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 Park VP of Investor Relations and Treasury here at <unk>. Joining me on today's call are Henry <unk>, 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.
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 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. This 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 with that I'm happy to turn the call over to Henrik.
Thank you Frank and good morning, everyone and thank you for joining US today, it's a little earlier than our usual timing probably move to call up that's all headed back to Austria. This afternoon to continue.
Hands on manufacturing and supplier engagement.
I want to thank all of the stakeholders teams and partners for an amazing progress we have made in 2022.
Of course, 2023 is an inflection year for <unk> as we reached.
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 drinks with science 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.
And our 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 fiscus 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 open 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 in Munich, which is 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 pick up locations in the U S and Europe .
We made will be made.
Charging your ocean, a more convenient and integrated.
Experience with home charging and public charging partnership in Europe , and U S now finalized.
Physicals 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 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 certified high quality EV repairs.
Now, 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.
Uh huh.
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 encountered some testing delays due to weather and COVID-19 absences and some complicated retest the slowdown process.
We took on a lot by doing both the U S and Europe obligation at the same time, but 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 <unk>.
The car company to actually do dual homologation and two continents, but 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 Dolby 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 <unk> got that 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 it's going to be closer to $360 $3 50 and in Europe .
Had 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 congratulations to our engineering team because they've done an amazing job in rift.
Mining 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 <unk>.
Company that launched its first vehicle and achieved the world's longest range I think its 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.
Along with 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 magna are 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 the other.
Almost learned from them exactly how 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 I'd be eating and of course, our engineers there as well and everybody was just amazed how will this cocker formed I'm Super 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 are 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.
While almost all of our suppliers are performing a few have difficulties ramping so we're happy with our decision to begin with a slow ramp we're confident we will.
We'll be ready for customer deliveries once we have received the 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.
Something very important and I hope everybody.
We'll 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.
Stream the 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 on orders now total approximately 65000 for the fifth corrosion, reflecting the large and growing global addressable market for a well appointed electric SUV as we start deliveries, we expect increased brand awareness.
And as 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 recent 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 a first glimpse of the fish corrosion, which shows how passionate and committed our customers onto 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'll 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.
When I go in the current let me tell you I 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 wanted to tell you when you get in this car and use it you don't need any instruction on how to use it. It's just like the first time, you've 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.
Also 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.
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 incentives suite, which is designed to be continuously updated through our <unk> platform and <unk> will talk more about that is obviously also give us endless opportunities to.
Bring some really cool features to market later, because some patients is so advanced like the digital reader for example, okay.
Let me get to short peer update.
The peer group program is progressing well, we achieved our goal of a driver will appear 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 the high mounted brake light.
The side view has a unique iconic graphics and a clean sculptural buddy 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 that's 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, they've 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 is already.
Gone extensive aerodynamic testing in the wind tunnel and we expect the truck version to achieve well over 300 miles.
We will offer two different battery packs because I also think because of the price and the size of the pair. This may be a second EV for many EV buyers that already lofty vs and drive Cds 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 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.
Off a bit as well.
And then finally here I want to talk a bit about our.
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're still keeping our promise of always having at least four unique features on each vehicles. So we will showcase the pear, which has 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 is our take on it.
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'm excited.
About shoring up anyway.
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 are here for and the hard work on ESG continues at the company.
We are progressing on company targets aligned with the United Nations sustainability development goals that are materially relevant 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 M. S. Ci upgraded us.
And the positive momentum continues in addition based on.
All our hard work and public disclosures.
Sustained analytics the truck the sustainability reasonably upgraded fisker 40 spots in global automotive industry rating. We are now the top ranked U S passenger EV Oems the top ranked meaning we have the lowest risk rating based on ESG risk.
<unk> 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 thats 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 whatever you want to but we could essentially just abandoned all our future programs and just live with the ocean that isn't critical Derisked and there is no other startups that I'm aware of that makes E. D's that is profitable from the get go from the first year and I think that's what I'm Super excited about.
So I'm going to hand, it over to Bob to talk some more about other exciting things Luca.
Academic.
Although the entire vehicle development process. The final stage via credit team 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.
Truly spectacular product.
Getting with the Crisco Ocean final engineering testing and validation has progressed quite well over the last few months.
Note.
Complete boots or 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, we stopped supervised testing followed by documentation somewhat of which can be done in parallel with the testing component.
Then we submit final testing results to regulators.
By regulatory review and approval.
Then issuance of certificate, which is U S. EPA certificate 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 are the only startup that is how mitigating and advanced meter zoom intensely 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.
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 hardened performance.
All of which we now have to flow through.
Our new regulations became effective for this model yet.
Including cybersecurity rules, requiring hardened performance spending every level of control unit to the pipeline in the cloud to ensure functional safety resilience.
We only have a few tests left that required calibration of parts and software by suppliers.
This process is driving quality.
<unk> and final calibration of both hardware and software into the product.
We expect boots European W. E T a testing and U S. F N B S is self certification.
<unk> testing should be complete in March.
We are working closely with our 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 the product.
That is reliable from day, one so we must make sure that everything is 100%.
The final implementation phase is very consuming it is necessary to produce highest quality for our customers.
Functional safety software has been implemented and has been validated.
And also needs to be documented.
Through our various final testing, we have confirmed that the ocean performance as amazing as we planned.
We've taken the only feedback on driving dynamic also for instance from automotive journalists and have implemented those changes into the vehicle.
Eco dynamics right tuning is complete.
Firmed with series bonds, entitles booth warm and cold weather conditions.
Results have been finalized and the industrialized with our partners with every positive with very positive feedback.
With a 56 Uighurs, we've produced post S&P.
There were certain areas, so we needed to improve and strengthen the software supplier level and in terms of integration which is crucial.
For seamless high quality experience.
We set up a task force that uses HR methodologies could you shoot management and solving software metals with suppliers 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 vehicles software.
We are taking advantage of the valuable time with 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.
Yeah.
All of our efforts remain focused on launching new car with high quality of hardware and software functionality.
For example, the Ocean comes equipped with a great set of base Adas features the.
The oceans Adas functionality is very competitive and 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 all the time to continue to improve the customer experience and product performance.
In terms of OTT readiness.
That's fully implemented otas.
Key domain controllers.
The gate us, including at centers that are weaker control unit for cockpit computer to name a few.
All of the Otas components from TCU component level to Frisco pipeline and cloud has been reviewed by a third party.
That's been proven to be functionally safe in the ICU to six to six two compliant and Furthermore, cyber security compliance following peso to 1434.
So many literally the illusion multimedia integrations quite impressive the phone system delivered to your experience in the car.
Our cooperation with a leading film studio a multimedia experience has been optimized for low N V H and implemented with our unique you argue weeks. 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>.
<unk> continues to ramp up and we have made great progress by utilizing our India trip.
The first driver of the payout prototypes.
At the end of 2022.
Which marks a significant milestone in the program's development.
The pay out with a truly revolutionary electrical architecture.
With the 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 focused kept payout.
Which will be a software driven comp the future.
We have built an amazing team and ours with significant design the development competence, we have organized ourselves available.
Collaborate seamlessly across all those ambulance Europe , and India teams and time zones and to fight the ongoing impact from Covid.
Our team is focused on meeting our commitments and driving results that support the rapid scaling of our business. Thank you.
The call over to get up.
Good morning, everyone I'm extremely excited to be here today, and I want to start my remarks by thanking the entire <unk> team and all our partners and suppliers for continued 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 Apis.
And then delivering a very high quality disrupted vehicle I personally spent the last four weeks in Austria.
And manufacturing teams at Magna I guess, that's more of my <unk>, then my CFO hat and quite frankly, I'm loving it let me provide an update on our manufacturing and supply chain status.
They even holiday shutdown at manga style, we completed the final modifications and equipment processes and structure and facility installation and integration work that involved 25 best vendors and over 300, plus construction workers final tuning is underway in the body and paint shops, and the General Assembly line.
Because scheduled to wrap up by the end of March.
Training has occurred and lockstep with plant and facility readiness offline commissioning is ongoing post to sort of optimize and all relevant posted 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 into the phase of high volume ramped up production.
Atlanta manufacturing client readiness, we had an increased presence of various suppliers in January and February onsite at Magnus Dio, who are committed to supporting us during this launch phase.
Have completed <unk> integration with all our suppliers and Carlos issued but near term Q1, Q2, along with a 23 calendar year annual rolling forecast that has been released.
Long lead material auditing commitments, but critical items, such as batteries and drive units have been confirmed that suppliers material planning and pre production teams are in constant 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 <unk>.
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 pike and subsequently 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.
Any possible disruption.
Our suppliers have already requested more time for granite Creek ramp to establish the internet people processes and as Henrik mentioned the slow ramp up was a very good decision all 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 for all parts out of Europe , and North America Magnus diet is executing logistics and managing shipping patterns based on planned production schedules.
Battery shipping from China has been tested in various type of all three modes of shipping they cook in sea freight.
All critical components like batteries with long lead in lung kinds of times, we have partnered with a professional service provider mask, who is managing our end to end and 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 Opex is well established.
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 <unk> follows.
<unk> advanced 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 are bogged down over 30% from 2022 highest battery raw material prices, such as nickel and cobalt that down meaningfully from peaks, while lithium 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 not.
Even starting to hear the industry watchers discussed potential oversupply of battery materials in the future we've seen a significant improvement in European energy prices with European natural gas prices now back down to mid 2021 levels logistic costs in Canadian container prices have reduced meaningfully as more container capacity has become available and we found.
We 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.
Remember, we introduced our interactive Treaty configuring, and then updated App and website I must say that'd be up I apologize on behalf of the entire picketing early glitches and our digital offerings. We are a little too excited to get it out to get some excitement with our customers. We will continue to evolve the platform.
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.
New physical web and App improved for a seamless and intuitive way.
Explore and own a fifth Caribbean the benefits of the new fiscal App as follows number one Neil My fiscal account profile management hub for reservations, and autos, 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 suite of configuration with the most up to date product information packages options and accessories and I must say it does not have the.
<unk> easy to use can think betas out debt.
Now turning to our Q4 results balance sheet and 2023 outlook.
Fourth quarter revenue totaled 206000 U S dollars driven by sales of physical branding home charging solutions and merchandise.
I know a lot of people are eager to understand whether it'd be a book revenue for the 15 fleet vehicle sales to Magna. So let me address this we built 15 fleet vehicles. The Magna in December as of year end in 2020 to these vehicles.
Still 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 plan. We could use revenue recognition per GAAP does not apply one of these vehicles. It's currently being shown.
Cased 215 Oems in Sweden to highlight join 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.
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 match.
<unk> spending while continuing to execute on our business, but such a discipline does not come by chance it comes by design.
SG&A was modestly lower.
On 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.
Reductions in Capex, which we didn't need and also certain payments moved into 2023.
The other hand, R&D was higher as we started to reach industrialization and certain key milestone, which actually triggered accruals of certain Edd. In addition in order to keep our program timing on track. We 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 also moved into 2023.
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 you see it this excludes approximately <unk> <unk>.
$8 million of BP receivables, which I believe to 2023 and would have added to cash balances. If he had received them last year during.
During the quarter, we brought in approximately $57 million.
$250 million at the market equity program, which is part of the 2 billion shelf.
<unk> 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 we had.
Turning to 2023 guidance overall, non-GAAP SG&A R&D plus 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 model. 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 ocean as Henrik mentioned, we can enhance liquidity further in case capital markets are tighter.
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 the initial office.
We are targeting to enter into production of up to 42400 units provided our supply chain delivered as forecasted and we receive homologation in a timely manner. Similarly, 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.
We will be self sustainable as a company with these margins given our asset light approach. This could continue searches to strategically strengthen our in house technical capabilities total team members now over 850, we are broadening our geographic footprint to protect them from our 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 shortly.
Technical 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 Fitbit 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 continue to show agility, and resiliency and adjust whenever needed to stay on track. We're now happy to take your questions.
Okay.
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 to collect the cancelled a 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's very helpful.
Maybe two questions one for Henrik on demand one for Pete on gross margin.
Henrik how do we monitor and sort of encourage the order conversion I think investors seem super focused on 65000 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 trends, mostly being delivered in 2023, but if you could talk about order conversion and how you're monitoring customer engagement that that'd be great.
Yeah, absolutely. So I mean first of all as I think most people know we have already converted quite a lot of orders.
Done.
Two reasons, one we had a limited 5000.
<unk>, 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.
The firm orders for.
Several several thousands of.
Other vehicles out of the U S, which four came out of the <unk>.
While 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 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.
So at this point I think we're seeing a really really firm.
Commitment from most of our reservation holders. What we are doing is we are reaching out to our reservation holders. Almost every week. They also don't want to irritate 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 to 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.
Thats, all I will say, but the fact that we continue seeing a growth in our reservations I think really shows the unique product that we have because.
Everybody keep seeing growth when 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.
The visibility could you just walk us through sort of the risks 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 been 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.
The 8% to 12% gross margins that we have outlined these actually are GAAP.
<unk> 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. We make these gross margins from the first call and I think I'd highlight highlighted that multiple times in 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.
Count.
Amortize against.
Opportunities.
Sure.
Sorry, 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 course, so when you were making the comment about batteries that for longer term gross margins, obviously, there would be more variability.
Interrupt.
Yeah sure so.
Chris when it comes to battery prices op actually contract is already set in stone and what changes is the certain material prices, which are linked to indexes, which are 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 partners see a tail volume can also have an impact.
Third area that can have an impact on battery pricing is if you decide the CTO 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 about battery pricing I think we've seen the highs of the highest and I'm expecting that we are now going to get tapering 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.
Input prices keep going down I see that as an opportunity for us to improve our gross margins.
Also 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 customers. 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 launcher. So any fixed cost 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 they.
<unk> that these prices stay of course theres been an increase with respect to 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 of raw material price changes to when it would flow through on your battery pricing is like six months 12 months is there any timeframe you can add to the quarterly.
Quarterly quarterly got it.
Perfect and then speaking of quarter, we 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.
On the same page not assuming any deliveries in calendar Q1, and then 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 don't want to separate the two we can produce cars today.
As long as we get like I mentioned earlier.
Turning 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 all 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 down from 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 it steps down and maybe what R&D is required in the future for new product.
There are 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.
Buyers and we have relied on magna to do some of the engineering also we relied on certain suppliers do 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 RMB in house. The second point is that we have certain areas where we.
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.
Spin off you're going to modify that so there are many many many areas, including I can talk about E architecture, where we have the capability to take all the 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.
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 F. T 32 platform, but it is really a derivative of the oceans. So again youre not youre not now.
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 prototype of the Ocean. There was nothing there everything has to be new.
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 there's the price of entry and suppliers generally charge you <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.
A follow up maybe you can talk a bit more about the timeline.
Per.
You mentioned, you have a prototype or how many incremental prototype stages.
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 of spec books and spec books means that every part could be the mirror.
For example, Theres a spec book in 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.
Tap on the mirror.
Everything thats in the mirror.
Little electric motor or whatever.
What normally happens is you create that spec book.
Simply as a startup together with supplier, sometimes what happens with normal Oems or traditional Oems that's been added for a while.
The spec book from their previous car and they apply it to the next call, which essentially I mean, it's just like a recipe in our bakery.
When the Sun daughter takes over they will use the same recipe as the mother and father and.
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 that goes all the way up to $70000. So of course, it has certain engineering solutions that fits the premium segment, but when we looked at the pair we wanted to come up with some ideas.
That 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 if you 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.
Show, our menu just like Coca Cola business 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. Dan 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 lead the E architecture will be sought.
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.
So in the original traditional common restrictions you have many issues, which are now consolidated to just a few if you imagine how many skus need polar supply need packaging needs.
Housing and we can reduce it to just a few.
With this saying the complexity to consolidating into less computers.
<unk>.
Playing in that advantage not just in regards to the owning the software on one inside and all the features and functions being implemented in those fewer.
<unk>.
Our computers, but also reducing the complexity.
With suppliers, reducing the complexity and cost reducing the complexity of wiring harness.
Just a few centralized computers.
Allow you to reduce extremely the cost.
<unk> components to inviting harness to E D and D b.
We are doing currently.
Consolidated into this new architecture, which really becomes more of a software driven call, where we see the future going.
Specifically for the Lowe's is to reduce drastically the bom cost from the architecture or do the complexity of the domain computers are increasing this is.
<unk> drove through future E architecture, which we are implementing into the payout.
So Dan just to highlight between Henry can do cloud overall the call has fuel parts, whether it's electrical components are as mechanical components net material means less cost.
It also means that you have less integration, both electrical and hardware means that your prototyping costs for less means that your overall overall 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've identified some of our Sse's already we have identified what chips, we want with respect to infotainment.
And the process of finalizing Adas and then when it comes to the actual.
Uh huh.
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.
Uh huh.
Commodities and suppliers.
Great. Thank you.
Yes.
Our next question is from <unk> <unk> from Citi.
Okay.
<unk> is now open. Please go ahead.
Great. Thanks, Good morning, everybody and congratulations to you too.
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, maybe you feel that there's sort of a 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.
Okay.
He does not generally given guidance, but 24, so is that the question.
Yeah.
Okay.
Okay.
Those margins have given us on a annual basis, not giving guidance on a quarterly basis.
Okay.
Got it and I guess, I guess would it be different treatment of certain costs next year just want to elaborate if there was a comment you made around.
The gross margin treatment initially.
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 still 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 helped US wanted that clarification I guess, secondly, just going back to the to the payer to the earlier commentary on the Blake computer and the new electrical architecture and you have to look at that.
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.
Kind of benefit would be of that.
Next generation of architecture.
You know what.
Added overall vehicle level, it's enormous it's just enormous because you're reducing the number of hardware and you're 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 means a lower Bom I think this is a 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 at 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 less complexity and purchasing so I think that for US. This is really critical to get us there.
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 I'd want 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 allows you future features and functionality, which is even beyond anything you put two mentioned so that is quite amazing.
Super powerful computer.
Network inside the car, which is giving us more opportunity for life cycle management.
One item I do want to add it is it's the in the future you want to upgrade the vehicle the more and more that sits 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.
To your liquidity.
Just kind of you get 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 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 in the plane back to Australia to make sure we get full speed in the production of seamless obligation is there we're going to start delivering a bunch of cars I'm Super excited thanks for joining in and.
Fantastic week.
Yeah.
Ladies and gentlemen. This concludes today's call. Thank you for joining you may now disconnect your lines.
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Yeah.
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