Q1 2023 Fisker Inc Earnings Call
[music].
Hello, and welcome to the fifth Group, Inc. First quarter 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
Like to ask a question during this time simply press star one on your telephone keypad I will now turn the conference over to thank Bart sorry to Frank Boruc, Vice President of Investor Relations. Please go ahead.
Thank you, Sarah and Hello, everyone and welcome to his first earnings call.
Service and might even shrink our VP of Investor Relations and Treasury.
Joining me on today's call are Stuart.
Chief Executive Officer, Dr. Curt <unk>, Chief Technology Officer Dr.
The Chief Financial Officer, a chief operating officer. Please.
Please note that today's discussion.
We're looking statements.
<unk> actual results in future periods are subject to risks and uncertainties that could cause our results to differ materially from those projected these risks.
Fourth in the press release, we issued earlier today as well as those more fully described in our filings with.
The Securities and Exchange Commission todays discussion also includes certain non-GAAP measures, including non-GAAP operating expenses one thing.
The reconciliation of our non-GAAP financial information to the most directly comparable GAAP financial information appears in today's release.
With that I'm happy to say, okay. Thank you.
Thank you Brian .
Hi, everyone.
Thank you for joining us today for our first quarter.
Where your earnings call I want to thank all of our stakeholders and partners for their amazing progress we made in 2023.
We would like to thank all of our loyal customers.
These last few months, where we've been working through full engagement letter ratings.
We are excited.
First ocean delivery in Denmark last week.
With great journey as well this week.
Most of the breadth of our multi country launch strategy starting to take shape.
And with that I, just wanted to go off script, a little bit.
So the story of the first delivery in Denmark is that.
Amazing.
It does.
Kind of a reason as sort of a strange times, where somebody can write an article even from a very well known use outlet.
Without necessarily having the facts and suddenly have a huge impact on a company like ours because it.
For example, Bloomberg right something obviously it gets copied by a whole bunch of other sites.
But Brian because that is the truth.
No it wasn't a very hard look high.
Hi strike back or something like that.
However, when I launched the burn scar.
The first time in Denmark.
No I went there seem pretty excited and they will be called as the article came out.
So claims that there is a software that makes our cars go slow.
And of course, I can sit here today and say easily driving <unk>.
<unk> 125 miles an hour and somebody will probably say well that was <unk>.
Thanks, Scott I can also tell everyone that couple of weeks ago, I've broken Los Angeles and San Francisco.
70 miles an hour on public roads on a cost advantage on the exact well that really customer time.
So we delivered a cost in the car.
Lastly, total customer.
And I ask that customer if I can say that the product does over the damage.
So our leasing team.
That's helpful Bruce.
He said, yes, I can borrow at TV.
And on the Street.
Probably in the back room MRO.
And within a half mile.
Last one.
Alright, guys feelings.
So I would never thought it was just a speeding ticket will need to have a value today.
Because I probably want to get that from the guests.
Yes that was unfortunately I have to tell them you are getting a speeding ticket.
Given this large and important we get that in a couple of weeks across the total amount paid for it.
And now let's open a lot like December 22nd goes a long way to show the new car.
It is driving fairly fast.
Maybe sometime next year.
But it is kind of staff that we need to get to this point in time.
Although student statements online refused such everyday bauxite.
I want to start with that one would likely get onto some more serious business.
So let's get onto that in 2023 is an important year for Pittsburgh as we work to ramp up production of concentrate deliveries. We now have almost 1000 people more correctly I think language.
40, salespeople and assist the team and we're all working hard on various initiatives to support a successful launch.
Lastly, in disposing and Theyre working at things versus trading after sales service repairs charging et cetera. So everything is set up for a seamless delivery of our vehicles.
So I'll need to meet as.
<unk> business model.
Those are scale benefits by leveraging our world class partners, we're able to provide customers with broad coverage and reach from day, one and we are super excited to shift gears from a startup.
Things are becoming a revenue generating car company and that is happening as you see.
So our direct to consumer sales and service network supports exceptional customer experience last month, we started welcoming customers at our Vienna, and coordinating center plus this week to.
Two customer locations in unit a showroom in centralized facility in motor World.
<unk> unit and <unk>.
Flagship launch launch located in the City Center.
Great Dan person.
He was able to look at potential customers. Unfortunately, Mason <unk> accruals suggested policies were active on the car the excitement about the vehicles getting to sit in the vehicle.
And as a chance to actually shake hands with a few customers.
Sure, Mike, Jeremy and talk to them with the kind of cool.
Really great to see the interactions with a firsthand when people come into a store just fantastic and of course of the coming months.
By opening more and more.
Customer centers allowances now lounge in La later this months and Youre also going to against our pop up.
What are they going to be follow ups, all over Europe and U S stock offerings test rides. So for the first time, yet really actually going out to sell those vehicles and really.
We have our customers experience with real production vehicles I think this is the most exciting time, so far in our history.
So our loan strategy supported the vast network of physical certified coalition and service centers to complement business owned servicing Bridger operations for example.
Great.
Our customers will have 50% of the pluses in Denmark, Norway and Sweden. In addition to system mobile technicians backed up by multiple service partner locations in each region reached and were really getting something done.
Over the quarter, we announced our debt.
Our European public charging partnership will complement of which complements our unequal partnership in Europe .
When combined with <unk> networks in North America that will provide <unk> customers with access access to over 600000 charging points. So our customers are going to lose anything in that regard.
Let's go to the Ocean update.
Underscoring our intense focus on preparing for the production ramp and ensuring we deliver the highest possible quality.
On the Ocean from day, one I along with other senior leaders have been baked in Europe for the last couple of months working closely with all our partners I spend a lot of time on the production line of Magnum and saw firsthand what an amazing joined the team we have got worse on the Ocean. Just a couple of examples it takes the vote, but we have some.
Sidney so $600000, we bought it and keep that only about a minute to install battery was just a super cool have shown in a couple of times.
My social media to actually see that in reality is just amazing. It is also another robot actually installed both the east versus the loaders and everything around them and burdens in less than a minute. So it's amazing to see what the possibilities are once we go into high volume manufacturing obviously.
The Ocean is perhaps the only.
<unk> high volume E Com, Amy <unk> start up.
Is that in the last couple of years has been launched on Super excited about that is really to be able to support a higher volume.
Our number one priority is launching and ramping of high quality Fitzgerald with class, leading features and range and as you know we do have the loans range in Europe any SUV.
We're excited to have the drive initial deliveries in Europe , which will be followed by Assaf, Brian and.
I'm eager to get the oceans enhanced by U S customers as well once we have the regulatory sort of certificate of EPA complete, which we expect to have those months I mean, I actually expected amount of days rather than weeks, because we have already delivered our vehicles to BP and we have already confirmed that they're not a necessity.
And then just coming back to Europe .
We have everything done here, all honest with certifications done.
Same use actual also litigation is done so in Europe .
We are scaling up production next week reduced that'll start ramping up full speed.
Then of course that will start more deliveries in Europe .
After having driven the cloud will grow quite a bit.
Last few weeks, including Brian It with our first customer.
Can't say, how truly amazing it is just unbelievable the handling.
Can sell it because it's the first cause Maxine property, you said that the accident was changing this or should cut again for the physical roads and detailed drove better so I'm super excited about that.
On the customer as well, so I'm, just saying that from a selling and secondly, ecstatic about it. So as we have mentioned previously while we will prioritize our ocean one extremely trends throughout most of 2003, we have recently produced several ocean ultra and sports strengths on the production lines of Batman and he wants to ensure.
Auction readiness of those trends ahead of time, and we do anticipate customer deliveries on those trends will begin in September and that's what we always plan and that Hasnt changed but we will start with first deliveries of these variants in September of course that means we will be incredible price competitive ones because these.
Vehicles on the market.
The only thing demand remains strong and we continue building awareness with organic marketing efforts that I just mentioned before and of course that can be even stronger. Once these documents cars on the road I think our model you're going to see that we are going to have a big increase of reservations at this point the leverage based on orders.
We have approximately 65000 of this erosion and I guess flat is the new up in that segment started to slide three where we saw competitive price points and turmoil in the financial sector. So I'm very happy that we have stayed on that element of those who may have given up the rest of Asia is immediately somebody else to take it over which I think is.
Nearly vertical and during this turbulent period, we remained disciplined with our marketing spend.
We continue to spend wisely and utilized targeted support.
Our vehicles hit the streets as consumers learn more about the ocean. We expand deliveries, we expect increased green brand advantage to drive even more customer consideration demand with omission I fully expect by the next earnings call. We'll be again, we will have quite a steep rise in the reservations might be with the market with this vehicle.
We continue to showcase the ocean for a variety of brand building activities since our last earnings call. We are clear that events across France, Norway, the United Kingdom, and the United States.
Industrial back from Oslo last week, whereas over the Nordic summit and shared our vision our team increase overall in our systems ready to disrupt the automotive world by creating the most emotional and sustainable electric vehicles that was exciting to see the consumers' reaction in Norway as well on the Norway of courses.
Our number one.
Country year in Europe in terms of reservations CBS eager to get started there as well and we see a huge potential in Norway as well.
I'm also going to speak here at the financial times feature.
<unk> summit.
In London Tomorrow.
And we will be discussing.
The industry the challenge of carbon into automotive ecosystem et cetera, So and we'll report out as well.
Got recognition for our class leading this erosion already calibrated last months, we won the international recognized Red Dot Award for outstanding product design.
This award evaluates vehicles based on design policies production function and aesthetics ease of use in responsibility and sustainability. So we are honored to see the visibility is getting recognized.
This is the music.
It also has a large retail tour.
Total addressable market in both Europe , and North America, and growing appeal from key customers as well.
So our innovative partnership with ample which we just announced will first Martin only the feed market with batteries Swappable fiscal ocean vehicles by Q1 2024, that's quite soon so lowering the base purchase price and increasing EV production is accurate the goal of this and of course.
We're entering a new segment as we have been in talks about the change of large order possibilities with fee margin.
And we were able to adopt such a swappable batteries strategy to divest vicinity is teva tumors certainly need some we'll talk about that a little more shortly when we get more state.
Yes.
Some of these orders et cetera.
Now, let me talk a little bit about the peer and some future product updates the payout program design engineering continues to progress well consumer interest in the resolution of our care continues to grow even though we have only revealed limited.
We actually see the photos or cheaper Brian's so current payer reservations now exceed 6000 reservations.
<unk> has had some of the following impacts on manufacturing in the U S.
We've done extensive diligence on the supply chain in order to ensure we can capitalize.
On the European vehicle credit program and multiple source certain components such as batteries.
And we are working towards a USD battery manufacturing solution in this room is necessary to take full advantage of these incentives.
And obviously.
Having a vehicle in this price range, then use incentives becomes even more important. So we also continue our work with Blackstone are finalizing plans for an innovative manufacturing setup that will be required for the uniquely engineered peer the peer design engineering has been focused on reducing parts, while avoiding expand.
Let alone Carson gasolines yet.
We are focused on our new strategy, because the yield plus plus that has enabled us to reduce costs by about 25%.
Retaining the radical exterior and interior design with a unique customer features while we redeemed 200 renovated trough levels.
And we are also confirming asphalt all of our development and I'll talk more in detail, where the cost of parts et cetera, we are able to confirm with 29900 <unk> price and obviously is there are 7500 discount on top of that when Youre looking at $22500 I think menu really.
I would say it is in your hands when it comes to amazing easy for 'twenty 2000 <unk> results.
We will not know the peer production to start in early 2025, so that shifted it a few months out.
That was necessary to make sure we get this battery manufacturing is done in the U S.
So in today's earning release, we announced we will be adding an optional hardcore offer a package for ocean goal for us.
And I just want to mention that because that's actually a package that will be available already this year, even to people who have already purchased the ocean. So it'll be a measurable and all of the all wheel drive versions and I think this is going to be super exciting as vehicle.
This will move the ocean into a new market segment with few direct <unk> vintages at our price point the force E development and head of IR Senior VP of engineering, David King <unk> early career and offer value tiny almost a national champion roomba as well so I can guarantee that this will be quite nice.
I'm really excited about showing it by the way and we will be sending out some initiatives. Later today. So you can see what Google News I think is really going on.
Offer something unique in this segment, which is not available today, and I think being able to drive zero emission in nature is even cooler.
Finally.
I am really excited about this year as well we are planning to showcase our future product portfolio with several drivers of prototypes.
Our inaugural Investor Day on August 3rd this year, so beyond the middle right now of designing and developing and constructing these vehicles and I can tell you. This is going to be something else quite.
And you're also going to be unveiling the radical Peter as a fully drive a vehicle youll see the interior the exterior you'll see our recruitment features has never been seen before in any car. So I'm super excited about that and I think with Samsung shockwaves throughout the auto industry, when Scott Bailey or future model lineup, which.
Really good to show the growth strategy, we have in our product strategy.
It is unparalleled and may be one or perhaps the strongest points a booster.
Angel model, whether it's showing yields without somebody in the <unk> segment and almost redefining.
So with that.
On <unk> optimistic about business future and realizing our vision of <unk> future growth and I will now turn it over to improve Hart, our chief Technology officer. Thank.
Thank you Andrew.
Beginning with the fiscal <unk> I'd like to begin by providing an update on the continent and mitigate process. The only startup business mitigated the veto tenure as the CEO continuously in both North America and Europe .
We believe this will prove to be a critical advantage in our growth strategy. However.
This has not been an easy task and scale overheated regulations in June AEP very okay.
One of the key milestones in the past few months.
The <unk> team achieving the combined <unk> range of up to 770 kilometers 414, UK months for the 20 inch wheels.
701 kilometers volume 36, UK markets for 'twenty twos yields insights.
Louise.
These results, meaning the fiscal Ocean has the lowest <unk> of any battery electric SUV sold in to.
To date.
St.
These results.
The findings significantly exceeded our previous estimates.
630 P M.
With moves was most impressive to me was the minimum range difference between the 2020 two each trials and yields.
Less than 1%.
Such a small range difference is this is a testament a testament to <unk> engineering collaborations when developing specific tires and aerodynamics.
<unk>.
I'd like to congratulate the team on a job well done.
We look forward to getting the official EPA range results and anticipate these will meet or exceed our estimated 350 <unk> range for the fiscal midstream.
We delivered our first week of the year last week and now have approval to sell in well over a dozen European countries the year.
S approval process is progressing well.
We completed the U S Federal NHTSA self certification of the EPA completed its confirmatory testing.
Net initiative.
We are not waiting for the EPA test results to.
To confirm our test results performed by a third party perspective.
We are intensely focused on the TV EBITDA comp improvements, which we expect this months.
Hi, Doug I'd also like to point out that while our focus has been on launching the ocean one extreme and we've continued to make progress on the ultra and spot trends as well.
We have produced several units of the all geared towards ultra and the <unk> Gladstone.
Which are being used for internal testing with some litigation are expected to start this summer.
Functional safety implementation has been the critical area of focus for our team.
We don't want to risk anything when it comes to launching deals we want to use a product that is really from day. One so we must make sure that everything is 100%.
We completed the Es anthem, Dsos and NHTSA testing requirements in the us and internally designated <unk>.
Peanuts is.
To perform at the highest standards and we are very proud of these results.
As I have explained in the long term rates and the <unk> spending time pardon me the software in the vehicle and then tooling you have all the diagnostics for high volume streamlined commissioning end of line testing.
Specifically, we worked on fine tuning funnel management and network management and optimum powertrain integration for a seamless customer experience.
Iran Block machine validation springs to the architectural ready further automated production process.
<unk> technology routines and flash procedures at the production facility in Oregon also over the air updates.
Great effort have been spent on the acceleration of automated calibration routines.
Loss components, especially default.
Radar systems to be successfully adjusted to production tax.
And the beta has increased software and we expect improvement over time with software enhancements to key areas Humber and software configuration management.
We rely heavily on our supply chain partners.
<unk> been co developing proposals to receive final matured parts from suppliers acceptance testing and ensuring all costs at the same country duration.
Unlike the hardware aspects of a rebuild we expect to continue innovation and progress with the vehicle software.
We've taken advantage of these past few months to deep dive into all possible customers scenarios, Deepak and perform additional testing to provide customers with the best experience. Upon delivery. For example, we are lending carbon neutral fleets in the U S and EU for functional validation to.
Defined customer educators and further improve the experience this lead programs clearly beneficial.
To identify customer relevant integration issues as quickly as possible.
So in daily sessions.
Issues or concerns in reading software updates to refined experience.
We just over the air updates and ensure the pipeline.
This is a phase every car manufacturer go through with the difference that we have full connectivity and can react to BDC.
Now we have extended the program to early customers.
We get this we think.
This process allows the hardening of the software in the field.
That being said the soft LTV, we never truly done as there will always be meaningful into improved functionality and deployment new features.
We plan to launch over the outfits overtime to continually improve the customer experience and product performance.
I am, particularly pleased with the implementation of the oceans infotainment system.
Greatly simplified the controls creating is straightforward.
Switching between different settings functions and features.
Sunday containment system to be very unique in outcome.
And then part of implementation and.
And easy to use nature and great functionality.
Let me also highlight the studios on system level, which.
<unk> has been integrated into our immediately get experience, which delivers a rich immersive sound.
Now, let me provide an update on payout.
As we start to shift and focus to payout we can use all of our expense to create the next generation of mobility.
Im looking forward to sharing more details in new dive at our product day event in August this year.
The payer body structure will fulfill the 25 highest global safety standards.
U S and European and Chinese and CAD, II, H as top safety pick and as competitive and nda's durability and functionality compared to oceans multi material body structure.
<unk> body structure uses a different approach for more sustainability desktops.
It's possible, we would mean less mass less cost and less cotwo from.
Transportation. We are also looking to increase the amount of recycled steel biomass.
Based on our engineering study this will yield significantly lower carbon footprint than the typical energy intensive aluminum mixes.
We're taking our emphasis on sustainability and lead us to the next level by introducing a scalable reusable embedded electronics architecture path.
This will be pad with an advanced software architecture, creating a highly scalable software defined platform.
<unk> is also designed for much faster data speeds and wireless connectivity than the current generation. This.
This platform will be even easier to adopt and tool all our next generation vehicle driving cost and quality benefits for the year.
Use of hardware and software across our entire product line.
Already bid and key performance computing electronic components and software and calls and also electronics and software development will enable Cisco to deliver highly differentiated user experiences and connected services throughout the lifetime of the Zika.
We have a talented and growing team of engineering software experts in house complemented by World Class partners with.
Physical auction is a contract vehicle with the beds of Ettrick bibs and capabilities and the final product is incredible.
Excited for our customer.
To finally have the opportunity to experience these features too.
Well positioned to support ultra maturity and our upcoming retail platforms, including trail.
Thank you I will now turn the call over to Peter Thank you Luca.
Good afternoon, and good morning, everybody around three years ago. When we had planned an IPO to a major IBD Apollo's back we had a vision you had a vision with a great product in the fiscal ocean and with that mission and our asset light strategy at that time, we have to from a platform engineering.
Partner manufacturing partner create a supply chain and ramp ups supply chain create validation and testing plan to achieve on validation and certification and a robust product create a customer base with retail and sales channels.
23 of them to a high volume product.
The company, whilst achieving these milestones and ensure we had sufficient funding along the way to achieve all these things above and Thats only two years ago in.
In 2020, and 2021 with the advent of several new sign ups ready to conquer the EV market and the availability of capital on Wall Street at all found it very very easy.
Last two years have not been easy for anyone but it has operated the real scalable businesses from Powerpoint slides global pandemic geopolitical events elevated inflation rapidly rising interest rates unstable supply chain market volatility or is that capital markets product price wars are all extreme events.
It has tested our resilience.
Ability to navigate through volatility and deliver what we set out in 2020.
The barriers to entry are high in this business and what we set out to do is not difficult it is almost impossible.
Can be achieved till date.
We have created an amazing product at both Henry can be explained the differentiated features and I cannot wait for our customers to experience dose and for us to scale up.
<unk> is the ultimate foundation of innovation and disruption of differentiated exciting and unique product portfolio and feature a unique skill set and this is this good intellectual property a phenomenal product and we are really excited to show this portfolio.
Summer and this is what differentiates us from other players.
Ultimately created our own flexible proprietary platform that will hold several new vehicles in the future and it can also be licensed to other Oems with such an exciting product. We also managed to energize.
World Class supply chain to join our mission, which is also an extremely difficult task to do during these times.
Every company has had supply chain issues, so have been might.
But we always found ways to work through them and we continue to do so and I will give some examples later with a world class leading emotional product, we organically built a highly engaged and committed customer base that stands at 65000 today, and we're very proud and grateful to our loyal customers and we.
We'll continue to grow the enthusiasm to additional experience and.
Super exciting Super fund retail stores.
Recently, our principal EU locations and I got a chance to visit two of those.
Munich in Germany, and one of those of course in Copenhagen, and we expect to grow that to over 25 locations by the end of this year.
The European obligation certification completed we have now crossed the final hurdle to commence sales in Europe is.
This call is behind.
These are significant and major milestones, but everybody underestimate, but what they should be seen as crossing major barriers to entry that only a handful of companies have achieved.
Now the license to sell cars.
Mentioned, we registered our first two vehicles in Germany, and Denmark, you will top key large markets. We are now preparing to receive parts two big marketing and customer cause later this week the second quarter, we expect to produce 80 cars a day during the last week of June which should ramp up on weekly basis throughout.
A year with a run rate, it's easy to forget where we started what we have achieved and where we are today.
Now a final hurdle amongst all of those different milestones I talked about is to achieve a 2023 band which requires us to ensure that both our supply chain and manufacturing partner ramp up so we can deliver high quality cars to our customers a great experience.
I would like to thank all our suppliers and our manufacturing partners because they have come through with US in these tough times. They are world class leading partners. What we are setting us up is the maximum run rate and achieving a high quality production that can be scaled up.
Last year I had outlined on our fourth stage production ramp up plan that would take us from S&P to full high volume lean manufacturing and target the run rate in excess of 55 to 50000 units annually achieved over roughly four quarters.
Just to remind everybody gauge one was expected to last through the end of March 2023.
Just to tell everybody what happened during stage, one we secured quality and capacity readiness on 78% of all supply chain parts as a majority of our suppliers integrated production goes into one line.
The production ramp.
However, we did have challenges and let me explain in some of these challenges we had challenges with specifically wanted tier one supplier that requested additional time between integration and the tooling vendors had setbacks due to bankruptcy in Europe or late two incompletion. However, we understand the situation and we handle.
The situation with patent speed and we took the responsibility in our own hands and entered into direct negotiations with the insolvency receive regulatory approvals.
We resolved the release of our tools and our tier one supplier has now confirmed that they will be able to meet our new forecasted volumes, yes actively working with those suppliers in a specialist and are managing these with tier ones to make sure we had no disruptions in our production schedule.
SaaS bookings were deployed to secure the remaining surprise. During Q2, we also had a handful of suppliers who have requested more time for industrialization and high volume ramp up specifically in areas like safety critical parts and we are working with the suppliers to ensure that the nida adjusted volume forecast in the timely manner.
Over 90, Btu suppliers that have to achieve both hardware and software readiness as bill talked about hardware and software configuration. In addition to hybrid readiness software from each of these titles that can be validated at manga style hardware in the loop and at the vehicle level prior to supply and receiving approval so in industrials.
As the component software product Google integration, we have requested several suppliers and they are working on site. What some of the others that are not so critical are managed by our material planning and engineering teams to ensure the right hardware software combination is present and the parts we have a production of the latest release level.
For the vehicle look.
Look I just wanted to hundreds of integration management. This is a 40 grail of what the new software based cars.
Dependent on I am very pleased to announce that fiscal <unk> will collaborate with service now on a new solution for the modern software driven car, which requires an innovative hardware software configuration management platform for the big data era, both sandeep produce cars, but also Linda in the field and we do over the air updates.
We have implemented Cleveland quality audit processes.
Five critical commodity prior to the incoming parts inspection and the QE stage. We have found cases, where supplier did not need design specification, which triggered a five day look back process that the S. QE and supply team implemented tools are all open to the items I know, it's boring I know nobody realised.
This is critical but this is what it takes to create a high quality product with supply chain disruptions easing may not suppliers have managed to adjust for reduced input cost recently and started passing on the benefits and they have built in mechanisms, including breaking mechanisms within our contracts some suppliers, who did not manage the forward purchase.
As well are still figuring out how to adjust pricing, but in Q3, we should see an overall reduction in input costs.
The improvement in commodity and logistics prices, while all our battery raw materials prices.
Prices are down meaningfully from the peaks, most notably lithium carbonate is down over 50% from our last earnings call and of more than 70% from recent peaks.
We continue to work with our supply chain to ensure we remain competitive in our cost and offering to our customers. Just this morning reported earnings calls I had an extremely productive meeting with DHL a battery partner will continue to support us and Im really excited to say that I'm visiting and then at the end of May and at the beginning of June to discuss.
We can consolidate our partnership if you needed to increase capacity, how do we work with them on a pay program our digital direct to customer approach is a differentiator and enables efficient sales and distribution costs, which are essential for delighting, our customers connecting with them and their vehicles, when and where they choose and supporting the slide.
With a profitable growth from an early stage, we continue to enhance the fiscal web and app platforms to allow customers to seemingly purchased vehicles just wanted to remind about chase partnership in the United States and center there in Europe .
Digital functionality will expand in the coming weeks and alignment with our production ramp schedules for both the purchase journey and ownership experience.
And support I think we have the best configuration of product out there, which really leads to an emotional engagement with the product digitally for example, the physical and digital platform that will be released in the coming days will allow our customers to seemingly purchased vehicles online, including financing insurance delivery or pickup scheduling and tracking.
Title and registration, which make truly make this digital platform final day completion service and roadside assistance scheduling will also be available and finally, we are excited to release the ownership and connected vehicle experience through the Cisco ramp later this month as well.
Now turning to.
The numbers Q1 results balance sheet transparency outlook due to our updated obligation timing and supply chain limitations. During this launch period as I described above we have updated our 2023 production forecast to more conservative forecast as we dose shift to the right.
First quarter revenue totaled 198000, largely driven by sales of.
The fiscal branded home charging solution.
Our partnership with box and to merchandize the decrease quarter over quarter is due to reduced sales of physical brand home charges compared to Q4, when we of course benefit from early adopters.
<unk> to outfit their garages during holiday shopping season, and as we are launching cars and customers are converting there.
Registrations into orders I expect it to pick up as we deliver more vehicles to the customers.
Q1 operating expenses totaled $121 6 million R&D FCA has some nonrecurring launch milestone accruals, which reduced the run rate for these line items over the balance of 2023 lots of operations was also $121 6 million net loss totaled $120 6 million or <unk> 38 cents loss.
Sure.
Improvement on last year's net loss of $122 1 million and 41 cents loss per share capital.
<unk> came in at $45 7 million for the quarter stable year over year, our balance sheet remains solid as we have shown.
Discipline over several quarters as a public company. We finished Q1 with $652 5 million in cash this excludes $22 million of pending the receivables and I expect these <unk> to come in in the next few weeks and these will go down as we finish our tooling expenditure during the quarter, we brought in <unk>.
Similarly, $47 million from a 350 million aftermarket equity program, which is part of our 2 billion shelf. In addition, we regularly monitor all funding channels and evaluate opportunities across the full spectrum of debt and equity instruments in order to maintain a prudent liquidity profile and appropriate support our asset light model.
Turning to our outlook as noted in today's press release, our overall non-GAAP SG&A and R&D Capex guidance for 2023 remains unchanged at 535 million to $610 million. This is consistent with our expectations provided last quarter. This guidance benefits from our asset light business model and disciplined.
Cost management, while at the same time supports a prudent investment plan should circumstances warrant we have already identified very strategic costs down levers that we can exercise. We now expect to produce between 4800 to 1700 vehicles in Q2 and Thats provided all our suppliers can support this volume.
We shifted our module per volumes of the rights due to home litigation timing and supply chain limitations, especially with regards to interior parts that were impacted by a tier two tooling supplier bankruptcy as I explained earlier sysco expects to have a steep ramp up this summer and we expect to end the third quarter at over 1500 vehicles built Kobe.
Equating to over 70000 annual run rate Accordingly, we are revising our calendar 2023 production guidance to 32000 to 36000 units as conservative numbers provided all our partners can ramp up at high quality and high volume, we still maintain and anticipate gross margins for the full.
Year 2023 in the 8% to 12% range and Po tension positively adjust positive adjusted EBITDA provided input costs do not change drastically.
<unk> is now represented in 11 countries and counting as we prepare to deliver ocean wanted to all our launch market instead of the infrastructure for the next wave of countries, we will enter I'd like to close by thanking.
Incredible team members, our partners and our suppliers for their hard work and dedication, bringing an amazing vehicle market. Despite many external challenges we had.
Fundamentally Asia and you make quick decisions, we're now happy to take your questions.
Operator could you. Please go to the platform.
Well for the Q&A session will start with some of the retail questions that were submitted over the state platform.
First question in light of diluted share price, what is produced to increase shareholder value and instill confidence.
And Richard do you want to take that.
Yes.
I think.
We are trying to be as transparent as we can and of course, we can't own it bring up the news when they are in English I know a lot of <unk>.
Shareholders would like to see US send out press releases every second data, obviously is impossible because sometimes you do need to finish certain milestones before we can do it but I think we are extremely active.
At <unk>, we are moving fast and of course. The next step now is really getting the cars on the road that is what's going to bring value to our shareholders, that's where it's going to bring confidence in the market, but it also has to be high for heavy vehicles and that has to be a high quality deliver delivery and thats why we started out with.
Proper deliveries to make sure that the entire process works because once you drop in delivering 15 up 100 vehicles, a week, we need to deliver vehicles Super fast and we do have examples where that was an issue. So we don't want to run into these issues that we can't deliver the vehicles. We can produce we definitely have the customers.
You don't have to worry about that secondly, I just wanted to say that part of building this investor confidence once we're out in the market. These vehicles are showing continuous deliveries and production through June and July we decided to have our investor or shareholder call at analyst day.
On August 3rd this year.
And I can tell you it will blow everyone away, it's never been seen before the type of product display we are going to do a show on August 3rd.
Metal up together with our teams to develop these vehicles right now theyre going to be stunning theyre going to be amazing and thats going to be nothing like it and I think this will finally show that since they have a completely different path and a completely different market opportunity.
Our future product strategy, so I'm Super excited about that and I'm sure. That's kind of built Investor Conference. I know you don't want to say a few things about Venezuela Peter Yeah.
Yes.
CFO absolutely for all of our shareholders.
There's nothing more than I would like to see our stock price higher of course, I would like the market to recognize the true value. We have I took everybody through the milestones we've achieved and sometimes you wonder that when we went public we hadn't achieved all of this and to date. We've achieved all of this and we still report a phenomenal cash balance and.
We are about to generate revenue I, absolutely understand what our retail shareholders are asking and that's exactly what they are doing what we need to do is we need to remain laser focused to deliver and we need to deliver high quality cars, we need to deliver on the production ramp we need to support our suppliers and we need to keep our head down and we just need to de lever the <unk>.
Our plan for the fiscal Ocean, we are working extremely diligently sometimes 18, sometimes 20 hours a day, sometimes no fleet to ensure the highest quality product and customer experience on day, one and frankly I think if we keep executing on our model on an asset light model the market will recognize the share price.
I also mentioned earlier that there's a fundamental difference when you're developing and you don't have the license to sell versus when you have the license yourself you truly become a car company and I think with that we would expect the market to reward us for our resilience for our hard work by the great products we've launched.
Thank you.
Operator, now, let's turn to the phone lines for questions. Please.
Thank you if you have a question. Please press star one on your telephone keypad.
Our first question comes from the line of Chris Mcnally with Evercore. Please go ahead.
Hi team. Thanks, so much for that after the detail so.
Two questions one on production and then secondly on Fox Con so.
Henrik and Gaeta the updated our production cadence seems to make sense. It's about one five months is the way.
I calculated off from the February discussion.
Homologation was delayed we've talked about that could.
Could you could you just go into if there is any other outside issues getting you mentioned that the tier one.
The last two months, it's been rectified is there any other issues between now and sort of that June into September ramp, where we sort of have high visibility into the 6000 per months per month. Thanks. So much.
I think Chris I, just want to remind you that we of course need the U S EPA, which we do expect to come in so just wanted to remind you of that but from my point. Besides the topics that I have mentioned if those bold plan, we see no other impact to other issues.
And maybe I can.
To us in the strong side.
As we moved forward with a pair of development, we actually came up with some phenomenal ideas to take further costs out of the vehicle. We do have an incredible innovative engineering team and obviously they've learned a lot during the ocean development and we have put some of those learnings into.
The pair of specifically of how to reduce potash and I know everybody is talking about giga castings, but when we've talked about almost a cost and what's going to happen when you crash a car.
Such a casting so obviously, it's affordable car you always want to be able to ensure affordably and we want to be able to repair. It. So we came up with this phenomenal concept, which we call steel plus plus but it also means we have to do something a little unique when it comes to assembly.
So that means it took us a little longer.
Kind of look at that we do have of course, a manufacturing team now that are looking into that together with Fox com.
Also as I mentioned that our aid means that we do have to make batteries here in the U S to take full advantage of that those credits and we do want to have those because imagine if we're able to sell the cough a $22500 of investors going to be in the same so that.
Obviously, what we want to do because that's going to be such a unique market that we're going to go in there was nothing that compares to it. So that's that's really important data and you want to add something.
I just want to say behalf of course, a great relationship with <unk>, given the fact that the vehicles.
Super exciting.
It's a very high quality product.
Innovative great experience I think we are jointly extremely proud.
How fast we did this product.
With respect to the facilities, we have some great ideas.
Chairman Yeung is visiting us a niche.
<unk>.
I think theres more to come.
I really appreciate it.
With respect to Pakistan should we expect when there.
All of that.
The EIS had been started the teeth of any cost that we would get a formal announcement of our manufacturing agree.
Agreement and then just one other one in the press release it mentions battery partners.
One of the shifts from second half into 'twenty five.
Essentially imply that it would be <unk> and youre working with another battery producer as well.
Yeah, absolutely of course, we will make announcements as soon as we have firmed up with Russia.
We're also make announcements all I can say is that the planned visits.
Chairman announced the Oregon June , allowing meet them and hopefully we can finalize everything at that point in time.
And as soon as we do we will send out a press release Super fast and do that now as I mentioned before in terms of ideas of course ideas are only valuable if you actually implement them and that's exactly what we've done on the payer program. We have already implemented these radical new engineering.
Solutions.
Our program I think we went last time already talked about our blade computer which drastically reduces.
Impairments as well so those are all things that we have to kind of put together as a manufacturing plan as well and like I mentioned, I think earlier and if not I would say it here.
We are way more active of course.
And the Fox client relationship when it comes to how we set up the manufacturing plant that we needed to be at Magna because <unk> already had a rolling machine going into Fox strong youre, starting slightly more on a clean sheet of paper, we still have some advantages facilities youll make a radical new vehicle electric payer, but yes, we will be announcing.
Fermi.
Deals once we have them both when it comes to phosphates and when it comes to the battery deals that we are working on right now.
Much appreciate it.
But.
Your next question comes from the line of Jeffrey <unk> with T. H. Please go ahead.
Good morning, everyone and thanks for taking my questions. My first one is on pricing.
Different auto manufacturers, taking different actions with respect to pricing strategies I Wonder if you could just go over your philosophy around that on the one hand, you are one of the automakers that didn't raise prices. The last several years and as you highlighted you continue to expect a 12% margins for for this year, but on the other hand with pricing competition across the <unk>.
<unk> aimed at incentivizing demand I, just wonder how you weigh the pros and cons, there and I guess as you think about all of that more directly should we expect any changes to pricing for the ocean going forward. Thanks.
Yes, So let me take that I mean first of all I think everybody who reported on the price decreases.
On some of the vehicles, specifically one brand out there that we all know I think you forgot that that's the same be able will also allow us to incredible increases that happened six months ago, a year ago, one and a half year ago. So if you actually look at the total.
Pricing since two years ago, there really just come back to where they were two years ago and what it really indicates is that people weren't willing on a long term basis to pay those higher prices.
The increase increases for these products, whereas with Fisker, we have not raised oil prices for two years, when we announce them and we are still cheap.
Cheaper or lower cost than our competitors, we still have them.
With more features longer range than our competitors, so I'm not really worried about pricing.
I think we got some other really unique things up our sleeve.
Those in terms of customer service.
So in terms of what we can do with a battery swap once we try out the fleets.
There is potentially.
Possibility to go.
Two I would say individual consumers without vessel later, but that could be interesting thing about a solution like that is that you are obviously not paying for the battery and the vehicle you pay that over several years. So now you are lowering the cost of that vehicle, maybe 10000, or so dollars, which would be quite unique. So I think we've got a lot of things up our sleeves that we can use it.
There should be it should be necessary.
Peter mentioned, we are also in a unique situation, where we make money on our vehicles from the get go because youre paying a fixed manufacturing fee. So I don't think we are under the same pressure.
Some of our competitors out there and I think it was a unique product in the pricing here in.
I don't think people necessarily neither by 60 or $70000 per car.
Don't like just because they get a few thousand dollars off of course of this extreme yes, maybe.
But at this point in time like I said, we have maintained our reservations in fact, we have seen an uptick in Europe because of course in Europe to get all the incentives equally to everybody else. So it's an equal playing field here in Europe , and finally I will say.
I've mentioned before we are seriously looking at U S manufacturing for the Ocean as well eventually we.
We don't have any firm things that we can announce at this point in time, but we are actually looking at that and of course, the payout will be made in the U S. So the batteries from there.
Great appreciate that and then I guess maybe.
Yes.
Thanks, Hey, I just wanted to ask one follow up just if you could.
Some additional color on margins for the year I appreciate the reference for guidance kind of staying in taxpayer for the full year on that 8% to 12%, but is there any color you can give us on how that progresses through the quarters, obviously Q2 relatively light compared to the rest of the year just on the Homologation timing. So just from that lighter Q2 to the rest of the year as you scale up just curious somehow.
Margin improved throughout that timeframe I appreciate it.
Okay.
Guidance.
You end up doing that however, what the color I can give you is that of course with respect to EDI. It's frontloaded.
Tooling Capex is obviously as we are getting into launch is coming into play and as we get towards the year end. These NRT is disappearing and of course.
When it comes to actual input costs.
As I mentioned earlier, we should see Q3 to be I think for everybody a better better quarter with respect to input costs I think in terms of our sort of asset light strategy that pretty much remains impact for the whole year. So I would say that those gross.
Gross margins.
In fact, the only item I would say is that we have some modest launch costs, but they are nowhere close to everybody else and they would not have any material impact.
No numbers.
Thank you operator.
Please go to the next question.
Your next question comes from the line of Al Martinez with Raymond James. Please go ahead.
Thank you for for the question.
If you look at supply chain management, given that your production expectations have as you said shifted lower end to the right.
Are your suppliers.
Suppliers battery and otherwise.
We're ready to accommodate.
The evolving trajectory of what your production will look like.
So in terms of our numbers I mean, if you look at the guidance and where we are.
It's not a dramatic change number one.
In terms of how the supply chain operates number two we pay for our own tools. So we don't amortize those costs within these price, which is what traditional Oems DSO as a result.
<unk>, if they don't achieve the volumes or they don't get to fail fast and from our point of view, we work very closely with all the suppliers. This is a launch year and all suppliers understand launches of a unique year and.
Of course, we have fully loaded vehicles. So all suppliers benefit from that I also think that.
Suppliers want to be part of growth and our product represents growth and everybody. All our supply chain are so proud to be part of this product because it opens up frankly, new markets for them in a growing EV industry. So we have a phenomenal relationship with all our suppliers, we work very well with magna's tire in.
Distributing what you call EDI I call off diesel they organized it.
Systems, when you work with a complex supply chain throughout the world, we manage the supply base as well.
And yes, we absolutely look in a very seamlessly now.
There are certain suppliers that.
They have issues in ramping up we have mechanisms, where we can work with them. So if at some point we needed to turbocharge in our stage four of the planned silver charge. The supply chain. We of course have to invest we have to notify them ahead of time, but in some cases, depending as already said there is an opportunity to increase.
Potentially 20%, 30% volumes on the same tools and probably we can have more volumes are.
A similar demand at Magnesia, we can go from 50 to 70000 units as we've said before without much effort of course, you need to put in an extra shift, but I feel very confident with the volumes we have on working with the supply chain.
Just a quick housekeeping item as a follow up.
Depreciation expense.
Went from less than $1 million per quarter or.
Six months ago to $9 million this quarter.
Will it continue to increase or is this kind of it the new normal around $9 million.
It's actually related to the cost of.
Amortizing the 91, so I think we can probably discuss it in detail offline.
Okay.
Your final question comes from the line of James Picariello with BNP Paribas. Please go ahead.
Hi, everyone.
Henrik I appreciate the candid Miss in your kind of Miss in your opening remarks, so just to confirm what was said.
Yes.
So among the few deliveries to customers in Europe . Thus far is the company's statement that none of these vehicles has been returned for any any type of problem.
Yeah I mean.
I cant believe Youre reading those gardens, Archibald yes, I'm confirming the car still in Copenhagen, and the other curves are organic.
As soon as they get back to Munich on planes, a driver, which I believe is next week when I'm going on a podium there to speak about automotive.
I think it's a reuters events one was wrong.
And there are others and then.
Yes, just can we confirm the pack size for the Ocean now that we've got.
Carson in the hands of our customers. Thanks.
Yes, that's 113 colonial which is showing that we probably have the most energy dense battery pack in the world right now when you take into consideration all of you who was the same size as well.
If lama wire BMW, etc.
Yes. Thank you I appreciate it.
Thank you.
And then I will turn the call over to Henry for any closing remarks.
Thank you very much I appreciate everybody on the call and again.
It is incredible what.
Ridiculous article can bring around and it's incredible that we have to spend time, you have an earnings call talking about speeding tickets to confirm our car actually can go fast, but I guess, that's the way.
World, We're living in I think actually it's going to be phenomenal, even if we hit our 32000.
Products this year in terms of deliver deliveries and.
Production and I think <unk>.
B way beyond that because I'm going to push for it.
I think <unk> mentioned, there are some amazing suppliers on lesser something really out of the world Crazy happening I'm Super confident about it and it will be over achieving our goals.
But what I also want to mention is and I think nobody is really paid attention to that one thing is how many cars you produce.
Another thing is how many cars you can sell and deliver.
And I think that's really the important part here and why we are trying to streamline our logistics and delivery process why they're going all digital why we have spent several months setting a very sophisticated delivery infrastructure hiring some of the best logistics.
<unk> that can bring the vehicles as fast as possible to our customers. We are looking into the new ways of delivering hundreds of cars per day.
And that really is important because you don't want to stand at the end of the year, having produced 36000 cars and only delivered 25 I would like to say in the end of the year. If I produced 36000 cars I would like to deliver 35500 as possible and that's what we're going to push for and I think this is really the key here is.
Seamless process, where we may want money, where we get fantastic products outdoor consumers and as I mentioned earlier, we are proud now to be a revenue generated car company and now all the needs to do to scale and deliver amazing vehicles. Thank you very much everyone.
This concludes the conference call you may now disconnect your lines.
Thank you.
Yes.
Yeah.