Fisker Inc. (FSR) on Q4 2021 Results - Earnings Call Transcript
Operator: Good afternoon and thank you for attending today's Fisker Incorporated Fourth Quarter 2021 Earnings Call. My name is Austin and I'll be the moderator for today. All lines will be muted during the presentation portion of the call, with an opportunity for questions-and-answers at the end. I would now like to pass the conference over to our host, Dan Galves, VP of Investor Relations. Dan, go ahead. Dan Galves: Thanks, Austin. And welcome everyone to Fisker's earnings call. Joining me on the call, as usual, are Henrik Fisker, Chief Executive Officer; Dr. Burkhard Huhnke, 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 make 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 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. Henrik Fisker: Thank you, Dan. Thank you, everyone, for listening in. I think we've got a really exciting earnings call. I'm super excited about it. This year has just been taking off extremely fast. We are still on target with our SOP date of November 17 this year. That hasn't changed. In fact, I'm really excited about flying over next week to actually get into a notion and see it come off the prototype line. I've already had a look at some of the first parts that came in. They look extremely high quality for being this early in the phase. And we of course have people on the ground over there inspecting all the parts, et cetera, and working really closely with Magna. And I have a lot of faith in Magna, I have to say. We are working closely together. The quality of work they have shown so far has been amazing and I think we're both in for an amazing high-quality launch in November this year. And of course, the acceleration of reservations has also really taken off this year. It's actually been a 400% increase per day versus 2021. So I'll talk a little bit more about that as well. Again, priority one for us is launching the Ocean. And we are working extremely hard and we are working with all our suppliers to make sure that despite any chip crisis or supply chain difficulties that we are solving them week by week and it's something that takes a lot of work to do. It's not easy to do it. But so far we have managed it. And so far I am still fully sure that we will launch in November, because we have this amazing team and these amazing suppliers and that's something that I think is -- I want to commend the team for, because they are really working hard and I also want to commend our suppliers for that as well. I think one of the reasons that our Fisker Ocean have increased in reservations this year is because, of course, we showed the vehicle last year. But this year, it's clear for people, this vehicle is actually coming out this year. And when you compare the Fisker Ocean to any announced EV coming out this year, it's clear that we are the leader in so many areas in our price class. For example, there is no really cool-looking SUV under $40,000. Let's just make that clear. Secondly, when you look at a $50,000 or even a $68,000 SUV, there is nobody that even comes close to us when it comes to range. The Ultra which starts at $49,900 comes out at 340-mile range, which is clearly leading of any SUV or crossover in the entire world. And the same with our Fisker Ocean Extreme, which comes out a 350-mile-range-plus. Now that's not the only thing that differentiates the Fisker Ocean Extreme and the Ultra. The Extreme are seeing the highest reservation interest probably because that we have so many industry-leading features, in fact features that no matter what you would pay -- nobody even offer. Even if you go out and kind of buy a $400,000 Rolls-Royce, you will not have California mode. You will not have solar roof. You will not have a lot of the things we have in the Fisker Ocean. One of the things that I'm super excited about that normally belongs to supercars is our torque-vectoring system in the powertrain. I personally drove it on the test track. It just makes it feel like a race car drive. And I think once we get journalists and customers out and experiencing this sometime later this summer, I think we're going to see another amazing uptick in reservation because that is just in its class of its own. So with all these extra things in this vehicle, I think we're just offer that cannot be compared. And I want to answer the last thing, which for me sort of was a natural. When I picked up my iPhone and turn it around to watch a movie I said to our engineers "Why can't we just do that in the car?" They were grumbling a bit. But finally, they said let's do it. And I have to say our engineering team did it. We have a world-first 17.1-inch rotating screen in the Extreme Standard. Just a push of a button. It rotates. You can sit and watch movies. And it's by the way also I believe going to be the highest resolution screen in the world which again is something that sets the Ocean apart. Now what I'm excited about announcing today which is brand-new announcement is our world-leading warranty program. And why can we set out a world-leading warranty program? Well, that's because we will have a super high-quality car produced with Magna in Austria. And of course, we have some extremely high-quality international suppliers as well. So with this warranty, we are having a basic warranty of six years and 60,000 miles on our powertrain and battery warranty up to 10 years and 100,000 miles. So powertrain and battery warranties is 10,000 100,000 miles. And I think that is one of the key things that's going to get people that hasn't had an EV before jumping into a Fisker Ocean because they want to feel that comfort that they're going to get the best warranty in the world and that means we're standing behind our product. It really shows our confidence in the build quality, the technology quality and the overall durability that we expect of this vehicle. Now we think that what we can see, we have done of course our internal data on our buyers, because we are able, because we interact directly with our customers, we're able to go out and actually do regular surveys to our existing reservation holders. And what we have seen is that they really appreciate some of the features we have in the vehicle. But overall, design is number one. And that's something again that sets us apart. And of course if it was easy to design a cool car, I assume that most giant automakers will never have a flop. But they obviously do once in a while so it's not that easy. So that's something I think we're number one in the world and we'll kind of remain that. And then number two is our commitment to ESG and just creating the world's most environmental-friendly vehicles and the sustainability aspect of our vehicles go beyond the electrification. It's the vegan interiors the recycled materials, is a solar roof. All these things and things that people care about. If they have a choice and can get a sexy sustainable vehicle versus an unsexy sustainable vehicle or a sexy non-sustainable vehicle why not get both -- best of both worlds? And I think that's what we are seeing in our uptake in the reservations. Now of course how can we come out with a vehicle this compelling at this greater price? And part of this is of course that we have an internal development process which is focused on developing vehicles for low cost. And this goes of course hand-in-hand with our asset-light business model as well. And finally, we have a development process which is probably the fastest right now in the world. And it allows us to put in the latest technology which usually by the way is cheaper than the old technology. And therefore, when our customers take delivery of vehicle in November, they'll get the latest technology that we had only chosen probably last year and even some of the early this year. So when you normally buy a car that technology is probably already three or four years old. So I think that's where we make a difference as well. And I also want to say finally we are seeing a saturation in the luxury EV market and I think we have to recognize we were the first ones to think seriously about getting in to creating affordable EVs. And I think that's really something that is now showing its fruits by the reservation that we have created. And of course with the PEAR that we just decided to go out and open up reservations for, one of the reasons is that we have quite a lot of private people that have asked, if they could put reservations last year for the PEAR, we really hesitant to do it that early. We kept on getting some pressure there. And then finally when we now lately have been in discussions with some global rental car companies that are interested in larger volumes of both the Fisker Ocean and the Fisker PEAR, I personally thought it would be fair to offer reservations for the private people who already asked for it last year. Because obviously once we make a deal with a large rental car company, they'll scoop up a large amount of these vehicles, which will mean it will be more difficult to get your hands on one of the first ones. So that's really why we opened up the reservations. And I also want to say that the PEAR program we actually just here last week passed one of our first engineering milestones on the PEAR program. So it's actually quite on this way exterior design is pretty much frozen. Now why wouldn't we just go out and show this vehicle? Why not just show it and get a lot more excitement around the PEAR? Well the PEAR looks nothing like the Ocean, in fact it looks nothing like any other vehicle in the world. And I even hesitate to call it a car, I call it a mobility device. And the reason is that this vehicle is so different in how it looks, how it's going to function, some of the features some of the way you store things in this vehicle has never been seen before. And that's not something we want to give away to the competition anytime soon quite frankly. But I also want to highlight another thing that is the essence of Fisker and what we're doing with technology. So one of the things that's very important for Fisker, and I think we're taking the first radical step in the world of any automaker is as we always said, we're a digital car company. So our plans in the future is have an overwhelming amount of over-the-air digital features and updates rather than a whole bunch of hardware options. And what that allows us is to create a reoccurring revenue over the lifetime of these vehicles. And of course, it opens up totally new revenue streams not only for us, but also for example, for a global rental car partner, where you don't anymore have to, for example, you remember clearly one year and a few years ago had to order a navigation system and you actually have to take them a little back and carried out in the car and put it in there. With our vehicle, we're going to offer probably dozens of over-the-air upgrades that you can do in your rental car and that we and our rental car partner can make money on. And you only really need to order it if you need it, and you can actually order that probably any time during the time you use the car. And that of course, also goes through into our flexible lease, where we will own this vehicle for 12 years and imagine the recurring revenue you have over 12 years on a vehicle that has been paid off after probably about four years. That, of course, is a long-term vision, but I think it's important to have it in there because we are here to redefine the car industry as we know it. Now coming back to the Ocean here for a moment to talk a little bit about the revenue and the mix of buyers. So, about 80% of the Ocean reservation holders are planning to buy one of the two top trims. And how do we know that? Again, we went out and we did our own survey with our reservation holders. That's one of the advantages about being direct to customers. We can do these surveys and get feedback within 24 hours. So 80% intend to buy one or two top trims, which gives us an average selling price of about $56,000 for the Ocean, which of course then would give us an average revenue of about already a potential revenue at this point in time with -- by the way we just passed 31,000 orders. I think we announced 30,000 an hour ago, but we actually passed 31,000 orders. So they just keep coming in faster. And with that we have just passed a potential revenue of $1.7 billion, which I think is amazing. Now we see it again, as I mentioned earlier with the PEAR. Reservations are coming in fast. I think it shows the outstanding product features and expectation there is to Fisker and the brand that we will deliver something. Super exciting. Now finally, conversion of reservations to orders. That's obviously going to be something that we are going to focus on later this year. We have sort of a placement holder of a website and a configurator. We are planning a very elaborate, I think, industry-leading configurator coming out late this summer and that will allow people to go in to truly configure their vehicles into the minute detail in an incredible engaging way that has not been seen before. And after that in October, we'll start reaching out to customers and they firm up their orders. And my expectation is that we will be able to firm up orders that are -- mean we will be totally sold out for next year. I mean, seeing the rate that we're running in at now is 31,000, I don't see any problem in easily getting way past our goal of 50,000 reservations this year in fact probably a lot higher. So the conversion into 50,000 firm orders shouldn't be that difficult. I'm fully convinced about that. And of course, also be opening a couple of experience centers here this summer. Now why are we not blowing millions of dollars on TV commercials and all that? Because we have all these orders coming in, and I want to have that firepower when I need it and that's probably going to be more next year. But we, of course, still have done some marketing in a very innovative efficient way, which of course is the reason why we keep getting all these orders in. Now, finally I just want to talk a little bit about the future product that we are planning. I want to say that. Why -- somebody is asking, why are you starting the second car when you haven't even started delivering the first one? Well, here's why. The real market of EVs and I'm not talking about the EV luxury market it was already starting to be saturated but if you think about the rest of the car market under $50,000 that is so thinly occupied. I mean, if you look at gasoline cars you have at least a dozen and many segments two or three dozen alternatives in every single gasoline segment. Today there are segments in the EVs that are completely unoccupied. You can't even find a car. I challenge you to go and find a real sexy SUV and I didn't say hatchback or a crossover but SUV under $40,000. I'm challenging you to find a sexy high-tech electric vehicle under $30,000, just anyone. Now with that in mind think about what's going to happen in the next two years. All this market share is going to be up for grabs. And if we are having a vehicle among the very few, we will have the ability to take a much larger market share that we normally would have. If you would have 50 competitors and we don't, all these competitors that everybody is talking about is coming out with $60,000, $70,000, $80,000 plot cars. We are coming out with vehicles and segments that nobody's even seen and nobody's even announced in the next two years. And let's face it, even if you announce a car today, it won't come out before 2025. The PEAR because we announced it yesterday, it doesn't mean we started it yesterday. We started that a year ago. So we're already well-ahead of the curve. We are well-ahead of anybody that we are seeing as real competitors in my view and that's really what the advantages with Fisker is. And that's why, we are starting not one product, not two products, not three, but four products. So we are sure that we have four segment leading products in production before 2025, because we want to go out and take a large slice of this pie. All these different segments that we're going into, we're going to have the best vehicle and that's why we're going to be able to accelerate in our orders. We're not here to say, hey let's make one car and then three years later let's start another car. That's not how these times work. The whole world is moving way too fast. The good news is Fisker, we are moving the fastest and we already took these decisions two, three years ago. So with that, I'm sure I forgot a few things that are for me maybe not so exciting about numbers and how many people and all that, but I know we have a lot of other capable people to talk about this. I want to hand it over to Burkhard because he has some exciting stuff to talk about when it comes to technology. Burkhard? Burkhard Huhnke: Yeah. Thank you Henrik. Let me start with Fisker Ocean. As Henrik said, the prototype test and validation program is fully on track. The prototype program has many phases and purposes. Of course it's to ensure all the components are seamlessly integrated and that all our virtual modeling of performance is coming through in the physical world. But it also has the critical function of keeping very tight coordination with the supply chain, ensuring that the entire vehicle is ready for launch and that takes on added importance during a time of fragile supply chains. We are able to continuously monitor potential shortages of components. And when there are early warning signs rapidly innovate solutions to derisk and particular component any particular component. Here are some quick updates on the prototype process since last quarter. Testing of the prior prototype stage is ongoing so we are in the midst of a vehicle dynamics calibration and tuning in Italy. We've also begun cold-weather testing in Sweden, where we can test our powertrain and chassis systems in extreme cold temperatures as well as a variety of snow ice and wet road conditions. The complete vehicle prototype shop at the assembly facility in Austria is fully operational and the first complete prototype vehicles are coming off the line. And these vehicles will soon start testing all vehicle attributes such as safety, crash test, ADAS, climate comfort, powertrain system performance, the chassis, vehicle dynamics, electrical integration and complete vehicle durability and more. This prototype operation will soon have the capacity to produce up to two cars per day on track with what we said on the Q3 call. Overall the process -- progress has been very positive. Our confidence in the quality and in on-time launch is very high and as Henrik mentioned has given us the confidence to launch Fisker Ocean with an industry-leading warranty. I also wish to say few words on some of the technical aspect of Fisker PEAR. Fisker\’s development and recruiting activity so far have left to significant growth in our in-house design and development competence on the entire hardware and software aspect both in US and India. This will be augmented by a powertrain development and technical center of excellence. We are implementing here in Southern California that will focus on all powertrains aspects both hardware and software as well as general vehicle benchmarking and root cause analysis. On PEAR specifically this development of competencies and supply chain partnerships leveraging advanced silicon and software solution is enabling the next-generation electrical architecture for Fisker PEAR. With the dozens of ECUs in a traditional vehicle consolidated down to a few central computer units this planned architecture will support a best-in-class connected high-performance compute ADAS system with embedded and cloud supported machine learning and AI technologies. Fisker's software-driven ADAS architecture will enable a further leap in safety features and will support Level 3 advanced driver assist functions. Inside the cabin the cockpit computer will drive the highest resolution displays with cutting-edge graphic processors. The consolidation of ECUs and addition of smart zonal gateway compute at tremendous capability, but also lowest mass reduces complexity of the buying and lowers the overall bill of material cost. In addition, Fisker will continue to build on our existing over-the-air updatable platform supported by 5G and WiFi 6 including as Henrik has stated digital life cycle management with highest level of security always updated with the new software and technology improvements. We call it seamless compute from cloud to edge. The car becomes smarter and even safer over its lifetime. Thanks very much. Now, I turn the call over to Geeta. Geeta Gupta-Fisker: Thank you, Burkhard and welcome everyone. 2021 was a great year for Fisker, but it also went super-fast. We all worked really hard to get to where we are today. We have continued to grow our talented and passionate team brought, onboard all our key suppliers, and progressed in every area to get ready for launch. We have developed an amazing product, packed with advanced technologies. All key suppliers are identified nominated and on board. We're in full execution mode for the prototype testing phase as well as serial tooling for high-volume production and all our partners are fully aligned with the schedule through launch. And as Henrik mentioned, we're feeling really good about customer demand crossing 31,000 reservations for the Fisker Ocean today. As a start-up, we have both learnt a lot and executed critical milestones in a very short span of time. The Ocean development process has generated significant IP at the platform, component design, vehicle integration level, including serial tools that we are funding. A good deal of these design components and tools can be used for our future vehicles. As the concept base of PEAR is completed, we are now identifying carrying over content that will be shared from Ocean to PEAR. Given the highly differentiated and unique design of PEAR, we will clearly have new content, but all carryover parts will benefit the bill of materials of both Ocean and PEAR. We expect that sharing of components and intellectual property will help us further optimize R&D and CapEx investments which would typically be in billions for a traditional OEM. We also anticipate volume-based reductions in general for PEAR due to its intrinsic high volume expectations and specifically for parts that can be shared amongst all our vehicles. Going beyond vehicle development itself we've architected the company to scale in every which way. IT solutions and architectures are generally the least exciting part of the business, but I am personally committed to good process as this is the only way to scale all aspects ranging from engineering, supply chain integration, vehicle forecasting and ordering, and customer experience, all need to be managed seamlessly and efficiently. We've implemented several IT systems from ERP, CRM, PLM, as well as several platforms to create a seamless IT architecture that can be scaled globally for all our vehicle programs and for all customers all over the world. We continue to invest in our critical IT infrastructure as this is key for the scalability of our businesses. We also continue to form our global entities as we will be selling in multiple launch markets or clearly beyond United States. Our teams are now knee-deep in architecting and fully integrating systems for a frictionless user journey from the ordering process to trading valuation to financing to ownership experience. I'm personally really excited to announce today that we have nominated JPMorgan Chase in North America and Santander in Europe as our banking partners for point-of-sale retail loans for all our customers. The customer experience inside and outside the car is supported by our creation of a high scalable, secure, multi-cloud infrastructure to support Fisker's future vehicle fleet. We are utilizing state-of-the-art technologies and provide for bidirectional connection between the vehicle and the cloud. This means that our vehicles and our mobile app are fully intertwined and the changes in the vehicle will be immediately reflected on mobile devices and vice versa. Our over-the-air update strategy is unique and fully driven by Fisker Cloud. This allows us to update individual vehicles as well as portions of all the fleet of vehicles. Overall, the goal of our digital strategy is to improve the user's ownership experience and develop unique touch points with the customer to create a positive feedback loop. The cloud infrastructure is also a key enabler to provide unique experiences to our customers through the human machine interface. We have invested in a state-of-the-art screen and are now focusing on utilizing that not only for intuitive control of the vehicle systems, but also to deliver exciting and useful content to our customers. We are working with multiple technology partners and suppliers to deliver very unique content in a variety of areas, including data, navigation, music, video and beyond. We also look forward to making announcements in these areas prior to Fisker Ocean launch. And of course, these content opportunities will be included in all future products beyond Ocean as well. Now let's move to financials. Regarding the balance sheet, as you can see from our cash balance and guidance, we have stayed disciplined with our spending, and we have the resources to fund the Ocean program launch in November and to stay on track with our other projects in 2022. Looking at the Ocean ramp post November, we are developing a very robust working capital model and are in discussions with several large balance sheet banks for access to asset-backed credit lines to fund working capital needs in a non-diluted way. It also helps that, we've been given industry standard payment terms by many suppliers. And of course, if we feel the need to bolster the balance sheet further, we have shown in the past that we have good access to public markets. Finally, before turning to the outlook, I'd like to note that in addition to what Burkhard stated about the management of semiconductor and other component supply, we're also very well aware of global challenges in logistics pricing and timing. As we plan for sales and after sales, we are taking this challenge head on and are already engaging with third-party logistics suppliers and specialists to plan ahead of time in terms of both inbound logistics of parts to Magna Steyr and outbound logistics of complete vehicles to various launch countries and repair parts to our designated warehouses and service partners. Direct-to-customer sales approach means, we know where our future customers are, and can plan all the way to last mile deliveries way ahead of time. Now turning to our results and outlook. Our operating expenses in Q4 line closely with internal expectations and the guidance we provided on our Q3 call. Capital expenditures more than tripled versus Q3 levels, but again, was somewhat below our expectations. Despite meaningful ongoing work, the timing of CapEx billing continues to come slower than our forecast. Operationally, the increase in R&D in Q4 versus Q3 was primarily the result of increased headcount, increased prototype spending and meaningful payments to suppliers for engineering, design and development. Increase in SG&A expense in Q4 versus Q3 was a result of higher headcount and higher marketing expenses related to the LA Auto Show and other marketing activities. Turning to our outlook. As noted in our press release, our overall non-GAAP OpEx plus CapEx guidance for 2022 is $715 million to $790 million. This compares to a total of $458 million in 2021. The bulk of the spend is continued execution of Ocean through launch, plus costs of running the business with PEAR R&D spending ramp in second half of the year. Product-related CapEx is exclusive for Ocean as we do not expect any significant CapEx on PEAR this year. Happy to answer guidance-related questions and Q&A, but I would like to highlight a couple of very important points. Number one, on the engineering side, our product engineering headcount will transition to spending the bulk of their time on PEAR over the course of the year. Engineering headcount will increase, but we are focused on adding incremental headcount at our development center in India, where there's a lot of talent, but at a lower overall cost. And as I noted above, we will be leveraging significant IP, which is shared between Ocean and PEAR program. Number two, I'm very pleased we have green lit a powertrain development center here in Southern California that will focus on everything from pack design to thermal management to battery management, system design. We have already built strong internal capability in these areas. We're building that out and providing the technology and tools required to increase expertise in this critical area. This center of excellence will also be used for vehicle teardown benchmarking as well as root cause analysis as Burkhard explained earlier as well. Finally, as we approach launch, I want to reimpose something that is unique to our capital-light strategy. All our manufacturing, planning and launch costs with Magna Steyr are included in this guidance including the cost of manufacturing the initial Ocean volume in 2022. Any sharing of launch costs with our partner including unabsorbed overhead of the manufacturing facility are all pre-fixed, pre-negotiated and included in our guidance, which helps us to avoid the uncertainty and cash spending volatility around the launch period that plagues many start-ups. We wanted to make that clear for your modeling purposes. I am extremely proud of the entire fiscal team for all the accomplishments in 2021 and the sense of confidence across the entire organization as we look ahead to launch a fantastic vehicle on time and continue to show our innovation and product and our discipline in finance. We're now happy to take your questions. Dan Galves: Thanks, Geeta. Austin, can you collect the Q&A queue, please? Operator: Thank you. Our first question is from Dan Levy of Credit Suisse. Dan Levy: Hi, good evening. Thank you for taking the question. Wanted to start with – I see your press release, you have guidance on the spend but maybe you could just comment here. I don't see anything – you're giving operating expense. You haven't guided to the total EBIT amount given just factoring in revenue. So what is a reasonable expectation for in 2022 the number of deliveries that you'll have by the end of the year, given start launch production mid-November and just what that equates to or what you expect in revenue on that? Geeta Gupta-Fisker: So Dan, I'm not dumb enough to make that forecast. But hey, Dan joking aside. Just for the modeling purposes, I wouldn't want to give this because it's not a material amount. We start SOP on 17 November. And bear in mind, December is holiday in the factory. I do think that the time to the vehicles being shipped out of the factory and in the hands of customers there's always a lag. So for modeling purposes, I would not put too much onus on any meaningful deliveries or revenues at the end of this year. I think what's critical is that we will reach SOP and we will have the capability to have a full year of production and a very seamless ramp-up next year and that's what we are fundamentally focused on. Dan Levy: Great, great. Thank you, Geeta. And then just the second question is just between now and the start of production, is there a view on just what the largest pain point is that needs to be addressed, or if there's any one risk that needs to be monitored more than anything else just to ensure you have SOP. What's the one variable that needs to be monitored to make sure that you're on time by mid-November, if there is one? Henrik Fisker: Hi, Dan. As you know, we are in this sort of little uncertainty in the world around supply chain and chips as I mentioned already. We are monitoring that weekly between all our suppliers. Magna has been amazing here as well, because of course, it's not just Magna Steyr we're working with. We're also working with many of the Magna companies. So as a group, this is a gigantic corporation. And they of course, also have a certain amount of purchasing power around the world. So I think so far we have managed that really well. And the good news is that it's not like we're -- if you were launching next week I might have been a little nervous. But in November, we have been ahead of the curve. I mean we have already laid out our expectations to our suppliers. So, so far I think actually that's going really well. Secondly, I was of course always a little complaining to Magna why can't we do earlier this or earlier that but now that I look at it it's quite good to see the conservativeness of Magna starting prototyping. And I'm flying over as I said next year -- sorry, next week to see the -- one of the prototypes on the line. And you will be making hundreds of prototypes before even SOP and that's very unusual for a start-up. So again, we are taking that risk out. I'm not saying SOP is when we built the first handful of cars. So I think that overall, we are really just monitoring and staying on top of things and I think that's the key. There's no magic here other than a lot of hard work but a lot of talented people with incredible suppliers and that's really what we are focused on. Dan Levy: And just a – Dan Galves: Thank you, Dan. Dan Levy: Thank you. Dan Galves: The next question, Austin please. Operator: Our next question is from Itay Michaeli of Citigroup. Itay Michaeli: Great. Thanks. Good afternoon, everybody. Just two questions for me. First, the release mentioned potentially large volume commercial customers for Ocean and PEAR reservation. Just curious if you could share a bit more detail around that size timing. And maybe to our extent these could be rental fleet or a rideshare fleet, just curious on what you're seeing there. Henrik Fisker: Yes. Thank you. We already have a couple of commercial deals some rideshare groups in Europe. What we are talking about here is much larger deals with international rental car companies. And as I mentioned, I think there's a few really innovative rental car companies out there who's seeing the opportunity to get first to market with the most exciting EVs. And I don't think they're seeing that very soon customers not only are kind of want to have EVs but might even turn to rental car companies to maybe even try the first EV before they buy one. And then, finally the revenue and profit possibilities with modern vehicles like Fisker with over-the-air options, et cetera, is a whole new development that has never been seen in the rental car market before. So we have been in talks with several about some major deals and how we can both benefit from this. And I expect we will do such a deal not within months but maybe rather within weeks. But we're still doing negotiations here, so it's a little too early to give more details on this. Itay Michaeli: That's very helpful, Henrik. Maybe two super quick follow-ups on PEAR. One, I don't think you could shared anything on the initial round of reservations. And also, how should we think about the timing for, I guess, a formal unveiling of the vehicle? Henrik Fisker: So as I mentioned earlier, normally, I wouldn't have mind unveiling it later this year, but this is so radical, this vehicle that I think if we can have a head start of a couple of years over anybody else, that's going to be phenomenal for the type of market share we can take. My goal is that we will ultimately produce over 1 million PEARs a year sometime after 2025. Obviously, that's going to demand multiple factories in multiple continents, but I think this vehicle has the potential of being iconic globally. It's designed not to fit in a segment, but to fit in a future lifestyle and we just don't want to give that revolution away to anybody else. So we're not going to show that vehicle probably before later next year. Itay Michaeli: Got it. That’s all very helpful. Thank you. Dan Galves: Thank you, Itay. Next question, please. Operator: Our next question is from Jeoffrey Lambujon of Tudor. Jeoffrey Lambujon: Good afternoon, everyone and thank you for taking my questions. Maybe, first on PEAR, following the news yesterday on the reservations opening up, which I think is a bit sooner than folks might have been expecting as alluded to. So I'm very excited to hear about your commentary on that. My question on it is about the minimal production of 250,000 units that came to the news, which I know you've spoken to before as an ultimate short-term target versus maybe a 150,000 range, if a greenfield facility was the route that you went. But just given the challenges that other automakers have faced in designing and bringing a sub-$30,000 all-electric vehicle to market, it'd be great if you could just speak to what you see as some of the gating factors or key milestones in reaching that level of production. And what differentiates Fisker's plans from competitors, just as we try and get a sense for all the moving pieces in terms of what parts of the supply chain or streamline with part sharing with the Ocean? And how you think about battery supply and sourcing? And then, of course, what you all think about as you internally forecast demand? Henrik Fisker: Yes. I mean, look, having already received over 1,000 reservations, I think, the demand of 250,000 is easily going to be achieved. Obviously, the Ohio factory, the Foxconn have obtained, gives us even higher potential than that. But coming back to some of the other areas of supply chain, as you know, we signed a deal with CATL last year. That's the world's largest manufacturer of battery cells and in that deal is our ability to increase the volume by giving them at least 12 years sort of heads-up -- sorry, 12 months heads-up. Sorry about that, what I want to say 12 months. So 12 months heads-up and then we can increase volume. Here is the interesting thing is that, I think once you have developed a battery module together. And once you have developed battery pack together, it's a lot easier to increase the volume than if you just randomly going around to different battery makers buying cells and making them -- making battery packs yourself, because that becomes much more difficult when you have to suddenly increase the volume. So I think that the relationship that we have with CATL has been built over many years. It's going to help us get to the volume we need. And of course let's also not forget, I think it's pretty public knowledge that Foxconn is also very intertwined with CATL. So I think we got two conglomerates, that have both interest in the PEAR program, specifically when we talk about these type of volumes and specifically when we talk about making these vehicles globally and potentially eventually make battery cells and packs locally near these factories. And I think that's really the advantage about this program. What's happening right now in the EV world is that, every manufacturer around the world is launching random EVs and they're usually projected to make 50,000 to 100,000 of those EVs. And we're making a vehicle where we think the potential is $1 million in a market where you can easily sell $1 million if you have an incredible vehicle and that's really different with this vehicle. And suppliers love the idea of being able to supply one part in one million parts. There is nothing better for a supplier and that's really was the aim of this product. It was not just to do another EV where we think we can make 100,000 of them, it was really to break that mold, which has been the success mold of the gasoline vehicle industry of the big companies. But nobody has achieved that yet and I think we can achieve it with this. But it means we need to have an outstanding product and we do. We have an outstanding product Jeoffrey Lambujon: Thanks a lot. Dan Galves: I am going to break in for a couple of minutes and ask a couple of questions that came in through the safe platform that we use to take retail investor question. I am going to ask to -- first one is, when can we expect to see the Fisker experience centers begin to open to the public. When will advertising start? How is Fisker planning to deliver vehicles and services? Geeta Gupta-Fisker: Dan, I'll take that question. So advertising can mean a lot of things. And if the person who's asked the question means broadcast commercial meaning commercials on television, it's unlikely we would ever pursue something like that until we are way down the road because these are expensive. These are very high dollar items and I think Super Bowl alone is about $20 million. After all, we are sold out well into 2023. The marketing that we've been doing so far is very cost efficient and it's intended to provide awareness for the brand and the Ocean product and it includes a direct engagement with our customers. Now pursuing that and unveiling all the details of Fisker Ocean in November has led to a major increase in demand and brand awareness as you can see in our reservation numbers. On the experience side, we do expect to have two flagship experience centers one here in L.A. and one in Munich this summer and with more to come. We are developing plans in-house for very cost-effective customer-centric concepts that take care of test drives, experiences and vehicle deliveries, which are now in process. Dan Galves: Thanks, Geeta. Second question what's Magna's maximum annual capacity for Ocean? How fast can they scale if Fisker Ocean sales ramp up much faster than you projected? Henrik Fisker: So with Magna, we laid out I think a very conservative plan originally about 5,000 per month. However of course, Magna is a experienced contract manufacturer. And we are going into I believe the biggest hole that they have in the plant. Super modern, modern equipment and it would allow us to next year easily get over 7,500 units per month in the second half, if we have the demand. It looks like we do have the demand. So I think that will happen. In 2024, I think it's open to well over 10,000. It's going to really come down to if you want to invest a little bit extra to really get the demand -- or sorry the monthly rate way over 10,000. But I don't -- I think with Magna the good news is that they have such a smooth running facility gigantic that I think -- I wouldn't say anything is possible. We probably couldn't make million vehicles there, but we can make a lot of vehicles. They have extra land. They have a lot of capabilities to expand. So I think we'll be fine with Magna in terms of being able to expand if demand is there. Dan Galves: Thanks Henrik. Austin, can we go back to the analyst queue please for the next question? Operator: Of course. Our next question is from Adam Jonas of Morgan Stanley. Adam Jonas: Great. Just two questions. How do you plan on funding the PEAR? Because I mean you pulled forward or kind of versus expectations opened up a reservation book earlier. You're providing a lot more details earlier, if we can't see it. I think anyone on the call here would expect that the Ocean won't fund the PEAR over the next 12 months or so at least. So -- and you're guiding to $800 million of cash usage. So folks are wondering does the pull forward of reservation opening also be prepared pardon the pun with a pull forward of capital needs? And my follow-up question is when is the Austria test-drive event? Geeta Gupta-Fisker: I'll take the first one Adam and maybe Henrik or Burkhard can take the second question. So to answer your first question Adam the guidance that we're giving it includes full Ocean delivery start of production in November. And it also takes into account other projects which obviously critically is PEAR and all the other items we mentioned throughout the year. There are certain overlaps between the two programs. Of course our internal headcount. It will go from 400 to 800. We are doing some cost management strategies by having headcount in India and other low-cost jurisdictions. We're also looking at a significant carryover content where we have either invested in D&D or ED&D in tools. That's the exercise that we've just completed and we continue to complete. So with the guidance we've given we do project that for this year we will be able to get PEAR to a very good place. Now we're very glad that we did the convert deal in August and we effectively raised capital at nearly $20 a share and we did the cap call at $32. Now we knew it was the right thing to do to fully de-risk our spending needs in 2022 even though we do believe our valuation will be much higher in the longer term. Now you're absolutely right. You can never have too much capital in this business. And we are talking to banks about working capital asset-backed lending when it comes to working capital needs for Ocean and beyond. Now I don't expect that we would use revenues from any of our programs to only fund. We will have to look at all different kinds of capital because we are in growth mode. We have to bring four vehicles to market by 2025. And if I would say that we could do that with $1.6 billion then I think we would be the best acquisition target for any traditional OEM. So I do think that we would look at effective ways of using our IP effective ways of using our existing capital effective ways of maximizing return. I do think at some point next year, we will need money for CapEx on PEAR. And at that point in time, we will look at potential opportunities which are nondilutive. And if there's an opportunity for us to consolidate our balance sheet as I said before we will grab that opportunity. Adam Jonas: Thanks, Geeta. Henrik Fisker: What was the second question? Adam Jonas: When can we go to the -- when are we going to want to start blasting the Falco and Mozart? Henrik Fisker: Hi, it's snowing over there. So no we will -- so I think we're planning here the summer to get over and get a few people over to do some test drives. That's still the plan. We have our racecar driver that's Api Eaton, British female racecar driver, who is going to come over as well and do some fine-tuning and set up. And hopefully, she can take your and take you out and scare you and shake you up a bit because this thing is amazing. Adam Jonas: Look forward to. Thanks, Henrik. Dan Galves: Okay. Thanks for your question, Adam. I think we have time for one more and then we have -- and then I'm going to turn it back to Henrik, for one more thing. Thank you. Do we have one more question in the queue, please? Operator: Our final question is from Pavel Molchanov of Raymond James. Pavel Molchanov: Yes. Thanks very much. On the 30,000 reservations for the Ocean I know you haven't broken out the geographic mix kind of country by country. Is it -- is the distribution evolving along the same kind of trajectory that you would have expected a year or six months ago? Henrik Fisker: So first I'm happy to say that during this call we broke 31,000 reservations so we actually have 31,000. Burkhard Huhnke: And that's on Ocean specifically not Ocean and PEAR. Henrik Fisker: Yes this is just Ocean. So geographically sort of high level I think we're about 80% North America and 20% in Europe. We -- you must remember, we haven't really officially launched in Europe, yet. So we are going in a couple of weeks to the Mobile World Conference in Barcelona in Spain to launch the vehicle officially. We expect I think 40 or so European journalists to attend that event specifically, to review the Ocean. So I'm very excited about that. We'll have staff and myself over there to present the vehicle. And of course that should drive hope a lot of press in Europe and that would kind of become our first launch Given the task to our VP of Marketing sales in Europe to actually get closer to Europe becoming I think about 40% maybe even higher. I think with some of the latest push that's happening in Europe on electrification. I think we can definitely get to a 40% share in Europe, maybe even 50% if some of the European governments continue to push for electrification as hard as they have. The other thing that probably will push suddenly reservations up in Europe is going to be the fleet orders. Fleet is big in Europe. And our -- the Ocean is definitely right spot on for fleet sales in Europe, specifically because of the utility of being an SUV, but an aerodynamic SUV that then also have an incredible long range. In Europe, we have our two vehicles having a range over 600 kilometers, which barely any other vehicle have in the segment, even close to that. So that's something that's important for fleet customers because they're used for sales representatives, executives et cetera. So I see that Europe will see a big push in the next six to nine months as we move forward. Dan Galves: Thanks, Pavel. Henrik -- I'm going to turn it back to Henrik for one more comment and then we're going to close the call. Thanks everyone. Henrik Fisker: Thank you, Dan. So actually, I do want to say thanks to Dan because Dan has been part of this incredible startup phase that we've gone through and now that we're sort of levering out and everything is running. Dan has decided to take up a new challenge Dan. So I wish you all the best for that. And maybe you can tell a bit about what that is. I'm sure if you would like to know. Dan Galves: Yeah. Thanks, Henrik. Listen when I decided to come to Fisker, it was because I thought the company had the perfect strategy for building a car company in 2020 and everything I've seen since I joined has only increased my confidence in that view. But I am going to go back to a company I used to work for, for a few years called Mobileye who's going to be publicly announcing an IPO coming up in Q2. Ultimately, I decided that the chance to go back to my roots with a company that I've missed greatly that I only left because there was little use for my skills, once Mobileye wasn't public anymore. Help them go public again was the right decision for myself and my family. I'm really, really fortunate to be starting a new exciting opportunity, but also able to remain a long-term shareholder in Fisker and a Fisker Ocean owner very soon. Henrik Fisker: Well, Dan, we are going to send you that Fisker Ocean, but it's going to be without cameras. You're going to have to pay for that yourself. So I do want to also say Eduardo Royes from ICR of course has been with us since we went public. And he'll continue to support us as well as our in-house IR Andrew McFarland as well, which is here always on the call. So we have adequate support I think in that area. And then finally, I just want to say I am super excited to fly to Europe next week and get in an Ocean one of these first vehicles coming off the production line. So stay tuned. I think that's going to be super exciting. Thank you very much for attending everybody. Dan Galves: Thanks everyone for joining the call. Thanks, Austin. We're going to sign off. Thanks very much everybody. Operator: That concludes the Fisker Incorporated Fourth Quarter 2021 Earnings Call. Thank you for your participation. You may now disconnect your lines.FSR Ratings Summary
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Fisker Stock Drops 43% on Possible Bankruptcy
Fisker (NYSE:FSR), an electric vehicle startup facing financial difficulties, has reportedly sought the assistance of restructuring advisers to explore the possibility of filing for bankruptcy, according to the Wall Street Journal. After the news emerged, Fisker's stock plummeted more than 43% intra-day today.
The company, which is in danger of running out of cash this year, has appointed FTI Consulting for financial consultancy and the law firm Davis Polk for legal advice regarding the potential bankruptcy proceedings.
Fisker's financial struggles were highlighted last month when it reported $273 million in sales for the prior year, while grappling with over $1 billion in debt.
Additionally, Fisker expressed significant concerns about its future, revealing doubts about its capacity to continue as a going concern. The company is currently in the process of seeking additional capital from investors and searching for a new manufacturing partner in the U.S.
Fisker Stock Drops 43% on Possible Bankruptcy
Fisker (NYSE:FSR), an electric vehicle startup facing financial difficulties, has reportedly sought the assistance of restructuring advisers to explore the possibility of filing for bankruptcy, according to the Wall Street Journal. After the news emerged, Fisker's stock plummeted more than 43% intra-day today.
The company, which is in danger of running out of cash this year, has appointed FTI Consulting for financial consultancy and the law firm Davis Polk for legal advice regarding the potential bankruptcy proceedings.
Fisker's financial struggles were highlighted last month when it reported $273 million in sales for the prior year, while grappling with over $1 billion in debt.
Additionally, Fisker expressed significant concerns about its future, revealing doubts about its capacity to continue as a going concern. The company is currently in the process of seeking additional capital from investors and searching for a new manufacturing partner in the U.S.
Fisker’s Rating Slashed at Evercore ISI
Evercore revised its rating for Fisker (NYSE:FSR) from Outperform to In-Line and set a 12-month price target of $2.00 for the stock. This downgrade follows Fisker's announcement that it has lowered its production forecast from an initial range of 13,000 to 17,000 units to just 10,000 units.
The analysts at Evercore believe that 2024 will be a critical year for Fisker, requiring careful planning to navigate recent challenges. These challenges include risks to the brand's reputation, the necessity of raising additional funds, and the potential dilution of capital. In their note, Evercore ISI analysts expressed concerns about Fisker's execution capabilities and the absence of solid evidence of improved performance.
They described the upcoming year as a "highly precarious tightrope" involving execution challenges, brand risks, the need for capital raises, and the possibility of dilution.
