Overview
Fisker is building a technology-enabled, asset-light automotive business that it believes will be among the first of its kind and aligned with the future state of the automotive industry. This involves a focus on vehicle development, customer experience, sales and service intended to change the personal mobility experience through technological innovation, ease of use and flexibility. The Company combines the legendary design and engineering expertise ofHenrik Fisker to develop high quality electric vehicles with strong emotional appeal. Central to Fisker's business model is the Fisker Flexible Platform Agnostic Design ("FF-PAD"), a proprietary process that allows the development and design of a vehicle to be adapted to any given electric vehicle ("EV") platform in the specific segment size. The process focuses on selecting industry leading vehicle specifications and adapting the design to crucial hard points on a third-party supplied EV platform and outsourced manufacturing to reduce development cost and time to market. The first example of this is Fisker's work to adapt theFisker Ocean design to a base vehicle platform developed byMagna Steyr Fahrzeugtechnik AG & Co KG ("Magna Steyr"). Recent Developments We achieved several key milestones inEurope in April andMay 2023 , including (i) the all-electric Fisker Ocean Extreme equipped with standard 20" and optional 22" wheels and tires achieved combined WLTP ranges of up to 707 km/440 miles and 701 km/436 miles, respectively; (ii) we opened our inaugural Center + facilities inCopenhagen, Denmark andVienna, Austria ; (iii) theFisker Ocean received small series type approval from the regulatory authority to be sold and delivered inEurope ; and (iv) we completed an initial delivery of the limited edition Fisker Ocean One to an early customer inDenmark and we registered a Fisker Ocean One inGermany forHenrik Fisker , our CEO.
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As outlined earlier this year, our production forecasts are linked to supply chain readiness and receipt of multiple regulatory homologation approvals across our launch markets. The timing of these approvals has shifted, which impacts our initial volume forecasts for 2023. Based on our current expectations for approvals, which includes obtaining US homologation approvals inMay 2023 , as well as our capacity expectations related to our supply base, we currently forecast we will produce 1,400 to 1,700 vehicles during the second quarter of 2023. 23
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Our focus during this initial industrialization phase is to ensure process readiness, tooling maturity, and part validation. Our suppliers are subject to external factors that could impact their ability to ramp output of components for our vehicles. For example, one of our Tier 2 suppliers entered receivership, which required a timely solution with our Tier 1 supplier to secure the underlying tooling. Our key supply chain partners are concentrated within an umbrella group of companies, and we are dependent upon their operational performance. A successful launch of theFisker Ocean is reliant upon our key suppliers' ability to mature software and components to market release levels. Our ability to reach expected run rates is also contingent upon the ability of our manufacturing partner to successfully ramp production at required quality levels. We continue to work with our suppliers, including our manufacturing partner, to add shifts to increase production capacity and meet our production goals for the second quarter.
Basis of Presentation
Fisker currently conducts its business through one operating segment. As a company with no commercial operations and limited revenues derived from merchandise sales and home charging solutions, which are not core to our ongoing business, Fisker's activities to date have been limited and its historical results are reported underU.S. GAAP and inU.S. dollars. Upon commencement of retail production of its Ocean SUV, Fisker expects its global operations to focus primarily on theUSA and theEuropean Union markets. As a result, Fisker expects that the financial results it reports for periods after it begins retail production will not be comparable to the financial results included in this report or Fisker's Annual Report on Form 10-K for the year endedDecember 31, 2022 filed with theSEC onMarch 1, 2023 .
Results of Operations
Comparison of the Three-Months Ended
The following table sets forth Fisker's historical operating results for the periods indicated: Three-Months Ended March 31, 2023 2022 $ Change % Change (dollar amounts in thousands) Revenue$ 198 $ 12 $ 186 n.m. Cost of goods sold 164 11 153 n.m. Gross Margin 34 1 33 n.m. Operating costs and expenses: Selling, general and administrative 44,648 21,992 22,656 103 % Research and development 76,999 101,460 (24,461) (24) % Total operating costs and expenses 121,647 123,452 (1,805) (1) % Loss from operations (121,613) (123,451) 1,838 (1) % Other income (expense): Other income (expense) (45) (371) 326 (88) % Interest income 6,894 265 6,629 n.m. Interest expense (4,601) (4,383) (218) 5 % Foreign currency gain/(loss) (401) 746 (1,147) n.m. Unrealized gain/(loss) recognized on equity securities (730) 5,120 (5,850) n.m. Total other income (expense) 1,117 1,377 (260) (19) % Loss before income taxes (120,496) (122,074) 1,578 (1) % Provision for income taxes (59) - (59) n.m. Net Loss$ (120,555) $ (122,074) $ 1,519 $ - n.m. = not meaningful. 24
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Revenue and Cost of Goods Sold
InMay 2023 , we began producing vehicles for deliveries to our customers and, accordingly, we are recognizing vehicle revenues from the sale of initial Fisker Ocean SUVs. Merchandise sales and home charging solutions are not intended to comprise a significant portion of the Company's revenues. Over the course of the second half of 2023, we will ramp production volumes at a measured pace to ensure the supplier base can delivery high-quality components in line with our serial production run-rate. Sales of branded apparel and goods and home charging solutions totaled$198 thousand with related costs of goods sold of$164 thousand resulting in a gross profit of$34 thousand during the three-month period endedMarch 31, 2023 compared to branded apparel sales of$12 thousand with related cost of goods sold of$11 thousand resulting in gross profit of$1 thousand during the corresponding three-month period endedMarch 31, 2022 . Once we commence production and sale of our vehicles, we expect cost of goods sold to include mainly vehicle components and parts, including batteries, direct labor costs, amortized tooling costs and capitalized costs associated with the Magna warrants, and reserves for estimated warranty expenses.
Selling, General and Administrative
Selling, general and administrative expenses consist mainly of personnel-related expenses for Fisker's executive and other administrative functions, advertising and marketing expenses, and expenses for outside professional services, including legal, accounting and other advisory services. Selling, general and administrative expenses increased by$22.7 million or 103% from$22.0 million during the three months endedMarch 31, 2022 to$44.6 million during the three month period endedMarch 31, 2023 , primarily due to increased salaried, targeted marketing and advertising for events, employee headcount, improved benefits in line with our human capital and ESG goals designed to offer potential employees competitive compensation packages and stock-based compensation. With vehicle deliveries beginning in the second quarter of 2023, we will increase our marketing and advertising efforts in alignment with expected customer interest in theFisker Ocean . Also, Center+, showroom, vehicle processing, and service and pickup locations will open throughout the remainder of 2023 resulting in higher expenses. The timing of openings will correspond with customer order demand and completion of homologation inEurope andthe United States . Selling, general and administrative expenses include stock-based compensation benefit of$0.7 million and stock based compensation expense of$1.8 million for three-months endedMarch 31, 2023 and 2022, respectively. Overall, total headcount for the Company increased to over 900 employees as ofMarch 31, 2023 , compared to 760 employees as ofDecember 31, 2022 . The company expects selling, general and administrative expenses, excluding stock-based compensation expenses, in the year endedDecember 31, 2023 to range between$130.0 million and$160.0 million as compared to$106.4 million in the year endedDecember 31, 2022 .
Research and Development
To date, Fisker's research and development expenses have consisted primarily of external engineering services in connection with the design of theFisker Ocean model and development of the pre-production and start of production vehicles. Research and development expenses decreased by approximately$24.5 million or 24% from$101.5 million during the three months endedMarch 31, 2022 , to$77.0 million during the three months endedMarch 31, 2023 . The decrease primarily relates to higher costs associated with the purchase and expense of$39.2 million for prototype parts and engineering and design services incurred as Fisker met key development gateways during the first quarter of 2022 that did not recur in the first quarter of 2023 as theFisker Ocean is in the final stages of homologation. Higher costs in the first quarter of 2022 are only partially offset by higher headcount in the first quarter of 2023. Over the remainder of 2023, we expect research and development expenses will continue to trend lower than the corresponding three-month periods in 2022 as conceptual design and development of PEAR and costs associated with the completion of homologation in 2023 are not expected to exceed 2022's costs incurred to complete the engineering and design of the Ocean and transition to production, including accrual of probable achievement of engineering and design milestones at the end of 2022. Research and development expense includes stock-based compensation benefit of$1.0 million and stock-based compensation expense of$3.3 million for the three-months endedMarch 31, 2023 and 2022, respectively. 25
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The company expects research and development expenses, excluding stock-based
compensation expenses, in the year ended
Interest Expense
Interest expense consists of interest expense associated with the convertible senior notes.
Interest expense amounted to$4.6 million and$4.4 million during the three months endedMarch 31, 2023 and 2022, respectively due to the sale, inAugust 2021 , of$667.5 million principal amount of 2.50% convertible senior notes. Interest expense in the subsequent three-month period throughout calendar year 2023 will approximate$4.5 million , including accretion of debt issuance costs.
Foreign Currency Gain/Loss
The Company recorded foreign currency losses of$0.4 million during the three months endedMarch 31, 2023 , compared to gains of$0.7 million during the three-months endedMarch 31, 2022 , primarily due to remeasurement losses on Euro-denominated monetary assets caused by weakening Euro currency rates. For the remainder of 2023, we expect EUR denominated transactions associated with our foreign operations and services provided by suppliers will increase and will subject Fisker to greater fluctuation in realized gain and losses from foreign currencies.
Unrealized Gain/Loss Recognized on
Unrealized losses recognized on equity securities held as of
Provision for Income Tax
Fisker's income tax provision consists of an estimate forU.S. federal and state income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in the tax law. Fisker maintains a valuation allowance against the full value of itsU.S. and state net deferred tax assets because Fisker believes the recoverability of the tax assets is not more likely than not.
Provision for income tax amounted to
Net Loss
Net loss was
Liquidity and Capital Resources
As of the date of this Form 10-Q, Fisker has yet to generate any meaningful revenue from its core business operations. To date, Fisker has funded its capital expenditures and working capital requirements through equity and convertible notes, as further discussed below. Fisker's ability to successfully commence its primary commercial operations and expand its business may depend on many factors, including its working capital needs, the availability of equity or debt financing and, over time, its ability to generate cash flows from operations.
As of
InMay 2022 , we entered into the Distribution Agreement, pursuant to which Fisker established an ATM Program. Pursuant to the ATM Program, Fisker may, at its discretion and from time to time during the term of the Distribution Agreement, sell, through the Agents, shares of its Class A Common Stock as would result in aggregate gross proceeds to Fisker of up to$350 million by any method permitted by law deemed to be an "at-the-market offering" as defined in Rule 415 of the Securities Act of 1933, as amended, including without limitation sales made directly on theNew York Stock Exchange , on any other existing trading market for the Class A Common Stock or to or through a market maker. In addition, the sales agents may also sell the shares of Class A Common Stock by any other method permitted by law, including, but not limited to, negotiated transactions. We issued 8,884,080 shares of Class A Common Stock under the 26
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ATM Program during the three-months endedMarch 31, 2023 for gross proceeds of$54.8 million , before$0.8 million of commissions and other direct incremental issuance costs. As ofMarch 31, 2023 ,$101.7 million of Class A Common Stock is available for sale under the ATM Program. InAugust 2021 , we entered into a purchase agreement for the sale of an aggregate of$667.5 million principal amount of convertible senior notes due in 2026. The net proceeds from the issuance of the 2026 Notes were$562.2 million , net of debt issuance costs and the 2027 Capped Call Transactions discussed further in Note 9. The 2026 Notes mature onSeptember 15, 2026 , unless repurchased, redeemed, or converted in accordance with their terms prior to such date. The 2026 Notes were not convertible as ofMarch 31, 2023 . Fisker expects its capital expenditures and working capital requirements to stabilize in 2023 and beyond, as it progresses toward production and deliveries of theFisker Ocean , develops its customer support and marketing infrastructure and expands its research and development efforts on PEAR, Ronin and other future vehicle programs. Fisker believes that its cash on hand will be sufficient to meet its working capital and capital expenditure requirements for a period of at least twelve months from the date of this Form 10-Q. Fisker may, however, need additional cash resources, including proceeds from the sale of up to$101.7 million of Class A common stock under the ATM Program, to fund its operations until it commences serial production levels of theFisker Ocean due to changed business conditions or other developments, including unanticipated delays in negotiations with OEMs and tier-one automotive suppliers or other suppliers, supply chain challenges, disruptions due to COVID-19, competitive pressures, and regulatory developments, among other developments such as the collaboration on "Project PEAR" with Foxconn announced inFebruary 2021 . To the extent our current resources are insufficient to satisfy our cash requirements, we may need to seek additional equity or debt financing. In particular, in addition to issuing equity under our ATM Program, we may seek other forms of financing under our effective shelf registration statement or through private placements. Our existing effective shelf registration statement permits us to issue various securities for proceeds of up to$2.0 billion , which amount is reduced by amounts sold under our ATM Program. If such financing is not available, or if the terms of the financing are less desirable than we expect, we may be forced to decrease our level of investment in product development or scale back our operations, which could have an adverse impact on our business and financial prospects.
Cash Flows
The following table provides a summary of Fisker's cash flow data for the periods indicated: Three Months Ended March 31, 2023 2022 ( in thousands) Net cash used in operating activities$ (83,742)
Net cash used in investing activities (45,748)
(55,750)
Net cash provided by financing activities$ 50,099
Cash Flows used in Operating Activities
Fisker's net cash flows used in operating activities to date have been primarily comprised of costs related to research and development, payroll and other selling, general and administrative activities. Lease commitments as ofMarch 31, 2023 , will result in cash payments of$6.4 million for the remainder of 2023, and$8.8 million for 2024, and$35.8 million for 2025 and thereafter. Structural improvements are required before Fisker can use its Fisker Lounges in theU.S. andEurope for its intended purposes. The timing for completion of the structural improvements is expected during 2023. Compared to 2022, Fisker expects its cash used in operating activities will decrease as development costs of theFisker Ocean subside and cash collections from vehicle sales in excess of costs to manufacture accumulate throughout the remainder of 2023. In total, excluding stock-based compensation costs, Fisker is projecting to use between$290.0 million and$350.0 million for combined SG&A and R&D activities during 2023.
Net cash used in operating activities decreased by approximately
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Cash Flows used in Investing Activities
Fisker's cash flows used in investing activities, historically, have been comprised mainly of purchases of property and equipment. During the three-months endedMarch 31, 2023 , the Company acquired assets related to production of theFisker Ocean and its components that totaled$45.7 million compared to$45.8 million during the three-months endedMarch 31, 2022 . Fisker continues to expect 2023 capital expenditures for tooling and manufacturing equipment to range between$245 million and$260 million of which we expect at least 50% is denominated in foreign currencies, as serial production tooling and equipment installations continue at both vehicle assembly and supplier facilities during 2023.
Fisker used cash of
OnJuly 28, 2021 , the Company made a$10.0 million commitment for a private investment in public equity (PIPE) supporting the planned merger of leading European EV charging network, Allego withSpartan Acquisition Corp. III (NYSE: SPAQ), a publicly-listed special purpose acquisition company. The merger closed in the first quarter of 2022 which triggered our investment commitment resulting in a$10.0 million cash payment to acquire 1,000,000 class A common shares of Allego (NYSE: ALLG). Fisker was the exclusive electric vehicle automaker in the PIPE and, in parallel, has agreed to terms on a strategic partnership to deliver a range of charging options for its customers inEurope .
Cash Flows from Financing Activities
Through
Net cash from financing activities was$50.1 million during the three-months endedMarch 31, 2023 , which was primarily due to the proceeds from the issuance of the ATM equity program of$48.0 million , net of stock issuance costs of$0.7 million , as well as aggregate proceeds from the exercise of stock options and collection of related statutory withholding taxes of$2.8 million . Net cash from financing activities was$1.9 million during the three-months endedMarch 31, 2022 which was entirely due to the proceeds from the exercise of stock options and collection of related statutory withholding taxes due to payment and accrued as ofMarch 31, 2022 .
Off-Balance Sheet Arrangements
Fisker is not a party to any off-balance sheet arrangements, as defined under
Non-GAAP Financial Measure Reconciliations
The following tables show our Non-GAAP financial measure reconciliations:
Three-Months Ended March 31, Selling, General and Administrative Reconciliation 2023 2022 GAAP Selling, general and administrative 44,648 21,992 Stock-based compensation benefit/(expense) 657 (1,773) Non-GAAP Selling, general and administrative$ 45,305 $ 20,219 Three-Months Ended March 31, Research and Development Reconciliation 2023
2022
GAAP Research and development 76,999
101,460
Stock-based compensation benefit/(expense) 985
(3,292)
Non-GAAP Research and development$ 77,984 $ 98,168 28
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Critical Accounting Policies and Estimates
Fisker's financial statements have been prepared in accordance with GAAP. In the preparation of these financial statements, Fisker is required to use judgment in making estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Fisker considers an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on the condensed consolidated financial statements. For a description of our critical accounting policies and estimates, refer to Part II, Item 7, Critical Accounting Policies and Estimates in our Annual Report on Form 10-K for the year endedDecember 31, 2022 filed with theSEC onMarch 1, 2023 . There have been no material changes to our critical accounting policies and estimates since our Annual Report on Form 10-K for the year endedDecember 31, 2022 filed with theSEC onMarch 1, 2023 .
Recent Accounting Pronouncements
See Note 2 to the condensed consolidated financial statements included elsewhere in this Form 10-Q for more information about recent accounting pronouncements, the timing of their adoption, and Fisker's assessment, to the extent it has made one, of their potential impact on Fisker's financial condition and its results of operations and cash flows.
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