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spk01: Hello and welcome to the Fisker Inc. first quarter 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star 1 on your telephone keypad. I will now turn the conference over to Frank Boruck, Vice President of Investor Relations. Please go ahead.
spk09: Thank you, Sarah. Hello, everyone, and welcome to Fisker's earnings call. As Sarah mentioned, my name is Frank Borak, VP of Investor Relations and Treasury at Fisker. Joining me on today's call are Henrik Fisker, Chief Executive Officer, Dr. Vukor Vukin, Chief Technology Officer, and Dr. Gita Gupta-Fisker, the Chief Financial Officer and Chief Operating Officer. Please note that today's discussion includes four looking statements about our expectations. Actual results in future periods are subject to risks and uncertainties that could cause our 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. Today's discussion also includes certain non-GAAP measures, including non-GAAP operating expenses. Quantitative reconciliations of our non-GAAP financial information to the most directly comparable GAAP financial information appears in today's release. With that, I'm happy to turn the call over to Henry.
spk10: Thank you, Brian.
spk11: Good morning, everyone, and thank you for joining us today for our first quarter 2023 earnings call. I want to thank all of our stakeholders and partners for the amazing progress we made in 2023, and I specifically would like to thank all of our Noil Ocean customers for your patience these last few months where we've been working through homologation and supplier readiness. We are excited to have made our first ocean delivery in Denmark last week, And it was great to keep up with Journey as well this week. Our multi-country launch strategy is starting to take shape. And with that, I just want to go off script a little bit and give you sort of the story of the first delivery in Denmark, which I thought was quite amazing. And it does have kind of a reason, as we live in these sort of strange times where somebody can write an article, even from a very well-known news outlet, without necessarily having the facts, and suddenly have a huge impact on a company like ours, because when, for example, Bloomberg writes something, then obviously it gets copied by a whole bunch of other sites, thinking and taking for granted that it's the truth. And of course, it's very hard to strike back at something like that.
spk10: However, when I launched the first car, or actually delivered the first car in Denmark,
spk11: You know, I went there super excited, and it was before this article came out, which claimed that there's a software that makes our cars go slow. And of course, I could sit here today and say I've been in Italy driving on a test track 125 miles an hour, and somebody would probably say, well, that was probably a test car. I could also tell everyone that a couple of weeks ago, I drove from Los Angeles to San Francisco at about 70 miles an hour on public roads. And, of course, again, somebody was saying, well, is that really a customer car? So we delivered a customer car on Friday last week to a customer. And I asked that customer if I could take out the car because there was a Danish TV team, television team, with some photographers. And he said, yes, I could borrow it for that television.
spk10: So I went on the street with a photographer on the back with his camera. And within half a mile, I got flashed. and I got a speeding ticket.
spk11: So I would never have thought that such a speeding ticket would maybe have a value today because I probably, when I get, when that person gets it, which I unfortunately have to tell them you're getting a speeding ticket to get into this car, and you probably get that in a couple of weeks. Of course, I told them I would pay for it. And now, of course, I told them I would also like to send it to them so I can post it online to show that the car actually is driving fairly fast, maybe sometimes faster than it should. But it's kind of sad that we need to get to this point in time where we have to post speeding tickets online to refute such a ridiculous article. So I just kind of want to start with that, and then I would like to get on to some more serious business. So let's get on with that. In 2023, it's an important year for Fisker as we work to ramp up production and customer deliveries. We now have almost 1,000 people, more correctly, I think it's 940 or so people in the Fisker team, and they're all working hard on various initiatives to support our successful launch. So our class meeting is the ocean, and they're working at things such as trade-in, after sales, service, repairs, charging, et cetera. So everything is set up for a seamless delivery of our vehicles. So our unique asset life and ESG forward business model offers us scale benefits by leveraging our world-class partners. We're able to provide our customers with broad coverage and reach from day one. And we are super excited to shift gears from a startup into a phase of becoming a revenue-generating car company. And that is happening as we speak. So our direct-to-consumer sales and service network supports exceptional customer experience. Last month, we started welcoming customers at our Vienna and Copenhagen Center+. This week, we inaugurated two customer locations in Munich, a showroom and test drive facility at Motorworld outside Munich, and our flagship lounge located in the city center. And it was actually great because I was there in person, and I was able to look at potential customers that fortunately maybe didn't know me, so it was kind of cool to just see how they interacted with the car, the excitement about the vehicle, getting to sit in the vehicle. But I also had the chance to actually shake hands with a few customers, brush off a bit of my German and talk to them, which was kind of cool. So it's really great to see the interaction for the first time, real people coming into a store. Just fantastic. And of course, in the coming months, we are going to start opening more and more customer centers, lounges. We're going to open our lounge in LA later this month. And we're also going to, again, start a pop-up. We're going to do pop-ups all over Europe and the US. We're going to start offering access drives. So for the first time, we are really actively going out to sell this vehicle and really have our customers experience the real production vehicles. So I think this is the most exciting time so far in our history. So our long strategy supports a robust network of FISCA-certified coalition and service centers to complement FISCA's own service and repair operations. For example, in Scandinavia, where we made our first delivery, our customers would have FISCA-certified classes in Denmark, Norway, and Sweden, in addition to fiscal mobile technicians backed up by multiple service partner locations in each region, which have already been signed up. Over the quarter, we announced our Death Power European Public Charging Partnership, which complements our LICRO partnership in Europe. And when combined with ChargePoint's network in North America, that will provide fiscal ocean customers with access to over six 100,000 charging points. So I don't think our customers are going to lose anything in that regard. Let's go to the ocean update. On this morning, our intense focus on preparing for the production ramp and ensuring we deliver the highest possible quality on the ocean from day one. I, along with other senior leaders, have been based in Europe for the last couple of months. We're in close to a lot of partners. I spend a lot of time on the production line of Magna. And so firsthand, what an amazing joint team we have that works on the ocean. Just a couple of examples. It takes the robot we have specifically made for $600,000, we bought it, and it takes it only about a minute to install the battery, which just is super cool. I've shown it a couple of times on my social media. But to actually see that in reality is just amazing. There's also another robot that actually installs both the EVUs, which is the motors and everything around them, inverters, in less than a minute. So it's amazing to see what the possibilities are once we go into high-volume manufacturing. And obviously, the ocean is perhaps the only true high-volume EV from any EV startup in the last couple of years that's been launched. So I'm super excited by that. It really is a vehicle that's built for high-volume. Our number one project is launching and ramping a high-quality sister ocean with class-leading features and range. And as you know, we do have the longest range in Europe of any SUV. We are excited to have begun initial deliveries in Europe, which will be followed by a fast ramp. And I'm eager to get the ocean in the hands of our U.S. customers as well, once we have the regular certificate of EPA complete, which we expect to have this month. I mean, I actually expected a matter of days rather than weeks because We have already delivered our vehicle to BP, and they have already confirmed that they've done the testing. And just coming back to Europe, obviously, we have everything done here. All our certification is done. Same with the U.S. Accel, all certification is done. So in Europe, when we start the fully scaling up production next week, we're really going to start ramping up full speed. Then, of course, we'll start more deliveries here in Europe. After having driven the car on the road quite a bit over the last few weeks, including driving it with our first customer, I can't say how truly amazing it is. It's just unbelievable the handling. I can't tell you because this first customer actually probably said that he actually was changing his Porsche Cayenne for the Fisker Road and he felt it drove better. So I'm super excited about that. He is directly from the customer's mouth. So I'm just saying what he was telling me and he was definitely ecstatic about it. So, as we have mentioned previously, why we will prioritize our Ocean 1 Extreme trends throughout most of 2023, we have recently produced several Ocean Ultra and Sport trends on the production lines of MAGNA, and we want to ensure production readiness of those trends ahead of time, and we do anticipate customer deliveries on those trends will begin in September, and that's what we always plan, and that hasn't changed, that we will start the first deliveries of these variants in September, and of course, that means we will be incredible price competitive once we put these vehicles on the market. The ocean demand remains strong, and we continue to bring awareness to the organic marketing efforts that I just mentioned before, and of course, that's going to be even stronger. Once we start getting the cars on the road, I think our you're going to see that we are going to have a big increase of reservations. At this point, the net reservation orders So it was approximately $65,000 for the fiscal ocean. And I guess flat is the new up in the turbulent start of 2023 when we saw competitors are price cuts and turmoil in the financial sector. So I'm very happy that we have stayed on that element. So those who may have given up their reservation as they need to be somebody else to take it over, which I think is really, really cool. And during this turbulent period, we remained disciplined with our marketing spend. We'll continue to spend wisely and utilize targeted support as our vehicles hit the streets. As consumers learn more about the Ocean and we expand deliveries, we expect increasing brand advantage to drive even more customer consideration and demand for the Ocean. I fully expect by next earnings fall that we again will have quite a steep rise in the reservations once we hit the market with this vehicle. We continue to showcase the ocean through a variety of brand-building activities. Since our last earnings poll, we appeared at events across France, Norway, the United Kingdom, and the United States. I personally just got back from Oslo last week, where I spoke at the Nordic EV Summit and shared our vision, our keen future for all, and how Fisker is ready to disrupt the automotive world by creating the most emotional and sustainable electric vehicles. It was exciting to see the consumers' reaction in Norway as well. And then Norway, of course, our number one EV country here in Europe in terms of reservations. So we're eager to get started there as well, and we see a huge potential in Norway as well. I'm also going to speak here at the Financial Times feature of the CAR Summit in London tomorrow. I'm going to be discussing the industry, the challenge of carbon neutral automotive ecosystem, et cetera. So I'm looking forward to that as well. We have got recognition for our class-leading FISTA Ocean already. Last month, we won the International Recognized Red Dot Award for outstanding product design. This award evaluates vehicles based on design, qualities, production, function, and aesthetics, ease of use, and responsibility and sustainability. So we are honored to see the FISTA Ocean getting recognized by the design community. The ocean has a large retail total addressable market in both Europe and North America, and growing appeal for feed customers as well. So our innovative partnership with Ample, which we just announced, will first market only the feed market with battery-swappable Fisker Ocean vehicles by Q1 2024. That's quite soon. So lowering the base purchase price and increasing EV production is actually the goal of this. And of course, we are entering in a new segment as we have been in talks about potential large order possibilities in the feed market if we were able to adopt such a swappable battery strategy, because that specifically is tailored towards certain needs. And we'll talk about that a little more shortly when we get more, I would say, dependent on some of these orders, et cetera. Now, let me talk a little bit about the tier and some future product updates. The pair program design engineering continues to progress well. Consumer interest in the revolutionary pair continues to grow, even though we have only revealed limits of some actually little teaser photos or teaser drawings. So current pair reservations now exceed 6,000 reservations. The IRA has had some profound impacts on EV manufacturing in the U.S. We have done extensive diligence on the supply chain in order to ensure we capitalize on the new Clean Vehicle Credit Program and multiple source certain components such as batteries. And we are working toward a US-based battery manufacturing solution that's really necessary to take full advantage of these incentives. And obviously, having a vehicle in this price range, then these incentives becomes even more important. So we also continue our work with Foxconn on finalizing plans for an innovative manufacturing setup that will be required for the unique engineered pair. The pair design and engineering has been focused on reducing parts while avoiding expensive aluminum castings. We have focused on a new strategy called steel plus plus. That has enabled us to reduce parts by about 25%. We are retaining the radical exterior and interior design with the unique customer features, including the riveted truck, by the way. And we are also confirming after all our development and now got more in detail with cost of parts, et cetera, we are able to confirm the $29,900 starting price. And obviously, if there's $7,500 discount on top of that, then you're looking at $22,500. I think then you really got, I would say, an ace in your hand when it comes to an amazing EV for $22,500. We now know that pair production started early 2025, so we have shifted it a few months out. We think that was necessary to make sure we get this battery manufacturing done in the US. So in today's earnings release, we announced we'll be adding an optional hardcore off-road package for Ocean called Force E. And I just want to mention that because that's actually a package that will be available already this year, even to people who have already purchased the Ocean. So it'll be eligible in all the four-wheel drive versions. And I think this is going to be super exciting in this vehicle. This will move the Ocean into a new market segment with few direct e-become ventures at our price point. The Ford's e-development is headed off by our senior VP of engineering, David King, who had an early career in off-road rally driving and was a national champion bull rider as well. So I can guarantee you this Ford E will be quite a beast. I'm really excited by showing it, by the way. And we will be sending out some images later today so you can see how cool it is. I think it's really going to, you know, offer something unique in this segment, which is not available today. And I think being able to drive zero emission in nature is even cooler. Now, finally, I'm really excited about this here as well. We're planning to showcase our future product portfolio with several drivable prototypes, at our inaugural investor event on August 3rd this year. So we are in the middle right now of deciding and developing and constructing these vehicles. And I can tell you, this is going to be something else, quite a thing. And you're also going to be unveiling the Radical Pair. It's a fully drivable vehicle. You'll see the interior, the exterior. You'll see all the cool features that have never been seen before in any car. So I'm super excited about that. And I think we'll send some shock waves throughout the oil industry when you start conveying our future model lineup, which really would show the growth strategy we have in our product strategy, which I actually think is unparalleled, and maybe one of perhaps the strongest points of this curve, that every single model that we're showing you will have something unique in a segment and almost redefining the segment. So with that, I'm super optimistic about Cisco's future and realizing our vision of a clean future for all, and I'll now turn it over to Bukhar, our Chief Technology Officer.
spk07: Thank you, Hendrik. Beginning with the Cisco Ocean, I'd like to begin by providing an update on our dual-continent homologation process. We are the only startup that has homologated a legal senior tendency in both North America and Europe. We believe this will prove to be a critical advantage in our growth strategy. However, this has not been an easy task as there are over 100 regulations and 280 various tests. One of the key milestones in the past few months was the Fisker Ocean Stream achieving a combined WLTP range of up to 707 kilometers or 440 UK miles for the 20-inch wheels and tires, 701 kilometers, 436 UK miles for 22-inch wheels and tires. Both these results mean the Fisker Ocean has the longest range of any battery electric SUV sold in Europe today. extremely pleased with these results. The findings significantly exceeded our previous estimates of 630 clearance. What was most impressive to me was the minimal range difference between the 20- and 22-inch tires and wheels. That's less than 1%. Such a small range difference is a testament to Fisker's engineering collaboration when developing specific tires and aerodynamics for the ocean. I'd like to congratulate the team on a job well done. We look forward to getting the official EPA range results and anticipate these will meet or exceed our estimated 250 mile range for the fiscal ocean extreme. We delivered our first vehicle in Europe last week and now have approval to sell in well over a dozen European countries. The U.S. approval process is progressing, too. We completed the U.S. federal NHTSA self-certification, and the EPA completed its confirmatory testing at its lab in Michigan, and we are now waiting for the EPA test results to confirm our test results performed by a third-party test lab. We are intently focused on receiving EPA and CARB approvals, which we expect this month. I'd also like to point out that while our focus has been on launching the OceanOne Extreme trim, we have continued to make progress on the Ultra and Sport trims as well. We've produced several units of the all-wheel drive Ultra and the front-wheel drive Sport, which are being used for internal testing with formalization expected to start this summer. Functional safety implementation has been a critical area of focus for our team. We don't want to risk anything when it comes to launching the ocean. We want to release a product that is reliable from day one, so we must make sure that everything is 100%. We completed the US FMVSS and NHTSA testing requirements in the US and internally validated European NCAT. The ocean has proved to perform at the highest standards, and we are very proud of its results. As I had explained in the last remix, that I have been spending time hardening the software in the vehicle and ensuring we have all the diagnostics for high-volume, inline commissioning, and end-of-line testing. Specifically, we worked on fine-tuning power management and network management and optimal powertrain integration for seamless customer experience. We run bug bashing and validation sprints to get the architecture ready for the automated production process. including diagnostics routines and flash procedures at the production facility, and also over-the-air updates. Great effort has been spent on the acceleration of automated calibration routines at ADAS components, especially the 4D radar systems, to be successfully adjusted to the production tact. As the vehicle has increased software, and we expect improvements over time with software enhancements, The key areas have been software configuration management. We rely heavily on our supply chain partners and have been co-developing the process to receive final matured parts from ECU suppliers, acceptance testing and ensuring all cars have the same configuration. Unlike the hardware aspects of the vehicle, we expect continuing innovation and progress with the vehicle software. We've taken advantage of these past few months to deep dive into all possible customer scenarios, debug and perform additional testing to provide customers with the best experience upon delivery. For example, we are running cars in multiple fleets in the US and EU for functional validation and to identify customer edge cases and further improve their experience. These fleet programs are very beneficial to identify customer relevant integration issues as quickly as possible. So in daily sessions, we are reviewing issues or concerns and we use software updates to refine the experience. We test over-the-air updates and ensure the pipeline resilience. This is a phase every car manufacturer goes through with a difference that we have full connectivity and can react immediately. Now we have extended our program to early customers and even get their feedback. This process allows the hardening of the software in the field. that being said the software of the vehicle will never truly be done as there will always be room for to improve functionality and deployment new features we plan to launch over the air updates over time to continually improve the customer experience and product performance i'm particularly pleased with the implementation of the oceans infotainment system We greatly simplified the controls, creating a straightforward experience switching between different settings, functions, and features. I find the containment system to be very unique in our car. And I'm proud of the implementation and easy-to-use nature and great functionality. Let me also highlight the studio sound system level, which has been integrated into our multimedia experience, which delivers a rich, immersive sound. provide an update on PAIR. As we start to shift the focus to PAIR, we can use all our experience to create the next generation of mobility. I'm looking forward to sharing more details in real life at our product day event in August 3rd this year. The PAIR body structure will fulfill the 25 highest global safety standards US NCAP, European NCAP, Chinese NCAP, IIHS, top safety pick. And it's competitive in NBH durability and functionality. Compared to OCEAN's multi-material body structure, the pair body structure uses a different approach for more sustainability, less parts. Less parts will mean less mass, less cost, and less CO2 from transportation. We are also looking to increase the amount of recycled steel by mass. Based on our engineering study, this will yield a significantly lower carbon footprint than the typical energy-intensive aluminum mixes. We're taking our emphasis on sustainability and reuse to the next level by introducing a scalable, reusable embedded electronics architecture in PAIR. This will be paired with an advanced software architecture, creating a highly scalable software-defined platform. This platform is also designed for much faster data speed and wireless connectivity than the current generation. This platform will be easier to adopt into all our next-generation vehicles. Driving costs and quality benefits through the reuse of hardware and software across our entire product line. We already are building key performance computing electronic components and software in-house. In-house electronic and software development will enable Fisker to deliver highly differentiated user experiences and connected services throughout the lifetime of the leader. We have a talented and growing team of engineering software experts in-house, complemented by world-class partners. The Fisker Ocean is a complex vehicle with the breadth of attributes and capabilities, and the final product is incredible. I'm excited for our customer to finally have the opportunity to experience these features, too. They are very well positioned to support ocean maturity in our upcoming vehicle platforms, including TRAIR. Thank you. I will now turn the call over to Dieter.
spk04: Thank you, Luca. Good afternoon. Good morning, everybody. Around three years ago, when we had planned an IPO through a merger with the Apollo SPAC, we had a vision. We had a vision with a great product in the fiscal ocean. And with that vision and our Acid Light strategy, at that time, we had to form a platform, engineering partner, and a manufacturing partner, create a supply chain and ramp up supply chain, create a validation and testing plan to achieve homologation and certification, and a robust product, create a customer base, with retail and sales channels, a 2023 ramp to a high volume product, grow the company whilst achieving these milestones, and ensure we have sufficient funding along the way to achieve all these things above. And that's only three years ago. In 2020 and 2021, with the advent of several new startups ready to conquer the EV market and with the availability of capital on Wall Street, it all sounded very, very easy. The last two years have not been easy for anyone, but it has separated the real scalable businesses from PowerPoint slides. Global pandemic, geopolitical events, elevated inflation, rapidly rising interest rates, unstable supply chain, market volatility, altered capital markets, product price wars are all extreme events that have tested our resilience, our ability to navigate through volatility, and deliver what we set out in 2020. The barriers to entry are high in this business. And what we set out to do is not difficult. It is almost impossible. What have we achieved till date? We have created an amazing product, as both Henrik and Bukat explained, with differentiated features. And I cannot wait for our customers to experience those and for us to scale up. Product is the ultimate foundation of innovation and disruption. A differentiated, exciting, and unique product portfolio and features is a unique skill set. And this is Fisker's intellectual property, a phenomenal product, and we are really excited to show this portfolio in the summer. And this is what differentiates us from other players. We ultimately created our own flexible proprietary platform that will hold several new vehicles in the future, and it can also be licensed to other OEMs. With such an exciting product, we also managed to energize a world-class supply chain to join our mission, which is also an extremely difficult task to do during these times. While every company has had supply chain issues, so have we. But we always found ways to work through them, and we continue to do so, and I will give some examples later. With a world-class leading emotional product, we organically built a highly engaged and committed customer base that stands at 65,000 today and we're really proud and grateful to our loyal customers. And we will continue to grow the enthusiasm for our digital experience in super exciting, super fun retail stores. We recently opened four EU locations, and I got a chance to visit two of those in Munich, in Germany, and one of those, of course, in Copenhagen. And we expect to grow this to over 25 locations by the end of this year. With European homologation and certification completed, We have now crossed the final hurdle to commence sales in Europe. U.S. is close behind. These are significant and major milestones that everybody underestimates, but what they should be seen as crossing major barriers to entry that only a handful of companies have achieved. We have now the license to sell cars, as Henrik mentioned. We registered our first two vehicles in Germany and Denmark, two of our key large markets. We are now preparing to receive parts to build marketing and customer cars later this week for second quarter. We expect to produce 80 cars a day during the last week of June, which should ramp up on a weekly basis throughout the year with our run rate. It's easy to forget where we started, what we have achieved, and where we are today. Now, our final hurdle amongst all those different milestones I talked about is to achieve a 2023 ramp which requires us to ensure that both our supply chain and manufacturing partner ramp up so we can deliver high-quality cars to our customers for a great experience. I would like to thank all our suppliers and our manufacturing partners because they have come through with us in these tough times. They are world-class leading partners. What we are setting us up is for maximum run rate and achieving a high-quality production that can be scaled up. Last year, I had outlined our four-stage production ramp-up plan that would take us from SOP through full high-volume lean manufacturing and target the run rate in excess of 50,000 units annually achieved over roughly four quarters. Just to remind everybody, Stage 1 was expected to last through the end of March 2023. Just to tell everybody what happened during Stage 1, we secured quality and capacity readiness on 78% of all supply chain parts as a majority of our suppliers integrated production tools into Homeline to meet the production ramp. However, we did have challenges. And let me explain you some of these challenges. We had challenges with specifically one tier one supplier that requested additional time for tool integration as their tooling vendors had setbacks due to bankruptcy in Europe or late tool completion. However, we understood the situation, and we handled the situation with tact and speed, and we took the responsibility in our own hands and entered into direct negotiations with the insolvency receiver to free our tools. We resolved the release of our tools, and our Tier 1 supplier has now confirmed that they will be able to meet our new forecasted volumes. We are actively working with those suppliers and our specialists and are managing these with Tier 1s to make sure we have no disruptions in our production schedule. Passport teams were deployed to secure the remaining suppliers during Q2. We also had a handful of suppliers who have requested more time for industrialization and high-volume ramp-up, specifically in areas where there are safety-critical parts. And we are working with these suppliers to ensure that they meet our adjusted volume forecast in a timely manner. We have over 90 suppliers ECU suppliers that have to achieve both hardware and software readiness, as Bukhar talked about hardware and software configuration. In addition to hardware readiness, software from each of these suppliers has to be validated at MagnaStyle hardware in the loop and at the vehicle level prior to suppliers receiving approvals to industrialize the component software for product part approval integration. We have requested several suppliers, and they are working on site, while some of the others that are not so critical are managed by our material planning and engineering teams to ensure the right hardware-software combination is present and the parts we have for production is the latest release level for the vehicle. Bookard referred to hardware-software configuration management. This is the holy grail of what the new software-based cars are dependent on. I'm very pleased to announce that Fisker will collaborate with ServiceNow on a new solution for the modern software-driven car which requires an innovative hardware software configuration management platform for the big data era, both when we produce cars, but also when they're in the field and we do over-the-air updates. We have implemented pre-ranked quality audit processes where we verify critical commodities prior to the incoming parts inspection. In the QA stage, we have found cases where suppliers did not need design specifications, which triggers a 5D loopback process that the SQA and supplier team implement to close out all open QA items. I know it's boring. I know nobody realizes this is critical, but this is what it takes to create a high-quality product. With supply chain disruptions easing, many large suppliers have managed to adjust for reduced input costs recently and started passing on the benefits as they have built-in mechanisms, including built-in mechanisms within our contracts. Some suppliers who did not manage their forward purchase well are still figuring out how to adjust pricing. But in Q3, we see an overall reduction in input costs from continued improvements in commodity and logistic prices. While all our battery raw materials prices are down meaningfully from peaks, most notably lithium carbonate is down over 50% from our last running call and off more than 70% from recent peaks. We continue to work with our supply chain to ensure we remain competitive in our cost and offering to our customers. Just this morning before this earning call, I had an extremely productive meeting with CATL, our battery partner, who continue to support us, and I'm really excited to say that I'm visiting them at the end of May and at the beginning of June to discuss how we can consolidate our partnership. If we needed to increase capacity, how do we work with them on our pair program? Our digital direct-to-customers approach is a differentiator and enables efficient sales and distribution costs. which are essential for delighting our customers, connecting with them and their vehicles when and where they choose, and supporting the flywheel of profitable growth from an early stage. We continue to enhance the fiscal web and app platforms to allow customers to seemingly purchase their vehicles. Just want to remind about our Chase partnership in the United States and Centendare in Europe. Digital functionality will expand in the coming weeks in alignment with our production ramp schedules, for both the purchase journey and ownership experience and support. I think we have the best configurator product out there, which really leads to an emotional engagement with the product digitally. For example, the Cisco Web Digital Platform that will be released in the coming days will allow our customers to seemingly purchase vehicles online, including financing, insurance delivery, or pickup, scheduling and tracking, title and registration, which truly makes this a digital platform. Final sale completion, service, and roadside assistance scheduling will also be available. And finally, we are excited to release the ownership and connected vehicle experience through the fiscal wrap later this month as well. Now turning to the numbers, Q1 results, balance sheet, 2023 outlook. Due to our updated homologation timing and supply chain limitations during this launch period, as I described above, we have updated our 2023 production forecast to a more conservative forecast as we bill shift to the right. First quarter revenue totaled $198,000, largely driven by sales of the Fisker branded home charging solution as a partnership with Ballbox and through merchandise. The decreased quarter of quarter is due to reduced sales of Fisker branded home chargers compared to Q4, where we of course benefit from early adopters who are eager to outfit their garages during holiday shopping season, and as we are launching cars and customers are converting their registrations into orders, I expect this to pick up as we deliver more vehicles to the customers. Our Q1 operating expenses totaled 121.6 million. R&D SGA had some non-recurring milestone accruals, which reduced the run rate for these line items over the balance of 2023. Loss of operations was also 121.6 million. Net loss totaled 120.6 million or 38 cents loss per share. A modest improvement from last year's net loss of 122.1 million and 41 cents loss per share. Capital expenditures came in at 45.7 million for the quarter stable year over year. Our balance sheet remains solid as we have shown discipline over several quarters as a public company. We finished Q1 with $652.5 million in cash. This excludes $22 million of pending VAT receivables, and I expect these VAT receivables to come in in the next few weeks, and these will go down as we finish our tooling expenditure. During the quarter, we brought in approximately $47 million from our $350 million at-the-market equity program, which is part of our $2 billion shelf. In addition, we regularly monitor all funding channels and evaluate opportunities across the full spectrum of debt and equity instruments in order to maintain a prudent liquidity profile and appropriate support our asset life models. Turning to our outlook, as noted in today's press release, our overall non-GAAP SG&A R&D plus CAPEX guidance for 2023 remains unchanged at $535 million to $610 million. This is consistent with our expectations provided last quarter. This guidance benefits from our asset life business model and disciplined cost management while at the same time supports our prudent investment plans. Should circumstances warrant, we have already identified very strategic cost down levers that we can exercise. We now expect to produce between 1,400 to 1,700 vehicles in Q2, and that's provided all our suppliers can support this volume. We shifted our March-April volumes to the right due to homologation timing and supply chain limitations, especially with regard to interior parts that were impacted by a Tier 2 tooling supplier's bankruptcy, as I explained earlier. Fisker expects to have a steep ramp up this summer, and we expect to end the third quarter at over 1,500 vehicles built per week, equating to over 70,000 annual run rate. Accordingly, we are revising our calendar 2023 production guidance to 32,000 to 36,000 units as conservative numbers, provided all our partners can ramp up with high quality and high volume. We still maintain and anticipate growth margins for the full year 2023 in the 8% to 12% range and potentially positive adjusted EBITDA provided input costs do not change drastically. The fiscal team is now represented in 11 countries and counting as we prepare to deliver Ocean Ones to all our launch markets and set up the infrastructure for the next wave of countries we will enter. I'd like to close by thanking our incredible team members, our partners, and our suppliers for their hard work and dedication, bringing an amazing vehicle to market despite many external challenges. We are fundamentally agile, and we make quick decisions. We're now happy to take your questions. Operator, could you please go to the first question?
spk09: For the Q&A session, we'll start with some of the retail questions that were submitted over the SAIT platform. So, the first question, in light of the low share price, what is FISPR doing to increase shareholder value and instill confidence? Henrik, do you want to take that?
spk11: Yeah, thanks. I think, you know, we are trying to be as transparent as we can. And, of course, we can only bring out the news when there are news. And I know a lot of shareholders would like to see us send out press releases every second day. That obviously isn't possible. because sometimes you do need to finish certain milestones before we can do it. But I think we are extremely active. We are agile. We are moving fast. And, of course, the next step now is really getting the cars on the road. That is what's going to bring value to our shareholders. That's what is going to bring confidence in the market. But it also has to be high-quality vehicles, and it has to be a high-quality delivery system. And that's why we started out with a couple of deliveries to make sure that the entire process works. Because once we're up and delivering 1,500 vehicles a week, we need to deliver vehicles super fast. And we do have examples where that was an issue. So we don't want to run into any of these issues that we can't deliver the vehicles we can produce. We definitely have the customers. We don't have to worry about that. Secondly, I just want to say that Part of building this investor confidence, once we're out in the market in these vehicles and are showing continuous deliveries and production through June and July, we decided to have our investor or shareholder called Analyst Day on August 3rd this year. And I can tell you, it will blow everyone away. It's never been seen before, the type of product display we are going to do or show on August 3rd. I'm in the middle of to get our team to develop these vehicles right now. They're going to be stunning. They're going to be amazing. There's going to be nothing like it. And I think this will finally show that FISTA have a completely different path and a completely different market opportunity with our future product strategy. So I'm super excited about that. And I'm sure that's going to build investor confidence. I know, Ida, I want to say a few things about that as well. Ida?
spk04: Yeah. You know, as a CFO, Absolutely, for all our shareholders. There's nothing more than I would like to see our stock price higher. Of course, I would like the market to recognize the true value we have. I took everybody through the milestones we've achieved. And sometimes you wonder that when we went public, we hadn't achieved all of this. And today, we've achieved all of this, and we still report a phenomenal cash balance, and we're about to generate revenue. I absolutely understand what our retail shareholders are asking, and that's exactly what we're doing. What we need to do is we need to remain laser-focused to deliver, and we need to deliver high-quality cars. We need to deliver on the production ramp. We need to support our suppliers, and we need to keep our head down, and we just need to deliver the rollout plan for the fiscal ocean. We are working extremely diligently, sometimes 18, sometimes 20 hours a day, sometimes no sleep, to ensure the highest quality product and customer experience on day one. And frankly, I think if we keep executing on our model, on an asset-light model, the market will recognize the share price. I also mentioned earlier that there's a fundamental difference when you're developing and you don't have the license to sell versus when you have the license you sell, you truly become a car company. And I think with that, we would expect the market to reward us for our resilience, for our hard work, for the great product we've launched.
spk09: Thank you. Operator, now let's turn to the phone line questions, please.
spk01: Thank you. If you have a question, please press star 1 on your telephone keypad. Your first question comes from the line of Chris McNally with Evercore. Please go ahead.
spk05: Hi, team. Thanks so much for the detail. So two questions. One's going to be on production, and then the second's going to be on Foxconn. So Henrik and Gita, the updated production cadence seems to make sense. It's about one and a half months is the way I calculate it, all from the February discussion. Obviously, homologation was delayed. We've talked about that. Could you just go into if there's any other outside issues? Gita, you mentioned the Tier 1 over the last two months that's been rectified. Is there any other issues between now and sort of that June into September ramp where we, you know, sort of have high visibility into the 6,000 per month. Thanks so much.
spk04: I think, Chris, I just want to remind you that we, of course, need U.S. EPA, which we do expect to come in. So just wanted to remind you of that. But from our point, besides the topics that I have mentioned, if those go to plan, we see no other impacts, no other issues.
spk11: Yeah, maybe I can touch on the Foxconn side. You know, as we moved further with the pair development, we actually came up with some phenomenal ideas to take further costs out of the vehicle. We do have an incredible innovative engineering team, and obviously they learned a lot during the ocean development, and we have put some of those learnings into the pair, specifically of how to reduce parts. And I know everybody's talking about gigacastings, but nobody talks about how much they cost and what's going to happen when you crash a car. with such a casting. So obviously, if it's an affordable car, you also want to be able to insure it affordably, and you want to be able to repair it. So we came up with this phenomenal concept, which we call Steel++. But it also means we have to do something a little unique when it comes to assembly. So that means it took us a little longer to kind of look at that. We do have, of course, a manufacturing team now that are looking into that together with Foxconn. Also, as I mentioned, The IRA means that we do have to make batteries here in the U.S. to take full advantage of those credits. And we do want to have those because imagine if we're able to sell a car for $22,500, I mean, that's just going to be insane. So that's obviously what we want to do because that's going to be such a unique market that we're going to go in there with nothing that compares to it. So that's really important. Dita, you want to add something?
spk04: Yeah, and Chris, I just want to say we have, of course, a great relationship with Coxconn given the fact that we have the vehicle with this super exciting screen. It's a very high-quality product, very innovative, great experience. I think we are jointly extremely proud in how fast we did this product. With respect to the facility, we have some great ideas. Chairman Young is visiting us next month, and I think there's more to come.
spk05: I really appreciate it. But with respect to Foxconn, should we expect when all of the I's have been dotted, the T's have been crossed, that we would get a formal announcement of a manufacturing agreement and then just one other one in the press release that mentioned battery partners as one of the shifts from second half into 2025? Does that essentially imply that it would be CATL and you're working with another battery producer as well?
spk11: Yeah, absolutely. Of course, we'll make announcements as soon as we have it firmed up. We don't want to rush out and make announcements. All I can say is there's a planned visit for Chairman Young to come over here in June, and I'll meet him and hopefully we can finalize everything at that point in time. And as soon as we do, we will send out a press release super fast and do that. Now, As I mentioned before, in terms of ideas, of course, ideas are only valuable if you actually implement them, and that's exactly what we have done on the PAIR program. We have already implemented these radical new engineering solutions in our program. I think we went last time, already talked about our blade computer, which drastically reduces our components as well. So those are all things that we have to kind of put together as a manufacturing plan as well. And like I mentioned, I think, earlier, and if not, I'll say it here, we are way more active, of course, in the Foxconn relationship when it comes to how we set up the manufacturing plan than we needed to be at Magna, because Magna already had a rolling machine. Going into Foxconn, we are starting slightly more on a clean sheet of paper, which do have some advantages, specifically if you're making a radical new vehicle like the Pair. But yes, we will be announcing the firm you know, deals once we have them, both when it comes to Foxpump and when it comes to the battery deals that we are working on right now.
spk06: Much appreciated. Can you go to the next question, please?
spk00: Your next question comes from the line of Jeffrey Lambuchon with TPH.
spk01: Please go ahead.
spk03: Good morning, everyone, and thanks for taking my questions. My first one is on pricing. You know, with different auto manufacturers taking different action with respect to pricing strategies, I wonder if you could just go over your philosophy around that. You know, on the one hand, you're one of the automakers that didn't raise prices the last several years. And as you highlighted, you continue to expect 8% to 12% margins for this year. But on the other hand, you know, with pricing competition across the space aimed at incentivizing demand, I just wonder how you weigh the pros and cons there. And I guess, you know, as you think about all that more directly, should we expect any changes to pricing for the ocean going forward? Thanks.
spk11: Yeah, so let me take that. I mean, first of all, I think everybody who reported on the price decreases on some of the vehicles, specifically one brand out there that we all know. I think we forgot that that's the same people who also announced incredible increases that happened six months ago, a year ago, one and a half year ago. So if you actually look at the total pricing since two years ago, they're really just come back to where they were two years ago. And what that really indicates is that people weren't willing on a long-term basis to pay those high prices, the increases for these products. Whereas with Fisker, we have not raised our prices for two years when we announced them, and we are still cheaper or lower cost than our competitors. We still have a product with more features, longer range than our competitors. So I'm not really worried about pricing. I think we got some other really unique things up our sleeve, both in terms of customer service, also in terms of what we can do with the battery swap once we try out the fleets. I think there is potentially a possibility to go to, I would say, individual consumers with that. That's a little later. But what could be interesting about a solution like that is that you're obviously not paying for the battery in the vehicle. You pay that over several years. So now you're lowering the cost of that vehicle maybe $10,000 or so, which would be quite unique. So I think we've got a lot of things up our sleeve that we can use if it should be necessary. As Gita mentioned, we are also in a unique situation where we make money on our vehicles from the get-go. because you're paying a fixed manufacturing fee. So I don't think we're under the same pressure as some of our competitors out there. And I think with a unique product in the pricing we're in, I don't think people necessarily need to buy a $60,000 or $70,000 car they don't like just because they get a few thousand dollars off. Of course, if it's extreme, yes, maybe. But at this point in time, like I said, we have maintained our reservations. In fact, We have seen an uptick in Europe because, of course, in Europe, we get all the incentives equally to everybody else. So it's an equal playing field here in Europe. And finally, I will say that I mentioned before, we are seriously looking at U.S. manufacturing for the ocean as well eventually. We don't have any firm things that we can announce at this point in time, but we are actually looking at that. And of course, the pair will be made in U.S. as sort of the batteries from there.
spk10: Great. Appreciate that. And then I guess maybe... Yeah, go ahead. Thanks.
spk03: Yeah, I just wanted to ask one follow-up, just if you could speak to some additional color on margins for the year. I appreciate the reference for guidance kind of staying intact there for the full year on that 8% to 12%. Is there any color you can give just on how that progresses through the quarters? Obviously, Q2 relatively light compared to the rest of the year, just on the homologation timing. So just from that lighter Q2 to the rest of the year as you scale up, just curious on how your margin improves throughout that time frame. Appreciate it.
spk04: I mean, we're not giving 4-1-4 guidance, so I'll just refrain from doing that. However, what the color I can give you is that, of course, With respect to EDD, it's front-loaded. Tooling CapEx is obviously, as we are getting into launch, it's coming into play. And as we get towards the year-end, these NREs are disappearing. And of course, when it comes to actual input costs, as I mentioned earlier, we should see Q3 to be, I think for everybody, a better quarter with respect to input costs. I think in terms of our sort of asset-light strategy, that pretty much remains intact for the whole year. So I would say that those gross margins are fairly intact. The only item I would say is that we have some modest launch costs, but they are nowhere close to everybody else, and they would not have any material impact in our numbers.
spk06: Thank you, operator. Please go to the next question.
spk01: Your next question comes from the line of Pavel Malkinov with Raymond James. Please go ahead.
spk02: Thank you for the question. As you look at supply chain management, given that your production expectations have, as you said, shifted lower and to the right, are your suppliers, battery and otherwise, ready to accommodate kind of the evolving trajectory of what your production will look like?
spk04: So in terms of our numbers, I mean, if you look at the guidance and where we are, I mean, it's not a dramatic change, number one, in terms of how the supply chain operates. Number two, we pay for our own tools, so we don't amortize those costs within piece price, which is what traditional OEMs do. So as a result, suppliers hurt if they don't achieve the volumes or they don't get to sales fast. And from our point of view, we work very closely with all the suppliers. This is our launch year, and all suppliers understand launch years are very unique years. And of course, we have fully loaded vehicles, so all suppliers benefit from that. I also think that suppliers want to be part of growth, and our product represents growth, and everybody all our supply chain are so proud to be part of this product because it opens up frankly new markets for them in a growing EV industry. So we have a phenomenal relationship with all our suppliers. We work very well with Magna Steyer in distributing what you call EDI call-offs. These are very organized IT systems where we work with our complex supply chain throughout the world. We manage the supply base well. And yes, We absolutely work in a very seamless way. Now, if there are certain suppliers where they have issues in ramping up, we have mechanisms where we can work with them. So if at some point we needed to turbocharge in our stage four of the plan, turbocharge the supply chain, we, of course, have to invest. We have to notify them ahead of time. But in some cases, the tooling is already set. There is an opportunity to increase potentially 20%, 30% volumes on the same tools, and probably we can have more volumes. Similar to at Magneshire, we can go from 50,000 to 70,000 units, as we've said before, without much effort. Of course, you need to put in an extra shift, but I feel very confident with the volumes we have on working with the supply chain.
spk02: Just a quick housekeeping item as a follow-up. Depreciation expense went from less than $1 million per quarter six months ago to $9 million this quarter. Will it continue to increase, or is this kind of the new normal around $9 million?
spk04: It's actually related to the cost of amortizing the nine awards. So I think we can probably... discuss it in detail offline.
spk01: Okay. Thank you. Your final question comes from the line of James Piccariello with BNP Paribas. Please go ahead.
spk08: Hi, everyone. Henrik, I appreciate the candidness in your opening remarks. So just to confirm what was said, So among the few deliveries to customers in Europe thus far, is the company's statement that none of these vehicles has been returned for any type of problem?
spk10: Yeah. I mean, I can't believe you're reading this garbage article. Yeah, I'm confirming.
spk11: The car is still in Copenhagen and the other car is still in Munich. And as soon as I get back to Munich, I'm planning to drive it, which I believe is next week when I'm going on a podium there to speak about automotives.
spk10: I think it's a very good event.
spk08: And then, yeah, and just can we confirm the pack size for the ocean now that we've got, you know, cars in the hands of customers?
spk11: Thanks. Yes, that's 113 kilowatt-hour, which is showing that we probably have the most energy-dense battery pack in the world right now when you take into consideration our vehicle is the same size as that.
spk10: Tesla Model Y or BMW X3. Yep.
spk06: Thank you. Appreciate it. Thank you.
spk00: And I will turn the call over to Henrik for any closing remarks.
spk08: Thank you very much.
spk11: I appreciate everybody on the call. And again, it is incredible what a ridiculous article can bring around. And it's incredible that we have to spend time. You have an earnings call talking about speeding tickets to confirm how a car actually can go fast. But hey, I guess that's the world we're living in. I think actually it's going to be phenomenal even if we hit our 32,000 products this year in terms of deliveries and production. And I think actually we'll be way beyond that because I'm going to push for it. I think, as Geeta mentioned, we have some amazing suppliers. So unless there's something really out of the world, crazy happening, I'm super confident about it and really overachieving our goals. But what I also want to mention is, and I think nobody's really paid attention to that. One thing is how many cars you produce. Another thing is how many cars you can sell and deliver. And I think that's really the important part here and why we are trying to streamline our logistics and delivery process, why we're going all digital, why we have spent several months setting out a very sophisticated delivery infrastructure, hiring some of the best logistics companies that can bring the vehicles as fast as possible to our customers. We are looking into unique ways of delivering hundreds of cars per day. And that really is important because you don't want to spend the end of the year having produced 36,000 cars and only delivered, you know, 25. I would like to say in the end of the year, if I produce 36,000 cars, I would like to deliver 35,500 if possible. And that's what we're going to push for. And I think this is really the key here is a seamless process where we make want money, where we get fantastic products out to our consumers. And as I mentioned earlier, we are proud now to be a revenue generating car company. And now all we need to do is scale and deliver on amazing vehicles. Thank you very much, everyone.
spk01: This concludes the conference call. You may now disconnect your lines.
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