Canoo Inc.

Greetings and welcome to the Canoe First Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. I would now like to turn the call over to our host, Nick Cunningham, Senior Vice President of Investor Relations and Capital Markets. Thank you. You may begin.

Welcome to Canoe's quarterly earnings conference call. This is Nick Cunningham, and I'm the SVP of Investor Relations and Capital Markets at Canoe. This is my second earnings conference call since joining the company, and I'm thrilled to be working alongside such experienced and innovative partners. Today I have with me investor, chairman, and CEO, Tony Aquila, and Interim CFO and Chief Accounting Officer, Ramesh Murthy. Tony will give you an update on our business last quarter. Ramesh will then run through our financial results for the quarter. He will then turn it back to Tony, who will provide closing remarks. We'll then open the call up for questions. Please be advised 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 discussion of 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 other reports that we may file with the SEC, including Form 8-Ks. All of our statements are made as of today and are based on information currently available to us. Except as required by law, we assume no obligation to update any such statements. During this call, we'll 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 will turn the call over to Tony.

Thanks, Nick. And thanks, everyone, for joining today for an update. on our Q1 2022 activity. Last quarter, we made it clear that we are a high-tech, customer-centric, advanced mobility company. Again, to all our believers and supporters, thank you for riding alongside us on our journey. Today, I'm going to cover highlights from the quarter, including our solid and growing partnerships with two states and a nation. The NASA win an update on financing and our progress towards production. Governments around the world are helping to accelerate the migration to EVs and clean energy. We are inspired by our Future Forward partners in the state of Oklahoma and Arkansas, as well as the Cherokee Nation, which continue to attract significant technology investments to the region. I was recently in Oklahoma where Google announced an additional investment in the state where they have invested a total of $4.4 billion in their data center in Pryor. The data center is the second largest in the world. This adds to the growing number of leading companies investing in the region. With the passage of the large-scale Economic Activity and Development, or if you will, LEAD Act, We believe the state of Oklahoma will offer an increasingly business friendly climate. The legislation creates a nearly $700 million program to incentivize top job creating businesses to invest in Oklahoma. The bill received overwhelming bipartisan support from the Oklahoma legislature passing the Senate by a 41 to 5 vote. and the House by an 81 to 17 vote. Thank you both the House and the Senate for their support of this monumental achievement. I'd like to give a few shout outs. Starting with House Speaker Charles McCall, Senate President Pro Tem Greg Treat, and Governor Stitt for their incredible leadership. Senator Roger Thompson and the Representative Kevin Wallace deserves particular credit for helping to draft and pass this important legislation. Thank you, Senator Kevin Matthews of Tulsa and your Democratic colleagues for your help in driving bipartisan support for this bill. We were active in supporting this initiative and are encouraging key partners to invest in the region. We appreciate the support from Governor Asa Hutchinson and his collaboration with Oklahoma. He is positioning Arkansas as a leader in advanced mobility and clean energy, and we are here to assist. He established a three-state partnership with Oklahoma and Louisiana to create a regional hub for the development, production, and use of clean hydrogen. I hosted a hands-on event in Bentonville, which includes several LDVs It was attended by fleet managers from municipalities and state agencies of Oklahoma and Arkansas. In June, we are planning to attend the UP Summit in Bentonville, which includes visionaries across multidimensional mobility community. We are gathering to generate ideas that we believe will challenge and change the mobility landscape. Over the coming quarter, we expect to move A 1000 vehicle order from the state of Arkansas from stage two to stage three. Our team will continue to work with the states for additional incentives to further solidify the region as a center for advanced mobility. This environment was selected for the combination of two visionary states and a nation. The Cherokee Nation, where we stand by our commitment toward workforce development. We have already broken ground on our mega micro factory in prior Oklahoma and are getting ready for the next phase of development. I would like to personally thank our government affairs team, in particular Chris Moore, for their many, many months of work in supporting initiatives within the states and the nation. Thank you to the citizens of Oklahoma and Arkansas and the Cherokee Nation for the strong support. We have never felt more welcome. Great news as well, the final CFIUS dilution condition related to the shareholder, DD Global Holdings, has been satisfied, and we are no longer subject to any further provisions under the National Securities Agreement. On the federal level, the administration continues to make strides with the National Electric vehicle infrastructure formula program, which dedicated $7.5 billion in infrastructure funds over the next five years to the states for additional EV charging stations. Our five initial rollout states will receive over $665 million or $5.8 billion allocated to states to fund EV charging infrastructure with over 50% of that rolling out in the next three years. An additional $2.5 billion will be devoted to EV charging in rural areas and in underserved communities. In March, the administration authorized use of the Defense Production Act to provide funding for mining, processing, and recycling of lithium, nickel, cobalt, graphite, and manganese and other materials. While the benefits from this initiative may not be immediate, we believe it may increase the supply of these materials from domestic sources over the medium to long term. This potentially benefits our partners like Arkansas, which has one of the nation's largest lithium reserves. We were chosen by NASA in a competitive process to produce vehicles that will transport astronauts to the launch pad for the Artemis lunar missions. These will be the first electric NASA crew transport vehicles. The Artemis program will be the first human lunar landing in over 50 years and will be the first to bring a woman and a person of color to the moon. A quick shout out to Representative Steve Womack from the 3rd District of Arkansas, who recently highlighted our NASA contract on the House floor. Artemis may well prove to be one of the longest running space programs, and we are honored to partner with NASA in this historic endeavor. Over 600 million people tuned in to watch the first moon landing in 1969. And with today's media landscape and population, we anticipate billions of impressions associated with the Artemis program. These vehicles will be produced in America by the people of the heartland, including Native Americans and veterans. We look forward to sharing more info in the future. On to financing. We have been clear with our partners and associates regarding our philosophy of raising capital judiciously. We will continue with this disciplined approach. It is a different market today, one with challenging conditions, but our strategy aligns with this type of market environment. We live in uncertain times. The team and myself have successfully navigated similar turbulent markets in the past. I reiterate, we will raise appropriate amounts to satisfy what we need, bridge two milestones, and be in a position to take advantage of our track record, our value creation, and potentially improving market conditions. To start, we entered into a $250 million equity purchase agreement with financing partner Yorkville Advisors. Next, we have a commitment for a $50 million pipe from an existing shareholder, further demonstrating long-term support and belief in the company. We also filed a $300 million shelf, bringing our total accessible capital to $600 million, optimizing our financial needs to SOP. We are in ongoing discussions with parties for additional financing as it makes sense based on our disciplined approach to managing our execution plan. A related party is exploring raising up to 100, or excuse me, up to $1 billion of non-diluted capital for the construction of the prior facility. Oklahoma Mega Micro Factory in Mid-America Industrial Park in the form of an ESG clean energy Native American affected communities opportunity zone funding vehicle. Further to our focus on sourcing regenerative non-diluted investment capital, this taps into eco-friendly high net worth investors focused to deploy this capital in a tax efficient manner that makes a big ESG difference. Moving on to supply chain dislocations, risks, and achievements. We have sourced 95% of parts for our LV and LDV domestic production and are grateful to be sourcing 91% of parts from the US and allied nations. We take a different approach to traditional problems. in the supply chain, starting with our design, which requires 50% less parts. Today, we have arranged for an on-time delivery of 100% of the required semiconductor chips for gamma and TT builds. Building on what I said last quarter, supply chain issues have worsened, especially as things have heated up on the geopolitical arena. We are still in process of securing on-time delivery of 26% of the semiconductor chips needed for SOP, which at standard cost represent less than 2% of our BOM. This issue has our team's full attention, and we are working aggressively to resolve it. As many OEMs and others have indicated, there may be industry relief for the semiconductor supply chain shortage coming in just in time aligning to our Q4 2022 SOP. We expect to hit SOP in Q4 2022. What remains is whether we will hit our full target of 3,000 to 6,000 units is still remaining open. Since the end of Q1, we have more than doubled the gamma builds to 39 vehicles, We completed our second year of deep winter testing of more than 2,000 additional miles. We will soon be entering desert testing for the second year, validate our systems once temperatures have reached optimal conditions. There is an open invitation to any analyst out there that covers us that would like to come down to do a test drive in one of our complete gammas. You will find it an exciting and different experience. With gammas increasingly coming off the line and entering testing, we are preparing to start the scale of production at our Bentonville Advanced Manufacturing Facility. Our second building is going up now, and we are front-loading battery production for SOP. Battery module production increased over 156% sequentially to battery modules for 43 gamma vehicles. We have been hiring and training personnel for Bentonville, and they are currently training on our battery line. On to sales. Our Stage 2 orders have increased 17% from Q4 2021 to Q1 2022. totaling over 17,500 units to date. Our pre-orders are completely organic. We continue to move forward sales discussion with several key partners, and we solidly anticipate that we will be sold out this year and next. We will keep you updated as we make further progress with our sales efforts. Okay. I would like to thank our partners, our suppliers, our employees for continuing to contribute to CANoe's mission. We are here today with the spirit of embracing challenge and change rather than shying away from it. And now for our financials, Ramesh.