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spk00: Ladies and gentlemen, welcome to the Romeo Power first quarter 2021 financial results and webcast call. My name is Charlie and I will be coordinating your call today. If you would like to ask a question during the presentation, you may register to do so by pressing start followed by one on your telephone keypad. I will now hand over to your host, Sam Dundee of BP Strategic Finance to begin. Sam, please go ahead.
spk02: Thank you, Operator, and good afternoon, everyone, and thank you for joining us today for Romeo Power's Q1 earnings call. Before we begin, I want to remind everybody that this conference call will contain forward-looking statements, including our expectations of future results, sales, cost of inputs, market dynamics, et cetera. Our actual results may differ materially from those projected in these forward-looking statements. Additional information concerning factors that could cause the results to differ materially from those forward-looking statements include macroeconomic conditions, demand for commercial electric vehicles, regulatory policy decisions, the continued impact on supply chains caused by COVID-19, and others contained in our press release as well as our public filings with the SEC. Today's call will also include a discussion of non-GAAP financial measures, as the term is defined in Regulation G. Non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with GAAP. Accordingly, at the end of today's press release, we have provided a reconciliation of these non-GAAP financial measures to the company's financial results prepared in accordance with GAAP. With that, I'll turn the call over to Lionel Selwood Jr., President and CEO of Romeo Power.
spk03: Thank you, Sam, and good afternoon to all. With me today is Lauren Webb, our Chief Financial Officer. As it has only been about six weeks since our last earnings call, we'll focus today's call on the latest updates since then. To start off, I'm sure it won't surprise anyone on this call to hear that the demand for vehicle electrification continues to grow. All vehicle OEMs are subject to regulatory and consumer pressures to reduce CO2 emissions. Romeo Power is well positioned to capitalize on that growth. We're continuing to leverage our advanced engineering expertise and the partnerships we have established with key industry leaders like PACCAR, Heritage, and Republic, among others, to develop and commercialize safe, durable, cost-effective battery pack solutions. We are proud to have earned the trust of leaders like these who face one of the most difficult electrification challenges, electrifying long-haul trucking in a cost-effective manner. Our technology advantages make us well-positioned to execute on long-term agreements with leading ODMs and fleet managers. Our technological mode remains second to none, as evidenced by the continued diversification and quality of our order book. Customers are realizing that the most effective path forward to an ultra-competitive, long-range, electrified commercial vehicle goes through Romeo Power. However, The near-term challenge is the limited number of battery cell providers producing safe, high-performance cells suitable for the commercial electric vehicle market. We are tackling this problem head-on by broadening our engagement with battery cell providers. We are taking key strategic steps to reduce the risk over the medium and long term. This has become one of the most critical issues facing our industries. and we are doing everything in our power to help ease supply constraints and improve the number of qualified cells for ourselves and for the industry broadly. We are driving a global and holistic strategy to secure our future. We have made significant progress since our last update towards securing adequate cell supplies. As we noted on our last call, we are driving to secure cell supply over the short, medium, and long term. We have made great strides since our last update. We are well positioned to sign an agreement shortly for multiple gigawatt hours through our long-term supply agreement with a top tier partner. We are also in active negotiations with two other battery cell partners, and we expect to begin negotiations with a fourth in the summer. Each partnership has its unique elements, but some consistent themes are structured allocation, pricing mechanisms, and access to next-generation technology, such as 4680s, when available. If executed successfully in aggregate, these agreements should ultimately provide us with access to a sufficient supply of battery cells to meet our long-term production targets. As a CEO, I want to assure shareholders that I am personally leading all of these negotiations, and I am committed to bringing them over the finish line throughout 2021. We are confident that our technology mode will continue enabling us to gain market share. Thus, we are taking steps necessary to support our customers, including finalizing 2021 and 2022 allocations. We will provide an update as we bring these partnerships to the finish line over the coming months. And we know we and the whole industry need more sales. So, we are in discussions with both established players and newer entrants to assess and, over time, enhance their readiness to meet our rigorous requirements for use in heavy-duty Class VI, VII, and VIII trucks. You may know that one of the hallmarks of Romeo Power's technology is our ability to enhance the performance of all cells, to efficient and adaptable pack design, which is driven, at least in part, by our rigorous integrated testing protocol and the flexibility to modify and adapt our patented e-play technology. From our founding, we have been committed to ensuring safety while pursuing high performance. we have built a very sophisticated testing capability that is a key advantage in enabling us to deliver safe, durable, cost-effective battery-packed solutions. Systems testing is far more accurate and faster when, for instance, the thermal and vibration testing are done in one second. Data from each of these test areas is being leveraged quickly to refine the system design, and iterations are executed faster. In parallel, the telemetry from the testing process informs the design of the battery management system that will ultimately elevate battery performance. As a systems engineer myself, I cannot overstate how important this design philosophy is to building better systems. Simply stated, it makes any cell better. We are committed to leveraging our testing capabilities and broad exposure to various vehicle applications to support the qualification of additional battery cells for use in these complex applications. Our expertise also enables us to match the appropriate cell to a particular customer and or use case application. Utilizing our proprietary approach to overall systems design has enabled us to hone in on the appropriate battery cell partners to support our long-term business plan. Thank you for your attention to that level of detail. I wanted to take a minute to describe that key differentiator because it's important to us and to the industry as a whole. This is obviously a very fast-moving technology, so we are also constantly evaluating strategic partnerships and other opportunities for collaboration to drive innovation at the battery cell level. We're all about teamwork at Romeo Power, and we are pleased with the number of esteemed industry participants we have had the opportunity to engage with. In fact, many of our engagements with OEMs feature deep collaboration. We believe this is an important validation of our technology and team. While we are on the subject of the Romeo Power team, we were pleased to announce yesterday Dr. Hang Shi, one of the foremost minds in lithium battery engineering, has joined Romeo Power. Dr. Shi is a 30-year veteran in the battery technology trenches who studied under world-renowned battery technology researcher Dr. Jeff Dahn and has founded and served as CEO and CTO of several key innovators in the field. We could not be more pleased to welcome him to lead our battery cell engineering group, and we consider him joining the Romeo Power team to be a major validation of our technology and opportunity. At Romeo Power, Dr. Shi will evaluate novel cell design and chemistries with external partners, as well as the viability of new cell technology. He will also be responsible for prototyping Romeo Power's proprietary chemistry-agnostic distributed cell design and leading commercial cell supply quality audits. We expect that Dr. Shi will also help drive our process to secure qualified cell supply. OEMs and fleet managers who are serious about electrification recognize that Romeo Power has the team and the solutions to deliver superior uptime, profit per mile, and return on investment. This is why we win. In early April, we were proud to announce our long-term agreement with leading commercial vehicle maker, PACCAR, the global maker of light, medium, and heavy-duty trucks under the Peterbilt, Kenworth, and DAF nameplates. For those of you unfamiliar, this is a company that produced over 130,000 trucks in 2020 alone and is also a leader in zero emissions commercial vehicles as well. The trust they have placed in us to help them achieve their ambitious electrification goals is an important milestone for Romeo Power. We announced in early April that we had entered into a long-term supply agreement whereby PACCAR will purchase our battery packs and battery management software for use in heavy-duty battery electric Peterbilt 579 EVs and Peterbilt 520 EV refuse trucks in North America. Folks on this call can appreciate how important this engagement is. Industry watchers have applied conservative growth and pricing assumptions to estimate the impact of Romeo Power being designed into just the 579 and 520 models. These two models alone have around a 10% market share of the total market for Class A trucks. We have seen estimates we think make sense that demonstrates this engagement alone has the potential to add significantly to Romeo Power revenue by 2025. Certainly, lots will change in five years, but we're excited to embark on this journey with PACCAR and other esteemed players in the heavy-duty space who have made carbon emissions reduction a priority. Also, as previously announced, Heritage and its affiliates and subsidiaries intend to purchase 500 battery electric vehicles equipped with Romeo Power battery systems for fleet deployment. What we had not announced was which OEMs. We are announcing today that Romeo Power and Heritage Environmental Services have selected PACCAR for 400 trucks, the Line Electric Co for 100, and Nikola Corporation for 1 to participate in the Heritage Romeo Power fleet electrification program. These packs will be supplied under existing contracts and are subject to successful validation in the pilot phase of the program. We believe it is critical for major fleet owners to understand that we have essential technology to help them meet their electrification goals, and we have made building relationships with fleet owners one of our go-to-market priorities. All in all, we are proud of the progress we are making and excited for what's to come. As we look at the sheer size of the North American heavy-duty commercial vehicle opportunity, it has been important for us to focus our efforts As we transition from the prototype phase to commercialization phase, our success can be measured by continued execution and five key vectors. First, attracting and retaining top-tier industry talent, which we have been doing in both our engineering organization and our business infrastructure. securing engagements with selected heavy-duty commercial trucking OEMs, with the PACCAR engagement being a major milestone and an enormous potential opportunity, as we described earlier. Third, deepening partnerships with fleet managers that provide a direct line to OEMs. Our relationship with Heritage is a great example of how this is working. Fourth, securing an adequate supply of cells suited to our target applications in complex, heavy-duty trucks, where total cost of ownership is the key. And finally, of course, none of these efforts matter unless we are simultaneously putting our talent and funding to work to scale up our manufacturing capabilities. We are firmly committed to ensuring we are scaled and ready to deliver at self-supply constraints ease. Lauren will provide a bit more detail on this, but be assured, we're investing to maintain and extend the competitive advantages our partners have come to recognize and expect. I would now like to turn the call over to Lauren Webb, our Chief Financial Officer, to discuss our first quarter results in greater detail.
spk01: Thanks, Lionel. For the many reasons Lionel just articulated, 2021 is expected to be a very heavily back-end loaded year for us. We posted first quarter revenue of $1,054,000, which compares to $2,522,000 in the year-ago quarter. Approximately another $1 million in revenue for prototypes shipped in Q1 is deferred in accordance with our accounting policy to recognize revenue at the point in time delivery of the final prototype occurs. Despite the delay in our revenue-generating capabilities caused by current constraints on cell supply, we have continued to optimize our product for large-scale manufacturing and build out our manufacturing capabilities. As a result, our cost of sales in the first quarter were $4.8 million. We are managing expenses as prudently as possible without risking our ability to be prepared for a smooth production ramp when the time is right. In addition to scaling up the labor force, we have refined our raw materials inventory, which resulted in some adjustments and increases in reserves. We are keenly focused on optimizing solutions for the specific OEMs we have chosen to supply to date, and we are working closely with their internal teams to be in a position to deliver the safe, durable power solutions they need as soon as possible. Moving through the financials, the total operating loss in the quarter was 25.5 million. Please note that the SG&A line includes 6.37 million of non-cash items, primarily stock-based compensation. The change in the fair value of the warrants added back 116 million, bringing our net income to 90 million. On a weighted average share count of 129 million shares, Our GAAP basic EPS was $0.70 per share. We now have $287 million of cash, cash equivalents, and investments, having used about $5 million in the quarter. As it was at the time of our last call six weeks ago, our backlog under contract stands at $555 million. Lionel highlighted our newest production agreements. We're excited to have been chosen to supply these OEMs and, as I noted, we're increasing our capital investment to ensure we are ready to deliver. The wild card remains sales, including availability, quality, pricing, and other costs to secure them. As Lionel noted, we're in the midst of active dialogue with multiple sales suppliers that give us confidence we can deliver on current customer commitments. We are still working through final terms, thus we cannot announce specific details at this time. We expect we will have more detail to share over the summer. You have heard from other industry players that capital commitments may be required to secure supply. We are pleased to have strong relationships with our suppliers and solid funding to enable us to navigate this landscape successfully. As we negotiate long-term supply agreements with pricing in part dependent on fluctuations in raw material indices, we are taking a very disciplined approach to the pricing constructs in new customer contracts. Similar pricing protection already exists in some of our current agreements, and we are committed to working collaboratively with suppliers, customers, and all members of the battery cell ecosystem to find the right balance to mitigate risk for all. As Lionel noted, we are laser-focused on utilizing our unique validation process and expertise to increase our own cell supply and to optimize performance for our customers as well. The necessary activity to do so will take some time yet, and any length of time is longer than we'd like. In the meantime, our active discussions with new cell suppliers give us a good line of sight to robust supply from both a quantity and a quality standpoint over the medium and the long term. We have named a number of key relationships, and I want to underscore that collaboration is a top priority for Romeo Power. All our customers have made commitments to electrify and are deeply engaged with us. It is not trivial to change out a battery system. and we appreciate the trust and investment our partners have put into incorporating our battery packs into their trucks. They recognize the performance of our systems is unmatched and that we will work tirelessly to be sure we don't disappoint them. We look forward to your questions. Operator, you may now open the line for questions.
spk00: Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, it is star followed by two. Our first question comes from Gabe Dowd of Cohen. Your line is open. Please go ahead.
spk07: Thank you. Good afternoon, Lionel and Lauren and everyone. Thanks for taking the question. Maybe Lionel, to get started with the Hey, Lionel. Could we maybe just start with the – on the supply side of the equation? I understand you're still in negotiation last quarter. You mentioned maybe you'd have an update to give you maybe a little bit of confidence on hitting the $18 million number for revenue for this year. Do you still have good visibility into that number? Do you have sales on hand that could help you achieve that number? Just curious how we should think about revenue for the rest of the year.
spk03: Sure. I'll have Lauren, can you give some color on the revenue outlook, and then I'll give some color around where we're at with our negotiations.
spk01: Sure. Hi, Gabe. Thanks for the question. We are not making any changes to the numbers that we provided previously. We are optimistic that we will be in the range of 18 to 40 as communicated until final allocations are announced and our final agreements are done with the cell supply. We won't provide more specifics, but we are very optimistic in the range that we gave.
spk03: And then, Gabe, the important thing to note, as I said in the opening remarks, is that we're well positioned to enter a long-term agreement for multiple gigawatt hours with one of our key partners. We're in active negotiations with another two, and we expect to start negotiations with the fourth in this summer. So in aggregate, if we're able to execute upon what we have in front of us, we'll be able to have adequate supply to satisfy our long-term production goals.
spk07: Thank you, guys. That's helpful. And then maybe just following up on the demand side of the equation, obviously a nice announcement in April with PACCAR. Could you maybe shed a little bit of light on the agreement and the revenue potential through 2025? um i know it's restricted to just the two peterbilt trucks but um you know i think we there's been some you know we had put out some numbers that could suggest it could be a nice you know revenue opportunity for you but does it so any any color around i guess first first revenue from the contract when you expect meaningful revenue to show up and then just total revenue potential uh from the opportunity sure lauren can you get some color there of course so uh
spk01: As you know, we define backlog very specifically, so PACCAR is not in our backlog, but we believe that the revenue potential from this agreement could be very significant to our long-term revenue plan, especially given the fact that the 579 and the 520 truck together have about 10% of the market share for the Class 8 truck market. So we do not have specific numbers to provide, but we see this as a very significant development. and we expect it to start generating revenues gradually and hit its stride around 2023.
spk07: Got it. Thanks, Lauren. And then just finally, Board Warner and Ecosol, they were Pretty complimentary of Accosol on their conference call and just curious if there's just any update on the partnership there and just ways to work together and kind of coexisting with Accosol. Is there any update on the partnership generally?
spk03: Hey, Gabe, look, our joint venture remains in place with BorgWana. Nothing has changed on that front. We're heads down driving to grow the order book in our joint venture with them and we value the partnership. Nothing more to announce at this point. You're welcome, Gabe. Thank you so much for the questions.
spk00: Our next question comes from Stephen Fox of Fox Advisors. Your line is open. Please go ahead.
spk06: Thanks. Good afternoon. First question, I was just curious, based on what you said about your cost of goods sold and building out the manufacturing, can you give us a sense for the pace you're building out capacity right now? Is it in line with the $18 to $40 million of revenues doing? Are you trying to get ahead of the equipment side relative to optimism around sales supply? Just any color on how the manufacturing has been affected by some of the other delays. And then I had a follow-up.
spk01: Sure. So the manufacturing capacity build-out that we're doing is in line with what we had originally planned in the sense that we always knew that this year's revenue would be heavily back-end loaded. And we are spending carefully as we're waiting to finalize negotiations and see what the final details of the sell agreements are. But there's not a substantial slowdown in our preparations because our objective is to be prepared to meet the production ramp as soon as the time is right and not to have any delay at that point in time. So we're spending very methodically. We have already brought in some additional labor to be prepared and smooth out the manufacturing process, as well as put equipment on order to have those lines in place. And, yes, it is in line with the 18 to 40.
spk06: Great. That's helpful. Just in terms of the negotiations, which, you know, thanks for the detail on that. And obviously, you don't want to sacrifice quality. But can you give us a sense for just the ability to close some of these in the current environment? It seems like, you know, your suppliers have a bigger pencil. You have huge opportunities in front of you. But how do you manage that with the idea of just sort of maybe sacrificing a little bit up front to sort of get that revenue stream going versus cutting the perfect deal?
spk03: No, hey, Steve, and good afternoon. Nice to talk to you again. Look, from our value partner standpoint, quite frankly, battery cell providers want to work with winners. And we want to empower the clear leader in provider of leading edge value technology in class 6, 7, and 8 trucks. Okay, so what we've been doing is just ensuring a long-term outlook locking down the supply, as we talked about last time, through 2028. This shows our vigor and conviction in our long-term outlook. And quite frankly, our order book, especially the last deal that we announced, is very, very impressive to our battery partners. So I'm highly confident in our ability to bring these deals over the line. So that's what I'm saying. The first deal, we're right there. We'll be giving updates in the summer, as well as we have the other two that's right behind it and a fort to start negotiation in the summer. And let me be clear. We will not sacrifice safety or quality to make numbers. That's not who we are. What we've done is we've leaned on our extensive library of battery cell test data to identify and prioritize the top four partners that will get us to execute on our long-term business plan.
spk06: That's really helpful, Kolar. And then real quick, just clarification on the backlog. It doesn't include heritage, or how much is it included with the heritage since you now announced who the OEMs are?
spk01: There is nothing for the Heritage Electrification Program included in there now, since there is a pilot program in advance of the orders. So that's not included right now.
spk03: OK. That's what I thought. Thank you very much.
spk00: Sure.
spk03: You're welcome, Steve. Thanks for the questions.
spk00: Our next question comes from Greg Lewis of BTIG. Your line is open. Please go ahead.
spk06: Thank you, and good afternoon, Lionel and Lauren. Thanks for taking my question. I was hoping for a little bit more color around how we should be thinking about the backlog. I mean, you mentioned that PACCAR is not in the backlog, but it's just kind of as we think about hurdle rates and kind of going forward. Should we be thinking about new customers getting signed up and building out that backlog, or is it going to be a mix where some customers go in the backlog and others just kind of have purchase agreements that kind of show up? I'm just kind of curious, just as we think that number should be building, kind of how you think about it.
spk03: Hey, Lon, can you get some color, and then I'll follow up.
spk01: Sure. Again, we are defining backlog very specifically in accordance with SEC guidelines and with GAAP. So there will be agreements that we sign that don't go directly into backlog. But the important thing that we will continue to highlight there is the duration of the agreement and the number of trucks or the number of vehicles that are included there because the important thing to understand is the size that they have in the market as well as the validation of our technology that customers are showing as they execute these agreements with us. So wherever possible, we would, of course, love to have minimum commitments and add directly to our backlog, but that won't always be the case.
spk03: Yeah, and the important thing there, as Ron explained, is just we're going after a tried and true structured SEC definition of what backlog is. But the key thing to notice is we are delivering on what we said we would be doing, which is continue to diversify our order book with high-quality customers. And you'll see throughout the rest of 2021, we're highly confident that we'll be announcing additional deals. So real and truly, it may vary from customer to customer, but rest assured, our order book continues to grow and is extremely impressive and, again, a major validation of the solutions that we're putting on the road today and in the future.
spk06: Okay, great. And then as we think about the new hire for Dr. Shade, he's obviously a very well-renowned cell engineer and You know, just as we think about that opportunity, I mean, for him and you, for him and the company, is this something more where it's about, you know, using existing supply chains to source cells, or is it potentially about creating new supply chains to source cells for Romeo?
spk03: Hey, Greg. Great question. Look, it's all of the above. Like I've said before, we're committed to driving innovation along all the value technology pillars, and this includes down at the cell level. So, again, I'm excited for Dr. Hsu to start anything from validating or evaluating our novel technology partners externally, whether it's validating and driving the cell-specific items that we have on our innovation roadmap, or even taking a heavy hand in continuing to add additional suppliers into the demand pillar, if you will, as well as just making sure from a quality standpoint, manufacturing standpoint, et cetera, that we have adequate supply to support the long-term business plan that we have. So we're not taking anything off of the table. Like you said, he's a 30-year veteran, and we're so excited for him to get started. We're committed to being the premier North American provider of long-range battery technology for years to come.
spk06: Thank you very much for the time.
spk03: You're welcome. Thank you so much, Greg.
spk00: Our next question comes from John Lopez of Vertical Group. Your line is open. Please go ahead.
spk04: Hey, guys.
spk03: Hey, John. Good afternoon.
spk04: How are you? And to you. I have a question. I'm sorry, Doug. I have a couple of, I guess, like clarifications or cleanups and then kind of a main question. The first one, Lauren, I think you had mentioned a couple of ad backs on the sales and marketing side. Outside of the stock comp, was there anything else in there?
spk01: So one of the big drivers for SG&A in Q1 is the investment that we're making into improving our infrastructure, looking at our IT systems, just adding to some of our efficiencies and infrastructure as a newly public company. And that does include some legal and accounting fees as well as IT consulting, et cetera. So I would expect that. that there may be another quarter or two of continued spend in SG&A that is outside of what may otherwise be normal.
spk04: Okay, I got you. That was actually my follow-up, but the first one was just on the reconciling items. I think you mentioned there's like $6 million to some change, most of which sounded like it was stock comp. Is there anything else from like the gap number that you would adjust to get to a non-gap number?
spk01: No, there's nothing material there.
spk04: Just the stock comp. Just the stock comp. Okay, I got you. And then my second one, just to go to the R&D side, I think you've given us a range last quarter, like 28 to 30 for the year. Does that still hold as well? Because things have to ramp up quite a bit to get to that number.
spk01: It does. We are at this point continuing to spend and invest in the R&D, but while we've been negotiating the self-supply agreements, we've been planning carefully and spending carefully, just as there have been a lot of variables at play. But our intent is to continue ramping to that R&D number as well as the manufacturing capacity ramp.
spk03: And then, John, I'd just like to add some color there. As we've talked before, we refuse to yield the lead to anyone. Okay, so from our research and development standpoint, we will continue to be aggressive there to ensure that our technology won't continue to be wide and actually expand. Okay, so we'll continue to give you our updates in that regard.
spk04: Got you. That's really helpful. Sorry, the last one. I thought the backlog when you guys updated us last time was still 544. I thought you said 555 today. Do I have one of those two numbers wrong? And if it changed, like what was that little marginal change?
spk01: It is $555, and that is from some changes in pricing in a couple of our contracts, a couple of small additional orders, but no other customers to announce. Those are just some immaterial changes in existing contracts.
spk04: Okay, I got you. And then, sorry, just to come back to the slope of the year here, I guess the way I want to frame this is, Do you guys feel like you've got sort of like regardless of the wrong word, but do you feel like you have comfort in at least doing the 18 and then depending on how the negotiations shake out perhaps going above that? Or I guess ask differently, is there a chance that the 18 doesn't come to fruition depending on how these negotiations shake out? Could you just talk through those dynamics?
spk01: We can, yes. So we are very confident in the $18 to $40 million. We built that range for our last call based on information available at the time, and that is still the number that we intend to achieve and expect to achieve for this year.
spk03: And, John, one thing, and I appreciate we're focused on the short-term here, but I want to reiterate these negotiations that we're talking about and highly confident to bring over the finish line are short, medium, and long-term in nature. So I just want to be clear about that point.
spk04: No, I got you. I just wanted to get a little bit better sense of the cadence here, but I think I got it. Okay, that's it for me. Thanks very much, guys.
spk03: Hey, thank you so much, John.
spk00: Our next question comes from Adam Jonas of Morgan Stanley. Your line is open. Please go ahead.
spk05: Hey, everybody. So, Lauren, can you remind us your company's targeted minimum cash balance?
spk01: We didn't provide a minimum cash balance, and it's too early to do that based on where we stand with the negotiations that we have now.
spk05: Okay. I respect that. And I'm just thinking, you know, given the capital commitments and the kind of arms race nature of battery supply securing and procurement, in what seems to be ever larger players getting into the business. I mean, it's a sign that you're in the right business, clearly. How would you, Lionel, how would you say your company, let's say, contemplates strategic alternatives to give the company ballast to so that, you know, again, if you're trying to optimize secure production medium and longer term, so you can really eliminate the potential lack of capital limiting your ability to really thrive in the market that you're addressing. I mean, you've seen, again, Borg is an example of what they've done with Akasol. There seems to be, you know, you're in a hot area, and I would imagine there would be, at the right price, strategic interest in your company. So, obviously, without announcing anything on the call, I'm not trying to get you to do that, but just how should we think about strategic alternatives from a fiduciary context, board context. Thanks.
spk03: Hey, first of all, good afternoon, Adam. Nice to talk to you again. Again, what you should think about is we're focused on being the premier provider of leading-edge battery technology to the Class 6, 7, and 8 realm. Okay? So from the customer standpoint, that's what we're focused on, bringing additional customers on board, high-quality customers to continue building and qualifying the order book. Again, from a battery cell standpoint side, the strategy there is locking in supply short, medium, and long-term, which we'll give you updates on in the summer, as well as the hiring of Dr. Shi gives us a lot of different realms and arenas that we can play in to further diversify ways to ensure supply. I don't want to speculate. Our strategy remains the same, which is to become one of the largest green energy companies the world has ever seen.
spk05: Great. And if I could just sneak one more in. You said you're continuing your hiring, right? I don't know if you could tell us how many employees you have right now. But again, between your role as an important high-tech manufacturer in an important part of the country, an important industry, that seems to be an increasing priority with the new administration. Could you update us on the landscape or the opportunity of any possible grants or government loans that could help you be in an even better position of having the capital and ballast to execute on your strategy in good environments and in difficult environments? Thank you.
spk03: Sure. Thanks, Adam. So let me unwrap that a little bit. So we're currently above 200 dedicated team members and growing really weekly. We're really focused on expanding not only our engineering team but our operations technicians team. Look, everybody loves what we're about at Romeo, and we really have lines out the door interviewing and bringing people in. Now, from the incentive standpoint, as you and I have talked about in the past, We're not focused on building a business with incentives. We're focused on actually making sure that we deliver product to make our customers' business plans make sense. What I will say, though, is, as you know, the government incentives will accelerate demand. And we are... what I would say, publicly positioned to really capitalize on that accelerated demand. So on that front, you know, we've had accelerated discussions, accelerated interest, with some pretty cool partnerships that we'll be announcing throughout 2021, where Romeo will be a benefactor because, again, we're the leading edge provider, and we provide superior profit per mile, ROI, and uptime. Thank you, Lionel. Thanks, Lauren. Thank you, Adam.
spk00: Our next question comes from Noel Parks of Two E Brothers. Your line is open. Please go ahead.
spk03: Noel Parks Good afternoon.
spk06: Noel Parks Good afternoon. Noel Parks Just a couple of things. One thing that you have been talking about for some time is that you've been seeing more inbound inquiries from potential customers, kind of above and beyond the established base you already have. And I noticed, of course, waste management seems to be sort of like a sweet spot as an entry point, just kind of an intuitive value proposition. Just curious if you could, over the last, since last call, if you could kind of characterize you know, what sort of inquiries you're getting, kind of what sort of timeframe size or verticals that you might be hearing more from.
spk03: Sure, and good afternoon again. Look, so you're absolutely right there. The inbound inquiries have been phenomenal, not only from the OEM standpoint, but as you pointed out, from the fleet manager standpoint. So actually getting anyone that's serious about electrification, so anywhere from Again, severe-duty vehicles, over-the-road vehicles, medium-duty vehicles, school buses, et cetera. So all of the above, really people are coming in the door because they know that Romeo gives them the best path forward to bring their electrification plans to life. So that's what we're focused on. We're focused on just translating those engagements into actual contracts, which we're highly confident we'll be able to announce additional production deals for 2021. as well as really continuing to solidify our fleet manager partnerships as, you know, push and pull from a demand standpoint. I think that the heritage program is a perfect example of this, you know, announcing the participants there. That's an awesome program where we're starting with 500 vehicles and it has the potential to expand. So our OEM partners in that, you know, congratulations to them. We're so excited to continue partnering with them on the fleet manager side. But what I'll say is additional fleets, I can't call the names now, but our fleet interests and fleet partnerships are growing, and you'll see us short, medium, and long-term leveraging those fleet management partners just to continue onboarding additional OEMs.
spk06: Great. And just talking about those different business lines, severe duty, over-the-road, et cetera, any of those you have a sense might – you might enjoy a little bit shorter, you know, more condensed or sort of more decisive sales cycle in landing land?
spk03: I'm not going to speculate in between, but what I say again, you know that we provide flexible solutions. So what you'll see Really, the customers that make a myriad of vehicles may be close faster. Why? Because under one roof at Romeo, they finally have a partner that can satisfy anywhere from their Class 6 offerings all the way up to their Class 8 offerings. So the aggregate package deal customers are really the ones that I would say maybe that may close faster because of everything that we offer and bring to the table with them. But with that said, our solutions are great, and we're the best. We're the leader in any of these segments. Great.
spk06: And just sort of a little bit of a housekeeping item. You made a comment about doing some refining of your raw materials inventory. I was wondering, is that just sort of a step change you're making for upcoming business? And I'm just wondering, going forward, sort of what might be the drivers for estimating that? Is it something that might correlate to... you know, backlog, looking out, uh, a couple of quarters or, um, just any, any, um, detail you can give on that would be great.
spk01: There's not a specific correlation to backlog for upcoming quarters, but as we've been moving from prototype phase to production ramp and maturing the product over the last year, there were some items that we didn't think were optimal for large-scale manufacturing as we move into that phase. So we've just been very diligently making sure that we have the best components the most efficient from both the cost standpoint and also a manufacturability standpoint. And that was really a product of the reserves and the reduction there was just a function of moving into that full production standpoint.
spk06: Got it. And just with, you know, so you keep working our way hopefully into the post-COVID era, any of that procurement, you know, impacted significantly just by the disruptions of last year? Does that sort of figure into what you had to reassess, or is it more just forward-looking? As you said, you're moving to the production ramp, and so you have more visibility about what you need.
spk01: It's primarily forward-looking, but there have been instances over the last year when there were difficulties in obtaining our top choice for certain components because of COVID disruptions. So it's true that in the last year we have been agile and secured components from multiple suppliers to meet the needs that we had, and they weren't always our long-term plan. That's true.
spk06: Got it.
spk01: Okay, thanks a lot.
spk06: That's all from me.
spk01: Thank you. Thank you.
spk00: This concludes the Q&A section of the call. I will now hand back over to your host, Sam Dundee.
spk03: Hey, thank you all. Thank you all for listening today and attending our audience call. We hope that you're excited for the demand for battery packs. What I want to say is we own your power. We are heads down, executing on our business plan. where we look forward to giving you updates on the self-supply negotiations that we currently have in motion, and also we look forward to continue giving you updates on the commercial agreements that we potentially have coming down the pipe. It's an exciting time at Romeo, and I want you to know that our technology mode stays wide. It remains second to none. and we're a company about onboarding high-quality OEMs as well as high-quality fleet managers going forward. So with that, talk to you in a few months, and thanks so much for giving us your time today.
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