Canoo Inc.

Hello, and welcome to the Canoe fourth quarter and full year 2023 earnings conference call and webcast. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may be placed at the question queue at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to John Wolfe, head of investor relations. Please go ahead, John.

Thank you, Kevin, and thank you, everyone, for joining us on our Q4 and full year 2023 earnings call. During the call, Tony will update you on our business and strategy. Greg Etheridge will provide an update on our financing activities, and Ramesh will go over the Q4 and full year 23 financial results and also provide some perspective on our outlook for 2024. Please be advised that we may be making 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. With that, I'll hand it over to Tony.

Thanks, John. Thanks, everyone, for joining us today. You've all seen the recent news from us and others, which has highlighted the big opportunities and the big problems, the perils of hurrying to market before being ready. We've heard for three plus years that asset light and racing to high volume was the path to success and profitability. When in fact, it is quite the opposite, and it's dangerous and expensive to hurry up to slow down. Even those with endless amounts of capital, like Boeing, have learned the hard way and it has impacted tens of billions of shareholder value. We have always been realistic about our business, shared what we knew, when we knew it, and made tough decisions and took you through it. It's our job to tell our shareholders what is competitive, what works and doesn't, and what gives us an advantage as we've learned from our customers. We do things differently from others because it's the right thing to do for us. And based on my experience and our team's experience with building successful businesses across different industries, this has not been an easy task. Early on, we decided to invest in a highly profitable large market. And that was a pivot for us. But it had over $1 trillion TAM with high volume multi-year delivery contracts with opportunities to expand and democratize our technology. We needed to control our IP and software, so we brought it in-house. We created a scalable global platform that addresses all service maintenance repair activities, including some customer workflows. Built an economically resistant customer base. We didn't go after consumers, we went after customers with large orders, high-grade bankable credit, discerning fleet industrial and government customers that could help us refine our product under stress and fatigue. We developed a step-level manufacturing process. We talked to you about 20,000 unit increments to be capital efficient so that we can scale our CapEx with our pre-sold vehicle demand. Then we move to validate the product functionality, mix and multi-year delivery schedules with our customers. This process takes time to integrate to our customers' delivery roadmaps, which extends beyond the vehicle itself. We have seen a very difficult market. We have adapted our disciplined capital deployment approach by raising only the amounts of capital we need for each milestone, and we will continue to do so. As market conditions continue to evolve, as you can see on the slide that we put in front of you, we remain in a position to take advantage of these dislocations to reduce capex and scale our operations. 20 cents on the dollar to purchase new or near new assets. This was unthinkable just 12 months ago by many analysts and investors who were worried that securing these items would have long lead times. We didn't disagree with you. We just focused on being the second new owner of that equipment. This resulted in a 35% to date or $48 million reduction in capital spending compared to our initial 2023 CAPEC guidance of $140 million, which is directly attributable to unrealized shareholder value. We believe that our disciplined approach and in light of recent dislocations makes our stock an attractive investment opportunity in a very important and unstoppable sector. The foreign trade zone designation took a lot of work by many people on the team. For our Oklahoma City facility, it is an important building block in our strategy. And the value of this will become more apparent to you in the coming quarters. But let me give you a few highlights. It will generate additional working capital benefits, including moving these newly acquired assets into our facility. Enhances our geographic expansion opportunities while reducing our cost of delivering our made in America vehicles at globally competitive prices. Up to 70 million in permanent working capital reduction. Incremental opportunities by vertically integrating more critical components with our key suppliers. recently we announced the usps purchase of our right-hand drive ldv 190 vehicles the usps being one of the largest fleets is driving the transition to electrification power powered by one of the largest veteran workforces in the country we are proud to be working with them to provide our right-hand drive steer-by-wire technology look out for the first vehicle vehicles delivering your mail starting this May. We will showcase our right-hand drive vehicles at several UK commercial vehicle fleet events in the coming weeks. Over the past year, we have made significant progress in our business. We've completed our product, advanced our manufacturing scale, and delivered vehicles to customers. Twenty-two vehicles completed in 2023, of which 17 were completed in Q4. Three delivered to NASA at the midyear, and nine delivered to customers in Q4. Ten have been allocated for demo and sale to international customers. Our OKC assembly plant in less than one year is on schedule to achieve our targeted step level manufacturing of 20K run rate readiness. On the slide, you'll see that there's a couple important things in that we'll talk about in a minute, which is our strategy about how to roll out our product without high cost of service centers. In addition to that, fine tuning it to our customer base. By having concentrated customers, you don't have charging network issues. In addition to that, the way we've done it, we can have fast action teams available within four to eight hours for a customer's needs. These are very important building blocks in building a sustainable business. We will now shift our focus to harmonizing and optimizing our supply chain to support step-level manufacturing. What has been lost on many is that you have to have four key elements in place before you scale. You got to be disciplined not to hurry up to go slow. You must have your product, your platform, and your economics right. A highly trained workforce that can produce the same quality as you move up from low volume to step-level manufacturing run rates. A support organization that is harmonized and optimized across the supply chain. And that aligns with your quality and step level manufacturing and tracking process. And a support workforce that is focused on the quality of the product delivery, safety, continuous training, customer journey, and after sales. These cannot be afterthoughts. They come across quickly. And I know this because I come out of after sales. I'd like to talk to you a little bit about this slide. Many people have asked us why have we picked 3,000-ish units to be in your first year? Because you can, as you study how the successful new entrants have done it, going all the way back to Henry himself, you can see that there's these step-level functions in manufacturing. And that's because of the confluence that you have to bring together all of the relevant elements. Otherwise, you break at your weakest point and your production stops and your cost skyrockets. We've been very focused on that. And while it may seem very unpopular at the time, the 20,000 unit run rate is in recent history a great example of how you step through manufacturing. 3,000 and 20,000 as you can see on the slide. We remain steadfast in our belief and have prepared a few slides to help you further understand and appreciate our production strategy. We encourage you to look at it and ask questions when we get to the Q&A so that we can drill down a bit deeper into the what. We are very cautious to make sure we do not get in the situation of others. This next slide is a very telling slide as well, in that a lot of everybody thought that if you can produce more volume, your economics get better. And that's really actually not the case. It actually starts with your embedded logic in your run rate and the capex. If you're too capex heavy, as you can see in this example, You're way ahead of your ability to produce. You will ultimately slow down based on your weakest link, and that will cause your cost to skyrocket, as we can see here. But if you study the successful examples like Tesla, and while it was chaotic and difficult, their phase was purely positive violence. As you can see, as they moved from 3,000 units and stepped up to a 20,000-unit run rate, they had their economics right. They were harmonizing their supply chain, which as they went through, and as Elon has said, manufacturing hell. We understand it. It's hot down here. But one thing we didn't do is we didn't deceive you with a big factory with 150,000 unit annual capacity. We just didn't go to the luxury markets. We stayed lean. We focused on areas where customer bases would be solid. and where the economics would work, and that you could work through all of the four key elements and grow your business and grow into a profitable one and learn how to scale it in those increments. This slide is a slide we wish we could have showed you a year ago, but I don't think you would have believed us because everybody was focused on more volume. As you can see, it doesn't help. You've got to first get it right. Now that you have a better understanding of our strategy, the first three quarters of this year will be about the things I mentioned above, including and very focused on harmonizing the supply chain and fine tuning our product mix to our customers' workflows. We're collecting data from our vehicles constantly in collaboration with our customers. With over 20,000 customer miles driven over the last few quarters, same-day fast action teams across any point of our disciplined rollout map, across the seven states as we disclosed earlier, we have had very few deployments. We've had many opportunities to do upgrades over the air and test our system, and that has prevailed well. I'm going to now turn it over to Greg for some financial metrics. Thanks, Tony.