Spruce Power Holding Corporation (SPRU) Earnings Call Transcript & Summary

Good day, and welcome to the XL Fleet Second Quarter 2022 Earnings Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Stacey Constas General Counsel for XL Fleet. Please go ahead.

Thank you. Good afternoon, everyone, and welcome to XL Fleet's earnings conference call to discuss our results for the second quarter of 2022. With me today are Eric Tech, Chief Executive Officer; Donald Klein, Chief Financial Officer; Mike Kenhard, Chief Technology Officer and General Manager of Power Drive; and Colleen Calhoun, Vice President and General Manager of XL Grid. Our call this afternoon includes statements that speak to the company's expectations, outlook or predictions of the future, which are considered forward-looking statements. These forward-looking statements are subject to risks and uncertainties, many of which are beyond our control, which may cause our actual results to differ materially from those expressed in or implied by these statements. We undertake no obligation to revise or update any forward-looking statements, except as may be required by law. We refer you to XL Fleet's disclosures regarding risk factors and forward-looking statements in today's earnings release, our annual report on Form 10-K and our other Securities and Exchange Commission filings. A copy of our press release has been posted to the Investor Relations page of our website for reference. The non-GAAP financial measures discussed in this call are reconciled to the U.S. GAAP equivalent and can be found in the press release that we issued this afternoon. With that, I will turn the call over to Eric Tech.

Thanks, Stacey, and thanks to everyone for joining us on the call today. I'd like to begin our discussion today by providing an update on our transformational M&A search process. First, as I discussed early this year, we institutionalized our search efforts through the formation of an investment committee comprised of senior leaders and Board members. We are continuing to advance the M&A search process with active involvement from our committee and a team of outside advisers. As we continue to identify the best business opportunity for XL Fleet over the immediate and long term, it is important to emphasize that we are upholding the same rigor in our due diligence today as when we kicked the process off earlier this year. Second, our cash position of approximately $322.4 million exiting the second quarter continues to position us in the driver's seat. We believe that we are an attractive M&A partner, given our public company platform, our strong cash position, significant financial flexibility and a world-class team. Third, as I mentioned last quarter, our process and focus areas include the potential for us to pursue opportunities outside of XL's traditional mobility focus. The search process has been eye-opening and highly informative. We have evaluated over 50 opportunities in the wider clean tech space to date, including opportunities spanning from mobility to stationary energy efficiency solutions and everywhere in between. We remain firmly committed to identifying opportunities that deliver value and position our company to contribute to the wide, growing and cross-industry need for decarbonization. And finally, as we continue to narrow the focus pool, our team has identified exciting opportunities that achieve our 3 core requirements, which include: one, a business that is making an impact on decarbonization; two, a leader in a mature and growing market segment; and three, a company that is generating positive EBITDA. We are more confident than ever in our ability to identify an opportunity that checks these boxes and accomplishes the long-term strategic objective that we set forth earlier this year. We look forward to providing further updates as we are able and hope to be in a position to do so sooner rather than later. Turning back to the business and operations. We continue to constantly assess the right and most efficient uses of our resources and capital. The challenging decisions that we made earlier this year include narrowing the focus of our Drivetrain business and better aligning our organization, continue to benefit our business by preserving cash and investing in near-term growth platforms. With that, I'd like to turn it over to Mike Kenhard for a brief discussion of our Drivetrain business.

Thanks, Eric. We were proud to have recently unveiled our first all-electric Refuse vehicle at this year's WasteExpo. During the quarter, the team ran trials in California, which included our vehicle following a gas-powered truck on a collection route. Our all-electric vehicle successfully completed the route with sufficient battery charge remaining, evidencing the ability of our vehicle to efficiently service this application. The first customer demonstration unit has been delivered, and the first customer orders are starting to come in. We are looking forward to delivering the first production customer units later this year. Regarding our previously announced U.S. Department of Defense project, the team has delivered the first demonstration unit on time for chamber testing at an Army facility. The team remains on schedule to complete all the deliverables by the end of the year. Turning to our legacy business. The hybrid sales are below plan for the quarter. However, this is mainly driven by chassis delays of the customers. Two large deliveries that were scheduled for the second quarter will now ship in the third quarter, with one of those having shipped already in July. However, the team is seeing some headwinds in the hybrid space as customers are concerned over general market financial uncertainty as we move into the second half of the year. With that, I'd like to turn things over to Colleen Calhoun to discuss our XL Grid business.

Thanks, Mike. Our World Energy business generated revenue of $2.2 million for the quarter compared to $4.2 million last quarter and $2.4 million in the prior period quarter. We completed approximately 80 energy efficiency projects during the quarter. Our project backlog was approximately 120 projects at the end of the second quarter, reflecting strong momentum. But the team is facing some headwinds, which began to impact the business during the second quarter. This includes significant utility program changes and project approval delays, material availability and longer sales cycle times attributed to large project mix. We continued to pursue a number of exciting opportunities resulting from the increased focus of carbon reduction by most of the New England utilities and remain focused on investing in the growth of our World Energy business, including expansion of the team. The team has brought on new hires with solar and mechanical capabilities, and the company is the top-performing National Grid small business CDO, which stands for a Customer Directed Option, across their territory. Now let me turn it over to Don to walk through our financials.