Q2 2021 Canoo Inc Earnings Call
[music].
Greetings.
And welcome to the <unk> second quarter 2021 earnings Conference call.
At this time all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation.
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As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host come all humming.
Thank you Sir you may begin.
Welcome to Canadian second quarter 2021 earnings conference call. My name is Kim I'll comment and I'm, the VP of Investor Relations at <unk>.
Today I have with me, our Investor Chairman and CEO, Tony Aquila, our new President Joe is that she Ryan interim CFO for an auto gieger and newly promoted SVP finance and Chief Accounting officer rematch Murphy.
Tony will provide an update on the progress we have made since our last call on the topics. We report on every quarter and Jos that will provide a glimpse into her mandate.
Not on the rematch will then go over our second quarter financial results and turn it back to Tony will then provide closing remarks, well then open the call up for questions.
Before passing it over to Tony I'd like to provide a recap on our recent Investor Relations day, which took place on June 17th just two weeks before the end of the quarter, we had more than 800 online and in person participants.
They provided a first glimpse of the new ecosystem in person attendees participated in vehicle test rides and got to speak with our team leaders across the business attendees also learn more about our technology and engineering and we're able to see all of our vehicles in person.
For those of you who may have missed the IR day is that I encourage you to watch the replay which is currently available on our website and on you too.
I've been an investor relations for more than 25 universe and participated in many analyst days the level of interest we saw in June, especially in a pandemic impacted environment was amazing and it reinforces that people are very interested in our product and that we are on the right track.
Before I turn the call over to Tony I'll take care of a housekeeping item and read our forward looking statements.
Please be advised we may make forward looking statements based on current expectations. These are subject to significant risks and uncertainties and our actual results may differ materially.
For a discussion of factors that could affect our future financial results and business. Please refer to the disclosure in today's earnings release and on our most recent Form 10-Q, and 10-K and reports that we may file on form 8-K with the SEC.
All of our statements are made as of today August 16, 2021 and are based on information currently available to us except as required by law, we assume no obligation to update any such statements.
During this call, we'll discuss non-GAAP financial measures you can find a reconciliation of these non-GAAP financial measures to GAAP financial measures in today's earnings release, which can be found on the IR section of our website.
With that let me turn the call over to Tony.
Thank you <unk>. Thank you everyone for joining us today before going further I want to thank the <unk> team for their hard work and dedication, especially during the resurgence of the pandemic.
As to the effects of the pandemic, we continue operating with a conservative stance early on we adjusted our projections because we believe in under promising and over delivering.
We've pushed back the full return to office at our Torrance facility, where we are complying with ongoing county restrictions on in person work. We continue to operate remotely with limited onsite presence in Torrance.
That said the geographical diversification of our workforce that we announced in our prior call has allowed us to maintain in person operations at different levels and at different locations.
We have also limited non essential travel.
Further the industry as a whole has been impacted by supply chain disruptions for material shortages or vendor delays chips.
Chip shortages have been one clear example of this disruption but.
But we have reduced risk and alleviated impact to our S O P.
We have previously consolidated.
Our electrical architecture into a narrow set of controllers using fewer chips less parts. Overall means we believe we are less exposed to global supply chain disruptions.
Overall, our sourcing team is in close communications with suppliers to address potential bottlenecks as we continue to make the precautionary adjustments and create mitigation strategies to ensure we're on track to reach S. O P. In Q4 of 2022.
To put it into context, we now have 40 people in supply chain procurement with decades of experience, which support our drive to delivering on SMP in Q4.
We will continue to monitor the situation and keep you updated to any material changes.
Before I update you on the quarter I would like to highlight some of the key global developments that are accelerating the shift towards electrification and will benefit our strategy of evs for everyone.
Mercury tightening access to productivity for hard working families.
The U S infrastructure spending bill, which passed in the U S. Senate will allocate 73 billion to power grid improvements and $7.5 billion to EDI infrastructure.
Recently, the European Commission proposed requirements.
55% decrease in new car Cotwo emissions by 2030, and 100% decreased by 2035.
The proposal also included mandates for ESG reporting requirements in effect.
This means that more than 13 million vehicles sold annually in Europe alone, we will need to transition from internal combustion to zero emissions by 2035.
Yeah.
On July 29th Congress introduced a tax rebate of $2500 for the purchase of used electric cars.
Resident guidance August 5th Executive order aims to make 50% of all new passenger cars and light trucks sold in 2030 zero emission.
This would impact more than 10 million vehicles sold annually in the U S.
We applaud Congress and the Biden administrations rollout of domestic policies to support the economy.
American innovation is helping lead the world to a zero carbon future, we need and look forward to continued support from Congress and the White House.
We are clearly at an inflection point as governments accelerate efforts to establish carbon neutral targets.
Now I'd like to introduce just said Sharon.
As many of you know just said brings a wealth of operational experience at a global scale.
Or do you just said.
Thank you Tony it's great to be with you on this call and I look forward to meeting many of you over time.
Joined the containerboard last year and have not been asked to take on this for all by Tony.
Working alongside him and the team I've come to appreciate their achievements and I am honored to join <unk> mission to bring electric vehicles to the heartland at.
But our purpose built for working men and women.
For those of you who don't know me I've worked at the intersection of government business and stakeholder partnerships at a global level as U S trade negotiator and leading the state Department's economic energy and transportation work.
Great pride in negotiating protecting and empowering U S industry and innovation.
And leading the world food program, we successfully transform the effectiveness and efficiency of the world's largest humanitarian logistics and supply chain and the entire food aid system.
The Revolution in mobility has the power to transform wholly economies.
Net zero economy simply cannot be achieved without transforming the transportation sector.
This is the time when electric vehicle adoption can happen at scale and be a leading force in building a more sustainable future.
It's only been a few weeks since I joined as president of <unk>.
I already relocated to Texas.
Diving in with Tony and the team here at Cowen.
One of my mandate is to enhance sustainability and ESG Foundation.
As mentioned in our recent press release, we've received a double a ESG rating from MSCI and I look forward to building upon us.
We are focused on scaling <unk> working to build alliances and develop our business to expand our reach as we get our easy Apple Road I'll hand, it back to Tony.
Thank you and welcome aboard.
You will be hearing more from just set on future calls as we continue to execute on our strategy. We told you we were focused on meaningful news or no news with.
That in mind, let me update you on our second quarter reporting.
The team is focused on executing our business plan to reach the startup production on schedule with the lifestyle vehicle.
In late 2022.
We have awarded two significant contracts that we shared with you during our Investor day first our phase one contract manufacturing with med car.
We ran a comprehensive selection process to reach this strategic decision, which provides us with an expanded geographic footprint from both an end market and distribution perspective.
As part of disagreement we expect to deliver 500 to 1000 lifestyle vehicles in 2022, and 15000 lifestyle vehicles in 2023.
Ned car has an experienced and proven team running one of the top rated plants.
Supporting Bmw's mini program amongst other major Oems.
The video group will not only serve our initial launch into North America, but later will serve.
As our launch point to expand into EMEA.
Joe set and the team will be working closely with them to ensure alignment across our ESG sustainability commitments and to mitigate any gaps.
Further the framework, we have established with Ned car will allow us to increase capacity from 15000 to up to 25000 units in 2023.
And now that our go to market team is kicking off we wanted to secure additional capacity.
Second we are also.
Announced phase two of our manufacturing strategy selecting Oklahoma as our partner.
This two pronged strategy is important for a few reasons.
As a new OEM working with Ned car will allow us to refine our manufacturing process, while augmenting our production expertise, which will be deployed in our Oklahoma manufacturing plant.
It will allow us to geographically diversify our manufacturing operations and position us to increase our commitments products and volumes to adapt to changing market demands and build flexibility in distribution.
The state of Oklahoma has committed approximately $300 million in non dilutive financial incentives to support our facility.
Approximately one third of the incentives are anticipated to come during the first 36 months.
So I'd like to thank the.
The people of Pryor, Oklahoma Governor stick, the principal chief of the Cherokee Nation, Chuck Pushkin Junior.
The Chief administrative officer of mid America, Industrial Park, Dave Stewart and his fantastic team.
Our manufacturing facility will be located in a historically significant place a beautiful location that were really excited about as we build our facility. We are committed to preserving the nature the beauty.
And the land.
This is the former site of the Oklahoma Ordinance work.
Facility, where tens of thousands of workers produced munitions during World War II.
The mid America Industrial Park has attracted the presence of seven Fortune 500 company.
This includes Google and Dupont.
In part through its continued investment in education.
And workforce development.
We are privileged to build our vehicles on this site in the great state of Oklahoma.
We have been honored to learn more about the people of Oklahoma and have been inspired by the NEDA Merit Native American residents connection to the land.
While the world is now shifting to tread softly on the environment their communities have always done so.
We look forward to working closely with them to build a facility and product that is sustainable and reflective of our shared values.
We are currently targeted to bring up to 2000 high paying jobs to our facility with a goal of hiring at least 40% of the workforce from the local community, which consists of native Americans and veterans.
Launching this facility in the U S is good for Oklahoma Good for America.
And it's the right thing to do for canoe.
We are in the final process of selecting a construction manager.
Architect engineering firm and more multiple high quality providers are bidding for these contracts and there is a potential that we will select one in the coming quarter.
We can then start to provide updates on our construction progress.
Now let me provide you an update on our progress towards production through the end of the second quarter.
At IR day, we had announced approximately 500000 miles of beta testing and as of June 30th we locked engineering and design to commence our gamma builds.
We have also sourced 87% of components compared to 74% in the first quarter of the year.
And excluding bulk material, we are 95% sourcing complete I would like to point out. This accounts for all complex components with the exception of batteries and we are targeting to make a final selection of our battery partner in <unk>.
In Q2 Pizza <unk>, our CTO and his team have completed engineering design for 67% of the lifestyle vehicle components and have moved those into tooling.
Our gamma phase is now in progress to put it into context. This phase includes comprehensive testing and final validation.
It will consist of 300 to 600 vehicle tests, including crash testing and certification.
We're also dedicating at least 10 to 15 gamma properties for vehicle durability validation, we will start the countdown to S. O P for our lifestyle vehicle when we enter the fourth quarter of this year and I look forward to introducing Pete to these calls.
As we give you more detailed information in the coming quarters.
Turning to our go to market and sales pipeline. During IR day, we said that we are starting go to market and.
And we are advancing our sales funnel in the second quarter, we opened preorders for all announced vehicles or consumer response to date has been organic.
Preorders for all vehicles have come from across the United States, which tells us that our vision to bring evs to everyone. Resonates we have seen the highest levels of interest from California, Washington, Texas and Florida.
We are also seeing numerous inquiries from the EU and Asia.
On when we will be opening up preorders in the region.
And we will provide updates at the appropriate time.
In the coming quarter, we are accelerating our go to market strategy. According to plan and we are expanding our sales and marketing team.
Moving on to our sales funnel as of June 30, we have engaged customers with buying capacity for approximately 500000 vehicles.
These customers are qualified for our product and the timing of product release, we define these as stage one opportunities in.
In stage two of our funnel, we have surpassed 9500 refundable non binding preorders for our announced vehicles.
The final stage or stage three of our sales funnel includes a binding contract with a nonrefundable deposit and we will begin reporting on these at the appropriate time.
As we have continued to make progress in human capital in the face of a tough environment. Our workforce increased by 230, 656 total employees compared to fourth quarter 2020, or 54% increase.
In the second quarter alone, we added 112 associates or up 21% sequentially.
Our total engineering head count grew by 23% sequentially. We now have over 480 hard hardware and software engineers, comprising more than 70% of our total workforce more than two thirds of our hiring in both quarters was.
Focused on engineering.
For sales and marketing head count increased by 31% compared to the prior quarter as we ramp up our marketing efforts.
We added key executive hires in human resources.
<unk> data security sales and design, we will go into this deeper when we report on our third quarter.
We continue to build out or just an office with additional general and administrative and sales and marketing associates.
Spite this challenge of Covid, we continue to bolster our team with the right people to execute on our key initiatives.
You learned about our vision for our App during Investor Day. It provides an asset management solution for every vehicle owner, which we believe will create value for our customers and in turn help us develop a strong and loyal customer base.
We are building an entire business unit around this ecosystem, which will drive customer experience with data and software.
And our App will work for all vehicles, whether it's a canoe or another OEM in your driveway. It will give every vehicle owner family or fleet owner the power to manage all of their mobility assets quickly and efficiently and opens doors for additional savings and value.
We're here with American innovation to bring Evs to everyone.
With that I'd like to turn the call over to <unk> and Ronaldo to provide details on our financials Renato.
Thank you Tony.
Our second quarter of 2021 results are as follows research and development expense of $57.6 million for the quarter compared to $14.6 million enterprises with period.
Excluding $8.5 million of stock based compensation research and development expense was $49.1 million SG.
SG&A expense was $44.6 million for the quarter compared to $3.4 million in the prior year period.
Excluding $17 million of stock based compensation SG&A expense was $26.27 $6 million.
GAAP net loss was $112.6 million for the quarter compared to our GAAP net loss of $23.2 million in the prior year period.
GAAP net loss in the second quarter of 2021 included $8.2 million noncash loss on the fair value change of earn out shares liability related to the periodic remeasurement of the fair value of our contingent earn out shares liability.
Adjusted EBITDA was -76.7 million for the quarter compared to minus $17.7 million from the prior year period a mesh. Thank.
Thank you Donato.
Turning to the balance sheet and cash flow.
Ended the quarter with $563.6 million of cash and cash equivalents.
Cash used in operations for the six months ended June 32021 was 108.8 million compared to $42.3 million in the prior year period.
Capital expenditures were $28.7 million for the six months ended June 32021, compared to $1 million in the prior year period.
Turning to our guidance.
For the third quarter of 2021, we anticipate the following expenditures.
Proximately 75 million to $85 million for operating expenses, excluding stock based compensation and depreciation and approximately 45 million to $55 million for capital expenditures.
Additionally, in the fourth quarter of 2021.
Expect to draw down $40 million of the $300 million in incentives to support our Oklahoma construction.
Before we open the call up for Q&A I'll turn it over to Tony for closing remarks, Thank you Ramesh.
We are encouraged by the regulatory tailwind and the heightened public interest in Evs, we've been investing in the right team to execute on our key initiatives as I've said before we're focused on big news or no news will continue to update you on our progress and our achievement.
Which have positioned us well on our account down to S. P for Lv in 2022.
We would now like to open the call for Q&A operator.
Thank you.
He will now have our question and answer session.
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One moment, please vote now poll for questions.
Our first question comes from John Murphy with Bank of America.
Sure.
Good afternoon, everyone. This is aileen Smith on for John can you hear me.
Yeah.
Yes, we can hear you.
Great first question on the 95 under Refundable Nonbinding orders is it possible to disclose the breakdown of those vehicles between the lifestyle or the all the orders between a lifestyle vehicles, the multipurpose delivery vehicle in the pick up.
Just trying to get a sense for how much is comprised of the lifestyle vehicle that that's closer to production versus the M. P. D D where demand from customers in that segment and competitive efforts are clearly heating up.
Hi, Okay. So this is Tony.
So the right now the current breakdown is we have a heavier percentage.
Trucks.
And the.
Than we do in the lifestyle vehicle if that's what your question is and it's it's you know.
1500, plus on those units.
But we're in discussions with.
Various parties regarding that those units, but that's that's the breakdown today, if you're just focusing on the L. B.
And we haven't gone out.
Yeah, we have thousands of them obviously in the here actually I just got the exact numbers.
So on <unk>.
<unk> thousand 542.
And those have been filtered. So we're now filtering through the 500000 now because we're just getting the go to market up.
And we'll start increasing that and these are of course, just all organic numbers at this point.
Got it so, particularly I mean, let's call it the business to business segment.
May be serviced by the multi purpose delivery vehicle and thinking about those customers that tend to order larger fleet size and when do you expect over time on in order to stay at that but it should be increasingly comprised of the M. P. D D, where youre going to have kind of sticky or bigger contracts that come through.
Yes, so as you saw at IR day.
And there the small package delivery. The reason why these are just organic.
Consumer centric orders that are in there that I just gave you the number on the.
The the fleet element ones.
A much larger number.
And for so because you have you have kind of delivery vehicles in both the Lv and in the NPV right. So one is large package one small package. So we havent announced any of those yet because we're in discussion with those accounts because we want to obviously get them.
Right into to <unk>.
And hopefully shortly thereafter into three end of that.
I think we have north of 4000 units already you know and again keep in mind. This is like Q2, there's a couple more weeks since IR day that we're reporting on here. So obviously theres a gap from where we are today.
Got it that's helpful.
And then when we back out stock based comp I think we got the operating expenses of $78 million in the corner, which is similar to the range that you're targeting for three kill everything about the cadence of operating expenses ex stock comp honestly cheeky without someone kale and it also came in a bit higher than the target you established last quarter. So as you see.
Radically getting closer to start up production Youre locking down your battery supplier among other activities why would operating expenses be flattish on a quarter to quarter basis is that just a function of timing.
I'm trying to get a gauge of how to forecast opex, especially into 2022 and what may be the appropriate exit rate from this year.
Yeah, I'll have I'll, let the mesh grab this one here with you but we.
We are on target there was just a swing in depreciation, but maybe you can give a little more color yeah. Yeah. So opex as you know as mentioned in our Q3 guidance, we are at $75 million to $85 million.
That's the way we kind of project at this point you know we are now into our gamma stage, and then kind of get down to production.
So.
A majority of our Opex consist of R&D cost related to engineering and design. So as you kind of move closer to gamma its us.
More involved in relation to the production base. So hopefully that answered the question as to why it kind of goes all the way, but we are on plan for Q4.22.
Great Great. That's helpful color and one last higher level question. If I may I. Appreciate you, giving us quarterly outlets are reporting and also that the world and your business remains very much dynamic.
But a lot of us I mean, I think community are trying to assess how many of the developments at the company more recently translate into financial opportunity in target versus those that were provided last year by the former management team.
From a visibility perspective, what developments would you need to see at the company or milestones that you would need to reach to start providing some longer term financial targets.
So we operate a very conservative model and you know the last public company that I founded and ran we didn't miss revenue for 34 quarters.
I think until we get our go to market really.
Starting to have a little more maturation, because remember we focused on building real product.
That's our model right. So so we really concentrate on the.
The focus of getting the real IP in place getting making sure we have the right segmentation and making sure we have the right design and so now we're putting in the go to market piece and I think my goal would be.
Within a quarter or two we can start to give you some.
Higher level views, what what we see for 2023.
And beyond.
But.
If you take the conservative approach you know and obviously this the comment we're making about adding additional capacity we are seeing positive signs so.
But if you will just because the environment has been so euphoric.
In the industry, we want to be.
Under promising and over delivering here if you will in the prior management team I really can't speak too much to what their vision wise other than we obviously revised it down and as you saw environmentally a lot of new guys advice revised it down so I think we took in.
Do affect also the Covid, we had some advantages the prior team didn't have because we could understand.
<unk>.
The impacts of Covid, we had made a lot more progress on purchasing and vendor management negotiations and.
We've saved compared to their program costs.
Hundreds of millions of dollars.
By Reconfiguring to use <unk> in the process, we ran and so on so I think.
You've got to put all that into context and give us a couple more quarters to really let the new team kind of print. It's if you will print on what we're going to do.
Absolutely understood. Thanks for taking my questions.
You bet.
Thank you.
Our next question comes from Craig Irwin with Roth Capital Partners. Please proceed with your question.
Good evening and thanks for taking my questions and just start I should say.
Congratulations on getting it the camera that's a nice milestone to.
Steadfast.
<unk>.
Tony I wanted to ask kind of a big picture governance question right. So one of your former employees.
This past couple of months.
Went over to Apple to take a senior leadership role.
On project Titan.
And you know the same reporting that noted that seem.
Seem to confirm.
Yes.
Beginning of last year.
There might be some conversations between canoe and Apple the more recent reporting saying that there was there was actually an informal acquisition offer.
Can you just describe for US how you would you would handle.
These M&A type conversations at the board level.
What would constitute an.
And offering.
It would need to be disclosed to shareholders.
And how have you talked to at or have people at the company talk to Apple maybe in the last six months or our last year.
So look first of all.
To your point about what would it take I mean, obviously, maybe you know this maybe you don't but.
I've done.
North of 70 plus deals.
Yes, Sir.
<unk> 20 billion.
And value.
And we returned 20% plus annually.
Return on capital. So we're very focused on that but at the same time. We're also.
We're not trying to make quick money here. We are building as you can tell the foundational stuff, where we're laying and if you compare our head count where our head count is against the new entrants in that foundational stuff we've done in the IP we've created.
I think it would show that we're very focused on the long term, however that said I mean.
I'm, the chairman of the company and I want to do what's right for shareholders. So to the extent that I see something that's super accretive.
Accretive.
That has the long term value principles, obviously, I would entertain it I've done it before I have a track record of it. So there is no question of that and we have a very good board lots of experience in this area.
Served on special committees and so on so we understand that at the same time.
I think we're also pretty astute negotiators.
And we do it for the long term as henceforth we saved hundreds of millions of dollars in the program.
And.
We'll keep our eyes peeled with respect to your comment on Apple I really don't have a comment.
And the reason is we just don't comment on those type of discussions.
But obviously I'm focused on deals that would be accretive long term to the company.
And it doesn't fit that then why would I do it I'm not interested in just pumping out news.
And not doing what's best for the long term shareholder in the company, it's tough to serve short term shareholders.
So that's the principles we guide by end.
We're looking at all things, we have many dialogues going on at any given time.
And I think if you get a chance Craig you really need to come down and see what we've done.
Yes, I am looking forward to that and that that response was perfectly rational I definitely appreciate that.
Tony.
You guys are obviously very excited about the vehicles that youre in final testing.
Yeah.
When do we start to see them more.
Sort of in the trade press already public.
Do you feel that that is.
These vehicles are.
Ready for.
Some of the some of the big events out there like sema or penalties and things like this.
Do we do we start to see a presence at the auto shows.
What's the what's the sort of big picture publicity marketing plan, that's going to help the public know exactly what kind of your mix.
Yeah look I think again.
Obviously being a very long term permanent capital kind of minded person.
I don't like over Hyping things as you have as you have learned.
We do want to create the element of surprise, it's the best thing I can do for long term shareholders, because they will and we will.
Teach people not to short our stock.
And we're very focused on creating long term value and those events are great for long term shareholders. When you do that but we will be it shows we're in gamma or so naturally we will be that will be very targeted.
We're focused on.
If you will.
<unk> Big news or no news I mean big deals are little deals, we just let happen.
And where we're going to be present in some regional shows that are upcoming without men.
Mentioning names unless you want me to.
Uh huh.
But we will be starting out there for the first shows.
In this quarter.
Yeah.
Excellent that's really good to hear thank you for taking my questions.
You bet Craig.
Okay.
Thank you.
As a reminder to our audience. If you would like to ask a question. Please press star one on your telephone keypad.
Our next question comes from Jamie <unk> with RF Lafferty. Please proceed with your question.
Mr. <unk>. Please proceed with your question.
Oh, sorry.
Good day, everybody How're you doing thanks for the update and thanks for taking my call them just congratulations on your position with canoe I'm looking forward to senior in a meeting with you in the future.
Question as far as the gamma freeze how long is that phase and are are we going to see any fleet customers testing give prototypes get prototypes of Tesla vehicle and is the current design the final <unk>.
Production design, that's going to be out in the market.
So we're going to run that phase right up until we go to manufacturing I mean, we were going to use every bit of time, we have.
We got 600000 miles on our gamma vehicles.
Pete will come.
Cover this in the count down so we're going to introduce introduced you guys the count down in Q4.
And we will be reporting quarterly on the critical points of casting and all of the comprehensive testing, we'll be doing so we'll announce that very transparently throughout the countdown.
And validation phase.
But we want to keep things as you know because one of the things. We're very focused on is just COVID-19 impacts as the supply line comes on so we've got you know we announced 40 people in our procurement side that are very focused on it we've already had to mitigate a few things and we have a very low reliance on China.
We're getting into.
Just.
In between the 10% to 15% range, we're trying to mitigate it down.
10% or below.
And so that there is even less risk.
We're trying to source everything we can in North America or allied countries that have really active and don't pose.
Swings in tariff risks than others. So we've been really focused on our financial.
Engineering and discipline as well as currency capabilities within this so I.
Hopefully that answers, how we're going to address it.
With with with respect to.
Gamma activity.
All right My next question.
I mean, some of the space some companies in our space Saar instead of relying on outsourcing and equipment from overseas.
Doing small acquisitions two to bring the supply chain and often in an era, where Tony what's your thought on that any maybe you can share that with us.
Yes sure.
So Jamie obviously, you know if you know my background, we are very.
Capital allocation, we do run that model and test in house versus outsource, obviously, we saw an arbitrage.
And getting non dilutive capital, hence forth. If you kind of look at our program costs compared to others youre going to see a wide swing of different return on capital.
Kind of going to end up with two manufacturing environments for the price of like 135.
And that will become much more apparent because it flows through and and everything.
And it also creates your geographic.
Spansion is you saw some people question why did we do this with PDL.
We did have a perspective that the EU would step up their rollout and mandate of Evs that gives us a great launching point and we'll backflow the vehicles into the U S market until and by the way we've done nothing excepted nothing organically even for <unk>.
Interests.
People to place reservations in EMEA.
And theres been quite a few inquiries there. So so look I think if you take the conservative stance approach, we're going to step through this.
And we're just going to continue to work and as you can see we're already cigna.
Signaling that we have additional capacity.
With our deal with BDO.
And of course, that's dead center of Europe.
It has the best shipping structures to get to the outside the region.
From where you are in.
And so theres good dialogue there.
In addition to that prior Oklahoma is dead center of the U S. And also has a great labor shed, hence forth what it did for US in World War, two and it's one of the best cost of living it's a top for cost of living environment, which again translates into <unk>.
Employee retention, we're thinking about long term stuff here.
And I think we are set up.
Obviously, we got a.
Get the go to market in these other pieces up and with the product.
And you've got now two abilities to distribute and by the way.
Just to be transparent I mean, we will have some leakage costs back flowing the first batch of vehicles in until we can get Oklahoma up and running.
But that cost is kind of sub 500 Bucks a unit.
Alright, and my last question any update on the contract with the video I know in a couple of days after the IR presentation. There was.
And I can update and a contract they contract as far as the scope and any or any details of our relationship with the video that's going forward well.
Yeah. So so obviously I signaled the framework is expanded to the ability to deliver 25000.
So it's progressing ahead of schedule, they got a little bit of a summer break in Europe. As you know this time of year, but I was in contact with them over the weekend, we continue to.
Okay.
Knock out everything, but Theres no show stoppers, they've got people deployed we got people deployed.
Some people are giving up their summer breaks in Europe to keep the project moving.
So we'll.
We will be announcing shortly the final agreement.
But yeah everything is coming in.
As we expect it again.
Watching what we say and.
We're saying things very clearly and just keep in mind you know everything we reported again, because we are getting a lot more done every evolution return here.
But you know what we reported is only through the two weeks after IR day.
Alright, Alright, alright, that's all that's all the questions I have thanks for the update.
Right, Okay. Thanks, Jamie.
Thank you.
There are no further questions at this time I'd like to turn the floor back over to management for any closing remarks.
Thank you all for joining us today and as always if you have any questions or any follow up please reach out to the IR team here and we'll be as responsive as we can thanks again look forward to seeing Europe down here in Dallas. Thank.
Thank you everyone.
Thank you.
Ladies and gentlemen. This concludes today's webcast you may now disconnect your lines at this time.
Thank you for your participation and have a great day.
Yes.