Q1 2024 Canoo Inc Earnings Call

Operator: Ladies and gentlemen, thank you for standing by. Our conference will be getting started momentarily. Please continue to hold. Once again, we'll be getting started momentarily. Please continue to hold. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Hello and welcome to the Canoo Q1 2024 earnings call. If anyone should require operator assistance, please press star zero. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad, and we ask that you please limit yourselves to one question and one follow-up. As a reminder, this conference is being recorded. It's now my pleasure to turn the conference over to John Wolfe, Vice President, Investor Relations and Corporate Finance. Please go ahead, John. Thank you.

Ladies and gentlemen, thank you for standing by our Congress will be getting started momentarily. Please continue to hold once again will be getting started momentarily. Please continue to hold.

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Speaker Change: Hello, and welcome to the <unk> Q1, 'twenty 'twenty four earnings call if anyone should require operator assistance. Please press star zero.

Speaker Change: And answer session will follow the formal presentation.

Speaker Change: You may be placed at the question queue at any time by pressing star one on your telephone keypad and we ask you. Please limit yourself to one question and one follow up as a reminder, this conference is being recorded its now my pleasure to turn the conference over to John Walsh, Vice President of Investor Relations and corporate Finance. Please go ahead John.

John Wolfe: Thank you, Kevin. And thanks to everyone for joining us.

John Walsh: Thank you, Kevin and thanks to everyone for joining US welcome to our Q1 2024 earnings call.

John Wolfe: Welcome to our Q1 2024 earnings call. During the call today, Tony will update you on our business and strategy, Greg will provide an update on our financing activities, and Ramesh will go over the Q1 financial results and discuss the capital efficiencies we have gained through low-cost acquisitions. Please be advised that we may make forward-looking statements based on current expectations. These are subject to significant risks and uncertainties, and our actual results may differ materially.

Speaker Change: During the call today, Tony will update you on our business and strategy.

Speaker Change: Well provide an update on our financing activities and a natural go over the Q1 financial results and discuss the capital efficiencies, we are gaining through low cost acquisitions.

Speaker Change: Please be advised that we may make forward looking statements based on current expectations. These are subject to significant risks and uncertainties and our actual results may differ materially.

John Wolfe: For a discussion of factors that could affect our future financial results in business, please refer to the disclosure in today's earnings release and in our most recent Form 10-Q and 10-K, and other reports that we may file with the SEC, including Form 8-K. All of our statements are made as of today and are based on information currently available to us. Unless required by law, we assume no obligation to update any such statement.

Speaker Change: For a 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 10-Q, and 10-K and other reports that we may file with the SEC, including form.

Speaker Change: Eight case.

Speaker Change: All our statements are made as of today and are based on information currently available to us except as required by law, we assume no obligation to update any such statements.

John Wolfe: During this call, we'll discuss non-GAAP financial measures. You can find the reconciliation of these non-GAAP financial measures to GAAP financial measures in today's earnings release, which can be found in the Investor Relations section of our website. With that, I'll hand it over to Tony. Thank you.

Speaker Change: During this call, we'll discuss non-GAAP financial measures you can find the reconciliation of these non-GAAP financial measures to GAAP financial measures in today's earnings release, which can be found on the IR section of our website with that I'll hand, it over to Tony.

Speaker Change: John.

Tony: Thank you for joining us. This earnings call will be more abbreviated update given we spoke to you six weeks ago. Our strategy of not focusing in on the consumer market as a first step has played out favorably based on the temporary headwinds facing that industry segment. It's been hard work to get here, and there have been bumps in the road, and we will continue to fine-tune. But as the smoke clears and the true value of the companies that made tough decisions early to focus on core markets with differentiated products, we believe we'll see not only appreciation, but we'll deliver a new standard of how global platforms can better meet customer use cases. This will also result in lower R&D and higher return on customer and shareholder capital.

John Walsh: Thank you for joining us this earnings call will be more abbreviated update given we spelled T. Six weeks ago, our strategy of not focusing in on the consumer market as the first step has played out favorably based on the temporary headwinds facing that industry segment.

Speaker Change: Been hard work to get here and there have been bumps in the road and we will continue to fine tune.

Speaker Change: But as the smoke clears and the true value of the companies that made tough decisions are really to focus on core markets with differentiated products. We believe we will see not only appreciation, but will deliver a new standard of how global platforms can better meet customer use cases.

Speaker Change: This will also result in lower R&D and higher return on customer and shareholder capital.

Tony: Our strong technology-focused culture is designed to meet our customers' mission-centric mobility needs. It's taken a lot of grit to get here. And it was made possible by the great contributions of many of our team to innovate and think outside the traditional industry box. To reiterate, we are focused on commercial fleet, government, and military customers and their missions and use cases, and their deepening focus on workforce safety and ergonomics. Now, let me give you a brief update on our business.

Speaker Change: Our strong technology focused culture.

Speaker Change: Zhang to meet our customers' mission centric mobility needs, it's taken a lot of great to get here.

Speaker Change: And it was made possible by the great contributions of many of our team to innovate and think outside the traditional industry box.

Speaker Change: To reiterate our strategy, we are focused on commercial fleet government and military customers and their mission and use cases, and they are deepening focus on workforce safety and ergonomics.

Speaker Change: Now let me give you a brief update on our business.

Tony: We are proud to have recently delivered LDV-190 vehicles to the USPS EV Charging Depot at South Atlanta Sorting and Delivery Center. These vehicles display our ability to customize configurations for our customers. They are right-hand drive, built for the use case of our hardworking postal workers, which is enabled by our steer-by-wire proprietary technology and our customer-specific modified design.

Speaker Change: We are proud to have recently delivered L. D. D 190 vehicles to the U S. P. S. EV charging depot at South Atlanta sorting and delivery center. These vehicles display our ability to customize configurations for our customers. They are right hand drive.

Speaker Change: Built for the use case of our hardworking postal workers, which is enabled by our steer by wire proprietary technology and our customer specific modify designs.

Tony: Watch for canoe vehicles to be out delivering your mail on routes in Atlanta. We look forward to proving to the USPS that our American-made product can achieve the new standards set by the Postmaster General and the USPS leadership team. Now that we have delivered right-hand drive vehicles to the USPS, we are underway in homologating our vehicles for additional markets to address the needs of similar customers. And many of you were wondering why we were so focused early on on becoming one of the approximate 261 foreign trade zones in the United States at our OKC facility.

Speaker Change: Watch for to new vehicles to be out delivering your mail on routes in Atlanta, We look forward to proving to the USPS that are American made product can you achieve the new standards set by the postmaster General and the U S. P. S leadership team.

Speaker Change: Now that we have delivered right hand drive vehicles to the U S. P. S. We are underway in homologate ing our vehicles for additional markets to address the needs of similar customers and many of you were wondering why we were so focused early on on becoming one of the approximate 200.

Speaker Change: 61, foreign trade zone, and the United States, and our Okc facility, hopefully disconnects yet another die.

Tony: We recently completed a two-week tour in the UK with our vehicles, including fleet shows and other events, which showcased our right-hand drive LDB configuration. To highlight, we were extremely impressed by the leadership teams from eight of the top 15 UK fleet operators that we met, which together represent over 1 million fleet units on the road today. These fleets have current electric adoption rates of up to 20%. The UK market has the tailwind of an aggressive mandate supported by the people's electrification goals and continues to be one of the fastest to adopt commercial EVs.

Speaker Change: We recently completed a two week tour in the U K with our vehicles, including fleet shows and other events, which showcased our right hand drive L. D. D configuration to highlight we were extremely impressed by the leadership teams from eight of the top 50.

Speaker Change: <unk> U K fleet operators that we met which together represent over 1 million sleep units on the road today. These fleets have current electric adoption rate.

Speaker Change: Up to 20%.

Speaker Change: U K market has the tailwind.

Speaker Change: And I've been aggressive mandate supported by the people of electrification goals and continues to be one of the fastest to adopt commercially DS.

Speaker Change: We were flattered by certain foreign Oems that spent more time in our booth and their own. We also appreciate being given the one to watch annual award at the Great British Fleet event.

Tony: To everyone in the UK who we met on the tour, we would like to say that your hospitality and your interest in our products have inspired us even more. Last week, the first of our vehicles arrived in Saudi Arabia for Red Sea Global, an inspiring development illustrating the Crown Prince's Vision 2030 goal to responsibly diversify its economy in an eco-friendly way. These vehicles are part of the previously announced pilot program to be used in its regenerative tourism developments.

Speaker Change: Everyone in the U K, who we met on the tour, we would like to say that your hospitality and your interest in air products has inspired us even more.

Speaker Change: Last week, the first of our vehicles arrived in Saudi Arabia for a Red Sea global inspiring development illustrated illustrating the crown Prince his vision 2030 goal to responsibly diversify its economy and an eco friendly way these vehicles.

Speaker Change: Those are part of the previously announced pilot program to be used and it's we generally kids tourism developments. In addition, we recently signed.

Tony: In addition, we recently signed a vehicle sales agreement with Jazeera Paint, enabling us to expand into the rapidly growing $30 billion TAM in Saudi Arabia. These agreements come from longstanding relationships in the kingdom and are now generating strong interest, including initial orders, and are opening the opportunity for additional capital partnerships. While we are not yet authorized to discuss all of the names, we continue to finalize vehicle configurations and set delivery schedules for our Fortune 100 customers to align with their workflows and use cases, and we will update you as we are able.

Speaker Change: Vehicle sales agreement with Jazeera paints, enabling us to expand into the rapidly growing $30 billion Tam in Saudi Arabia.

Speaker Change: These agreements come from long standing relationships in the Kingdom and are now generating strong interest, including initial orders and are opening the opportunity for additional capital partnerships.

Speaker Change: While we are not yet authorized to discuss all of the names we continue to finalize vehicle configurations and set delivery schedules for our fortune 100 customers to align with their workflows and use cases, and we will update you as we are able.

Tony: On our manufacturing and supply chain progress, which to some extent has slowed down, we expect more activity as we move through the year. And given the points above, we are working very aggressively to close the gap. We are increasing our step level manufacturing to reach a run rate of 20,000 vehicles by year end and to harmonize our supply chains and fulfill our growing backlog. We still have two long poles in our tent, aligning our supply chain and finalizing our capital requirements to meet our operational goals and run rate. And we are well underway and look forward to sharing information as to how we will bring these pieces together in the near future. The supply chain continues to be challenging for various reasons.

Speaker Change: On our manufacturing and supply chain progress, which to some extent has slowed down we expect more activity as we move through the year and given the points at bolt we are working very aggressively to close the gap, we are increasing our step level manufacturing too.

Speaker Change: The run rate of 20000 vehicles by year end and to harmonize our supply chains and fulfill our growing backlog.

Speaker Change: We still have two long poles in our tent aligning our supply chain and finalizing our capital requirements to meet our operational goals and run rate.

Speaker Change: And we are well underway and look forward to sharing information as to how we were bringing these pieces together in the near future.

Speaker Change: The supply chain continues to be challenging for various reasons, but we are making very targeted progress as announced we continue to purchase new and like new manufacturing assets to close the gap. Our teams are already integrating this equipment into our Oklahoma.

Tony: But we are making very targeted progress. As announced, we continue to purchase new and like new manufacturing assets to close the gap. Our teams are already integrating this equipment into our Oklahoma facilities. Ramesh will speak more about the value created through these acquisitions. To conclude, we would like to extend a deep thank you to those who believe in us and our strategy and especially to those who are supporting and helping us to resolve these remaining key items, which will enable us to scale our operation.

Speaker Change: These Nashville.

Speaker Change: Nashville speak more about the value created through these acquisitions.

Speaker Change: To conclude we would like to extend a thank you to those who believe in us and our strategy and especially to those who are supporting and helping us to resolve these remaining key items, which will enable us to scale. Our operations. In addition, we know.

Tony: In addition, we know that for some investors, it has been a challenging time over the past three years, and we hope that we are proving to you that we are focused on a strategy that is differentiated and we believe will remain in high demand because our vehicles have a lower cost of ownership, meet the rising focus on driver satisfaction, and higher safety standards on a regenerative platform, allowing us to compete, whether it's ICE, Bev, I look forward to seeing many of you at our first Oklahoma City Investor Day, which Greg will cover in his section.

Speaker Change: That for some investors it has been a challenging time over the past three years and we hope that we are proving to you that we are focused on a strategy that is differentiated and we believe we'll remain in high demand because our vehicles have a lower cost of ownership meet them.

Speaker Change: <unk> focus of driver satisfaction and higher safety standards on a regenerative platform, allowing us to compete whether its ice.

Speaker Change: Beds or hybrid I look forward to seeing many of you.

Speaker Change: Okay.

Speaker Change: And our first Oklahoma City, Investor Day, which Greg will cover in his section.

Speaker Change: I'll turn it over to Greg.

Greg: Thanks, Tony.

Greg: We remain convinced that the commercial and government segments have crossed a tipping point with electrification and are the most attractive markets to pursue for our vehicles due to the significant opportunity to enhance our customers' return on capital and to achieve a positive environmental impact. In my conversations with investors, it's often misunderstood that we are first focused on the commercial, government, and military end markets and have intentionally avoided the consumer market. Tony and the company made this pivot in late 2021, and our customers remain committed to sustainable mobility, primarily based on the strong economics and low total cost of ownership that our products provide. This commitment is as strong as ever.

Greg: We remain convinced that the commercial and government segments have crossed the tipping point with electrification and are the most attractive markets to pursue for our vehicles due to the significant opportunity to enhance our customers' return on capital and to achieve a positive environmental impact.

Julian: In my conversations with investors, it's often misunderstood that we were that we are first focused on commercial government and military end markets and have intentionally avoided the consumer market Julian The company made this pivot in late 2021, and our customers remain committed to sustainable mobility, primarily based on the strong.

Julian: Economics, and low total cost of ownership that our products provide this commitment is as strong as ever.

Julian: And we do not see any change in this feedback despite the headlines and challenges in the consumer market now.

Greg: Now, let me give you an update on our capital raising efforts. The company continues to have consistent access to capital from a wide number of sources, and we actively evaluate financing opportunities that best limit shareholder dilution. Yet, at the same time, we have robust average daily dollar volume in GOEV equity for a company of our size, which also enhances our options for accessing equity capital and makes us attractive to institutional investors.

Julian: Now let me give you an update on our capital raising efforts. The company continues to have consistent access to capital from a wide number of sources and we actively evaluate financing opportunities that best limit shareholder dilution.

Julian: Yet at the same time, we have robust average daily dollar volume and Joey the equity for a company of our size, which also enhances our options and accessing equity capital and makes us attractive to institutional investors.

Greg: I've spent a lot of years in the capital markets, and I'm a believer that we have the right business formula and team. Combine this with achieving our business milestones, our sources of capital are only increasing. Further, it's a competitive advantage raising capital with long-term relationships, and Tony Hathaway. He has a track record of building international businesses and we are growing and assembling a team and partners globally to execute on these opportunities. We are leveraging all of our existing relationships as well as building new ones. It takes time, commitment, international trips, and being on the ground in these regions to build these partnerships.

Speaker Change: Spent a lot of years in the capital markets and I'm, a believer that we have the right business formula and teams combined this with achieving our business our business milestones. Our sources of capital are only increasing further it's a competitive advantage raising capital with long term relationships and Tony has this he has a track record of bill.

Speaker Change: <unk> International businesses, and we are growing in assembling a team and partners globally to execute on these opportunities we are leveraging all of our existing relationships as well as well as building new ones. It takes time commitment international trips and being on the ground in these regions to build these partnerships and they have all.

Greg: And they have already yielded both strategic investor capital, as well as commercial agreements in the KSA region and beyond. We are excited about the future potential. A quick recap of capital raised since the beginning of 2022. We have raised approximately $662 million in financing from a variety of sources. Yorkfield Advisors has been the largest partner, providing approximately $405 million of primary capital. Equity capital market transactions have yielded $100 million. Strategic Supply Partner, 45 notes, and we had a termination of a contract manufacturing and investment agreement that yielded $38 million payment to Canoo. And finally, pipe transactions of approximately $72 million.

Speaker Change: Already yielded both strategic investor capital as well as commercial agreements in the KSA region and beyond.

Speaker Change: We're excited about the future potential.

Speaker Change: A quick recap of capital raised since the beginning of 2022, we have raised approximately $662 million of financing from a variety of sources.

Speaker Change: Worked through advisors, there's been a large the largest partner providing approximately 405 million primary capital equity capital market transactions have yielded 100 million strategics.

Julian: Strategic supply partner $45 million, and we had a termination of a contract manufacturing and investment agreement that yielded a 38 million payment to canoe and finally pipe transactions of approximately $72 million. In addition, our other largest supporter has been Tony and his family office AFB partners.

Greg: In addition, our other largest supporter has been Tony and his family office, AFB Partners and its affiliates, who have invested over $400 million since 2020. Tony and AFBP have supported Canoo at every critical juncture of the company's evolution. We have also now started to act as government funding.

Julian: And its affiliates, who have invested over 400 million since 2020, Tony in a N V. P and supported can do it every critical juncture of the Companys evolution.

Julian: We have also now started to access government funding as we announced in January we received the first funds from the state of Oklahoma and we are actively pursuing potential financings of certain government tax refunds and credits both of which are non dilutive forms of capital for command.

Greg: As we announced in January, we received the first funds from the state of Oklahoma, and we are actively pursuing potential financing of certain government tax refunds and credits, both of which are non-diluted forms of capital for Canoo. We believe opportunities like these will increase over the next 12 months as we steadily advance our business. Although the markets have been challenging in the last 24 months, we have been able to continue to invest in our business and advance the mission of Canoo.

Julian: We believe opportunities like these will increase over the next 12 months as we steadily advance our business.

Julian: Although the markets have been challenging the last 24 months, we have been able to continue to invest in our business in advanced emission a canoe.

Greg: We have been highly disciplined in the way we have optimized our business while staying flexible to allow us to take advantage of dislocations in the market, like our recent distressed manufacturing asset purchases that Ramesh will cover in more detail. Young companies like ourselves must remain focused, and this focus and execution will benefit our partners in the long term. Finally, as Tony mentioned in his earlier remarks, we are announcing an invite-only Analyst and Investor Day at our Oklahoma City facility this summer.

Julian: We've been highly disciplined in the way we have optimized our business, while staying flexible to allow us to take advantage of dislocations in the market like our recent distress manufacturing asset purchases that refresh will cover in more detail young companies like ourselves must remain focused and this focus and execution will benefit our partners and the long term.

Tony: Finally, as Tony mentioned in his earlier remarks, we are announcing an invite only analyst and Investor day at our Oklahoma City facility. This summer we will share more detail soon but we're very excited to showcase our progress as many of our suppliers and other partners and see when they toured this facility.

Greg: We will share more details soon, but we're very excited to showcase our progress, as many of our suppliers and other partners saw when they toured this facility. I will now turn the call over to Ramesh to cover the financial update.

Amesh: I will now turn the call over to a mesh to cover the financial update.

Speaker Change: Thank you Greg.

Ramesh: Moving to the income statement, our first quarter 2024 results are as follows. Research and development expenses totaled $26.4 million for the quarter, compared to $47.1 million in the prior year period, a 44% reduction from Q1 of 2023. We also reduced R&D expenses by 16% compared to $31.5 million for the quarter in Q4 of 2023. SG&A expenses excluding stock-based compensation totaled $22.5 million for the quarter compared to $24.1 million in the prior year period, a 7% reduction from Q1 of 2023.

Amesh: Moving to the income statement first.

Amesh: First quarter 2024 results are as follows research and development expenses totaled $26 4 million for the quarter compared to $47 1 million in the prior year period, a 44% reduction from Q1 2023.

Amesh: We also reduced R&D expenses by 16% compared to $31 $5 million for the quarter in Q4 of 2023.

Amesh: SG&A expenses, excluding stock based compensation totaled $22 $5 million for the quarter compared to $24 1 million in the prior year period, a 7% reduction from Q1 of 2023.

Amesh: <unk> also reduced SG&A expenses, excluding stock based compensation by 3% compared to $23 1 billion for the quarter in Q4 2023. Additionally.

Ramesh: We also reduced SG&A expenses excluding stock-based compensation by 3% compared to $23.1 million for the quarter in Q4 of 2023. Additionally, we achieved a 29% savings from workforce transition into Oklahoma, as well as transitioning from engineering to manufacturing.

Amesh: Additionally, a 29% savings from workforce transition into Oklahoma as well as transitioning from engineering to manufacturing.

Ramesh: As it relates to our key non-GAAP metrics, here is a summary. 28% or $18.8 million quarterly adjusted EBITDA improvement from negative $67.1 million in Q1 of 2023 to negative $48.3 million in Q1 of 2024. 11.5% or $6.3 million quarterly adjusted EBITDA improvement from negative $54.6 million in Q4 of 2023 to negative $48.3 million in Q1 of 2024. 72% or negative 2.83 adjusted net loss per share improvement from negative 3.96 per share in Q1 of 23 to negative 1.13 per share in Q1 of 24.

Amesh: As it relates to our key non-GAAP metrics here this summer.

Amesh: 28% or $18 8 million quarterly adjusted EBITDA improvement from negative $67 1 million in Q1 of 'twenty three the negative $48 3 million in Q1 24.

Amesh: 11, 5% or $6 3 million quarterly adjusted EBITDA improvement from negative $54 6 million in Q4 of 'twenty three.

Amesh: Negative $48 3 million in Q1 of 'twenty four.

Speaker Change: Seven 2% or negative 2.8 sleep adjusted net loss per share improvement from negative $3 96, a share in Q1 of 'twenty three the negative one wants to be sure in Q1 of 'twenty four.

Ramesh: 35% or negative 0.60 adjusted net loss per share improvement from negative 1.73 per share in Q4 of 23 to negative 1.13 per share in Q1 of 2024. Turning to cash flow. We ended the quarter with cash, cash equivalents, and restricted cash of $18.2 million. After giving effect to the CDC Preferred Stock Purchase Agreement, for a total of $16.5 million, our cash balance would have been $34.7 million on March 31, 2024. Net cash provided by financing activities for the three months ended March 31, 2024, was $49.8 million, compared to $56 million in the prior year period.

Speaker Change: 35% or negative 0.6, adjusted net loss per share improvement from negative $1 70 per share in Q4 of 23 to negative one one <unk> per share in Q1 of 2024.

Ramesh: Cash used in operations for the three months ended March 31, 2024 was $47.5 million compared to $67.2 million in the prior year period. The $47.5 million cash outflow for the quarter ended Q1 of 2024 is towards the lower end of the prior guidance provided in April of 2024. We will continue to optimize our capital in the future. Our cash outflows from investing activities of $4.9 million for the three months ended March 31, 2024 compared to $18.4 million in the prior year period.

Speaker Change: Turning to cash flows.

Speaker Change: We ended the quarter with cash cash equivalents and restricted cash of $18 2 million.

Speaker Change: After giving effect to the series C preferred stock purchase agreement for a total of $16 $5 million, our cash balance would have been $34 7 million on March 31st 2012.

Speaker Change: Net cash provided by financing activities for the three months ended March 31, 2024 was $49.8 million compared to $56 million in the prior year period.

Speaker Change: Cash used in operations for the three months ended March 31, 2024 was $47 5 million compared to $67 2 million in the prior year period.

Speaker Change: The 47 5 billion cash outflow for quarter ended Q1 of 'twenty 'twenty four is towards the lower end of the prior guidance provided in April of 2024.

Speaker Change: We will continue to optimize that capital into future quarters.

Speaker Change: Cash outflows from investing activities of $4 9 million for three months ended March 31, 2024, compared to $18 4 million in the prior year period.

Ramesh: Our Q1 2024 investment in CAPEX was primarily attributable to new or light new advanced manufacturing equipment purchases, primarily from the UK. These assets enable the company to increase its general assembly and vehicle cabin build capacity. These assets were all purchased at a discounted price of over 80% of the estimated value and were carefully reviewed, inspected, and selected by Kunal's team. As we continue to pursue these opportunities, our previously issued guidance from last month remains unchanged.

Speaker Change: Q1, 2020 for investment in Capex was primarily attributable to the new unlike new advanced manufacturing equipment purchases, primarily from the U K.

Speaker Change: These assets.

Speaker Change: Enable the company to increase its general Assembly and vehicle cabin both capacity.

Speaker Change: These assets were all purchased at a discounted price of over 80% of the estimated value and we're carefully reviewed inspected and selected <unk>.

Speaker Change: As we continue to pursue these opportunities.

Speaker Change: And the issue guidance from last month remain unchanged.

Ramesh: Additionally, since Q4 of 2023, we have purchased six times more assets from auctions at pennies on the dollar, reducing capital expenditures by tens of millions of dollars. And we will continue to follow this strategy as we progress. Other cost optimization efforts come from our recently established free foreign trade zone, which will lower the vehicle cost by up to five percent as we decide to export our canoe products to the rest of the world.

Speaker Change: Additionally, since Q4 of 2023, we have purchased six times more assets from auctions.

Speaker Change: Underdog, reducing capital expenditures by tens of millions of dollars and we will continue to follow the strategy as we progress.

Speaker Change: Other cost optimization efforts come from our recently established three foreign trade zone, which will lower the vehicle costs by up to 5% as we decided to export our two new products to the rest of the world.

John Wolfe: With that, I'll turn it back to Jon. Thanks very much. With that, Kevin, could you please pull the lines for questions? Sure. We'll now be conducting a question and answer session. As a reminder, we ask that you please ask one question and one follow-up.

Speaker Change: With this I'll turn it back to John.

Speaker Change: Welcome to extra mess.

Speaker Change: With that Kevin could you. Please poll the lines for questions.

Operator: We will now be conducting a question and answer session. As a reminder, we ask that you please ask one question and one follow-up, then return to the queue. If you would like to be placed in the question queue, please press star 1 at this time. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove a question from the queue. Our first question today is coming from Michael Legg from the Benchmark Company. Your line is now live.

Kevin: Certainly will now be conducting a question and answer session. As a reminder, we ask you. Please ask one question and one follow up then return to the queue, if you'd like to be placed in the question queue. Please press star one at this time.

Speaker Change: 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.

Speaker Change: Our first question today is coming from Michael Legg from the Benchmark Company. Your line is now live.

Michael Legg: Thanks, Good afternoon.

Michael Legg: Can you talk a little bit about the USPS and the.

Michael Legg: Expectations for an RFP to come and when the timing and what type of magnitude do you think that could be.

Tony: I mean... Hey Mike, it's Tony. You know. The USPS is very focused. Obviously, they've publicly announced what their objectives are, what US, you know, our Postmaster General DeJoy is doing, you know, to the business to make it competitive and ultimately profitable. We believe that, you know, there's a tremendous upside. We see them very focused on executing their plan. We see lots of opportunities. You know, they gave us a tough market to prove ourselves in.

Speaker Change: I mean.

Speaker Change: Hey, Mike This is Tony.

Tony: You know, weather condition-wise, geography, you know, routes, which we love and we're grateful for, and, you know, we'll have more to share with you on that, but my guidance would be to look at, you know, how much they've allocated to this initiative and the timeline in which the Postmaster General intends to execute it and his management team, in addition to that, his shift in the business to be much more competitive on shipping on the ground versus the air. Also, I didn't hear you mention Walmart at all.

Speaker Change: Yeah.

The USPS is very focused obviously, they publicly announced what their objectives are.

Speaker Change: What yes.

Speaker Change: Postmaster General the Joy is doing to the business to make it competitive and ultimately profitable we believe that.

Speaker Change: Yeah that was a tremendous upside.

Speaker Change: We see them very focused on executing their plan, we see lots of opportunities.

Speaker Change: They gave us a tough market to prove ourselves in.

Speaker Change: You know weather condition wise geography.

Speaker Change: Routes, which.

My Guy: Which we love and we're grateful for and we'll have more to share with you on that but my Guy My guidance would be to look at you know how much they've allocated to this initiative and the timeline in which postmaster general and.

Speaker Change: <unk> intends to execute it and his management team. In addition to that his shift in the business to be much more competitive on shipping on the ground versus the air.

Speaker Change: Okay, Great and then also I didn't hear you mentioned Walmart along can you just get an update on Walmart.

Tony: Can we get an update on Walmart? Yeah, we, you know, are not authorized to say too many things, but we continue to refine, you know, they're very focused on their business model, very well organized about their needs, and, you know, they take their view out for quite a long period of time. I think they have the infrastructure, the horsepower, and the team to execute it. We'll share more information as we're allowed, but we continue to be very focused on it and innovate, and there will be, you know, more information to share at an appropriate time, and then just I'll do one last one on the supply chain you mentioned it remains challenging we still have the guidance out there for 50 to 100 million, What needs to be done on the supply chain to get... Yeah, so look, I think we're hitting a point now, as you know, Mike, you know, you've been out to see what we've done, and how we're doing it and kind of the scrappy and an entrepreneurial way and the way we're trying to change the game and be able to scale our manufacturing and keep our costs in check.

Speaker Change: Yeah.

Speaker Change: Yeah, we're not authorized to say too many things that we continue to refine them.

Speaker Change: They're very focused on their business model.

Speaker Change: Very well organized about their needs.

And you know they take their do you out for quite a long period of time I think they have the infrastructure of horsepower and and the team to execute it.

Speaker Change: Well, we'll share more information as we're allowed but we continue to be very focused on it and innovate and there will be more information to share.

Speaker Change: Okay, Great and then just one last one on the supply chain you mentioned it remains challenging we still have the guidance out there for $50 million to $100 million.

Speaker Change: What needs to be done on the supply chain to get there.

Speaker Change: Yeah. So look I think we're hitting a point now.

Speaker Change: As you know Mike you know.

Speaker Change: You've been out to see what we've done and how we're doing it in kind of a scrappy in an entrepreneurial way and the way we're trying to change the game.

Speaker Change: And be able to scale, our manufacturing and keep our costs in check.

Tony: You know, we just only have so much capital and so many things we, while we would love to fight many things in parallel, we also have to be disciplined to where we have to fight in a serial fashion. And frankly, you know, all my years in this industry, especially around parts, locking your supply chain too early will only cause you problems as we've seen with recent, you know, current events that have been unfortunate for some. So I think, you know, there's a benefit and there's a risk. And that's why I say various reasons.

Speaker Change: We we just only have so much capital and so many things we while we would love to fight many things in parallel we also have to be disciplined to where we have to fight in a serial fashion.

Speaker Change: And frankly, you know.

Speaker Change: In all my years in this industry, especially around parts.

Speaker Change: Locking your supply chain to early will only cause you problems as we've seen with recent.

Speaker Change: Current events that had been unfortunate for some so I think yeah, theres, a benefit and there's a risk and that's why I say various reasons, but net net if we had.

Tony: But net net, if we had, you know, probably within the last two months, if we had the capital in place, we would have probably be a bit more accelerated. In addition to that, that's saying that knowing that we've now successfully completed the purchase of long lead equipment, that we were making the bet that we could buy and you know, when you're buying stuff at 10 cents on the dollar to 20 cents on the dollar, the bomb impact it has based on the useful life of these vehicles, which allows us to compete not only, you know, in the EV, which, you know, seems to be less favorable in some topic circles.

Speaker Change: Sure.

Speaker Change: Within the last two months, if we had.

Speaker Change: The capital in place, we would probably be a bit more accelerated in addition to that that's saying that knowing that we've now successfully completed the purchase of long lead equipment that we were making the fact that we could buy and you know when you're buying stuff at 10 cents on the dollar.

Speaker Change: <unk> 20 cents on the dollar the Bom impact it has based on the useful life of these vehicles, which allows us to compete not only you know in the E V, which seems to be less favorable in some topics circles. However at the end of the day it becomes a return on capital.

Tony: However, at the end of the day, it becomes a return on capital and a regenerative approach. And, you know, we've taken an approach to know that we will compete against ICE, DEV, and Hybrid. You know, those challenges are, Lessening as we go day by day, and I think we'll make a pretty big push here in the near future and we'll announce those things as they come to light.

Speaker Change: Regenerative approach and we've taken an approach to know that we will compete against ice pad.

Speaker Change: And I agree.

Speaker Change: So.

Speaker Change: You know those challenges are.

Speaker Change: Lessening as we go day by day, and I think we'll make a pretty big push here in the near future and we'll announce those things as they come to light.

Speaker Change: Great. Thanks, and congrats on the progress to date.

Mike This: Thanks, Mike.

Operator: Thank you. The next question is coming from Craig Irwin from Ross Capital Partners. Your line is now live.

Speaker Change: Thank you. Your next question is coming from Craig Irwin from Roth Capital Partners. Your line is that life.

Craig Irwin: Good evening, and thanks for taking my questions. So, Tony, the post office, I guess, is, you know... Can you maybe just help us with some breadcrumbs?

Speaker Change: Hi, good evening and thanks for taking my questions.

Speaker Change: So Tony on the <unk>.

Unknown Executive: <unk> office I guess as.

Unknown Executive: You know.

Speaker Change: And they can manage sometimes hard to hard to penetrate but actually far more visible than the fortune 100 customers.

Speaker Change: I know you gotta be looking to serve them. So I don't think we're gonna see electric.

Speaker Change: Electric pictures of your vehicle and some of these some of these other high priority customers that you're pursuing given you know their employees are often under NDA et cetera.

Speaker Change: Maybe just help us with some bread crumbs.

Tony: A little bit about who these Fortune 100 customers could be. You know, they're all sorts of different business models out there where they do need a large fleet. What would you say are the top 10 fleets in the country that might be the most attractive to you? An LD-190 would be a good match or, you know, a different format, a custom format.

Speaker Change: Little bit about who these fortune 100 customers could be.

Speaker Change: You know there.

Speaker Change: All sorts of different business models out there, where they do need a large fleet.

Speaker Change: What would you say are the top 10 fleets in the country that might be the most attractive to you.

Speaker Change: There you know something like you know.

Speaker Change: And that was the 190 would be a good match or you know a different format accustomed format.

Speaker Change: Can you tease that out maybe give us a little color on them.

Speaker Change: Who we could potentially see.

Speaker Change: Or is.

Tony: Yeah, that's a great question, Craig. So, you know, when you're when you're a TEM, if you will, not an OEM, you're a technology company and keeping secrets and and building things that give your customers competitive advantage, and really working and integrating with their teams, so that we can enable them to win on a platform that is scalable. And, you know, that's scalable across multiple companies, but yet each company has its uniqueness. I mean, we're not stamping out boxes here. As you know, you've seen what we're doing. It is different.

Craig Irwin: Yeah, that's a great question, Craig so when you're when you're at T. M. If you will not an OEM you are a technology company and keeping secrets and building things they give your customers competitive advantage and really working and integrating with their teams. So.

That we can enable them to win on a platform that is scalable and that scalable across multiple companies, but yet each company has its uniqueness and we're not stamping out boxes here as you know you you've you've seen what we're doing.

Tony: It isn't the easiest story to tell, as you know, but I will tell you that when those customers speak, I believe it will speak volumes of the discipline and the way we've approached partnering with them and solving problems and helping them gain their competitive advantage. And, you know, while we're, you know, we would love to have all the customers out there, we're also very selective to make sure we're not selling, you know, to every customer the same thing. We're very specific about creating competitive advantages with high volume customers that we believe are going to take market share here and globally.

Craig Irwin: It is different and it isn't the easiest story to tell as you know, but I will tell you that when those customers speak I believe it will speak volumes, if the discipline and the way, we've approached partnering with and solving problems and helping them gain a competitive bid.

Craig Irwin: Vantage and while were yeah, we would love to have all the customers out there. We're also very selective to make sure we're not selling to every customer. The same thing we're very specific about creating competitive advantages with high volume customers that we believe are good.

Craig Irwin: To take market share here and globally.

Craig Irwin: Okay, so then, again, if we could use the post office as like a metric, right? I think a lot of the first photos that people saw out there, you had the LDV-130 and the LDV-190 photographed and put up on different, you know, Unknown Executive, Jaime Perez, Kenneth Manget, Kunal Bhalla, Ramesh Murthy, Gregory Ethridge, in January of this year that you come to an agreement. You know, what sort of activity is there or, you know, roughly how many of the top fleets, you know, is it logical for us to assume that you're working with right now? And would you see a similar structure where you work with people for a period of months or maybe even years before you see a formal purchase agreement?

Speaker Change: Okay. So then again, if we could use the post office is like a metric right I think the first photos that people saw up there you had the L. D V 130 in the elderly 190, a photograph and put up on different you know.

Speaker Change: Internet web pages unofficial right. So you'd obviously been working with the post office for quite a while before you announced in.

Speaker Change: In January of this year that you come to an agreement you know what sort of activity is there are you know roughly how many of the top fleets. You know is it logical for us to assume that you're working with right now and would you see a similar structure, where you work with tumor people for a period of months or maybe even years.

Speaker Change: Before you see a formal purchase agreement.

Tony: Yeah, look, I mean, I think it's important to make sure that you're getting multi year, long term agreements that allow you to buy in your supply chain, right, that you can actually get the best returns, you know, trying to sell one at a time, 10 at a time 100 this month, you know, that's not our model. Our model, as you know, is based on being an integral partner, and, and really focused on the workflow, the wordware economics, we all know, you know, the driver safety and driver economic issues that are growing, and the ability to get more out of each square foot.

Speaker Change: Yeah look I mean, I think it's important to make sure that youre getting multi year long term agreements that allow you to buy in your supply chain right that you can actually get the best returns you know trying to sell one at a time 10 at a time of 100. This month, yeah, that's not our model.

Speaker Change: All of our model as you know is based on being an integral partner and really focused on the work for the world of economics, we all know.

Tony: So, you know, as you can see, what we see in our world, where some of the people in the space, they're trying to go down in square footage, which is very expensive because you have a lot of tooling breakage, right? You have a lot of leaking, have a lot of impairments, you have a lot of different products.

Speaker Change: The driver safety and driver of economic issues that are growing and the ability to get more out of each square foot. So you know as you can see what we see in our world where some of the people in the space, they're trying to go down in square footage, which is very expensive because you have a lot of <unk>.

Speaker Change: Lean breakage right you have a lot of leakage and lot impairments. He had a lot of different products ours is a common platform and we're going up in square footage.

Tony: Ours is a common platform and we're going up in square footage. And it was designed that way, which means customer, you know, use cases and gives them greater flexibility of use case on a common platform. So, I think, you know, from our perspective, you know, our goal is to be able to give our customers a vehicle that is configurable, adaptable to seasonality, but also on a common platform such that the return on capital will increase over time in generation two and three rather than decrease while we build a more profitable company at the same time. So, creating that, which is why you got to get outside the industry box, right, of thinking.

Speaker Change: And it was designed that way, which means customer use cases and gives them greater flexibility of use case on a common platform. So I think you know from our perspective, our goal is to be able to give our customers a vehicle that is configurable adaptable to seize.

Speaker Change: Tenacity AR, but also on a on a on a common platform such that the return on capital will increase over time in generation, two and three rather than decrease while we build a more profitable company at the same time, so creating that and which is why you gotta get outside the industry box.

Speaker Change: Alright are thinking.

Tony: And so, you know, I think for us, it's not an issue of opportunities, as we saw with the, maybe you have or haven't seen some of the reviews that came out of the UK, you know, it's a very competitive product, and it's scalable, and it's configurable, and that's what businesses need today. And so, I think for us, it will be how methodically we execute so we don't break our quality, we don't break the things that made us who we are, but that we continuously grow step by step, and we think of capital and how we deploy capital, not just by what we raise, as we've seen with others, but how we deploy, like waiting and buying, you know, at all-time lows.

Speaker Change: And and so you know.

Speaker Change: I think for us, it's not an issue of opportunities.

Speaker Change: As we saw with the and maybe you have or haven't.

Speaker Change: Seen some of the reviews that came out of the U K.

Speaker Change: It's a very competitive product.

Speaker Change: And yeah, and it's scalable and it's Configurable and and that's what businesses need today, and so I think for us it will be how methodically we.

Speaker Change #124: So we don't break our quality, we don't break the things that made us who we are but that we continuously grow step by step and we think of capital and how we deploy capital and not just by what we raised as we've seen with others, but how we deploy like waiting in buying you know at all times.

Tony: Two years ago, robotics was at an all-time high in cost. Today, we are the ones that are buying at an all-time low. Now, you know, we feel bad for those unfortunate, but sometimes shuffling the decks of the sequence isn't the way that people normally do it, can be a good advantage and I think you know, We've had some good luck and some discipline and of course now we've got to focus on these next two areas.

Speaker Change: It was two years ago robotics was at an all time high in cost today, we are the ones that are buying it at all time low now you know.

Speaker Change: We feel bad for those unfortunate, but sometimes shuttling the depths of the sequence isn't the way the people normally do it.

Speaker Change: Can be a good advantage and I think you know.

Speaker Change: We've had some good luck.

Speaker Change: And and some discipline and of course now we got to focus on these next two areas harmonizing the supply chain. So that is strong and can meet our demand.

Tony: Harmonizing the supply chain so that it's strong and can meet our demands is something we're very focused on right now. In addition to that, as you know, we've been against having Chinese parts in our vehicles for quite a number of years now since I took over. And as we saw with recent announcement, those things are playing favorably. And, you know, we're just trying to build a real strong business with a multi-year customer long-term relationship that drives their cost of capital down and their productivity up.

Speaker Change: It's something we're very focused on right. Now in addition to that you know as you know we've been against having Chinese parts in our vehicles for quite a number of years now and since I took over and as we saw with recent announcements those things are playing favorably and you know we're just trying.

Speaker Change: <unk> build a real strong business with a multi year customer long term relationship that drives their cost of capital down and their productivity up.

Operator: Great. Well, thanks for taking my questions. Congratulations on the continued progress. Thanks, Craig. Thank you. Next question is coming from Dan Ives from Wedbush Securities. Your line is now live.

Speaker Change: Great well, thanks for taking my questions. Congratulations on the continued progress.

Greg: Thanks, Greg Thank.

Greg: Thank you next question is coming from Dan Ives from Wedbush Securities. Your line is that life.

Daniel Harlan Ives: Yeah, thanks. Can you talk about Saudi Arabia's opportunity and just like how you're thinking about that, obviously at first.

Dan Ives: Yeah, Thanks, and can you talk about the.

Daniel Harlan Ives: Saudi Arabia opportunity and just like how you're thinking about that.

Speaker Change: No I understand your first deal and what that could ultimately be.

Tony: You know, I think if you if you looked in and you know this about us, you know, we we don't build to pass, you know, standards, we we build our products and break them. And we never shy around from the toughest market. I think if you build a product where you go to the toughest places to perform, you're going to build a better global product. And you know, I think Saudi Arabia is not only an environment that I encourage people to visit, you know, the vision of the Crown Prince and what he's doing for his people, the economy, the region, and ultimately the world, I think is pretty impressive, you know, we see the opportunity there, I mean, the build-out, the growth, the vehicles per household, there's just so many factors, obviously, you know, as you know, I'm a big fan and have friends in the region for many years, and I've just seen the changes and I'm a big believer.

Speaker Change: I think if you if you look Dan and you know this about US you know we don't Bill to pass you know standards, we rebuild our product breakdown and we never shy around from the toughest markets.

Speaker Change: I think if you build a product where you go to the toughest places to perform you're going to build a better global product.

Speaker Change: And you know I think Saudi Arabia is not only an environment that I encourage people to visit.

Speaker Change: The division of the Crown Prince and what he is doing for his people the economy the region and ultimately the world I think is pretty impressive.

As you know so we see the opportunity there I mean, the build out the growth.

Speaker Change: The vehicles per household there's just so many factors obviously you know as you know I'm, a big fan and have friends in the region for many years and I've just seen the changes and I'm a big believer.

Tony: And so that TAM is going to be rock solid, I think it will affect, you know, Africa and others, and I think it will bring them in a positive direction toward an ecological standard. In addition to that, I think the Brits, you know, are not being forced.

Tam: And so that that Tam, it's going to be rock solid I think it will affect you know Africa, and others and and I think it will bring them in a positive direction towards an ecological standard. In addition to that I think the Brits you know are not being forced.

Tony: You know, by regulations, they have a genuine need. They have a small island that they need to protect, and they're protecting it. That's why their adoption is up.

Tam: By regulations, they have a genuine need they have a small island that they need to protect.

Tam: And they are protecting it that's why the adoption is up.

Daniel Harlan Ives: You know, the U.S. Post Office was part of a strategy of going after right-hand drive markets. We believe in those markets, and of course we believe we have the lowest cost of entry, which of course that volume gives us more advantage as we produce vehicles, you know, for customers like the USPS. You know, we're always looking for ways to actually improve their bottom line. And then, you know, if we do a really great job on that, we're gonna create a great bottom line as we've been fortunate to do in our other.

Speaker Change: The U S Post office was part of our strategy of going after right hand drive markets.

Speaker Change: We believe in those markets and of course, we believe we have the lowest cost of entry which of course that volume gives us more advantage.

Speaker Change: As we produce vehicles.

Speaker Change: For customers like the U S. P S.

Speaker Change: Always looking for ways to actually improve their bottom line and then you know if we do a really great job on that we're going to we're going to create a great bottom line as we've been fortunate to do and or other countries.

Daniel Harlan Ives: [inaudible] Okay, and then just to, I mean, Craig's question on the post office, so. Just walk through again like the sequence of events like what how we should be thinking about this over the next, 3, 6, 9 months, part from a rollout.

Speaker Change: Okay, and then just to Craig's question or.

Speaker Change: Post office.

Speaker Change: So.

Speaker Change: Judy will walk through again like the sequence of events like what how we should be thinking about this over the next.

Speaker Change: 369 months turned from a rollout.

Tony: Thank you. Thank you. Thank you. I wish I could say more. But it's not the appropriate time.

Speaker Change: Hum.

Tony: I think that the most important thing is, you know, seeing the happy faces of the workers. And, you know, Postmaster General DeJoy is very focused on having a great relationship with his workforce, the largest veteran workforce in the U.S. We share his values. I think we're going to be in there doing everything we can to help execute on his strategy. He has the money and the ability to drive the change, with his leadership team.

Speaker Change #100: I wish I could say more but it's not the appropriate time I think the most important thing.

Speaker Change #101: As you know seeing the happy faces of the workers are.

Speaker Change #101: And you know.

Unknown Executive: The postmaster general the Joy is very focused on having a great relationship with its workforce largest veteran workforce in the U S.

Speaker Change #102: You know we share his values.

Speaker Change #103: I think we're gonna be in there doing everything we can to help execute on his strategy and he has the money and and and and the ability to drive the change with his leadership team. So you know I don't want to get out over my skis don't want the products speak for itself and when.

Tony: So, you know, I don't want to get out over my skis. I want the product to speak for itself. And when the post office is ready to share more, we'll will be will be right there with us.

Speaker Change #104: Post us ready to share more.

Speaker Change #104: <unk>.

Speaker Change #104: We'll be we'll be right there with them.

Okay. Thanks.

Operator: Thank you. The next question today is coming from Stephen Gengaro from STIFO. Your line is now live.

Speaker Change #105: Thank you next question today is coming from Stephens, Inc. <unk> from Stifel. Your line is that a lot.

Stephen David Gengaro: Thanks. Good afternoon, everybody.

Speaker Change #106: Hi, Thanks, good afternoon everybody.

Stephen David Gengaro: Um, I think I have two questions. But the first one is when we think about sort of the guidance you laid out for the year, I mean, it effectively comes to about 1000 to 2000 vehicles roughly delivered. Where do you stand in the visibility on the deliveries? And when do we start to kind of see a sort of a sustained ramp?

Speaker Change #106: Hum.

Speaker Change #107: I think.

I have two questions. The first one is when we think about sort of the guidance you laid out for the year.

Speaker Change #107: Effectively.

Speaker Change #107: Comes to about 1000 to 2000 vehicles, roughly delivered where do you stand in the visibility on the deliveries and when can we start to kind of see a sort of a sustained ramp.

Tony: Yeah, so look, every container we that we've purchased that we get online, you know, we When you come out to the factory, you'll see how we kind of built the factory, how we staged it for growth and for these other markets, which is why our MPP1 platform can produce upwards of $75,000 already. On an annualized basis, as we look to find ways to expand, the site is designed in 20,000 unit increments, and we got good visibility on, we're really playing an allocation game.

Speaker Change #108: Yeah. So look every container are we that we purchased that we get online.

Speaker Change #109: When you come out of the factory, you'll see how we kind of built the factory, how we staged it for growth and for for these other markets, which is why our M. P. T. One platform can produce upwards of 75000 already.

On an annualized basis as we as we look to find ways to expand the site is designed in 20000 unit increments and we got good visibility on we're really playing an allocation game and our customers that have become big believers by using the product and.

Tony: And our customers that have become big believers by using the product and us configuring it to their needs, you know, we are not able to deliver any one customer its full demand in the short cycle. So they've all been super great about allocation.

Speaker Change #109: As configuring it to their needs.

Speaker Change #109: We are not able to deliver any one customer its full demand.

Speaker Change #160: In the short cycle.

Speaker Change #110: So they've all been super great about allocation and of course, our whole thing is aligning with their multiyear strategies, which takes a lot of pressure off with a buy it now need it now hurry up and in addition to that you know I I do want to kind of go through the cycle to make sure that we.

Tony: And of course, our whole thing is aligning with their multi-year strategies, which takes a lot of pressure off of the buy it now, need it now, hurry up. And in addition to that, you know, I do want to kind of go through this cycle to make sure that we got everything right. I do intend to be measured as, you know, one of those TCPO rather than TCO only, you know, on the professional ownership.

Speaker Change #111: Got everything right I do intend to be measured as you know one of those T. C. P. R O a.

Speaker Change #112: Rather than T C L only.

Speaker Change #113: Now on the professional ownership so yeah, we've got we've got some high bars to hurdle.

Tony: So, you know, we've got, we've got some high bars to hurdle. We don't see any change. In fact, there are a couple other opportunities brewing, which close out a few more areas for us, where we manualized, semi-automated some of the process while we took the bet to wait that some guys will fall. And those that are continuing to give opportunities for us, and we're a ready buyer, and we make sure the capital is available for those acquisitions, those transactions, when those companies are in need, are now centering around the paint shop area, where we can pick up more automation and improve our bomb costs even more. So, we're starting to get, and hopefully it comes through this way. You can see, we're really getting it together to knock out those last two steps.

Speaker Change #113: Got it.

Speaker Change #114: We will we don't see any change in fact, there are a couple other opportunities burling, which closed out a few more areas for us we were we manualize a semi automated some of the process.

Speaker Change #114: While we took the bet to weight that some guys will fall and and and those that are continuing to give opportunities for us and we're already buyer and and we make sure. The capital is available for those acquisitions those transactions when those companies are in need.

Speaker Change #115: Our now centering around the paint shop area, where we can pick up more automation and improve our bom costs, even more so you know we're starting to get you know and hopefully it comes through this way you can see.

Speaker Change #115: We're really getting it together to knock out those last two stats and I think you know just by the circumstance of things the things that could haunt us as we go to market.

Tony: And I think, just by the circumstance of things, the things that could haunt us as we go to market have kind of ended up towards that tail end, and those things, and we're learning from those. Everyone we're buying equipment from, we are learning from them, what did they do wrong? What could we do better? And we believe that's real money, right? That's real investor capital. Otherwise, we'd have to go get that money and learn those lessons that way. So, it's not just the cost of equipment that Ramesh and Paul and team that have executed on, but it's also that we've been sponging up lessons.

Speaker Change #116: I have kind of ended up towards that tail end and those things and we're learning from those that the everyone. We're buying equipment from we are learning from them and what did they do wrong what did we what could we do better.

Speaker Change #116: And you know and and we believe that that's real money right, that's real investor capital otherwise, we'd have to go get that money and and and and learn those lessons that way. So it's not just the cost of equipment that we're matching and Paul and team that have executed on but it's also that.

Speaker Change #117: We've been sponging up lessons learned.

Stephen David Gengaro: Okay, thanks. I mean, but like, like, so do we, I understand sort of this is a process, but just from like a visibility perspective, like, can you like, should we think about 100 units in the second quarter and 500 in the third quarter? Like, I'm just trying to get some sense, as we sort of think about, is there anything you can give us that kind of helps us understand how that evolves?

Mike This: Okay. Thanks, Mike.

Speaker Change #118: Like should we I understand certainly this is a process, but just from a visibility perspective like can you.

Speaker Change #119: Like should we think about 100 years.

Speaker Change #120: Corner and 500 in the third quarter like I'm, just trying to get some sense.

Speaker Change #121: Yeah, I think about I mean is there anything you can do you ever start kind of helps us understand how that evolves.

Speaker Change #121: Yeah.

Tony: I would, but what I would say is more important than that right now is that we continue to go after and get vehicles on the road with customers that are high volume, multi-year purchasers of vehicles. In addition to that, we need to make sure our supply chain can supply as we step up. You know, that's always the big question in these things.

Speaker Change #122: I I I would but what I would say is more important than that right. Now is that we continue to go after and get vehicles on the road with customers that are high volume multi year purchasers of vehicles like.

Speaker Change #123: In addition to that we need to make sure our supply chain can supply as we step up.

Speaker Change #125: That's always the big question in these things and you know of course, you know we've been very focused for over two plus years, putting these vehicles on the road not for testing, but with customers doing their use cases.

Tony: And, you know, of course, you know, we've been very focused for over two plus years putting these vehicles on the road, not for testing, but with customers doing their use cases. You know, and so, you know, what I would say is give us a little bit of rope. We're not going to be so focused on quarterly guidance. We want to get a bit more maturity, but we will tell you 20,000 unit run rate.

Speaker Change #126: And so you know what I would say is give us a little bit of road, we're not gonna be so focused on quarterly guidance, we want to get a bit more maturity, but we will tell you 20000 unit run rate, we're going to knock out a couple of thousand units ish plus.

Tony: We're going to knock out a couple thousand units-ish plus, and, you know, we want to beat. We want to set the bar so that we can beat, and we can emerge with the right customers, and then really accelerate our ability to access non-dilutive, low cost of capital based on the credit ratings of these great customers.

Speaker Change #127: And you know we want to be we want to set the bar so that we can be.

Speaker Change #128: And and we can and we can emerge with the right customers and then really accelerate our ability to access non dilutive low cost of capital based on the credit ratings at these great customers.

Stephen David Gengaro: Great. That's helpful. Thank you, Tony.

Speaker Change #128: Great. That's helpful. Thank you Tony.

Speaker Change #129: Thank you.

Operator: Thank you. Next question is coming from Donovan Shaffer from Northern Capital Markets. Your line is now live.

Speaker Change #130: Thank you next question is coming from Donovan Schafer from Northland Capital markets. Your line is that a lot.

Donovan Shaffer: Hey guys, thanks for taking the question. So first, I just have to ask, and kind of as a refresher, maybe a reminder about, you know, battery sourcing and everything. There was this news today, Biden is increasing the tariff on batteries from China. I think, I believe it's at the level of cells.

Donovan Schafer: Hey, guys. Thanks for taking the questions. So first I just have to ask them and kind of as a refresher Amazing reminder.

Donovan Schafer: About you know battery sourcing and everything there was news today burden is increasingly view tariff on batteries from China I think I believe it's at the level of cells and then they also have this provision about battery parts.

Donovan Shaffer: And then they also have this provision about battery parts. Going from 7.5% to 25% effective this year, at some point this year, I really haven't parsed the whole thing just yet. I know you presumably haven't had much time to parse it yet, but if you can just give us any general perspective on how you would expect that to impact you.

Donovan Schafer: Going from seven 5% to 25%.

Donovan Schafer: Effective this year at some point this year I really havent parsed, the whole thing just yet.

Speaker Change #132: I know you, presumably we haven't had much time to parse it yet, but if you can just give us any general.

Speaker Change #132: Perspective on how you would expect that to impact to you know do you know if there's a carve out for commercial vehicles.

Donovan Shaffer: Do you know if there's a carve-out for fleet, commercial vehicles, any color or clarification there would be great. Thank you. Yeah, I don't have any...

Speaker Change #133: Vehicles any color or clarification, there would be great. Thank you.

Tony: Yeah, Donovan, we, you know, if you go back to earnings calls when I first took over, you would have, you would detect, you know, how we were migrating away from Chinese or, you know, let's say contested territories. And you know, we understand, you know, this is not just about energy, this is, this is national defense and weapons-grade type energies that are being done. There's a rotation in so many sectors from a competitiveness perspective. And we've never been reliant on Chinese batteries since I've been here.

Speaker Change #134: Yeah got it and then.

Speaker Change #135: We if you go back to earnings calls when I first took over.

Speaker Change #136: You you would have you would detect and you know how we were migrating away from Chinese or let's say contested territories.

Speaker Change #137: And you know we understand you know this is not just about energy. This is this is national defense, and and and and and and weapons grade type energies that are being done.

Speaker Change #138: There's a rotation in so many sectors.

Speaker Change #139: From a competitiveness perspective, and we'd never been reliant on Chinese battery since I've been here.

Tony: We exhibit those projects and we're focused on core allied nations, and I mean core, and domestic manufacturing, and bringing, you know, key partners with helping guidance by both sides of our Our senators and congressmen in working with countries to create economic development opportunities that you know we anticipated this. And we believe we're in a good position. We're not going to scramble, because we scrambled, you know, two years ago.

Speaker Change #140: We exited those projects and we're focused on core Allied nations and I mean core and.

Speaker Change #140: And domestic manufacturing and bringing you know key partners.

Speaker Change #141: With with helping guidance by both sides of our.

Speaker Change #141: Our senators and congressmen and.

Speaker Change #142: And working with countries to create economic development opportunities that we.

Speaker Change #143: We anticipated this.

Speaker Change #144: And we believe we're in a good position, we're not going to scramble.

Speaker Change #144: Because we scrambled.

Speaker Change #144: Two years ago.

Speaker Change #144: Okay.

Donovan Shaffer: Okay, that's helpful. And actually, kind of on the flip side, is there potential for any benefit? Because the other piece of this was, I believe it was a doubling of the tariff on the import of Chinese vehicles. And, you know, certainly, from a consumer standpoint, which you guys don't do consumer, you know, that's probably the main focus, but, with the challenge of doing like a class one vehicle. I mean, we've had companies in the past, you know, I think Elms was one of them where they were importing, you know, a very small kind of class one type cargo van from China and assembling that or putting that together here.

Okay. That's helpful.

Speaker Change #145: I'm actually kind of on the flip side is there a potential for any benefit because the other piece of this was I believe it was a doubling of the tariff.

Speaker Change #146: On the import of the Chinese vehicles, and you know certainly from.

Speaker Change #147: From a consumer standpoint, when she goes don't do consumer.

That's probably the main focus but with the challenge of doing like a class one vehicle I mean, we've had companies in the past you know I think elms was one of them where they were importing you know a very small kind of class one type cargo van from China, and assembling that are putting that together.

Donovan Shaffer: So I'm just curious if all, you know, holding all else equal, does this help with sort of moats or was there any real threat of competition from manufacturers in China and that is now somewhat diminished or? Is that something you just totally different apples to oranges never mattered in the first place?

Speaker Change #148: Other here.

Speaker Change #149: So I was just curious if off you know holding all else equal does this help with sort of moats or.

Speaker Change #150: Was there any real threat of competition from the manufacturers in China and that is now done.

Speaker Change #150: Diminished or.

Speaker Change #151: Is that something you're just totally different apples to oranges never mattered in the first place.

Tony: Now, so look, I've been highly criticized about this because, you know, we had to chart on, you know, charter territory to get away from China because China controls, you know, most of what can see, hear, sense in a vehicle, with the exception of us. And every, you know, we keep burrowing down deeper into our supply chains to their supply chains to make sure, I mean, we understand there's conflict, period, on technology that is arising, obviously, you know, from some of our past.

Speaker Change #151: So look I've been highly criticized about this because you know.

Speaker Change #151: We had a chart on.

Speaker Change #151: Charter territory to get away from China, because China controls you know most of what can see here since in the vehicle with the exception of US and every you know, we keep throwing down deeper into our supply chains to their supply chains to make sure I mean, we understand theirs.

Speaker Change #152: Conflict period on technology, that's that's rising obviously, you know from some of our past we had some good insights we understand that but we believe we have an advantage right I mean, we badge or our vehicles you know because they are American made.

Tony: We have some good insights, we understand that, but we believe we have an advantage, right? I mean, we badge our vehicles, you know, because they're American-made, they're American-innovated, you know. We actually have some suppliers where they have received notice from certain countries of question under this tariff where that if they sell to us, they will be cut off, because we are focused on, you know, militaries, fleets, and those matters. So we've navigated quite a bit of things.

The American innovate it you know, we actually had some suppliers where.

Speaker Change #153: They have received notice from a certain cut.

Speaker Change #153: Countries of question under this tariffs where that if they sell to us they will be cut off because we are focused on you know.

Speaker Change #154: Military fleets.

Speaker Change #154: And those matters. So we've navigated quite a bit of things I think are I think the game will get pretty interesting.

Tony: I think the game will get pretty interesting, and I think, you know, I applaud them stepping up because the Chinese government aiding, you know, this, you know, uncompetitive environment by subsidizing is just not right. And I believe our way will beat because we'll win on technology, and we've got to stay ahead of it. And that's what we're focused on doing. And I believe workforces that are very American-centric... Very much love what we do and why we do it.

Speaker Change #154: And and I think you know like.

Speaker Change #155: I applaud.

Speaker Change #156: And then stepping up because the Chinese government aiding.

Speaker Change #155: This.

Speaker Change #157: Uncompetitive environment by subsidizing, it's just not right.

And it's in the end and I believe our our way will be because we weren't on technology and we got to stay ahead of it and that's what we're focused on doing and I believe workforces that are very American centric.

Very much love, what we do and why we do it.

Donovan Shaffer: Great. And then just as I can squeeze in one last one, the deliveries this quarter to Saudi Arabia and also to, you know, USPS, are those revenue recognition events for those deliveries or are those still kind of in part of a demo type or broader contract conversation? And then any feedback from the usage? Like, I know they've demoed them, but maybe it's only been a day or two that they've actually been out doing them. But if there is incremental feedback, that'd be.

Speaker Change #158: Great and then just if I can squeeze in one last one is just terrific.

Speaker Change #159: The deliveries this quarter to Saudi Arabia, and also to U S. P. S are those revenue recognition events for those deliveries or are those still kind of in part of a demo type yet broader contract conversation.

Speaker Change #161: And then if you add back from the usage like I know they've done most of them, but maybe it's only been a day or two that they've actually been out doing them, but if there is incremental feedback that'd be it.

Speaker Change #162: That would be interesting to hear.

Tony: So I don't squeeze customers, you know, I mean, I, you know, I think we probably could be generating more revenue. But the answer is to your question.

Speaker Change #163: So I don't squeeze customers you know I mean, I I you know I think we probably could be generating more revenue, but the answer is to your question. Yes, we generate revenue we're trying to get you guys to focus on the fact that we're building a business rather than you know a lot of this fall stuff that was out there.

Tony: Yes, we generate revenue. We're trying to get you guys to focus on the fact that we're building a business, rather than, you know, a lot of this false stuff that was out there, and to also, you know, as we brought things down more into alignment to where we can execute, you know, get you focused on that and those customers and those size fleets, like in the UK. I mean, you know, we went there because we know there's a group of customers which represents a small group.

Speaker Change #163: And to also as we brought things down more into alignment to where we can execute.

Get you focused on that and those customers and the size fleets like in the U K I mean, you know.

Speaker Change #164: We went there because we know there's a group of customers, which represent a small group. If you think of US. We don't go after tons of customers. We go after customers that have tons of units.

Tony: If you think of us, we don't go after tons of customers, and our very core ally, Center, and that's been our niche and that's been our place, but yes, we'll continue to recognize revenue with respect to most cases, like in the Red Sea, I want to make sure that they love what we do. And when they do, I will, you know, I will bill them and I will, and we will project out the volume accordingly, but we will be much more of a tech company on being tight lipped about things. And I believe that, That will keep the element of the ability for us to not only meet but beat expectations as you guys kind of write your own views.

And and are very core allied centric.

Speaker Change #164: And and and and that's been our our niche and that's been a place but you know, yes, we will continue to recognize revenue and with respect to as you know most cases like in the Reg G. I want to make sure that they love what we do.

Speaker Change #165: And when they do I I will you know, our bill them and I will.

Speaker Change #166: And then we will project out the volume Accordingly, we will be much more of a tech company on being tight lipped.

Speaker Change #167: About things and and I believe that.

That will keep the element of the ability for us to to not only meet but the expectations as you guys kind of write your own views.

Donovan Shaffer: All right, great. Thank you for taking the question.

Speaker Change #168: Alright, great. Thank you for taking my questions.

Operator: You bet. Thank you. Next question today is coming from Amit Dayal from H.D. Wainwright. Your line is now live.

Speaker Change #169: You bet. Thank.

Speaker Change #170: Thank you next question today is coming from Amit Dayal from H C. Wainwright. Your line is now live.

Amit Dayal: Thank you. Good afternoon, everyone.

Amit Dayal: Thank you good afternoon, everyone. Tony you mentioned you know the dubrow constraints are keeping you a little bit from being where you potentially could be in terms of production etcetera.

Amit Dayal: Tony, you mentioned, you know, that CABRA constraints are keeping you a little bit from being where you potentially could be in terms of production, etc. Is that the bigger gating factor at this stage? Or, you know, your supply chain issues and you're, you know, just setting up all of the equipment, etc. Like, well, sort of keeping you from ramping production faster.

Amit Dayal: Is that the bigger gating factor at this stage or you know your supply chain.

Speaker Change #172: Issues and you're just setting up all of the equipment et cetera, like world sort of keeping you from ramping production.

Amit Dayal: Fastener.

Tony: I think keeping pacing capital. I mean, hopefully one of you guys kind of really goes out and builds a model and shows about how much invested capital that has been done to date to get to where we are, what the burn rates are, the disciplined capital approach, which, as you know, most people wanted money on the balance sheet, rather than we're very focused on what we can deploy, how we can deploy it, how big of a return, what's the advantage we can get, and focused on those kinds of items.

Speaker Change #173: I think getting the keeping pacing capital I mean, I hopefully one of you guys kind of really goes out and builds a model and shows about how much invested capital.

Speaker Change #173: That has been done.

Speaker Change #174: To date to get to where we are or what the burn rates are a disciplined capital approach, which as you know most people wanted money on the balance sheet.

Speaker Change #175: Now rather than we're very focused on what we can deploy how we can deploy it how big of a return what's the advantage, we can get and focused on on on those kinds of items, but I would say in looking back in the mirror knowing that we were able to close on these 44 containers and and.

Tony: But I would say, in looking back in the mirror, knowing that we were able to close on these 44 containers and some of these deals that we have in the pipeline, would I have pushed to have a bit more capital into the system, I would have done that. Because I would have accelerated a bit.

Speaker Change #176: Some of these deals that we have in the pipeline would I have pushed you'll have a bit more capital into the system I would've done that because I would have accelerated a bit but you know these are cautious times, there's a lot of criticism about things and unfortunately, you know.

Tony: But, you know, these are cautious times. There's a lot of criticism about things. And unfortunately, you know, some people have fallen, you know, from, you know, we're just in a different segment. And we got caught in the crowd.

Speaker Change #176: Some people have fallen you know from you know we're just in a different segment and we got caught in the crowd and we are step by step differentiating ourselves, but as time goes on you know, especially now it's very important that we solve the capital issues right. So we can accelerate step by step not.

Tony: And we're step by step differentiating ourselves. But as time goes on, you know, especially now, it's very important that we solve the capital issue. Right, so we can accelerate step by step, not as in tons, but as in staying efficient. Otherwise, you end up with, you know, idle points, and you don't want that. Hopefully that answers your question.

Speaker Change #177: Not not as in tons, but as in staying efficient otherwise you end up with.

Speaker Change #177: Oh points can you don't want that.

Speaker Change #178: Hopefully that answers your question.

Amit Dayal: No, it does. It just gives us a sense of, you know, how things are playing out a little bit behind the scenes for you guys. With respect to this Analyst Day coming up, are there any milestones or catalysts? that we should be aware of, you know, that you could potentially sort of You know, and I also disclosed around that time.

Speaker Change #179: Or does it just gives us a sense of it all oh.

Speaker Change #194: And it seems to me that with respect to this analyst day coming up are there any milestones with Atlas.

Speaker Change #179: But we should be aware of that.

Speaker Change #180: Could potentially sort of.

You know an ounce will disclose on that thing.

Tony: I think I think if you find people who've been out there and have gone through the slalom course. You know, I think. I think it will speak volumes, I think the experience will be different that we will put you through. It'll, it'll, it'll be what? People who are very proud of their product and want to put it to the maximum test, right in front of you and right beside you. So, I think the catalysts will continue to form here for us.

Speaker Change #181: I think I think if you find people who've been out there and have gone through the slalom course.

Speaker Change #181: I think.

Speaker Change #182: I think it will speak volumes I think the experience will be different and we will take you through.

Speaker Change #182: And.

You know it.

It'll it'll it'll be what.

Speaker Change #183: People, who are very proud of their product and and when I put it to the maximum test.

Speaker Change #183: Yeah.

Speaker Change #184: Right in front of you and bright decides it so.

Speaker Change #185: I think the catalysts will continue to farm here for Us and I think 2024 is just a heads down get it right close out to two gaps step level function focused on the economics long term deals get our non dilutive capital in place and.

Tony: And I think 2024 is just a heads down, get it right, close out the two gaps, step-level function, focus on the economics, long-term deals, get our non-diluted capital in place and, you know, seek the opportunities to expand the business on the footprint and grow upwards in square footage on the platform because of the higher return on capital for us in our company.

Speaker Change #186: Now seek the opportunities to expand the business on the footprint and grow.

Speaker Change #186: Upwards in square footage on the platform, what because of the higher return on capital for us and our customers.

Speaker Change #186: Okay.

Speaker Change #187: Thank you with that are you guys.

Tony: Thank you. With that, guys. Yes, I was just going to say thank you to everyone for the questions, but I'll turn it over to Hugh to wrap it up. Thanks. I'll turn it over to you for any further closing comments, my friend. Go ahead.

Yes, I was just going to say, thank you to everyone for further questions, but I'll turn it over to you to wrap it up.

Speaker Change #188: As I said, it or was it for any further or closing comments my friend go ahead. Please.

Tony: Just again, I want to compliment the team. These have been tough times. You know, we've rallied together and I'm extremely proud of these people and I couldn't say enough about it and I can't say enough about the customers and the people who believe in us at a time when innovation always hits a moment of pause. It's those people that make the difference, and I'm grateful for those people. And I hope that many of you continue your belief in us as well.

Speaker Change #189: Just again I want to compliment the team.

In tough times.

Speaker Change #189: No.

Speaker Change #190: We've rallied together.

Speaker Change #191: And I'm extremely proud of these people and I couldn't say enough about it and I can't say enough about the customers and the people who believe in us at a time when when when when innovation always hits a moment of pause. It's those people that make the difference and I'm grateful for those people.

Speaker Change #192: And and I hope that many of you continue your beliefs and us as well.

Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

Speaker Change #193: Thank you that does conclude today's teleconference and webcast you may disconnect. Your line at this time and have a wonderful day.

Speaker Change #193: For you for your participation today.

Speaker Change #193: Yeah.

Speaker Change #193: Yeah.

Speaker Change #193: [noise].