Filing summary
Issuer and period: The supplied filing is XL Fleet Corp.’s unaudited Form 10-Q for the quarter ended March 31, 2022, filed May 10, 2022. This does not match the request metadata identifying Spruce Power Holding Corp.; verify the issuer before relying on this summary. Amounts below are in millions of dollars unless otherwise stated.
Business context and financial results
XL Fleet provided commercial fleet electrification products through its Drivetrain business and energy-efficiency and infrastructure solutions through XL Grid. XL Grid includes World Energy, acquired in May 2021. In Q1 2022, management reorganized reporting into these two segments and undertook a strategic review that substantially reduced the Drivetrain product portfolio.
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $4.763 | $0.675 |
| Cost of revenue | $5.196 | $1.391 |
| Gross loss (gross margin) | $(0.433) (about -9%) | $(0.716) (about -106%) |
| Operating loss | $(23.686) | $(10.086) |
| Net loss (income) | $(16.077) | $61.914 |
| Basic and diluted EPS | $(0.11) | $0.46 basic; $0.42 diluted |
| Operating cash flow | $(19.096) | $(9.962) |
| Capital expenditures | $0.026 | $1.104 |
Revenue rose 606%, primarily because Q1 2022 included $4.165 million of XL Grid sales following the World Energy acquisition; Drivetrain revenue was $0.598 million versus $0.675 million. XL Grid recorded a $1.441 million segment operating loss, while Drivetrain recorded a $5.905 million loss. The quarter’s results included an $8.606 million goodwill impairment and $1.518 million inventory obsolescence charge associated with discontinued product lines. Q1 2021 net income was heavily affected by a $72.005 million non-cash gain from changes in warrant fair value; Q1 2022 included a $2.717 million warrant fair-value gain and a $4.527 million gain on extinguishment of New Markets Tax Credit-related debt.
Balance sheet, liquidity, and debt
At March 31, 2022, cash and cash equivalents were $333.461 million, restricted cash $0.150 million, and working capital $345.2 million. Cash and cash equivalents were down $18.215 million from year-end; total assets were $365.597 million versus $393.221 million. Total liabilities were $19.039 million, including $0.076 million of long-term debt and $4.261 million of lease liabilities. Stockholders’ equity was $346.558 million. Management said current liquidity should fund its current business plan for the next 12 months, while expecting short-term net losses.
Operating cash use increased to $19.096 million, reflecting the net loss and working-capital uses, including lower accrued liabilities. Investing activities provided $0.754 million, mainly from a refunded equipment deposit; financing activities provided $0.127 million. Cash and restricted cash ended the quarter at $333.611 million.
Material changes, outlook, and risks
- Restructuring: The company closed its Quincy, Illinois production center and warehouse, ended Boston engineering activities, discontinued all plug-in hybrid products and most hybrid drivetrain products, reduced its workforce by 51, and terminated its eNow partnership. It reported $2.358 million of restructuring-related charges, including $0.840 million of severance and the $1.518 million inventory write-down. Management expected lower SG&A in 2022 and reduced near-term operating cash burn.
- Supply and demand: Management said the vehicle-industry microchip shortage had materially constrained OEM chassis deliveries and was expected to continue adversely affecting 2022 results, despite some anticipated improvement. Risks also include component availability and prices, battery-cell supply, inflation, freight costs, and the impact of Russia’s invasion of Ukraine on materials and customers.
- Legal matters: The company disclosed securities class-action litigation, a Delaware stockholder lawsuit, and an SEC fact-finding investigation with a subpoena covering, among other topics, the XL Hybrids business combination and PIPE financing, sales projections, orders, suppliers, approvals, product performance, and disclosures. The company said it intended to defend the lawsuits and cooperate with the SEC; potential losses from the securities lawsuit could not be estimated. The filing warns that legal costs will be material and adversely affect results and cash flows.
- Controls: Management concluded disclosure controls were not effective as of March 31, 2022 due to material weaknesses involving IT general controls and management review controls. Remediation was underway but had not been completed or validated.
- Leadership: The CFO resigned in January; Donald P. Klein was appointed CFO on April 11, 2022. President Tod Hynes resigned in March under a separation agreement that provided for a $479,375 lump-sum payment and nine months of employer-paid COBRA premiums, subject to the agreement’s terms.
- Other commitments: At quarter-end, purchase commitments included $2.533 million for motors, $2.5 million for batteries, and $0.343 million for chip-sensitive items. The company also reported a $2.403 million warranty liability. It terminated its bus purchase agreement and received back its $0.780 million deposit.
The filing provides no specific revenue, earnings, or cash-flow guidance. Management’s stated outlook was continued short-term losses, anticipated lower SG&A and operating cash burn after restructuring, and sufficient liquidity for the current plan over the next 12 months.
Most important facts for investors to verify
- Confirm the issuer: this filing is for XL Fleet Corp., not Spruce Power Holding Corp.
- Assess whether the narrowed Drivetrain product strategy and XL Grid business can produce sustainable revenue growth and positive gross margins.
- Track operating cash burn, restructuring savings, and management’s 12-month liquidity assessment.
- Monitor the SEC investigation, class-action cases, and related legal costs and potential contingencies.
- Check whether the disclosed material weaknesses in financial reporting controls are remediated and independently tested.
- Evaluate continued supply constraints, inventory exposure, customer concentration, and the company’s ability to meet supplier commitments.