MONTREAL, July 31,
2024 /PRNewswire/ - The Lion Electric Company
(NYSE: LEV) (TSX: LEV) ("Lion" or the "Company"), a leading
manufacturer of all-electric medium and heavy-duty urban vehicles,
today announced its financial and operating results for the second
quarter of fiscal year 2024, which ended on June 30, 2024.
Lion reports its results in US dollars and in accordance with
International Financial Reporting Standards ("IFRS").
Q2 2024 FINANCIAL HIGHLIGHTS
- Revenue of $30.3 million, down
$27.7 million, as compared to
$58.0 million in Q2 2023.
- Delivery of 101 vehicles, a decrease of 98 vehicles, as
compared to the 199 delivered in Q2 2023. Less vehicles were
delivered due to the impact of the timing of EPA rounds and the
continued delays and challenges associated with the granting of
subsidies related to the ZETF program. Deliveries were also
impacted by a slowdown in the Company's production cadence due to
the integration of its Lion MD batteries onto its vehicles and the
continued ramp-up of production of the Lion5 and LionD
platforms.
- Gross loss of $15.2 million,
reflecting higher manufacturing costs due to the introduction of
new products and to the impact of lower sales volume, as compared
to gross profit of $0.4 million in Q2
2023.
- Net loss of $19.3 million, as
compared to net loss of $11.8 million
in Q2 2023.
- Adjusted EBITDA1 of negative $20.6 million, as compared to negative
$9.7 million in Q2 2023.
- Additions to property, plant and equipment of $1.3 million, down $17.8
million, as compared to $19.1
million in Q2 2023.
- Additions to intangible assets, which mainly consist of vehicle
and battery development activities, amounted to $10.6 million, ($9.4
million net of government assistance received), down
$7.3 million as compared to
$17.9 million in Q2 2023.
|
________________________________
|
|
1 Adjusted
EBITDA is a non-IFRS financial measure. See "Non-IFRS Measures and
Other Performance Metrics" section of this press
release.
|
BUSINESS UPDATES
- More than 2,100 vehicles on the road, with over 28 million
miles driven (over 46 million kilometers).
- Vehicle order book2 of 1,994 all-electric medium-
and heavy-duty urban vehicles as of July 30,
2024, consisting of 190 trucks and 1,804 buses, representing
a combined total order value of approximately $475 million based on management's
estimates.
- LionEnergy order book of 394 charging stations and related
services as of July 30, 2024,
representing a combined total order value of approximately
$9 million.
- 12 experience centers in operation in the United States and Canada.
- Commercial launch of our Lion8 Tractor truck at the ACT
conference in May
- Successfully completed the final certification for heavy duty
Lion battery packs, which will be integrated into our Lion8 Tractor
trucks
On July 31, 2024, the Company
announced an action plan (the "Action Plan") intended to streamline
its operations, further align its cost structure with current
demand and improve its liquidity position and ability to reach its
profitability goals. The Action Plan includes the following
actions and initiatives:
- a reduction of the Company's workforce by 30% (representing
approximately 300 employees) across Canada and the
United States and impacting all areas of the organization,
which is expected to be implemented over the upcoming days and will
result in mostly temporary lay offs (such initiative being expected
to result in annualized costs savings for the Company of up to
approximately $25 million, assuming
that employees temporarily laid off are not re-hired);
- adjusting the Company's truck manufacturing operations in light
of a lower market demand than initially anticipated for
all-electric trucks, including by introducing a batch-size
manufacturing approach for trucks directly aligned with the
Company's order book;
- the creation of a new product line through which the Company
will sell its battery packs to third parties;
- a process to optimize usage of the Company's facilities,
including the potential sublease of a significant portion of its
Joliet Facility and certain experience centers throughout
Canada and the United States; and
- the implementation of an overall efficiency improvement plan to
further reduce other operational expenses, such as third-party
logistics costs, consultant costs, and other selling and
administrative expenditures.
|
________________________________
|
|
2 See
"Non-IFRS Measures and Other Performance Metrics" section of this
press release. The Company's vehicle and charging stations order
book is determined by management based on purchase orders that have
been signed, orders that have been formally confirmed by clients or
products in respect of which formal joint applications for
governmental programs, subsidies or incentives have been made by
the applicable clients and the Company. The order book is expressed
as a number of units or a total dollar value, which dollar value is
determined based on the pricing of each unit included in the order
book. The vehicles included in the vehicle order book as of
July 30, 2024 provided for a delivery period ranging from a
few months to the end of the year ending December 31, 2028, with
substantially all of such vehicles currently providing for
deliveries before the end of the year ending December 31, 2025,
which corresponds to the latest date by which claims are required
to be made according to the current eligibility criteria of the
ZETF, unless otherwise agreed by Infrastructure Canada. In
addition, substantially all of the vehicle orders included in the
order book are subject to the granting of governmental subsidies
and incentives, including programs in respect of which applications
relating to vehicles of Lion have not yet been fully processed to
date. The processing times of governmental programs, subsidies and
incentives are also subject to important variations. There has been
in the past and the Company expects there will continue to be
variances between the expected delivery periods of orders and the
actual delivery times, and certain delays could be significant.
Also, there has been in the past and the Company expects there will
continue to be variances in the eligibility criteria of the various
programs, subsidies and incentives introduced by governmental
authorities, including in their interpretation and application.
Such variances or delays could result in the loss of a subsidy or
incentive and/or in the cancellation of certain orders, in whole or
in part. The Company's presentation of the order book should not be
construed as a representation by the Company that the vehicles and
charging stations included in its order book will translate into
actual sales.
|
On July 30, 2024, the Company and
the lenders under the Revolving Credit Agreement agreed to certain
accommodations relating to the temporary inclusion of additional
assets in the borrowing base until August
16, 2024.
"Despite the important challenges the electric vehicle market is
currently facing, Lion has been able to realize major headway in
the recent rounds of the EPA program, which should bring
significant positive momentum to our company, and also made
important progress in the last quarter, such as the commercial
launch of our Lion8 Tractor and the certification of our
LionBattery HD pack" stated Marc
Bedard, CEO-Founder of Lion. "Transition to electric is
taking longer than initially expected, but transportation
electrification is here to stay. It is with that mindset that we
have put together an action plan to adjust our cost structure to
enable us to continue to support the increasing electric school bus
demand and maintain our leadership position, while allowing us to
keep supporting the truck operators in their electric transition
and focus on our profitability objectives," he added.
SELECT EXPLANATIONS ON RESULTS OF OPERATIONS FOR THE SECOND
QUARTER OF FISCAL YEAR 2024
Revenue
For the three months ended June 30, 2024, revenue amounted to $30.3 million, a decrease of $27.7 million, compared to the corresponding
period in the prior year. The decrease in revenue was due to a
decrease in vehicle sales volume of 98 units, from 199 units (166
school buses and 33 trucks; 171 vehicles in Canada and 28 vehicles in the U.S.) for the
three months ended June 30, 2023, to
101 units (95 school buses and 6 trucks; 84 vehicles in
Canada and 17 vehicles in the
U.S.) for the three months ended June 30,
2024. The decrease in vehicle sales volume was primarily
attributable to the impact of the timing of EPA rounds and the
continued delays and challenges associated with the granting of
subsidies related to the ZETF program, as well as the impact on the
Company's production cadence due to the integration of its Lion MD
batteries onto its vehicles and the continued ramp-up of production
of the Lion5 and LionD platforms.
For the six months ended June 30, 2024, revenue amounted to $85.8 million, a decrease of $27.0 million, compared to the six months ended
June 30, 2023. The decrease in
revenue was due to a decrease in vehicle sales volume of 122 units,
from 419 units (373 school buses and 46 trucks; 386 vehicles in
Canada and 33 vehicles in the
U.S.) for the six months ended June 30,
2023, to 297 units (279 school buses and 18 trucks; 249
vehicles in Canada and 48 vehicles
in the U.S.) for the six months ended June
30, 2024. The decrease in vehicle sales volume was primarily
attributable to the impact of the timing of EPA rounds, the
continued delays and challenges associated with the granting of
subsidies related to the ZETF program, as well as the impact on the
Company's production cadence of the integration of its Lion MD
batteries onto its vehicles and the continued ramp-up of production
of the Lion5 and LionD platforms.
Cost of Sales
For the three months ended June 30, 2024, cost of sales amounted to
$45.5 million, representing a
decrease of $12.1 million, compared
to the corresponding period in the prior year. The decrease was
primarily due to lower sales volumes, partially offset by increased
manufacturing costs related to the ramp-up of the new products
(LionD, Lion5, and the Lion battery packs).
For the six months ended June 30, 2024, cost of sales amounted to
$112.1 million, representing a
decrease of $2.4 million, compared to
the six months ended June 30, 2023.
The decrease was primarily due to lower sales volumes, partially
offset by increased manufacturing costs related to the ramp-up of
the new products (LionD, Lion5, and the Lion battery packs).
Gross Profit (Loss)
For the three months ended June 30, 2024, gross loss increased by
$15.6 million to negative
$15.2 million, compared to positive
$0.4 million for the three months
ended June 30, 2023. The gross loss
was primarily due to increased manufacturing costs related to the
ramp-up of the new products (LionD, Lion5, and the Lion battery
packs).
For the six months ended June 30, 2024, gross loss increased by
$24.5 million to negative
$26.4 million, compared to negative
$1.8 million for the six months ended
June 30, 2023. The increase in the
gross loss was primarily due to increased manufacturing costs
related to the ramp-up of the new products (LionD, Lion5, and the
Lion battery packs).
Administrative Expenses
For the three months ended June 30, 2024, administrative expenses decreased
by $1.5 million, from $12.5 million for the corresponding period in the
prior year, to $10.9 million.
Administrative expenses for the three months ended June 30, 2024 included $0.4 million of non-cash share-based
compensation, compared to $1.6
million for the three months ended June 30, 2023. Excluding the impact of non-cash
share-based compensation, administrative expenses decreased from
$10.9 million for the three months
ended June 30, 2023, to $10.5 million for three months ended June 30, 2024. The decrease was mainly due to a
decrease in expenses and a lower headcount, both resulting from the
workforce reduction and cost reduction initiatives implemented in
November 2023 and April 2024, partially offset by higher
professional fees.
For the six months ended June 30, 2024, administrative expenses decreased
by $3.4 million, from $25.5 million for the six months ended
June 30, 2023, to $22.1 million. Administrative expenses for the
six months ended June 30, 2024
included $0.7 million of non-cash
share-based compensation, compared to $2.7
million for the six months ended June
30, 2023. Excluding the impact of non-cash share-based
compensation, administrative expenses decreased from $22.8 million for the six months ended
June 30, 2023, to $21.3 million for six months ended June 30, 2024. The decrease was mainly due to a
decrease in expenses and a lower headcount, both resulting from the
workforce reduction and cost reduction initiatives implemented in
November 2023 and April 2024, partially offset by higher
professional fees.
Selling Expenses
For the three months ended June 30, 2024, selling expenses decreased by
$1.2 million, from $5.5 million for the three months ended
June 30, 2023, to $4.3 million. Selling expenses for the three
months ended June 30, 2024 included
$0.1 million of non-cash share-based
compensation, compared to $0.4
million for the three months ended June 30, 2023. Excluding the impact of non-cash
share-based compensation, selling expenses decreased from
$5.0 million for the three months
ended June 30, 2023, to $4.2 million for three months ended June 30, 2024. The decrease was primarily due to
streamlined selling related expenses, including lower headcount and
marketing costs resulting from the workforce reduction and cost
reduction initiatives implemented in November 2023 and April
2024.
For the six months ended June 30, 2024, selling expenses decreased by
$3.3 million, from $11.3 million for the six months ended
June 30, 2023, to $8.0 million. Selling expenses for the six months
ended June 30, 2024 included
$0.1 million of non-cash share-based
compensation, compared to $0.8
million for the six months ended June
30, 2023. Excluding the impact of non-cash share-based
compensation, selling expenses decreased from $10.5 million for the six months ended
June 30, 2023, to $7.9 million for six months ended June 30, 2024. The decrease was primarily due to
streamlined selling related expenses, including lower headcount and
marketing costs resulting from the workforce reduction and cost
reduction initiatives implemented in November 2023 and April
2024.
Restructuring Costs
Restructuring costs of $1.4 million for the three and six months ended
June 30, 2024 are comprised mainly of severance costs related
to the workforce reduction announced on April 18, 2024. No such restructuring costs were
incurred for the three and six months ended June 30, 2023.
Finance Costs
For the three months ended June 30, 2024, finance costs increased by
$10.3 million, from $2.0 million for the three months ended
June 30, 2023, to $12.3 million for the three months ended
June 30, 2024. Finance costs for the
three months ended June 30, 2024 were
net of $0.4 million of capitalized
borrowing costs, compared to $1.4
million for the three months ended June 30, 2023. Excluding the impact of
capitalized borrowing costs, finance costs increased by
$9.3 million compared to the three
months ended June 30, 2023. The
increase was driven primarily by higher interest expense on
long-term debt, due to higher average debt outstanding during the
second quarter of fiscal 2024 relating to borrowings made under the
Revolving Credit Agreement, the IQ Loan, the SIF Loan, the
Finalta-CDPQ Loan Agreement, and the Supplier Credit Facility (as
such terms are defined below), interest (including interest paid in
kind with respect to the Convertible Debentures) and accretion
expense as well as financing costs related to the Convertible
Debentures and Non-Convertible Debentures issued in July 2023, and an increase in interest costs
related to lease liabilities. Finance charges for the three months
ended June 30, 2024 included non-cash
charges of $5.5 million related to
interest paid in kind with respect to the Convertible Debentures
and accretion expense.
For the six months ended June 30, 2024, finance costs increased by
$19.5 million, from $3.4 million for the six months ended
June 30, 2023, to $22.9 million for the six months ended
June 30, 2024. Finance costs for the
six months ended June 30, 2024 were
net of $0.7 million of capitalized
borrowing costs, compared to $3.1
million for the six months ended June
30, 2023. Excluding the impact of capitalized borrowing
costs, finance costs increased by $17.1 million compared to the six months
ended June 30, 2023. The increase was
driven primarily by higher interest expense on long-term debt, due
to higher average debt outstanding during the first half of fiscal
2024 relating to borrowings made under the Revolving Credit
Agreement, the IQ Loan, the SIF Loan, the Finalta-CDPQ Loan
Agreement, and the Supplier Credit Facility (as such terms are
defined below), interest (including interest paid in kind with
respect to the Convertible Debentures) and accretion expense as
well as financing costs related to the Convertible Debentures and
Non-Convertible Debentures issued in July
2023, and an increase in interest costs related to lease
liabilities, including for the Battery Plant. Finance charges for
the six months ended June 30, 2024
included non-cash charges of $11.0
million related to interest paid in kind with respect to the
Convertible Debentures and accretion expense.
Foreign Exchange Loss (Gain)
Foreign exchange loss (gain) relates
primarily to the revaluation of net monetary assets denominated in
foreign currencies to the functional currencies of the related Lion
entities. For the three and six months ended June 30, 2024, foreign exchange loss was
$1.0 million and $3.5 million respectively, compared to gains of
$1.8 million and $3.0 million for the three and six months ended
June 30, 2023, respectively, related primarily to the impact
of changes in foreign currency rates (impact of changes in the
Canadian dollar relative to the U.S. dollar).
Change in Fair Value of Conversion Options on Convertible
Debt Instruments
For the three and six months ended
June 30, 2024, change in fair value of conversion options on
convertible debt instruments resulted in a gain of
$12.5 million and $23.2 million, respectively, and was related to
the revaluation of the conversion options on the Convertible
Debentures issued in July 2023
resulting mainly from the decrease in the market price of Lion
equity as compared to the previous valuations.
Change in Fair Value of Share Warrant
Obligations
Change in fair value of share warrant
obligations moved from a gain of $6.0
million for the three months ended June 30, 2023, to a gain of $13.3 million, for the three months ended
June 30, 2024. The gain for the three
months ended June 30, 2024 was
related to the Specific Customer Warrants, the public and private
Business Combination Warrants, the 2022 Warrants, and the
July 2023 Warrants, and resulted
mainly from the decrease in the market price of Lion equity as
compared to the previous valuations.
Change in fair value of share warrant
obligations moved from a gain of $11.7
million for the six months ended June
30, 2023, to a gain of $20.1
million, for the six months ended June 30, 2024. The gain for the six months ended
June 30, 2024 was related to the
Specific Customer Warrants, the public and private Business
Combination Warrants, the 2022 Warrants, and the July 2023 Warrants, and resulted mainly from the
decrease in the market price of Lion equity as compared to the
previous valuations.
Net Loss
The net loss of $19.3
million for the three months ended June 30, 2024 as compared to the net loss of
$11.8 million for the same period
prior year was mainly due to the higher gross loss and higher
finance costs, partially offset by the impact of the reduction in
administrative and selling expenses as well as higher gains related
to non-cash decrease in the fair value of share warrant obligations
and the conversion options on convertible debt instrument.
The net loss of $41.0
million for the six months ended June
30, 2024 as compared to the net loss of $27.4 million for the same period prior year was
mainly due to the higher gross loss and higher finance costs,
partially offset by the impact of the reduction in administrative
and selling expenses as well as higher gains related to non-cash
decrease in the fair value of share warrant obligations and the
conversion options on convertible debt instrument.
Continued Listing Standard Notice from the New York Stock
Exchange
The Company also announced that on July
17, 2024, it received notice (the "Notice") from the New
York Stock Exchange (the "NYSE") that, as of July 16, 2024, it was not in compliance with
Section 802.01C of the NYSE Listed Company Manual because the
average closing price of the Company's common stock was less than
$1.00 per share over a consecutive 30
trading-day period.
In accordance with applicable NYSE rules, the Company notified
the NYSE of its intent to regain compliance with Rule 802.01C and
return to compliance with the applicable NYSE continued listing
standards.
The Company can regain compliance at any time within a six-month
cure period following its receipt of the Notice if, on the last
trading day of any calendar month during such cure period, the
Company has both: (i) a closing share price of at least
$1.00 and (ii) an average closing
share price of at least $1.00 over
the 30 trading-day period ending on the last trading day of the
applicable calendar month.
The Company is considering all available options to regain
compliance with the NYSE's continued listing standards, including,
but not limited to, taking actions that are subject to shareholder
approval no later than at the Company's next annual meeting of
shareholders.
The Notice has no immediate impact on the listing of the
Company's common stock, which will continue to be listed and traded
on the NYSE during such cure period, subject to the Company's
compliance with other NYSE continued listing standards. The Common
Stock will continue to trade under the symbol "LEV," but will have
an added designation of ".BC" to indicate that the Company
currently is not in compliance with the NYSE's continued listing
requirements. If the Company is unable to regain compliance during
the cure period, the NYSE may initiate procedures to suspend and
delist the Common Stock
Furthermore, the Notice is not anticipated to impact the ongoing
business operations of the Company or its reporting requirements
with the U.S. Securities and Exchange Commission.
CONFERENCE CALL
A conference call and webcast will be held on July 31,
2024, at 8:30 a.m. (Eastern Time) to
discuss the results. To participate in the conference call, please
dial (404) 975-4839 or (833) 470-1428 (toll free) using the
Access Code 940640. An investor presentation and a live webcast of
the conference call will also be available at
www.thelionelectric.com under the "Events and Presentations" page
of the "Investors" section. An archive of the event will be
available for a period of time shortly after the conference
call.
FINANCIAL REPORT
This release should be read together with the 2024 second
quarter financial report, including the unaudited condensed interim
consolidated financial statements of the Company and the related
notes as at June 30, 2024 and for the three and six months
ended June 30, 2024 and 2023, and the
related management discussion and analysis ("MD&A"), which will
be filed by the Company with applicable Canadian securities
regulatory authorities and with the U.S. Securities and Exchange
Commission, and which will be available on SEDAR+ as well as on our
website at www.thelionelectric.com. Capitalized terms not otherwise
defined herein shall have the meaning ascribed to them in the
MD&A.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at
June 30, 2024 and December 31, 2023
(in US
dollars)
|
(Unaudited)
|
|
|
|
Jun 30,
2024
|
|
Dec 31, 2023
|
|
$
|
|
$
|
|
ASSETS
|
|
|
|
|
Current
|
|
|
|
|
Cash
|
2,002,741
|
|
29,892,966
|
|
Accounts
receivable
|
58,542,074
|
|
75,641,780
|
|
Inventories
|
230,018,902
|
|
249,606,756
|
|
Prepaid expenses and
other current assets
|
1,860,117
|
|
1,553,276
|
|
Current
assets
|
292,423,834
|
|
356,694,778
|
|
Non-current
|
|
|
|
|
Other non-current
assets
|
7,646,954
|
|
6,994,815
|
|
Property, plant and
equipment
|
190,020,538
|
|
198,536,683
|
|
Right-of-use
assets
|
85,697,681
|
|
89,663,139
|
|
Intangible
assets
|
183,052,914
|
|
175,703,257
|
|
Contract
asset
|
13,072,979
|
|
13,528,646
|
|
Non-current
assets
|
479,491,066
|
|
484,426,540
|
|
Total
assets
|
771,914,900
|
|
841,121,318
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
Current
|
|
|
|
|
Trade and other
payables
|
66,758,623
|
|
92,424,961
|
|
Deferred revenue and
other deferred liabilities
|
10,473,496
|
|
18,267,139
|
|
Current portion of
long-term debt and other debts
|
31,886,443
|
|
27,056,476
|
|
Current portion of
lease liabilities
|
8,236,230
|
|
7,984,563
|
|
Current
liabilities
|
117,354,792
|
|
145,733,139
|
|
Non-current
|
|
|
|
|
Long-term debt and
other debts
|
247,688,441
|
|
197,885,889
|
|
Lease
liabilities
|
81,167,262
|
|
83,972,023
|
|
Share warrant
obligations
|
8,579,583
|
|
29,582,203
|
|
Conversion options on
convertible debt instruments
|
6,026,498
|
|
25,034,073
|
|
Non-current
liabilities
|
343,461,784
|
|
336,474,188
|
|
Total
liabilities
|
460,816,576
|
|
482,207,327
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
Share
capital
|
489,454,628
|
|
489,362,920
|
|
Contributed
surplus
|
140,757,712
|
|
139,569,185
|
|
Deficit
|
(296,708,772)
|
|
(255,746,097)
|
|
Cumulative translation
adjustment
|
(22,405,244)
|
|
(14,272,017)
|
|
Total shareholders'
equity
|
311,098,324
|
|
358,913,991
|
|
Total shareholders'
equity and liabilities
|
771,914,900
|
|
841,121,318
|
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE
EARNINGS
For the three and six months ended June 30, 2024 and 2023
(in US
dollars)
|
(Unaudited)
|
|
(Unaudited)
|
|
Three months
ended
|
|
Six months
ended
|
|
Jun 30,
2024
|
|
Jun 30,
2023
|
|
Jun 30,
2024
|
|
Jun 30,
2023
|
|
$
|
|
$
|
|
$
|
|
$
|
|
Revenue
|
30,276,027
|
|
58,015,843
|
|
85,756,916
|
|
112,719,248
|
|
Cost of
sales
|
45,489,617
|
|
57,596,937
|
|
112,114,193
|
|
114,557,630
|
|
Gross profit
(loss)
|
(15,213,590)
|
|
418,906
|
|
(26,357,277)
|
|
(1,838,382)
|
|
|
|
|
|
|
|
|
|
Administrative
expenses
|
10,944,160
|
|
12,478,787
|
|
22,061,493
|
|
25,481,472
|
|
Selling
expenses
|
4,274,676
|
|
5,466,706
|
|
8,035,670
|
|
11,326,366
|
|
Restructuring
costs
|
1,383,009
|
|
—
|
|
1,383,009
|
|
—
|
|
Operating
loss
|
(31,815,435)
|
|
(17,526,587)
|
|
(57,837,449)
|
|
(38,646,220)
|
|
|
|
|
|
|
|
|
|
Finance
costs
|
12,292,088
|
|
2,001,084
|
|
22,909,829
|
|
3,421,438
|
|
Foreign exchange loss
(gain)
|
971,342
|
|
(1,753,661)
|
|
3,524,106
|
|
(2,965,306)
|
|
Change in fair value of
conversion options on convertible debt instruments
|
(12,471,759)
|
|
—
|
|
(23,217,793)
|
|
—
|
|
Change in fair value of
share warrant obligations
|
(13,341,671)
|
|
(5,986,425)
|
|
(20,090,916)
|
|
(11,731,321)
|
|
Net
loss
|
(19,265,435)
|
|
(11,787,585)
|
|
(40,962,675)
|
|
(27,371,031)
|
|
Other comprehensive
loss
|
|
|
|
|
|
|
|
|
Item that will be
subsequently reclassified to net earning (loss)
|
|
|
|
|
|
|
|
|
Foreign currency
translation adjustment
|
(2,276,235)
|
|
6,898,743
|
|
(8,133,227)
|
|
7,362,420
|
|
Comprehensive loss
for the period
|
(21,541,670)
|
|
(4,888,842)
|
|
(49,095,902)
|
|
(20,008,611)
|
|
|
|
|
|
|
|
|
|
Loss per
share
|
|
|
|
|
|
|
|
|
Basic loss per
share
|
(0.09)
|
|
(0.05)
|
|
(0.18)
|
|
(0.12)
|
|
Diluted loss per
share
|
(0.09)
|
|
(0.05)
|
|
(0.18)
|
|
(0.12)
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three
and six months ended June 30, 2024
and 2023
(in US Dollars)
|
(Unaudited)
|
|
(Unaudited)
|
|
Three months
ended
|
|
Six months
ended
|
|
Jun 30,
2024
|
|
Jun 30, 2023
|
|
Jun 30,
2024
|
|
Jun 30, 2023
|
|
$
|
|
$
|
|
$
|
|
$
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
|
Net loss
|
(19,265,435)
|
|
(11,787,585)
|
|
(40,962,675)
|
|
(27,371,031)
|
|
Non-cash
items:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
9,108,162
|
|
5,561,359
|
|
17,195,476
|
|
10,475,016
|
|
Share-based
compensation
|
466,448
|
|
2,056,710
|
|
867,084
|
|
3,470,553
|
|
Accretion
expense
|
3,047,934
|
|
—
|
|
6,074,007
|
|
—
|
|
Interest paid in kind
on convertible debt instruments
|
2,477,108
|
|
—
|
|
4,950,035
|
|
—
|
|
Change in fair value
of share warrant obligations
|
(13,341,671)
|
|
(5,986,425)
|
|
(20,090,916)
|
|
(11,731,321)
|
|
Change in fair value
of conversion options on convertible debt
instruments
|
(12,471,759)
|
|
—
|
|
(23,217,793)
|
|
—
|
|
Unrealized foreign
exchange gain (loss)
|
1,280,968
|
|
(1,847,822)
|
|
3,917,505
|
|
(1,231,348)
|
|
Net change in non-cash
working capital items
|
19,691,656
|
|
7,054,722
|
|
(1,439,318)
|
|
(16,161,663)
|
|
Cash flows used in
operating activities
|
(9,006,589)
|
|
(4,949,041)
|
|
(52,706,595)
|
|
(42,549,794)
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
|
|
|
|
Acquisition of
property, plant and equipment
|
(1,564,403)
|
|
(17,812,004)
|
|
(5,388,348)
|
|
(45,396,451)
|
|
Addition to intangible
assets
|
(11,321,352)
|
|
(18,747,189)
|
|
(22,435,659)
|
|
(40,456,259)
|
|
Proceeds from Mirabel
battery building sale-leaseback
|
—
|
|
—
|
|
—
|
|
20,506,589
|
|
Government assistance
related to property, plant and equipment and
intangible assets
|
1,270,299
|
|
5,751,268
|
|
4,399,095
|
|
5,751,268
|
|
Cash flows used in
investing activities
|
(11,615,456)
|
|
(30,807,925)
|
|
(23,424,912)
|
|
(59,594,853)
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
Increase in long-term
debt and other debts
|
19,807,525
|
|
43,058,254
|
|
56,602,075
|
|
69,224,720
|
|
Repayment of long-term
debt and other debts
|
(3,698)
|
|
(6,199)
|
|
(4,370,947)
|
|
(22,495,971)
|
|
Payment of lease
liabilities
|
(2,021,130)
|
|
(1,354,189)
|
|
(4,013,671)
|
|
(2,715,536)
|
|
Proceeds from issuance
of shares through "at-the-market" equity
program, net of issuance costs
|
—
|
|
1,613,804
|
|
—
|
|
6,239,038
|
|
Proceeds from the
issuance of units through the December 2022
Offering - Warrants
|
—
|
|
—
|
|
—
|
|
2,907,226
|
|
Proceeds from the
issuance of units through the December 2022
Offering - Common Shares, net of issuance costs
|
—
|
|
—
|
|
—
|
|
4,175,836
|
|
Cash flows from
financing activities
|
17,782,697
|
|
43,311,670
|
|
48,217,457
|
|
57,335,313
|
|
Effect of exchange rate
changes on cash held in foreign currency
|
41,829
|
|
625,793
|
|
23,825
|
|
695,328
|
|
Net decrease in
cash
|
(2,797,519)
|
|
8,180,497
|
|
(27,890,225)
|
|
(44,114,006)
|
|
Cash, beginning of
year
|
4,800,260
|
|
35,972,482
|
|
29,892,966
|
|
88,266,985
|
|
Cash, end of
period
|
2,002,741
|
|
44,152,979
|
|
2,002,741
|
|
44,152,979
|
|
Other information on
cash flows related to operating activities:
|
|
|
|
|
|
|
|
|
Interest
paid
|
5,181,170
|
|
2,116,335
|
|
9,620,379
|
|
3,857,674
|
|
Interest paid under
lease liabilities
|
1,252,263
|
|
1,128,148
|
|
2,510,465
|
|
2,127,051
|
NON-IFRS MEASURES AND OTHER PERFORMANCE METRICS
This press release makes reference to
Adjusted EBITDA, which is a non-IFRS financial measure, as well as
other performance metrics, including the Company's order book,
which are defined below. These measures are neither required nor
recognized measures under IFRS, and, as a result, do not have a
standardized meaning prescribed by IFRS and are therefore unlikely
to be comparable to similar measures presented by other companies.
Rather, these measures are provided as additional information to
complement those IFRS measures by providing further understanding
of the Company's results of operations from management's
perspective. Accordingly, they should not be considered in
isolation nor as a substitute for analysis of the Company's
financial information reported under IFRS. Lion compensates for
these limitations by relying primarily on Lion's IFRS results and
using Adjusted EBITDA and order book on a supplemental basis.
Readers should not rely on any single financial measure to evaluate
Lion's business. Adjusted gross profit (loss) and adjusted gross
margin (loss), as defined in section 4.0 entitled "Non-IFRS
Measures and Other Performance Metric" of the Company's MD&A
for the years ended 2023 and 2022, are not presented in this press
release as the inventory write-down recorded by the Company in
connection with its decision to indefinitely delay the start of
commercial production of the LionA and LionM minibuses did not have
an impact on the Company's results for the three and six months
ended June 30, 2024 and 2023.
Adjusted EBITDA
"Adjusted EBITDA" is defined as net earnings
(loss) before finance costs, income tax expense or benefit, and
depreciation and amortization, adjusted to exclude restructuring
costs, share-based compensation, change in fair value of conversion
options on convertible debt instruments, change in fair value of
share warrant obligations, foreign exchange (gain) loss and
transaction and other non-recurring expenses. Lion uses adjusted
EBITDA to facilitate a comparison of the profitability of its
business on a consistent basis from period-to-period and to provide
a further understanding of factors and trends affecting its
business. The Company also believes this measure is useful for
investors to assess the Company's profitability, its cost structure
and its ability to service debt and to meet other payment
obligations. However, readers should be aware that when evaluating
Adjusted EBITDA, Lion may incur future expenses similar to those
excluded when calculating Adjusted EBITDA. In addition, Lion's
presentation of these measures should not be construed as an
inference that Lion's future results will be unaffected by unusual
or non-recurring items. Readers should review the reconciliation of
net earnings (loss), the most directly comparable IFRS financial
measure, to Adjusted EBITDA presented by the Company under section
13.0 of the Company's MD&A for the three and six months ended
June 30, 2024 entitled "Results of
Operations - Reconciliation of Adjusted EBITDA."
Order Book
This press release also makes reference to
the Company's "order book" with respect to vehicles (trucks and
buses) as well as charging stations. The Company's vehicles and
charging stations order book is determined by management based on
purchase orders that have been signed, orders that have been
formally confirmed by clients, or products in respect of which
formal joint applications for governmental programs, subsidies or
incentives have been made by the applicable clients and the
Company. The order book is expressed as a number of units or a
total dollar value, which dollar value is determined based on the
pricing of each unit included in the order book as further
explained under "Pricing" in section 10.0 of the Company's MD&A
for the three and six months ended June 30,
2024 entitled "Order Book". The vehicles included in the
vehicle order book as of July 30, 2024 provided for a delivery
period ranging from a few months to the end of the year ending
December 31, 2028, with substantially
all of such vehicles currently providing for deliveries before the
end of the year ending December 31,
2025, which corresponds to the latest date by which claims
are required to be made according to the current eligibility
criteria of the ZETF, unless otherwise agreed by Infrastructure
Canada. In addition, substantially all deliveries are subject to
the granting of subsidies and incentives with processing times that
are subject to important variations. There has been in the past and
the Company expects there will continue to be variances between the
expected delivery periods of orders and the actual delivery times,
and certain delays could be significant. Also, there has been in
the past and the Company expects there will continue to be
variances in the eligibility criteria of the various programs,
subsidies and incentives introduced by governmental authorities,
including in their interpretation and application. Such variances
or delays could result in the loss of a subsidy or incentive and/or
in the cancellation of certain orders, in whole or in part.
The Company's presentation of the order book should not be
construed as a representation by the Company that the vehicles and
charging stations included in its order book will translate into
actual sales. See the section below for a full description of the
methodology used by the Company in connection with the order book
and certain important risks and uncertainties relating to such
methodology and the presentation of the order book.
|
General
Principle:
|
The Company's vehicle
and charging stations order book is determined by management based
on purchase orders that have been signed, orders that have been
formally confirmed by clients or products in respect of which
formal joint applications for governmental programs, subsidies or
incentives have been made by the applicable clients and the
Company. The order book is expressed as a number of units or a
total dollar value, which dollar value is determined based on the
pricing of each unit included in the order book as further
explained below under the section entitled "Pricing".
The vehicles included
in the vehicle order book as of July 30, 2024 provided for a
delivery period ranging from a few months to the end of the year
ending December 31, 2028, with substantially all of such vehicles
currently providing for deliveries before the end of the year
ending December 31, 2025, which corresponds to the latest date by
which claims are required to be made according to the current
eligibility criteria of the ZETF, unless otherwise agreed by
Infrastructure Canada. In addition, substantially all of the
vehicle orders included in the order book are subject to the
granting of governmental programs, subsidies, and incentives,
including programs in respect of which applications relating to
vehicles of Lion have not yet been fully processed to date. The
processing times of governmental subsidies and incentives are also
subject to important variations. As further described below under
the sections entitled "Delivery Periods" and "Ongoing Evaluation;
Risk Factors", there has been in the past and the Company expects
there will continue to be variances between the expected delivery
periods of orders and the actual delivery times, and certain delays
could be significant. Also, there has been in the past and the
Company expects there will continue to be variances in the
eligibility criteria of the various programs, subsidies and
incentives introduced by governmental authorities, including in
their interpretation and application. Such variances or delays
could result in the loss of a subsidy or incentive and/or in the
cancellation of certain orders, in whole or in part.
The Company's
presentation of the order book should not be construed as a
representation by the Company that the vehicles and charging
stations included in its order book will translate into actual
sales.
|
|
Delivery
Periods:
|
The Company's order
book refers to products that have not yet been delivered but which
are reasonably expected by management to be delivered within a time
period that can be reasonably estimated and includes, in the case
of charging stations, services that have not been completed but
which are reasonably expected by management to be completed in
connection with the delivery of the product.
Purchase orders and
applications relating to vehicles of Lion generally provide for a
time period during which the client expects delivery of the
vehicles. Such period can vary from a specific date, a number or
range of months after the issuance of the order or application, or
a calendar year. The vehicles included in the vehicle order book as
of July 30, 2024 provided for a delivery period, subject to
the satisfaction of the conditions set forth in each order (which,
in substantially all cases as further discussed herein, relate to
the approval of governmental subsidies and grants), ranging from a
few months to the end of the year ending December 31, 2028, with
substantially all of such vehicles currently providing for
deliveries before the end of the year ending December 31, 2025,
which corresponds to the latest date by which claims are required
to be made according to the current eligibility criteria of the
ZETF, unless otherwise agreed by Infrastructure Canada. Delivery
periods are disclosed from time to time by the Company when
available in respect of material orders. Delivery periods should
not be construed as a representation or a guarantee by the Company
that the actual delivery time will take place as scheduled. Given
the nature of the business and the products of the Company, the
implied lead time for the production and delivery of a vehicle
(which may be impacted, among other things, by supply chain
challenges or changes in specifications), the nature of certain
customers of the Company (in many cases, fleet owners operating
capital intensive operations which require financing and ongoing
scheduling flexibility), and the fact that, as further described
herein, substantially all of the vehicle orders included in the
order book are subject to the granting of governmental subsidies
and incentives, actual delivery times may be subject to important
variations or delays. Please refer to the section entitled "Ongoing
Evaluation; Risk Factors" below regarding the potential impact of
variations or delays in deliveries.
|
|
Pricing:
|
When the Company's
order book is expressed as an amount of sales, such amount has been
determined by management based on the current specifications or
requirements of the applicable order, assumes no changes to such
specifications or requirements and, in cases where the pricing of a
product or service may vary in the future, represents management's
reasonable estimate of the prospective pricing as of the time such
estimate is reported. A small number of vehicles included in the
order book have a pricing that remains subject to confirmation
based on specifications and other options to be agreed upon in the
future between the applicable client and the Company. For purposes
of the determination of the order book and the value allocated to
such orders, management has estimated the pricing based on its
current price lists and certain other assumptions relating to
specifications and requirements deemed reasonable in the
circumstances.
|
|
Performance
Metric:
|
The order book is
intended as a supplemental measure of performance that is neither
required by, nor presented in accordance with, IFRS, and is neither
disclosed in nor derived from the financial statements of the
Company. The Company believes that the disclosure of its order book
provides an additional tool for investors to use in evaluating the
Company's performance, market penetration for its products, and the
cadence of capital expenditures and tooling.
The Company's
computation of its order book is subject to the specific
methodology described herein and may not be comparable to other
similarly entitled measures computed by other companies, because
all companies may not calculate their order book in the same
fashion. Other companies also sometimes refer to or use "order
backlog" or "order intake" as performance metrics, which are most
likely not calculated on the same basis as the Company's order
book. In addition, as explained above, the Company's presentation
of the order book is calculated based on the orders and the
applications made as of the time that the information is presented,
and it is not based on the Company's assessment of future events
and should not be construed as a representation by the Company that
the vehicles and charging stations included in its order book will
translate into actual sales.
|
|
Ongoing Evaluation;
Risk Factors:
|
A portion of the
vehicles or charging stations included in the Company's order book
may be cancellable in certain circumstances (whether by reason of a
delivery delay, unavailability of a program, subsidy or incentive
or otherwise) within a certain period. Management reviews the
composition of the order book every time it is reported in order to
determine whether any orders should be removed from the order book.
For purposes of such exercise, management identifies orders that
have been or are reasonably likely to be cancelled and examines,
among other things, whether conditions attaching to the order are
reasonably likely to result in a cancellation of the order in
future periods as well as any other available information deemed
relevant, including ongoing dialogue with clients and governments.
Such exercise may result from time to time in orders that have
previously been included in the order book being removed even if
they have not been formally canceled by the client. See the first
paragraph of this section entitled "Order Book" for a presentation
of the variance in the total number of units and the total dollar
value of the vehicles and charging stations included in the
Company's order book since May 7, 2024, being the last date on
which such information was presented.
The Company cannot
guarantee that its order book will be realized in full, in a timely
manner, or at all, or that, even if realized, revenues generated
will result in profits or cash generation as expected, and any
shortfall may be significant. The Company's conversion of its order
book into actual sales is dependent on various factors, including
those described below and under section 23.0 entitled "Risk
Factors" of the Company's MD&A for the years ended December 31,
2023 and 2022. For instance, a customer may voluntarily or
involuntarily default on an order, may become subject to bankruptcy
or insolvency or cease its business operations. In addition,
substantially all of the vehicle orders included in the order book
are subject to conditions relating to the granting of governmental
subsidies or incentives or a specified timing for the delivery of
the vehicle and, in a limited number of cases, the availability of
certain specifications and options or the renewal of certain routes
by governmental or school authorities. As a result, the Company's
ability to convert its order book into actual sales is highly
dependent on the granting and timing of governmental subsidies and
incentives, most notably subsidies and incentives under the Quebec
government's 2030 Plan for a Green Economy (the "Quebec Green
Economy Plan"), Federal Infrastructure Canada's ZETF, the
Government of Canada Incentives for Medium- and Heavy-Duty
Zero-Emission Vehicles (iMHZEV) Program, the U.S. Environmental
Protection Agency Clean School Bus Program and California's Hybrid
and Zero-Emission Truck and Bus Voucher Incentive Project (HVIP).
More than half of the vehicles included in the order book are
contingent upon grants under the ZETF, in respect of which
applications relating to vehicles of Lion have not yet been fully
processed to date and December 31, 2025 is the latest date by which
claims are required to be made according to the current eligibility
criteria of the ZETF program, unless otherwise agreed by
Infrastructure Canada. In addition, purchase orders obtained in
connection with the first round of funding under the EPA Program,
require, among other things, that vehicles be delivered on or prior
to October 2024.
Any termination,
modification, delay or suspension of any governmental programs,
subsidies and incentives, including, most importantly as of the
date hereof, the ZETF, the Quebec Green Economy Plan or the
EPA Program could result in delayed deliveries or the
cancellation of all or any portion of orders, which, in turn, could
have a material and adverse effect on the Company's business,
results of operations or financial condition.
The Company's
conversion of its order book into actual sales is also dependent on
its ability to economically and timely manufacture its vehicles, at
scale. The Company delivered 519 vehicles during the year ended
December 31, 2022 and 852 vehicles during the year ended December
31, 2023. As of July 30, 2024, the Company's vehicle order book
stood at 1,994 vehicles. The execution of the Company's growth
strategy and the conversion of its order book, which currently
provides for deliveries ranging from a few months to the end of the
year ending December 31, 2028, will require that the Company
increases its production cadence. While the Saint-Jerome facility
and Joliet Facility currently have the infrastructure in place,
including in terms of production lines and equipment, to achieve a
production capacity of up to 2,500 vehicles and 2,500 buses,
respectively, on an annual basis (see section 8.0 entitled
"Operational Highlights" and "Product Development and
Manufacturing" under section 11.0 entitled "Key Factors Affecting
Lion's Performance" of the Company's MD&A for the years ended
December 31, 2023 and 2022 for further details), the Company's
operations are currently being conducted on a lower scale and it
has limited experience to date in high volume manufacturing. In
addition, as of July 30, 2024, 145 units included in the order
book, consisting of trucks and representing a combined total order
value of approximately $55 million, related to products which had
been developed and were being sold, but that were not currently in
commercial production. See "Products and Solutions" in section 6.2
of the Company's Annual Information Form for the year ended
December 31, 2023 entitled "Business of the Company". Any failure
by the Company to successfully develop its vehicles, source its key
components, and scale its manufacturing processes within projected
costs and timelines could have a material adverse effect on its
business, results of operations or financial condition. As a
result, the Company's realization of its order book is subject to a
number of risks and uncertainties, including the risks described in
section 3.0 of the Company's MD&A for the three and six months
ended June 30, 2024 entitled "Caution Regarding Forward-Looking
Statements" and section 23.0 entitled "Risk Factors" of the
Company's MD&A for the years ended December 31, 2023 and 2022,
and there can be no assurance that the Company will be successful
in converting all or a significant portion of its order book into
actual sales.
|
RECONCILIATION OF ADJUSTED EBITDA
The following table reconciles net loss to Adjusted EBITDA for
the three and six months ended June 30,
2024 and 2023:
|
Unaudited - Three
months ended June 30,
|
|
Unaudited - Six
months ended June 30,
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
(in
thousands)
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
Revenue
|
$30,276
|
|
$58,016
|
|
$85,757
|
|
$112,719
|
|
|
|
|
|
|
|
|
|
Net loss
|
($19,265)
|
|
($11,788)
|
|
($40,963)
|
|
($27,371)
|
|
Restructuring
costs(1)
|
$1,383
|
|
$—
|
|
$1,383
|
|
$—
|
|
Finance
costs
|
$12,292
|
|
$2,001
|
|
$22,910
|
|
$3,421
|
|
Depreciation and
amortization
|
$9,108
|
|
$5,561
|
|
$17,195
|
|
$10,475
|
|
Share-based
compensation(2)
|
$466
|
|
$2,057
|
|
$867
|
|
$3,471
|
|
Change in fair value of
conversion options on convertible debt
instruments(3)
|
($12,472)
|
|
$—
|
|
($23,218)
|
|
$—
|
|
Change in fair value of
share warrant obligations(4)
|
($13,342)
|
|
($5,986)
|
|
($20,091)
|
|
($11,731)
|
|
Foreign exchange loss
(gain)(5)
|
$971
|
|
($1,754)
|
|
$3,524
|
|
($2,965)
|
|
Transaction and other
non-recurring expenses(6)
|
$248
|
|
$257
|
|
$501
|
|
$577
|
|
Adjusted
EBITDA
|
($20,609)
|
|
($9,651)
|
|
($37,891)
|
|
($24,124)
|
|
(1)
|
Represents the
restructuring costs (mainly severance costs) recognized in
connection with workforce reduction announced on April 18, 2024, as
described in note 11 to the condensed interim consolidated
financial statements as at June 30, 2024 and for the three and six
months ended June 30, 2024, and 2023. See also "Workforce
Reduction" in section 8.0 of the MD&A for the three and six
months ended entitled June 30, 2024 "Operational
Highlights."
|
|
(2)
|
Represents non-cash
expenses recognized in connection with the issuance of stock
options, restricted share units, and deferred share units issued
under Lion's omnibus incentive plan as described in Note 10 to the
condensed interim consolidated financial statements as at June 30,
2024 and for the three and six months ended June 30, 2024, and
2023.
|
|
(3)
|
Represents non-cash
change in the fair value of the conversion options on convertible
debt instruments as described in Note 8 to the condensed interim
consolidated financial statements as at June 30, 2024 and for the
three and six months ended June 30, 2024, and 2023.
|
|
(4)
|
Represents non-cash
change in the fair value of the share warrant obligations as
described in Note 9 to the condensed interim consolidated financial
statements as at June 30, 2024 and for the three and six months
ended June 30, 2024, and 2023.
|
|
(5)
|
Represents losses
(gains) relating to foreign exchange translation.
|
|
(6)
|
For the three and six
months ended June 30, 2024, and 2023, represents non-recurring
professional, legal and consulting fees.
|
ABOUT LION ELECTRIC
Lion Electric is an innovative
manufacturer of zero-emission vehicles. The company creates,
designs and manufactures all-electric class 5 to class 8 commercial
urban trucks and all-electric school buses. Lion is a North
American leader in electric transportation and designs, builds and
assembles many of its vehicles' components, including chassis,
battery packs, truck cabins and bus bodies.
Always actively seeking new and reliable
technologies, Lion vehicles have unique features that are
specifically adapted to its users and their everyday needs. Lion
believes that transitioning to all-electric vehicles will lead to
major improvements in our society, environment and overall quality
of life. Lion shares are traded on the New York Stock Exchange and
the Toronto Stock Exchange under the symbol LEV.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This press release contains "forward-looking information" and
"forward-looking statements" within the meaning of applicable
securities laws and within the meaning of the United States Private
Securities Litigation Reform Act of 1995 (collectively,
"forward-looking statements"). Any statements contained in this
press release that are not statements of historical fact, including
statements about Lion's beliefs and expectations, are
forward-looking statements and should be evaluated as such.
Forward-looking statements may be identified by the use of words
such as "believe," "may," "will," "continue," "anticipate,"
"intend," "expect," "should," "would," "could," "plan," "project,"
"potential," "seem," "seek," "future," "target" or other similar
expressions and any other statements that predict or indicate
future events or trends or that are not statements of historical
matters, although not all forward-looking statements may contain
such identifying words. These forward-looking statements include
statements regarding the Company's liquidity and capital
requirements and management's forecasts related thereto, the
implementation by the Company of measures and initiatives aimed at
reducing its cost structure, managing its liquidity and optimizing
its balance sheet (including the July
2024 Action Plan (as defined below)) and the expected impact
thereof, the end of the covenant relief period (as defined below)
and the upcoming maturity of certain of the Company's debt
instruments, the implementation by the Company of measures to
reduce its vehicle and battery development costs and its inventory
levels (including the Company's fiscal 2024 objectives related
thereto), the Company's order book and the Company's ability to
convert it into actual sales, the expected production capacity of
the Company's manufacturing facilities in Saint-Jerome and the
United States and the Company's battery manufacturing plant
(the "Battery Plant") and innovation center in Quebec (the "Innovation Center" and
collectively with the Battery Plant, the "Lion Campus"), the
sourcing of lithium-ion battery cells, the Company's future growth
and long-term strategy, ongoing litigation proceedings, the
Company's expected product pipeline, and the development and timing
of commercial production of certain platforms and models. Such
forward-looking statements are based on a number of estimates and
assumptions that Lion believes are reasonable when made, including
that Lion will be able to retain and hire key personnel and
maintain relationships with customers, suppliers and other business
partners, that Lion will be able to continue to operate its
business in the normal course, that Lion will be able to implement
its growth strategy, that Lion will be able to successfully and
timely ramp-up manufacturing capacity at its Saint-Jerome facility, its U.S. manufacturing
facility and at the Battery Plant and Innovation Center as required
in the future, that Lion will not suffer any supply chain
challenges or any material disruption in the supply of raw
materials on competitive terms, that Lion will be able to maintain
its competitive position, that Lion will continue to improve its
operational, financial and other internal controls and systems to
manage its growth and size, that Lion will be able to benefit,
either directly or indirectly (including through applications made
by the Company and/or its clients), on a timely basis, from
governmental programs, subsidies and incentives, that Lion will not
incur any material obligations with respect to product warranty
claims or product recalls, and that Lion will be able to secure
additional funding through equity or debt financing on terms
acceptable to Lion and in the amounts needed when required in the
future. Such estimates and assumptions are made by Lion in light of
the experience of management and their perception of historical
trends, current conditions and expected future developments, as
well as other factors believed to be appropriate and reasonable in
the circumstances. However, there can be no assurance that such
estimates and assumptions will prove to be correct.
By their nature, forward-looking statements
involve risks and uncertainties because they relate to events and
depend on circumstances that may or may not occur in the future.
Lion believes that these risks and uncertainties include the
following:
- any inability to generate sufficient cash flows and/or raise
additional funds to meet its capital requirements (including as
result of upcoming maturities of debt instruments such as the
Finalta-CDPQ Loan Agreement (as defined below) or the expiration of
the covenant relief period) and pursue its growth strategy, in each
case, when and in the amounts needed;
- any inability to remain in compliance with the terms and
conditions of its debt instruments (including during or after the
covenant relief period);
- any adverse changes in U.S. or Canadian general economic,
business, market, financial, political or legal conditions,
including as a consequence of the ongoing uncertainties relating to
inflation and interest rates;
- any unavailability, reduction, discriminatory application,
delay in processing or elimination of governmental programs,
subsidies or incentives due to policy changes, government
regulations or decisions or otherwise;
- any inability to ramp-up the production of Lion's products and
meet project construction and other project milestones and
timelines;
- any inability to meet the expectations of the Company's
customers in terms of products, specifications, and services;
- any inability to successfully and economically manufacture and
distribute its vehicles at scale;
- any inability to execute the Company's growth strategy;
- any escalation, deterioration and adverse effects of current
military conflicts, which may affect economic and global financial
markets and exacerbate ongoing economic challenges;
- any unfavorable fluctuations and volatility in the availability
or price of raw materials included in components used to
manufacture the Company's products, including battery cells,
modules and packs;
- the reliance on key suppliers and any inability to maintain an
uninterrupted supply of raw materials;
- any inability to reduce total cost of ownership of electric
vehicles sold by the Company over time;
- the reliance on key management and any inability to attract
and/or retain key personnel;
- labor shortages (including as a result of employee departures,
turnover, demands for higher wages and unionization of employees)
which may force the Company to operate at reduced capacity, to
lower its production and delivery rates or lower its growth plans,
and could pose additional challenges related to employee
compensation;
- any inability to maintain the Company's competitive
position;
- any inability to reduce the Company's costs of supply over
time;
- any inability to maintain and enhance the Company's reputation
and brand;
- any significant product repair and/or replacement due to
product warranty claims or product recalls;
- any failure of information technology systems or any
cybersecurity and data privacy breaches or incidents;
- any inability to secure adequate insurance coverage or a
potential increase in insurance costs;
- natural disasters, epidemic or pandemic outbreaks, boycotts and
geo-political events such as civil unrest, acts of terrorism, the
current ongoing military conflicts or similar disruptions;
- any event or circumstance, including the materialization of any
of the foregoing risks and uncertainties, resulting in the
Company's inability to convert its order book into actual sales;
and
- the outcome of any legal proceedings in which the Company is or
may be involved from time to time.
These and other risks and uncertainties
related to the business of Lion are described in greater detail in
section 23.0 entitled "Risk Factors" of the Company's MD&A for
the years ended December 31, 2023 and 2022. Many of these
risks are beyond Lion's management's ability to control or predict.
All forward-looking statements attributable to Lion or persons
acting on its behalf are expressly qualified in their entirety by
the cautionary statements contained and risk factors identified in
this MD&A and in other documents filed with the applicable
Canadian regulatory securities authorities and the U.S. Securities
and Exchange Commission (the "SEC'').
Because of these risks, uncertainties and
assumptions, readers should not place undue reliance on these
forward-looking statements. Furthermore, forward-looking statements
speak only as of the date they are made. Except as required under
applicable securities laws, Lion undertakes no obligation, and
expressly disclaims any duty, to update, revise or review any
forward-looking information, whether as a result of new
information, future events or otherwise.
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SOURCE The Lion Electric Co.