Having fallen over 20% yesterday, the Arrival (NASDAQ: ARVL) share price is staging a recovery today. The stock has soared 10% at the time of writing. The firm just announced its Q1 financial results and they have resonated well with investors. Although the EBITDA loss increased on an annual basis to $67m, the company is starting to ramp up its start of production (SOP). The progress made thus far was also in line with guidance.
Arrival of bus certification
When Arrival last reported results, management mentioned the priority was to complete its biggest obstacle, vehicle certification. Therefore, the recent EU bus certification is a confidence booster, as the Nasdaq-listed company can now begin public road trials in the UK and Europe. These are expected to start in the next quarter. Private road trials with First Bus drivers are already in progress.
Good intentions
One of the most important metrics to pay attention to is letters of intent (LOIs). This determines the number of potential orders Arrival has in its books, indicating future revenue. LOIs saw yet another increase to approximately 143k. Despite the growth rate decreasing to 7%, I’m just glad to see that demand continues to be strong. When questioned about this on the earnings call, President Avinash Rugoobur attributed the slowdown to a shift in focus. He stated that the sales team is now in the process of converting these LOIs into binding orders.
Additionally, the milestones set out by Arrival in the previous quarter were also met. Aside from the all important bus certification, the startup completed its final prototype for its van.
We have already passed over 70% of our Van certification tests and made strong progress on our Microfactories with our cabin, hoop and skateboard all assembled using our advanced robotics platform.
Source: Arrival Q1 2022 Financial Results
Arrival has also been proactive in its equipment installation at Bicester. It has assembled and installed all robotic technology required for vehicle assembly. As such, I’m confident in Arrival’s ability to produce its target of 400-600 vans this year.
| Arrival Bus Milestones | Expected Timing | Arrival Van Milestones | Expected Timing |
|---|---|---|---|
| 1. Trial Bus Production | Achieved | 1. Final Prototype Van Build | Achieved |
| 2. Proving Ground Trials | Achieved | 2. Van Certification | Q2 2022 |
| 3. Bus Certification | Achieved | 3. Bicester Equipment Installation | Q2 2022 |
| 4. Phased Trials with First Bus | Commenced | 4. Public Road Trials | Q2 2022 |
| 5. UK Production of Saleable Buses | H2 2022 | 5. Bicester/Charlotte Van SOP | Q3/Q4 2022 |
Micro factors
With all that being said, Arrival still sparks some pessimism in me. While its cash position is strong enough to last the financial year, what lies ahead is unknown. The EV firm still expects to finish the year with a cash balance of $150m-$250m. CFO John Wozniak has made no secret of Arrival’s need to raise capital in the near future. Capex continued to hover around high levels of $99m, although this is expected to taper off from Q3 onwards, as mentioned on the earnings call. CEO Denis Sverdlov mentioned that the business may face issues sourcing materials in the medium term as well. This could hamper its optimum production rate of 20,000 vehicles a year, per factory.
The bright side, however, is that Arrival continues to prove its doubters wrong. Its microfactory production concept is starting to show promise. With a positive set of results and promising guidance for the future, I’ll definitely be looking to add to my position in Arrival. This is especially so when the Arrival share price is trading at 95% off its all-time high.
