Q1 2023 Arrival SA Earnings Call

<unk> director of Investor Relations and today, we have with us eager carve off a rival groups you might be Wilson CEO of North America, and John Wozniak and CFO .

Before we begin I'd like to remind everyone that certain statements made on this call today are forward looking statements. These.

These statements are subject to various risks and uncertainties and reflect our current expectations based on our beliefs assumptions and information currently available to us.

Although we believe these expectations are reasonable we undertake no obligation to revise any statements to reflect changes that occur after this call.

Descriptions of these factors and other risks that could cause actual results to differ materially from these forward looking statements are discussed in more detail in our filings with the SEC.

First quarter of 2023 business update issued today on the 15th of May.

During the call. We also refer to certain non <unk> financial measures that should be considered in addition to and not as a substitute for or in isolation from or FRS results for.

For further information please refer to our Investor relations website at investors that arrival dot com and with that in mind I'll now turn it over to Igor.

Thank you Anna and good afternoon, everyone. In Q1 was significantly reduced our cost base through the optimization initiatives, we have planned for the quarter, including hearing our targets for regular quarterly spent which excludes supplement of legacy supply obligations others.

The actual costs. These actions have allowed us to focus the organization on our business flow, which is to deliver our purpose built cluster for delivery vehicles for the U S market in 'twenty to 'twenty, four which we call. The excel them I would like to remind you that we believe we have a clear and compelling business flow focused around.

Our <unk> <unk> across four commercial vehicle designed specifically for last mile delivery fleets vehicles. In this size category typically too large to be manufactured by a traditional automotive Oems as a result, the vast majority of our vehicles through this cluster built using OEM charges that is they'll finish.

As a complete vehicle through a second stage manufacturing.

<unk> also shows a high level of commonality with our certified European Alba has a higher margin profile and qualifies for a REIT tax credit up to $40000, making it is ultimately a very strong contender for adoption by U S fleet operators.

During the quarter, we announced a business combination was the case with the capital acquisition Corp. Five Kingston since senior leadership adds decades of automotive and industrial experience as well as access to available customers.

Supply chain expertise in building and running vehicle manufacturing facilities, and public company leadership, and managing and deploying capital the combination validates arrivals strategy to bring our purpose built cluster for last mile delivery vehicle to the us market and should provide a meaningful amount of capital.

For the XL program, we're looking forward to partnering with skills to meet our production goals.

Our focus going forward. This year is on closing the merger with scale symptom and executing our operational milestones which include <unk>.

Continuing to validate our product and manufacturing methods through producing.

Our events in Vista, accumulating 250000 kilometers in road mileage testing and finalizing our <unk> design.

All of these exports will help to inform and approved the design and manufacturing of our <unk> well at Amtrust production in Charlotte planned for next year.

I will now hand, it over to Mark to elaborate on how we are progressing towards achieving this milestone. Thanks Pierre.

<unk> ran builds are progressing well we've completed the build of three vehicles and have a further five vehicles in process.

Remind everyone. We're building these vehicles to further develop and integrate our manufacturing processes and then accumulate additional test miles for the vehicle.

Investor We now have several stages on her body assembly process running completely automatically with Rmr's integrated carry both parts and the vehicle to the assembly. So.

To date, we're nearing 50% of our design throughput in some of the assembly stages.

Because the manufacturing process, we're using industry is very similar to what we were using Charlotte. The XL ban are Mr. Development experience will have an enormous benefit for the Charlotte factory next year.

We have also advanced our road mileage accumulation racking up 90000 kilometers so far from our <unk> fleet with the goal of accumulating over 250000 partners by the end of the year or.

Our vans are being driven for multiple hours of almost everyday on public roads by rival employees and I'm happy to say that the vans are operating reliably and to specification.

Due to the reuse of common components and engineering solutions. This mileage accumulation program is continuing to improve our confidence for the <unk> program.

On the <unk> program itself, we've completed our courts around the vehicle simulation analysis and preparation for release of long lead structural parts next quarter.

As we further evaluate the XL program business case, we decided the commercially available systems may present, a better alternative than developing tooling in house components, especially for those components with a high material costs.

Using commercially available components reduces our development cost program investment and program risks.

We will have more to say around the specific component strategy in the future.

That concludes my summary, I will now turn it over to John provider financial update John .

Thanks, Mike in March we outlined our priorities for this year, which are to raise the capital required to operate the business into late 2023, and two raised sufficient funds to bring <unk> to market next year.

I would first like to comment on our initiatives to improve our liquidity position. This year. We ended March with $130 million of cash on hand, the change in cash of $75 million from Q4 included a $25 million received from <unk> and use of cash of approximately $60 million.

For restructuring related costs and legacy supplier payments.

In April we entered into a business combination agreement with Kensington Capital acquisition Corp, five which provides us access of up to $283 million upon closing of the transaction subject to redemptions the.

The business combination remains subject to shareholder approval. In addition, we are working diligently to complete our annual report on form 20-F for the fiscal year ended December 31 2022.

In summary, we believe our business plan is sound and we are working diligently to bring the necessary capital.

To meet our 2024 production goals, our top priority remains closing our transaction with Kensington and the entire leadership team is focused on making that happen we.

We are still very optimistic that we have the IP the talent and the know how to bring arrivals purpose built to ads to market and.

And we believe we will succeed improving our revolutionary new method of production in these challenging market conditions and will require a great deal of discipline perseverance and support from our partners, but we are confident that we will meet those challenges head on and emerge as one of the leaders in the rapidly growing commercial.

<unk> market.

We want to thank our shareholders investment partners customers suppliers and most importantly, our employees who have stayed loyal to arrival over the years and continue to root for us every step of the way.

And with that we can move now to Q&A.

Okay.

Okay.

So we have two questions here from Jeff Osborne from Cowen The first question.

Can you expand on the design readiness of the <unk> program.

What technical progress has been made thus far and what is left to do.

Mike or ego or do you want to take that question.

Jonathan I think Mike in a better position to answer this question.

Alright, thanks very much.

Hey, as I said in my comments, we've just completed our fourth analysis iteration on the <unk>. These are <unk>.

Simulations that are done.

Just on the digital design of the product, which is well along.

And as I mentioned, we're getting ready to release, our production intent designs for long lead parts next quarter long lead refers to the fact these are parts, where the tooling times are some of the longest in the program.

And then we will stagger the release of the remaining parts through the rest of the year.

Shortly.

And.

Medium lead parts will be later in the year we.

We expect to be doing physical testing early next year in preparation for building preproduction vehicles in Charlotte.

Around the middle of next year, leading of course to startup of production at the end of next year in Charlotte So.

We're on schedule and we're making good progress and again because of all the testing that we're doing around the <unk>.

That we the El vans are we building Bicester.

We have a lot of confidence that what we're doing with the XL ban is going to be successful.

Okay. Thank you, Mike and we'll have another question from Jeff Osborne from Cowen.

Can you please give us your thoughts on when you're seeing the <unk> transaction might close.

Should we think about the risk of elevated redemptions and your ability to move the ball forward on that.

Sub program.

But the Charlotte.

I think.

John .

You should answer this question.

Thank you Igor and thanks, Jeff for the question I'm going to take the second part of that question first.

Around the redemption risk, obviously, I don't want to predict the redemption rate for this transaction, but what I would say is.

Not only have we structured the transaction to provide a significant premium to the Kensington shareholders. We also believe.

That the arrival business case, which is the building a purpose built vehicle for the North American market in the <unk> class.

Which as we mentioned carries significant.

<unk> under the investment reduction Act.

So we believe that business cases compelling we believe that the return on investment is compelling.

And with the Kensington team.

We will have a number of months.

To sell this transaction two our.

To our Investor base, and we believe that we will be able to bring a significant amount of capital to the business, which will allow us to start investing in the <unk> program.

With respect to the timing obviously.

Jeff as you know Theres, a number of factors that impact timing that aren't within our control like the SEC review process, but we're moving as quickly as possible to close the transaction and we're going to work diligently with the Kensington team to get this done as quickly as we can.

As you know the SEC review process can take a couple of months. We also have the shareholder vote, which we have to schedule as well and that's typically about.

30 days from when the SEC review process is complete.

So a normal merger process does take it you know.

Anywhere from I would call it.

Three months or more.

And we're just going to work as hard as we can to get this closed as quickly as we can.

Thanks for the question.

Okay on it.

Do have any other questions.

Okay.

Okay. It looks like we have no further questions.

Yes, it looks like we do not have any other questions. So.

Thank you.

All for attending this.

This earnings call.

Tim.

Thank you goodbye.