Aurrigo International plc (AURR) Earnings Call Transcript & Summary

Thank you, Ian. That's great. Right. So let's just have a quick look at outlook. And I'm going to start in the middle of this slide because a lot of the company is foundationally running around the Automotive business because not that's really the super future of the business, but the technology, the direction of Automotive, and we're not in nuts, bolts and swarf and bits of metal. We're in the very high technical end of delivering very high quality and in some cases, safety-critical components to the automotive industry. And to do that, you need to be an exceptional supplier and have all the systems and the quality systems and reliability systems backing you up. And that is paying dividends in our Aviation products and our aviation customers who can rely on us that we're not just two students out of a university in California that have built something up. We're a proper company that has spent decades knowing how to deliver highly complex systems. So that all goes down well. The fact that we have a strong balance sheet, the fact that we have a really good shareholder base and the fact that we now have the business location and the facilities to deliver are all now bringing to bear in the growth side on the left-hand side. And I haven't put all the customers in here, by the way, for all the sections. But -- you know some of the leading ones that we've got with Changi and Swissport and UPS and Cincinnati and Schiphol, et cetera. As Ian said, we haven't lost any of those customers. All those programs are still running. We are very deep into those programs. And I can tell you some very exciting results that we've got and operations that are going on, and we should be able to report hopefully soon on where we are on some of those programs. And hopefully, you should see some news flow coming out over the following months. And what's really important is to be involved in the ecosystem. We are not just a company that invents things, throws it at our customers or just spins around on a technical angle. We are the company that deals directly with the policymakers, the decision-makers, the insurance people, the legality of all of this. So you can see names there, Civil Aviation Authority. I was with them yesterday talking very deeply as to how we bring systems like this and products like this into the U.K. We deal directly with the FAA in the U.S. exactly the same way, CAAS, CAAS there, Civil Aviation Authority Singapore, we deal directly with them. In fact, they're actually a customer. And then organizations, world organizations like IATA, where we're on the technology committees, where we're telling all of these organizations about what we're doing, how we're doing it and working with regulators to make sure that we -- once regulation comes in, we are at the forefront of that and quite honestly, making sure that the high bar is higher for anybody else to come in, and that's really important in everything we're doing there. So what have we got going forward? Well, we still have a large global market. And in fact, that market is actually increasing as new airports, in fact, lots of new airports come online. We calculated 700 or more airports that would have a beneficial business case to adopt the tech. And now on top of that, we now have -- obviously, we've got Automotive, but we now have this defense market opening up. And actually, in the U.K., defense market is opening up to smaller technology companies. If there's one lesson that has been learned from the Ukraine-Russia war currently is that speed and reliability of speed and change and being able to develop things at pace with ingenuity and entrepreneurship is really important. And you can find that in the U.K. in smaller technology companies, and we are one of those companies. So there's been strong market tailwinds for some time, and these are just getting bigger and bigger. And again, defense, when we talk about defense, we talk about our many aspects. But of course, the RAF and other flying organizations around the world, they all have their own airports, and they all have to move things around on those airports. So we've got such a cross-cutting suite of products and technology, this defense market could be considerably large for us. We have a track record of innovation and R&D and commercializing those, and that's super important when these are products and systems that need to be of the utmost accuracy and dependability and you need to be relied on, and we need to position ourselves to show that people can lean and rely on us to develop and deliver these critical systems. But you've got to be differentiated in your technology. We're not a me-too company. And I think we've demonstrated to our customers and people that are talking to us how we can really help our customers to move forward into the future with some high-tech solutions. We've built everything right from the start, and we continue to do so on a scalable business model. We launched the hub strategy. We have brought on investors who can scale this business with us. We've got very advanced discussions in the U.S., in the Middle East and the Far East in terms of how that hub strategy would be deployed and who would be working with us and coming on board with us, which is super exciting as well. And then we've got a very experienced team, and we've added to that experienced team. So we brought in Mark Gower, who is now Director of Autonomous Global Deployments. Mark was heading up Gatwick Ground Services, 1,300 employees GBP 60 million, GBP 70 million turnover business wholly owned by International Airlines Group. He's joined us because he's driven by this passion to bring autonomous vehicles into airport operations, and he knows on the ground how to do these things. And that's a really important thing that we have additional people joining the company now. And please keep a look out because I would imagine more would be coming in the future. So I think that's a quick but solid update of what we've been doing in the first half of this year. We're well into the second half of this year, which is super exciting. And I'm looking forward to providing you a further update as we go into the new year. But for now, I'd like to say that's our presentation over, and I'd like to hand back. Thank you.

[Operator Instructions] I'd like to remind you that recording of this presentation along with a copy of the slides and the published Q&A can be accessed dashboard. As you can see, we have received a number of questions throughout today's presentation. David, can I please ask you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end.

Yes, absolutely. Right. Here we go. So Richard, thank you very much for your question. What margin profile do you believe the Autonomous business can achieve at scale once production volumes increase and the investment in manufacturing capacity is fully absorbed? Yes. So short question requires quite a long answer, but the short answer to it is there is a very limited investment other than getting the buildings themselves into the manufacturing capacity. So we're not building a production line. We're not investing in a huge amount of capital equipment. All of the vehicles will be built on a cell-based process, which is quite common for lower manufacturing build capacity. So each cell is multi-variant. In other words, you can build different vehicle types at each cell and you have a cell team. So to manufacture up to those 500 vehicles, we're not going to be investing hundreds of millions of pounds into that. So that's the first thing. In terms of margin profile, well, the answer to that is what I'd really like to do with the business is I'd like to transition the business over the forthcoming years into a much higher margin profile business. We already get high margin of our consultancy work, of our Auto-Sim and anything to do with software, you're talking 90-plus or more percentage gross margin on those type of projects. And we're talking 45% to 50% gross on anything we do with vehicles. So if we, through the hub strategy can transition the business into more where we're developing product and we're developing software, but we're sending that product out for someone to build that product and deploy it for us under license. then the licensing revenue, the software revenue should be much higher margin. So really, that's my answer to you. It's all about transitioning the company from where we are now to more software and licensing as we scale this around the world. Second question, Alan B, current monthly cash burn rate, what is it approximately? Well, that's not something we can go into on this call, Alan. But I think if you did a little bit of simple math on what cash we had at fundraise back in October, November and the funds that we are showing at the end of June, you should be able to get roughly what our cash burn is. Stuart A, please, could you tell me the ownership details of the new building? Are you tenants or do you own the freehold? Thank you, Stuart. Well, we're tenants. We don't own the freehold. We took the building over from a previous tenant. They had a 15-year lease, and we literally stepped into their shoes with some very smart negotiation, but we stepped into their shoes. So we have the remaining 7-year lease on that facility. Stuart A again, can you explain more about your Dubai office? What are your plans there? Yes. Well, the answer to that is there is a lot of activity, as you probably might guess in the Middle East in terms of -- let's just put the conflict with Iran to one side just for a second. But there is a huge amount of growth in the UAE, in Qatar and in particularly Saudi Arabia in terms of airport development and plans to make that -- it's already a regional super hub, but to make it a regional mega hub. And the new airport that is being developed in Dubai, which is a 5 runway 260 million passenger operation, which will start, I think, first operations in 2032 to move that amount of people around and that amount of baggage and that amount of cargo, you really can't do that in manual methods. And I can tell you now that the airport designers and planners and the operational companies are all looking to how they autonomize all of the baggage, all of the cargo as much as they possibly can. And we are right in the thick of that. And you can't do business in some of these regions if you're not there on the ground. And it's very important that we do that. So bringing the Iran conflict back in again, things have slowed up a little bit, but we intend to have that office opened and a very, very small initial team on site as soon as we possibly can. Steve B, who do you think are your competitors for autonomous vehicles at airports? Okay. So we do have competitors, Steve. There's not many of them, but there are competitors. So the first thing is it's always great when you're in a market where there are competitors because it actually proves there is a market because other people look at it and think they can make some money out of it. So currently, our main competitors are 2 French companies and a Chinese company. And when I say those as competitors, those are competitors in Baggage or Cargo movements, not in people movements because there are a number of other companies that are trying to move people around. But in baggage and cargo, effectively, it's 3 main players. Those 3 main players are in the main, trying to automate existing vehicles, existing ground support equipment vehicles, and they haven't to date been looking at it from a clean sheet of paper starting in, what would it look like and what would be the maximum benefits that you get from an autonomous operation. So we think we're ahead both in vehicles, technology and deployments and the -- and where we've got those deployments to. But you should never stay complacent. We've always got to think faster, think smarter and keep ahead of the competition. But we are very clear who our competition are, and we keep tabs on them daily. Stuart A. Can you explain more -- sorry, we've done that one. Yes. Stuart -- yes, sorry, they're rolling up a little bit. Sorry, they're all coming in. There's more questions. Is your defense customer in the U.K. or NATO? So the only probable thing I can tell you right at this minute because I can't tell you what it is and who is it for. But yes, the first contract is in the U.K. However, I don't actually know where the equipment that we are doing is going to end up. So it's definitely going into the U.K. Whether it ends up in NATO, I don't know. But certainly, there are opportunities for the company, both in U.K. defense, NATO defense and defense in other jurisdictions where we may have offices already. Speaker 4 Philip T. In the first part of his presentation, did David mention something to do with power electrical constraints at airports? If so, could you expand on that point, please? Yes, of course, Philip. So I can give you a practical example in Singapore. So Singapore have very constrained electrical requirements in terms of capability of the grid. So if you go and build a massive new terminal, Terminal 5, which is what they're doing currently, and you also plan to run and continue to run Terminals 1 to 4, and then your plan is to convert every single vehicle to electric. And when I mean every single vehicle, I mean everything, catering wagons, baggage trolleys, fuel browsers, people movers, then you can imagine that the amount of grid capacity that you need increases substantially. And if you overlay that on the flight times, i.e., peak and dip, if you look at the peak, then actually, there isn't enough grid capacity to support that electrification program. So one of the things that you can do with Auto-Sim is you can say, okay, well, given a certain grid capacity to the airport, what would be the optimum vehicles to convert to electric first to give you the maximum benefit because, of course, if you start converting the wrong vehicles first, you might not get the maximum benefit from the grid capacity you've got. And although this is probably not relevant in the U.S. because they seem to have more capacity than actually demand, it certainly is relevant to airports in other locations. So we are working with airports as to how we get an optimum solution to the grid capacity they've got currently. Robin M, please give more details around UPS trial at East Midlands. What are the KPIs and by when? And is this a trial for a larger follow-on order? Okay. So basically, just to go back in history a little bit, we applied to the U.K. government for support to do a joint program with UPS at East Midlands to develop a new cargo carrying vehicle, which ended up being Auto-Cargo. UPS, by the way, don't have any commercial or IP hold over us on that vehicle. It's all ours. It's just that as part of that U.K. government program, it was great to have the customer or the potential customer involved in the program and also the potential customer to tell us some of the specification that they required for that vehicle to operate in their airports, not just at East Midlands, by the way, at all their airports around the world. So Auto-Cargo was developed in conjunction with UPS. It will work as a cargo vehicle in other airports. But specifically for UPS, it's designed so that it can go into any UPS airport and operate. We've been -- we worked on the first program, and that was very successful in developing the first vehicle. We then applied to the government to say, this is great. UPS think is brilliant. Can we have a second tranche of money, which they said, yes, they thought what we were doing is fantastic. So we went into a second round, which enables us to develop a Mark II vehicle with several improvements that we had established from the Mark I operating at the airport. And now we have that Mark II vehicle running extensive durability trials at East Midlands. We anticipate at the end of this year or beginning of next year that we will have closed out all of the KPIs and all of the reliability and movement requirements that they want. And yes, we would love them as a customer. That's what we've been driving for, for the last 18 months. So I hope to report on that in the coming months. Alan B, if your opportunities and aspirations come to pass, will you need further funding in the short to medium term? Well, that's always a sort of a perennial question in these type of companies and these type of projects. So the answer right at the moment, given everything that we know, the answer is no. We don't need any additional funding right now. We have funding to take us way into 2027. However, you don't know what you don't know. And if some of these projects do come off, obviously, there are commercial arrangements that we can have with customers. In several customers, we have cash upfront or prepayments or what have you. So commercial aspects aside, my role is to expand this company as quickly and safely as we can and to grab market share and to grab customers. So if we need to raise funding to do that, it will be raised on a positive and not on a negative. And that's what myself and my executive and the Board are trying to do. So I know that's a bit of a roundabout answer, but that's what we're trying to do. So thank you very much. I think we've gone through most of the questions, if not all of the questions. And again, thank you very much for your time, and I'll hand back again.

That's great. Thank you for answering those questions you can from investors. And of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet Company platform. Just before redirecting investors to provide you with their feedback, which is particularly important to the company, David, can I just ask you for a few closing comments?

Yes, of course. So once again, thanks to everyone for attending today and also for following the company in general. We're building something really special here. We're 4 years in -- or 4 years in on our life on aim. We're considerably more in total, but 4 years on [ aim ]. I think we have done a really good job. Our team is working tirelessly. We've made some -- whatever we've said we were going to do, we have been delivering, and we will continue to do that. And highlights moving into a new facility has been just game-changing for us, positioning us for the future and not just our staff and the working environment, but really our customers seeing that we are serious about this, and we are going to succeed. And picking up and winning some of the biggest contracts that we've had since I started the company way back in 1993. And indeed, we haven't mentioned but winning further grant funding. We're still very much seen as a company by the U.K. government as someone they want to back. And that should give you confidence as well that we're on the right road here. And bringing new people into the company, to help with that expansion. So I'm really excited about what we've got. The entry, although it's small into defense could be huge, and we just need to continue doing the daily job and moving this company forward. So thank you for your support, and we look forward to updating you in the future. Thank you very much.

That's great. Thanks for updating investors today. Could I please ask investors not to close the session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This may take a few moments to complete, and I'm sure it will be greatly valued by the company. On behalf of the management team, we'd like to thank you for attending today's presentation, and good morning to you all.