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Lordstown Motors Reports Third Quarter 2022 Financial Results
November 08 2022
https://ih.advfn.com/stock-market/NASDAQ/lordstown-motors-RIDE/stock-news/89492922/lordstown-motors-reports-third-quarter-2022-financ

Lordstown Motors Corp. (Nasdaq: RIDE), (“Lordstown Motors” or “LMC”), an original equipment manufacturer (“OEM”) of electric light duty vehicles focused on the commercial fleet market, today released its third quarter 2022 financial results and provided a business update.

Third Quarter and Recent Business Highlights

- Start of commercial production of EnduranceTM vehicles at the Foxconn Ohio assembly plant, at a very slow rate
- Successful collaboration between LMC and Foxconn teams over the last year
- EnduranceTM recently driven and evaluated by over 30 journalists, as semi-finalist in the North American Truck of the Year (NACTOY) competition. Team is pleased with journalist’s favorable initial feedback
- Ending cash balance and short-term investments of $204 million, above internal expectations, due to continued strong spending discipline
- Reported operating loss of $154.8 million includes a $74.9 million non-cash asset impairment charge, a $30 million accrual for historical litigation, and a $16.2 million charge to reflect the net realizable value (NRV) of inventory
- Adjusted operating loss1 excluding the above items of $33.8 million, 33% lower than adjusted operating loss in 2Q22 on the first full quarter without plant operating costs and other reductions
1) See “Non-GAAP Measures” below.

Outlook2

- Reaffirming Q4 start of deliveries of Endurance, subject to full homologation and required certification, which is expected later this quarter
- Awaiting approval from EPA and CARB. All FMVSS crash testing has been successfully completed; remaining non-crash testing ongoing
Continue to target initial production batch of up to 500 units; seeking OEM partnerships to scale Endurance
- Pre-development work on next vehicle has begun by LMC, in collaboration with Foxconn EV ecosystem, including MIH consortium
Foxconn has agreed to make an additional investment in Lordstown Motors of up to $170 million, subject to certain terms and conditions
- Target year end cash and short-term investments of $150 to $165 million, including Foxconn initial investment, and excluding contingent liabilities and other financings
2) Please refer to “Forward Looking Statements” below.

Executive Commentary

Commercial production of our Endurance BEV pick-up truck began in the 3rd quarter, at a very slow rate. Engineering readiness, quality, and part availability have and will continue to govern the speed of production and our ramp up and the timing of our first deliveries. Twelve of the first batch of up to 500 units have been built at the Foxconn EV Technology plant in Lordstown, Ohio to date. Production is expected to increase towards the end of the month as the remaining supplier part pedigree and availability issues are resolved. Approximately 30 commercial units of the first batch are estimated to be built by the end of 2022, with the remainder built in the first half of 2023.

Full homologation and certification is expected later this quarter, which is required to start shipping vehicles to our customers. As previously reported, all FMVSS crash testing has been successfully completed and remaining FMVSS non-crash testing is ongoing. As with any new vehicle launch, engineers will continue to drive and accumulate miles on test vehicles to find and resolve any potential issues and help ensure that we give our customers a great experience.

Three weeks ago, over thirty automotive journalists conducted extended drives of the Endurance and competitors as part of the North American Truck of the Year (NACTOY) semifinalist evaluation. The team is pleased and excited by the initial feedback from the journalists, both during the drives and in their early articles, and looks forward to the next phase of the competition and the announcement of the Truck of the Year winner in January.

“I am very proud of how far our capable, disciplined, resilient, and collaborative LMC/Foxconn team has advanced this vehicle over the last year, as we prepared for commercial production,” said Edward Hightower, Lordstown Motors’ CEO and President.

As previously discussed, the first production batch of Endurances will be limited to up to 500 vehicles, because the bill of materials (BOM) cost is materially higher than our anticipated selling price. Investments in hard tooling, building scale with production suppliers, and VA/VE initiatives would bring this cost down, but have been deferred to manage the balance sheet and limit the amount of new capital needed to achieve initial production targets. LMC continues to seek one or two OEM partners to help scale the Endurance. As one of the very few full-size, all electric pickup trucks in the market, the Endurance offers other OEMs the opportunity to enter the market quickly and at relatively low cost.

LMC continues to make progress in the planning and pre-development work on its next vehicle, which will be co-created with the Foxconn EV ecosystem and the MIH Consortium.

Yesterday, LMC announced that Foxconn has agreed to make additional equity investments in LMC (collectively, the “Investment Transactions”) of up to $170 million in the form of $70 million of LMC’s Class A common stock and up to $100 million of a newly created Series A Convertible Preferred Stock (“Preferred Stock”). Upon completion of the Investment Transactions, Foxconn is expected to hold all of LMC’s outstanding Preferred Stock and 18.3% of its Common Stock on a pro forma basis, and will have the right to designate two members of LMC’s Board of Directors.

Lordstown Motors will use the proceeds from the sale of Common Stock for general corporate purposes and the proceeds from the sale of the Preferred Stock to fund development and design activities for a new electric vehicle program in collaboration with Foxconn (the “EV Program”). The $100 million direct Preferred Stock Investment replaces the joint venture funding previously announced by Foxconn and LMC.

Foxconn’s Common Stock investment will be funded in two tranches. The first tranche of approximately $22.7 million is expected to close on or about November 22, 2022, subject to customary closing conditions. The second tranche of approximately $47.3 million is subject to regulatory approvals, including clearance by the Committee on Foreign Investment in the United States (“CFIUS”), as well as other customary closing conditions.

Foxconn’s Preferred Stock investment will be funded in three phases. The first $30 million will be funded, subject to satisfaction of certain closing conditions, simultaneously with the closing of the first tranche of Common Stock. The remaining shares of Preferred Stock will be purchased by Foxconn based on achieving certain EV Program funding milestones to be agreed-upon by the parties.

Foxconn’s additional investment in LMC is a strong sign of confidence in our team’s product development and engineering capabilities and will help accelerate the EV ambitions of both companies. We continue to believe that deep collaboration with Foxconn, as its preferred North American vehicle development partner, and Foxconn’s EV ecosystem, including MIH, is key to our company’s long-term success.

“We are proud of the accomplishments of the Lordstown and Foxconn EV Technology teams in bringing the Endurance into commercial production. While we have more work to do, our entire team cannot wait to get the vehicle in the hands of our customers. We are also extremely excited by the additional investment and expanding relationship with Foxconn and the opportunities it provides beyond our first vehicle,” said Edward Hightower, Lordstown Motors’ CEO and President.

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Third Quarter 2022 results

Third quarter operating loss of $154.8 million included $121.1 million in non-cash charges consisting of a $74.9 million asset impairment, a $30 million legal accrual, and a $16.2 million charge to reflect the net realizable value (NRV) of inventory. Excluding these charges, adjusted operating loss was $33.8 million, of which research and development (“R&D”) and selling, general and administrative (“SG&A”) costs represented 19.8 million and $13.9 million, respectively.

R&D expenses were $19.8 million in the second quarter of 2022, representing a decrease of 31% compared to the second quarter of 2022, on an as adjusted basis. The decrease was related to the elimination of the costs to operate the Lordstown, OH, plant, which was sold to Foxconn on May 11, 2022.

SG&A expenses were $60.1 million for the quarter, and as adjusted to exclude the NRV and litigation accrual, were $13.9 million, 35% lower than second quarter of 2022 on an as adjusted basis. The reduction was primarily related to personnel costs along with other legal fees.

At the end of the quarter, cash and short-term investments on hand was $204 million, approximately $32 million lower than the second quarter of 2022. The change in cash reflects The change in cash includes $49.6 million in cash used for operations, including an $8.6 million working capital benefit, $10.5 million in capital expenditures and $26.7 million in cash proceeds from equity issuances.

Please refer to “Non-GAAP Measures” and “Forward Looking Statements” below.

Conference call Information
Lordstown Motors will host a conference call at 8:30 a.m. Eastern Time today (Tuesday, November 8, 2022). The call can be accessed via a live webcast that is accessible on the Events page of Lordstown Motors’ Investor Relations website, as well as the investor presentation deck, at https://investor.lordstownmotors.com/. An archive of the webcast will be available shortly after the call.

About Lordstown Motors Corp.
Lordstown Motors is an original equipment manufacturer (OEM) of electric vehicles focused on the commercial fleet market, with the Endurance all electric pick-up truck as its first vehicle being launched at the Foxconn EV plant in the Lordstown, Ohio facility. Lordstown Motors has engineering, research and development facilities in Farmington Hills, Michigan and Irvine, California. For additional information visit www.lordstownmotors.com.

Contacts:

Investors
Carter W. Driscoll, CFA
[e-mail]

Media
Colleen Robar
[e-mail]
313-207-5960