Fisker Inc.

Ladies and gentlemen, thank you for your patience. This call is due to start in a couple minutes time. We'll be right back. Hello and welcome to today's Fisker Inc. third quarter 2022 earnings call. My name is Elliot and I'll be coordinating your call today. If you would like to register a question during the presentation, you may do so by pressing star followed by one on your telephone keypad. I would now like to hand over to our host today, Frank Baroque, Vice President of Investor Relations and Treasury. The floor is yours, please go ahead.

Thank you, Elliot. Hello, everyone, and welcome to Fisker's 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 and Chairman, Dr. Burkhard Hunke, our Chief Technology Officer, and Dr. Gita Gupta Fisker, our Chief Financial Officer and Chief Operating Officer. Before turning it over to Henrik, we advise we'll 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 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. 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 hello, everyone. We really appreciate you joining this call today. I want to begin by thanking all our teams and stakeholders for the strong support this year and the incredible progress we have made so far in 2022. Despite the ongoing global turbulence, we have successfully navigated the challenging environment, closely collaborating with our partners to protect our startup production timeline. So 2022 progress continues at a strong pace. The ocean program is on track for startup production in a couple of weeks, to be exact, November 17th. Our reservation have continued to grow. We now have over 62,000 reservations and orders for the fiscal erosion. Customers are really responding to the fiscal oceans class leading an industry first features and we got quite a few of those and sold off of calendar 2023 the US allocation for ocean ultra and sport trims in response to the IRA and the balance sheet remains solid at over 800 million in cash and business continues to scale. The fiscal team is now approximately 700 globally. And I expect that we'll probably get close to 800 before the end of this year. We are driven by strong growth in India, which gives us around the clock capabilities to design the software and services that will go into our vehicles pre and post production. The organic marketing efforts continue. We were just at the Paris Motor Show and then followed by the Oslo Motor Show, our Norwegian debut. We also debuted the ocean in various regions of the U.S., both on the East Coast, New York, Washington, and then in Texas, and internationally in Sweden as well. So stay tuned for more pop-up events. We have seen they've been really successful and quite low-cost marketing events. On the ocean update, our priority number one has been to launch a high-quality fiscal ocean that has class-leading features and class-leading range. Ocean testing and validation has progressed well over the quarter. Bukat will share some more details, but there's a few that I just want to highlight right away. We finalized real-world hot climate testing, and that was completed in Death Valley, California, where it was up to 122 degrees, and everything performed extremely well. We also improved the maneuverability and overall ride and handling of the vehicle. So the ocean suspension has been developed for enhanced agility in all conditions. And I've personally driven this vehicle and it just feels amazing. Same with the braking efficiency, regeneration optimization for maximized energy recovery and a consistent pedal feel. So overall, spent a lot of time driving the vehicle. I think that's one of the Very important things for having an excellent vehicle. It's got to be fun to drive. It's got to be safe to drive. It's got to handle well, and I think the Ocean fulfills all that. To the manufacturing update, as I noted a moment ago, the Ocean SOP is on November 17th. Our startup production signifies high-quality hardware built at Magna with all the investments we have made and getting to a place where we can increase ramp month by month. We have worked closely with our supplier through design verification and parts validation, testing, and parts have been migrating from prototype to home line tools to serial tools. Getting to high quality and stable high volume ramp up production typically takes about 12 months. We deliberately plan our production ramp to ensure mature supplier parts tooling, mature parts, and mature software to provide the highest quality vehicle to our earliest customers. We have developed a detailed four-stage ramp-up plan to ensure parts suppliers follow our anticipated production ramp volumes. Our 2023 quarterly production plan is as follows. Q1, over 300 units. Q2, ramps quickly up to over 8,000 units. And Q3, again ramps even higher to over 15,000 units. And then in Q4, we reach the remainder of 42,400 units. This is the detailed plan that we have created so far. However, of course, if everything goes as planned, which I expect it to do, we would try to see if we can, together with our suppliers, increase the volume in the end of the year. And that obviously is something we will discuss closer towards the mid of next year. Gita and Bugha will also discuss these four stages in more detail later in the presentation. On the ocean demand, It has been strong as we approach SOP and continue to build awareness through organic marketing efforts. Reservation continues to increase, more than 62,000 reservations and orders for the fiscal ocean. We are also focused on ramping up suppliers to support increased production numbers, as I mentioned earlier. Just before the Inflation Reduction Act was signed into law, We acted quickly and enabled fiscal ocean reservation holders to enter into a binding contract to potentially retain eligibility for the old federal EV tax credit. In less than a week, we sold out our US allotment of fiscal ocean sport and ultra trim levels. We support solutions that provide more choice for consumers and level playing field as we look to grow the EV market in the US and continue to advocate for a meaningful transition period which drives us to a clean future for all. So what that really means in sort of layman words is that, of course, everyone in the U.S. got told about the Inflation Act in about August this year, and that was going to take effect in January 23. Obviously, nobody can plan for a U.S. manufacturing plant in four to five months, so we think it's realistic to give a couple of years chance to actually figure out how we get to U.S. manufacturing. And that's really what we are encouraging the U.S. government to think about. And we are seeing there already are discussions between E.U. and U.S. to maybe loosen some of these rules, which I think would be meaningful. Okay. Last month we revealed many new features of the fiscal ocean that are super cool. The user interface. Taco trays, for example, for driver and passenger seat, hidden glove box, rear seat controls, which is really cool for if this vehicle is used for ride hailing, et cetera. And also, we have a digital rear view mirror where you really don't need to care about your rear window if it's clean or not. Or if you have filled up the trunk, you can always see out through the rear, a super cool feature. And there's other features that you will see and discover when we start delivering our vehicles. 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, our extensive human-centered design process led us to update our web and mobile experiences. And we will roll out a new Fisker connected app on November 17th this year with continual updates into the spring. We will also introduce our new 3D configurator on November 17th. redesigned navigation, vehicle order, and transaction flow, as well as the seamless ways for our customers to interact with the vehicles. All of this will be available in multiple languages. We also plan to localize our reservation ordering process in several additional countries in first half of 2023, including large potential markets such as China and India. In addition to opening the reservation process to these large global markets, we have started to examine opportunities for local production in India, which I recently visited, where we see significant potential for the fiscal pair. We are going out in phases, which will help plan our production forecast and after sales infrastructure build out. While the pair is already planned to be manufactured in the U.S. with Ocean, we are in exploratory discussions about U.S. manufacturing with several parties. This could include licensing our Ocean platform and the sale of emission credits to an OEM partner. In the interim, we continue to advocate, as I've mentioned earlier, for consumers to have more choices and also to see that we can get a manufacturing plan here in the US at the right time. Okay, let's get to the pair update. On target with the cost of this vehicle, signed off concept and phase exterior design fully signed off and interior signed off. Now into execution, continue to transition engineering and purchasing team to pair. So we are using a lot of internal people now for the pair program, which obviously reduces costs as we develop it in-house. We are already engaging suppliers for the pair. There's an incredible number of suppliers that are interested in working on the pair. Pair production and sales are expected to start in 2024, and the base version is still expected to be priced under $30,000. And the way we're able to do that is by looking at the pair as a mobility device rather than a traditional car. which allows us to prioritize different things in the vehicle and lowering the cost in certain areas of vehicle that wouldn't have been normal if you thought about it as a typical car development process. So coming back regarding to the IRA, we have started examining with Foxconn factory investments needed to position pair production for IRA compliance over time. Our production partner Foxconn started planning for lean production system. Our reduced product and process complexity will lead to a more profitable vehicle. All core manufacturing processes will be done in-house, stamping, body, paint, GA, and PT. The Foxconn factory will have a smart automation, maintenance, digital factory, and production facility. The industrialization phase will focus on state-of-the-art equipment and tools, people qualification, and launch quality management. Final phase of production readiness will be process control, verification, and quality control check. Stamping will be capable for big, dimensional, and complex parts. The body shop will be flexible, integrated, and modular structure. The paint shop will have brand new ecosystem, which will be the most environmental friendly. General assembly will have effective and efficient production lines. Current pair reservations. currently stand at, have exceeded just about 5,000 reservations. Let me talk a little bit about marketing events and experience centers and partnerships. Due to our strong ocean demand pipeline and uncertain macro environment, our marketing spend has become more targeted and shown increased effectiveness. For example, in the past few months, we have experienced a roughly 10% uplift in premium trim configurations. And that's really due to this targeted marketing, digital marketing that we are doing in-house. We recently shared that our first lounges will open next year. While the construction delays are unfortunate, the later lounge opening bolster liquidity. If only Magna could build lounges too. We have been very active with our organic marketing events and more flexible pop-ups to allow our prospective customers to experience the ocean. Our current US ocean road tour connects with customers in multiple cities and states, including several debut locations. We followed a similar approach in Europe with debuts that I mentioned earlier in Sweden and Norway. In light of our strong reservation and order pipeline and the ongoing global market turmoil, we have moderated our marketing spend to certainly focus on remaining 2003 trim allotments. And I know it's exciting to see, of course, a lot of incredible marketing from us, but it really wouldn't make sense to spend millions of dollars in marketing knowing that we are pretty much sold out for next year. So I would rather spend these millions of dollars on new product and getting them faster to market than early marketing. In September, we announced a partnership with Wallbox, who will be our global partner for home EV charging solutions. We are pleased to provide class-leading, competitively priced chargers for fiscal owners. I think this is really going to be an easy-to-use, class-leading Wallbox charger. So advanced sustainability, let's talk a little bit about that because that's one of our brand pillars, and our commitment to sustainability is unwavering. We are proud that the ocean will be produced in Magna's carbon neutral plant in Austria. And the ocean will contain over 50 kilos of recycled polymers and bio-based materials, more than any other vehicle we know currently on the market. In August, we published our inaugural ESG impact report in advance of the fiscal ocean November 2022 SOP date. demonstrating our foundational commitment to the environment and social responsibility and transparency. We have seen progress in our ESG ratings, such as the upgrade in the MSCI ESG score from BBB to BBB rating. This rating is better than many of the larger OEMs and our competitors. Looking ahead, We are nearing completion of our first draft lifecycle assessment of this vehicle. This measures the carbon footprint from upstream sourcing in outbound logistics, manufacturing, the use phase, and end of use. So I'm super optimistic about Fisker's future. I'm really excited. I can't wait to go to Magna next week where we actually have invited journalists and also analysts that would be able to drive our vehicles. Very excited to see what the outside world think about our vehicle. Our team have done an amazing effort in an incredible short time, and I'm looking forward to host journalists and analysts next week at Magna on their test track and, of course, get a tour of the plant as well and seeing oceans being built on the assembly line. So for now, over to Burkhard, our Chief Technology Officer.