Lordstown Motors Projects Huge Increase In 2021 Cash Burn Following Q2 Results
On August 11, Lordstown Motors Corp. (NASDAQ: RIDE) reported results for the quarter ended June 30, 2021. Perhaps the lone positive detail in the announcement was that the company reaffirmed that “limited production” of its Endurance electric full-size pickup truck will begin in September 2021. Commercial deliveries could commence in 2Q 2022 and accelerate in the second half of 2022. In after-hours trading, Lordstown stock jumped US$0.29, or 5%, on this news.
The other key announcement in the earnings release was decidedly less constructive. The company increased its projected 2021 cash burn by an astonishing ~US$200 million to US$780-US$825 million from the US$585-US$625 million guidance it issued just 2 ½ months ago. Management cited prepayments for hard tool purchases as a key reason for the step change.
| Year 2021 Guidance (Issued 8-11-2021) | Year 2021 Guidance (Issued 5-24-2021) | Year 2021 Guidance (Issued 3-17-2021) | |
| Trucks to be Produced | Limited Production | ~1,000 | ~2,200 |
| Production Start Date | Late September 2021 | Late September 2021 | July-August 2021 |
| Selling and Administrative Costs | US$95-105 million | US$55-60 million | US$40-45 million |
| R&D Costs | US$310-320 million | US$280-290 million | US$180-190 million |
| Capital Spending | US$375-400 million, largely related to prepayments for hard tool purchases | US$250-275 million | US$250-275 million |
| Sept. 30, 2021E Cash Balance | US$225-275 million, without including any funds from a capital raise | ||
| Dec. 31, 2021E Cash Balance | US$50-75 million | US$200 million | |
| Implied 2021 Cash Burn | US$780-825 million | US$585-625 million | US$470-510 million |
| Implied 2021 Cash Burn Minus 12/31/20 Cash Balance | NEGATIVE US$150-195 Million | US$5-45 million | US$120-160 million |
Lordstown’s year-end cash balance was about US$630 million, so it will need to raise at least US$150 million of cash in 2H 2021 to reach zero cash balance by December 31, 2021. Some of this gap will likely be bridged by a July 26 agreement Lordstown reached with a hedge fund based in the U.S. state of New Jersey, YA II PN, LTD.
YA has agreed to purchase up US$400 million of newly issued Lordstown stock over a three-year period. The YA purchases will be made from time to time over that period and, surprisingly given Lordstown’s fairly tenuous financial condition, will be done at Lordstown’s – not YA’s – discretion.
Lordstown is hoping to raise additional funds from other parties, but the company did not announce any agreements in its earnings release.
US$220 Million Cash Drawdown in 2Q 2021
Lordstown’s cash balance fell to about US$366 million as of June 30, 2021 from US$587 million on March 31, 2021. The company expects its aggregate cash to decline at a slower pace in 3Q 2021, reaching US$225-US$275 million on September 30, 2021. Cash burn will then presumably reaccelerate in the fourth quarter.
| (in thousands of US $, except for shares outstanding) | Quarter Ended June 30, 2021 | Quarter Ended March 31, 2021 | Year Ended December 31, 2020 |
| Operating Income | ($110,337) | ($106,206) | ($102,481) |
| Operating Cash Flow | N/A | ($71,520) | ($64,320) |
| Capital Expenditures | ($121,000) | ($54,264) | ($58,237) |
| Cash – Period End | $365,900 | $587,043 | $629,761 |
| Debt – Period End | $0 | $1,015 | $1,015 |
| Shares Outstanding (Millions) | 176.6 | 176.6 | 168.0 |
Lordstown’s reaffirming the September commencement of Endurance production is constructive, and its financing agreement with YA has, in our opinion, even more positive implications. However, the magnitude of the negative cash flow forecast revisions made by the company must be a source of investor concern.
Lordstown Motors Corp. last traded at US$5.58 on the NASDAQ.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
