RMO - Earnings call transcript Q4 2021

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Operator

Welcome to the Romeo Power’s Fourth Quarter and Year-End 2021 Earnings Conference Call and Webcast. At this time, all participant lines are in a listen-only mode. [Operator Instructions] Please note this conference is being recorded. An audio replay of the conference call will be available on the company’s website within a few hours after this call. I would now like to turn the call over to your host, Ashley Gruenberg of the Alpha IR Group. Ashley. ahead, go Please

Ashley Gruenberg

welcome. and you Thank

PowerPoint everyone Joining website me Kerry I our results, Executive and was that expectation posted and Brennan, quarter to posted be today our also Slide are romeopower.com conference safe PowerPoint harbor liquidity, want and are items. two Chief Financial to imports, those and Susan Along both of and cash a release today. contain Shiba, remind earlier will press that other dynamics, of the year-end outlines Chief we lines, this our call Officer. capacity, will forward-looking and sales, referring of statements. company’s Officer; on including earnings today that market production spending at Please cost fourth that XX-K note statements, availability, future our

and actual from adversely those differ projected may Our discussed statements. these results forward-looking materially in or

GAAP. a a financial as non-GAAP remarks. to cause update these in materially factors in differ under the obligation our the Susan that, substitute measures Regulation please G. for call should I’ll over that term information measures, Non-GAAP With of turn discussion or X, is and financial to a information disclosures release in press Today’s public few as financial isolation turn in not that our statements may as Additional defined forward-looking earlier call for with compliance from, the in well that to went be Slide presented opening as considered to with company SEC. could is concerning statements. include The today, results no the out from forward-looking are filings also adversely and contained

Susan Brennan

today. thank Ashley. joining for Good afternoon, you all Thank you, and us

more going to overview guide a our holistic to Ashley of a provide our conversation mentioned, path to business forward. our as and we wanted today As PowerPoint we’re use

Officer. and financial a some results I for close talent our Kerry will will Anne I momentum our pivotal walk with half Devine our Operating as and and of a company our members Both additional then our was our tremendous as as deeper team January development. began recent Officer of success second priorities team, will of a then in discussion commercial we XXXX in areas Rose needs, experience questions. two gained with new out added of recent executive broadening the of in-market will leadership year execute. take identification People and our XXXX your year, year. terms us our the We highlights, then examples, and to focus we aligned agenda, outlook. this In our and business, production through our Chief XXXX, in In Rogers start critical our Chief have high-level review operations to

lifeblood team, our property, to The intellectual complete. addition continue With transition the this their is we advance and and company industry-leading platform. leadership of is our our invest now and technology to

large-scale around where We talent developed our have team, solutions. advanced are of respect the a XX% the and our which following we on few battery scientists, The are depth knowledge electrification we Romeo XXX customers recently technological of areas and nearly lead. engineers highly have

vehicles key commercial battery Our for in last several achieved over the months. milestones team safety several

of safety into We and with differentiating announced XXXX. in I in later in-depth tested a requirement speak customers. collaboration were the presentation. standard to this solutions sensing data-driven battery leader the latter in believe our against with market. rapidly Technology, products agreement by Dynexus a and in more will intelligence valued battery this as safety around standards developed developing safety rigorous We half products, both the is Our a set the engineered for performance highly

the battery tools, has with customer to Our major by and collective are now team’s customer that trucks diagnostics public And performing. are predictive new in technology results. our a stage powered develop the successfully pre-production initial well who forward recently service The and call noted team trucks to validated to how work battery we third, looking Dynexus packs. and those for the continue on we engineers a are

We mile on are with they – and far. of running single a have charge, have routes XXX-plus completed XX% so time journeys

In well, While have a growth. to XX% their added year-to-date than one and future half daily system, encouraged the increasing our critical nearly initial XX% transition of we XXXX, shift we – in rates it accelerated of included as to and of solution XXXX, quarter our is This highly success. that of are the higher is production production Shifting the just vehicle, third by are the average our one four-fold. part we of gears XXXX. We accommodate components operations. fourth team by that second

our we beginning there. and operations transitioning all Lastly, secured process future of Cypress, in California home are the

they part As for delivery. future of have and multiple designed lines the production as are our being simulation we completed reviews preparation, constructed of

front, commercial the were we as On active extremely well.

saw the in we release three-year million, and our agreement customers. additional vehicles, an minimum of approximately value the our one is supplier extension extension of signed in you As with This a same is commercial last the with longstanding possible upside time press customer $XX existing week, period. of over a leader

will pursue base help our time. began commercial our electrification to widen over opportunities client team us and diversify focused we that Additionally, new and

first of began battery As debut conjunction pleased delivery. size sections, collaboration flow were of new first last-mile culminate Indigo’s the in a with full morning, will later Show in a This year. and samples phase we market delivering emerging to customers the this advanced technology. vehicle showcar LA in marine, announce Technologies, to to Auto which as at the we Indigo develop of commercial efforts, its expected with lightweight This phase is Indigo these defense, in result our such rapidly

Moving our to chain. supply

companies daily, hourly our chain weekly. all continue and with to As we manage today, supply

in of of XXXX. a We long-term supply through the signing relationships. cell supplier the in critical are securing continue driving X to Tier quarter make we a semiconductors procure included and components. agreement third other headway efforts supply And to with battery cell new supply This

parts, of we dynamic as continue be all is as in team environment. this remain predictive to and Our navigate possible to working availability will to diligent

completed during excited we and This and milestone accelerate total were Romeo in a free was joint vehicle for And return maximize and types the our Power commercialization team. this future products acquisition of Finally, importantly, BorgWarner. control fully BorgWarner’s most efforts control summarize, prior Power. pursue Romeo to prioritize that the broader across completed between use customer decide This our exceptionally our more the electrification intellectual previously Romeo We R&D the of now now We focus can strategic of future step. we a how valuable this our of have investment. partnership. to should we venture and restricted significant scope on I’m proud assets, interest of to one are and appropriately our important asset we range worldwide. To engagements are Most of various applications property. that

taken focus, technology and on of continued the with challenges We our to execution have improve.

landscape opportunities a I’m customers, relationships the We are nascent strong current electrification themselves. forward and simultaneously customers prospective QX XXXX. with strengthening to partnerships avail with building in new as changes looking while

great company floor. the mission team a of remain the production to from pursuing CEO and the We have relentless assembled in the

quality over All now would high-level of bringing call Kerry? financials. overview, [ph]. for of around safety, like rallied Kerry us I turn and a market strength our that electrification the to With have to to the review with

Kerry Shiba

it’ll I’m By I yet, sure SEC the Thank but – Susan. our looking, – website think I’m the you, is it’ll don’t shortly. XX-K be way, just I up on filed

I everybody just to is sure So wanted of that. make aware

fourth quarter our technology. our we industry-leading demonstrate new commercial as to look results mentioned, as progress function Okay, Susan continued team, and leverage

our will revenues few left, was on the If we of key conference year, This financial of Starting $XX previous of quarter quarter. confirmed Please than on our with outlook quarter of of for some you reported time the for third spend which to sequential items. was expectations #X, million at $XX.X last to the consistent turn Slide revenue which and the million the in million XX% $XX in the resulted $X.X call. higher fourth XXXX provided full we year, minutes million revenue a of the I growth

them. revenue this thing an an indicator to are we of respect major make. we of as changing guidance. put progress I’d battery will we continue our this right a perspective, these customer. footnote are to with that that is that outlook providing for that we point, previously, the best in to used or very to we bottom it’s With our a a in frame we point revenues, there the this To to which cells, For also states the very, is respect manufacturing also Page out believe And the outlook it understand on to important product the again, X, arrangement XXXX, procured on how important understand. is impact have cells

was our related value So included both revenues. our cost the of revenues in and

our product forward, cells procuring and them. into make consigning is Going the that we battery go these customer for

products will commitment of costly no carry anything, This As either capital working it cells, positive capital single this which the revenue for not part of customer. largest is if us we to since on also And have component to has this impact our is the we that of shipping a are the for of material no be of component. cost working result, value volume the revenue our longer for the battery or bill customer. will of our

result, a million year. revenue our As million of XXXX to $XX $XX for the is the in range outlook

outlook understand on this otherwise again, a of the However, stated cell consignment because comparable our would guidance occurring very important changing if to basis. arrangement, be double approximately to

would flows P&L, were a keep please you. be prior outlook the how we’ve our our if cell again, and year, So approximately range the to that it given change double comparable it structural in mind stated to the through

XXXX achieved a XXXX As than at in to be looked higher a this on what times again range basis. X we we our revenues if X comparable result, of the would in

we as $XX is to primarily of that payment the February, joint thus, standby a share credit. of purchase we liquidity refer I’m that note to million of side to consumption and quarter operating in million growth, consumed of $XX Turning approximately of on of $XXX million of again, at liquidity, $X included Cash right growth, quarter. $XXX our $X reflective does reference higher Please of venture. to remove for expenditures, simply ELOC. in the December cash investments, net equivalents remaining to this this for end the reflective compared for million previous million net as the BorgWarner cash which not an our This and the made secured a capital receivable, cash, inventory XXXX, XX, going to year losses. million $XXX their of at the February the slide. We million line accounts please and ended equity the fourth the funded

the sell While all I common the for in have the a ELOC, cash shares related represented discount sell. to when won’t go the right into on to we details, to X.X% market we fees price with counterparty fundamentally the

As a we because is are are obligated are result, the under on for shares optionality number basis. fees page a And and ago any this it this of sell provides is us important not to incurred arrangement. essentially

While we has and use agreement, price share been impact. terms timing SEC. the sold with you which consider and encourage the intend will ELOC ELOC, the specific amount you the to review I our the have to the interest dilution if filed needs, of cash

shareholder of improving other value ratio back also are to our growth, for we With overall growth and capital on. reducing our turn ensure now fiscal focus We our and review financial and products to in corporate continued areas will will we and related call and to strategy of support all assess priorities R&D, to cost expense, to investment structure to performance Susan? of technology to our that controlling overview, Susan a products, price initiatives other the accretion, operating the for revenue I’d XXXX. the alternatives important like balance continue our

Susan Brennan

Kerry. Thank you,

over support of his that As this you already enhanced have number foundational elements and heard company. today, a seven last have the note rebuilt months, we

may for those I Romeo to want especially you restate who all minute just us. a know of take be is getting to what to So about,

Slide Let’s X. begin on

complex technology our of into energy transportation an applications. are on on market energy we storage for applications just where modes focused needed. more or various technology vehicle are electrification electrification electrification. I dense commercial historically and safe mentioned, We broadening commercial as and of specifically, the leader focused solutions, high reach But vehicle highly We is have

energy measured of combination including a performance work an to in our of consists provides go-to-market. ease We manages expert Performance, how systems better our product of sense fit range our systems. density, innovate manner, ways, and charge Our of many which that standards, X and technology, cells and and we engineering, battery Both selected integrated in software end exceeding together is System specific all hardware configurability seamless providing the application industry-leading battery battery a and cell critical stages safety design of by battery manufacturing We design, at of battery disposal. Slide team scientists. to of customer life needs. time, around

are maximize and will to requirements While need to thermal strong the industry a performance. it continue features, as commodity, our space address challenging in-market and The allows energy multiple proprietary not. of management and components, battery a using view and to density, design configurable why is structural reinforce are needs. packaged Cells safety manufacturing us and our techniques support voltage constraints packs their team. cells for cell battery application This the integrated nature

extending of applications, batteries to we further value. envision cycle our life extract vehicle also Beyond the

packs energy for state storage For after from redeployment the allows example, depletion for remaining reach suitable removal our they in after are This XX% of of the charge and threshold. applications vehicles. modules

We at end the expert have partnered of with battery to ion now lithium called Technologies Retrieve cycling disposition provide company, responsible a battery plan life. an

is on spend advancing turn Please importance vehicles safety. the let’s of obviously few Slide The electrification to rapidly a Now and X. markets. a minutes new critical of

vehicles so it electric are safety for commercial is developing. fact, new In standards that just

Romeo. upgrades, testing detected. in As sensors Romeo’s importance allow External is and critical window detect provides includes And years product software safety of minutes someone software I’m the of automotive failure safety who to once of I recent a new spent have the proud know of significant extremely or has put introduction how a validated onset the on this that anomaly. our in an we which is. the XX anomaly algorithm market, safety This

number five And is require XX, global competing regulation only globally safety GTR match window features. standard today. than minutes. XX can a published our not accepted are safety any Thus, New of aware standards three the technical like of solution more or times that products we these

like take to minutes tomorrow. would both turn and to a today Slide Now, to our X. few I in-markets, discuss Please

and has medium commercial focus creating solutions been in for the heavy-duty primary particular, vehicles, Our of applications. electrification

manufactured global examples we heart sense are of our You of competitive all this of leveraging in only as can California, the are expanding battery packs initial Slide our state see some of electrification. are vehicles located Southern on our the the a is the that And which slide. of complex gives the in this technology opportunities. world Further, beginning. today, a are X vehicle is advantage you we better for commercial how given

expand factors. by Our strategy has other this markets into shaped several year to been

modes commercial all Our current the concentrated in industry, are of heavily vehicle is transportation customers electrification of while accelerating.

new joint opportunity pursue engineering. in-markets recent mix additional can development solutions the purchase the of Our to applied be a multiple strategic prior with relationships. of to affords And us diverse no our venture

from in also marine, of last-mile construction, market customers focus develop market we efficiency industries Each benefits of to segments, other batteries. of XXXX, The power equipment, the space existing properties these redesign and vehicles, in ancillary with no safety, current agriculture the our configurations our systems. configuration density batteries and segments of in Romeo’s So required. widening needs their fit are these including energy

incremental the just months I and is let The every first XX Already plans. finalized electric of a and gives the that So representation diversification progress vessels of first in that. extension are offers into a redesign other what fulfill visual product for to repeat required. we XXXX, orders said, delivered market Slide long-term commercial not and samples potential acceleration their who our customer real it’s only of segments me you the opportunity no four two marine more testing technology, commercial just in day. customers electronic contract three-year electrification longstanding integration plan, are a in multiple initial have the customer we with vehicle making for Romeo’s respective

might many have engagement contracts exploring in cycle a the vehicles to can this months. and service market. slide of is complete But initial adding we’re the to markets see we’re thought verticals faster samples Slide XX moving diversity new new you and up As on not electrification, depicts many the take these from to industry and hope of is in-markets fraction to of only time have and them our of provides XX what home. forward. The clear a will we slide view production

our proud California. As be new we facility Romeo move – is into to our Cypress, focus XXXX, shifting is to to California-based a company. moving in our

Moving to and our future grow into for room capacity efficiency, production increase space our will this expansion. facility lab and installed leaves allow us

complete by and of thing the I to our Cypress is more to end build our from One about expected batteries. Many want transition We cell team. science July. to companies Vernon speak the R&D

company use battery customers relentless to high charge how who component, common Our output optimize and focusing and and cell rapid capabilities the a is energy our power its time. and demand safety, for

to important, same R&D operations, facilities buildings we as manufacturing are service. with prioritize continuing for for in the design and design As our

with We are are experience our is as together us manufacturing own user Thus, our keeps our further all allows with under new on of moving. changer. without game It efficiency. mission roof a we growth as one and one battery focused the on facility

table for Slide increase half preparing for our believe of high-volume prepared being of which demand diversification shareholder remain meet proudly industry. is of this XXXX to today must from be From accelerating began priorities exceed also on the an long-term Fulfill production efforts. and order What strategic installation We in electrification expected lines, nimble end review XXXX our driving line, these our are in on me, in now to CEO to built a in will we building This this is on products. QX of our in XXXX. online XXXX. priorities exciting person will XX. our our is the remarks individually half come are the and in our the This with I collectively value. customer are the year We stakes. second We expectations. focused the today time capacity commitments, second in

objectives. are Cypress. us aligned on of All these Leverage

a one while pandemic team. do earlier, as to ability us. manufacturing this as changer restrictions Romeo the around and total for under Vernon, need leverage increasing for us we As regroup a design abating noted service. gives outgrowing With and Cypress I roof Cypress accelerating as is well to game our

a have R&D landscape team, starting truly I position and to look products. future our fair R&D world-class and forward in for a company secure to to leading the Cypress. at R&D investment IP, fundamental We assembled in improving our is our improve – Advanced together continued return and

critical While being opportunities. diversify the continue We of our and focus spending time of a it technology. Expand we will amount dedicated today’s during on new the on to prudent we how is capitalize overall, value our for discussion in our optionality on advancing fair us to all of have.

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remain a mentioned, I priority. investment R&D As will

higher There with across are on waste. the business. and Next achieve All throughput, we need these raise key the efficiencies productivity numerous goals. forward business focused initiatives reduce leverage to objectives of cost going improve our to manufacturing

a are Lastly, SG&A was as company. expense public has expected grown as we

growth business evolution management in customers, proactive in But balance To and our carefully long-term conclude, still we a our industry XXXX. servicing remain and navigated the success. highly tremendous for to rebuilding change we repositioning our of expense. nascent team, continue against period in will We

to right forward I And the for We are concludes with technology, Romeo Q&A. success for now That the prepared to have of sharing looking the and all the right the platform optimal you. to journey right and that turn our drive team, will call over moderator remarks.

Operator

Instructions] from open. is question your from Investo [ph]. Partners] Thank John, you. line first Craig [Operator comes [John Our

Unidentified Analyst

future? feel mentioned and previous informing with why information Yes, we’re thank in the like? so? agreement that – it here investment darkness how company have a I’m with deleted the to that our again. price? contributed drop not, supply we orders material was to then announced not And and might habit of never the it we and it about LG why quarter, the We in it you. I’m like alliances, sales the had of kind curious Are LG, be there’s addressing proceeding Well, was and curious we’re supply. from to cloaked beneficial that feel of precipitous is that. if what what the And secondly, And a community share in and going in is

Kerry Shiba

Well, both let address me to those. try of

with supply number I one, for itself. speaks the agreement, respect cell X-K to the think

which refer offering that only degree pace or With disclose would is something I we the feel we to have speak to So back respect we we’re that. when appropriate to to information, the at the public.

just are to going talk about we’re those sit the here the chatter of not We’re We’ll so. to company developments when for important do chattering. prepared achieved and sake of and

Unidentified Analyst

find is that. the from it’s if company, anything we’re we we almost asleep. what Well, Yet, by not as appreciate hearing

we maybe perhaps just think it your that hands the we do in something leave of mention I’ll future to you. can that. and Thank productive So can in

Kerry Shiba

you. thank Okay,

Susan Brennan

you. Thank

Operator

your Daoud Our Cowen. is next from Gabe question comes line Gabe, open. from

Gabe Daoud

I be curious, maybe consignment marks, helpful? bit explain cells more I revenue, everyone. a just issue could was but Good color the impact and afternoon, this to would prepared with the explained a Kerry, in if you bit thanks. little Hey, you the more little think

Kerry Shiba

to Gabe, the Yeah. Sure, way. and from you, by nice hear

I step think me step. be a back bit a redundant. maybe little might and I half a But let

for the you As been well most demand. demand of out cells been cylindrical has of where aware, balance – as year capacity short to supply of the are has you’re running battery regard somewhat whack with awareness

the think and go it’s many what And as on out have, typical goes try is worried to it’s whether secure when a for battery product cells as allocation, goes very as players vehicles, that to I very natural they building or of it typical they everybody secure shipped natural the into again, And product to situation. that on to a that’s to did. and as work the in kind of they batteries product we can in of So the very back because market And about allocation situation, us consign think, then able they cells building an allocation. is a for us for them. received exactly together, to I us both that, are was, Nikola assemble result for to cells so directly,

of mechanics do mechanics that’s the is Now all, we own situation. all not it of because it business The the those cells.

We will not be will, including sales a be cost value to that as and also, of you will is our comparable today. billing revenues them, cost that it’s of we and result referred if that, invoice, showing or of the or in not cost

kind capital Quite just down, at carrying off all. of takes honestly, of gets business the shipping doesn’t volume it for our affect everything So books. cost basically, netted we’re working the us, of

So we’re fine with that.

to to to We’re have batteries vehicles. be their they’re any build able still and we event, our getting still able in service would customer as

the – essentially because of were it we looking we works it to have want impact mechanics time put to So make more one everybody the I sure, on to the sure a also. make our the think that out apples-to-apples pure have basis, And say I’ll things been guidance we double of reiterated there. revenue all reported revenues would an If cost range and I at revenues. you on understands it does But reported out. got once. than more

Gabe Daoud

helpful. Thanks, That’s Kerry.

talked mentioned, annual out capacity maybe have think know, there now of the coming facility? what just I Cypress is of some by facility, there? how you think should we the up capacity that the about be should Susan, first of output new the ready about Okay, you quarter following XXXX. But I

Susan Brennan

the as here X well gigawatts. call we this constrained we capacity in before And move were call. as we and that’s gigawatts. Yeah, to which We’ll discussed to is stated have Vernon, X.X last this in

the So to our we opportunity now. now module manual have having line the the an automated lines advantage we with have versus line, current

simulations those to is and sweat doing my said As assets. continuing I we’re in we’re remark,

So we’re move. built X.X to team the really without manufacturing at here. beyond getting prior going looking gigawatts, forward least to and having that We’ve our

ability – will the So have we the move we automatic. replace will the to semi

We will automated. the add

as expecting go grow, much we’ll mentioned, can. we get we As be previously I’m to as have at beyond gigawatts at we that. X least are volumes the but holding able But to

Kerry Shiba

up. but couple The maybe Again, will capacity ramp through new things, too. a a go of other

As mentioned, we’re production automation which are be the a at the to going bringing to of there’s of different going two be had And perspective degree lines, in in that’s beginning to year, next going great. that them. Susan be higher how new We’ve how things – equipment. going flow, and to time going that’s simulations get the capacity, to production is of it’s gone always to takes how through it But some product and ramp great. run used new we with up to the from

that lot can the I way. terms of in and along by a think of be the most what capacity important affected quote thing, maybe stepping back gigawatts to is without the is variables trying

get to move to think back of we business after put I have our we thing in plenty to lines capacity one, in. is most service production those important stand going number the we’re and

stands. if feel additional we honestly be a means would to nice to like continue have investments we’re that capital make with Because clearly capacity speed That that deal to very you market, problem grow we’ll will to communicate where to you the to communicate we but to have for to with. keep that We as future. well doing up and quite you the in

Gabe Daoud

Okay.

very That’s for last thanks. one me. helpful. then And one just Okay,

expect XXXX, satisfy you know that over could – go we think look as about K revenue the months? – go so and enough forecasting cells hand? next sale inventory I comment for And certainly at have on you the you’re to couple agreements then, on cell everyone. certainly more should we following Thanks, supply of XXXX. Just and again. just supply, the just we the through But we up the details

Kerry Shiba

number things. far Gabe, guiding at one, as have, in couple that the we’re to think as cell commitments looking good I towards we a in and the of we’re business XXXX. with regard shape

you a talked function, Susan AK for I And think have past we’re our of this in about cell think continue may we the new as differentiator concerned, agreements head and the with. behind technical have importance met we is that far compete that us our As Srouji and CTO. comes that. the our is those going scientists of it to to as I And is, expertise the when battery are this

for find can right want put itself, we we’re technology we’ll – of and or can up at science, commitments generations our cylindrical better new to come at to that As I’m look alternative The I always we’re and cells be going you that, that new sources. be continue the fit clearly, cells going market. not alternatives, technology be that back actively that, key new markets’ continue to cell we’re with you or cells because we part those turn the or to we’re that to looking we And going there needs, to supply going of reason, similar going meet the that, to the go or into different agreement an look long-term assessing perform, to to place. agreements adjust a of look whatever sometimes if to do then to of accordingly. to customers. to advantage at part supply our in predict for have is the But cell cell that producers, target how may added for occurs, how a the into manufacturers see

Operator

At we hand no Brennan any I’ll this questions. Susan for comments. closing have time, to back now further

Susan Brennan

for today’s all, Thank call. you, joining

as believe about on we great the your the of future support the market forward. excited charge Have strongest appreciate Power have and night. We’re teams, technology and today. we solutions We Romeo a continued

Operator

our today. us Thank joining your Please you, concludes lines. now call. for This disconnect everyone,

Romeo Power (RMO) 1 Mar 222021 Q4 Earnings call transcript