Q3 2021 Arrival SA Earnings Call
[music]. Thank you all for joining us today for our rivals.
Quarter 2021 financial results My name is Medaire, Sony VP of Investor Relations and with me today is Dennis Bad loss arrival CEO up enough reservoir, President, Mike Abelson, CEO of Automotives, and John Wozniak, CFO before we begin I'd like to.
Remind everyone that certain statements made on this call today are forward looking statements. These statements are subject to various risks and uncertainties and reflect our current expectations based on our beliefs assumptions and information currently available to us. Although we believe these expectations are reasonable we undertake no obligation to revise any statements to reflect changes that occur.
After this call description of these factors and other risks that could cause actual results to differ materially from these forward looking statements.
Discussed in more detail in our filings with the SEC and our third quarter earnings release issued today on the ATM. During the call. We also refer to certain non <unk> financial measures. This should be considered in addition to and not as a substitute for or in isolation from a life address results for further information please refer to our Investor relations.
Website at investors <unk> arrival dot com.
With that in mind, I'll turn it over to Dennis.
Yes.
Yeah.
Thank you <unk> and thanks, everyone for joining US today, we are on a mission to replace old vehicles to electric I would like to use this opportunity to remind everyone that rivals any if there's not an automotive business. It is a platform technology business, we have invested in enabling technologies software components.
Cereal robotic micro factory that provide a strong competitive advantages for us we're doing things that have never been done before and expect our powerful technology will change the fundamentals of automotive industry. These transformative technologies are coming together in our RF micro factories, and we like what we see our fears about the youth for validation has been completed which is an important.
<unk> for the company and I can share it is a remarkable product with a bulk of the number of events around the world, where our customers were able to experience all of them firsthand. The car is progressing well and in fact, there is developed to the level, where we are happy to share today.
For the Boston event are unchanged.
Developing flight vehicle platforms, when large van Bob but for emerging markets and car, but to achieve our mission to replace older vehicles with electric.
One of the great 10th of vehicle platforms and produce them in hundreds of micro factors.
We have revised our 'twenty two expectation with a more conservative view.
Ever I'm very confident we are well positioned with significant growth in the next several years, we believe that the sides of our business will be defined by the number of petrofac for it to be deployed.
And the number of macro factors is primarily defined by the capital we have access to it could be tens of micro factory of 100 and for this reason, we withdraw our long term forecast.
All of our 2400 employees, who share our initial and values and have a strong sense of purpose.
With that overview, let me now hand over to Avinash President.
Yes.
[music] Thanks Dennis.
In Q3, our teams have been working tirelessly towards our product at micro factory launch dates alongside this we have also been executing and other vital areas of our business as we ramped the first production as we progress the launch we wanted to update the market on changes to our 2022 forecast John and Mike will go into the details, but the main message is we have decided to adjust.
The timing of our fault micro factory as well as the launch of a large van to invest further in our platform technologies and start of production for our Boston ban our current non binding orders NOI reached 64000 vehicles and we have added a number of high quality customers to our pipeline. These otherwise continue to be weighted to what our band pro.
Graham at this stage and as previously communicated but those typically require public road trials. Our first of these will start early next year, we continue to build vans and buses as we prepare for launch and today I'm pleased to give you a first look at our all new bus from the wrap around.
Round screens inside and out to the use of ambient lighting reconfigurable seating and the ease of maintenance to name a few we believe the arrival bus brings a whole new level of experience that are drivers operators and passengers our bus van and car use the same in house developed components composite material for body panels.
And all connected through the cloud to our backend ecosystem. We believe arrivals method creates truly compelling products for our customers at a competitive price point and the feedback to date has been very positive you'll see these buses on road trials in the U K early next year arrival car is progressing well and we are also giving a first look today.
With our first prototype expected by the end of this year.
Several highlights in the quarter, but to pick a few we provided <unk> band to be used for deliveries at the Dubai Expo, where UBS as the official logistics partner, we were chosen as one of the green dozen companies at the global investment Summit in London selected for our pioneering Green technologies that summit was posted by the UK Prime Minister and some.
Quoted by members of the Royal family, bringing together 200 of the world's most prominent decision makers. We also announced the arrival service network program using our in House Digital service platform, which trained and certified technicians to service our vehicles. The service platform uses data from arrivals vehicles and proprietary algorithms to enable exist.
Service providers to repair and maintain our electric vans and buses, we have recently announced eight partners in the U S and Europe, who have signed up to repair and maintain our vehicles throughout program. These initiatives serve to highlight the ways in which arrival has captured the attention of large global companies and organizations around the world we have.
Also been ramping up our sales efforts and hosted a global tour of the ban in the U S and Europe for our customer base. This was very well received and gave us a chance to showcase arrivals unique vehicles and customer value proposition.
I wanted to remind everyone that arrival is the only company with a new method in the whole industry. We are focused on developing enabling technologies components platform with materials micro factories software and robotics and we utilize these technologies in all of our products, we see arrival as a pioneer in the EV space, leading the transition to.
Evs globally by creating products that are zero emission more desirable more sustainable and more equitable ESG that our call and I am proud to say that in Q3 as part of our engagement ear at Cop 26 from which I am currently joining this call we have announced our pledge to reach a net zero carbon position by 2040, all beginning to.
The goals of the Paris agreement 10 years early as the management team.
We're looking into how we can do this even foster our CEO of arrival automotive Mike Abelson will now give us an update on our program development and micro factory status Mike.
Okay.
Thanks, Avinash I want to begin by reiterating that we continue to expect started production for the bus in Q2 of 2022 and started production to the ban in Q3 of 2022. This slide shows our upcoming program milestones on the milestones.
Remains unchanged from when we presented them in our Q2 earnings call. It won't surprise anyone to hear me say these milestones are the priority for the entire arrival organization over the next three to four quarters equipment installation has begun in rock Hill and will be substantially complete by the end of the year since Mr is used as our process development micro factory, we have been.
Installing equipment there for some time and I expect it to be substantially complete by the end of Q1 next year Charlotte will be our third micro factory. In 2022 has started production there expected in Q4 of 2022 <unk> is a unique facility because it serves a dual purpose as arrivals global center for <unk> and then the companies.
First band Micro factory.
You can think of <unk> as our version one point I'll then micro factory one of the advantages of the micro factory approach is the ability to further optimize the layout of equipment and operations of each subsequent micro factory and Mr. We're already installing the second generation of our composites manufacturing line.
We have recently installed six of our third generation technology and the Assembly area. We are now assembling our fifth generation of autonomous mobile robots or Amr's mobile robot choose to move vehicles and parts through the micro factory. This latest generation Ammar has a two ton payload capacity and it's capable of coordinating movements wirelessly.
Most of our robots can be used to move the vehicle or component, that's too heavy or too large for single Ammar given all of this ongoing development. We know that history does not represent an optimize band micro factory.
Only the first version on the product side as Dennis not National already noted we've completed assembly of our first <unk> prototype plus.
Great to see the bumps come to life the impact of both the exterior design and the experience inside the bus are just as dramatic as we've always expected. This is the first of several that will be used for final product validation and we have a number of buses and build ranked behind it that will be completed in the next few weeks. We've also completed the first.
He is durability test program.
We have completed two of the European certification tests for pumps from a cost perspective. This slide highlights to cost we expect to incur at our first two <unk> factories, which include production equipment and non production capex such as site readiness and logistics total Capex for rock Hill is expected to be approximately $50 million in Capex for Mr is.
To be approximately $75 million as we've said visitors are firsthand my dream, because we've been simultaneously developing our product and our manufacturing process spending at <unk> is now higher than we originally forecast an additional contributing factor to the higher Capex is the fact that we decided to bring the majority of logistics operations in house since.
Logistics is such a key component of the Mic factory operational costs, we prefer to have this under internal control for our first Michael we're still evaluating different operating models for logistics and future Michael factories, and the optimal approach may actually differ by region, we anticipate the Charlotte and other future events factories will have anymore.
<unk> footprint and improve processes compared to history with the micro factory method, we have the opportunity to further optimize each mine componentry as it's deployed Charlotte will be the second version of our band Micro factory process and we therefore expect total capex to be lower than Mr. We've also decided to bring our battery module Assembly in house.
As a reminder, in the arrival battery architecture battery cells are assembled into battery modules that are shared across all of our vehicles. The battery modules are then assembled in the vehicle specific battery packs micro factory. The first battery module Assembly facility will be in the UK and will support initial production at multiple factories to date, we've already manner.
In fact should more than 1850 high voltage battery modules to support our prototype builds I will now turn it over to our CFO John Wozniak to go through our financials and provide more detail on all of these updates impact our projections Jon.
Okay.
Yes.
Thanks, Mike first I'll cover our Q3 financial results before moving on to longer term trends the loss for the period was 26 million euros compared to a loss for the period of 22 million euros in the third quarter of 2020, the adjusted EBITDA loss for the quarter was 40 million euros compared.
To a loss of 18 million euros in the third quarter of 2020 administrative expenses were 38 million euros and non capitalized R&D expenses were 9 million euros compared to administrative expenses of 20 million euros and non capitalized R&D expenses of 1 million euros in the third quarter.
Of 2020 capital expenditures in the quarter were 81 million euros compared to 21 million euros in the third quarter of 2020, we.
We ended the quarter with cash and cash equivalents of $381 million euros or approximately $440 million. We expect capex for Q4 2021 to be between $110 million euros, and $120 million euros, and adjusted EBITDA for the fourth quarter.
2021 to be modestly higher than Q3, reflecting our head count.
We have decided to make additional investments in R&D and tooling to improve our platforms to bring battery Assembly and logistics in house to secure battery lines for multiple years through prepayments to our supplier and to add resources to our sales finance and legal functions. We've made these investments in areas that we believe.
To better prepare us for our first product launch and makes our business stronger and more resilient for when we scale. We are also experiencing price increases in certain raw materials, including aluminum and petrochemicals because we are investing more in our platforms. We have revised our micro factory investments for next year.
Are we.
We now plan three micro factories in 2022 Rock Hill, Bicester and Charlotte and have moved our fourth micro factory to 2023, we continue to expect van micro factories to produce 10000 vehicles per year at full capacity on two shifts, though we are expecting a more conservative.
<unk> ramp next year as we start each micro factory on one shift and are not planning to reach full capacity until early in 2023 as a result, we expect both vehicle volumes and revenue to be modest next year revenue is expected to start in the second half of 2022 and be weighted.
Towards the fourth quarter as Dennis mentioned beyond 2022 revenue growth will be dependent on the number of micro factories, we can deploy which is a function of the timing and availability of capital the quantum and timing of which is uncertain. At this time, given this and the rapidly changing nature of our business, we no longer believe.
Our long term financial forecast should be relied upon we will continue to update you on key operational milestones, including the status of our vehicle programs and our plan of micro factory rollout, which we believe are the key indicators of the progress. We are making we also expect future volume mix to be even more weight.
Towards Bam, which is consistent with the robust LOI activity. We continue to see for this product from a cost perspective, we expect 2022, adjusted EBITDA and Capex will be in a range consistent with the third quarter of 2021 on an annualized basis we.
We are forecasting marginally higher SG&A costs associated with adding sales and finance resources over the next several years, we will continue to capture additional efficiencies in our micro factories and expect to achieve total required capex per micro factory of approximately $50 million. We will also.
Continue to lower the opex requirements that our micro factories and expect long term production and assembly opex of approximately $15 million for micro factory initial operating costs for logistics is approximately $10 million for micro factory. However, we expect to optimize our logistics model.
As we scale the number of micro factories to significantly reduce this cost over time from a working capital perspective, we have proactively secure two cell lines and are continuously evaluating opportunities to further derisk law on term sell procurement.
In general as we scale, we believe our working capital terms will improve through larger volumes and better leverage with our suppliers.
I'll now hand, the call back to arbitrage for our conclusion.
Yes.
Thank you.
Okay.
Thank you John to repeat our message arrival is unique we believe our new method will change the fundamentals of the auto industry.
We reconfirmed our key milestones for the bus and then and today. We showed you the outstanding bus the band, which is a great product the market needs and gave you a first look at <unk>, which is an important vehicle for shared mobility arrival is not a traditional OEM. We are developing technology platforms that allow us to create multiple products and build them in local microfracture.
These are relatively small resources arrival is on a mission to replace older vehicles with electric we continue to see strong growing demand from customers all around the world and we expect this to continue as we bring our remarkable products to market in the coming months. The commercial vehicle market is in the beginning of an enormous an imperative transition and we believe we are coming.
For the market at the right time without transformative new method of production and superior products. Thank you, we'll now move on to Q&A.
Thank you so much and again everyone. As a reminder, if you want to ask a question. Please use the raise hand function located at the bottom of your screen.
Unless you've been called on you will have the ability to on mute. Your audio again. Please use the raise hand feature at the bottom of your screen.
And then just if you'll go ahead and start your video call me. Please.
Alright.
Hello, everyone.
I shared my screen.
Then can you see my screen, we sure Ken Thank you Dennis I appreciate it.
So actually it's quite important for our company in Q3, because we didn't show.
<unk>.
<unk>.
Were actually working and we're working hard to develop exterior of armored car, which we built together with Uber that's.
As you know.
And it's the first time, we're showing.
Three of the car today.
We are quite happy.
We are extremely happy about this product and.
It's quite difficult to understand from this picture, but it's actually the hype of the vehicles.
Yes.
Much higher than like a normal Carson, which creates a totally different experience for the person who's beside <unk>.
<unk>.
Overall.
And actually in the left bottom corner, we have a schedule of our.
Boss for emerging markets. So it is a high flow months.
But given what you from our.
Low floor bus platform, which we're developing now we announced in Q2 that we started to develop.
This type of product using our Indian <unk>.
Center.
And we are also very pleased to say that this product is developing really well.
<unk>.
So.
That's probably.
So this is this car.
Big picture. So we are happy to answer your questions.