed in the truck as they are in the school bus base, but they will help and as I mentioned this morning.

Nicolas Brunet: And as I mentioned this morning, the EPA is stepping things up quite big with a $2.6 billion funding program report that opened yesterday and for which applications are due by the end of the month. Bill, I mean, in the early spring with EPA, this time for the class six and seven, obviously, the ports are for a class A tractor. So all in all, there's there's there's certainly good. Okay, just a clarification question on the inventory comment, the 50 to 75 million, was that a kind of net number, accounting for what I suspect would be headroom for inventory as you ramp up production? Or was that somewhat of a gross comment that today you're setting at 50 to 75 million, and you could take that out?

Stepping things up quite big with a $2.6 billion funding program for parts that open yesterday and for which <unk>.

Applications are due by the end.

Bill.

Many in the in.

Early spring with Epa's. This time for the class six and seven obviously the purchase for a class a director. So all in all there is there is there are certain good movement there.

Okay.

Just just clipper could you a question of the inventory common 50 to 75 million <unk> was that a kind of a net number so accounting for.

I suspect would would be hesitant to inventory as you ramp up production or was that some of the groves comments today, you're studying at $50 million to $75 million and you can pick that up but.

All set potentially be all sorts of that as a as a ramp up production.

<unk> a working capital.

Richard Coulombe: The offset, potentially the offset to that is as you ramp up production, that would obviously be working capital and Dan Levy. And we're looking at a net reduction, $50-$25 million, considering the growth. We finished the year with $250 million in inventories.

Had one does it is no longer we're used to being in a net reduction the noxious net reduction 50, depending on my forehead.

Considering the growth like a desktop accurate in like we finished the year with $250 million of adventure east, but like I said earlier and we have some finished goods there that were smoke we know we're going to move.

In a short period of time and then we're very focused on again disciplined on raw material in the current context right now.

Richard Coulombe: Like I said earlier, we have some finished goods there that we know we are going to move in a short period of time, and then we're very focused on, again, discipline on raw materials, and the current context right now allows it, so we're really trying to bring the arts in, in more of a just-in-time approach, so that's going to be the focus, and $50-$70 can be net, in that number. Perfect That's very helpful. Thank you very much and best of luck in 2024. Thank you, Kevin.

So we're ready.

Going to agree heartburn.

Any more of it just in time approach so that that's going to be the focus and then.

E 70, a convenient.

And that number perfect that that's very helpful. Thank you very much and best of luck in 2024.

Thank you Kevin Thank you.

Oh.

The next question comes from my <unk> from D. A Davidson. Please go ahead.

Hi, good morning, Thanks for taking my question.

I think the assets every quarter. So I'll ask it again here do you do you feel like 2024 will be a year of growth for deliveries overall.

Operator: Thank you. The next question comes from Mike Shlisky from DA Davidson. Please go ahead.

Operator: Hi, good morning. Thanks for taking my questions. I think I ask this every quarter.

When you practice.

Practicing a challenge first few months here, but do you think that there'll.

They'll be growing this year.

Well My case next year speaking.

Nicolas Brunet: So I'll ask it again here. Do you feel like 2024 will be a year of growth for deliveries overall? Perhaps we're seeing a challenge, you know, in the first few months here, but do you think that you'll be growing? Well, Mike, Nick here speaking.

A lot of moving pieces and.

24, but the short of it is yes, we are aiming for in Europe growth and delivery.

When I say that moving pieces, obviously to have the order book is type does that ETS application.

And so that I mean.

Is a big driver of our deliveries for the upcoming year.

As we mentioned in the prepared remarks, we see some volatility in the next few months again driven by these these subsidy programs, but without a that we're aiming for $2000 for it to be a growth you have broken the others.

Nicolas Brunet: There are a lot of moving pieces in 2024, but the short of it is yes, we are aiming for a year of growth and delivery. When I say the moving pieces, obviously, half the order book is tied to the ZATF application. And so that is a big driver of our deliveries for the upcoming year. As we mentioned in the prepared remarks, we see some volatility in the next few months, again driven by the subsidy program. But without that, we're aiming for 2024 to be a year of growth. Great

Great.

I also want to ask about about market share, especially in school buses.

There's been a large supplier of batteries go bankrupt recently.

[noise] supply at least one of the bus makers on the <unk> side I'm I'm curious if you.

Thus far seen some sort of expansion and you're sure expect more and.

And 2024.

More than you ever expected given perhaps there's at least one company not delivering right now I'm just curious whether there's been a lot of grants switching out there in your opinion.

Nicolas Brunet: I also want to ask about market share, especially in school buses. There's been a large supplier of batteries gone bankrupt recently. They supply at least one of the bus makers on the EV side. I'm curious if you, Thus far, I've seen some expansion in your share and expect more in 2024, more than you would have expected given, perhaps, there's at least one company not delivering right now. Just curious whether there's been a lot of brands switching out there in your opinion.

Yeah, we're on the market share from forward looking to capture all the market share that we can't we just like I alluded to in trucks. When we think market share we like to stick to the facts and we look at the registration.

And by the fact that we see we are the number one player in all electric school buses in North America, and I'm talking specifically addressed.

Type CMV combined.

We of course, we saw that bankruptcy as well.

Are we seeing a shift in applications not yet but at the same time one of the things that I think will distinguish us is the extent to which we are delivering on the program specifically the EPA program, where close to 80% delivered on our applications of the first round and we think that the program moves forward.

Nicolas Brunet: Yeah, on the market share front, we're looking to capture all the market share that we can. But we, just like I alluded to in trucks, when we think about market share, we like to stick to the facts, and we look at registration. And by the stats that we see, we are the number one player in all electric school buses in North America, and I'm talking specifically about types C and D combined. And we, of course, saw that bankruptcy as well. Are we seeing a shift in applications? Not yet.

The the odm's ability to deliver rapidly will be an important factor.

Okay I'll pass it along thank you.

Thank you Mike.

Our next question is from Georgia, Jana requests from kind of culture Nosy. Please go ahead.

Nicolas Brunet: But at the same time, one of the things that I think will distinguish us is the extent to which we are delivering on the program, specifically the EPA program. We're close to 80% of the way to our allocations in the first round. And we think as the program moves forward, the OEM's ability to deliver rapidly will be an important factor. Okay, I'll pass it along.

Good morning, and thank you for taking my my questions.

I would like I know, it's a volatile environment you mentioned.

Some issues with allocations of orders, but I was wondering if you you mentioned liquidity, if you could give us sort of it in broad strokes.

Operator: Thank you. Thank you, Mike. [inaudible] Good morning, and thank you for taking my questions. I'd like to, I know it's a volatile environment, you mentioned some issues with allocations of orders, but I was wondering if, you know, you mentioned liquidity, if you could give us, sort of, in broad strokes. What you're expecting 2024 to look like from an EBITDA perspective and maybe a gross margin perspective, just so we can kind of compartmentalize what, you know, what your cash needs will be, you know, throughout the year. Hi George and Richard.

You were expecting 2024 to look like from a from an EBITDA perspective, and maybe a gross margin perspective, just so we can kind of compartmentalize what.

What your cash needs will be throughout the year. Thank you.

Hi, George is Richard Redfin now.

We don't we don't provide.

Any any guidance.

Any comments on the liquidity front.

Like I said earlier recall the year with 93 million.

Million in cash in all $52 million on a revolving SS.

Ability, we believe we have sufficient run rate 40 year key drivers and offer us in terms of liquidity, obviously, we're coming towards the end of our investment cycle right. We we we.

Richard Coulombe: Listen, you know right now we don't provide any guidance. I can, maybe, comment on the liquidity front. Like I said earlier, we close the year with $93 million, $30 million in cash, and $62 million on our revolving facility. We believe we have a sufficient run rate for the year. Key drivers for us in terms of liquidity, obviously, we're coming towards the end of our investment cycle. This year, we're looking at CATEX, which is going to be lower than $10 million.

This year, we're looking at.

They don't Capex, that's going to be lowered 10 million, we talked about the invent an entry reduction plan. They not between 50 $75 million. We continued to be very focused on overall cost control over production SG&A. We expect this trend to continue.

The percentage of so.

You started improvement over a year and that's going to continue we have a lot of initiatives I'm proud of cost savings. So so that's R. Another focus area for us and R&D same thing as we introduce a new products in the market, we see the R&D.

Richard Coulombe: We talked about the inventory reduction plan, between $50 and $75 million. We continue to be very focused on overall cost control and cost reduction. SG&A, we expect the trend to continue with the percentage of sales. I'm hoping to see some improvement year-over-year, and that will continue. We have a lot of initiatives on product cost savings, so that's another focus area for us. R&D, same thing; as we introduce new products in the market, we see the R&D spend going down. We're looking at a 30% reduction this year, so those elements make us feel really comfortable with our cash position. Hey George, maybe one additional comment as well. Obviously, the growth CATEX being behind us is a big, big thing, and you don't see that very often in the EV space, so I think it's great. Also, what we did this morning, letting go 100 people.

Been going down and we're looking at a 30% reduction this year. So so those those element makes us feel really comfortable with our definition, Hey, Georgia, maybe one additional comment as well obviously you know with the growth Capex being behind US is a big Big thing right and you don't see that very often in the space.

Space, So I think it's great and.

And also what we did this morning like you know letting go 100 people.

Obviously this is not the kind of thing that we wanted to but we're taking the action to make sure that we're protecting our liquidity without a doubt.

Thank you and maybe it's a follow up you know the previous.

Question was about market share.

<unk> one of the larger competitors in this space has talked about expecting to order about 30 to win excuse me about 30 per cent.

The orders related to at least round two of the EPA Clean School bus program.

Maybe again in broad strokes.

What would be satisfactory for you in terms of just a market share.

Marc Bedard: Obviously, this is not the kind of thing that we wanted to do, but we're taking the action to make sure that we're protecting our liquidity without a, Thank you. And maybe as a follow-up, you know, the previous question was about market share. Excuse me, one of the larger competitors in the space has talked about expecting to order about 30 to win, excuse me, about 30% of orders related to at least round two of the EPA Clean School Bus program. Maybe again, in broad strokes, you know, what would be satisfactory for you in terms of just a market share? When will the rate for those two programs be determined?

When rape and for those two programs. Thank you.

Yeah, Hey look we.

For Us a Georgia.

Expectations of winning in a program that's lottery driven right because that's what it is is is more speculative then and we're going to be here. So I'm not going to comment about specific numbers I will say you know.

We are number one player in the space by registration today by market share our market share has been more waited in Canada relative to the U S and we expect to wait we're hoping to see continued improvements and the proportion of our wins.

Nicolas Brunet: Yeah, hey, look, we... For us, George, expectations of winning in a program that's lottery-driven, right, because that's what it is, are more speculative than... We're going to be here. So I'm not going to comment about specific numbers. I will say, you know, we are the number one player in the space by registration today by market share. Our market share has been more weighted in Canada relative to the US, and we expect to see continued improvements in the proportion of our wins under the EPA program. The dialogue with the customers is very constructive, but ultimately, we'll want to talk to them about purchase orders and not, I appreciate it. Thank you. Our next question comes from Dan Levy from Barclays. Please go ahead. Good morning. Trevor Young is on for Dan today.

Under the EPA progress.

The dialogue with the customers is very constructive, but ultimately will Wanna talk with with purchase orders and not with the with.

With with these types of forward looking at them.

I appreciate it thank you.

Thank you.

The next question comes from Dan Levy from <unk>. Please go ahead.

Good morning.

For the day to day, thanks for taking the questions. So.

The order book I I can appreciate that the timing of the award.

Under the under your major.

Programs are significantly impacted by the timing of.

Operator: Thanks for taking the time to answer the question. So, looking at the order book, I can see that the timing of the awards under your major lunch programs is significantly impacted by the timing of the government subsidy programs. We're looking, I guess, we're looking for a sort of inflection in the order book, and I was just curious if you could, I know you can't guide to it, but could you quantify what we could expect as these programs act, you know, the timing aligns, and would these jumps in the order book be larger than some of the larger sequential jumps you've seen in the past? Look, could they, I guess they could, Dan, if I'm, if you look at it, essentially, again, there was a billion dollars allocated to the second round of the EPA program, and as I mentioned, 70% of that is allocated to what we call free agents, meaning it's not Lion, it's not other OEMs, it's not their dealers.

I guess the government subsidy programs, but.

Okay, I guess, we're looking for sort of inflection in the order book.

Just curious.

If you could.

<unk> guide to it but could you quantify that.

What what we could expect as the programs.

The timing of line.

Jonathan order books be larger than some of the larger sequential jumps you've seen in the past.

They I guess, they they put down.

Pardon.

If you look at it essentially again, there was a $1 billion allocated.

Located in the.

Wrapped round right around the second round DPA program.

And as I mentioned, 70% of that is allocated to what we've tossed reagents, meaning its outline.

Hotline is that other <unk>, it's not their dealers that's.

Nicolas Brunet: So it's close to 2,000 units that are, we believe, up for grabs by everyone, including us, and we're working hard at it. And then there's $500 million in the rebate program that just closed on Feb. 14, and that will be allocated in April. So when you look at it, starting in April, and for the next few months, there will be a lot of funding that could result in purchase orders for the next few months. And so, yes, the jump could potentially be bigger than we've seen in the past. I also mentioned that when these programs come out, it really is OEMs like us, or certainly we do promote these programs and make sure that the clients are aware. We file a lot of applications on behalf of clients, but more and more, that program gains maturity, and the school districts and operators are aware of the program and file on their own and then pick an OEM.

So it's close to 2000 units that that are we believe.

Up for grabs bye bye, everyone, including us and we are working hard at it.

And then there is a $500 million in the rebate program.

That is just closed in.

And 10, 40, right and so and that will be allocated in April. So when you look at it starting in April in the next few months there will be a lot of funding that can result in purchase orders for the next few months and so yes, the gentleman could potentially be bigger than we've seen in the past also mentioned that.

When these programs come out it really is like US will certainly we do make the promotion of these programs and make sure that the clients are aware, we filed a lot of applications on behalf of clients, but more and more that program gained maturity and the school districts and operators.

Are aware of the program and file on their own and then pick an oes. So there will be a lot of dollars out there dedicated the bus purchases that that are up for grabs so technically speaking absolutely yes. The the the jumps in the future could could be higher in the order books when obviously it starts in.

Nicolas Brunet: So there will be a lot of dollars out there dedicated to bus purchases that are up for grabs. So technically speaking, absolutely, yes, the jumps in the future could be higher in the order book when, obviously, it starts potentially in April and then in the fall. That's that's very helpful. Thank you. Then there's a follow-up. We've seen these reports coming out about the finalized EPA, EPA targets for light vehicles specifically, and it sounds like the emissions targets might get softened a little bit, at least through 2030. And I was just curious if there were any meaningful reads here for year-end markets. You know, I appreciate that light vehicles are a different world, but is there any reason to think that this sentiment might translate over into your realm as well?

Sensually in April and then in the subsequent months.

That's that's very helpful. Thank you then there's a follow up.

We've seen these reports coming out about the finalized.

G P. A targets for the light vehicles, specifically it sounds like the emissions targets might get softened a little bit at least 220 30 and I was just curious if there was any meaningful reads here for a year and mortgage you know I I appreciate that light vehicles, a different world but is.

Is there any.

And to think that the sentiment might translate over into into your realm as well.

Mmk rules.

Yeah.

From our standpoint, we've seen no change.

First of all especially when you look in the in the school bus space I don't I.

Nicolas Brunet: For EPA rules? From our standpoint, we've seen no change. You know, first of all, especially when you look in the school bus space, I don't, I think we're past the point of convincing, is under festival-ready. We'll get to that in a minute. Okay, so as you may or may not know, by and large, it's about lubricating our electric vehicles. What Marc said is a few years behind the school bus, for sure, but a much bigger market that I mentioned earlier.

I think we're past the point of convincing cuss.

Customers and in General Society around the benefits of electric school buses relative to the easel for a school bus application.

On top of EPA targets really Derek our state level of provincial level regulation, that's coming into place and so know what's happening in the light vehicle sector has been impacted us and in the truck space. We set it in the past the truck space serves a medium and heavy duty here is is a few years behind the schoolbus were forward.

Much bigger market as I mentioned earlier, there really is.

Marc Bedard: It really is a discussion topic that has been more active with the larger operators that really have these targets out there. There is regulation and targets as well, right then and with all these large companies who essentially need to figure out the solution going forward. So, in short, no impact as it relates to these systems. Light as Switch *** How is green up?

A discussion topic that has been more active with the large operators that really have these targets out there there's regulation there's targets as well right then.

With these large companies that essentially need to figure out the solution going forward. So in short then no impact as it relates to the.

Light duty and also with with respect to the greenhouse gas.

Operator: C d. What is the vision of the Ministry of Energy and Industry? Cûté, I would say that it's almost the same as, you know, the Aega configuration. You know, green up, I have lots of our miles all together, are complexed, and vriough jet powe gid and n o k like, you know, the 35 % target that they have for 2030. 2030 is tomorrow. So we do not see how, you know, this could decrease, and we really see that that will be the best way to achieve their goals, and that's exactly what we echo on the US side and in Europe as well. That's really helpful. I appreciate it. Our next question comes from Chris Salfa from Be Riley. Please go ahead.

Emissions, if you wanted to lower them one of the best ways to attack the <unk> duty trucks and buses you know forever bus that you're doing it like.

Taking up basically at least five five cars from the from the street so.

Really the best way to get to your goals are bringing that down the greenhouse gas emissions and when you're looking in Canada like you know the 35%.

Target that they have for 20, <unk> 2030 tomorrow. So we do not see this decrease and we.

We really see that that will be the best way to achieve their goals and that's exactly what we are echo on the on the U S side and in Europe as well.

That's really helpful. I appreciate it.

Our next question comes from that Chris Alpha from be Riley. Please go ahead.

Hey, guys. Good morning, <unk>. Thanks for taking my questions here would you be able to quantify the impact on the delay for the initial lighting D. One five vehicles.

Marc Bedard: Hey guys, good morning, and thanks for taking my questions here. Um, would you be able to quantify the impact of the delays for the initial Line D, Line 5 vehicles in the fourth quarter versus how much you were expecting versus kind of the push out there? I think it would be helpful. Yeah, Chris, obviously, you know, we cannot provide the exact figure, but you know, that was significant, right? Some of it is explaining the difference between, you know, what the street was looking at and the final number that we got at 188, which was clearly below our expectations. So, that was a mix of that and the ZDTF, but you know, for us, quality is always number one, and it's not easy to bring any new product to market. We see that. I mean, there are very few new EV products coming to market, and when you do that, you need to take your time.

Quarter, there like you know versus how much you were expecting Persian cat.

Push out there I think it would be helpful.

Yeah, Chris I mean, obviously, we cannot provide the exact the exact figure but that was.

That was significant right some of it is explaining the the difference between the.

The Street was I was looking at the final number that we got that 188, which was clearly.

Hello.

Expectations, So that was a mix up nap and <unk>.

But perhaps I mean quality is always is always number one that's not easy to bring any new products to market. We see that I mean, there's very few new GB products coming to market and when you do that if you need to take your time. So our goal was really to start delivering them by the end of the year, but.

Marc Bedard: So, our goal was really to start delivering them by the end of the year, but we've had a few challenges, like in terms of, you know, software updates and those kind of things where we felt that, you know, since those will be the first deliveries, the customers deserve the best. So, we will catch up. I mean, what we lost at the end of Q4 is going to take us two quarters to catch up, but we feel good about the quality of the product we're bringing to market, and you probably saw some feedback from some of the customers that started to receive the line at the end. It's very, very positive.

But I mean, we we've had a few challenges like in terms of software updates and and those kind of things, where we felt that can ever since those will be the first deliveries.

Customers.

Deserve the best and.

So we will catch up I mean, what we lost at the end of Q4 is going to take us two quarters to catch up but we feel good Louisville, the quality of the product, we're bringing to market and you probably saw some feedbacks also on some of the customers that started to received via the 90 and it's very very positive.

Okay.

Marc Bedard: Okay, maybe just, you know, if we take out the DTF, you know, and kind of look at the backlog, how many of the remaining school buses, all electric school buses are Line D? And, you know, can you give us any sense around the breakdown of expected timing, excluding that kind of Canadian program that is obviously out of your control? I just wanted to get a better feel for, you know, other timing delays beyond that one that we're seeing here.

Maybe just you know if we take out the GTS Ah you know kind of look at the backlog.

How many of the remaining school all electric school buses are.

<unk> can you give us any sense around you know.

Breakdown of expected timing, excluding that kind of Canadian program that is obviously out of your control I just wanted to get.

If we could get a better feel for.

No other timing delays beyond that one that we're that we're seeing here yeah, I think he called out a little bit with the <unk> for 84 for this past grant one but.

Nicolas Brunet: Yeah, I think you called out a little bit with the EPA, you know, for April with this past grant one, but, you know, kind of a broader, you know, peek at the order book, I think would be helpful. Yeah, so the majority, more than half of the order book, right, is with the ZEPF. Additional to that, the rest, Chris. I'd say the majority of that is still in the type C market. We have a supply. Thanks, I'll open the queue here. The next question is from Étienne Larochelle from Desjardins. Please go ahead.

Kind of a broader peak.

Ordered book I think would be helpful for folks.

Yeah. So the.

The the majority more than half of the the order book right is is in the.

<unk>.

Conditional to that the rest.

Chris.

I'd say still the majority of that is in the type C market we have a.

A good amount of demand for the type D and the order book, especially for a product that we haven't delivered yet.

But but the bulk of it is in the type C.

Nonetheless, we.

You generate the most demand with the vehicle when you put it on the street, which is what we're doing now and so we expect production of the type need to ramp up in demand to ramp up concurrently.

Operator: Hey, good morning, and thank you for taking my question. My first question is on the headcount cuts you announced this quarter. I'm just curious if you could provide more color on how much in OPEC savings this could translate to and if you will incur any charges for this in the upcoming quarter. Yeah, so good morning.

Okay.

Thanks, I'll I'll work with the carrier.

Thank you.

The next question is from Etienne Rochelle from day Chopin.

Please go ahead.

Hey, good morning, and thank you for taking my question and my first question is on the hip down to cut you announced this quarter I'm. Just curious if you could provide more color on how much an <unk> savings prescription please do and if you're willing to try new charges for the upcoming quarters.

Yeah. So.

Unknown Executive: The account number is 100 people that we've let go, and most of them are on the night shift. So basically, at this point, we're temporarily eliminating the night shift. And a lot of them are manufacturing workers, but some of them are overhead as well.

Good morning, <unk> is one of the people that we we've we've let them and most of them are on the night shift.

So basically at this point, where it's and poorly eliminating the the.

The night shift.

And.

A lot of them are manufacturing people.

But some of them are overhead.

Unknown Executive: So basically, you know, we're reducing the overhead at the same time. So is that your question? I missed part of the second part of your question. Yeah, so I was just curious if you could provide more solar and how much in OPEX savings this could translate to and if it would incur any charges in the upcoming quarter. It's really good for that.

As well, so basically we're reducing the overhead at.

At the same time.

So is that your question I missed part of your the second part of your question.

Yeah. So I was just curious.

<unk> how much in OPEC savings, it's good that translates to an institute nature.

You would enter any charges.

<unk> really good for them and the 150, you previously announced.

Unknown Executive: And the 150 you previously announced back in December. Yeah, well, the 150. We're already, obviously, you know, benefiting from this cap. I mean, there's some, you know, in addition to the savings, obviously, we're making on a temporary basis because the goal is for those employees to go back to work as soon as we get, you know, approvals from the DTF for the delivery of our vehicles. So, we still hope that this will be the case. If not, the annual saving that we're looking at with this is around, you know, $8 million US.

But in December.

Yeah, well the 150 were already obviously benefiting from this.

This this cap I mean, there are some.

In addition to be.

So the savings obviously, we're making on a temporary basis because the goal is to is to is to.

For those employees to go back to work as soon as we get you know a <unk>.

<unk> from the <unk> for the delivery of our vehicles. So we still hope that this will be the case if not <unk>.

The annual saving that we're looking at with this is around $8 million U S. So that's the kind of saving we're looking at and you're excluding the payroll and obviously the other expenses related to the night shift, but the real goal is to get great news from <unk> bring back our people.

Unknown Executive: So, that's the kind of saving we're looking at when you're including the payroll and, obviously, the other expenses related to the night shift. But the real goal is to get great news from the ZDTF and bring back our people. Got it. Thank you for the cover. And maybe as a follow-up, with supply chain issues and shipping costs easing over the last couple of months, I'm just curious if you've seen a reduction in your deal of material costs. Well, we saw some reduction a lot because of all the initiatives we have that Richard was alluding to in the past. He was saying that we're working a lot on the bill of materials and making savings. So there is some of that.

Got it thank you for color and maybe as a follow up with the <unk> and the shipping cost using over the last couple of months I'm. Just curious if you've seen a reduction of your bill as much as you can.

Well, we saw some reduction.

<unk> because of all the initiated as we have that Richard was alluding to in the past.

He was saying that we are working a lot on the bill of materials I mean savings.

So there is some of that.

Obviously, you know with the with the amount of inventory that we have it could take a little while as well to start seeing the benefit of those cost savings because we have $250 million of inventory and their real goal is obviously to use that.

Unknown Executive: Obviously, with the amount of inventory that we have, it could take a little while as well to start seeing the benefit of those cost savings because we have $250 million in inventory, and the real goal is obviously to use that inventory as soon as possible to get the benefit of that $50 to $75 million inventory reduction that Richard was talking about. But this is top of mind for us to keep reducing the cost of the bill of materials, and we have people working full-time on that without any compromise on quality.

Inventory as soon as possible to get the benefit of 50 to 75 million others.

An inventory reduction that Richards was talking about but this is top of mind for us to keep reducing the cost.

The the bill of material and we have people working full time on that without any compromise.

Unknown Executive: Got it. Thank you for taking my questions, President. Thank you. If there are any further questions, please press star 1 on your telephone keypad now. I have no further questions on the call at this time, so I'll hand the floor back to you. Thank you, everyone, for joining the call today. We really look forward to continuing the discussion, and feel free to contact me for any follow-up questions you may have. Have a nice day. Thank you. This concludes today's conference call. You may now disconnect your lines.

On on Unplugged.

Got it. Thank you for taking my questions are <unk>.

Thank you.

If there are any further questions. Please press star one on your telephone keypad now.

We have no further questions on the call at this time, so I'll handle global tears.

Thank you everyone for joining liquid today, we really look forward to continue the discussion and feel free to contact me for any sort of question U mass and have a nice day.

Thank you. This concludes today's conference call you may not will disconnect your lines.

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