Earnings call transcript Q1 2023

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Operator

Greetings and welcome to the Canoo First Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please note, that this conference is being recorded.

I will now turn the conference over to our host, Kunal Bhalla, Senior Vice President, Corporate Development and Capital Markets. Thank you.

begin. may You

Kunal Bhalla

will welcome, raise With and Tony Canoo's earnings the run for Murthy. quarterly CFO, business, results on Thank will financial and Ken today everyone, Ramesh are call. then Tony Ramesh CAO, me Manget; our CEO, quarter. an Investor, conference update Ken the capital you, through and to provide strategy, Chairman the Aquila; share and will

open then for call the will We questions. up

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

For could the with and that we results disclosure Form financial SEC, of Form on a to earnings other and reports including today's recent discussion XX-K and release factors affect our the X-Ks. and file in refer may our that business, please most future XX-Q

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

During this non-GAAP measures. financial call, we'll discuss

find can our financial non-GAAP which financial release, earnings on of the be these GAAP found today's in IR can section measures website. the measures of to reconciliation You

access Now, left webcast the navigate page video landing bottom please towards link the of and to page. the the

briefly, We video. we while will pause the watch

Over you, to Tony.

Tony Aquila

important everyone, weeks we related ago, issues Thank QX you, update, you, provided which past six legacy than Kunal, company's a and for for included our us which earnings, joining less thank to XXXX results. management. was comprehensive the Last

for approval the commission, hope coming SEC settlement in the our to disclosed quarter. the staff XXXX a final which of QX the of wait we to see in and with by we the filing, reached we settlement continue As the

the remaining The and release. watch shareholder Staff’s in issues, Berkshire's at senior about We earnings legacy traditional this cover Munger’s recent on investigation management some I the resolving of Charlie ongoing. to meeting. Warren encourage former understand continues Buffett which automotive of will to industry that we focus team comments remains executives the you

And The business traditional we the traditional we manufacturing are not now auto cover is to in interest OEM. as uncertainty agree. unstable regional industry. for will and coming we be future period to introduced automotive affect TEM, with market. a create we fed for discussions the of quarters U.S. and traditional Rapid which trying industry. But debt go starting automotive rise which a and the more and which we that's why are economies, in rates, challenging completely re-founding the will tough, limit European policy, headwinds banks, unresolved traditional continuing directly a This be

We have the consumer long and the all cost zero due to driven for term numbers seen to continue for in-bound in grow technologies. rapidly. rising with coming others Medium continuing fears vehicles, of demand capital, technology vehicles demand emission emission the of will to inflation from zero weakening

As age all-time we XX years can high segment. vehicle has reached an years depending see, the the average XX on and between

current vehicles, demand TAMs volume that prove in we are is on, where and technology for numbers focused geographies set and especially driven emission the These is the there zero stage high buyers.

geographies focused believe also regulatory favorable and on that we and there conditions. the are capital available where We is segments

volume platform a deliver and our capital customers to strategy on order who multi-year starting with return commercial Our high in cycle. across

in ahead facilities of margins to the put early newcomers place For production on large of weakening confirmed has orders a that challenge. demand chose production for higher the industry, units negative overall and been consumer many

remediating are targeted raise has as focused Our different challenges very we on strategy milestone different we capital. is that driven and therefore

are for We to platform. conditions starting see our improving pricing

last efficient competition. which confirmed XX% is range XX% XXX delivery book. our with than multi-year a for the configuration to often higher have plus cases, We order mile EPA highly organically used growing mile

by In customer. positive. the customer parts exist to operating to and We remain that other to exactly by we range you specific manufacture need words, focused that cost cash on lower and result path used our for start range share conditions Fewer will know clear and optimization lower case. environment drive customer and in what that to performance complexity flow

had We and don't a can what from high customers what on We do roll-out to capital. on get our designed support must strong is it gained market and to care strategy. our about go our do. We commercial customers for it care return to do

tests programs, and announcements in-depth extensive currently is many are our advanced because have in validation reflected our running are shortly. order these run testing and We will of customers platform continuously we book or our which on additional with already focused customer have some

we to the to our decision manufacturing early onshore jobs U.S. explained Previously, and

seemed the not has from like time, move benefit well us environment. it may positioned current right this the the at have While to

Currently, is Our for the credit tax under Act. is this others LDV offshoring. available and as Inflation pricing eligible EV not commercial discussed the due to many Reduction to

often focused has this an during on technology. capacity economic large in always and have changes OEMs upfront, the above, tough said establishing we been radical conditions anchor As but

to to Our the capital incremental capacity more online expand be decision ability how bring basis prudent an allocation geographic and we to strategy. we believe at with expansion stage will prove

we We invested and emerging technology. capital our white for democratizing assets on anticipated and address in to the some IP voids TAMs our our spaces and existing

coming the will We more quarters. share in

a manufacturing commercial to and our systems. This cost launching infotainment on complexity the and product consumer focused less risk high will without require capital. benefit interior is, of expectations Another and trim based strategy we on

more refine and to we achieving the at faster in work While above. we achieve breakeven achieving are confidence flow margins volumes, and positive cash lower we scale our continue on focused to and reach do this

the to and from enable will efficiently in transition to headcount transition ramp perspective. market, more manufacturing to Oklahoma us workforce total go to support a cost we As manufacturing

ratios workforces. material we our and between a seeing are headcount We our labor as Oklahoma shift California mix and arbitrage

gain As we co-ordinate to to structure. better our we and mature, start cost ability optimize must

able We we a to manufacturing, help by leaseback facility. reduce office. lease to sale family long-term for via for my structuring dilution were and manufacturing Moving capital the secured burden the company a OKC

committed more the other time believer include initial company we a priorities. shareholder, long-term As structured for the could to cash sensitive so payment and the shares redeploy

think to about a capital [de-SPACing] it. the deployed diluted since basis, the we and way [ph]. quarter hard. raised non-dilutive manufacturing in Bringing and We Another recognize any most on is this

focused manufacturing know experience a de-risking it right, in we not embracing we few and doing the are quarters better, to has that on the team and We and all continuously last have different, we the put process. together it the advanced complexity focused do answers. is What to in passion while innovate, on have great

parties. many of while high ramping and off across dealing from and complex software third-party, assemblies, learn to currently struggles shelf those diverse parts supply of barriers continue de-harmonized, chains these We the with sometimes the with issues production too integration independent and

still in better we capital by said, being has That some get time primarily in our driven our legacy for fighting the production. put production, of are matters, friction, harmonized milestone harmonizing exacerbated areas supply just efficiency leakage, chain we discipline. some is in also which getting fatigue, for This while capital and

book to This our which time XX,XXX team on and exiting the Manufacturing on our which our expenditures XX,XXX we is and installing Oklahoma recently in from a started general approach Detroit target mainline] functional [ph], current for line based focused order also currently This the Our has City OKC. our our to and validation run targeted includes to [Body-in-White assembly and on us opens working by Facility. ability is run setup just of reaching shipped gross at remain move We rate, focus at XXXX. margins. capital XXXX rate on

order. NASA small a on us criticized Many

share a will little for us. Now, we reason partner of important NASA why. is an and customer the

NASA's with miles comfort, and of first on [Canoo] around is a of in an engaged deeply team performance and that configurable because uniquely and engineers functionality, astronaut's safety, journey X the [ph]. vehicle's are We interior scientists especially the behaviors, starts security

interior we has investment learn design. deliver invaluable our configurations helping to innovate as on futuristic based and Their for highly is functional customers us been prepare our unique and

In fact, social an team hosted our Artemis have on Charlie recently as Blackwell milestone you NASA's by review. NASA, part posted as important led team of media by seen

it, to you haven't free it up. feel seen If look please

And honor be some is the the above, vehicles able it work the NASA. deliver in of to impressive coming remain to top most an at we the On of American quarter. innovators to with on-track

a we order strong pricing resilient we have multi-year condition. book said with improving earlier, As

It will Fortune Fortune customers. our announce we is book at quarter-over-quarter X% of important meets valued of with shortly Stage platform the work-ready needs is and validation XXX order Our a targeted that billion. in further a sales X.X grew the two and another one Stage now with This XXX. orders, our finalization X X exceeds and agreements, and

doing on and ourselves that. have pieces. to closing, more In is We and phase less. an with do we complex to important This prove we to are with many we focused moving have know continue just

raise Now, deeper on and over an Ken? turning strategy you and our will performance view a give financial Ken to who capital it provide update of projections. Ramesh and our our

Ken Manget

you, Thank Tony.

As in from last we and XXXX time on our just the we call, XXXX, moving capital a finalized executing raise are capital plan strategy. discussed in

a strategy. which So is described more before, driven Tony milestone as

Our more demand is multi-year and contractual certain.

to are processes Our execute. manufacturing easier

being achieve gross Unlike for our demand means versus thresholds required others, volume our less production potential matches nearly expenditure margins. positive to is capital sales. This

Our focus of to ramp-up formation allocation continue and alignment is capital to of our a achieve manufacturing. with

a warrants was for improvements. XXXX, the from capital issued XX.X in debenture April leaseback sale million exercise convertible with registered recent XXXX XX the million facility initiatives, City Yorkville. the XX on million at direct non-dilutive of a XXXX. XX, X% Oklahoma coupon most by June A maturing February notable dilutive and which offering of in Among held million XX tenant

in PPA [circa] ATM million have we total the and addition, via [ph] In XXX million XXX access liquidity of XXX million to facilities. each

production. on walk we focused results. Ramesh now of improving cash are move to synchronization capital allocation managing We our as the will and through our

Ramesh Murthy

Ken. you, Thank

would the prior and was sale period. X.X in the of cash have XX, debentures for cash XX.X the to million, in quarter compared warrants, million on $XX of been ended cash exercise the in XXX.X XXXX. with million XXXX balance ended equivalents. quarter convertible We million Turning Cash our to XX, million the XX in effect March million and operations March the issuance to used After of flow. giving year cash of XX.X

ended City. of XXXX months to expenditures compared XXXX, XXXX, XX, financing March XX.X the capital of months activities cash impacted for activities X provided ended March the Oklahoma the cash Our million March quarter-ended to migration was X.X to for for financing the X net months March XX.X XX, X ended XXXX, is million, XX.X million provided by the Net XX, for in million. by XX, compared

lower cash XXXX our in cash Our per approximately month was in average outflow XXXX. than XX% QX outflow

QX cash we to continue XXXX. of into We optimize move as

income the Moving statement. to

reduction expense a year SG&A prior which quarter quarter, QX expenses, prior the for to XX.X a and totaled quarter, reduction compared investing XX% the first period, in for from results of XX.X million in development include manufacturing XX.X XX% of compared period, the XXXX XXXX. million Our from follows: activities million million are to Research as the was XX.X XXXX. year QX in

As beyond, we to following: in XXXX, primarily A and to our progress objectives. increased annual we expect operating reduction expenses, our resulting compared on from in XX% the focus XXXX XX%

to labor XX% human to XX% Some reduction mix XX% of a and Oklahoma, include workforce Tony benefits, support manufacturing XX% reductions fees, from infrastructure, arbitrage mentioned. reduction has change XX% in reduction labor professional in in a cost to a XX% IT capital transition these that to in in and

working others Our capital with to and manufacturing complexity achieve focus orders sooner on positive allows requires and margins confirmed industry. us less to the capital lower needs, in compared multi-year expenditures commercial

of path we in We dual have the the strategy, amount which capital a investment adjusts for short-term. access manufacturing

to Tony's closed by leaseback office. excludes been recently family total approximately billion, the which has Our date sale investment X.X

in-house additional the and and XXX to our of entrepreneurial with date through investment capital ramp a readiness, will shareholders. continue which million XXX reach Our run combination of invested approach in a partners capital outsourced, comprised our of manufacturing XX,XXX approach, to XXX total requiring to phased date leverage rate is total million expenditures in across long-term refine million which we along to to expenditures

pricing. capital by XXXX margin Further, models, we based in million. readiness us an rate incremental is positive manufacturing target current expenditure to Thereby XX,XXX million with $XXX current in of achievable a based on only $XX XXXX on to believe run allowing our our gross

loss compared EBITDA quarter, negative period. prior net million year XX.X to the GAAP the for Adjusted in the million net for XXX.X XXX.X million of the negative in GAAP compared quarter, million was period. prior to year was XX.X loss

guidance. Moving to our

as is XXXX compensation CapEx $XX QX for to guidance excluding to Our $XX million $XX OpEx, stock of depreciation. $XX and million. follows: million million,

We are to release full-year targeting next the guidance. quarter

back questions. it the Turning for to operator

Operator

your from Wainwright. first question. Please Amit Thank you. [Operator state comes Dayal question with Our H.C. Instructions]

Amit Dayal

Good and there afternoon or know, Tony, operational the side that you of impact with, from, SEC shipments you. year? on is what is things respect of to with Thank to, ability related everyone. you any your just on maybe happening you end these comments the by begin to side start know, this deliver made,

Tony Aquila

No.

As the approval. do we're for but to give activity continue to while they former their us sign-off stated, concluded the we employees, company's has more been and commission just around waiting

Amit Dayal

production just a us second quarter? quarter or on there, could this ramp of little from And with going And on do of timeline initial then you right to I then the set-up underway visibility lines the – by play production bit you Are the third Okay, getting understood. have, activity end how you you respect now? thinking, out? early will to some mean are looking you you see etcetera give a

Tony Aquila

Yeah.

production So, them testing be as for XX customers, and we're We the NASA. as We with did in done right? limited and we vehicles NASA extensive as we'll quarter. got delivering some using the said, LDVs well activities we've

So, us it the of would as in to the generate revenue some quarter starting well. be coming beginning

little things because So, to on just it wider being disappoint We're want don't people. will limited. be a we

lot rate. you you the In is at And models we So, check delivering be release on you see want a this Right? heavily exiting and run quarter and we expectations. your We’ll XX,XXX vehicles can double detailed to it in very exceed information. gave see. can can a fact, focus more

Amit Dayal

[ph]? for maybe XX XQ, OpEx should that XQ a expect last know, million similar range you ramp to the million to Okay. [production XX take place will – guidance and increases] we Thank at you. will for, you be XQ, just And or some one, as

Tony Aquila

a it's Yes. change going bit. I mean, to

it'll down. So, and up go

be, taken, and focused mass was think said how I well [X right, for allowed geographical and very, And years, we cycle, said, expansion Buffett more figure which seeing is XX to on have terrible something in the expandable we as I is appropriate, format, secured very then I car to you And The when an us as tough. Warren to with Charlie what which as the where strategy XX [ph]. appropriate prior have a in you're to years know us approach which generation] site production, technology a driven, that we to long-term. model it the well. has think have every traditional Munger it out

get guidance So, our we'll capital more more We'll quarter. we And step raise accordingly. and next into and guidance as we'll about in-depth give that. talked full-year the earlier, plan is to in

Amit Dayal

you, Thank That's have. Okay. all Tony. I

Tony Aquila

Amit. you, Thank

Operator

next from Our with Lafferty. Perez R.F. comes question. question your state Jaime Please

Jaime Perez

Hey, afternoon my question. taking for everybody. Thanks good

equipment? we rate as for working capital is it the – capital far run capital? need far do XX,XXX need [ph], let I run the As mean, CapEx, – you do mean rate cash equipment XX,XXX used what the get and that just have that as generated raise you me you is [focused] and is what and maybe else to the to everything then and I as to

Tony Aquila

Yes.

had We're dual Jamie? are to So, lot valuations, below have more way a we we it. going very do, we we the to in conservative current which right, path do about Otherwise, the and believe to raise there's capital a be par.

time more that So in-source it right? as we will developed scale. of dug path. an more things shift in-source at more standards a that's That we we as dual over we and do why and we model, have path As really outsource to has dual be our in-house visibility, deep the

you don't then think have of model. no, everything in-source we the So, is the if answer

tooling. ever everything is key but some of we your There's possibly your you pretty can everything. need, really is your GA, think If say, you matter model, – don't stuff. that have this really I your outsource paint, you think you'll areas have the the still in-source, much Body-in-White, really and

Jaime Perez

Now, you we're or not I the the supply mean, been has EVs chain issues been but the did problem suppliers. hearing your suppliers from solved, delivering supply problem? EVs with other with logistics they've that through for third-party OEM problems having constraints foresee that

Tony Aquila

and increase focused I been assemblies legacy our driven from the a design of matters issues is think of approach, our the more with were and outsource model. volume on traditional a parts and So, look, reduction they suppliers more taking large the have uniqueness of where technology

fatigued in had a our we to we've a because suppliers go, – And we to obviously, to been the we them re-founding, of quite ramping change to that model model. is few get the want which

with are in have concern. is, And XX parts a on exception say I'd the general the more supply of any the at friction that so, industry self-inflicted given there we just day chain, are

Jaime Perez

Walmart have any order do for on And updates you [indiscernible]. question, the my final us?

Tony Aquila

Yes.

if of script, have the but in you'll in announcements see comments think I continue. things the quarter, some So, some coming you see we'll the

Jaime Perez

all for That's I have Thanks. tonight.

Operator

it questions I'll to turn Thank for remarks. you. closing Tony Aquila all That's have today. we the back

Tony Aquila

investors innovate Look, give our seeing out operator. all re-founding to to and way. to the good people customers, have to we're We been done suppliers, partners, a a our very our the And associates a you, our Thank have to to lot the future. got we while who a different I have us hardworking just had helping to want big to that prove. shout very in

We everybody way I are companies and from know want we every value. And we deal a tough shout build in to out new is and intend who's and a us. give big prove execute to times use cash experience to have we've optimize And you. Thank these scratch. and that we got building it. supporting the deal to shareholder

Operator

All this Thank Have conference. evening. good parties today's may And disconnect. a concludes you.

Canoo (GOEVQ) 15 May 232023 Q1 Earnings call transcript