Fisker Inc.

Hello everyone and welcome to the CISCA Inc second quarter 2021 earnings call. My name is Brica and I'll be the moderator for today's event. If you would like the opportunity to ask a question today, please remember to press start followed by one on your telephone keypad. And I will now hand over to our host Dan Gels to begin. So Dan, please go ahead when you're ready.

Thanks a lot, Rika. Welcome to Fisker's earning call, everyone. Joining me on the call are Hendrik Fisker, Chief Executive Officer, Dr. Bukhar Khunka, Chief Technology Officer, and Dr. Geeta Gupta-Fisker, Chief Financial Officer and Chief Operating Officer. This quarter, we also have with us Christian Marty, our VP of European Marketing, Sales, and Service, to talk about our recent investment and partnership with Allegro. Before turning it over to Henrik, be advised we will make forward-looking statements within the meaning of the federal securities laws. Forward-looking statements generally relate to future events for future financial or operating performance. Our expectations and beliefs regarding these matters may not materialize. Actual results in financial periods are subject to risks, 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. will reference our financial measures that do not conform to generally accepted accounting principles or GAAP 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 reconciliation of non-GAAP financial information to the directly comparable GAAP financial information appears in today's earnings release. And with that, I'm happy to turn it over to Henrik.

Thank you, Dan, and welcome, everyone, and thank you for joining. I'm really pleased with the progress we have made on the two vehicle programs. We have made great progress in growing our team and also built some serious relationships with some really big suppliers and big business partners. And, of course, we have really far, far along with our supply chain. We have announced some, I think, great supply deals lately that we'll talk a little bit about. I also have a lot of confidence in the fact that we're on time and on budget on the ocean program. I know I sound like a broken record and it's boring, but I think in this case, the broken record is quite good to keep on saying that we're on time on the ocean program and we're on budget. Really, really important. And that really comes down to the execution that our team, internal team here in engineering, purchasing, design, finance have done in this program, of course, together with our partner in this program, Magna, and all our suppliers and our supply purchasing organization have done a great job to bring in suppliers that is helping us stay on time on this program. We've also made tons of progress on the pair program. The ability to actually execute two vehicle platforms, two different vehicle platforms in this stage as a startup company is quite unique. I think it really validates our strategy. I don't think there's any startup ever, even any U.S. startup, that actually have developed or started to develop two platforms simultaneously, despite probably some of them having raised more billions of dollars than we have. And I think it really shows the strengths of our business model, the strengths of our team, and of course the strengths of our partnerships, because we do have two amazing and two different partners, and I think that really sets us apart. In terms of our balance sheet, it's really strong and of course that is because we have a really strong internal control system with our finance team our purchasing team and our engineering team but but i think what's really important to notice here and something maybe a lot of people would miss the fact that we have over 950 million dollars on the balance sheet and we raised a billion over a billion dollars last year You could think why haven't we spent more money? Well, the reason is that we actually have some amazing suppliers that sees us as a very, very viable business. And you mustn't forget that suppliers actually get behind the curtain. They actually see our business model. They see our vehicle. They see the technical specifications. They see our detailed production planning. And only then a supplier decides whether they want to work with this company. And then they decide what are the payment terms for this company. Are they going to be normal or are they going to be different where you have to pay a whole bunch of money up front? And I think we have shown that we have credibility with our suppliers. And therefore, we're able to conserve the cash in this manner. And therefore, we're able to get extraordinary support from all our suppliers, which I think is really the reason why up to this point, we're doing so well. And we haven't announced any delays or any overspending when it comes to our ocean program. also we have of course added some spending this quarter here when it comes to our internal spending on engineering and testing specifically testing as you know we have developed something we call the ff path which is the fiscal flexible platform or agnostic design and that's really a development an accelerated development method which allows us to bring in new technology very late in the program. So today, if you buy a brand new vehicle, most likely that technology was selected three, four years ago. But in our case, we have brought it as close as 18 months before we launched the vehicle. That's probably similar to some electronic industries like the smartphone industry. So you will get really the latest technology from Fisker. And because we've been able to select some of that new technology, and we'll show you that in November this year, we also have to do some more testing. And we have decided to do some of that testing in-house because we want to make sure that we get the right customer attributes. So that's a really important thing for us. And finally, Gita and Christian will touch on our recent cooperation agreement with a large European charging network, Aligo. This will benefit our customers and I think really create a competitive advantage for Fisker in Europe. They have thousands of charging stations and Christian, our VP of marketing over in Europe, will go into that in a moment. We, of course, also will take care of our U.S. customers. As you might remember, we signed a deal with Electrify America, the largest group of independent charging stations in the U.S. And if you think about this, it took another pretty famous company probably about five to seven years to build out a charging infrastructure in the U.S. and Europe. When we start with the fiscal ocean in the next year, We will offer our customers between Electrify America and Allegro a larger charging infrastructure straight out of the gate. We don't have to build this up. We don't have to spend billions of dollars doing that. We will integrate our apps seamlessly with these two charging groups, and I think this will really be a unique experience and a competitive advantage for us. Finally, let me talk a little bit about in detail on the Ocean Program progress update. As I mentioned, we are on the track for SOP on November 17, 2022, so November 17 next year. All the agreements with Magna for platform sharing, development, and manufacturing, and our final, we have gone into a lot of detail on prototyping, testing, as well as the ramp-up phase in those agreements. And of course, this also means we have a clear visibility on cost as well. So that's something that's extremely important. And I want to also give you some detail on why we know we are on track. So we have a handpicked experience team that has grown significantly. In fact, a little faster than we originally anticipated. And it's consistently delivering to the engineering supply chain timelines. We also have the robust engineering process and gateways that ensures anything falling behind is highlighted early. And let's face it, I mean, this is the car industry. Nothing is going to run absolutely perfect all the time, but the key here is to create a culture where any issue is highlighted right away and where you work collectively to find a solution and remain on track. And it's also important that you have an internal tracking system where you immediately can see contingency plans and you catch up and make sure that you actually bring anything back on track that might have fallen behind, which it always does. But the key is, can you bring it back on track? And so far, we've been able to do that because we really have created an amazing internal tracking system. We have, of course, as I said, already reached not only full design freeze, but also we have frozen all the specification of the vehicle. We have already finalized our three variants. We're going to have the first variant called the Sport. We've just got rid of sort of the a base model, calling it a base model. So instead, we call it the Sport because we actually have quite a lot of equipment in that base vehicle. So we call that the Sport. So you get the Sport package with the original price of $37,500. Then we have two more models where we up the power. We add a lot of options, a lot of technology to these two other options. And we're going to announce details of that and pricing of that in November this year. I would expect that our middle vehicle, so the middle price will be the biggest seller of all the vehicles and we have a great profit margin on that vehicle as well. We have a robust process for testing and validation, homologation and certification that are of course signed off both by Fisker and Magna and our supply chain. And why is that important? Because of course, if you are a startup company and you just make your own car somewhere, you can obviously decide to skip some of the important testing and therefore risk quality, maybe even risk some safety. In our case, we are following very tight guidelines together with Magna and our supply chain to make sure that our vehicles are fully tested, we get the best safety ratings, and right out of the gate, we want to deliver the highest quality vehicles. now as i mentioned earlier uh this position of the in-house capabilities is something that we are building up because this will be important for the other vehicles that we're going to be launching in the future and as we have accelerated the peer program we are already using this cross-functional ability both on the ocean program and on the PAIR program. And as you know, we are actually working on two more vehicles, not as intensively as the ocean and the PAIR, but these vehicles, the two next ones, will also benefit from this in-house home negation testing and validation, and ultimately that will actually save us money. We also are already seeing benefits between these four programs of carrying over parts that Fisker have uniquely designed, and that's something that's going to benefit us Later down, when we start looking at the lowering of the building materials, higher volume for parts, etc. So, bottom line, a lot of work ahead, but pieces in place. We have a high level of confidence for the execution phase until production of the ocean starts next year, November 17th. Let me give a little bit of a marketing update. I know a lot of people are asking about marketing, and Of course, we have actually a really, really exciting marketing plan, but I don't really want to go out and use up the gunpowder too early. So we decided to really kick off this marketing plan simultaneously with the launch of the FISCO Ocean Production Vehicle in November at the LA Auto Show. And by the way, if for whatever reason LA Auto Show shouldn't go forward, we already have a plan B. So we will be launching our vehicle in November. Maybe it's an open air event or something else. We have a couple of ideas for that. But when we get to November, that's when we are actually going to reveal some of these new technical details that we have. In terms of the marketing, we will start really spending on marketing from November and, of course, into 2022, where we are opening experience centers. We are attending several other automotive shows, events. We are creating some really unique, I would say, uh unique partnerships uh some unique events something that nobody else have done before we're going to go heavily into digital marketing we have a lot of great collaborative partners and ambassadors that we're going to unleash next year we already have signed up our vehicles for a couple of different television series that we're going to get into so believe me we we are going to go all out from november this year now One of the things that a lot of people are asking as well is what are the main reasons for buying a fiscal erosion and what is the advantage over the competition? Well, let me just sort of maybe go through a few of them here. Design, you know, we are a design-led company. And as you move into electrification, let's not underestimate the value of design. Because in the end of the day, when you used to buy a gasoline car, it was about how the engine sound, how smooth was the gear shift. Well, little things are falling away. So I personally believe design is going to be more and more important. And who wants to drive a boring, dorky car if you can get a good-looking car for the same price and even faster, even better, have more technology? So I think design is going to be one of the leading things specifically in the marketing segments that we're going in. I mean, we're not making minivans and we're not making delivery trucks. We are making vehicles that people save to own. We are making vehicles that people are proud of, that people want. So I think design, we are the leader in that. Sustainability, number two. Sustainability, I think coming out of COVID, is going to be one of the key differentiators for us. I think today's consumers want to align with the brands they buy. You're spending a lot of money on a vehicle. And if you can get a vehicle that is not just another electric vehicle, but actually one of the world's most, and I believe we can make the world's most sustainable vehicle, I think that's a really, really strong brand pillar. So sustainability and ESG is actually one of our highest, highest brand pillars. Then, of course, there's the value. And when you think about it, you hear an electric vehicle is expensive. Well, compared to what? So you compare an electric vehicle in a certain price class to what else can I get for my money if I look at another vehicle? Either it's electric or it's gasoline. And I will say the Fisker Ocean, without three price points that we have and the amount of technology performance we have in these vehicles, we are, I would say, amazingly competitive. Now, you're going to judge for yourself when we release the final data in November, but I think you'll be very surprised, and I think that's going to be another differentiator for the Fisker Ocean. Then overall vehicle performance. Vehicle performance is also dramatically, in my view, going to change. You know, yes, we know you can make a fast electric car and, you know, there's talk about range and all that, but in the end of the day, how is this vehicle performance relating to how you drive and what you do with this vehicle in your daily life? We will have amazing performance options for this vehicle, so don't worry about that. I'm a car guy, and I love 0-60. And by the way, I also think we're going to achieve potentially the longest range in the size and price class of vehicle we're in. That's something that I'm fairly confident in. And then, of course, there is the battery pack management system, the drive unit itself, how it performs, you know, what can it do. And we got, I think, a pretty big surprise in terms of how this vehicle is able to handle. And in my view, I mean, I went out and I tested our powertrain on the test track. And I was just blown away. It actually makes you feel like a Formula One driver, what this vehicle can do. And it's not just about the acceleration, but actually how the vehicle handles. I personally have never driven an SUV that handles as good as the Ocean and have the type of responses that a Fisker Ocean has. So I'm super excited about it. Finally, I mentioned SUV, and that's exactly the keyword here. It's probably pretty easy to go out and make another hatchback crossover, get a little bit good CD figure and all this type of stuff, but how do you truly make an exciting vehicle that people really want? And again, there is zero doubt. And the data shows us that the highest growing segment in the world is Azure East. And I think we have a pretty hot one. And I think this is a big differentiator. Five is user interface. You know, we have a great person there leading the team in user interfaces, interacting with our engineering team, and they are working seamlessly together to create what I think is going to be the world's best user interface. My mandate to them was, you know, I want to feel when I get in this car how I felt the first time I got an Apple iPhone in my hand. You know, it was that moment of, is this really going to work? And then there was, wow, I don't need to read anything. It just works seamlessly. That's the type of feeling I want in the Fisk erosion. I'm sitting in the reviews, and I think we're on the way to this. It's not an easy path. We do it in-house. We're coding in-house. We're developing in-house. It's going to be fully connected. It's going to have a totally different way of using it, but I think it's going to be very intuitive. And, of course, it's going to have a lot of opportunities for over-the-air updates. So we are going to excite people with new features as we move along into 23, 24, and 25, and so on. So I think the exciting part is we're going to be able to keep this vehicle fresh and keep updating it with new exciting features. And then just the last thing, that's one of my favorites, is one unique feature, which we have talked about previously, is the California mode, which creates this convertible feel by the touch of a button. You know, it doesn't matter how much money you spend on a car. Even if you would buy a $3 million supercar, no other car has that feature. And you know what? Once you try it, it's pretty amazing. And to be able to get it in this price class is quite unique. So I'm excited about that, too. Let me finish with ESG. As I mentioned, an important pillar in the company. We continue to make significant progress on implementing ESG goals across our business. In fact, there are dozens of ESG deliverables assigned to various departments within Fisker. And most importantly, we aim to produce the world's most sustainable vehicle. And that goes all the way into our supply chain. You might have noticed we just announced a supply deal with Bridgestone. And I know it might not be too excited about reading details about tires, but we spend a lot of time to figure out who makes the world's most sustainable tires and what do they do, not just the tire itself, but in the way they get to this tire, how they actually develop it and certify it virtually and all that. And that's what we do with every single supplier. Again, also, of course, Magna, being the fact that our vehicle is going to be produced in a CO2-neutral factory already next year, I think is pretty amazing. Finally, in terms of the Fisker Ocean, you know, we obviously have other ideas about ESG and some long-term goals that we are working on within the company. We set the goal of making a CO2-neutral car by 2027. That's three years earlier than anybody else has announced they're able to do it. The team is aligned. They're aligned behind our brand. And I think that I can really feel within Fisker that we are going to be the best in ESG. I'm convinced about it. So thank you very much. We'll take some questions later on details, but I now want to hand it over to Burkhard. our Chief Technology Officer to provide us some detail on how he is directing efforts to develop two platforms at the same time, not an easy feat, and something that is only possible through our unique business strategy and partnerships. Burkhard.