Fisker Inc.

Good afternoon, thank you for attending today's Fisker Inc. second quarter 2022 earnings call. My name is Frances and I'll be your moderator today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you'd like to ask a question, please press star one on your telephone keypad. I would now like to pass the conference over to our host, Frank Borak with Fisker.

Thank you, Francis. Hello, everyone, and welcome to Fisker's second quarter earnings call. As the operator mentioned, my name is Frank Borak, VP of Investor Relations and Treasury here at Fisker. Joining me on today's call are Henrik Fisker, Chief Executive Officer, Dr. Burkhard Hunke, Chief Technology Officer, and Dr. Geeta Gupta Fisker, Chief Financial Officer and Chief Operating Officer. Before turning it over to Henrik, be advised we will be making forward-looking statements within the meaning of the federal securities laws. Forward-looking statements generally relate to future events or future financial or operating performance. Our expectations and beliefs regarding these matters may not materialize. Actual results and financial periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include those set forth in the press release we issued earlier today, as well as those more firmly described in our filings with the Securities and Exchange Commission. The forward-looking statements in this presentation are based on information available to us today. We disclaim any obligation to update any forward-looking statements except as required by law. We'll 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 our non-GAAP financial information to the directly comparable GAAP financial information appears in today's earnings release. With that, I'm happy to turn the call over to Henrik.

Thank you, Frank, and thank you, everyone, for joining this call. I first want to actually begin thanking all our teams and our partners for the incredible progress we have made here today. I'm really, really excited. I'm actually really excited about this call because we got so many exciting things to announce. Of course, the progress has continued at a great pace and is unscheduled when it comes to the ocean. And we're on track for SOP on November 17th this year, as we have stated previously. And that remains the same. And we have also continued into the next phase of our second program, the PAIR program. I'll talk a little bit about that later. We have completed 55 ocean prototypes. And they've, of course, been built to do all our testing. That continues. And we've got some great results. And Magna continues to build prototypes throughout the rest of this year until SOP. We also have had reservation growth that has continued at a rapid pace. We now have over 56,000 reservations, including 5,000 pre-orders for the FiscaOcean 1. So we have seen customers responding to the FiscaOcean's class leading and industry first features. I want to mention that getting thousands of people here in the U.S. to put down $5,000, a non-refundable on a vehicle they haven't seen yet, they haven't sat in yet, they haven't driven, really shows for me the commitment, but also the value proposition that we have in the Fisker Ocean, not only in terms of price, but all the things that we offer. And if you go to our website, Fisker Ring, you can see that we have many, many features that you can't even get on another car. You can't get such a big solar roof as we have. You can't get a California mode. You can't get a 17.1 inch rotating screen. And I can go on and on about all the features, these fantastic features that we have developed at the Fisco Ocean have, and quite frankly, makes it stand out in this class. Now, we opened the pre-orders in early July for a $5,000 or local equivalent down payment in Europe. And for the exclusive launch edition, which we call the Fisker Ocean One. And I'm happy to say that we are sold out of all the 5,000 Ocean Ones pre-orders and everybody paid $5,000 for that order. And that really represents, in my mind, a real order. And it's actually quite a historic moment because I don't think anybody has ever done that before in such a way. And it really also shows that we now have a potential revenue of $350 million, which are already secured before we start production, which I think is amazing. Let's get to the balance sheet. It remains solid at over $850 million in cash, and our business continues to scale. The fiscal team are now over 550 people representing over 60% growth year to date, including our new SVP of global manufacturing, who will focus on a lean manufacturing and innovative techniques. And what I mean by that is that Fisker have a development process where it's all about efficiency. So we are bringing a manufacturing brainpower in early in the development process, specifically on the pair program, because we have a very, very tough target to reach in terms of cost for that. And that includes, of course, ease of manufacturing. So I've given very clear guidelines to the engineering team, reduce parts, reduce cost. And we are now in the second phase of that program. And I'll talk a little bit about that. And we are still on target to launch that vehicle for under $30,000. Now, also, the organic marketing efforts continue. UK debut at Goodwood Festival of Speed. And we had a French debut in Paris. plus continued progress on our Fisker lounges, which is what we call our experience centers or showrooms, which we expect will open later this year, both here in the U.S. and Europe. And also stay tuned for more pop-up events and our inaugural appearance at the Paris Auto Show in October. So we obviously are starting to get more marketing vehicles in October, and that's when we're going to start getting out and showing our car a little more as well, because I know a lot of people have asked for that. but we are now starting to get these marketing cards in October that we can start showing. So let me go back to a little more detailed ocean update. So our number one priority is to launch a high-quality fiscal erosion on time, and we remained on track to do so. So on the prototype update, as I mentioned, we have completed the 55 prototype builds and continue to build vehicles, and the testing and validation is well underway. In July, Fisker Ocean Prototype arrived in the U.S. for testing. We have five prototype vehicles in Michigan undergoing ADAS testing with Magna and also completing testing for high pressure, water tightness, high and low speed features, powertrain, and much more. Our U.S. internal crash testing, which we do in-house, by the way, with prototypes, achieve five-star equivalent ratings, which gives us confident informal ratings when they come out. Now, we are not in charge of when those formal ratings come out because basically IHS and other rating companies have to buy our vehicles next year and do their own testing, independent testing. But we are very confident that we achieved a five-star equivalent rating, what we have done so far, because obviously we have done all the testing internally. I personally received my ocean test vehicle in LA and have been very impressed with the handling and performance. driving around on many different streets in LA. And I'm just so amazed about what we've accomplished with this vehicle so far. And this is not even the final vehicle. It still needs fine-tuning. But I've also driven this vehicle actually in a later stage on the suspension on the high-speed track in Italy. And I can promise anybody this is going to be one of the best handling SUVs in the world, hands down, specifically when you combine the actual cornering and driving ability and performance compared with comfort. It's easy to make a super sporty car, and it's easy to make a super comfortable car, but combine the two for everyday use is super difficult, and we have really achieved this with the Fisker Ocean. I can't wait for people to get in and drive it. Now, the ocean demands remain strong. Our marketing and brand-building efforts are working. Most impressive is selling out of all the 5000 Ocean Ones launch editions, pre-orders with customers in all nine launch countries and all 48 continental US states. Our customer outreach was limited to our launch market in reservation order. Based on our information, this is the largest deposit amount of number of launch units for any premium affordable vehicle. So I think we did really well here. We have a very unique internal data-based marketing strategy as well we are using and we are building that skill internally. The Ocean is a luxurious fully loaded edition, the Ocean One, of the Fisker Ocean that include rarities and features uniquely only to the Ocean One, including an Ocean One signature badge, plaque, specific numbering, and over $5,000 of included options. People love the Big Shore Blue. So far, most popular color selection. We obviously can see what people have ordered. And the $5,000 down payment show us that customers are truly committed and allow us to plan the build with their unique colors and specifications months ahead of SOP, leading to a more seamless launch and initial deliveries. I mean, that's another very important point. The more you can plan your production ramp up, the better it is, and we are able to do that because of these firm orders we have got for the Ocean One. And I think the customers recognize the great value proposition of the vehicle, the many class-leading or industry-leading features, and the confidence in the Fisker and Magna to produce a high-quality vehicle. And we truly also appreciate customers' understanding, you know, of the current elevated logistic cost that, quite frankly, in my view, are way too high, but we are just passing over the cost of logistics to our customers. And I will promise if we get to a point where these logistic costs are falling, we will also lower our delivery costs. This is simply just a factor of the current environment. And I want to remind everybody that we have not raised the prices for the first 40,000 vehicles we'll deliver, but we do have to pass over certain logistic costs such as delivery costs, unfortunately, to our customers. But I do think these costs will fluctuate based on logistics rates as we move forward, and then we will adjust them as well. So reservations generally continue to increase, and we have started the strategic discussions with Magna to add capacity. Continued strong growth because Ocean is segment leading, has a great design, and has many sustainable credentials. And as we get closer to SOP and continue to be increasingly transparent with respect to our product and what customers are getting, And for what price, prospective customers should only get more and more excited, we're serving a notion. And we think we're seeing that already. As you start comparing our vehicle and the specification with other competitors, I think we're way ahead. And of course, we are going to show even more detailed about some options and actually equipment that we haven't announced yet that I think only is going to add to that. Starting on November 18th, the day after our official start of production, we are happy to announce that we will begin taking pre-orders for our customers who are interested in the Ocean Extreme trim. And this will be followed by pre-orders beginning opening for our Ultra and Sport trims already in Q1 2023. We are going out in phases, which will help us again plan our production forecast. And we have reserved both ocean ultra and ocean sport production for next year. So even if we were to be completely sold out of next year's production with extremes, we are promising we will still build some ocean ultras and some ocean sports, and they will be available from around Q3 next year. Let's come to the peer update. In early May, Foxconn completed its acquisition of an operational 6.2 million square foot manufacturing facility in Ohio. And that's where a pair will be built using the Fisker developed SLV1 platform. That's a brand new platform that we are developing in-house. And again, as I mentioned, it's about reducing parts and costs so we can get a super exciting vehicle on the road with high technology without spending it on platform stamping and complicated structures, et cetera. And we intend to build a minimum of 250,000 pair vehicles a year. once the plant ramps up production. And pear reservations have now surpassed 4,000. We, of course, haven't shown much of the pear. There's kind of a new image today, a little bit of the front with the super cool round front windscreen that we are working on getting into production. It's difficult, but we'll make it. We make things happen at Fisker. We make dreams come true. We don't give up on innovation. So there's a lot of innovation features in the pear, something that not only have you never seen in that price class, but I actually think You have never seen it on any car, any production car before. I'm super excited about this vehicle. I think this will really be redefining not only how you develop a vehicle, but also the content of the vehicle, the design of the vehicle, and finally, what you get for your money on an electric vehicle. And I know a lot of doubters out there that we won't be able to make this vehicle for under $30,000, but we are doing it with the ocean, and we'll do it with a pair. We have an internal process that is unique and with us really allows us to get that point. But you can't get to that point if you try to develop a vehicle like you have developed gasoline vehicles the last hundred years. You completely have to rethink what a mobile device is of the future. And that's what we have done with the pair. And I think we're going to excite the market when it comes out in 2024, which is still scheduled for, and as I said, starting under $30,000 before any incentives. And I also want to mention again, you know, we have this vehicle will be built here in the U.S. So now we have manufacturing opportunities in Europe and we have manufacturing opportunities in the U.S. And I think that's extremely important that we have been smart enough to hedge no matter what type of legislation comes in the future. I think we are in a very safe position. We've got affordable vehicles. We have heads to our manufacturing strategy. We are brought in a super manufacturing guy that are looking into even more opportunities, what we need to do for localization of manufacturing, what do we need to do for potential battery manufacturing here in the US in the future, battery JVs, et cetera. So there is nothing that we're not looking at. All opportunities are open. And because we are so agile and fast, we can actually move and actually do what's needed to fulfill the market conditions. And in fact, we are already looking at actively offer some pre-sales of the ocean should a legislation come into place where we would want to take our customers to take advantage of the $7,500 tax rebate for 2023. So if that becomes necessary, we have already a plan and we'll announce that if it's needed. So I'm very comfortable with that as well. Let's come to the customer experience strategy and an update. Fisker brand lounges, which we previously referred to as experience centers, will offer prospective customers the opportunity to see and experience the company's vehicles, as well as speak with product experts on hand. Depending on state laws, some Fisker lounges showrooms will also offer test drives. There's a few states where that makes it more difficult. We will find other ways to make that happen. Don't worry. Locations in addition to LA and Munich locations, we expect to open later this year. We expect to announce further locations in the next few months. We are already negotiating on a lot of different real estates, both in the US and Europe. We will also have Fisker Center Plus locations. Our Center Plus locations are really delivery centers and it's service centers and where you will go to test drives. And that's a real unique Fisker strategy that hasn't been used by any other car company in the world. And we are doing that so we can offer you, the customer, a much better experience, but also more value for money. We don't want to charge you for expensive buildings and leather couches and all that stuff. We want you to come and pick up your car, which you probably only do once every two or three years, and you would rather go and get a great price for the car than having to go to a super expensive glass pallets and we have to add $2,000 per car. We don't do that. It's about getting product to our consumers that are state-of-the-art at the best price. Service centers will be operated by Fisker. We, of course, also have partners strategically placed until or even during these service centers operation where we can also bring vehicles in for service. Of course, with our fantastic and I think class-leading warranty Nobody really has to think about service for the first five or six years. In fact, if there's any warranty issues, obviously it's Fisker's obligation, and we will come and pick up your vehicle, and we will either do mobile service, or we will take it to one of our center pluses, or we will take it to a partner of us. But we take care of it. You absolutely don't have to worry about it as a customer. Finally, our advanced sustainability vision, a clean future for all. We are proud that Fisker Ocean was produced in Magna's carbon neutral plant in Austria. The Fisker Ocean will contain over 50 kilos of recycled polymers and bio-based materials, more than any other vehicle that we know of currently on the market, highlighting our commitment to sustainability. Our vision when we started, and we talked about that already two, three years ago, was to make the world's most sustainable cars, and we're coming through that. We have an amazing in-house team. We have a leader of ESG, and we are going to soon announce our ESG impact report later this month. And we're actually doing that ahead of production, which is very unique. And I think this illustrates how integrated ESG is throughout our business. And we also are still very firm on wanting to reach to create a CO2 neutral car by 2027. And most likely we will use the pair model as a foundation for that CO2 neutral model. So already a lot of these ideas are flowing into the pair program, and we are aiming to lead with the world's most sustainable vehicles. I'm very optimistic about Fisker's future and realizing our vision of a clean future for all. I now want to turn it over to Burkhard, our Chief Technology Officer.