Romeo Power, Inc. Class A

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.

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.

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.