Arcimoto, Inc. (FUV) CEO Mark Frohnmayer on Q4 2018 Results - Earnings Call Transcript

Apr. 01, 2019 8:09 PM ETArcimoto, Inc. (FUV)
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Arcimoto, Inc. (NASDAQ:FUV) Q4 2018 Earnings Conference Call April 1, 2019 11:30 AM ET

Company Participants

Greg Falesnik - Managing Director

Mark Frohnmayer - Founder, President and CEO

Conference Call Participants

Greg Falesnik

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Arcimoto, Inc. Fourth Quarter and Full Year 2018 Earnings Webcast. During today's presentation, all parties will be in a listen-only mode. This conference is being recorded today, April 1, 2019 and the press release accompanying this webcast was issued at the close of market today.

At this time, we will now play a brief corporate update review. Over to you, Mark.

Mark Frohnmayer

Good afternoon everyone, good morning everyone on the West Coast. I've got to a little quick quarterly year long update video and we'll kick in through the slide presentation and open it up for Q&A.

[Audio/Video Presentation]

All right, so before I dive into talking about the specifics of what we've been doing in Arcimoto over, really over the course of the last year and then the last quarter. Just a note, what we've really been doing from a market communication perspective, is beginning to tell the story of the platform. So, Arcimoto's mission to catalyze the shift to a sustainable transportation system really is all about going after the wide range of vehicles trips on the road that are overcapacity for vehicles that we use.

And when we look at the market as a whole, it is a giant market, it's a giant problem and it's a giant opportunity. And we've really, we've looked at four different particular use cases that cover really a whole range of vehicle usage on-road. And the platform story is really all about using the same electromechanical platform to tackle each of those various problems and right sized the footprint of daily mobility. So one platform all electric, lighter footprint, more efficient by an order of magnitude in today's cars and cost effective, this is what took us many years to develop and it's what we have refined over eight generations of product development. It's an incredibly fun and compelling stable ride on the road, and yet very useful for a wide range of daily trips.

Our market entry product is the Fun Utility Vehicle, the FUV. We are a consumer first brand. We -- the Company was started out of individuals, the individual desire to take part in a solution to sustainable mobility. And so, we think it is very important that our customers be able to make that choice and that we lead with that consumer focused brand. But ultimately, we see a wide range of commercial fleet opportunities as well.

The Rapid Responder, which is really just the FUV with blinky lights on it and supplies for emergency responders is a totally natural fit application for the platform and is something that we feel very strongly about that fleets particularly city fleets, emergency fleets, campus fleets have the opportunity to select much more efficient products that also do a better job of moving rapidly to emergency sites and so on.

And then finally, where we really see just a giant opportunity is in last-mile delivery. So, this last couple of years, we've seen just massive investment go into food and grocery delivery. Opportunities, nearly every logistics company out there is looking at how to speed up delivery operations, so doing just in time delivery, same day delivery, and yet doing so more efficiently and with lower operating costs. And this is where we see the deliveries are fitting into just a huge number of opportunities on the road. This is for us and incredibly exciting product development.

And again, between the Deliverator the Rapid Responder, and the Fun Utility Vehicle, we're estimating that more than 90% of the parts are going to stay the same between all of those different products. And by the way, for folks who have questions, there is a Q&A function in the interface, the zoom interface where you can put a question in, and we'll do Q&A right there at the end.

As we look to the future, the future is autonomous. And we see the Arcimoto platform as an ideal platform for autonomous driving for a giant chunk of the trips taken on the road today, about 80% of ride -- 85% of rideshare today is one passenger. And when you combine one in two passenger autonomous rideshare with last-mile delivery, that is where we see the Arcimoto platform really hitting the sweets spot in terms of utility, footprint and affordability with options for partnerships, with sensor suppliers, software vendors, building out that full stack for daily autonomy and transit.

Our go-to market approach initially will be focused on direct experience in rental. So, the Fun Utility Vehicle, we're planning to have a 100 of those on the road starting next quarter. And some of those will go into our very first rental operations in Eugene and in Southern California. And the rental model for us is really just -- is a way of getting people, an experience of the vehicle, a really good experience of vehicle where you have a chance to actually drive it for a half a day or for a full day without having to have the pressure of a salesperson in the vehicle with you and where the outlets that actually offer rentals are themselves profitable enterprises.

We see vacation rental and tours as being sort of the first foray into that market, and then ultimately, we also see that the Fun Utility Vehicle is an ideal vehicle and ride sharing platform. We have moved from an empty building in at the time of our IPO to a functioning factory. We plan to kick off our first pilot production tomorrow. So, we are going to be actually -- where we have been doing station builds up until the end of this quarter where a full vehicle would be built on an individual station.

Starting tomorrow, we will begin building vehicles in station -- in assembly station with starting at a 2-day takt time where the vehicles will move from station to station every two days where all the parts are there, ready to be put on the products and then vehicle goes out to the end of the door at the end of its time on the assembly line. And we're anticipating that 2-day takt time is going to be reduced to one day than a half a day than once every two hours, as we ramp up production speed and increase getting vehicles out the door.

So, our production targets really have not changed in terms of getting to a higher scale of production that is from a year from when we are starting production, we intend to be producing at 200 units per week production rates. We have slightly upped our, what we're anticipating our average sales price to be on account of the introduction of new products in the family. And we have seen a big jump in preorders over the last quarter versus the quarters before, which we see as indicative of market support for the imminence of production of the Arcimoto.

As we look over the long ramp, this is really just the beginning. The whole purpose of the getting the amp up and running, getting to a rate of 200 vehicles per week is to prove out a factory production model that we will then sale aggressively, opening new factories in, we intend to open another factory on the East Coast with the support of the advanced technology vehicle manufacturing program in the form of energy. And we're in discussions with folks actually in a number of locations all over the world about production of Arcimotos in other markets.

As we look at our Arcimoto as a whole, it's really all about being as efficient as we can possibly be improving out a globally scalable model, going after a massive opportunity. And I think you could see that in terms of our opportunistic and strategic capital raises over the course of the last year. The majority of which were done above market had strong insider support. And we see pursuing that same strategy including going after really the opportunity for non-dilutive financing for the big scale steps as we really aim to make a real impact on greenhouse gas emissions and the transportation sector as we know it.

Or two goals for the next year, this is really where the rubber hits the road. So, we plan to deliver more than 400 evergreen addition FUVs. The opening -- once we are in production, we will be opening our rental locations, starting first in Oregon and California that putting in place our services and delivery network, and completing additional products based on the Arcimoto platform for much wider market opportunities. We'll also be fleshing out the full option set for the FUV and getting ready for higher scale production in 2020 and beyond.

Just a quick note on the space as a whole, we have seen massive investments over the last year. At healthy valuations, we believe Arcimoto has a compelling and unique story to tell in this space. And then as we get into production, that's something that we will continue to do.

And that about wraps it up for the planned remarks section, and again, go ahead and if you have questions, go ahead and put them in into the Q&A interface and I will be happy to answer them.

Question-and-Answer Session

A - Mark Frohnmayer

Every single electric vehicle manufacturer ends up, the actual step of developments into production for every EV maker is just a massive undertaking, I'm actually very proud of the performance of the team. It has been -- there have been lots of sticky wickets, lots of unknown unknowns, but we have been crushing through them really I think quite an impressive pace, and we are very excited to get production vehicles on the road.

In terms of selling the platform to others, yes, we -- the idea of the platform is it actually provides a platform that, that not only we but other manufacturers can customize and even individuals can customize to their particular needs on the road. We can envision vehicles suitable for contractors, vehicles suitable for a wide range of custom purposes where we would normally require a much larger footprint vehicle.

There was a report -- next question, there was a report out about recall the vehicles. Could you comment? Yes. So, over the -- we recall our beta fleet of vehicles, we had a number of issues that we discovered over the course of 2018, and we brought those vehicles back-in, in order to solve those issues. This was -- it was planned that the beta vehicles we're going to have things that we would work out and that has been very informative on the development of the product for the retail edition.

Next question, as the initial 100 Evergreen series sold out. The initial 100 vehicles series, yes, we have the full evergreen, the full first 100 vehicles is now fully allocated. The Evergreens we plan to be selling the Evergreen through this year, but those first 100 that we're pushing to get on the road next this quarter are now fully allocated.

And in terms of the next question, which is when do we anticipate moving to markets on the West Coast? We'll have a handful of our first 100 Evergreens out on to very early supporters out on an investor's out on the East Coast actually right after the turn of the quarter. We're still going to be very much focusing on West Coast delivery throughout the year. But we will be -- the plan is by quarter four to be opening up to two other areas of the country as well.

Question, how do you differentiate yourself from Electra Meccanica SOLO, another three-wheel electric vehicle. While we should look at the SOLO as another product that that aims to satisfy a certain swath of the transportation marketplace, the differences between the FUV and the SOLO are primarily that the FUV carries two people, the SOLO to carries one. The FUV has dual motor front wheel drive. The SOLO has rear wheel drive on the single rear wheel.

The SOLO is designed much more as an automotive style product where the FUV has more of a motorcycle feel that has the ability to take the doors off, experience the air around you. And so in terms of which product is going to be more appropriate for you, if you're doing a lot of long distance commuting, you want an automotive feel and style, the Electra Meccanica might be the right product for you.

If you're traveling around with a friend to go out on a date or two, to hike or whatever, then the FUV would be a more appropriate choice. Both have awesome applications in rideshare. When we look at the delivery market, the Deliverator version of Arcimoto has a bit more storage space about double the storage space of the Electra Meccanica. So, we think that for certain delivery applications, it will be more appropriate choice.

Let’s see the next question. Is there a normalized scale on how many commercial sales are mixed into the personal use preorders? In other words, how severely will the preorders to be delayed as rentals and commercial usage vehicles are built. So, the query question, Arcimoto has always planned to have vehicles in market that early prospective customers can drive. So, we were always going to fold rent, initially, the plan was to do test drive outlets that the rental facilities are really just a more much more efficient way for us to do that.

We don't see the commercial opportunities really jumping line of our preorder customers. So, the preorder customers, we are saving your spot in line based on when you put down a $100 reservation. And then when we open up the region that you are in that opportunity will be preserved in the order that you are in the queue.

In terms of our commercial focused vehicles. The fleet focused vehicles like a Rapid Responder and the Deliverator. Those are peoples we have built one prototype of each. We do not plan to put those actually into full production until 2020. And those are going to be what helps build the scale of opportunity for 2020 as well as help drive on the cost through economies of scale. So, the commercial vehicles we see, is really actually a major win for our retail FUV customers as well.

Next question is. What publicly available charging infrastructure can be used with the FUVs? The FUV has a standard J1772 level to charging plug. So any of the standard charging stations that you see all over the place, the charge points in the blinks and that have that standard J plug. Those all work with the FUV?

Next question is. When will the rental locations be open? The plan is to reopen the geolocation commensurate with when we deliver the very first retail series, FUVs, which will we are targeting for this quarter. And we expect that the San Diego location will be open, if not at exactly the same time then very shortly thereafter.

The next question is do you have motorcycle license to drive the FUV? The answer is that varies by state. In our initial focus states of Oregon and California, no motorcycle license is required. Currently in Washington State, you need a motorcycle license to operate it. And you can actually take that motorcycle endorsement tests using the Fun Utility Vehicle. So, we are going state by state, working in states where the laws require a motorcycle endorsement and saying hey, look, this vehicle has it -- the learning curve is about 30 seconds. It's a stable platform vehicle. You don't need to know how to ride a two wheeler in order to pilot it. And we found very good reception that message so far.

Next question, can you talk a little bit more about autonomy? Is the plan to provide the platform for the companies to integrate cameras, lidar, radar and their software platforms? Or do you have your own plans? It's really -- it’s a mix of both. So, we are going -- we plan to do a baseline implementation of an Arcimoto autonomous vehicle with partners. We expect to be heavily engaged in the integration step of that. And we are also plan to open the platform and sell the platform to folks who want to use it for their own autonomous fleets software and the full software in center stack that they're developing.

Next question is. Can you tell us about the federal loan program that you're applying for? And how important is the overall strategy of the Company? The ATVM loan program is the Advanced Technology Vehicle Manufacturing loan program. We're in the early stages still of applying with federal government for that money. It is a program that was constituted in order to further development and manufacturer of advanced technology vehicles and ultra-efficient vehicles. And in terms of how important is it to us our overall strategy, we don't -- we're not counting on it until it is, it is an approved application and is it is money that will be coming into the bank.

But it is one example of a non-dilutive capital source that would allow us to dramatically increase production scale here in the U.S. And it would be in terms of whether that happens before or after potential joint ventures and overseas production that would have essentially the same characteristics in terms of non-dilutive large scale capital really remains to be seen. But right now what we're building is, is really the argument and demonstrating the true market potential that justifies those sorts of capital formation activities.

The next question is. How many preorders do you now have? We reported at the end of the quarter that we have 3,883 orders, that's up from I believe honestly 3,200 and change at the end of at the end of Q4. So, we saw an acceleration in preorders over the last quarter and we actually expected that acceleration. The peers will continue to accelerate as we actually begin delivering vehicles in the market as we open up our visual locations and as we really fleshed out the whole product family on the road for our commercial customers.

Mark Frohnmayer

All right, well, thank you all for joining us today. 2018 was a pivotal and transformational year for Arcimoto. After more than a decade of development, we are now really on the cusp of production starts. We're starting to do our pilot production tomorrow. We're still working through a variety of testing and final regulatory compliance issues. At the conclusion of which, we will begin delivering for the first time Fun Utility Vehicles to our retail customers.

We have expanded this quarter our offerings from one product to three to hit a much wider swath of the overall market place including rapid response, local last mile delivery. And we believe that Arcimoto is positioned very well in this rapidly changing transportation space to make a meaningful difference by right sizing the footprint of daily mobility.

I am very proud of all that our team has accomplished. This transition from product development to production is a huge hurdle for every EV endeavor and our team's ingenuity and really passionate commitment to developing a true sustainable mobility solution as well as the incredible support that we have received from our stakeholders that has powered us through to this next step. It's been critical and it's allowed us to get to the point where we're truly on the verge of beginning to address urban congestion and climate change.

And so, thank you again for participating and we'll next you next time.

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