Q2 2022 Fisker Inc Earnings Call
We are attending today's Fisker, Inc. Second quarter 2022 earnings call. My name is Frances and I'll be your moderator today.
All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end if you'd like to ask a question. Please press star one on your telephone keypad.
I'd now like to pass the conference over to our host Frank Buraq with Fisker.
Thank you Frances Hello, everyone and welcome to fiscal second quarter earnings call as the operator mentioned my name is Frank <unk> VP of Investor Relations and Treasury here at Fisker. Joining me on today's call are Henrik Fisker, Chief Executive Officer, Dr. Burkhardt, Hooky, Chief Technology Officer, Dr. Geeta Fisker Chief financial.
<unk> and Chief operating officer.
Before turning it over to Henrik be advised we will be making 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 and uncertainties that could cause actual results to differ materially from those projected. 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 Securities and Exchange Commission. The forward looking statements. In this presentation are based on information available to us.
We disclaim any obligation to update any forward looking statements, except as required by law, we will reference certain financial measures that do not conform to generally accepted accounting principles or GAAP during today's call, including non-GAAP operating expenses. This information may be calculated differently than the non-GAAP data presented by other companies.
Wanted a 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 Henrik.
Thank you Frank and thank you everyone for joining this call.
I first want to actually begin thanking all of our teams and our partners for the incredible progress we have made year to date.
I'm really really excited I'm actually really excited about this call because we got so many exciting things to announce.
Of course, the progress has continued at a great pace.
And as unscheduled when it comes to the ocean and be on track for Sop on November 17th of this year.
We have stated previously and that remains the same and we have <unk>.
Also continued into the next phase of our second program to payer program I'll talk a little bit about that later.
We have completed 55 ocean prototypes.
And they are of course has been built to do all our testing that continues and we've got some great results in Mac Mac continues to build prototypes throughout the rest of this year on celestial Pete.
We also had reservation growth that has continued at a rapid pace. We now have over 56000 reservations.
Including 5000 preorders for the physical Ocean. One so we are seeing customers are responding to the <unk> class leading an industry first features.
I want to mention that getting thousands of people here in the U S to put down 5000 nonrefundable on a vehicle they havent seen yet they havent sat and yet they havent driven really shows for me the commitment, but also the value proposition that we have in the fifth corrosion not only in terms of price but.
All the things that we offer and if you go to our website <unk> you can see that we have many many features that you can't even get on another car you can get such a big solar roof is we have you can get a California mode. You can get a 17 point.
One inch rotating screen and I can go on and on about all the features. These fantastic features that we have developed at the fiscal ocean have and quite frankly makes us stand out in this class.
No we opened the preorders in early July .
For a $5000 or local equivalent downpayment in Europe .
And for the exclusive launch edition.
Which we called the Fisker Ocean, one and I'm happy to say that we are sold out of all the 5000 ocean ones preorders and everybody paid $5000 for that order and that really represents in my mind, a real order and it's actually quite a historic moment, because I don't think anybody has ever done that before.
For in such a way and it really also shows that we now have.
Potential revenue of $350 million, which are already secured before we stopped production, which I think is amazing.
Let's get to the balance sheet. It remains solid at over $850 million in cash and our business continued to scale. The fiscal team on all over 550 people representing over 60% growth year to date, including a new SVP of global manufacturing, who will focus on a lean manufacturing and <unk>.
<unk> techniques and what I mean by that is that Cisco have a development process, where it's all about efficiency. So we are bringing manufacturing brainpower in early in the development process, specifically on the payer program because we have a very very tough target to REIT.
In terms of cost for that and that includes of course ease of manufacturing so that I've, given very clear guidelines with engineering team reduced parch reduce cost and we are now in the second phase of that program and I'll talk a little bit about that and we are still on target to launch that vehicle for under $30000.
Now also the organic organic marketing efforts continue.
UK debut at Goodwood Festival of speed, and we had a French W. In Paris, plus continued progress on our physical launches, which is what we call our experienced centers, our showrooms, which we expect will open later this year both here in the U S and Europe .
And also stay tuned for more pop up events and our inaugural appearance at the Paris Auto show in October .
So we obviously are starting to get more.
Marketing vehicles in October and that's when we're going to start getting out and showing our car a little more as well because I know a lot of people have asked for that but we are now starting to get these marketing cars in October that we can start showing so let me go back to a little more detail Ocean update.
Our number one priority is to launch a high quality physical erosion on time and we remained on track to do so so on the prototype update as I mentioned, we have completed 55 prototype builds and continue to build vehicles.
The testing and validation is well underway in July of fiscal Ocean prototype arrived in the U S. For testing, we have five prototype vehicles in Michigan undergoing Adas testing.
It was magnum and also completing testing for high pressure water tightness of high and low speed features powertrain and much more.
Our U S internal crash testing, which we do in house by the way the prototypes achieved five star equivalent ratings, which gives us confidence and formal ratings when they come out now we are not in charge of windows formal ratings come out because basic.
Basically.
IHS and other rating companies have to buyout vehicles next year and do their own testing independent testing, but we are very confident that we achieved a five star equivalent rating what we have done so far because obviously, we have done all the testing internally.
I personally received my Ocean test vehicles early and have been very impressed with the handling and performance.
Driving around on many different streets in L. A and I'm just so amazed about what we've accomplished was vehicles. So far and this is not even the final vehicle is still needs fine tuning but.
I've also driven this vehicle actually in a in a.
Later stage on the suspension on the high speed track in Italy, and I can promise anybody this is going to be one of the best handling Suvs in the world hands down specifically when you combine.
The actual cornering and driving ability and performance compared with comfort, it's easy to make a super sporty car and is easier to make super comfortable car, but combine the two for everyday use is super difficult and we have really achieved this with a physical erosion I can't wait for people.
To get in and driving now.
The Ocean demand has remained strong.
Our marketing and brand building efforts are working most impressive is selling out of all the 5000 Ocean ones launched editions preorders with customers in all nine launch countries and all 48 Continental U S States, our customer outreach was limited to our launch market.
In reservation order based on our information. This is the largest deposit amount of number of launched units for any premium affordable vehicle. So I think we did really well here, we have a very unique internal.
Data base marketing strategy as well, we are using and we are building that skill internally.
The Ocean is <unk> fully loaded edition the ocean one of the Fisker ocean than.
That include rare Chisholm features uniquely only to the ocean one.
Including an ocean, one secret or batch plaque specific numbering and over $5000 of included options people love the big store Blue So far most public Carlos election, we obviously can see what people have ordered and the $5000 Downpayment show us that customers are truly committed and allow us to plan the built with their unique color.
And specifications months ahead of ESOP, leading to a more seamless launch and initial deliveries I mean, that's another very important point.
The more you can plan your production ramp up the better it is and we are able to do that because of these firm orders we have got for the Ocean <unk>.
The only thing that customers recognize the great value proposition of the vehicle. The many class leading our industry, leading features and the confidence in the fiscal <unk> and magna to produce a high quality vehicle and we truly.
Also we also appreciate customers understanding.
The current elevated logistic costs.
Quite frankly in my view, a way too high but we are just passing over the cost of logistics to our customers and I will promise if we get to a point where these logistic costs are falling the will also lower our delivery cost. This is simply just a factor of the current environment and I want to remind everybody that we have not.
<unk> raised the prices for the first 40000 vehicles that will deliver but we do have to pass over certain logistic costs, such as delivery costs. Unfortunately tool to our customers.
But I do think these costs will fluctuate based on logistics rates as we move forward and then we will adjust them as well.
So.
<unk> generally continued to increase and we have started to strategics discussions with magna to add capacity.
Continued strong growth because ocean a segment, leading has a great design and has managed sustainable credentials and as we get closer to S&P and continue to be increasingly transparent with respect to our product and what customers are getting and for what price perspective customers should only get more and more excited we're.
We're serving in the Ocean and we think we're seeing that already as you start comparing our vehicle and the specification with other competitors I think we're way ahead and of course, we are going to show even more detailed about some options and.
And actually equipment that we havent announced yet, but I think one is going to add to that.
Starting on November 18th the day after the official start of production. We are happy to announce that we will begin taking preorders for our customers who are interested in the ocean extreme trim and this will be followed by preorders beginning opening for our ultra and sports shrimps already in Q1 2023, we are going.
Out in phases, which will help us again plan, our production forecast and we have reserved both.
Ocean Ultra and Ocean sports production for next year. So even if we were to be completely sold out of next year's production with extremes. We are promising we will still build some ocean ultra is on some ocean sports.
They will be available from around Q3 next year.
Let's come to the payer update in early May Fox <unk> completed its acquisition of an operational $6 2 million square foot manufacturing facility in Ohio, and Thats, where payable will be built using the physical developed SLD. One platform. That's a brand new platform that we are developing in house and again as I mentioned.
It's about reducing parts and cost so we can get a super exciting vehicle on the road with high technology without spending it on platform stamping uncomplicated structures et cetera.
We intend to build a minimum of 250000 pair vehicles a year once the plant ramps up production and payer reservations have now surpassed 4000, we of course havent shown much of the peer that's a kind of a new image today, a little bit of the front with the Super Cool round front windscreen that we're working on getting into production.
It's difficult, but we'll make it we make things happen in fiscal <unk>, we make dreams come true, we don't give up on innovation. So theres a lot of innovation features and the pair something that not only have you never seen in that prior price class, but actually the thing you have never seen on any car any production car before.
I'm Super excited about this vehicle I think.
This will really be redefining not only how you develop a vehicle, but also the content of the vehicle the design of the vehicle and finally, what you get for your money on electric vehicle and I know a lot of doubters out there.
That we won't be able to make this vehicles under 30000, but.
We are doing it with the ocean and we'll do it with a payer we have an internal process that is unique and with US really allows us to get that point, but you can get to that point. If you try to develop a vehicle like you have developed gasoline vehicles. The last hundred years, you completely have to rethink what.
<unk> device is of the future and that's what we have done with the payer and I think we're going to excite the market. When it comes out in 2024, which is still scheduled for and as I said.
Starting on the $30 before and in sensors and I also want to mention again.
We have this vehicle will be built here in the U S. So now we have manufacturing opportunities in Europe , and we have manufacturing opportunities in the U S and I think that's extremely important that we have been smart enough to hedge.
No matter what type of legislation comes in the future I think we are in a very safe position. We've got affordable vehicles, we have hedged our manufacturing strategy. We have brought in a super manufacturing guy, but I'm looking into even more opportunities what we need to do for localization of manufacturing what do we need to do.
<unk> for potential battery manufacturing here in the U S. In the future battery Jv's et cetera. So there is nothing that we're not looking at all opportunities open and because we are so agile and fast we can actually move.
And actually do what's needed to fulfill the market conditions and in fact.
We are already looking at actively offer some pre sales of the oceans should legislation come into place.
Where we would want to take our customers to take advantage of the $7500 tax rebates for 2023, so if that becomes necessary. We have already a plan and we'll announce that if as needed so I'm very comfortable with that as well.
Let's come to the customer experience strategy, and an update sysco brand launches which were.
Previously referred to as experienced centers will offer prospective customers the opportunity to see and experience the company's vehicles as well as speak with product experts on hand, depending on state law. Some physical launches showrooms will also offer test drives there's a few states where that makes it more difficult. So we will find other ways to make that happen.
Gary <unk>.
Locations in addition to Elliot Munich locations.
We expect to open later this year, we expect to announce further locations in the next few months already negotiating on a lot of different real estate, both in the U S and Europe .
We will also have physical center plus locations are center plus locations are really delivery centers and it service vendors and where you would go to test drives and Thats, a real unique fisker strategy that hasnt been used by any other car company in the world and we are doing.
That's what we can offer you the customer a much better experience, but also more value for money, we don't want to charge you for expensive buildings in leather couches and all that stuff, we want to come and pick up the conference you're probably gonna do once every two or three years.
And you would rather go and get a great price for the car than having to go to a super expensive.
<unk> Palace, and we have to add $2000 per car, but you don't do that it's about getting product to our consumers that our state of the art at the best price.
Service centers will be operated by Fisker. We of course also have partners strategically placed until or even during these service centers operation, where we can also bring vehicles into service of course, with our fantastic and I think class leading warranty nobody really have to think about service.
For the first five or six years in fact, if there is any warranty issues. Obviously, it's <unk> obligation and we will come and pick up your vehicle and we will either to mobile service or we will take it to one of our center pluses or we will take it to a partner of us, but we take care of it.
Absolutely you don't have to worry about as a customer.
Finally, our advanced sustainability vision at clean future for all we are proud that <unk> produced and Magnus carbon neutral plant in Austria. The Fisker Ocean will contain over 50 kilos of recycled polymers in bio based materials more than any other vehicle that we know of currently on the market highlighting our.
Commitment to sustainability, our vision when we started and we talked about that already two or three years ago was to make the world's most sustainable cars and we're coming through that we have an amazing in house team, we have a leader of ESG and we're going to soon announce our ESG impact report later this months and we're actually doing that.
Our head of production, which is very unique and I think this illustrates how integrated ESG is throughout our business and we also are still very firm on wanting to reach to create a seal to neutral car by 2027, and most likely we will use the.
Per marvell as a foundation for us to neutral model. So already a lot of these ideas are flowing into the payer program and we are aiming to lead with the world's most sustainable vehicles.
I am very optimistic about <unk> future and realizing our vision of a clean future for all.
Now want to turn it over to book Hart, Our Chief Technology Officer.
Thank you Henrik.
Beginning with the fiscal Ocean engineering testing and validation as posts are progressing well.
We remain on schedule to achieve <unk> in November .
Super agile teams at <unk> and Magna efficiently collaborate in the modern way fits.
<unk> shed reach and experience continue to ensure all of our pumps are sourced delivered assembled and tested on schedule.
Closely partnering with our supply chain to protect our November 17th production plants and from our vantage point semiconductor chip availability is proving and positions us very well for SRP.
The old 55, who are all complete prototypes have been built and performance has been confirmed.
These vehicles have.
Production intent design and components.
<unk> used for validation and all the attributes such as safety with the highest <unk> ratings Adas NV H climate control powertrain system performance chassis electrical integration complete vehicle durability.
As we progress through the different performance tests or Adrian teams can quickly.
Synthesize the results and rapidly make any final modifications based on extensive testing, including alone 40 vehicle level test sub system testing and simulations. The fiscal ocean is on track to meet global certification.
We have recently begun to next bill phase, it's called the <unk>.
<unk> built which is done with bodies bid from the series manufacturing line and paint process.
<unk> is the final build before we enter OSU production. These vehicles are intended to be fully representative of the final series design and will later be billed on the series final Assembly line.
They will be used for final validation and testing of complete vehicle performance controls and functions. In addition, these vehicles will be used to start all final certification and Homologation testing.
Henry and I are going to Cogs next week to observe and monitor all of this final build phase.
We have been collecting data to owed or build phases and closing the iteration loop to update the final phase as we approach serial production to full Ocean program has come nicely together.
We brought over several prototypes vehicles to the U S for testing of Adas, electrical and infotainment systems and overall function and comfort we believe.
This is really important to have the data from every region to be customer oriented in every situation.
At close collaboration with Bridgestone to ensure top performance generally we have done everything to maximize driving range of Ob codes, including optimization.
Work on the efficiency <unk> and <unk>.
Integration work on software and electronics is currently underway and all of the domains are coming together, including user interface interface user experience or we call. It <unk>.
We are simplifying and integrating features a 100% customer reliability incentives friction.
The customer experience inside and outside of the car is supported by our creation of a highly scalable secure multi cloud infrastructure to support Cisco's future vehicle fleet.
On the state of the art technology provides for a b directional connection between the vehicle into cloud.
This enables our <unk> mobile app to dynamically intact. The end result, the digitally connected vehicle with easy to use functionality that is always available for our customers.
Over the updated ability strategy is unique and is fully driven by physical cloud. It allows us to update individual vehicles as well as portions of all of the fleet of vehicles.
We believe the revenue and margin potential of old connected strategy will be first of its kind.
Now to briefly touch on <unk> specifically.
Engineering has continued to ramp.
And this ocean gets closer to S&P, we're transitioning more and more resources from the Ocean program to the <unk> program.
We have finalized the concept and have begun the a simple phase the payer will have a truly.
<unk> electrical architecture with him and he's using traditional vehicle consolidated down to a few central computer units.
<unk> continues to rapidly scale, our core technical competence.
Robust in house IP creation to both software and hardware engineering.
Yes, much in house software competence and I'll focus on the main domains software cockpit computer aid us battery and powertrain.
Our San Francisco Technology Center, along with our newly established India headquarters a focus on the design and engineering of software systems to support the ocean and future vehicle programs.
Our technical staff has grown over 50% year to date to approximately 300 strong.
A further illustration of our growing technical progress in house IP creation, Cisco's rapidly expanding global patent and patent pending portfolio currently alone 17.
This build a fantastic team in.
<unk> continued to invest in internal capabilities that will enable cisco to innovate and introduce cutting edge technology into our platforms.
Thank you I will now turn the call over to Gita. Thank you look at and welcome everyone over just over three months to S&P. Our number one priority is ensuring development timelines remain on track and that our supply chain is J D. First started production on November 17th and subsequent ramp up in 2020.
In this current tough environment. It is extremely important that I emphasize our asset light strategy, which we started off with over two years ago is a very purposeful strategy designed to support us in all economic cycles. It offers scale benefits without the complexities risks.
And fixed cost of a fully vertically integrated approach, we continue to staff up with 530 full time employees across nine countries and of course that does not include over 500 colleagues, we have at Magnus tie in Graz in engineering purchasing quality.
Vance manufacturing engineering and over 8000 colleagues, we have will ultimately build the corrosion at Magnus time.
Even after this growth we are still a small fraction of the size of other sector participants yet we aim to produce more vehicles in our first full year of operation than any other EV startup has done in history. Our unique model reduces the high operating leverage inherent in this industry and dramatically shorter the development timeframe.
Now, let me share some thoughts on recent Ocean program milestones. In addition to what Henrik <unk> already spoke about the prototype build phase is now complete with 55 prototypes deployed globally critical testing and validation required for launch is well underway and on track for a November S&P timing we employ.
A comprehensive supply chain management approach I had mentioned last time on our earnings call that we have an executive team and executive supply chain task force between physical and Magna that continues to systematically conduct reviews meat suppliers and so any critical issues we have its appeal.
These include in person visits to confirm bumper to bumper readiness for tooling.
Status capacity and production part approval process achievement.
So <unk> beat that we continue to update our supply chain with our latest reservation and preorder numbers and discuss opportunities specific went expansion beyond existing capacity targets staying on the supply chain topic commodity pricing has come off the boil it since our last call for example, steel which is more important for <unk>.
And then aluminum is down 40% from early May and 55% year on year key battery components have also moderated a bit. In addition, the strong dollar has mitigated inflationary pressures for us as well since many of our supplier contracts are euro denominated euro has weakened 10% year to date versus the U S.
And it's currently bouncing along its lowest level in 20 years since 2000.
2002.
As a reminder.
Our contracts favour factor in commodity prices inflation productivity and foreign exchange. Some of these critical elements will be calculated on a quarterly or annual basis as we start to ramp up production next year.
As a result, we will have much better visibility of the actual impact of commodity prices to a bomb further into 2023, while we plan to produce between 40% and 50000 Ocean vehicles. In 2023, we expect this to be backend loaded reflecting a deliberate early production strategy to ensure we do.
Deliver a high quality vehicle to our early customers I want to level set revenue expectations for 2022 with a limited number of working days between November 17th in year end combined with holiday related factory closure, and we could transit time to the U S. This translate to little to no revenue this year.
We have clear visibility and locations of our first 5000 Ocean one customers and are fully focused on establishing a seamless experience as we start delivering these vehicles. This insight provides significant advantages, including optimal customer service and efficient cost management by enabling us to sequence with position.
Our delivery centers phosphate houses last mile logistics network and local after sale support infrastructure last month, we announced just to finance a digital financing platform offering seamless and convenient loan purchase options to fiscal customers retail loan options include vehicle accessories and home charging equipment financing.
Reaffirm the nomination of Chase in the U S. In Santander consumer finance in Europe , as our retail financing partners as a complement to vehicles financing. We also aim to provide our customers with value added services, such as trade ins and competitive insurance on our digital platform before turning to our financial results I wanted to make some comments about customer.
As Henrik mentioned, we're very excited to have sold out all 5000 pay orders for Ocean, one long tradition secured by $5000 or equivalent.
In local currency deposits from each customer from an accounting standpoint, we will not recognize revenue until the underlying vehicles are delivered to customers. Our ocean one customer's hail from nine launch countries and utilize various payment methods, but their down payments and as a result, depending on the time payment method the final.
<unk> intermediary either transfers those deposits to fiscal shortly after PR or when the vehicle is delivered.
Turning now to our Q2 results balance sheet and 2022 outlook. Our Q2 operating expenses of $88 7 million or $87 5 million ex stock compensation expense.
Assistant with our internal expectations.
Capital expenditures of $54 2 million increase from Q1 levels due primarily to the timing of Capex spending operationally R&D decreased in Q2 versus Q1, primarily due to lumpier milestone timing in Q1, an ocean.
The slight decrease in SG&A any expense quarter over quarter was due to effective cost controls and the non recurrence of major trade show events. In Q2, Q1 had CES and mobile World Congress, partially offset by team member quote as a reminder, equity interest in a Lego is reflected in non operating results.
We are working to develop seamless integration of legos vast European charging network onto the fiscal App and <unk> and we will offer 12 months free of charging under Lego network for Activations prior to March 2024.
During the second quarter, we recognized a 10 million mark to market loss or roughly 0.0 cents.
<unk> per share on a level holding and other income, which will obviously fluctuate each quarter based on a lego share price back.
She'd remains solid we have stayed disciplined with our spending finishing the second quarter with $851 9 million in cash.
Have the resources to fully fund the Ocean program launch in November and to stay on track with other projects in 2022 during the quarter. We also established a $350 million at the market equity program, which is part of the 2 billion shelf rehab.
During second quarter, we tested the plumbing on the ATM facility and we brought in approximately $14 million.
We continue to evaluate multiple options across a range of funding channels to efficiently finance that growth beyond <unk>, including our working capital needs brick and mortar facilities and future vehicle platforms. In addition to evaluating incremental sources of liquidity, we regularly assess the levers we can pull to adjust Ben if warranted for example.
The pacing of our physical infrastructure investments and regional hiring activity in <unk>, we remain nimble and positioned to bolster our balance sheet and support our future growth opportunities as appropriate turning to the outlook as noted in the press release, our overall non-GAAP Opex plus capex guidance for 2022 remains unchanged.
At $715 million to $790 million the bulk of the spend is continued execution of ocean through launch plus cost of running the business with bad R&D spending ramp ramping up in the second half of the year.
Product related Capex is ocean driven as we don't expect any significant capex on pad this year.
We're proud of the entire fiscal team's determination and resilience and agility, including all our suppliers and partners, but navigating through a dynamic environment and maintaining a laser focus on launching an amazing vehicle on time, we're now happy to take your questions.
Thank you. Thank you I would like to ask a question. Please press star followed by one on your telephone keypad, if you'd like to remove that question. Please press star followed by Kim.
Again to ask a question. Please press star one as.
As a reminder, if you are using a speaker phone. Please remember to pick up your handset before asking your question.
First question comes from Joseph Spak with RBC. Please go ahead.
Okay.
Thanks, so much and thanks for all the commentary.
And I know you went through this a little bit about some of the commodities moving in.
Contracts.
Resetting either either quarterly or annually, depending on countries or not.
There's still I think a lot of investor confusion out there as to who is exactly are responsible for the different forms of potential inflationary costs. I mean, I think it's pretty clear that you compare to the cost on some of the batteries, but stuff like.
Steel versus energy costs for instance, like how does that work with your contract manufacturers.
Yes sure so.
I'd mentioned in my commentary that all our contracts they actually address.
Any inflation, which obviously clearly impacts labor if there is any commodity prices, which are indexed to London metal exchange, which is pretty normal and all these contracts and then there is obviously productivity.
Generally all contracts automotive contracts have productivity because you improve the way you do things means you do things faster and then there is foreign exchange and all the contracts.
Between fiscal and suppliers and we adjust them on a quarterly basis. So typically.
We of course as a customer responsible but we work with our suppliers to look at all these numbers on a quarterly basis and would adjust for them upwards or downwards.
Maybe just again just make the tangibles of since were not in production were not affected by any of these prices at this point in time.
Alright.
Okay, and then second question, Patrick and it's great to hear that.
These prototype vehicles are getting out there.
So you and the team can test them and make additional assignments, but.
You are.
About 100 days away from S&P.
Yes.
When do we need to lock down because I'd imagine you want to try to minimize changes on the line and the line once it starts it's certainly gotten some other startups in.
A little bit of trouble.
And also I don't know that Theres, some prototype vehicles state side when should we expect drives for.
Third parties like the media or maybe more by investors and analysts.
Yes, so first of all.
There is two different type are actually several different type of prototypes, so as I mentioned.
Was that we have already built 55 prototypes to actually useful to hardcore testing. So the test vehicles, we're getting here, which all nice nicely painted northern camouflage those of test vehicles, which are for me here and maybe a couple of our engineers to drive around and I would say a little bit more of a fine tuning.
For maybe some chassis feedback, but there is no real adjustments happening at this point in time.
As a result of driving around in those test vehicles, we have done most of that fine tuning on test tracks et cetera.
So.
These vehicles like I just mentioned, we just got now are really like fully pain that nicely done up and all of that and we are driving around them.
So thats not unusual and also remember I know you referred to other EV startups and then they I am sure are doing their own.
Processes et cetera, but we are we are following.
Slightly more traditional OEM process when it comes to testing.
Because we are working together with Magna. So I don't think anybody should worry about us making any changes underline that's really not what we're going to do we have already made the changes we need to do the only thing that usually at this day and age when we're talking about new technology that is getting.
Improved and adjusted until you launch and actually even get upgraded after launch which happened in the smartphone world and the computer World of software. So we will continue improving software even after loans and upgrading our systems and I think that was already in other carmaker that has done that and I think you will see many.
Future carmakers.
Doing that because it is constantly evolving but the hardware itself. There is no more adjustments already to that that has already been frozen fixed.
So I don't really see any issues there at all when it comes to whenever you're getting.
People in the vehicles.
I would have like to cut people in the vehicles, a little earlier, but I don't want to get People's into a vehicle that is only 90%, 95%. There I wanted to be 100% perfect. So I think it's going to be closer to beginning in November .
As my Best Guesstimate right now you also have to remember.
Remember that every single vehicle that we're making right now is spoken for in terms of being used for something whatever that might be.
I think it's going to be closer to around November timeframe.
Okay looking forward to that.
Maybe one more quick one.
The guidance does imply.
Step up in.
Opex in the back half.
As we approach launch.
Just from a.
Cadence perspective.
Is it is it more for the third.
<unk> third quarter with the launch or or is it more balanced because some of that spending your staffing in advance.
<unk>.
It's more balanced Joe to be honest.
We've been pretty prudent and we took some early measures.
As Henrik mentioned, we took some decisions on.
On some of the operations that we didn't go into some of these expensive fiscal lounges.
Some of these numbers, we have the capability to control.
And I think there is absolutely zero change and some of them.
<unk> expenses, we have on ocean, so very balanced.
Thank you.
Yeah.
Thank you.
Thank you for your question.
Our next question comes from James Picariello with BNP Paribas. Please go ahead.
Hey, guys.
Regarding the proposed <unk> tax credit legislation.
And the final North America.
Assembly requirements to be eligible for <unk> from.
7500 dollar credit.
If this goes through I mean could fisker utilize.
Fox Con plan or just some other measure to meet that final.
Assembly thresholds so that the ocean is eligible for at least half of the credit just wondering what your initial.
First blush contingency plan.
And your thinking there.
That looks like.
So what I mentioned earlier is that we have just hired senior vice president of manufacturing.
There are a lot of experience here in the U S manufacturing.
And we're putting together a strategy with him.
This legislation is again to effect.
We would have some countermeasures, where we would definitely.
Half.
Ocean U S manufacturing, we're not ready to announce where and how but.
That's something we are actively working on absolutely.
And the battery supplier alliances that you have in place today.
Do those suppliers have U S capacity to meet the other half of the tax credit just wondering what your thoughts are there.
So.
First this is a very complicated legislation, where we're also talking about materials and the batteries and ironwood actually estimate.
I don't even know if there's one car today that fulfills all of these requirements that will get the full tax credit.
I don't have a pressure I don't even think its five cars. So it's definitely not a good legislation for any consumers don't want to buy an EV no matter, where it is made.
But in terms of battery for the Ocean, we have a very firm contract with CHL.
Sure.
I can't speak for them, but I think that has already been.
Some news about that Theyre looking for U S production.
For the pair we have not.
A final decision on who is going to.
Supply of batteries or whether it's only going to be one supplier, but one thing's for sure it would be a better supplier that would have.
Eventually U S manufacturing and.
I could see us make close corporation, a joint venture we are not quite ready to announce that yet, but it's something that we clearly are planning for with or without that legislation because maintenance 150000 vehicles in Ohio, you're going to need to have.
Battery manufacturing in the U S.
Yes, Okay. That's super helpful. And then just on the ATM $350 million ATM equity offering is there an exploration.
To that tranche.
Yeah, Great question, it's actually I'm, sorry did I hit all of its $250 million. So there is a three year shelf life.
Okay and then my broader question on that point, how are you thinking about.
Additional liquidity sources out to 2023.
Equity offering comes in light through through the rest of this year it sounds as though youre comfortable talking about cash on hand, giving you well through this do this year, but what are the options in your and your thoughts on liquidity as you should.
Yes.
Yeah, Yeah, Great question, So again I want to repeat that.
Very very proactive last year, we're in a capital intensive business, we plan to bring full vehicles to market by 2025. So we clearly need capital to fund. These programs, we need capital for marketing sales and service, we need capital to support customers. So we clearly need capital, but we also want to be.
Full of raising capital at the right time at the right valuation and when it's opportune. So we already showed that last year when we placed the convertible note.
$675 million, which had a five year maturity at great guns.
Great instrument that would be used in addition to that in the 2 million share of the $3 50 is already allocated to ATM. It's a three year shelf life and as everybody knows the mechanics of an ATM. It is not something you close within a day or so it's a long term instruments. So we have that instrument available as and when we need and we feel the market.
Right now in addition to that.
Obviously, kidney and equity market and we have a balance of $1 65 billion left in the shelf and we can use that shelf to place great equity if the market conditions are right, we could place the convertible note.
So those.
Both of those instruments, obviously go straight to the balance sheet and then.
Finally, again I'd say that we are talking to multiple banks to discuss.
<unk> back loan against.
Yes.
Our work in progress against finished vehicles, then believe magna and I in transit to our customers and the fact that we completed these 5000 Ocean. One PR does is a great Testament to show a potential of 250 million in revenue just from Afar Patel.
Potential lenders, who can clearly see that we have imminent revenue coming.
So we are looking I understood. Thank these different all these different approaches.
Others, which you haven't talked about.
Emission credit sales and are all the other options. So we will absolutely strengthened the balance sheet.
In the coming months.
Thanks.
Okay.
Thank you for your question James The next question comes from Adam Jonas with Morgan Stanley . Please proceed.
Okay.
Hi, everybody.
I know youre going to have more visibility when you actually start making cars, but you did say that you have the discussions at least quarterly so.
Based on that how much doesn't ocean bill of materials cost today in U S dollars factoring in the <unk>.
Euro weakness, but then the other puts and takes on the input prices and energy et cetera, how.
How much more does it cost today versus say one year ago order of magnitude not going to hold you to a specific dollar amount.
Adam It's a great question, we actually don't encourage those discussions because they don't really mean anything and the reason for logging.
We talk to suppliers the only price out when we are ready to put a purchase order.
For a quarter so honestly.
We clearly have costs that are related to content that are related to our design intent parts currently and.
The reason why we never increased prices was because we were very confident.
What we are seeing and what we are discussing with our suppliers now I don't know what Q1 Q2 next gen looks like but again, we are very confident that if there's upward movement in commodity pricing, we have enough headroom to absorb that and areas, where we feel it's justified to share with us.
<unk> as Henrik mentioned earlier is logistic cost and instead of building it into the price of the vehicle, we instead separated it out for full transparency.
Thank you.
To answer your question.
We haven't really done serial pricing right now with suppliers because they are not producing cars, but again I don't see any surprises next year, but we don't know okay.
Thanks, Peter and just a follow up and thanks for the comments and being very open and transparent about the need.
For capital going forward.
But just specifically for the ramp of the Ocean. You said you have enough liquidity for yearend and into 'twenty three for development work.
But is it safe to say that that you would need capital to actually ramp production of the ocean.
So the ramp needs are obviously cash flow working capital needs right, we have certain times from suppliers.
And you're only realizing like I said revenue when the customer pays and typically the customer pays when you exchange the asset.
Obviously as a startup we're trying to explore if we can get non dilutive funding and if there is a delta then absolutely we're going to have to raise money and we could supplement that through the ATM, we could supplement that through a convertible loan depending on the borrow and depending on the market conditions, we could supplement that.
To another equity raise.
And we absolutely are working with banks to identify exactly what that capital need is and how should we structure. It.
Thanks Peter.
If youre talking to banks, but.
Is it too soon to think about.
Exploring strategic value for the company as well.
Thank you that's my final.
Yeah.
We are opportunistic Adam we are always thinking about any opportunity that comes our way. So absolutely. We are always looking at strategic opportunities as well.
Okay.
We're going to take a few questions from the retail shareholder pull online.
The first one is.
For you Henrik.
Will you be able to share rollout plans, including when reservation holders can expect delivery in their markets.
So we're looking at.
We're launching our new interactive configure rate on October .
And.
What we just said was we're going to start taking firm.
Reservations on the extreme November 18th the day after we stopped production and at that point in time, we would definitely give.
The indication of the quarter Youll get deliveries in and then of course as we get closer.
Two the actual delivery will give a firm probably about six weeks before so we are working on all these details right now and we want to be as accurate as possible and we will probably also allow people to somehow track, whereas that car in this entire process.
But we should be able to give.
In the end of this year, some pretty clear guidance on when people will get the car.
Thank you Eric next question with the way the economy is going is <unk> going to market to masses are only meek.
Vehicles for elite consumers.
I think we're already R. R.
No.
We have already said that we will produce the $37500 Ocean sport from Q3 next year, we have already announced our pair which will be starting under 30000.
The only thing I can count on one hand, the amount of Evs that has kind of come on market.
In 2000.
24, that's going to be under 30000, So I think we will have a real unique proposition.
And Super high volume potential for our two vehicles.
What was important about the ocean was that we ultimately are able to get really high volumes out of that vehicle by having a base price of 37500 and what's important about the pear is to get it under $30000 because now youre talking about potential millions of vehicles. So absolutely I think we will.
Have a large span I think we have design, which is timeless, which.
It is done in a way where you can't really see what the price of our cars I mean, a lot of people think they can't afford the ocean. When this year for the first time, they don't know the car.
Other people, saying that said it was $80000 of course is not.
So we.
We will we will definitely continue to offer value all the way from a peer on the 30000, all the way up to our rone and even if we do a $200000 car you would offer tremendous value and I think that's part of how we develop all vehicles, that's what we stand for as a brand.
Thank you Henrik and Alaska retail question is there a chance ultra production, let me start sooner than Q3 2023, none at this point we have to plan production far ahead, and we also have to think about the company's financial health.
I know, we have a lot of investors on the call and I'm sure. There's also a lot of people who is maybe ordered an ultra or even some investors that are all audit and ultra but ultimately we are a business and what we are seeing right now is a very healthy demand for the extreme and the ocean one.
And right now we can see that we should be able to fulfill.
Even not all of these orders all the way to Q3, so normally.
We wouldn't have committed to start ultra.
All transport production in Q3 next year, we may have been able to go all next year without producing any old tours or any sports, but it was very important for the company to stand up to what we have promised which was to deliver a $37500 car and a $49900 car in.
Q3 next year, and we standby that promise we have planned it into a production.
That's what we're going to do.
Thank you and operator can you go back to the analyst Q&A.
Thank you. Our next question comes from Pavel <unk> with Raymond James. Please proceed.
Okay.
Thanks for taking the question.
You touched on the U S tax credit I wanted to ask about the U K you were planning to launch a right hand version of the Ocean in the U K market next summer.
And then in June the British government.
Wiped out the plug in car Grand.
Does that change your strategy for entering that market.
No in fact, we saw an incredible uptick in the Ocean won orders from the U K have yet actually allocate it.
Certain amounts of the UK, but they went way over so we didn't have see any impacts on that I think we're extremely price competitive.
Without vehicle already in the UK.
Let's not forget that in the UK. This applies to everyone. It's not about if your vehicle is manufactured in UK or stuff like that so it really has no impact I think on our competitiveness if everybody has to pay a little more than everybody else to pay a little more and we are still competitive so we haven't seen any negative.
Feedback on that and we have not changed our plans, we will start delivering right hand drive vehicles in the UK mid next year.
Okay.
Up on that you have the charging partnership with a Lego in Europe of course do you have an interest in a similar kind of relationship where they charging company in the United States.
Yes, So let me explain a little bit about the.
Charging relationships so first of all.
We have a partnership with the group.
All the.
Charging infrastructure will be displayed on the HMA, which is obviously critical in all global markets.
And then the second level of integration is to then integrate our web app and our HMA.
Individual charging station providers. So they are in the process of doing that and then the third step is making deals with charging station companies to be able to provide better pricing or plug in charge. So we're doing all these three and.
We obviously with the Lego have a deeper relationship and we're doing the same here in the U S. As well we are not ready yet to announce those partners, but we will in the coming days and weeks as we integrate those in the <unk> App. We also have identified our partner for home charging installation.
We are also looking forward to announce in the coming weeks.
Got it thanks very much.
Thank you for your question. Our next question comes from <unk> Patel with Wolfe Research. Please go ahead.
Yes.
Alright, thanks, so much for taking my questions.
Wanted to follow up first on a question that was brought up earlier, so maybe just to be more specific.
Your your.
The agreement with.
With Magna.
Does how does.
Energy costs factor into that obviously I ask only because we've seen.
And in energy prices across Europe .
So is that something that gets passed on to fiscal or has that responsibility borne by magna.
So first of all energy cost for a facility like Mac now.
Fixed.
Variable utility cost and the.
Agreement, we have bid.
Magna is set.
Two levels the way vehicle contract manufacturing works is you have a fixed element and you have a variable element and typically.
Ren.
Leasing the space utilities et cetera, they typically fall in the category where.
Shed those costs amongst various different.
Partner customers et cetera et cetera.
Now specifically, what I can talk about in Austria.
There was talk about sort of gas now in our case magnetite uses gas for pain shop, all of the areas are now being switched to biodiesel hydropower.
And in the case of Magna itself.
They are hedging and buying around 85% of the gas for next year, they confirm that to us.
Released or releasing that in our Q.
Austrian government is planning to put automotive as a priority given the number of jobs. It Hasnt, Austria and they've also secured 70% of that gas is there for 2023.
I frankly do not see this as any risk and it will be disclosed amongst our risk factor when we released the Q.
Okay.
Okay. Thanks, that's helpful.
And then you mentioned quite a few potential initiatives around project pier and potentially even forming joint venture relationship with battery manufacturers.
And you mentioned that from a pure related spending our capex spending in 2022 so.
I'm just trying to.
Think about the implications, though as we think about the ramp up of peer spending, especially in 2023.
Both on the Opex and Capex side, I guess, maybe how do we think about the needs for that program, especially if you compare it to what you've already had to spend on the ocean do you see the potential for leverage against the ocean level spending.
Are you going to have to actually spend more.
So this is a great really great question.
<unk> asked that because what we're doing now actually as we are doing a lot more in house development on the pair them, we were able to do with the ocean because we were scaling up the team and working closely with Mac now of course.
So by taking that work in house.
Less capital outlay, and we also moving people already know from the Ocean program over to the <unk> program and then finally, there's also a lot of commonalities on parts and suppliers between ocean and the payer so it actually.
Some of these parts will be fully carryover. So we don't have to necessarily to a whole new design for these parts and then there is the fact that Fox Con have already acquired the facility in Ohio, and we are working closely with them on how to lay out the factory. So I do see overall this program at least in the.
Initial phase the much lower capital outlay than the Ocean were initially.
To answer your specific question on capital needs. So this year the main investments on there.
<unk>, so concept development <unk>.
<unk>.
Look I mentioned earlier, we have a lot of engineers over 300, including engineers, we are hiring in India, who are now transitioning over to the <unk> program and we are starting to do supplier selection in the second half of the year.
On August September timeframe.
And then as we select suppliers.
I expect that at some point next year, we need to start getting into tooling.
However in the case of Pet program, we are going to do purchasing this time in a slightly different way given its a U S centric program, it's quite common in the U S to develop.
Different commodities parts with suppliers, but it's also quite common bid out to it.
It's uncommon to do that in Europe , but quite common in the U S. So we are looking into those strategies and that would require daily investing capital and it's a high volume program.
I expect that some of the tools are probably more expensive than ocean. We are also as Luca mentioned looking at a virtual a lot of the hardware will become virtual so we expect a very efficient bomb when it comes to E. We expect very.
Efficient harnesses noteworthy harnesses.
We probably spend a bit more on the computer.
Battery, we will have to see where we end up it will probably have a smaller battery then the ocean given it's under 30000, So I think.
It would be definitely below ocean and I think we will get much more capital efficient on the pad.
But we will have capital when we get into we will have to 100% <unk> capital to kick off the tooling with suppliers next year.
Okay. That's really helpful. And then lastly, just can you remind us of your of your service strategy. It's something that you talked about back in 2020, but I believe your strategies to work with with Cox automotive.
Correct me, if that's changed but.
Can you just remind us what the how many what what kind of Kpis are you targeting in terms of footprint.
The number of mobile vehicles that could provide service et cetera.
Yes, great Great question, So we divide service into multiple.
Areas, obviously collision is by far the biggest and most complicated as you know and collision also falls outside of R&D that involves insurance. So we are working on collision partners and all of the nine launch market as we speak and collision is generally partnered we will also look at certain.
Right.
Articulation centers that will release more information on that towards the end of the year than the next area that you look at is the cloud.
You also.
We are looking in Europe equal is required by law. So we are also bringing an equal partners in Europe .
We're actually going to offer that here in the U S as well, even though it is not required by law. Then in addition to that we've named for other minor areas bid stone in the U S and certain parts of Europe and <unk> in Scandinavia.
Other areas of service.
And they all have sort of different types of service, whether it's tire changer.
Other minor items that can be repaired and then in addition to that we're looking at especially in areas, where we can build the service ourselves and then finally batteries need to be trained in a unique way and we are developing our own high voltage cleaning. We are developing we are working with <unk> as well.
<unk> some of these processes and procedures.
Okay, great. Thanks.
Thank you operator, that's all the time, we have for today's Q&A.
Thank you I'll now pass it back over to the management team for any further remarks.
Thank you very much everyone I thought there was a super exciting and very good earnings call and we are excited to move on and share news over the next couple of weeks and months as we progress towards start of production with the Cisco Ocean. Thank you very much everyone.
That concludes the <unk>, Inc. Second quarter 2022 earnings call.
For your participation you may now disconnect your lines.
Okay.