Q3 2020 Arcimoto Inc Earnings Call
[music].
Just to reiterate really quickly again the vision of our commodity is simply the rightsizing of the vehicle platforms that we use every day.
And by by Rightsizing It the platform to a human scale, we believe that we can deliver something to the market that is fundamentally disruptive in terms of price.
And sets a new bar for efficiency for daily transportation.
We're going after a giant market and we have our our product family is built around.
Slices of that overall vehicle market.
And falling with us for a while you've seen this slide before.
And in what we announced this morning is that we now have a product that fits squarely into that force category. So the daily driving fund utility vehicle, the deliberate or for last mile delivery rapid responder from.
Those on the front lines and now the roadster, which is our sort of halo product pure fun machine.
That we're incredibly excited about and incredibly excited about the partnerships that weve developed to put it into the marketplace.
We are using one platform and actually Samir who came up with this.
This notion of multiple shots on goal for one platform that share is the very same economy of scale.
And you if you follow vehicle companies you hear a lot about platforms that work across multiple different.
Vehicles for us, it's a little bit different and that.
Approximately 90% of the parts are shared between all of the products on the platform.
And we plan to use the very same assembly line to build those products.
So the three that we had talked about previously and fund utility vehicle and production now deliver greater and rapid responder are in pilot and.
And then Mike.
We tease both as a cameo which is our lead into a flatbed utility vehicle and then the roadster, we announced development of just this morning.
So the.
The overarching goal for the company today is to get to mass production.
We have built out our our team are really filled key seats in quarter three both internal team as well as industry collaborations and probably.
The couple of really significant ones that have been recently are the development work that we're doing with Monroe and associates over the summer, we did really kind of a high level run through of.
The whole vehicle architecture and.
Dissection of every single part and assembly process and what we're engaged in right now.
Is is actually our first three engineering projects in tandem with Monroe, and that's an updated design for the front clip for mass production.
A full rigorous cost down analysis for the the parts on the vehicle and then a deep simulation analysis that will lead directly into the light weighting of the product so.
So.
The other the other really critical collaboration that we have done is that is what we announced with DHL.
And it's I think it's hard for me to overstate the importance of that.
What what they figured out was how to get vehicles from our dock into the drive ways of arc and auto customers as a common carrier and that really it that is going to simplify the process of delivering vehicles.
For the whole United States.
And ultimately provides a springboard to the world So what.
Has been typical of vehicle companies that sell direct is sort of a piecemeal approach based on different states franchising laws. This gives us a common solution for all of our customers.
And has the added benefit of allowing us to four states, where where they are delivering from our komodo to a customer where we don't sell direct.
Actually it is.
I think more optimal in the sense that.
That we can actually book the revenue when it leaves our dock instead of when it arrives and our customer.
We also announced.
That progressive the leading motorcycle insurance carrier in the country is now carries the arkon modem as part of their web interface. We teamed with wrote America for roadside assistance and what you'll see over the course of the next year we.
We believe is more and more of filling up those key ecosystem pieces to be and scale production because it's one thing to produce 50000 vehicles plus per year and that's a huge challenge in of itself, but we need the support framework and the market for that to actually be viable for sales.
Alongside that we're planning to announce and we've been selling on the west coast, primarily for since the inception and production.
And we believe that in the in the coming months that we will announce new new market areas, where we're going to be delivering into.
And then finally.
Where we see the the primary capital source.
That we are targeting for the funding of the capital expenses of scaling production is the advanced technology vehicle manufacturing loan program through the department of energy and we are we're still pushing to get that application in by the end of this year. So what we talked about on the last quarterly call and going to go through this with.
Jesse on the next slide as well is that we are we believe we're still tracking with the goals that we set out in our Q2 earnings call.
And and we're real excited about it.
So Jeff do you want to talk a little bit about our near term piece.
And actually let me before and before you do that there is we did drop another video.
Right at the end of the market right after the market close today.
And I think this is really important to highlight which is that that are.
Overarching goal is get to scale production in the near term we want to make sure that our early adopters are really really happy with the products that they've got and so we're going to this this little pieces. Just a quick interview with some of the folks who have been early to get our commodity vehicles.
Actually.
Second here.
Sure and that but.
Yes.
And I'll tell you described rock.
[noise] definitely aptly named sign utilities.
And our trout, I would rather try and buy our promoter and the other Vietnam.
I'd been driving it everywhere.
And like a 16 year old and I know and even care, where I go over why go there and go out and I get it and I just drive around alone.
I love It it's been a fund vehicles hybrid and since February and all whether it is just per.
Moving solid growth.
Good day.
And for the first time I'm sorry, yes.
The drilling times.
And with money.
Non-GAAP.
And then on cash.
And yet or.
That's true.
Hi.
Yes, and they can't think and quantify that yet and the black.
They really and you stay so low to the ground day it and also how you feel safety so from Phil.
I'd also like to give and big shout out to the Ark the Moto team.
Your workmanship and design is possible.
And myself offering and CECO pickup suited for take on weekends, and we could order out because it's just so from to try and favorite part and owning and is being able to park and anywhere the parties and Chris.
Does get rock star partner.
And what I recommend people to buy and our commodity yes.
Probably the vehicle everyone should have.
Equal and mark that that leads.
Leads well into this and is this conversation.
The mission for Q3, and Q4 and for our commodities.
Has been to deliver reliable product on time too happy customers.
We believe that.
Fulfilling that mission and building the foundation of the company that can do that.
Allows us to successfully scale.
So I think that video is a good good.
Visual.
Happy customers and that they are feeling from our product.
We've had to do that.
Got it the other issues with before you get scale is is your supply chain.
So we're not getting all that in order.
And our quality.
And team customer service sales all the things that.
People don't see that.
Our required to deliver reliable vehicle happened.
With really good success in Q3.
Uh huh.
Awesome.
I would say just to add onto that the we have definitely faced.
Channel bottlenecks and the process and that's that is to be expected in any scale up.
And operation and this of course has been compounded by the fact that we are in the midst of a raging pandemic and that has affected.
Us and.
Very I would say a small amount and that we have had to really rethink our our production processes and our health and safety processes, but it's also been hit and some of our suppliers and were expecting.
Those will largely be alleviated in Q1, and probably our most significant hurdle has been the manufacture our vacuum for and plastics and.
And we are in the process of vertically integrating the build of those components and that's going to have an effect both on our ability to move material smoothly who'd process, it's going to be a substantial cost reduction for the vehicle.
And that's going to come online in Q1 so.
The elements that we talked about in the Q2 call. We're targeting three it per day consistent by the end of quarter. Four we believe we are still on track for at least one week of continuous three day production by the end of this quarter, we aim to sustain that throughout quarter, one and then by the end of quarter. One we believe.
We are still on target to get to four per day.
So again the targets that we outlined in Q2, we believe we are on track.
And again there will be.
Just a heavy caveat to that in terms of the progress of pandemic.
So which leads into the pandemic update so again this is going to be near term revenue uncertainty.
And full speed ahead for scale planning. So we believe that the health of our team and of our of our broader community is Paramount. We are reliant on every single member of the Ark Moto team.
To help us get to this next major step of the company.
We have to date had zero confirmed cases of COVID-19.
And we attribute that both to the general focus of all of this within within our broader community as well as.
The fact that we're taking it very seriously and that our team is taking it very seriously so.
We are.
Again expecting that that production and revenue impact in the near term is primarily due to supply chain little bit to manufacturing process improvements and I think what's what's also really worth mentioning here is that most of the work we have to do today is planning and engineering for scale production.
And that's actually been.
I think going faster as a result of the fact that we are working from home, we're able to much more easily collaborate with people who are in Detroit, who are in southern California, We're all using the same tools and all using the same language.
And we're getting really get and hang of working remote and collaborating across the country. So.
And those into an existing very well understood market, which is the market for fun go things on the road and I would put vehicles like to a motorcycles other gas powered three wheelers sports cars. The the the fund machine as well understood.
Category in the marketplace. It and we have picked fantastic development partners for this court and Pacific is is developing the whole seat and saddle piece of the vehicle and the national cycle leader in motorcycle Windscreens is developing the windscreen.
For the roadster and partly because the the platform is already very stable and good to go and partly because we've got great team members. We think this is actually going to go into production and the relatively near and and the relatively near timeframe, so higher margin simpler build and <unk>.
<unk> and as we are running numbers and they get into <unk> I'm Gonna say this is a highly caveat and forward looking statement, but we believe that if things go you know tightly according to potential that with the capital that we have on hand, we could build to cash flow positive bitch.
'cause of the inclusion of the roadster and the product family.
So that is not to say again to get to mass production scale. We think we're going to require a substantial additional capital and we're looking to the non dilutive advanced technology vehicle manufacturing loan program to get there, but we think that in a low lower volume production scenario with the facilities that we have that the roadster.
Provides a fundamental shift and the calculus of our product family. So it is also gives us a new audience and as we look to scale. The roadster is another important arrow and the quiver for building that sales picture into the 50000 plus units per year realm.
Also I should say that that are preorder customers will have the option to choose a roadster instead of a fun utility vehicle should day, so desire and I think as you as you see where we begin to open new markets. We think some of those new markets that we're gonna open in the near term it will be very optimal for the roadster.
As well as the S U V.
So stay tuned on the roadster front, but it's something that we are incredibly excited about so yeah, just to just to summarize I'm going to summarize this that we have.
And quarter, three we launched multiple high visibility <unk> pilot programs, we launched it deepened our collaboration with industry scale experts, we team to the global logistics giant for the delivery of our products, we faced incredible challenges from the pandemic too.
Global Firestorm that we're going to scale fire storms that were right at our doorstep and in spite of that we had a fantastic September of deliveries art September year to date revenue surpassed every powerful year, our balance sheet is the strongest it's ever been and the company's history, we did I a.
Can't capital raise at the strongest valuation and the company's history and yet we're maintaining physical discipline over over every aspect of the process. So got back in the saddle on production and delivery our marketing team has been knocking out a bunch of pieces from our beta.
And figure ater to new videos that really show much more of the customer experience of the vehicle and I think those would be very useful tools as we go to scale. So this was to me the most fantastic quarter in art modus history, and I think it builds let's just build a foundation for the.
The future of suggest so with that I am going to stop sharing these slides and open up to our analysts presentation. So this is gonna be this as we have our our falsie sweet here on the call Chief Operating Officer, Harry Becker C Chief strategy offers.
He could've Palti, Chief Marketing Officer, Fritz Chief Financial Officer dug can't pulley at least one of you out there with a frustrated that you were only hearing from me. So now you've got the whole team and we've got in terms of analysts Samir Joshua from H E. W. Michael Szeliski from colors, Jed door trimer for.
Mm Canaccord Genuity Gamesome guillory from what Bradley Woods, and then Galileo Russell from hyper change. So the way we are going to do this welcome you all I'm just gonna go through one at a time, you'll get one sort of question dialogue and then.
<unk> will also have Eric Fritz is going to be going through the Q&A submitted by the audience and picking out questions. So who wants to go first.
Raise your hand and here we go Samir first.
And my Thanks for taking my question. So just confirming you shit 31, the vehicles and September. So you said that I'm 36, tofu aitken's during the Parker, Doug do you have the number for total vehicles and a quarter.
We shipped 31 during the court during the Carter, Okay, and so stepping back up and you just help us understand for customers who are on the preordered list.
What is hopefully like do they automatically get the notification that day, and I'm gonna receive them and <unk> and discuss them and I'll bet and few customers and this this so Fritz you Wanna take a stab at that the pre order to order process.
Sure as as we open upstate for delivery and currently we are delivered to Oregon, and Washington, California, We reach out to the for your customers and order on that list to give them the opportunity to reserve a spot and our production queue and it just keeps going until we fill up the production queue. They.
State and the order that they were in on the list and then as we open up more spots and the <unk>. We'd go further down that list and as we open up new states, we will reach out to those folks and turn as well we do have some fleet customers on and that list and we are filling those.
As we come to them as well and.
And and to add onto that we have we opened up reservations for quarter for production and delivery I I want to say right at the beginning of October and that we have now fully subscribed our production for Q4. So we are we are fully booked through two four will be open and Q1 here soon.
And in tandem with some announcements coming up.
Alright, maybe I just one more question and.
That's perfectly pilot programs that hire car and one Burger do you have any sense of timing on and when those pilots with a progress and what the next steps are and that sure. Yeah. So so the and actually the the the wall Burgers pilot was actually a sale of of a of a.
Pilot deliberate so that is gonna be ongoing four I mean, they're they're they're using it for the foreseeable future down there and key west hire car. We don't we haven't picked determinants of that program, where basically it's still in development of and the the production deliberate or which is going to be where we were sort of building them.
And we we take right now we take and MTV at the end of the line with a slightly modified brain and then our R&D department build back and and a pretty labor intensive process. So the production to Liberator will be bill using back from plastics off of our own automated back one plan.
<unk> facility within the manufacturing plant. So that's I would expect that all of our pilot copilot.
Pilot programs will wrap up once those production deliberate hers are are coming up one.
Alright, galley I saw your hand up next.
Yeah I was just wondering if you could give us any clarity on the gross margin sort of now that we're hitting like production uhm ramping economies of scale. How do you expect like the gross margin to train like at what point and gas is every F. E V. Rolling off the line of pop and is you know throwing off cash breath I guess.
So so I would say a gross margins and Q3 were ugly and that really has to do with we have we have fixed costs for production and we were had had a lot of fits and starts there I expect that's gonna continue through queue for and then substantial cost reduction programs that we've been <unk>.
Working on and we'll start to come online and quarter, one and quarter to and my hope is that by the end of quarter to that we are that that we're we're making I I think good looking gross margins and I think that's gonna be driven by a couple of things one it or the cost reduction program and so we have and place and then to him.
Is the addition of the roadster to the mix because that that should be a driver of higher margins in the near term and then of course I would caveat everything that I just said on the basis of the progress of the pandemic because again any supply chain disruptions in the near term are going to impact.
Production scale, and then also impact margins.
And can I, please and one more sure yeah I thought it was actually my progress I I, even bought more stock with weak and if off and you guys have pumped uhm and I was curious can be if I was and S. U V deliberate or <unk> customer or I can get preordered, must've Brown and I still need to live writer and I wanted to get one of these roadsters instead of a normal S. U V is that <unk>.
Essentially like a Q1 like when you set out these coupon batches will people start be able to get Roadsters. Then yeah. So we have not announced delivery time frame for the roadster uhm. So look for that announcement soon but I'm I'm optimistic that that we're gonna be developing it and and pretty rapid succession I mean, we so we base.
Agley shop that that roadster video week, and a half ago and we put the roaster protostar on a truck on Tuesday, It went to Corbin Pacific for seat development. My carbon took one right and this and if you're not familiar with motorcycle and just religion my carbon he is.
Has been developing seats and saddle since before I was born set the land speed record for electric motorcycles, and Bonneville and 72. He said I. He took one ride and such as the best writing three Wheeler I have ever written and and they their team is just jamming on and moving forward on what we think it's gonna be a really nice.
Saddle and storage solution for the roads, so they're they're cooking natural cycles cooking and then we're gonna do our part in terms of build and the platforms.
Alright, Michael.
Okay, Hey, alright, thanks for having me and have me on this call and I kinda want to get a feel cause I'm the numbers and got expenses going forward I sell our idea was up quite a bit from the last corner cops and it was so close pandemic number and if you have two more major platforms or vehicle over there and cook and develop.
And right now, but even even itself costs were up a little bit and a quarter from the from the previous quarter can you give us some sense as to what to stretch it might be Q4, and the first part of of next year and what's behind those costs of the day higher marketing costs L. A little bit about your cash bear and expectations as well and go into the first part of next year.
So I would say I I would expect that our our marketing expenses and <unk> expenses and we're gonna go up slightly and queue for R&D may track upwards, a little bit as well because again, we are we're really doing we're developing or continue and <unk> developed or you know the F. A vs rapid respond or the deliberate or.
Now roadster, although most of that development work is happening with our partners and then we are also in the process of planning for scale production and those are going to have ongoing costs as we get off the scale, but we are going to keep a real tight leash, particularly on sales and marketing we've now fleshed out.
<unk>, a fantastic marketing team and I think you can see that from the output that has happened from our marketing Department and just the last month and a half. So I don't see that is growing significantly chest and you want to add anything here.
<unk> I think that you're gonna see those cost equal out pretty well and when when production starts stabilizing too.
Q1 is that message we're building the infrastructure and the foundation for that Q wants you to production schedule.
Can I ask why don't Wanna hear from <unk>, while I have you here you've been a bunch of new pre orders your your backlog of triage it up I think.
What about 10 nine per cent from there and from the from the prior year here what is and there was your orders or <unk> or are they cause it renters are they U T and I even know what they are when you get them all day, all day higher car to me and such as to what's in that and.
And your most basic and orders there I I would say that probably the the bulk of them are fun utility vehicles, but we've definitely had deliberate or you have orders come in is deliberate or preorders and we'll have.
And I would say and the next several months, we're going to have a much better picture of what our full preorder list looks like in terms of balance of products and.
But we and we we really and can we prove or is it something that we don't actually push on we are those preorders are coming and you know either by word of mouth or by earn media and so we see it as a as a very good thing that we have had quarter over quarter increases and preorders really red and.
Years and years.
Okay. Thank you all have back and and like.
Jim.
Hey, Mark similar to our following onto to Michael's question.
Since you're not really actively marketing for new orders right now.
Oh.
When do you think you're going to have to start doing that in order to.
In order to get that kind of volume that you would like to get and the next couple of years.
So yeah I.
I would say that the primary marketing that we believe we are going to have is word of mouth from our customers that we are and and and if you look at what we did with the customer testimonial video. That's an example of really letting are letting our existing customers speak for us and speak for the product what we have found in.
And so the the limited advertising that we do is really just all about telling the company story. So we're gonna be very we think very smart and targeted about where we put the ark and modal message so far when in the and the programs that we run on Youtube and Facebook we see.
Doubly hi completion rates of video watches you have you think about that we build rides video that you saw at the beginning of the call approximately 10 per cent of the people who see that video on Youtube as and add watch it all the way to the and so five minutes, one and 10 watch that.
All the way to the finish and we think that that is going to be our advantages will be word of mouth through customers very low cost of customer acquisition. We found that when we want sharp product video back and 2017 is that preorder acquisition process like somewhere between 25, and and $50 to get a preorder when we were actively soliciting for orders.
Uhm and and that was for a company that was not actually delivering products that was when we were you know.
Still years away from production. So we we think that as we get a lot of very positive customer responses as we get vehicles out and the field and when we talked to our customers are saying you know I'm selling this thing every day people are always asking me questions get tons of thumbs up they're very excited to learn about the product.
And you know I think Tesla is famous for doing zero advertising at all that's not to say they don't spend anything on marketing, but you know where I think we're gonna be very efficient about marketing, even as we jumped to scale.
And you've given reproduction targets for the end of this quarter and the and it's next can you get a production targets at the end of next year.
So.
We are our production target for the end of this year for Q4 is to eclipse, what we did and Q2 and Q3. So we want to do greater than that number added together and again jump up to three excuse me to four per day by the end of Q1, and then some time over the summer.
And we plan to step up basically double from there and it's at that point that we think with the right product mix as we really push units out the door by the end of the summer with the right balance of units assuming that are cost reduction programs succeed where where they will that's where we think we could can.
<unk> reach positive cash flow and.
In terms of the number of units, we we have not put out guidance for full year for next year and I don't I'm not gonna do that on this call. We're just I think the timing of those jumps is gonna have a significant impact, but I would say if you run those numbers and and are very conservative about it I think that would provide a reasonable.
Around and you were spot on for Q3, if I recall correctly so.
Uhm.
Yeah.
Thank you Jed.
Yeah. Thanks for taking my question, it's a first and in terms of this format, but I guess, you're breaking all sorts of bounce wait til the end of the call [laughter]. So I do have a couple of questions for you. So first if it just look at the production numbers so uhm.
Three a day on a three day work week, I guess me too about and annualized of about 500.
And when you jump off to that 12 per week sort of 650 type of level. So if we look at production and and kind of unpack. The relationship you have with sandy and how he's helping you kind of scale to that 50000, which is a huge jump from where you're at right.
And now I guess I'm curious in terms of your strategy to introduce the roadster because it would seem like the margin profile for the deliberate or and the first responder is the greatest so until you get to that scale why not focus on those vehicles to kind of help you get there and verses into.
Reducing our fourth you know product offering to the mixer, so as far as day, there probably three reasons why one is that we believe that the margin profile for the roadster is going to be better than the deliberate or and rapid responder. It is it we are going to position it as a halo product for the brand it will be more expensive than.
And or equal and expense to whatever else for selling and we think is going to compete well in the fund vehicle space and I I should say with the roadster what surprised me most about actually writing the prototype was how surprised I was at how awesome. The writers and you know you can.
Take my word for it you can take my carbons word for it you can try it yourself it is and experienced unlike anything else on the road and for people who are looking for a superfund machine and we think it's gonna be a very good option and if you look at the so so I've read Claris, that's Q3 and they have seen a significant increase and motorcycle sales and.
And significant increase and slingshot sales, what you're having with you know the the pandemic started off at last mile delivery going to the Moon and now I think a lotta people. Just are are looking for outlets for fun and if you think about the the 10000 people a day, who turned 65 that is a giant mark.
<unk> of fun seekers out there, who who we think will be good candidates for the roadster.
The second thing is that the roadster is a simpler vehicle for us to build that it by taking away. The upper frame Assembly that is a that is a a big component for us of both the assembly process and then the sub component Assembly. So we think we can actually do higher output of vehicles with.
And the space that we have now with the roads during the mix then without it and then finally as we look to build the overall scale production picture Yeah, we want to make sure that we have a sales pipeline that hits the that day.
And that fills to that 50000 plus units per year, and we think the road, there's gonna be a nice a nice piece of that overall person. So.
So we think I mean, you do have some control over your based on how you price the models Accordingly, and terms what that day, ma'am profile and your pipeline looks like in terms of that build should we then thank through V strategy of kind of when you look at the cost of the road.
<unk>, that's your aggressive on that and the deliberate or and the first responder just based on the contribution margin of those or are you going to be equal across so and so I think yeah I think the the the road and you will have a higher margin. Then then either and the other two although rapid responder is and.
Another one where we think that the market is going to be a little bit less sensitive to the price and all.
Suddenly for delivery and for the deliberate or to really work as a mass bleach solution, we think it needs to be aggressively price and yeah. So that's that's a a volume play that really comes and as we get those mass production volumes and then becomes a really viable option for gig driver.
<unk> and for largely appointments. So you know they they they the idea here is really to synergize and time are are product introductions and ramps to to to maximize both near term margins as well as.
I I think the and <unk>. It is important to have a halo product and the family something that really go and you know that that that people are going to really jump onto in terms of the the just the pure thrill enjoy a writing it down the road.
And have that with the F U V and the the F b as in incredibly fun vehicle to drive us all of our customers say, but when you take away that upper frame it and you and you put the rider in a more aggressive stance, where you really connected with a machine. It. It it takes it to a whole new level kind of one last.
I'm from me, then I'll jump back and queue. So if I just look at deposit deposit number was down uhm year over year, but then and number of preorders was off. So you can you just help myself and others in terms of the math and yeah. So we include they're there and we have two distribution agreements.
That are a piece of that for other areas of the world that don't fit into our deposit category. All the rest are individual customer per yours, and so that's where the balance of that comes out great.
Great. Thank you.
Fritsch and I got anything from the audience that ties in here quite a bit actually and my apologies in advance to anyone's, who has specifically call out that I butcher their name, but here, we go and quite a few questions.
About Monroe and associates and can you describe and any sort of detail the fruits of that relationship the timing that we might see on improvements and specifically from Eric I can <unk>, while I have no doubt them and wrote associates will be able to help you going forward scaling operations and I would like to know.
<unk>, how you and sure that the Knowhow stays with dark modal and you will not be dependent and real going forward that yeah. I think that last question is is really fundamental and I I would say to.
<unk>, what what is so cool to me about Monroe I'm. Many things is that their whole philosophy is to to teach the teams and they work with so that when they leave they're not just walking out the door with all the <unk> you know what what what they're doing is they are helping us really level up our our production thing.
King as we go to scale in addition to diving and on some very key engineering challenges as we go to scale and I talked a little bit about this earlier in the slide presentation, We know where we started over the summer was kind of and exhaust instead of workshops about all the bits and pieces of the vehicle and now we've actually we're.
I actually diving into the real engineering projects. So we have a master services agreement with them, we dive and we're we're diving and or a first pieces of three piece of work and we expect those to continue over the development towards scale production.
Uhm alright back to back to that you haven't do you want to maybe throw and another one or two there for it.
Sure.
Let me see here Robert Golf.
I see it is incredible positive the same quarter prior year increase and revenue about 1818 per cent, what kind of demand and the form of sales have you seen for your vehicles per segment and then follow on what kind of demand increase your forecast over the next five years. So.
Next five years, that's a that's a a big question I I would say I I think it is promising that we again have a quarter over quarter and <unk> net increase and preorders. We hope that that continues we are also seeing yep that once we opened production reservations for quarter for we quickly filled those from.
And reservations and went out and I subscribe per quarter for so our goal over the next five years is to scale and to the hundreds of thousands of units globally and I think it is still early to predict way too early to predict what the what the the clear segmentation of that will be in terms of.
Our overall product family, but I expect that the both deliberate or and fun utility vehicle are gonna make up kind of the significant scale of that of of our scale production that rapid responder and and uhm roadster will be narrower slices about higher margin.
The overall scale picture.
Rubber golf as long as we're on his name had another question I see also that you have roughly 17 million cash and cash equivalents to solid increase from your end of 2019 and if you would please describe your approach to capital allocation inclusion major uses and sources of cash over the next three to five.
Years and explain how actions taken this quarter of contributed to that point, yeah. So so and we've touched on and there's a little bit with with my questions were were expecting modest increases and R and D very modest increases and marketing where the book of the cash that we spend is going to.
And go is in capital outlays to go to scale production and that'll include extended facilities higher automated Assembly line tooling four scale production processes that are going at at high rate and and so and and in terms of what we've done and are doing this call.
Otter is the the big action item there is to get our advanced ecology vehicle manufacturing loan program loan application and the department of energy the the.
That the process of of the federal government has been and I'm moving quite slowly, particularly on the political side and the build up to the election, we think that there is going to open up a window in the near future where things are moving much faster and so we want to be ready with an applet.
Patient and so that is a lot of our work both internally and with Monroe is the planning and really getting our arms around what what needs to go in that application and so we're at the after this earnings call that becomes you know the the full court press for the financing manufacturing teams on the planning side.
And to get that application and.
Alright back to the top Samir.
Hey, So correct me, if I'm wrong, but I <unk>. It seems that day and went through he has been going up a little bit does this is this because of quantity shows that you're trying to address with parts of ethanol and then create and come back ordered list that they are moving up supply go ahead, and just to supply and issue.
You know I would say probably a bit of both but Terry maybe you Wanna put it a little more color on that.
Sure if I understood your question and had to do with the level of inventory.
Yes, yes.
It takes a lot of parts to make the vehicle and of course and you have to have all of those parts. So as we've struggled with the supply chain just in a couple areas that have standard either to the Covid uhm pandemic or two quality issues. The other parts continue to.
Come in and as as you May know, we planned on having all of those parts ended up and vehicles and leave sooner rather than later, so that causes the inventory to pile up just a little bit.
But going forward and the advantage going forward is we take our foot off the gas just a little bit with the parts that we do have stockpiled and we're doing a good job of relieving the the roadblock standard that are making a standard just a little bit so it will even out uhm, but the year 22.
20 has been and I wanted the more difficult or casting and evening out years, well certainly the most difficult when I've seen.
Yeah, and and to that I think to that point you know our our goal right now over and above anything is yep.
<unk> good customer really good customer experience and then smoothing out all the bottlenecks in the process from materials, all the way through to vehicle delivery and service after delivery to make sure that what has now been a pretty stutter step process is a smoothly flowing river and we think that <unk>.
See and light around the corner on that I. It's it's certainly still gonna be a challenge and queue for and and and likely into Q1, but we're we're working diligently to alleviate those bottlenecks at the same time and we're driving down our cost of goods sold so just a quick call you up on the wall.
And the D issues can you give us an update on what kind of issues here for Ya and and I'll also knew I'll I'll take care of your address and those.
So we've we've had and it really runs the gamut there have been a few and and and I would say probably Terry would you say plastic and then our our our biggest paint paint point there.
I I I would say that the biggest problem. We've had has been with bodywork. There are a lot of body work panels and I would also say that the supply change that we use to receive that money work.
Has been hit by.
Work force problems through the pandemic, probably worse than any other supplier and we've had this the good thing going forward is the thermo forming and.
Capability is what we're bringing in house, and Q1, which we will and and I've seen a couple of questions about how much do you intend to vertically integrate that's our next vertical integration play to is to bring in the thermo forming piece of the puzzle which puts it squarely.
<unk> into our own capability will be and control of the entire schedule of that and it will also take some cost out because our margins will improve on those parts and pieces.
But and.
Alright, we're gonna have to do have a rapid fire around Galileo do you have a another quick one.
Alright, Mike.
Alright, Thanks, Mark you you both lower the price the base price so that day, so recently and what's your new figure it out service and I'm kind of curious whether any of your original orders have been at the lower prices are are people out and all the options on the higher price Persians.
Fritz you Wanna hit that I I'm I'm I'm as anybody ordered just a base model. There there have been a few just a couple Gary shaken his head [laughter].
I believe we currently have an average selling price as configured of around 21 to 22.
So many of them are using the options to upgrade but there has been a couple of at the base price.
So so it's it's actually a higher S. P. Now since you lost the the figure area rug and lower well the evergreen was priced at 19 nine but it actually had options for customization on top of that as well okay. Thank you.
And that was one and things that actually surprises was the evergreen was originally supposed to not have options and customers get demanding and so we added from him.
And one of the things that Gal answer question early on and off the margin that I think it was a really good milestone and we met Mister <unk>.
And average sales prices and about 22 six.
<unk>, which got us and and the reductions and I and materials cost and the bill of materials got is true positive.
Margin as far as material and that was.
Very good milestone I think.
And.
Thank you.
Alright gym.
When do you think you're going to get the bulk of them on Monroe recommendations implemented.
I think that's gonna be an ongoing process for the next 20 months plus.
We're gonna we plan to be working with them and and hand through this scaling process.
Alright Jed.
So if I just look at the numbers and I do some quick math, you know 20000 dollar ask fee for the quarter and the vast majority of your <unk>. Your losses is I mean anyone who's buying a vehicle at this price is getting a fantastic deal when I look at your cost structure right. Now. So you know kind of a follow up to Jim.
Previous question about in a row again strategy wise why not focus on the deliberate or and the first responder, maybe the roadster has a lower cost, but I would think you almost want to steer people away from the S. U V until you can actually get your cost structure and a much.
More reasonable level, so so you're not <unk>.
Basically, giving the you know or I don't Wanna say, giving away, but you're you obsessionally are it and I mean people are getting a fantastic deal at these levels and you you don't Wanna ship money and the truck and and there's no question about that and and when <unk>. When <unk> you have a very low unit production, which was two three there's no avoiding that given the.
Overhead of the business and the average to get the scale.
To your point driving people away from the F. U V and two other offerings, we think that the roadster is going to be a great product for some of our S. U V. Customers. We are also planning on having the rapid respond or be essentially production ready before the end of the year, where it through or and and.
And and upset or vetting process, and again that one's gonna have a very different market to go out and so.
Yeah that that being said, we definitely have preorder customers who've been waiting a very long time for fun utility vehicles, and we want to make sure that they are satisfied as well the margins don't start to look good on the deliberate or until we are and have that vertically integrated plastics production and we're back loving those panels rather than make them as.
Art projects and that's come and that is coming soon so again, I mean, where I I look at this all as still you know start up phase building out the market building out the product family Previn for scale and then on the other side of that just a giant and market opportunity and you know.
A real solution for the world. So it's going to take investments on our part to get there and part of that is is reflected and ugly upfront margins.
Thank you [laughter].
Alright, Fritz we're we're almost to the end of the hour you got a couple of last questions from the audience. Yes. Several questions on the D. H O partnerships and what that means for nationwide delivery timing.
And as we talked about in the the <unk>. The near term plan is that we will have announcements in the near term in the near future about additional markets that we're gonna open so while D. H L has the ability to ship to all 48 states almost right out the gate, we still need to make sure that we have the <unk>.
Proper.
Care and maintenance capabilities online and each market that we go into so that's gonna be the major gating factor is getting our service scaled up and what we're doing right. Now is we are building really the comprehensive service training materials, our our vision for service is that we rely.
On and market partners for for a major piece of that and and markets that are that are populace in terms of our kimono customers will also have mobile service hitting new markets, but I would say stay tuned on new markets and we're opening probably most critical for us.
And the near term is Florida, we have a we have a.
Ton of preorder customers and Florida, and so that's that's one that we're working on in and and the very near term and then also some spots up and the northeast with the goal that we want to you know obviously a lot of folks out there had been waiting and very long time to get their <unk>, we feel that the pandemic has been and.
And you're a slowdown for us and that regard, but we are working very diligently to get to the point, where we can deliver nationwide and and get everybody's orders and their driveways.
And a Martin and we also have several questions about technology seems like we have a lot of tests are fans out there and the audience questions about potential partnerships integrating technology, whether it be battery technology or autonomous technology, yeah, great questions.
Uhm, Yeah. If you didn't catch test was battery day presentation. They I just put out a a a mind blowing presentation for anyone who has been in the field for a long time in terms of what they are doing both on the vertical integration of production of battery cells on the sustainability component.
And battery production not shipping the same grants and around the World Six times and then you know the sort of digging ditches and killing him in and that has been typical of the battery production process for with him and batteries and they figured out ways to get around a lot of that so that's a major cost reduction driver, it's core to the mission of sustainability.
City of our Komodo that we have sustainable constituent parts. So at the point that you know <unk> decides that they want to sell and supply cells to the broader market. If they ever get there that is conversation, we would certainly be willing to entertain and when it comes to autonomy, we think that the art.
Modem platform will make a fantastic platform for autonomous driving both for delivering people and for delivering products. It. The same thesis of the <unk> platform, which is that it makes no sense to drive a 4000 pound vehicle to carry on a good day.
200 pound dude around town and.
And we think that that thesis holds and the autonomous World now we are not we have never been capitalized to go after the sensor and software problem. In addition to getting production up and running so our focus is getcha scale production of the platform, but we think that that at that point that this platform.
Will be a good host two autonomous technologies and you know that what what test is working on there any any number of players and the field who have very promising solutions that are that are coming to the fore and so we we think Arca motor is going to be and a good position to offer a pathway and and the market for those technologies.
And I think with that <unk> or overtime real quick let me just say and <unk>. There's no no not one word there's just plenty of questions that we didn't get to sofa, you didn't get and answered go ahead, and send us and emailed to investor out argument and Dot Com and we'll try and answer for Ya Yep Investor at Arkham Motor Dot Com, if you're not sure.
And up for our industrial updates you can do that on our commodity dot com slash I R as well as our newsletter or tomorrow Dot com Slash preorder, if you haven't gotten and line yet and there was there was one there was one final question from the last earnings call that I didn't get to which is that somebody asked if if those and.
From his ever come off the wall and I play them and asked it to play punk. So this time, we're gonna do something that we think is unprecedented and NASDAQ earnings calls, which is and Ark and motive sing-along I'm going to share. The the lyrics everybody else on this call should be muted.
And this is.
This was a song written by my uncle, John Uhm, who who happens to be a let's see.
Here. We go this is what what's what's this to the tune of John.
The Fox so this to the tune of the Fox and I have a couple of guests out and the front porch got the I'm new to the band job, So I'm gonna be plugging along.
But.
Feel free to feel free to join in.
I'm joined by Julia, France, who is a fantastic violinist with Eugene Sir Anthony John Frohnmayer.
World Class rower, former chairman of the National Endowment for the Arts.
And we're gonna play you a little are Komodo song.
[noise].
And the way.
No.
And.
[music].
And that.
And last.
And then.
And.
And.
Ooh.
All of that.
[music].
Alrighty and the road and that's.
And.
[music].
Well, that's all I know Oh, yeah.
And wishing you all health and the holidays and a bright road ahead and and we'll see you soon.