Q4 2020 Fisker Inc Earnings Call
[music].
Ladies and gentlemen, thank you for standing by and welcome to the Fisker, Inc, fourth quarter and full year conference call.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session to ask the question. During the session you will need to press star one on your telephone if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker of today and Gals VP Investor Relations. Thank you. Please go ahead Sir.
Thanks, a lot David and welcome everyone to Fisker inaugural earnings call discussing Q4, 2020 results the 2021 financial outlook and a comprehensive update on the business.
Joining me on the call are Henrik Fisker, Chief Executive Officer, Dr. Bukhari, Hunker, Chief Technology Officer, and Dr. Geeta group, the Fisker Chief Financial Officer, One thing before I read the disclaimer. The outlook released today does not assume any impact from the Mou on announced with Fox on yesterday, so keep that in mind before turning it over to Henrik the.
Advice, we will make forward looking statements within the meaning of the federal Securities laws forward looking statements generally relate to future events or future financial or operating performance, our expectations and beliefs regarding these matters may not materialize actual results in financial periods are subject to risks uncertainties that cause could cause actual results to differ materially from those.
These risks include those set forth in the press release, we issued earlier today as well as those more fully described in our filings with the SEC forward looking statements in this presentation of our based on information available to us as of today, we disclaim any obligation to update any forward looking statements, except as required by law, we will reference our financial measures that don't conform to the Jeep.
The general accepted accounting principles during today's call, including adjusted operating loss free cash flow. This information may be calculated differently than the non-GAAP data presented by other companies quantitative reconciliation of our non-GAAP financial information to the directly comparable GAAP financial information appears in today's earnings release.
With that I'm happy to turn the call over to the Henrik Thank you Dan.
Kind of everybody two of Fisker Inc's first earnings call on.
I'm extremely excited about older come from and so we have achieved over the last six months for growth in 2020 on 2021 on.
Until now.
And it really has.
I think put forward the vision of.
Of what <unk> is in it.
Really put to life of our business model and most people are starting to understand how competitive is the theyre going to be.
We have completed so far this week of course complete the merger.
The listed publicly on New York Stock exchange the kicked off the Ocean program completed PPS milestone in November last year, and then they have accelerated hiring of about 148 people as of today and a lot of people being hired a really amazing talented people both from within the current industry, but also a lot of <unk>.
People from without the car industry from the tech industry for instance.
We have nominated of dozens of global suppliers. The nominated on battery cell supplier, which is extremely important adas as well as domain controllers.
The planned specification that have improved quite a lot and that's something I think is really important to emphasize compared to what we showed at <unk>.
Back in 2020 the.
Daily reservations.
Our 400% sustainably since we listed publicly and we are now at about 12467 total reservations.
In summary fiscal completed all of our 2020 goals on.
Time and on track to launch the Ocean on time, starting at $37499 next year.
On our business model.
Reinventing the automakers' business model in a day.
Different way than anyone else and that alone is creating a competitive advantage versus both startups and traditional carmakers.
The advantages versus traditional automakers really platform sharing our unique development process that we called the FF Pat rapid decision making per.
When you sit and engineering meeting starting from five or six in the morning till late at night, and I do that because I want to be available from the team to make decisions. The right. There and then with Sera of bureaucracy and that is really something that enable us to cut development time in half.
It also allows us to make signal of the decisions within 18 months before we launch the vehicle and that is already paid dividend of.
On analyzing market segments improving range on acceleration.
State of the art, Adas, which we call <unk> pilot and then modern electric architecture into the.
We're looking at the product two and a half to three years ahead of time.
Kind of lead to obsolete products. So when we are able to do is put the latest state of the art technology into a vehicle and thereby get ahead of our competitors. One example by the way would be the the battery sales, which we first locked in very recently and we are getting the latest technology with the.
Actually locked them in the last year, we were the accident got last generation of battery sales.
So again.
Today's world backing of product three or four years before you launch it it's just not kind of work in our opinion.
So at the advances versus startup automakers contract manufacturing small markup is nothing compared to on time SRP fast ramp up high initial quality and it allows us to focus on things that matter to the customer our relationship with the Magna has been outstanding they have a long standing experience.
And the producing high quality of vehicles, and we have developed with them. The ocean so far to be of high quality of vehicle and we can see that on.
We expect our expectation on that area to come true.
Let's go to the 2021 goals and objectives. The priorities are Ocean program remains on track and two of stellar product build.
Building on our brand and our reservation growth kicking off design and development of future vehicles, because not a car coming unless you have a range of vehicles and we are planning several new vehicles before 2025.
And then priority one is really differentiating ocean and.
And creating IP, our talented team fast decision, making class supply chain buying has led to improved specifications versus what we originally planned and will turn into a unique FM 29 platform filled with Cisco of IP and this was fall of.
Other models on the FM 2009 platform in fact, we are already.
Designing on working on the second vehicle on the Fms.
The 29 platform.
Debt to fill it and some of the detail in key areas of the vehicle I turn it over to our CTO Fuqua pocketbook of homegrown. Thank you Henrik.
Really pleased with the tenant of if enabled through the object and.
Positive reception from the global supply chain, which I think is due to the capability of all of team on a strong balance sheet and all of the Derisked production strategy.
Plus it's quite attractive to the supply chain the launch the latest advanced technology in the 18 months from sourcing because then they can demonstrate the capabilities to other customers quickly.
Who wants to win the contract and wait three years to launch it that's the old weighted and the supply chain is eager for a new process.
To be specific on all of the technology advancements I will share a few examples.
Safety, we are modifying certain areas of the visa.
The architecture to enhance the crash ratings.
Mark the competition and are targeting the highest crush performance and all of the segment.
Eight of us.
<unk> pilot the pits.
Intended to in pilot is the first system integrating digital imaging radar and one of the first programs to use mobilized nextgen camera and chipset.
The drama on the single domain controller and integrated by market in electronics.
<unk> spent a lot of time thinking about how to use the hardware to make customers driving experience special.
They've come up with the set of industry unique features focused on sales we do.
Using the annoyances enhancing entertainment. These features developed by <unk> of the team and we believe will serve as a great platform to monetize software content initially and over the life of the vehicle.
The powertrain, we recently nominated suppliers for battery cell drive unit, the powertrain domain controller the pricing in line with much larger Oems.
We are confident ocean, but the really blow away. Although originally planned specs with the $3 50, plus of my range for the Ultra long range version and Sop for second to 60 times four.
The base solution.
We continue to build out of our cloud and machine learning platform to monitor all of the performance of the whole of powertrain and we'll use the data to improve performance over time over the year.
Speaking of connectivity the.
Our goal is for fiscal oceans of become a mobile device.
We are developing the next generation of electrical architecture centered around several of the domain controllers supporting the major of subsystems that.
The system is connected to the cloud by the <unk> data pipeline developed by our edge computing team.
The 10 state of the art collection of the machine learning to analyze overall system performance to support predictive maintenance and all of the software updates.
<unk> range and performance.
And to enable new revenue streams by operating upgrades to features and functions and integrating third party services.
Notably.
The upfront the investments we're making these technologies go beyond the ocean at Fox systems like user interface of pilot and powertrain.
Life of future vehicles as well.
The overall pie and anticipate.
We anticipate we will execute the sustainable SUV the truly stands on hold from the competitive landscape, we see in 2020 and beyond and will be profitable at an affordable price.
I will note two of them as Victor.
Thank you Barbara.
So all of our second priority is increase the brand awareness and drive the next wave of reservation of growth.
I'm really pleased with the uptake we've had on the reservation on so far considering.
A lot of these reservations, where made two years before we launch the vehicle of pretty much zero marketing dollars.
We also have a unique ability to actually go back to our reservation holders.
And the figure out exactly what they want who they are and how we can create a targeted marketing campaign. So for example, we are encouraged by the broad appeal, where 70% of our reservation holders have never owned an EDI and over 50% up from non premium brands and that really shows the appeal.
Of the fifth corrosion.
We have also found out I would say unfortunately or you can say fortunate on do you want to look at it.
But we did find out that the majority of the reservation of holders of men and it actually.
It's interesting because of the allows us to make targeted marketing towards women, because we actually think and I personally think the <unk> is also perfect for women.
So we are going to create some targeted marketing in certain areas, which is normally very difficult. When you don't exactly know who's interested in the new vehicle or if you don't understand who actually have not already reoccur on why not of those of the type of things we can figure out.
We are of full marketing plan.
To do all of this and we will obviously not really start that until we start showing our final production vehicles later this year.
<unk> already done a lot of virtual.
Kind of online visuals with our Fisker Ocean and now that we will have the prototypes ready we want to find the right time as COVID-19 hopefully get over to show. Our vehicles. Later this year most people might know that we originally had planned around the Los Angeles. The auto show that was kind of come here in March which is now.
Sorry in May which has now been delayed until November so I would suspect that theres a good chance our launch will be just before November this year, coinciding with the Los Angeles the auto ship.
Branding and product and marketing opportunities in 2021.
We are releasing more details on our specifications on trim levels. So people are kind of be able to actually sit down and have some fun.
Deciding which vehicle, which package they want to offer.
Also of specification of that thing is going to be really exciting.
So to see how competitive they are.
Also kind of have a design studio on our App. We can go in on play around with colors et cetera, and then of course, the laid out when the of our prototypes ready.
We are also going to let some some journalists into the vehicle driving it. So we can get some feedback and everybody can read about how our vehicle performs.
Going to be a very important part of our marketing later this year and then at the same time.
Launched the product we also launch.
Our sort of brand campaign, which is really going to be around sustainability beauty and design. The high technology is going to be of given and you will see that as the mentioned more of the specifications for the future.
And of course, our brand is in line with our ESG goals and our ESG strategy is a responsible supply chain with the right policies in place.
Work with our suppliers on that and we benchmark the competition to ensure the ocean is planned cash leasing and sustainability. Our aim is still the fisker ocean will be the world's most sustainable vehicle and our aim is the the vehicles, we make in the future will take the lead in sustainability.
We got on ESG director.
That had been assigned deliverables and he is the signing deliverables to each department.
To make sure that we are adopting and we are measuring the performance we are adopting the rights.
Ways of doing things in the measuring the performance as well and that's something that we're going to be releasing data on at a later point in time.
The number three drive profitability growth beyond the ocean and of course start production of the Ocean.
The ocean when we launch it we'll really have a lot of segment leading features and this is something where we are very very confident in our sales predictions of this vehicle. We think is really going to be outstanding in the market segment. We also expect for three more distinct models to come to the market.
By 2025.
And they will each go into market segments, where we would.
Either really I think fast off the market segment was something completely different or maybe even create a brand new market segment, we're not going to make any me two cars, that's not what <unk> is about.
We will have at least one additional model on the FM 29 platform, where we will be able to share a lot of common systems and therefore make it very cost efficient at the second model on that platform that of course, we are working together with magna.
We expect that sometime late 'twenty or early 'twenty four that we would have U S manufacturing four <unk> 29 per.
Platform and we've already had some discussions with magna Bob debt as well.
And then of course, eventually youre going to have to work on both sales and assembly in China I expect that we will be opening up reservations for the fiscal of Ocean end of this year in China. It's obviously, the world's largest EV market and it's a very important market that we must enter and we have clear plans to do so.
<unk>.
Additional platforms, including Mou with Foxconn.
Of course is something that we've always said as part of our strategy. Our strategy has always been to actually have several multiple partners talking about different platforms with different vehicle segments, and we have announced the second part on our Fox Con and we are in constant conversation with other <unk>.
Groups about other very exciting projects and.
And that's something of course that we will talk about when we are ready, but it has always been part of our business model.
Finally, we are credible and then continue to prove points everything we're doing in 2021.
Think that you have already seen how we are on time and you will see later this year. When we start building prototypes, we will prove that we are serious about being on time as the startup and thats something that I personally will make sure I follow up on every single day in the company seven days of week I'd like to hand, it over now so all of <unk>.
Hello.
Thanks, Andrea and welcome everyone before going through our results in the outlook I think just a minute to discuss my key priorities is the company's CFO and the metrics and performance indicators, we are focused on.
And the one community the value of the capital of the interested the setting aggressive the greens and of those targets and achieving them. We have need of out of 2021 guidance today and why the actual results may differ from those we project. These goals on my personal commitment to all the stakeholders debt.
We worked very hard and relentlessly to achieve our executive team is committed to driving the unique culture of asset light, what things should cost and rapid decision, making as Henrik mentioned.
I am in daily meetings, with both Magna and just the teams and our purchasing finance and engineering departments to make suppliers elections and drive efficiencies in the overall, it's just the Ocean program the daily deep dive and intelligent decision, making is critical in us hitting a bond targets now, which we believe is the most.
Critical aspect to ultimately hitting our profitability targets.
Looking at extremely methodical manner with Magnus and.
And inviting multiple suppliers to bid on a components challenging them in a variety of these and ultimately selecting the most qualified and cost competitive vendors on the program lifecycle basis as an executive team we have to set of the company for long term success, and we have to think of future products and platforms now yesterday, we announced the day.
Exciting partnership with Foxconn and this is consistent to the the Parkman strategy, which you saw last year.
On the very strong and the deep relationship the Magnum group of companies as you saw on our agreements on equity EBIT Magna International Magnus tie on debt from sharing and contract manufacturing ended the Magna electronics on Adas. Both companies are working tirelessly to meet the joined the program Deliverables. We also completed the Volkswagen Fox and share.
On the agreement for the fiscal Ocean program last year.
And the startup we need to maximize the ili on our assets every day with my finance team I look at opportunities to meet the cash go further and get a multiple of returns on every dollar we spend.
We exclude the exploring other opportunities such as monetizing of future emission credits or even licensing income.
The nine platform.
Potential partners.
Net intend to keep your eyes.
In terms of in terms of Kpis, we are committed to a set of goals that the drive long term financial performance that benefits all our stakeholders.
Overall try the Kpis up number one of stellar product number two bill of materials that underpins market, leading growth margins number three is that the on time and number four overall program cost and index or the authority on the.
Near term focus in terms of external metrics is on operating expenses and capital expenditures as we get into start of production in Q4, 'twenty, two and beyond volume average selling price and gross margins will come into focus.
I want to reemphasize, one more time that the work we are doing today.
Achieved those margins is happening every single day.
Finance purchasing and engineering teams.
And the key benefit of our asset light strategy is that it lends to a low overhead we expect that the flow through into positive operating income and free cash flows and efforts per year of production.
Now turning to our results and outlook.
Q4 results were in line with internal expectations at the start of the quarter operationally the increases in R&D and SG&A expense in Q4, 2000 22020 versus prior periods. The primarily the result of the Ocean program gaining momentum in Q4 at the end of 2020, the 101 employees.
Full time and as of today the 148.
Also reported a noncash gain and changes to fair value of convertible equity security debt security was retired as part of a reverse merger. So we should not see any activity in that line item going forward.
I would also like to note that the first tranche of Magnum was vested during Q4 2020, we have capitalized $58 million related to that as an intangible asset.
Once the tax production Q4, 2022 that asset will amortize over the life of the Ocean program, but the cost of goods sold.
On you to that in Q4.
Most of the Ocean program related activity, including scoping product that could be identifying key suppliers and creating an execution plan for long lead components of spending was mostly head count related.
These are the likelihood major announcement in July we expected a significant amount of supply related R&D and capital spending to occur in Q4, however, given the much more informed forecast of the program looking along with Magna and our suppliers that spending will now occur in 2000.
The 2021.
Now turning to our outlook as noted in the press release.
Expect overall cash spending to be $450 million at the midpoint of the range, which would consist of an R&D expense of the approximate $895 million SG&A of approximately $30 million and capex of approximately $225 million.
We expect the cadence of spending to be roughly steady across all four quarters in 2021, beginning in Q1, our R&D expense will increase meaningfully as we continue to build our internal organization kickoff lonely suppliers and ramp of payments to third party service providers. The rapid ramp up of spending in Q1 should give.
Plenty confidence that the concept of supply evaluation work. We did in Q4 was successful and the program is now in full execution mode findings.
Finally, we have excellent visibility on the Ocean program spending it is based primarily on supply of nomination agreements and a well defined timeline on a highly diligence cost schedule on vehicle integration and production per patients developed in collaboration with our partner on partner Magnus items.
While we cannot guarantee everything will go to plan, we are highly confident that the many unknowns and risks that all startup phase of more limited by Cisco do ex due to our unique business model this cost and timing visibility sets us far apart from other new EV startups, and we expect it will meet the growing and Mr confidence over.
Right.
Finally, we have taken sophisticated program cadence methodologies that established Oems follow and combined at the rapid decision, making at each program deeply to reduce cost and time to S&P.
This helps us checkup program timing and budget at all the key gateways of the program.
As both R&D and production to kickoff is key focus in 2021, I would like to provide some additional color on our 2021 spend.
In 2021 spend is driven by three main categories number one on engineering head count number two engineering design and development payments from various components and services provided by our suppliers number three cost of Bill news in tourist type vehicles for validation purposes.
Capex consists of two linked the unique bots that supply of facilities and the unique tooling and equipment at Magnus tire manufacturing facilities to produce our fiscal vehicles. Our guidance includes our choice to spend more than originally planned for R&D on specific technologies.
Make our product more exciting in class meeting as Henry can do kind of discussed on again.
Importantly, we do not expect the include the incremental spend with impact program timing on the price and margin structure of ancient levels of the Ocean. However, we believe the better than expected performance across several areas, enabling the ocean to stand out from a competitive landscape supports strong demand strong mix.
And more importantly, we are equipping of vehicles with the right hardware that enable monetizing software enabled revenues generated at the point of sale and beyond overall I'm extremely proud of the entire fisker team for all of the accomplishments over the past six months and the plan to be the established to execute a fantastic profitable project.
And on budget, we're now happy to take your questions.
As a reminder, ask David if you could assemble the queue. Please.
Certainly.
The reminder to ask a question you'll need the press star one on your telephone to withdraw your question press the pound or hash key please standby, while we compile the Q&A roster.
Your first question comes from the line of Mark Delaney with Goldman Sachs. Your line is open.
Yes, good afternoon, and thanks very much for taking the questions.
Was hoping to start by asking about the new.
Announcement with Fox on I believe Fisker had been targeting of 200 to 250000 deliveries by the decade.
The majority of that coming from the Ocean SUV, but in the announcement from yesterday, you talked about the potential for the boxcar on relationship alone to be.
250000 units all of them I don't think there is a timeframe specified for getting there. So can you help us understand to what extent the Mou with fast time may change your 2025 delivery target.
Yes. This is Henrik here thanks for the question.
I think it will have a positive impact on our projections.
This is the program that really has come to life here a little.
Alongside our original predictions and I'm really really excited about it.
And if all goes well, which I hope it will react to the crude she is sort.
Passing our original goal of 250000 by 2025.
Yeah.
That's helpful.
The hoping to better understand.
Why.
Various choosing to collaborate with hot high for for.
The future of platform, you mentioned theres potential other options.
I understand how high is the Vegas iPhone assembler of in the World and there's been a lot in automotive components.
The company is expanding into other automotive partnerships, but I don't believe Han has a lot of experience.
Doing a full vehicle assembly. So maybe if you can talk a bit more about what the.
The led to this relationship.
Some of the things that excite you about working specifically with with Hot high and then.
Are there any drawbacks of starting to work with multiple manufacturing partners as opposed to potentially.
Working more exclusively with magna on perhaps benefiting from some economies of scale by concentrating your your manufacturing relationship. Thank you.
Yeah.
Well first of all of us.
We have always stated our business model was always about having multiple partners I think.
That allows you to go into different segments.
They have different type of innovations happening with different partners Magna has been of great partner.
Continues to be of great partner, we have a lot of plans with Mac net debt is specifically around the FM 29 platform when it comes to Fox from.
That's quite a unique.
Deal because Fox from is also investing into the vehicle. So we're really co developing this vehicle. That's the number one number two this is not another electric vehicle. This is reinventing the form of mobility for the future.
And I think Fox Con was really set on finding what they said is almost like.
The next Apple of cars, you know what does that kind of be how do we create this sort of momentum.
Where we think completely different about the automobile today, if you think about the automotive industry that box themselves into segmentation. So when a new car comes out. It's clearly stated it fits in this segment and if I'm, an accountant or design of our earning this salary of then that should be driving that car.
And if somebody else I might choose a different car because thats on the segment.
What we want to do is we want to create a vehicle, which have nothing to do with the segments you should be able to be bought by anybody because it is the perfect choice of mobility, specifically in urban areas and as a commute of vehicle.
That's quite a big task, what's interesting here about Fox Crown in this particular area is that if we want to create a premium vehicle and we want to have a lot of innovation on it we have to take cost out somewhere.
And I think that's probably one of the Fox comes strength as being I believe the largest manny.
Manufacturer in the world they've got an incredible lots of supply chain.
The.
Believe that they have the ability to check a lot of cost out of on automotive supply chain, having looked at it and the investigating it and that was very attractive to us also coming from a clean sheet of paper with really no heritage.
Think Fox Con might be the one of the few companies in the world that have not made of car actually can come up with new ideas of how to make of current of different way and I think thats the sort of exciting thing about this project and because we have several projects and because we are talking to several of <unk>.
Different.
Companies.
It's not like we are taking a risk with just one company doing one experiment.
However, I feel with this particular vehicle being somewhat of an experiment to be quite Frank It's a huge challenge to try and do what we're doing but I couldnt imagine a bit of partner than Fox from to do it because they have been able to take these experiences and experiments in the path I mean, that's essentially what made them famous.
Is that the jumped in and did the iPhone, Apple, so who better to be our partner on a project like that.
Very helpful. Thanks, so much for taking the questions and congratulations on having your percentage of your card.
Thanks Mark.
Your next question, but how about on the line of Jeff Osborne with Cowen <unk> Company. Your line is open.
Great Congratulations for forgetting the first of all of that.
Couple of questions on my end.
I was wondering if you could touch on the percentage of the Ocean Bill of materials that is nailed down.
Now to give you the confidence on the margin so you talked about.
You highlighted a few key components, but just is there of magnitude that you could give us through the full vehicle cost.
Thanks, Jeff This is Keith I'll take that question, Jeff We've organized the program.
Very sophisticated gateways gateway last year was what we call the product specification gateway, maybe fundamentally identifies specifications in the vehicle on next gateway, which is the upcoming in March is what the target assessment at that point in time. They have nominated all are.
Major suppliers, especially the low me tooling and this gives us a very high confidence in terms of what a bond would look like at this point in time on the the kidney decide what features we think provide great content to the customers. All features we think that we may not want at this point in time, but me introduce need.
And in the lifecycle of the product. So we are very confident that we have achieved the bond targets. We wanted to achieve in fact, I would say that we have more content in the vehicle than we had originally planned for in July.
Got it that's great to hear.
Mrs.
Didn't hear you correctly, but on the experience on her you highlighted introducing the vehicle in November at the La Auto show I think originally you were hoping to have an experience center, where people could see on touch the prototype in may is that still on schedule given COVID-19 I wasn't sure if escalate.
Due to Covid it would make no sense of urban experience under right now so because nobody would.
Really able to go there. So we decided there was no point in taking that extra.
Cash outlay at this point in time, however, we have several locations that we're in the Midland negotiating.
And whether we launch all of vehicles after the experience center or another event, we haven't decided yet but like I mentioned due to Covid I expect that the launch would be sometime maybe before November hopefully at least the end of this year and again, we are a little bit in the hands of Covid here I don't see the point of doing a virtual low.
Launch because we have already shown.
On a vehicle and many different online media.
And so I really want to show this vehicle in reality of having people drive it that's the whole idea of so we will find the right moment later this year to do it.
Got it that's all I had thank you.
Your next question comes from the line of the team of colleagues with Citi. Your line is open.
Great Hi, everybody congrats on the on the first of all earnings call.
Just wanted to.
I guess I just wanted to talk cash.
Strategically as we think about your growth over the next few years.
And the revenue opportunities beyond the sale of the vehicle and maybe specifically is hoping to get an update on the release.
Just thoughts on like the flexible lease model if you can.
You mentioned, some software opportunities that you're pursuing as well as well as on any potential options for your customers too.
Net to share their vehicles through peer to peer on other constructs like Todd just want to get a sense of there is thoughts sort of in terms of of the larger opportunity beyond the vehicle sales itself.
Yes, so maybe I'll just take the beginning of this question and then the handle the <unk> CFO.
So the whole idea about our flexible lease is that.
We own the asset and we meet this vehicle out over probably from the beginning towards the end of its life and it could be somewhere between 12 to 15 years and you could see let's say, maybe eight to 10 people getting into the vehicle over those 12 to 15 years.
And if you imagine that the first person.
Lisa this vehicle.
And as they are enjoying this vehicle, they're deciding to purchase some feature over the air for $1000.
And enjoying that feature of the then hand, the vehicle back, let's say half. The two years, we know these without sort of another person, but before we send this out for another lease for selecting the low price we reset the vehicle to zero, if you want which means.
Of this person was the second person once the leases vehicle than the again pains of that feature that we have already developed and that shows you the potential of selling of feature multiple times over the life of the vehicle of course also percentage of upgrading this feature to give even more value, but it shows you the mobility of <unk>.
Revenue that is possible when we own this fleet and we operate the vehicle and we also think that our vehicles. After four to five years will be way more attractive as the used vehicle in this lease form versus any other competitor because of our vehicles is going to be maintained by us.
The OEM.
And it'll be on the full warranty because we maintain it and that I think is really going to be a unique competitive advantage. It's I'll handle the dealer to talk a little bit more about the revenue opportunities yes.
The revenue opportunities as I mentioned earlier of course as emission credits Micha clearly assets that we would generate the looking at even potentially pre selling some of these emission credits and I think some some of the companies have shown that can be of great potential to generate revenue and as I also mentioned that there are opportunities for us to share.
The if im 29 platform. So that's another potential source of revenue and other areas since youre of direct to customer and we have our own app, where we engage with our customers on a.
Again the basis, we are exploring maybe we should look at the business of captive insurance that share risk with the various underwriters.
Great. That's all very very helpful. If I could just thinking of one last one just I think the press release mentioned some ongoing discussions for fleet reservations.
Maybe if you could share the an update on it.
Maybe the size or timing around what we might expect around the on growth.
Fleets I think it's on particularly in Europe.
Yes, we see this as an incredible promise of market.
Specifically in Europe, because in Europe, it's more normal than even large corporations actually offering they are employees of lease vehicles as part of of retaining are attracting.
The employees and we have already we have just added specific.
Specific sales person for fleet sales in the Europe started a few weeks ago. So that's something that we're going to go aggressive into MBR in discussions with several groups over there and I are of high hopes for this because of vehicle as the perfect size in Europe is obviously built in Europe.
So I think this could be a very attractive.
Avenue for growing sales for us.
Great. That's all very helpful. Thank you.
Your next question comes from the line of Adam Jonas with Morgan Stanley. Your line is open.
Thanks, everybody.
The Henrik.
Apples are nice.
But the issue.
Nothing quite like a fresh juicy per right.
I have a question on the engineering and capital resources.
Running two major projects again, let's let's assume the Mou moves forward, okay, and it seems like that process of moving fairly aggressively as as youre.
Or model to move fast.
But you'd be running two major projects.
The middle of the year of later this year with two separate manufacturing partners in two different regions at scale, it's an amazing opportunity to take your technology.
And business model of the scale to get the jump on competitors, while managing the risk, but I'm wondering if your current capital base is set up to run these two programs.
Simultaneously or whether there may be a need or opportunity to bring in more capital to ensure your financial strength of the partner.
During this important time of execution.
And can you remind us how you think about minimum cash levels as well kita and anything else you might give us on.
Are you able to give us right now in terms of if the Mou moves forward, how your projections of cash consumption by order of magnitude could change this year.
Sorry, there's a few questions in there, but I think you'll get the adjusted I think are important.
Yeah. Thanks, Adam appreciate it.
Let me just start by saying that we actually already have started this program and the good news is that I am pretty low paid in the company and I do both of these jobs. So that's a good start.
And so that's not a big influence right now as we are in the design phase, but youre absolutely right. Eventually we're going to have to spend some money on this project one of the unique things that I just want to highlight in this program is that.
Foxconn has committed to invest in this program and that's something we're going to be going into details over as we move forward, but the program is on full speed, we're extremely excited about it and.
Of personal electric automotive revolution of something that the.
I think as needed and really could change the market dynamics, specifically, if you talk about more mass market of higher volume in the right price segment on this vehicle will be priced well below the <unk>.
Ocean.
And I think that's where the real opportunity is prime on hand, it over to get it to go more on details around your financial questions and thanks, Adam Adam Sensible I wouldn't.
The confirm that I'm afraid the risk of the CSO once we have the.
CEO, who looks at very exciting products I am the risk of a CEO looking at our balance sheet and investments that gives us the right out of lives. So first of all we have no debt. We ended the year with over 1 billion do you have the three.
The balance sheet.
No you're absolutely right how would you look at resources. The two programs principle, we are looking at how we maximize existing resources in both the companies both of the companies have existing IP they have existing capabilities and that's what the next few months will be spent at the end of these next few months.
Clearly identify what.
<unk> both company needs to make now, let's talk a little bit about our existing balance sheet. So today, we will in the <unk>, we'll be investing hundreds of millions of dollars in production tooling and equipment that we will own.
Our discussions indicate that these can be potentially financed at no cost in a variety of ways you'd be willing to do that specifically for the ESG for the company and again I'd mentioned about emission credits that can be monetized now both of the companies are committed to investing so it's not just physical the investing and as we all would agree.
Capital markets have decided that electrification is the future of automotive and once we achieve some of our key R&D and production milestones is the.
Both the need and an opportunity to further bolster our already strong balance sheet.
Do that and inefficiently.
Okay. Thanks for that Keith and I, just have one follow up on batteries.
I've been accused of overreacting on Sn.
But I'm kind of of nervous guy.
Im thinking that there could be a battery of shortage of very serious <unk>.
<unk> demand and balance as we see EV demand and then the number of the entrants promising such large volumes now you're you've got again, you've got a jump on this and I would imagine that magna on and Fox on or two to our partners at <unk>.
If they tell someone we need the batteries that that's something you want to try to do but.
Am I crazy.
From your lens.
Two of our Henrik.
Do you think their battery shortage, where would you rate battery shortage risk on the scale of one to 10 and how can you assure us here of that that's not a gating factor for you I'm talking on cell supply specifically.
As you know to make good on your Sop and the ramp efficacious Lee. Thank you.
Yes, so we have already nominated our cell supplier and it is one of the largest <unk>.
Sales suppliers from the world there'll be of work quite a long time.
And at this point do not really see.
An issue for us for Fisker and the reason is that the supplier is very well known for both Mac and Fox Com ex U.
Seth So it's not like either of the three companies have to go in on a total there so for fifth Guy I don't see it as an issue now kind of the issues of other companies entering the space, possibly.
I also think of it depends on the how fast of course, the EV growth is on each continent. Now we have seen that frankly in Europe. There is a lot of the new factories being set up.
As well as in Asia, I actually think the one that's lagging behind right now is the U S and Thats just talking generally about the battery.
Battery cell and battery pack production.
So we are already in discussions with our nominated cell supplier about setting up.
<unk> sales and battery pack manufacturing both.
Potential Europe and the U S. So it's definitely the something where you've got to have of Tightknit relationship.
With long term in mind to make sure you have would you need to either you have a few things, yes, Adam I just want to add you know you're absolutely right, while you're skeptical because.
Whilst we've been talking to multiple battery companies they've been burned by many Oems who haven't delivered on the volumes that the requested and as a result, what we've found is all of the battery companies are very very selective in who they want to work with and when you want to have the capacity.
Lockdown you have to have relationships. You also have to have a desirable product that the battery companies will want the batteries to be in because the HUD. The story before that somebody wants to make an easy, but fundamentally and nobody wants to buy so it's not just the function of locking capacity, but its.
Writing battery suppliers, bringing them the deal on the journey, making the belief that this will be a win win and of course, there's only one company that's been able to do that and we are very confident will be the second one.
Thanks, so much.
Thank you Adam David I'm going on I'm going to jump in here for a second.
The guys retail investors are important to us that they make up or the percentage of our shareholder base and I solicited. Some questions. We'll try to do them rapid fire. So we can get back to the analyst Q, but im just kind of ask a few I'm going to start with one we.
We heard you talking on social media about on IP Center Youre, establishing in India can you give us a little bit more detail on that.
Show of aircrafts, so it's actually not an IP send data to the software development center of it.
To grow.
With a soft coalbed methane San Francisco Silicon Valley, we are building up the softness excellence teams, which will focus.
On the embedded software and the cargo means and be on secured data pipeline from the cost of the cloud and edge computing capabilities, including machine learning in the backend of our of Frisco cloud.
In India of you will find all of the additional small talents and resources, we need to further develop our software competencies in these areas. So from the embedded automotive operating system experts in program most of the data enter the spring data scientists.
Great. Thanks for the cart.
Next question is is what is not changing over the next 10 years, and how we will fisker and capitalize on that belief.
Actually I would say everything is going to change and that's the power of our plan to reinvent the car company of the future I think we are.
Really showing how we are executing this plan we started out with magna in what we're doing the back then in terms of getting faster market with the incredible product the Fisker Ocean and will now follow up this is showing series of the seriousness about it with Fox from.
It's taking another step so I am very confident that we're on the right path there and no. We're not seeing sale and we really don't want sort of a zero change we want to of a lot of change.
Thank you Henrik.
Next question will assess the redeem their public warrants.
Okay. As you can do the question is referring to the $18 4 million public warrants at $11 50, we do have the right to redeem those warrants if I share prices above $18 20 out of 30 consecutive trading days, which could potentially drive an inflow of over 22.
The $200 million in cash and the reason why I didn't use the admin Adam asked me. The question how can you additional deleveraging our balance sheet and the answer to the question is we do not have any intention of doing so for a couple of reasons number one those warrants expire in a bit less than five years. So there is meaningful.
Time value and we do not want to limit that value for the holders of the warrants number 218 million shares is a very meaningful amount of dilution for all of the existing common shareholders at a price that is below today's value and very much below what we believe the future value of fiscal could be.
<unk> execute our milestones of plant eventually those warrants will exercise and the shares will come in but we don't think it's a good signal for us to choose to take dilution of that price bottom line is we have a strong balance sheet and we believe there are multiple avenues to bolster that if we choose as I explained earlier.
Okay, great. Thanks, Peter David.
David can we go back to the Q4, probably our last question maybe one more.
Certainly your next question comes from the line of John Lopez with vertical group. Your line is open.
Hey, good evening, thanks very much.
I had a couple of real quick ones, if I could the first thing I guess, maybe just a clarification I was also encouraged to see the reference on the on the fleet developments.
When you guys are taking reservations from fleet is that number of resident in the reservation count you've offered or are those only retail reservations.
Yes, so of centers being I guess it is it is showing up.
Think of in the future.
Not probably not going to emphasize so much on releasing numbers so often.
Each deal is different.
In fact, one of the deals at the <unk>.
First deal that we did the veeco the actually Werent order a lot more vehicles, and we sort of kept it a little bit back.
So again.
This is a huge potential specific for fleets, though.
I expect these orders to really start coming in next year, because sometimes are perfect end of this year I would say because they normally order of about a year out these fleets in Europe, so I could see that kind of.
Accelerating more towards the end of this year with John just just to be Super clear within the number that we released today Theres 300 fleet units, which we announced last year.
Perfect. Thanks.
My second one is just on China Henrik I think I heard you say you guys would perhaps like to start taking reservations. There by year end hopefully I heard that right can you just remind us of processes procedures any regulatory items, what do you need to check off between now and then.
To begin that process and can we assume that any costs.
For those would be resident in the current spending plan.
So just to be clear, yes, there is a lot of kind of the rules and regulations on China, and I'm going to handover to Peter but we definitely.
Want to start taking reservations from China from our App online et cetera and of this year, because we have a lot of requests.
From various potential customers other China already but let me hand, it over to Peter just to explain why that's a little more difficult, yes, well first of all of you know I wanted to start off by saying that the fiscal the ocean will be of globally certified vehicle, including China. So came into the very large market for us in terms of China specific.
Actually in the post of the setting up the China, just long procedures that it takes the COVID-19.
The set up the company.
Of course Magna has the presence in China. So we have the.
The net to leverage magna's existing facilities in China.
When it comes to taking reservations in China, clearly the have to have the right.
Software development within the App. So people in China can access at the would also look at local language and whenever we need to do.
I think we budgeted for an experience center in China.
You may not be this year, maybe next year.
But from our point of view this year, taking reservations in China would not be an incremental cost since they are largely based off of.
The digital App.
Web.
That's great really help David I think we can I guess one more question.
Thank you.
Your next question comes from the line of path of all fallen shop with Raymond James Your line is open.
Thanks for taking the question congrats on your first earnings call.
I was intrigued by the <unk>.
Demographic analysis that you've been doing with the reservation book.
And I'm curious when will you take that debt.
GAAP.
Calling your reservation holders about.
Which version of the Ocean update.
Of our et cetera, and which option they may want to.
Ultimately paper.
Yes, absolutely the thing here.
So first of all there is.
There's a couple of things here, we will.
Not releasing option packages and specifications end of this year.
So people can already start seeing which specific package they want for the ocean.
And colors et cetera, but in terms of actually approaching people and get them to commit we have the you are fairly close to start up production because we don't do that this year on somebody's credit score changes et cetera that would be too difficult. So I would expect we do it a few months before the actual production starts of debt would be.
Last year.
Kind of how I see it we have to sort of just look at it from a practical standpoint.
Some people who have reserved.
<unk> of the car.
Don't know which model they want at this point so the.
May be a certain.
Lack of certain models, depending on how fast we can produce them.
We are planning to offer even the base model from the beginning.
So there will be availability I believe of all of the four packages right now, but ultimately we will obviously one of so most of the high price version.
Because thats the highest profitability vehicle for us in cash flow is important for us as we restart, but we're not going to kind of wait several years to also the base car because we make money on the base car as well, but as I said I would expect end of this year, we will show the option packages in the end of next year, we'll start kind of honing in on people on and make sure that they are.
Emitted.
Right. Thanks Henrik.
A valid.
You have a quick follow up.
Yes, yes, yeah, a quick follow up on that given that you've done some of that demographic work and you've identified 70% of reservation holders own on non luxury.
Our vehicle kick day does that say anything about which version they may ultimately have interest debt.
The most of what we set was debt.
The above 50% is coming from non luxury cars and non luxury cars don't mean necessarily have to be cheap.
I don't want to make any brands here, but there are some mass market brands sell 50 of 600000 other cars I think what we are showing here is the market opportunity that we have with the personal climb of few thousand dollars up to all of vehicle or whether they come a few thousand dollars down on the stay at the same room I think the real opportunity.
The here is that of somebody who is coming from the mass market brand of so millions of vehicles, a year of coming to us while debt mass market brands already offering on the EV in the same space I think that is the real key message here and the excitement for us to see that we can actually get people out of.
Traditional mass market brands were usually you have very conservative people, who rarely changed branch on specific enough to of new EV startups, the best encouragement that we see here.
Thanks, very much thanks, David.
Thank you very much of El <unk>.
To thank everybody for listening in.
It was great to have the interactive communication as low him I think thanks on behalf of the <unk> really appreciate it.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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Yes.
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