Lightning eMotors : Transcript Q2 2023

Raw Transcript

14-Aug-2023

Lightning eMotors, Inc. (ZEV)

Q2 2023 Earnings Call

	Total Pages: 16
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Lightning eMotors, Inc. (ZEV)	Raw Transcript
Q2 2023 Earnings Call	14-Aug-2023

CORPORATE PARTICIPANTS

Brian Smith	Kash Sethi
Vice President-Investor Relations, Lightning eMotors, Inc.	Chief Revenue Officer, Lightning eMotors, Inc.
Tim Reeser	David Agatston
Co-Founder, Chief Executive Officer & Director, Lightning eMotors, Inc.	Chief Financial Officer & Senior Vice President, Lightning eMotors, Inc.

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OTHER PARTICIPANTS

Colin Rusch	Michael P. Ward
Analyst, Oppenheimer & Co., Inc.	Analyst, The Benchmark Co. LLC
Sherif El-Sabbahy	Abhishek Sinha
Analyst, BofA Securities, Inc.	Analyst, Northland Securities, Inc.

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MANAGEMENT DISCUSSION SECTION

Operator: Greetings and welcome to the Lightning eMotors 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. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Brian Smith, Vice President of Investor Relations. Please go ahead.

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Brian Smith

Vice President-Investor Relations, Lightning eMotors, Inc.

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.
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Lightning eMotors, Inc. (ZEV)	Raw Transcript
Q2 2023 Earnings Call	14-Aug-2023

Tim Reeser

Co-Founder, Chief Executive Officer & Director, Lightning eMotors, Inc.

Thank you, Brian, and thanks to everyone for joining us today. I'll start off on slide 4 with today's agenda. I will begin with a second quarter summary, followed by an overview of key products, an update of followed by an overview of key products and 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. Kash will then provide an update on products, markets and customer success. And David will wrap up with a financial summary.

Moving to slide 5, a summary of the quarter. First, Q2 is 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 6, 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 eChassis. 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 multiunit purchases or releases. While the sales ramp may take time, initial customer reaction is extremely positive and Initial customer reaction is extremely positive in over a wide range of real-world use cases.

Turning to slide 7, the development of our Lightning eChassis is progressing well, with prototype development, and testing is scheduled later this year. We expect to have two chassis initially one for Class 3 and one for Class 4, 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 model and are collaborating closely with the chassis partner who already has the manufacturing capability to support our requirements.

Moving to slide 8. Let's discuss the supply chain landscape. I am certain that I am as tired of talking about supply chain as our investors are and 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

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Lightning eMotors, Inc. (ZEV)	Raw Transcript
Q2 2023 Earnings Call	14-Aug-2023

inventory spikes like we saw in Q2. The GM chassis is preferred by most Taipei 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 in CATL to meet our Q3 and Q4 build plans. The dynamics of the battery supplier landscape over the plans. The dynamics of the battery supply or landscape over the last few years led us to adopt a multisource 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 find higher quality components from reputable suppliers. We are managing through such transitions for components including motors, vehicle outfits and power steering pumps.

Turning to slide 9, this chart shows how new US 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' ae 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 practices 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 eminent and impactful new mandate is the Advanced Clean Fleets Regulation that California Air Resources Board approved in April 2023. The regulation requires a phased-in transition for California fleets towards zero emission in medium and heavy duty vehicles starting in 2024. The adopted rule is meant to enforce a large scale transition of zero emission in 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 4 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.

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Kash Sethi

Chief Revenue Officer, Lightning eMotors, Inc.

Thank you, Tim. I'll begin on slide 12 with an update on our Class 4 EVs. Earlier this year, we launched our next generation ZEV4, a flexible platform that allows us to build a variety of commercial vehicles, like school buses, public transit shuttle buses and various kinds of delivery trucks and move trucks. A strategy of leveraging the industry's existing bus and truck upfront network is working, and we continue to explore partnerships with additional vehicle builders. As Tim mentioned, we successfully ramped up ZEV4 production in Q2 and customer feedback has been positive so far.

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Lightning eMotors, Inc. (ZEV)	Raw Transcript
Q2 2023 Earnings Call	14-Aug-2023

Moving on to slide 13 for an update on our second generation Lightning Mobile DC Fast Charger. I'm pleased to report that we have delivered the first customer units in Q2. Additionally, we showcased the product at the Dallas Fort Worth Airport where we provided mobile charging to airport staff and customers in a variety of airport locations. We developed this product based on over two years of testing and customer feedback on our first generation lightning mobile. It is designed to support up to 420 kilowatt hours of energy and can fast charge over five vehicles - up to five vehicles at a time.

The impressive array of use cases range from fleet managers needing short to medium term charging solutions from fleet managers needing short- to medium-term charging solutions as a way for the long-term solutions to be upgraded. To event planners who want to provide passenger car charging at concerts, sporting events and music festivals. To tow truck companies who would use it to rescue EVs that may have been stranded after running out of juice. We look forward to sharing more updates on this exciting product in the near future.

Turning to slide 14, we summarize here our current lineup of products that are driving our business this year. Zero emission cargo vans, delivery and work trucks, passenger vans, shuttle buses, school buses and the Lightning mobile DC fast charger. These are real products on the road with customers today, and we continue to receive repeat orders from an expanding customer base. We will continue exploring new products and new vehicle partnerships that are strong growth potential in 2024 and beyond.

Moving to slide 15 for an update on the large order we previously announced from Macnab EV sales. This contract includes a 126 zero emission vehicles, a mix of ZEV3 and ZEV4 cargo vans, passenger vans and shuttle buses. Initial deliveries occurred in Q2 and we expect to deliver the balance of the order across Q3 and Q4.

Turning to slide 16, I want to highlight the success of our ZEV4 school bus product so far. We're building this in partnership with Collins, our group company. Collins has over 50 years of experience building school buses with tens of thousands of buses on the road today. We're able to leverage not only their bus manufacturing expertise, but also their nationwide network of school bus dealers who make for a great sales and service partner. Nearly 40 electric school buses have been deployed this year, and we have a significant number of confirmed orders for additional buses to be built in Q3 and Q4.

Moving on to slide 17, let's look at some numbers from the field. We have now deployed over 600 zero emission commercial vehicles, that have accumulated an impressive 4.9 million miles on the road, a number growing rapidly every week. This includes over 10 unique vehicle types, demonstrating the variety of market verticals our core EV technology can be commercialized in. With real products and customer success stories, we are positioned nicely in the marketplace where many of our competitors are still in the prototype development and testing phase years behind us on real world experience.

And with that, I will turn it over to David to provide an update on Lightning's financial results and outlook.

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David Agatston

Chief Financial Officer & Senior Vice President, Lightning eMotors, Inc.

Thank you, Kash. I'll now provide some commentary on our second quarter results, followed by our 2023 outlook. Beginning on slide 19. For the second quarter, we generated GAAP revenue of $7.9 million, our second highest revenue quarter ever, driven by the initial success of our recently launched ZEV4 school bus product and continued sales of our ZEV3 inventory.

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