The Lion Electric Company Common Shares

Good morning, ladies and gentlemen. Welcome to Lions' first quarter 2021 results conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. At that time, if you'd like to ask a question, please press star 1 on your telephone keypad. If you would like to withdraw your question, please press the pound key. As a reminder, this conference call is being recorded. I would now like to turn the call over to Isabel Ajahi, Vice President, Investor Relations and Sustainable Development. Please go ahead, Ms. Ajahi.

Thank you, and good morning, everyone. Bonjour, tout le monde. Welcome to Lions first quarter 2021 results conference call. With me today are Mark Bédard, our CEO funder, and Nicolas Brunet, our Executive Vice President and Chief Financial Officer. Before we begin, I would like to mention that during today's call, we will make certain forward-looking statements regarding our future business expectations, which involve risks and uncertainties. Forward-looking statements are predictions, projections, and other statements about future events that are based on current expectations and certain material factors and assumptions, and as a result, are subject to risks and uncertainties. Many factors could cause actual future events to differ materially from the forward-looking statements made on this call. For more information about factors that may cause actual results to materially differ from forward-looking statements, please refer to our filings made today and to the risk factors contained in our final non-offering prospectus filed on CEDAR on May 6, 2021, and to our other filings made on CEDAR and with the Securities and Exchange Commission including our registration statement on Form F-4. Forward-looking statements speak only as of the date they are made. You are cautioned not to put under reliance on forward-looking statements. We undertake no duty to update this information unless required by law. Finally, please note that we report in US dollars and under IFRS. Comments today may refer to certain non-IFRS financial measures, such as adjusted EBITDA, and certain performance metrics, such as the companies of the book, which are defined, further described, and in certain cases reconciled in our earnings release and MD&A issued this morning. With that, I will now hand the call over to Mark Bedard.

Mark? Thank you, Isabelle. Good morning, everyone. My name is Marc Bedard. I am the CEO and founder of Lion Electric. Thanks for joining us today on Lion's first conference call as a public company. This is the start of a new chapter in Lion's history, as we became the first manufacturer of all electric medium and heavy-duty urban vehicles to be listed on both the NYSE and the TSX. There are mainly three key elements that I would like you to remember from today's Q1 results announcement. Number one, we successfully completed our public listing and related private placement for a net trace of approximately $490 million, which is available to support our key growth initiatives. Number two, Lion has a strong momentum with clients. Despite the continued impact of COVID-19, we are seeing a positive trend in our order book with accelerating deliveries as shown by the significant order of 260 school buses that we announced earlier this morning. And number three, We continue to execute on our strategic plan. We announced the building of a U.S.-based, large-scale, 20,000 electric vehicles manufacturing capacity per year plant in Joliet, Illinois. We also announced the construction of a highly automated 5 gigawatt hour per year battery plant, which we announced with both the Prime Minister of Canada, Mr. Trudeau, and the Premier of Quebec, Mr. Legault. This battery plant has the capacity to provide batteries for approximately 14,000 Lion vehicles per year. We opened two additional experience centers and we incurred sustained growth in our employee count along with many strategic hires. I will provide an update on each of these items and then pass it on to Nicolas Brunet, who will discuss financial performance for Q1 2021. First, for those of you who don't know us, here's a very brief summary of Lion. Lion is a well-established leading manufacturer of all electric medium and heavy duty urban vehicles. benefiting from over 10 years of all-electric vehicle R&D and manufacturing experience, and targeting a total addressable market, a TAM, of over $100 billion per year in the U.S. and Canada. We put clients at the center of everything we do. And today, even if we just started delivering our trucks within the last few months, we already count multiple Tier 1 clients, such as Amazon, Pride Group, IKEA, SoBase, and Canadian National Railways in the truck sector, and Student Transportation of America, National Express, First Student, Transdes, LA Unified School District, Twin Rivers, Keolis, Montreal Airport, and Seguin, just to name a few in the bus sector. As their EEV strategic partner, we pride ourselves for offering our clients turnkey solutions for all aspects of their fleet electrification, including vehicle selection and specs, ride and drives on our trucks and buses, charging infrastructure selection, grant support, training, and ongoing maintenance and telematics. We create, design, and manufacture all-electric Class 5 to Class 8 commercial urban trucks and all-electric buses and minibuses for the school, paratransit, and mass transit segments. Today, Ryan has approximately 390 real vehicles on the road with over 7 million miles driven. Our vehicles have a favorable total cost of ownership as compared to diesel vehicles. All Ryan vehicles are purpose-built for electric with our own chassis, bus body, and truck cabin, and proprietary battery system technology. We have seven purpose-built electric truck and bus models available for purchase today, with eight new models in development. With our first deliveries of Lion 6 and Lion 8 trucks now behind us, we expect to add 10 types of vehicles on the road by the end of 2021, as we expect to add this year the Lion V school bus and the Lion 8 bucket and tractor trucks to our portfolio. Also, we plan to start delivering five additional new types of vehicles by the end of 2022, namely the Lion 5, the Lion 5 and 6 utility, the Lion 7, the Lion 8 boom truck, and the Lion electric ambulance. Our existing manufacturing facility near Montreal has currently a capacity of 2,500 vehicles per year. We also recently opened a new assembly facility close to our current manufacturing plant that will enable us to optimize vehicle production. This plant will be used for the manufacturing of our Lion-A and Lion-M minibuses. Let's now come back to the purpose of the call and discuss the three main items I highlighted at the beginning. First, our public listing. We successfully became a publicly traded company on both the NYSE and the TSX on Friday, May 7th. The proceeds of the public listing, including in the private investment, net of transaction fees amounted to approximately $490 million, which will be largely used to accelerate our growth plan. There are approximately 188 million outstanding common shares of Lion. Our ownership structure consists of approximately 70% ownership by legacy Lion shareholders, 20% ownership by former public Northern Genesis shareholders and SPAC sponsors, and approximately 10% by the PIPE investors. I would like to thank our board members for their contribution and dedication to Lion, and would also like to welcome our new directors, Ian Robertson and Trejo Rapp from Northern Genesis. Now, let me address the purchase order book. In the last few months, Customer feedback has continued to be very positive and level of interest from fleet owners continues to increase. We keep moving from outreach to concrete discussions on specs, total cost of ownership, energy requirements, and delivery timelines. This dialogue already translates into accelerated orders and we feel this is just the beginning. Our order book continues to gain momentum, with truck orders from large fleet owners, including an order for 100 trucks from Pride Group to be delivered over 2021 and 2022, and initial truck orders from sizable fleet owners, such as IKEA's logistic partners Second Placid and Metro Supply Chain Group, Sobase, Heritage, Con Edison, and many others. On the bus side, we have seen the dialogue with fleet operators accelerate, despite continued headwinds from the pandemic. Just this morning, we were pleased to announce that we secured an order of 260 school buses from a leading school bus operator, with deliveries to take place from the second half of 2021 to the first half of 2023. This represents Lion's largest order to date. Also, We secured an initial order from L.E. Unified School District for 10 Lion Seas, the second largest school district in the United States, and another one of up to 60 units from Gopsegang over a period of five years. We have clearly seen an acceleration of dialogue with the largest school bus fleets, who are increasingly turning to fleet electrification. With the announcement of very important government subsidies and funding programs in recent months, Combined with the reopening of schools in key markets such as California, we expect a continued acceleration of the school bus order book, mainly in the second half of 2021. I will discuss the regulatory environment in a few minutes. Altogether, as of May 14, 2021, our vehicle order book stood at 817 all electric vehicles, consisting of 209 trucks and 608 buses, representing a combined total order value of over $225 million. Most of these orders are expected to be delivered within the next 12 months. Let me now spend a minute on Q1 deliveries, which are important as directly linked to revenues. Deliveries, which had slowed down last year in great part due to COVID-19, have begun to regain momentum near the end of last year, as witnessed by our Q4 2020 results, where we delivered 46 vehicles. In Q1 2021, which is traditionally a seasonally low quarter in the school bus space, we delivered 24 vehicles, as compared to two during the same period last year. Q1 2021 deliveries included our first deliveries of six Line A trucks, in addition to 18 school buses. I am also very pleased to say that during the last few weeks, 10 Lion C trucks were delivered to Amazon. Let me also add that selling an electric truck or bus and selling a diesel one is totally different. And this is the reason we have decided several years ago to put together our direct sales model with no boundaries between Lion and our customers. This model is working very well and clearly distinguished Lion as a strategic partner to its clients. This is translating into tangible results, and this is promising to be very successful. That direct sales model is tailored to provide a smooth transition to electric for the fleet operators. First, Lion Energy, our division which assists customers with selecting, purchasing, project managing, and deploying charging infrastructure ahead of vehicle delivery, is gaining significant momentum. When we launched it, our objective was to facilitate the EV transition journey to our customers. Today, we have a current order book at 76 charging stations and related services that represents a total order value of over $800,000. We were also pleased to announce during the quarter that we have signed a reseller agreement with Slow Ad Energy, which adds to the charge point, ABB, BTC Power, Blink, and UV charging infrastructures we are currently offering to our customers. And as a reminder, we are agnostic when it comes to the recommendation of charging infrastructure and seek to offer the equipment that is the most adapted to the needs of our clients. Second, our Lion Grant team is busier than ever, working with customers and potential customers in identifying and applying for grants and subsidies. as we are seeing new attractive funding programs being put in place on both sides of the border. This team, which operates at the forefront of policy and the evolving EV ecosystem, is highly knowledgeable of programs and subsidies that can apply to our clients, helps our customers navigate this complex environment to leverage and secure funding for them. In the last few months, we have witnessed a true desire by government officials to support the cleaner environment. Most recently, a few announcements were made in that regard. President Biden's clean energy plan targeting the electrification of at least 20% of the 500,000 plus school buses in the United States. The recent announcement by Mayor Bill de Blasio to electrify 100% of the New York school bus fleet by 2035. This is without mentioning programs such as the ACT, adopted by Carbon California, which sets clear requirements on manufacturers to sell zero-emission trucks and buses. Fourteen other states and Washington, D.C., have also announced their intention to put similar programs in place. I am pleased to report that with the deliveries in California, we have already started accumulating credit towards the ACT program, and we expect to eventually monetize these credits. Also, Quebec's 2030 plan for a green economy, dedicating $250 million Canadian dollars over the next three years to electrify approximately 2,600 school buses, And starting with model year 2023, new diesel bus purchases will no longer be legal in Quebec. Even if the TCO calculation is favorable in many cases with our Lion vehicles, those incentives make it easier for the fleet operators to electrify their fleets. Third, shortly after the end of the quarter, we opened two additional experience centers, one in Jacksonville, Florida, and the other one in Terrebonne, Quebec. Our state-of-the-art, highly innovative experience centers are the first fully electric service centers in North America. These dedicated spaces are essential locations where prospective customers, policymakers, and other transportation industry stakeholders can test and drive our vehicles, learn about their specifications and advantages, meet Alliance sales representatives, get charging infrastructure assistance, discuss grant and subsidy with our experts, receive training for drivers and maintenance specialists, and have existing vehicle service. Last but not least, we can also provide long-term financing solutions to facilitate the purchase of our vehicles by our clients, smoothen the transition to electric, and in many cases, benefit from a favorable TCO from day one. As you see, we are more than just a manufacturer of electric vehicles, and we firmly believe that electric transportation will be a major catalyst for improving our society, environment, and above all, our quality of life. Let me now provide an update on our strategic plan and the way we are executing our plan. First, let me address our U.S. manufacturing plant. We recently announced that we will operate our high-volume, state-of-the-art vehicle production plant in Joliet, Illinois, where the construction of our plant is well underway. This plant will be highly automated with a production capacity of 20,000 vehicles per year. The new facility for which a long-term lease has been secured will be the largest production site for zero-emission medium and heavy-duty urban vehicles in the United States. This plant will give us the ability to meet the increasing demand in the marketplace for made-in-America zero-emission vehicles. Our 900,000-square-foot new facility will enable us to gain significant additional production capacity close to our USP customers while reducing production and delivery costs. Facility ramp up is expected in the second half of 2021 and our first vehicles will roll off the production line in the second half of 2022. This will represent an initial investment of at least $70 million. It should at first add a minimum of 745 clean energy direct jobs to the region over the next three years. Now let me give you an update on our battery plant. Last March, we announced the construction of our battery plant intended to result in a highly automated plant assembling proprietary Lion battery modules and packs with an annual capacity of five gigawatt hours, enough to electrify 14,000 medium and heavy duty Lion vehicles on an annual basis. Funding of the battery plant was announced during the quarter. to the effect that approximately 100 million Canadian dollars in funding support will be provided from the Canadian federal government and from the Quebec government, 30 million of which is expected to be forgiven, subject to lie in meeting certain specific conditions. We are still in the process of finalizing the specific location, which we will announce this coming quarter. We remain on track for the selection of our contractor in the second half of 2021, the commencement of construction of the facility in the first half of 2022, and for the initial production of battery modules and packs in the second half of 2022. Producing our own battery modules and packs should result in significant cost savings, provide full control over battery specs and dimensions, and remove key supplier dependency. Let me take a few minutes here to address potential cell shortage, which in the last few months has been a topic of discussion in our industry. Lion has not been impacted by this potential industry shortage. We have a multi-sourcing strategy for our batteries and battery components with multi-year supply agreements with BMW, LG Chem, and Romeo Power, and we also have been building our own battery packs for years. Furthermore, we always maintain a healthy level of battery inventories, which combined with scheduled and reconfirmed deliveries, minimize the risk associated with the potential shortage of battery materials. While we remain vigilant, we do not expect that a battery shortage will impact our operations in the near future. Now turning to staffing. We continue to improve our teams on all fronts. As of May 14, Our total headcount exceeded 650 employees, of which over 200 in engineering and R&D. In our management team, Isabelle Adjaï joined us as VP, Investor Relations and Sustainable Development, and François Duquette joined as VP, Chief Legal Officer and Corporate Secretary. Isabelle brings over 25 years of experience in IR with companies such as WSP and Action Pharma. Francois brings over 20 years of experience at CDPQ, Allen & Overy, and Simmons & Simmons. We also added new key strategic members to the team. Rocco Mezzatesta, a Senior Vice President, Product Development and Vehicle Engineering. Rocco tasked with product development as well as the management of engineering projects. brings over 20 years of engineering experience, mostly in the transportation industry for companies such as Tesla, Ford, and Toyota. He will collaborate with Philippe Leblanc, who has played a key role in the development of products and will now be Vice President, Innovation and Advanced Engineering. Vince Spalafora is joining us today as Vice President, Financial Reporting. Vince, who is joining from Gildan Activewear, has more than 15 years of experience in publicly listed companies. He will oversee all aspects of financial reporting and related compliance. And last but not least, Brian Pearn will join us on June 7th as Chief Commercial Officer. Brian will play a key role in our growth by expanding to new markets, building on long-standing relationships with existing clients, while developing new accounts and expanding market share. Brian is an experienced executive leader with a demonstrated history of working in logistics, fleet, financial services, and electrification industries. He comes to us from XL Fleet, where he led the development of the commercial team. His previous work experience also includes Element Fleet Management and G Capital, where we served as Senior Vice President of Sales at both of these companies. With that, let me now turn the call over to Nicholas, who will comment on our financial performance.

Thank you, Mark. I am thrilled at the progress our team has made in parallel with the public listing process, which lasted over six months. All this done in an unprecedented pandemic environment. Given the early May close date, Each of NGA and Lion completed Q1 2021 as independent entities. As I discuss Q1, my comments will cover Lion's results only. Results presented for Q2 will, however, consolidate NGA and be on a post-transaction basis. Before I discuss Q1, I would like to briefly discuss our fiscal year 2020 results, as we did not get the opportunity to comment on numbers which were disclosed as part of our public filings for the transactions. Like companies from most sectors, fiscal 2020 was a very unusual year as the pandemic put significant pressure on our operation, our clients, and our suppliers. As the situation was evolving, our first objective was to ensure the health of our employees and their families, of our clients, and of the communities in which we operate. Our second objective was to implement tailored business continuity plans aimed at supporting our clients and business partners as they were navigating these unprecedented times. Despite the circumstances, we also aimed to maintain a high pace of vehicle R&D to continue to advance our various platforms and technology. As of today, most of our office people have been working remotely for over a year. We have adapted our business processes, and we believe we are well positioned to accelerate our growth as the economy continues to recover. Let's take a more detailed look at key highlights for fiscal 2020. We delivered 80 all-electric urban vehicles in 2020, all Lion's Sea school buses. For the year, we posted revenues of $23.4 million, down 24% compared to $30.7 million in fiscal 2019, primarily due to the impact of COVID-19 on our operations and on our clients. Our gross profits for fiscal 2020 amounted to $3.1 million, or 13% of revenue, versus $10.1 million, or 33% of revenue, in 2019. The reduction in gross margin is mainly a result of us delivering less vehicles than planned while, at the same time, increasing our manufacturing capacity and thus the fixed expense component of our gross margin in order to grow the business. SG&A amounted to $65 million, of which $55 million is a non-cash expense related to a revaluation of existing management stock options. Net of the non-cash stock options expense, SG&A expense amounted to approximately $10 million for the year. Adjusted EBITDA for the year was negative $4.3 million compared to positive $3.9 million in 2019. The EBITDA reduction in 2020 was largely due to continued fixed cost investments to scale the business with deliveries and revenue not following the same pace due to a large extent to the pandemic. In parallel, we continued to prepare for future growth. We invested a record amount of $16.5 million in acquisitions of intangible assets, which is largely R&D, as we are actively developing eight additional vehicles, while at the same time continuing to develop our battery technology. All in all, we have delivered a good year in 2020, as despite the turbulence caused by the pandemic, we made significant investments in the execution of our strategic plan, and we were able to secure funding to support Lyon's long-term growth. Let's now turn to Q1 2021 performance. Q1 is typically a slower quarter in the school bus space from a seasonality standpoint, and our sector remains affected by COVID-19, though we are seeing signs of improvements. We delivered 24 vehicles in Q1 2021, including 18 Line C school buses and six Line 8 trucks. 22 of these deliveries took place in Canada. This compares to a total of two school bus deliveries in Q1 2020. As Mark mentioned, we also delivered 10 Line 6 trucks to Amazon after the end of the quarter. We have therefore now delivered both our first Line 8 and Line 6 trucks. Revenues for Q1 2021 were of $6.2 million compared to $1.2 million in Q1 2020. Our gross profits for Q1 2021 amounted to negative $1.8 million versus negative $1.1 million in Q1 2020. The negative gross margin is related to lower volumes in Q1, which do not fully offset the fixed cost portion of our cost base, to an unfavorable pricing link, as well as the fact that we produced our very first trucks during the quarter. Administrative expenses amounted to $6.3 million for the quarter, of which $3.1 million is a non-cash expense related to existing management options. On a cash basis, administrative expenses amounted to approximately $3.2 million for the quarter. Selling expenses amounted to $4.4 million for the quarter, of which $2.1 million is a non-cash expense related to existing management options. On a cash basis, selling expenses amounted to approximately $2.3 million for the quarter. Adjusted EBITDA for Q1 stood at negative $5.9 million compared to negative $3 million in Q1 of 2020. Q1 2021 acquisition of Intangible Assets, which is largely R&D, amounted to $6.5 million, more than double last year's amount, as we continue to accelerate the development of our vehicles and battery technologies. As of today, our order book stands at 817 units consisting of 209 trucks and 608 buses for a total value of over $225 million. Most of these orders are expected to be delivered in the next 12 months. Our order book also includes 76 charging stations and related services representing a combined total order value in excess of $800,000. Based on what we see in the market and the trend experience in past years, we anticipate continued momentum in the order book. Let me now discuss the impact of our public listing. As Mark mentioned earlier, our public listing and the related private placement resulted in a cash inflow of approximately $490 million, approximately $90 million of the proceeds loan and convertible to ventures, with the remainder as cash on our balance sheet. We therefore have debt facilities of approximately $12 million, with approximately $400 million of cash on the balance sheet immediately following closing. In order to provide maximum flexibility, we also expect, subject to market condition, to put in place a new syndicated credit facility, and we hope to announce something to that effect shortly. The closing of the transaction and our transition to a public company will result in the elimination of certain liabilities on our balance sheet and non-cash items on our P&L related to retractable common shares, convertible debt, and management options. Now, turning to the year ahead, we expect the electrification of medium and heavy-duty fleet to continue to gain momentum, driven both by the will of large fleet owners to electrify their fleet and by attractive government programs aimed at accelerating fleet electrification. we expect these favorable sector trends to help with the continued acceleration of our order book and our pace of delivery. At the company level, we will aim to improve the conversion rate of advanced client dialogue into orders, continue to increase vehicle production rates, and accelerate delivery. In light of the COVID-19 situation, our relatively recent entry in the truck market and our transition to a public company We do not anticipate providing any short- or long-term financial guidance in the foreseeable future. Going forward, we, however, expect our disclosure to discuss industry trends, trends in lines, orders, and deliveries, the launch of new vehicles, key milestones on our battery plant and U.S. vehicle facility, progress with experience centers, and company headcount and key senior hires. I will now pass it back to Mark for concluding remarks.

Thank you, Nick. We are pleased with the expansion of our business, the continued validation of our technology, and our market position. In the next few months, we will focus on, first, continue focusing on our customers and working with fleet owners to provide them a turnkey solution and help them navigate the transition to electric and full confidence. This should translate into order book growth and accelerated deliveries. Second, executing of our strategic growth projects. We will continue to advance our 20,000 vehicle per year U.S. vehicle factory and our 5 gigawatt hour per year battery assembly plant. Third, continue to attract the best talent, make key strategic hires, and train the team to successfully execute on our growth strategy. Before we turn to Q&A, I would like to thank the fantastic team at Lion, Our achievements today reflect the daily hard work of each and every team member. We are entering the most exciting chapter of our story, and we are all committed to continuing our success while accelerating our growth. As I have always been saying, We hope to have the support of investors who are with us for the long term, who can appreciate the incredible opportunities within the electric vehicle commercial space and the need to progress at a pace that allows us to maintain our significant first mover advantage. Let's now open the lines for questions.

Thank you at this time. If anybody would like to ask a question, please press star one on your telephone keypad. Your first question comes from Bernard Poirier from Desjardins. Your line is open.

Hey, good morning, Mark. Good morning, Nicholas. Congrats for the latest development. You just completed the delivery of 10 trucks to Amazon. Could you maybe discuss about the next step with respect to Amazon?

Sure. Good morning, Benoit. This is Mark. Absolutely. So, yeah, we successfully delivered the first 10 units within the last few weeks. And, yeah, so the decision, obviously, is Amazon's decision, I mean, for the future. But we are ready to deliver, I mean, as many trucks as they would like to be delivered.

Okay. And with respect to Heritage, there's been a great announcement for the purchase of five trucks and potential for 10, 100 additional orders. Could you talk maybe about the timing around the validation program?

Yeah, the validation program for the first five units will be before the end of this year. And you said it, I mean, if they are satisfied with the performance of those five units, then they have an option to buy 100 additional units. And this is a mix of Lion 6 and Lion 8.

okay and with respect to refuse trucks mark any update on the progress of the pilot program with waste connection and could you maybe provide the caller about the potential market opportunities in the waste industry aside heritage and waste connection

Sure. The refuse truck potential is huge, as everybody knows. We'll be delivering the first unit to Waste Connection within the next few months. We're in negotiation with many, many customers. This is, as you know, this is a real full electric refuse truck, meaning this is an electric buddy on our electric truck. And you can do the full day of operation, over 1,200 stops. on the single charge, so the customers are looking forward to do some ride and drive on this truck and to start purchasing those trucks.

Okay, that's great, Collar. And last one for me, could you talk about the expected ramp-up in headcount and SG&E for 2021?

Sure. Well, it has to do with manufacturing capacity, obviously. And what's good is that we do have a manufacturing capacity of 2,500 units per year right now in our actual plant in Montreal. So this is good. As you guys know, we made the announcement of the Illinois plant also that we are starting the ramp-up of the building within the last few months and before the end of the year. And the first buses and trucks will be rolling up the line in H2 of 2022. So we are ramping up the number of employees. We're a little bit over 650 employees. employees right now, and we are hiring all the best resources. As, you know, I mentioned earlier, also the significant hires we have made in the last few months as well. So this could go, you know, to a very significant number within the next 18 months, depending, you know, on the order book.

Okay. That's great, Collar. Thanks for the time. I'll get back in the queue. Thank you.

And your next question will come from Jonathan Lammers from BMO Capital Market. Your line is open.

Good morning. Congratulations on the public listing and capital raise. I appreciate that you're not going to be updating your guidance going forward, but would you be able to comment on how actual order activity, year-to-date, as compared to your expectations and, more importantly, your ability to meet the targets you laid out in the prospectus? Sure. I'll pass it to Nick.

Hey, Jonathan. Nick here. Good to speak with you. Look, I mean, we announced this morning the purchase order book at 817 units and that most of these units, we expect, will be delivered in the next four months. And this is, you know, we also announced that this was the extent of the KPIs, if you will, that we will report on that front. And so I will leave it at that.

Okay, and I'm curious, it seems like customer demand near term is shifting a little bit in favor of school buses from trucks relative to maybe what you put out before. Can you comment on how easy it is to adjust the assembly lines to produce more school buses and fewer trucks or vice versa? I believe the underlying chassis are fairly similar.

They are, Jonathan, you probably remember that underneath a school bus, you have a Class 7 truck chassis. So you're absolutely right. I mean, we can do, when we're saying we have a manufacturing capacity of 2,500 units per year right now, it's a myth. of school buses, buses, and trucks. And we can do, you know, all of them, and it could be, you know, a mix of any of those models. And the same thing with the 20,000 units manufacturing capacity in Joliant. In total, it's a manufacturing capacity of 23,000 units. Shifting, I mean, you said, you know, shifting from school buses to trucks. I mean, we see a lot of enthusiasm on the truck side as well. And I think you know what happened on the school bus side is that we've been working in this market, I mean, for many, many years. We delivered our first units over five years ago. As you might recall, and then President Biden and the Prime Minister Trudeau came up, you know, with subsidies, same thing in Quebec and many, many other provinces and states right now. So it seems like everybody, I mean, recognizes the value of carrying our kids in electric school buses. And to us, I mean, this has been, you know, like a slam dunk, I mean, for many, many years. So the whole market of school buses is going electric. President Biden said that at least 20% over the next few years will be converted to electric, and they're investing the money into this. So school buses, obviously, is a great, great market. that a lot of people were, between us, I mean, understating a few years ago. But turning to the truck market, I mean, oh, no, huge enthusiasm. I mean, we are having regular, I mean, contacts with the customers. We are doing rides and drives. We got, you know, that big order from the price group for 100 units. In addition to, you know, all the other orders I mentioned earlier, earlier and we are in negotiations with many major fleets everywhere in the United States and Canada. So I would say, you know, the whole market is, I think, going electric and school buses, I mean, it is now, and electric trucks. I mean, it is now as well, but obviously we're just at the beginning of it, so it takes, you know, a little bit more time, but the whole market is very excited about, you know, using electric trucks and buses.

Okay, thanks for that. And just on this order from First Student, are you able to share with us anything about how long that order took to develop and whether there could be future opportunities with them or other large contractors in the U.S. going forward?

There are many opportunities right now, Jonathan. It's an order for 260 buses. Those buses will be used in Quebec. So this is only, you know, for the Quebec operation of First Student. They have a fleet of about 750 buses, so it's about a third of the First Student fleet in Quebec that will be electrified. So this is very exciting. They have been using 16 of our buses for a few years now. And they were operating those buses. They've ordered, you know, an additional 10, and now they are ordering an additional 260 for a total of over 280 buses in their fleet within the next, let's say, 18 to 20 months. And it seems like, you know, what First Student is doing is We feel that many school bus operators will be doing the same thing, not only in Canada, but in the United States as well. You probably know that we made very significant deliveries in California as well. We won the CCRSP less than two years ago, and we have people on the ground over there with two experience centers. in California, one in L.A. and one in Sacramento. So we're very well established with our eight experience centers across the United States and Canada, I mean, to service those buses and trucks. And we are opening a lot of experience centers as well. So we do see a lot of enthusiasm and very, very excited about what for students is doing with us.

Great. And I'm sorry to follow up on this, but just on lead times, How do those compare for these large bus customers to the private truck customers? Jonathan, you mean on the truck side? Well, on trucks and on school buses, just how long it takes to negotiate the agreement and get from this point of discussion with the client to actually putting an order in your backlog. No, sure. Thank you, Jonathan.

Yeah, you asked me that question earlier. Well, you know, for students, it's an ongoing relationship and discussion because they're already using our electric buses. So I would say, you know, it's really not really, I mean, like negotiation and how long it takes. For many of them, it's like ongoing discussions and operating discussions operating those buses. So it really depends, you know, from one customer to the other. But for new customers, usually they like to do ride and drive, which we do with Lion because we have vehicles on the ground. They can do some ride and drive, which is great. So it could go, you know, from a few weeks to many months.

Okay, I'll pass the line. Thanks for your comments. Thank you.

And your next question will come from John Lopez from Vertical Group. Your line is open.

Hey, good morning. How are you? Yeah, good morning, John. We're very good. How are you? Good, great. Thanks so much for taking the time. So my first question, I'm wondering, can somebody provide us a backlog question? figure as of calendar q4 that kind of seems like the kpi you guys are going to maybe rely on here is there any way we could get the historical uh trending for that Hey, John. Nick speaking. Thank you. We were at over 300 units at the end of Q4, and just a figure with deliveries and all that, the number of purchase orders we secured from year to date, Jan to year to date, is a little bit over 530. Gotcha. That's really helpful. Thank you, Nick. My second question is just about production. I think I saw the disclosure of a little over 40 vehicles in the quarter. Sorry, again, is there a way you could offer us that figure for calendar Q4? And what I'm really trying to figure out here is a bridge on the gross margin side. To say it differently, I would expect you guys probably produced a couple amount of vehicles in Q4 and, again, in Q1, even though the deliveries dropped. Do I have that right? And if I do, how does the gross margin trend relative to that? So roughly speaking, I think that's correct. I don't have the Q4 production with me right now. We have a job. In terms of gross margin, we at Q4 were around 18% gross margin, largely also related to the number of sales of the vehicle sales that we had in the quarter, which was 46 in Q4. Okay, okay, I got you. I'll follow up with you on that one. And so my very last question here, just relative to what I think you guys are saying on the backlog, I guess the expectation is most of the units will be delivered kind of over the next 12, but then on the other hand, it sounds like the first student order... probably extends out a bit beyond that. So I guess my question here is, if I take those two customers, they seem like they're pretty sizable, percentage of the backlog. Are you comfortable that most of that gets delivered in the next 12, or should we really be thinking most of this is like over the next 18 to 24? Yeah, and I'll start again. So for first students, we're going all the way to H1 of 2023. Right. So you talked to customers. I guess the second one was Pride. Sorry, exactly, yeah. Yeah, yeah. So Pride will be, you know, in part this year and in part next year, a little more weighted towards this year. But, yeah, so that's – and then, I mean, calendars. Calendars. Okay. All right, great. That really helps. Thanks so much, guys. Thank you, John. Thank you, John.

And your next question will come from Rupert Murray from National Bank. Your line is open.

Good morning, everyone. Congratulations on reporting the first quarter, and thanks for taking the questions. Getting back to the gross margins, can you discuss your sales strategy, how you're setting the ASP today, and how much of your manufacturing costs would you say are fixed costs versus variable costs?

Sure. Well, good morning, Rupert. Great to talk to you. Well, with respect to the ASP, obviously, you know, we do have a strategy of, you know, pricing. And the ASP, I mean, we expect, you know, will go down with time as we're passing, you know, all the cut savings to the customers, like we've always said. And, you know, this is why we're investing so much money. For example, in the battery factory, we're most, well, about 40% of the time, of an electric vehicle is within, you know, the battery. Now, Nick, with respect to the gross margin.

Yeah, so with respect to the portion of the fixed cost that's fixed versus variable, the thing to keep in mind, Rupert, is that it'll change on a quarter-by-quarter with volume. But when we look at it on a full-year basis, we estimate about a quarter of the, so about 25% of the cost base above the gross margin level is.

Okay, great. So looking at your current ASP and your backlog, do you have a sense for what your break-even point is on sales at the current pace, current price?

Yeah, it's not a figure we'll be putting out per se, but look, if you look at Q4 of 2020, we were break-even on the bid for that protocol.

Okay, thank you. I respect you're not going to give financial guidance. We have talked a little about the cadence of orders over the next 12 months. Just wondering, is the cadence determined only by the timing requirements of your customers or is some of this the rate that you're able to ramp production? Are you ramping production? Are you fully able to deliver at the rate of 2,500 units per year today? Yes.

There is no issue, Rupert, with the renting of production. Our manufacturing capacity is 2,500 units right now. Obviously, we need to rent up the number of employees, which we do as needed. It's really not a challenge in this regard. Let's keep in mind that we're working very, very close to our customers. with Lion Energy. And this is where, you know, for many customers, for many clients, this is where the challenge is. Sometimes we need to make sure, you know, that the infrastructure is ready on their end. So what we do, I mean, as soon as possible, we start working with them to make sure that they can keep doing what they're doing great, their business. and we can take care of the project management of the charging infrastructure. And as we said earlier, we are resellers, you know, of many brands as well, and we do that. So it could take, you know, a few months to get that organized and the project management, depending on the size of the delivery as well. And we're working very close to the customer. So when we're delivering, for example, let's say in three months, From now, all those three months, I mean, we'll be, you know, busy taking care of the operation and making sure that all the infrastructure will work very well when we will deliver the vehicles.

Thank you. And then just finally, I'm wondering if you can give some more color or any metrics on the sales pipeline that we can track going forward. You talked a little about coding activity and how it's evolved. Maybe give us more color on that and and how your conversion rates have been evolving as well, conversion rates to sales?

Yeah, it's going very well. I mean, we've been ramping up. our sales team as well. We have about 50 employees now in our sales team. So, I mean, adding those, you know, discussions with customers and the fact that they can do rides and drives on our products, on our vehicles, I mean, it is great. So, no, the conversion rate, I mean, I think will be very, very good. And the customers, obviously, we are in relation with. You know, the... Well, the first thing for them is the great news that we share with them most of the time is that the total cost of ownership works very well in most of the cases. And this is like – this was in the past like a well-hidden secret, let's say that, and we're doing the calculation with them with their own – And when they see that we can do the project management of the charging infrastructure as well, they can talk to customers. We're the leader in electric school buses in North America. We like to speak with the other customers. And now that we just started, you know, doing the delivery on the truck side as well, I mean, we see an acceleration in closing the orders. Absolutely.

Thank you. I'll leave it there and get back in the queue. Sure, thank you.

And your next question comes from Michael Glenn from Raymond James. Your line is open.

Hey, good morning. So I guess my first question, just in terms of the U.S. facility first production targeting towards the end of 2022, when I listen to it, it feels like an aggressive timeline to get to that point. I'm just curious, how much buffers have you put into that timeline and how Are you comfortable you have all the supply chain you needed set up surrounding that production ramp and to get all the equipment delivered in time in order to make that production happen?

Absolutely, Michael. Well, this is a great question. And I mean, for anybody that will open, you know, a factory where they do not have a lot of electric manufacturing experience, I mean, this will be challenging. I mean, for Lion, it's totally different. We've been manufacturing those vehicles, I mean, for more than five years now and working on them for more than 10 years. So it's a huge difference. So we are already doing business with all the Tier 1 suppliers. And we do have a human manufacturing capacity of 2,500 units. And if you take a look at the building as well, the building is very well underway right now. If you look at the pictures, and for some of you, I know some of you guys have been able to see it. You've been able to go on site as well. Very, very exciting. I mean, this building is very well underway. And we will take, you know, we do the occupancy of this building within the next few months with the ramp-up of the building before the end of the year. So, no, I mean, the first units will roll up. H2 of 2022, no doubt in my mind, everything is in place. The supply chain is already in place with what we're doing. You're welcome to visit our current factory. So we do have a lot of experience. So for anybody else that is not used to do that, that will be challenging. But for Lion, we've been doing this for many years, Michael.

And what are some of the big, when I think about what that line looks like, I mean, what are some of the significant manufacturing type items that you need to get into the facility to make the production happen? Is it robotic? Is it just labor? Or what is it exactly?

Well, it's a mix of what you just said. I mean, it's a mix of robotics and labor. We are starting to hire the people as we speak. We announced the Joliet facility only about a week ago. And so we just started, you know, the hiring process. So ramping up. The labor, the good thing is that, you know, Joliet, this is one of the reasons we've selected Joliet, with the labor and also, you know, the specialized labor that we will need at some point. Robotics, I mean, is a good point as well. I mean, we are looking, you know, at manufacturing, I mean, at a great pace, obviously. So it's a mix of all of that.

Okay. And just circling back onto Amazon, can you give an idea of the trucks that have been delivered up to now, the use case that they're being put through, and any sort of feedback you're getting from the customer? Are there tweaks that have to be made to the platforms to get them more aligned with what Amazon needs?

Yeah, Michael, this is really a private discussion with Amazon. So, I mean, we were able to say that we delivered the truck, but the usage, you know, what we are doing with it, I mean, it's a private matter between the two companies. Okay.

Okay, thank you for taking the questions.

Thank you. And our final question from today will come from Benoit Poirier from Desjardins. Your line is open.

Yes. Could you talk maybe about the overall pricing environment we see these days as we've seen some favorable announcement related to government subsidies, Mark?

Yeah, Benoit, I mean, there have been, you know, great announcements on subsidies. As we're saying, you know, even if the total cost of ownership works on most cases, the operators, I mean, at some point need some help to do a school transition to electric. And you saw what's happening on the school bus side. The school bus side with President Biden that said he wants to electrify over 20% of the 500,000 plus students. school buses in the U.S. This is great. Mr. Trudeau said that he's looking at replacing 5,000 buses in Canada. It's a mix of transit buses and school buses with electric school buses within the next five years. Mayor de Blasio mentioned before 2035, wants to electrify the police in New York. The ACT program also in California, but also that many other states are looking to apply in their own states. So there's a lot of money right now, and the people see the benefits. of going electric. And I think what they like to see as well is this total cost of ownership being so good right now at this point, but that will improve with the higher demand over the next couple of years. This is great. I mean, we're very excited about all the money that is coming in to make a smooth transition transition for the operators to electric, and also, you know, the government of Quebec that came up, you know, with over $20 million for school buses. Great, great news.

Okay. Thank you very much again. Thank you, Benoit.

This brings us to the end of our Q&A session. I turn the call back over to Isabel Ajayi for closing remarks.

Well, thanks, everyone, for joining the call today. We look forward to continuing the discussion with you, and feel free to call me, contact me for any follow-up questions you may have. On this, have a nice day. Thank you. Thank you, everyone. This will conclude today's conference call. You may now.