Electric Last Mile Solutions, Inc.

Good afternoon and welcome to the Electric Last Mile Solutions second quarter 2021 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask a question. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then Q. Please note this event is being recorded. I would now like to turn the conference over to Eric Grossman, Director of Investor Relations. Please go ahead.

Good afternoon and thank you for joining us for Electric Last Mile Solutions second quarter 2021 earnings call. Before we begin, we'd like to remind you that remarks made on today's call may include forward-looking statements. These are based on our predictions and expectations as of today. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today. For a more detailed discussion of the factors that may affect the company's results, please refer to our earnings release for this quarter and to our most recent SEC filings. Joining me on the call today are James Taylor, co-founder and CEO of Elms, Jason Law, co-founder and executive chairman, Albert Lee, BFO, and Rob Song, Deputy CFO and Treasurer. Management will make some prepared remarks, and then we will open the line for your questions. Now I'll turn the call over to James.

Thank you, Eric, and thanks, everyone, for joining us today. We had a momentous second quarter in which we made great strides in our mission to redefine productivity for our customers with intelligent e-mobility workstations designed for the last mile. In short, we completed our business combination with Forum Merger III Corporation and became the first publicly-listed EV company focused exclusively on the Class 1-3 commercial segment, which we call the Last Mile segment. We acquired our EV manufacturing plant, and our engineering program is on track. Demand continues to be strong, and we are now actively working with customers to finalize their order commitments. and we are affirming our plan for SOP of the urban delivery by the end of the third quarter this year. This keeps us on track to be a first mover in the Class 1 commercial EV space. And this is our first earnings call. I'll begin with some company background, then provide details on our business updates and outlook, and lastly turn things over to Albert to discuss our second quarter financials and outlook. At elms we saw the opportunity to serve the underserved the businesses of this country from trades to fortune 500 fleets who have lacked the proper sustainable and intelligent productivity solutions solutions that are profit drivers not cost centers and we identified a white space the class one commercial ev segment. And we expect the benefit from several major tailwinds first. is the enormous demand for commercial vehicle solutions, driven in large part by the exponential rise of e-commerce. Then there is the green tidal wave led by both companies seeking to meet aggressive ESG targets and the government, which is pushing and in many cases mandating the adoption of sustainable solutions such as commercial EVs and working to expand available funding and tax credits. There are a few, if any, commercial EV options on the market today to meet that demand. Here lies our opportunity. There are many new entrants and existing players who have announced commercial EV products, but we believe those deliveries are, in general, some time away. Elms is coming in the very near future, and we plan to ramp to mass production levels. and we will start in the Class 1 segment where we expect to be a first mover and then expand into the Class 3 segment as another early EV entrant. Our key differentiator and enabler is our unique business model. By leveraging existing and market-proven components, we can quickly get to market with reliable products at an exceptional speed by industry standards. The use of an EV-ready facility and market proven components dramatically reduces our costs and allows us to provide what we believe will be one of the lowest total costs of ownerships. And as a solutions provider, we're not just delivering the hardware, but also customization and digital solutions that will enable our customers to do more. And our products, the urban delivery and urban utility are segment defining. We expect both to offer at or near acquisition pricing, including federal incentives, versus competing ICE vehicles, as well as more cargo volume, which to our customers is far more important than weight. And we're excited to be making these EVs here in the U.S. and help make this country the center of EV design and manufacturing. With that intro, let me now give you an update on our business activities to date and our outlook for the rest of the year. In June, we completed our business combination with Forum, which resulted in a total capital raise of $294 million, more than sufficient funds to execute our business plan. We also acquired our fully capable EV factory in Mishawaka, Indiana, and are rapidly progressing towards production readiness. We enhanced our global organizational capabilities by expanding the leadership team with key personnel across digital solutions, engineering, operations, finance, and sales and marketing. Recent additions include Chief Strategy and Digital Officer Jonathan Ballin, VP of Engineering Praveen Cherian, and Adam Du, Director of China Operations, Deputy CFO and Treasurer Rob Song, Chief Revenue Officer Ron Feldeisen. To further advance our global engineering operations and to access talent and global suppliers, we have plans in place to expand our office locations to include Shanghai and San Francisco. On the customer front, we announced earlier this year that we have received more than 45,000 pre-orders for just the urban delivery, and we're very excited to announce that we are working with customers and our distributor partners to finalize order commitments with targeted end customers, including FedEx independent contractors, Amazon delivery service partners, on-demand cargo van rental companies, universities, HVAC companies, and many others. Our customer engagement is simultaneously continuing at a rapid pace with more than 35 scheduled trials for potential customers across verticals Again, spanning parcel delivery, telecoms, home improvement, vehicle rental, ports, and so on. We're also directly engaged in discussions with numerous fleet management companies. These are an important go-to-market channel in the commercial vehicle industry. The top 10 U.S. FMCs, as they're called, alone oversee more than 1.9 million vehicles. One example of these engagements includes Merchant's Fleet, the nation's fastest-growing FMC, and a leading driver of fleet electrification. As part of its Electrify Fleet initiative, Virchens Fleet has announced a commitment to have 50% of its mobility fleet electric by 2025 and 50% of its managed clients' fleets electric by 2030. We also announced a partnership with Trane Technologies' Thermo King unit, the global leader in transport refrigeration to build a first of its kind all electric refrigerated delivery vehicle prototype to demo with customers. This highlights our capabilities to deliver upfitted solutions across a number of industry verticals. In this case, the delivery of perishables from food and beverage to vaccines while providing customers with green products that will drive them towards their sustainability targets. This is really a great application for our product. If you think about the current gas and diesel refrigerated vehicles out there today, they're constantly idling, wasting energy, and spewing pollutants. And this is the kind of product that shows how we can make the entire supply chain cleaner, more sustainable, and at a lower total cost of ownership. This is just one example of the end use cases and verticals we can touch We'll provide more details as we finalize our arrangements with other targeted upfitting partners. Importantly, we'll shortly be initiating customer pilots with our second vehicle, the Urban Utility, our all-electric Class III medium-duty truck. As with our urban delivery, we believe the Urban Utility will be very competitive across both price and cargo volume versus both existing ICE competitors and new EV entrants in the segment. Customer demand for the urban utility has been incredibly strong, and companies are eager to have our demo vehicles in hand. At that point, we will begin to take reservations. On the back of the urban delivery, we believe the launch of the urban utility will provide Elms a strong portfolio position across the Class 1-3 last mile segment. We don't see any other OEMs getting the kind of EV foothold as quickly as we anticipate entering the market. We've also announced a strategic distribution partnership with Randy Marion Automotive Group, one of the largest commercial automotive retailers in the country. We feel very good about this partnership, which unlocks another important and high-volume go-to-market channel. We now have an order commitment from Randy Marion Automotive Group representing nearly $200 million over the next 12 months. And to support our customers and maximize uptime, we're putting in place a service ecosystem to offer complete coverage and deliver service in the most efficient manner possible. We plan to use Elm's Air fleet monitoring system, which will include over-the-air update capabilities, as well as incorporate all of the dealer service partners as well. In May, we also announced a service collaboration with Cox Automotive to give our customers access to Cox's end-to-end fleet service, including 6,000 service locations, 3,000 partner locations, and Dickinson Fleet Services Network of more than 800 mobile technicians. Our partnerships with Randy Marion Automotive Group and Cox Automotive are specific examples of how our ecosystem approach enables speed to market and de-risks our launch with both distribution and service covered from the onset. What I'm not doing is going dealer to dealer and trying to build my service network up from scratch. When it comes to launch readiness, we've made great progress and are definitely accelerating efforts here where we can recover from the delay in the merger closing, as well as all of the other challenges that the industry experiencing. Most visibly, we acquired our EV ready manufacturing plant in Mishawaka, Indiana. This is a phenomenal plant, one I've had a long history with, that has proven itself flexible for quick ramp and launch of different vehicle platforms, from the Hummer H2 to the Mercedes vehicles. There are a couple other major benefits from this specific plant. First, the previous owners made significant investments in the facility to retrofit it for EV production. This means that we have limited retooling required for launch. In fact, less than $10 million, a fraction of what it would typically cost OEMs to retool a plant. This plant also has an estimated annual production capacity of 100,000 units, which supports our business case as a mass production EV OEM and equips us with the ability to satisfy the enormous demand we are seeing on the commercial EV front. We benefit also from an experience ready and highly motivated workforce, many who have actually previously worked at this plant and went through extensive EV launch training. In addition, we have strong support from the Indiana Economic Development Council, which has offered us up to $3 million in conditional tax credits and training grants. Our engineering activities have also advanced at a great rate, in part due to our business model that leverages many existing, validated, and market-proven components. While we are engaged in a number of standard OEM engineering activities, from software development to validation testing, we have a lot of focus on our vehicle integration and homologation efforts. We are on schedule to finalize our testing and meet U.S. regulatory requirements. Our IP portfolio continues to grow as well, and we recently filed, for instance, a patent for a proprietary Class 1 commercial EV frontal impact absorption design as part of Elm's proprietary EV crash protection system. We've tested the technology in this patent application in crash testing and the results were extremely positive. We're confident with our progress to date and are now proceeding with final confirmation testing for the body structure. We expect that to occur this month. I feel very positive about our supplier ecosystem to support our launch. Last week, we held our first summit with key strategic suppliers to align on their individual capabilities and launch readiness. This was also an opportunity to ensure that all communication channels are open as we approach startup production. As you're all aware, battery supply is a high-profile subject at a national level and in the total EV business. On that front, back in February, we announced that we secured a battery commitment from CATL, the largest global battery company. We also signed a binding supply agreement with Wuling Motors, a leading automotive manufacturer of electric cargo vans. This broadens our supply base for market-proven components, and we'll be working with Wuling as our primary supplier of body and chassis components for the launch of the urban delivery. Elms has been driving the overall vehicle design based on U.S. customer requirements, and engineering specifications. Finally, I'd like to discuss now our outlook through the end of the year. First, we're affirming our plan for SOP by the end of the third quarter for the urban delivery. We've also set our production schedule for 2021 with a target of 1,000 vehicles. We set this, we believe, in spite of the delay in the close of the merger, COVID-19 disruptions industry-wide supply chain challenges, and now what appears to be the biggest of all challenges, logistics. But we believe that this target was important to set for several reasons. First, we have such strong demand from customers that we need to get to market as quickly and as great a scale as possible in the near term. By hitting production this year, we see an opportunity to establish longstanding customer relationships that will separate ourselves from a crowded space full of new entrants who will not enter the market for some time, many for several years. Second, we need to align all our suppliers and partners and get their commitments, which we now have in place. Now, I want to remind everyone again that there are definitely challenges in front of us. I've just mentioned some of them, the delay in the deal close, COVID-19, part shortages, supply chain complications, logistic challenges and rising freight costs, increases in prices of raw materials, and so on. We are not alone in experiencing a shortage in containers and a four to five times price increase in container costs. We're doing our best to offset these, but these challenges are real. All of this is on top of the normal challenges that come with launching a vehicle and ramping production. We're fortunate that the ELMS team has a tremendous amount of experience launching many vehicles, so we're pushing ahead to reach our target of 1,000 units this year. To summarize, we believe we have all the pieces in place to launch this year and take advantage of a tremendous market opportunity. How often in life does a business come around that has white space, customer demand, business and government alignment, and solves an enormous environmental problem. I believe we are positioned to be a major contributor to the solution, not in several years, but starting this year. And even if we were to capture only a fraction of the total addressable market, just 5% by our estimates, that is enough demand for us to produce tens of thousands of vehicles annually. Our goal, of course, is to capture far more than a fraction And we believe that our launch this year and first mover advantage will provide us a solid footing to establish Elms as the leading provider of last mile solutions. We are at an inflection point in commercial EV adoption and Elms is positioning itself to capture that demand. We'll have more developments to share over the coming months as we approach our start of production. And I look forward to updating you on our progress. Now, I'll turn it over to Albert to go through our financials.