XL Fleet Refutes Grossly Inaccurate and Misinformed Report by Short-Seller

March 8, 2021

XL Fleet’s technology is validated by independent testing facilities adhering to EPA standards and backed by real customer experience

XL Fleet has revenue growth, positive gross margins, proprietary technology, repeat customers, and over 4,000 systems with more than 145 million miles on the road

XL Fleet has successfully sold the majority of its electrified powertrain systems without subsidies in an industry where most sales have relied on incentives

XL Fleet has highly experienced technical and program management teams that have successfully developed a broad range of electrified powertrain systems

XL Fleet will report fourth quarter and full-year 2020 financial results on March 30, 2021

BOSTON–(BUSINESS WIRE)–XL Fleet Corp. (NYSE: XL) (“XL Fleet” or the “Company”), a leader in vehicle electrification solutions for commercial and municipal fleets, today responded to a March 3, 2021 report targeting XL Fleet, written by a short-seller with a disclosed economic incentive to negatively influence the Company’s stock price.

Upon further thorough review, XL Fleet reiterates that the report contains numerous factual inaccuracies, misleading statements, and flawed conclusions. The report should not be relied upon by existing or potential investors seeking to make an informed investment decision.

“XL Fleet has a long track record of success in the fleet electrification space, a proven business model with best-in-class technology, and a customer-centric approach,” said Dimitri Kazarinoff, CEO of XL Fleet. “We stand by the validity of our technology, the benefits it delivers to our customers, and the opportunity to further extend our leadership position in an attractive market. I am incredibly proud of what our team continues to achieve, and we remain focused on executing our strategy.”

XL Fleet system effectiveness and technology is validated by independent testing facilities following EPA standards to save fuel and maintenance costs, leading to customer re-orders that account for a majority of XL Fleet revenues since inception.

The short-seller’s ROI calculation utilizes inaccurate information. The Total Cost of Ownership analysis included in XL Fleet’s investor presentation is accurate and based on factual inputs and assumptions, as summarized in the below table.

In fact, XL Fleet has tested its systems with independent third parties, including ESW America, who have utilized the same EPA miles per gallon (MPG) test methodologies used by vehicle manufacturers. Testing validates that XL Fleet’s technology achieves or exceeds 25% improvement in MPG for hybrid electric vehicles (HEV) and 50% improvement for plug-in hybrid electric vehicles (PHEV).

In fact, XL Fleet’s customers regularly achieve these and greater performance metrics in the field, with numerous published examples of fleets proactively touting these impressive results that are available on the Company’s website and social media accounts.

In fact, XL Fleet has sold and deployed electrified powertrain systems for over 4,000 vehicles to date, with customers who have cumulatively driven more than 145 million miles with XL Fleet’s technologies.

In fact, the short-seller report fails to recognize that, as with any motor vehicle, actual customer MPG performance heavily depends on a range of factors related to how the vehicle is used. This is especially true for commercial fleets, where payload, drive cycles and amount of idling time have significant impact on actual performance. Applications with a heavy instance of braking and acceleration events will generally deliver the best results from the system. This is a widely understood aspect of hybrid operation in commercial fleets and is transparently explained in the Company’s sales processes and referenced in marketing literature.

In fact, independent studies show a three-fold increase in brake life with hybrid electric drive systems. XL Fleet has conservatively assumed a two-fold brake life in its published Total Cost of Ownership analysis.

In fact, XL Fleet has steadily increased its revenue through re-orders and increasingly large order sizes from its customers, accounting for a majority of XL Fleet revenues since inception.

XL Fleet is a fleet electrification leader that is delivering innovative technology, proven customer value, growing revenues and positive gross margins, with significant opportunity for continued growth.

XL Fleet’s current and future leadership position in the electrification space is due to its established position as a provider of hybrid electric and plug-in hybrid electric powertrain solutions. The short-seller report cites anonymous sources to erroneously suggest that this limits XL Fleet’s ability to deliver all-electric solutions in the future.

In fact, XL Fleet has established strong relationships with leading commercial and municipal fleets throughout North America, many of whom have already expressed interest in purchasing the Company’s all-electric options once available. In addition, XL Fleet has established relationships with leading vehicle manufacturers and built a network of over 100 upfitter partner locations to establish sales, installation and service capacity with fleets. XL Fleet will leverage this portfolio of relationships once its all-electric products are in production beginning in 2022.

In fact, XL Fleet will continue to address the lasting market opportunity for hybrid and plug-in hybrid electric vehicles, as BNEF projects that only 28% of new light commercial vehicles will be EVs in 2030.

In fact, XL Fleet has successfully sold the majority of its electrified powertrain systems without subsidies in an industry where most sales have relied on incentives.

In fact, XL Fleet is expanding its powertrain solution platform to include highly complementary charging infrastructure, power management and energy storage services through its XL Grid division. When combined with its real-time fleet intelligence platform, XL Link, the Company is in a uniquely strong position to scale as it diversifies its products, applications and geographies.

XL Fleet’s experienced technical and program management teams are developing a full suite of electrified powertrain systems and related energy storage systems for fleet applications.

In fact, XL Fleet employs a highly experienced engineering team of 43 full-time engineers with an average of 17 years of relevant experience. XL Fleet has an innovation portfolio backed by deep IP and a rich patent portfolio, including 25 issued patents.

In fact, many of XL Fleet’s team members have held senior engineering positions at leading vehicle manufacturers, Tier-1 automotive suppliers, and industry-leading automotive engineering services firms such as AVL, IAV, Ricardo plc and FEV Group – the same firms used by Ford, GM and other major automotive and commercial vehicle manufacturers. Additionally, XL Fleet’s team has decades of experience with a broad range of electrified powertrain systems including hybrid electric, plug-in hybrid electric, battery electric, and fuel cell electric systems.

In fact, more than half of XL Fleet employees today are engineers, and the Company is further expanding the scope and scale of its in-house engineering expertise. The Company anticipates growing its full-time engineering headcount by 50% in 2021. This includes the 24 open engineering positions currently posted on the Company’s public website.

XL Fleet’s executive leadership team is execution-oriented with an unwavering commitment to the highest levels of integrity, accuracy, and performance throughout its business and reporting practices.

The short-seller report makes numerous inaccurate or misleading assertions about XL Fleet’s long-term revenue projections and seeks to mislead investors and the market by interchangeably referring to “backlog” and “pipeline” to feed a false narrative around XL Fleet’s sales prospects.

In fact, there is a significant and widely understood difference between backlog and pipeline. A backlog refers to the total amount of unfilled order volume backed by specific purchase orders. A pipeline refers to the aggregate of all sales leads across probability types being pursued by the sales team.

In fact, XL Fleet’s 2017 funding round was completed in-line with comparable market valuations. The increase in XL Fleet’s valuation since this funding round reflects the significant growth achieved by XL Fleet over a more than four-year period, the value of its new public platform and its more than $400 million of cash on the balance sheet, combined with the significantly enhanced market backdrop for fleet electrification. The valuation increase is also in-line with public market comparables, which have experienced significant growth over the same time period.

In fact, XL Fleet’s management team has a track record of successfully navigating global supply chain challenges and a highly competitive operating environment. For example, in 2019, XL Fleet, as well as major vehicle manufacturers, were impacted by a component shortage that affected battery supply. XL Fleet has since established a more robust and reliable supply chain, and now has multiple battery suppliers and proprietary battery packs in place.

In fact, while XL Fleet did lose CARB approval status in 2019 and was unable to secure re-approval in 2020 due in part to the COVID-19 pandemic, the Company expects to receive CARB re-approval in 2021.

In fact, XL Fleet’s most recently reported quarterly earnings included record quarterly revenue of $6.3 million and gross margins of more than 12% in the third quarter of 2020. XL Fleet looks forward to presenting its earnings for Q4 and FY 2020 on March 30, 2021.

“XL Fleet management, engineers and team members have spent over a decade building a strong business and technological leadership that enables our customers to achieve their environmental sustainability goals,” said Tod Hynes, Founder and President of XL Fleet. “We have a proven and successful track record with over 4,000 systems on the road that have driven more than 145 million customer miles. XL Fleet is well positioned to continue delivering value for customers and shareholders as we expand into new products, services, markets and geographies in the years ahead.”

Key Topic: ROI Calculation

Short-Seller Claim: In its ROI calculation, short-seller presents a deeply flawed analysis showing negative ROI of 53.1%.
XL Fleet Response: In fact, the Total Cost of Ownership analysis included in XL Fleet’s investor presentation is accurate and based on fact-based inputs and assumptions. The Company reiterates its ROI conclusions for the representative fleet of 55.7%.
Source Reference:
- https://s26.q4cdn.com/920386777/files/doc_presentations/2020/Updated-Investor-Presentation-9.21.20.pdf

Key Topic: Fuel Savings

Short-Seller Claim: In its ROI calculation, short-seller wrongly assumes fuel cost of $2.50/gallon.
XL Fleet Response: In fact, the average fuel price in XL Fleet customers’ markets is approximately $3.00/gallon. Approximately 25% of XL Fleet units are in Canada, where the average price for fuel is approximately $3.70/gallon. Approximately 10% of XL Fleet units are in California, where the average price for fuel is approximately $3.56/gallon. The current average price for fuel in the U.S. is approximately $2.71/gallon. The $3.00/gallon figure utilized by XL Fleet’s analysis is accurate.
Source Reference:

Key Topic: Vehicle Life

Short-Seller Claim: In its ROI calculation, short-seller wrongly assumes a service life of 5.25 years.
XL Fleet Response: In fact, the short-seller’s service life assumption of 5.25 years, combined with its yearly mileage assumption of 23,520 miles, would imply a total service life of less than 125,000 miles. Commercial van expected life is 250,000+ miles. Of the 4,000 XL Fleet systems on the road, approximately 335 customer vehicles have driven over 125,000 miles, and more than 22 customer vehicles have logged over 250,000 miles. A majority of XL Fleet vehicles on the road are not yet halfway through their useful life. The 10-year service life utilized by XL Fleet’s analysis is accurate, and conservative based on industry norms and customer feedback.
Source Reference:
- https://news.ihsmarkit.com/prviewer/release_only/slug/automotive-average-age-cars-and-light-trucks-us-rises-again-2019-118-years-ihs-markit-
- https://www.ntea.com/NTEA/Member_benefits/Industry_leading_news/NTEANewsarticles/Aging_trucks_create_more_service_opportunities.aspx?fbclid=IwAR3mkimdcKilEbdqwvYYSwODX5Hop5g6odQWuQdIt9cJ37I30kwxgv209PU#:~:text=In%202008%2C%20average%20age%20of,recent%20analysis%20by%20IHS%20Markit

Key Topic: Maintenance Savings

Short-Seller Claim: In its ROI calculation, short-seller wrongly assumes total maintenance savings of $20,000, or just $200 per vehicle.
XL Fleet Response: In fact, it is widely understood that a hybrid system captures energy normally dissipated in break heat causing wear. Instead, this energy is stored in the battery for use to later help accelerate the vehicle in a process called regenerative braking. This helps add significantly to the vehicle’s brake life. XL Fleet’s analysis assumes normal brake pad and rotor replacement every 40,000 miles, which carries a parts and labor cost of $650 in each instance. For reference, the Green America report referenced herein states that a hybrid car’s brake pads “last three times as long as those in a conventional car, reducing the frequency of break pad replacement.
Source Reference:
- https://www.greenamerica.org/green-living/money-saving-perks-hybrid-car
- https://doi.org/10.2172/894985

Key Topic: Fuel Savings

Short-Seller Claim: In its report, short-seller wrongly states that XL Fleet’s claims of 25%+ MPG gains are incorrect and misleading.
XL Fleet Response: In fact, XL Fleet’s fuel economy performance has been validated by independent sources including Automotive Testing and Development Services, Inc. and ESW America, Inc. Additionally, short-seller does not properly account for the significant impact of other variables. With any motor vehicle, actual customer MPG performance heavily depends on a range of factors related to how the vehicle is used. This is especially true in the commercial fleet market, where traffic patterns, payload, drive cycles, amount of idling time, and weather have significant impact on actual performance.
Source Reference:
- Report: Fuel Economy Tests using XL, Inc’s Hybrid Powertrain System X3.0 2017 Ford F-250 Pickup Truck
- Report: ‘Fuel Economy Tests using XL Hybrids, Inc.’s Hybrid Powertrain System’
- Report: ‘Fuel Economy Tests using XL Hybrids, Inc’s Hybrid Powertrain System X3.0’
- Report: ‘Fuel Economy Tests using XL Hybrids, Inc’s XLP Hybrid Powertrain System X3.0 Ford F150 Plug-In Hybrid Electric Vehicle (PHEV)’
- https://www.fueleconomy.gov/feg/factors.shtml#:~:text=Aggressive%20driving%20(speeding%2C%20rapid%20acceleration,more%20idling%20will%20lower%20MPG.&text=increase%20aerodynamic%20drag%20and%20lower%20fuel%20economy
- https://www.fueleconomy.gov/mpg/MPG.do?action=browseList2&make=Honda&model=Accord%20Hybrid

Key Topic: Driver Cost

Short-Seller Claim: In its ROI calculation, short-seller wrongly assumes driver cost of $18.52/hour.
XL Fleet Response: In fact, XL Fleet’s analysis is based on fully-loaded cost of labor of $50/hour. This figure reflects the blended nature of XL Fleet’s customer drivers, which includes services technicians, utility workers, government employees, and other specialized trades that cost companies even more than $50/hour.

Key Topic: System Cost

Short-Seller Claim: In its ROI calculation, short-seller wrongly assumes hybrid kit cost of $17,000.
XL Fleet Response: In fact, XL Fleet’s analysis is based on volume pricing for XL’s hybrid Transit van system of $13,000 per system. This pricing is based on an actual 2020 customer order, including estimated cost of installation.

About XL Fleet Corp.

XL Fleet is a leading provider of vehicle electrification solutions for commercial and municipal fleets in North America, with more than 145 million miles driven by customers such as The Coca-Cola Company, Verizon, Yale University and the City of Boston. XL Fleet’s hybrid and plug-in hybrid electric drive systems can increase fuel economy up to 25-50 percent and reduce carbon dioxide emissions up to 20-33 percent, decreasing operating costs and meeting sustainability goals while enhancing fleet operations. XL Fleet’s plug-in hybrid electric drive system was named one of TIME magazine’s best inventions of 2019. For additional information, please visit www.xlfleet.com.

Forward Looking Statements

Certain statements in this press release may constitute “forward-looking statements” within the meaning of the federal securities laws. Forward-looking statements generally are accompanied by words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should,” “would,” “plan,” “predict,” “potential,” “seem,” “seek,” “future,” “outlook,” and similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These statements are based on various assumptions, whether or not identified in this press release, and on the current expectations of management and are not predictions of actual performance. Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements, including but not limited to failure to realize the anticipated benefits from the business combination; the effects of pending and future legislation; the highly competitive nature of the Company’s business and the commercial vehicle electrification market; litigation, complaints, product liability claims and/or adverse publicity; cost increases or shortages in the components or chassis necessary to support the Company’s products and services; the introduction of new technologies; the impact of the COVID-19 pandemic on the Company’s business, results of operations, financial condition, regulatory compliance and customer experience; the potential loss of certain significant customers; privacy and data protection laws, privacy or data breaches, or the loss of data; general economic, financial, legal, political and business conditions and changes in domestic and foreign markets; the inability to convert its sales opportunity pipeline into binding orders; risks related to the rollout of the Company’s business and the timing of expected business milestones; the effects of competition on the Company’s future business; the availability of capital; and the other risks discussed under the heading “Risk Factors” in the definitive proxy statement/prospectus filed on December 8, 2020 and other documents that the Company files with the SEC in the future. If any of these risks materialize or our assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. These forward-looking statements speak only as of the date hereof and the Company specifically disclaims any obligation to update these forward-looking statements.