Proterra Inc

ladies and gentlemen good afternoon my name is Abby and I will be your conference operator today at this time I would like to welcome everyone to the Proterra second quarter 2022 conference call today's conference is being recorded and all lines have been placed on mute to prevent any background noise after the speaker's prepared remarks there will be a question and answer session If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one once again. Thank you. And I will now turn the conference over to Aaron Chu, Vice President of Investor Relations at Proterra. You may begin your conference.

Thank you, operator, and thank you all for joining us for Proterra's second quarter 2022 conference call. Joining us today from Proterra are our CEO, Gareth Joyce, as well as our CFO, Karina Padilla. After the markets closed, we published our quarterly letter on our website and in an SEC filing, which we encourage everyone to read for details on our financials and insights into our operating results in the strategy, industry dynamics, and outlook. During this conference call, we will make statements related to our business and industry that are forward-looking statements under federal securities laws. These statements are not guarantees of future performance. They are subject to a variety of risks and uncertainty, and our actual results could differ materially from expectations reflected in any forward-looking statements. For a discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC's website and via the investor relations section of our website. Additionally, non-GAAP financial measures will be discussed on today's conference call. Reconciliation of these measures to their most directly comparable GAAP financial measures can be found in today's quarterly letter. We'll kick off the call today by introducing our Chief Executive Officer, Gareth Joyce, for his opening remarks. Gareth?

Thank you, Aaron, and to everyone for joining us on the call today. In Q2 2022, our team's preparation and execution enabled us to continue to navigate to a difficult operating environment with global supply chain conditions remaining disruptive and unpredictable. As a result, we delivered excellent growth in Q2, driven by continued momentum at Proterra Power and strong execution at Proterra Transit, while sustaining a strong balance sheet with more than a half a billion in cash and equivalents as of June 30th. Q2 operating highlights include growth by a factor of 10 times for Proterra-powered deliveries to another record of 348 battery systems, as well as a new high in revenue of $24 million for the quarter, a rebound in Proterra transit deliveries from Q1 levels to 52 new electric transit buses, yielding $51 million of transit revenue for the quarter. Battery production closed to doubling year-over-year to 79 megawatt-hours, and Proterra Energy delivering 3 megawatts of charging solutions despite continued power shortages as well as site commissioning delays. Altogether, we generated record revenues of $75 million, growing 27% both year-over-year and compared to Q1 2020. 2021 and positive gross margin of 1%, down from 2% a year ago, but up significantly from negative 5% in Q1 2022. Meanwhile, demand for electrification solutions not only remains healthy, but the tailwinds are on the verge of becoming even stronger in the United States in the second half of 2022, with over $800 million of awards funding electric transit buses as part of the federal loaner program anticipated to be announced this month, as well as the first $250 to $500 million in awards under the EPA's electric school bus funding expected to be announced in October, both of these being markets which Proterra serves through either Proterra Transit or Proterra Power. Our team is doing an excellent job executing. But I can't overstate how difficult an environment we're operating in right now. The economy and capital markets are in a much different state than they were just six months ago, not to mention two years ago before we went public. We're now in a market that has lost some of its enthusiasm over high-growth companies and is focused far more on margin improvement, capital management, and cash flow generation. Fortunately, our new leadership team has been instrumental in evolving our management operating systems to improve our ability to steer the business as we've made the shift from startup to scaler. We will explore these dynamics at the end of the call, but we will first provide a more detailed review of our Q2 results. I will start with the Q2's operating metrics and business trends, and then I will pass it to Karina to review revenue, gross margins, and cash. And then I will close with a reiteration of our 2022 guidance, as well as some strategic commentary on how we are responding to the current economic and capital markets. Let me begin with Proterra Power and Energy. Momentum continues to grow at Proterra Power. Battery systems delivered in Q2 were higher than Q1, which itself was higher than all of 2021. enabling another quarter of record deliveries and revenue in Q2. Proterra Power delivered battery systems for 348 vehicles in Q2. That is more than 10 times the 30 vehicles we delivered battery systems for a year ago and 21% higher than the 287 vehicle units delivered in Q1 2022. Through June 30, 2022, we have now delivered battery systems to more than 1,000 vehicles for our OEM partners. While this figure includes some prototypes and vehicles still in production or in transit to the end user and is not reflective of the underlying kilowatt-hour battery capacity, Powered has now delivered batteries to more vehicles for our OEM partners than to Proterra Transit vehicles. Proterra Power's pace of growth is underpinned by the expansion in the number of our customers' vehicle programs entering series production, and by the growth in volumes of these programs as our customers scale up production. To put it all in perspective, at the start of 2021, we had established partnerships for five vehicle programs, but we're only delivering to one in series production. In Q2 2022, we had announced partnerships with more than a dozen OEMs covering over 20 vehicle programs. and we delivered battery systems to 15 different OEMs in the quarter, four of which were in series production, and the rest prototypes for current or potential partners. While the four vehicle programs in series production accounted for the vast majority of our volumes in Q2, many of our other vehicle programs that are still in the development phase achieved some important milestones over the last few months. showcased its first electric double-decker bus using our battery systems. And we supplied the batteries to Steyr ahead of Volta Trucks' start of production verification vehicles. And in recent weeks, we shipped prototypes to Nikola for both its Tray Bev and Tray fuel cell EV vehicles. Battery production also continued to grow materially year over year, including supply for both powered and transit we produced 79 megawatt hours of batteries in Q2, almost double the 41 megawatt hours we produced in Q2 2021. And we have now cumulatively produced over 650 megawatt hours of heavy-duty batteries for commercial and industrial customers and vehicles. At Proterra Energy, however, significant supply chain constraints continue to impact results in Q2. On top of continued shortages in charging hardware, we are now also coping with the shortages in SwitchGear 2. Nevertheless, we delivered 3 megawatts of DC fast charger solutions, down just 300 kilowatts from 3.3 megawatts in Q1 2022 and compared to 4.6 megawatts in Q2 2021. However, demand for our fleet-specific megawatt-scale charging solutions continues to expand. In addition to our foundational demand for the transit bus segment, highlighted by an order from BC Transit in Canada for our megawatt scale chargers, along with their order for Team ZS5 electric transit buses, we received multiple megawatts of orders from non-transit customers in Q2, namely in the school bus and coach bus segments. So together, total Proterra powered and energy revenue grew 127% year over year, to a new quarterly record of $24 million. Moving on to Proterra Transit. Transit deliveries grew significantly versus Q1 2022 as production rebounded from Q1 2022, which was particularly impacted by supply chain disruptions. Q2 results reflect the benefits of some of our efforts to improve supply chain performance and production processes for the current environment. As a result, in Q2, we delivered 52 new electric transit buses in a quarter, as compared to 54 in Q2 2021. This also represents 30% growth from Q1 2022 as our proactive supply chain initiatives to create more flexibility in our production system paid off, with our highest quarterly production rate on record for our Greenville factory. We also delivered five pre-owned buses in the quarter, which continues to demonstrate the potential for a pre-owned market in electric transit buses. To be clear, overall supply chain issues haven't improved, and we continue to face constraints in wiring harnesses and power connectors amongst other items. And the COVID-19 lockdowns in China early in Q2 compounded some shortages, particularly in motors and other electrical components. But all the credit goes to our team who put in an incredible effort and got the job done. I'll now hand over to our CFO, Karina Padilla, to provide deeper insights into our revenue, gross margin, and cash flow performance. Karina?