Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- The Lion Electric Co (LEV, Financial) has implemented cost reduction initiatives expected to result in annualized savings of approximately $65 million.
- The company has launched a formal process to sublease a substantial portion of its joint production facility, aiming to reduce expenditures while maintaining production capacity.
- LEV has seen positive movements in both the ZETF and EPA programs, which are expected to support future revenue growth.
- The company achieved a $15 million inventory reduction in Q3 and a $35 million year-to-date reduction, aligning with its goal of a $50 million reduction in 2024.
- LEV continues to ramp up production of its LionC school buses with proprietary battery packs, receiving positive feedback from customers.
Negative Points
- LEV is facing significant cash flow and liquidity challenges, with a growing concern note indicating uncertainty about its ability to continue as a going concern over the next 12 months without additional funding.
- The company experienced a decline in deliveries due to delays with the ZETF program and timing of EPA-related deliveries, impacting revenues.
- LEV's order book decreased due to the withdrawal of 515 bus orders related to the ZETF program and delays in the Lion8T truck production.
- Q3 gross margins were negative $16 million, and EBITDA was negative $19.5 million, reflecting lower revenues and increased manufacturing costs.
- The company is actively seeking additional financing and working with debt holders to strengthen its financial position, indicating ongoing financial instability.
Q & A Highlights
Q: How might the new U.S. administration impact programs subsidizing electric school buses and commercial vehicles?
A: Marc André Pagé, Chief Customer Officer, stated that it's too early to determine the exact impact. However, the EPA Clean School Bus Program, originating from the bipartisan infrastructure law in 2021, is progressing well. Additionally, there are significant subsidies at the state level in places like California, Texas, Michigan, Colorado, Illinois, and New York.
Q: What happens to the 515 units removed from the order book related to the ZETF program?
A: Marc André Pagé explained that this removal was not due to customer cancellations but rather an adjustment based on the current timeline of the ZETF program. The company intends to work with clients to potentially bring these units back into the order book.
Q: Are you lowering your list price to match subsidies, or are you finding additional subsidies for customers?
A: Marc Bedard, CEO, mentioned that the EPA program subsidies are adequate and sometimes generous. The company aims to be nimble with pricing, aligning it with volume and competitive dynamics. The goal is to maintain attractive total cost of ownership for operators.
Q: What is the potential for vehicle deployment under current programs, and what market share does Lion Electric target?
A: Nicolas Brunet, CFO, confirmed that over 10,000 electric school buses could be deployed by 2027 under various EPA rounds. Lion Electric aims to capture a significant market share, being among the leaders in North America for electric school buses.
Q: How easy would it be to increase production capacity if orders were received?
A: Marc André Pagé noted that while the company has the necessary equipment, managing liquidity is a priority. However, they have the capacity to ramp up production when needed.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
