Hello, everyone, and welcome to Arrival's fourth quarter and full year 2022 business update webinar. My name is Mike and I'll be your operator today. Before I hand the call over to the Arrival team, I'd just like to go over a few housekeeping items for the program. As a reminder, today's webinar is being recorded. After the speaker's remarks, there will be a question and answer session and if you'd like to ask a question during this time, please use the raise hand function located at the bottom of your screen. If you plan to ask a question, please ensure that you've set your Zoom name to display your full name and firm. Thank you for your attendance today, and I will now turn the call over to Arrival.
Thank you all for joining us today to discuss Arrival's fourth quarter and full year 2022 financial results and business update. I'm Annie Wechter, Director of Investor Relations, and today we have with us Igor Torgov, Arrival CEO, Mike Ableson, CEO of North America, and John Wozniak, CFO. Before we begin, I'd like to remind everyone that certain statements made on this call today are forward looking statements. These statements are subject to various risks and uncertainties and reflect our current expectations based on our beliefs, assumptions, and the information currently available to us. Although we believe these expectations are reasonable, we undertake no obligation to revise any statements to reflect changes that occur after this call.
Descriptions of these factors and other risks that could cause actual results to differ materially from these forward looking statements are discussed in more detail in our filings with the SEC and our fourth quarter and full year 2022 financial results and business update issued today on the 13th of March. During the call, we also refer to certain non-IFRS financial measures. This should be considered in addition to and not as a substitute for or in isolation from our IFRS results. For further information, please refer to our investor relations website at investors.arrival.com. With that in mind, I'll turn it over to Igor.
Thanks, Annie. Good evening, everyone. I've been in my new role as a CEO of Arrival for a bit more than one month, but have been with the company for just over three years. I know the business pretty well and have a clear idea of what needs to be done. The Q4 business results and current objectives for 2023 we will share with you today are extremely important to me. I have not accepted the role of CEO lightly. It's true that there is much to do to ensure we start production of our vehicles, but I'm confident we will clear these hurdles and get back on track. How do I know that? Over the last eight years, we developed a solid portfolio of progressive IP in electric vehicle hardware components and the software which integrates them.
Rapid vehicle design and prototyping framework and tools, advanced mobile robotics and new methods to flexibly manufacture high margin vehicles. We are steadily increasing our liquidity while further reducing the cost of running our business, as shown through our recently announced 50% global headcount reduction and in our recent announcement over $50 million equity capital commitment from Antara, which will also reduce our debt due. We believe we have a clear and compelling business plan to bring our technologies to the U.S., market through a purpose built van designed specifically for last mile delivery drivers. It's a product with a high level of commonality with our certified European L-Van , has a high margin profile and qualifies for IRA tax credit up to $40,000, making it ultimately a very strong contender for adoption by U.S., fleet operators.
By the end of March, we will be successful in achieving our goal for with regards to global headcount reductions as forecasted. What is most important is that we manage to retain key talent that allows Arrival to continue to innovate, improve, and refine our portfolio of key IP and technologies while we work to deliver to the business plan and vehicle program milestones. Our Bicester Microfactory team has been given the green light to continue building 10 vans for public road testing this year to accumulate 250,000 kilometers. The purpose of which is to further develop highly automated factory processes and integrate this with the company proprietary advanced mobile robotics. These activities will also help us to accelerate the development of the U.S., purpose built van and start production in Charlotte with many improved efficiencies already in place.
Mike will tell you more about this in a minute. Lastly, we're announcing the kickoff of a fundraising efforts to fund the U.S., production plan today. We're interested in working with investors whose belief and financial support will be necessary to complete the U.S., product development and start of production in the Charlotte factory targeted for late 2024. Before I hand the call over to Mike to talk more about our vehicle development programs, I want to emphasize that cash management is at the forefront of our business plan this year and remind you of a few of our key targets. Arrival had approximately $205 million of cash at the end of 2022. Subsequent to year-end, we received a capital commitment of another $50 million from Antara in new equity.
Through the same agreement with Antara, our largest holder of convertible bonds, we were able to reduce our debt by $121.9 million through a debt to equity transaction. The remainder of our debt is due in January 2026. In addition, today we are announcing an equity financing line with Westwood Capital, which will provide up to $300 million of additional liquidity to the business. With cash on hand and additional initiatives to reduce working capital we expect to have sufficient liquidity to fund the business into late 2023. As I mentioned, we are launching initiatives to raise capital specific to U.S., vehicle program. John will tell you more about those capital needs later on.
Lastly, today, we are also calling shareholders to a extraordinary general meeting on April 6th, for the purpose of voting to approve a reverse stock split of Arrival shares, as well as a proposed capital reduction. If passed, a reverse stock split is one important action that will enable Arrival to cure its trading price deficit with the Nasdaq and trade above $1 before our May 1st deadline. With that, I'll hand it over to Mike for updates on our vehicle development progress.
Thanks, Igor. Over the last few months, Arrival has spoken publicly about the need to significantly reduce our headcount and cash burn while we focus the business on our U.S., product strategy. The larger market size for commercial vehicles in the U.S., paired with higher average selling prices and margins and IRA tax credits of up to $40,000 per vehicle, create an extremely compelling opportunity for electric commercial vehicles in the U.S. Last quarter, we announced that we decided not to ramp production at our Bicester, U.K. facility so that we could focus our efforts on the U.S., market. Our first U.S., product will be a purpose built delivery van that we've designated XL. Our current plan is that the XL-V an will start production in the Charlotte microfactory in late 2024.
We haven't provided too many details about the XL- Van up until now, so I'd like to take the opportunity to tell you a little bit more about this program, which started development back in 2021. The XL- Van is a Class 4 commercial vehicle designed specifically for last mile delivery. Vehicles in this size category are typically too large to be manufactured by a traditional automotive OEM. As a result, the vast majority of vehicles in this class are built using an OEM chassis that is then finished as a complete vehicle through a second stage manufacturer. The complexity of this two stage manufacturing process results in relatively high prices for the finished vehicle. As we will be supplying the vehicle directly from our factories, the higher prices in this segment offer Arrival the opportunity to make a correspondingly higher margin.
Because of the high carryover components and engineering solutions from the Bicester L-V an to the XL- Van, we had a sizable head start on XL- Van engineering and design. Although the vehicles are obviously different sizes, almost all of the components for the low-voltage electrical and control system were carried over. Similarly, engineering solutions for body structure, interior closures, and some chassis systems were also carried over from the Bicester L-V an. We've obviously made improvements in some of the concepts based on our learning from L-V an, but the XL- Van design is well advanced, and we anticipate starting to release long-lead parts in Q2 of this year. As we've said previously, further capital specific to the XL- Van program will be required in order to invest in the supplier production tooling and complete the procurement and installation of equipment in the Charlotte factory.
However, with the flexibility of our manufacturing approach, we will be able to stage the investment in the factory as we ramp up production volume. Our layouts for the Charlotte factory are well advanced and have incorporated lessons learned from the Bicester factory. We continue to believe that our manufacturing method offers the most efficient way to match production capacity with demand, thereby maintaining competitive CapEx per unit cost, even at volumes significantly lower than a traditional assembly plant. While we work on securing investment for the XL launch, our production team in the Bicester factory will be building 10 additional vans by August of this year. The purpose of these builds is to further develop automated assembly processes and integrate these with the company's proprietary AMRs.
These vans will then be used to accumulate more than 250,000 kilometers of public road mileage by the end of the year to further validate Arrival's engineering designs and components. Given the high commonality of componentry between the XL- Van and the L-V an built in Bicester, this additional validation mileage will provide an opportunity to identify any issues well before building XL pre-production vehicles next year. We're looking forward to sharing more updates on these van builds and public road tests in the coming months. With that, I'll hand the call over to John for our financial results and outlook.
Thank you, Mike. Between the fourth quarter of 2022 and now, the company has taken many steps to ensure that we have the liquidity we need to run the business into late 2023 and raise the capital to fund the U.S., vehicle program described by Mike. I want to first recap a few of the initiatives we have put in place during this period. First, we launched additional cost control and cost reduction initiatives to further reduce the company's cash burn to no more than $35 million per quarter, which significantly reduces the size of investment required to fund the business this year. We will achieve this target through a number of initiatives. We are in the process of finalizing a further 50% reduction of our global workforce that will result in less than 800 employees by the end of March.
Through the restructuring process, the majority of our workforce is now in four locations and is primarily focused on bringing the XL- Van into production in Charlotte in late 2024. At the same time, we are simplifying our legal entity structure and reducing our real estate footprint. We have already exited a number of leased sites. We have also implemented stringent cost control measures in addition to the headcount reductions, which include a hiring freeze and a spending freeze, including restrictions on all new purchase commitments, which all require my approval. We expect to achieve this quarterly cash burn rate by the second half of 2023, once restructuring costs and some legacy commitments have been settled. Second, the company secured a $50 million capital commitment from Antara.
Antara has also agreed to exchange $121.9 million of our convertible bonds due in 2026 for equity, reducing our debt load by almost 40%. We will continue to consider additional opportunities to raise liquidity and reduce debt as they arise. Finally, today we are announcing an equity financing line with Westwood Capital Management, which provides up to $300 million of committed capital. There are two additional announcements I want to discuss today. First, we announced the calling of an extraordinary general meeting of shareholders to vote on a proposed reverse stock split and a reduction in the par value of our shares. A reverse stock split will allow the company to regain compliance with Nasdaq Global Market and begin trading above $1.
The EGM will take place on April 6th. Shareholders will be receiving a convening notice this week. It is expected, given a satisfactory outcome of the EGM vote, that Arrival shares will begin trading well above $1 by mid-April with a par value of no more than $0.01. I want to provide more details on the capital raise process we are announcing today in an effort to fund the XL- Van start of production in Charlotte next year. The company will be exploring a range of strategic options in the coming months.
This will include reaching out to potential strategic and financial investors in an effort to raise up to $500 million of capital to fund the following activities for our U.S., launch: investments in prototyping, supplier production tooling, the procurement and installation of equipment in the Charlotte factory, working capital for the factory and general corporate purposes. To fund the XL program this year and meet our start of production target date in late 2024, we will need to raise approximately $100 million-$150 million of the $500 million investment. Turning to our outlook, the XL funding activities are specific to driving start of production in Charlotte next year. There is no planned CapEx related to this program until dedicated capital is raised. We will achieve our $35 million burn rate by the second half of 2023.
The $35 million quarterly cash spend is primarily comprised of personnel costs related to the vehicle program and microfactory processes and the cost of support functions and running our facilities. With the available capital resources and additional initiatives to optimize working capital, we expect to have sufficient liquidity to fund the business into late 2023 without investments required for XL production. In summary, while we continue to improve our liquidity position, we require additional capital to complete the design and development of the XL product and start production in 2024. We believe the XL- Van is an attractive product for the following reasons. There are significant industry tailwinds in the U.S., due to the Inflation Reduction Act, which provides meaningful incentives to purchasers of commercial electric vehicles. The XL- Van has an ASP of over $100,000 and as a result high margins.
With this expected margin profile and the lessons we are applying from the development of the L- Van and Bicester, we believe we will be able to achieve cash flow break even once production in Charlotte is fully ramped. I will now turn the call back to Igor for closing comments.
In closing, the fourth quarter was an active quarter focused on proactively taking steps to increase liquidity to provide the foundation to run the business while raising funding for the XL- Van program. We know we had failed to deliver upon our milestones and promises in the past. The board and senior management team are razor focused on driving efficiency in the organization, including placing priority on a product which has very attractive attributes from a market penetration and cash flow perspective. We are 100% committed to winning back confidence in Arrival and believe that the significant amount that we have already achieved, the new steps we are taking, and the streamlined organization mean that we are now set up for delivery. It's through the execution of our business plan that will build back this confidence.
Since we now have the liquidity on hand to run the business operations and demonstrate we can put another 10 vans on the road in the U.K., we are optimistic that we are able to strengthen our investment case for the XL- Van raising efforts. We have appreciated the patience and continued support from the markets, our suppliers, shareholders and bondholders as we establish the foundation for the 2023 year. I'm also personally appreciative of the trust and support I've received from the Arrival board and many employees as I've taken on this great responsibility at a critical time in Arrival's history. Thank you. With that, we will move to Q&A.
As a reminder, if you wanna ask a question, please use the raise hand function located at the bottom of your screen. Once you've been called on, you'll have the ability to unmute your audio. Our first question comes from Jeff Osborne at Cowen. Jeff, your line is open.
Hey, thanks for taking the questions, guys. A couple on my end a lot of moving pieces here to sift through. I was wondering on the Antara proceeds and the equity financing established with Westwood, that's up to about $350 million to run the business, which is great to see. You also stated that the liquidity should only get you into late 2023. I was wondering if you could sort of walk through the timing of those cash flows, in particular the Westwood component would be helpful.
We, you know, we previously disclosed the Antara Capital commitment. That $50 million of Antara is committed in the first half of this year. We already executed on $25 million of that upon signing of that transaction, and we do expect the second $25 million to hit before the end of the second or first half this year, so before June 30th. Westwood, the way we think about Westwood is it's a, it's a very good product for us to have because it does provide us access to the capital markets, and it does provide liquidity to the business. Jeff, you know, that's the type of product where the amount of capital that you can raise in any given month is going to be determined by the market volumes and the share price.
We've taken a rather, what I would say, is a very conservative view right now of how much capital we can raise under that product. What, what our hope is that it will become more meaningful over time, particularly as we execute on some of the milestones that we've laid out this year, around building vans, getting miles on the product as well. Of course, as we start our more fulsome capital raising initiatives and we start to get a capital specific for the vehicle program, we expect, honestly, that the ELOC will become a more meaningful product for us. It's good to have, it's a backstop, but we certainly don't wanna rely on that. That's why we've provided the guidance that we have.
Got it. Thanks, John. Just a couple others on my end. I was wondering if you, maybe Mike, can provide more details on why you selected the XL- Van for the U.S., market and, you know, maybe why 10 is the right number to produce the Arrival Van in Bicester, you know, versus five or 20 to help you accelerate that production timeline. Is there something unique about XL in the U.S., market? You know, whereas the smaller van might not have been a great fit for the U.S., but maybe it was more conducive to Europe.
Yeah, absolutely, Jeff. You hit on one of the primary reasons. The XL- Van is of a size that it's very common here in North America. It's not very common at all in Europe. The XL- Van is similar in size to sort of the large UPS or FedEx vans you might see rolling around in your neighborhood. You know, the opportunity in the XL- Van segment with the higher prices that we talked about, with the IRA that we covered, with relatively little competition, honestly, when we look at the segment, and especially with the advantages we feel like we can bring, given all of the vehicle development we did on the Arrival Van and the process development.
That's where the 10 builds in the U.K., become important and is the rationale behind us continuing with those. I mean, as you saw in the pictures and in the background that we have behind us, the vans are very similar. The smaller van, the L- Van, and the XL- Van, which is the one that we'll bring first to North America. They're similar not just on the product side, but on the process side. These builds in Bicester we can use to further develop the processes that we'll be using in Charlotte at the end of next year when we start production there, including, you know, completing the integration with our AMRs, which are proprietary with Arrival.
Once we have the builds, because of all the commonality between the two van types, on the product side, we can use those vans to do a lot of validation and development work. I'm especially interested in getting some high mileage durability, because that takes time and, you know, it takes a fleet of vehicles some number of months to accumulate that sort of mileage. It's extremely valuable information, and it's valuable getting it so far ahead of start of production of the XL- Van. These L- Van builds I think are gonna be a huge benefit to us as we look forward to the XL start of production next year.
Jeff, I'd just make a couple of comments to follow on to that. You know, first of all, part of the reason, you know, we looked at the XL product as well is the investment required to get it into start of production is actually a bit lower than what we would have needed for the L- Van. I talked today a little bit on our pre-recorded comments that we needed about $500 million to raise for the XL program. If I really break that down, think of it as we need about $200 million to complete the prototyping for that product, invest in the microfactory, and invest in hard tooling for the program. We're going to reuse some of the CapEx that we have in Bicester.
We'll be able to ship that over to the U.S., and install it in Charlotte, so that minimizes some of the impact there. The tooling investment is a bit lower for this product than what we had previously talked about for the L-Van, and that's due to the fact that the volumes will be different. It's a lower volume product, but it has a very, very high margin. As we looked at the investment case for the XL product, it was a combination of factors. It required less capital investment, and it, you know, carries a very attractive margin at much lower volumes. It gives us the opportunity. We're not giving up, for example, on, you know, a next generation delivery van that's of a smaller size.
We just think that given the market dynamics in the U.S., this is the most attractive product to bring to market first in the U.S.
Got it. Maybe one last one here for Igor. Look forward to working with you in your new role here. You know, you mentioned hitting the sub 800 employees here by the end of March, which is great to see as it relates to hitting that cash burn target. I think at the peak you had, like what, 2,500 employees. I'm just curious, with the 800 or so that are left, you know, how do you think about what they're focused on? Are you migrating away from software? You know, that used to be the pitch, you know, a year and a half ago, was around the microfactory itself.
I'm just curious, you know, how if you were to sort of bucketize the 800 employees that are remaining, what their main day to day function is. I think John also mentioned that they're in four locations. If you could share where those are, that would be helpful.
Yeah, Jeff, thank you for this question. I mean, we basically internally split this into five key buckets, and the biggest one is our vehicle programs. Here we have about 31% of the talent. The majority, the vast majority is focusing right now on XL- Van. We also have a very small team that are thinking about future products for Arrival. This is right now, very, very small team. The second largest, we have our technology components. I mean, that, I mean, we referred previously as Arrival Elements.
That is the team who are developing the hardware and also software that allows to integrate those components together and provide actually continuous integration or a kind of continuous integration and continuous development when we will improve on the components. Our new strategy assumes that this group provides software to integrate not only our in-house components, but some of a third party components that we may choose to optimize on the cost of our vehicles. The third we have what we call robotics or robofacturing. This is about 21% of our entire talent.
this team will continue to focus on the software development for our new method of assembly, and also, integration of a software with the technology cells and other equipment. We have about 40% in a central function because we continue to be a public company, and we need a proper support of all requirements and also run the business from legal, finance, talent and other perspectives. Finally, we have about 11% in digital IT. Here we also, I mean, got some additional optimization, and we made a decision to put several products on hold.
Not I mean, to stop them completely, I would say, from strategic perspective, but put them on hold for a while to reflect on our updated strategy and business plan. That basically, I mean, how the current almost current 800 people are allocated.
Jeff, the significant locations, it's the U.K., continues to be our largest location. Obviously, the U.S., we have a large development team working on the XL product. Our technology team is, you know, primarily based in the U.K., and Georgia. Georgia is a location for us as well. We have very good robotics talent in Germany. When we reference four locations, those are the four primary locations I want you to kind of focus on. In addition to that, I would say we've not obviously given up. I think you referenced our production method. In fact, the flexible manufacturing method, the low CapEx manufacturing method is still the core of our advantage as Arrival, and we will be in production in Charlotte using that method.
That is largely software driven, and that's what's unique about our method, is that the factory itself is really a software defined factory, as we've, you know, referenced on many calls prior to this.
Yeah. I would also would like to add that, despite, I mean, pretty significant, redundancy that, we went through last, two months, I would say that we were lucky, and we managed to keep the key talent, in all, areas that are, crucial for, Arrival success. I mean, we, managed to keep, key talent in vehicle programs and components and robofacturing and in digital and IT.
Perfect. I appreciate the thorough analysis there and walkthrough. That's helpful. Appreciate it. That's all I had.
Thank you.
Thanks for your question, Jeff.
Thanks, Jeff.
All right. With that, we wanna thank everyone for attending. This is gonna conclude today's conference call, and you may now disconnect.