Q3 2021 Proterra Inc Earnings Call

Conciliation of these measures to their most directly comparable GAAP financial measures can be found in today's quarterly letter, we will kick off the call today by introducing our chairman and Chief Executive Officer, Jack Allen for his opening remarks, Jack. Thank you Erin and thanks to all of you for joining us today.

Really excited to present, our second quarterly report as a public company in.

In Q3, we were able to overcome numerous supply chain complications that are affecting most of the industrial world to report growth in battery production revenue and gross margins in the quarter.

Battery production rose, 95% year over year to 62 megawatt hours.

<unk> powered battery deliveries to commercial vehicle Oems grew more than 140% year over year to 78 vehicles sets.

It will be doubled to 130 vehicles. If you include our electric transit buses.

Bus deliveries it for Terra transit were up 58% year over year and all in our revenue grew 30% year over year, and 6% quarter to quarter to $62 million.

At the same time gross margin ticked up a couple of percentage points from Q2 up two 4%.

So let me start with just a couple of comments about the macro market.

So while our Q3 results demonstrate how <unk> growth is riding the emerging wave of commercial vehicle electrification.

All of our businesses will provided a significant tailwind with the passage of the infrastructure investment and jobs Act last Friday.

We provided details of what this funding would look like in our Q2 call.

But I'll reiterate that it provides a five year extension of the federal surface transportation Bill.

That bill provides long term funding certainty for transit as.

As well as an unprecedented level of support for the electrification of transit and school buses.

It provides $39 billion for public transit in addition to the current baseline.

Including more than $4 billion of funding Thats dedicated to zero emission transit buses over five years.

There is a minimum of $2 5 billion and up to as much as $5 billion of funding for electric school buses.

$7 5 billion for electric vehicle charging and this is not just for passenger vehicles, but also for commercial fleet charging as well.

And there is additional funding to help port and airport electrification.

So as you can see this package provides support for each of our business lines and our plans for growth over the next five years.

We continue to believe that demand is at a tipping point not only for electric transit buses, but electric commercial vehicles in general.

And we've established a firm foundation across all our businesses to take advantage of it.

<unk> not only has a growing backlog, but our bid universe is up 28% year over year.

Even before the benefit of the infrastructure Bill.

We expect with Terrapower to supply batteries to at least seven different vehicle programs by the end of next year.

And this is up from only one at the start of this year.

With many more anticipated in 2023.

And our new megawatt scale charger is starting to gain traction with large fleets as evidenced by <unk> energy, having been selected by the law.

To supply five of our one five megawatt Mega Chargers.

So in response to this growing demand we have added a second shift to a battery facility in the city of industry.

And we're planning a second shift.

In our Burlingame facility in.

In Q1 of 2022.

We are also ready to add a second shift to our bus production as well.

This would increase our throughput by 50% or more.

But we're awaiting supply chain complications to smooth out first is it really makes no sense for us to add the labor unless we have the parts that they need to assemble.

With that let me spend a couple of minutes on supply chain.

It's been widely covered supply chain has been a significant hurdle this year.

I am sure just about every manufacturer's, earning report conference call today is filled with complaints about cloud towards trucker shortages shipment delays et cetera.

And certainly we weren't immune from that either but.

But we did set ourselves apart this quarter and how we dealt with it.

Manufacturing is tough in this environment, especially when you're ramping.

So if you ask an engineer a financial analyst how many parts does it take to build a bus.

Youre going to get a quantitative answer maybe its 1000 5000, whatever it may be.

But if you ask a plant manager same question Youre going to get the real answer it takes all of them.

Connectors for the wiring harnesses are just as important as an axle or transmission.

And scaling production requires a delicate balance of a lot of moving parts.

For us on the one hand, it helps to be vertically integrated.

We are and.

And we have a supply of battery cells, so by producing our own battery packs.

<unk> eliminated a major pinch point confronting any electric vehicle Oems.

Beyond that it really helps to have experienced manufacturing and our supply chain that teams that have been through these challenges before they know how to plan and they know how to react.

To adjust to the supply chain deficiencies in some cases, we found new suppliers for our own suppliers. So they can complete critical components for us.

In other cases, we brought production of some components and sub assemblies in house.

For example, we expanded in house wiring harness and metal fabrication capability to produce over 600 wiring harnesses and over 600 metal fab parts on our own in this quarter.

<unk> energy also encountered its own supply chain issues stemming from industry wide shortages of key charging hardware components.

This forced us to push three megawatts of installations out of this quarter.

But even with these challenges we reported solid growth in revenue and improvement in gross margin.

So as we look ahead.

Like others, we expect these supply chain complications to continue at least through early 2022.

But for the full year 2021, our revenue forecast remains at $2 46.

We representing a growth of 25% year over year.

Our orders and our production schedule support this target.

But supply chain delays may impact the timing of deliveries and our ability to achieve our forecast.

We have buses on the assembly line today that are ready to go.

But the wiring harnesses are day to day for us to complete them.

As a result, it is possible that 5% to 10 buses may not be delivered by year end in which case the revenue recognition will likely be pushed into Q1 of 2022.

Regardless, we feel confident that Q4 revenues are still on track to grow year over year by double digit percentage points.

And with demand across all our business is more robust than it's ever been.

The regulatory tailwind is gathering steam.

We feel really good about accomplishing another year of strong growth in 2022 as well.

So let me introduce you to Gary choice Gareth was promoted to president of <unk> in September and he is going to play a major role in achieving this growth.

Gareth.

Thanks, Jack Firstly, let me share how excited I am to help prepare and drive the transformation of the commercial vehicle industry to electrification over the next decade.

For those of you who died.

I have spent most of my career in operational and commercial loans across a range of industrial businesses at one point I was CEO of <unk> Bank, Canada, and more recently, the chief Sustainability Officer of Delta Airlines.

Through these experiences I've learned that industrial enterprises of the future will succeed in making sustainable energy solutions, a differentiator for growth and not an impediment to growth.

Let's talk a bit about the business units.

First of all the way out hit commercial vehicle electrification unfolding three phases phase one.

Transit buses.

The first to achieve better total cost of ownership than diesel and T&D.

This began in earnest in the middle of the last decade.

Phase II is short haul so last mile delivery Shuttles school buses vocational class four through eight vehicles.

This is happening today.

And the next phase phase III will be long haul.

I think most investors understand we've made a name for ourselves as a leader in phase one we wanted to share with investors. The foothold we've created that has already positioned us to be a leader in phase II as well.

Transit is indeed at the forefront of this transformation when we started selling electric transit buses years ago. Each customers typically ordering 102 buses are Pete recently customers have graduated to order sizes of $22 50 units.

Two two orders totaling $60 million Miami has ordered 75 buses from us to date.

Multiple orders Edmonton.

Is that 40 <unk> electric buses.

Port Authority in New York is at 36 units.

Next we expect to see more and more agencies launch rfps in procurement for a 100 plus units kept metro and Austin is a great example, last month, we announced a $24 million order for 26 of our VX five buses.

But this is just the first stage of a total procurement plan exceeding a quarter of a $1 billion to acquire almost 200 electric buses and related charging.

We hope to be frontrunners for and a lot of this early oil.

And to meet transit agencies, 100% zero emissions targets, a significant increase in the pace of orders will be required.

Now the passage of the infrastructure Act provides not only a significant increase in federal funding to help achieve these targets, but importantly, five years of funding that means transit agencies don't have to worry about this being renewed each year, but can rely on it to support our long term multiyear procurement plan.

Jack mentioned $4 billion in funding for zero emission trended, but allow me to puts us in better context, that's more than $800 million available per year, starting in 2022, an increase of more than 500% from the $130 million allocated last year, when approximately 400, new electric transit buses.

Deployed in North America.

So you can see how meaningful this should be for electric transit bus penetration.

So shifting over to powered.

Also some recent developments have been very exciting in October we announced a new deal with <unk> that.

That is not only I'll take in partnership with them after the electric excavator and announced earlier this year, but our entry into the mining market with electric <unk> <unk> and load haul dump is.

Today, We also announced an expansion of our partnership with Lightning E. Motors. In addition to the cost III commercial bank, we've agreed to supply batteries for that cost four equal 50, and classified at $5 50 electric vehicles.

As part of this we signed a 900 plus megawatt hour supply agreement through 2025 that includes batteries for <unk> contract with Forest River that was previously announced.

The advanced clean Tech Expo in August I'll put a great snapshot of the breadth of interest in commercial vehicle electrification, our booth was packed everyday and we met with more than 20 Oems in segments across the spectrum not only Oems seeking to electrified vehicles, but also for new vehicles.

<unk> in general of course on highway applications, but more and more we're also getting inquiries for off highway segments.

More importantly, we think revenue is about to reach an inflection point.

We saw a glimpse of it this quarter with powered deliveries up over 140% year over year.

With only two vehicles and carries production Diamond is electric school bus and <unk> electric coach pups.

Over the next few months, we expect to begin shipping batteries for two other vehicles launching serial production, specifically lightning <unk> class III commercial van and Don with plastic step van.

Later in 2022, we also expect startup production for three more vehicle programs and the remainder of our existing partnerships in 2023.

Thanks to the infrastructure Act, two and a half to $5 billion.

And funding for electric school buses should provide a nice tailwind to the volumes for our Diamondback Thomas bus partnership.

And of course.

We will be working to establish new partnerships for even more vehicles vehicle programs along the way.

And finally for Terra energy, which not only serves as an enabler of transit in battery sales, but also provides a meaningful increase in the lifetime value for a customer and as a coal contributed to achieving total cost of ownership targets for battery electric commercial vehicles.

We believe we haven't differentiated offering for <unk> solutions that helps reduce both the space and cost of depot charging.

And our megawatt scale charging solution is starting to get traction as Jack mentioned in the market as evidenced by our selection by the fall.

515 megawatt charges as part of a new micro grid projects.

There is even more disruptive opportunity, though on the energy front charging management and <unk>.

Last month, we announced a major achievement and the successful commercial operation of a vehicle to grid project in which a <unk> powered Julie Thomas Electric School bus delivered almost three megawatt hours of energy to the grid of the more than 50 hours using our charging solutions to put that in perspective, that's enough to power 300 houses.

For a day.

This was not a pilot projects that are real world demonstration of how our technology can be used in a commercial setting to increase the value and potential revenue generation that electric commercial vehicles and charging bring to the table.

So as you can see the tailwind to demand are gathering momentum across all three of our businesses and we remain optimistic about our business model and product positioning to capitalize on this multi decade transformation thats underway.

We have invested and continue to invest strategically in our supply chain production capacity product development and service support capability to meet this growing demand.

At the end of the day as proud as I am of our accomplishments and growth in Q3. The fact is today's results reflect only the beginning of our journey.

Commercial vehicle electrification is but one element of a broader global transformation and the way we consume energy not only will this require a major shift in the supply chain, but also a complete change in the way, we deliver and manage energy.

What excites me most about <unk> is particularly in particular that foothold and technological competencies in three key elements of this new era batteries.

<unk> integration capabilities and charging.

It may be early days, but <unk> is well positioned to not only create and capture value in this new era of electrification, but actually help drive and accelerate the transformation itself.

With that I'll pass it back to Jack.

Thanks, Gareth and we're really grateful to have Gareth in this expanded role.

On the CFO front, we fully intend to have a permanent CFO in place by the new year and.

In the meantime, we are in good hands with our interim CFO HAC thereof.

I've had the pleasure of knowing for over 20 years as we shared some time together at Navistar before and during his time as CFO.

He is uniquely qualified to help us during this interim period.

So I have a couple of introductory comments about himself and talk about the financials and then we'll move to Q&A.

Thanks, Jack for those of you, who don't know me I've been a finance executive for more than 30 years, including 22 years at Navistar, where I was fortunate to be the CFO from 2009 to 2013.

Since that time I've been using my experience to help various companies through transitions and it's a privilege to be part of the <unk> team at this critical juncture in its strategy.

With that let's talk through the financial highlights for Q3 for a pro Tara.

Revenue continues to grow and Jack covered that so I'll jump right into gross margins gross margins improved to four 3% in Q3 versus two 2% in Q2 the.

The improvements can be attributed to a better mix of buses leading to higher price realization as well as an improvement in overall product quality, which is flowing through as reduced warranty cost.

Favorable product mix can come and go I am pleased to see the improvement in overall product quality. This benefits should continue as we move through the fourth quarter and beyond.

The improvements in margins is impressive given the challenges the company continues to manage through and its production facilities.

Supplier issues have contributed to inefficient production cycles higher inbound freight costs and ultimately shipment delays, we will continue to manage these challenges for at least into early next year.

Moving on to the balance sheet.

Our cash balance remains strong with $727 million of cash and securities at the end of the quarter.

Operating cash flow was negative $13 million for the quarter as we continue to invest in our facilities and expand our product offering to grow our business.

Our business is structured to grow so we've invested in people and products to facilitate this growth leading to increased R&D as well as operating expenses.

Working capital was a source of cash of about $1 million in the quarter on.

On the positive side, we collected the increased receivables that were discussed last quarter and we continue to prudently manage accounts payable.

This was offset by increased inventory as we continue to use inventory as a buffer against supplier issues.

Our strong cash balance allows the company to continue to invest in its business.

Revenue growth will be the key to improve cash flow for the business going forward.

Finally, we reported GAAP net income of $36 million or <unk> 17 per basic share.

This benefited from a $73 million gain from the noncash revaluation of warrant liabilities in the quarter.

In October we announced the redemption of all warrants associated with our combination with Arclight clean transition that led to our public listing.

As a result, we will no longer be reporting this noncash revaluation in future quarters.

But most importantly, this action exchanged 21 million outstanding warrants for approximately 5 million new shares of pro Tara.

Said another way the company completed an effective stock repurchase of 16 million shares at no cost.

This is a material improvement in our capital structure for our equity shareholders.

That is all I have and I'll pass the call back to Jack for some closing comments before we open it up to Q&A.

Thanks, a J and as Gary said, it's crucial to keep one eye on the bigger picture here and not to get too caught up in the quarterly snapshots.

At the end of the day, we believe each of our businesses are ideally suited and positioned not only to take advantage of but actually helped drive the commercial vehicle industry transformation to electric.

If you step back and think about where we were entering into this year.

We're a private firm with approximately $180 million in cash.

Our self supply contract for only two more years.

And we had five battery supply partnerships and only one expected to produce material volumes in the coming year.

Today as we enter into the final months of 2021, we're a publicly traded company with over $700 million of cash.

We have a deal for multiple gigawatt hours per year of cell supply through 2028.

And 12 for Taro powered vehicle programs in place with seven of them expected to be in serial production by the end of next year.

On top of that in Atlanta, two of the largest electric transit buses orders ever in North America.

And the infrastructure Bill sets up an expected acceleration in orders in the coming years.

I really want to express my genuine appreciation and gratitude to all of our employees on the east coast to the West coast that have dedicated themselves to the <unk> mission and worked so hard not only to get us this far but also enable our execution in Q3.

We expect to close out this year with solid growth.

And we're feeling even better about 2022 and beyond.

With that operator, let's open things up for Q&A.

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Your first question.

Comes from Sharif I'll say by please go ahead.

Hi, good afternoon, everyone and congratulations on a great quarter.

Youre welcome.

My first question is around production capacity I believe at the analyst day, you'd say there are 675 megawatt hours in Los Angeles, and another 345 in Berlin game with the added shifts in the alterations to the Burlingame facility, what's overall annual capacity as of now.

So the.

The borrowing the capacity that we put in a growing game is what brought us to the $3 45, So we have over one megawatt.

Our battery capacity in place today.

As we look forward into our forecast, we clearly see that we are going to need more battery capacity and as we've indicated we expect to add more better capacity in 2022.

Understood and then with federal infrastructure Bill when do you see orders from Dot's actually materializing.

Sure I'll have Gary I'll take a stab at that one.

Yeah. Thanks first of all there's still some unknowns out there as far as implementation goes so Colin give you a definitive answer, but we don't anticipate too much in 2022, it's more likely a 2023 impact.

But there may be some impact in areas like school bus.

And energy deployments late 2022.

And we've included that that could have anticipated and the maintenance type model.

And so.

At this stage can be too much more definitive because it's very fresh for all of us.

Understood. Thank you very much.

Next question, Steven Fox with Fox Advisors.

Thanks, Good afternoon, a couple from me first of all on the supply chain.

It sounds like you took some tactical.

<unk> approach to some of the issues with in housing.

Some of the components can you talk about whether that's a permanent solution or a temporary solution and then when you talked about sort of supply chain issues maybe into the early part of next year I guess I'm trying to understand why you think things sort of ease up to you and then I had a quick follow up.

Sure I guess, probably the best way to say it is.

There is a lot of supply chain impacts that are affecting a lot of companies.

For us we.

Have an ample supply of battery cells.

Many don't.

Also the electric vehicle industry is not as impacted.

By the chips.

Supply challenges that the automotive industry or the diesel.

Engine industry has so for right now we kind of put those aside and we're really just focused on wiring harnesses. So with the actions that we've taken and what our suppliers have taken.

We can't say sitting here today that will only be impacted by the first half of the year, but we're anticipating that they will be there will be impacting us in the first half of the year and we're going to continue to monitor whats going on as we prepare our guidance for 2022.

So just to clarify I mean is there a risk in sort of a bit of a cascading effect into the into 2022, where you catch up on what you Miss out on.

Before but there is Q1 delays et cetera.

There is certainly is the opportunity for there is a risk that that.

Production snowballs, along but we've been at.

A quarterly build in the even with the challenges that we've had in the 50 ish transit buses a quarter. So we don't see deterioration for that but but we want to build from that.

We'd like to put a second shift on so when we have the backlog to build more.

That's helpful and then just lastly.

As a follow up to the prior question I understand that it takes time for.

The bill that the promoted and worked through some of these agencies, but I thought it was somewhat of a.

Although weak for the bill mentality on other programs that could country is that is that still possible or is that considered already in some of your guidance.

Well certainly we would expect that as the Bill was signed next week and the funding has led that there will be transit orders.

Against these funds in 2022, but the order to delivery cycle for transit can be in the 14 to 16 month range. So although we will see the orders in 'twenty two as Gary said, we really don't expect to see the revenue probably until early 'twenty three.

I understand that thank you.

Okay.

Next question Courtney <unk> with Morgan Stanley.

Hi, Thanks for the question guys.

If we could just follow up on the comments on the supply chain.

I think that's really just a lag.

Chris issue can.

Can you just remind us.

<unk>.

Something that is in sourced in mulch.

Multiple suppliers are they is it primarily a logistics issue or just help us understand.

Kind of.

What the actual issue is and.

Would you say that it has gotten worse during the quarter, which led to this guidance.

Sure.

Thanks for the question.

So.

Our primary issue today is wiring harnesses I don't want to portray this as being our only issue, but our primary issue today.

As wiring harnesses today, we do some wiring harnesses inside we also use multiple suppliers the challenge around wiring harness ironically is the connectors.

There is a global resin shortage and that resin shortages whats impacting the availability of the connectors.

And those come from tier two and tier three suppliers on a global basis to our wiring harness suppliers that we have in North America, primarily and also in house, So thats the challenge and when you have.

When you're relying on tier twos and tier threes. It really makes the communication of when youre actually going to get that part.

Far more difficult to predict.

Okay, Great. That's helpful. And then maybe just on a follow up for that.

Can you comment on infrastructure can you just.

Talk about how you anticipate your market share evolving now that there are in a more substantial government.

Allocated towards electric assets at this point.

And just how you feel like your positioning from a market share perspective.

In bus and then any implications for that type of thing.

Well I think again, it's a low dose.

<unk> plays out.

We have an established market share presence, which is industry, leading having being a first mover in this space.

We expect that will continue to enjoy it.

Our leadership position, but of course as new players come into the market the market the market in certain size and they're going to gain some market share. So we expect that to normalize to some extent.

We built that into our models the park model had been accounted for.

We.

Anticipate maintaining a leadership position, but obviously some dilution will occur.

And then on the powered side, we're aligned with Thomas and Thomas as one of the leading <unk>.

School bus providers in the country. So we feel like we're in a very good position. There every time a school bus it's sold as electric as our powertrain in it.

But also I think what's interesting about the infrastructure Bill when it comes to school buses historically, the federal government is not funded school buses.

They've all been funded either in the local districts or at the state level. So this minimum of two and a half and up to $5 billion of funding for school buses not only is huge it's unprecedented in this market and we're very excited about that and that can have a 22 2022 impact.

Because the order to delivery cycle for a school bus is much shorter than that from a transit bus.

And that vehicles in series production ready.

That's helpful. Thanks.

Yeah.

Next question, Brian Johnson with Barclays.

Thank you.

I'll talk a little bit more about the pro tear up Howard.

Business first of all as you kind of work with LG and kind of allocate sales does it create any cap on the kind of signings you could generate deliveries or kind of the backlog to start building on park tower.

Hi.

We don't anticipate there being constraints we have.

Strategically been working on our supply position for cells for some time now and through the securing of our agreement with <unk>.

LG out to 2028 four cells.

Including the production of cells in the U S.

We believe we're very well positioned to be able to support our growth, which we had strong ambition for again as indicated in the past take republished.

We feel very confident that we have well secured cell supply to enable our growth and feed the demand that is out there.

Okay, and then kind of second round Portera powered.

<unk>.

There has been some talk around Lps with patent expiration.

Essentially allowing.

No because thats in China to both make those and exploit the amount of <unk> sports event in China.

A lot of times commercial applications are mentioned.

Two two.

Not necessarily trying to go at Porsche model, that's kind of speeds.

Have you looked at that.

Timeframe, where you could start adding LSP approach terrapower.

We at the moment are very confident in our current technology path, which is NMC cylindrical format cells, but we monitor the market constantly we're testing different cell format on a constant basis to make sure that we remain well positioned for where the sweet spot of what's required to <unk>.

Factory commercial vehicles for the future so.

NSP is it technology, we monitor in the dynamic you've just described is something we continue to to.

Yes stay appraised of and keep ourselves well positioned flexibility is important but we have confidence in our current technology pathway with NMC and cylindrical cells.

Okay. Thanks.

One thing is important is yes, boating battery packs for commercial vehicles.

Yes.

Managing a number of dynamics its energy.

An efficient space and white usage.

Combined with the safety.

Safety is the Paramount requirement and then.

Vehicles that are designed to operate over last cycle.

Three or four times longer than a passenger vehicle and so we have a lot of a lot of confidence in how we design and architect our technology path and have the same rock not NMC cylinder coins, the sweet spot for where we think we need to be.

Next question, John Lopez with vertical group.

Hi, Thanks, so much I had three hopefully relatively quick ones if I could defense one is.

How are you doing.

So I just wanted to in the short term the short term deferred revenue line dropped by a decent amount excuse me versus the prior quarter.

What's that.

We'll have to investigate that and give you a better answer.

Off the top of my head I don't have that answer.

Okay.

Okay.

Just directionally does that line have any.

Sort of interplay with with backlog.

No that would have anything to do with backlog.

Got you Okay that helps.

Secondly, just coming back to the pack side your shipments in calendar Q3, we're at least quite a bit above what we were modeling.

And I'm wondering I know you spoke a little bit about it but could you maybe just unpack again like what drove that big jump.

Sequentially was there anything in terms of the rhythm of the ramp of the two existing programs.

That causes a seasonal fluctuation or something along those lines and within that like I'm wondering do you think it's possible year customers are perhaps trying to immunize themselves from some of the supply chain headwinds like are they may be putting inventory in place. So they don't run into an issue of their own down the line.

No I think it's just.

As these.

Our products are going to series production, it's the demand for production and we certainly don't see inventory building going on for Patrick.

We've got right now, we'd give time, where full visibility into our supply base and our ability to build so.

It's really a very close to adjust in time delivery from us to Daimler into their products.

Got it really helpful. And then the last one is just on the gross margin and I guess I'm.

I am happy to see it but I'm actually quite surprised it seems like your mix shifted away from buses import tax.

But your gross margin nevertheless increased versus the prior quarter.

So that leads me to wonder can you just give us like a directional feel for where your pack gross margins on a write down EBIT say relative to the current corporate average and is there anything looking from Q3 to Q4 that we should be aware of like any one time.

Items.

Like Black box.

In the two periods.

Well, we don't get into profitability by product line at this point, so I'm going to I'm going to skip. The first question what drove improved gross margin in the quarter was a better.

Mix of buses in the revenue pile.

And like I said that can come and go.

But also the improvement in quality.

<unk> was $1 million reduction in prior period warranty, but then that also reduces what were accruing for warranty going forward. So you'll see.

That improvement is sustained itself.

As we move as the business grows and volume flows through our production facilities.

We get better utilization of our facilities that will be the big driver of improved gross margin.

Okay got you and so within that it doesn't sound like there's anything we should consider as like rolling off between Q3 and Q4 on the gross margin line.

Now, it's a pretty consistent mix of revenue through 2021.

Got you thanks, very much really appreciate it.

Thank you Jeff.

Next question, Sean Milligan with Williams trading.

Hey, guys. Thanks for taking my question.

If we stick on powered for a little while I was hoping you could talk through I think on the prepared remarks, you said you had seven.

Powered programs that are in serial production Alastair.

I was curious if you could.

Kind of talk to us about maybe how many programs.

And then.

Maybe the time to go from pilot to zero production and how that looks.

Yes.

First of all I'll just correct something you said there are currently two.

Programs in serial production.

<unk> told us both buses with Daimler in Nevada, who coaches.

We expect early next year another two programs to go into serial production and by the end of next year three more so that will total seven in series production by the end of next year and then the remainder of the partnerships that we have of the trials that we have publicly shared.

Is two.

2023 production.

So it goes from two this year another five next year and the remainder of the 12 in 2023.

Okay.

Sure.

I guess prepared remarks focused on the infrastructure bill, but when you look at the build back better Bill Thats coming up.

<unk> EBIT tax credit for commercial vehicles, and then I think there's a program around class six and class vehicles for rebates, just curious to get your thoughts on those programs and how they might look for you.

Howard segment.

Yes, there is many things.

And that bill.

And clearly for us probably the two most important ones are the ones you mentioned the incentives behind battery electric.

Commercial vehicles, and obviously it impacts all of the vehicle segments and the charging infrastructure too.

<unk>.

The proposals they would go a long way to improve the total cost of ownership proposition materially.

Significant numbers, but.

We don't know if that happens or not.

We certainly hope it does.

But we have a lot of confidence that the momentum in the market and the demand.

There is already.

Resilient and robust and.

The infrastructure Act.

So I mean that we know is out there and we will continue to fuel demand.

As for the.

Full year referencing still a lot of unknowns, but it would be good for the industry transformation.

Great. Thank you.

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Im calling in to hear about our per territory.

We look forward to talking to you soon thank you all very much.

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