Lightning eMotors, Inc

Greetings. Welcome to Lightning eMotors first quarter 2023 earnings file. At this time, all participants are in listen-only mode. Any question and answer session will follow the formal presentation. If anyone today should require operator assistance during the conference, please press star zero from your telephone keypad. Please note that this conference is being recorded. At this time, I'll turn the conference over to Brian Smith, Vice President of Investor Relations. Brian, you may now begin.

Thank you, Operator, and thank you for joining us. On 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 first quarter, 2023, 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. 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 will begin with a first quarter summary, followed by an overview of key products, the fly chain progress, and conclude with a short discussion on product positioning and the incentives landscape. Cash will then provide an update on products and markets, and David will wrap up with a financial summary and discuss the agreement we announced today with Yorkville Advisors to provide growth capital. Moving to slide five. First, the ZEV4 transition to the GM platform is now complete. The transition had to be expedited because the Romeo recall on the legacy ZEV4 product forced us to accelerate the sunsetting of our E450 platform. While the gap in our product offerings during the transition period caused our financial results in the previous two quarters to be disappointing, the investment we made in this new platform was clearly the right decision. In the core, Lightning produced 53 vehicles and powertrains, and of those, 13 were ZEV4s on the new GM platform, and the rest were ZEV3 vehicles. In addition to completing the manufacturing transition in Q1, we took steps to support our customers through this recall, which I will discuss in more detail. The combination of not having enough new ZEV4 vehicles ready to replace the legacy vehicles in early Q1, plus the expense we are incurring to provide customer refunds and replacement vehicles for impacted customers, muted revenue. The relatively complex accounting to correctly reflect the recall transaction in our financial statements is what caused the delay in our 10Q filing and earnings release. Now that this transition to the new platform is in our rearview mirror, we can look ahead, and I am pleased with the strong order book we have built for our ZEV4 school bus and public transit shuttle bus business. In many cases, the orders we have been receiving for the ZEV4 school buses and public transit shuttle buses have been the direct result of the new incentive landscape. As we've previously highlighted, Class 4 electric school buses and public transit shuttle buses are uniquely positioned to receive the $40,000 IRA incentives backed on top of EPA or FTA incentives that can then be added to state incentives. In addition to the bus momentum, Cash will talk more about the new 126-unit order from McNab EV sales that we announced last Friday and that we expect to revenue in the second and third quarters of this year. On the funding side, I'm pleased to announce a new agreement with Yorkville Advisors that we believe will help provide us the capital we need to continue our growth trajectory. David will provide more detail and discuss our commitment from Yorkville. Moving to slide six, I will provide more detail on the impact we experienced from Romeo's battery quality issues in Q4 2022 and Q1 2023. We were forced to recall all Romeo batteries due to defects we identified. but those fixes required Romeo's support, which we expected to receive. They have not agreed to provide support or honor their battery warranty, and we filed suit against Nickel and Romeo on March 9th. We chose to do the right thing for our customers, and we are buying back the full vehicles containing Romeo batteries. As highlighted, this battery issue significantly impacted Q4 and Q1 sales. Furthermore, we booked the majority of the cost of the vehicle buyback against revenue in Q1. The relatively small remainder of the buyback cost will be amortized against future 2023 revenue in recognition of the commitment made by our customers to purchase new ZEP4 vehicles to replace the vehicles under the recall. In addition, we've been able to recover value from the vehicles we repurchased through sales of chassis and other components in the secondary market. This resale value is also factored into the net impact to our financials. While the situation has certainly been difficult given the impact of Q4 2022 and Q1 2023, the good news is that our customers appreciated our support and holistic solution. We are working with them to convert their original orders from the legacy Class 4 platform with Romeo batteries to the new GM platform with Proterra batteries. Many of our customers have already made the switch, and some have already received their new ZEV4 vehicles. Moving to slide seven. Unlike many of our peers, we have mature offerings that include a full range of fleet electrification solutions from vehicles and service, powertrain technology, charging, finance, and incentives. And finally, our Lightning Insights telematics and analytics offerings, which provide fleet intelligence including driving efficiency, charging optimization, and predictive maintenance. Lightning now has over 500 vehicles spread throughout the U.S. and Canada. supported by a spare parts and service infrastructure and a talented service team already in place. Combined with our robust manufacturing capabilities, we are ready to scale. Moving to slide eight, I want to elaborate on our new streamlined product development focus for 2023. Our near-term focus is on our ZEV4 vehicles, which include Class 4 school and shuttle buses and Class 4 trucks built on the GM platform. plus our mobile DC fast charger and best-in-class telematics and charging systems. We ship GM platform vehicles in Q1 and are delivering our first revenue units of the mobile DC fast charger in Q2. Although we don't know what the sales cycle will be on the DC fast charger, given the newness of the product and the high ASP, we are working to accelerate it by helping customers rent or lease the product to our finance and lease partners. Customers are showing strong interest in our school buses, public transit shuttle buses, trucks, and the mobile DC fast charger, and we expect all four to drive strong revenue growth in the second half of this year. Moving to slide nine, let's discuss the supply chain landscape. On the chassis side, our work with GM is providing a sufficient and consistent supply of chassis to serve our targeted markets. but exact timing of deliveries can still impact quarterly revenue. The GM chassis is preferred by most Type A school bus providers, and we are currently the only OEM with an electrified solution on this platform. We are continuing to work on our purpose-built Lightning E chassis, and we expect to begin initial testing in the second half of this year and move into production next year. On the battery front, we have sufficient quantities of high-quality batteries from Proterra and CATL for our near-term needs. Beyond chassis and batteries, we continue to work to diversify our supply chain with new, higher-production, lower-cost suppliers to help reduce the cost and lead times we are seeing for components such as electric power steering, high-voltage heaters, high-voltage air conditioners, and thermal management parts. Turning to slide 10, You can see how the new North American U.S. incentive programs match our current product offerings, and our customers are very excited to use these incentives to help fund a large portion of the purchase price of their vehicles. Most of these programs have launched recently, so we're beginning to see increased order activities as we help customers navigate the application process and obtain needed approvals. And now, I'll turn it to Cash to provide an update on our products, markets, and sales momentum.