Fisker - Q1 2023

Executive Summary

• Q1 2023 was pre-revenue but operationally pivotal: first Ocean deliveries began in Europe, while U.S. deliveries were guided to start in June pending EPA/CARB approvals.
• Reported net loss of $120.6M and EPS of -$0.38; revenue was ~$0.198M, with both EPS and production guidance disappointing vs expectations; 2023 production guidance was cut to 32,000–36,000 from up to 42,400 previously, a key negative catalyst.
• Liquidity remained solid at quarter-end with cash and cash equivalents of $652.5M; management emphasized disciplined spend and a staged ramp (Q2: 1,400–1,700; Q3 ramp; ~6,000/month thereafter).
• Demand indicators stayed constructive: Ocean/PEAR reservations and orders totaled “over 70,000” as of May 8, 2023; partnerships (e.g., Ample battery swap for fleets) and network expansion progressed, but homologation and supply-chain timing pushed production rightward.

What Went Well and What Went Wrong

• What Went Well

  • Initial customer deliveries commenced in Copenhagen and Munich, establishing delivery processes; “It has been a fantastic weekend to have kicked off customer deliveries and opened our flagship Lounge in Munich yesterday.” — Henrik Fisker.
  • Regulatory progress: U.S. EPA testing completed for Ocean Extreme with EPA/CARB approvals expected “later this month” (May), setting up U.S. deliveries in June.
  • Strategic ecosystem build: announced Ample battery-swapping partnership (fleet Ocean by Q1 2024) and European charging integrations (Deftpower, Allego), expanding customer access to 600k+ charging points across EU/NA.

• What Went Wrong

  • Financial miss: EPS (-$0.38) and minimal revenue (~$0.198M) disappointed; EBITDA remained negative with loss from operations of $121.6M; Street viewed production guidance reduction as a key negative.
  • Production plan shifted right due to homologation/supply-chain timing; FY23 production cut to 32k–36k units from up to 42,400, delaying scale benefits and margin ramp.
  • Elevated cash burn persisted: net cash used in operating activities of $83.7M and capex of $45.7M in Q1, though liquidity remained adequate to continue ramp.

Transcript

Operator (participant)

Hello, 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 one on your telephone keypad. I will now turn the conference over sorry, to Frank Boroch, Vice President of Investor Relations. Please go ahead.

Frank Boroch (VP of Investor Relations and Treasury)

Thank you, Sarah. Hello, everyone, welcome to Fisker's earnings call. As Sarah mentioned, my name is Frank Boroch, VP of Investor Relations and Treasury at Fisker. Joining me on today's call are Henrik Fisker, Chief Executive Officer, Dr. Burkhard Huhnke, Chief Technology Officer, and Dr. Geeta Gupta-Fisker, the Chief Financial Officer and Chief Operating Officer. Please note that today's discussion includes forward-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 earnings release. With that, I'm happy to turn the call over to Henrik.

Henrik Fisker (CEO)

Thank you, Frank. Good morning, everyone, and thank you for joining us today for our first quarter 2023 earnings call. I wanna thank all of our stakeholders and partners for their amazing progress we made in 2023. I specifically would like to thank all of our loyal 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 kick off journey as well this week. Our multi-country launch strategy is starting to take shape. With that, I just wanna 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.

It does have a 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. When, for example, Bloomberg writes something, obviously it gets copied by a whole bunch of other sites thinking and taking for granted that it's the truth. Of course, it's very hard to fight, strike back at something like that. However, when I launched the first car or actually delivered the first car in Denmark, you know, I went there super excited, that was before this article came out, which claims that there's a software that makes our cars go slow.

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 will probably say, "Well, that was probably a test car." I could also tell everyone that couple of weeks ago, I drove from Los Angeles to San Francisco at about 70 miles an hour on public roads. Of course, again, somebody could say, "Well, was that really a customer car?" We delivered a customer car on Friday last week to a customer. 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. I went on the street with a photographer in the back with his camera.

Within half a mile, I got flashed, and I got a speeding ticket. I would never have thought that such a speeding ticket would maybe have a value today, because I probably when that person gets it, which unfortunately I have to tell him, "You're getting a speeding ticket, together with this car," and he probably gets that in a couple of weeks. Of course, I told him I'll pay for it. Now, of course, I told him I would also like that he sends it to me, so I can post it online to show that the car actually is driving fairly fast, maybe sometimes faster than it should. 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 argument.

I just kinda wanna start with that, and then I would like to get on to some more serious business. 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-so people in the Fisker team, and they're all working hard on various initiatives to support our successful launch of our class-leading Fisker Ocean. They're working at things such as trade-in, after-sales, service, repairs, charging, et cetera. Everything is set up for a seamless delivery of our vehicles. Our unique asset-light 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.

We are super excited to shift gears from a startup into a phase of becoming a revenue-generating car company. That is happening as we speak. 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 launch lounge located in the city center. 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.

I also had the chance to actually shake hands with a few customers, brushoff, bit of my German and talk to them, which were kind of cool. It's just really great to see the interaction for the first time, real people coming into a store, just fantastic. Of course, in the coming months, we are gonna start opening more and more customer centers, lounges. We're gonna open our lounge in L.A. later this month. We're also gonna again start a pop-up where they're gonna do pop-ups all over Europe and U.S., where we're gonna start offering test drives. For the first time, we are really actively going out to sell this vehicle and really have our customers experience the real production vehicle. I think this is the most exciting time so far in our history.

Our launch strategy supports a robust network of Fisker-certified coalition and service centers to complement Fisker's own service and repair operations. For example, in Scandinavia, where we made our first delivery, our customers will have Fisker Center+s in Denmark, Norway, and Sweden, in addition to Fisker mobile technicians backed up by multiple service partner locations in each region, which have already been signed on. Over the quarter, we announced our Deftpower European public charging partnership, which complements our legal partnership in Europe. When combined with ChargePoint's network in North America, that will provide Fisker Ocean customers with access to over 600,000 charging points. I don't think our customers are gonna miss anything in that regard. Let's go to the Ocean update.

Underscoring 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, working closely with all our partners. I spent a lot of time on the production line with Magna, and saw firsthand what an amazing joint team we have that works on the Ocean. Just a couple of examples. It takes a 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 EDUs, which is the motors and everything around them, inverters, in less than a minute. It's amazing to see what the possibilities are once we go into high volume manufacturing. 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. I'm super excited by that. It really is a vehicle that's built for high volume. Our number one priority is launching and ramping a high-quality Fisker Ocean with class-leading features and range. 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 regulatory certificate of EPA complete, which we expect to have this month. I mean, I actually expect it in a matter of days rather than weeks because we have already delivered our vehicle to the EPA, and they have already confirmed that they've done the testing. Just coming back to Europe, obviously, we have everything done here. All our certification is done. Same in the U.S. Actually, all certification is done. In Europe, when we start the fully scaling up production next week, we're really just gonna start ramping up full speed. Of course, shortly after that, we'll start more deliveries here in Europe.

After I've been driving 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 tell you because this first customer actually properly said that he actually was changing his Porsche Cayenne for the Fisker Ocean, and he felt it drove better. I'm super excited by that. He is directly from the customer's mouth, I'm just saying what he was telling me, and he was definitely ecstatic about it. As we have mentioned previously, while we will prioritize our Ocean One Extreme trims throughout most of 2023, we have recently produced several Ocean Ultra and Sport trims on the production lines of Magna. We want to ensure production readiness of those trims ahead of time.

We do anticipate customer deliveries on those trims will begin in September, and that's what we always planned, and that hasn't changed, that we will start the first deliveries of these variants in September. Of course, that means we will be incredibly price competitive once we put these vehicles on the market. The Ocean demand remains strong, and we continue building awareness through the organic marketing efforts that I just mentioned before. Of course, that's gonna be even stronger. Once we start getting the cars on the road, I think automatically you're gonna see that we are gonna have a big increase of reservations. At this point, the net reservation on orders totals approximately 65,000 for the Fisker Ocean.

I guess flat is the new up in the turbulent start of 2023, where we saw competitor price cuts and turmoil in the financial sector. I'm very happy that we have stayed on that element. Those who may have given up their reservation, there's a need for somebody else to take it over, which I think is really, really cool. During this turbulent period, we remain 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 increased great brand awareness to drive even more customer consideration and demand for the Ocean.

I fully expect by next earnings call 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 call, we appeared at events across France, Norway, 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 clean 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. Norway, of course, is our number one EV country here in Europe in terms of reservations.

We are eager to get started there as well, and we see a huge potential in Norway as well. I'm also gonna speak here at the Financial Times Future of the Car Summit in London tomorrow. We're gonna be discussing, you know, the industry, the challenge of carbon-neutral automotive ecosystem, et cetera. I'm looking forward to that as well. We have got recognition for our class-leading Fisker 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. We are honored to see the Fisker Ocean getting recognized for this by the design community.

The Ocean has a large retail, total addressable market in both Europe and North America, and growing appeal for fleet customers as well. Our innovative partnership with Ample, which we just announced, will first market only the fleet market with battery-swappable Fisker Ocean vehicles by Q1 2024. That's quite soon. Lowering the base purchase price and increasing EV production is actually the goal of this. Of course, we are entering in a new segment as we have been in talks about potential large order possibilities in the fleet market if we were able to adopt such a swappable battery strategy. That specifically puts us tailored towards certain fleets, and we'll talk about that a little more shortly when we get more, I would say, definitive on some of these orders, et cetera.

Now let me talk a little bit about the PEAR and some future product updates. The PEAR program design engineering continues to progress well. Consumer interest in the revolutionary PEAR continues to grow even though we have only revealed limited, sort of some actually little teaser photos or teaser drawings. Current PEAR 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. We are working towards a U.S.-based battery manufacturing solution, which really is necessary to take full advantage of these incentives. Obviously, having a vehicle in this price range, then these incentives becomes even more important.

We also continue our work with Foxconn on finalizing plans for an innovative manufacturing setup that will be required for the uniquely engineered PEAR. The PEAR design and engineering has been focused on reducing parts while avoiding expensive aluminum castings. We are focused on a new strategy we call Steel++. 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 innovative truck, by the way. 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. 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 are now looking at PEAR production to start in early 2025, we have shifted it a few months out. We think that was necessary to make sure we get this battery manufacturing done in the U.S. In today's earning release, we announced we'll be adding an optional hardcore off-road package for Ocean called Force E. I just wanna mention that because that's actually a package that will be available already this year, even to people who have already purchased the Ocean. It'll be eligible on all the four-wheel drive versions. I think this is gonna be super exciting, this vehicle.

This will move the Ocean into a new market segment with few direct EV competitors at our price point. The Force E development is head up by our senior VP of engineering, David King, who had an early career in off-road rally driving and was a national champion co-driver as well. I can guarantee you this Force E will be quite a beast. I'm really excited about 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 gonna, you know, offer something unique in this segment, which is not available today. I think being able to drive zero emission in nature is even cooler. 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. We are in the middle right now of designing and developing and constructing these vehicles. I can tell you this is gonna be something else, quite a thing. We are also gonna be unveiling the radical PEAR. As 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. I'm super excited about that.

I think we'll send some shock waves throughout the auto industry when we start unveiling our future model lineup, which really will show the growth strategy we have in our product strategy, which I actually think is unparalleled and maybe one of perhaps the strongest points at Fisker, that every single model that we're showing you will have something unique in the segment and almost redefining the segment. With that, I'm super optimistic about Fisker's future and realizing our vision of a clean future for all. I'll now turn it over to Burkhard, our Chief Technology Officer.

Burkhard Huhnke (CTO)

Thank you, Henrik. Beginning with the Fisker Ocean, I'd like to begin by providing an update on our dual continent homologation process. We are the only startup that has homologated the vehicle simultaneously in both North America and Europe. We believe this will prove to be a critical advantage in our growth strategy. This has not been an easy task as there are over 100 regulations and 380 various tests. One of the key milestones in the past few months was the Fisker Ocean Extreme achieving a combined WLTP range of up to 707 km or 440 U.K. miles for the 20-inch wheels and tires. 701 km, 436 U.K. 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. We are extremely pleased with these results. The findings significantly exceeded our previous estimates of 630 kilometers. 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 350 mile range for the Fisker Ocean Extreme.

We delivered our first week in Europe last week and now have approval to sell in well over 12 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 intensely 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 Ocean One 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 homologation 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 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 U.S. FMVSS and NHTSA testing requirements in the U.S. and internally relegated European NCAP. The Ocean has proved to perform at the highest standards, and we are very proud of these results. As I had explained in the last earnings, 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 have been spent on the acceleration of automated calibration routines and 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 mature parts from ECU suppliers, acceptance testing, and ensuring all cars have the same configuration. Unlike the hardware aspects of a vehicle, we expect continual 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 U.S. and EU for function validation and to identify customer edge cases and further improve the experience. These fleet programs are very beneficial to identify customer relevant integration issues as quickly as possible. In daily sessions, we are reviewing issues or concerns and we 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 the difference that we have full connectivity and can react immediately. 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 implement 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 Ocean's infotainment system. We greatly simplified the controls, creating a straightforward experience switching between different settings, functions and features. I find the infotainment 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. Let me provide an update on PEAR. As we start to shift our focus to PEAR, 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 on August 3rd this year. The PEAR body structure will fulfill the 25 highest global safety standards, U.S. NCAP, Euro NCAP, C-NCAP, IIHS Top Safety Pick, and is competitive in NVH durability and functionality. Compared to Ocean's multi-material body structure, the PEAR 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 PEAR.

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 speeds and wireless connectivity than the current generation. This platform will be easier to adopt into all our next generation vehicles. Driving cost 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 vehicle. 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 best of electric builds 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 and our upcoming vehicle platforms, including PEAR. Thank you. I will now turn the call over to Geeta.

Geeta Gupta-Fisker (CFO and COO)

Thank you, Burkhard. 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 Fisker Ocean. With that vision and our asset-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. 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 to date?

We have created an amazing product, as both Henrik and Burkhard 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.

Every company has had supply chain issues, so have we. We always found ways to work through them. We continue to do so. 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. We're really proud and grateful to our loyal customers. We will continue to grow the enthusiasm through our digital experience in super exciting, super fun retail stores. We recently opened four E.U. locations. I got a chance to visit two of those in Munich, in Germany, and one of those, of course, in Copenhagen. 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 weekly basis throughout the year with our run rates. 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 rates 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 a run rate in excess of 50,000 units annually achieved over roughly four quarters.

Just to remind everybody, stage one was expected to last through the end of March 2023. Just to tell everybody what happened during stage one, we secured quality and capacity readiness on 78% of all supply chain parts as a majority of our suppliers integrated production tools into home line to meet the production ramp. We did have challenges, and let me explain you some of these challenges. We had challenges with specifically one tier 1 supplier that requested additional time for tool integration as their tooling vendors had setbacks due to bankruptcy in Europe or late tool completion. 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. 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. Task force 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. We are working with these suppliers to ensure that they meet our adjusted volume forecast in a timely manner. We have over 90 ECU suppliers that have to achieve both hardware and software readiness, as Burkhard talked about hardware and software configuration.

In addition to hardware readiness, software from each of these suppliers has to be validated at Magna Steyr, hardware-in-the-loop, and at the vehicle level prior to suppliers receiving approval to in-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. Burkhard 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-ramp 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 meet design specifications, which triggers a five-day loop back process that the SQA and supplier teams implement to close out all open QA items. I know it's boring. I know nobody realizes this is critical. 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. 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 earning 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 earnings call, I had an extremely productive meeting with CATL, our battery partner, who continue to support us. 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 pay program? Our digital direct-to-customer 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 Fisker 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 Santander there in Europe.

Digital functionality will expand in the coming weeks in alignment with our production ramp schedule 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 Fisker 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. Finally, we are excited to release the ownership and connected vehicle experience through the Fisker app later this month as well. 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 build 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 Wallbox and through merchandise. The decreased quarter-over-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. 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, SG&A had some non-recurring launch, 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 0.38 loss per share, a modest improvement from last year's net loss of $122.1 million and 0.41 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. I expect these VAT receivables to come in in the next few weeks. 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. 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-light model. 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-610 million. This is consistent with our expectations provided last quarter.

This guidance benefits from our asset-light 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 1,400-1,700 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 regards to interior parts that were impacted by a tier two 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 32,000-36,000 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%-12% range, and potentially positive adjusted EBITDA, provided input costs do not change drastically. The Fisker 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?

Frank Boroch (VP of Investor Relations and Treasury)

Well, for the Q&A session, we'll start with some of the retail questions that were submitted over the Say platform. The first question. In light of the low share price, what is Fisker doing to increase shareholder value and instill confidence? Henrik, do you wanna take that?

Henrik Fisker (CEO)

Thank you, Mike. I think, you know, we are trying to be as transparent as we can. Of course, we can only bring out the news when there are news. 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. I think we are extremely active. We are agile, we are moving fast. Of course, the next step now is really getting the cars on the road. That is what's gonna bring value to our shareholders. That's what is gonna bring confidence in the market. It also has to be high-quality vehicles, and it has to be a high-quality delivery.

That's why we started out with a couple of deliveries to make sure that the entire process works. Once we're off and delivering 1,500 vehicles a week, we need to deliver vehicles super fast. We do have examples where that was an issue, so we don't wanna 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 wanna say that part of building this investor confidence, once we're out in the market with these vehicles and are showing continuous deliveries and production through June and July, we decided to have our Investor or Shareholder call it Analyst Day on August 3rd this year. I can tell you, we'll 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 together with our team to develop these vehicles right now. They're gonna be stunning. They're gonna be amazing. There's gonna be nothing like it, and I think this will finally show that Fisker have a completely different path and a completely different market opportunity, with our future product strategy. I'm super excited about that, and I'm sure that's gonna build investor confidence. I know Geeta wanna say a few things about that as well. Geeta.

Geeta Gupta-Fisker (CFO and COO)

Yeah. you know, as 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. Today, we've achieved all of this, and we still report a phenomenal cash balance, and we are 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 Fisker 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 from day one. Frankly, I think if we keep executing on our model, on our 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. 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.

Frank Boroch (VP of Investor Relations and Treasury)

Thank you. Operator, now let's turn to the phone line, questions, please.

Operator (participant)

Thank you. If you have a question, please press star one on your telephone keypad. Your first question comes from the line of Chris McNally with Evercore. Please go ahead.

Chris McNally (Senior Managing Director)

Hi, team. Thanks so much for the detail. So, two questions. One's gonna be on production and then the second's gonna be on Foxconn. Henrik and Geeta, the updated production cadence seems to make sense. About 1.5 months is the way I calculated off 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? Geeta, you mentioned the tier one 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.

Geeta Gupta-Fisker (CFO and COO)

I think, Chris, I just want to remind you that we of course need U.S. EPA, which we do expect to come in. Just wanted to remind you of that. From our point, besides the topics that I have mentioned, if those go to plan, we see no other impacts, no other issue.

Henrik Fisker (CEO)

Yeah. Maybe I can.

Geeta Gupta-Fisker (CFO and COO)

Yeah

Henrik Fisker (CEO)

Touch on the Foxconn side. you know, as we moved further with PEAR development, we actually came up with some phenomenal ideas to take further cost 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 PEAR, specifically of how to reduce parts. I know everybody's talking about giga castings, but nobody talks about how much they cost and what's gonna happen when you crash a car with such a casting. Obviously if it's a affordable car, you also wanna be able to insure it affordably and you wanna be able to re-repair it. We came up with this phenomenal concept which we call Steel++.

It also means we have to do something a little unique when it comes to assembly. 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. 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. We do wanna have those because imagine if we're able to sell a car for $22,500, I mean, that's just gonna be insane. That's obviously what we wanna do because that's gonna be such a unique market that we're gonna go in there with nothing that compares to it. That's really important. Geeta, do you wanna add something?

Geeta Gupta-Fisker (CFO and COO)

Yeah. Chris, I just wanna say, we have of course, a great relationship with Foxconn given the fact that we have shipped the vehicles 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.

Chris McNally (Senior Managing Director)

I would really appreciate it. With respect to Foxconn, should we expect when there's feel like all of the, you know, the i's have been dotted, the t's have been crossed, that we would get a formal announcement of a manufacturing agreement? Then just, you know, one other one. In the press release it mentions battery partners, as one of the, you know, the shifts from second half into 2025. Does that essentially imply that it'll be CATL and you're working with another battery producer as well?

Henrik Fisker (CEO)

Yeah, absolutely. Of course, we'll make announcements as soon as we have it firmed up. We don't wanna 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. 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 PEAR program. We have already implemented these radical new engineering solutions in our program. I think Buhre last time already talked about our Blade computer, which drastically reduces our components as well.

Those are all things that we have to kind of put together as a manufacturing plan as well. 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 PEAR. Yes, we will be announcing, the firm, you know, deals once we have them, both when it comes to Foxconn and when it comes to, the battery deals that we are working on right now.

Chris McNally (Senior Managing Director)

Much appreciated.

Frank Boroch (VP of Investor Relations and Treasury)

Operator, can you go to the next question, please?

Operator (participant)

Your next question comes from the line of Jeoffrey Lambujon with TPH. Please go ahead.

Jeoffrey Lambujon (Managing Director in Equity Research)

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%-12% margins for this year. 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. I guess, you know, as you think about all of that more directly, should we expect any changes to pricing for the Ocean going forward? Thanks.

Henrik Fisker (CEO)

Yeah. 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 the incredible increases that happened six months ago, one year ago, one and a half year ago. If you actually look at the to- pricing since two years ago, they're really just come back to where they were two years ago. 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. 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. 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. Now you're lowering the cost of that vehicle, maybe $10,000 or so, which would be quite unique.

I think we got a lot of things up our sleeve that we can use if it should be necessary. As Geeta mentioned, we are also in a unique situation where we make money on our vehicles from the get-go because we're paying a fixed manufacturing fee. I don't think we're under the same pressure as some of our competitors out there. I think with a unique product in the pricing we're in, I don't think people necessarily neither buy a $60 thousand or $70 thousand 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. It's an equal playing field here in Europe. 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 actively looking at that. Of course, the PEAR will be made in U.S. as so will the batteries with PEAR.

Jeoffrey Lambujon (Managing Director in Equity Research)

Great. Appreciate that. I guess.

Henrik Fisker (CEO)

Yeah, go ahead.

Jeoffrey Lambujon (Managing Director in Equity Research)

Thanks. Yeah, I just wanted to ask one follow-up, just if you could, speak to some additional color on margins for the year. Appreciate the reference for guidance kind of staying intact there for the full year on that 8%-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. Just from that lighter Q2 through the rest of the year as you scale up, just curious on how, you know, margin improves throughout that time frame. Appreciate it.

Geeta Gupta-Fisker (CFO and COO)

I mean, we're not giving quarter-on-quarter guidance, so I will 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, you know, as we are getting into launch, it's coming into play. As we get towards the year-end, these NREs are disappearing. 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. 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.

Frank Boroch (VP of Investor Relations and Treasury)

Thank you. Operator, please go to the next question.

Pavel Molchanov (Equity Research Analyst)

Your next question comes from the line of Pavel Molchanov with Raymond James. Please go ahead.

James Picariello (Senior Equity Analyst)

Thank you for 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?

Geeta Gupta-Fisker (CFO and COO)

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. As a result, suppliers hurt if they don't achieve the volumes or they don't get to sales fast. 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. 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.

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. We have a phenomenal relationship with all our suppliers. We work very well with Magna Steyr in distributing what you call EDI catalogs. These are very organized IT systems where we work with our complex supply chain throughout the world. We manage the supply base well. 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. 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.

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 Magna Steyr. We can go from 50,000-70,000 units, as we've said before, without much effort. Of course, you need to put in an extra shift. I feel very confident with the volumes we have on working with the supply chain.

James Picariello (Senior Equity Analyst)

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?

Geeta Gupta-Fisker (CFO and COO)

It's actually related to the cost of amortizing the Magna warrants. I think we can probably discuss it in detail offline.

James Picariello (Senior Equity Analyst)

Okay. Thank you.

Operator (participant)

Your final question comes from the line of James Picariello with BNP Paribas. Please go ahead.

James Picariello (Senior Equity Analyst)

Hi, everyone. Henrik, I appreciate the candidness in your opening remarks. Just to confirm, you know, what was said, so among the few deliveries to customers in Europe thus far, is the company statement that none of these vehicles has been returned for any, you know, any type of problem?

Henrik Fisker (CEO)

Yeah. I mean, I can't believe you're reading this garbage article. Yeah, I'm confirming. The car is still in Copenhagen, the other car is still in Munich. 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 automotive. I think it's a very good event if I'm not wrong. You know.

James Picariello (Senior Equity Analyst)

Got it. Yeah, just can we confirm the pack size for the Ocean now that we've got, you know, cars in the hands of customers? Thanks.

Henrik Fisker (CEO)

Yes, that's 113 kilowatt, 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 a Tesla Model Y or BMW X3.

James Picariello (Senior Equity Analyst)

Yep. Thank you. Appreciate it.

Henrik Fisker (CEO)

Thank you.

Operator (participant)

I will turn the call over to Henrik for any closing remarks.

Henrik Fisker (CEO)

Thank you very much. I appreciate everybody on the call. Again, it is incredible what a ridiculous article can bring around, and it's incredible that we have to spend time. We have an earnings call talking about speeding tickets to confirm our car actually can go fast. 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, you know, products this year in terms of deliveries and production. I think actually we'll be way beyond that because I'm gonna push for it. I think as Geeta mentioned, we have some amazing suppliers. Unless there's something really out of the world crazy happening, I'm super confident about it and really overachieving our goals.

What I also wanna mention is, 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. I think that's really the important part here and why we are trying to streamline our logistics and delivery process, why we are going all digital, why we have spent several months setting up 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. That really is important because you don't wanna spend the end of the year having produced 36,000 cars and only delivered, you know, 2025.

I would like to say in the end of the year, if I produce 36,000 cars, I would like to de-deliver 35,500, if possible. That's what we're gonna push for. 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. As I mentioned earlier, we are proud now to be a revenue-generating car company. Now all we need to do is scale and deliver our amazing vehicles. Thank you very much, everyone.

Operator (participant)

This concludes the conference call. You may now disconnect your lines.