Lightning eMotors, Inc

Greetings and welcome to the Lightning and Motors second quarter 2023 earnings call. At this time, all participants are in a listen-only mode. A brief 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. It is now my pleasure to introduce your host, Brian Smith. Vice President of the Disaster Relations. Please go ahead.

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, Kash Sethi, and CFO, David Agatston. Ahead of this call, Lightning issued our second 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 second quarter summary followed by an overview of key products, an update of our Lightning eChassis development, supply chain progress, and conclude with an overview of the incentives landscape and the 2024 California Advanced Clean Fleets Regulation. Cash will then provide an update on products, markets, and customer success, and David will wrap up with a financial summary. Moving to slide five, a summary of the quarter. Q2 was a strong quarter, but the second highest quarterly revenue in our company's history. You'll recall that our prior two quarters were constrained by issues related to the recall of Romeo batteries. With that behind us, I'm pleased with the solid order book we have built for our ZEV4 school bus and shuttle bus vehicles. We have sufficient inventory and the orders in hand to convert that inventory into cash during Q3 and Q4, and are maintaining the lower end of our 2023 revenue guidance. As we turn inventory into cash, and reduce our outgoing cash outlays, we continue to explore all options and have been working with financial advisors to support a recapitalization and or sale of the business. Moving to slide six, I want to elaborate on our continued 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, plus our mobile DC fast charger, while our longer-term focus is on the Lightning E chassis. We ramped production of our ZEV4 platform vehicles in Q2, and I'm pleased to say the customer response has been very positive, and customers are already responding with repeat orders. In addition to the ZEV4 ramp-up, we delivered our first customer units of the mobile DC fast charger in the quarter. The mobile fast charger is a one-of-a-kind product with an attractive sales price. We expect the sales pipeline to continue to grow as potential customers complete successful trials and demonstrations, and we expect these to result in multi-unit purchases or leases. While the sales ramp may take time, initial customer reaction is extremely positive and over a wide range of real-world use cases. Turning to slide seven, the development of our Lightning-E chassis is progressing well with prototype development, and testing is scheduled later this year. We expect to have two chassis initially, one for class three and one for class four, which share many common components. They both will provide improved range and payload versus our current ZEV3 and ZEV4 vehicles. Lightning's current ZEV3 passenger van is the only electric passenger van in the market in North America today for Class 2 or 3, and we expect our new ZEV3 eChassis will allow us to continue our leadership in the medium-duty passenger van segment. Our new ZEV4 cutaway chassis eChassis will support multiple vehicle applications, such as buses, trucks, and ambulances, and come with a modern single or dual cab with safety features not available today on current medium-duty cutaway platforms. We continue to stay true to our Capital Light model and are collaborating closely with a chassis partner who already has the manufacturing capability to support our requirements. Moving to slide eight, let's discuss the supply chain landscape. I'm certain that I am as tired of talking about supply chain as our investors are in hearing about it, but there's no denying that the EV supply chain continues to be dynamic and still in a very early state relative to the traditional automotive supply chain. On the chassis side, Supply has improved materially, and we have sufficient supply to meet our revenue guidance. But inconsistent lead times and timing of deliveries can still impact quarterly revenue and result in temporary inventory spikes like we saw in Q2. The GM chassis is preferred by most Type A school bus OEMs, and we are currently the only EV manufacturer with an electrified solution on this platform. On the battery front, we have sufficient quantities of high-quality batteries from Proterra and CATL to meet our Q3 and Q4 build plans. The dynamics of the battery supplier landscape over the last few years led us to adopt a multi-source strategy, and that will serve us well given the most recent news from Proterra. We are in discussions with Proterra and expect to be able to purchase batteries from them as needed for 2024. As we look to the future, we are engaged with all major battery suppliers and technologies to identify other lower-cost, high-quality battery solutions. Beyond chassis and batteries, we continue to work to diversify our supply chain and to find higher quality components from reputable suppliers. We are managing through such transitions for components, including motors, vehicle up fits, and power steering pumps. Turning to slide nine, this chart shows how new U.S. and Canadian incentive programs purposefully align with our current product offerings, and our customers have been using these incentives to help fund a portion of the purchase price of our vehicles. We are beginning to see increased order activity as we help customers navigate the application process and obtain needed approvals. These new incentives and the associated cumbersome application and award process have elongated the sales cycle due to lack of definition and extended award timing, but we are now seeing some steady flow and expect the pipeline and backlog to continue to accelerate as customers become more familiar with the incentive processes. Turning to slide 10. I want to highlight that incentives are not the only demand driver. States are also implementing mandates to further drive adoption. The most imminent and impactful new mandate is the Advanced Clean Fleets Regulation that California Air Resource Board approved in April 2023. The regulation requires a phased-in transition for California fleets towards zero-emission medium and heavy-duty vehicles starting in 2024. The adopted rule is meant to enforce a large-scale transition of zero-emission medium and heavy-duty vehicles in California. Starting this January, commercial fleets of 50 or more trucks, as well as federal government agency fleets of vehicles in California, will be required to add zero-emission vehicles to their fleets. And from 2024 to 2026, 50% of state and local government purchases must also be zero-emission vehicle or near zero-emission vehicles. As of the 2021 census, there were over 55,000 class four through six vehicles in California with five to seven year replacement cycles that will be immediately impacted by this regulation. In addition, there are 14 other states who are adopting or considering adopting similar mandates. And now I'll turn it to Kash to provide an update on products, markets, and customer success.