Canoo Inc.

Greetings and welcome to the CANOE third quarter 2022 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow a formal presentation. If anyone should require operator assistance during this conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to our hosts. Kunal Bala, Senior Vice President of Corporate Development and Capital Markets. Thank you. You may begin.

Thank you, and welcome, everyone, to Canoo's quarterly earnings conference call. Today, I have with me investor, chairman, and CEO, Tony Aquila, along with interim CFO and Chief Accounting Officer, Ramesh Murthy. Tony will provide an update on the business. Ramesh will then run through our financial results for the quarter. Turning it back to Tony for closing remarks. We will 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 10Q and 10K and other reports that we may file with the SEC, including Form 8Ks. 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. Now, please navigate to the webcast landing page and access the video link towards the bottom left of the page. We will pause briefly while you watch the video.

And now I'll turn it over to Tony. Thanks, Kunal, and welcome everyone to the call. Thank you all for joining. Speaking to you today in the midst of global economic and geopolitical disruptions, the market and sector are under pressure. And these growing pains are compounded given the large group of younger companies. I've said this before. Our team has weathered this type of environment successfully in the past. We have been through the tech bust, the 08 global financial crisis, and others. Our strategy is bearing out, and we will speak more about it today. We are a large investor compared to our peers, focused on creating long-term shareholder value, and sometimes you take more pain on the front end. So we're going to have a bit of a different approach compared to others in the space. Our big news or no news approach is deliberate, keeping our cards close in a competitive market sector. Today, I am going to connect some of the dots so you can see more clearly our strategy as we get even closer to SOP. We have stayed focused on creating unique IP, increasing our patents by 13% to 205 total patents in the third quarter. We have made the decision to manufacture domestically in the United States very early on. And we expect to achieve a 20,000 unit run rate capacity in 2023, doubling that capacity in 2024. We have over 300 million invested in machinery, equipment, and tooling, finished gamma build phase with 118 vehicles built. and remain focused on the start of production. We are pioneering aspects of the automotive business model compared to both traditional and recent approaches. Some of this is becoming public now. We have more and we will continue to release it over time. We were ready for the Inflation Reduction Act or IRA and are leveraging our platform That is 92% sourced in the U.S. or allied nations. Targeting high-grade commercial customers, we are already positioned to choose who we partner with. Nineteen months since taking on the CEO role, our strategy is starting to come into light. We've made moves which you may not have understood at the time, but they put us ahead in terms light of the IRA bill. And now you see others scrambling for alternatives. We've been strategic and sequential in our actions to set up the building blocks for a long term growth value creation and successful company. We focus on a use case driven technology platform architecture. And we finalized the MPP1 platform and derivative products, the LBB and the LV, with third-party validation, including real-world deliveries for one of our customers. We have put a lot of work into making the MPP1 a foundation for our business. We are capable of producing 60,000 units of our MPP1. In future quarters, I will explain why that is important. We invested nearly $1 billion in the creation of Canoo's technology and now have over 205 patents. Early on, we changed our business model to develop IP for ourselves, not others. That has materialized into significant inbound interests as of late in licensing and strategic partnership opportunities, which we are currently evaluating. More to come on this in the future. But our focus is launching our own brand and secondarily pursuing those possible partnerships. From the start, we've been focused on sourcing parts from America and allied nations, followed by a focus on domestic manufacturing. This isn't just patriotic. It is good business sense. IP and supply chain control helped position us well for the recent past IRA. We developed partnerships with two states and the sovereign nation, Oklahoma, Arkansas, and the Cherokee Nation. We are making significant investments in these two states and will create an estimated 3,400 new high-tech American jobs. To attract this investment, these jobs, and the significant economic impact they can bring over many years, Oklahoma, Arkansas, and local partners have offered us now rising to $485 million in total incentives. Thanks to Governor Stitt, Governor Hutchinson, their economic development teams, legislators, and the partners in both states for their continued support. In this phase, we have focused on large strategic customer commercial orders. securing high-grade credit commercial customers, as well as a landmark NASA contract, and further expanding our TAM into the rapidly growing, as we can all now see, government and defense opportunities. We received the U.S. Army contract for analysis and demonstration, and the service expects to begin experimenting at Camp Grayling this month. We will deliver the vehicles on schedule and with even greater functionality, a record-breaking 140 days since we signed the contract to delivery. We are working on other government-related projects that leverage our unique IP and are continuing to develop IP, and we will share more in the coming quarters. As you know, we also selected a proven battery partner in Panasonic and are honored to to be selected as their second partner in North America besides Tesla. You have been patient, and we appreciate it. And today we announced our Phase 2 manufacturing strategy. We previously announced a battery production facility earlier in this month in the Mid-America Industrial Park with a highly automated, high-speed production line. Today, we are pleased to announce that we have entered into an agreement for the purchase of a vehicle manufacturing facility in Oklahoma City. This is a 120-acre facility with existing production-ready infrastructure, is strategically located, and is close to on-ramps and off-ramps, has all of the transportation and ecosystem infrastructure, including rail. We are planning to ramp to a 20,000 initial annual run rate capacity in 2023 and up to a 40,000 annual run rate capacity by 2024 with opportunities for expansion. These two facilities underpin our phase two manufacturing plans and provide us the scalability and rapid ability to deliver vehicles to our customers in 2023. and bridge us to a mega micro factory in Pryor. The mega micro factory will now be on a separate capital track. More to come on this in the future. Oklahoma City Mayor David Holt and the city's economic development team are outstanding advocates for their hometown. SOP starts this month with our contract manufacturing partners on our own equipment. Following these initial builds, we will then aggressively shift all our equipment and focus to our new facility during Q1 and Q2 of 2023 as we start production. We expect the first sellable vehicle deliveries to occur in the back half of Q1, and we will ramp production in 2H 2023 to 20,000 units run rate by year end. Moving on to software, another differentiator for Canoo. So let's talk in-house development software. We have a lot of experience in developing software for this industry. In our other and previous investments, we have deployed and are actively supporting our customers' mixed fleets today. 94% of electrical devices on the vehicle can be updated over the year. we have deployed 200-plus successful OTA updates to our fleet. 2,500-plus remote commands have also been successfully deployed across the fleet. We collected 150 data points and signals per second during customer test cycles, which resulted in 121 million data points per vehicle, to reduce our bond, increase our functionality, improve our data products, analytics, and improve the efficiency of the workflow for our partners. We are focused on defining new types of business. We are not focused on the traditional 100-year-old OEM model. Our complete technology platform is assembled, harmonized, and articulated here in-house. This is a standalone business for us going forward with many ongoing discussions, as mentioned prior. The software code has been developed in-house and allows for a secure, flexible, and upgradable platform that can remain fresh across its cycle. Since taking over, we've moved from outsourcing to insourcing. That is IP creation. We focus on use case space software driven approach. We are building an ecosystem that creates a high return on capital as we have done previously for our customers and open up new high margin revenue streams for us all. Moving on to sales. Between our commercial sales and our reservations, production is sold out through 2024. Our order book growth over the last quarter, we have $2-plus billion in total orders in our pipeline. We have grown our Stage 3 contractual commitments to 750 million or 18,000 units, a 224% growth over the last quarter, including commitments from Ziba for an initial binding commitment of 3,000 units in 2024 and from King Beach. with a binding order of 9,300 American-made electric vehicles. We now have 42,000 units of Stage 2 orders growing 57% over the last quarter. And over 50% of our orders are LDVs versus 28% last quarter. We have also announced our virtual canoe experience on our homepage. We are very happy to report that we had zero downtime during advanced customer road test programs. Now, let us move to an update from the field with customer road test programs. We made over 1,400 deliveries covering 4,500 plus miles during peak and non-peak metro and rural environments. over 41 days across two of these major metroplexes and rural areas. 65% to 70% remaining charge operating in 23 degrees to 110 degrees temperature. Zero downtime and zero accidents. All necessary fixes and maintenance were completed during the post-derivery window. Offering customers a very specific program so that their uptime can be appreciated and achieve their new goals. The road test programs have been a testament to our commitment and investment in extensive and rigorous vehicle and customer validation programs. And we have received very positive feedback from users on aspects such as the right comfort, visibility, and workflow ergonomics. We're moving from engineering the product to now manufacturing it at scale. Now we move to the next thing we have to prove. We successfully completed our gamma builds and begin homologation activities. We have completed all required manufacturer cost down and range, coast down and range testing and will be submitting our EPA application on Monday, November 14th. We received preliminary range indications of 200 plus based on testing at an EPA-certified facility. Activities for other certification processes to meet standards for FMVSS, CARB, and FCC compliance are also in process currently. We are ready to start production. We are anxious about it. We're excited about it. We're focused on it. For the lifestyle delivery vehicle, with SOP expected to launch on 11-17, and we aim to complete final certification in the first quarter of 2023. We're taking a disciplined phased expansion approach to bringing on capacity based on committed orders. This is now proving to be a very good move for us since the economy is now more turbulent and it's more difficult to sell vehicles one at a time. As mentioned previously, during the first half of 2023, we will begin installing our existing machinery and equipment into our new facility. We will be phasing our expansion strategically by aligning our capacity with the committed order book, continuing our disciplined approach to accessing capital and capital allocations. We will double our capacity strategically and run rate from 20,000 by the end of 2023 to 40,000 by the end of 2024 and beyond as we bridge to our mega micro factory in Pryor. While we're a bit delayed in Pryor due to economic reasons, we have accelerated with the Cherokee Nation our partnership and are able to launch the battery assembly center in Pryor. So jobs are ahead of schedule. in that area, which is very strategic for many reasons. Our manufacturing plan enables rapid geographic expansion and opportunistic joint ventures that we have track records of doing in the past globally. As my last company, we expanded it to 96 countries. We will discuss this more in the future. The LDV's components are below are below our goal at $1,600, which lowers BOM costs and reduces supply chain and build complexity without reducing the customer satisfaction. We are now ready to receive the tooling we previously acquired and placed orders for outstanding equipment for our facilities. Our plan is to build 15 production vehicles this year. These vehicles will be allocated across our committed order customers, including some to NASA and Walmart, among others. The last two quarters have been very tight. The macroeconomic has worsened, pushing the cost of capital higher and forcing us to accelerate our maturity and manage cost efficiently to achieve our goals. We have been doing our best to manage cash, continued access to liquidity and dilution. We reduced our cash burn by 25% over the last quarter, and we will continue to shift the expense mix, increasing the ratio of capital spend to operating spend, which we will also focus on the financing. On the access of the financing front, we have secured an additional $30 million in in a pipe and a note to be converted via cash or stock. We are in the final phases of evaluating multiple options to finance the Oklahoma facility that the team has been working on for quite some time. And last but not least, we are in the final stage of a fixed asset financing facility for our machinery and equipment. Now I'd like to turn it over to Ramesh to give you more about the financial metrics.