Kingsley Afemikhe: Yes, absolutely. I can take that. Let me talk about on a unit basis, what we’re including there is the direct material costs, so, that’s the cost of the chassis, the cost of the bodies, and also the battery systems we have on there, also the direct labor cost and all the indirect costs as well that are linked to the units. So, freight, taxes, rent, depreciation, all that you will expect. What you basically flushing out the inventory through. Over and above that, when you about a unit-level, there are also a number of other accounting adjustments, often there are reserves for particular reasons, including an NRV reserve or an E&O reserve, which you then see recognized on a GAAP basis in your financial statements.
And so what we’ve guided to is being positive on a gross on a unit basis by the end of the second quarter inclusive of those indirect costs that I mentioned. Following up on that, just talking a little bit about how we were trending in Q4. As Dakota mentioned, when you look at pure direct material costs as well as direct labor costs, we were about breakeven on the units — the step van units we delivered in Q4. And the steps that we’ve mentioned today, there’s $15,000 that we’ve identified, those are really the first step in a number of other improvements in the direct material costs and the labor cost manufacturing time that we expect to bake-in over the course of 2023 and into 2024. And so where we think about it is achieving gross margin positive is a station on the journey to being cash flow positive, which is our focus as a company in the coming years.
Adam Bubes: Great. Thanks. That’s helpful. And can we shift to cash flow for a second? So, wondering how you’re thinking about cash bearing through 2023 in your capital position today?
Kingsley Afemikhe: Yes. No, absolutely. When I look at — when we look at our operations this year, there are really three lags, as I mentioned, there’s costs and the direct material costs, the overhead costs, and also with the pricing action that we’ve taken. We expect overall as we go towards the journey being gross margin positive as well as being really, really capital disciplined on our operating expenditures, that our operating expenditures will come down significantly this year. We feel pleased that we have ample liquidity to fund operations in 2023 into 2024 and we’re scaling as we’ve guided to.
Adam Bubes: Thanks so much.
Dakota Semler: Thanks Adam.
Operator: The next question comes from Michael Ward of Benchmark. Please go ahead.
Michael Ward: Thanks. Thank you. Good afternoon everyone. I wonder if I could just dig into the production numbers a little bit more. I think you entered 2022 with a significant backlog. And one thing I’m curious about is, is the current backlog on the step vans shifted entirely to the next-generation to the 2023 model?
Dakota Semler: Yes, Mike. Good afternoon. That’s a great question. The entire backlog has not shifted to that model, but as we’ve started to move customers over to the new model, they’ve been increasingly interested in it. So, I would say that when we go to those customers, we’re giving them a vehicle that’s a similar ASP with better performance and better maintenance performance. And so when you go to a customer, offering them something for the same price, but ultimately, going to save them more money and better actual real-world driving performance and range, most of them are not turning it down.
Michael Ward: Okay.
