The Lion Electric Company Common Shares

Good morning, ladies and gentlemen. Welcome to LION's second 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. To ask a question during the session, you'll need to press star 1 on your telephone keypad. As a reminder, this conference call is being recorded. I would now like to turn the call over to Isabel Adjaye, Vice President, Investor Relations and Sustainable Development, Please go ahead, Ms. OJ.

Thank you and good morning, everyone. Welcome to Lions' second quarter 2021 results conference call. Bienvenue à la conférence téléphonique sur les résultats financiers du deuxième trimestre de l'année 2021 de Lyon. While today's call will take place in English, we would of course be delighted to answer any question in French during the Q&A session. Although today's call will mainly be in English, we will be happy to answer any question in French during the Q&A session. With me today are Marc 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 the 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 risk and uncertainties. Many factors could cause actual future events to differ materially from the forward-looking statements 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 prospectus dated May 5, 2021, filed with the Autorité des Marchés Financiers. and to the registration statement on Form F1 filed with the Securities and Actions Commission and declared effective on June 14, 2021. You can also consult other documents publicly filed with the AMF and the SEC. Forward-looking statements only speak as of the date they are made. You are cautioned not to put on your reliance on forward-looking statements. and we undertake no duty to audit 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 company's order book, which are defined, further described, and in certain cases reconciled in our earnings release and MD&A issue this morning. With that, I will now hand the call over to Marc Bédard. Marc?

Thank you, Isabelle. Good morning, everyone, and thank you for joining us this morning. If I had to provide the title for our Q2 conference call, it will be, despite the pandemic, Ryan is delivering strong results and is executing its strategic plan in a very organized and timely manner. Let me first remind you who Lion is. We manufacture 100% electric trucks and buses, no hybrids. We are solely focused on electric technology. No fuel cells, no CNG, no propane. Our vehicles are purpose-built for electric. We don't do retrofits. There are mainly three key elements that I would like you to remember from today's Q2 results announcement. Number one, we continue to see great momentum in client dialogue, which is translating into accelerated purchase orders and deliveries. Lion is one of the very few companies in the EV industry that is currently delivering vehicles and charging infrastructures while executing its growth plan. In our list of Tier 1 customers, such as Amazon, IKEA, Canadian National Railways, Sobeys, Con Edison, Heritage, First Student, National Express, STA early unified school district keeps growing and continue to validate our unrivaled leadership in the market. Number two, we continue to advance the development and commercialization of new platforms, and we're planning to launch eight new models by the end of 2022 for a total of 15 all electric models, the largest product lineup in the industry. Number three, We continue to achieve important milestones on our strategic plan, namely the construction of our Joliet Illinois manufacturing facility with a capacity of 20,000 vehicles per year, the construction of our battery plant and innovation center, as well as multiple eye rings across the company. All this within our announced timeline, despite the pandemic. In a nutshell, We are building up the entire organization to continue to execute on our strategic plan, all this while benefiting from an unprecedented favorable legislative backdrop, both in the United States and in Canada. I will now provide an update on each of these items, and I will then pass it on to Nicholas, who will discuss our financial performance for the second quarter. Let me start by discussing our deliveries and purchase order book. During Q2, we delivered 61 vehicles as compared to 22 last year, an increase of 177%. These deliveries consisted in 13 trucks and 48 buses. 41 of these vehicles were delivered in Canada and 20 were delivered in the U.S. I am pleased to see continued momentum in deliveries despite the impact of the pandemic. as important to us as deliveries or purchase orders, as they give an indication of upcoming deliveries and related revenues. As of today, our order book totals 965 all-electric vehicles, consisting of 703 buses and 262 trucks, representing a combined total order value of over $280 million. We expect that the majority of these vehicles will be delivered within the next 12 months. Great new client wins in the order book include customers such as Green Mountain Power, Dan Ross, Zoom, and Casella Waste Systems, just to name a few. The order book also includes a new order from Amazon for 15 Lion-8 tractor trucks. It also includes a repeat purchase order for 35 Lion Seat buses from the Prince Edward Island Provincial Government, positioning Lion as the lead electric OEM in this province, with a total of 47 electric school buses. Let me be very clear, this is an order book, not a pipeline or a backlog. The continued momentum in our order book stems directly from our ability to leverage the full-line ecosystem that is tailored to electric vehicle fleet operators, as we have now been doing for many years. This includes a direct sales force that is highly specialized in EVs, complete infrastructure sales and support through Lion Energy, as well as leveraging our experience center network in our grant team. Speaking of grants, we continue to see an unprecedented favorable legislative backdrop to promote EV adoption, both in the United States and in Canada, with a true desire by government officials to support a cleaner environment through tangible EV grant programs. For example, our order book includes numerous school bus orders for which customers have benefited from the $250 million subsidy program launched by Quebec MCQ last April. In fact, 16 buses have already been delivered under this revised program. As a reminder, under this program, customer benefits from a subsidy amounting from $100,000 to $150,000 per vehicle. What matters to us even more than the amount of the subsidy is the objectives set by the government. They committed to having 2,600 new electric school buses on the road within the next three years. and to electrifying 65% of Quebec's school bus fleet by 2030. Additionally, starting on November 1, 2021, every new school bus registered in the province of Quebec will have to be an all-electric school bus. We are convinced that the subsidy program approach favored by the Quebec government is the right one to accelerate the transition to electric vehicles and that it will have a major impact on many other province and state legislations with respect to accelerated EV adoption. We also believe that Lyon is uniquely positioned to deploy school buses as part of this program. Another notable EV incentive program you have all heard about is the California HVIP-1, which opened to new voucher requests lately with $96 million for the purchase of commercial electric vehicles to be registered and operated in California. And Lion is one of the leading applicants into the HVAC program. Earlier this week, the US Senate passed the Bipartisan Infrastructure Investment and Jobs Act, which includes $5 billion of funding towards the replacement of existing school buses with clean and zero-emission school buses. With this vote, we are getting one step closer to unprecedented funding for initiatives targeting reduction in transportation emissions and charging infrastructures, which is very good news for our industry. Shortly after the end of the quarter, the California legislator and Governor Newsom signed a budget bill to further promote the adoption of zero-emission vehicles. Under this new bill, The allocation of $2.7 billion for zero emission vehicles and their infrastructure in the state budget in 2021 and 2022 was authorized. This $2.7 billion in funding is intended to put 1,000 new zero-emission trucks, 1,000 new zero-emission school buses, and 1,000 new zero-emission transit buses on the States Road and will support the rapid growth of charging stations across California. Lion, being the electric school bus leader in California and in North America, and also adding an unparalleled lineup of electric trucks available now for delivery, is very well positioned to tap into this program and continue to deploy electric vehicles in California in a timely manner. Last, only three days ago, the Canadian government further clarified the terms of its previously announced program and confirmed that through the Zero Emission Transit Fund, it will be investing $2.75 billion over five years to support public transit and school bus operators' plan for electrification. This much awaited announcement will support, among other initiatives, the purchase of 5,000 zero-emission buses. Navigating this grant environment requires a clear and thorough understanding of all the programs available. Over the years, Our Lion grant team has established lines of communication with key governmental bodies providing grants and subsidies, including the MTQ, the California Energy Commission, and CARB, to name a few. Being able to support our clients throughout the whole process with our Lion grant team is one of the items that sets Lion apart from competition. Let me now spend a minute on other elements of the Lion ecosystem. Our Lion energy division which has its customers with selecting, purchasing, project managing and deploying charging infrastructure ahead of vehicle delivery also continues to gain momentum. In less than a year of operation, it has already generated revenues of more than half a million dollars. As of today, The Lion Energy Order Book stood at 73 charging stations and related services, representing a total order value of approximately $1 million. This includes an order for 35 charging stations from the government of PEI, which we announced earlier this week. As a reminder, we are agnostic when advising customers on their infrastructure needs, and we are a reseller for different types of charging stations, including from ABB, ChargePoint, slow add energy, blink, and UV with a full lineup of level two and three charging solutions. Finally, a word on our experience centers, which are dedicated spaces where customers, policymakers, and other transportation industry stakeholders can drive our electric trucks and buses, learn about their specification and advantages, meet Alliance sales representatives, discuss grant and subsidy assistance, receive vehicle training, and have existing vehicles serviced. We currently have eight Lion Experience Centers in operation across North America and expect four new ones to be in operation in Virginia, Minnesota, Tennessee, and Vermont by the end of the year. We are also simultaneously working at securing additional facilities to continue to expand our experience center network. Let me now provide an update on the execution of our strategic plan. First, our Joliet Illinois manufacturing plant. I am pleased to report that the shell building of our 900,000 square foot facility is approximately 80% completed. We have pictures showing the plant in our Q2 2021 results slide deck that you can find on our website. Completion of the construction of the building is still planned before the end of this year. We have retained Colliers International as construction project manager and Merkur as advisors to assist us with global project planning, as well as for the selection and commissioning of production equipment. As a reminder, Our highly automated production facility will have a production capacity of 20,000 vehicles per year in full operation. It will be the largest dedicated production plant for zero-emission medium and heavy-duty vehicles in North America and Lion's biggest footprint in the United States. It will give us the ability to meet increasing demand in the marketplace for made-in-America zero-emission vehicles. Everything is going as planned, and the initial vehicle production is expected to begin in the second half of 2022. Now, turning to our battery plant and innovation center. During the quarter, we officially announced that our battery plant and innovation centre will be located at the YMX International Aero City of Mirabel, which is about 20 miles from our current manufacturing site near Montreal. This project is well underway. Works such as geotechnical work, environmental studies and permitting are currently being performed, while on-site construction has already begun. We have retained Pomerlo, a flagship corporation in the Canadian construction industry, as project manager and general contractor for the construction of the battery plant and innovation center. In parallel, we have also retained JR Automation, an Itachi company, for battery manufacturing automation and equipment selection. Here again, I want to confirm that we are on track with the previously announced timeline and that the initial production of battery modules and packs is planned for the second half of 2022. Once fully operational, we expect an annual battery production capacity of 5 GWh, enough to electrify approximately 14,000 of Lion's electric trucks and buses. Producing our own battery modules and packs will be a key strategic differentiator, and it should result in significant cost savings, provide full control over battery specs and dimensions, and remove key supplier dependency. The third element of our strategic plan relates to the Lion team. We continue to improve our team on all fronts during Q2. As of today, Our total headcount amounts to approximately 900 employees, of which approximately 270 in engineering and R&D. We also recently started the hiring process for the Joliet manufacturing plant, and we'll update you on that process in the quarters to come. In our management team, Brian Pearns joined us as our Chief Commercial Officer, François Beaulieu as our Vice President Chief Information Officer, and Natalie Giroux joined our leadership team as our Vice President, Chief People Officer. Last, I would officially like to welcome Mr. Lorenzo Rocchia, who recently joined Lions Board of Directors. Lorenzo is the Chairman of Transatlantic Holdings, an international financial holding company. He also co-founded Transatlantic Power and Skyline Renewables, one of the largest energy renewable companies in the United States. We are looking forward to benefiting from Lorenzo's expertise. Before turning it to Nicholas to comment on our financial performance, I would like to briefly discuss our supply chain. Like many other automotive OEMs, we are currently being impacted by an increase in the cost of certain components required to build our vehicles. This cost increase is mostly due to higher costs in the steel parts and harnesses, and also in the freight costs in general. This increase has had a marginal impact on our bill of materials as of today. We are also impacted by longer lead times on several components. Our approach to minimize delays and limit any cost increases is to overstock several key components, and we are grateful we adopted this philosophy even before the pandemic thanks to our long-term experience in EVs and to our vertical integration strategy. For instance, we currently have inventory on-end of over 1,000 battery packs with numerous additional shipments already scheduled for the rest of 2021 and additional significant quantities reserved for 2022 and also 2023. Additionally, our inventory of battery modules is sufficient to build approximately 240 additional Lion batteries. We also have several long-term agreements with other key suppliers, and in most cases, we have supplier redundancy for critical components. Our strategy of working in two markets, buses and trucks, serves us very well in this regard, given the commonality of many components that can be used on most, if not all, of our models. Altogether, we have been able so far to maintain a good production rate with few production delays, while experiencing a slight increase in our material and freight costs. We are confident in our ability to significantly reduce our cost base when the global supply chain situation returns to normal. With that, let me now turn the call over to Nicolas, who will comment on our financial performance. Thank you, Marc.