Carbon Revolution Public Limited Company

Good afternoon, and welcome to the Carbon Revolution POC Business Update Call. Today's call is being recorded, and we have allocated one hour for prepared remarks and Q&A. At this time, I would like to turn the conference over to Ashish Gupta, Investor Relations for Carbon Revolution. Thank you. You may begin.

Thank you, Operator, and thank you, everyone, for joining us today. Hosting the call are Carbon Revolution CEO and Co-Founder Jake Dingell and CFO Jared Buckle. We would like to remind everyone that this call contains forward-looking statements including, but not limited to, Carbon Revolution's expectations or predictions of financial and business performance and conditions, competitive and industry outlook. Forward-looking statements are inherently subject to risks, uncertainties, and assumptions, and they are not guarantees of performance. We encourage you to read in full the Form 20F issued with the SEC on November 13, 2023, and the accompanying presentation for discussion of the risks that can affect Carbon Revolution's business and the outlook of the company. Carbon Revolution is under no obligation and expressly disclaims any obligation to update, alter, or otherwise revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. With that, let me turn the call over to Jake.

Thank you, Ashish. This is our first earnings call since we began trading on the NASDAQ following the closing of the business combination with Twin Ridge Capital Acquisition Corp last month. I'd like to start by thanking our whole team for their contribution to Carbon Revolution's success. I'd also like to thank our shareholders for their support and patience towards the completion of the transaction, which was an important milestone for the company. Now for today's agenda, I'll start off by giving a short overview of the company and a brief history of our expansion, with a focus on our progress over the last year. Next, I'll discuss our value proposition and how we are well positioned to capitalize on accelerating industry trends. I'll then speak about the opportunity ahead of us, highlight recent program wins and discuss why we think our technology is poised for rapid adoption. I'll then turn it over to our CFO, Gerard Buckle, who will provide financial and operational highlights and an update on the capital structure. Moving first to the company background, on what we do and the enormous and exciting global opportunity in front of us. Carbon Revolution is an established tier one supplier to the global automotive industry. We are disrupting the $38 billion automotive wheel market with our highly differentiated and unique lightweight carbon fiber composite wheel technology. We've spent over a decade developing this technology and are the first and remain the only company to produce and sell carbon fiber wheels at scale to top global automotive OEMs in North America and Europe. Compared to conventional aluminum wheels, our carbon fiber wheels can deliver up to a 50% weight reduction. This has significant benefits for all vehicle types. For an EV, this weight saving can result in a 5% to 10% extension of range if the weight saving were to be reinvested in battery mass and depending on the level of integration, into the overall vehicle design. Additionally, reducing mass from a vehicle's wheels reduces rotational unsprung mass, which substantially improves the handling, acceleration and braking of the vehicle. We've worked to build and protect our competitive advantage in a number of important ways. First, after more than a decade of development, we believe that our technology is many years ahead of our closest aspiring competitors. We've protected this position by establishing a portfolio of 103 patents, with 82 granted and an additional 21 pending. Second, we've established relationships with major global automotive OEMs, such as Ford, General Motors, Jaguar Land Rover, Ferrari and Renault, most of whom have multiple programs awarded. Programs that are currently in production together with other multi-year contracted programs that are yet to enter production result in a significant portfolio of future business or backlog. This provides substantial visibility to our expected near and medium term growth. Finally, as Gerard will discuss in more detail, the first phase of our Megaline project is now commissioned with additional capacity to be added in line with new programs coming into production over the coming years. This largely automated manufacturing process is progressively adding substantial capacity at a much lower cost per wheel and helping us to meet accelerating demand from our customers, the global OEMs. Moving now to the history of our successful expansion. We characterise our long-term strategy in terms of four key phases. with R&D, commercialisation and industrialisation occurring to date in Australia, and the fourth stage scaling up with international manufacturing now in the detailed planning stages. During the R&D phase, we worked closely with numerous OEMs across the globe as we evolved our technology to the level that would satisfy the requirements for introducing a safety-critical technology. Next, the commercialization phase kicked off as we secured and started to deliver the products for our first OEM programs across multiple customers. We laid the foundation for our deep customer relationships in this period and accelerated our product and process development to differentiate our offering, extending our lead in the market. To date, we have delivered 11 production programs with another seven awarded programs working their way through the pre-production stages. We are now in the industrialisation and scale-up phase. Manufacturing currently takes place in Australia at our 10,000 square metre ISO-certified state-of-the-art manufacturing facility that was purpose-built in 2014 and then expanded significantly in 2018. With larger volume programs now approaching production, we are scaling with our increasingly automated manufacturing line in Australia. We plan to then replicate and multiply this in lower-cost manufacturing regions over the coming years. We expect the first of these to be in North America. 2023 has been a transformative year for Carbon Revolution, and we have made enormous progress across new business awards, operations and funding. In the last year, we were awarded an additional five programs, taking total awarded now to 18 programs with six global OEMs. Due mainly to these newly awarded programs, our backlog, which is the projected future revenue for awarded programs, has more than doubled and is now over $730 million. Beyond this significant expansion in order volume, our recent growth provides strategic diversification of the market segments, customer base and geographies that we serve. The recent launch of the Range Rover Sport SV was our first program in the large SUV market and our additional awarded programs include our first two for electric vehicles and a program with a premium brand of a major German OEM. We've also made strong progress on our Megaline project, successfully commissioning the first phase of the project and setting new production records as we scaled up throughput throughout the year. The number of wheels produced from this line is increasing while production costs are benefiting from higher automation levels. Gerard will discuss these improvements in more detail shortly. We'll continue adding capacity to the plant as required by new program introductions and growth in existing programs over the coming years. The year has also been transformative from a funding perspective with the completion of the company's business combination with TRCA the establishment of a $60 million IP-backed term loan and funding of the first $35 million tranche of an up to $110 million preferred equity facility with OIC. Turning now to how our wheel technology uniquely addresses the enormous challenges faced by OEMs arising from the rapid transition to EVs and other related industry trends. Regulations such as the corporate average fuel economy or CAFE targets are tightening dramatically. This is accelerating the demand for innovative technologies that can significantly improve the overall efficiency across all vehicles that are being produced by each OEM. EVs are the primary solution that the major global OEMs are turning to in order to meet these CAFE requirements. But as the automotive sector transitions from internal combustion engines or ICE vehicles to EVs, vehicle mass is dramatically increasing. due to the enormous size and weight of batteries required to achieve adequate range. This comes on the back of much longer-term consumer trends towards SUVs and trucks and increasingly larger diameter wheels. The combination of these factors has resulted in significant structural challenges for OEM vehicle engineers to design suspension systems and axles that are strong enough to support massively heavy conventional metal wheels. The up to 50% weight saving that can be delivered from our carbon fiber wheels and the knock-on benefits to the overall vehicle makes our technology an extremely compelling solution. To speak now specifically to our technology's benefits for electric vehicles, range is the new currency for OEMs as the market transitions to EVs. Even in the best cases, EV range is far less than what a conventional ICE vehicle achieves on a tank of fuel. The weight reduction of up to 50% provided by our lightweight wheel technology can enable extension of EV range by a significant 5 to 10%. The bottom end of this range represents the possible gains if the weight saving were to be reinvested directly back into battery mass. The top end of the range represents the potential further benefits that can be derived from aerodynamic, NVH and vehicle integration enhancements. Because our carbon fibre wheels are a bolt-on technology solution, their application does not require significant investment in the overall vehicle design or in the vehicle manufacturing plant. Concurrent with the EV transition, OEM design studios are trending to larger and larger vehicle designs, which require increasing wheel size for aesthetic and proportional purposes. Large aluminum wheels that are strong enough to support this new generation of massive vehicles are so heavy that they challenge the overall vehicle structure. In particular, they increase the stresses on the suspension structures and pose other weight challenges to such an extent that our customers are increasingly telling us that using aluminum wheels is becoming impractical at these increased sizes. The convergence of these factors is driving demand for carbon revolutions technology as a critical enabler for the next generation of vehicles. By providing a solution that allows studios to deliver their desired aesthetics without sacrificing the ability to meet OEM structural requirements and performance targets, we are creating a clear pathway to widespread adoption of our carbon fibre wheel technology. An additional challenge faced by OEMs in the EV segment is road noise, which is particularly noticeable because of the contrast with the nearly silent EV powertrains. While other sound reduction measures often increase vehicle weight, Carbon Revolution's wheel technology reduces road noise while providing very significant weight savings. The low density, highly damp nature of carbon fibre composite structures allows our wheels to reduce road noise transmission. We now have two EV programs awarded and in the advanced stages of development and further programs in the pipeline, including large SUV and pickup truck segments. Carbon Revolution's penetration is now expanding beyond the performance and luxury segments to the large scale SUV and truck platforms. These represent a very significant part of our existing and prospective customers' current and future revenues and profits. Moving now to the size of the opportunity, the total addressable market for the global automotive wheel industry is enormous. It is expected to grow from $38 billion in 2020 to almost $60 billion by 2028, reflecting a greater than 5% compound annual growth rate off an already impressive base. Based on the number of EV programs we have in development, we expect Carbon Revolution's lightweight wheel technology to be an important part of the range solution for EVs, as well as supporting the efficiency, performance, and handling of conventional ICE vehicles whose weight has steadily grown over the past four decades. Notably, with EV market share expected to increase from less than 5% of the global market in 2020 to greater than 20% by 2030, we are seeing the demand for our technology dramatically accelerate as vehicle weight reduction becomes a top priority for OEMs. As customer demand for carbon revolutions technology accelerates, our team is successfully converting demand into program awards by providing solutions to the primary challenges facing OEMs. These include unlocking range improvements for electric vehicles, enhancing structural durability, and offering unique and compelling styling options favored by the design studios. Our solutions-orientated approach is driving an acceleration in the rate at which we are converting customer interest into program awards. Our first program was awarded in 2013, and between then and October 2022, a further 12 programs were awarded, with a total backlog at October 2022 of $335 million. Between October 2022 and September 2023, a further five programs have been awarded with a backlog as at September 2023 of $730 million. So we have had 18 programs awarded to date and we are only just getting started. Of these, six programs are currently in production, five are in after sales, that is they have completed the serial production stage and are now supplying after sales or spare parts. vehicles in the market we have seven awarded programs that are in development meaning they have been formally awarded but are not yet in serial production activities during this pre-production phase include virtual engineering physical prototyping and testing and then multiplying out production capacity ahead of serial production Typically, the customer will reveal or launch the vehicle to consumers during this phase, at which point it typically becomes known that the vehicle will be fitted with our carbon fibre wheels. Carbon Revolution has captured a clear first mover advantage with our unique next generation automotive technology. It's a well-established adoption curve for comparable automotive technologies. When introduced, new automotive technologies typically penetrate the luxury or performance end of the market first, before transitioning to full adoption as a mass market product. You can see some great examples on slide 12. Carbon Revolution's unique technology and rapid growing backlog of awarded business make it incredibly exciting to be engaging with our OEM customers as our carbon fibre wheel technology progresses rapidly through this adoption curve. After more than a decade of intensive technology development and significant investment to date, we've successfully delivered almost 80,000 wheels to our global customer base. Our first program was the Ford Mustang GT350R and we've subsequently delivered three additional programs to Ford, the GT, GT500 and Dark Horse Mustang programs. We have had multiple programs to date with Ferrari, the Corvette Z06 with General Motors, the Renault Megane, Hot Hatch and most recently our first SUV program, the Range Rover Sport SC with Jaguar Land Rover. Our list of programs and customers has grown with the seven awarded programs in development. The six programs in production and the seven awarded programs in development provide a backlog of over $730 million. As is typical in the automotive industry, these contracts don't contain take or pay or other minimum purchase obligations. Accordingly, our forecasts typically represent the capacities that our customers have asked us to install, and also the durations we know or expect in relation to these programs. Nearly 50% of backlog is from the EV programs, which are yet to enter production, and the majority of the backlog is derived from OEMs based in North America, with the remainder in Europe and the UK. We expect to grow our awarded programs with new and existing customers in these geographies and potentially expand to Asian-based OEMs. Before I turn it over to Gerard, I'd like to note that we have a track record of beating OEM award forecasts. As mentioned, we have a significant and growing backlog. If you look at the four main programs completed to date with OEMs, we have either exceeded or significantly exceeded the original awarded volumes. This historical outperformance versus the original OEM forecasts for our awarded programs gives us the basis for confidence in our revenue forecasts. With that, I'll now hand it over to Gerard, who will review our financial results.