Q1 2021 Lordstown Motors Corp Earnings Call
[music].
Ladies and gentlemen, and thank you for standing by and welcome to the lowest power Motors first quarter 'twenty 'twenty 1 earnings conference call. At this time, all participants are in a listen only mode.
After the Speakers' presentation there'll be a question and answer session to ask the question. The 1 of the session you would need the press Star then 1 of your telephone please be advised the today's conference maybe recorded if you require any further assistance. Please press Star then zero I would now like the hand the conference over to your host today Carter Driscoll head of.
The Investor Relations. Please go ahead.
Thank you operator, good afternoon, and thank you to all for joining Lordstown Motors first quarter 2021 earnings conference call.
Implement today's discussion. Please go to our IR website to view, our press release and Investor deck.
And we begin I want to call your attention to our safe Harbor provision for forward looking statements and is posted on our website and as part of our quarterly update.
The safe Harbor provision identifies risk factors that may cause actual results to differ materially from the content of our forward looking statements for the reasons and we site and our form 10-Q, and other SEC filings, including uncertainties posed by the difficulty in predicting future outcomes.
Joining us today, the Lordstown Motors founder CEO, and Chairman, Steve Burns, President Rich Smith, and CFO Julio Rodriguez.
Steve will provide a strategic update on the business followed by rich will give a more detailed update on production and then Julio will cover the financial results followed by Steve who will provide our outlook and closing remarks with that I'd like to turn the call over to Steve Burns.
Thanks, Cotter and welcome to everyone.
Our mission here at Lordstown Motors is to be the leading manufacturer for electric light duty trucks and the United States.
Our first vehicle the <unk>.
All of electric endurance work truck is on track to start limited production in late September.
And we expect to start deliveries later in the fourth quarter.
As a reminder, the engine.
The answer is a full size pickup truck. The we believe can achieve the equivalent of 75 miles per gallon and.
And travel up to 250 miles on the charge.
Today, I'm very excited to announce a major milestone.
We have started physical crash testing of our beta of vehicles.
We have passed every test we have taken on the first attempt.
Including the full speed frontal and the side pull test.
The data results from the physical crashes correlates very closely to our software model.
And we are therefore, reiterating our belief that we can achieve a 5 star safety rating from.
<unk> side and rear of the final version of the endurance.
To date, the endurance has met the front impact federal Motor safety standard, which is F. N B S. S..2 O 8.
And the side impact F N B S. S 2014 requirements through these actual crash test Hell.
How old it the federally approved Trc test facility in Ohio.
These are the 2 most difficult task for any vehicle.
And we passed the requirements with our beta vehicles.
These are critical milestone for us and remove some of the biggest technical barriers.
This provides us a solid foundation as we complete our development and validation work.
We are continuing to work on establishing relationships with fleet management companies that we believe can be the basis for meaningful revenue revenue. Once the truck is ready for sale and we can demonstrate that it performed to our expectations.
These include our previously announced series agreements with Holman as well as the recent agreement we've entered into with <unk> group.
We're also and discussions with several charging companies and infrastructure providers.
To help us provide a simple and seamless solution for our potential customers.
Our ability to produce enough vehicles to satisfy our expected market demand and it depends on many variables.
Such as suppliers and passing all required regulatory hurdles.
And also our access to capital.
Our research indicates a very robust demand for our vehicles.
However, capital May limit of our ability to make as many vehicles as we would like and as such.
We are constantly evaluating our capital needs and the various types of capital available to us including strategic capital.
As the automotive world speeds towards vehicle electrification.
It's starting to be cleared of many and then the.
Electric full size pickup truck with a 250 mile range is going to be quite attracted to a large portion of the market.
As the new OEM, we are often asked.
How we are able to be first of market and the highly competitive pickup truck category and the U S and how.
How are we able to off the endurance of such a competitive price point.
While we have 2 major advantages that have enabled us to reach our progress to date.
First is our innovative technology.
We believe that the endurance will be the simplest mass produce truck ever made.
Far simpler and smarter and.
And any internal combustion vehicle and even simpler than any EV on the road today.
Our innovative hub motor based architecture and the.
<unk> us to use advanced proprietary software base motor control.
Rather than mechanical routing of powered each wheel.
The result is a smart pickup truck that is robust enough to handle the most demanding of duty cycles.
But easily field maintained and serviced and yet can be offered and an attractive price point to our customers.
And this is just our first model.
Our goal is the subsequent options will include things like advanced Informatics and crash avoidance features that we offer through over the air of software updates.
Another expected benefit of the physical simplicity of our vehicle is increased uptime for our customers.
Which translates into a lower total total cost of ownership the key metric that drives customer demand and private product loyalty.
We have been conducting robust testing of electric hub motor and vehicle design over the last year.
Including entering the Baja race.
The race allowed us to validate our vehicle performance and literally the harshest of environments.
While we are still learning how to optimize fast charging and such a train we had no mechanical issues and the race and we're able and accomplished 2 important goals 1.
Validate our hub motors frame thermal management system and battery pack.
And to advance our DC fast charging capabilities.
We learned that our production hub motor design is well suited to perform and low traction environments like Baja sand.
And our battery pack is resilient to high torque and high impacts.
We also learned of the thermal management system was able to compensate and the demanding Baja race environment.
For DC fast charging the race requirements for quick recharging prompted us to modify our DC fast charging capabilities months earlier than we had planned.
As a point of clarification, our production and battery pack worked to the expected range and its mechanical performance was flawless.
The reality of any battery pack.
Is that it has a fixed amount of energy relative to the the energy consumption of the vehicle sand and loose soil has 4 times.
Higher coefficient of friction that of paved road does.
Our energy usage was on par with our simulations.
And our confidence that our vehicles range will meet the 250 mile target for an average customer of duty cycle.
Finally, 40 miles of Baja is enough evidence that our thermal power thermal and powertrain performance assumptions are correct and such extreme use case.
Final testing and validation for our production vehicles will be completed at greater than 500000 miles of paved and hard packed dirt roads.
The endurance customer will receive a vehicle.
With the amazing performance and safety pedigree.
In addition, we are thrilled to have the opportunity to illustrate the capabilities of our endurance demonstration vehicle to the United States Army.
As a potential vehicle for the E L RV, which is electric light reconnaissance vehicle program.
And we look forward to working with the U S Army should the opportunity present itself from the future.
Our second advantage.
As in the production readiness for scale.
Our from former GM facility has now been upgraded to EV readiness.
The full stamping robotic body welding assembly and paint.
This plant would normally have required billions of dollars of investment to build as the greenfield.
Our team is very proud of the betas, we've built here.
Proud of their quality safety and drive the ability.
1 very important production, though we want to remind you of is our 800000 square foot propulsion facility.
Which 1 manufacturer of battery packs and electric motors.
And it will be 1 of the largest battery pack lines and North America.
And the largest hub motor facility globally.
This will be an amazing accomplishment and we fully expect our investments and our battery pack design and its automated production Dubai. This to provide us with a key competitive edge, both and cost control and Pat quality.
The first phase of the pack line is installed and is being tested currently.
The line will make battery modules the contained over 6000 individual cells.
That are assembled into every endurance and it will do so without human hands ever touching yourselves.
It is the mechanical wonder.
And we believe will be a huge strategic advantage for us.
Next we will be building out our hub motor production line the summer.
We can't wait to show everyone of our vertically integrated factory during lordstown weeks, starting June 'twenty 1.
In addition, we have established in house production of key components and secured critical supply chain partner.
To support our ability to scale.
This includes includes agreements with semiconductors inverters cells and frame.
Although the Covid has constrained the automated of automotive supply chain and globally and it's caused a material increase and our R&D expenditures.
We have been proactive and this effort.
Finally, I want to remind everyone that we have begun work on our second vehicle.
And all electric vans.
It's built on the endurance chassis, which leverages many of the same parts engineering and existing supply agreements.
And we will share of prototype with you this summer.
Our hub motor based skateboard is especially well suited for event because of the lower floor height, the results and more cargo space and has easier access and regress.
Leverages the way to build a strong multifaceted automotive company and.
And we are leveraging much of the endurance technology and the van and all of our future vehicles.
With that I will turn the call over to rich discussed our progress on production and engineering and regulatory compliance.
Thank you, Steve and good afternoon to everyone on the call I'm Rich Smith, President of Lordstown Motors, and I'm happy to provide and update on production engineering and testing first.
First of all of it I will update you on the betas, followed by progress on the plant retooling and propulsion and built out and finally provide some context on our early crash test and other vehicle validation efforts.
First of the endurance betas and Steve said, we are firmly on track with our beta builds.
Most to completing this program made up of 21, 4 testing and the rest of the production validation.
Chris Schlicht tests are used by the industry to verify that the airbags seatbelts and potential of our work with Indian interior towards the CAE symbolization predictions for F. N B S. S performance.
We have also began durability testing understanding how hard it is of the past crash tests the.
And the requirements for selling vehicles is to meet F M and BSS require regulations, which we expect to pass without issues and the objective is to achieve competitive.
And C. H P test star ratings, which are not mandatory at this point, we do not see any impediments to meeting our N C. A T targets again based on early results. We are excited to report that we believe the endurance remains on track to achieve 5 star rating.
We are retooling the plant to be flexible.
And to enable us to build multiple vehicle platforms and extensively from trucks and cars.
We are still on track to build preproduction vehicles, known as Ppb's and July P. P. B's and have the battery packs of motors built in house as well as paint sub assemblies frames, all completed and our plant.
As we complete ppvs, some will be heading to 2 conductor crash and engineering and foundations by the National Highway Transportation Safety Administration Nitza and late summer is 1 of the final steps before production now let's talk about the retooling.
Stamping and all 4 stamping presses are up we began reconditioning and proving out our robotic bank of robotic body shop. The most expensive pooling of our plant is up and running including the laser roof wells. The paint shop is on schedule and is virtually complete General Assembly is also on track and finally, we have started to install the new.
Nancy marriage line.
Shifting focus to propulsion Weird you just start building the first electric of motor line on site and in July. It is currently being validated by our partners.
We anticipate the Michigan the first motor line before the start of production in late September we believe that once all lines are building commission that we should be the largest manufacturer and automotive motors and the world and with that I will hand over to Julio to take you through the financial results. Thank you.
Thank you rich and good afternoon, everyone and I also want to thank everyone for joining today's call.
I'm Julio Rodriguez the key.
The cell officer and.
The review, our first quarter 'twenty 'twenty 1 results.
As of May have seen we published an 8-K on may be lifted.
Dress and the recent statements levied by the SEC regarding the accounting treatments per warrants issued by the snacks.
We're continuing to work on completing the restatement and expect to be in the position to file our form 10-K and form 10-Q zone.
Now turning to our financials.
All of our financials are presented in accordance with GAAP.
And the first quarter of 2021, we recorded an operating and net loss of $106 million or so.
This consisted of $14 million and certainly and then 3 of their expenses.
And $19.92 million and R&D, which 1 of them.
Stock compensation expense.
The higher the expected R&D.
And.
It's largely from <unk>.
Higher costs from the life changed that remains on the direct from Covid issues and of.
Which impact the beta of costs.
Higher costs of shipping, including the expedited shipping.
And greater use of temporary external engineering anchors.
For the balance sheet. We ended the first quarter of 2021 of total cash position of $587 million.
We have total assets of $779 million, largely consisting of our cash position plus $155 million and PP&E.
$76 million and.
The total liabilities mainly accounts per.
And $703 million in shareholders equity.
From a cash flow perspective.
The use $72 million and cash from operations.
$53 million, so the best thing activities from purchases of capital assets.
And generally the $83 million from financing activities, mainly from warrant exercises.
Our combined cash use.
The additions and.
The investment was the 120 millions of dollars excluding.
The $82 million and cash we received from warrant exercises.
We ended the quarter with approximately 177 million shares.
And if all outstanding warrants were convert the today, we would have approximately 180 million diluted shares outstanding net.
Counting employee stock options.
Thank you and I will turn the call back over to Steve who will provide our outlook and closing remarks, Steve.
Thanks Julio.
As we discussed and our last earnings call.
Parts of the short seller report our board of Directors established the special Committee of independent directors.
To investigate the allegations made by the short seller.
The SEC has also commenced and investigation and has sought information from us and we are cooperating with that investigation.
The special committees review is ongoing and we expect that the special committee will be and are positioned to report on the results of their review of the allegations and the short seller report prior to the end of the second quarter.
Pending the release of those results neither of the special Committee nor of the company is and are positioned to comment further on the short seller report.
Now on the guidance.
As we have already indicated our cost of exceeded our prior expectations for the reasons laid out earlier and the pace of our production ramp will depend on our ability to secure additional funding.
We are updating the outlook for 2021 that we provided last quarter.
We continue to expect between 250 and $275 million and Capex.
On the operating front, we now forecast $55 million to $60 million and SG&A.
Of which 4 million is stock compensation expense.
And $280 million to $290 million, and R&D of which $7 million the stock compensation expense.
We now forecast the net loss of between 360 and $380 million or approximately $2.5.
To do the $2.15 and loss per share using the 177 million basic class a shares.
Let me explain a few additional key assumptions in this guidance.
These forecasts would allow us to finish the year with approximately $50 million to $75 million and cash without any additional funding.
But in order to do so we would be pursuing a conservative budget, reducing costs and delaying investments and the production would start in September would be at best 50 per cent of the prior 2021 unit expectations.
We are currently in discussions for and asset backed financing opportunity that is at the preliminary stage.
In addition.
We also remain and due diligence for an application for the ATV and loan.
Furthermore, we intend to engage in discussions with strategic investors.
And we continue to seek and pursue opportunities and other tax credits and grants across multiple jurisdictions.
We want to thank all of our talented employees for their hard work and dedication across our offices and Lordstown, Ohio Farmington.
Farmington Hills, Michigan, and Irvine, California.
We are proud to be part of the voltage valid Renaissance and Ohio and.
And part of the solution to addressing the climate change and sustainability issues, we all face.
In summary, our mission is to bring to market. The first full size of electric pickup truck.
And deliver on our commitment to safety sustainability and efficiency and the automotive landscape.
We want to reiterate how delighted we are by the performance of our truck and the east crash test.
These are major milestones that we achieved on a road of production.
Every member of the Lordstown team is laser focused on bringing the endurance to market as soon as we can use.
Using our innovative and disruptive technologies.
We want the lordstown endurance to be the first mass produced full size of electric trucks and the world.
Thank you for your time, and we very much look forward to welcome and you'll hear and lordstown the week of June 21.
Operator, we will now take questions.
Thank you as a reminder to ask a question you would need the press Star then 1 of your telephone to withdraw your question. Please press the pound key.
Please standby, while we compile the Q&A last day.
Thank you. Our first question comes from the line of Greg Lewis with <unk>. Your line is now open.
Yeah. Thank you and good afternoon, everybody and yes, the hey, congrats on moving forward with the debate of taxes. It seems like it's kind of progressing nice.
I did want to dig in a little bit and now in the the additional capex.
Kind of walking through and looking back at the previous quarter's press release. It looks like about 100 plus of that was related to R&D could you kind of walk us through some of those changes and.
And what is kind of driving those net incremental capital requirement on the R&D side.
Yeah, Thanks, Craig and by the way I, just before I jump in and I want to make sure everybody knows we have Darrin pulse, our chief engineer here and John <unk>, our VP of propulsion, just won't be able to answer any questions that you got to ask.
The the 50000.
And what view there is we've had to because of the supply chain. We've had to bring a lot more stuff in house right Hurts your upfront because you got a tool for that you've got and engineer for that right and and.
But it helps you and the long run it definitely helps you as the endurance volumes go up and as we layer and the additional vehicles like the van so the the engineering all of the for example of lot of people don't realize all of the betas right those aren't inventory those are treated as R&D.
So as we.
As we March through everything some things were a little more expensive than we thought some things we had to go outside for validation like the brake testing and things like that and a lot of it's just how we're going to make these parts inside rather than the purchase them, so that kind of all dovetails into that.
Yeah.
Okay. Okay, great. Thank you for that and then just I just did want to follow up I mean, it looks like youre progressing through.
Making the move forward on the crash test.
What else what else what other kind of hurdles should we be looking for over the next couple of months kind of ahead of moving into.
Moving and the preproduction and July right. Great question. So obviously crash testing is a huge gating item right. If that doesn't go as you think or if it goes really sideways that can cost you a year and.
Hundreds and hundreds of our $1 billion right. So that is.
You know the why there are no small car companies usually in the United States because of that so to get past that gating item.
Item really should lower execution risk for anybody thinking about are we going to get the September.
The other thing is as we've been making estimates over the last year.
You know as you get closer to production obviously the number of variables decreases. So you just start to dial it in more and more of course.
Could could supply chain continued to.
To evolve, yes, but we have taken the liberty of securing the things.
The big things that we can see that we wouldn't be able to pivot. So for example, we have ourselves the source from 2 different vendors. So we have enough cells.
Contractually too.
Make it all the way through.
Our foreseeable future, we electronics the chip shortage you hear about all the time, we went ahead and upfront bought those enough to get through this year.
So that we're not constrained that way frame.
Frame, we had to bring the frame and house because of that that was the at risk with suppliers, so things like that but I think and general.
And it's costing us more than we thought but relative to.
The conventional thinking and we're moving very quick and.
You know really doing this for.
The X.
Good good pricing so we're very happy with it we don't like that it's moving.
The the targets moving a little bit, but we've taken the attitude of first the market is everything.
It's really starting to evolve that.
The vehicle like this this size of this bad this cab. This range. This price point is a very popular item kind of with the events of last week.
And it's not just the niche item now, it's it's really gone mainstream and so we think first mover advantage is very important so we have.
Louis sided on the on the fact of how do we maintain September.
And Greg just to drill down on your point about what's left to do.
Yes, so theyre and host here a couple of things and we go from beta where we have <unk>.
Production intent designs with more of a prototype parts and as we go to PPV. We go to production and 10 parts of production tools. So that is going to be the big change that happens in the PPV Bill.
As we do that we will be continuing deeper into our durability testing.
Our break tuning steering systems and vehicle dynamics work.
That's a big milestone as we move forward and then that sets us up for F. N. B S. F 100 series, which are the non Chris.
<unk> test that we need to do with the P. P fees.
That will start at the end of the summer. So the short answer again, Greg I think as regulatory is a big part of this business right and as you can imagine its supply chain and regulatory once you get your recipe and your engineering done and you've got a vehicle that physically is attractive to folks and also the specs meet their needs and then it comes down of regulatory.
Tori and supply chain and and your in house production. So obviously in house production, we pretty much control, but regulatory is is a big part of U S automotive we've.
Again past the biggest gate. There is are these 2 tests that we passed.
Are the toughest too and we wanted to get those upfront. The fact that the test matches highly correlates as I say to our software emulation. So it basically did exactly what we thought.
And it's quite remarkable to be at this stage.
Okay perfect. Thank you very much and look forward to catching up on a couple of weeks.
Thanks, Craig.
Thank you. Our next question comes from the line of John Murphy with Bank of America. Your line is now open.
Good afternoon guys.
And just wanted to ask the first question I mean, obviously, youre, commenting that youre going to raise capital sooner.
Sooner rather than later.
And you made mention on the call of an ABL or and asset backed line or or other structure I'm. Just curious what you would put into that and and maybe if you could continue and consider the lordstown plant and what would the borrowing base beyond that because I mean, you've talked about that being billions of dollars.
And $2 billion plus.
And the replacement value so that would give you a lot of runway I mean, how do you think about potentially pledging the lordstown plant and is that part of the discussion so far and how big could that be.
Good Great question, and obviously, we're looking at all types of capital, but non dilutive like that is that and strategic is very important to us, but we have zero debt and we have a lot of assets. So it lends itself and we're buying a lot of parts and so all of that there's folks that want to finance that so it's a.
We're pretty mature on some of the discussions I mean, they're they're early but we feel it's the prudent thing to do so we're spending time on that.
Hello, and did you want to say anything about that yet and we have you know.
Billions of dollars and assets that we can use for and but we want to.
Do copy of the financing of the new or the next capital expenditures of we're going into so.
Right.
So theres a lot of fix it.
Not a lot of folks there are folks that make a living and out of financing capex and.
And then it always helps if you got extra collateral of above and beyond that.
Got it Okay and then just a second question, Steve you were mentioning.
Bringing or in sourcing some parts.
Because of the supply chain was not necessarily ready or disrupted by Covid and that's.
Part of the reason for the expenses and Capex went up.
You said something about in sourcing the.
Frame and I'm just curious.
When do you think you need to make decisions because of things of that is a big.
The big capital commitment and and <unk> and R&D feet on your trucks and and any vehicle for that matter that has the frame.
And what other parts of being in sourcing and and when do you kind of pull the trigger and do that because that seems like a pretty quick turnaround. If you were in sort of the claim since the last conference call I'm trying to understand how this is working.
Yeah, and just for those that don't know we are a body on frame vehicle like all of trucks are most trucks and.
So the frame is where our truck gets a true <unk> strength. We also have the.
The the.
Thing that most people don't have to consider when their engineering and as we have a big battery.
The big pattern pack in between that train and and and just again a quick note on the frontal crash test it did not penetrate and touch the battery pack. So those of the kind of considerations that go into your your frame and the.
The vendor that we had laid out for the frame suddenly was going to be able to all of it was going to have the charges more and we just decided to take it in house and it's constantly a do we pay more for the part and and hurts our profit margin or do we source and inside and sourcing and side of course like I said does this frame will be very similar to the frame.
The van and.
We start the when youre going to be of multi vehicle platform and you really can get those kind of leverages. It starts to change your decision process and the van is just looking more and more.
Lack of winter for us. So we are that affects it so I'll, let rich maybe jump in a little bit there is the John like Steve said, we we do when we sort of stuff. We do of course they of multiple suppliers. We had 3 different suppliers on the frame of some of it was based on timing and some of us based on cost.
And a lot of it was based on the timing schedule of the launch of the vehicle.
All of it was based on cost, but once we do the return of investment and the timeline of the launch and the.
Endurance and the fall it came down to the best option for US was the and source of the frame and and as Steve said It gave us the flexibility to go to market on multiple vehicles quicker as well.
And then of course, we haven't line stamping plant and we have a lot of spare robots with the size of the facility that we've got from general Motors. So it allowed us to put a lot of those processes in place and.
And it was the best business decision for us to in source of the frame. So thats. The decision we went with us of business.
Average by the major fault and how fast can you make that decision I mean does that mean that and we're talking about a big decision and if you've got the stamping presses and the robots and the world shops to do this I mean, thats pretty impressive and it seems like maybe you should of been thinking about doing.
Net before.
I mean, if you had all of that stuff that you know that capital and.
And how fast those decisions get made.
And it took us about we didn't really want to make that decision upfront because of the capital investment as you said it was about a 3 month decision that we really didn't want to have to do and the beginning because we were trying to save the capital but at the last minute as Steve said, we had a supplier of kind of pull back and and the other supplier of let's say supplier of being suppliers see the price was very drastic to our bond.
Cost of.
And the timeline. So we we we had to choose to bring it in house at that point the.
Of the decision that went into it as you know where we're going to have to change it what does the crash test and go well, we're going to have to change. It if you got an outside vendor making it.
As quick to respond it did great and the crash test, but we are.
We're just.
It is constantly a buy versus make conversation comes down to usually.
It's a little more expensive upfront of course, but pays off and the long run and.
As an early OEM right, we're really cognizant of there are some people that sub everything out some small so many of these startups USA and <unk> everything out and we have a lot of folks here from Tesla for example, and they know our new OEM. Whoever you are you're going to have early issues and you want to be able to deal with those.
Quickly and not have a third party.
Taken their time are busy with another client or that sort of thing so big things like frame. We just started to realize and we should have in house. In addition to the economics, it's also being able to.
We want to make sure the any early teething problems that we have as the new OEM were in position radar battery packs were making the pack, we're making the hub motor and we're making the frame the biggies.
And our control.
And then just lastly, real quick and 1 of the of the appeals of the <unk>.
Business models that you're getting out there in front of potential established competition and we've heard news about the F 150 lightning.
Price point is relatively surprisingly low below 40000 boxes.
And as you think about the competitive.
<unk>.
And and the potential slowdown and your production ramp how concerned are you and that you know putting you sort of on your back foot in the competitive environment and door. If you raise enough capital could you reaccelerate the your production ramp curve.
Oh, yes, everything we're doing is to enable us to when we receive the capital where we're looking at to be able to have it all of the pent up <unk>.
System ready to go I think the competitive landscape is the most important part of our conversation here.
We're just.
The.
And the fact that the.
Competitor Who's very established automaker and has been working on this for several years and.
Didn't come out with the 600 mile truck or of flex capacitor aura of.
While looking vehicle right from the same bed same cab spout. The same range about the same pricing. So it's quite remarkable that we are on par.
With somebody like that.
At this point and we're getting the market faster, but we sure are always cognizant of.
There just seems to be such of market demand for us and now that it's gone mainstream not just niche we want to be ready to pounce.
If the.
If the market demand is what we think so.
We're always keeping out of mind it would be crushing too to have the lead have the first market mover and not be able to fulfill I mean, obviously you can't just move on a dime and this business, but we are.
Every decision we make is trying to.
Make sure we can.
And can satisfy and take we want as many people buying art vehicle and why we're the only game in town and that will just give us we want to be on version 2 point of when somebody else comes out with version 1 point, though.
Great. Thank you very much guys.
Thanks, John.
Next question. Please. Thank you. Our next question comes from the line of Mark Delaney with Goldman Sachs. Your line is now open.
Yes, good afternoon, and thanks for taking the questions. The first question is on the liquidity target that the company articulated by year and can you provide more details on what youre thinking in terms of working capital.
They may need to be invested this year to support the ramp and and also.
Support.
And for Us.
And the sales and operational parts of the business and.
And what's embedded within that liquidity target.
Good.
I'll start off here and then I'll turn it over to Julio we just wanted to everybody to know that.
With no funding, we can we can get good.
Get trucks out this year, which again, we think is paramount.
And so we're expecting 2 to receive funding and the various manners of which we've discussed.
And we expect the ramp to be basically what we had hoped but we have to put the Astra Gov and it's going to require us to be successful and our fundraise and which again we are.
Going to be the only of the electric pickup truck market as far as we're concerned just got a huge boost last week right and.
And to have.
Half of our model the almost the same we feel that.
We should we should keep our ramp and the.
We have with being debt free and ATV and loan op.
<unk>.
And we feel will be there, but we wanted to make sure everybody knew the worst worst case, we're still make and pickup trucks. This year.
The key item of the working capital obviously is.
The inventory and.
And slowing down the the ramp.
And save Us.
And the inventory, but I mean, we obviously I mean, we need to get the working capital of financing and.
So that's what we're pursuing so as soon as we know of.
<unk> got the couple of financing.
Definitely we're going to start ramping up again.
Got it Okay and then my second question was on the ATV and loan opportunity and you spoke of a little bit about that on your last earnings call and then.
You talked about and the press release today about hoping to complete that and the next few months.
I think you said before I mean, this is a pretty extensive diligence process that the government goes through and maybe you could talk a little bit about what they may have already done in terms of their diligence process and.
And what they may still need to do and kind of where that the next few months.
The potential timeframe is coming from thank you.
Okay, I'll jump in and let the Carter take it but of course, we got to be sensitive.
2 of their confidentiality, but I don't think of the secret that they look technically at you. They look financially at Uli look EPA wise that you they look at market demand for your product.
And they are very these are senior folks right they've been doing this for a long time I don't think there would be of test. So if they didn't get the Sloan back and the day rate. So there are very conscious of of all of it and.
I think it's important to note they have not made a loan and a while so the fact that.
Where this knee deep with them is really encouraging to us and we.
Uh huh.
I don't I don't know if I'm allowed to say, we are optimistic or not but.
We feel good about it.
Yes, the Mark just to tie it into your liquidity question earlier, so that it doesn't play any role and the liquidity numbers that we provided you with our.
And our modified production ramp they've done as Steve said several rounds of diligence, we believe that so far they have been favorable we cannot comment on any timing.
But we believe that we're progressing at the time line that we originally thought we would and we are hopeful that we will reach a stage.
Such that we could potentially come to terms and we can't comment on the timing of of the application.
Got it thank you.
Okay.
Operator, well take the infusion but.
Our next question comes from the line of Harry Nickel with Wolfe Research. Your line is open.
Hi, guys. Thanks for taking the question.
The first thing I wanted to talk about was just how we think about costs and the bomb going forward.
And your first Investor Day, you talked about of $42000 bond now and of $37000 bond in 2024.
100000 unit, obviously, just sourcing expectations of <unk> brought a lot and how.
Can you just talk about how you're thinking about the.
And.
Now and how Youre thinking about the bond in 2024, and 1 all of the moving parts are there.
Sure Hi, this is Steve Harry.
You know just to put it in context, we have probably 3000 parts and the vehicle, which is very low for vehicle 2000 of them we purchase.
Alright, just the.
Kind of frame it up.
We have we're the only and full size of electric coming out with for electric Motors, everybody else has to write but we don't have things like drive shafts and new joints and.
Gears and differentials so it's a trade off back and forth, we make our own motors. So that we can control of the cost of them, we expect to drive that down significantly over time right. We make our own battery packs. So we can control of the costs of those we have our sell deals, but the packs a big part of it the physical pack and I don't know if you.
Heard on there, but 6 of the 6000 and cylindrical cells that go into every endurance. Our goal is not to have of human Tan touch those so that that of course dramatically starts to lower your cost and we know all of this upfront we know aspirational. The we wanted to get there. We're pleased that we are on course to do all of that so while we don't talk.
<unk> about our Bom I think electric vehicles are going to be.
Less expensive than anybody dreamed going forward here over time, because the supply chain is ramping up right. It floats all boats when.
And when somebody is making on the electric air conditioner for some of its going to do.
Yeah.
And.
Gasoline and trucks, but it's an electric air conditioner, So we get to use it as well so even gas trucks don't like to have a fan belt with the.
Uh huh.
Compressor on it any more of like the old day, So all of the the supply chain moving towards electric as it starts to become more and more kind of generally known that everything now that the number 1 vehicle and the planet.
Is going to electric it's even it just moves the needle. So we tried to control of everything we can that's unique to us, but we buy a lot of stuff and even the sales of course I think everybody is aware of that sales continue down we're working on our own sales even that and lots of people are working on their own sales for 3 or 4 years down the road.
And they're just coming down theyre getting safer, they're getting more dense and they are coming down and price. So everything's moving directionally. The right way you know I've been in businesses, where things are moving in the opposite way, but here of price wise quality wise the number of choices, we have and some of the components.
Everything is moving Directionally correct, I mean, the electrification of trucks.
As is happening and in America.
And I forget Harry.
Those numbers the site, where pre COVID-19. So it's really not apples to apples to where we are with the industry supply industry.
Industry wide supply issues. So the comparability is difficult at this point, but you have to yeah, I hope that kind of level out.
And so as we've seen and that's going to subside.
No totally I mean, so out of high level than maybe the bonds of a little bit higher now do you do you think about the mid decade bomb materially different from that 37000 number that you've given pre COVID-19 and it does seem like.
Since our pre a lot of these issues.
Yeah mid mid decade and of course again, what we're doing with our motors and power electronics that run those the big cost and the in electric vehicle or the drivetrain and the battery of course everything else is.
Not too far from of conventional vehicle.
Especially now the conventional vehicles are used and things like electric.
Air Conditioner so.
I think it's going to be better than we forecasted, but that's just kind of globally looking at the way of the world's going again, what happened last week really changed that was a watershed moment.
And we think it's just going to be 2 full size of electric trucks for awhile for years to come here and.
And we're right with them competitively price wise.
So.
And the temporary increase from Covid.
And everybody even gas vehicles of all increased their prices. This year. So when you think that will subside over time, we don't think it's going to have a long term, but I think a much bigger driving force and that the temporary issue of that is.
These tier 1 suppliers, there's just more and more of them and.
That that creates a horse race and their work you know they're competing on price, we're doing as many of electric vehicles as anybody and the truck space. So.
The old model, where somebody was making.
The $1 million gas vehicles.
But theyre, making the same number of electric vehicles and us at level of levels of play of Plainfield a lot.
Yes, no understood that's helpful and if I can just ask 1 more of like obviously, the cash burn and picked up a bit. This year can you sort of potentially provide some color on how we think about free cash flow breakeven just in terms of units or how we think about where volume need to go for the company to start.
Generating free cash flow given the cost structure, given everything that's going on right now.
Yes.
Remember to keep this heraeus Carter and to keep this in context.
We do believe the phenomenon with the supply chain is temporary so.
We're not ready to give an update on a specific breakeven target, but we don't think it necessarily differs from what we had originally thought going into the plan because we believe this will subside.
Okay that is helpful. Thank you for clarifying that that all of the.
<unk> from me Tonight, Thanks, Scott Thanks.
Thanks, Eric.
Thank you. Our next question comes from the line of Adam Jonas with Morgan Stanley. Your line is now open.
Evening, everyone. First question is regarding preorders I believe the last update was in January and early January when you.
Sure. The over 100000 preorder milestone can you provide an update of where we are today.
Yeah, Hi, Adam this is Steve.
I think we articulated that that was a nice round number and now that the betas were out we were stopped at the 100000 and we are converting folks over to what we call now vehicle purchase agreements I think last time, we announced we had 2000.20000 of those are so that's up to north of 23000 and I think.
These are although still can't be order orders because of we don't have the vehicle done and through regulatory out you are not allowed to take orders, but they have a lot a lot stickier things some of them have downpayments and them as we get close when we got to start spending the money to make make the vehicles we are.
We are demanding down payments things like that so a lot more teeth and the old days.
Tom Tom can he was telling me I'm, a little low and 23000, it's really around third 30000.
Okay.
And and those that 30 that around 30000 and they do.
<unk>, some form of a down payment or some of them day.
Most of those all of the new ones do.
And when we get I think it's with them when we get 90 days from building right. Then downpayments do write that takes the onus off of us to buy those parts ahead of times and.
More of a.
Our conventional.
Model.
Okay. Okay.
And just a final 1 from me Steve you know, it's a question on providing adequate capital.
So the company, while recognizing the strategic value of your assets the plants your tooling your market position right. The time to market all of the things you mentioned.
And so I guess, if the goal is the AD ballast and resilience of the company. So that you can ramp efficacious Lee.
And be a strong financial partner that Youre <unk>.
Commercial customers would really rely on you to be to see them zero right for these work trucks would you consider strategic alternatives, including potentially of sale of the company.
As a mechanism to bring that capital and and crystallize that ballast.
Well it is it as you know we're in a very capital intensive business. We think we do a great job of.
We're trying to do this for the least amount of capital of anybody's ever tried this before and again getting to the milestone of crash test you just don't see the the 50 vehicle companies that have gone before us that didn't make it it's not because it wasn't demand for their product, it's because they couldnt get this far so we.
I don't think we've ever considered selling the company, but we are in discussions with a few strategics large strategic.
And investors that of course would bring something a lot more than the and funding, but we do want to be known as obviously it helps float all boats. If we are strong financially right. So somebody buying archrock knows we're going to be here to service. Some somebody realizes we've got the wherewithal to test these appropriately which.
We have with or without financing, we're not putting anything out that isn't.
Bent on 5 star, maybe the safest pickup truck ever into the wall and.
Enough durability testing that we're all confident.
Of how good this is and as we start to get folks like the army looking out at the.
And it's starting to be apparent that.
The the hubs the hubs motors are very very good for motors of course is always better than 2 and so the superior traction thing we have the simplicity. We have we're starting to get now that we're at beta we're getting people are starting to realize what we're talking about here and so you know.
We continue to evaluate the strength.
And what capital is available to us the ATV and for example.
I think it's fair to say this this is just my personal feeling there would be no Tesla.
They didnt get that early <unk> loan right and it was a big 1 and then they paid it back early and it's a huge success for the ATB and program and Thats. The best money you can get right. It comes with the pedigree of the Doe.
Doing diligence on you just make sure your technology and your market and your everything is good.
And it's very good price of money.
There's other things out there not as good.
But.
In addition to.
Obviously government vehicles, we're going to start going <unk>.
Electric we want to be and government buys a lot of trucks, we want to be right in there and theres a lot of.
The obviously the $7500 tax rebate instantly is great for our customers.
Carbon credits are a great way to get us off the ground, but there is a lot of.
Of government help as well so we're investigating all of that constantly about the about evaluating it.
Adam just directly right. So we have no intention of not being and automotive OEM. There are a lot of ways. We can take the facility and different ways. We can monetize it but right now our plan is still to be and automotive OEM, but we will do everything possible to maximize shareholder value and we will look at all opportunities, but right now of the plan is to remain to be and automotive OE.
Yeah.
Adam I think of all the people you probably you know we feel like we are.
There is nobody going to come to market soon with the full size of electric pickup truck right. So theres no small companies coming behind us.
We had a big announcement last week the brought the whole thing mainstream right. The number 1 vehicles going electric the.
And the other people that make gas pickup trucks have not shown their card yet timing wise so the.
Sal and we're going to be the only to electric.
Full size pickup trucks on the market for quite some time.
No.
Selling is not anywhere and our vernacular.
Thanks, Dave.
Okay Man.
Thank you. Our next question comes from the line of John Lopez with vertical group. Your line is now open.
Hey, thanks very much.
I had 2 if you don't mind, the first 1 and I'm, hoping you can maybe just level of status because theres been a bunch of changes and the metrics you guys have offered these last few months.
So number 1 what are you viewing as the prior 2021 production target and.
And the commentary you've made today about production.
Is that only in a scenario, where you are unable to get funding its sort of reads like you're cutting production. But then you also introduce the caveat. So could you maybe just talk about this a couple of dynamics for a SEC.
Sure John.
First and foremost I just want to be clear and.
Maybe we Werent Super clear.
We are we're saying look if we don't get any funding, which is not and our.
Thought process, but if we don't it's always good to know worst case, we might only make half of what we were going to make before right. Obviously, we don't want to do that with the with a strong <unk>.
<unk> type by customers for the vehicle and to be again, we're really first mover advantage has proven to be.
Very very important and and new technology like this so we intend to bring capital in and and.
1 or more of the various ways and strategic.
<unk> is really attractive to us as well, but we fully intend to capitalize ourselves such that we can make our milestones and just for.
To refresh your for 2021.
We are at 2200 vehicles 200 endurance.
The van won't come online until next year and so we are.
And we're only talking about this year.
And for most things so.
So and simple math, we're going to be about 1000, if we don't get any funding.
Okay understood sorry, just on the other side of that if we see and announcement from you and the next little bit that you have secured funding and then we just sort of instantly assume youre back to the 2200 and vigor.
Correct correct.
Okay got you and that helps and then sorry, just isn't and adjunct I guess to that.
Does any of this do any of these perturbations and maybe the second half of this year did you hear of any of the knock off effects onto what you were anticipating to produce for like 22 of 23.
And I'm not quite following the other John I'm sorry.
I'm, sorry, I'm just asking.
Your line outside of volume target for next year John.
Exactly what I'm asking is if you make any adjustments to your 2021 production does that knock off to what you could do and 22 and 'twenty 3.
And then it really depends on the timing of the financing and and how quickly we can secure.
We're not ready to update 2022 numbers right now and until we go and.
Check out those different sources and opportunities and see what we can potentially raise and I will update you as soon as we can.
In short order and in and let you know what we think we can secure and then give you a more robust 2022 forecast update.
Okay understood. There. Thank you sorry, the second bucket or sorry, My second question and I guess that was all kind of 1 question.
The second 1 is just and I guess your assets a little bit before.
Maybe I'll try it this way.
Given how far above where you thought 2021 spending was going to land can you talk to us even just directionally about what 'twenty, 2 and 'twenty 3 spending look like have you front loaded.
Typically more of what you expected over a multiyear timeframe or does this kind of a new base from which we have to think about the next few years layering on.
Good I'm going to let rich jump on that but just as an example, right the.
We're building a huge battery pack facility here right.
And we've said I think it's going to be second largest and the country when it's fully up and running we're doing that.
And anticipate because you just can't move quickly right.
So, let's say, we get the funding and now we say okay now, let's do everything we thought let's even do more of the next year. If we can so we are continuing to keep our powder dry we're trying to I think thats the question Youre asking.
And the up the increased spending.
We're trying to keep our head of our cake and eat it too that if we have to pull the lever for.
And for funding and slow down a little bit it doesn't.
Preclude us from.
And doing what we want to do once the.
The funding is there right so or some clarity that we should put.
On a full speed. So we just don't want to handicap ourselves and if we can and it's not a perfect science, but we are trying to maintain the big stuff with the long tentpoles the long lead items.
Like building out of battery factory.
And we're continuing down that road, so that we are able to execute and what we wanted to.
So.
Answer to your question pretty quick John because of the timing, but most of the 20 most of the 'twenty 2 plan as the capacity tightens the already for the 30 thousands of the battery most of the hub motor to body shop, the paint shop and General Assembly is already tooled for that where we've cut back the tooling cost is mostly the body shop and stamping and so we go to more of a curve sets of software.
So we will have to go hard tools.
It would be most of that cost of the frames and the frame line and.
The body shop, and the standard shop is where we have to add the hard tools too so that would be where the increase will have to come in 2020.2.
Okay. Okay. Thanks for the thoughts guys I appreciate it.
Thanks Kim.
Operator, do you have any more but.
Okay.
Our last question comes from the line of Ben <unk> with Baird. Your line is now open.
Hey, Thanks, guys and thanks for going over I appreciate it.
Just on the battery strategy could you talk a little bit about you guys mentioned, maybe bringing sales in house and.
And how you are evaluating.
That decision.
My second question is just on competition going back to some of your earlier comments, you mentioned to your truck and someone else's out and the market and I was just.
And wondering how you think these on the go forward, but I wonder how are you.
The segment revenue and who has become the market as well as Tesla come in the market in that group.
Okay.
Okay.
And then and then.
And just finally, I guess, you've posted strategic 14 times.
And so I was just wondering for.
What strategic means to you all.
I think the quick grants would be like and OEM.
Should we like cast our net.
Broader than that as we think about what the strategic investor would be.
Thanks.
Well I think youre on the right track there, but it can be many things a lot of people.
Our in this business that can help us and <unk>.
And on capacity and.
So when we say strategic we're not thinking it's not kind of tangential, it's a direct bank.
Thing for us as far as help in addition to money. So it could be many things it could be engineering could be.
Yes.
A lot of parts, we have of GM parts deal, which has been and valuable to us.
And we just learned that from that experience. We have learned that maybe we don't do everything by ourselves and.
100 years of automotive out there and.
Maybe we should.
The.
If somebody is interested in investing and bring more of the money sometimes it's true.
It's worth way more than the money on the when I talk about first mover advantage and there will only be 2 of us im talking strictly about a full size work truck, so really and from what I understand is a mid sized truck geared towards the adventure market.
And and Tesla cyber Chuck.
We're not sure what market is it's aimed for but I don't think its for the worker. So.
That's what I mean by the.
And then I'm going to let John Baugh here.
And kind of talk to you a little bit about our battery strategy. If that's okay.
Thank you very much.
Yes. This is John Baugh.
No.
For the of battery cell.
We are conducting research and development on that just like any other serious OEM would have to do.
And we look at our story from Tesla Motors and they have all of the strategic partnership with Panasonic, LG and Samsung and pretty similar to the dam, we have that but the same time and anticipate what the supply demand right and the future and everyone know that the the man for the batteries.
And much much higher than what the supply and can produce so.
We anticipate that we are not going to be exception for that so that's why we have to.
And Thats the way some of the shortage and we.
Starting the research now for that now and.
The couple of years out of well, we don't have a problem.
Okay got it thank you guys.
Thank you Beth.
Okay.
Thank you, yes, and no further questions I will now turn the call back to Steve Burns for additional remarks.
Thanks, operator, and I really want to thank everybody for I know, we went a little over here, but this is the car business and we're at startup car business. So it takes a little while the explain.
I think from our point of view from management's point of view.
Of course, we don't like cost overruns.
And we don't like supply chain, that's bouncing around a bit but that's just part of this business. What we are extremely excited about is strong demand for our product.
And it's been validated now.
And last week's announcement was basically archrock at our price points and.
That's a big move to <unk>.
Take the number 1 vehicle and the in the country and turn into electrics, So really we.
To be this close to production to be first and that highly competitive marketplace and I hope everybody can appreciate why.
So excited margin entering into the U S pickup truck wars right. It is fierce fiercely competitive we're coming in with the 75 mile per gallon.
Centrally of pickup truck that gets that kind of.
Fuel economy, so that is a that's a game changing moment so.
And the big if I were watching us.
And trying to figure out if we are on course.
As we navigate this to be this close again, our guesses are getting better as we get closer to production you can't.
Since were cutting new new teeth here of new path and nobody's ever cut before.
We've been relatively close.
And the crash test right, if we had been really.
Sideways on that crash tests, it would set us back so that is to us the.
The largest gating and element, we have passed it and and so.
So I think that should help dial in and whats the execution risk of us actually getting there so and thank everybody again for being on the call and we'll talk to you soon.
Everyone.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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