Carbon Revolution Public Limited Company (CREVF) Earnings Call Transcript & Summary

Good morning and good evening wherever you are. I'm John Jannarone, an Editor in Chief of IPO Edge. We are here today with Jake Dingle, who is the CEO of Carbon Revolution. This company is going public, as most of you know, through a SPAC transaction. We're going to talk more about that in this fastening business. We're going to talk about how Carbon is so important in wheels and what Jake is doing, especially in light of this major transition we're seeing to electronic vehicles, EVs. Before we jump into that, I just want to remind everyone, we really encourage you to ask questions, and please do so most simply through the Zoom portal right in front of you. You popped those in, in the last 15 minutes of today's session. Jake will be very happy to address those. Additionally, if you can't make the whole thing or you'd like to watch a replay, we'll publish this later this morning, most easily found on our website, IPO Edge. Also, you can find that on Yahoo Finance or on your Bloomberg terminal. And lastly, I'd like to, if I can, play a video. If not, we're going to do a little bit later. Jake, let's just kick it off. This is Jake Dingle, CEO of Carbon Revolution. Jake, thank you for joining us.

Thanks, John. Great to be with you. Good morning.

So Jake, I think a lot of the folks are watching to know about the company, but I want to hear about you a bit first. What got you interested in this? And how do you become the CEO of this business? Just tell us how it all came together.

Well, I have a mechanical engineering background. So -- and I've moved around a fair bit in terms of my career. I spent a period of time in the defense industry, building complex equipment, including Navy ships and military vehicles. And in fact, ever since an early age, I've been involved in building or making things in one form or another. I did an MBA. I spent some time in strategy consulting. I worked with Boston Consulting Group and L.E.K. for a while, which is an eye opener, a great way to quickly develop perspectives for a lot of different industries I decided to gravitate back to manufacturing and building things though. Spent some time in Australia and listed companies, again, manufacturing in the food industry, M&A around management. And then ultimately wanted to get back to do more entrepreneurial things. And coming across a clean sheet opportunity is unusual. It doesn't come around that often. But when I first learnt about this technology at the very earliest stage and had the chance to get involved both as an investor and in a hands-on way and ultimately as the CEO, it seem to be a very good use of the sort of skills and experience I developed for a couple of decades before that.

That's great. So Jake, not all of us have been to Australia, I have, but it is a bit of a surprise that it's an Australian technology company that is providing this incredible stuff to some of the world's most famous carmakers, just tell us how that came about.

So the original concept emerged from a university project, actually, a student project under the Formula SAE program. The establishment of the business followed that fairly quickly once it was identified, there was something really compelling in terms of a commercial application. The university and the collaboration with the founders was really a key part, given the confidence and the capability of that university. It was compelling as a concept that could be commercialized just because of a 50% reduction in the massive wheels, which are part of the rotating unsprung mass of the vehicle. Most important mass on a vehicle is rotating unsprung mass. It's a very compelling concept. So if you take that much weight out of a vehicle, you transform its efficiency, which could be used either for its performance or how economic it is. Saving 100 pounds of weight from wheels or from 4 wheels collectively has a far better effect than saving it from the same amount of weight from an interior part of the chassis. So it was -- the founders -- those of us that sort of founded the business were interested not just in the composite side of it but also in automotive engineering and in creating a business out of something compelling. It would certainly seem to be the basis for something big, something that could be disruptive. Initially, though, the business really got started with 4 guys and a shared in a backyard in the city of Geelong, which is right down the bottom, southwest and end of Australia. So it was really a classic typical start-up story, but it was a disruptive potential of it. And the high-growth vision that we cheered as founders, right from the outset was that certainly what got me excited coming out of bigger industries. And so I guess it was the capability and the technology that existed in that part of the world and the vision for making a disruptive technology. And I think one of the things that did characterize the early stages was how we approach business development and developing the technology from the outset. We traveled with early prototypes into North America and Europe and demonstrated what we thought we could achieve with the major global OEMs. And it was easy to get their attention -- once we found the right people to speak to it, it was quite easy to get their attention because they're being aware of people trying to do this before, had never come across anyone that has successfully done it. Very intrigued to see if we'd actually manage to do it. And so we aim for OEMs that were global. Obviously, none of them were building cars or not any significant volume in Australia at that stage. So with Europe and North America, and to some degree, Asia to get in front of OEMs talking to them about what they might be concerned about with the technology. And actually, it was almost collaborative. As we understood what would concern and the most, which is often things to do with safety, it's a safety-critical technology. We use their concerns and their questions to direct how we prioritize solving those issues and presenting versions of the technology that they could really get comfortable with. And obviously, safety was a key one. Our early adoption was always going to be on high-end applications. It's an obvious and starting point. We started with OEM customers that had that kind of portfolio, but with a big base as well that we knew that we could grow into.

Great. Now, Jake, of course, I love seeing your wheels on a Ferrari, but Ferrari is not the biggest company in the world. What's, I think, especially exciting is something that we talk about a lot here is this shift to EVs. And I think even in the last few months, that's become more important to you guys. Can you tell us about how that's come about and why those wheels make sense for EVs?

Yes, absolutely. It's worth remembering. This is fundamentally an efficiency technology. It delivers an efficiency step change. So that efficiency can be used to drive a step up in performance or a step down in energy consumption, depending on what you want to do with it, what the application is. And that's really the key to why it's very compelling on a Ferrari or a Mustang or a Corvette, which are the early applications that you've seen and where most of our first 70,000 wheels have gone. But if you look at what's happening in the automotive industry globally and the shift to EVs, vehicles are getting heavier because of the way batteries and wheels are a big and heavy component on any vehicle. And as I said before, they are some of the most important mass on the vehicle as well, which carries a premium. So if we can have the massive wheels, and in some cases, we've been able to deliver between 100 and 150 pounds of weight savings, that's an astronomical amount of weight put on the table for vehicle engineering teams. It can deliver between -- up to between 5% and 10% range extension benefit. So that's where you see sort of the initial rationale for it being so important in the EV space. Significant weight saving as vehicles are getting heavier and as range anxiety is really driving a competitive dynamic within the OEMs as they electrify their fleets. There's a number of things that it delivers in the EV space. So it's a solution for range. It's a solution for enabling OEMs to stay within their CAFE requirements or the [indiscernible] CAFE compliance, which is really in weight and fuel economy and range driven. And the fact that there are weight classes through all of the OEM vehicle portfolios and they have to try to meet those weight classes, means that anything that you can do to provide a significant weight save and particularly one that actually comes with some value and some utility to the end consumer, means that they can more effectively meet those weight targets, they can actually add other things to the vehicle that add value as well. So the regulatory drivers, wheels are getting bigger as well. Typically, over the last 3 decades, you've seen wheels get bigger and bigger, particularly for the big SUV and pickup truck platforms. Wheels 22, 23, up to 24 inches and continuing to grow. In aluminum, trying to do wheels that size is really difficult. They're getting so heavy and they're starting to challenge the structure of the vehicle itself. Suspension and connecting systems are starting to need to be beefed up, which has more weight. But to be able to take that size of wheel, do it in carbon fiber, where as it gets bigger, the structure is more efficient in carbon fiber, that really delivers value both structurally and from the design studios point of view, it gives them the ability to get to the aesthetics that they're really after for those larger vehicles and follow that theme. So it's a big lever to pull in terms of weight saving, particularly as wheels are getting bigger and bigger. And aluminum appears to be reaching some sort of a limit in terms of size and its ability to be produced in that size and to be applied to vehicles as well. So there are sort of key reasons that the range, the structural impacts on the vehicle and the regulatory drivers through the CAFE regulations.

Perfect. Jarrett Banks has joined us here. Jarrett welcome to the program. Jarrett, I think you were going to talk to Jake about the global wheel market. Why don't you jump in here and say hi to Jake?

Thanks, John, and hi, Jake. Love to know about the global wheel market here and exactly how big is this opportunity for Carbon Revolution?

Well, we see it as an enormous opportunity. Even at our early stage that we are today, the addressable market is huge. So the total wheel market annually is around $38 billion or that's what it was in 2020. $38 billion is expected to grow to about $60 billion by 2028. And that's around about -- today, that's around about 400 or over 400 million wheels Just the premium and performance segment of that, which is about 10%, is over 40 million wheels and much more than 10% of the value of the market because they're at the premium end. So that's really the immediately addressable market for us that we're already selling into. If you relate that to the aluminum wheel market, which dropped the industry in '70s, we can expect to see something similar, we believe. So virtually all passenger vehicles produced in the U.S. now come with aluminum wheels, but once they were at a similar penetration level to where we are today. So it's a very large market. We won't be racing quickly to the bottom or to the mainstream end because capacity -- apart from anything else, frankly, capacity won't allow that to happen. And there's quite a lot of different segments that we can address, handle or provide solutions for OEMs trying to take weight out of particularly the premium end of these weight classes and vehicle segments in those weight classes where they can generate real value from that weight save from having a technology like this that both adds to attributes but also enables them to add more value to the vehicle and provide more to the end consumer. So we have a number of steps. We're on a fairly typical automotive adoption curve, whether it's like aluminum wheels or fuel injectors, air bags, disc brakes, power steering, those sorts of things, they tend to start at the higher end in performance for premium and then they gradually tripled down to achieve widespread adoption and then full penetration into a given market. So the market is enormous. It's about 100 million vehicles per year or close to that. So well over 400 million wheels a year. We're really addressing about 10% of that today. But as we expand our manufacturing in lower-cost regions closer to our customers and gain scale, our costs will come down, and we will be able to address bigger and bigger chunks of that market over the coming years. And that's all -- that is our strategy and always has been the vision for the technology.

All Right. Great. I believe we have a video we'd like to play right now. If I could just share my screen, there we go. [Presentation]

Okay. That was an incredible video. Jake, I wonder with such a big market opportunity, are there other companies out there doing what you're doing? And how do you compare yourselves with them?

Well, others have tried over the years and are still trying. Competitors are largely still at very early stages and low volumes and sort of prototyping stages. So we're the only company that's achieved scale, which is, I guess, testament to our approach and the focus on the OEM space and the way that we focused on being able to scale to meet that volume. So we certainly expect more to try. This becomes more and more sort of the technology as the demand accelerates, and that's what we're seeing. It's really why we're undertaking the listing to be able to underpin that growth, but it's a huge market. We've got a sustainable lead sustainable competitive advantage due to our IP advantages, our scale, the learning curve that we've developed in more than a decade and the processes that we've been through over the last few years with our customers, we've developed very strong relationships with customers and a reputation as a Tier 1 supplier. They're all key planks to the strategy. In fact, GM just recently awarded us their Supplier Excellence Award, which points to how they see us. We're not just a supplier of an exciting technology, but we're actually acknowledged now as a high-quality and responsive supplier in terms of how we work with our customers. And that's all part of creating a moat from an IP perspective and a competitive advantage that we can defend. It's not just about having the best technology. It's also about how you work with your customers. But we've certainly got an edge, a very strong leadership position, at least 5 years, probably more than that over the next sort of competitor. So we plan to keep moving fast and growing to protect that leadership position.

All Right. Great. You just talked about some recent partnerships. Tell us about some go-to-market strategies and how you plan on expanding your sales channels?

We've had a great deal of exposure over the years to the major global OEMs. Our primary focus really is on North American and European market. That's where we're focused at the moment. We can only talk about customers and programs that we are supplying once they have announced it publicly [ the builds ] just due to confidentiality. But you've seen that we have 5 OEMs that we've announced programs with 16 programs to date, and we continue to build that pipeline, the programs that we've awarded this year. So the this year so far include 2 major EV programs as part of that mix. We've also seen the launch of the Range Rover Sport SUV this year. That's the first of our I guess, nonperformance or track orientated vehicles, it's a premium SUV and a very exciting new launch of a vehicle and a new application in the first of what we believe will be a very big part of our portfolio going forward. But in terms of go-to-market strategy, we supply exclusively to OEMs. That's how the business is set up. We are focused on the aftermarket at this stage. The requirements for OEM supply are very different and more stringent and typically much higher volumes than you would see for aftermarket applications, technically more stringent. And our customer relationships, they're intimate from the point of view of being close technically sure that their requirements and the way they apply and optimize our technology is done in partnership with us given the expertise that we can bring to bear with that and to make sure they get the best possible value out of it. We've got a very extensive engineering capability. That's part of our business model. Clearly, this is a highly technical and sophisticated product, and so we need a broad range of engineering capability. They get involved early with customers, hence that sort of intimate relationship, both the engineering and program teams to make sure the product is developed and ready in time for the vehicle start of production. And so the business has, I guess, a good leverage to volume. That's why things like our profitability milestones come on fairly quickly as our volumes increase. We've seen a huge increase in our backlog in the last few months. It's now around $680 million. Backlog is the aggregate of the awarded programs that we have and the forecast volume to come out of those. So that's doubled in the last few months of about $680 million. So I think the key things in terms of how we go to market is selecting partners that we can -- or customers that we can have a strong strategic partnership with. That tends to lead the industry and others follow. We have repeat business in virtually all cases, and that's very important on multiple programs with multiple customers, and that trend continues. And it's a key element of the strategy because once you have your first program established, the follow-on programs are much more straightforward, given how much upfront validation has to be done to bring a new technology and safety critical technology into an OEM for the first time.

Right. And you mentioned you're working towards higher-volume programs. Can you elaborate on how you position Carbon Revolution to achieve this? And what you're going to do to expand this further?

Absolutely, yes. Our focus from the outset has been to develop -- currently develop the product and processes together to develop stable and repeatable manufacturing processes that can be scaled, automated and industrialized. So we've already automated a significant portion of our factory. This factory in Australia really is what we would see -- what we call as -- what we call our pilot facility. So our first Mega-line is being built in Australia and is in production now. It's been producing since the beginning of this year, and that is ramping up. The Australian [Audio Gap] when it's full, will potentially produce up to 100,000 wheels per year with this first Mega-line. It's well on the way to being filled. So we have already -- we've already actually been awarded the majority of the volumes that fill that facility, and they will come into production over the next 2 to 3 years. And that obviously gives us great forward revenue visibility for the programs that we have awarded and even despite the delays that we've seen caused by COVID, those are now coming through. Beyond that, we -- having completed the work on the pilot line, we're planning a larger facility will be in North America or a North American location, reducing costs from the manufacturing side from a supply chain perspective, getting closer to customers, shortening working capital cycles and facilitating much higher volumes. And so that really is the broad strategy. Perfect what we've got in Australia. We're looking to partner with industrialization partners to derisk the expansion of that and to make sure that we can put capacity in place fast enough for customers. They're all now asking, and this is one of the reasons that we set out to raise capital and to reset our listing is because our customers are now asking us when the next tranche of capacity is going to be available, and they're expecting to see that come on stream closer to where their manufacturing vehicles.

And just to follow up on that, expanding offshore requires a lot of capital investment. Is that why you've chosen to go with the Nasdaq? And why did you choose the SPAC route over other options?

Yes. Manufacturing and physical technologies in general are capital intensive. We need capital to allow us to keep growing the market. As we said before, it's an enormous market. We really barely scratched the surface in terms of demand. Even at our current economics, there's -- there are a lot of -- there's a lot of growth opportunity there. And so that accelerating drive -- accelerating demand. Really, the decision was made early last year as we saw this coming that we needed to transition and look to establish a source of capital that would come from North America, from the U.S. It became fairly evident that we were going to need to do that early next -- early last year and get the supply chain and the manufacturing footprint set up. We need to -- obviously, to be able to build facilities and set up that type of capability, we need a balance sheet that can support it. And hence, the search for the right forms of capital. We went into this knowing that it was coming from North America the demand principally. That's where the shift to electric vehicles and the larger electric vehicle market was going to accelerate the demand. So that was the OEM base that we had to demonstrate this capability to. It led us through a detailed process to raise capital that may ultimately -- we didn't set out saying we wanted to do this as far as back. We set out looking at all the different options and particularly focused on the North American market. That led us to Twin Ridge as a potential partner. And then I think as we got to know each other and realized that there was a very good fit, Twin Ridge, a very credible party, understand the industry well, great reach to the capital markets and an ability to help us with sourcing this capital. So that was part of the process. We arrived at that as the preferred option. It takes longer to do a SPAC deal than a standard IPO. It gives you more time to inform and to bring the market up to speed with what you're doing. For us to just try to list the company in North America without the sort of partnership we've established with Twin Ridge, it would have been much more challenging. So they really do -- they bring important capabilities and networks, capital market access and really help to make sure this is an enormous success, and they share our vision for it to be a huge success as well. So it's a way of becoming listed and having access to those deep pools of capital to support the growth that we've got ahead of us.

Right. Now let's turn to intellectual property. You recently announced the company secured a $60 million debt facility backed by your IP. what does that do for the business? And how did the SPAC deal help get that raise done?

Yes. The debt facility is a very good example of a different method of accessing capital, something that's just not available in the Australian financial or capital markets. So that's a great example of the things that are opening up to us as we move towards completing the merger and being listed in the U.S. The assets that back alone are all the intellectual property and the hard assets that's been developed over more than a decade. And we have talked about earlier. It's a great example of what being listed in North America opened up to us. And it's really the first tranche of capital to support our balance sheet. We're working on other elements. There's obviously the SPAC itself, but we have an active process going on to ensure that we have the securest balance sheet we can as we move into the North American market. And we're just seeing a lot more innovative, broader opportunities for sourcing that right kind of capital so that we can get on and build the business and deliver what our customers are demanding.

All right. Great. Now we've just passed the halfway point this year. How is Carbon Revolution doing so far? Any bottlenecks issues that you want to bring up? Or any good news you want to bring up?

There's been plenty happening in 2023. It's been an exciting year for us so far. Our forecast revenue is to grow from over $28 million in calendar '22 up to 90 -- roughly $90 million in calendar '24. So we're in the middle of a compound annual growth rate in revenue of 78%. That's obviously significant. It's all coming from the programs, as I talked about earlier, that are awarded programs. So there's no blue sky in it. This will drive increasingly positive contribution margins, which is a key aspect of how we measure our path to profitability up to around 35% in calendar '24, and we expect to be EBITDA positive [ bring ] calendar '24 as well. From an operation perspective, leading into this year, the last 3 years have been really challenging with the pandemic and supply chain disruptions. We're really turning the corner now, though, across all fronts. We've managed through COVID-induced delays in our customer programs. A large number of programs have been delayed. And I think everyone is aware of what COVID and the pandemic has done for the automotive industry, semiconductor shortages and just the stress in global supply chains generally. So we've hit the ground running really well in '23. The Mega-line commissioning has gone well. We've ramped up production for the Corvette Z06 wheel and start production of that Ranger Rover Sport SUV wheel and the Ford Mustang Dark Horse wheels as well. So 3 programs really ramping up in production. Wheels are featured quite prominently in public unveilings of the Corvette E-Ray, Mustang Dark Horse has been launched, and as I mentioned earlier, the Range Rover Sport SUV. So the awareness and respect of our brand globally is improving. And in the factory, the Mega-line is now demonstrating the cost reductions that we invested in it and invented it essentially to be able to deliver. So we're now starting to see really positive signs of where the efficiency of our manufacturing operation can get to, and we're going to need that scale because that's going to be the core of how we ramp it up into the future. From a quality perspective, which is particularly important to delivering good quality, as I mentioned earlier, we were very delighted to get awarded the General Motor's Supplier Quality Excellence Award. So that's been a big highlight for 2023, recognition of our ability to provide quality at volume. So a great accolade for us. And as I said, it demonstrates that we're not just supplying an exciting technology. We're doing it in a way that OEMs appreciate. I guess the final point really on where we are as an industry. The global automotive industry is still dealing with post-COVID supply chain headaches to some degree, vehicle build schedules continue to be more volatile from what we are seeing in pre-pandemic than what we saw pre-pandemic just due to residual supply chain impacts and shortages. So there's no shortage of orders for the vehicles that our wheels go on. In fact, typically, they seem to have very long order books and backlogs, but those vehicles can't be built if all the components can't be secured from other suppliers. So we're obviously watching that carefully and working really closely with customers through that. It will get easier to manage as that stress reduces progressively in supply chains. And frankly, as we have more and more programs in production with less exposed to any one particular program.

That's great news indeed. Now before I pass the baton back to my colleague, John Jannarone, to take some audience questions. I wonder if you could just talk briefly, Jake, about the safety of carbon fiber wheels.

That's a great question. Firstly, safety is always the number one and most serious consideration for any global OEM, particularly for a safety critical technology like wheels. So as you can imagine, the validation requirements for a component like a wheel is incredibly or are incredibly stringent. Our wheels have never -- also nor would we ever expect any sort of special consideration or exemptions from this. We need to exceed all of the safety and durability requirements that metal wheels have to deal with as they're set out by the OEMs, and they're typically much tougher than any aftermarket standard, too, by the way. In fact, given the early adoption stage of our technology and particularly as we take onboard new customers, we've been put through some much more extreme tests, both in labs and on vehicles than the standards actually require or that the OEMs require just to see how wheels perform and how -- and learn about this new technology. So the really positive news from those tests and the way it's being brought to market is not only our wheels considered to be very robust and damage tolerant, they also demonstrate some benefits relative to metal wheels. The fibrous nature of the carbon fiber composite means that their fixed actions hold together if they're an extreme one-off impact events, metals, and metal wheels could be expected to and come apart, our wheels can hold together. It's a bit like on a breaking a stick of celery versus breaking a carrot. The fibrous element hold it together, and that's considered to be a beneficial thing. It's -- again, no wonder that the cells, the driver sitting in cars are made from carbon fiber. It's the same material. They're using it for the same reason. It's a safe material if it's designed well and the components are built properly for that sort of application.

Great. John, take it away.

All right. Thanks, Jarrett. Jake, we've got an audience question here. And this is something I believe I asked you when we spoke last week. As a Ferrari fan, I'm very excited to see these wheels on exotic cars, but just help us understand how it works for a luxury -- ultra-luxury vehicle, but it also can make sense for an EV which might not cost $200,000 or $300,000, that whole EV might cost $50,000, $60,000, $70,000, but it still makes sense. Can you just help us understand how that works?

Yes, absolutely. There's -- there are a number of attribute benefits that all come within a carbon fiber wheel. So clearly, the simplest one to understand is that they add efficiency, so they add range. And from an OEM's point of view, they're a bolt-on technology. There's no investment required in the manufacturing plant to apply them. So whilst they are at a cost premium, they actually are easy to apply in a very efficient way to add range and take weight out of the vehicle. As I mentioned before, weight savings, a big impact to OEMs trying to make -- to meet CAFE regulations and stay within vehicle weight classes. And in fact, there's an interesting thing that happens, and this is why the premium end of the market is the next real -- the premium end of the EV market is the next obvious segment for us to address as we work our way through the price volume curve is because at the premium end of any weight class, the OEMs tend to max out on what they can offer as extra. Utility extra components and things that the consumer would want to have on a vehicle. So if you can offer a premium technology that adds attributes like range or style or NVH benefits and aerodynamics, if you can do that and save weight, you can also add other things. And then overall, from a business standpoint, it helps the OEMs to offer their consumers more within a vehicle without exceeding weight class limits. And that's -- there's a number of weight classes, the most extreme top end. Some of the EVs are struggling to actually stay within the light-duty passenger limit. So offering 150 pounds potentially for a vehicle of that size and weight brings it back into actually having an impact on CAFE and enabling some of the lesser performing vehicles from an economy standpoint just to continue to be sold. So it applies to EVs from a range, from an overall weight, a structural point of view as well, as I mentioned earlier. It relieves some of the structural challenges, and it enables and facilitates large wheels that everybody within the OEM studios wants because consumers like them and want them and it's an enabler where aluminum really seems to be maxing out now.

Great. And I want to talk about a specific OEM that you and I discussed again last week on Range Rover. So tell us what's going on there? And I think this ties into this increasing diameter in the wheel size, right?

Yes. So the first SUV application of our wheels to be launched was the Range Rover Sport. They were looking for a world first cutting-edge innovation, what I call sort of boundary pushing technologies to make the best performance SUV who have been released on the market. We saved about 9 kilos per corner, total of 36 kilograms or a 41% weight saving versus the aluminum wheels. So it provided them with performance, increased agility, better fuel economy and an aesthetic that really fitted with what their end consumers wanted. So they were looking for new and innovative technologies to improve that vehicle further. They've obviously got a very strong leadership position in that segment and bring them to that market. We work very closely with the team for quite a number of years actually. So because these vehicles are so much bigger and heavier and there are different application to what you've seen in the market up to this point, you can imagine there've been a culmination of quite some years of developing the technology using all of our same principles but applying it to a much heavier vehicle that requires a much more robust version of the technology, and off-road is a great application for this technology. It is so strong and still at such a lightweight. I think this new vehicle that's come out, the SUV, the Ranger Rover SUV is a great demonstration of how the technology applies to that much bigger platform. And you'll see more of that coming to market in the coming months and years.

Great. I've got a capital markets question for you, Jake. I am -- Jarrett and I both actually worked in Singapore together. I've spent time in Australia myself. You're listed in Australia, but why is it -- and you're not the first. I've seen this happen a number of times now. Why is it that a high growth tech company is perhaps better off listing on Nasdaq and staying at home in Australia?

Well, I can only really speak for us. But the U.S. makes -- it just makes sense for us. The market is far more familiar with advanced physical technology companies. It's -- there's a deep and a liquid market for these sorts of technology ventures. We actually have quite an access to North America already. We have a growing sales and customer engineering team based there. A huge amount of our demand is coming from there. And the adoption is being dominated by that geography. We expect to have a manufacturing footprint in North America close to our customers and develop a supply chain around that, that's underway. And whilst our IP has really been developed out of Australia, and the manufacturing facility that we've got today, which we intend to continue operating, has been a great way to develop that technology. We've actually always talked about having manufacturing in North America and other parts of the world. And this move from a capital markets perspective is just really to, I guess, fish where the fish are. There's a sophisticated market for these sort of ventures is well understood what we're trying to do, and there seems to be strong support for this and a strong understanding of what it can do for the automotive industry in general. So it is a whole logic to doing it. And we're servicing a global market and will be a U.S. listed global company.

Great. I had a question come in over e-mail. I think someone might be looking for a job with you guys. Are you having a hard time finding talents? And do you expect to hire more in Australia or will be predominantly in the United States?

It depends what the role is. We have a team of application engineers that work very closely with our customers. That's both in North America and Europe, and we have our sales force in those geographies as well. We'll develop our technical center in North America. And obviously, as we grow manufacturing offshore as well, there will be much more operational roles. So development of the technology, and they are all important. Intellectual property portfolio will continue in Australia, but it's really -- it depends on what sort of skills and capabilities we need at the time. And it's never been difficult to attract people to come and be part of this team because what we're doing is very exciting.

Great. No, Jake, I think we touched on this earlier, your backlog has increased dramatically in the last several months. Can we just dig into that a little bit? I mean one thing that surprised me was that a lot of that is driven by EVs. Now of course, there are ICE vehicles that will continue to require your wheels. But can you just dig into that a little bit more detail for us?

Absolutely. So almost half of that backlog is EVs now. And we expect that to continue so that it's dominated by EV platforms. And it's both -- the number of programs that are EVs and the size of them, frankly, they're getting larger and larger, which is exactly what we've intended to happen. So we're moving through this adoption curve from that niche end to more and more volume programs still at the premium end, but there's some enormous platforms, particularly in the SUV and pickup market, where the real revenue drivers and the real focus of the OEMs is in those segments, and that's what we're starting to get into now, as you've seen with the Range Rover, but there are others in North America. And so we expect that to dominate. We will continue to do the smaller programs and the premium and performance programs, but the OEMs are gradually going to be phasing out ICE vehicles and more and more of their volumes will be EV. So it's just a natural progression. And obviously, this is a great fit for their EVs, and it solve problems that they're facing as they bring those to market, which are typically dominated by the weight. They're finding they have to be to get range and to have the batteries that will deliver that sort of range.

No. Jake, we have, in fact, on its own program, interviewed many, many companies in this EV space. Are you able to work with virtually any OEM, particularly in the EV world? I mean you've got Lucid, Tesla and then, of course, the legacy automakers, of course, are virtually all doing EVs. Are you a fit for any of them? How does that work out?

Yes. Every EV vehicle -- every EV that obviously, they all have 4 wheels, they all are battling for range. The range on a vehicle is significantly less even at the better end of the spectrum typically less than what it's replacing in terms of ICE. So yes, it's a bolt-on technology. As we grow, as the supply increases, we expect to increase the number of customers we're working with. And as I said, we have a strategy of working closely with customers that we can have strong strategic partnerships with that we are adding to that all the time. So absolutely, it's a technology that will be disruptive. It's already disrupted the industry, but it will continue to disrupt on a bigger and bigger volume, hence the move and the capitalization of the company, but it's certainly applicable for any EVs.

Jake, we've discussed when you and I spoke last week, about how -- this is quite complex how the weight in the wheel has a huge impact on the performance of the car. So that can even mean it's going to turn better and so on. Can you talk a little bit about how that works?

Sure. And that's very evident when this technology has been using to improve -- being used to improve performance, you see it on a track. I think the Corvette talked about -- one of the Corvette team achieved a 1.5 second lap benefit just from changing the wheels out on about a 2-minute lap. And the weight of the wheels and their responsiveness and their stiffness means that they get much better grip as well as faster acceleration, better braking and just overall better steering capability. Now you do feel that on the road as well, but obviously, you're not going at the speeds on the road that you are on the track, hopefully. So some of the benefits in a performance setting are really amplified by the speed, but it is still efficiency. You're still talking about what the efficiency of weight saving does. It's just that wheels are dynamic, they rotate, the front wheels turn. So there's gyroscopic forces as well that are amplified by turning the front wheels. And all of that can be felt very strongly on a track when you're doing lap and trying to improve lap times. And we've seen it time and time again. At Ferrari, a couple of weeks ago, the 296 GTB, I think it was -- broke a Nuerburgring record and went under 7 minutes with our wheels as well. So there's some exciting and very clear demonstrations of the performance benefits of this technology. Again, it's an efficiency technology offers a step change in performance or a step down in the energy required to do the same thing.

No, Jake, this relates to the earlier question I think that someone asked, I can understand quite easily how this works with the Ferrari or in a lead car like that. But if you're talking about a less expensive car, is it an economic decision the OEM makes this will make the vehicle better, even though these might be more expensive than traditional aluminum wheel?

Well, that's -- at the stage of the adoption curve that we're at, at the moment, the OEM decision is based around what this unlocks for them in terms of delivering attribute benefits to their end customer, the consumer what else it facilitates them doing with the vehicle, staying within a weight class, being able to add more things that add potentially more value to the customer and -- to the consumer and generate more revenue for the OEM. So it's really a value equation. We talk about value parity. So I mean, aluminum wheels have sustained a pretty significant premium to steel wheels for years, but they've still taken a huge amount of the market of them. And that's because their value is very high relative to steel wheels. We're quite analogous to that. At a premium price, we are still being adopted very rapidly because of the value that we're able to deliver. And it's all of those things we talk about solving regulatory issues, improving range, solving structural issues and facilitating OEMs to be able to apply and integrate other things into the vehicle that add value and create a better business case for them. And over time, our costs will continue to come down as a new technology that's scaling up, the costs come down because of automation, reducing labor costs, reducing labor rates by producing in different regions and reducing supply chain costs and raw material cost through scale. So all of these dynamics come to play and will help us to move down a price volume curve over time. But as I said, we don't need to race to the bottom because of just how enormous the market segments that we're already participating in are. I mean, 40 million wheels, we've successfully put around 70,000 wheels on the road and are growing rapidly. And as you said, the backlog is increasing rapidly, but our immediately addressable market is around 40 million wheels.

All right. That's great. Folks, I just want to remind everyone who's listening and watching here, pop in any questions. We only have 8 minutes to go. We've got a few more questions in here. Jake, let's get into some of the financial details. We've interviewed many, many, many companies going public on our program here. And something that investors really want to know about is how your path to profitability works? Can you explain that for us? And I believe for everyone who's watching this is detailed pretty well in their investor presentation, which is pretty easy to find, but let's hear from the man itself. So Jake, can explain how that works?

Absolutely. It's -- volume is really a big driver of profitability for us. So to -- the decision to exclusively work with OEMs meant establishing effectively a business structure that was able to be an interface with OEMs, and that means that there is a level of fixed cost that's required to be established to do that, just in order to be able to play in that market. But what that means is that the fixed cost stays relatively fixed. And as we grow our volumes, there's a rapid path to profitability. When you combine all of the automation and efficiency that we're driving at the moment and making very good progress on, so labor productivity, raw material cost reductions, the things that we've implemented as the Mega-lines come in and the automated advanced manufacturing environment, we see a very rapid path to profitability. We expect to be EBITDA positive through next calendar year, likely going to be the second half of next calendar year. We know very clearly what our volume run rate needs to be to get to EBITDA positive and that's within our sites. And then there's a lot more volume that can be generated from even just from the Australian business. Beyond that, we would expect to probably double beyond that EBITDA positive point out of Australia from this cost base. And as I said, we've got most of the programs locked in and awarded to be able to generate what we think will be those forecast volumes. So it's highly leveraged over the fixed cost that we have in the business. We're now seeing the performance of the plant come through very well. The volatility in ordering that I mentioned earlier is obviously a factor, but that's just a timing thing. I think the OEMs have been very clear with us, our customers are very clear. They want to build as many cars as they can with these wheels on as quickly as they can because it's a very good business model for them as well. So we obviously can't control how quickly they can build vehicles if there are other supply chain challenges. But certainly, on the basis of the forecasting that we have and our work with our customers, we see that coming through next year. And that's an exciting phase to get to.

Jake, we've got a question here. Someone is asking, how do I benchmark you? It's not as that there are several other elite wheel makers that are publicly listed and you're not going to necessarily compare yourself to Ford or Tesla. When you're talking to investors, what sort of other companies do you look similar to?

It's -- I don't have a list of them to share now. It's probably something we can come around and provide some thoughts about afterwards. I think at our stage, you would typically look at valuation based on revenue multiples as a realistic way to benchmark, obviously, driving to EBITDA positive in the next year or so is going to change the way that can be looked at. But yes, I guess, physical technology companies, anything given the depth of the market in the U.S. businesses that are exposed to the EV market battery, we are, in a way, doing the same thing that battery technology companies are doing to improve the efficiency and range and overall utility of electric vehicles as the whole world transitions over to electric vehicles and alternative propulsion to ICE. So I think they're the kind of comparables, we see a huge growth trajectory, obviously, and that's why we're going down the path we're going down at the moment.

I see Mohammed has raised his hand. Mohammed, you got a question, you can jump in and ask us. But in the meantime, another one just popped in here. How does this business normally work? If you look at the major OEMs, do they generally outsource their wheels? Or are they made in-house? Or are you changing the way things are done in that regard?

No. Wheels -- the OEMs do not produce their own wheels. The aluminum wheel industry is a very well established and a large industry globally, North America, Asia and Europe has quite a number of major players. It's really quite a -- it's quite a big industry and fragmented with a lot of different players. But OEMs purchase it as what they call as a commodity and essentially just work with the supplier that fits their demand is the best. The majority of OEMs that -- the majority of North American vehicle manufacturers and European vehicle manufacturers, passenger vehicles are using aluminum wheels rather than steel wheels. And so that's really the market that we're most comparable to.

Great. Jake, there's a question about the backlog. And someone is asking, how do these contracts normally work? Do you make a deal for 5 years of wheels or a certain number of wheels? Just how should we model that out if we're trying to understand how the business works?

Yes, it's a well-trodden path in the auto industry. So our arrangements are very typical. There is a time frame for the project or for the particular program, usually between 5 and 7 years. Sometimes a little longer, sometimes a little shorter, but that's how long they go for. We are provided with capacity requirements for that period of time. And then we establish, it usually takes up to 2 years from award to having a program start production and then the typical production period is 5 to 7 years. The auto industry does not work with take-or-pay contracts. It doesn't matter who the Tier 1 supplier is, whether it's us or someone much, much larger, but the industry doesn't work with take-or-pay, but for our benefit or our benefit is really that we're a unique supplier of this technology. And we're on some fairly high-profile vehicles. And so there's reasonably good security over visibility of what we're supplying to. And it's really the capacity for that period of time and then an ongoing partnership with the OEM to make sure that the wheels that they need to put on the vehicles are there when they need to build a vehicle.

Makes a lot of sense. Well, Jake, this hour is just flown by. I'm sorry for you folks who've got a few more questions in here. In fact, if you do want to get in touch with Jake for the team here, please e-mail us and we can try to facilitate that. Jake, something I always like to ask as we wrap up here, obviously, I'm going public is exciting. We're a few weeks into the second half of 2023. What are you most looking forward to aside from going public as the year closes out?

Look, I think the announcements of our products or our technology on major vehicles and major vehicle launches is always exciting. So we really enjoy that because it's an opportunity to see how our product is improving some of the best vehicles in the world, and we're lucky enough to be on some of the best vehicle launches in the world. So we're looking -- certainly looking forward to seeing more of that. I think seeing our factory fill out and the volumes coming through is also really exciting. We've got a fantastic team here in Australia, a very sophisticated factory. And I think we have a very steep trajectory ahead of us in terms of production for all these programs that are awarded, as I said. So it'll be exciting as well. So announcements of new vehicles, the whole team gets excited about that when our wheels are on them and just watching the factory start to really build and get to profitability, which really is just driven through volume now. We've done a lot of that hard work to set it up. So yes, we do have a very exciting next 12 to 18 months ahead of us and obviously looking forward to getting the listing done and being a U.S.-listed company.

Well, we're looking forward to having you here, Jake. And this has been a fantastic discussion. Jarrett, thank you, too, for co-hosting here. I just want to remind everyone the easiest place to find a replay is, of course, on our platform, IPO Edge. You can also look at the ticker, TRCA, on your Bloomberg or Yahoo Finance, and you will find it right there in about an hour or so. That's Jake Dingle. Jake, thank you so much for joining us. Thanks for everyone, especially those of you who asked questions. This has been a great session.

Thanks, John.

Thank you.