Polestar Automotive Holding UK Plc Q1 FY2024 earnings call

• Per Ansgar discussed 2023 preliminary results, noting it was their first year of full Sarbanes Oxley compliance, corrected errors, and a $450 million non-cash impairment charge. He also highlighted 2023 global vehicle sales up 6%, but revenue down 3%, and Q1 2024 financials with revenue down, negative gross profit margin, and SG&A expenses down 1%. - Thomas Ingenlath talked about Q2 delivery figures with 13,000 cars delivered, strong performance in certain markets, positive reviews of Polestar 3 and 4, adjusting retail and sales model, new market launches in 2025, management appointments, and confidence in the company's future based on cars, brand, and shareholders.

In 2023, global vehicle sales were up 6% to 54,600 cars, but revenue was down 3% due to channel mix and higher discounts. Gross result was negative $415 million including a $450 million non-cash impairment charge. For Q1 2024, revenue was down about $200 million due to lower volumes, higher discounts to manage inventory, and revenue recognition complexities on sales to the China JV. Gross profit margin was negative around 9%.

• Target to achieve cash flow break-even in 2025, but adapting business plan due to short-term uncertainties from import duties and pricing pressure. - Expecting updated guidance later in the year. - Strong momentum seen in Q2 with sales momentum impacting inventory levels and cash flow, confident of stronger deliveries in the second half of 2024 driven by Polestar 3 and 4, and model expansion and new market launches in 2025 as key growth drivers.

• Uncertainties from introduction of import duties and continued pricing pressure in global EV markets, including China. - Mismatch in timing of tariff implementation and production ramp-up for Polestar 3 in the US.

Q: Could you disclose how many Polestar 4s were sold in Q2 to the Chinese joint venture?

A: Per Ansgar said very few, around 200 in Q2, and sales trends expected to continue growing in Q3.

Q: How have announced tariffs impacted Polestar and how will it be mitigated?

A: Thomas Ingenlath said tariffs on Polestar 3 import were mitigated by production in South Carolina, and Per Ansgar added about duty drawback mechanism.

Q: What are the capital needs and how is cash flow being improved?

A: Per Ansgar mentioned working intensively on improving cash flow, with trade financing facility of EUR470 million largely undrawn.

Q: Are you on track to hit revenue covenant in 2024?

A: Per Ansgar said Q2 was on track, and Q3 and Q4 look good.

Q: What do you need from markets for cash flow breakeven?

A: Thomas Ingenlath said seeking external equity investment.

Q: Key drivers to reach volume for cash flow breakeven?

A: Thomas Ingenlath and Per Ansgar mentioned new markets, expanded distribution network, sales model changes, and activation of existing markets.

Q: Financial impact of shifting to non-genuine agency model in Europe?

A: Per Ansgar said net gain expected, with metrics to benefit both Polestar and dealers, and potential improvements in working capital.

Q: Confidence in bringing up sales numbers?

A: Thomas Ingenlath was confident due to strong reviews of cars, diversified manufacturing footprint, and 80% increase in Q2 deliveries compared to Q1.