Q2 2023 Canoo Inc Earnings Call
Speaker 1: Greetings and welcome to the new second quarter, 2023 earnings call. At this time, all parts of events are in a listen only mode. A question and answer session will follow the formal presentation.
Speaker 1: 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
Speaker 1: Kaniobala Senior Vice President of Corporate Development and Capital Markets. Thank you, you may begin.
Speaker 2: Thank you, everyone, for joining us on our Q2 2023 earnings call.
Speaker 2: During the call, Tony will update you on our business. Ken will provide an update on our Capital Rays plans.
Speaker 2: And Ramesh will go over the Q2 financial results.
Speaker 2: commercial go over the Q2 financial results. We will then open up the call for questions.
Speaker 3: TV's be advised.
Speaker 2: we may make forward-looking statements based on current expectations.
Speaker 2: These are subject to significant risks and uncertainties, and our actual results may differ materially.
Speaker 2: For 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, 10Q and 10K.
Speaker 2: and other reports that we may file with the SEC.
Speaker 2: including Form A case.
Speaker 2: All of our statements are made as of today and are based on information currently available to us.
Speaker 2: Accept as required by law, we assume no obligation to update any such statements.
Speaker 2: During this call, we'll discuss non-GAAP financial measures.
Speaker 2: You can find the reconciliation of these non- GAAP financial measures, GAAP financial measures in today's earnings rates, which can be found on the IR section of our website.
Speaker 2: Now please navigate to the webcast landing page and access the video link towards the bottom left of the page.
Speaker 2: We will pause briefly while you watch the video.
Speaker 3: Over to you, Tommy.
Speaker 4: Thanks, Kunal, and welcome, everyone.
Speaker 4: Let's start with legacy matters. On August 4th, 2023, the company has finally settled the SEC matter regarding the acts of former executives.
Speaker 4: resource and the process has taken us 28 months and millions of dollars which reduced our ability to access capital markets into higher cost channels during this period because it perceived uncertainty. We now look in moving past this matter. Putting it to an end is a welcomed and liberating.
Speaker 4: And the process has taken us 28 months and millions of dollars, which reduced our ability to access the capital markets into higher cost channels during this period because of perceived uncertainty. We now look forward in moving past this matter. Putting it to an end is a welcomed and liberating event for us.
Speaker 4: As we now move to change in our reporting, let me give you some highlights from Q2 and the recent quarter. What you guys are going to see is we'll start to report very similar to all other public companies where we'll be giving you guidance.
Speaker 4: And I think you'll like what you see and hear in today's call. We are focused on continuously iterating and refining our product. We are, with our customers and internally, look, everyone is fighting through a lot of recall problems, because testing and durability are two different things. And I'm talking about long-term durability.
Speaker 4: What the customer's durability requirements are, coming out of my past and after sales, we always saw the aftermath of these issues, which is why we have been testing these vehicles with our customers for over a year in real world conditions and extreme weather conditions under customer use cases.
Speaker 4: It's not theoretical, what we have done. On May 15th, 2023, completed our LDV-130 with customized cargo use cases for customer evaluations. On July 20th, this year, completed annual summer testing in record 120 degree heat.
Speaker 4: As we all know, the impacts of this summer have been extreme, and we've taken advantage of that doing real customer testing. On July 31st, we completed all compliance activities for FMVSS and CARB certification for LDV, in addition to previously announcing EPA certification.
Speaker 4: equals hundreds or thousands of vehicles sold on a multi-year delivery with high grade credit and long-term partnerships.
Speaker 4: To build these businesses from scratch is not easy, you can't just appear as a consumer brand.
Speaker 4: You can't appear as just a brand, even within fleets. You must prove yourself.
Speaker 4: We have a $3 billion older book.
Speaker 4: and 70% of that is commercial customers. 1.6% growth in the quarter on stage two and three orders.
Speaker 4: We are slowing down the amount of orders with the $3 billion order book with being very methodical about our allocation with customers, their credit, and so on as we look to.
Speaker 4: use different kinds of non-delivered financing with binding orders. We have 500 million in binding contracts.
Speaker 4: which aligns our order book ramp with our production. I think this is a big thing a lot of people struggle with.
Speaker 4: was to build the big 150,000 unit box.
Speaker 4: And we thought very differently. I know it's been a subject of many discussions, but those that get it understand why we're doing. And I think in these times, it's proving why it's best to align to your book.
Speaker 4: We have 750 million plus in those committed orders, and that gives us the ability to not be building units and then trying to sell them. We have a very different strategy.
Speaker 4: That gives us about 18,000 units committed orders. We can start to focus on now 24, late 24, 25 customer allocations.
Speaker 4: On August 11th, closed another Fortune 100 customer agreement to purchase vehicles for their national fleet. We'll do the same as we've done with the existing customers, like Walmart, where we tested the vehicle extremely. And then we are going to build it. We are very focused on having a.
Speaker 4: moving to manufacturing progress and readiness. All the equipment is now at our facility in Oklahoma City.
Speaker 4: We have implemented a combination of in-house hybrid and outsourced strategy to support our 20 K-Rome rate. Our initial focus has been on process repeatability and enhancements, harmonizing our supply chain and our product readiness.
Speaker 4: As we have discussed, unlike other EV companies who are bearing the cash burn of this low-capacity utilization,
Speaker 4: our manufacturing capacity is harmonized.
with contracted demand for our vehicles and key components, and we will only build what we have sold.
Now, we have to stay long ahead of that curve so that we're similar to what we've done in our other companies.
is to be able to project revenues longer than 12 months with committed customer orders.
is to be able to project revenues longer than 12 months with committed customer orders. We're still strongly about our phased lamp approach.
I do believe it to be the lowest cost capital approach, while it does create some friction in the timing and delivery and the phasing in of additional equipment to increase your capacity.
just believe in these capital markets, it's proven as well. On April 10th, the OKC facility was acquired. On May 17th, General Assembly line was all started since installation. On June 15th, the low volume GA line validation completed.
On July 27th, 20K run rate for our battery module line at prior Oklahoma.
This allows us for other revenues with people like the Department of Defense and other people which need our modular battery technology.
On July 31st, 20K run rate for robotics and assembly line for our ladder frame equipment at Oklahoma City. And so that makes substantially for this phase, at this run rate.
our machinery and equipment in Oklahoma City and prior.
Next, our government relations team has worked systematically to leverage all relevant federal, state, and local tax credits, grants, and other incentives to support electric vehicle and battery, modular manufacturing in Oklahoma, and to deploy these technologies nationwide.
Like any company, as it becomes to market, it zigzags a little bit, and we have the great support as we try to figure out the best way for us to move forward in Oklahoma to get the support up.
The Oklahoma legislature and the government.
The governor himself. On August 9, 2023, we signed agreements with the Cherokee Nation to invest thousands of dollars in each worker development.
to help us hire trained skilled workers within their reservation.
for battery module manufacturing at our prior Oklahoma facility. This is very helpful to us.
and we create jobs, advanced manufacturing jobs, and an area where it's needed badly. And with the Cherokee Nation support, it helps us align with executing their vision and ours. On August 13th.
We contracted up to 113 million of our state of Oklahoma incentives to create 1360 advanced manufacturing jobs in Oklahoma which spans across Oklahoma City and prior Oklahoma
In the quarter we moved to revenue generation, which is a big milestone.
Remescial cover our enhanced approach to reporting as a revenue generating company. Additionally, our investment in democritizing RIP will allow us to generate other revenue with high margin to various customers, including but not limited to the government.
which have a serviceable, attainable market of what we see in the current purview of about 650 million followers.
On July 10th, 2023, we signed with the Department of Defense Innovation Unit. We moved to Phase 2 of the High Power Battery Pack Development Agreement.
July 12th, we delivered to NASA the first three.
Clint Trance bought vehicles.
This has been a very discerning customer. They've been extremely helpful with us in design areas, particularly in interior efficiency and ergonomics within the cabin. And this will help us as we move forward.
tremendously so we're very, very grateful for the partnership and the purchase from NASA. Early today we introduced the second derivative of the LBD line, the LBD 190.
This specifically aligns to our customer needs. As we learned in all the testing and performance data, we saw with our customers. And we designed the MPP1 to be able to have derivatives. So it's pretty low cost. Gets much more customer optionality.
And this particular derivative picks up 30 plus percent more cargo utilization and 95 percent of all the space in this vehicle is usable.
while maintaining high worker ergonomics and productivity for ingress, egress, and load and unload.
high worker ergonomics and productivity for ingress egress and load and unload. May 11th.
opportunity to use that for other use cases like the Department of Defense and others. We have found that's to be similar to what we've seen in companies like Tesla and others. With that, I'll cover some more in Q&A, but Ken, why don't you give us some information on the capital lines? Sure, thanks, Tony. So on the capital side, total capital raise since Q1 was approximately 132 million. Here a combination of 109 fromggak??úldvígú forensics, grapef?? utid
21 million of warrants, and cumulatively 11 million from pipes placed with AFV partners. We're a mesh roll shortly give guidance on our capital needs for the rest of the year to achieve our Ganty Factory and Red and Most Targals.
The COT will require, will come from a combination of new and proven sources. Over the past several months.
We engage with new potential capital sources and have received L-O-L-I's turn sheets, including asset-backed proposals.
which collectively represent a coverage ratio over 1.5 times the required capital. We will provide additional details in the coming weeks as we execute on our capital plan.
We're mishwild now walk through the results and update a guidance. Over to your mishwild.
and updated guidance over to your mission. Thank you, Ken.
Before I move into Q223 results, I wanted to share the reflection regarding the SEC matter.
Our new accounting function is more mature and we are confident that we have the right processes, policies, expertise and controls in place as the business grows. Now let me walk you through the results of Q223. Turning to cash flow. We ended the quarter with $5 million of cash and cash equivalents. After giving effect to the issuance and sale of the second and third your full convertible debentures for a total of 53.2 million and proceeds from the August 5 or 3 million. Our cash balance.
would have been $61.2 million on June 30, 2023. Cash used in operations for six months ended June 30, 2023, was $1.29.5 million, compared to $2.37.6 million in the prior period. Our capital expenditures...
of 33.9 million for the six months ended June 30, 2023, compared to 65.4 million for the six months ended June 30, 2022.
Net cash provided by financing activities for the six months ended June 30, 2023, was on the $132.2 million. Compared to the net cash provided in financing activities for the six months ended June 30, 2022, of $92.6 million.
Our monthly cash flow in Q2 of 2023 was approximately 38% lower than our average cash flow per month in 2022.
We continue to optimize cache as we move into Q3 of 2023.
to optimize cash as we move into Q3 of 2023. Moving to the income statement.
Our second quarter 2023 results are as follows. Research and development expenses, which include investing in manufacturing activities, total to $38.6 million for the quarter, compared to $115.5 million in the prior year period, a 67% reduction from Q2 of 2022.
S-GNA expense was 30.4 million for the quarter compared to 55.2 million in the prior year period, a 45% reduction from Q2 of 2022.
Gap net loss was 70.9 million for the quarter compared to gap net loss of 164.4 million in the prior year period.
Adjusted EBITDA was negative 62.3 million for the quarter compared to negative 149.8 million in the prior year period.
Moving to our guidance.
Our guidance for the second half of the year is asked for news.
Capix, $70 million to $100 million. Our 2023 second half adjusted EBITDA guidance of negative $120 to negative $140 million will bring our full year adjusted EBITDA guidance to negative $235 million to negative $260 million, which is a 40 to 45% reduction from the prior year. Demonstrating our relentless focus and discipline of expense management as we prioritize manufacturing.
This focus will ensure that we have the necessary capital to deploy as we execute our plan to achieve a 20,000-unit run rate per year, manufacturing readiness.
A 20 to 30% reduction in second half operating expenses, excluding depreciation and stock-based compensation, compared to second half of 2022, primarily resulting from increased focus on our objectives. Some of these reductions include a 15 to 20% reduction in professional fees, a 35 to 40% reduction in travel-related expenses, and a 20 to 25% reduction in human capital cost for workforce transition to support manufacturing in Oklahoma, labor arbitrage benefits, and change in labor mix.
Commercial Fleet Orders with less manufacturing complexity allows us to achieve positive margins sooner than and requires lower capital expenditure and working capital needs compared to others in the industry.
The approach that Tony took coming in and refounding the company is becoming clear and clear.
Our investment of $1.5 billion to date is attributable to the results.
To go to him, he reminds us that we are like Henry and Ferdinand and not like Ford and Porsche.
In summary, let me explain to you our strategy with a sole focus on a double digit return on capital and shareholder return. We build to deliver and we do not build to sell.
With our focus on fleet and commercial orders and over 18,000 units, or $750 million of binding commitments for our fleet customers, we have de-wrest our revenue model.
Some companies in this industry are faced with declining demand, as they have prioritized consumer reservations which have a higher risk. These companies also have inventory on hand ranging from approximately 40 to 300 days and are exposed to large declines in value of inventory resulting from the lower of cost on net realizable value adjustments. Whereas, our finished goods on hand will be significantly lower in days to weeks depending on customer acceptance of delivery. In the upcoming quarters, we will be reporting our revenue streams.
Split into vehicle revenue derived from free solutions and other revenue. Our sources of other revenue include upfitting, software, battery modules to potential customers that may or may not be publicly announced. Faced manufacturing ramp approach reduces risk of idle capacity. As mentioned before, we plan to use a combination of in-house
Hybrid and outsource manufacturing strategy along with the FACE ramp approach and keeping the core IP operations in-house.
On a comparative basis, other companies in this industry have large manufacturing facilities.
With idle capacity ranging between 60 to 70% in 2023, with front loaded CapEx investment. Additionally, the total CapEx investment by these companies from inception to break even is expected to range between $3 billion to $6 billion.
However, under our FAST RAMP approach, we could operate in a near full capacity utilization of a manufacturing facilities with only 25 to 35% of the Capix investment. Even companies that work on an asset-light model are still expected to spend.
Approximately 55 to 65% of our expected capex investment to get to break even. In the previous quarter, we shared our guidance for additional capital expenditures to reach to a 20K run rate and a 40K run rate in house manufacturing readiness.
We plan to reduce the previously anticipated $140 million to $200 million in additional capital expenditures to reach the 20K run rate in manufacturing readiness.
to arrange your $80 million, $210 million by leveraging a combination of in-house, hybrid, and outsource manufacturing strategy as we continue to refine our anticipated spend across our vendors and long-term partners.
Further, we maintain the projections to achieve a 40K run rate by 2024 with an incremental capital expenditure of 90 to 120 million dollars. thereby allowing us to target gross margin positive in 2025 based on our current pricing.
Paths to profitability and cash invested to gross margin breakeaver.
Our investment of approximately $1.5 billion to date on developing our product, which includes a multi-purpose purpose platform, allows us to develop several derivatives with little incremental investment.
Combined with a face manufacturing approach, allows us to exit 2024 with a 40K run rate on manufacturing readiness.
Other companies have invested approximately $8 billion, $23 billion of cash to date, with some expecting break even in 2024, while others not seeing break even in sight. Let me turn it back to Tony for closing remarks. Thanks, Ramesh. Hey.
In closing, we are very proud of our first deliveries. Tanasah, our manufacturing is progressing. Our vehicles are proving themselves in customer hands, demand is strong and growing. And we are fortunate to have dedicated partners championing our success. I want to thank our suppliers, our partners, our customers.
We appreciate everyone's continued support. With that, I'll turn it over to the operator for Q&A. Thank you, ladies and gentlemen. At this time, we will begin ducking your question in answer session. If you'd like to ask a question, you may press star one on your telephone keypad. A confirmation tunnel indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, you may need to pick up your handset before pressing the star key. Our first question comes from the line of admit Dale with HC Wainwright. Please proceed with your question. Thank you, our graph and everyone. Don't need to begin with, could you maybe give us some additional color on this high grade manufacturing approach. What will be done in-house and what will be outsourced?
Yeah, so, hi Amit, how you doing? So what we concentrated on was getting alignment with some partners for the stamping and the cabin activity as well as e-tote. Those are big lead time items. And find alternative technologies.
and spray final finish elements of it. Those are the biggest areas that we worked. Everything critical we kept in house. Like the MPP1, you know, the capacity of that line could go up to 75,000 already.
And of course that helps with our geographic extension, but that's how we're doing it. And then adds our order book and our ability to deliver on that order book, a line will bring more of those pieces in house. Right, otherwise we end up with too much caps, up. Yes, understood. And but eventually this could be brought in also really sort of played by here to see how you
board. And we're not we're just waking up being Henry and Ferdinand and being creative, being entrepreneurs, finding ways to use the least amount of money with the maximum result for manufacturing. That's how all these companies are built. So that's really what we've been very focused on is to be able to find that creative way and then figure out with our partners which ones we're going to keep.
on the outside versus what we're going to bring in. Obviously studying the economics as well and getting harmonized product and supply is one of the big tricks in this industry. Honestly thank you for that.
The new Fortune 100 customer Tony, you help us give us any color on which vertical is this like a logistics player or retail player any color on, you know, what type of industry this free customer is part of.
Yeah, it's an industrial customer. They want to keep these customers like, along with the surprise. So similar to what we did with our other large customers, is we want to prove it before they actually...
And so we'll go into a series of testing in the community. Eventually those pictures will get out into the communities that we test them in. And then that particular customer is targeting 10,000 units, which is not reflected in our old book. Thank you. Any updates on sort of forming up pricing, you've got close to sort of making deliveries now. Any range on the pricing front that you might have an update for us.
and because interiors are very painful in this industry. And so by focusing in on that, that helped us as well as the demand for this segment, especially with the 190 derivative coming out with 95% usable space, we're coming in in the 60s range on mixed pricing when a customer orders both. And the return on capital per square footage is... is... is... is...
extremely competitive uh... god thank you i'll stop here and you know the other questions are flamed thank you all right thank you our next question comes on the line of steve engine goro with stevele please continue to question uh... thanks and that's another break uh... first. We were talking about the the second half.
Even though guidance, can you give any color around volumes or the top line as you think about the second half heading into 24? Yeah, so this is a low volume scenario. I mean, I think what we've done here is we didn't try to...
You know, we want everybody calibrated to the ramp. That's why we focused on run rate. But it'll be a low volume number of units that we are delivering in that time, you know, call it.
the ramp. That's why we focused on run rate. But it'll be a low volume number of units that we are delivering in that time. You know, call it, I don't know.
If everything goes as planned on the inside, well above another 20 or 30 vehicles as we finish out this year.
Okay, great. Thanks. And any updates on either especially with the conclusion of the SEC stuff, anything on grant subsidies and or anything around the potential for a DOE loan?
Look, obviously the SEC was a significant overhang for us to go after great incentives like the DOE loan and others. Obviously, we now enter a new era, making any comments on that, but for sure we're looking at all avenues. I can...
their money behind. In helping communities, in delivering vehicles that make a difference to the admissions and you know so we're targeting what is important to them and and we believe we've achieved a significant part of that and of course you know we'll be seeking all
funding opportunities we can now that, if you will, the gloves are off for us. Thanks, and then two more for me. One is around gross margins. You mentioned gross margin positive as a potential for 2025 and I think
As you cross the 20,000 unit mark, it starts to get at least positive from a contribution margin perspective. Any?
thought process on kind of when we what the volume needs are to get to gross margin positive.
Yeah, so look, as you can tell, you know, by what we've focused on is we focused on being able to have this platform, these Fleet Centric and Government Centric Vehicles.
These facilities can break even at 40,000 or slightly below.
Obviously, the configuration of the vehicle helps because we have much higher margin as we do the up bidding for their use cases.
But it's a different model, right? I mean, you have to think of us more like, you know, we're a lot like an aviation defense contractor as well as like a Auschka-Gaush, more than we are like a Ford, because we're building sold units. We're building on contracted units. And so, obviously that gives you a better insight. In addition to that, we're not projecting our software revenues or any of those items. And as we saw with our recent deliveries, those customers wanted software services. We built a complete, you know.
workflow back and down these on our platform. So we'll be talking about that more in the future. But yeah, we're very focused on 2025 because at that point, we've crossed over into the 40,000 plus range in capacity. Great. Thanks for all the color and just one file 180.
Given the topic of the month here, Tesla's network and the next connectors, any comments around that?
So obviously, you know, you saw we're doing some work with the Department of Defense, their innovation unit.
for battery technologies. We've already successfully obviously, we know how to do democratized charging. And in addition to that, we took the approach that our vehicle will adapt to any kind.
our platform. So, but we're not rushing out there to go sign up some network thing. We're very focused on very specific customers, very specific territories and the grid available and the predictability in those.
areas again, you know, Unfortunately, been lumped in with some of the different kind of a customer set than we're going after
Got it. Great. Thank you for all the detail. Our next question comes from the line of Jamie Perez with RF Laffordy. Please receive a new question. Hey everybody, how you doing? Thanks for taking my question. So Tony, can you tell me, I mean, I know you're not the SSE sediment, but over the last couple of months, over the impacts. And now that the overhang on the stock has gone away, I know you briefly mentioned some customers and finance. And what about vendors and maybe give some color on what's what's the company's plan going forward after the
I have a couple of follow-ups also. Yes, so now it's really the official re-founding of the company. I mean, we're now, you know, we got that thing behind us, which was painful, obviously, and distracting and obviously impacted shareholder value and access to capital. But we also took the time to get our product right, to get it tested by customers, start getting started with our servers, everything else is sent to customers, certainly if we fix our paperwork with all of that, whether we do it with acronyms or writing*,
And so, you know, we made the most out of the situation. I believe that this is kind of now when the world starts to see us a bit differently as we move to manufacturing and especially being one to step forward and say, you know, we will only build sold units. We're going to be much more.
It doesn't have downtime for upfitting or configuration, all that stuff. This is a very long-term integrated model with the customers' business. And that is difficult to do. And so having those things completed, we're out testing the 190 already, though in 120 plus degree weathered, doing 45 to 50 stops a day. So, we're trying to do this very, very differently, and do it very predictable. Because otherwise, you theorize, you engineer, you test.
You build and then the market tells you what you built. We're trying to circumvent that risk coming out of the aftermarket, as you know, Jamie. So I think the significant things are to come forward now, I believe now that the overhang has, but I think the whole sector has a bit of proving to do.
And so we're just now really trying to break out and be identified for who we are.
All right, so on that note, so basically when you bill for customers, you don't, instead of building just a building, you don't have the inventory overhang and just parking lots of cars waiting to be sold. It's more like, so you're going to have luck. Is that the best way to characterize it? Yeah, the best way to think about it is these will be pre-sold units which will help us achieve much better finance.
binding purchase order and it's about delivery so they get money we get money you know it's like you know
It's it's the way it should be when you're when you're especially when you're young You don't have a big balance sheet. You can't take the risk of flooring You know, I think we've harmonized this to you know, what Henry and Ferdinand would do if they were in my shoes
Now the settlement, I mean, is one and a half may as far as peers, I mean, we've heard some more to magnitude of
Yeah, so look, I think the amount that the company got find is the testament to the transparency, the everything we did when we didn't when I came in and didn't understand the model I told the market immediately. I think it represents kind of how we've been running the shop. It's pretty low when you look at the
But, but, but we did the right thing and as Ramesh said, we took the opportunity to look in the mirror and make sure we're running a real public company, you know, I've ran public companies and we didn't miss earnings for me.
34 quarters. We're really trying to build a very strong TEM technology equipment manufacturer business.
and and and and not take the risk of getting it wrong.
We're investing capital to get it right.
All right, so let's switch gears a little bit, pun intended. What about the battery? I mean, we've been hearing in the news one of your competitors have problems with the battery. The unit has to be recalled and sometimes you see Tesla's going on fire. Yes. Could you describe your technology compared to the peers?
Yeah, so look, we would have suffered many of the same things had we not done the type of. And most people test to pass, we actually test to break.
It's very different. And so when you do that, especially with these new dense, high power systems, I mean, it's not an ice engine. You can't be careless about this. This is near nuclear grade time.
energy. So that's the big area. It's around batteries. I think people have been just a little speculative and theoretical, but one of the reasons we focused on Panasonic because Elon's done a great job You know working with them to make those self-dependable. We're using the same series
That's the big area. It's around batteries. I think people have been just a little speculative in theoretical. But one of the reasons we focused on Panasonic, because Elon's done a great job, working with them to make those selves dependable. We're using the same series.
And in addition to that, if we had followed the traditional path, we'd be in the same place all these other guys are. We'd be recalling like crazy.
But one of the reasons we wanted to go after the DOD and the very high standards and others is to test the hell out of this in scenarios we can't even imagine.
Because once it gets in the hands of customers, what is going to happen is going to come back at you. So that's why we've done what we've done. And I think it puts us in a much better place, plus our technology is modular.
And it's at the cell level of integration of the tech stack. So, you know, we can, we know something, you know, like the US Army, testing and others that have really, I mean, these people test your vehicle. Like, they do things you can't imagine.
And in doing that, we get instant feedback from our control tower. And it's highly focused on how the batteries perform and perform in a cell failure.
And in doing that, we get instant feedback from our control tower. And it's highly focused on how the batteries perform and perform in a cell failure. It's not a giant big pack.
It's different and we've concentrated, you know, we're probably on, I would say, generation three of that already. Alright, okay. That's a good color and thanks for taking my question. Be back.
The next question comes from the line of Pavel Malsanov with Raymond James. Please proceed with your question.
Thanks for taking the questions. Can we get an update on what's happening with Walmart and when
deliveries to that customer are expected to start.
Yeah, well, we have the 190 being tested right now. Once that's complete, we'll finalize the mix.
of and the delivery schedule. That's our focus with them. Make sure we have the configuration right for their needs.
I will say that the incredible heat that we've experienced here in Texas has been really good in helping us and helping everyone because I think everybody's crossing into new territories.
as this global warming and others have effect and you know electric vehicles have to be considerate to what is happening in order for it to perform to the needs. But this is the approach we're taking with all customers just so you know is to really work with them, test it, get it right, focus on a multi-year delivery schedule and because we have to ramp production we have to invest CapEx and we're trying to really...
business and then to go ahead and deliver those via have a binding purchase order and then we build it. Follow up question about batteries. It feels like in the last 100 days
battery prices have fallen.
possibly at the fastest rate since the global financial crisis or certainly the early days of COVID.
Yeah, so look, I think there's always like a bubble in things, right? As we all know, we see in things, which is why we concentrated on saying, look, we're not going to go... And unfortunately, we had to unwind a bunch of stuff that was...
over commitments of the typical 50, 100,000 commitment to a supplier. We really focus more on the mark-to-market aspect of things. We believe that things were overinflated. And with a binding purchase order when you go to your suppliers, it's easy for you to get priority.
And in addition to that, our view was that as the US
starts to become less dependent on single source environments and the availability of lithium and all these other rare earth materials that are becoming more available. We're finding in Latin America, we're finding in many places that there's access to these rare earth materials that are US allied nations.
So we think that all those factors are coming together and the fact that the DOE and the US government is demonstrating an urgency around it, we think that that also helps.
And I think some of the softening demand caused people to go, whoa, I don't have a purchase order here.
So, it drops pricing, right? It's always after the height comes.
So is after the height comes the recalibration.
Understood. Thanks very much.
Understood. Thanks very much. Be back.
There are no further questions in the queue. I'd like to hand the call back to management for closing remarks. I'd like to thank everybody for joining us today. The team's available to answer any questions. And I just want to thank all the investors for their support. It's not easy to go through what we've gone through and what you've gone through.
But we're here to do our job and build a profitable company. We thank all of you.
Ladies and gentlemen, this does conclude today's conference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.