Electric vehicle maker Canoo Inc. (Nasdaq: GOEV) finished off the first three months of 2023 with $6.7 million of cash on hand and another consecutive quarterly loss, with first-quarter balance sheets in the red by $90.7 million, the company announced Monday.
The company, which is moving its headquarters to Bentonville, narrowed its loss from $125.4 million in the same period a year ago.
At least $1.4 billion has been invested into Canoo, executives said during an earnings call.
In April, Nasdaq warned Canoo that it could be delisted from the exchange after the closing price for the company’s common stock fell below the $1 per share minimum for 30 consecutive business.
Canoo’s stock closed at 60 cents per share Monday, rising about 2%. For the year to date, shares have fallen 52%.
CEO Tony Aquila said he expects the company, which has manufacturing facilities in Oklahoma, to start generating revenue next quarter, though he tempered his optimism so as not to buoy expectations and fall short, he said during the earnings call after the closing bell Monday. He said a deal with Walmart Inc. of Bentonville whereby the retailer agreed to buy a few thousand Canoo vehicles is still on the books.
“We will have some announcements in the coming quarter,” Aquila said of the Walmart deal. “But things continue.”
“We have to continue to do more with less,” the CEO said. “This is an important and complex phase with many moving pieces. We know we have to prove ourselves and we are focused on doing just that.”
A U.S. Securities and Exchange Commission investigation into the firm’s former senior executives, which resulted in a $1.5 million fine, is still ongoing, Aquila said. That investigation revolves around Canoo’s merger with Hennessy Capital Acquisition Corp, a special purpose acquisition company.
The company has set targets of producing 20,000 of its futuristic-looking zero-emission vehicles by the end of 2023 and doubling that number in 2024. Executives did not disclose how many vehicles have been built so far this year.
They said the construction of assembly lines, which includes equipment shipped to Oklahoma from Detroit, is underway at the Oklahoma City facility.
Executives characterize Canoo’s business approach as one that is tailored to client needs with production that ramps up with orders rather than assembling thousands of cars and selling them after the fact.
“Our decision to bring capacity online to expand at an incremental basis, we believe, will be more prudent for capital allocation and our geographic expansion strategy,” Aquila said.
Canoo has taken a more “technology driven” approach, Aquila said, adding suppliers are “more focused on a traditional large-volume outsource model.”
“We had to get them to change to our model, a ramping model,” he said. “The friction we have in the supply chain is more self-inflicted, with the exception that there are about 20 parts that are just, in general, on any given day, an industry concern.”
They said they believe this on-demand model will lead to profitability but that the EV market continues to be difficult due to supply chain issues and pressure to source components domestically rather than overseas, a requirement to qualify for tax credits and other federal grants available to businesses that invest in the more environmentally-friendly automobiles.
Mitigating “complexity” in the manufacturing process is challenging with “too many complex parts in assemblies while dealing with diverse supply chains and high barriers of software integration across independent parties,” Aquila said.
Canoo has $2.8 billion worth of orders in the pipeline, representing a 5% quarter-over-quarter increase in stage two and stage three orders, Aquila said. It recently secured new orders from a Fortune 100 and Fortune 500 company, the CEO said, without further specifics.
Canoo is targeting a gross positive margin in 2025. For the second quarter of 2023, Canoo projects capital expenditures between $10 million-$20 million and operating expenses between $40 million-$60 million.
For the first quarter of 2023, operating expenses totaled $67.2 million compared with $120.3 million for the same period last year.
Operating expenses are projected to decrease in coming quarters because of lower IT infrastructure costs, professional fees and human capital expenditures as its workforce mix shifts to manufacturing away from the more capital-intensive roles in areas, like research and development, executives said. Workforce arbitrage could also decrease expenses.
Canoo is "focused on managing cash and synchronization of capital allocation as we move to production," Ken Manget, chief financial officer, said.
For the first three months of 2023, cash outflow was 30% lower than the average cash outflow per month in 2022, Ramesh Murthy, Canoo finance and chief accounting officer, said.
The company is focusing on “geographies and market segments where there is available capital and favorable regulatory conditions,” Aquila said, adding there has been weakening consumer demand and high margins for other EV newcomers “that chose to put in large production facilities ahead of confirmed orders has been a challenge.”
“Our strategy is different,” the CEO said. “We have targeted milestones and are seeing improving pricing conditions for our platform.”
Canoo is focused on “range and performance by customer and customer use-case,” he said. “You need to know what range and operating environment conditions exist for that specific customer.”
"We have a lot to prove, and we intend to prove it," Aquila said. "These are tough times, and we have to execute and optimize the way we use cash and build shareholder value."