Q1 2022 Canoo Inc Earnings Call
[music].
Greetings and welcome to the Canoe first quarter 2022 earnings call. At this time, all participants are in a listen only mode.
A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please.
Please note that this conference is being recorded.
I would now like to turn the call over to our host Nick Cunningham Senior Senior Vice President of Investor Relations and capital markets. Thank you you may begin.
Welcome to <unk> quarterly earnings Conference call. This is Nick Cunningham and I'm, the SVP of Investor Relations and capital markets that can do.
This is my second earnings conference call since joining the company and I'm thrilled to be working alongside such experience and innovative partners today I have with me Investor Chairman and CEO , Tony Aqua and interim CFO and Chief Accounting Officer, Ramesh Mercy Tony.
Tony will give you an update on our business last quarter Ramesh will then run through our financial results for the quarter. He will then turn it back to Tony who will provide closing remarks, well then open the call up for questions.
Please be advised we may make forward looking statements based on current expectations. These are subject to significant risks and uncertainties and our actual results may differ materially for a discussion of factors that could affect our future financial results.
And business. Please refer to the disclosure in today's earnings release and on our most recent Form 10-Q, and 10-K and other reports that we may file with the SEC, including form eight Ks all of our statements are made as of today and are based on information currently available to us.
Sept as required by law, we assume no obligation to update any such statements. During this call. We will discuss non-GAAP financial measures you can find the reconciliation of these non-GAAP financial measures to GAAP financial measures in today's earnings release, which can be found on the IR, what IR section of our website with that I will turn the.
Call over to Tony Thanks, Nick and thanks, everyone for joining us today for an update on our Q1 2022 activity last quarter. We made it clear that we are a high tech customer centric advanced mobility company.
Two all are believers and supporters. Thank you for writing alongside US on our journey today Im going to cover highlights from the quarter, including our solid and growing partnerships with two states and the nation.
NASA win and update on financing and our progress towards production.
Governments around the world are helping to accelerate the migration to even clean energy.
We are inspired by our future forward partners in the state of Oklahoma, and Arkansas as well as the Cherokee nation.
Which continue to attract significant technology investment to the region.
He was recently in Oklahoma, where Google announced an additional investment in the state where they have invested a total of $4 4 billion in their data center and prior.
The data center is the second largest in the world. This adds to the growing number of leading companies investing in the region.
With the passage of the large scale economic activity and development or if you will need to act. We believe the state of Oklahoma will offer an increasingly business friendly climate.
The legislation creates a nearly 700 million dollar program to incentivize top job, creating businesses to invest in Oklahoma.
The Bill received overwhelming bipartisan support from the Oklahoma legislature, passing the Senate by a 41% to five vote in the house.
81% to 17 mode. Thank you both the house and the Senate for their support of this monumental achievement I'd like to give a few shout outs.
Starting with House Speaker Charles Mccall.
President Pro 10 grade treat and governor state for their incredible leadership.
Senator Roger Thompson, and the representative Kevin well Wallace deserves particular credit for helping to draft and pass this important legislation.
Thank you Senator Kevin Matthews of Tulsa, and your Democratic colleagues for your help in driving bipartisan support for this deal.
We were active in supporting this initiative and are encouraging key partners to invest in the region.
We appreciate the support from Governor Asa Hutchinson and his collaboration with Oklahoma is positioning Arkansas as a leader in advanced mobility and clean energy and we are here to assist.
He established a three state partnership with Oklahoma, and Louisiana to create a regional hub for the development production and use of clean hydrogen.
I hosted a hands on event in batten Bentonville, which includes several ldds.
It was attended by fleet managers from municipalities and state agencies of Oklahoma and Arkansas.
In June we are planning to attend the up summit in Bentonville, which includes visionaries across multi dimensional mobility community. We are gathering to generate ideas that we believe will challenge and change the mobility landscape over the coming quarter, we expect to me.
Move a 1000 vehicle order from the state of Arkansas from stage two to stage III.
Our team will continue to work with the states for additional incentives to further solidify the region as a center for advanced mobility.
This environment was selected for the combination of two visionary states and our nation.
The Cherokee nation, where we stand by our commitment toward workforce development, we have already broken ground on our Mega Micro factory in Pryor, Oklahoma and are getting ready for the next phase of development.
I would like to personally thank our government affairs team in particular, Chris Moore for their many many months of work in supporting initiatives within the states and the nation.
To the citizens of Oklahoma, and Arkansas, and the Cherokee nation for the strong support we have never felt more welcome.
Great news as well the final <unk> dilution condition related to this shareholder DB Global holdings has been satisfied and we are no longer subject to any further provisions under than National Securities agreement.
On the federal level. The administration continues to make strides with the National Electric vehicle infrastructure Formula program, which dedicated seven 5 billion in infrastructure funds over the next five years to the states for additional EV charging stations.
<unk>.
Our five initial rollout states will receive over $665 million.
<unk> five 8 billion allocated to states to fund EV charging infrastructure with over 50% of that rolling out in the next three years.
Yeah.
An additional $2 5 billion will be devoted to EV charging in rural areas and in underserved communities.
In March the administration authorized use of the defense production Act to provide funding for mining processing and recycling of lithium.
Nickel cobalt graphite.
And magazines and other materials, while the benefits from this initiative may not be immediate we believe it may increase the supply of these materials from domestic sources over the medium to long term this potentially benefits our partners like Arkansas, which has.
One of the nation's largest lithium reserves.
We were chosen by NASA.
In a competitive process to produce vehicles that will transport astronauts to the launch pad for the Artemis lunar missions.
These will be the first electric NASA crew transport vehicles.
The Artemis program will be the first human lunar landing in over 50 years.
We'll be the first to bring a woman and a person of color to the moon.
A quick shout out to representative Steve Wallach from the third district of Arkansas, who recently highlighted our NASA contract on the house floor.
Artemis may well prove to be one of the longest running space programs and we are honored to partner with NASA. In this historic endeavor over 600 million people tuned in to watch the first moon landing in $19 69.
With today's media landscape and population, we anticipate billions of impressions associated with the Artemis program.
These vehicles will be produced in America by the people of the Heartland, including Native Americans and veterans, we look forward to sharing more info in the future.
On to financing, we have been clear with our partners and associates regarding our philosophy of raising capital judiciously.
We will continue with this disciplined approach.
It is a different market te today.
With challenging conditions, but our strategy aligns with this type of market environment.
We live in uncertain times, the team and myself have successfully navigated similar turbulent markets in the past.
I reiterate we will raise appropriate amounts to satisfy what we need bridge two milestones and be in a position to take advantage of our track record our value creation and potentially improving market conditions.
To start we entered into a $250 million equity purchase agreement with financing partner Yorkville Advisors next we have a commitment for a $50 million pipe from an existing shareholder further demonstrating long term support and belief in the <unk>.
Company.
We also filed a $300 million shelf, bringing our total accessible capital to 600 million optimizing our financial needs to S. P.
We are in ongoing discussions with parties for additional financing as it makes sense based on our disciplined approach to managing our execution plan.
A related party is exploring raising up to 100 or excuse me up to $1 billion of non diluted capital for the construction of the prior facility.
Oklahoma Mega Micro factory and mid America Industrial Park in the form of an ESG clean energy Native American affected communities opportunity zone funding vehicle.
Further to our our focus on sourcing lead generative non diluted investment capital. This taps into eco friendly high net worth investors focus to deploy this capital in a tax efficient manner that makes a big ESG difference.
Moving on to supply chain dislocations risks and achievements, we have sourcing 95% of parts for our Lv and LD be domestic production and are grateful to be sourcing 91% of parts from the U S and Allied nation.
Yes.
We take a different approach to traditional problems in the supply chain, starting with our design, which requires 50% less parts today.
Today, we have arranged for an on time delivery of 100% of the required semi conductor chips for gamma NTT builds builds.
Building on what I said last quarter supply chain issues have worsened.
Especially as things have heated up on the geopolitical arena.
We are still in process of securing on time delivery of 26% of the semi conductor chips needed for <unk>.
Which at standard cost represent less than 2% of our bonds.
This issue has our teams full attention and we are working aggressively to resolve it as many Oems and others have indicated there may be industry relief for the semiconductor supply chain shortage coming in just in time aligning to our Q4 2022.
We expect to hit in.
In Q4 2022.
What remains is whether we will hit our full target of three to 6000 units is still remaining open.
Since the end of Q1, we have more than doubled the gamma builds to 39 vehicles. We completed our second year of deep winter testing of more than 2000 additional miles.
We will soon be entering desert testing for the second year validate our systems once temperatures have reached optimal conditions.
There is an open invitation to any analyst out there that covers us that would like to come down to do a test drive and one of our complete gamut you will find it exciting and different experience.
With gamma is increasingly coming off the line and entering testing.
We are preparing to start the scale.
Production at our Bentonville advanced manufacturing facility.
Our second building is going up now and we are Frontloading battery production for S. P.
Battery module production increased over 156% sequentially to battery modules for 43 gamma vehicles.
We have been hiring and training personnel for Bentonville and they are currently training on our battery life.
Onto sales our stage two orders have increased 17% from Q4 2021 to Q1 2022 totaling over 17500 units to date, our preorders are completely organic we continue to move forward sales dis.
<unk> with several key partners and we solidly anticipate that we will be sold out.
This year and next we will keep you updated as we make further progress with our sales efforts.
I would like to thank our partners our suppliers our employees for continuing to contribute to Canadian mission.
We are here today with the spirit of embracing challenge and change rather than shying away from it and now for our financials Ramesh.
Thank you Tony.
First quarter of 2022 results are as follows.
Search and development expenses of $82 5 million for the quarter compared to $39 3 million in the prior year period.
Excluding $7 million of stock based compensation research and development expense was $75 5 million.
SG&A expense was $55 6 million for the quarter consistent with the prior year period.
Excluding $13 7 million of stock based compensation SG&A expense was $41 9 million.
GAAP net loss was $1 $25 4 million for the quarter compared to a GAAP net loss of $15 2 million in the prior year period.
GAAP net loss in the first quarter of 2022 included a $15 5 million noncash gain on the fair value change of earn out shares liability related to the periodic remeasurement of the fair value of a contingent earn out shares liability.
Adjusted EBITDA was negative one 107 $4 million for the quarter compared to negative $49 8 million in the prior year period.
Turning to the balance sheet and cash flow.
We ended the quarter with $104 9 million of cash and cash equivalence.
Cash used in operations for the three months ended March 31, 2022 was $1 23 million.
<unk> to $53 9 million for the three months ended March 31 2021.
Capital expenditures were $28 4 million for the three months ended March 31, 2022, compared to $12 1 million for the three months ended March 31 2021.
Due to the timing of the inflow from our announced funding management has added a going concern qualification to our financial statements for Q1.
Turning to our guidance.
For the second quarter of 2022, we anticipate the following expenditures.
<unk> $95 million to $1 5 million for operating expenses, excluding stock based compensation and differentiation and approximately $85 million to $105 million for capital expenditures.
Before we open the call up for Q&A.
I'll turn it over to Tony for closing remarks, Tony.
Thank you.
The mesh.
We will push forward to support workforce development within the Heartland, where we will build our vehicles. We are committed to technological industrial level change, which will upset these communities and uplift than our commitment to hiring and training.
A workforce consisting of veterans and native Americans is just solid.
We are in a good spot to listen to learn to act and to provoke this change.
We'd like to thank again, our partners, our suppliers and our associates for their unwavering support of our mission as always we will keep our eyes on the goal and stick to our philosophy of Big News are no news.
Q.
Operator, please open it up for questions.
Thank you and at this time, we will conduct our question and answer session.
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Once again to ask a question press star one on your telephone keypad will pause for a moment to poll for questions.
And our first question comes from Sameer Joshi with H C. Wainwright. Please state your question.
Yes, thanks, good afternoon, everyone.
Just a quick question on the expected Capex.
Oh.
Amongst the guided during the previous conference call also around $60 million to $80 million.
It came in at $28 four ish million.
Was this related to financing timing or was it related to some other.
Yes.
Yes. Thank you so maybe for your question. So it was not related to financing timing frankly, what it is.
It's more it's a payment related to milestone recognition of our fixed asset. So once we get fixed assets, we have to follow the accounting rules for milestone recognition. So what youll see lower on Capex. In Q1 is what gets picked up into Q2.
Right and so that's why the guidance is slightly higher for this quarter.
So for the year.
Are we still looking at that one and this is our estimation of around 245.
$230 million to $250 million.
So I mean as you know, we typically provide guidance only for one quarter. So we provided our guidance for Q2 2012.
But I think I think our capital raising efforts kind of tells you.
And if you know our track record and pretty disciplined here.
Yes.
It was going to remind next question.
The 250 <unk> looked at recently.
Sure.
With me.
What do you expect the timeline could be four one.
Sure.
Closing off the hook on the drawdown of the two.
Jim.
I mean.
The first type will probably close this week.
<unk>.
Yes.
No problem and then just after the S three filing.
Access to New York Mill. So that's a couple of weeks so it's pretty it's virtually immediate.
Understood.
One more question on the reveal that there was some return of prepayment of around $34 million.
Out of the way or.
Is there anything more to be expected.
No, but we continue to have a working relationship with them.
With the video there.
Really doing some stuff with us so we have a continuing relationship. So we're continuing to receive benefits from our partnership.
Understood and.
Congratulations on the math.
Lesion ship.
Can you give us a little bit more.
Insight into.
Now until the vehicles are launched.
What kind of testing or pre qualification.
Any other.
Check boxes milestones that you need to achieve.
Yes, so look I think that the thing that we're very focused on is the second building in Bentonville. The first building is up.
It's.
Getting ready for some of its installation work.
Second building is moving at record speed. The team there is doing an incredible job.
That's pretty big focus for us obviously, because bentonville can produce 20000 ish vehicles for us.
I think also in addition to that you saw the commentary about exploring more non dilutive capital.
And the essence that the MAA IP.
We're building this as an opportunity zone, so that could give us access to some very interesting capital.
And.
A lot of people talk about ESG like its a thing.
For us it's just our culture.
That's why we're doing what we're doing so.
It aligns well.
To be very focused on that in the quarter. In addition to that the micro chips.
GAAP for Sop.
<unk> secured gamma and TT.
But.
That 2% of.
Of the Bom cost does give us a little bit of agitation. So we're going to pile on that and find the various sources.
One thing with using half the number of micro chips of almost all vehicles out there.
It does make you more reliant on the chips you have coming in EMEA.
Yes, yes.
I know <unk> answered the next question.
But.
For my side.
Is there any.
Are there any additional hurdles or milestones that can be true.
Okay.
Before I believe.
We launched the Moon.
Yes.
This is a constant.
The contents of that would be confidential and really an asset discussion.
Any discussions we make on that would most likely be joint.
<unk>.
Authorized but it's a very exciting program.
In fact, I will be spending most of the week there.
With some of our team members.
<unk>.
I'm really proud of what the country is doing and it's just an amazing privilege to be a part of it.
Yes, yes.
Congrats on all the progress you've made thus far and good luck.
Thank you. Thank you.
Thank you just a reminder to ask a question at this time press Star one on your telephone Keypad Press star two to remove yourself from the queue.
Our next question comes from Jamie Perez with RF Lafferty. Please go ahead.
Good day, everybody and thanks for taking my question.
Question could you give us an update on the equipment in the plant. We told me I think last quarter, you gave us an update on how much is in the plant and I'm sorry could you just give us some color on that.
So we're producing vehicles now.
We're.
Running somewhere between.
And I'll call it.
Up to 12 units a week right now so we have that is giving us a chance to work with our current robotics.
Everything and work out our processes.
When you have half the number of parts and you have a unique design that's designed to be repairable.
It actually is proving to be more.
Much better.
We have areas that we've been able to accelerate.
So that we can improve our processes.
So.
Those items are going in there we're testing and we're fine tuning them, we're getting them ready for SLP in Bentonville.
And I.
I don't know if you guys can travel yet but.
Love to have you come down and drive them.
Driving this vehicle by wire is an experienced and so we'd love to have it come down.
Well I'm not that far away.
I'll take you up on your offer.
The the gamma vehicles are there.
Testing audio in customers' hands.
Customers if they are a customer for the individuals off fleets could you just give us some update on that.
Yes, so right now we are using them for customer engagement.
And and were primarily concentrating on fleet customers right now.
Alright, alright.
Now as far as the preorders is the bulk of that fleet customers of our individual reserve those are purely organic we haven't laid in there anything but the at 1000 of the 2000 fleet orders.
And I believe me.
Maybe.
Some probably one third of it is coming from various fleets.
In.
In the auto maybe maybe a little more than that I'd have to get the specific breakdown, but we can get that to you. If you want it.
The focus for US right now is obviously on.
Larger users because we want to book ourselves out into priors opening.
<unk>.
Right now.
Feedback from these large clients as far as the performance of the vehicles.
Requirements, because we have other evs.
I've been in touch with their.
Potential clients.
Fleet clients and it sort of.
Demand at some.
Load requirements.
How is that going along with the.
What kind of scale and really it's going it's going really well I mean.
We should have played I was driving them around it and.
In L. A.
I guess a week ago.
And I mean people are just stopping us on the street.
Asking questions.
Pulling up to US one stop signs just because of the amount of space utilization turning right I mean the capabilities are.
You know this is the best I've felt about it.
It all coming together.
But the best thing is I would tell everyone.
When you drive it and you sit in it and you see it.
In your pocket next to something that you hear us do it just tells you what we did.
So that's going to be the best way for you to write year note.
It's actually come down and drive it.
Yes, I can wait, especially if the unit design now as far as enough congratulation on the Artemis win.
I know this might be a little bit hypothetical, but what other opportunities are you looking at and just because it's a pretty you mentioned.
It's a pretty visible.
Sure.
We will go to watch a countdown and watch a canoe vehicle.
The astronauts to the rocket ship so no other opportunity do you think this might open as far as.
You know maybe government are.
Other programs.
Well I mean I think.
You know Jamie we told you about our focus was.
To focus on the market movers, and really focus on purpose built activities and that.
Have a high return for our customers and for ourselves.
<unk>.
Obviously.
This is not just the only thing we're focused on right.
Although it's an important one.
But it does open us to engage with other government agencies, which we already are.
Alright, alright, thanks for the update that's all the questions I have I.
Have a great day.
Thanks, Jamie.
Thank you there are no further questions at this time I'll turn the floor back to management for closing remarks.
Thank you all for joining our call and have a great day.
Thank you all parties may now disconnect and have a good day.