Q1 2021 Fisker Inc Earnings Call
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Our free cash flow.
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Good day, and thank you for standing by locking to the Fisker incorporated first quarter 2021 earnings call at this time, all participants from the listen only mode. After the speaker's presentation, there will be a question and answer session.
Ask the question during the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero out of.
Now like to hand, the conference over to Mr. Dan Golf, Vice President Investor Relations. Sir. Please go ahead.
Thanks, Lee and welcome everyone because of group's first quarter earnings call. Joining me on the call are Henrik Fisker, Chief Executive Officer, Dr. Bukhari, <unk>, Chief Technology Officer, and Doctor Guida Goop, the Pittsburgh, Chief Financial Officer, and Chief operating officer before turning it over to the Henrik the advisory will be making forward looking statements within the meaning of the <unk>.
<unk> Securities laws forward looking statements generally relate to future events for future financial or operating performance of.
Our expectations and beliefs regarding these matters may not materialize actual results in financial periods are subject to risks uncertainties that could cause actual results to differ materially from those projected. These risk of include those set forth in the press release, we issued earlier today as well as those more fully described in our filings with the Securities and Exchange Commission. The forward looking statements in this.
The patients are 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 do not conform to generally accepted accounting principles of our GAAP during today's call, including non-GAAP operating expenses.
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 am happy to turn the call over to Henrik Thanks, Dan and thanks, everyone for joining.
I'm extremely pleased for the progress we've made in the ocean so far.
<unk> said for many times you of what news COVID-19 of new Skus to delay anything we're on track for production and deliveries to start in the next year.
We completed a major engineering milestone of March this year, which enabled us to kick off tooling and the start both test and validation for some key components of the next big milestones in the office.
We'll have the chassis mobile is complete.
And that will allow us to do some more testing and fine tuning. We also will do more bills of prototypes of meals over the course of course of the year of when we start adding more and more of production level of components.
And of course virtual prototypes of the safety of elevations are also in process and that means that we will have one of the safest vehicles on the on the road. In fact, we are already working on fulfilling 2023.
Safety ratings for five star So that means if you would buy a vehicle today.
And the vehicle of our vehicle will be saved for them. The vehicles of the bank debate, because we really reach for the long term highest in March.
Also the engineering powertrain modeling supports all of our expected range of exploration will have up to 350 mile range and I'll talk vehicles with the share six interest from four seconds. So we are definitely not only going to be on the hardware competitors, but that's really.
Super car territory for a family SUV, which is pretty amazing for the price offering that.
From self certification of the home of the games and the better.
And Chris plan in place I know, it's not very exciting, but it's critical for.
The concurrent launch in both U S and Europe.
Thats accurate.
The <unk> debt.
Ensure that we are ready to deliver our vehicles both in the U S and Europe next year, that's pretty unusual most car can we start in one market.
Can you kind of do simultaneously.
Europe and U S.
Our supply chain is of major success story suppliers of being very selective taking into the products business case, it's not.
The only about the Oems name. It's also about the viability of debt products on our strategy is appealing.
Because first of all the of showing demand confidence.
Growing demand every single day.
The nations, we're now well over 16000 reservations and just see that of continuing.
Fact, all the plan is to accelerate that towards the end of the year.
And of course, the fact of weird the sign and will deliver of midsize SUV the fastest growing market segment in the world I would say the probably has the most compelling design specifications are quite frankly amazing.
Of the type of affordable price for your offline starting at 37 500.
And I would actually say I don't think there is any issue of the electric SUV. The has been announced so far coming out even the end of next year. The starts of 37500 little type of design and specifications that we will offer so when some people are saying that we have plenty of competitors coming next year.
It is simply not true there's a lot of it should ease coming out, but the way more expensive the lessor.
The lesser capabilities in all of vehicle and I don't think they really have the design that we have neither.
We have a truly unique product and.
And of course.
Supply confidence when it comes to the confidence of Mac nickel hit volume targets and ramp timing why is that important because suppliers will not want to sit with a whole bunch of parts of the company of order. If the company is not capable of scaling up fast enough and I know it sounds very tightening and exciting.
For an EV startups of growing both the owned plan to learn how to manufacturer of car build is that means of your two three of four years.
Into actually scaling up that means your suppliers you are leaving them hanging and this is not something that we're going to do is something where our suppliers of confidence because they know maximizes the professional automaker and the know how to scale up and I think thats a very important part of why we get the best suppliers on our side.
And then of course, the long term growth confidence net.
Net up again, when you combined FM twenty-nine platform and the SP 20 platform volumes.
We have one of the highest volume combinations in the industry. We are talking about several hundreds of thousands of volumes already now we are seeing suppliers, giving us great deals on various parts of the day by the way also sharing between the two vehicles of future vehicles bottom line, the insurance estimates and targets into re.
<unk>, we have a clear plan in place for all of the 16, one the component that goes into a vehicle.
All of the vehicle cost the amount based on hard vendor coach of contracts and support our previously communicated cost pricing and profitable goals profitability goals.
So we will be profitable the this vehicle even for the price of via launching an app and again that has to do with the amazing.
Volume pricing, we're getting direct to consumer and just our lean business model nearly all of the sorry.
One thing I, just want to mention as well is the clear execution plan from now until the <unk> that are fully.
Support and committed by Max on all of our vendors is another important point lobby no we're going to start deliver of vehicles next year.
When it comes to talent, we're now fully in execution phase and have the talent in place to execute we of over 200 people in the company and they are all of the highest caliber do take a little longer to hire people because we wanted to absolute best and today. There are several hundred Macknay engineers work on our behalf as well.
Hiring definitely accelerating since January.
We added about 10 people per month in Q4 last year and 25 per month. So far in 2021 engineering isn't a great place non rebuild of sales and marketing talent and we are already starting to hire quite of lot of marketing people. Both here in the U S as well as in Teu.
Europe.
And as you know, California is the best place to attract talent.
Now I feel really good about over 16000, the reservations one thing just of kind of given the comparison.
One of the Tesla model S was 18 months about 18 months before ESOP Tesla had about 3400 orders were about 18 months before so PMD of one side, we have 16000 orders.
I think thats pretty amazing specifically of some people say those of crowded market out there.
And on top of that.
Particularly we have the daily market of the vehicle, we really start to ramp up the marketing in November when the show the car of the La Auto show will be actually will have the quite a few surprises with ice, which I think will add a lot of extra reservation of interest in the vehicle.
We expect the emotional designed technology impact of affordable electric SUV can pull from a very broad addressable addressable market.
So we went also out of that ex our own data.
And debt.
Sort of basically the survey on our reservation holders and what we can see is that about 70% of of reservation holders accident of driving of gasoline vehicles a day.
The 15% drive of non premium brand and 50% drive vehicle types other than Suvs and it comes back to my point that we're not just trying to get for.
Hoping to get people out of an SUV and <unk> corrosion, we're already getting people out of the other type of vehicles <unk> sedans and into the fiscal <unk> and I think that's a huge differentiator of our vehicle.
When it comes to our portfolio of expansion.
Fully unplanned for delivering for different vehicles by 2025.
As you might have read we have kicked off the pay of program and complete a binding agreement with Fox Com.
This vehicle will be quite unique it is in great shape for launch in Q4 2023, as we of about 30 months out and we have already completed exterior design of sorts of several key components. This vehicle by the way is not just another electric car. This is about creating a revolution.
The China everything upside down we have so many inventions most vehicle right from how you load the vehicle it doesn't have a normal trunk opening it has a unique way of.
Usability and functionality of the interior of the I've never seen before the vehicle itself. I think is iconic I personally think is my best design work ever and I'm just I'm Super excited about this vehicle I think we will easily be able to sell more than 250000 vehicles of that of year.
And just wait to see it is just amazing.
In terms of the last two vehicles for the total plan of for coming together between 2000 of before 2025, we actually already have the signed the third vehicle in the fourth vehicle they're already in negotiations for.
For something pretty unique about that vehicle as well so the for vehicles actually are on plan.
Alright.
Finally competition, that's been a lot of talk about compensation and there will be quite of bit no doubt, but it's important to moving context use outlets on Friday of noted there'll be 12 of electric Suvs from the margin in the U S. When we launched the ocean and as I said earlier, yes that will but a lot of them will be a lot more expensive. They don't look as good they wont have the type of <unk>.
Acknowledging that we have let's not forget again, we're inserting our advanced technology into our vehicles. This year because of all of them very unique development process that means if you go and buy a <unk> Ocean next year, you will get newer technology than any of the car because any of the car you buy.
The next year that technology has already been chosen several years before so we are very confident that we will have some of the best technology out of Vietnam actually going to showcase some of it in November at the early order show.
Finally, ESG is something that is one of our brand pillars, and we have published our responsible supplier policy.
We have the on course in Q1, where the serve it out work force to assess where our business can be and we also have a clear framework.
The of kind of come out with some data that I think it's going to be quite amazing when we want to be able to quantify what we mean by ESG.
Finally.
We are deep into the companywide starting on the value evaluating the <unk>.
Feasibility of a scientifically based truly climate neutral vehicles over the midterm and that's something we're going to talk about a little later.
But finally quite frankly, I will channels any launches show me of $37500 issue the debt even comes close to the ocean and nobody has been able to do that yet when somebody mentioned the SUV is always moving up the market segment is quite frankly has never peer to peer compare.
Arizona.
So thanks, and I'll now turn it over to book out our Chief Technology Officer of surprise, some more detail of our software efforts and a few other core technical detail.
Thanks, Henry Yes, associate the relevant there is the key priority for Frisco controlling of major customer facing aspects of the vehicle itself to the stack is important for several reasons, let me explain the umbrella.
One it allows us to design and execute the seamless easy to mitigate the user experience that the fully integrated with our mobile app.
And then number two we can add features improved performance.
<unk> customer of <unk> and other issues rapidly through over the air updates.
In the industry for the long time low costs perfect from day, one the protection, we must be able to deploy the improvements <unk> already on the road.
Number three.
<unk> for its something that should be changed the don't want to rely on the players two megabytes of two of which can take months the need.
Each of the relevance of domestic the customer can see and experience every day like the user interface and the overall customer experience.
And therefore, we want to pursue opportunities to monetize product upgrades and other digital data services. So that's the growth.
And then the other to accomplish that goal we need to.
And the one on the pipe that delivers the data back and for us from the Rico, beating all fits because of the excellent centers with programs and data scientists in San Francisco to the commitment of India.
This includes the pattern from the car to the cloud and vice versa over the air.
Dates and edge computing capabilities.
So you need to own the growth where the data store.
The building in Frisco closed and if the data scientists analyzing data of sense to continue to optimize the net features and functions.
So.
Many of you need to own software and the key debates that impacts the customer important to isolate what is important.
The design of two write software to control of the window for us.
This is the commodity the supply chain is under control, but the.
Other hand components of the infotainment system that speak directly to the customer.
The old debt.
Some of the updates of the total train is owned by Us ex <unk>.
The controls data flowing in and out of the cloud to go into other areas.
So finally, you need of modern consolidated the electrical architecture to efficiently move data around the vehicle.
We have been able to source key multi domain controllers using the <unk> system on chips that suppliers are eager to grow for us.
It's just the future.
So we have some advantage of small and nimble company the.
Very logically would of been partners with interest debt helps with no cultural cash between software and software engineers.
You can pick and choose the step for example of our user experience design and such the teams.
Mainly from outside the industry. So we make technology decisions rather than you need to do.
The <unk> doses.
The most modern cloud Gateway <unk> communications, the main controller technology and displays into the book.
We still have a lot of work to do but.
Coincident with the efficacy of planned debt other software teams from San Francisco for India. After the task.
And we are already experiencing success the reason.
For the successfully proved out proposals from the software from a growth of two week of domain controllers for the most of that sort of the tendency.
Great.
Thanks, and no one of them.
The other two detail.
Thanks to cut and welcome everyone I'm really excited to be here today on our second earnings call and report back that of Q1 results were in line with the comments, we made on our Q4 call back in February.
Our financial discipline, and various departments executed well for us.
The spending time line.
On track for the full year guidance previously communicated which did not include any spending on pant program.
Now with the binding agreement in place the Fox Con.
Adding $30 million for the midpoint of about 7% increase to overall spending of balance sheet remains extremely strong with 985 million cash and no debt basically flat with the December 31, 2020, and $89 million of inflows came in from warrant exercises.
The incremental cash offsets of Q1 spending of current cash reserves are sufficient to fully fund the ocean program two side of production.
And to be very clear, we have no need to raise additional capital in 2021.
The predictability of our future business has taken a major need public and the.
To be absolutely turned what was once estimates for the ocean Bill of materials engineering testing validation.
The actual contracted cough the.
This income sourcing activities, and then isn't well defined timeline and of highly diligent cost can do for weekly integration and vehicle Assembly with.
What we have done is institute the very robust sourcing consists of physical that I need in collaboration with the engineering and purchasing teams. Both at the current bank now and now at Fox Con a new partner.
My understanding is key we have the 10th concept and specification for each part and of course.
And made ex team has worked with engineering to target what the particularly the component should cost.
Benchmarking activities tax loans for sourcing and continued throughout the entire project lifecycle.
Moving these financial models, we are well per se to have in depth discussions with our suppliers about the input and production costs for each component in our work to convert the supply of quote indices of the contracts as one team engineering budgeting, focusing quality in finance and <unk>.
It is with our supply base to ensure timing cost EOG and quality targets unmet simultaneously.
As a finance engineering milestone in March the tender talked about we have suppliers identified for 100% of box, including all of the ocean dividends.
Established a plan.
For each pipe to support testing and validation activities, which are boring, but day necessary.
Now well underway in the process of avoiding serial production contracts with over 60% of the pipe accounts, representing more than one thousands of parts and then more than that by dollar value I think for.
Any thoughts or in the negotiation phase.
The more information on the key suppliers during the course of the year.
Overall on the bond side, we now have high the visibility and achieving the previously communicated bomb estimate the opportunities identified by our teams to guide that even lower we are particularly excited about our cost position on batteries.
Once an agreement is reached on localized production, we will share more details around our favorable position in vaccines and a supply of partner.
Assembly and logistics have also gained visibility and the levels that are consistent with the estimates we discussed back in July time between when the announced business combination overall, we're in a great place as the high majority of Ocean costs for now based on competitive competitor had been the hot growth. Thank you for orders of <unk>.
Track.
Good.
I want to highlight the cash lift warrant exercise, we executed in March and April the <unk>.
Choice the only allows cash synthesizers mitigated dilution to our shareholders by two and a half points and also signal confidence in our balance sheet future spending plans and access to capital finally, very excited to have reached the binding agreement the stock's gone to develop the second platform SB 28.
For the initial group of launching.
Fourth quarter 2020 feet, both companies have tremendous resources to contribute to the program in terms of human capital intellectual property and existing supply chain.
Beyond the third product itself. This relationship has a very positive impact on ocean and the essence of 89 platform in several ways.
The highlight the steel.
Number one we had fixed kind of already built in the organization that is focused on diesel affordability and corresponding supply chain that support support affordable price bump. This means there are many relevant synergies between ocean and platform number two the ocean in the program.
Have a great opportunity to share several components and subsystems such as domain controllers control units batteries.
Please that we talked about to day connectivity and various other hardware and this is only possible because of the ocean was already designed with the affordability in mind, let's of several other startups that are looking at very expensive products and have an organization that does not think about vehicle affordability company does.
900000 got the cards have very limited opportunities to share.
Parts of the bill of materials within afforded the C segment vehicle the.
Culture that via entering at Cisco.
The three of deep supply chain and relationships from the Fox Con side.
Any bearing fruit by the Ocean program of nomination of shop at the announced this morning for an extremely unique display was a major win that we have not happened without the Fox current relationship and is a great example of conforming chairing between two different back from 10 vehicles.
We have also gotten the assistance from Foxconn and chipset sourcing, which is obviously a very critical component in the current environment and before we now have an opportunity to drive additional cost reductions for the Ocean program throughout volume sourcing piece of the added volume of the close timing of these two launches at the end of 'twenty two and the other.
At the end of the twin creeks and simply the long term volume opportunity for suppliers of being aborted on those two separate programs.
Is it going to be one of the most innovative automotive programs and via inviting suppliers to participate now today.
How quickly is on into the Dunkin' guidance I just wanted to remind everybody of the kpis that everybody at fiscal it focused on and are measured by.
Overall kind of Kpis the number one let's tell of product number two our bill of materials that underpins market, leading gross margin number three started production on time and number four overall program cost and in that order of priority.
What my performance metrics of based on as well as well as every single team member at Cisco and we remind all of our suppliers and partners on these key kpis of the drive system.
Now turning to our results and outlook. Our Q1 results were in line with the internal expectations and the commentary we provided on the last earning calls operationally the increase in R&D. In Q4 2020 was primarily the result of increased head count and the initial kickoff with many suppliers that drove the initial engineering design and development spend.
The reduction in G&A expense relative to Q4, 2021 of the result of non current of one time costs incurred in the prior quarter due to closing of a business combination.
Also reported a non cash expense associated with the public and private brands I just want to remind everybody that our net loans totaled $176 8 million and 60 63 loss per share however, excluding of $145 2 million noncash.
Non operational losses, reflecting changes in fair value of.
Convertible equity securities and embedded derivative net losses actually total taken $1 6 million and 11 loss per share.
As of April 19, these public and private bonds for the retired and mitigate so we should not see any of this activity in that line item going forward. Our capital expenditures was meaningfully in Q1 $21 million to $66 million versus half of million dollars in Q4 2020.
Again in line with the expectation as you began meaningful capitalized spending on the Ocean platform. Finally, we also reported some revenue from exciting merchandise sales.
To remind all of the analyst is not material and we do not recommend any analyst and time forecasting. It as you see this is the critical marketing tools and a critical tool for a fan, but we do not see it as an important aspect of the.
And the revenue it is an important aspect of brand building and engagement with our customer base turning to our outlook as noted in the press release, we are again.
The midpoint of our guidance for overall cash spending by $30 million to the high end of the prior guidance. The guidance now includes estimated spending on project debt.
Which of the prior guidance.
Explicitly did not include.
The balance of this year's aggregate spending to be roughly steady across the remaining three quarters of 2021.
And each of the modestly increase sequentially due to higher head count R&D spend will be of big heavy in Q2, and Q3 than Q4 due the timing of incremental supply AT&T and our prototype testing and validation program, we would expect capex to be somewhat lower in Q2 than in Q1.
Now specifically on the Pet program, we are using the existing resources to define and design of the program to be very specific. This is the current human capital that Henrik highlighted in his remarks and intellectual property book kind of highlighted the developed alone or in collaboration with suppliers the timeline for <unk>.
As submitted by the Ocean was last year in the second half of 2020 definitely leveraging existing assets and resources that we've developed over the last year. The spending in 2021 modest overall I'm extremely proud of the <unk> for all of the competition, we have in 2021 and the plant we've established.
To execute a fantastic profitable product on time and on budget, we're not happy to take your questions.
Felipe could you queue up the analysts. Please certainly at this time, if you would like to ask the question simply press Star one on your telephone keypad against the ask a question. Please press star one on your telephone keypad.
Your next your first question comes from the line of Adam Jonas from Morgan Stanley. Your line is the opening.
Thanks, and good afternoon everybody.
Of data.
A comment I made of misheard you. When you said that you are moving into.
Contracts for 60% of the parts on the Ocean and I think you said that represents over 1000 parts, how many parts of our endless cars.
<unk> hundred five ex Adam.
That includes the obviously.
All of the all the assistance they may have additional subsystems, but its about 600, including subsystems.
I'm curious how that compares to other vehicles, you think that it would be going up against in terms of.
The complexity.
It seems like a very low number although I notice the definition.
The national noise of that really comparable.
Similar level.
So the reduce of couple of components of the electronics, Oh, sorry, but the general you could say that's similar radio compared to other.
Okay great.
And I appreciate the deal on the sharing between the 2009 in FY 'twenty eight.
You've called out some parts I didn't know if it was.
If by order of magnitude the value of those parts.
What we're thinking about.
Could it be something substantial like 20 or 30% or.
Or closer to 50% of I think you've mentioned of sharing of battery, but just wanted to kind of get a get a sense of dollar terms of among a range. How much you think you could share between those two platforms.
Because obviously the batteries of major part of the vehicle.
So as the innovative screen the rear developing together with sharp.
And then there's a few other things as well so I would definitely say, it's easily will be over 30% in terms of value.
Okay.
And just a final one for me there's so many there's so many great things app.
Last one for me.
When we finalize the JV ownership.
The structure or details about the JV itself beyond the binding agreement with with Fox Con and Han Hi, Im wondering if you could give us a sense of timing of more of the details behind that binding agreement. Thanks.
Hi, Adam as you can imagine in the.
The program that is so complex says the Pep program, we are taking into consideration intellectual property. We are taking into consideration tax also that's the one needs to be of global program. So we're looking at all possibilities at this point in time, we haven't said much of this is a joint venture of both companies will continue to operate.
<unk> as they are and the loop, Canada more commercially or commercial contracts for your way of investing in sharing profit. The at this point in time, we are leaving through all of the complications of tax of nicely, but we do have the path forward and we hope to share that in the coming months.
Okay. The data then just because you are so efficient answering I'm going to slip one more in here for you.
I believe you when you presented the ocean timing at the time of the.
Earlier this year.
Our understanding was that the.
Company was fully funded through the end of 2022 again, excluding per you mentioned no need for additional capital this year, but I.
I imagine there could be quite a big inflection of the spending next year could you could you say the company is fully funded through launch of pair or is that a totally different situation now and we need to see how those capital commitments play out in the next year. Thanks. The question, Adam and I did expect that one for me and so two things first of all.
For the items, we do not need to raise any additional capital in 2021, the either fund Ocean of Pan as you know, we took an additional $89 million debt throughout our cash reserves to a very healthy balance sheet of $985 million. The forecast that we gave the guidance of an additional 30.
Which group of operating expenses to the.
For the <unk> program. So given the fact that would be of leveraging our existing asset base. We are on track for per the are on track for Ocean now, let's talk a little bit about your question do we need to see additional cash in 'twenty, two and the balance sheet remains super strong with $985 million. We also show.
A tremendous discipline and given the guidance I'm sticking to it in Q1, and you will see it in the coming quarters I just want to remind everybody of how we can optimize the balance sheet of the need to so at this point in time, the investing hundreds of millions of dollars in production tooling and equipment. Some of that you see in our Q1 numbers and a lot of this can be.
Finance at the low cost in a variety of these in the E&P.
<unk> for with manner.
The number number two we again have a significant amount of IP that's in book the.
At the 29 and SP 28 programs and we still have 90 calculated net of the <unk>.
License them out or not number three we control all of the emission credit and there are opportunities to monetize these and ahead of time, if we wanted to and again I want to remind everybody of my comments last time net capital markets continue to believe that electrification of the future of automotive. So once we have some additional.
Milestone in the field, we need to add more cash to the balance sheet, we will but at this point in time, we do not see any need for these additional cash this year.
Thanks kind of next question please.
Yeah.
Thank you for your next question comes from the line of each of my Kelly from Citi. Your line is now open.
Great Hi, everybody.
Just a couple of questions. Just first one I think the release mentioned some additional deals for fleet in the Europe in Q2, maybe talk a bit about about those deals and are they some of those in the reservation numbers.
Yes, so we actually hired of specific person over in Europe to pursue the fleet deals and of the pursuing the top 100 companies in Europe for the highest ESG goals of actually want to go fully electric.
And I think we will be.
<unk> some interesting deals here in the near future its a little too early to talk about the right now, but ICEE of incredible process of trend because when you look at the European market and the our segment of the.
About half of all vehicles sold in Europe actually fleet deals and all of your the perfect position for that so I'm pretty excited about the forecast of that and I think youre going to see some some significant upside of the upside already this year.
That's helpful. Just the follow up.
Out of questions first on the ocean of any update on the when we'll see or you will launch the kind of focus. Thank you wait there for all of the trim combinations.
And then secondly on the FY 'twenty eight.
You could share in terms of targeted range.
Performance for the starting price.
Yes, so on the ocean sort of.
Waiting until the November because we've got some pretty significant news on technology.
That we're going to show up.
On the Ocean in November at the end of the auto shows we have decided to actually make back corn side.
Our app and website update where you've been able to fully configure the vehicle colors option packages, we will announce details of the specification details of the pricing and.
Everything is pretty much in line with our forecast. So unfortunately have to wait until November but it really is borne out of the fact that we added some new technology features from the vehicle that we think is going to really put us way ahead of the competition. So we don't want showed up too early.
When it comes to the.
Of the per program.
As I mentioned.
This is kind of.
Really revolutionary program.
The recently of working with Fox condom business, because we truly want to create the revolutionary vehicle and that's something that doesn't happen often of the car industry and.
The point with this vehicle is trying to see if we can re imagine what of vehicles should be for the future consumer and I see personally a lot of trends that will change significantly over the next three to five years that I think thats vehicle can cater to the first of all.
I think people are going to move away from the traditional segmentation of vehicles from the she had already with the ocean, where more than 50% of the people who has ordered the ocean of coming from other vehicle categories, which is kind of unique other than the industry for 30 years from when you develop the vehicles. We always look at your main competitors you get.
95% of your customers from those that's not the case of the ocean. So because of that we are specifically targeting the per as almost like a non segment of vehicle that could take customers away from.
Any vehicle of any type of and because of that in each of the vehicle that also then basically introduces some completely new innovative features of nobody else have but everybody will desire and I'm sorry, the two kind of uses very <unk>.
Typical example, but that's it.
Exactly what happened with the iPhone when it came out it was the first for.
There was a small computer with no buttons.
The people from Motorola Nokia and every other phone maker of Blackberry. The last debt held up because of it was that went to Apple and of course mountain of Samsung et cetera, but the point of this vehicle is exactly to do that and I can't imagine anybody better than fast time to do that was in terms of specification.
Absolutely no I don't want to give away to the competition, what we're thinking because of so radical it's a complete departure away from today thinking of making the car I personally have to get completely out of my little car box and think about.
How would the check company design the vehicle rather than Howard of car design of our car company design of vehicles.
Thanks for your time net.
Certainly.
Thank you. Your next question comes from the line of John Murphy from Bank of America. Your line is now open.
Good afternoon everybody.
Maybe just a quick follow up to that.
The Henry.
The developing a revolutionary new product in the industry $3 million in spending this year seems like non a lot of money.
Credit costs, a lot more money in the future for both yourselves and Fox gone and how I mean, how should we think about program costs for this.
For something Thats very resolution of that sounds very inexpensive.
Yes, So I think there's a couple of things is very unique for this program first of all Foxconn and <unk> jointly investing in for this program both of US have quite a lot that we bring to the table. We now have.
Pretty well staffed in the engineering and design group.
So we don't have to go out from the off hire those people for that the sort of coming into this program.
<unk> is moving to the next phase of <unk>.
From the solicitation and then you of Fox kind of of course debt.
Has an immense supply chain and here's what I think a lot of people what nobody is talking about the <unk>.
<unk> debt as we move from gasoline vehicles, which have been perfected over 100 years, the move from gasoline vehicles into <unk>.
Electric vehicles, that's the.
The part of the story of the actual moving into vehicles with the theoretically our computers on wheels.
Now who would be the best supplier in the world.
The supply of the most cost effects of highest quality components for your computer of the smartphone.
The flex com they have all the big of the supply chain for electronics in the world.
I have been amazed when I have seen the pricing for some of these components I mean, I couldn't even imagine because the prices are so different what I'm used to of the car world and Thats why were going to be able to make a vehicle for less than 30000. So I can concentrate not on having to invest certain of electrical components, but rather coming out for.
The truly innovative things in innovation doesn't necessarily need to cost more money, it's about being brilliant at some of the smarter idea of thinking out of the box from taking the risk and this is the risk of the product the rewards could be huge which I think it will be the people who is kind of a seamless program is very few and keep the chop scheper are quite frankly amazed.
But it has shown us that we don't want to go out and talk about the right now it's just too early a member of.
30 months away and giving too much away to the competition, but in terms of investment.
The big investment will really start happening in 'twenty, three and at that point Fisker is making the health of revenue.
Second the second question real quick head count at the same kind of thing you are being incredibly efficient.
Got it and then you're getting a lot done with 203 people.
Sure everybody's sweat cards here at the company.
And working really hard to get all of this done because it's a lot for 203 people.
Some point do you think you need to expand and accelerate that head count dramatically easier to get closer to Sop.
Or are you going to be able to operate with a very efficient army of very hard working people.
A whole lot of the whole lot done.
Our leverage partnerships to get it done.
So so.
If you're truly big into the traditional kind of history, you will realize that despite the only talk about it a lot of the components of cars today of made by suppliers.
I think we have just kind of.
Got a little on the on a more extreme level on that what we have set of lot of things that are not really creating IP or are mundane task.
We are getting out of suppliers of we have a great relationship of Magnum. They have an amazing engineering for us while we have hundreds and hundreds of people working there on our behalf on a program of course, we keep expanding and Thats why I said I can see of adding quite a lot of development people, but we are trying to avoid is hiring fillers.
I know some companies out there are really excited about announcing when they have hired 1000 people and maybe half of them 500 of just fillers, but we don't have any similarly, we don't want any fillers.
Phuket doesn't even have a secretary.
Sometimes the user's meat, but.
It is true.
We are just so efficient.
Debt.
So for designing the cars and I think Thats again innovating doesn't come if I give you a million people doesn't mean, they're going to come up with an amazing idea.
Einstein and a few of those that are pretty much by themselves. So I'm not worried about that.
I think the of course.
Get out of the market, we're going to hire a ton of marketing and sales people, who are going to of people standing in our experience centers expanding our vehicles, but that's still about 18 months away until then we are.
Really just hiring a lot of drilling engineer software engineers.
Really smart people that helps create innovative products, Hey, John Peter I, just wondered John I, just want to highlight a little bit about our asset light model.
Question is actually quite good because it kind of answers the fundamental philosophy of the company, which is the platform sharing the at the factual sense I just want to remind that the startup programs with something called platform sharing and as a result, we are not developing and we can do component in the car from scratch. So you don't need to have.
In engineering talent that is designing and engineering every single component. If you don't do that you don't need to have a corresponding budgeting team or a corresponding.
Jenny staff, so that from sharing is really critical for that lean asset light. The second part I want to highlight and book the program. We of core engineering that we do have a profit magna that supports the engineering programs the tight side I want to highlight volume.
Talk about it.
Alex traffic Fisker, we also have a huge pool of indirect and direct labor on the books of Magnetek. They will be building a car. So there will be thousands of people who the building our car at Magna Steyr theme of talk Scott and then finally as Henrik alluded to we are ramping up our sales and service sales both in Europe and.
So, yes, we will ramp up but in the right manner. We would not have cash that is that can be centralized, but there every day, adding incremental value.
Thanks, Thanks, John the pump Lee I'm, just kind of jump in we took some questions from the day technology platform over the last couple of weeks from retail investors I want to ask a couple of both the.
For the first one is that there are actually several highly voted questions on chip supply and how for us for plants. The secure supply commitments in this area for card happy.
Happy to take debt so.
So.
So called chip.
Chip shortages, so the difficult challenge for the industry, but in some of the really a shortage.
The result of the petroleum, but the.
The phase III to repurpose capacity towards higher value consumer.
Consumer electronics trips and just the way from low margin legacy automotive Microcontrollers, and let's say 28 nanometer nodes in the higher.
So the general industries what debt.
The situation will work itself out over the next 12 months, but even if it doesn't.
Few reasons Tobey.
The less impacted than most if at all.
Let me explain the number one we have the luxury of finalizing of the concept phase for the ocean free knowledge of the situation to our own context.
Partners has allowed us to make design and supply chain choices, but focused on needs to areas of supply chain with ready supply for chips. For example, we of Resourcing of the vehicle control of chipset for all part of them recommend the mill.
Other external but it's in displays where all the supply of shop is designing of the components you I'd know insourcing semiconductors based on what is readily available.
So the number to that.
We always.
The new Mexico, and compute architecture of those more centralized.
Focus on high performance domain controllers phase of the most modern SEC's. So this includes than us.
The 10% with a mobilized vision systems with sort of the state for the UA. The sensus powertrain Btu for AFG productivity volume of these chips of multi short supply.
And finally.
Probably the most importantly in comparison to the other start ups as the old partner network.
The <unk> and Foxconn financially invested in all of the ability to satisfy demand we have two partners with deep influence and the rest of the interest and maturity of supply commitments for all components not just the chips.
<unk> already seen multiple instances, where this has helped us.
Thanks for the car Com next question is do you have a definite date to begin production of the Ocean. What's your plan to show early prototype versions of the vehicle and what government subsidy of do you anticipate.
Yes, absolutely we have very high kind of of that as I mentioned earlier our Q4.
2022 of US will be next year in fact, the actual SRP date is November 17th next year. If you want to of an expect day and I am Super confident supported by Mac that we will actually make that day.
Secondly, we start initial deliveries both in U S and five key European markets also end of next year and then more importantly, full run rate production will happen in the first half of 2023, Thats something that no other EV startups ever done and I think quite frankly, the only be part of.
With somebody like manner.
In terms of the demonstrator vehicles I mentioned already will show first production of vehicles in November we are planning a bench of showed in Europe. Shortly beginning of next year.
And then in Q1 next year, we'll actually get the first journalist and some analysts in the vehicles and drive them.
The first demonstrated of vehicles and quite frankly.
Both move out of need we already drove our powertrain, it's unbelievable the powertrain. It actually it makes you feel like of Formula one driver because we have some really unique electronics in the powertrain that allows you to handle this vehicle on the limit in such an amazing way I can't wait for people to try it.
Sure.
It's unbelievable and this price class price for us So I'm Super excited about it and again remember our vehicles start of 37500 hand in the US now finally.
Terms of our subsidiaries.
We believe we of legible for all of the subsidiaries that are available at least the way it is today.
And that includes from Europe, and just to give them. The example in Germany with subsidiaries.
Our vehicle will be price the low 32000 of the euro.
For anybody on this call you go and take a look at what you get for 32000 Euro in Germany, and Thats, including mirror of that story, there, which the sales tax in Germany, which is pretty high. So that's an incredible competitive vehicle and that's why Germany is one of the first countries youre going to launch in Europe, as well and where we got a lot of orders from already.
A lot of reservations, Okay. One more retail question and then we'll get back to the analyst too.
Now one of the most shorted the stock from the market that the company of any plan to help protect shareholder value against short selling of manipulation. Absolutely. We are only thinking of long term shareholder value now the challenge is the so many new mobility and <unk> companies that are using the stack might need to raise capital as we've seen in the last few months and several companies.
Along the way have changed that strategy the targets now not only the daffing casting doubt all of it is it is also putting everyone. In the same bucket. The only differentiator is execution and the ability of an experienced and dedicated company like <unk> to deliver quarter on quarter and we had.
Didn't exactly that just want to remind everybody that we knew we needed to raise of $1 billion and we did exactly that to derisk, whilst we're not generating any revenue over the next few months number two our original targets of tenant that original business model has not changed we have not changed goalposts and enel based by May.
The lead on contracts not just estimate number three we have cash.
True to our asset light business model and a positive day by signing two partners to the end of June of the current and planned for in our original filing which is why we have the ability to forecast and updated guidance on the path program number for in our 2021 and two things going on a milestone.
The in spending very much on target with our guidance. We are disciplined we have an experienced management team that knows what they're doing the credibility does not happen overnight and we intend to continue to put out a proof point that they are not part of the crowded startup and experience in the space and it is no doubt it will be reflected in our stock price.
In the medium and in the longer term.
We cancel all of the corridors and we are building the company for long term success I, just want to add something where given just the.
I know that there are some hedge funds of needs to go out and do some shorting, but actually the full sorry for the people who is investing those because it's clear the sum of those shorts. They just are very superficial that don't have deep knowledge of how complex. The automotive industry is and I think if you spend a little bit of time understanding our.
<unk> relationship with Fox Con and Mac math, you will quickly understand that you stand to lose a lot of money of short against those couple of Hey, That's my opinion and I hope, we can prove everybody wrong.
Okay. Thanks, Thanks, Henry Lee can we go back for the analyst Q for the last few months.
So kind of everybody. Please please limit your question for one please.
The thing Q moving on here. The next question comes from the line of John Lopez from vertical group. Your line is now open.
Hi, Thanks, so much.
I hope at the one but I'm going to do a two parter if thats, okay I apologize.
But I wanted to push of digging a little bit more on powertrain and battery specifically so.
Sort of part of day here are you just to make sure I am clear you are comfortable with commitments.
Both pricing and volume on the sell side not just through the initial production launch, but all the way through the full volume ramp in 2023 can you speak to that for a second and then the second part just to throw it in.
You've talked about comfort in up to 350 miles of range on the higher trim burdens models of the Ocean I'm wondering if you can just talk for a second about any sort of range dispersion as we get closer to the base model are you willing to start talking to us a bit about the range.
What it might look like there.
Thanks very much.
Okay.
I'll take the first part of the question. So what excites me about our powertrain is the three things first of all we have very high quality suppliers, we're not ready to reveal the names and we're going to keep it in secret of little bit, but for all time of Boston suppliers vendors.
Our partners in the Ocean program and the partners and the Pep program really really excited they have committed the new and physically they have of long term partner second thing, yes. Our partners. The committed we are in the testing phase we are not just in the contact the Powerpoint where actually in testing phase we are testing book.
For the systems on their own so the testing Denise we're testing the systems on their own and we have plans for testing in the ecosystem for the different meals difference of the tag the PTO PPE to the all of those.
And then finally the type of thing that really excites me, it's actually the pricing I think we are at such a good pricing for both the system, which is in fact at par at some of the tier one tier one Oems and the of police force for both the sales and the driver of that now I believe on the batteries we are at.
Our cost per patient, which is very competitive at the same levels the places.
I see a further cost line opportunity, which will make us extremely competitive is in Pakistan blurry as we finalize the vehicle integration testing and validation, but we those are the more information on both selling back into construction due course once we finalize the localization I also want to remind everybody of that.
For Ocean, we are looking at Europe and of course for the program. We're looking at U S and both of our partners are geared up for both of these locations on the.
Range of tankage onto book up.
Sure.
We believe the 350 miles charted for the powertrain is very likely because that is what all of which were powertrain modeling is telling us.
Able to simulate EHS cycle.
The powertrain for these Austin spit it out with all the variables.
Efficiency rates there'd be no will be then production versions of the plus because we compete the anchors one team and all of the non powertrain engineering groups of Illumina the efficacy of plan to achieve the aerodynamics and rate targets required to achieve growth in the range mix valuation so of physical testing with production and components.
Later this year, so but bottom line is a real.
The challenging targets, but from a modeling of our plan of saying we can achieve them.
Maybe I can just add to this debt will.
When we showed our vehicle of regionally.
In the beginning of 2020 of we had estimated 253 of them on a range from again that comes back to the point, we were able to put the newer technology of the vehicle, which is driving up it's because of the $3 50 in terms of our base current it hasnt changed like the I've said 250 to 300, so the base that will be closer to 250 miles but I.
I think you will see two type of people in the future of those people who are okay with carrying around the expense of battery want the range and I think youre going to see people, who realize that most of the daily commute of 30, 40 miles and they don't really need to pay for a giant pet battery pack of carried around let's not forget <unk>.
Staying ability on the environment caring hungry.
Hundreds of pounds around every day, if you're one of go 30 of 40 miles doesn't really make any sense. So we really see two types of people here ordering all vehicles, those who probably have a lesser need for Super long range and then those will help meet the super loans, but the silver along of what we call. It the ultra long range.
Is available both in the medium and the tough version so only the base orders were up slightly in this range of more than adequate and I think more than most vehicles in the segment.
Great. Thanks, Henrik and let's try to squeeze one more question, but I have to be pretty efficient.
Lee.
Youre welcome. The next question comes from the line of Jeff Osborne from Cowen and company. Your line is now open.
And all of your comments are about the $37000 vehicle, but the medium term operating model for the company suggests that the prices will be up in the mid 50% of 60000. So I didn't know what level of comfort you have that some of the features that youll be showing at the OE Auto show and other performance features will be actually what the.
Consumer wants just especially given the in response to your question about environmentalism and the limited rates that people need.
Yes, I'm fully confident we have not changed any of that of course in fact.
Only our top vehicle will be over 50000, I think it will be.
I'm very surprised with our of.
The first two vehicles from factory of scrap the base and we called out of the base of support model and the second vehicle as the power sport.
The polo sport will also be on the 50000. So we are very comfortable with the equipment NAV in the vehicle, we're going to be able to offer additional things with over the of updates.
But I don't think theres any any car out there or any of vehicle is even close to compete with what the offering.
The across the range.
Okay. Thanks, Jeff.
We're out of time for Lee can you closeout of the call. Please thanks, everybody for your participation. Thanks for your interest in Fisker, we really appreciate it. Thank you very much everybody appreciate it.
Thank you for your centers and ladies and gentlemen. This concludes today's conference call. Thank you for your participation even now disconnect.
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