Lightning eMotors, Inc

Greetings and welcome to the Lightning eMotors third quarter 2022 earnings results call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Brian Smith, Vice President of Investor Relations. Thank you. You may begin.

Thank you, Daryl, and thank you all for joining us. Hosting the call today are Lightning's co-founder and CEO, Tim Reeser, Chief Revenue Officer, Cash Sethi, and CFO, David Agatston. Ahead of this call, Lightning issued its third quarter 2022 earnings press release and presentation deck, which we will reference today. These can be found on the investor relations section of our website at lightningemotors.com. On this call, management will be making statements based on current expectations and assumptions, which are subject to certain risks and uncertainties. Actual results could differ materially from these forward-looking statements due to risk factors that are listed in today's earnings release and in our filings with the SEC, which can also be found on our website. We assume no duty to update any forward-looking statements except as required by law. Today's presentation also includes non-GAAP financial measures. please refer to the information contained in today's earnings press release for definitional information and reconciliations of non-GAAP measures to the comparable GAAP measures. With that, let me turn it over to Tim.

Thank you, Brian, and thanks to everyone for joining us today. I'll start off on slide four with today's agenda. I'll begin with an overview of Lightning, some highlights from the quarter, a discussion of our progress on managing our supply chain, and a discussion of our focus on gross margin improvements. Cash will then provide an update on products and markets, including an example of how the new incentives landscape stacks up to drive accelerated sales and business development initiatives. And David will wrap up with a financial overview. Moving to slide six, a summary of the quarter. At $11.1 million, our Q3 revenue was a record. and was 78% higher than our previous record from one year ago. Our production team executed very well in the quarter, producing 104 vehicles, which is more than double our production from a year ago. We have focused from our inception on attracting and hiring top talent, and we are excited that David Agustin has joined us as Chief Financial Officer. David is an experienced technology finance executive he is already making an impact by building on the solid financial systems and disciplines that teresa our former cfo instituted and he is now augmenting that with the talent and infrastructure to support accelerated organic and inorganic growth in 2023 moving to slide seven we believe lightning motors continues to be the only full range manufacturer of class three through seven zero mission vehicles in the market including ambulances, shuttle buses, utility trucks, school buses, and motor coaches. We're the only company currently shipping products in all of these classes today. We started in 2008 with commercial vehicle hybrid solutions and have now shipped over 430 zero emission vehicles with over 2.8 million zero emission miles driven by our customers. Our strategy to start by electrifying ICE chassis has allowed us to produce in volume earlier than our peers advancing our experience with designing, manufacturing, and selling a wide range of commercial ZEVs and powertrains, and giving us a competitive lead as we now move to designing and building our own ground-up ZEVs alongside our current vehicle and powertrain offerings. We continue to invest heavily in R&D and engineering to develop and perfect new commercial vehicle platforms and powertrains, and improve our reliability, reduce the cost of our current offerings, and expand our service and support capabilities. Moving to slides eight and nine, we've built a modular software and hardware architecture that allows us to serve a highly segmented and customized market with cost-effective solutions. Our high level of software and hardware customization that is required for commercial electric vehicles is something that legacy OEMs have not historically offered and are not well suited for. You can see from slide eight the full suite of Lightning's electrification solutions, enabled by our deep software, vehicle integration, and full ecosystem expertise. Slide nine shows our broad range of vehicle and powertrain platforms, either already in production or expected to be in production in 2023. Moving to slide 10. Since our last earnings call, we've announced a strong lineup of new products and partnerships, including a 170-vehicle deal with Gobolt, a sustainable, fulfillment, and last mile delivery company based in Canada for delivery vehicles in the U.S. and Canada. We also announced a second generation repower offering for large motorcoaches, which builds on our successful single and double-decker motorcoach demonstration vehicles we built and tested over the last two years. This Class 7 and 8 powertrain, designed for repower applications, extends the life of the buses at less than half the cost of a new bus, and turns a highly polluting vehicle into a zero-emission masterpiece. And just last week, we announced that Transport Canada, a federal institution promoting environmentally responsible transportation, has registered Lightning eMotors, creating additional opportunities for customers to leverage Canadian incentive and funding programs for our entire portfolio. Moving to slide 11, let's discuss the supply chain landscape. As we stated previously, batteries, which were supply limited last year, are in much better shape due to new battery partnership agreements, and we have inventory on hand today. The situation remains dynamic, however, as new platforms may require and or benefit from new battery configurations, both to support more range on a given platform, as well as reduce the price and improve quality and safety. We are working on both 400-volt and 800-volt configurations with both nickel manganese cobalt-based batteries, which have begun to see price stabilization after a large price increase mid-year, and lithium iron phosphate pack options. We are pleased to have long-term supply agreements for both battery chemistries with some proprietary safety technology built into our LFP battery systems offerings. On chassis, we now have much better availability for Q4 and Q1 with our new platform partnerships and agreements. With over 270 chassis currently on our lot, Our manufacturing and engineering teams are readying the production line to produce our first GM Class 4 platforms, which we expect to deliver to customers this quarter. In addition, our Lightning E-chassis and Bluebird E-chassis powertrains are on target for production in the second half of 2023. Beyond chassis and batteries, we continue to work to diversify our supply chain with new, higher production and lower cost suppliers to help reduce the cost and lead times we are seeing for components such as high voltage heaters, high voltage air conditioners and heat pumps, and thermal management parts. Turning to slide 12, we are again now seeing an increase in momentum towards the electrification of commercial vehicles after a brief pause in new orders while customers waited for the EPA and FDA incentives passed last year to hit the market. In addition to these new programs funded by the 2021 Infrastructure Act, which are now close to being awarded, we believe the passing of the Inflation Reduction Act during Q3 with its $40,000 federal tax credit for zero-emission commercial vehicles in Class IV and larger, is motivating customers to accelerate their efforts to transition to zero-emission trucks and buses. We believe the IRA's scope will benefit Lightning more than other vehicle manufacturers, given the alignment of the IRA's incentives with our wide vehicle portfolio. Turning to slide 13, let's discuss our business model and the progress we are making toward reaching positive gross margin. Our growing sales and production volumes are enabling both supplier cost reductions and labor efficiencies. Our engineering and manufacturing teams are making material progress in unit cost reductions via manufacturing automation and engineering cost down work. We have said in the past that we need to approach our single shift annual production capacity of 1,500 units to fully absorb our overhead and our sales growth, to fully absorb our overhead, and our sales growth continues progressing toward that goal reducing our overhead allocation per unit. Finally, Lightning has increased our prices across our product lines, some of which will be absorbed by government grants and incentives rather than by customers directly. With these changes, we expect to reach positive gross margin during the second half of 2023. And now we'll turn it to cash to provide an update of our products, markets, sales momentum, and a look at how the incentives now stack up to drive market acceleration.