Aurrigo International plc (AURR.L) Earnings Call Transcript & Summary

Okay. We've now got our last presentation of the evening before the bash, and it's a company called Aurrigo, another new company. We've not had Aurrigo on the show before. So welcome to them.

Hi, David. Thank you very much, and thank you to everyone.

Yes. Welcome, David.

It's great to be able to present the company. So let's see if I can just shut down the previous presentation I'm not sure whether I can actually.

Actually we'll do it for you.

There we go. Let's try that. And let's try that. Let's hit that. Right. Is that good? Can everyone see that?

Just waiting for it to come through. Yes, perfect.

Fantastic. Okay. Great. Thanks, David. Yes. Thanks for everyone staying on. I know it's been a long session, but really interesting. It's been my first session to Mello and have a listen to everyone. My name is David Keene. I'm actually the CEO, but I'm also the Founder of the company. And I founded the company back in 1993 and at that time we were, and still are actually, an automotive high technology company supplying the rights of Jaguar, Land Rover, Aston Martin, Bentley and people like that, but we are high tech. My background is in electronics and it was only set up to be high tech in automotive and that technology in terms of electronics and software development has meant that 11 years ago we moved into autonomous vehicles and at that point we were doing passenger vehicles, off road, low speed passenger vehicles. Very shortly after that we had a call from International Airlines Group saying, "We really love what you're doing, but we don't want vehicles. What we want is, can you move baggage and cargo around the airport?". And that's what we began doing in 2018 By 2019 we'd won the best innovation award for technology at Heathrow that year. Very shortly after that we were approached by Chinese, Singapore Airport and started working with them. By 2022 we listed on the same market and since then, as you can see in the top-left here, we've become the leading international provider of these technology solutions and our competitor base is very small. It's actually 4 or 5 companies globally and we are the current leader. Our vehicles are the #1 vehicles in terms of ability and solving the issues that the airports want and we'll do a little bit more of that in a little while. We've grown since we listed from 48 employees to 107, and I think we can do more with 107 employees than companies can do with 1,000. We have very strong engineering and we're very technically skilled and we've now -- we have offices and teams headquartered in the U.K. in Coventry. We have an operation in Cincinnati in the U.S., in Ottawa in Canada and we have quite a reasonably large team in Singapore supporting customer work. And we're really leveraging that 32-year heritage of technology and automotive to bring a different viewpoint and to bring these innovative and complex automotive product skills that we've got into the Aviation industry. So solving long-standing challenges in the airport arena is really important now and is gaining massive momentum. So improving safety, operational efficiencies, a very big green agenda, sustainability targets and also big problems because since COVID, people have gone off to do other jobs. Working on an airport on the tarmac airside is very challenging. You can be in very cold weather, you can be in very hot weather; and so bringing people back to work in that environment is tough and of course everyone thought that people wouldn't travel by air post-COVID, but in fact they're now travelling more than they did before COVID and those growing passenger volumes are causing increased pressure on labour shortages. We went to market, as I said, in 2022. We only had 1 customer, that was Trinity Airport, we now have a nice portfolio of very well-known airports and companies and projects running with all of those. And over the -- I'm not going to talk about our financial numbers in this presentation too much because actually we're only about 2 weeks or so away from issuing our final results for FY '24. But we did put a trading update out recently so I can talk about some of these and we've moved significantly in the growth in our aviation revenue from what were very relatively tiny numbers on top of our automotive revenue to about GBP 2.9 million additional revenue last year in aviation. We have, by our analysis, there are over 700 airports globally that would benefit from our products and technology and this is a huge market and the same problems in terms of passenger volumes rising and increasing labour shortages is exactly the same in the U.K. as it is in the U.S. or the Far East. So this is truly a global market and predictions circa 20 billion of airport automation will have happened and be happening by 2032. And as a small company at the moment we are right in the heart of the transformation that's going to happen with baggage and cargo systems. So let's just focus really on Aviation. Everything you see in this presentation, we do everything. So we develop the vehicles, we build the vehicles here in Coventry at our manufacturing facility, we write all of the embedded automated driving software for the vehicles and we also produce some other products, which you'll see in a short while. And as you can see our brand, the Aurrigo brand, has come from nowhere in this space in the last 2 to 3 years to the point where we are being recognised as the leaders in next generation of ground support equipment. So it's a growing market. As I said it's a GBP 19 billion market projection growing very quickly and we're in the heart of it with this 700 airport opportunity. We are not doing any outbound market work. We're not trying to sell to anybody. In fact, we are pretty inundated with inquiries that are all inbound who are very interested about what are we doing, how are we doing it and how that could improve airlines or airport operations. And also they're very excited about we now have reference sites around the world, so we're taking visitors to our operations in Singapore and in Schiphol and in Cincinnati and showing them actual real vehicles operating in real environments. And that market is changing very rapidly. The Baggage Innovation Working Group and BOOST which you can Google and have a look at now contains approximately 150 airports and airlines who are all looking to adopt new technologies and share and learn with each other about how they can adapt these technologies as quickly as possible. And again, we are members of Baggage Innovation Working Group and so we're presenting to these airlines and airports every 8 weeks or so in terms of the progression and what we're doing. So what does what does that market want? It wants Operational Efficiency. Automation brings that. It reduces human errors and improves safety in airport operations. But it also reduces the cost of errors. There is a high degree of cost associated with humans driving into aircraft, and those aircraft that are then taken out of the situation have to be replaced by other aircraft and that leads to all sorts of things, and not least customer dissatisfaction about getting from A to B. I've already touched on labour shortages. It's a huge staffing issue and there is also a high turnover of staff. Environmental regulations have been coming in for some time and they're now really hitting the airports, so you'll have seen -- if you look at some of this and you go to airports yourself, you'll see that the need to replace diesel-powered equipment with electric ground support equipment is now almost being legislated certainly in Europe and they are being looked at across the world. And then integration of Learning and AI. People throw these terms around quite a lot, but to have a machine that can then run under a platform that can control it and optimise where those vehicles go, how they operate and the least amount of time and the most efficient uptime is a really important thing and automation brings all of these. So what makes us different? And it's really basically down to our cutting-edge technology. So in the vehicles themselves they use a series of sensors and our software systems to make sure that those vehicles can operate in an airport environment. They're not operating very quickly and they're about 25 miles per hour, which is the same speed as any of the current equipment but they operate that with a sense of knowing where they are, what they've got to do, not bumping into each other or any of the other equipment and navigating those complex environments. We are the only company worldwide that is currently allowed and signed off for our vehicles to operate right up to the aircraft and that is docking with the aircraft. The competitors are only allowed to stage on the apron away from the aircraft and that's a testament to the amount of effort and capability and skill set that we have here in the company. We then have some products, Auto-DollyTug, which I'll show a bit more in a minute. It's a unique vehicle. And it combines all the features of the current baggage dolly, but it allows one of the containers, the aircraft containers that holds your bags to be carried on its back as well as being able to tow 4 containers behind it. And it also comes with some really key features that really automate the end-to-end process of loading and unloading an aircraft. Recently, we've just released our Auto-Cargo vehicle, and this is a unique vehicle really transporting heavy cargo loads. And again all of these vehicles are zero-emission. We have a product called Auto-Sim, which is developed to enable 3D visualization. It's a digital twin and we'll look at that in a second. And then the safety protocols, and the fact that we've been independently third-party tested for our operational safety and our cybersecurity on our platform means that we can provide a reliable and predicted operation, because let's say that airports and airlines are very conservative people and they wouldn't bring machines into the airport if they didn't think they were reliable. And so we have passed numerous tests in numerous locations to enable us to operate. Our business model is really straightforward. On the first bit is Consultancy using the Auto-Sim, and that software allows us to show an airport or an airline how to visualize bringing in this technology into the airport without them spending huge capital amounts of money. They can plan that against operations today, they can plan it against operations in the future and they can see how they would implement not only electric vehicles, but also where they put the chargers, how many charges they need, what grid capacity they need and then what the effects of automated vehicles would bring to operational efficiencies. The second bit is obviously in the sales and initial deployments and scale up of our vehicles. And then, the really exciting thing and where we're going in the future and we should have this sort of implemented and proved out by the end of this year is we have a platform that all of these vehicles connect into. In fact we will not allow any of our vehicles to operate at airports without it has our connected platform for the vehicles to protect them i.e. [ a cybersecure ] platform, which then connects into the airport system, but that platform is a bit like Uber. So if we pick up a container and we move it from 1 location to the other we get a SaaS recurring revenue from those movements. So we will be the Uber of airports globally. So a bit more on Auto-Sim, is a visualization of what it looks like. It is a full 3D digital twin modeling tool. It enables you to put a flight board in so all of the flights and all of the different carriers, all of the equipment that is used to service the entire aircraft. So not just our vehicles and how they might interact with the aircraft and the baggage tools, but actually how they interact with everything else that's coming to the aircraft. And if you've ever looked at the window, which I'm sure most of you have, is a busy old environment out on the airport apron. Lots of activities have to be done, whether it's cargo or baggage or whether it's clean water or refueling or whatever. In our simulation models that we're running at Changi Airport in Singapore, we're modeling up to 58 different vehicle types, including catering wagons, et cetera, that are coming to the airport and going to the aircraft and being scheduled. So it's a really huge tool, and we've developed this from scratch. This is not based on anything. We've done it from scratch. And every customer location is running Auto-Sim. Then there's the vehicle itself, Auto-DollyTug and you can see in the picture it's carrying what's called a unit load device, which is a ULD. Those device -- those containers are loaded into the belly of a wide-bodied and narrow-bodied aircraft and they carry about 30 to 40 of your bags and they're that funny shape obviously because they need to fit into the shape of the lower hold. This is a unique vehicle. There is nothing like it in the world and it has been built out by listening to the customers that we have and working with the customers and asking them what features would you want to make end-to-end baggage and cargo functions as seamless as possible. And so this vehicle it not only drives forwards, it drives backwards, it rotates on the spot, it will drive sideways both left and right, it has robotic arms that will grab a container and drag it onto the bed and automatically lock it down. It'll operate in a baggage haul, under tunnels, along roadways, as I said right up to the aircraft and it's unique and we're building them right here in the U.K. We have plans to scale up production in the U.K. and also in a couple of locations around the world, but this is a unique product developed by a British company. And then the product that we've just launched only a few weeks ago. We've benefited a lot from grant money from Innovate UK and the Centre for Connected and Autonomous Vehicles and to date we have won in cash terms nearly GBP 20 million to help alongside the funding that we've got to develop all these vehicles over -- and technology over the last 10 years. And this is a great example where we have partnered with UPS, we don't really need any introductions, and we've partnered on a program supported by the government where they're paying 60% of the project costs on gear to develop a vehicle that suits UPS's cargo requirements. As a matter of fact, it suits all sorts of cargo requirements for cargo operations around the world but we've developed this with UPS. The first vehicle's been built, it's real and it can get delivered to UPS's U.K. cargo hub, which is the second biggest in the U.K., which is based at East England's airport. It will then go through a series of tests from now towards the end of the year and we're very hopeful that this vehicle will do what UPS want. And if that's the case then UPS will look to implement this vehicle at locations that it has around the world, and that's a lot of vehicles if we can get to that point. So the interesting thing about the UPS guys is that, and I didn't know this myself, but everything out of North America that is wheels on the ground like the brown UPS vans that you see delivering parcels or these type of vehicles that are servicing aircraft and cargo operations is all administered and headed up by the U.K. and the head of that department is the person that's personally working with me to lead this project. So that is an exciting opportunity for the company and we're one of the biggest, if not the biggest, cargo operators in the world. So we have competitive advantage. We're first mover, we're pioneering, we're developing these airside vehicles and we're ahead of all the major competitors we have, even though some of those carry very big brands that they've had for many years, but we're ahead of them. We've got the right products and we've got IP protection. So we have a patent and IP portfolio, which is extensive. When we listed in 2022 in September, we had an independent valuation of GBP 16 million worth of IP, and we have substantially increased that IP since we listed. We've got proven products -- sorry, proven pilots at several airports now around the world and we've also signed some key partnership agreements and they are there not just for testing vehicles, but to look at how we work with those customers to bring this technology in over the next weeks, months and years, such that they can automate their airport and operations. And of course, all of our vehicles are zero emission. We don't build anything that isn't electric. And so we're right there in the heart of being able to sort environmental issues that the airports have got. Because we do everything right now, we design it, build it, deploy it, run the vehicles, we're able to customize and get unique solutions if we need to. But it turns out that the vehicles and the technology I've just shown you, actually is pretty much the same vehicles and same tech that is required in every location around the world. So we're not finding, we're going to go to an airport and having to keep twiddling or fiddling with the product. It's the right product for all locations. And we've got great experience. We're a 30-year-old -- 32-year-old actually, company. We've been working in already highly regulated, complex environments, managing very complex supply chains and developing and manufacturing products for the highest quality for -- and excellent reliability for the automotive industry for all of these times. And we're now applying all of that into the Aviation sector and coming at it with a different viewpoint and one that is being really appreciated by the customers and the people we're talking to. So we've got real momentum, at the moment. We've got great progress with the customers. And we've just launched -- sorry, we've just announced our latest partnership. We've had a vehicle running at Schiphol Airport in Holland for some many months now. And Schiphol has a commercialization arm called Aviation Solutions. And they won't move to commercialization of any of the tech that they have on the airport unless it's been tested and can be formally approved. I'm pleased to say that a few weeks ago, that approval was formally released. And Aviation Solutions are now able to approach the 60 or so airports that they already deal with. And you can go on to Aviation Solutions website, you'll see us on there with our products. And so Auto-Sim, also Auto-DollyTug, we're now effectively under the umbrella of the Royal Schiphol Group, enabling us to be taken into these airports and discussions being had about how we implement it, and also demonstrating at Schiphol. As I said, we've got the most advanced vehicles and we continue to advance the functionality from feedback from earlier trials and indeed the trials we've got. And we wouldn't have robotic loading and unloading if we hadn't been taken down that route by the customers who are embedded into what we're doing. And even at Changi, the operation of the vehicles in severe, heavy downstorm rains, it just rains as anyone who's been to Singapore knows. And those vehicles have to continue to run. And we are really the only company at the moment who's developed a sophisticated rain software algorithm that allows those vehicles to operate. In fact, the CEO of Changi Airport said to me, Dave, if you can't get these vehicles to operate in the rain, then we will not buy them and we're not going to go ahead. And so it was a great day when we demonstrated to him while he's holding his umbrella watching what we're doing. And that's what got us through to the latest large project that we have with Changi Airport. What we've also done is secured further funding. So we've had a couple of rounds of funding, but the last funding was late-2024. And really, that's been brought in to scale our activities, increase our headcount a little bit, particularly in our overseas offices. And we're now really well capitalized through this year and into next year to support that scale up in activities that we want to do. As I said to you, we've put out a Trading Update, we haven't got confirmed results yet, but they're in line with guidance for 2024. And actually, we're better than expected in our EBITDA loss, significantly better. And really, those significant increase in aviation sales has also been underpinned by solid performance from the Automotive division, which produces very good levels of cash, nice gross margins. And really, all of that cash is targeted along with investor money into doing what we're doing. So expanding the product range, bringing also cargo in, that gives us significant opportunity into the cargo market. And we couldn't have done better to get a great partnership with UPS. So in conclusion, what is the investment case? Well, the first real big thing is, it is a large global market. Every airport around the world that you have probably flown to has all the same issues, all the same pretty much outdated technology and the ways of doing things, and all of those could be improved by our technology. There's very, very strong market tailwinds. We're -- as I said previously, we're not going out and trying to bang on the door and sell these things. People are coming to us. Having established and trusted technology, we are one side of a coin. We are the guys that know about the technology, know how to build the vehicles, and know how to operate on the airport and get from the aircraft to the baggage haul and back. Our partners are the airlines and the airports who know how to run airports. And together, in those partnerships, that is a very compelling proposition. And what you will see going forward is more of those partnerships as we bring our tech and the operators together. We've got technology and differentiation. We've got the best vehicle. It's got the most features. And those features are all required for operation in the future world of Aviation and operations in Baggage and Cargo. And we've got a scalable business model. These vehicles, they're the same vehicles going into all locations. And the same technology can run. So it's not like we're customizing anything. And more importantly, we've got a very, very experienced team who have extensive experience in aviation, automotive engineering, and also manufacturing and scale-up. All of our Board are shareholders and have paid for those shares. They're committed to the company. Myself and my brother are the biggest shareholders in the company. And we are totally committed to the company. We've actually never taken anything off the table ourselves in terms of any of the funding raises. And when we floated, we also gave shareholdings to all of the employees. So although we're a public company, we're still a very tightly-knit family company. I regard everyone as my family. And that enables us to deliver what larger companies really can't do. So the next time you are looking out the window, and you see out the window of a plane, and you see lots of people driving around with technology and vehicles and trolleys and all sorts of equipment that hasn't really changed in 40 to 50 years, just think to yourself about the transformation in what's happened in warehousing automation. How do you get your Amazon parcel within 2 hours or the next day? Think about automation that's gone into ports, Singapore ports, for instance, totally automated. And then look out that window and see all those vehicles and think how that could be automated. And that future is not that far away. So that's us. I hope that's given you an outline, and thank you very much for listening.

Great. Thank you, David, and good to hear about a new company. So Margaret kicks off, the questions are quite a few. She says, a very interesting suite of products. Is the company going to need an equity fund raise though to finance scaling up the business?

Well, the answer to that is that we've -- and thank you for that question, by the way. The answer to that is that right here and now, the answer is no because we're at a point now where any contracts that we're going to do in terms of supplying vehicles or even technology into these customers, they are very used to paying a proportion of that contract upfront. And so we move from cash drain to cash generation. So given the scale that we're moving at the moment, I don't currently see the need right here and now to do any fundraise. We're very well capitalized at the moment. But who knows, if we were absolutely inundated with inquiries and we needed to do something, then perhaps we would look at that. But right now, no.

Yes. Now Martin asked what is the current state of play with the Auto-Shuttle? Is this still being marketed?

The answer is yes, Martin, it is. I didn't want to confuse everyone because if -- on these presentations when you introduce things. But the Auto-Shuttle is definitely still part of our product portfolio. And we have moved from previous trials where we've been on road trying to do sort of a passenger transport facility within cities. We're now moving that Auto-Shuttle airside. So there is a large requirement to move personnel around an airport. And actually, they already use their own mini buses and transport systems airside. So I think what you'll see coming up reasonably soon is you'll see our Auto-Shuttle starting to operate within the airside environment. And then, and just for people who don't know the Auto-Shuttle is, it's a 10-seater vehicle that will drive 10 people around autonomously on a route and drop them off and pick them up. And the reason we're really focusing on airports rather than on road, road is really difficult to do. You need billions of dollars. And people might be on this call thinking, well, are these guys just raising a few million and doing all this? Well, the answer is we're laser-focused on not being on road. On road is super difficult. But if you go to an airport, which has got rules, regulations, it's got a tight -- very tightly confined -- defined operational domain and the speed of the vehicles going around is relatively slow, then it's a perfect, absolutely perfect location to deploy automated vehicles.

Very good. Now Leslie asked, how critical are strategic partnerships for accelerating growth? Are there any key partnerships or developments we should look out for this year?

Well, my whole strategy is moving into key partnerships. We've already signed 3 of those. And it's no doubt that if you want to move into this market quickly without raising billions of dollars, then you need to do it with partnerships. And also, those partnerships give you credibility. So I explained in the presentation about the Aviation Solutions. They look to commercialize things that they've developed with suppliers or themselves at the airport. And instantly, if you can win that, you get put in front of 60 -- 60 or so airports. So I think you will see more partnership deals coming along because also we might not want to manufacture hundreds of vehicles ourselves. We might not want to do the deployments ourselves anymore. So now that we've got the technology to a point where we understand it ourselves end-to-end, you can start to see that we could break down some of this operation, partner with different people to help us execute it, and then partner with airport groups or airline groups. So that's how we're going to do this, and that's how we're going to do this quickly at a reasonable cost level.

Yes. Now Wayne wants to know what's the price per vehicle and the margins?

Well, Wayne, that's a very good question. And unfortunately, that's commercially-sensitive. But what I would tell you is the vehicles are competitive. So if you look at the business case of what we are doing, how we're doing it and how efficient we might be doing it and you work all those numbers out, it actually works out really nicely with a very good return on investment. So approximately, if an airport was to use some of these vehicles do some of the operations, you're talking about probably a 3-year return on investment. And in terms of margins, if there's one thing I've done over 32 years is make money. So I know how to get some of these vehicles, so we've got good profit margin, both gross and net. And certainly, the programs that we're working on at the moment are starting to move into that profitability in terms of those individual projects. But of course, we're still scaling all of the operation and the people. So that's why we've got the funding.