The Lion Electric Company Common Shares

Welcome to Lion Electric's fourth quarter and fiscal 2022 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. As a reminder, this conference call is being recorded. I would now like to turn the call over to Isabella Jahi, Vice President, Investor Relations and Sustainable Development.

Please go ahead. Good morning, everyone. Welcome to Lion's first quarter and fiscal 2022 results conference call. Bienvenue à la conférence téléphonique sur les résultats financiers du quatrième trimestre et de l'exercice 2022 de Lyon. Today, I'm here with Marc Bédard, our CEO funder, and Nicolas Brunet, our EVP and CFO. Please note that our discussion will include estimates and other forward-looking information and that our actual results could differ materially from those implied in those statements. We invite you to review the questionnaire language in this morning's press release and in our MD&A regarding the various factors, assumptions, and risks that could cause our actual results to differ materially from those implied in such overlooking statements. With that, let me turn it over to Mark to begin.

Thank you, Isabelle. Good morning, everyone. At the beginning of last year, as we were discussing our strategic objectives for 2022, we highlighted the following specific areas of focus that guide our work and investments. Ramping up production at our Montreal plant, building and starting production at our Joliet plant and our battery factory, and accelerating vehicle and charging infrastructure deliveries. I'm glad to report we delivered on our plan for each of these items while maintaining our commanding leadership in the electric school bus space. There are three main elements we will be talking about today. Number one, we continue to increase our vehicle production cadence in Q4, which translated into growing vehicle deliveries and growing revenue. And we expect this trend to continue in 2023. Number two, We achieved significant milestones in our two growth projects as we assembled our first electric school bus unit at our U.S. manufacturing plant and our first battery pack in our battery factory. And number three, while in 2023, we will continue to invest in our two new manufacturing factories to ramp up production capacity, we will also continue to smartly align capital spend with expected near-term demand for our vehicles and to carefully manage our liquidities. We will provide color on each of these items before we open the line for questions. Let's begin with deliveries and orders. During the quarter, we delivered 174 vehicles consisting of 139 buses and 35 trucks. This is the fifth quarter in a row of sequential growth in vehicle deliveries. In fiscal 2022, we delivered 519 vehicles more than twice the 196 vehicles delivered in 2021. Our PO book currently stands at 2,468 vehicles for total order value of $575 million. It includes orders for 2,167 electric school buses, including 190 from the EPA program. As school districts that were awarded grants under the program have started to place purchase orders, ahead of the April 28 deadline. Speaking of the EPA Clean School Bus Program, we have already started delivering electric buses funded by this program well ahead of the October 2024 deadline. Also, as per the program rules, we expect the EPA to make upfront payments to program awardees after receiving proof of a confirmed purchase order. This will have a significant positive impact on our liquidities by allowing us to invest in upfront procurement costs required to manufacture these vehicles. Our PO book also includes orders for 301 electric trucks. And last, our Lion Energy PO book amounts to approximately $6 million, mostly for charging infrastructure and related services. Besides the EPA, ZTF, and many other programs discussed previously, Other legislation and funding initiated continue to support the shift to the electrification of the transportation sector, which represents great news for Alliant and our customers. For example, the U.S. federal government recently published the U.S. National Blueprint for Transportation Decarbonization and signed the Global Memorandum of Understanding on Zero Emission Medium and Heavy Duty Vehicles, which commits to 30% of medium and heavy duty vehicle sales being zero emission vehicles by 2030 and 100% by 2040. In California, the proposed 2023 budget allocated $48 billion to climate change. On the IRA front, Ryan was officially approved as a qualifying manufacturer by the IRS, which means that our vehicles sold in the United States starting January 1st, 2023 are eligible for a tax credit of $40,000 per vehicle. Let me now provide an update on our supply chain. Last year, the supply chain continued to be impacted by several factors, although to a lesser extent than in 2021. As discussed previously, this has generally translated into longer lead times, increased transportation costs, and ultimately, higher cost of components for vehicle production. While supply chain issues are improving, we nevertheless expect continued challenges this year which may impact our production cadence and vehicle cost. To mitigate those supply chain impacts, we have successfully put in place several measures, which we will continue in 2023, including qualifying additional suppliers and proactively managing inventory for critical components such as batteries and motors. At the end of the quarter, we had approximately 4,700 BMW battery packs on hand. This inventory should enable us to gradually convert to land batteries as we ramp up our own battery production, which I will address in a minute. As far as battery packs to be supplied by Romeo, the arbitration process is progressing. In addition, we initiated legal proceedings against Nikola Corporation on the basis that it intentionally interfered in our contractual relationship with Romeo and in our business expectancy with respect to our relationship with Romeo. As you can expect, we will refrain from commenting on this situation. Let me now talk about the development of our different vehicles. We have substantially completed the development work for the Lion-A bus, the Lion-D bus, the Lion-5 truck, and the Lion-A tractor truck, and we expect these platforms to begin commercial production this year. Please note that the timing of the start of commercial production for the Lion-A tractor truck could be impacted by the supply of the Romeo-powered battery packs for the reasons I just mentioned. Also, as a reminder, our buses will be manufactured at both the Montreal and Joliet plants, while our trucks will be manufactured in Montreal for the time being, where we have ample capacity to accommodate current demand. Which takes me now to an update on the Joliet plant and the battery plant. As announced, We completed in Q4 the assembly of the first electric school bus unit at our U.S. plant and delivered our first made in America electric school buses while we ramp up our manufacturing capacity in Joliet. In this regard, we expect to manufacture a modest number of buses in Joliet during the first quarter, followed by a gradual increase in production throughout the year. We will continue to invest carefully in the Joliet plant this year. with a goal to have an annual production capacity of 2,500 buses by the end of the year. As for our battery plant, following the completion of the installation of the first portion of our battery assembly line in our battery manufacturing facility, we completed in Q4 the production of our first battery pack at our own battery factory. Final certification of the first battery pack model is expected in the first half of this year, followed by a gradual production ramp-up in 2023. The first Lion batteries will serve to power the Lion C and Lion D school buses and the Lion 5 trucks. With our planned 2023 investments in the battery plan, we are targeting to reach a battery production capacity of 1.7 GWh by the end of the year. This represents capacity for approximately 5,000 vehicles in a mix of buses and trucks. As for the Innovation Center building, the shell work is now substantially completed, and this building will initially be used this year for testing certification of vehicles and batteries, for pre-delivery inspection of vehicles, and as a warehousing space. Let me now talk about our recently announced North American agreement with Mitsubishi and EMGS Commercial Finance. to provide financing for all electric buses and medium and heavy-duty trucks through our Lion Capital Solutions offering. This agreement will allow Lion Capital Solutions to provide our customers with financing solutions specifically designed for Lion school buses and trucks, thereby making it easier and simpler for our clients to secure the financing required for the purchase of their Lion vehicles. All of this without putting any significant pressure on Lion's balance sheet as we will leverage Mitsubishi's vehicle financing expertise in capital. This type of product offering should have a positive impact for our customers, as it could eliminate or reduce upfront capital requirements for the purchase of line vehicles. Nicholas will now further discuss our financial performance for Q4 fiscal 2022, and he will also provide color regarding our CapEx objectives for 2023. Thank you, Mark.