Sono Group N.V. (SSM) Q3 2022 Earnings Report, Transcript and Summary

Good day and thank you for standing by. Welcome to the Q3 2022 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your speaker today, Kirill Bagachenko. Please go ahead.

Thank you, Heidi. Dear, ladies and gentlemen, welcome to our conference call. A press release including financial information for the third quarter of 2022 was released this morning. It is available on our website and on EDGAR platform. A full interim report will be published later this week. On today's call, we have our CEO, Laurin Hahn; our Chief Operating Officer, Thomas Hausch; and our Chief Financial Officer, Torsten Kiedel. Laurin and Thomas will first provide an update on our operations. Torsten will then review our Q3 financials. And Laurin will conclude today's presentation with some important news. After that, we will be happy to take your questions. Before we continue, please be reminded that today's presentation will contain forward-looking statements made under the Safe Harbor provisions of the U.S.s Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the views expressed today. The information regarding the risks and uncertainties is included in the recent filings of the company with the U.S. Securities and Exchange Commission. The company doesn't assume any obligation to update any forward-looking statements except as required under applicable law. With that, I will now hand the call over to our CEO. Laurin, please go ahead.

Hi there. And thanks, Kirill. Warm welcome to everyone on this call. As you know, we are working very hard every single day to deliver on our mission, solar on every vehicle. And I want to start today with this beautiful picture here. The Sion in front of the Golden Gate Bridge, while being successfully shown in our U.S. tour recently. As you all know, there are so many challenging things out there happening right now in the world. Inflation, recession, energy crisis, Russian-Ukraine war, the COVID-19 pandemic and a very challenging capital market. And in these difficult times, people become more cost sensitive and look for affordable, yet still innovative solutions for their everyday life. And the Sion is exactly one of these technical solution. Approximately €25,000, very affordable, solar charging, very convenient and reduces utility bills, bidirectional charging, a home storage on wheels. Our SEVs is the perfect answer for so many people and so many problems we have in the world right now. And I was thrilled to see how the Sion resonated in the U.S. with the people we met, including press and media, potential strategic partners and other interested individuals who attended our event. Same as in Europe, people are looking for an affordable, sustainable and yet innovative car. And that's not for just another luxury EV, which the majority just can't afford. That said, let's talk about the recent milestone we have achieved. One year has passed since we went public in November 2021. And we keep on delivering on our ambitious plans. Within the last 12 months, we achieved 30% growth and are now looking at 21,000 B2C Sion reservation holders. We achieved 44% growth on the B2B side of the Sion preorders. This sums up to an incredible amount of approximately 43,000 Sion preorders and reservations, which would equal a potential backlog of over $1 billion. We achieved 130% growth with our 23 B2B solar customers where we license and sell our solar technology. We achieved an impressive 240% growth with our total of 34 patents granted or filed. And we almost doubled our staff to over 418 engineers and industry experts. And lastly, we delivered on our IPO promise and built 17 vehicles and body-in-whites of our Sion's validation fleet. Let us walk you through the achievements in more detail. Let's start with our first business unit, Sono Solar, where we license and sell our solar technology to trucks, buses, vans and more. We entered several new markets with strong customers. 130% growth since our IPO, now at 23 customers. These are industry leaders like Mitsubishi, Scania or MAN. The latter both being Volkswagen subsidiaries. These are very renowned corporations, are now starting to integrate solar into their first product, still on a prototype basis, but with a massive potential once we achieve fuel integration. We now have solar customer in over 10 countries globally, running from Japan to the U.S. So let me give you some examples of the recent customers we signed. We recently announced Scania and LLT as new customers. Six Scania diesel buses have been equipped with our innovative solar technology and are already up and running in Sweden. It's a customized version of our Solar Bus Kit. And Scania is a subsidiary of Volkswagen with over 54,000 employees. Scania operates in more than 100 countries and delivered roughly 90,000 vehicles in 2021 alone. Another customer was Pepper. Pepper has integrated our solar tech in one of their electric buses. Pepper is the world's first digital OEM in the automotive industry for repowering and new vehicle. First solar integration by Sono Motors on e-buses. So, our Solar Bus Kit is now applicable for diesel and electric buses. We are expecting the e-bus market to gain significant market share over the next five plus years. We have 1.3 kilowatt peak installed on an electrified Mercedes-Benz Citaro. And more and more customers are beginning to understand the value of solar integration to reduce TCO and CO2 emission. This is especially the case for commercial vehicles. But there's more to that. We have made great progress with our seamless solar integration, going from vehicle applied photovoltaic, short VAPV, to now vehicle integrated photovoltaics, short VIPV. We have now developed our sixth generation of solar technology and this trailblazing solar technology is so unique and proprietary that other OEM started to approach us to find out more. And here, I'm not speaking about commercial vehicles, but passenger car OEM. So, let me share some exciting news with you today. We received the first purchase order from one of the world's largest car manufacturer. The scope of the order is the delivery of solar body panels for a first prototype. Together with Sono Motors, this OEM wants to explore solar integration into their high volume vehicle production. We have worked with that OEM customer now for several months, and believe this partnership shows the potential that our technology and business have to move to the next level. On that note, let me answer the question why other car manufacturers should license our solar technology. And yes, it's because of three simple answers. First, they want to avoid a huge reengineering effort. Second, they don't want to lose time to come to the market. Or to say it in another famous words, if a trend becomes obvious, you are too late. And third, they don't want to infringe our patents. So, our technology is an already developed technology, which saves time; ready for large scale production, it's industrialized; and it's protected with a very strong IP. With that great news, I hand over to Thomas.

Thank you, Laurin. And thank you for showing us the Sion in front of the Golden Gate Bridge in San Francisco. Here you can actually see the Sion in Brooklyn, where we calculated an average yearly free range from solar powered vehicle of nearly 5,000 miles or 8,000 kilometers. Overall, we're making good progress on our Sion. We are on track with testing and series validation. We have now produced and fully assembled 17 vehicles and bodies in white and plan to complete 32 of them within the next weeks. We're testing in several locations around the world including aerodynamics and wind tunnel tests in Sweden, steering and other driving dynamics tests in the Northern U.S. and consumption and efficiency testing in Spain. On the development side, overall, we're progressing as planned. We've entered a release process for series, which marks the completion of a core stage of development work. We continue to order series development tools. Key functionalities, such as discharging, charging, solar yield, drivability, infotainment, were successfully tested. And of course, the final validation is ongoing. Good news also on the series production. We have received more series tools. We've nominated more series suppliers. We continue to have detailed alignments with Valmet Automotive regarding our manufacturability and next line builder commitments for our body shop and general assembly. However, a reduced funding speed drives the delay of the SOP from the second half of 2023 into Q1 2024. Our definition of SOP continues to be handing over sellable product to customers, not just producing vehicles alone. You can see that we're preparing for series production and servicing. And that's why we are tied up now with a Europe-wide partnership with Bosch Automotive for the long term. We're working with them for servicing and repairing the Sion in Europe. This completes our three pronged approach to allow self-repair to the customer, empower independent workshops, but also create a Europe-wide dedicated partner network. In our case, for the Sion launch, we're starting with 50 Bosch Car Service locations in Germany to be trained and qualified. More locations in European countries are following in the course of the subsequent rollout. Bosch Automotive aftermarket gives us access to over 10,000 workshops in Europe as one of the world's largest grouping of repair locations. Another one of our important partner is Continental. We appreciate partnering with such a well-established Tier 1 supplier. And I'm showing here an advertisement created by Conti. Conti, and formerly also Vitesco – Conti in their former function also as Head of Vitesco already supplied us with our electric drive unit for our SEV2 years ago. Here in our SEV3, our series validation vehicles, you can see many applications from Continental including ADAS function, vehicle control unit software, and many others, just to name a few. So much about this Sion. Let's give a corporate update and start that one with the Sion here in Los Angeles where we calculated an average yearly free range from solar of nearly 6,000 miles or 9,000 kilometers. We created these real pictures just recently on our first U.S. tour for Sono Motors. The feedback we received on this tour from our Sion series rehabilitation vehicles, but also for our overall company and the solar business was quite rewarding. In October, we showcased this for three weeks. We had interviews with CNBC, Barron's, CNET, Axios, Boston Globe, among others. And receiving the broader interest for our solar EVs in the U.S. showed the generally huge and positive interest in solar technologies as well. As an impression for you, we selected seven pictures representing our seven locations we serve. Feedback from the people we met, including press, potential investors and other interested attendees, was very positive. For example, many followers and interested parties perceived the Sion as being much bigger, more spacious in real life than in pictures. There was excitement about the smooth integration of the solar wafers. Whoopi Goldberg was especially convinced by the affordability of the product. The wish and need to see our vehicle on the road and to see the application of our technology was evident to everyone on our small team on the tour. Further progress was made in our team composition and protecting our IP. We're now well over 400 employees by the end of Q3 2022. In December, 418, with more than 300 engineers. About 50% of our employees have an international background, with currently 45 nationalities represented at Sono Motors. Based on the aforementioned funding speed, we have implemented a hiring freeze since November to control our operational expenses. On the patent side, we continue with high speed for filing patents. We have now five patents and utility model applications filed in Q3. Three additional filings since the end of Q3. In total, we have now four patents granted. 30 patents or patent utility model applications filed as of December 8. To continue, Torsten will take you through our financial key facts.

Thank you, Thomas, for the warm welcome from my side. Let me start with our year-to-date financial results. In the first nine months of this year, we significantly increased our revenues and achieved €180,000 from Sono Solar and Sono Digital compared to no revenues at all in the same timeframe in 2021. In parallel, we made substantial R&D investments with almost €90 million spent in the last nine months in comparison to €27 million year-to-date September 2021. We also started purchasing necessary machinery and tooling in preparation of the start of production and capitalized approximately €42 million as of September 30, 2022 versus €1.5 million one year ago. I'm also glad to highlight that despite the strong growth in our operations and headcount, we were able to keep SG&A costs well under control with approximately €16 million for the first nine months in comparison to €13 million in the same timeframe last year. That's nearly an increase of €3 million. Let's look at the third quarter in more detail. The revenue growth accelerated particularly in Q3, with six times higher sales compared to the previous quarter, resulting in €138,000 in revenue. Our cash and cash equivalents were at roughly €33 million on September 30 of this year. Since liquidity is essential in such a challenging market environment, let me also update you on our current and expected liquidity. It's approximately €55 million as of November 30, which consists of €25 million of cash and cash equivalents and the signed agreement for the sale and issuance of up to $30 million of convertible debenture, on which I'll provide more details on in a minute. The substantial investment, combined with the SG&A, resulted in approximately €56 million net cash outflow in Q3 of this year. Looking ahead, I'd like to share with you a helicopter view of where we stand on the development side and how that connects with our funding needs. Overall, we've raised around [€300 million] over the last couple of years. This allowed us to achieve the series validation vehicle fleet in our car business. And on the solar side, we were able to develop the aforementioned sixth generation of solar panel integration and to deliver the first prototypes to many renowned vehicle manufacturers. You've come this far and now we have a fairly short distance towards launching Sion production. We currently estimate that we need approximately €130 million until the next crucial milestone, the pre series vehicle release next summer. Thereafter, we estimate that we'll require only an additional €80 million to start delivering the first Sion to our customers in Q1 of 2024. We're currently in the process of securing this funding. Just this morning, we announced an agreement for the sale of convertible debentures with Yorkville Advisors. We will get net proceeds of $30 million in three tranches. The first one upon signing, the second one upon signing a registration statement, and the third one upon effectiveness. We're quite happy with the favorable terms we received – a 4% interest, no warrants, FX conversion price of $1.75, unless the stock price is below that level, then a variable conversion of 96.5%, the lowest daily EVOP during the seven prior days. Conversion below the fixed conversion price are limited to the greater of either 20% of the monthly trading volume or $5 million per month. And the limitations can be waived at the company discretion. What I'd like to highlight here is that while the debentures provide us with meaningful upfront capital, the conversions related to them would effectively replace our use of the existing committed equity facility or our new ATM going forward since both are now limited to 2% of daily trading volume, subject to exceptions for days with high trading volume. Worth mentioning is that we also filed a registration statement on Form F-3. We made this move because we recently became self-eligible and wanted to add this vehicle to our finance toolbox. On December 7, Sono Group also entered into an at the market sales agreement with B. Riley, Berenberg, and Cantor Fitzgerald acting as sales agents. The size is up to $135 million and the sales agent commission is 3%. As mentioned before, once the debentures have been repaid, the ATM program will replace the existing committed equity facility that we have been using in the last 4.5 months and it's meant to enhance our access to capital. Given the same convertible debenture agreement, we don't plan to use the ATM extensively until the convertibles are redeemed. I've now shared the pillars of our funding strategy for Q4 that are already secured. We started with a €33 million in cash at the end of Q3, secured an agreement for the convertible debentures with $30 million and already had inflows via the committed equity facility of approximately $7 million this quarter. Summed up, we have secured €70 million in total. Let me now share with you how we plan to close the remaining gap of approximately €130 million to finance the next big milestone, the pre-series vehicles that will already come from our – at our production partner, Valmet Automotive, in Finland. The most significant source of funding will be a community marketing campaign we are launching right after this call. With the support of our strong community, we are planning to raise €84 million net, which translates to 3,500 full Sion down payments. In a moment, Laurin will provide more details on why we strongly believe this is the right next step. Let me just comment on the additional two instruments we are planning following the successful raise of the envisioned €84 million. We plan to tap capital markets again and raise a total of approximately €50 million via additional sale of new equity. We've had ongoing dialogues re IP lending and asset-based financing secured with our patent and the production machinery to further leverage the funding as much as possible and to keep dilution as low as feasible. Also, in our own interest. We will keep you updated once there's news. Before I hand over to Laurin, I'd like to share some more thoughts about the funding in general. We've achieved very important operational and commercial milestones since we went public one year ago. These include signing promising partnerships in our solar business and presenting our first Sion series validation vehicles. At the same time, high inflation and rising interest rates as central banks seek to curb inflation have resulted in negative sentiment in the financial markets since the second quarter of this year, with many tech companies losing between 50% to over 90% of their respective market cap. Shares in mobility tech companies have been particularly hard hit. As a result, financing our CapEx program through equity has become challenging and dilutive for existing shareholders. One view of the investment community is that we should focus on capital light revenue generating solar business and abandon the Sion project. We hear you, and we will be willing to streamline our business. As a public company with shareholders, we have to be open to any and all alternatives that are best for the long term prosperity of our company. However, we believe one aspect that makes Sion unique is our very strong and loyal community. They want us to bring the Sion on to the road as much as we do. We believe that, with our community, we can bridge that difficult market environment, reduce the overall funding need and prove to the capital market the strong demand for our solid technology and our affordable SEV design. Handing over to Laurin once again to talk about the next step.

Thanks, Torsten. I want to start with, we have an incredible €1 billion of potential backlog revenue, with over 40% with down payment. So, before we dare to decide to stop the Sion project, we want to give the approximately 21,000 reservation holders, our community, one last chance to prepay the car in full. And by doing so, partially solve our funding hurdle. These 21,000 reservations are an equivalent of approximately €460 million when converted into potential revenue, with almost €600 million worth of B2B preorders. On top of that, we have a potential order backlog of more than €1 billion. So why not asking the community to help to bridge the funding that? Well, this is exactly what we plan to do by launching a special marketing campaign. We are calling this special marketing campaign Save Sion. With it, we will give our customers community the chance to prepay the equivalent of 3,500 Sion within 50 days. To make this clear, our community is an invaluable asset. We believe no other company has such a strong community. So, the community engagement is planned like this. We launch a special marketing campaign today. We ask customers for an upfront payment of their car reservations equivalent to 3,500 Sion full price payments. This would lead to €100 million cash in, including VAT. The good news for investors out there, it's a non-dilutive way of bridging the funding gap. And here's the simple message we give to our community. 21,000 people have reserved the car. The vast majority of people plan to pay us the full down payment as soon as they expect to get the vehicle. So now, we ask them to give us some of the money 12 to 18 months earlier in order to start the production of their car. And they will only have to pay if the campaign is successful. In order to support our message, we have planned a very intensive marketing campaign around it. Our planned activities are to start under the hashtag #SaveSion, an exceptional social media campaign, with transparency as a key factor of success. Additionally, we started a Sion tour from Germany, Austria, Switzerland, Netherlands, 12 cities, inviting 10,000 people. We give incentives for advance payment, up to 10% discount for full priced down payment. And the campaign will last for 50 days from December 8 until January 25. This is a complete new way of marketing. And we have great experience in it. We have been successfully funded by the community in the past. In 2019, we raised €63 million in payment commitments in 50 days through prepayment, loans, donations, but no dilution for equity. At that time, it was the largest of its kind for a hardware product in Europe. The public feedback was overwhelmingly positive. We received positive press coverage around the world. So we also believe this time in our strong community. We have done it once in 2019. Now, with the Sion in its final production design in comparably higher brand awareness and a shorter distance tour towards the start of production, we are confident that we can work this out and that we can be successful with this campaign. The numbers speak for themselves. We have since then doubled the amount of the community members and we plan to raise double the amount of the money now. So, it's doable. We can achieve it. If it doesn't go as expected, we will focus on the B2B solar only business case as a very attractive alternative, which is significantly less capital intensive. We believe we already have all the resources on hand to roll it out. Moreover, we have had a number of promising negotiations with potential strategic partners interested in our solar technology. So, we would not rule out some strategic alliances here. So, let us prove you and all investors out there that it's about a car that has massive potential, a community that has one belief, a belief that even a small group of people can make a difference. So, let's do it. Let's bring the Sion to series production for a world without fossil fuels. Thank you.

With this, we will be happy to take any questions. Heidi, could you please remind our participants all the instructions.

[Operator Instructions] We will take our first question. The first question comes from the line of Christopher Souther from B. Riley. Please go ahead. Your line is open.

Hi guys. Thanks for taking my questions. And congrats on the progress here.

Thank you, Christopher.

So maybe just, you called out initial shipments to automotive customer looking at integrated solar for potentially high volume vehicles? Can you talk through the steps and timelines that you have ahead of you in order to get design wins from that customer? I just wanted to frame where we think we are in that process. And great to see that process starting to kind of kick off.

Sure. So usually, this goes in three main steps. The first step is a prototype in order to convince internally the management and the engineers to take a look and to test this solution. That's the first step. The second step is then series development where you have two to three years of series development until it goes into production. And that's the first step, series production.

Got it. Okay. And as we're looking at €130 million that we need to get to pre series production, can you give us a sense of the timing of the cash out? It sounds like there's kind of a go or no go decision based on kind of the community? Can you just kind of walk through timelines that we should expect around the Sion cash needs and decisions there?

First of all, it's good to see that we have access to the €70 million I mentioned, as a starting point. So that's already a big step towards the funding need. And the additional capital, this is why we're kicking it off today. The sooner we have transparency, the sooner we can kick off purchase orders for some of the bigger machineries and toolings that we need to kick off as soon as possible. So the timing Laurin talked about is a 50-day campaign, and hope to see along, over the next couple of weeks, how we're progressing there. And then, as soon as we have more transparency on the potential success of the campaign to kick off the required or necessary purchase order for the machineries.

Okay. Got it. And just last one, are there any strategic opportunities as we're kind of entering kind of a new year as far as other OEMs out there that are looking for credits? Would it still be too early for you guys to start pre selling emission credits, that kind of thing? Are there other opportunities with kind of existing OEMs as far as strategic opportunities to help with the financing there?

You know better than us, we're a publicly traded company, so we only give you the information that we can give out. Fact is, however, we continue to – are in discussions on the items you just mentioned with not only one passenger car OEM alone. So we continue on the business that we have started two years ago at CES at the end of -- at the beginning of 2021 to continue to talk about other opportunities, including the credits you just mentioned. Of course, as you know, they're effective in Europe only when you register the first cars. So, the priority for us is now to make sure that we are successful in the campaign we just presented to you.

Okay. Makes sense. Appreciate the time here. Thanks guys. I'll hop in the queue.

Thank you.

Thank you. We will take our next question. And the question comes from the line of Eric Stine from Craig-Hallum. Please go ahead. Your line is open.

Hi everyone. Thanks for taking the questions.

Hi Eric.

So just to kind of stick on the point from the previous question. So, on the 50-day campaign, it sounds like optimism on that front. Can you just talk about – in the scenario where you have to pause that affects the decision that you make, does that impact anything with Valmet? Does that -- I mean, is it something you're able to – I don't want to say easy, but you're able to stop and then start again if you're in a position to do so? Or how does that just kind of impact the relationships and the work you've done to date?

Yes. Thank you. That's an awesome question. So as we inform the public, of course, we also inform our suppliers. And of course, as I mentioned earlier, with the funding that became more complicated, as Torsten described it over the last couple of months, we have made the decision that we presented today to move our SOP from the second half of 2023 into the first quarter of 2024. So we did, of course, this in concert with suppliers. And we do not expect any dramatic impact from delaying our SOP with any supplier. Can never rule it out. But specifically with Valmet Automotive, it's a very good partner. So, no, we do not expect from that campaign in the announcement today anything but the delay we just mentioned.

Right. But if the -- let's say at the end of the 50-day campaign, you realize that maybe you need to push that a little further. Is that something that – I would assume you'll be kind of having conversations ongoing with your suppliers, so that they're aware of the situation. But is it fair to say that that wouldn't cause a great disruption and that is something that you can start up again or get back on that timeline pretty easily if you're able to do so.

Well, we want to act now and to try not to drag it out endlessly. So we have been successful in the past with the 50 days, raising those €53 million in payment commitments. Now we have doubled the amount of community members. We have so much more visibility in the market. We cruised to such a corporation by now, so that we are very confident that we can make it.

Okay. Got it. And then just on the good news on the PO signed with the large OEM, just curious, with financing top of mind, any thought or any interest from some of those large partners potentially in some sort of strategic investment to kind of help alleviate that. I know you're probably limited as to what you can say, but anything along those lines might be helpful.

Yes. Sure, of course. We have some kind of confidentiality limitations here. But of course, we would be foolish not to speak to potential OEMs or to OEMs out there about a potential strategic investment. And of course, those who receive or are currently looking into our solar technology would be the ones most likely to invest. But you also know how it works. With big OEMs or big corporates, it does take time. So for us, it's great to see there's interest in technology. We take this as a first step and we believe, once we have proven the technology works, yeah, then, consequently, conversations will continue.

Okay. Thank you.

[Operator Instructions]. We will take our next question. Our next question comes from the line of Andres Sheppard from Cantor Fitzgerald. Please go ahead. Your line is open.

Hi, good afternoon, everyone. Congrats on all the milestones. And thanks for taking our questions.

Yes, thank you, Andres.

Yes, my pleasure. And so I wanted to maybe clarify a little bit on the funding strategy. So, I see you've raised -- you've mentioned your raise at €70 million. You expect to raise an additional €134 million. And so, I just want to make sure I understand this correctly. €40 million of that is expected to be a new capital raise or debt. €10 million will be from the ATM and then the rest is from the community down payments. I guess if there's any issues or delays in the community down payments, and would that change the amount that you expect to raise? -- I'm sorry. I just want to get more color on the capital funding strategies, particularly in regards to ATM and to the community down payments. Anything you can say there? Particularly given where the maybe the stock is trading, is the ATM – do you still expect to use that?

First of all, let's start with the ATM. Or in the past, the committed equity facility. As you probably saw, our daily average trading stock volume increased significantly ever since we went to the U.S. in order to present our solar technology and the Sion. Prior to the U.S. tour, the weeks prior to that, we averaged around 300,000 on a single day. And now, we're looking at more than a million. I believe that latest number was 1.7 million for the last month of average daily trading volume. So significant improvement there. As I mentioned before, since we now signed the convertible debenture with Yorkville, we will limit the usage of the formerly committed equity facility, in the future ATM, in order not to put too much pressure on the stock. So, it's limited to 2%, and there's an exception for very high trading volume days where we can use it to a bigger extent. But of course, interest here is to keep dilution as low as possible. We spoke extensively about the community down payments, about the marketing campaign, and why we believe this is the right next step. It's non-dilutive. It's an incredible community we have out there. And this would reduce the overall funding amount significantly. And of course, as you can imagine, one of the feedbacks in the past was, you still need a lot of money. We know it's not a lot of money from an OEM perspective, it's not a lot of money in comparison to many of our peers. But having to raise more than €200 plus million still until start off production is quite some money. And this is why we believe achieving a successful community campaign or marketing campaign will reduce that amount significantly and that will make it easier for equity investors to realize the potential there is in our technology and in the stock as well.

Got it. Thank you, Torsten, that's very helpful, very detailed. Appreciate it. Maybe as a follow up, can you just remind us what the kind of the cash burn or the cash outflow expectations are maybe on a quarterly or annual basis? I think in the past, you had mentioned the operating and investment cash flow outflow of about €165 million for the second half of this year and a little bit north of €150 million in 2023. So have those numbers changed? Are they kind of expected to be the same? Thanks.

Yes. So what has changed is, of course, we try to adapt to market environment as much as possible. So we try to postpone some expenses. And we did the hiring freeze that Thomas talked about, and started that in November, to be as efficient as possible with the money we have received. I think this is key. We decided against layoffs. Of course, there are many tech companies right now laying off people. It comes at a price. And this is why we decided let's take the step of a hiring freeze. Looking forward, the internal burn rate is less than €5 million a month, mainly for salaries, the 400 plus employees we currently employ here in Munich, and then some other OpEx. Of course, what we need to do is continue to invest in CapEx. Majority of the use of funds, as indicated in the past, is for production machinery and toolings. We trigger the purchase orders, so we drive the - when we need to pay for those orders. And this then is connected to when do we get access to the money in order to then purchase the production machinery toolings.

Got it. Thanks, Thomas. And congrats again on the quarter. I'll pass it on. Thank you.

Thank you.

Thank you. We will take our next question. And the question comes from the line of Austin Zocco from Freedom Capital Markets. Please go ahead. Your line is open.

Hi guys. Congrats on a successful third quarter. Just had a couple of questions here. So, like as you've probably seen, last month your competitor Lightyear announced that they've begun production and are planning to scale early next year. So, what is Sono's plans around staying ahead of a competitor in the space like Lightyear in the solar auto industry?

Hi, thank you Austin. Awesome question. First of all, believe it or not, but we love every EV that gets produced and put online. We even love it more if solar electric vehicles get out there. We don't see any competitor in the next 10 years in the market that's increasing massively. Particularly, shoutout to Lightyear. If I'm not mistaken, the car is about 10 times our price. It's a wonderful product. It's a low volume, high priced product. And with that kind of production, you actually do a lot of work by hand. So you have a lot of high variable cost. While we have the first affordable solar electric vehicle, and that's why we're upfront investing into tools and machinery that makes this car sell at €25,000 or roughly $25,000 net. So that is the main difference. And we hope to see many more solar electric vehicles coming out in the future.

Great. Thanks for answering that. And I just had one more around on the marketing campaign that you guys are running. So are you a little concerned about like upsetting your customer base if you don't hit the delivery milestones like you publicly announced of starting at Q1 of 2024? Are you concerned that maybe some of the people that paid down early are going to be upset if you guys have to push back products, I mean on delivery.

So, we're trying to be very transparent with our community, publishing biweekly – every second week, a sprint report on our website. We're publishing even on our website, the exact time plan to production. And, yes, another delay is, of course, not a great news to our customers. But we are trying to be that very transparent OEM who delivers also the reason for it, the rationale behind it and we think our community can deal with it.

All right. That was great. That's all my questions. Thank you.

There seems to be no further questions at this time. Please continue.

Thank you, Heidi. Thank you all for joining our conference call. If you need more information, please take a look at our website or reach out directly to our IR team. Have a great day and hope to be talking to you soon. Bye-bye.

Thank you, all.

Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.