Zapp Electric Vehicles Group Limited

Good day and thank you for standing by. Welcome to ZAP's Shareholder and Analyst Update conference call. At this time, all conference call participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. If you are a conference call participant, to ask a question during the Q&A session, you will need to press star 1 and 1 on your telephone and you will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1 and 1 again. Alternatively, written questions may also be submitted at any time via the webcast. Please be advised that today's presentation is being recorded. I would now like to hand the call over to Mark Coble, Head of Investor Relations for ZAP. Please go ahead.

Thank you, Sharon, and welcome everyone to ZAP's shareholder and analyst update call and webcast. We'll start with some prepared remarks from Swin and Dave, and then Jeremy and David will join for the Q&A portion of the presentation. During today's call, we will discuss our business outlook and make forward-looking statements. These comments are based on our estimates and expectations as of today. Actual results could vary materially due to a number of risks and uncertainties, including those described in our most recent filings with the SEC, which are also available on our website, ir.zap.ev.com. Now, I'd like to turn the call over to Swin Chatsawan, CEO of ZAP, for his opening remarks.

Thank you, Mark. And thank you to everyone for joining us on this call. A lot has happened ahead of our first year in as a public company, and we've made more progress since then. I'd like to start with some recent developments first before recapping 2023, and then provide you with our outlook for the rest of 2024. We recently secured a standby equity commitment of up to $10 million. This will provide the capital for the start of production, or SOP, and for I-300's commercial rollout in Europe. $10 million seems like a very small amount, but that asset-light business model centered around our flexible contract manufacturing agreement means we do not need hundreds of millions of dollars to rotate, unlike most other EV companies. I'll expand on that later. In December, we successfully completed all the vehicle tests required for EU homologation. Once the production conformity audit part is complete, we expect to receive i300's European certification. After that, product will be delivered throughout the EU. Completion of the test is positive not just for our rollout in Europe, but also sets up our launch for key Asian markets. More on that in a bit also. Based on the funding available to us, we expect to start delivering bikes to our customers in the summer. Now let's double back to 2023. i300 won two more design awards, This brings our total to eight. We won the prestigious Red Dot in the motorcycle category, alongside Ferrari's new hybrid Purosang, which was best of the best. i300 is now on display at the Red Dot Museum in Germany. That was also granted patents for two of i300's key differentiators, the weight and component reducing exoskeleton that gives the i300 its distinctive appearance. and the interchangeable front sender. These features form a part of ZAP's design and brand DNA. In total, ZAP now has 16 IP registrations and patents granted around the world, and an additional 21 such applications are pending. This is a significant amount of design and tech value added, both for a mobility startup and for a first single product. Market-wise, i300 also received its first peer review by the UK's Electroheads. The video was watched over three million times within just seven days after upload. Commercially, we entered into a consumer financing partnership with United, a major European consumer finance company. United will provide a white label link directly into our e-commerce stack. This will give our European customers instant traded offers on a one-stop shop basis. Zapp is now being closely watched This state of readiness has now resulted in over 200 reseller inquiry worldwide. I-300 represents a new category of electric two-wheeler. But at the corporate and business levels, we have also innovated. There are several things that differentiate us from other EV companies, both two and four-wheelers. First, that was conceived from the beginning to scale as an asset-like business. Our contract manufacturing agreement is with a world-class, mature, tier-one automotive partner based in Thailand. This dovetails with our receivable financing facility from the Export-Import Bank of Thailand, also known as Exim. Both agreements were secured early in our development cycle. Our manufacturing contract has no minimum, but can be scaled to hundreds of thousands of units quite quickly. Without us having to invest in the capex for their fixed assets, which is unlike other EV companies. At the OPEX level, the Ex-Im credit facility allows our contract manufacturing to scale in direct portion with purchase agreements which we receive from customers. Again, significantly reducing working capital needs. Next, on the retailing end of the business, we set out to correct persistent flaws in the existing two-wheeler purchase and ownership experiences. Our full-stack e-commerce platform creates a better, one-stop shop, online user experience, or UX, within which we're able to incorporate upselling and brand extension opportunities. These include a high-graphics configurator that offers a comprehensive set of personalization and financing options. This not only benefits customers, but the upsell opportunity can increase the total value of each purchase, which can all be done directly on the staff Our UX extends beyond the purchase experience. It also includes a premium dropship direct-to-customer, or DSDTC, delivery system. That branded and fully equipped vans and trained technicians deliver bikes directly to our customers' locations. Afterwards, the UX extends into ownership. Inspections, servicing, repairs are all carried out in the same manner. We'll also be having offline point of sale locations. in case potential customers want to see an i300 and configure their bikes in person. The first one was opened in Paris. The stack is also used on site there by customers and staff and ensures a seamless and consistent UX. In today's market for consumer durables, winning the emotional connection by design is key to securing the value purchase decisions, even before the UX can commence. I-300's design awards and early feedback give us a high degree of confidence. The Z-shaped exoskeleton has the added benefit of giving the I-300 and ZAP a design DNA from which brand DNA and ultimately equity value can be created. The key benefits of I-300's new form factor are that it combines the performance of a step-through, commonly known as a scooter, with the accessibility of a step-over, more commonly known as a scooter. It is therefore the most fit for purpose for its use case as a premium city bike. Observers such as ElectroHeads and others believe i300 will establish a new category of product. To this, ZAP has led on proprietary technologies, engineering, and production methodologies. These range from the low component whole vehicle architecture, the virtuous circle of reduced weight and reduced number of battery cells, curated component sourcing, and a focus on sustainability, including recycled and upcycled materials and simplified assembly processes. These all provide practical and functional customer benefits. For example, the ultra-lightweight battery packs, born from our proprietary cell-to-pack technology, do not require any dedicated charging infrastructure. Our patented exoskeleton improves accessibility, maneuverability, and agility from reduced weight and lower center of gravity. It also makes it possible for modular under-seat storage. i300 will be priced competitively to capture gasoline riders who are either upgrading from lower categories or moving across from larger motorcycles straight to an EV step-through. This has become the ubiquitous trend throughout Asia. Here you can see the value of our low component architecture, Gen 2 sustainable materials, simplified assembly process, quality control, and contract manufacturing in action. With the drawdown of the $10 million stand-by equity commitment, which Dave will talk about in more detail later, we have the financial resources to start production and execute the commercial rollout of I-300. We expect to commence delivery in Europe in summer. First bikes are designated for our marketing fleet and early customers. On the right, you can see the i300 on display at our first boutique in Paris. We'll be moving to a high footfall location in central Paris by the summer to coincide with our first delivery. The retail and display concepts you see are also a source of differentiation in the two-wheeler space. They are intended to mirror our online look and feel to provide that seamless UX. Our boutique will be supplemented by pop-ups inside department stores. They too will also carry the same brand identity. So what does all this mean for ZAP in 2024? Firstly, a reminder that our fiscal year ended September 30th. The summer deliveries would equate to the last fiscal quarter of 2024. We want our initial rollout to create a clear understanding of our brand, product, and price positioning. After our location in the EU and parts of Asia, we expect a significant ramp-up in deliveries over the following 15 months. In terms of efficiency, our contract manufacturing agreement, in conjunction with our proprietary four-station dolly assembly system, means we can roll out production very incrementally. This avoids the potential production line-based issues and the costs associated with stopping and restarting, and overruns. Production can closely track demand and can eliminate finished goods, inventory, and associated costs. Layer onto this I-300's low component architecture, an I-300 can come off the dolly system every 30 minutes. To illustrate its modularity, a single five-man dolly team in a three eight-hour shifts using only 3,000 square feet of space could complete a run of 50 units per day for an annualized run rate of 4,000 units. When production needs to expand, teams and their dollies can be added quickly and cheaply. At the other end of the scale, we have a commitment of up to 200,000 square feet of space from our contract manufacturer. This would equate to a potential production capacity of up to 300,000 units per year, with no significant capex required from ZAP. Exim receivable financing would scale up commensurately. Further, our portable battery solution is not dependent on dedicated charging infrastructure. This removes the key scale limiting factor and significant cost, so we can focus solely on the sale of the vehicles themselves. First summer deliveries will confirm the functionality of both our omnichannel e-commerce stack and our DSDTC model. will be taking these European experiences and go to market in Asia. In terms of numbers, initial deliveries will be dependent on several variables, including supplier lead times and shipping from Asia to Europe. We aren't giving revenue guidance for fiscal 2024, as a portion of the first bikes are already booked out for testing and front office use. For fiscal year 2025, however, which starts in October 2024, remember, we anticipate sales of around 5,000 units. We will be more focused to ensure that long-term value is created by the delivery of our brand and product position into the marketplace. Towards the end of 2025, production should ramp up further as we roll out across many more countries. We expect to finish the year at a significant run rate of 20,000 units, for a revenue of around $170 million on an annualized basis. Also keep in mind, as mentioned, these forecasts are much lower than the production capacity we have available to us, which is 200,000 units by 2025 and 300,000 units by 2026. We would naturally ramp faster if demand for I-300's innovative design and technology are there. In summary, We believe we've taken a well-researched approach from day one, and now the start of production is a major tipping point for ZAP. The Thule Wheeler market is large and expected to grow. ZAP was conceived to maximize shareholder value from this global megatrend. The vote of confidence from Yorkville, with its $10 million stand-by equity commitment, provides a runway beyond start of production and paves the road to ZAP's launch, commercial rollout in multiple countries. We've also raised additional smaller proceeds from the sale of common shares priced at the market today in a separate private transaction. i300 is highly fit for purpose for its use case as a premium city bike. We believe that can scale quickly to cater for rising demand in Europe and key Asian markets, including India. These markets make up about half of all two-wheelers sold globally. For further perspective, Our committed manufacturing capacity of 300,000 units by 2026 would only represent a share of 0.5% of the 60 million two-wheelers sold worldwide in 2022. With that, I'd like to hand the call over to Dave. Thank you.