Filing summary
Entity note: The supplied filing is XL Fleet Corp.’s Form 10-Q, not a filing identifying Spruce Power Holding Corp. It reports the quarter ended June 30, 2022, was filed August 9, 2022, and lists the NYSE ticker XL. Verify the entity before relying on this summary.
Business context and reporting period
XL Fleet described itself as a North American commercial-vehicle electrification and energy-solutions provider, with Drivetrain and XL Grid segments. The unaudited report covers the three and six months ended June 30, 2022; comparison periods are the corresponding 2021 periods.
Key financial metrics
Amounts below are in millions of dollars unless noted. The filing presents its statements in thousands.
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $3.010 | $3.694 | $7.773 | $4.369 |
| Gross profit | $0.565 | $0.962 | $0.132 | $0.246 |
| Gross margin | 18.8% | 26.0% | 1.7% | 5.6% |
| Operating loss | $(14.640) | $(12.669) | $(38.326) | $(22.755) |
| Net income (loss) | $(12.698) | $(10.469) | $(28.775) | $51.445 |
| Basic earnings (loss) per share | $(0.09) | $(0.08) | $(0.20) | $0.37 |
| Operating cash flow | Not stated separately | Not stated separately | $(30.272) | $(20.544) |
At June 30, 2022, cash and cash equivalents were $322.371 million; working capital was $333.2 million. Total liabilities were $18.690 million, including $5.444 million of lease liabilities. Reported debt was $33,000, including current and long-term portions. Cash, cash equivalents and restricted cash fell $29.305 million during the first half. No dividend or formal earnings guidance is stated.
Material changes versus prior comparable periods
- Q2 revenue declined 19%, principally as Drivetrain revenue fell 37%; XL Grid revenue declined 9% amid fewer projects. First-half revenue rose 78%, largely because 2022 included six months of World Energy, acquired in May 2021, while 2021 included only the post-acquisition period.
- First-half Drivetrain revenue fell 28%. Management attributed pressure in part to limited OEM chassis deliveries amid the microchip shortage.
- Gross profit and margins weakened. First-half cost of revenue included about $1.7 million of inventory write-downs related to discontinued or scaled-back products.
- First-half net results swung from income to loss. The 2021 comparison included a $74.731 million gain from the change in warrant-liability fair value; the 2022 period included a smaller $4.500 million gain and an $8.606 million goodwill impairment. A $4.527 million gain on extinguishment of debt partly offset 2022 losses.
- Cash used in operations increased to $30.272 million from $20.544 million in the first half of 2021.
Outlook, management commentary, risks and unusual items
- Following a strategic review, the company closed its Quincy production center and warehouse, ended Boston engineering activities, discontinued plug-in hybrids and most hybrid drivetrain products, cut 51 positions, and terminated its eNow partnership. It recorded $2.358 million of related first-quarter charges, including severance and inventory obsolescence.
- Management expected continuing near-term net losses but believed available liquidity would fund the current business plan for at least the next 12 months. It said cost reductions were intended to reduce near-term cash burn.
- Management warned that the microchip shortage was adversely affecting 2022 vehicle deliveries and results, with only an expected partial improvement in the second half. Other cited risks include supply constraints and component costs, inflation, utility incentive dependence in XL Grid, and COVID-19-related disruption.
- The company reported securities class actions, a shareholder derivative action, and an SEC fact-finding investigation. It said it intended to defend the lawsuits and cooperate with the SEC; potential losses could not be estimated. The filing warns that legal and investigation costs will be material and adversely affect results and cash flows.
- Disclosure controls and procedures were deemed ineffective as of June 30, 2022 because of material weaknesses in IT general controls and management review controls. Remediation was ongoing and not yet validated as effective.
- Other notable items: the New Markets Tax Credit financing was terminated in January 2022, producing the debt-extinguishment gain; the company terminated its sponsorship agreement effective June 1, 2022; and it had purchase commitments for motors, batteries and chip-sensitive items totaling about $5.4 million, including an open-ended battery commitment.
Important facts for investors to verify
- Confirm the issuer: the provided filing is for XL Fleet Corp., whereas the request identifies Spruce Power Holding Corp.
- Review subsequent filings for progress on restructuring, product strategy, Drivetrain demand and XL Grid project margins.
- Track operating cash burn against the stated 12-month liquidity assessment and the company’s cash balance.
- Monitor the SEC investigation, litigation, legal costs and any changes in estimated exposure.
- Check remediation of the disclosed internal-control material weaknesses and confirm the accuracy of segment and revenue disclosures.
- Assess customer concentration: three customers represented approximately 95% of Q2 2022 revenue and 98% of first-half 2022 revenue.