Canoo Inc (GOEV) 2021 Q3 法說會逐字稿

Good day, and welcome to your Canoo Third Quarter 2021 Earnings Call.

(Operator Instructions) And the floor will be opened for your questions and comments following the presentation.

At this time, it is my pleasure to turn the floor over to Kamal Hamid, Vice President of Investor Relations.

The floor is yours.

Welcome to Canoo's quarterly earnings conference call.

My name is Kamal Hamid, and I'm the VP of Investor Relations at Canoo.

Today, I have with me, Investor, Chairman and CEO, Tony Aquila; Senior Vice President and Interim CFO, Renato Giger; and Senior Vice President of Finance and Chief Accounting Officer, Ramesh Murthy.

Tony will provide an update on the progress we have made since our last call.

Renato and Ramesh will then review our financial results for the quarter and turn it back to Tony, who will provide closing remarks.

We will then open up the call for questions.

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.

For a discussion of those 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 reports that we may file on Form 8-K with the SEC.

All of our statements are made as of today and are based on information currently available to us.

Except those required by law, we assume no obligation to update any such statements.

During this call, we will 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 turn the call over to Tony.

Thank you, Kamal.

Thank you, everyone, for joining us today.

Before discussing the third quarter, I want to take a quick look back at what we've accomplished so far.

We first took ownership of the past and then we focused on the present and the future.

We assembled a qualified season Board with public company experience and continue to strengthen the management team.

We refined our strategy and go-to-market and we're the first the EV SPAC to rationalize our plan.

No good deed goes unpunished.

And as we discussed in our Q4 2020 earnings call, we are now seeing some of our peers adjust their guidance.

As part of our re-founding, we instituted public company discipline and we find our strategy to focus on maximizing return on capital and creating long-term shareholder value.

These included expanding our TAM to an estimated 4.4 million vehicles by developing 3 new derivatives on our multi-purpose platform design.

Targeting monetization touch points to reach multiple owners across the vehicle lifecycle via up-fitting, customization and over-the-air services and more.

Is there any one of the proprietary asset management software platform, which will enable Canoo customers to manage all vehicles in their household with easy access to our ecosystem of service providers and exiting low to no return on capital businesses and prioritizing investments in our own IP.

We have grown our IP portfolio by 144% to over 127 pending or registered patents, since the beginning of the year.

Increased focused on design ADAS and chassis.

We will continue to prioritize IP that drive shareholder value.

Our team has grown by 87%, since the beginning of the year.

We now have approximately 700 and 100 contractors and have strength in core areas, including engineering, powertrain, ADAS, business functions, FP&A, customer journey and IT.

We diversified our footprint beyond California by adding locations in Texas and Michigan, opening up additional labor pools at a lower cost.

You've heard me say it before, our discipline is big news or no news.

We completed more than 500,000 miles of beta testing and validation and our next big milestone will be getting Gamma vehicles into the hands of our potential customers.

We selected Pryor, Oklahoma as the site of our own facility and secured up to $300 million in non-diluted incentives.

And just recently announced that we selected Panasonic, a pioneer and world-class battery manufacturer as our battery supply partner.

I would like to personally thank, Allan Swan, the President of Pana, for his leadership in the entire Panasonic team for their support.

We assess numerous suppliers and selected Panasonic because they are the best.

They have an unquestionable track record with billions of cells on the road today for Tesla.

In our view, Panasonic operates one of the fastest, safest lines and they are serious about their commitment to being environmentally friendly.

Selecting Panasonic enables us to deliver enhanced safety and lower cost of ownership to our customers.

Earlier this year, we selected Oklahoma as the location for our own manufacturing facility.

Today, we are excited to announce that we have expanded this partnership to include Arkansas and additional locations in Oklahoma.

Our corporate headquarters will be relocated to Bentonville along with an advanced manufacturing industrialized facility.

Technology hubs in Tulsa and Fayetteville to support R&D in electronics, powertrain, battery, vehicle engineering and testing.

A Software Development Center in Tulsa and a Customer Support and Finance Centers in Oklahoma City.

California will maintain its current focus on engineering in vehicle design.

Combined these facilities are expected to employ as many as 1,200 people providing high education and jobs in the region.

Now with these final pieces in place, we will now focus on completing definitive agreements with each state, which will include approximately $100 million in additional non-dilutive financial incentives, making the total approximately $400 million.

With these agreements, we are targeting approximately $100 million in vehicle orders with the states and universities where we are locating these facilities.

I'd like to thank Governor Stitt and Governor Hutchinson and their teams for their support and commitment in championing advanced manufacturing jobs and high-tech innovation opportunities in their states.

Their forward-thinking will create high-tech jobs in their states for the new EV economy.

I am also honored to announce that we will be partnering with The George Kaiser and The George Kaiser Family Foundation to help in their transformation of Tulsa into a vibrant and inclusive economy while helping us with recruiting education and diversity of our workforce.

Our thanks also extends to other great families, organizations, tribal nations and the local governments in the region, who share and support our vision.

In light of our expanded partnership with Arkansas and Oklahoma, we are now able to accelerate our advanced manufacturing industrialization facility in the US ahead of VDL Nedcar.

Addressing growing demand for the LV delivery and the LV, which will avoid a 25% tariff on cargo vans imported into the US putting us ahead of schedule.

Create a direct link between our prior factory and our industrialization facility and produce the LVD and other LB variants on the same production line.

We will accelerate our advanced manufacturing production in the US to begin before Q4 2022.

Given these advancements by the end of November, we will re-prioritize our relationship with VDL Nedcar.

We have been focused on reducing execution risk as Europe and the Netherlands are still struggling with pandemic inflation, shipping and taxation.

As for our progress towards production, we have engineering design is complete and sourced for our LV gamma built.

And here is a smooth peak at what we are doing in the United States with one of our partners.

Please navigate to the webcast landing page and access the video link towards the bottom left of the page.

We will pause briefly while you watch the video.

(presentation)

As you can see the progress on gamma, which is our last step prior to production and we're excited to get vehicles into the hands of our customers.

And now for our financial results, Renato?

Thank you, Tony.

Our third quarter of 2021 results are as follows: Research and development expenses of $59.4 million for the quarter, compared to $18.9 million in the prior year period.

Excluding $5.8 million of stock-based compensation, research and development expense was $53.6 million.

SG&A expense was $45.5 million for the quarter, compared to $8.4 million in the prior year period.

Excluding $13.2 million of stock-based compensation, SG&A expense was $32.2 million.

GAAP net loss was $80.9 million for the quarter, compared to a GAAP net loss of $23.4 million in the prior year period.

GAAP net loss in the third quarter of 2021 included a $25.8 million non-cash gain on the fair value change of earn-out share's liability related to the periodic re-measurement of the fair value of our contingent earn-out share's liability.

Adjusted EBITDA was negative $85.8 million for the quarter, compared to negative $20.1 million in the prior year period.

Ramesh?

Thank you, Renato.

Turning to the balance sheet and cash flow.

We ended the quarter with $414.9 million of cash and cash equivalents.

Cash used in operations for the 9 months ended September 30, 2021, was $180.6 million, compared to $65.1 million in the prior year period.

Capital expenditures were $74 million for the 9 months ended September 30 compared to $1.2 million in the prior year period.

Turning to our guidance.

For the fourth quarter of 2021, we anticipate the following expenditures: approximately $95 million to $115 million for operating expenses, excluding stock-based compensation and depreciation, and approximately $60 million to $80 million for capital expenditures.

Before we open the call up for Q&A, I'll turn it over to Tony for closing remarks.

Thank you, Ramesh.

It's been a year of milestones in growth.

I want to thank the Board, the entire Canoo team, and all our partners for their hard work and dedication.

We would now like to open the call for questions.

Operator?

The floor is now open for questions.

(Operator Instructions) We'll take our first question from Craig Irwin with ROTH Capital Partners.

So hey, that's really exciting progress with the gamma vehicles.

I love the video.

As always, cool videos.

Can you maybe remind us of the size of the gamma fleet you're going to field and the technical capabilities of its fleet?

Do you expect to use these vehicles in some of your partnerships as early testbeds for some of the ADAS stuff that you've been looking at?

Can you help us shape out, sort of, what the real technology development will be on these platforms?

So hey, Craig.

We will be focused on about 120 to 150 of those vehicles, and some of them will be in the hands of potential partners.

Understood, understood.

And then there's been a scarcity of marketing vehicles, right?

You do get vehicles to some of these major trade shows, but I think there's quite a lot more demand across the punching, because now when people see the car in person, it's a very different response and sometimes see in a 2-dimensional video or even a picture.

What's the potential for some of these vehicles may be being made available for ride and drive or -- as we marketing vehicles over the next couple of years?

Yes, we'll be doing selective events in early to mid next year to bring people through the vehicles.

We'll do some roadshows.

We've already started a few very selective in quiet ones.

And we'll continue to do those.

Understood.

Yes and I attended one, that's fine.

So completely understand the reprioritization of VDL Nedcar, right?

Given that you guys are moving faster and bringing a long production and executing ahead of, sort of, the original game plan.

I noticed there was a $26 million payment to Nedcar in the quarter.

Can you maybe discuss what you see the relationship possibly looking like?

You know, I know there's a number of weeks for you to still finalize this.

But what's your vision for how Nedcar fits into the future of Canoo?

So Craig, we took a bit of a punch in the face.

Obviously, in the beginning when we said, hey, we were going to have VDL Nedcar as Phase 1, and industrialization and our manufacturing in Phase 2 and 3. And we did that because that was the right thing for us to do and to relate to the market, while we are working out and mitigating risks and finding our state partners.

We've since been able to do that and including the continuing pandemic issues plus the demand for more of the LDV rising fast.

We -- obviously, we're working on the track to get it closer to where our ground zero manufacturing is going to be.

So all those things, we just got lucky.

They all came together.

And we have a -- I personally have a very good relationship with the Vendola family.

And if you remember way back when I said this, I said we're using it is a backfill till we get things figured out here in the US, but that it was really for geographic expansion into Europe.

And so now that becomes more clear.

We'll continue our discussions with them through the month to figure out what that looks like.

We're not worried about $26 million.

We have a very good relationship with them.

We have very little leakage of that.

We'll have some.

If we choose to reprioritize the timing, but we didn't ship any of the equipment that we're shipping into the industrialization center.

So, everything, kind of, worked out actually costs kind of come in better, right?

And we are bigger fans of owning our own facilities, then we are contract manufacturing, because there are inherent risks with that, having it out of your control.

And so I think we just keep punching out these things and tightening it up and bringing it to center and executing on what we say we are and, to the extent we can, pulling it forward.

Excellent.

Excellent.

And then last question for me.

Can you maybe update us on the CapEx for your company-owned manufacturing?

What your expectations are over the next number of quarters?

And it's incredibly impressive to pull forward capacity in this environment where everybody is complaining that they can't keep delivery of equipment, because of this global supply chain issue.

Maybe if you could talk a little bit about, you know, how you work with your partners to pull this off?

And what gives you the confidence that this is materializing?

Well, I think, there are still -- every company is kind of going through some kind of impact with inflation and scarcity of materials.

I think the fact that we had the foresight to bring down our numbers to reasonable numbers that we could raise allowed us to secure realistic supply lines.

And we've -- obviously, I covered the point, and I remember right you are one of the ones kind of upset with me in the beginning.

I gave you a hard time, I did.

But as you can see now, you know, look, we've been in this space a long time.

When a pharma company, we didn't miss guidance, consensus for 34 quarters.

I mean, we intend to be very realistic and move up, not move down.

And there is -- we've got to keep it still conservative, and we're going to continue to do that.

But we continue to mitigate all those steps.

We feel really good about the supply line, Panasonic doesn't just select anyone, as you probably know.

And I think bringing our partners deeply along with what we're doing, why we're doing it and what their size and impact is that we can bring, not only as a TAM, but into the communities into what the product purpose is.

So I think we continue to gain supporters.

But look, we've got to keep making first downs here and win the game.

Excellent.

Well, congrats.

You're beating my numbers, I think, 3 quarters in a row now.

So that's -- it's a good place to be.

And I'll hop back in the queue.

Thanks, man.

We'll take our next question from Jaime Perez with RF Lafferty.

So you open up in the U.S. facility in -- on the fourth quarter of 2020 (sic) [2021], which is next year.

How much of the leader, a lot equipment have you ordered?

What's the schedule for tooling in pre-production?

So you could give us a little bit of color on the progression of get into the manufacturing stage?

We obviously feel good enough that will be ahead of Q4 with our suppliers.

We are currently mitigating a couple items right now, but we are -- all of them will come in before the Q4 timeline.

So we are in positive territory right now.

We have most of the stuff being built and/or built.

And we are continuing to monitor the situation and make sure nobody slips, and where we see anything we have mitigation strategies in place.

And we are 100% sourced.

Our engineering is locked.

I mean, we've made a lot of progress and deep complements to Sohel and his team for what they've pulled off.

They've been working non-stop.

Yes, I know the company has made great progress since last year's, especially when you took over.

Now the Arkansas events into -- that's a low season facility.

I mean how different is that from the facility in Oklahoma?

Oh, it's very different.

This is an advanced manufacturing facility that will allow us to produce vehicles for unique use cases, as well as accelerate our testing into gamma.

We're looking for ways to take down the traditional go-to-market way, and this will produce vehicles that we will sell as well.

So, it gives you a valve plus that valve is for your advanced innovation, which is connected.

If you notice, we've basically laid out for you guys an entire corridor strategy of how you get the labor shared and how you get the best arbitrage and how you get an amazing workforce and community involvement.

So that facility will be an area of innovation for us and rapid prototyping.

And so we can push through gamma faster on the other derivatives and get product to market from there, while we're tooling up in the factory and prior.

Does that make sense?

Yes.

That does.

That's all the question I have.

(Operator Instructions) We'll take our next question from Amit Dayal with H.C. Wainwright.

Tony, just to begin with, with respect to the Panasonic relationship have you committed to any minimums on the battery orders from them?

Yes, we have.

Okay.

And we have shared -- we have minimums in excess of what we have projected to the market if that's your question.

Okay.

And then as you get closer to commercializing the offerings, I mean, have you sort of narrowed down the pricing range for the vehicles?

Should we expect it to be similar to, kind of, what you have guided for any change on that front?

Yes.

There is a little bit of creep going on.

We're mitigating it in some advantaged areas.

We've reduced our costs significantly by accelerating the site by about $6,000 to $8,000 a unit that we would have been carrying, if we were supplying into the US from Europe.

So that is a positive for us, obviously.

But we -- I would say we'll see some creep like everybody else, but I think we'll be -- my projection is we'll be below others.

Okay.

And then just the $100 million in orders from Arkansas and Oklahoma Universities and the state.

Are these definitive agreements or just sort of a more even level type agreements?

Yes.

These are discussions that we're having and we'll finalize those in the definitive agreements, but you'll see the press releases from the states.

I mean, these 2 -- these are 2 amazing governors that are businessmen.

They know how to help.

They want to create high-tech jobs.

They want to create this as a new industry in the corridor.

And so they've been extremely helpful.

And obviously, we're always conservative, but we'll be focused on having those in the definitive agreements.

This concludes our question-and-answer session.

I would now like to turn the call back over for closing remarks.

Thank you all for joining us today.

Feel free to reach out with any questions or if you want more information and we look forward to updating you in about 4 months.

Thanks, everybody.

Thank you, everyone.

This does conclude today's teleconference.

We thank you again for your participation.

You may disconnect your lines at this time and have a great day.