Arcimoto Inc (FUV) 2020 Q1 法說會逐字稿

Well, thank you all for joining here, Arcimoto's 2020 quarter 1 earnings webinar update. This is actually going to be pretty much a follow-on to the quarter 4 and full year earnings webinar that we did a few weeks back. So if you are new to the story, feel free to hit that video up on our arcimoto.com/ir page.

I'm going to start with a couple of quick videos that are really, really picking up where I left off in the earnings call last time, which was the experience that one of our very dear customers has had with the Arcimoto, that being my mom, our first Angel investor, our very first preorder customer. Then we're going to do a quick vignette on the very first Deliverator that we have in the field. Going to talk a bit about the goals that we laid out for quarter 2 and where we are in the progress on that, touch on our company meeting that's coming up in a week or so and then open it up for questions.

So it's going to be -- the planned remarks are going to be pretty short. And I want to make sure we get to your questions. If you have questions, please use the Q&A feature in the interface.

So with that, I am going to switch over to Video, one moment.

(presentation)

So just a couple of points on that. One, strongly considering -- considered handing over my company spokesperson role to my mom, I think she'd do a fantastic job. But in reality, she -- what she touched on is something that we have heard from over and over from our early adopter customers, just the feeling of joy of being connected to the world in the vehicle, the level of response that the vehicle receives on the road. And just what that does for the perception of sort of the post COVID era and the mission of having skies that are clean and a world of sustainable transportation. And I think the FUV even more speaks to that post COVID era than perhaps the era before. And the Deliverator, the carry forward is our very first Deliverator pilot. That's our very first Deliverator that we have out in the field. We have planned for this quarter, another 5 Deliverators that will be going into commercial service fleets, and we're going to have a lot more to talk about those particular projects in the coming weeks.

So I'm going to jump into just a quick discussion of our goals for this quarter and where we stand. When we talked 8 weeks ago, we were in the throes of adjusting to the pandemic that has gripped the world. And we have, in that time, adapted our processes for the majority of our staff to work from home. That's actually been in a lot of ways a productivity booster. We found that using online video conferencing tools, we're able to, in many ways, work more effectively together in meetings. We have also adapted the production line.

So one of the questions that has come in is when are we planning to restart production? The answer is that we actually already have. So we are building now FUVs again, at a very low production rate, primarily to fulfill our obligations to our early Evergreen customers get vehicles out into the field for key early adopter fleets for our fleet vehicles and continue building for those of you who have been waiting for a very long time to get your Arcimotos.

We have launched Deliverators to key fleets. So as I mentioned, we were planning on building 6 in total this quarter. All 6 have been built. 4 now have been deployed. 2 more are going to go into service in the next couple of weeks. And those are all -- for us, what we see those as hitting really the wide range of uses for last-mile delivery from up and coming restaurant chain to one of the largest grocery store chains in the country to next-generation gig economy driving for delivery purposes. And so we're going to have a lot more to talk about in the coming weeks about the Deliverator and how those pilots are coming.

We also, in our last earnings call, talked about our applications for CARES Act financing. We received our PPP loan. The emergency disaster loan is still in process. And really the bulk of our effort from the finance and planning side has been going straight after federal support through the advanced technology vehicle manufacturing loan program. As those of you who've been following us for a while, know that ATVM is where we have been targeting scale financing really for -- since before we went public. That was in our original IPO documentation. And what we had been waiting for was actually having real production experience under our belt. So we had a grasp on what the real scaling process would look like.

So with 6 months of real production under our belt, a much clearer picture of what it's going to take in terms of capital expenditures, additional space, to scale up manufacturing to the next major step, we are -- have been pounding away furiously to get that ATVM application done. Our draft is complete. We're in the review process now and planning to submit to the Department of Energy that draft in the coming weeks.

We have also secured -- for those who are watching our press releases as of this morning, we have secured additional financing. When we talked about financing of the venture just a few months ago, we were in a very different position in the market. And so we took the opportunity presented by the extreme growth and interest in Arcimoto to secure additional bridge financing that we believe will take us assuming that factors go in the way that we hope that they will go, will take us through that application process with the Department of Energy.

And I think equally important on the scale production side is that -- and I go -- I went into a much more detail on this yesterday in an interview with Hyperchange, but we have engaged Munro & Associates, which is a storied Detroit Engineering firm. Most notable to me before we started talking to them for their really involved teardowns of Tesla's Model 3 and Model Y. But I've come to learn that they've had a major impact on a number of very high-profile automotive programs through major global auto manufacturers. And we are bringing them on board to whet our scaling plans to look at the Arcimoto program through the lens of true deep Detroit expertise. And we think that they're going to be an invaluable team asset as we go into scale mass production.

The other piece that we have been afforded through this time is just to catch up and learn from our first 100 vehicles on the road. And so we are taking the learnings from the early experiences of our customers, from our own experiences with our early pilot vehicles in the fleet setting, to make improvements to the vehicle architecture and the production process. And that is going to affect every vehicle that we build going forward.

So again, we have now restarted production, albeit at a very low volume production rate. We are adapting as best we can to the pandemic, and I really attribute that to the great strength of our leadership team. And this has been a topsy-turvy world for everyone. And yet everyone at Arcimoto, really from the leadership team on down has kept a cool head, and we have pressed forward with full speed. So that is where we stand today.

As we look forward down the road, I think we -- if you look at these goals for the quarter, we think we have our stated goals well in hand. And that is going to lead into quarter 3, where we're going to be pushing much more on building out the sales pipeline and then finalizing and pushing through the ATVM process to begin the next stage of build out and scale.

So with that, I'm going to do 2 more things. One, I'm going to play, we -- to the point of key early customer delivery and launching of our Deliverator pilots. We have just done 2 sort of back-to-back Crazy California Delivery Adventures. And I've got a short teaser clip that I'm going to play you from those. And again, these will have a lot more to show on that front when -- in the coming weeks. But here, let me bring that back up.

(presentation)

So we've taken advantage of the fact that we're doing some key deliveries to refresh our marketing assets. You'll see those fold into videos that we release in the coming months. And also taking advantage of these trips to pull in some of the vehicles that need work and bring them back to the home base.

So with that, one final note, which is that our annual meeting is coming up here, Saturday, June 20, at 9 in the morning. Typically, we host those events inside the factory and offer test drives and tours and things of that nature. We are -- due to the pandemic, we are not going to be doing that this year. We are strongly encouraging that folks vote your proxies now. And attend via the live stream that will be up at our Investor Relations page at arcimoto.com/ir. So no tours or test drives will be available. The in-person portion of the meeting will be outside rain or shine. And again, just for the safety of all involved, we're really recommending that folks attend virtually and get their proxies in advance.

So with that, I am going to open it up to Q&A. And yes, fire away.

I'm going to bring up. We had a couple of questions come in online. So I'll start there. First was, what is the planned restart date for production of units at the plant?

That, again, has already happened. We restarted late in May and are now working our way through the final Evergreens and some additional fleet pilots.

The question -- second question was how much will we receive net of costs and fees related to today's announced stock offering?

The deal -- this was a deal that priced at $3 a share are all common, no funny handcuffs, and it was net of offering costs and fees, we should clear about -- just about $7.5 million.

Our expected -- the next question is what is our expected cash burn rate for the next quarter?

I don't have a specific answer for you yet. The bridge cash literally just came in the door, right, is in the process of coming in the door right now. But the -- I think the key is that it will be -- we really did a major step down in burn rate when we shuttered the production line in March. We have come back up a little bit and we plan to keep very tight control on costs in the coming months as we work through our next key milestones, primarily going after the advanced technology vehicle manufacturing loan funds. So we're going to really make the bridge funding that we've taken on stretch as far as we possibly can to achieve our next critical milestones and prime amongst those is going after significant scale, non-dilutive financing through the ATVM program.

Next question is, can you touch upon how you charge your vehicle?

So the FUV has just a standard J plug, J1772 Level 2 charging plug. So you can either charge from a 110 adapter or you can charge from any of the level 2 charging stations that are floating out there.

Next, when do you expect the company to be able to self-fund via cash flow from ops? Is there a certain daily production volume that takes us to that level?

That's -- that question is an interesting one to answer because it is dependent upon a few different factors. We believe that with -- should we be successful in our push for scale funding through the ATVM program that we will be able to scale up with the proceeds of those funds to profitability inside of -- or right around the 18-month time frame. There is another pathway that we can take that focuses on the Rapid Responder, which we think is going to be a higher-margin opportunity in the near term. That is the Rapid Responder, we believe, has a market that is less sensitive to price than either the Deliverator or the Fun Utility Vehicle. And therefore, we'll be able to achieve profitability with that product line at a lower production rate.

So it's -- in terms of production rate and timing, we think we could get there faster, fewer with the Rapid Responder, but the mission of the company is sustainable transportation for the world. And that means we're pushing to scale as quickly as we can across our whole product family. And that's really where it stands. So plan A is go after large-scale nondilutive funding through the ATVM. Then secondarily is to focus on our highest margin potential products and drive to profitability at a lower unit volume, which we think is going to be in the low thousands of units per year and more achievable with the facilities that we already have on hand.

Next question is, what was the amount of the PPP loan?

We cleared just over $1 million from the PPP.

What is -- the next question is, what is the max daily output you can achieve with current plant and funding?

We were -- when we shuttered production in March, we were just about to step up to 3 units a day, the plan then was to step up to 4 units a day in this quarter, 8 units a day in the quarter following. And then all the way to 16 units per day in quarter 4, which is -- equates to right around 250 vehicles a month out of the current facility using our present assets. So that's 250 vehicles a month, about 3,000 vehicles a year, and that's where we think -- where we focus very much on higher cost higher-margin products that we could achieve a path to profitability. What we're aiming for with the proceeds of the advanced technology vehicle manufacturing push is to be able to get all the way up to -- in the 17,000 to 20,000 units per year range, which puts us in a whole different scale in terms of revenue and profitability.

Next question is, do we have an ETA of when we'll open up preorders beyond the 3 or 4 West Coast states and particularly the Midwest? What are some of the criteria that we're considering in that decision? Finally, when and where will Arcimoto start-up roadshows for test drives, again, in particular in the Midwest?

And I would say that the pandemic has really thrown a wrench into this year's plan for expanding market area. So I don't have a clear picture for you, other than to say it would be likely either end of the year or going into the next year when we would be really opening up the Midwest and East Coast territories. And similarly, we're keeping a very watchful eye on the progress of the pandemic in terms of how we manage travel and road shows. So we are currently doing no test drive roadshows around -- even our local area around the West Coast. And as that -- as we see how the summer goes, we will certainly reevaluate those plans. Even the trips that we are doing, for example, to California, we did that entirely self-contained. We brought our own mobile home to take our team down, had our meals all done. So we really -- our -- safety of our team is paramount. The last thing we want to do is bring an outbreak into our own home and facility. And so -- but we expect that as the country continues to battle the pandemic that we will reevaluate as we go on.

Next question is when do we expect to have initial inputs from Munro?

Actually, I mean we got inputs on day 1 and day 2, which is today, but our initial phase is about a 2-week sprint to really get an understanding of the program, and then that's going to lead to multiple phases down the road. So I think we're already seeing the value of bringing their team on board in very short order.

Next question is, do you have an expected time line for implementation relative to volume production?

The time line for stepping up production is still in flux. We were planning on producing on the order of 1,000 vehicles this year right immediately prior to the pandemic hitting. All of those plans just sort of went right back up the window. But as we look to our plans for 2021 and beyond, we think those are actually coming into sharper focus for -- and potentially nearer implementation depending on how quickly we can move and how quickly we can move through the Department of Energy Process. We think that now is a time -- certainly for us, as a company now is absolutely the right time to partner with the ATVM. We also think that now is the right time for the federal government, if we just look at what they have been doing in terms of economic stimulus, now is the right time to move quickly through their processes. So a lot more is going to become clear on both of those fronts in the coming couple of months.

And I see -- there might have been a couple of questions over here in chat.

Your mother should be your spokesperson. No kidding.

Yes. And I think it's time for me to retire and hire her on. She needs a day job, I'm sure.

So question, what exactly is Munro going to do? And will it result in significant CapEx costs?

So they are evaluating the program through a few different lenses. One is simply just looking at our supply chain and saying, they have deep insight into the automotive supply chain in the automotive world. And so when it comes to the question of, well, how much should this thing cost? They already know the answer. And that I think is going to be incredibly helpful as we look at our current supplier conversations in the go-to scale step and that's not really about CapEx that's simply about just where we should be and who we should really be talking to for those pieces of the program. Where we would see CapEx would be things like process changes for particular parts. So where if we have a 15-part weldment that can be turned into a single stamping with the investment in a stamping tool and save on a per unit cost, we'll look at what our expected payback is and make those investments where they make the most sense.

And then finally, we're also working with them on is just simply design optimization, and that would be using our current methods of manufacture. And those would carry with them sort of de minimis tooling costs, but would result in potentially a lighter weight vehicle that would be more efficient and lower cost to some degree. So all of those options are on the table. And I think we're going to just see how that process unfolds with them in the coming weeks and months.

Question is, how many units of delivery should we be modeling for Q2? And what are your thoughts on deliveries for Q3?

I would say Q2 is going to look probably not that much different from quarter 1 in terms of unit count. And that quarter 3 is still a work-in-progress in terms of planning. But it is likely that we are going to stay at a relatively low production volume for at least the next couple of quarters.

Finally, do we have an ETA to complete the first 100 Evergreen FUVs?

I'm currently pushing the team to have those completed by the end of this quarter or shortly thereafter. And then the question becomes one of delivery as the pandemic has definitely thrown a wrinkle both into the production side and the delivery side. But we are pushing to get those out into the hands of our early Evergreen customers so that they can have an absolute blast this summer.

Any plans on partnering with Tesla or another provider for service, parts and charging?

I think Tesla, in particular, could be a fantastic partner for us on a number of fronts. We would love to talk with them about everything from battery cells to providing semi-trucks for our delivery. Whether it's the right fit on service, I'm not so sure. I mean one of the advantages that we have with the product on service is that we really can do a mobile service van that fixes basically every part on the vehicle because of the way the vehicle is architected and its size. We just don't -- we don't need typically a full automotive service type shop or repair type shop to service the vehicle. So -- but I definitely see the potential for synergy in the electric vehicle space and Tesla is awesome, and that's a conversation we're totally happy to have.

What kind of support and upgrade options will happen in the first production models if you make significant changes to future models?

So great question. And what we're planning on doing really is keeping the basic architecture the same. We have a very modular product architecture. So the front clip bolts up to the backbone chassis, the cage drops on top. And so when we make architectural changes in each section, those will -- we're aiming as much as possible to keep those backwards compatible from a bolt interface as we possibly can. And in a lot of cases, the upgrades that we're making as we're learning through this process, we're actually applying back to every vehicle that we have in the fleet. So it's not just the new vehicles that are going forward that get the benefit, but our existing customers are seeing improvements in the software, improvements in drivetrain components and sort of all the improvements across the board that we've done so far. At some point, we may see a major platform rev, where not everything carries forward, but so far, that has not been the case.

Next question is -- and it's sort of related, incremental changes with Munro suggestions or changes with model year?

I think it's too early to predict. I think there will -- but I would say probably a mix of both. So some changes that will make sense that to fold into the current design process, the current production model. And then others that would take more substantial architectural changes would have to wait for a subsequent model year.

Next question is, long term, can you shed any light on global market potential you are considering?

What I would say to that is that we are receiving inquiries literally from all over the planet for the Arcimoto. I think there's -- arguably, it is a -- potentially an even better fit in markets like Europe and Southeast Asia, where you have smaller roads, denser more crowded cities. And so we have -- as we are really dialing in on what our scale production push looks like, we are moving forward on conversations about how do we take that scale manufacture template and copy paste it around the world? And who are the right partners to work with in each of those markets to really understand the market? And how to go into that market in the most successful way possible? So a lot of exciting conversations in the works on that front, none of which I'm going to talk about.

Next is, great news on working with Sandy Munro. Thank you. He is awesome. Best press release quote we've ever had.

Is that arrangement a pure consulting engagement? Or is he taking some sort of interest in the firm?

The first phase is just a pure consulting arrangement but we -- as we look down the road and figure out what that full project looks like, we've got a number of options on the table.

Can you expand on the agreement with Munro and what types of benefits, design processes do you expect and what time frame?

I think I've already really touched on a bunch of those. But if there's something I missed, Humphrey, I can go into a little bit more detail.

Product availability to the Canadian market?

To be determined. We want to -- basically, within the next 18 to 24 months, we want to be ready to go into additional markets, including Canada and Europe and Southeast Asia, and that's going to involve really another whole regulatory pass. And so the exact timing of that is still unclear. We're still getting our sea legs here in the domestic market, but we feel the global demand and are -- we very much want to satisfy our particular preorder customers, who are our neighbors to the north and overseas. So definitely significant on the priority list.

Great work. I just bought my first shares today, and I'm excited to follow Arcimoto. You picked a good day to buy shares. You lived in Fort Lee.

Well, yes. So we're just right down the road. So once we're back up and doing things like tourists, come on down and kick the tires.

Regarding areas of purchase delivery process and servicing any thoughts on outsourcing this?

So yes, and I think if you look at our initial announcement with Road America, where they are handling all of our roadside assistance nationwide. They're exposing their whole network of service garages for us to cherry-pick from in our key markets. We want to have a baseline of company-operated mobile service.

But ultimately, we want to partner with in-market outfits and sort of not reinvent the wheel, but have authorized Arcimoto service partners in our key markets. We already have a service training program up and running and have run our first-class through that program, and that will fold into eventually distance learning Arcimoto training and so on. So that is -- as much as possible, our philosophy is to collaborate where it makes a lot of sense and not reinvent the wheel and save all of our energy and effort for the things that we can uniquely provide to the world.

When do you anticipate being able to provide a readout on the Deliverator, Rapid Responder pilots?

So we're already getting feedback. And you could see that in the carry-it-forward video. I just -- part of the trip -- this most recent trip to California is that we delivered Deliverators to one of our key delivery partners. And on the way we actually made a substantial package delivery using those very same vehicles. So I can attest from personal experience, the carrier capacity is fantastic and the ride experience is great, although I admit bias. But we are definitely looking forward to the feedback from our early pilot partners. And that will be not just to validate the market thesis, but also substantially to make improvements to that product in order to -- for the actual production version of the Deliverator. So we're expecting one significant design rev at least between now and what we would call the production Deliverator that we're shooting for, for the end of the year.

Final question on the list is, what will -- when will announcement of large grocer collab happen?

And that is TBD. We don't have a fixed time frame on when any announcements are happening. You can imagine that a company of that magnitude is they are quite protective of their brand image, and they want to make sure that we've delivered them a quality product and that they are getting good use out of it before we go blast it out to the world. And so we're -- stay tuned on that front.

Okay, final, final question. Where does the leisure fleet offering rentals rank in regards to your priorities versus Rapid Responder, Deliverator in consumer?

I would say that this has been one of the things that has shifted somewhat as a result of the pandemic is that in the early part of the year, we were really very focused on getting lots of rental franchises open and the sort of collapse of vacation travel due to the pandemic has shifted our priorities from that to looking at delivery fleets, both for companies that are owning their own vehicles as well as for vehicle sharing type applications. And so what might have been a focus in the past on a -- well -- and by the way, rentals are still very much the plan going forward for the consumer model. But we're seeing sort of an adjacent opportunity that's emerging that we're going to be talking about soon that's focused much more on gig -- the gig economy and delivering for work.

So I would say that we have our first key rental partners, the Arcimoto down in Key West, and they have now taken their second delivery of vehicles. So they're almost up to their full plan of 20 vehicles at their first outlet. We have our partner down in San Francisco, GoCar Tours and it's looking like they are -- they have, I believe, resumed operation of their rentals, and we're going to be talking about what the next steps mean down there. But we have slowed a little bit on the franchise push side in order to get Rapid Responder and Deliverator pilots out as well as continuing to make sure that our -- that we're making real progress on our consumer backlog.

And that looks like all of them. So I really appreciate you all tuning in. Stay tuned. We've got a lot of cool stuff coming in the coming weeks and months. And as always, we very much appreciate the support of our investors and our stakeholders and we would not be where we are today without all of you. So thank you all. We hope that you are staying safe and healthy in these interesting and turbulent times, and we'll see you next time. Take care.