Q4 2021 Proterra Inc Earnings Call
Ladies and gentlemen, thank you for standing by my name is Brent and I will be your conference operator today.
At this time I would like to welcome everyone to pro carriage fourth quarter conference call webcast.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
If you would like to ask a question at that time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again pressing star one thank you.
Now my pleasure to turn today's call over to Mr. Aaron <unk>, Vice President of Investor Relations. Please go ahead.
Thank you operator, and thank you all for joining us for <unk> fourth quarter 2021 conference call Joy.
Joining us today for <unk>, our CEO , Karen joined us as well as our CFO Karina Padilla. After the markets closed we published our quarterly letter on our website and SEC filings, which we encourage everyone to read for details on our financials and insight into our operating results and strategy industry dynamics and outlook.
This conference call, we will make statements related to our business and industry better forward looking statements under federal Securities laws. These statements are not guarantees of future performance. They are subject to a variety of risks and uncertainty and our actual results could differ materially from expectations reflected in any forward looking statements.
A discussion of the material risks and other important factors that could affect our actual results. Please refer to our SEC filings available on the SEC's web site and via the Investor Relations section of our website. Additionally, non-GAAP financial measures will be discussed on today's conference call. A reconciliation of these measures to their most directly comparable GAAP financial measures can be found in today.
This quarterly letter.
We will kick off the call today by introducing our Chief Executive Officer Garrett choice for his opening remarks, Thank you Erin and to everyone joining us on the call today.
Wanted to leave our first call as CEO of <unk> and thrilled about the opportunity that lies ahead.
Unfortunate not to have to start from scratch, but on taking over as CEO , we are hitting the ground running.
I couldn't be more grateful to continue to work that Brian all began and generous foundational year, putting us on the map as a leader in electric transit buses and bringing on board, our Chief Technology Officer Best in Gray.
<unk> proprietary battery technology.
And so Jack Allen subsequent meter shopping maturing manufacturing operation.
Turning us across the kind of the chasm.
And help me has raised nearly $650 million.
And the transaction to tell you guys Patrick.
Because of their efforts.
Actually a tightening the range of a leading horse in the race.
I'm inheriting a company that is on its fourth generation battery technology that has broken new boundaries and the size and weight of the vehicles that can be electric line.
Produced more than 500 megawatt hours of batteries to date.
Is on pace to increase its battery manufacturing capacity from around one gigawatt hours today.
Multiple gigawatt hours in 2023.
And as a decade of vehicle manufacturing and electric powertrain integration experience with more than 800 vehicles produced and delivered including more than 200 electric buses in 2021.
And a fantastic team of employees will not only bring their experience intellect and ingenuity to the table, but the passion to help us pursue our vision of cleaner.
Quiet transportation for all.
Let me start first by reflecting on our 2021 accomplishments.
I will provide our revenue guidance for 2020, and then I will discuss our order backlog growth before handing it off to Korea to discuss Q4 and more detail first on 2021, leveraging our technology and manufacturing platform, we reported strong growth.
Even in the face of well publicized supply chain dislocation affecting manufacturers across the globe in 2021.
Our deliveries of battery systems increased by 155% year over year to 273 vehicle space.
<unk> grew 22% year over year to 280, New electric transit buses.
Production grew by 7% to 189 megawatt hours for the year and total revenue grew 23% year over year to $243 million.
In addition, raw order growth across all of our business lines drove our backlog and contracted orders in total $1 3 billion at year end.
This growth we achieved in 2021 does not come without its share of challenges that the impact of global logistics supply chain and customer related complications as been widely reported across the industrial landscape not only for Q4, but early in 2022 as well.
We have continued to manage through this well, but we arent immune to the effects not only has the production challenges not improved since Q T. But they have gotten worse in some areas. We are somewhat in a perfect storm of parts shortages shipping delay inflation in material costs and all of the resulting production lines.
Commission fees.
On top of that since December and the spike in Omnicom.
There has been widespread labor absenteeism at our suppliers, our customers and our facility that are further complicated operational efficiency.
But we don't expect all of us to loss.
So for now the complications I'll not only constraining our growth.
But as Karina, we'll discuss in more detail shortly impacting our gross margins as well.
Even in the face of these headwinds we are establishing 2022 guidance as follows.
Revenue growth to accelerate from 2021 levels.
So between plus 24, and plus 34% year over year.
So a range of $300 million to $325 million in revenue.
Our order backlog supports even faster growth.
But given the state of the supply chain, we think it's prudent to establish guidance assuming no material improvement in supply chain.
And in turn translate production rates for the balance of the year.
And importantly I.
Our guidance does not reflect any potential impact from Russia's invasion of Ukraine.
This revenue level isn't where we would likely to be for 2022, but the fact is the manufacturing environment is very challenging right now.
We'll grow as fast as the supply chain and our production capacity allow us to you this year.
But our guidance assumes one that our content manufacturing operates only on one shift for the rest of the year and to the expansion of our battery manufacturing capacity at grid does not come online until Q4 and doesn't contribute meaningfully to volumes until 2023.
Nevertheless.
Incorporating these constraints we are still confident in the opportunity to generate at least 24% revenue growth in 2022.
While production and pricing constraints demand is most certainly not.
A healthy book of business supporting strong rates across all of our businesses for the next few years.
Our contracted orders is powered for.
Combined with our cognitive energy backlog was approximately $1 3 billion at the end of 2021.
First on transit orders grew 45% last year top of our record orders in Q4.
It's reflective is doing better than our next best quarter and our backlog is now at approximately $450 million.
This is all before the electric transit bus funding has become available from the infrastructure investment and jobs Act that was just enacted last November .
Previously for example, no no funding totaled approximately $130 million in 2020, we had approximately 400 electric buses were deployed in the U S.
Funding for zero emission buses in the U S will increase more than five fold to approximately $800 million.
Through 2026.
Supporting our step changing growth in transit bus demand.
Powered experience even better growth. The fact is commercial vehicle electrification is no longer only about prices demand is truly broadened to the rest of the commercial vehicle landscape.
The tariff powered and partnerships with five Oems early in 2021, all of which were for buses.
In 2021, we expanded per Terrapower is partnerships with 13 Oems COVID-19 vehicle programs spanning trucks two buses to off highway equipment.
10 of these programs.
Currently scheduled to be in serial production by the end of 2022.
Altogether for Taro pilot has $800 million of contracted orders representing close to two thirds of our total backlog and contracted orders.
Meanwhile, <unk> energy is starting to book some large depo scale charging projects that our solutions are designed for.
One three megawatt installation for the Santa Clara Transportation authority and the other gentleman half megawatts one for the <unk>, we disclosed in our last call.
These projects are orders of magnitude larger than a typical public charging station passenger vehicles.
Most will be both with our solar storage micro grid that will support critical vehicle charging even in a power outage.
This is the size and types of fleet scale charging infrastructure that will be increasingly required for higher commercial vehicle adoption.
We believe we have the experience and capabilities to deliver.
So while our covered on our accomplishments for the full year of 2021, and our outlook for 2022, I will now hand, it off to our new Chief Financial Officer, Karina Padilla, who will discuss our Q4 results in more detail and in particular on gross margin.
Rina.
Thanks, Darren Im excited to China on my first conference call as CFO for carrier and then even more excited to have time per carat commercial vehicle electrification continues to gain momentum.
I'll give you a quick intro my background and I'll dive into our fourth quarter results.
Also don't know me my entire career.
Spanning over 20 years of technology company, Thanks, Bill and Motorola semiconductors, and industrial firms like Ingersoll Rand and calculate all the place where they're at different stages of their maturity and forever.
Held leadership roles across a wide range of functions ranging from divisional CFO with responsibilities spanning multiple country to investor relations and everything in between.
Thank you John for Terra at this critical juncture for both the company and the industry I'm passionate about the industry and they want to do my legal relatively better place for my children and the generation that all of them procure it to me is the perfect mix of Green and industrial I'm looking forward to working with all of you in the years ahead now jumping on this one.
Our fourth quarter results.
We achieved strong growth in deliveries and revenue across both business. Yet however, our margins were adversely impacted by a wide range of supply chain challenges compounded by the impact of inflation and plant inefficiencies.
Our total revenue in Q4 grew 26% year on year to $58 million.
Driven by record pro tariff current deliveries.
System, and procured transit delivery of new electric matching our prior record quarter.
And energy revenue grew 19% year on year to $13 million, representing 19% of our total revenue.
<unk> power deliveries of battery systems for more than 300% year over year to 130, 98%.
<unk> energy installations were down 24% year over year.
Like a lot.
Primarily because charging hardware shortages constrained our ability to complete installations in the quarter and have been pushed into 2022.
<unk> side of the business, our revenue grew 28% year over year to $55 million, representing 81% of our revenue.
Fourth quarter deal here to match, our highest quarter of delivery at 54 assets.
We also put the first time, 49%.
During the quarter.
Sure.
Demonstrates the potential for pre owned market and electric transit buses.
We exited supported with a healthy order book of one $3 billion in backlog and contracted.
Growth in 2022 and beyond.
Okay.
On the first Macintosh.
We reported a negative gross margin of $2 8 million in Q4 2021.
As compared to the gross profit of $1 1 million in Q4 of 2020.
Okay.
We typically focus on year on year comparison, I will focus my margin commentary on the sequential comparison to our third quarter, 2021%.
In Q3 2021.
$70 million.
Thanks, Ron.
Despite of approximately $5 million.
In Q4 2021.
Increases in material costs from inflation volume and product mix.
The $4 million of the variance.
Okay.
Vermillion com.
From increased freight cost and volume.
These are driven by two unexpected impacts largely stemming from supply chain disruption personal right.
Container shipping rates have more than doubled since the start of 2021, we can delay shipments for weeks if not months.
The cases, we have resorted to pay for expedited premium freight to meet customer delivery time.
Second.
As the impact from product mix and inflation.
We're excited to see the market opportunity for <unk>.
With the sale of nine.
This is substantiated fill in jeopardy of our product. However, if you market opportunity resulted in a revenue mix that impacted the quarter.
Additionally, we had one large contract that shifted in the quarter. It was originally.
We signed in 2018.
Marquee customer presenting a large long term opportunity. This opportunity was priced aggressively and does not account for the rate of inflation, we would see three years later, creating a headwind on our margin.
They are facing similar headwinds across our portfolio from inflationary pressures. This global supply chain is experiencing in particular on our long cycle contracts.
We are taking actions to mitigate some of these headwinds these actions and progress will be more permanent in nature, how much gross margin improvement in 2022 <unk>.
However, we have a $3.
But we are also evaluating.
The ink contracts have been placed on taxes.
Second.
We should see production efficiencies.
Improved efficient.
This should lead to lower freight pricing and the need for fewer expert.
An alternative supplier.
And gained efficiencies across.
All areas of the production floor third our supply chain.
And logistics normalized we will execute on our capacity expansion currently limited part shortages.
Over time increase capacity through the addition of ships and the expansion of our need battery facility in Greer, South Carolina will enable revenue growth scale and better asset utilization.
As a result, we expect gross margin to continue to steadily improve in subsequent years.
With that said as of today, we have not seen evidence of the supply chain normalization.
Effects of the war in Eastern Europe are unknown at this stage.
Moving on to cash.
Balance sheet remains healthy ending the year with $661 million in cash and short term investments.
<unk> balance sheet strength to enable us to scale and give us room to write out any short term turbulence, while providing flexibility to invest in both manufacturing capacity expansion and R&D.
Our free cash flow for the year was $150 million.
This was inflated by higher than normal working capital consumption in Q4, mainly from an increase in accounts receivable between large number of buses that were deliberate late in the quarter and an increase in inventory stemming from the strategic decision to start up on battery cells normalizing for these two items free cash flow burn would have been closer to 120 million.
Our cash position gives us ample flexibility to fund our operations, while continuing to invest for future growth.
So that's an important part of our Q4 and 2021 financial statements I wanted to mention is that we will be filing a <unk> 25 form today with the SEC and we need extra time for our auditors to finalize our review of our fourth quarter.
Results.
Given it's our first year.
Accelerated filing requirements, we ran it.
And so we just needed.
So a bit more time to file.
With that I'll pass it back to Gary for his closing commentary.
Sure Yes.
Okay.
I'm very excited to have someone who is capable and dynamic is karina on board to help us find the right balance between.
The investment in growth.
Operational disciplined on items like margins and cash.
But I was providing the opportunity to move to pretend.
It was an easy decision and not leave a fortune 500 company to join an up and coming technology company lifeboats era, because of one <unk> and beyond.
Vehicle electrification is one of the great secular themes offering one of the select multi dose.
Okay growth opportunities before us today.
The transformation in how we transport ourselves and goods around the world is absolutely imperative for us to accelerate if.
If we ever expect to address the existential environmental challenges confronting the world over the next few decades and leave the world's innovation.
Not only for our children, but our children's children to enjoy it as much as we can.
This is not about the key shale saving the world. This.
This is about savings entity.
Standard of living as we have taken for granted not only our whole lives, but for generations before us.
<unk> power 40 to clear <unk>.
And I'm sure a lot of this call agreed the global fleet of vehicles is on the path towards zero emission. It has begun with passenger vehicles and the next phase is commercial and industrial.
And the electrification of the global fleet of commercial vehicles will require an enormous supply of factories full.
<unk> costs were electric penetration of trucks or buses from ICT and Morgan Stanley suggests the market for commercial vehicle battery in North America and Europe .
Currently 40 gigawatt hours in 2025.
Thanks to a 100 gigawatt hours in 2008.
So please stop and think about the magnitude of those figures for a moment.
This is a loss of vaccines.
And this is from a base of maybe a two gigawatt hours today.
I believe there are a few players in the world that will be able to achieve a maintenance free safety performance and cost attributes required for commercial <unk> industrial vehicle batteries and even fewer that can provide the scale.
The one is in this space.
We'll capture most of this opportunity what exhibit.
Execution.
Conscious have a strategy.
It must have the ability to execute on those two.
People the team with engineering competence and passion to succeed.
And finally three okay.
Technology.
That could break new barriers in performance.
It actually accelerates adoption.
<unk> demonstrated our capability in all three dimensions already.
First on execution.
Designing a product is not the same thing is producing and producing that is not the same thing as high volume manufacturing.
We are not only produce 500 megawatt hours of batteries as well as 800 electric transit buses through the end of 2021, but are poised to be producing batteries, a multi gigawatt hour scale in 2023.
<unk> has already built a mature manufacturing and supply chain operation, we have the capacity in place at three facilities already up and running for years.
And have demonstrated the ability to rapidly scale, we built our city of industry fast factory in less than a year for under $20 million and our thick and 635 megawatt hour battery factory also in less than a year were under $20 million.
And now we are on track to build in less than a year, our battery factory with 327000 square feet of manufacturing space.
To produce multiple gigawatt hours of batteries per year.
As well as drivetrain and ancillary electrification components and quiddity, we had the wherewithal to establish alone battery cells through 2028, including from a U S facility.
On the key.
Our people are our most valued assets.
Take the initiative on their own.
Turning towards a common goal.
With that our low cost <unk>, there is no product and that means to service a two.
We're all here to make a difference.
A better future for all of us.
I am grateful for all workout team pursuing every day throughout the year as I expect our shareholders will be when they see the results of the case that over time.
Finally.
And most importantly, we have the technology.
Factories are not easy.
Hi.
Very hard.
I will now talk in the last few batteries co passenger vehicles, but heavy duty battery cable.
Meeting the much larger payloads and tougher GE cycles required for commercial <unk> industrial vehicle applications.
Batteries are not like semiconductors, as you Jan more and more transistors onto a square inch, particularly is not likely to become more volatile.
With heavy duty commercial vehicle batteries. It takes a unique balance of technology engineering menu.
The factoring and electrical integration into the vehicle to be able to maximize the amount of energy on board one vehicle to handle payloads.
Tens of thousands of pounds in some cases.
And achieve long cycle, Lachlan can handle daily charge or discharge as well around 10 plus years.
And you still have cost maintained an exceptional safety profile it minimizes thermal risk.
All at a total cost of ownership that is viable for fleets to profit on a cost per mile basis.
Because the first applications of our technology our in transit buses in school buses with a high safety standards. We've honed in on every one of these factors for year.
Not only intimately know what peak needs, but more importantly, what we must be to meet those needs.
Demonstrating our excellence.
<unk> battery technology has been adopted by 13 Oems across 19 vehicle programs spanning three cargo vans and cost 46 work trucks to in plastics, and Jim delivery vehicles, and class eight tractors, including even fuel cell trucks.
Through school shuttle and transit buses.
And as also Brian can new barriers and industrial electrification empowering multiple off highway categories at many didn't even think viable for electrification years ago like mining equipment construction equipment and container handling at ports.
We are on course to <unk> technology powering everything from delivery vans, bringing packages to your door to school buses, bringing your children home in the middle of the week.
Two tractor trailers carrying goods between cities.
'twenty, John excavated Guinea alternative construction site, and forklifts and container handlers that carry loads up to 75000 pounds of course the performance so far.
Product, it's about your ability to continue to improve your products and stay ahead of the curve, but I think leading the market but accelerating.
Checking the box not chasing it.
Our fourth generation battery already lead the market and optimizing energy density lot insights.
With our new App and factory and get humming.
On line later this year, we will be launching our first generation battery that is targeting another leap in energy density, while still offering thousands of charge discharge cycles to support.
Put an approximate 10 year life.
While still maintaining our exceptional safety profile and further lowering our cost per kilowatt hour.
We believe we have the technology and manufacturing platform that centers in the middle of the commercial vehicle electrification ecosystem and positions us to grow as electric industrial and commercial and industrial fleet accelerates.
So we've covered a lot on this call, but if I sum that up in simple terms 2021 hasn't been easy, but our team does an excellent job managing through all of the unexpected challenges.
2022 is not starting off any easier.
But our biggest constraint to growth this year is not demand.
And how much supply chain and production capacity allows us to produce.
We grew revenue, 23% year over year and traded for anyone.
And have now grown revenue at a compound annual growth rate of 25% since 2008.
Assuming no major deterioration in production and supply chain dynamics revenue growth in 2022 should accelerate to between 24% and 34% year over year.
So between $300 million and $325 million in revenue.
While we have a plan in place to improve gross margin over time as the supply chain environment normalizes.
Short term uncertainty the size over the next three CA world is going to need tens of gigawatt hours of heavy duty battery.
<unk> for commercial vehicle Judy cycles and.
<unk> is the technology the team and the ability to execute.
To play a major role in this emerging market.
We also have the capital to fund our technology development and expansion plans.
The first priority is to capture the opportunity.
The next stage is optimizing the results.
We will no longer allow we can also start focusing on it.
Optimizing the results.
I can't imagine a company better positioned for this opportunity.
Im excited to be able to shepherd for Tara on the path to get there.
With that we will open it up to Q&A operator.
At this time I would like to remind everyone in order.
To ask a question press star followed by the number one on your telephone keypad. If he would like to withdraw your question again press star one in the interests of time, please limit yourself to one question and one follow up question.
Your first question comes from the line of Courtney <unk> with Morgan Stanley . Your line is open.
Hi, good morning, guys aircrafts.
It's been a long day.
If you could.
Just give us a little bit more color on the guidance for power and energy revenue to more than double to <unk>.
100 million.
How should we be thinking about how the powered side should ramp versus the energy side.
You talked about a.
A couple large infrastructure.
Cartoon projects that should be flowing through but then.
Also I believe you talked about.
Some contracts that were creating.
So they were priced aggressively from 2018 are those also.
Included in that $100 million and will there be any margin dilution associated with that.
Okay. Thanks.
Great question.
So as far as the 100 million for power and energy goes.
We have a strong order book for power production through.
Through our contracted orders going into next year. So we have.
Yeah.
Our current line of sight to the production requirements there.
The energy business.
A little harder to have a clear line of sight to the.
Timing of those projects.
Highlighted on previous calls and again today the.
The infrastructure projects can be.
Be less predictable given the just the nature of the environment, we're working in.
<unk>.
Land is not ready for us to be able to install equipment at a given time for whatever the reasons.
It does.
Create some <unk> for us.
Sort of environment.
Little harder to be.
Accurate.
The timing of those programs.
So we're not we don't split the.
The.
Our revenue forecast with powered energy, but certainly we have a much clearer line of sight to the order book and production timing of what's on the powered book than we do on energy.
I appreciate that you guys don't split out maybe if you could give us any guidepost for battery system targets versus.
Megawatt.
And charging infrastructure installed for the full year.
Give us some framework there.
So again, we don't know we don't break it out into what portion of the revenue is coming out of pilot and what portion is coming out of energy I think it would be fair to say that in 2022. It biases towards powered given the clarity we have on the order book on the production planning we have for that.
Product.
And as I say on the energy side.
We have a little less.
China is it the timing of the site implementation and so our bias is towards powered.
Okay Fair enough and then just wanted to follow up on the transit side, Yes, I think youre originally intending to add a second shift next year now it sounds like guidance, that's only assuming one shift.
Can you give us any color on.
What type of improvement in the supply chain or specifically, what the bottlenecks are.
And then in the back half of the year.
Yes.
First of all let me just say as regard to 2022.
Demand is not the challenge for US we've shared with you that.
Our contracted orders.
Susan.
Backlog for both transit and power and energy is healthy.
Roughly $1 $3 billion Mark.
We're confident in the demand that lies ahead of us.
Your point about Tom's of production, yes, we are still constrained.
Running on a one shift operation intention.
Until we can ensure that we have stable material flow to the line to be able to keep an efficient second chip running.
It really doesn't make sense to ramp up and scale from a cost efficiency point of view.
So we're eager to get a second chip running but right now the.
The challenges we see on the supply chain side like we reported last quarter I mean, raising is still a significant material constraint for.
Connectors and wiring harnesses.
Until we have good stable flow of product like that it's very hard to scale up a second shift in your production line.
I would also say the.
Yes, the actual physical product, where we had some constraints on supply, but also the situation around distribution and freight across the globe is still very challenged pulses, so clogged up.
We see long delays in getting product.
From point of manufacturer to point of our production line.
In some cases, but more importantly.
Its still little unpredictable, so ultimately what we look.
And cost effectively as I said the demand is not a challenge we have the demand and we're ready to meet.
Should we have the team to execute on it we have the production capability. We have the quality management systems, we're just going to make sure we get stable material.
Thank you.
Your next question is from the line of Brian Johnson with Barclays. Your line is open.
Thank you just kind of continuing in that vein.
The $1 3 billion backlog just want to confirm that's up from $7 50 last year.
Which would imply a pretty healthy book to Bill ratio that's correct.
I know youre, not giving backlog quarterly.
That's right I mean, we committed to report our backlog once a year and.
This is the time that we're doing it and you can see here.
Yes.
The book has both Nokia and its well balanced between the portfolio as we noted.
400, <unk> $450 million on transit and alright, Ron about $800 million.
Power and energy.
Okay. So clearly that one 3 billion supports more than the 300.
Your guidance for $300 million next year.
But if you don't find anything else that would only be.
$330 million a year in 'twenty three 'twenty four 'twenty five so I guess, a couple of things kind of work.
If we get some comfort in growing well beyond.
Beyond that $300 million, and then two and I think.
So we are circling around that in the lab.
Question.
If there werent supply chip supplier other supply chain constraints.
Given the career factories.
Would be the theoretical Max capacity Max production for next year.
Excuse me for this year.
Sure.
Yes.
As you know.
From a single shift operation, we're running at around about 200 units. If we can run two shift operation for trial.
On the bus.
Capacity of around 400 units.
Okay.
Once we can get get the line fully.
Aligned with raw material, we certainly have growth potential from a production point of view and the ability to.
Feed into that order backlog.
Okay.
And in terms of pipeline.
Negotiated but not yet signed at that support further backlog growth into next year.
And therefore, maybe a little bit of parity when when we when we talk about contracted orders that typically on a powered side out of our business. The way we both of those contracts.
As we report on minimum order quantities.
On the transit side here, we talk about.
Backlog, which is typically what comes from.
<unk> that we would receive from transit authorities.
And in those cases, we know they have the funding in place to support those LOI.
We don't count options in our backlog. So what you have in that that number is essentially what we know under the NOI.
Two.
Sure.
Numbers.
Okay. Thanks.
Your next question is from the line of Sharif Hello, Savvy with Bank of America. Your line is open.
So first of all.
You discussed the guide a bit too much but.
Some of the numbers that have been provided around.
From 2022 outlook prior to this would you say that without any of the supply chain constraints that those numbers would.
Likely be achievable given the demand backdrop.
Yes, I think if.
If we think about the growth outlook.
As I noted the demand is there.
Yes, we're talking about so that.
Yes, Dan meeting roughly 40 gigawatt hours of batteries by 2025 for trucks and buses just in Europe and the U S from.
Yes, what today is just a couple of gigawatt hours.
The demand is there, but if you consider what sort of disruption received to supply chain and production in the past 12 to 18 months.
The demand curve does shift to the right.
Yes.
Simply because the around and being able to fulfill the demand.
So that kind of does move to the right.
And so the rate at which we continue to build our growth.
<unk> is a little.
Different to what we saw 12 to 18 months ago.
One our confidence in the areas that when you have the demand out there we demonstrated with a 25% compound annual growth rate since 2018, and now guidance towards 24% to 34% growth for 2022, we have a constant driver, but we're not going to give a forecast.
On an outlook.
Yes, it's just not clear enough for us to see full five years out from now given the kind of disruption we've seen in <unk>.
The suppliers.
And the final thing I'd, probably comment on theirs.
That speaks a lot to the concert environment on duals. So just wanted to mentioned that battery factory three.
Our next comes on stream in Greer South Carolina.
It's fourth quarter this year.
Yes.
Credit as benefit of that comes in 2023.
They were also very excited to be able to set up a large scale facility, where we have the opportunity to not only meet demand bond, but also good in a cost efficient way because it's a large scale.
Production facility so.
So theres a lot of.
We can lean into.
As we continue to secure a better supply chain fulfillment.
Understood. Thank you and just as a follow up on the gross margin.
You mentioned that there were pass throughs that would take some time to come into effect.
What's sort of the lag. That's currently built into those contracts and are you taking a different approach to your long term contracts.
After this last year of turbulence.
<unk> I'm, sorry, I missed the first part of your question.
Goodbye.
But on the line for a moment, which mind just repeating it for me.
Of course, you had mentioned the there was a bit of a lag with some of the pass throughs and long term contracts, what's sort of the timeframe of that that's built into the portfolio of long term contracts and are you taking a different approach to those contracts going forward given the turbulence in the past year.
Yes.
Coming to us specifically relating to the energy business, where your book.
<unk> charging infrastructure, that's sort of fleet scale solutions to meet the needs of these.
Yes.
Definitely charging requirements for multiple vehicles running on us out of a single <unk>.
I can appreciate it those are pretty large scale infrastructure projects.
As I mentioned infrastructure projects R. R.
Yes, it's coming around.
I can't say with any certainty.
Bringing but.
We certainly continue to.
We are typically working with government.
On those talked about.
Adjustments.
Okay.
Your final question comes from the line of Steven Fox with Fox Advisors. Your line is open.
Hi, good afternoon, thanks for taking my questions.
Two questions first off.
Can you address a little bit more in detail the inflation pressures youre seeing.
From two aspects. One is I think you mentioned that youre going to try to reprice some of your backlog, which doesn't seem to be having much success in the supply chain to date, So where do you think you could have success on that and then secondly, when we think about sort of some of the guidance you gave for this year.
What are you sort of thinking in terms of inflation going forward from here and then I had a follow up.
Sure.
First of all I think.
On inflation, specifically, what I would say is we're seeing the cost pressure already in our business.
We responded to that and have.
Engage in discussion with existing customers.
The opportunity to see price relief.
Given that input cost pressure.
We continue to add those does discussions on an ongoing basis, but equally we are also for product that is.
Being sold at the moment by our team we have taken price action already.
So I expect that we will see some benefit from that.
Coming on the supply side.
We responded on the.
Yes.
Demand side and there is a lag effect that occurs between.
And the opportunity to recover some of that impact.
And what about repricing in the backlog is that.
A significant heart failure or is that sort of on the margin I'm trying to understand the comment that priority right now.
I think there is a significant effort there are some contracts we have in place with customers that allow us to.
Respond to inflationary pressure and others do not so we don't have a margin as contract environment.
As you can appreciate the transit authorities in contracts for the buses were very different to our contract might look like for a power customer and equally for an LNG contract. So it's not a homogenous contract landscape, but we do have opportunity in <unk>.
Okay. That's helpful. And then just lastly, just bigger picture understanding that obviously a lot of these impacts are out of your control but.
Trying to set expectations correctly.
What im.
I'm thinking about the new batteries.
Okay plant coming on line by the end of the year the risk that that gets pushed out.
Risks that you consider agency constraints.
On.
Wiring harnesses, even though you have a massive backlog that could grow a lot more this year.
How do you leverage that backlog in order to become.
Sort of get a bigger pencil in the supply chain and make sure that you start hitting a lot of these aggressive plans. Thank you.
Yes. Thank you Stephen that's a great question.
As I said, we are a business that is run from startup to scale up.
So first of all yes, we have a leadership team in place and our broader team that is.
Experienced in and running.
Running production systems operations management systems supply chain systems quality systems, that's an important tool.
To have at a time like this.
So we have in our supply chain team of continuous.
Protests.
King at how we can.
Find opportunity to in some cases consolidate volume to get volume opportunity with a supplier, where we think that that will be beneficial but in other cases, we actually have to.
Look for alternative sources of supply and diversify our supply base that we derisk it.
That's a constant series of actions that you have to go through to make sure that you are optimizing your supply chain risk.
So there is no single action around that that is a process of continuous optimization given that we're in a dynamic market where it is in fact, sometimes very difficult to predict when the next constraint by com. So I think one of the big assets. We have is the management operating system to be agile and be able to respond.
To the market and we are continuing to invest in that and improve our capability.
One one action as we shared on our supply chain.
Yes.
For our supply chain team.
And it's continuing to think about opportunities like that.
To ensure the security of supply.
Alright.
I appreciate all the color. Thank you very much good luck going forward.
Thank you Steve.
There are no further questions at this time I will now turn the call back over to Mr. Gareth Joyce.
Well thank you.
I'd just like to express my sincere thanks to everyone who joined us today.
And certainly looking forward to the exciting journey that lies ahead of us I. Appreciate your time. Thank you.
Ladies and gentlemen, thank you for your participation. This concludes today's conference call you may now disconnect.
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Okay.
Okay.