Arrival’s Third Quarter 2022 Business Update

LUXEMBOURG, Nov. 08, 2022 (GLOBE NEWSWIRE) — Arrival (NASDAQ: ARVL), inventor of a novel new technique of design and manufacturing of electrical automobiles (EVs) by native Microfactories, at present reported monetary outcomes and a business replace for the third quarter ended September 30, 2022.

“2022 has been a challenging year for Arrival as well as the entire sector but we are agile in responding to these challenges. Our valuable IP developed through an impressive stack of in-house technologies gives us a unique advantage in developing electric vehicles and adapting to new market conditions quickly. We will continue to build a small number of Vans in Bicester (UK) while advancing our composite materials, components, vehicle software, autonomous mobile robotics and Microfactory to bring our products to the US market, which has become the most attractive opportunity for Arrival in the mid to long term after the tax credits offered under the IRA became effective. We will use cash on hand of $330 million and look to secure new funds to achieve our goals in the US,” stated Denis Sverdlov, Arrival founder and CEO.

Recent Business Updates

Given a mix of difficult financial occasions and US market alternatives improved by tax credit for business electrical automobiles launched by the Inflation Reduction Act, the Company will deal with these actions over the subsequent few quarters:

• Extend the runway of $330 million money readily available by restructuring the business to scale back prices
• Continue to advance their distinctive applied sciences together with composites elements, elements and software program, autonomous cellular robotics and Microfactory processes that are frequent to all automobiles that will likely be developed for the US
• Produce a small variety of Vans in Bicester to optimize Microfactory meeting processes
• Perform sturdiness testing on their automobiles and proceed trials
• Secure new funds to convey a household of merchandise to the US

What Has Changed

• The Company can’t make margin on the present L Van product given the excessive value of elements related to being on low-volume (or “soft”) tooling, and lack of funds to finance laborious tooling
• Due to the present market cap and common every day buying and selling volumes, the $300 million ATM platform established in Q2 has not allowed the Company to boost the anticipated capital this yr to spend money on laborious tooling
• The US market, with the latest introduction of the Inflation Reduction Act tax credit providing as much as $40,000 for business electrical automobiles, the big market dimension, plus the anticipated increased margins for business automobiles, has now develop into essentially the most engaging marketplace for Arrival
• As a end result, the Company introduced plans to focus its distinctive applied sciences on a household of merchandise for the US market utilizing money readily available whereas searching for additional funding to finish improvement of US merchandise and enter manufacturing
• Arrival plans to additional right-size the group together with slicing money intensive actions primarily associated to third-party spend and prices associated to ramping up manufacturing of the L Van in Bicester to be able to lengthen the money runway. The results of these proposals is predicted to have a large influence on their workforce, predominantly within the UK

Third Quarter 2022 Financial Results

• Loss for the interval of $310.3 million, in comparison with a loss for the interval of $30.6 million within the third quarter of 2021. This loss in Q3 2022 contains non-cash impairment fees and write-offs of $232 million
• Adjusted EBITDA loss for the interval of $73.3 million, in comparison with an adjusted EBITDA lack of $45.9 million within the third quarter of 2021
• Administrative bills of $79.6 million and non-capitalized R&D bills of $27.7 million, in comparison with administrative bills of $52.2 million and non-capitalized R&D bills of $2.9 million within the third quarter of 2021
• Capital expenditure for the interval, together with tangible and intangible purchases, of $80.4 million, in comparison with $67.6 million within the third quarter of 2021
• In Q3, the money steadiness diminished roughly $180M. Primary makes use of of money had been associated to capitalized R&D and manufacturing facility spend, wage bills, working capital spend, analysis and consultancy spend, and different operational bills
• Cash and money equivalents of roughly $330 million as of September 30, 2022
• Shares excellent totaled 638,344,885 and weighted common shares excellent in Q3 totaled 634,246,242 as of September 30, 2022

Outlook

• Arrival expects to finish the yr with between $160M and $200M of money. Expectations for ending money contains roughly $35M in This fall for severance and retention associated prices, and roughly $40M for different restructuring prices
• The Company expects money readily available to fund the business into Q3 of 2023
• Limited assets and the engaging alternatives of the US market makes growing US merchandise one of the best use of capital, however this implies revenues and margins will come later; not in 2023

Going Concern
In August, the Company introduced plans to make use of current money readily available of then $513 million plus funds accessible via a $300 million At the Market (ATM) Platform to ship the primary automobiles to UK clients this yr, spend money on laborious tooling and launch the Charlotte microfactory subsequent yr.

Due to the present market cap and common every day buying and selling volumes, Arrival has opted to not entry the ATM to attain these targets.

As of September 30, 2022, the Company had current money and money equivalents of roughly $330 million. This steadiness just isn’t enough to cowl twelve months of operations.

As a end result, on October twentieth, the Company introduced a plan to restructure its business considerably to increase their money runway and to focus assets on a household of merchandise for the US market in addition to its enabling applied sciences.

Further funding stays required to execute this revised business plan, which requires decrease capital investments and is anticipated to supply increased margins upon manufacturing.

The Board thought-about that the corporate doesn’t at present have money readily available to fund operations for the approaching twelve months and that materials uncertainties about going concern stay after consideration of those mitigating actions.

The Board additional thought-about that the corporate is exploring all funding and strategic alternatives to acquire this needed funding.

Therefore, however the fabric uncertainties famous, the Board decided that the corporate’s unaudited monetary data introduced inside is appropriately ready on a going concern foundation and doesn’t at present see any changes that might end result within the foundation of preparation being inappropriate.

Webcast Information

Arrival will host a Zoom webinar at 8:00 A.M. Eastern Time at present, November 8, 2022, to debate its third quarter 2022 monetary outcomes and business replace. The stay webcast will likely be accessible on the Company’s web site at investors.arrival.com. A webcast replay will likely be accessible roughly two hours after the conclusion of the stay occasion.

Non-IFRS Financial Measures

This press launch contains Adjusted EBITDA which Arrival makes use of to evaluate the monetary efficiency of its business that isn’t a measure acknowledged underneath IFRS. This non-IFRS measure shouldn’t be thought-about a substitute for efficiency measures decided in accordance with IFRS and is probably not akin to related measures introduced by different issuers. “Adjusted EBITDA” represents earnings earlier than curiosity, tax, depreciation and amortization, adjusted for impairment of intangible belongings and monetary belongings, share choice bills, itemizing bills, truthful worth changes on Warrants, reversal of distinction between truthful worth and nominal worth of loans that acquired settled in the course of the interval, truthful worth motion of embedded by-product, realized and unrealized international change positive factors/losses and transaction bonuses. For a reconciliation of Adjusted EBITDA to Operating loss, see the reconciliation desk included later on this press launch.

About Arrival

Arrival’s mission is to grasp a radically extra environment friendly New Method to design, produce, promote and repair best-ever electrical automobiles, to help a world the place cities are free from fossil gasoline automobiles. Arrival’s in-house applied sciences allow a novel strategy to producing automobiles utilizing rapidly-scalable, native Microfactories. Arrival (NASDAQ: ARVL) is a joint inventory firm ruled by Luxembourg legislation.

Forward-looking statements

This press launch accommodates sure forward-looking statements throughout the which means of the federal securities legal guidelines, together with statements concerning the merchandise provided by Arrival and the markets through which it operates and Arrival’s projected future outcomes. These forward-looking statements usually are recognized by the phrases “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “positioned,” “strategy,” “outlook,” “future,” “opportunity,” “plan,” “potential,” “predict,” “may,” “should,” “could,” “will,” “would,” “will be,” “will continue,” “will likely result,” and related expressions and embody, amongst different issues, their 2022 outlook. Such statements are made pursuant to the secure harbor provisions of the Private Securities Litigation Reform Act of 1995 and are primarily based on administration’s perception or interpretation of data at present accessible. Forward-looking statements are predictions, projections and different statements about future occasions which are primarily based on present expectations and assumptions and, in consequence, are topic to dangers and uncertainties. Many components might trigger precise future outcomes and occasions to vary materially from the outcomes expressed within the forward-looking statements on this doc. Among the important thing components that would trigger precise outcomes to vary materially from these projected within the forward-looking statements embody, however usually are not restricted to: (i) the influence of COVID-19 on Arrival’s business; (ii) financial disruptions from warfare and different geopolitical tensions (akin to the continuing army battle between Russia and Ukraine); (iii) the chance of downturns and the potential of speedy change within the extremely aggressive trade through which Arrival operates, (iv) the chance that Arrival and its present and future collaborators are unable to efficiently develop and commercialize Arrival’s services or products, or expertise important delays in doing so; (v) the chance that Arrival might by no means obtain or maintain profitability; (vi) the chance that Arrival experiences difficulties in managing its development and increasing operations, (vii) the chance that third-parties suppliers and producers usually are not in a position to totally and well timed meet their obligations; (viii) the chance that the utilization of Microfactories is not going to present the anticipated advantages as a result of, amongst different issues, the lack to find acceptable buildings to make use of as Microfactories, Microfactories needing a bigger than anticipated manufacturing facility footprint, and the lack of Arrival to deploy Microfactories within the anticipated time-frame; (ix) the chance that the orders which have been positioned for automobiles, together with the order from UPS, are cancelled or modified; (x) the chance of product legal responsibility or regulatory lawsuits or proceedings regarding Arrival’s services; and (xi) the chance that Arrival might want to increase extra capital to execute its business plan, which is probably not accessible on acceptable phrases or in any respect; and (xii) the chance that Arrival is unable to safe or shield its mental property.

The foregoing listing of things just isn’t exhaustive. You ought to rigorously think about the foregoing components and the opposite dangers and uncertainties described within the “Risk Factors” part of Arrival’s annual report on Form 20-F filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 27, 2022, and different paperwork filed by Arrival with the SEC every so often. In addition, forecasts about future prices and different monetary metrics and our expectations as to our capability to execute on our present business plan within the close to time period and the long run are primarily based on quite a few assumptions we make, together with the next assumptions that Arrival’s administration believed to be materials:

• Operational assumptions, together with, the event and commercialization of Arrival’s automobiles, the roll out of Arrival’s Microfactory manufacturing areas, the manufacturing capability of Arrival’s Microfactories, the number of Arrival’s merchandise by clients within the business Van and Bus trade, development within the varied markets Arrival is concentrating on, common promoting costs and ensuing gross sales of automobiles
• The mixture of merchandise produced and bought together with corresponding prices, together with materials and part prices, meeting prices, manufacturing prices, and prices associated to product warranties. Many of those prices are forecasted to range considerably as Arrival commences manufacturing in its Microfactories
• Our capability to boost capital essential to execute on our present business plan and manufacturing timeline, together with the roll-out of our Microfactories, in addition to to take care of our ongoing operations, proceed analysis, improvement and design efforts and enhance infrastructure
• Capital expenditure is predicated on quite a few assumptions concerning the expenditure required to construct Arrival’s Microfactories, together with the price of preliminary arrange of manufacturing facility amenities and the price of manufacturing and meeting gear

In making the foregoing assumptions, Arrival’s administration relied on quite a few components, together with: its expertise within the automotive trade, its expertise within the interval for the reason that inception of the corporate and present pricing estimates for prototype automobiles and car elements in addition to the projected prices for first manufacturing facility areas which are already in improvement; its greatest estimates of the timing for the event and commercialization of its automobiles and general car improvement course of; its greatest estimates of present and future clients buying Arrival’s automobiles; and third-party forecasts for trade development. Forecasts of future monetary metrics are inherently unsure, and precise outcomes might differ considerably from forecasts primarily based on our assumptions underlying these forecasts at the moment.

Readers are cautioned to not put undue reliance on forward-looking statements as they’re topic to quite a few uncertainties and components regarding Arrival’s operations and business setting, all of that are troublesome to foretell and lots of of that are past Arrival’s management. Except as required by relevant legislation, Arrival assumes no obligation to and doesn’t intend to replace or revise these forward-looking statements after the date of this press launch, whether or not on account of new data, future occasions, or in any other case. In mild of those dangers and uncertainties, it is best to needless to say any occasion described in a forward-looking assertion made on this press launch or elsewhere won’t happen. Arrival doesn’t give any assurance that Arrival will obtain its expectations.

Media Contacts For Arrival

Media
[email protected]
Investors
[email protected]

Reconciliation of Net Loss to EBITDA and Adjusted EBITDA in USD (Thousands)

Note: The above desk displays approximate USD values in hundreds, with prior interval numbers being restated to USD (hundreds).

(1) Impairment losses and write-offs embody impairment of Arrival Internally developed intangible belongings which had been written all the way down to truthful market worth within the reporting interval, following a lower in firm market capitalization and associated share worth decline. Impairments additionally embody changes for lease areas now not utilized by the Group.
(2) During the prior interval ended September 30, 2021, on account of the conclusion of the merger with CIIG, Arrival issued shares and warrants to CIIG shareholders, comprised of the truthful worth of the Company’s shares that had been issued to CIIG shareholders, and in change, the Company obtained the identifiable web belongings held by CIIG. The extra of the truthful worth of the fairness devices issued over the truthful worth of the recognized web belongings obtained, represents a non-cash expense in accordance with IFRS 2. This one-time expense on account of the transaction, is recognised as a share itemizing expense introduced as a part of the working outcomes throughout the consolidated assertion of revenue or loss. Listing expense additionally contains USD $19.8 million of different associated transaction bills.
(3) Warrants are truthful valued as of the steadiness sheet date. The change in worth is recorded within the consolidated assertion of revenue or loss.
(4) Employee loans initially recognised at their truthful worth are amortized over the interval which they’re anticipated to be repaid. Employee loans, which get repaid/settled at an earlier date than what was initially anticipated ends in achieve within the consolidated assertion of revenue or loss.
(5) The Group has re-financed some loans given to workers in April 2022. As per IFRS 9 the the distinction between the truthful worth of the brand new loans and the carrying quantity has been recognised within the consolidated assertion of revenue or loss
(6) An embedded by-product is a part of a hybrid contract that additionally features a non-derivative host. The Company has recognised the embedded by-product as a part of the convertible notes issued in November 2021 which is truthful valued as at steadiness sheet date. There was no such motion within the prior interval of 9 months to September 30,2021.
(7) Following the profitable merger with CIIG sure government officers of the Group obtained a one time bonus. This is included in administrative bills within the consolidated assertion of revenue or loss within the prior interval of six months to June 30,2021.