Proterra Inc

Good afternoon and welcome to Proterra's fourth quarter 2022 conference call. All participants are in a listen-only mode. After the speaker's presentation, we will conduct a question and answer session. To ask a question, you'll need to press star followed by the number one on your telephone keypad. As a reminder, this conference call is being recorded. I would now like to turn the call over to Erin Chu, Vice President of Investor Relations. Thank you. Please go ahead.

Thank you, operator, and thank you all for joining us for Proterra's fourth quarter 2022 conference call. Joining us today from Proterra are our CEO, Gareth Joyce, and our CFO, Karina Padilla. After the markets closed, we issued our quarterly letter, and our 10-K will be filed tomorrow. During this conference call, we will make statements related to our business and industry that are forward-looking statements, including statements that express belief, expectation, projection, forecast, anticipation, plans, guidance, and similar phrases or intents, regarding future events and the company's future performance, which are considered forward-looking statements as defined by the Private Securities Litigation Reform Act. These statements are not guaranteed the future performance. They are subject to a variety of risks and uncertainty, including those noted in our quarterly letter and our filings with the FCC. Our actual results could differ materially from expectations reflected in any forward-looking statements. We specifically disclaim any intent or obligation to update these forward-looking statements, except as required by law. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on March 15, 2023. Since then, we may have made announcements related to the topics discussed, so please refer to the company's most recent press releases and SEC filings. For 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 in addition to financial information prepared in accordance with U.S. GAAP. These non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with GAAP. A description of these non-GAAP financial measures and a reconciliation of these measures to their most directly comparable GAAP financial measures can be found in today's quarterly letter available on our website at ir.proterra.com. Now, we will 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. 2022 was a momentous year for Proterra, both in terms of the progress our business has made, but also in terms of the challenges we had to overcome. And in 2023, we open a new chapter in Proterra's journey, in which we expect to generate more revenue from battery sales than bus sales. And we aim to improve manufacturing efficiency, gross margins, and cash consumption through both the ramping of production at our new multi-gigawatt hour capable powered one facility, the consolidation of bus manufacturing in Greenville, and a reduction in operating expenses. For the call today, I will open with a summary of 2022, both a discussion of our 2022 audit and a review of our 2022 operating results. Then I will pass it to our CFO, Karina Padilla to provide the quarterly detail. And finally, I will close with our 2023 outlook. First, I'd like to address our 10-K NTs. When we file our 2022 10-K, it will include management and our auditor's conclusion that there is substantial doubt about our ability to continue as a growing concern. This growing concern qualification that will be included in our auditor's report in the 10-K would constitute an event of default under both our convertible notes and our credit facility. However, we have obtained a waiver under the convertible notes until March 31st, 2023. This has a lot to do with our debt covenants. We have approximately $170 million of convertible notes outstanding, for which there is a minimum liquidity covenant that requires our cash and liquidity to exceed four times the cash consumption at the end of each quarter. At the end of Q4 2022, we did not meet this covenant. The convertible debt holders provided a waiver retroactively for the end of 2022 for this covenant in addition to a waiver for a quarterly reporting covenant for prior periods. They also provided a prospective waiver in respect to our auditor's report containing a going concern qualification in our 2022 10-K. If we do not obtain a further waiver beyond March 31st, 2023, all amounts outstanding under the convertible notes could become immediately due and payable and all commitment obligations under our credit facility could be terminated. But we are working with our debt holders and are optimistic about finding a resolution. We have also implemented a number of cost reduction initiatives since the start of 2023 that we expect to lower our cash consumption starting in Q2. At the end of 2022, our cash, cash equivalents, and investments were $298 million. Our 2022 10K will also include management and auditor reports disclosing material weaknesses in our internal controls. To be clear, there is no restatement of prior financial statements.