Q3 2022 CYNGN Inc Earnings Call
Greetings and welcome to the <unk> third quarter 2022 financial results Conference call. At this time all participants are in a listen only mode. A brief 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 as a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Carolyne Sohn Investor Relations for Simpson. Thank you Caroline you may begin.
Thank you operator, and Hello, everyone. Thank you for joining us the press release announcing results for the third quarter and nine months ended September 32022 is available in the investors section of the company's website investors that Finjan dotcom.
A replay of this broadcast will be made available on the website. After the increase of this call.
Before we get started I would like to remind everyone that this conference call and any accompanying information discussed herein contains certain forward looking statements within the meaning of the safe Harbor provision of the private Securities Litigation Reform Act of 1995.
These forward looking statements can be identified by terms such as anticipate believe expect future plan outlook and will and include among other things statements regarding the company's continued development on the enterprise economy suite or E S and its components expectations regarding sales into our revenues growth strategy ability to deliver it.
Painful long term value.
To respond to the changing environment and operational focus.
Although the company believes that the expectations reflected in its forward looking statements are reasonable as of today. Those statements are subject to risks and uncertainties that could cause the actual results to differ dramatically from those projected there can be no assurance that those expectations will prove to be correct.
Information about the risks associated with investing in Finjan has included in its filings with the Securities and Exchange Commission, which we encourage you to review before making an investment decision.
The company does not assume any obligation to update any forward looking statements as a result of new information future events changes in market conditions or otherwise, except as required by law.
On today's call the company's chairman and CEO Leo Tal will discuss recent operating highlights chief.
Chief Financial Officer, Don Alvarez will follow with a review of the company's financials for the third quarter and first nine months of 2022.
You all will return to make a few concluding remarks before opening the floor for questions with that I will turn the floor over to New York. Please go ahead.
Thank you Caroline and good afternoon, everyone.
Towards the end of the third quarter and in November we announced several major developments that processed further ahead.
Go to market timeline, since becoming a public company and closer to scale commercialization well first software offering.
First key development was the signing of a multi phase contract with a significant new customer has chosen <unk> as a technology partner.
<unk> two electric fortunate.
Electric forklifts will be the customers first autonomous vehicle as it embarks on its electrification and automation strategies.
This partnership marks stringent extension of grid Mod second vehicle platform.
Geared towards commercialization.
Excited to have the opportunity to work with this customer a multimillion dollar global manufacturer with variety of building materials used in commercial and residential book.
We've worked closely with the customers to.
I understand the operation, which will allow us to apply our enterprise departments, we create differentiated value proposition for them.
The second major development was quite quickly.
With a U S based when you factor.
That will allow us to scale the production of drug, but it's more quickly autonomous structures, putting the kids in the hands of customers, it's lower cost.
This represents a significant opportunity for St. Joe as we look to leverage drive more ease of installation and scale deployment or larger based customer in vehicles.
The ability to retrofit vehicles and operate heterogeneous suite continues to be a key differentiator versus other conference and we look forward to additional future opportunities.
Our unique technology value proposition to customers.
In October we announced the contract with heavy demand.
<unk> electric industrial vehicles, and the Greenland holding corporation, whereby finjan will be the exclusive supplier of vehicle tracking systems to help our asset tracking tool box in Sydney Cracker will be installed on each purchase heavy vehicle as a value added items to their customers.
We are pleased to be recognized by the industry incumbent or the <unk>.
You bought but keep features awkward banking sector, such as location correcting using cell tower triangulation and extra long battery life with.
This contract says and validation of the value from Fiat Chrysler and location data thinking yes.
Who focus on efficient execution and despite the difficult macroeconomic circumstances, we surpassed all of the major milestones for 2022 that we had set forth for things in a year ago. When we went public.
Our original goal for this year as communicated with investors during the IPO was to deploy eas at a single customer site with long vehicles.
We have executed multiple beta deployment.
Both sites and have begun expanding geismar to a second vehicle.
In addition, we have made significant progress in recruiting and are close to having the team we need to get us through commercialization of skill that being said, we do expect to make a few key personnel hires in the coming months.
From an operational perspective, we recently completed the expansion of our Menlo Park headquarters, which includes an autonomous vehicle development and test facility.
We're excited by our achievements this year and look forward to closing out.
Whitney 22, when our strong milk and with that I'll turn it over to Don to review our financial results.
Thanks, Pierre I'll quickly go over the financial highlights for the third quarter and nine months ended September 32022, covering both R&D and G&A expenses, which make up our total opex additional details can be found in our financial press release.
That was issued earlier today as well as in our Form 10-Q, which we anticipate filing with the SEC. This week.
Total operating expenses for the third quarter ended September 32022 were $5 3 million compared to $2 1 million in the same quarter of the prior year.
The increase was primarily due to a $1 $6 million increase in R&D expenses related to noncash stock based compensation costs incurred for additional engineering staff and contractors allocated occupancy costs and R&D related travel costs. We expect these costs to continue to increase as we continue to invest in building our engineer.
<unk> to further our R&D efforts.
G&A expense also increased by $1 $6 million, which was largely related to increased non cash stock based compensation expenses incurred.
For additional personnel and professional services to support our status as a public company.
We reported a net loss of $5 3 million for the third quarter of 2022 compared to a net loss of $2 $1 million in the prior year quarter as a result of the increased total expenditures.
Net loss per share on a basic and diluted basis was <unk> 16.
Based on approximately $33 6 million weighted average shares outstanding for the quarter ended September 32022.
This compares to a net loss per share on a basic and diluted basis for $2 17.
Just on approximately 1 million weighted average shares outstanding in the prior year quarter.
For the nine months ended September 32022, total operating expenses were $13 7 million compared to $5 8 million in the prior year period.
This was due to a $3 $7 million increase in R&D expense and a $4 $2 million increase in G&A expense.
Net loss was $13 7 million for the nine months ended September 32022, compared to a net loss of $5 7 million in the prior year period.
Net loss per share on a basic and diluted basis was <unk> 45 based.
Based on approximately $30 4 million weighted average shares outstanding compared to net loss per share on a basic and diluted basis $5 94.
Based on approximately 1 million weighted average shares outstanding in the prior year period.
Turning to the balance sheet, we had $27 7 million in cash and short term investments at September 32022, which compares to $22 million at the end of 2021, our working capital was $27 3 million compared to $22 1 million at the end of 2021 and total stockholders' equity was $28 8 million.
Compared to $22 2 million at December 31, 2021.
I would now like to turn it back over to Lisa Yahr.
Thank you Don.
It has been a very exciting year procedures so far.
We're in a unique position in the industrial economy space and are working hard to be the first company to reach scale commercialization with AAV technology. The recent developments, we announced are setting the stage for an eventful 2023 and beyond.
And we look forward to continuing to work closely with our partners and customers expanding and leveraging these relationships.
Recurring revenue streams via a software as a service robotics as a service model.
Virtualization.
With that operator, let's open it up for questions and answers.
Thank you at this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing with Barclays.
One moment, please while we poll for questions.
Thank you. Our first question is from Theodore O'neill with Litchfield Research. Please proceed with your question. Thank.
Thank you very much.
I was wondering in your prepared remarks here at the beginning you sited.
Three important <unk>.
Developments in terms of the electric forklift market and scaling production of the drive Mod and the contract with heavy and I was wondering if you could if you could give us any milestones that we could look forward to related to these contracts either in the.
The phases are going through or what other.
Monetary aspects of it are production aspects of it we might expect to see over the next 12 months.
Hi, Phil this is leila.
So.
The three are sort of separate topics.
With regards to ascribe mod.
Is it supply too.
Columbia stock chasers.
The focus so far has been the end to end go to market.
And taking that technology with our partners.
And for the customers and be able to support the growth of deployment.
We actually accelerated the timeline and took on several addition to the original one we were planning.
In order to explore the applicability of this stuff just there is two different applications and we have the opportunity to deploy them.
Three.
Ill facility, but also in manufacturing site.
The next steps with these are to look at slightly larger deployment and start moving some of those too.
Commercial.
Beyond the initial appointment.
That's on the stock to certification.
The the <unk> is the first.
The first distribution of in senior Cracker.
Through our partner distribution channels. So heavy vehicles are going to come off the factory.
Right correct.
At the beginning it's going to be a few dozen.
Record that.
Once you expand over time.
Is.
Have you start selling those services to their customers and we're working on additional channels and direct.
B to B cells.
As a company.
All right.
Sure.
What about the forklift side, yes, okay. Good question. So the electric forklift is something that's really ahead of its time in the sense that.
Our plan was really to move forward with the stock chasers and get them to commercial deployment before taking on a second vehicle. However, this particular company presents a very interesting opportunity for US. This project is.
It's more in a REIT project.
They bring up off of new vehicles that specifically meet it.
For purposes.
And once we've completed successfully the R&D the pilot phase and improve the applicability of <unk>.
Driving within Eas over forklifts of operation and we will discuss continued commercial engagement. So at the moment we're.
We're going to keep the disclosure I thought was already published in <unk>.
Clearly more of these milestones we're going to go back and update on the status of the project.
Okay.
<unk> and.
I was under the impression on the Q2 call that there had been a large increase in R&D employees.
Did that number to go up significantly and the operating expense cute Q2 to Q3.
Would you didn't really change very much is there.
Is there any expectation that this number is going to grow significantly before the end of the year the R&D expense.
Hi, This is Don.
Yes.
Our R&D expenses will continue to increase.
They will not increase as dramatically as they did between Q1 and Q2.
Okay.
But.
We definitely anticipate it.
Coming up and I think that we had a couple of <unk>.
Specific positions Theyre fairly high pain that we had planned for Q3 that did not materialize and will publicly.
Into Q4, and maybe even Q1 and that might be a good thing actually given the market.
Okay.
Sounds good thanks very much.
Thank you. Our next question is from Rommel.
ACO with Aegis capital. Please proceed with your question.
Hi, Good morning, I'll start with a question on labor.
Our R&D, which Dan you just touched on.
We are seeing pretty big headlines about significant layoffs in the tech sector is that.
Providing any sort of.
East to the labor cost pressure that you've seen here in that market for the last couple of years or is it maybe too early to tell on that just yet thank you.
It definitely creates.
A slug of.
Candidates are relevant to us, especially companies.
That has people that are experiencing developing AI and people that have worked in robotics and on self driving.
However, it's going to probably take a quarter or two until there's really going to be a change in compensation.
And compensation structure immediately what we're already seeing is.
A bigger slate of candidates and much easier ability to be selective.
And hired the right people, we need so we're already starting to see the benefits of that but I think the real impact is going to take some time.
And of course as Don said, we are.
Aware to the environment, we're trying to be conservative as much as we can.
And I'm not in a position like other companies that we would need to consider layoffs. Later, so we regular slowdown recruiting and really bringing the critical roles and then.
Grow as a function of commercial traction as you start seeing customers coming in and recognize bill.
Okay.
And maybe just a follow up if I could I think you touched on this in the comments.
But the.
You've obviously had some some very strong initial success, signing some pretty meaningful customers right off the bat, maybe with an initial product here or there, but I wonder if you could just talk a little bit more about the opportunity.
Bringing them into your ecosystem, bringing them with one product line with <unk>.
<unk> in the forklift, but obviously that's a.
$5 billion company I mean, obviously there is significant opportunity just with that one client alone and with others I Wonder if you could just talk about the evolution of of getting them to the customer, but also just building with them over time once they are in your ecosystem. Thanks.
Okay, Let me hand, this over to Ben who can answer that.
Ramos, yes.
That's a great question.
There is only so much that I can disclose given the early stages, but what you're what you're alluding to is.
Exactly what we have preached about the vehicle agnostic approach that we have so.
We alluded to electric forklifts being the first and most prominent of vehicles that this customer wants to automate and electrify and their new rollouts.
Of an automated and electric vehicle strategy.
And it is representative though of what we have what we have been preaching which is that it.
Electric forklifts are not the only vehicles in their fleet. So we do really see it as a.
A first opportunity for a meaningful success out of the gates with the most impactful vehicle in the electric forklift and part of the reason for our selection and what we see as really the long term vision.
Vision that grows this from being a customer for a vehicle is that it really does ultimately grow into this being then repeated across other vehicle form factors within their global fleet, which is a substantial vehicle fleet and growing that footprint within the customer and bringing to fruition.
That defensibility that we that we have been touting about the way that we built the technology, which is then automating that second vehicle that third vehicle becomes a de facto solution with syngenta as opposed to with a different automation supplier. So so it is it really is that first meaningful step in what we see being.
Yeah.
As long as they continue to be successful a larger rollout into multiple vehicles, whether they are a meaningful customer.
And then just following up on that to what extent then does that to come to the extent that you can successfully do that become a barrier to entry with.
With that customer as well as many others.
Do you mean competitors obviously.
Right right exactly.
Yeah.
That is our expectation that once we understand the customers operation we've done our first vehicle for them our marginal costs for.
Rolling out additional vehicles beyond that reduce whereas the any new competitor that would come and try to bid to automate those types of vehicles would incur marginal costs that are that are higher that we already incurred and are in the process of reducing so we're seeing firsthand that this <unk>.
Strategy that that we have been that we have been pitching about the ability to automate different types of vehicle form factors by being more software centric by being a more software defined vehicle and vehicle agnostic.
Is really coming to fruition and it's getting us the.
The most difficult selection of winning that first vehicle and winning the next one become the next ones become iteratively in incrementally easier and easier for us which means on the flip side trying to capture those becomes more and more difficult for our competitors.
Great. That's very helpful. Thank you so much.
Thank you.
As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Our next question is from Jason Corman with Carmen Financial. Please proceed with your question.
Hey, guys good evening.
First of all congratulations on a successful quarter.
Im really happy to see you follow through on your plan.
The question that I have is in regards to Infineon tracker.
Uh huh.
So right now it seems like Youre doing like in house sales than you have.
Partnerships et cetera.
Have you thought about reaching out to.
Perhaps.
And those are maybe primary service providers.
In general all the service providers, who already have their own sales teams.
And I'm sort of asking like could you outsource all of that sale.
And maybe accelerate that revenue generation.
And then maybe just a.
Broader question.
The SaaS space, and what Youre doing with RASM SaaS.
Maybe is that as well I get a lot of SaaS companies. The first 2 million $5 million is very difficult.
So maybe just to jumpstart our revenue growth.
I think I've got my question.
Yeah. The simple answer is yes.
We are we are doing a combination of.
Traditional <unk> sales. If you will that is that is in house, but we are also looking for.
Leveraged opportunities whether it be through different distribution channels value add resellers that go and allow us to lean on other sales team and other channels that go beyond our own organic efforts and spend.
In order to grow the reach of infinite tracker.
And infinite tracker very much does target.
And on boarding.
Familiarization with our tools and by extension.
And earlier introduction of revenues there.
And.
And then the Eas product, which as you know.
Large a larger ticket price.
But.
And often a longer sales cycle.
So infinite trackers, certainly does try to create sort of a springboard in that regard both from a revenue and from a customer engagement and Onboarding perspective.
I appreciate that and maybe I shouldn't just like ask.
Did you actually reached out.
Verizon obviously doesn't deal with us, but there are service providers that deal in the industrial end.
That space.
In the U S internationally.
Reaching out to them directly because you have like 15 year battery life I'm not going to go through all the specs.
I. Thank you for very competitively against your competitors, so what about that.
Yeah again, the simple answer is yes, we do see the telecom the telecoms providers as one of the most meaningful.
Partner opportunities for and can attract or.
It's one that certainly is in our consideration.
I appreciate that thank you very much.
Yeah.
Thank you there are no further questions at this time I would like to turn the floor back over to Lee or call for closing comments.
Thank you for your time today.
And our conversation with investors and we're coming to visit us in our newly renovated office.
Barely.
Witness vehicles with technology and with the team.
A free to reach out to us if any additional questions.
Alright, Thank you all very much.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.