The Lion Electric Company (NYSE:LEV) Q3 2023 Earnings Call Transcript

The Lion Electric Company (NYSE:LEV) Q3 2023 Earnings Call Transcript November 7, 2023

Operator: Good morning, ladies and gentlemen, and welcome to Lion Electric’s Third Quarter 2023 Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference call is being recorded. I would now like to turn the call over to Isabelle Adjahi, Vice President, Investor Relations and Sustainable Development. Please go ahead, Mr. Adjahi.

Isabelle Adjahi: Good morning, everyone. Welcome to Lion’s third quarter 2023 results conference call. [Foreign Language] Today, I’m here with Marc Bedard, our CEO, Founder; Nicolas Brunet, our President and Richard Coulombe, our Chief Financial Officer. Please note that our discussion may include estimates and other forward-looking information and that our actual results could differ materially from those implied in any such statements. We invite you to review the cautionary language in this morning’s press release and in our MD&A, which contains important information regarding various factors, assumptions and risks that could impact our actual results. With that, let me turn it over to Marc to begin. Marc?

Marc Bedard: Thank you, Isabelle. Good morning, everyone. Today, we are pleased to report that in Q3, we achieved record deliveries, revenues, and gross margins, clearly showing that our focus remains our goal to profitability. Compared to Q3 2022, we basically doubled our revenues, with approximately the same SG&A expenses. And our gross margin went from negative 9% gross margin of over 6%, mostly driven by higher volume, favorable average selling price, and continued cash control. We had a significant EBITDA improvement as well, increasing from negative $15.1 million in Q3 2022 to negative $3.9 million in Q3 of this year. Also, we now have more than 1,600 vehicles on the road, with more than 19 million miles driven or 30 million kilometers, a significant achievement demonstrating our leadership position in the EV space.

It is also my pleasure to acknowledge recent leadership appointments. Nicolas, who got deeply acquainted with Lion’s products, customers, and operations over the past four years, was named President, and works with me on the elaboration and execution of all strategic aspects of the business. His main focus being our commercial operations and the acceleration of sales across the United States and Canada. Richard who has been instrumental in driving our growth projects with a lot of success for the last two years was appointed Chief Financial Officer. Richard will leverage his 25 years in executive finance roles to support our objectives of profitability and positive free cash flow. I will now provide an update on several key decisions we have made to focus on our profitability objective and optimize capital usage.

On the bus side, we will postpone the commercial production of the LionA school bus to prioritize the commercial production of our high demand products and the timely integration of our Lion batteries on our existing platforms. On the truck side, the litigation with Nikola Motors and their decision not to supply us with the Romeo Power batteries will result in us using our own Lion batteries on our LionA tractor truck, thus postponing its market entry to mid-2024. And finally, we have great news with respect to both the Lion5 truck and the LionD school bus. As we started commercial production for both of these vehicles and will soon begin customer deliveries. Now turning to our manufacturing plants and operations. In Joliet, we now have the infrastructure in place to reach a production capacity of 2,500 school buses per year.

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Q&A Session

During Q3, we continue to ramp up the production of LionC buses. And like I just mentioned, we have also started the commercial production of LionD units. At our battery plant, we continue to ramp up production of Lion battery packs during the quarter. The current production line allows us to reach production capacity of 1.7 gigawatt hour per year, enough to power over 5,000 of our vehicles. The certification process for the Lion pack is progressing well and we expect final certification to occur before the end of the year. With respect to our Innovation Center, the building is currently being used as a testing and certification center for our vehicles and batteries, as a pre-delivery inspection site and as a warehouse or inventory. This allows us to leverage space available and optimize operational efficiency.

Additionally, we will soon start using the Innovation Center as a showroom and delivery center for our customers to see and test our vehicles on our test track and take delivery. In a nutshell, we have been able to expand our manufacturing capacity to our targeted levels and the CapEx investments for our two growth projects will be completed by the end of this year. On that note, I will now ask Nicolas to dive into our commercial operations performance before turning it to Richard who’ll discuss the financial highlights of our Q3 results.

Nicolas Brunet : Thank you, Bedard. We delivered 245 vehicles in Q3 consisting of 220 school buses and 25 trucks. 132 vehicles were delivered in Canada and 113 in the US. This is a record number of overall quarterly deliveries, but also a record for deliveries in the US, where we delivered purpose-built, easy school buses to several new customers. The vast majority of those US deliveries were part of the EPA’s Clean School Bus program. We are pleased to make prompt deliveries under the EPA program demonstrating Lion’s leadership in US EV school buses. Cumulatively, for the first nine months of the year, we delivered a total of 664 vehicles, almost twice the 345 vehicles delivered over the same time same last year. With respect to the order book, it currently stands at 2,232 vehicles.

That’s 268 trucks and 1,964 buses totaling $525 million with the LionEnergy book at 129 charging stations, representing $4 million. Worth mentioning is a conditional order from Highland Electrics for 50 LionC school buses, which we announced this past Friday. This quarter’s vehicle order book was affected by various factors, including the removal of 140 units from the deferral of the LionA platform discussed earlier, as well as purchase order delays and cancellations related to subsidy programs, mostly stemming from clients awaiting funding decisions. We anticipate a positive momentum in all electric school buses as a result of attractive funding programs, including awards under the $400 million 2023 EPA grant program, which draws significant customer interest ahead of applications in August, and for which customer awards are expected in Q1 2024.

Potential orders under the 2023 EPA rebate program, with a budget of $500 million requiring applications by January 2024 with award announcements scheduled for April 2024. Several appealing programs in states such as Texas, Colorado, New York, Michigan, and California, which could drive school bus demand beyond the scope of the EPA program. And momentum in the Quebec school bus market where the subsidy program was recently renewed and enhanced with an increase of available funding from $125,000 per bus to $175,000 per bus depending on battery capacity. This momentum in the school bus space is further supported by an increasing number of states passing laws to accelerate the electrification of the transportation sector. Separately, we are in ongoing dialogue with the Canadian Federal government that any satisfactory approval of sizable applications for school bus deployments placed under the ZETF program.

Successful completion of this process would enable timely vehicle deliveries and could generate further applications for potential new purchase orders. On the truck side, while this market is still at a very early stage with electrification just commencing, we remain very enthusiastic about our prospects in the Class 5 to 8 market. Leveraging our purpose-built truck platform, Lion stands out as one of the few players of critical mass of vehicle on road and we expect the upcoming deployments of Lion5 units to generate significant customer interest. Like in the school bus sector, we are closely monitoring billions in existing and upcoming subsidy programs aimed at accelerating fleet electrification. To conclude, we continue to experience strong customer engagement on fleet electrification underpinned by solid desire to transition to EVs as well as emerging regulation and attractive subsidy programs, and we believe Lion is very well positioned to address this upcoming demand.

On that note, Richard will now discuss our financial performance. Richard?

Richard Coulombe: Thank you, Nicolas. I will start by commenting on Q3 results, including an update on CapEx. I will then discuss our liquidity position. In Q3, we delivered 245 vehicles resulting in record revenue of $80 million. This represents revenue growth of almost 100% compared to the same period last year and close to 40% versus Q2, 2023. This increase in sales volume coupled with favorable product mix and average selling prices as well as continued cost discipline led to gross margins of 6.7% compared to negative 9.3% in the previous year. For the quarter, SG&A before noncash share-based compensation was $17 million. As a percentage of revenue, SG&A before noncash share-based compensation decreased from 36% to 21% over the last year due to disciplined cost containment efforts.

This is a trend we are looking at maintaining as we continue to focus on reaching our profitability and positive free cash flow objectives. Adjusted EBITDA improved to negative $3.9 million from negative $15.1 million in Q3 2022. Additions to net intangible assets mostly related to R&D amounted to $15 million, a decrease of $3 million when compared to $18 million in Q3 2022. Capital expenditures amounted to $16 million, including $4 million for Joliet and $8 million for the Lion Campus, a significant decrease as compared to 29 million last year. We anticipate combined CapEx spend of approximately $12 million in Q4 for the Joliet plant and the Lion Campus, leading us to the conclusion of our main initial investment on these projects. We therefore continue to expect minimal capital expenditures in the foreseeable future mostly maintenance CapEx as our growth projects have reached their targeted capacity level.

Now turning to liquidity and capital resources, in Q3, we successfully closed financing resulting in $142 million of growth proceeds or $136 million net which provides us with additional flexibility to continue to execute our plan. As of September 30th, 2023 our immediate liquidity stood at $132 million consisting of $36 million in cash and $96 million in immediate borrowing capacity on our revolver. At the end of the quarter, our debt balance stood at $176 million. Finally, as we move forward with our 2024 budgetary process, we continue to focus on decreasing product costs, optimizing working capital management and improving our internal cost structure. Back to you Marc.

Marc Bedard: Thank you, Richard. Before we open the lines for questions let me conclude by saying that we are pleased with our Q3 performance and thrilled about the opportunities unfolding in the EV market and our positioning. Our commitment is to achieve profitability and positive free cash flow and we are confident that we have the right elements in place, the right focus and the right strategy to achieve our objectives. Thank you for your attention this morning. Let’s now open the lines for questions.

Isabelle Adjahi: Operator, we will now open the lines for questions. I just want to ask you to limit to two the number of questions asked to allow other participants to ask their questions. You can of course go back in the queue if you have any follow-up questions.

Operator: [Operator Instructions]

Marc Bedard: I think we have a question from George. George, please go ahead.

George Gianarikas: Hey, good morning, everyone, and thank you for taking my question. And congratulations on a great quarter. I wanted to ask about the sustainability of your, the gross margin momentum that you showed. Now, how should we think about the next couple of few quarters in terms of modeling the gross margin going forward? Thank you.

Richard Coulombe : I’ll take that one. Thank you for the question, George. So we achieved record 6.7% gross margin in Q3, so representing substantial increase compared to 0.7% in Q2 2023 and negative 9.23% in Q3 2022. So sustaining positive gross margin and achieving positive free cash flow clearly is number one priority at Lion. It would obviously require continued focus on revenue growth and tight management, cost management. We are definitely in the right direction, but we could see some volatility as we continue to ramp up. New platform deliveries on the LionD and Lion5 starting this quarter and the gradual integration of our Lion Battery into the current commercial model could temporarily affect our growth margin. We continue to be very focused on driving productivity within the organization and working at reducing our product cost.

George Gianarikas: Thank you for that. And then maybe this is my second question. Again, it’s a housekeeping. You mentioned that going forward, your growth CapEx is more or less complete. Can you just remind us what the level of maintenance CapEx we should assume for the firm for the next couple of years? Thank you.

Richard Coulombe : Should be pretty minimal. Right now, we’re really aiming at single-digit CapEx for next year. It’s going to be largely maintenance CapEx.

George Gianarikas: Single-digit millions is the number you mentioned.

Richard Coulombe : Correct.

Operator: We now have Michael Shlisky with D.A. Davidson.

Michael Shlisky: Yes, hello. Good morning. And thanks for taking my question. So right now, you’re up and running with a really nice-looking plant in Illinois. Obviously, we’re all established in Quebec. Do you have any views as to when your visibility is going to be good enough at this point to start giving us some guidance about what your deliveries might be, at least one quarter out? How consistent is your production rate right now?

Nicolas Brunet : Hi, Mike. Nick here, I’ll take this one. Look, I mean, we’re still in ramp-up mode. The guidance decision is one that we’re always assessing internally. We don’t have an update to provide this morning. And when things change, we will, but there’s no set timing for us to provide any guidance going forward.

Michael Shlisky: Okay. Maybe I can ask, just talk a little bit about the Lion8 tractor. I guess I’m curious, you can tell us a little bit behind the scenes as to how you developed the battery, guided it to the truck, and getting that whole project finalized. Was there a high cost there over the last couple quarters that we should be thinking about? And do you expect to recover most of that from Nikola once that case is resolved?

Nicolas Brunet : Well, with respect to Nikola Motors, well you know that we terminated basically what was going through with that right now, so the proceeding against Romeo, but not when civil proceedings against Nikola. But going back to your question on [inaudible], I mean, we had no choice in using our own batteries. And the HD batteries will be certified early next year. And we will be able to use those batteries on the Lion8 Tractor. This Lion8 Tractor, I need to tell you, Mike, is amazing. And obviously the whole market is expecting it. We will be able to put a lot of kilowatt-hours on those trucks. So we will have a lot of range as well. So we’re expecting a very good demand, I mean, for that product. But obviously going back to the root of your question on Nikola Motors, respectfully, I mean, we will not be able to comment further because of the proceedings going on right now.

Operator: We now have Benoît Poirier from Desjardins Capital Bank.

Benoît Poirier: Yes, good morning, everyone. Just looking at your truck backlog, if you remove the 140 purchase order, sorry for the just looking on the bus side, there was 140 purchase orders removed from the Lion8. But it looks like there’s some booking was over on the bus side. Could you comment about your bidding pipeline and your ability to secure more momentum on the bus side in 2024?

Nicolas Brunet : Yes, certainly Ben. Ben, I’ll take this one. Look, there are a number of moving parts in the order books during the quarter, as you mentioned, the most important one was the removal of 140 Lion8 units related to the postponement. But there’s also some volatility caused by the timing of the subsidy programs and that’s expected as customers await to know what their allocations are or what the programs that are being put in place are renewed before they’re placing the order. I think it’s important to re-emphasize that we continue to see strong engagement from the customers towards fleet electrification. And we see some upcoming catalysts in the order flow. I mentioned earlier the EPA rounds two and three for which allocations to customers are expected, allocations of awards are expected early next year.

That’s $900 million of school bus funding right that’s coming in the US federally, somewhere in between end of Q1 and beginning of April. In the Quebec market here, which is obviously a big market for us, there was a positive in the subsidy program as it was being extended and renewed. And the good news is that the subsidy that previously paid $125,000 per school bus was extended, and it was increased where now the operators can obtain up to $175,000 per bus based on, depending on battery capacity. There’s the ZETF program that we talked about that could lead to, of course, near-term deliveries for us when we hopefully get the approval. But also that will drive more purchase order flows, we believe. And then there’s a number of various funding alternatives as well at the state and at the provincial level.

So overall, we continue to feel very good about the demand environment, but those subsidy programs can create some volatility in the order book on a quarter-to-quarter basis.

Benoît Poirier: Okay. And with respect to the subsidy bus order from Ireland, which is conditional, what is the timing with regard to the final approval for the King and ZETF subsidy?

Nicolas Brunet : Yes, I mean, we have a number of orders that are in the queue for the ZETF. Tough to point to specific timing of each, but we say on the larger orders, we’re progressing well in the dialogue. We hope that it’s in the near-term, but obviously difficult to pinpoint the specific time. But it’s live right now in the dialogue, very live.

Operator: We now have Dan Levy of Barclays.

Unidentified Analyst: Hi, Josh on for Dan’s line today. I had a quick question on if we’re getting any mixed benefits from an increase in U.S. sales. I saw that the U.S. volumes picked up quite a bit this quarter and ASPs also went up accordingly. I was wondering if there’s any correlation or special benefit from increasing sales into the U.S. versus Canada?

Nicolas Brunet : Yes, I’ll take this one. The short answer is yes, typically in the U.S. market we tend to sell units with more onboard energy, higher battery capacity, more options. The U.S. market is a more intricate market rather than the Canadian market where there’s less differences in between a province in the states. Obviously, the regulatory environment is different, and so we do tend to sell vehicles with more options that are more custom in the U.S. and have a higher average selling price. Obviously, keep in mind the U.S. market is about 10 times the Canadian market. It’s our goal to match that as an opportunity.

Unidentified Analyst: Thank you. And as a follow-up, we’re seeing somewhat slower EV uptake among the medium and heavy-duty trucks. And I was wondering if you have any inclinations on whether maybe like some of the states like California or any of those other states on the advanced clean fleet will potentially consider bumping up the potential regulatory credits to spare some more demand there.

Nicolas Brunet : Let me start by saying that in the truck space, the truck EV market for the Class 5 days is really still at adjacency, right. If you look at it as of June 30th this year, there were less than 1,000 vehicles registered. And based on this data, the Lion would be the fourth player in the space. So we’re one of the very two players with critical math and importantly with a purpose built product out there. We have seen some positive legislation. You talked about California advanced clean fleet. That’s certainly positive development. This is more on the regulation side. And typically, yes, we’ve seen that following regulation is the modification at UL of the subsidy programs. We don’t have direct visibility into that, but we’ve seen it in other markets and we’re certainly hoping it will be the case as well.

Altogether, again, the market is just at the beginning and we have the product and the manufacturing capacity to accommodate clients as things ramp up. And we’re very hopeful for this market to increase significantly over time exactly when it remains to be observed.

Operator: We have our next question from Tamy Chen with BMO Capital Markets .

Tamy Chen: Hi, good morning. Thanks for the question. Can we go back to the Canadian subsidy program, the ZETF? What’s causing against some of the delays? Is it just the application? There’s additional nuances or revisions required and so there’s just been a delay from administrative perspective. I’m just trying to understand what’s going on there.

Nicolas Brunet : Yes, hi Tamy. Look, the ZETF program is one that is very specific application by application and so it’s — every approval is different. The orders that we have in the Q are, we believe, the first big ones for the school bus, because recall that the program is both for transit and school buses, and those are the first big ones for the school bus. And so there’s dialogue between the federal government, ourselves, and our clients to find the appropriate, to get the appropriate terms. I need to point out that the acts of our clients directly within the parameters of the program. So we’re hopeful that we’ll get a good resolution. And again, it’s very bespoke application by application, and obviously there’s a, yes, there is an administrative burden to that. We believe that once the first large ones are hopefully approved, the things can accelerate from that.

Tamy Chen: I see. Okay. And the Lion8 plus the school bus. So I just want to make sure I understand. You’d post the 400, sorry, the 140 units deferred in your order book. Is that on the Lion8 school bus? And so was with the customer that deferred or you made the decisions to prioritize other higher demand product? I just want to make sure I understand that aspect correctly. Thank you.

Marc Bedard: Yes, good morning, Tim. Yeah, this is related to the Lion8 school bus. And it’s a matter of focus. We’re strong believers in the focus as you know, when we decided to focus the commercial production of the item and products as you were saying so with the LionC and it’s almost — it’s also the LionD coming to market, the Lion5 and the Lion8 a little bit later. So all a matter of a focus and test control.

Nicolas Brunet : And if I just address the order book part, it was us removing those units from the order book as we’re undertaking dialogue with customers to see if there’s a desire to defer the longer period of the order or to convert it to a LionC or LionD order. But just in our review, we felt prudent to remove those from the order book.

Operator: We now have Christopher Souther with B. Riley Securities.

Christopher Souther: Hey, guys, thanks for taking my question. Congrats on the progress here. I just wanted to touch a little bit on kind of the production mix between the two facilities. Could you give us any sense of what the kind of output is starting to hit out of Joliet here? And then I have a follow-up.

Richard Coulombe : Yes, good morning, Chris. Yes, Chris, it’s going well. You will probably remember we have a manufacturing capacity of 1,000 buses in Montreal and we have a manufacturing capacity of 300 buses in Joliet and in Montreal we also add capacity for 1,500 trucks on an annual basis. So the cadence is going very well and there was no question yet on the supply chain but the supply chain is getting a lot more stable and that was a discussion we had probably for the last two years. So it’s getting a lot more stable and we’ve been working a lot on the redundancy suppliers as well. So it’s going quite well. So our goal is really to increase the pace as needed and that the goal is also to manufacture in the country where the buses are being delivered and we’re getting there.

So obviously we’re doing less buses in the US right now than we’re doing on the Canadian side but as Nick was saying earlier the US market is ten times bigger, the Canadian market and with the manufacturing capacity of 2,500 buses on the US side we’re very, very well equipped to increase the pace as we get more orders, we’ll be able to deliver.

Christopher Souther: Just to clarify then so like in the third quarter the deliveries by country kind of matched up with the geography of the manufacturing facility or are we not quite there yet on the US school bus side?

Richard Coulombe : By and large, yes, Chris.

Christopher Souther: Okay, got it. Okay. And then if I’m kind of looking at the margin increase, I think pricing had a big piece to do with that. As we kind of trend higher with, can you just kind of talk through what that premium in the US should be that we can kind of bake in as we have US kind of ramping up more. I just want to get a sense how much continued opportunity of price increase on the ASP side we have, and is there any kind of delta on the production cost side between the two at this stage? And then I’ll hope in the queue.

Marc Bedard: Yes. Chris, as I mentioned earlier, it really is about selling, it’s about the onboard energy that we have in the vehicles, it’s about the options that we have in there for an equal build, there’s no price difference or at least no material price difference between producing in Canada and producing in the US. So it really is about mix and options on the vehicle more than anything else. And I couldn’t point to a rule of thumb of US versus Canada.

Operator: We now have the next question from Rupert Merer of National Bank.

Rupert Merer: Hi, good morning. On working capital, your working capital increased a little bit in the quarter. I’m wondering if you can get some color on what drove that, I imagine, combination of batteries and vehicles. And how do you see that evolving over the next few quarters?

Nicolas Brunet : Rupert, thank you for the question. I’ll take that one. So obviously there’s a portion of the working capital increase that’s directly connected with the growth in our production, but also the introduction of the LionD, the Lion5, and also, we’re preparing for the integration of our batteries into our platforms. So this is somewhat driving some of the increase. I can tell you we’re very focused on working capital. One strategy we had in place was overstocking of inventory given the spike in prices that we went through in the last year or so. And today, as Marc pointed out, we don’t necessarily need this strategy anymore. So right now we’re very focused on really reducing working capital, and we expect to see working capital turning around in the next few quarters.

Rupert Merer: Is there much an inventory related to vehicles that are awaiting ZETF funding? And when you get funding, could you see some of that working capital coming out?

Nicolas Brunet : Yes, well, as Nick pointed out earlier, there’s a couple that were awaiting approval. There’s one that has been lagging from that quarter with the reliance on [inaudible]. Also, there’s 50 of them that are definitely just waiting to be delivered. So yes, there are some, and you will see some bigger as we get approval.

Rupert Merer: Great. Thanks. And then secondly, you talked about the fact that the supply chain is easing and earlier on in your prepared comments you talked about focus on cost reduction. I’m wondering if you can give us some color about where we are today in the costs and where are the opportunities to drive out cost in the future and also if you could give a comment on inflation and if you’re seeing now say reduction in the inflation that we’ve seen over the last few years.

Marc Bedard: Yes, good morning, Rupert, this is Marc. Yes, we’re focused on reducing the cost as you know. So there’s many places where there will be savings in the future. Obviously, the inflation didn’t help, I mean still hitting us. The inflation right now as we all know. But there are a lot of places where we see a lot of benefits. First of all, I need to tell you that in our manufacturing processes are a lot more stable. And this is good. We’ve been doing this for many, many years and we see the benefits of that. Obviously with volume going up, then the amortization of the fixed cost is getting better. One place where we will be reducing significantly, and this is starting now, it’s also in R&D. I mean, we’ve invested a lot in R&D in the past.

And in the future, the R&D investments will be going down. And speaking of cost control, you probably saw also that the SG&A has been very like stable. And we are looking at reducing the percentage of SG&A over sales in the next quarters as well. So for example, we’ve been able to double the sales this year compared to last year with about the same amount of SG&A expenses. So it’s all about the focus on our products. It’s about the focus on the margin bringing down those costs. And you probably saw as well that in Q3 of last year, Rupert, we sold 156 vehicles and we had a negative EBITDA of $15 million. This year, we had a negative EBITDA of $3.9 million with 245 vehicles. So you can do the math. I believe that everyone can see that the business model is scaling very well.

And we said that in the past, but I think this is the proof that you’re seeing now. It’s scaling very well. And the good thing is that we don’t need very high volume to reach profitability.

Rupert Merer: Great. Thanks for the color, Marc. Yes, definitely solid margins this quarter. Congrats. I’ll get back in queue.

Operator: We have the final question on the line, registered from Abhishek Sinha from Northland Capital.

Abhishek Sinha: Yes, thanks for taking my question. This morning, in your gross margins, and now you have two consecutive quarters of quarter gross margins. So I understand the margins could be lumpy given the nature of the business, but can we say to you, assume that the margins would be positive from here on, going forward, given ramp up in US and higher ASPs in order.

Nicolas Brunet : Yes, Abhi, this was mentioned earlier, we’re going to see some movements in gross margins. So obviously with — our volume, I mean the margin is, this is really helping the margin, as I was just saying earlier, but the launch of the new platforms though. And we’re talking about the Lion8 Tractor, and next year we’re talking about the Lion that we are starting the delivery in Q4 of this year and also the LionC. Well, it’s obvious that the gross margin at the beginning of those products is not as good as the one, it’s going to be in a very near future. So we expect some, all the stuff in the gross margin for the next two or three quarters because of those items.

Abhishek Sinha: Got it. Could you comment on the M&A landscape in the sector? I mean, we see some of the peers are under stress just wondering how you got the evaluating any such opportunity or mostly just focus on organic growth from here.

Marc Bedard: Yes, we’re fully focused on managing our business. We’re increasing our margin. I mean, we’re commercial, the meetings with customers and having a very efficient operation as well. I mean, this is our focus. So we’re 100% focused on those items right now. So we’re not looking at this. Thank you. We have no further questions in the line. So I’d like to hand it back to Ms. Adjahi for any final remarks.

Isabelle Adjahi: Well, thank you everyone for joining the call today. We really look forward to continuing with the discussion and feel free to contact us for any follow-up questions you may have. Thank you.

Operator: Thank you for joining. And this does conclude today’s conference call. Please have a lovely rest of your day. And you may now disconnect your lines.