Arrival is running out of cash — and fast

The high cost of trying to develop and produce vehicles, a business pivot and three restructurings has taken a toll on commercial EV maker Arrival. And it doesn't look like it's going to get any easier for the company.

Arrival, which went public in 2021 via a merger with a special purpose acquisition company, posted preliminary fourth-quarter and full-year earnings reports Thursday. The gist? Arrival is burning through cash and is on the hunt for more.

Curiously, Arrival has pushed its earnings call and "business update" to March 13. (Public companies traditionally hold a call with investors and analysts the same day they report earnings.) These extra few days will allow the "company to potentially finalize a transaction which, if consummated, would provide additional liquidity and further extend its runway."

Arrival didn't disclose any details about the transaction and it's unclear if the company is selling assets, raising funds or both.

The EV maker also issued a range for its quarterly and full-year losses, another odd move that suggests the company hasn't finalized its accounting. The range doesn't soften the news. Arrival is a sieve.

The company has yet to generate any revenue and doesn't expect to until 2024. Which means its results are all about expenses.

Arrival reported a net loss of between $588 million and $597 million in the fourth quarter compared to a $67 million loss in the same year-ago period. That huge jump in losses is due in part to non-cash impairment charges and write-offs of about $406 million, according to the company. Even with that write-down removed, the company still saw its losses expand nearly threefold.

Net losses for 2022 were between $998 million and $1 billion compared to a loss of $1.3 billion in the previous year. That might not seem so bad, in terms of comparison. However, Arrival notes that the full-year 2021 loss included a one-time non-cash charge of $1.2 billion that was associated with the merger of itself and CIIG.

A loss is a loss is a loss. However, what that last detail tells us is that costs in 2022 were actually substantially higher than the previous year, despite the company still not generating revenue.

The numbers are still eye-popping even on an adjusted EBITDA basis, which removes items like earnings before interest taxes, depreciation and amortization. Arrival reported an adjusted EBITDA loss in the fourth quarter of between $162 million and $172 million compared to a loss of $85 million in same year-ago quarter.

Arrival said the increase in losses was due to $70 million in salary and contractor costs "not capitalized" in the fourth quarter, as well as a $25 million expense for parts and subassemblies. That "not capitalized" term is likely associated with the large number of layoffs that occurred last year. Costs can be capitalized when there is a long-term benefit. Salaries and contractor costs increased QoQ and YoY, but they are categorized as "not capitalized" because of the layoffs.

It was the same case in the full-year adjusted EBITDA results with Arrival posting a net loss of $379 million to $380 million in 2022 compared to a comparable adjusted loss of $203 million in 2021. The company said there was an added $102 million in salary and contractor costs "not capitalized" and a $38 million increase in parts and and subassemblies expenses.

Those "not capitalized" costs are likely to continue in the first quarter since the company cut more workers this year. In January, Arrival announced its third restructuring in a year with plans to cut its workforce by about 50% to about 800 employees globally. Arrival said the layoffs along with other reductions in real estate and third-party spending will help it cut operating costs by $30 million a quarter.

Arrival saw its administrative expenses also increase fourfold to $133 million in the fourth quarter of 2022, compared to the same period a year ago.

And finally, there's the cash position. The company's cash fell by 33%, or about $126 million, to $205 million in the fourth quarter. The company said it used that cash for short-term obligations (aka working capital spend) as well as to repay interest on loans and lease liabilities and capital expenditures.

Taking into account the company's expenses, $205 million is not going to be enough to keep its wheels turning through the rest of the year. And unless that unknown transaction delivers an EV van-load of cash, the company's demise may happen quicker than expected.