The Lion Electric Company (LEV) Q3 2024 Earnings Call Transcript
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Overview
Basic Financial Performance (2): Quarterly revenue and gross margin are down, indicating financial struggles. Product Development and Business Update (3): Delays in production and regulatory challenges, but potential for future growth. Market Strategy (3): Plans to capture market share, but competitive pressures and economic factors present risks. Expenses and Financial Health (2): Liquidity risks and increased costs despite cost-cutting. Shareholder Return Plan (2): No significant positive announcements. Q&A reveals concerns about liquidity and management's unclear responses. Overall, negative sentiment due to financial instability and uncertainty.
Key Financial Performance
Quarterly Revenue $30.6 million, down from previous year due to lower unit sales and increased manufacturing costs.
Gross Margins Negative $16 million, improved from negative $19.5 million year-over-year due to cost-cutting measures.
SG&A Expenses $13.1 million, down $3.7 million from prior year, reflecting cost reduction initiatives.
CapEx $400,000, down approximately $16 million from last year, indicating reduced capital expenditures.
R&D Expenses $6 million, down approximately $9 million from last year, showing a decrease in research and development costs.
Available Liquidity Approximately $27 million as of September 30, indicating ongoing liquidity challenges.
Inventory Reduction $15 million reduction in Q3 and $35 million year-to-date, aligning with the goal of a $50 million reduction for 2024.
Order Book Value Approximately $420 million, down due to the withdrawal of 515 bus orders related to the ZETF program.
Line Energy Order Book Approximately $8 million, indicating ongoing demand for energy solutions.
Operating Highlights
New Product Development: Continued ramp-up of production for Lion's proprietary battery packs, with positive customer feedback on the new platform.
Commercial Production Delay: Commercial production of the Lion AT truck has been pushed to 2025 due to headcount reductions and focus on liquidity.
Order Book Status: As of November 6, 2024, Lion's vehicle order book stands at 1,590 vehicles, valued at approximately $420 million, with a decrease due to the withdrawal of 515 bus orders related to the ZETF program.
EPA Clean School Bus Program: Over 275 purchase orders related to the U.S. EPA Clean School Bus program are in the order book, with a new funding round announced for up to $965 million.
Cost Reduction Initiatives: Implemented headcount reductions and other cost-saving measures expected to yield annual savings of approximately $65 million.
Inventory Reduction: Achieved a $15 million reduction in inventory in Q3, with a total of $35 million year-to-date, aiming for a $50 million reduction in 2024.
Liquidity Position: Actively seeking additional financing options to strengthen financial position and address upcoming debt maturities.
Production Strategy: Adopted a batch size manufacturing approach to minimize expenditures and cash burn while maintaining market leadership.
Risk or Challenges
Liquidity Risks: The company faces significant pressure on cash flow and liquidity, with uncertainty about its ability to continue as a going concern over the next 12 months if no additional funding is raised.
Regulatory Delays: Delays associated with the Canadian Federal ZETF program and the timing of the U.S. EPA program have negatively impacted revenues and production cadence.
Order Book Reduction: The company proactively removed 515 bus orders from its order book due to uncertainty related to the ZETF program, which may affect future revenue.
Production Challenges: Headcount reductions and a focus on preserving liquidity have led to a slowdown in production cadence, impacting delivery timelines.
Economic Factors: The company is navigating a challenging economic environment, with increased manufacturing costs and lower-than-expected sales volumes affecting profitability.
Funding Dependency: The company is reliant on government subsidies and funding programs, which may be subject to changes in administration and policy.
Inventory Management: While the company has made progress in reducing inventory, the overall objective has been adjusted downward due to lower sales expectations.
Guidance & Outlook
Cost Reduction Initiatives: Implemented headcount reductions and other cost reduction initiatives expected to result in annual savings of approximately $65 million.
Batch Size Manufacturing: Adopted a batch size manufacturing approach to minimize expenditures and cash burn while maintaining market leadership.
Subleasing Production Facility: Launched a process to sublease a substantial portion of the production facility to reduce expenditures.
Battery Pack Sales: Plan to start selling battery packs to third parties beginning in 2025.
Inventory Reduction: Achieved a $15 million reduction in Q3 and a $35 million year-to-date reduction, targeting a total of $50 million in 2024.
Revenue Expectations: Q3 revenue recorded at $30.6 million, impacted by lower unit sales and production cadence.
Order Book Value: Current order book stands at 1,590 vehicles with a total order value of approximately $420 million.
Future Deliveries: Expect remaining units from a significant order to be delivered over 2024 and 2025.
Liquidity Position: Available liquidity as of September 30 is approximately $27 million, with ongoing efforts to secure additional financing.
CapEx and R&D: CapEx reduced to $400,000 and R&D to $6 million, reflecting a significant decrease from previous years.
Shareholder Return Plan
Expense Reimbursement Payments: $30 million obtained under the grant ramp.
Order Book Value: Approximately $420 million, consisting of 1,590 vehicles.
Inventory Reduction Plan: $50 million inventory reduction targeted for 2024.
Funding from EPA Clean School Bus Program: Up to $965 million available in the latest round.
Funding per Bus: $325,000 for priority districts and $170,000 for other eligible districts.
Key Q&A
Earnings Word Cloud
LEV Transcript
Basic Financial Performance (2): Quarterly revenue and gross margin are down, indicating financial struggles. Product Development and Business Update (3): Delays in production and regulatory challenges, but potential for future growth. Market Strategy (3): Plans to capture market share, but competitive pressures and economic factors present risks. Expenses and Financial Health (2): Liquidity risks and increased costs despite cost-cutting. Shareholder Return Plan (2): No significant positive announcements. Q&A reveals concerns about liquidity and management's unclear responses. Overall, negative sentiment due to financial instability and uncertainty.
The earnings call highlights several challenges: declining revenues, negative gross margins, and significant EBITDA losses. Despite cost control measures, workforce reductions, and potential funding from EPA programs, the overall financial health is weak. The Q&A session revealed slow electric truck demand and unclear management responses on funding reallocations. While there are efforts to improve cost structure and inventory, the lack of a shareholder return plan and negative booking in Q2 suggest continued investor concerns, likely resulting in a negative stock price movement.
LEV Report
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