Polestar Automotive Holding UK Limited

Hello, and welcome to Polestar Q3 2023 Resorts Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. I would now like to hand the conference over to Brianna. You may begin.

Thank you, operator. Hello, everyone. Bojana Flynn here from Polestar Investor Relations. Thank you for joining our Q3 2023 results call. Thomas Singenloth, our CEO, and Johan Malmqvist, our CFO, will start with our opening remarks, followed by analysts and retail investor questions. But before then, I will cover some housekeeping points. I would like to remind participants that many of our comments today will be considered forward-looking statements under 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 was being communicated. These forward-looking statements include, but are not limited to, statements regarding the future financial performance of the company, production and delivery volumes, financial and operating results, need for outlook and medium-term targets, fundraising and funding requirements, macroeconomic and industry trends, company initiatives, and other future events. Forward-looking statements made today are effective only as of today, and Poster 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 factors contained in our SEC filings. In addition, management will make references to non-GAAP financial measures during this call. A discussion of why we use non-GAAP financial measures and information regarding reconciliation of our non-GAAP financial measures with our most directly comparable gap measures is in the investor update presentation issued earlier today. With that, I would like to turn the call over to Thomas. Please go ahead.

Thank you, Bojana. And thank you to everyone for joining us today at a slightly different time than we normally would hold our call. The reason for this, as you probably know, is that we are hosting Poster Day here in Los Angeles tomorrow morning. We will have a number of technology partners, including Mobileye, Luminar, and BComp joining us to deep dive into the technologies that will form the future of our cars. It's shaping up to be a fantastic event. And for those of you that aren't able to join us, we will be publishing a recording of the keynote presentations and highlights from the exhibition area on our website afterwards. Starting with the results, the third quarter saw record deliveries of 13,976, a growth of 51% compared to last year. We saw a positive impact from channel, market, and product variant mix, and the start of Polestar 2 model year 24 deliveries. In total, during the first nine months of the year, we delivered 41,817 cars. growth of 37% compared to the same period last year. And Johan will take you through the financial results in more detail in a moment. Turning to the operational highlights of the last quarter. Starting with Polestar 2 and the significantly upgraded model year 24. Deliveries of this higher-priced model continue to ramp up, and it is receiving great reviews. Top Gear calls it one of the most complete electric cars money can buy. Odd Trader ranks it 4.5 out of 5 stars. It's the highest possible rating in the safety, power, and features category. Similar high scores and headlines continue to be published across pretty much all of our key markets. This is a car that up until now we have built our brand, commercial operations, and supply chains on. This one car. When you consider this, you can see the significant opportunity that we now have with two new models, luxury performance SUVs coming to the market. Let's start with poster three. Preparations for start of production, first in China early next year, and then in the US in the summer of 24, are progressing well. Polestar 3 successfully completed hot weather testing in the UAE in September, and the last phase of testing will be completed by the end of this year. The new electric performance SUV created a buzz when it arrived in our Polestar spaces over the summer, and it is attracting new Polestar customers to come in and experience it firsthand. I spent a few days myself with one of our Polestar 3 test vehicles last month, and even for me, it was an eye-opener to experience how much of a shift the car represents for us. The ride and handling, and of course, the luxurious spaciousness. Turning to Polestar 4, our SUV coupé. Last time we met, I talked about the positive reception this car had at the Chengdu Auto Show. Now, two weeks ago, we had the first media test drives on Ningbo racetrack, where journalists got to push the car to the limits. The resulting reviews are very positive, especially with regards to its performance, handling, and passenger comfort. Start of production of Polestar 4 in Hanzhou Bay begins next week, with customer deliveries in China starting before the end of the year and in the rest of the world planned for mid-2020. Polestar is a leading partner of Google, and Polestar 2 was the first car on the market to feature Google's Android's automotive OS when it launched in 2019. Since then, we've seamlessly integrated a number of apps into our cars, most recently Prime Video, which we announced in September. Several other manufacturers have now followed the path of our successful cooperation with Google. Now, as I alluded to earlier, we will deep dive into a number of exciting innovations tomorrow at Polestar Day. Our full lineup of cars will also be on show in the U.S. for the first time, and we are giving visitors a chance to experience the first dynamic experiences of Polestar 3 and 4 on the roads here in Los Angeles with our test engineers conducting ride-alongs. I have talked before about the value of this unique position and platform that we have created. A strong and established market presence with a wide sales and service network that extends far beyond most pure EV startups and matches what most traditional OEMs offer. Over the last few months, we took the necessary steps to rework our business plan. We are reducing costs and improving efficiency to create a more resilient and profitable Polestar. and reducing our funding needs at the same time. Achieving cash flow break even already in 2025 will show the strength of our asset-light biggest model. Margin over volume is our way forward, supported by a gorgeous lineup of four exclusive performance cars. Our strategic direction is clear. We are safeguarding the premium position of the Polestar brand. This plan reduces our expected cash outflow from the end of September this year to 2025 to around 1.3 billion US dollars, following additional support announced today from our two major shareholders. In 2025, we are targeting total annual deliveries of around 155,000 to 165,000. In addition to the value derived from our growing lineup of post three, four, and five. We are taking several actions to improve margins and reduce OPEX. Johan will cover in a bit more detail the contribution of these actions. I will give you some further color where we have to introduce more significant changes to our operations. Main steps are taken to further improve our margins. Introducing more flexible packs as our model lineup grows into more luxurious segments. also need to offer customers the ability for greater customization generating more revenue across our car lineup taking a more focused approach to our market presence starting in europe we have a number of markets that are both performing well and show continued scope for further profitable growth we are going to shift investments into these from markets which are either smaller or less profitable It's not about leaving a market, but about directing our resources to where they give us the best impact. In some cases, we'll also move to an important moment. As you know, since the start of the summer, our operations in China are part of a JV with Meizhu, providing a stronger foundation for us to succeed. Improving the profitability of our US business. Part of this turnaround will be driven by the introduction of Polestar 3, a car that will be much better positioned for the U.S. consumer, and especially once production in South Carolina starts. With that said, we are taking further steps to adjust and target our brand build and marketing spend, and we are making sure that we have the most efficient retail partners set up. Identify product cost reduction opportunities, both by working closely with R&D and purchasing. We have ambitious but realistic cost reduction opportunities identified to reduce the bill of material. We are also reducing our operation expenditure across the business, which Johann will go into more detail on in a minute. 2025 is an important milestone, but not the end state. Our ambition is, of course, to continue to develop the Polestar brand, our volumes, and profitability in the long term. We have a significantly stronger foundation from which to build on than many others. We have a strong and a unique brand, and strong and supportive shareholders. And with that, I'll hand over to Johan for more on the Q3 results, 2023 outlook, and some detail behind our strength and business plan, and of course, the funding update. Thank you for listening in, and I look forward to taking your questions after you answer remarks.