Cyngn Inc. Q1 2023 Earnings Call
Greetings and welcome to the Syngenta first quarter 2023 earnings call.
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Brief question and answer session will follow the formal presentation.
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Yeah.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Ben My Mac with.
Head of Investor Relations.
Mr. <unk> you may begin.
Thank you operator, and thank you to everyone on the call for joining us today.
The press release announcing <unk> results for the first quarter ended March 31st 2023 is available at the investors section of the company's website at investors don't change until call.
A replay of this broadcast will also be made available on the website approximately one hour after the completion 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 without too much by.
These forward looking statements can be identified by terms such as anticipate believe expect future plan outlook will and include among other things statements regarding the Companys continued development of its commercial products expectations regarding sales and all revenues growth strategy, our ability to deliver sustainable long term value ability 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 could differ dramatically from those projected.
There can be no assurance that those expectations will prove to be correct.
It makes it about the risks associated with investing its engine.
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 , Neil Tal will discuss recent operating highlights Chief Financial Officer, Don Alvarez will follow with a review of the company's financial first quarter of 2023.
Neil will then return to make a few completing remarks before opening the floor for questions and with that I will turn the call over to Neil.
Thanks, Brendan good afternoon, everyone.
Today I'm pleased to be reporting the significant progress we've made this quarter on a mission to bring autonomy to industrial vehicles.
So it doesn't Nicole we're still learning what do we do I'll start with a brief overview and I encourage you to visit the website and especially our blog.
The Syngenta com for more information.
Hey, Jamie focus on solving the challenges associated with labor shortage high cost of labor and the cost of accidents that arise from human error and negatively impact the global economy.
We address these challenges with AI robotics and data to produce self driving software. It can be applied to any vehicle to help industrial organizations get work done consistently efficiency and safely.
As a developer and user of artificial intelligence, we're excited to see that the AI World has come to an inflection point with the wider community now using and seeing the value of AI, we've been developing advanced learning based algorithms for self driving for many years. We believe the large scale adoption of this technology is the future of the IND.
That's real world.
The foundation of our technology is our enterprise it front of me suites or E S.
It is a suite of intelligent fleet management and analytic software that allows customers to manage the complex AI and robotics technology and delegated driving up goes vehicles to our self driving solution known as drive using simple tools and interfaces.
Across the different technologies that comprise Eas Finjan has seven issued U S patents 18, non provisional patent applications.
Six have already been allowed in 'twenty pending PCT international obligations.
Syngenta autonomy solution is available on new vehicles purchased from our OEM partners with the solution integrates adult for line, but importantly, he is also available as a retrofit an existing industrial feeds using our turnkey hardware solution.
The person expensing Dragon with kids.
Commercially released autonomous structure, a solution can be installed being just a matter of hours drug. Once kids is an important element of our go to market strategy and allows for scalable deployment for existing or new vehicles.
But developing a first economical retrofit package for existing vehicles.
Even with the Kid can simplify the transition to autonomous vehicles for companies that already have a fleet.
We estimate changes significant market opportunity, it's more than $200 billion a year based on the estimated costs of important drivers for approximately 5 million material handling vehicles operate worldwide.
According to publicly available data the global average annual cost to employed individuals to drive one of these vehicles is over $40000. This is an expense that could be eliminated contingent technology the cost of labor and therefore, the valuable information is significantly higher in western economies and specifically in North America.
Which is where we're focusing our current sales efforts.
But even with the high cost of labor industrial organization, especially from the manufacturing and logistics tell us that if they could hire more people now they would do it without hesitation, but the short that just in the labor market prevent them.
In terms of the warehousing manufacturing and logistics base is a high fixed cost as a percentage of their overhead and the tight labor market makes it very difficult for them to run the most effective operation by using autonomy to operate their vehicles customers can redeploy existing workers to more productive tasks and optimize the operation.
Improving efficiency and profitability.
In addition.
These improvements don't factor in the increased productivity that autonomous operations of industrial vehicles, along our <unk> solution. It doesn't require a break for vacations, you never destructed and doesn't require periodic training is human operators.
Which allows for more efficient driving seem just technologies also safer it doesn't become distracted or break the rules. We follow the guidelines strictly and insurers that safety is prioritized, reducing the expense of accidents and downtime from human error.
In a study conducted last year and our business using our vehicle autonomy solutions Finjan technology improve the productivity of the operation by up to 33%.
Unlike self driving robo taxis on public roads and highway Avi trucking companies that are still years away from any large scale commercial deployment, we are bringing autonomy to industrial vehicles using private facilities to date, our stock chaser solution is commercially available ready to ship and being actively deployed to customers and prospective cut.
Yes.
We signed our first commercial contract for the deployment of stroke chasers with U S. Continental for deployment in their southern California facility at the end of 'twenty to 'twenty two.
This appointment went live in the first quarter of 2023.
With fully autonomous truck chaser storing goods throughout the rest of the site.
Let me conclude the autonomous navigation, both indoors and outdoors as products are moved between buildings on the site.
Jordan I'll throw navigation is a differentiating feature of drive more advanced autonomy capabilities.
During the first quarter, we brought our first head of sales on board, Chris Wright has a wealth of experience in the industrial automation space and he's already developing the sales funnel for the stock checks a solution.
Seeing promising interest in our stock chaser of drug one since we ramped up our sales effort.
Many firms in the industrial automation industry or in the process of developing a single solution for a particular use case syndrome. However has developed a software foundation that is vehicle agnostic and can be deployed on almost any industrial use case. Therefore, our commercial development focus is also on ensuring we are expanding.
Our solution to more areas of customer demand.
We have a pay deployment engagement with a leading manufacturer of building materials using commercial and residential properties that uses thousands of forklift and its global operations.
This project will expand the capabilities of Eas and are driving more solutions to the most widely used industrial vehicle into world Forklift autonomy is a significant commercial opportunity and we're excited that not only have we successfully validated development milestones and triggered payment under the development contract.
We have also increased the scope and size of the contract following the successful demonstrations.
We're targeting a 2024 release the commercial version of the forklift autonomy solution.
Another track of our product commercialization strategy is the expansion of EBITDA, yes to the mining industry through an engagement with a tier one OEM in the space.
The mining industry is an early adopter of automation technology and readily accept the productivity and safety benefits or vehicle automation.
We're delighted to achieve state of the art results with a novel application of a key drug on subsystem in the mining domain and received extremely positive feedback from our development partner. The commercial version of our mining solutions is expected to follow the forklift solution into the market.
As we move increasingly into commercialization mode. We continued to develop our leadership and management team.
Last month, we won't come onboard Sean Stetson is vice President of engineering, and Felix sink as Vice President of Engineering services.
John has over 20 years experience of commercializing emerging technologies.
And we'd be responsible for overseeing all hardware and software development on the engineering team as we expand the commercialization of our Eas capabilities.
<unk> also has over 20 years of experience in robotics automation and technology and we'd be responsible for quality assurance customer success and support and streamlining development processes through the company.
With Sean Felix Kris and several other extremely strong hires that we've made recently we have a core team that we need in place our management team has a wealth of experience.
The industrial automation sector.
Concentration that would be on executing on the plan.
We're already seeing the impact of our strengthened leadership team as we released the latest major E. S. Uptake. This month, yeah, Yes, 9.0, it makes our customer proposition even more compelling by adding new features such as we turn to home automation intelligent queuing and additional vehicle insights will continue to add features to our E. S.
Plus one which is intended to help customers realize the full value of their thrown them a bit.
Opportunity for Syngenta technology significant and refocus on the rest of the year will be on identifying those customers with bright combination of unit requirement inside specifications that will allow us to get the best short term wins and high long term upside.
We expect that our sales team will secure additional sales channels.
And deployments as we move into the second half of 2023.
We also anticipate that we'll be disclosing.
The achievement of addition of successful milestones in both our paid development projects as we move those towards commercially viable solution.
I look forward to updating you on all the commercial success as we move throughout the year.
Finally, we filed a universal shelf registration statement on form S. Three with the SEC at the start of the month.
Once it becomes effective it will provide the tianjin with flexibility to access the capital market in the future if circumstances arise it would make the sale of securities advantageous to the company and its stakeholders.
To summarize during the first quarter, we continued our focus on commercialization that I outlined on our lesser in equal our sales team is engaged with potential customers.
That we're confident will lead to additional commercial structures for deployment by the end of the year. We have met required milestones on the heavy industrial vehicle development project and third and perhaps most excitingly, we have not only met development milestones on the forklift project. We have also extended and Upsized our project to bring autonomy to this most.
Twice widely used often.
<unk> material handling vehicles, but the rest of the year, our objective remain unchanged and I look forward to updating you on our further success in future calls with that I will turn the call over to Don.
Thanks, Pierre I'll now take you through a brief summary of our financials.
During the first quarter, we reported our second successive revenue generating quarter as a public company and booked $873000 in revenue, which was more than three times. The revenue we reported in the fourth quarter of 2022.
Substantially all of the first quarter revenue was related to the two nonrecurring engineering contracts that we signed with commercial partners to bring new vehicle types to the market.
We ultimately expect these contracts to yield more than the initially reported $1.6 million largely due to continuation of the projects with additional phases and increased scope towards product is it product position.
First quarter total operating expenses were $6 $1 million as compared to $3 $8 million in the first quarter of 2022. The increase was primarily due to higher R&D costs related to additional head count and contractors added over the past 12 months to support our technology.
G&A expenses were also higher in the first quarter because of an increase in personnel related costs and additional expenses to support the overall growth of the company as well as public company responsibilities.
Net loss in the first quarter of 2023 was $5 $6 million or <unk> 17 cents per basic and diluted share. This compares to a net loss of $3 $8 million or 14 cents per basic and diluted share and a corresponding quarter of 2022.
We ended the first quarter with unrestricted cash and short term investments totaling approximately $17 million working capital D ended the quarter was 17 $4 million with stockholders equity of $19 $4 million.
Additional detail on all of these numbers can be found in our earnings press release that we issued earlier today and the 10-Q that we anticipate filing with the SEC later this week.
With that I'd like to turn it back to Lee are for his final remarks here.
And it's been a very busy and productive quarter for syndrome with a focus on accelerating our go to market plan generating revenues and expanding our product offering inside the warehouse to include autonomous cars and beyond into the heavy industry and mining sectors. This progress is possible due to the great people, we have assembled here.
And I'd like to thank the <unk> team for all their hard work and I would like to open the call up for analyst questions.
Thank you.
We'll now be conducting a question and answer session.
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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 you very much and congratulations on the good quarter.
My first question is about AI and obviously a lot has changed in the world of AI in the last year. I was wondering does this present more problems or opportunities and how might it impact product development.
Yeah.
I feel good to see you here.
Yes.
We think about AI from two perspectives, one is as part of the product offering how can we make our system more intelligent how can it become more productive and how can they take advantage of all the data that our vehicles are seeing when deployed and the other the other side of it is how do we use AI based tools for our own development things.
Like co pilot for core development and other more recent system as we think about AI as being.
Positive.
Driver on both sides.
I think that our tools that are being developed help us.
Build faster and allow for faster turnaround solutions to the customer and at the same time the tools that allow us to develop the perception models or the decision, making or anything else in the system that helps us achieve the level of driving that.
And the people could before.
Also take advantage of the development of tools and hardware better Gpus.
Or infrastructure by other companies. So we see both both do things as positive trends.
Okay and as you mentioned here on the call as you seek additional and larger stock chaser deployments how much of this is.
Oh, you know.
Retrofits installing the drive model on an existing stock chaser versus brand new stock chasers.
It's a transition.
I think it's a transition phase if you look the life span of these vehicles stroke chasers would usually being service four to seven years.
Companies that invested in some of our OEM.
OEM partners customers have hundreds of these vehicles.
And those fleets, you'll be ashamed for them to just throw them away and buy a complete new vehicle for automation. So there's a big opportunity for retrofit these vehicles and over the next several years as new vehicle purchases come through what they're going to come off the line with our system. So there there's a transition phase from a perspective, where ignostic.
The third party manufactured that does the integration of the drive more kit for us on the vehicles.
It's the same efforts with them, whether it's an existing vehicle.
When you want.
Yeah. Good point, thanks very much.
Thank you. Our next question is from Paul Frac with Alliance Global Partners. Please proceed with your question yes.
Yes, good afternoon.
The last update on the U S system, you talked about you know higher functionality lower component complexity and also reducing computing costs and you actually gave some metrics associated with those improvements do you have any metrics associated with the latest update on EBITDA, yes.
Okay.
Not off the top of my head, we can follow up on that and share.
Whatever it is readily available for that I think the release of the ninth point to all with focus on the other types of features.
More that are customer facing that facilitate scalable deployment and integration to customer operations.
And less about.
Increasing efficiency that was a bigger needs with the previous one it wasn't such a big news this time other things.
Took the helm and we're at the front of the deployment, but like I said, we can follow up with metrics each one of them.
That'd be great and then you talked about significant new interest and can you maybe give us an idea of sort of where you're seeing it and anything that you know maybe it there like.
Is your ROI calculator on website generating reads or just what sort of what what's the nature of the significant new interest.
Hey, this is bad land in there so I think that the new interest is really a byproduct of our readiness to.
Did those go out.
That new interest as well as access to new interests. So we're not doing anything profoundly different in terms of our lead generation and and creating interest. You mentioned you are like calculators. One tool that we have a we have we've had presence at trade shows recently that have been successful with.
Got both inbound and outbound calling campaigns with marketing that are essentially always on so I wouldn't say that there has been a profound shifted there. It's that we really have pushed through into the next let's call. It phase of commercial readiness with the stock chaser when we IPO Ed we were very clear about.
It was a product that was what we called the beta release at the time, we would only pursue select customers through 2022, which is exactly what we did it was a short list of customers by design and the reality of that is that those are you know those.
Constraints are now effectively removed so we're going after a wider swath of customers. We're going after larger customers. We're leveraging the partnerships that we have with Columbia and otherwise in the industry.
So I think it's really just seeing that that commercial readiness come to fruition.
More than a shift in our behavior.
Great and then when you look at your operating expenses for the quarter with $6. One you back out stock comp and.
To get to about <unk> 5.1 is that a reasonable run rate for the rest of the year.
Hi, Hi, this is John speaking, yeah, I think actually the.
Current trajectory of our cash burn essentially what you're alluding to here is fairly will fairly be fairly consistent through the remainder of the year.
You did make a few key hires in the first quarter.
Throughout the quarter, so not necessarily a full impact of those hires in all of Q1, so there's potentially a bit of an uptick just for.
You know a full quarter effect of some of these investments that we've made but.
For the most part I think we're directionally.
Where we are with what's happening with respect to run rate.
Great. Thanks for your time.
Okay.
Yeah.
Thank you.
Linda if you would like to ask a question. It is star one on your telephone keypad.
Our next question comes from Darren <unk> with <unk>.
Research. Please proceed with your question.
Hi, yes, thanks for thanks for taking my question here.
First one I just have is related to commercialization. So I think you had mentioned that a 'twenty 'twenty four.
Is kind of the timeline that youre looking for forklift commercialization, and then potentially having the mining commercialization happening after that.
The expectation E based off of what you're seeing in the forklift space, maybe that's looking at 2025 or beyond for the mining commercialization just maybe just some context behind some of the prioritization that youre thinking on that.
Yeah.
Hi, This is new York.
The.
Stop chaser, the material moving vehicles stroke chasers.
Against like tow tractors, and Tigers family that moves things on the vehicle and in towards them on cards work, usually in the workflow and warehouse.
Environments logistics manufacturing in tandem with forklift. So when you think about a lot of these customers whether we start with one of these structures Tucker's and then they add.
Our forklifts or the other way around.
It's a penetration into an expansion inside that account too.
To expand our offering to the customer the value to them and then the efficiency of these vehicles working together. So you can think about the stock chasers.
The first product in a material handling inside warehouse.
Larger offering.
In the mining, it's a slightly different situation, where the scope of the project is upgrading software over an existing automation solution. So it's more streamlined because there's already a company that manufactures these solutions and they're looking to upgrade them. So the go to market is different it's more scale.
Because he's he's software only and it's directly through.
The the veeco partner that will take it to the market. So at the moment, we think about these as two separate threads.
And based.
Got it Okay, and then just going back to that question on the cash burn from before I know last quarter.
We had talked about this this cash burn rate it looks like it was a little bit higher from previous quarter.
From those hires and then I'm just looking at this now it looks like there was some proceeds from the maturity of some of the short term investments and then.
Our reinvestment of those is as the shelf offering is that a factor.
Factored in with the cash burn that the shelf registration you know can we look at that and say hey that that might bridge the gap with some of the Casper and later on towards the later half of 2023 or <unk>.
Is it the expectation that potentially that could be sooner.
We honestly don't have any sort of expectations with with respect to when were going to raise additional capital the filing of the S. Three was very much a housekeeping.
Exercise just to make sure that we have the vehicle in place such that if there is movement in the market we can.
Very efficiently take advantage of that movement.
It's not it's not factored into our cash.
Cash burn, but it is clearly a vehicle that is in place or will be in place shortly here.
That will afford us the opportunity to you know.
Go to the market very effectively and very efficiently in response to hopefully what will be positive you know market trends.
Got it okay, and when you say market fluctuations, but what do you mean by that exactly.
Well hopefully increase in stock price, where if we can raise money at cheaper rates essentially.
Got it okay.
Thank you.
Our next question comes from Ron Mills.
Tony CEO with Aegis capital. Please proceed with your question.
Thank you very much I wonder if you could just discuss how long do you hold marketplace and the pace at which you feel.
You know potential customers are looking to adopt new technologies such as your own.
Do you would you say overall over the last few years the pace has been.
Okay.
In light of what.
You have expected, maybe trailing behind or maybe accelerating it I wonder if you could just give us your perspective on that thank you.
Sure Hi, Roland good to hear from you if.
If you really it's really track the read a recent milestone and then also we practically just hired a sales team couple of months ago right. So I'm very happy with the progress the team.
<unk> is ramping up they're starting to build that distribution channels. The sales channels. The funnel of the material working with the marketing team overseeing both inbound and we're selectively growing outbound for key accounts with our OEM partners. So I'm happy with the progress but of course, there's always more we can do they always are.
Trying to get.
Faster revenues and to broader deployment. So I hopefully will have more news to share in the coming months.
But to your question, yes, I'm satisfied with the pace of progress.
Okay, great. Thanks very much.
Okay.
Yeah.
Thank you.
There are no further questions at this time.
This concludes today's teleconference. You may disconnect your lines at this time.
Thank you for your participation.
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Okay.
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Sure.
Uh huh.
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Yeah.
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