Q3 2021 Canoo Inc Earnings Call
Ladies and gentlemen, thank you for your patience you are holding for today's can do third quarter 2021 earnings call. At this time, we are gathering additional participants and will begin momentarily. We appreciate your patience and ask that you. Please continue to hold.
Uh huh.
[music].
Good day and welcome to your <unk> third quarter 2021 earnings call all lines have been placed on a listen only mode and the floor will be opened for your questions and comments. Following the presentation. At this time. It is my pleasure to turn the floor over to come all Hammett, Vice President of Investor Relations. The floor is yours.
Welcome to <unk> quarterly earnings Conference call. My name is Kim Mohammed and I'm, the VP of Investor Relations at noon today I have with me Investor Chairman and CEO, Tony envelope Senior Vice President and interim CFO, we're not eager and senior Vice President of finance and Chief accounting <unk>.
Officer Ramesh Murphy.
Tony will provide an update on the progress we have made since our last call.
We're not I wouldn't wear masks will then review our financial results for the quarter and turn it back to Tony who will provide closing remarks, we will then open up the call for questions.
Please be advised that we may make forward looking statements based on current expectations.
Subject to significant risks and uncertainties and our actual results may differ materially.
For a discussion of those 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 E. S E T.
All of our statements statements are made as of today 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 will discuss non-GAAP financial measures you.
You can find the 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 I'll turn the call over to Tony.
Thank you come all thank you everyone for joining us today before discussing the third quarter I want to take a quick look back at what we've accomplished so far.
We first took ownership of the past and then we focused on the present and the future.
We assembled a qualified season board with public company experience and continuing to strengthen the management team.
We refined our strategy and go to market.
And we're the first stack to rationalize our plan.
No good deed goes unpunished.
And as we discussed in our.
Our Q4 'twenty 'twenty earnings call. We are now seeing some of our peers adjust their guidance.
As part of a rebounding, we instituted public company discipline and refined our strategy to focus on maximizing return on capital and creating long term shareholder value. These included expanding our Tam to an estimated $4 4 million vehicles.
By developing three new derivatives on our multipurpose platform design.
Targeting monetization touch points to reach multiple owners across the vehicle lifecycle.
Fitting customization and over the air services and more.
Designing a proprietary asset management software platform, which will enable customers to manage all vehicles in their household.
Easy access to our ecosystem of service providers and exiting low to no return on capital businesses and prioritizing investments.
The Pea.
We have grown our IP portfolio by 144% to over 127 pending or registered patents since the beginning of the year.
Increased focused on design, a das and chassis, we will continue to prioritize IP that drive shareholder value.
Our team has grown by 87% since the beginning of the year.
We now have approximately 700 employees in 100 contractors and have strength in core areas, including engineering powertrain a bass.
He has functioned S. P N a customer journey and I T.
We diversified our footprint beyond California by adding locations in Texas and Michigan.
Opening up additional labor pool at a lower cost.
You've heard me say it before our discipline is big news, but no news.
We completed more than 500000 miles of beta testing and validation in our next big milestone will be getting gamma vehicles into the hands of our potential customers.
We selected Pryor, Oklahoma is the site of our own facility and secured up to 300 million in non dilutive incentive.
And just recently announced that we selected Panasonic, a pioneer and world class battery manufacturer as a battery supply partner.
I would like to personally thank alonge fun, the president of Pinner for his leadership and the entire Panasonic team for their support.
We have numerous suppliers and selected Panasonic because they are the best.
They have an unquestionable track record with billions of cells on the road today per Tesla and.
In our view Panasonic operates.
One of the fastest safest lines and they are serious about their commitment to being environmentally friendly.
Selecting Panasonic enables us to deliver enhanced safety and lower cost of ownership to our customers.
Earlier this year, we selected Oklahoma as the location for our own manufacturing facility.
Today, we are excited to announce that we have expanded its partnership to include Arkansas and additional locations in Oklahoma.
<unk> corporate headquarters will be relocated to bentonville, along with an advanced manufacturing industrialized facility.
Technology hubs in Tulsa in Fayetteville to support R&D, and electronics powertrain battery vehicle engineering and testing.
Software development center in Tulsa, and our customer support and training Center in Oklahoma City, California will maintain its current focus on engineering and vehicle design.
Combined these facilities are expected to employ as many as 1200 people providing high education.
And jobs in the region.
Now with these final pieces in place we will now focus on completing the definitive agreements with each state which will include approximately 100 million in additional non dilutive.
Anshul incentives, making the total approximately 400 million.
With these agreements we are targeting approximately 100 million in vehicle orders with the states and universities, where we are locating these facilities.
I'd like to thank Governor state and Governor Hutchinson and their teams for their support and commitment in championing advanced manufacturing jobs and high Tech innovation opportunities in their states.
They are forward thinking will create high tech jobs in their states within new E B economy.
I am also honored to announce that we will be partnering with the George Kaiser.
And the George Kaiser family Foundation to help in their transformation at Tulsa into a vibrant and inclusive economy, while helping us with recruiting education and diversity of our workforce.
Our thanks also extend to other great families organizations tribal nations and local governments in the region, who share and support our vision.
In light of our expanded partnership with Arkansas, and Oklahoma, We are now able to accelerate our advanced manufacturing industrialization facility in the U S ahead of Bbl Med car.
Addressing the growing demand for the Lv delivery and the Lv, which will avoid a 25% tariff on cargo vans imported into the U S. Putting us ahead of schedule.
Create a direct link between our prior factory and our industrialization facility.
And produce the L E D.
And other Lv variant on the same production line.
We will accelerate our advanced manufacturing production in the U S to begin before Q4 2022.
Given these advancements by the end of no remember, we will re prioritize our relationship with BDO Med car.
We have been focused on reducing execution risk as Europe, and the Netherlands are still struggling with pandemic inflation shipping and taxation.
As for our progress towards production, we have engineering design is complete.
And sourced.
For our Lv gamma built.
And here's a sneak peek at what we're doing in the United States with one of our partners.
Please navigate to the webcast landing page and access the video link toward the bottom left of the page we will pause briefly while you watch the video.
Yeah.
Yes.
Yeah.
Okay.
Uh huh.
Yeah.
Okay.
Okay.
Yeah.
Uh huh.
Uh huh.
Okay.
Yes.
Yeah.
Yeah.
Yeah.
Yeah.
Yeah.
Okay.
Okay.
Yeah.
Okay.
Okay.
Okay.
Yeah.
Okay.
Okay.
Okay.
Yeah.
Yes.
Okay.
Okay.
Okay.
As you can see the progress on gamma <unk>.
As our last step prior to production and we're excited to get vehicles into the hands of our customers.
And now for our financial results.
We're not them.
Thank you Tony our third quarter of 2021. The results are as follows research and development expenses of $59 4 million for the quarter.
Compared to $18 9 million in the prior year period.
Excluding $5 8 million of stock based compensation research and development expense was $53 6 million.
SG&A expense was $45 5 million for the quarter compared to $8 4 million in the prior year period.
Clothing, $13 2 million of stock based compensation SG&A expenses were $32 2 million GAAP net loss was $80 9 million for the quarter compared to a GAAP net loss of $23 4 million in the prior year period GAAP net loss in the third quarter of 2021 included a $25.
8 million non cash gain on the fair value change of earn out liability related to the periodic remeasurement of the fair value of our contingent earn out liability.
EBITDA was negative $85 8 million for the quarter compared to negative $21 million in the prior year period.
Thank you Bernardo turning to the balance sheet and cash flow.
We ended the quarter with $414 9 million of cash and cash equivalents.
Cash used in operations for the nine months ended September 30 of 2021.
$180 6 million compared to $65 1 million in the prior year period.
Capital expenditures were 74 million for the nine months ended September 30, compared to $1 2 million in the prior year period.
Turning to our guidance for the fourth quarter of 'twenty or 'twenty. One we anticipate the following expenditures approximately $95 million to $115 million for operating expenses, excluding stock based compensation and depreciation and approximately $60 million to $80 million.
Capital expenditures.
Before we open the call up for Q&A.
Turn it over to Tony for closing remarks.
Thank you in Nash, it's been a year of milestones and growth I want to thank the board the entire community team and all our partners for their hard work and dedication.
We would now like to open the call for questions.
Operator.
Thank you the floor is now open for questions. If you do have a question. Please press star one on your telephone keypad at this time, if you're using a speaker phone, we ask that you pick up your handset Baltic pipe well.
So you pick up your handset to provide the best sound quality again, if you do have a question or comment. Please press star one on your telephone keypad at this time, please hold a moment, while we poll for questions.
We'll take our first question from Craig Irwin with Roth Capital Partners. Please go ahead.
Good evening and thanks for taking my questions. So.
So hey, that's that's really exciting progress with gamma vehicles I loved the video as always cool videos.
Can you maybe.
Find us on the size of the gamma fleet, you're going to field.
And the technical capabilities of its fleet you know D. Do you expect to use these vehicles and in some of your.
Partnerships such as early test beds for some of the Adas stuff that you've been looking at.
Can you help us shape out sort of what what the what the real technology development will be on these platforms.
Yeah, So hey Quinn.
Well, we'll be focused on about 120 to 150 of those vehicles and some of them will be in the hands of potential partners.
Understood understood.
And then.
It's been a scarcity of marketing vehicles right. You know you you do get vehicles to some of these major trade shows, but I think there's quite a lot more demand across the country cause that when people see the car in person that's a very different response sometimes.
And.
Two dimensional.
Video or even picture.
What's the potential for some of these vehicles, maybe being made available for ride and drive or as marketing vehicles over the next couple of years.
Yeah, we will be doing.
Selective events in early to mid next year to bring people through the vehicles will do some road shows we've already started a few very selective and quiet ones and we will continue to do those.
Understood.
I attended one.
That's fine.
Sure.
[laughter] complete completely understand the.
The re prioritization of a video net car like given that you guys are moving faster and bring online production.
And executing ahead of sort of the original game plan I.
I noticed it was a $26 million payment to make car and COO.
<unk> can you maybe discuss what you see the relationship possible looking like.
I know there's a number.
The number of weeks for you to still finalized this but what's your vision for how <unk> fits into the future of canal.
So Craig you know, we took a bit of a punch in the face obviously in the beginning when we said Hey, we were gonna have BD.
BD L Ned car as phase one and.
Industrialization their manufacturing in phase two and three.
And we did that because that was the right thing for us to do and related to the market. While we were working out and mitigating risks and finding our state partners.
We have since been able to do that and you know.
Including the continuing pandemic issues plus the demand for more of the L. E D.
Rising fast.
Obviously, we're working on the track to get it closer to where our ground zero manufacturing is going to be.
So all those things you know, we just got lucky they all came together and we have.
Personally have a very good relationship with the vendor like family.
And if you remember way back when I said as I said, we're using it as a backfill until we get things figured out here in the U S. But that it was really for geographic expansion into Europe.
And so now that becomes more clear.
We will continue our discussions with them through the month to figure out what that looks like.
We're not worried about the 26 million we have a very good relationship with them, we have very little leakage of that we'll have some.
If we choose to re prioritize the timing.
But we didn't ship any of the equipment that we're shipping into the industrialization center. So everything kind of worked out actually costs kind of come in better right.
And we.
We are bigger fans of owning our own facilities than we our contract manufacturing because there are inherent risks with that.
Having it out of your control and so I think we're just you know we just keep punching out these things and tightening it up.
And bringing it to the center and executing on what we say we are and to the extent we can pulling it forward.
Excellent excellent and then last question for me can you maybe update us on the Capex for this.
The company owned manufacturing what your expectations are over the next number of quarters and you know it's incredibly impressive to pull forward capacity in this environment, where everybody is complaining that they can't get delivery of equipment because they saw this global supply chain issue.
If you could talk a little bit about you know how you work with your partners to pull this off and you know what gives you the confidence that this.
This is materializing.
Well I think.
There still are.
Every company is kind of going through some kind of impact with inflation and scarcity of materials.
The fact that we had the foresight to bring down our numbers to reasonable numbers that we could raise.
Allowed us to secure a realistic supply lines.
And we've obviously.
I covered the point, you know and I remember right you are one of the ones kind of upset with me in the beginning.
I gave you a little bit.
But as you can see now we've been in this space a long time you know.
When a pharma company, we Didnt Miss.
Yeah.
Incentives for 34 correlation when we intend to.
Be very realistic can move up move down and there is we got to keep it still conservative.
And we're going to continue to do that but we continue to mitigate all of those steps we feel really good about the supply line Panasonic doesn't just select anyone as you probably know.
And I think bringing our partners deeply along with what we're doing why we're doing it and what the size and impact is that we can bring not only.
As a tam but into the communities into what the product purposes. So I think we continue to gain supporters.
But look you know we got to keep you've got to keep making first down here in <unk>.
And then the game.
Excellent well congrats you beat my numbers I think three quarters in a row now so.
That's a good place to be and I'll hop back in the queue.
Thanks Man.
We'll take our next question from Jaime Perez with RF Lafferty. Please go ahead.
Hey, Good day, everybody and thanks for taking my question so.
You opened up in the U S facility in the fourth quarter of 2020, which is next year.
How much of a lead a lot equipment have you ordered what's the schedule for tooling and pre production. So you could give us a little bit of color on the progression of getting into the manufacturing stage.
We obviously feel good enough that will be ahead of Q4.
With our suppliers, where we're currently mitigating a couple.
Items right now, but we are all of them will come in before the Q4 timeline. So so we're in we're in positive territory right now.
Have a most of the stuff being built <unk> built and we are continuing.
Continuing to monitor the situation and make sure nobody slips and where we see anything we have mitigation strategies in place and we're 100% sourced.
Our engineering is locked.
Made a lot of progress.
<unk> complements to Soho and his team for what they pulled off they've been working nonstop.
Yeah, No. The company has made great progress since our last yes, especially when you took over now.
The Arkansas events.
Let's say some facility I mean, how different is that from the AR facility in Oklahoma.
Oh, it's very different this is an advanced manufacturing facility that will allow us to produce vehicles for.
Unique use cases as well as accelerate our testing into gamma we're looking for ways to take down the traditional go to market.
Wei and this will produce vehicles that we will sell as well. So it gives you a valve plus that valve is for your advanced innovation, which is connected if you notice we basically laid out for you guys and entire corridor strategy.
How do you get the labor shed and how you get the best arbitrage and how you get an amazing workforce and community involvement.
So that facility will be an area of innovation for us and rapid prototyping.
And so we can push through gamma faster on the other derivatives.
And get product to market from there, while we're tooling up in the factory in Pryor that makes sense.
Yeah. That's fair. Thank you for that response off that's all the questions I have thanks a lot.
You bet.
Again, if you do have a question or comment. Please press star one on your telephone keypad at this time well take our next question from Amit Dayal with H C. Wainwright. Please go ahead.
Thank you good afternoon, everyone.
Tony just to begin with with respect to the Panasonic relationship.
Have you committed minimums on the battery orders from them.
Yes, we have.
And we have shared we have we have minimums in excess of what we have projected to the market. If that's your question.
Okay. Thank you.
And then.
As it gets closer to.
We're commercializing.
Offerings, I mean have you sort of narrow down the pricing reinsurance immune goes should we expect it to be.
So a little better what you guided for or any change in their phone.
Yeah, there's a little bit of creep going on.
We are mitigating it in some advantaged areas.
Well you know we've reduced our cost significantly by accelerating the site.
By about six to $8000 a year.
Unit that we would have been carrying if we were supplying into the U S from from Europe.
So.
That is a positive for us obviously.
But we I would say, we will see some creep like everybody else, but I think it will be.
My projection is we'll be below others.
Okay.
And then.
Million in orders from you know.
Christopher.
Oklahoma University's understood. These definitive agreements or just sort of a more even level.
Agreements.
Yeah. These are discussions that we're having and we will finalize those finalize those in the definitive agreements, but you'll see the press releases from the states.
These two these are two amazing governors that.
Businessmen they get it they know how to help they want to create a high tech jobs they want to.
Create this is a new industry in the corridor and so they've been extremely helpful and obviously, we're always conservative.
But we will be focused on having those in the definitive agreements.
That's all right. Thank you.
You bet.
This concludes our question and answer session I would now like to turn the call back over for closing remark.
Thank you all for joining us today.
Feel free to reach out with any questions or if you want more information and we look forward to updating you.
About four months thanks, everybody. Thank you everyone.
This does conclude today's teleconference. We thank you again for your participation you may disconnect. Your lines at this time and have a great day.