Canoo Inc.

Greetings and welcome to the Canoe Second Quarter 2023 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce Kunil Bala, Senior Vice President of Corporate Development and Capital Markets. Thank you. You may begin.

Thank you, everyone, for joining us on our Q2 2023 earnings call. During the call, Tony will update you on our business. Ken will provide an update on our capital raise plans. And Ramesh will go over the Q2 financial results. We will then open up the call 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 a 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.

Over to you, Tony. Thanks, Kunal, and welcome, everyone. Let's start with legacy matters. On August 4th, 2023, the company has finally settled the SEC matter regarding the acts of former executives. This has been a significant burden on the company's time, resource, and the process has taken us 28 months and millions of dollars, which reduced our ability to access the capital markets into higher cost channels during this period because of perceived uncertainty. We now look forward in moving past this matter. Putting it to an end is a welcomed and liberating event for us. As we now move to change in our reporting Let me give you some highlights from Q2 and the recent quarter. What you guys are going to see is we'll start to report very similar to all other public companies where we'll be giving you guidance, and I think you'll like what you see and hear in today's call. We are focused on continuously iterating and refining our product. With our customers and internally, look, everyone is fighting through a lot of recall problems because testing and durability are two different things. And I'm talking about long-term durability. What the customer's durability requirements are, coming out of my past and after sales, we always saw the aftermath of these issues. which is why we have been testing these vehicles with our customers for over a year in real-world conditions and extreme weather conditions under customer use cases. It's not theoretical what we have done. On May 15, 2023, we completed our LDV-130 with customized cargo use cases for customer evaluations. On July 20, this year, completed annual summer testing in record 120 degree heat. As we all know, the impacts of this summer have been extreme, and we've taken advantage of that doing real customer testing. On July 31st, we completed all compliance activities for FMVSS and CARD certification for LDB, in addition to previously announcing EPA certification. Our sales strategy has been one fleet sale equals hundreds or thousands of vehicles sold on a multi-year delivery with high-grade credit and long-term partnerships. To build these businesses from scratch is not easy. You can't just appear as a consumer brand. You can't appear as just a brand even within fleets. You must prove yourself. We have a $3 billion order book, and 70% of that is commercial customers. 1.6% growth in the quarter on stage two and three orders. We are slowing down the amount of orders with the $3 billion order book. We're being very methodical about our allocation with customers, their credit, and so on as we look to use different kinds of non-diluted financing with binding orders. We have $500 million in binding contracts which aligns our order book ramp with our production. I think this is a big thing a lot of people struggle with, was to build the big 150,000 unit box. And we thought, you know, very differently. I know it's been a subject of many discussions, but those that get it understand why we're doing it. And I think in these times, it's proving why it's best to align to your book. We have 750 million plus in those committed orders, and that gives us the ability to not be building units and then trying to sell them. We have a very different strategy. That gives us about 18,000 units committed orders. We can start to focus on now 24, late 24, 25 customer allocations. On August 11th, closed another Fortune 100 customer agreement to purchase vehicles for their national fleet. We'll do the same as we've done with the existing customers like Walmart, where we've tested the vehicle extremely, and then we are going to build it. We are very focused on having a low recall rate, a low warranty impact, and we're very focused on battery performance. Moving to manufacturing progress and readiness. All the equipment is now at our facility in Oklahoma City. We have implemented a combination of in-house hybrid and outsource strategy to support our 20K runway. Our initial focus has been on process repeatability and enhancements, harmonizing our supply chain and our product readiness. As we have discussed, unlike other EV companies who are bearing the cash burn of this low capacity utilization, our manufacturing capacity is harmonized with contracted demand for our vehicles and key components. And we will only build what we have sold. Now, we have to stay long ahead of that curve so that we're similar to what we've done in our other companies. is to be able to project revenues longer than 12 months with committed customer orders. We feel strongly about our phased ramp approach. I do believe it to be the lowest cost capital approach. While it does create some friction in the timing and delivery and the phasing in of additional equipment to increase your capacity, we just believe in these capital markets, it's prudent as well. On April 10th, the OKC facility was acquired. On May 17th, general assembly line was all started its installation. On June 15th, the low volume GA line validation completed. On July 27th, 20K run rate for our battery module line at Pryor, Oklahoma. This allows us for other revenues with people like the Department of Defense and other people which need our modular battery technology. On July 31st, 20K run rate for robotics and assembly line for our ladder frame equipment at Oklahoma City. And so that makes substantially for this phase, at this run rate, our machinery and equipment in Oklahoma City and prior. Next, our government relations team has worked systematically to leverage all relevant federal, state, and local tax credits, grants, and other incentives to support electric vehicle and battery modular manufacturing in Oklahoma and to deploy these technologies nationwide. Like any company, as it becomes to market, it zigzags a little bit and we have had the great support as we tried to figure out the best way for us to move forward in Oklahoma to get the support of the Oklahoma legislature and the government, the governor himself. On August 9, 2023, we signed agreements with the Cherokee Nation to invest thousands of dollars in each worker development to help us hire trained, skilled workers within their reservations. for battery module manufacturing at our prior Oklahoma facility. This is very helpful to us, and we create jobs, advanced manufacturing jobs, in an area where it's needed badly. And with the Cherokee Nation's support, it helps us align with executing their vision and ours. On August 13th, We contracted up to $113 million of our state of Oklahoma incentives to create 1,360 advanced manufacturing jobs in Oklahoma, which spans across Oklahoma City and prior Oklahoma. In the quarter, we moved to revenue generation, which is a big milestone. Ramesh will cover our enhanced approach to reporting. as a revenue-generating company. Additionally, our investment in democratizing our IP will allow us to generate other revenue with high margin to various customers, including but not limited to the government, which have a serviceable, obtainable market of what we see in the current purview of about $650 million. On July 10, 2023, we signed with the Department of Defense Innovation Unit. We moved to phase two of the High Power Battery Pack Development Agreement. July 12th, we delivered to NASA the first three crewed transport vehicles. This has been a very discerning customer. They've been extremely helpful with us in design areas, particularly in interior efficiency. and ergonomics within the cabin. And this will help us as we move forward tremendously. So we're very, very grateful for the partnership and the purchase from that. Early today, we introduced the second derivative of the LDD line, the LDD 190. This specifically aligns to our customer needs, as we learned in all the testing and performance data we saw with our customers. And we designed the MPP-1 to be able to have derivatives. So it's pretty low cost. Gives much more customer optionality. And this particular derivative picks up 30 plus percent more cargo utilization. And 95% of all the space in this vehicle is usable. While maintaining high worker ergonomics, and productivity for ingress, egress, and load and unload. May 11th, we completed the LDV 190 pre-production build. On August 14th, unveiled the LDV 190, the derivative of the original LDV. Again, you know, having these platforms that you can deliver derivatives and democratize technology so you can get an opportunity to use That for other use cases like the Department of Defense and others, we have found this to be similar to what we've seen in companies like Tesla and others. With that, I'll cover some more in Q&A. Ken, why don't you give us some information on the capital markets?