Polestar Automotive Holding UK Limited

Hello, everyone. My name is Brianna Flynn from Polestar Investor Relations. I will cover a few housekeeping points before handing over to Thomas Ingenlath, our CEO, and Johan Malmqvist, our CFO. Their remarks will take about 15 minutes and we'll then open the line for analyst questions, followed by questions received from our shareholders. Before handing over the call to Thomas, I would like to remind participants that many of our comments today will be considered forward-looking statements under the U.S. federal securities laws and are subject to numerous risks and uncertainties that may cause Polestar's actual results to differ materially from what has been communicated. Forward-looking statements made today are effective only as of today and Polestar undertakes no obligation to update any of its forward-looking statements. For a discussion of some of the factors that could cause our actual results to differ, please review the risk factor section of our report on Form 20F or other documents we filed with the SEC. You may also find more information of overlooking statements in our filings with the SEC or our investor update presentation and recent press releases which can be found on our Investor Relations website. Further, we're hereby advising you not to place undue reliance on the preliminary estimated unaudited operational financial results for the year and quarter ended December 31st, 2022 that we are announcing today. Our independent registered accounting firm has not completed its audit of our year-end results. The preliminary estimated unaudited information we present today could be subject to material adjustments and we should not be considered substitutes to the annual report on Form 20F that we will be filing for the year ended December 31st, 2022. In addition, management will make references to non-GAAP financial measures during the call. Our discussion of why we use non-GAAP financial measures and information regarding reconciliation of our non-GAAP financial measures with our mostly directly comparable GAAP measures is available in our earnings press release as well as in the investor update presentation issued earlier today. With that, I'd like to turn the call over to Thomas. Please go ahead.

Thank you, Bojana. And thank you to everyone who has joined our results call. When I reflect on the outcome of 2022 and what lies ahead, I'm confident we have the right strategy of capturing the market opportunity with our established global presence and the rapid product rollout. With more than five years as CEO, I know that our focus on design, innovation and sustainability is what resonates with the market and makes customers passionate about our brand. This underpins the role we play in the much needed shift to sustainable mobility. Now, the recent achievements. I want to underline how delighted I am with everything we achieved in 2022. It was our biggest year yet, despite the fluid and challenging environment. There are many highlights of 2022 to mention. Most importantly, we delivered what we said we would. More than 50,000 vehicles globally, up 80% year on year. Today, there are around 100,000 Polestars on the roads in 27 markets. There are 158 retail locations and over 1,100 points where our customers can get service. Only one other pure EV player in mass market production has this kind of global footprint. Thanks to the huge team effort, over 21,000 vehicles were delivered in the fourth quarter, our record quarter to date, to help us surpass the 50,000 volume target. This was an important milestone, which demonstrated the abilities and strengths, and I would like to thank everyone at Polestar that made this happen. We grew our revenues to $2.5 billion, up over 80%. Together with support from our major shareholders, we strengthened our liquidity so that we can remain laser-focused on business execution. A business execution that first and foremost prioritizes and safeguards our rapidly expanding premium product portfolio, despite prolonged macro and ongoing supply chain constraints. So, starting with design and our product development. We launched our first luxury SUV, Polestar 3, in October 2022 in Copenhagen. And we were extremely pleased with the reception that it received, including order intake to date. Polestar 3 is a powerful, designed electric performance SUV that appeals to the senses with a distinct shape and excellent driving dynamics. It is a car that has been designed as a Polestar from start to finish and built for the electric age. We are working closely with our manufacturing partners now to start the production in the middle of this year. Once the production in China commences, the team will move to Charleston, South Carolina, looking to start US manufacturing of the Polestar 3 in mid-2024. Keep an eye out this spring. We will host some exciting Polestar 3 events in the US, meeting customers, investors and media. In January, we launched a major update of Polestar 2, a new high-tech front end that reflects the design language premiered by Polestar 3, the Smart Zone. Polestar 2 also gets substantial sustainability and performance increases with a battery upgrade and new, more powerful and at the same time more efficient motors. For the first time in a Polestar, rear-wheel drive with Polestar 2. In short, we showed our continued love for Polestar 2 by keeping it fresh and exciting alongside launching new vehicles. We are doing both as we believe this is very important in keeping customers connected with our brand and satisfaction high. Focus on customer satisfaction has been a critical factor that has ensured Polestar 2 is today amongst the top 10 best selling BEVs in many markets, including the UK, Sweden, Norway, Canada, South Korea and Australia. And as I promised, I'm happy to confirm Polestar 4 is in the starting blocks. We can't wait to show it to you and we will very, very soon. Moving to innovation, another key pillar for Polestar. We recently reached an agreement with Google for our vehicles to benefit from their latest enhancements, such as a new HD map in poster 3 and the rollout of remote actions for poster 2. We are expanding our partnership with Luminar from poster 3 to include their LiDAR technology also in poster 5. The utilization of LiDAR technology continues to gain momentum as the global focus on next-generation safety and autonomous increases. Worth mentioning, Polestar 3 with LiDAR is available since February to order at polestar.com. Sustainability underpins everything we do. Our ambitious sustainability project, Polestar Zero, continues to build momentum. In the last few weeks, we added a further... Eight new partners, bringing the total of 24 overall. And we are making strong strides towards our goal of creating a truly climate-neutral car by 2030. We initiated the pathway report in response to the climate crisis and in collaboration with another EV maker. We believe collective actions to reduce greenhouse gas emissions in the supply chain and increase renewable energy in the grids are needed in addition to the faster EV adaption. To sum it up, I'm extremely excited for 2023. This year, we will fundamentally build on all our achievements from 2022 and, despite a still uncertain and fluid operating environment, plan to deliver 80,000 cars, 60% more than last year. Polestar in the coming months will meaningfully transform from a one model company to having a line up of three cars in our portfolio. Free from legacy constraints and backed up by the scalable asset light model, we will capture more of the market growth opportunities while always keeping true to our core pillars of design, innovation and sustainability.

now i would like to ask johan to comment on our financial results and give some guidance on 23 outlook thank you thomas hello everyone and thank you for taking the time to join us today it's great to see so many of you on the call and on the webcast starting with operational highlights first We have delivered 51,491 cars globally in 2022, of which 21,067 in the fourth quarter, our record quarter to date. Just to stop and reflect on that for a moment, delivering over 21,000 cars in the quarter is a fantastic achievement for a young company. As Thomas mentioned, it is an important milestone which demonstrates both our abilities and strength, our ability to ramp up production, our ability to meet the logistical challenges of handing over the keys to over 21,000 customers across the globe in one quarter, and the strength of our brand and product. Most importantly, it demonstrates that we have the capability to execute in a fluid and still challenging environment. We are now active in 27 markets on four continents and have 158 sales locations and over 1100 service points. We grew these by 40 to 50 percent, complementing our digital first direct to consumer approach with our expanding fiscal footprint. We also recognize that it is still a challenging macro environment. And as I shared on the last earnings call, we started to take actions already last year. I'm pleased to see that those initiatives have come through in the numbers, especially in our operating expenses. I am proud of what we have accomplished through the tremendous hard work and dedication of our entire organization. Moving to the financial highlights for full year 2022. Revenue increased 84%. from 1.3 billion to 2.5 billion, mainly driven by an increase in Polestar 2 vehicle sales with continued commercial expansion across both existing and new markets. This growth was partially offset by slightly lower revenue per vehicle due to product, market mix, and foreign exchange impacts. To put this into context, we mainly sold long range dual motor variants of the Polestar 2 in 2021. While in 2022, we introduced other variants to offer choice to our customers. Some at lower price points, which had an impact on average revenue per vehicle. With regards to market mix, our sales in 2022 were proportionately higher outside of Europe, where revenue per car is typically lower. And in terms of foreign exchange, this was due to strengthened US dollar versus predominantly European currencies. Gross profit increased from 1 million to 119 million, leading to an improved gross margin of 4.9%. This was driven by higher post-war II sales and lower fixed manufacturing costs. And in the latter part of the year, price increases. partially offset by foreign exchange, which led to higher cost of sales and product and market mix. Selling general and administrative expenses were 21% higher at 865 million compared to 84% growth in revenues as we start to accrue benefits of scale. Research and development expenses were down 27% to 171 million due to the absence of Polestar 1 amortization, partially offset by higher spend on future vehicles and technologies. Operating loss, excluding the one-time share-based listing charge of 372 million, decreased 8% from 995 million to 914 million. Moving on to Q4 2022, I would like to point out four items. Revenues in the quarter were nearly 1 billion as we delivered 21,000 cars, a great achievement. Gross margin was 6.3%, better than expected as the full effect of the price increases introduced early in the year came through in the quarter, but input costs are still lagging and only had a meaningful impact in December. Thirdly, selling general and administrative expenses were kept flat compared to the same period last year due to the active cost management that I mentioned earlier. And finally, together, these resulted in the reduced operating loss of 205 million, down 39% when compared to Q4 2021. Moving on to cash flow. Cash used for operating activities for the full year was 1.1 billion, mainly driven by operating loss, working capital increase in inventories and trade receivables as a result of higher production and sales, and interest expenses due to increased financial indebtedness. Cash used for investing activities was 0.7 billion, predominantly driven by intellectual property investments for Polestar 2, Polestar 3 and Polestar 4. CapEx in Q4 was lower than expected, but largely due to timing. cash provided by financing activities was 2.1 billion, driven by the net listing proceeds of 1.4 billion and a net increase in short-term borrowings of 0.7 billion to support the continued growth of the company. So at the end of 2022, cash and cash equivalents stood at approximately 1 billion. Before I hand over to the operator, let me wrap up with the outlook for 2023. Global volume is expected to be approximately 80,000 cars, an increase of 60% year on year, predominantly driven by Polestar 2 sales. We expect gross margin to be broadly in line with 2022, with volume and product mix supporting margin progression later in the year. And finally, we are on track in terms of liquidity, and as we previously communicated, We continue to explore potential equity and debt offerings to raise additional capital to fund operations and business growth. Thank you again for joining. Over to the operator for the live Q&A by the analysts. And then, as Bojana said, we will answer some questions from our shareholders.