Q4 2022 Fisker Inc Earnings Call
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Hello, and thank you for your patience, ladies and gentlemen.
During the presentation of today, you'll have the opportunity to ask a question by pressing star followed by one on your telephone keypad.
The conference will begin shortly please standby.
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Hello, everyone and welcome to <unk> fourth quarter and full year 2022 earnings call. My name is Bruno and I will be operating your call today.
During the presentation you can register to ask a question by pressing star one on your telephone keypad.
I will now hand over to your host Frank Buraq. Please go ahead.
Okay.
Thank you Bruno Hello, and welcome everyone to <unk> earnings call as the operator mentioned my name is Frank bark VP of Investor Relations and Treasury here at <unk>. Joining me on today's call are Henrik Fisher, Our Chief Executive Officer, Dr. Bukhari Hunky, our Chief Technology Officer, Dr. <unk>, <unk>, our Chief Financial Officer, and Chief operating officer before turning it over to Henrik be adverse.
<unk>, 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.
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 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 accounting GAAP principles.
Today during today's call, including non-GAAP operating expenses.
Information may be calculated differently than the non-GAAP data presented by other companies quantitative reconciliations of our non-GAAP financial information to the directly comparable GAAP financial information appears in today's earnings release, and with that I'm happy to turn the call over to Henrik <unk>.
Thank you Frank and good morning, everyone and thank you for joining US today, it's a little earlier than our usual timing probably moved to Cola all hit it back to Austria. This afternoon to continue a hands on manufacturing and supplier engagement.
Want to thank all of the stakeholders teams and partners front Amazing progress we have made in 2022.
Of course, 2023 is an inflection year for <unk> as we reach.
Industrialization and pivot from vehicle development to customer deliveries. The 850 strong fiscal team is hard at work readying, our inaugural physical allowances and center plus us integrated with our trade in and after sales service and repair partners and uplifting our initial mobile service brands among many other key initiatives.
We have a fantastic team and.
And a partner with World class manufacturer and suppliers. These strengths will shine through this year and it really is the basis for our business model.
Let's start with direct to consumer sales and service.
We have made progress on last mile delivery delivery.
Support infrastructure, California, DMV sales license is approved for the fifth corrosion, we will utilize a third party vendor for customer title and registration services in the U S and EU, which will be integrated into physical customer journey, we have home delivery partners identified for the U S and all.
European launch countries to complement our growing network of our own center plus delivery locations.
We are also planning initial pop up delivery sites, specifically in areas, where we may not have opened delivery centers yet.
Trading services available in the United States and Europe .
In all the large countries and launch areas.
Our flagship launch launches in Los Angeles, and Munich, which are slated to open in mid Q2 as you remember they were a bit delayed because of COVID-19 will be complemented by quickly expanding center pluses, including Vienna, Copenhagen, and Stockholm, where we will offer test drives services service and deliveries.
Of all vehicles. In addition, we signed an innovative test drive and delivery center in Munich. We are currently in negotiations on more than a dozen properties for additional lounges and center pluses vehicle processing centers and service and pickup locations in the U S and Europe .
We made will be made.
<unk>.
Your ocean, a more convenient and integrated.
Spirits with home charging and public charging partnership in Europe , and U S now finalized.
Physical flexible service approach includes third party service and repair provider plus Cisco's own service solutions externally. We have nominated partners for after sales service and repair in key U S and European markets, providing broad geographic coverage for ocean customers right from.
The beginning initially.
Initially we will provide service options via physical armed service centers and physical mobile service. We have started uplifting physical mobile technician vehicles to support our flexible and convenient service option. In addition to service partners. We have quickly expanded the physical collision repair network in the U S and Europe for certify.
High quality EV repairs.
Let's come to the Ocean update.
Our number one priority is launching a high quality physical erosion with class leading features and range. We're excited to get the ocean in the hands of our loyal customers once their home litigation process is complete.
The ocean obligation testing is expected to be completed in March which will be followed by a regulatory approval processes.
I had.
Expected us to be farther along when we last spoke in November, but we encounter some testing delays due to weather and COVID-19 absences, and some complicated retest that slowed our process.
We took on a lot by doing both the U S and Europe obligation at the same time.
The ability to sell the ocean in so many countries and important derisking strategy and gives us the opportunity to increase sales and shift towards whichever market offers the strongest growth and I just want to emphasize that it's not normal for any car company to actually do dual homologation and two continents.
I think once this is done it's a huge advantage for us because we have also built out our complete service and sales network in Europe . So it really opens up endless possibilities for growth.
We recently completed our EPA and W. LTP range test and our internal findings show a longer range for the fiscal ocean there'll be initially.
Projected and this reinforces our expectation that the ocean will have the world's longest range of any SUV crossover price below $70000 for 7000 euros and book out would go into that detail. Later, if you remember we had announced 350 mile range here in the U S EPA.
And I would just say I think there's going to be closer to $360 $3 50 and in Europe .
The announced 630 kilometers and I think this will be closer to 700 than 630, you obviously can't announce the exact numbers yet because they have to be verified by the two agencies, but we have run all these test and I want to say congratulation to our engineering team because they've done an amazing job in rift.
Finding every little detail that attributes to getting those long range more than we originally had expected because we actually use some of these vehicles.
From our start up production to actually refine and refine and refine and of course theres not one element alone that makes this long range. It's really the genius I would say of our engineering team that has created this and being a company that launched its first vehicle and achieved the world's longest range I think.
It's pretty amazing specifically, because it's also an affordable vehicle. So congratulations on that and I'm Super excited when we get the final ratings, but theyre going to be good.
Alright.
Let's go to manufacturing and production update.
All of the other senior leaders have been based in Europe actually for the past few months working closely with all our partners preparing for production around ensuring we deliver the highest quality possible ocean from day one.
I have to say I love walking around on.
On the production line talking to the skilled Mcmahon.
People unemployed about the product about the quality doing reviews right there with the cars as they come off the line. It's just fantastic to actually stand there with people who is build cars some of them for 2030 years Amazing high quality cars and they actually I would say, it's the other way almost learned from them exactly how <unk>.
You make such an amazing quality car and I'm Super excited about that quite frankly.
Last week I oversaw the final extreme cold weather testing for powertrain and chassis systems.
And I have to say it was amazing to drive this car on a frozen lake in Northern Sweden. We also had a race car driver there at Eaton and of course, our engineers, there as well and everybody was just amazed how will this car performed.
Very excited again to get in the hands of people and I think what you really do on a lake like this you actually push the kotchman extreme them, probably no normal customer will rarely ever do.
And it really shows how safe how predictable how will this car handles and part of that is not just electronics and everything else is also the actual proportions of the vehicle. So it has to do with the width and wheelbase based length to get that optimized is the hardware thing.
And if you don't get optimized you can do a lot of tricks with electronic suspension, but at the end of the day. This vehicle fundamentally have the right proportional setup and that's something that is just making an amazing experience when you drive it.
The serial production lines undergoing also final tuning General Assembly staff training is almost complete and supplier ordering is well underway the high level of coordination and integration of the entire supply chain and assembly ecosystem has been impressive.
Peter will discuss the supply ramp in more detail key risks, we are managing and how we are working with our partners to support the ramp.
Almost all of our suppliers are performing a few have difficulties ramping so we are happy with our decision to begin with a slow ramp we're confident.
We will be ready for customer deliveries once we have received.
Required regulatory certifications and we maintain our 2023 production target of 42400 units. Now. This is important because of course supply chain have to deliver and of course, there can be hiccups, but here is something very important and I hope everybody will understand.
And that is because of the amazing ability of Mac not to ramp and I'll give you. The example, yes, we only make 56 cars since November last year, but that was on purpose.
To date and actually even last week and weeks before Matt and I can already make 20 cars a day on average that's 100 cars a week already now so the key here. The key takeaway is that when we are ramping up specifically in Q2, we're going to have such a strong ramp that.
Any units that may have been lost early on can easily be caught up later in the year and that's why we maintain our guidance of 42400 vehicles for the year extremely important note here.
Alright.
Let's get to the ocean demand.
Our reservations continue to increase despite new competition in competitors' price reductions net reservations in orders now total approximately 65000 for the fish corrosion, reflecting the large and growing global addressable market for a well appointed electric SUV as we start deliveries, we expect increased brand awareness.
This to drive even more customer considerations and demand for the ocean repriced the ocean extremely competitively considering the many proprietary features such as class leading range, California mode Solar Sky solar roof.
Of course, the amount of horsepower in this vehicle for the price of amazing the $17 one inch rotating screen, a digital <unk> radar and on and on I could keep on on that but it really shows that people appreciate how unique our vehicles and as consumers have opportunities to interact in person with ocean. We.
We expect this value to increase.
And really resonate and drive even more sales.
We continue to showcase the ocean throughout a variety of brand building activities two of the larger reason events include media investors and business partners in Austria in Las Vegas.
Our pop ups continue to be very popular with the reservation holders and prospective customers many of whom drove long distances to get their first glimpse of the fish corrosion, which shows how passionate and committed our customers or to the brand and I really really appreciate that and I think it really built again, a strong foundation for our brand.
And since our last earning call earnings call. We also took the ocean to six states in the U S, Texas, New York, Florida, Las Vegas, Utah, and California and also.
It did pop up as many European countries and of course will.
We will continue doing that and actually increase it.
As we move forward.
I want to just highlight a couple of really innovative things that are inside the ocean.
One is the user interface and I know thats been of course, a few videos.
On social media about it but those were all early preproduction versions of this user interface. The final user interface I just want to tell you it's amazing.
I go in the current let me tell you I actually hate computers quite frankly.
I'm really not good at and I don't know when I use them, they always breakdown, but I want to tell you when you get in this car and use it you don't need any instruction on how to use. It is just like the first time you picked up an iPhone. It just is intuitive and that is what's really cool about this user interface and that was all developed in house now.
So what is super cool and I'm really impressed about what we have done in house is the ocean over the air update capabilities and they are now complete it's amazing to experienced the vehicles getting updated and improved fully over there and this was all developed in house, it's just super cool to see.
And then finally, the ocean will come with advanced Adas controller incentive suite, which is designed to be continuously updated through our <unk> platform and <unk> will talk more about that it obviously also give us endless opportunities to.
Bring some really cool features to market later because of some bashan is so advanced like the digital reader for example.
Let me get to short peer update.
The peer group program is progressing well, we achieved our goal of driving both peer prototype before year end last year, which you may have seen me driving around in L. A was quite fun actually.
Revealing more of the exterior production design of for example, the real lighting is a continuous light strip around the rear window with an integrated high mounted brake light.
The side view has a unique iconic graphics and a clean sculptural body side with pronounced vendors that really gives you the powerful white stands and it also means a car in this price range is going to handle amazingly.
The overall.
Lights have the signature of Fisker dual light bar surrounded by high Tech like graphics, and then the vehicle sits a bit high off the ground and you also have a high seating decision, even though it looks quite sporty and thats really a perfect specifically for city driving and that is combined with his big canopy that's huge.
<unk> window, which I think today might be the most advanced front windscreen on a modern car because there's a lot of new rules and regulations on how to do front windscreens. So we don't see these super round Windscreens anymore that we used to see in the Sixty's, but we've actually achieved that and it gives you an amazing view of the road.
From you anything that happens in front of you.
Finally, the dynamics shaping has already gone extensive aerodynamic testing in the wind tunnel and we expect the truck version to achieve well over 300 miles.
We'll offer two different battery packs, because I also think because of the price and the size of the pair this may be.
Second EV for many buyers that already love Cds and drives Tvs and therefore, they may not need to carry around a giant expensive battery if they're only using as a city car. So we will offer some different variations. There. We also have some super excited different interior variations, but we'll talk about that later.
And the parents being engineered using new automotive specific specifications and that's important the new automotive specification because that's how we achieve the base price of $29900. That's not a price. We just threw out there you've actually gone through all of the development to ensure that that is the price that we're going to achieve.
I'm Super excited about that.
The current payer reservations are just exceeding 5006 hundred we did release a new images images today, so maybe though.
Up a bit as well.
And then finally here I want to talk a bit about.
Our future product portfolio.
Because in the end of the day.
We do have a goal to reach 1 million vehicles per year.
Later this year at our inaugural Investor Day event, we expect to showcase our future or at least some of our future product portfolio with several durable prototypes and they will all be in new segments and we are.
We are still keeping our promise of always having at least four unique features on each vehicle. So we will showcase the pear, which had some amazing features never been seen before on any vehicle. We will also showcase the rollout and then we will showcase our our Alaska program, which.
Our take on a pickup truck and we have some amazing features that's never been done on a pickup truck before I'm Super excited about showing that.
Another cool thing about this pickup truck and that is that we actually are able to use a lot of the ocean components in that vehicle, which means we're going to be able to do it faster and more affordable that probably a lot of other electric pickup trucks out there. It's gonna look really really tough, but still beautiful so I'll make side.
Sure.
Hey.
I can get carried away when we talk about product.
Alright, let's get some sustainability that's another of our Super brand pillars, it's really at the heart of what we have here for and the hard work on ESG continues at a company. We have we are progressing on company targets aligned with the United Nations sustainability development goals that are materially.
Irrelevant to our company. Additionally, as we prepare for our next annual ESG impact report, we have completed our lifecycle assessment for the fish corrosion and.
And based on our foundation of transparency and lead the auto industry, we expect to publish this LCA our lifecycle assessment during the first half of this year.
Super excited to share the results furthering our leadership in sustainability and we mentioned on our last call that as Ci upgraded us.
And the positive momentum continues in addition based on.
All our hard work and public disclosures.
Sustained analytics, the truck or the sustainability reasonably upgraded fisker 40 spots in global automotive industry rating. We are now the truck ranked U S passenger EV Oems the top ranked meaning we have the lowest risk rating based on ESG risk.
Rating scores.
So I want to come back and say I am Super excited I'm excited to get on the plane back from accuracy the cars, but I want to I want to say one thing that's really the surprise here and data will go into details on that and that is that we are going to be profitable. This year and she will explain that more in detail. So I just think about this for a moment.
Because what we could do but we want to but we could essentially just abandoned all our future programs and just live with the ocean that has incredible derisked and there is no other startup that I'm aware of that makes evs that is profitable from the get go from the first year and I think that's what I'm Super excited about.
I'm going to hand, it over to we've got to talk some more about other exciting things Luca.
Okay.
Although the entire vehicle development process. The final stage via Caribbean has always been my passion.
And compressing aspects such as E integration and final Adas validation.
Getting into the detailed some final tuning, especially around software debugging excites me as I see the tangible progress we are making each day towards completing the development.
A truly spectacular product but.
Getting with the critical Ocean final engineering testing and validation has progressed quite well over the last few months.
Note.
Complete boots, our EPA W. LTP range testing and our results show, even the longer range for the fiscal ocean than initially projected.
We look forward to the former co terminations to validate the significant accomplishment.
We are currently in the Ocean certification process.
Confirm all safety requirements and we continue progressing through the home litigation phase.
Final validation activities to confirm or weaker targets have shown that the majority of areas meet or exceed our engineering objectives.
I want to commend our teams who have been fully committed to the extensive homologation testing process over the past few months.
Just taken longer than originally expected.
Let's unpack the obligation poses a bit.
Which comprises multiple phases.
Stop booth supervised testing qualified documentation somewhat of which can be done in parallel with the testing component.
When we submit the final testing results to regulators, followed by regulatory review and approval.
Then the issuance of certificate or just U S. EPA certificates on conformity in U S. European whole rebuild type of pooling certificate.
That enabled us to sell it because.
Let me provide a sense of the scale and complexity.
On litigation Phase.
We had the only startup that is how mitigating and advanced meter simultaneously in both North America and Europe .
Applied to approximately 20 countries. There are over 100 regulations and around 270, various tests covering everything from crush test them to software readiness and requires coordination with multiple regulatory authorities.
But once this is achieved it gives us the opportunity to launch in various markets.
The risk the total addressable market and grow our brands and these critical market.
Each regulation could have hundreds of pages of requirements and test them.
Small even stricter regulation supply for model year, 2023, including increased safety standards and cybersecurity rules requiring houghton's performance.
All of which we now have to flow through.
The new regulations became effective for this multi year.
Including cybersecurity rules, requiring hardened performance spending every level of control unit to the pipeline into cloud to ensure functional safety resilience.
We only have a few tests left that required calibration of pumps and software by suppliers.
This process is driving quality improvements and final calibration of both hardware and software into the product.
We expect both European W. <unk> testing and U S. F. N. B S is self certification testing should be complete in March.
We are working closely with the regulators to facilitate efficient review and approvals, but the ultimate Timeframes for these next steps within our control.
Functional safety implementation, that's been a critical area of focus for our team, we don't want to risk anything when it comes to launching.
We want to release a product that is reliable from day, one so we must make sure that everything is 100%.
While the final implementation phase is very consuming it is necessary to produce highest quality for our customers.
Punctual safety software has been implemented and has been validated.
It also needs to be documented.
Through our various final testing, we have confirmed that the ocean performance as amazing as we planned.
We have taken early feedback on driving dynamic also for instance from automotive journalists.
Implemented those changes into the vehicle.
Eco dynamics right tuning is complete.
Firmed with serious pods entitles, both warm and cold weather conditions.
Those have been finalized and the industrialized with all partners with every positive with very positive feedback.
With a 56 week US we've produced post S&P, we saw there were certain areas, where we needed to improve and strengthen the Susquehanna supply 11, and then terms of integration, which is crucial for seamless high quality experience.
We set up a task force that uses HR methodologies, you shoot management and solving softer metals with some.
<unk> on a daily basis.
We've seen tremendous progress optimizing and hardening the software maturity in the vehicle.
Unlike the hardware aspects of the vehicle, we expect continual innovation and progress with the vehicle itself that we.
We are taking advantage of the valuable time with us.
Until the Homologation certification is complete to deep dive into all possible customer scenarios, Deepak and perform additional testing to provide customers with the best experience upon delivery.
Okay.
All of our efforts remain focused on launching new car with high quality hardware and software functionality.
For example, the Ocean comes equipped with a great set of Adas features.
Oceans Adas functionality is very competitive.
Comparable to that seen in premium German brands.
As Henrik alluded to however, there is more validation book needed to finalize our FY pilot Adas system in the Ocean.
We plan to launch OTT updates over time to continue to improve the customer experience and product performance.
In terms of OTT readiness, we have successfully implemented ot apex of key domain controllers.
That gave us even including at centers that are weaker control unit for cockpit computer to name a few.
All of the Otas components from EQ component level to Frisco pipeline and cloud.
Been reviewed by a third party.
And that's been proven to be functionally safe and ICU, two 6% to six two compliant and Furthermore, cybersecurity compliance following peso to one tort reform.
Similarly, literally the illusion multimedia integrations quite impressive the phone system delivered to your experience in the car.
And Golub Corporation with a leading sound studio <unk>.
Media experience has been optimized for low MGH and implemented with our unique <unk>.
So users can enjoy a premium has a free experience.
Now to touch briefly on payout.
While we are currently focused on launch activities for the Ocean <unk> continues to ramp up and we have made great progress by utilizing our in Europe .
Our first driver the payout prototype was built at the end of 2022.
Which marks a significant milestone in the programs development.
The payout.
If a truly revolutionary electrical architecture.
Many he's using the traditional veeco consolidated down to just a few central computer units, which we call the blade computer.
This enables us to execute a fully next generation electrical architecture folks has kept pace.
Which will be a software driven comp the future.
We have built an amazing team and ours with significant design the development competence.
Organized ourselves available to collaborate seamlessly across all of those inflows Europe , and India teams and time zones and to fund the ongoing impacts from Covid.
Our team is focused on meeting our commitments and driving results that support the rapid scaling of our business. Thank you I will now turn the call over to Gita. Thank you Luc and good morning, everyone I'm extremely excited to be here today and I want to start my remarks by thanking the entire Cisco team and all our partners and suppliers.
<unk> hard work and persistence to launch an amazing vehicle building, an innovative global EV brand is challenging and our team remains focused on execution no matter. The obstacles and then delivering a very high quality disruptive vehicle I personally spent the last four weeks in Austria.
Buttressing and manufacturing teams at Magna I guess, that's more of my <unk> and my CFO hat and quite frankly, I'm loving It let me provide an update on our manufacturing and supply chain status.
Getting to even holiday shutdown.
Manga style, we completed the final modifications on equipment processes and structure and facility installation and integration work that involved 25 vendors in over 300, plus construction workers final tuning is underway in the body and paint shops, and the General Assembly line, which is scheduled to wrap up by the end of March.
But post training has occurred and lockstep with plant and facility readiness offline commissioning is ongoing process to optimize and all relevant factors are on site. In line commissioning is also ongoing with integration and testing with equipment and software suppliers and this is super critical for us to get it.
The phase of high volume ramped up production.
Pat Farrell into manufacturing plant readiness, we had an increased presence of various suppliers in January and February onsite at Magnus Tayo, who are committed to supporting us during this launch phase.
Have competed EDA integrations with all our suppliers and call us issued.
Q1, Q2, along with 23 calendar year annual Rolling forecast that has been released.
Long lead material auditing commitments for critical items, such as batteries and drive units have been confirmed that suppliers material planning and pre production teams.
<unk> communication, sometimes on a daily basis multiple times, a day with suppliers in EU, China and North America to make your parts are doing is on schedule based on lead times and management of deliveries to support the logistic modes Ocean truck and rail.
Our China operations are beginning to ramp up including hiring key personnel in China, and China consolidation Center is fully operational executing Q1 Q2 material to seep in shipping out of China to grants to support our production schedule. We expect to begin receiving parts in March in Graz, most likely spread out.
Over the month.
Suppliers ramp up and we synchronized just in time logistics for all the parks as you start getting initial pack and subsequent really ramped up in Q2.
Any parts shortages may now become more obvious our teams are prepared and have set optimal inventory levels. It's continuous monitoring our supply chain risks and logistic delays and then react accordingly to avoid any parts supply disruptions.
Some of our suppliers have already requested more time parameters Graham to establish the internet people processes and as Henrik mentioned the slower ramp up was a very good decision to allow suppliers to ramp up parts with high quality.
Specifically one of our tier one suppliers. It's been screened during this ramp up period and we are working jointly with them declined compressed this timeline.
We are partnering with logistical experts to manage the timing and fills a component.
All parts out of Europe , and North America minus diet is executing logistics and managing shipping patterns based on planned production schedules.
Betsy shipping from China has been tested and verify for all three modes of shipping they cook in sea freight.
All critical components like batteries, the Colombian lung trials at times, we have partnered with a professional service provider mask, who is managing our end to end shipments from China, including storing the batteries in Europe and managing the on time delivery to the Assembly plant. In addition, <unk> provides secure their housing for a backseat whilst I was.
In Austria I visited the state of the art 3000 square meter battery storage facilities, which is only 40 miles from Magnus plant and its supplement battery safety stock onsite at Magna I was extremely impressed with the practices that Max follows.
<unk> advent and sophisticated ways in which they are not material they look at safety procedures.
We've seen continued improvements in commodity and logistics costs.
Steel and aluminum onboard down over 30% from 2022 highest battery raw material prices, such as nickel and cobalt are down meaningfully from peaks. While it can carbonate has started to ease in recent months and we expect prices to continue to decline throughout 2023, I had an excellent discussion with our partner <unk> in China and they are.
They showed us that physical will get the best prices.
Material prices come down now we have even starting to hear industry watchers discussed potential oversupply of battery materials in the future.
<unk> seen a significant improvement in European energy prices with European natural gas prices now back down to mid 2021 levels.
The costs in Canadian container prices have reduced meaningfully as.
As more container capacity has become available and we frankly saw this as mess with shipping batteries from China to grants for example, ocean freight costs, approximately 70% lower than a year ago.
No economic growth and low inflation this year could provide further commodity and supply chain relief and lower input costs in general.
As a digital direct to consumer brands, our online ecosystem as a critical platform for interacting with our customers and connecting them with debit cards in November we introduced our interactive three D configurations.
And then updated Abbott website, I must say that would be up I apologize on behalf of the entire picketing early glitches and our digital offerings, we have a military excited to get it out.
Get some excitement with our customers we will continue to evolve the platform as our customers provide feedback on the expenses. The new version of our web application in Iowa. It's App is planned to go live this coming Tuesday March 2nd and Android will go live on Tuesday March 16th and we look forward to receive your feedback.
This new physical web and App improved for a seamless and intuitive way.
Explore and own a fifth Caribbean the benefits of the new fiscal Apple pillars number one new my fiscal account profile management hub for reservations and orders, which I personally architected. The team number two new ocean auditing process, including a price estimate, but delivery trade in and financing choices.
Which is an excellent task force that was done between marketing between our finance teams between teams a seamless collaboration completely developed in house and finally, an enhanced CD configuration with the most up to date product information packages options and accessories and I must say it is not it.
Most easy to use can think vegas out debt now turning to our Q4 results back.
Our balance sheet in 2023 outlook fourth quarter revenue totaled 206000 U S dollars driven by sales of fiscal branding home charging solutions and merchandise.
A lot of people are eager to understand whether we are booked revenue.
<unk> fleet vehicle sales to Magna. So let me address this we built 15, keeping it goes the magna in December .
As of year end in 2020 to these vehicles.
On our books as they built them in December and January Magnus started using these vehicles for data collection improvements and validating additional features to be added in the months to come due to planned vehicle use revenue recognition per GAAP does not apply one of these vehicles is currently being showcase.
Just 215 Oems in Sweden to highlight joined powertrain capabilities of both physical and Magna and I'm personally Super excited to go out there in about 10 days and see how that vehicle is doing.
Q4, operating expenses were $178 million or 176 million extra compensation expense like Catholic capital expenditures came in at $34 million for the quarter full year, Opex and Capex of 702 million excluding stock compensation expense came in below the low end of our guidance range.
Of $715 million to $719 million. We are pleased with this result, and believe it is a continued testament of our ability to carefully manage spending while continuing to execute on our business plan.
Such discipline does not come by chance it comes by design.
SG&A was modestly lower.
Strong cost control and lean operations and also because we needed to do less marketing overall since Henrik I talked about the excellent reservation numbers. We have Capex was also well contained again due to disciplined management due to certain benefits with respect to FX some real.
<unk> and Capex, which we didn't need and also certain payments moved into 2023 on the other hand R&D was higher as we started to reach industrialization and certain key milestone, which actually triggered accruals a certain edd. In addition in order to keep our program timing on track with <unk>.
Also made a decision to utilize some low volume tooling. During this period, which also increased R&D and as a result, some of the Capex ultimately into 2023, our balance sheet remains solid we finished Q4 with over $736 million in cash better than we had expected and higher than consensus forecast due to deliberate.
Cost management and opportunistic ATM usage for reference this is approximately $100 million higher than consensus average as we see it. This excludes approximately $28 million of receivables, which had delayed to 2023 and would have added to cash balances. If he had received them last year.
During the quarter, we brought in approximately $57 million.
Some are $250 million at the market equity program, which is part of the 2 billion shelf, we have demonstrated our HR business management and prudent liquidity.
We remain focused on optimizing our investments and cost structure to remain fit for purpose and aligns with our production and delivery cadence again I want to highlight in 2022, our 2022 Opex may seem higher than expected, but overall, our capex taking into account.
We are way ahead, turning to 2020 guidance overall non-GAAP SG&A R&D, that's capex guidance for 2023 stands at $535 million to $610 million range. This guidance reflects our efforts to advance our product development goals, while maintaining liquidity that is commensurate with our asset light.
We've also identified strategic levers, we can pull if a sale plans change we have the capital for Ocean launch if we decided to focus only on the ocean as Henrik mentioned, we can enhance liquidity further in case capital markets tighten up we have engaged an investment bank to secure non dilutive capital and I'm pleased.
To say that we have received a couple of initial tons and are in discussion with lenders, but working capital facilities for later this year as we going to see the production. We are currently evaluating this initial office.
We are targeting two including two production of up to 42400 units provided our supply chain delivered as forecasted and we see homologation in a timely manner.
We expect 2023 gross margins in the range of 8% to 12% and potentially positive EBITDA.
These numbers could get better as we achieve efficiencies with our suppliers and if input costs keep going further down.
There'll be some sustainable as a company with these margins given our asset light approach.
Continuing searches to strategically strengthen our in house technical capabilities total team members now over 850, we are broadening our geographic footprint affect them from a global business model. Today. We are incorporated in 16 countries and we currently have team members in 10 of these markets. We anticipate opening new markets chunky are taking.
Center of excellence in India has accounted for significant hiring in the past few quarters, providing frisco with round the clock technical expertise I'm extremely proud of the <unk> team our partners and suppliers for all of these accomplishments we've made in 2022 and already in early 'twenty three and the unrelenting focus on launching an amazing vehicle we.
Continuing to show agility, and resiliency and adjust whenever needed to stay on track. We're now happy to take your questions.
Yeah.
Operator, please start the question and answer session.
Sure.
Ladies and gentlemen, if you would like to ask a question. Please press star followed by one on your telephone keypad now.
I think the only thing I'd like to cancel the question you Press Star followed by two and pleased to also remember too and mutual microphone.
Yeah.
Our first question is from Chris Mcnally from Evercore, Chris. Your line is now open. Please go ahead.
Thank you so much team and really appreciate all the guidance because it is very helpful. So maybe two questions one for <unk>.
Henrik on demand one for Pete on gross margin.
Henrik how do we monitor and sort of encourage the order conversion.
Investors seem super focused on 65 net orders is great, but it's only a couple of hundred down. So how do you keep sort of the lower trimmed engaged where they may have lead times of of over nine months I know you've talked about the higher trend, mostly being delivered in 2023, but if you could talk about order.
Version, and how you're monitoring customer engagement that'd be that'd be great.
Yeah, absolutely. So I mean first of all as I say.
Most people know we have already converted quite a lot of orders.
One out of two reasons, one we had a limited 5000.
Ocean ones, where we took a nonrefundable 5000 total deposits. So those are pretty much gone, we actually have a thousand.
People on the waiting list to get a notion one.
We then also have sold or fully.
Firm orders for.
Several several thousands of them.
Other vehicles out of the U S, which four came out of the.
I'm, sorry, but we had that one week, where we took the opportunity to offer people to make a firm commitment. So they had potentially the possibility to get this tax refund of 7500.
So that's already gone now the next step is we're going to open up for firm reservations, starting with the extreme very shortly both in Europe and U S and we have a lot of people who are super excited.
About doing that so they can obviously make a firm order start putting in their colors and wheels et cetera.
At this point I think we're seeing a really really firm.
<unk> from <unk>.
Most of our reservation holders. What we are doing is we are reaching out to our reservation holders. Almost every week. We also don't want to imitate them with stuff from us, we'll be keep them up to speed.
What's going on I think the fact that we.
We have not raised prices.
Been firm without pricing reset of pricing long time ago, and it works with our business model, we make money on all vehicles and I think that's a very important part of why we have loyal customers. I also think once we get this vehicle on the road or even people who go on actually try it.
I actually think that's going to be the ultimate conversion weapon when somebody gets into the vehicle and go Wow. This thing is amazing.
That's all I will say, but the fact that we continue seeing a growth in <unk>.
Our reservations I think really shows the unique product that we have because.
Not everybody keep seeing growth.
Do you see.
More competition coming and somebody lowering prices et cetera, but I think that really shows that we have a great product.
Thanks, so much Henrik and data maybe really quickly on the gross margins again I appreciate the.
The visibility could you just walk us through sort of the risk and opportunities around the range, 8% to 12%.
How do we think about ramping that throughout the year could be gross margin positive sort of in one of the early quarters, let's call. It Q3.
And then just remind us how the margin and the supply agreement works and contract manufacturing. Thank you.
Sure, Chris So I think that.
The 8% to 12% gross margins that we have outlined these are actually <unk>.
GAAP accounting based include stock based compensation.
So we have taken into account all the investments we have made and we have factored those in when we look at these gross margins I think you asked the question what are the risks and opportunities. So I think from my point of view to achieve these gross margins I don't frankly see a risk unless the battery prices travel.
So I don't frankly see a risk in achieving the gross margins.
These gross margins from the first call and I think I'd highlight highlighted that.
Is it both times and multiple earnings calls and that is because of our asset light strategy and we don't have those huge factory billions of dollars of cost to account.
Amortize against.
Opportunities.
It is argued I just wanted to.
Is it possible you could just give how long I mean, you have obviously visibility on your on your battery prices for a certain number of <unk>.
A quarter. So when you were making the comment about battery that for longer term gross margins, obviously, there would be more variability.
Correct.
So yeah sure so Chris.
Chris when it comes to battery prices Opex a contract is already set in stone and what changes is the certain material prices, which are linked to indexes.
Common to everybody not just us the second place where.
You have the ability to.
Influenced the battery price as volume, obviously, so as Henrik mentioned as our opportunity to grow increases I'm expecting as I discussed with our partner <unk> volume can also have an impact the Todd area that can have an impact on battery pricing is if you decide with <unk> to jointly participate in mining.
I don't see that happening anytime soon.
We are an asset light business, but I would never say never.
Should we have an opportunity to do something which is ethical and which is exciting to address the pricing so I'm not concerned.
Turned about battery pricing I think we've seen the highs of the highest and I'm expecting that we are now going to get taping off.
With respect to battery prices.
In terms of the I'll talk a little bit about opportunities and I'll come to contract manufacturing in terms of opportunities and input prices keep going down I see that as an opportunity for us to improve our gross margins.
So I think that we have an opportunity here to look at a very sustainable product.
With respect to all the components and commodities I alluded earlier to steel and other other other areas.
Now, let's look at.
Contract manufacturing so contract manufacturing again, I think we've talked about it many times and you were in the plan and you saw on your own why we don't have the inefficiencies and Magna doesn't have the inefficiencies that we started a path. There are multiple products made on the same line. So we are part of the multiple product line.
That means that you shed the cost base along with the other customer. So that's the first thing the second thing I want to highlight is that the way the contract. This is launcher.
It's not a full year of production. This is launch here so any fixed costs. They apply for next year. So we have a fairly defined manufacturing agreement, we don't reveal our assembly costs. That's our trade secret. So we keep that in house, but very confident that these are price to stay of course theres been an increase with respect to <unk>.
Inflation, so those labor costs are very well known the labor Union, but we factored in even those inflationary increases and the gross margins that I gave you guys.
Next question.
Operator, our next question is from Jeff Osborne from Cowen and co. Jeff. Your line is now open. Please go ahead.
Thank you two quick ones, maybe just a follow up on the prior line of questioning.
What is the lag.
Raw material price changes to when it would flow through on your battery pricing is it like six months 12 months is there any timeframe you can add to the quarterly.
Quarterly quarterly got it.
Perfect and then speaking of quarterly how should we think about the cadence.
Production through the year last quarter, you had given some helpful commentary on what you thought production would be by quarter, you, obviously reiterated guidance for the full year I assume we should be all on the same page not assuming any deliveries in calendar Q1, and then is the the old production ramp still applicable or no.
There was a lot of questions. So let me take one by one so deliveries have nothing to do with production deliveries have to do that obligation and getting the approvals to sell the cars. The honest separate the two we can produce cars today.
As long as we get like I mentioned earlier we.
We are starting to get parts I saw batteries last week I'm seeing other parts coming in so as long as parts keep coming in we can produce the cars no problem, but what we need is the certification to sell the vehicles in Europe and U S and I think book like went into great detail about that already now let's come to production itself we.
Can produce Henrik mentioned 20 cars, a day and we have a very clear plan with Magna style on how to increase the production capacity week on week on week, all the way through to December this year.
So the numbers, we had the guidance we had given hasnt changed in terms of what we can produce what we need to monitor as I mentioned is supplier ramp up so as I alluded to certain suppliers.
They feel they need a little bit more time for their own feedback processes high quality paper processes, and we will monitor what that means between March April may in terms of where they get to peak peak production, but I'm expecting that by June timeframe. All the suppliers are fully ramped up.
Production needs, which is more or less a 5000 a month at this point in time.
Perfect. Thank you.
Our next question is from Dan Levi from Barclays.
Your line is now open. Please go ahead.
Okay.
Hi, good morning.
Thank you for taking the question.
Wanted to ask about about the R&D guys. So youre guiding to 2023 R&D is $160 million to $190 million. This is a significant step.
Step down.
The $400 million plus you did in 2022 so.
Maybe you could just talk about please.
The underlying requirements or dynamics, and R&D spend why steps down and maybe what R&D is required in the future for new product care a road.
Alaska.
Yes.
Great question, Dan sedan, when a company starts up operations do you have a certain level of inefficiency.
And that's why we have a lot of outside.
<unk> and we have relied on magna to do some of the engineering also we relied on second supplier into some of the engineering, which is why you saw Ohio <unk> Bill for Ocean now as we go into the second vehicle on one hand, we have enhanced our own.
Internal team, including a pretty significant.
Employee base in India, which as we know is a much reduced cost than hiring here in California.
So that accounts for some of the reduced cost that we brought some of the R&D in house. The second point is that we have certain areas where it may.
They won't have to repeat the engineering, let me give you. Some examples. So for example, the otas pipeline that <unk> talked about once those investments are in place. We don't have to repeat them Henrik talked about UI UX once that development. The best UI UX experiences developed now youre doing.
But now you are going to modify that.
Many many many areas, including I can talk about E architecture, where we have the capability to take over certain components from certain suppliers and carryover and use those for a second vehicle and finally, we are more efficient we have a team that works together smarter just far more efficient.
When it comes to next year and then maybe just to add to that you mentioned, Alaska that will be very broadly based on the ocean youre going to call. It the ft 32 platform, but it's really.
Derivative of the oceans, so again youre not youre not now.
<unk> engineering, a car from ground up and that's also why we can have you can create a driver of prototype really quickly because when we created the first driver prototype of the Ocean. There was nothing there everything has to be new that's not the case with future vehicles that I hate to say the final comment, but frankly, there is a price point for a new startup.
Price of entry and suppliers generally charged you a hyatt <unk> once you get past that phase you are welcomed into the club and you get treated like a real OEM.
Alright, great. Thanks, and then just.
Follow up maybe you can talk a bit more about the timeline of pair.
You mentioned you have a prototype, but how many incremental prototype stages.
Are there you know at what point do you start to do the supplier sourcing when does the bond get locked in and I think you had mentioned at one point that there was a.
High amount of carryover content from Ocean to pair maybe you can reiterate if that's still the case or any incremental color on that front. Please. Thank you.
Yes, So first what I mentioned was a new way to specify a vehicle and what I mean by that is that when anyone anywhere in the world creates a car. It is a set up spec books and spec books means that every part could be the mirror.
For example, Theres a spec book on the mirror and that spec book for example in the mirror might contain.
So many different things from the light has to be to glass.
On the mirror.
Everything thats in the mirror.
The little electric motor or whatever and what normally happens is you create that spec book.
Specifically as a startup together with supplier, sometimes what happens with normal Oems or traditional Oems that's been added for a while they take the spec book from their previous car and they apply it to the next car, which essentially I mean, it's just like a recipe in our bakery.
When the son or daughter takes over they will use the same recipe as the mother and father and nothing really changes in our case, we decided was a pair to actually completely redo. The spec books. We obviously have all the experience with the ocean and refine come through it and certain elements that are.
Greater devotion that we can use we'll use but other things may be two premium because in the end of the day the physical erosion is a premium vehicle.
Goes all the way up to $70000. So of course, it has certain engineering solutions that fits that premium segment, but when we looked at the pair we wanted to come up with some ideas. There has never been done before to achieve our goal of being able to sell this vehicle for 29900, as a base price and make money on it.
And we went through all that have already gone through all that we have also gone through how can we lower the cost of the total development, maybe we do less prototypes, maybe two prototypes of different stage, there's a whole bunch of things, we're going through now I'm not about to <unk>.
So our menu just like Coca Cola doesn't show their ingredients is laying in some save somewhere and so it does here at Fisker, So I'm not going to elaborate more on that but believe me, it's a pretty exciting program and it will come out of $29900. Then you asked a question about the bomb and you asked a question about supply engagement. So I think.
What I'm Super excited about learning more and more about E architecture from Blue card and how amazing and lean the E architecture will be.
Pass onto book like to explain a little bit and then I'll jump back in on the bump.
Let me talk about the.
Central computers.
In the original traditional comedy Frictionless, you have many issues, which are now consolidated to just a few if you imagine how many skus you polar supply need packaging needs.
Housing, we can reduce it to just a few.
With this I was saying the complexity to consolidating into less computers.
Playing in that advantage not just in regards to the owning the software and one inside and all the features and functions being implemented in those.
Fewer compete.
Computers, but also reducing the complexity.
Suppliers, reducing the complexity and cost reducing the complexity of wiring harness.
Just a few centralized computers.
Now you have extra to reduce extremely the cost.
From components to <unk> <unk> to <unk> <unk>.
We are doing currently.
Consolidated into this new architecture, which really becomes more of a software driven car.
We see the future going spin.
Specifically for <unk> it allows us to reduce drastically the bom cost from the E architecture or do the complexity of the domain computers are increasing business.
The advantage of through future E architecture, which we are implementing into the path.
So Dan just to highlight between Henry can do cloud overall, the call has fuel parts, whether it's electrical components or its mechanical components net material means less cost also means that you have less integration, both electrical and hardware means that youre prototyping costs are less means that your overall over.
Complexity is less.
So the way we look at per we are engineering the entire E architecture in house, it's well underway, we are working with.
We have identified some of the Ah <unk> already we have identified what chips, we want with respect to infotainment.
Behind the process of finalizing Adas and then when it comes to the actual.
A body and chassis the development is being done in house completely we are.
Almost final negotiations when it comes to powertrain. So we have identified pretty much all long lead.
Commodities and suppliers.
Great. Thank you.
Yeah.
Our next question is from <unk> <unk> from Citi.
Your line is now open. Please go ahead.
Great. Thanks, Good morning, everybody and congratulations so just a couple of quick follow ups for me first.
Hoping you could just talk a little bit about the cadence you expect for gross margin this year.
You mentioned earlier that.
This is a launch year and maybe you feel that there is sort of I guess treatment of a fixed cost was hoping that you could elaborate a bit more on the gross margin kind of in year, one and year two in terms of.
The earlier comments.
Yes.
P J I'm not <unk>.
Generally given guidance for 24, so is that the question.
Okay.
Okay.
Gross margin I've given them.
Neil basis, not giving guidance on a quarterly basis.
Okay.
Got it and I guess, I guess would it be different treatment of certain cost next year. So just want to elaborate if there is a comment you made around.
Sort of the gross margin treatment initially.
A launch year.
No because we don't have our own factory as I explained all of the costs. We have are amortized over the period of time, we havent determined whether the life of those tools at seven or 10 years, that's supposed to be determined as we get into sales but.
I don't see minor launch costs, but I would not if you're putting a model together I would not stimulated based on other vertically integrated.
These.
Got it perfect. That's helpful. Just wanted that clarification I guess secondly, just going back to the parents to the earlier commentary on the Blake computer and the new electrical architecture.
Quantify it maybe at a high level, how much of that is contributing to more efficient R&D spending this year as well as what you think the ultimate kind of.
Benefit would be of that next generation of architecture.
Yeah.
Adam overall vehicle level, it's enormous it's just enormous because you're reducing the number of hardware and you fundamentally able to upgrade features to the application layer. So once your hardware than your operating system as in you will fundamentally.
Changing things through your application layer, so reducing hardware it means a lower Bom I think this is our trade secret. So I would hate to give our trade secret on what the Bom is but what I can tell you is that we are starting to develop the entire vehicle from the basis of the E architecture because it.
The end of the day, you decide which is used to.
Virtualize, but more importantly, you also start to impact supply chain and you start to create a more beneficial supply chain and you also need.
Less complexity and purchasing.
So I think that for US. This is really critical to get a very very sophisticated E architecture. It does by the way impact powertrain and it impacts pretty much every other module I just wanted to see book like wants to add anything.
Science.
Reduction of the Bom cost.
Increases the performance drastically so that is an interesting trade off.
The bomb cost is being reduced the high performance compute.
<unk> future features and functionality, which is even beyond anything you put you mentioned so that is quite amazing.
Super powerful computer within our.
Network inside the car, which is giving us more opportunity for them.
The life cycle management.
The one item I do want to add it is in the future you want to upgrade the vehicle the more and more that's it.
On the application layer means you have less cost for model year changes or upgrades because they are software driven rather than hardware driven or black box driven that comes from suppliers.
That's very helpful. Thanks for all that color.
A final question with cash at over $700 million and the guidance you outlined today, just curious how you're thinking about minimum cash.
This year liquidity.
Just kind of your overall plans there.
I think we all self sustainable so we have a very good cash position and as you see the guidance is 535 million to $610 million I think year on year. We've shown that we are always at the lower end or below guidance. So I would let you do your model yourself.
Perfect. That's very helpful. Thank you.
Ladies and gentlemen, we currently have no further questions I.
I will now hand back to Henrik Fisker for final remarks. Please go ahead.
Thank you very much this was a super exciting earnings call, but I will be jumping on the plane back to Australia to make sure we get full spend the production in a seamless obligations. There we're gonna start delivering a bunch of cars I'm Super excited thanks for joining in and.
Fantastic week.
Ladies and gentlemen. This concludes today's call. Thank you for joining you may now disconnect your lines.
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