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spk02: Ladies and gentlemen, thank you for standing by. My name is Brent and I will be your conference operator today. At this time, I would like to welcome everyone to the Romeo Power's first quarter fiscal 2022 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. It's now my pleasure to turn the call over to Ashley Gruenberg of the Alpha IR Group. Please go ahead, Ashley.
spk04: Thank you and welcome. Joining me today are Susan Brennan, Chief Executive Officer, Kerry Sheba, Chief Financial Officer, Lauren Webb, Chief Strategy and Commercial Officer, Anne Devine, Chief Operating Officer, and Dr. A.K. Pruji, Chief Technology Officer. Please note that our first quarter earnings press release and a PowerPoint that we will be referring to today are both posted on the company's website at Romeopower.com, and our 10-Q is also filed with the SEC earlier today. Slide two of that PowerPoint outlines our safe harbor statements. Along those lines, I want to remind everyone that this conference call will contain forward-looking statements, including our expectations of future results, sales, availability, production capacity, market dynamics, liquidity, cash spending, and other items. Our actual results may differ materially and adversely from those projected or discussed in these forward-looking statements. Additional information concerning factors that could cause the results to differ materially and adversely from these forward-looking statements are contained in our press release that went out earlier today, as well as in the disclosures in our public filings with the SEC. The company is under no obligation to update forward-looking statements. Today's call may also include a discussion of non-GAAP financial measures, as that 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. With that, I'll turn the call over to Susan Brennan for opening remarks. Susan?
spk07: Thank you, Ashley. Good afternoon, all, and thank you for joining us today. As you can see on slide three, we have an exciting discussion lined up for you. Our business momentum is accelerating, and thus, I have asked some members of our senior leadership team to join us today. Our agenda for today's presentation is as follows. I will open up the call with an overview of our first quarter and some recent business highlights. Lauren will then discuss our commercial strategy and recent successes. Then Ann will walk through some of the positive operational results we have achieved during the first quarter. AK will then provide a deeper dive into our technology, focus and differentiation. Then Carrie will wrap up the presentation with first quarter financial results and closing remarks before we take your questions. Turning to slide four, we are proud to have made significant steps on our path towards growth in the first quarter of 2022. We delivered total revenues of $11.6 million in the first quarter, which was consistent with the annual expectations we outlined for you last quarter. This meaningful increase in revenues reflects higher deliveries of our battery modules and packs, continuing the trajectory that was established in the second half of last year. As we continue to work towards our mission of powering the world's transition to electrification, we have expanded our total addressable market by expanding into new, previously untapped market verticals and vehicle types. This wider commercial scope has allowed us to pursue a broad range of potential customer relationships within these markets, offering us new avenues for long-term revenue expansion. As our battery products and technology gain further traction across the industries in which we are participating, production and scalability matter. Our sales growth and the deeper adoption of our offerings by the market are predicated on our ability not only to increase, but also to enhance our production processes and quality. We continue to be encouraged by the steps we are making operationally, and that is evident through the improved fixed cost leverage and scale that we have achieved as we have increased production volumes. This year, we have seen daily production rates increase up to 75% versus the fourth quarter of last year. This increased manufacturing throughput has been supported by adding a third shift at our Vernon, California facility. The increase in our production capabilities and volumes has been made possible by our team's pointed focus on key areas of process improvement as we expand our capabilities. Ann will speak on this later in the call. Additionally, we have also met all of our milestones and remain head of schedule in the ongoing transition of operations to our new manufacturing facility in Cypress, California. This new, larger location will further allow us to streamline operations, increase delivery levels, execute against our major contracts, and keep our R&D department and our manufacturing operations under one common roof. These enhancements will allow us to capture increased cost efficiencies and productivity, which will further reduce operating costs relative to our revenues as we take a new business and work down our existing backlog, which currently sits at $412 million based on minimum purchase commitments as of quarter end. Slide five gives you a visual sense for how our commercial momentum is accelerating. Our new management team came on board starting in the summer of last year. While this was important foundationally for our company, the purchase of our prior joint venture in February of this year was truly transformational. It gave us back full control of our intellectual property and R&D. Very importantly, it also opened new markets and geographies for us to pursue. Our commercial momentum is clearly evident on this slide. As you can see, how quickly our commercial wins followed this event. Working chronologically, in early February, we signed a three-year contract extension with a long-standing customer and leader in the commercial vehicle industry. The minimum value of this extension is $17 million. Then in March, we captured numerous wins, including a new multi-phase commercial program with Indigo Technologies an automotive OEM that powers both rideshares and delivery vehicles. Next, we announce a collaboration with Wright Speed, now Revo Powertrains, a leading designer and manufacturer of EV powertrains to safely repower school buses, transit buses, and certain medium and heavy duty trucks into zero emission vehicles. In another major milestone, we began shipping the first units of 80 kilowatt hour production pedigree packs to a key customer who is a heavy duty commercial electric vehicle manufacturer. Moving to May, we just recently announced that we were selected by a new customer as the sole provider of lithium ion batteries for its next generation low speed electric vehicles. Lastly, The importance of full ownership of our solutions can be seen by the fact that we have secured four new pilot program customers, two of which were previously restricted by clauses within our joint venture agreement. Given this momentum and the breadth of conversations that our commercial and technology teams are having today, I believe we have only scratched the surface of what Romeo is capable of. and we look forward to continuing to deliver exciting new partnership opportunities. To summarize, I am extremely proud of the Romeo team and the progress we are making commercially and operationally. We continue to strengthen our partnerships, leverage new opportunities, and streamline our operations. As our industry continues to grow and evolve, we are well positioned to power vehicle electrification across multiple industries and further advance our leading EV battery technology. With that high-level overview, I would now like to turn the call over to Chief Strategy and Commercial Officer Lauren Webb, who will speak further about the exciting commercial sales and partnership activities occurring at Romeo Power.
spk05: Lauren? Thank you, Susan, and good afternoon. I'll begin my remarks on slide six, where I will give a brief discussion of Romeo Power's recent business development activity and successes. As Susan just said, the last quarter has been one of building forward momentum. First, we reached a tremendous milestone in the history of our company. Though we've been designing battery systems and delivering battery packs to customers for multiple years, in Q1, we began serial production for a Class 8 OEM. We've now proven that we not only have the right technology to power long haul heavy duty fleet, but we also have the operational know how to put these trucks on the road at scale. We expect to solidify our position as a Class 8 battery supplier as we move towards serial production with other Class 8 customers in 2023. We have commercial relationships with truck manufacturers representing approximately 30% of the Class 8 market today, and we're pressing forward to engage with others. We're also pleased to have announced four commercial wins in this quarter. Selecting the right battery supplier is a lengthy and important process for all customers, regardless of their industry. We understand the complex concerns each of our prospective customers has in choosing the right electrification partner, and we will continue to invest the time necessary to develop a high-quality order book. To that end, we've built a strong new sales team with extensive experience in commercial and transit vehicles, as well as in a variety of alternative fuels. In a short period of time, these seasoned sales professionals have developed a strong pipeline of new pilot customers in our expanded target markets and designed a battery seminar for prospective customers who are in early stages of their electrification decisions. We're looking forward to hosting the first one of those seminars this summer in our Cypress facility. Since our acquisition of the prior joint venture in February, our team has thoroughly vetted the opportunities from the acquisition and determined 15 to be worth pursuing. In fact, two of these opportunities have already converted to new orders. We've also added seven new opportunities in fields that previously would have been restricted by the JV, either because of vehicle type or geography. On slide seven, we outline in simple fashion the value proposition of our product and technology and why customers are choosing Romeo to meet their unique needs. Increasing numbers of small commercial and niche vehicle markets are beginning the transition to electrification. and Romeo's highly configurable design and variety of voltage offerings make us an attractive option for all of them. Our 10-kilowatt-hour building blocks can be sold alone, individually, or as a bundle of modules with our battery management system, or they can be packaged into the 30-kilowatt-hour or 80-kilowatt-hour Monara packs, which will accommodate numerous vehicles in any industry, on road or off road, on land, in sea, or in the air, manned or autonomous, et cetera. We're engaged in conversations weekly with vehicle manufacturers and integrators in these markets. As we focus on commercializing our existing product portfolio in as many applications as we can, we will continue to be opportunistic in emerging markets. Slide eight outlines one such emerging market, and that's mobile charging. As the commercial vehicle industry seeks to comply with federal and state electrification goals by 2030, it's clear that sufficient charging infrastructure and grid capacity to support the vehicle mandates will be difficult to achieve on that timeline. In order to support our fleet customers' electrification activities, Romeo is developing a mobile charge trailer capable of powering multiple vehicles simultaneously, for example, up to four Class 8 trucks. This mobile unit pairs our Minara 80 packs with DC chargers in a 40-foot container that can be attached to a trailer for mobile deployment at worksites, as supplemental charging in a depot or in emergency response situations. This charging trailer is currently in the proof of concept phase, and the first prototype is planned for deployment with one of our strategic fleet partners in the first quarter of 2023. We look forward to sharing more information about this project with you in future calls. With that, I'll turn the call over to Anne Devine, Chief Operating Officer, who will discuss details around our operational activity. Anne?
spk06: Thank you, Lauren, and good afternoon, everyone. This is my first earnings call with Romeo Power since joining the team as Chief Operating Officer earlier this year, and I look forward to getting to know our investors and stakeholders in the coming months. I'm going to focus my remarks on the exciting strides we are making as we advance our operational capabilities and the progress in our ongoing move to our state-of-the-art facility in Cypress, California. First, regarding the move to our new plant in Cypress, Our timeline is detailed on slide 9, and we're currently slightly ahead of schedule. Since February, we have consistently met our internal milestones from completing the architectural design through the initial launch of construction, achieving all the necessary permitting. We are now pushing forward through the construction process, and we anticipate that this will ultimately be completed by late July. This slide also displays a few images of the current construction progress underway in Cypress. including the completion and setup of our production line number three, which will be commissioned shortly. The bottom image shows the already completed relocation of line one from the Vernon facility. You've heard a state in the past that this move is strategically important to our development and success moving forward as we grow. It not only allows Romeo to double its floor space and provide for expanded lab facilities, But it also keeps our product manufacturing under the same roof as our engineering personnel and assets, which could not have occurred had we remained in our current Vernon location. Moving on to slide 10. Quality remains one of Romeo's critical focus areas as we strive to partner with our customers in this rapidly evolving industry. We've spent considerable amounts of time expanding training programs, conducting fewer changeovers in order to improve consistency and machine uptime. Focus on this critical area has been the driving force in delivering the observed 90% improvement to our end-of-line yield targets, and evidenced further by the 18% reduction in scrap and meaningful improvements in laser weld performance we have achieved. The image towards the bottom of the page actually displays machinery that has directly contributed to the improvements we are seeing in laser weld and scrap reduction. These developments are exciting steps forward in our operations and indicative of the sequential progress we are making in positioning our operations to meet customer commitments and growing demand. Turning to slide 11, we show the progress we are making in terms of driving higher manufacturing throughput and increased customer deliveries. The chart on the page shows a significant increase in deliveries to customers as measured by the battery modules shipped on a month-by-month basis. As we close the first quarter, we were able to achieve monthly production rates that have marked an increase of up to 75% compared to that of the sequential fourth quarter. As you can see on the chart, Line 3, as I mentioned a moment ago, has been installed and is in the process of completing its commissioning phase and full ramp-up at the Cypress facility. Again, the full move to Cypress is expected to be complete in Q3. Going forward, we will install additional production equipment which we expect to be complete by the end of the first quarter in 2023. This will help us satisfy the growing needs of our current and prospective customers. We are very encouraged not only by the solid operational foundation we are building, but how these actions translate to a greater fixed cost leverage and direct improvements to manufacturing throughput, driving our ability to deliver volume growth. Now, I'll turn the call over to AK, Chief Technology Officer, who will provide you with greater detail around the future of Romeo Power's technology. AK?
spk10: Thank you, Anne. This is AK, Chief Technology Officer at Romeo Power. I'm responsible for ensuring our technology and products are leading the transition to electrification of commercial vehicles. Earlier today, I was honored to be a featured panelist at the Advanced Clean Transportation Expo here in town. where Romeo is also a sponsor and exhibitor. This is one of North America's largest conferences, showcasing real-world applications of the latest transportation technologies. I thought it would be great for our investors to get a sense of the presentation that I delivered at the Expo, as it highlights our leading IP and where Romeo fits in the rapidly evolving electrification industry. Please turn to slide 12, as I'd like to give you more insight into what our current technological pillars are. and share some of our latest critical data and results, demonstrating our leadership and competitive edge in the marketplace. From a very high level, the segments on which we're focused are cell technology, module and pack technology, embedded systems and power electronics, and last but not least, battery intelligence and warranty services. Turning to slide 13 now. Fundamentally, on the cell technology side, we're seeing the EV industry exhibit three major categories with multiple approaches within each category. These categories or segments are best referred to as entry-level, low-cost, mostly achieved via lithium iron phosphate or LFP, high-volume performance with the NCM, NCA, and NCMA cathodes, as well as high performance for specialty applications, usually dominated by dominant silicon anodes, lithium metal, solid-state cells. The categories just mentioned exhibit different performance to cost characteristics. and typically sacrifice performance for improved cost. With the current state of technology scaling and market penetrations, it's evident that commercial vehicle solutions are spread between entry-level low cost for low mileage applications and the high volume performance segment enabled through the advancement of nickel-based energy dense systems. Our Minara product family today competes very well in the performance high volume segment. As evidenced by our customers, achieving some of the longest range performance in their vehicles using our batteries. So this is a very strong position to be in as performance to enable complex electric applications is well balanced with the cost of entry and the total cost of ownership. Additionally, this places us in a very particular position on this graph, such that our roadmaps and development efforts are focused on continuously increasing energy density while maintaining the highest safety standards, all while reducing costs. This would basically be moving us and our customers towards the top left corner of the graph, towards the ideal state we all would like to see. In this quadrant, we're optimizing for safety, range, cost, charge time, and power availability. As a result, for at least the next decade, we're convinced that advanced commercial vehicles and their applications will thrive on graphite-based anodes and nickel-based cathodes and their evolutions. Now, I'd like to show you some of the technical results that demonstrate how advanced our product is as applied to advanced commercial vehicle electrification. As you can see on slide 14, safety comes first. It's our goal to eliminate unsafe events by combining design and algorithms in a cost-effective fashion. Today, the industry must move and maintain at least single cell salt tolerance. This is the ability to control a cascading event resulting from the major failure of a cell. We have all seen in the media recently the consumer vehicle thermal events across some very well-known car brands. These systems were based on patch cells and prismatic cells, which cannot achieve single-cell fault tolerance unless they incur heavy losses in energy density and increased cost in the design. Not only do our systems achieve single-cell fault tolerance on a variety of cell chemistries, but we have also implemented and commercialized an event detection feature that exceeds industry standard by threefold. We're able to provide the commercial truck driver an 18-minute safety window by providing a warning signal before an uncontrolled event or anomaly occurs. We believe we're one of the few, if not the first, to achieve and exceed the standard called GTR20 for complex commercial vehicle applications. In the future, we will be developing even more advanced features with longer horizon prediction ability. It's our goal to one day achieve prognostics to give alert signals with even longer safety windows. Moving on to another critical piece of the puzzle we've solved is the combination of fast charge and long life for commercial vehicle batteries. Please turn to slide 15. As a reminder, electric commercial vehicles are trying to displace diesel commercial vehicles, which are known to be heavy duty with long life, albeit their notoriety for toxic emissions and impact on global warming. What you see on the graph are validating results from our own NARA product under daily fast charging conditions. Here we're talking about 10% to 80% state of charge in 30 minutes only, which we believe is a first for commercial vehicles. This is equivalent to adding 250 to 300 miles of range on a Class 7 or 8 truck using the growing in popularity 1 megawatt chargers. Results show that even though charge conditions are very aggressive, we're able to achieve 1,800 cycles and counting all while maintaining, so far, 85% capacity retention. To be clear, these results were collected on a Menara-type prototype delivered to a major Class 8 OEM. We will continue conducting these tests and report back. This state-of-the-art result is achieved through careful cell chemistry selection and applying it to Romeo Power's proprietary charge control algorithms, thermal management, and other design features. Our nominal charge results and fast charge results indicate that our battery systems can compete on performance and life against diesel, scoring 8 to 12 years of first life and an excess of hundreds of thousands of miles. This is a very high bar for new chemistries to achieve. It's a major challenge for lithium metal, solid state, or silicon dominant systems to penetrate advanced commercial vehicle applications against the result you've just seen. Romeo Power has clearly defined the right solution for these demanding vehicle classes. We believe we're the first company to deliver such validated performance for heavy-duty commercial vehicles. I will now turn the call to Kerry to discuss our financial results and 2022 outlook and for some closing remarks.
spk00: Kerry? Thank you, AK, and good afternoon or evening to everyone. Please now turn to slide number 16. As Susan mentioned, our first quarter results demonstrate continued progress and notable top-line growth as we further leverage our commercial progress, improved operations, and industry-leading technology. Beginning on the left, we reported $11.6 million of revenue for the first quarter of 2022, which was 27% higher than revenues in the previous quarter and almost 11 times higher when compared to the first quarter of 2021. Our notable revenue growth was driven by increased delivery levels against our key sales contracts, supported by our improved production capabilities and increased staffing to add effective production capacity. Moving to our revenue guidance, we are affirming our outlook of $40 to $50 million for the full year 2022. I do want to remind you that we have changed the arrangement with respect to battery cells used in our manufacturing of product for a major customer, thus having an impact on how we frame our revenue guidance. Previously, we procured these cells, so the related value was included in both revenues and cost of revenues. Going forward, we anticipate that a major customer will be procuring and consigning battery cells that go into the product we make for them. As a result, the value of battery cells, which is the largest single component of the bill of material, will no longer be part of either our revenue or cost of revenues for this customer. Absent a change in the cell arrangement, the underlying product volume would equate to a revenue expectation roughly two times higher than our stated guidance when you compare this to how we reported in the prior year. We will inform you in the future of the revenue impact if the battery cell consignment arrangements change from the assumptions underlying our stated revenue guidance. Turning to liquidity, please reference the right side of the slide. We ended the quarter with approximately $67 million of cash, cash equivalents, and investments, which I will refer to as cash for simplicity, which compares to $120 million at the end of the previous quarter. The sequential decline in cash was significantly impacted by the roughly $37 million of expenditures we made to acquire the remaining interest in our former joint venture. These expenditures include both the purchase price and fees directly associated with the transaction. While this was a substantial investment by the company, as you heard today, this was strategically and commercially transformational. The full control of our valuable intellectual property and the manner in which it is further developed and deployed commercially will allow us to capture new sales opportunities, open up new markets, and drive new revenue growth. As discussed last quarter, this February, we secured a $350 million standby equity line of credit, which I refer to as an ELOC. While we intend to continue to use the ELOC, the timing and amount sold will consider cash needs and the context of share price and trading volumes. During the quarter, we raised $25 million through the sale of 16.7 million shares. Please now turn to slide number 17. As Susan and the team have discussed, we are taking many steps which collectively are aimed at increasing the long-term value of the company. Lauren discussed our continuing focus on the commercial vehicle market, including the largest segment, which is heavy-duty truck applications. We also are broadening our reach into applications where we believe our technology is demonstrating differentiated value for new and diverse customers. As Anne described, we continue to achieve important operating improvements. We will continue to support the commercial scale launch of our largest customer, while also increasing our agility to support new customers and programs concurrently. AK discussed key elements of our underlying technology, reflecting the depth and breadth of our industry-recognized expertise, which supports the capture of new customers and applications, both for now and into the future. Finally, we are making important capital investments to increase and improve our production capacity and laboratory capability to ensure we can be ready to support and enhance our growth in the commercial marketplace. Our continued investments whether they be for capital assets or to support the important resources driving our market, operating, and technical efforts, clearly require our ability to have continuing access to capital and liquidity to drive our initiatives. At our current stage of development, it also is clear that our access to capital will continue to be the equity markets, which it is with many other companies that are in similar stages as we are. We are mindful of the shorter-term impact on share dilution. However, our path forward and ability to increase enterprise and shareholder value require continued funding to support our progress. The long-term market outlook continues to reflect significant growth opportunities, which points to the opportunity to increase value of the business. At the same time, We also must be realistic and recognize the pace of our development, and related funding can be affected by many variables influencing the overall industry. Some of these variables may shift the timeline of growth rates to the right, which also may affect our capital needs. As many of you likely have seen already, we filed the proxy statement for our annual shareholders meeting with the SEC on April 28th of this year. I want to point out there are two proposals, specifically numbers five and six, which, as described in the proxy statement, focus on measures important to our ongoing ability to access the equity market to raise needed capital. While we will continue to explore all options to best enhance long-term shareholder value, your support of all of our ballot proposals will be important to our future. Thank you for your attention and ongoing support. We now will turn to addressing your questions. So, Brent, we can go ahead and start the Q&A session, please.
spk02: At this time, I would like to remind everyone, in order to ask a question, press star followed by the number one on your telephone keypad. We'll pause for just a moment to compile our Q&A roster. Again, if you would like to ask a question, press star 1 on your telephone keypad.
spk01: Ladies and gentlemen, please stand by. Again, if you would like to ask a question, press star 1 on your telephone keypad.
spk02: Your first question comes from Noel Parks with Tuohy Brothers. Your line is open.
spk09: Hi, good afternoon. Good afternoon. Sort of a broad question, but just as you've discussed previously, a number of the things about your technology that are proprietary and offer some differentiating advantages. And maybe, for example, some of your development on the BMS side. With these innovations, are there additional development tasks associated with compatibility with third-party vendors' systems or just some of the among potential client base, do these bring any issues or challenges as far as they're integrating them with their own, for example, say, fleet management software and so forth?
spk05: Hi, Noel. Thank you very much. That's a great question. And I'll start and then turn it over to AK. So we do have several aspects of our technology that make the battery management system and our own batteries function at a premium level together, but we work very well with our customers and their vehicle management systems and software, as well as with fleet partners to make sure that the service that we offer is exactly what they need and potentially could be a service that we would offer separately from products in the future, though that's not something that we do today. So I'll let AK speak to more technical aspects.
spk10: Yeah, no, thank you, Lauren. And I would say I would just reconfirm the umbrella that Lauren provided. Shall we translate this technology to other players in different areas in the value chain than directly to our battery systems? That is something we don't have more information to discuss on today. But the most important thing is that everything we're developing is developed for the industry and for our customer pool, as well as for it to be compatible and integratable with all the other components that you see on a vehicle electrification. And that's why we are able to address the breadth of customer we have today.
spk09: Great. Thanks for the clarification. And I also just wanted to step back just to make sure I understood. You mentioned that in the guidance for revenue that because of the, I guess, accounting change for this customer, that would have a much bigger effect on the guidance numbers had that change not happened. Could you just walk through the details of that again just to make sure I got it?
spk00: Sure, Noel. The big change was really the accounting is just following how the business is changing, number one. In the past, and with most of our customers, we procure sales. So when we do that, they go into our product, and the value of those sales, therefore, ends up in our invoice. It's part of our revenue stream, ends up in our cost of report as cost of product revenues. With a major customer of ours, and this is why it's a significant impact on our guidance, we are together working where they're going to be purchasing cells directly themselves from a battery cell supplier and consigning them to us. So because we don't actually own those cells, we don't rebuild them to them. They don't show up in our invoice value or our cost of revenues. Because the cell is the single largest component of the bill of material, as well as combined with the fact that it's a significant customer, that's why the impact on a comparable basis is as large as really a 2X impact. Comparing our $40 to $50 million guidance, that would basically double those numbers, $80 to $100 million. If the business arrangement were the same, and then therefore the accounting were the same year over year. Another way to think about a null is that the volume of product that underlies that is going up substantially in the ratio, basically, that our revenue guidance would be if it were accounted for on the same basis. So the product volume is there. It just kind of nets down the numbers both on the revenue and the cost side.
spk09: Great. Okay, thanks a lot. And I just wonder if you could maybe talk a bit about The implications of your taking over the BorgWarner joint venture, what's that likely to mean in the coming year as far as either your strategic positioning or in terms of product that you would have been developing with their cooperation on their behalf that's not going to be essentially in-house?
spk05: Sure. And I'm actually going to start with the latter part of your question first, which is that the business pipeline, both for Romeo Power itself and for the joint venture, was all around the same product family and same product line. So there's no lack that we will see in terms of business opportunities or a delay in product development since Romeo was responsible for the R&D behind the joint venture already. In terms of how that puts us strategically positioned, the optionality that we now have by being able to sell into any vehicle market and any geography really can't be underestimated. And this year, I would say most of the volume that we will see in the largest portion of our revenue will continue to be in the commercial vehicle space. And as we are pursuing and developing the opportunities that we have now taken over from the joint venture pipeline and that we're developing separately, those may take some time to convert into material volume orders since the typical cycle is to start with some initial samples and then grow that over a period of time. So we expect to see the same sort of development cycle from the commercial side that we have seen in Romeo's history over the last couple of years.
spk09: Okay, great. And is there any capital that was more or less allocated to the JV or accrued in advance that is not going to just sort of revert back into your own budget?
spk00: Yeah, no. Up to the point in time where we purchased the remaining share on the joint venture, Our funding obligations primarily were to share our proportionate amount of operating expenses, which was basically focused on the technical efforts, the R&D efforts that were being run as part of the venture. There were no capital assets in that venture up at the point of separation. So there was no historical funding for that, and there was certainly no funding obligation for CapEx that we assumed. All of our future capital plans are all under our own direction, under our own roof. Those were plans we were making even before the separation. So there's no impact kind of before and after that is material as a result of that.
spk09: Great. Thanks a lot. That's all for me.
spk02: Okay.
spk09: Thank you.
spk02: Your next question comes from the line of Tyler DeMatteo with BTIG. Your line is open.
spk08: Hi, everybody. Good afternoon. Thanks for taking the question. Really appreciate it. So as we think about the CapEx build and Cypress facility, particularly as we move to the next couple of quarters, I know you mentioned you said that that you are looking to add some additional equipment at that facility how should we think about that ramp up and the build out to get us to that first quarter 2023 commercialization i'm just curious to hear the cadence and what what other tooling could be done there please thank you sure i'm not surprised by the question tyler as you try to fill out your model um
spk00: First off, let's kind of reiterate some of the things that we talked about that are drawing investment for us at this point in time. As we mentioned, the facility is significantly larger, basically 2X of where we reside today in Vernon. There's costing involved to build out the facility itself. We kind of inherited or walked into a big box, basically, which was great because it allowed us to design everything inside the factory exactly as we wanted it to be. We are constructing lab space, of course, the factory floor. In addition to that, Ann talked about that we are also not only relocating existing manufacturing equipment, but we are adding to our capacity. In fact, the first addition on top of our existing capacity is on the floor today in the form of a production line that's going through its shakedown cruise right now to start up and running. And then we also have additional equipment I'll call them highly automated production lines that we are looking at for the future to be able to support our growth going forward in addition to, I think through the benefits of increasing automation, improve quite honestly the consistency as well as the pace of the product that we get off the line. So there's a stream of things that we are doing here. Now, where I'm going to disappoint you quite honestly is We have not issued specific guidance on CapEx or cash flow, and I'm going to have to stay within those lines. I will tell you directionally, Tyler, that the amount of CapEx that we will incur this year, which is episodic for all the things that I just talked about, will be significantly higher than annualizing what we incurred in the first quarter. I think our first quarter was, out of memory, about $3 million worth of CapEx Our spend pattern this year is going to be heavily rear-end loaded in the back half of the year, and it will be, I will use the term significantly higher than what the annualized rate of the first quarter would be.
spk08: Okay, great. Thanks for the call. I really appreciate that. That's all I have. I'll turn it back to the queue. Thank you. Okay. Thanks, Tyler. Thanks.
spk02: There are no further questions at this time. I will now turn the call back to management for closing remarks.
spk07: Thank you all for joining today's call. You heard from several of our leaders today, and it is clear that our momentum is growing. We have carved out a unique position in our industry, and we have a unique opportunity to help drive the world's transition to electrification. We thank all of you for the current and continued support and look forward to the journey ahead. Have a great night.
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