Q3 2022 Electrameccanica Vehicles Corp Earnings Call

Who will offer some more granular insight into our financial performance. Shortly as you may recall from some of the announcements. We've made market is one of a number of senior hires we've made over the past few months as we continued to professionalize, our leadership team and improve our operational expertise in anticipation of our next phase of growth.

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Let's talk about the headline numbers.

Production for the third quarter was 103 vehicles dropped sequentially from this year's second quarter as our manufacturing partners and vendors were impacted by pandemic aftershocks and China's zero Covid policy.

But roughly the same as production a year ago.

We saw very slightly lower sequential solo deliveries during the quarter as we delivered 64 vehicles versus 68 last quarter.

Revenues were correspondingly slightly lower at 144 million versus $155 million during the prior quarter, but roughly 12 times higher than the same quarter a year ago.

Finally, and while we have a lot of work to do on this front.

Want to highlight that we also improved our gross margins by roughly 55 points from last quarter.

We expect margins to be volatile from quarter to quarter, given the unpredictable macro environment, but directionally, we're headed in the right way and I want to give credit to everyone and electromechanical who's working hard to make sure that we're running our business as efficiently as we can.

If you haven't had a chance to read our investor letter for this quarter I encourage you to do so.

But I wrote that there were three important takeaways from our business this quarter, let me touch on them briefly.

While we produced and delivered fewer vehicles this quarter than Q2, we don't see a slowdown in either demand or in our ability to scale in order to capture our horizontal market opportunity.

Our manufacturing partners, who faced a zero COVID-19 policy headwind are back on track and at the same time right. Now we are activating a new marketing campaign across multiple channels that we expect to have a significant impact at every point of our sales pipeline.

What this means is that across our key markets and in front of key audiences. The solar will be visible dynamic and changing the conversation around mobility.

If you want to see what this looks like there are linked to our newest video spots on our website and I also think they are terrific there.

Perfectly convey the excitement and energy and maximal minimalism the solo provides.

The second takeaway, it's clear to me that the decision to onshore our manufacturing capabilities to our own facility in Mesa was exactly right.

It will allow us to dramatically shorten our supply lines and associated lead times reduce costs.

Avoid unforeseen tariffs.

His direct control over manufacturing and operations.

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And not least the potential to create hundreds of jobs in our home market the United States.

And we got additional good news from where we were awarded a license to sell Evs in Arizona.

Part of our strategy is to be continually expanding our sales footprint, but Arizona and Phoenix in particular represent a valuable opportunity for electromechanical.

In many ways. It represents a place and population that could not more closely aligned with our vision of an ideal market for the solo.

It's one of the largest metro areas in the U S. It's home to thousands of businesses dozens of colleges and universities and tens of thousands of students.

This area has popular major league sports teams World class recreational facilities and of course, it's beautiful just outside the urban and suburban areas and some of the best biking, and hiking anywhere in the country.

To get a sense of the opportunity for the solo as most recent U S census data nearly one 5 million people in the area commute to work by driving alone.

That's an incredible number and opportunity.

For the third takeaway look I want to be candid about how difficult. This current environment is for everyone consumers are being battered by price increases on the things that matter. The most from food to housing to energy Bill.

Businesses faced similar cost pressures something we feel keenly everyday as we source the parts and materials, we need to build our vehicles.

At the same time electromechanical is in the fortunate position of having both high confidence in our strategy and our product.

And importantly, the resources necessary to pursue and realized that strategy.

Nothing about the current environment suggests to me that the long term market opportunity ahead of US has diminished in fact, the opposite is true in an environment, where the cost of simply getting to work is sorry. The solo is an elegant affordable solution for everyday need.

Sure by hundreds of thousands of computers.

And we have great people the right approach to manufacturing and we have managed our resources, particularly our balance sheet with a view to making sure. We have the runway we need to meet our goals.

With that and before I offer some final remarks, let me turn to Mark to review the financial performance.

Mark.

Thanks, Kevin and thanks, everyone for joining today.

I've had a chance to meet some of our investments already but I am genuinely looking forward to getting to know more here as a central and <unk>.

Kevin said earlier, our revenues in the third quarter were $1 4 million up 12 comps from the previous year.

Slide six 9% decline from the prior quarter.

Reflected by the reduction from.

68 solid deliveries to <unk> 64, a production as Kevin mentioned with the 100 between vehicles. We believe production figures are influenced by temporary pressures on our vendors manufacturing partners and related supply chain disruptions, resulting from zero cobot policies. Our gross margin was minus 66, 3% which represents.

A 55% sequential improvement from the previous quarter. Obviously, we are pleased with the direction. It's kind of this change are we mindful that we could experience some volatility on a quarter to quarter basis in the near term like every manufacturing business, we're managing against inflationary pressures and costs and the supply chain issues.

Over time as we complete the process of onshoring all.

Our manufacturing facility in Mesa This will enable us to have a greater control of our supply chain avoid unpredictable tariff policy and expect that this will positively contribute to our gross margins.

Our operating expenses, which include SG&A and R&D increased 14, 2% sequentially over the prior quarter to $20 9 million, reflecting higher costs to support our expanding operations.

We continue to be disciplined as possible when it comes to allocating our capital while at the same time.

Making investments that are core to our strategy and success as a business consistent with this our investments in both R&D sales and marketing have increased on a year on year basis reflected in the higher opex expenditures all in all our net loss for the third quarter was $21 5 million or six 1% sequentially.

Increased from the prior quarter.

Finally, and importantly, our balance sheet remains healthy with a working capital of just over $173 million at the end of the quarter, everyone is working hard here to ensure that the financial and operation machinery is in place to support our strategy and growth and we appreciate your confidence with that I will turn the call to Kevin. Thank you.

Thanks Mark.

Before I go I want to say again that I'm encouraged as I look forward, we have great momentum for both our vehicles and brand and our business.

On the vehicle front as some of you might have seen maybe even in person depending on where you live in September we launched a pilot project with California's largest pizza hut franchisee American West restaurant group.

Over the course of the 13 week pilot, which ends in December of this year.

W. RG will have put at least 12 of our solo cargo vehicles through their paces delivering pizza and its temperature controlled custom built cargo area across Los Angeles, and other southern California counties.

We will be learning alongside with the folks at AWS, <unk>, which will in turn contribute significantly to the development of our solo cargo program.

And as I said earlier, we are also continuing to up level, our senior leadership team and we are pleased to welcome not only mark <unk> and CFO , but also just welcome our new General Counsel and corporate Secretary Tony that both have hit the ground running.

Last quarter, we also committed to improving our communication and connectivity with you our investors.

We are making good on that commitment we have launched not only our refreshed investor relations web site, but a brand new landing page for not just investors, but any one curious about the latest developments in our business and our markets.

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We've already heard from a number of you that the insights and engagement are helpful and appreciated and we encourage everyone to visit.

Finally, and while it is some time away we will be hosting our first investor day at our Mesa facility in February investors will have an opportunity to see not only the plant and our assembly line.

Meet the people and electromechanical who are working everyday to meet the mobility challenges of the future.

We will provide more details on this event in the near future.

We're excited about the next quarter and the next year with the launch of our new marketing campaigns, the solo will be more visible to more people than ever before.

A pilot program with AWS <unk> will provide valuable insights as we develop the solo cargo ever.

Every day, we're closer to bringing our manufacturing onshore and in house and we continue to expand our sales footprint.

When I took over as CEO almost a year ago, I said that I wanted a company to be understood as an OEM.

Because that was how we were going to operate our business and deliver returns to our investors.

Aching and selling great vehicles.

Nothing about that has changed and everyday we continue to put the pieces in place that will allow us to scale into a mobility opportunity that continues to grow.

That's a lot to look forward to for everyone at electromechanical and for you our investors too.

Thank you again for your confidence and stays simply electric.