Polestar Automotive Holding UK PLC Q1 FY2024 earnings call

Full Year 2023 Highlights - Reported unaudited full year 2023 figures, working on Sarbanes Oxley compliance and correcting prior errors. - Global vehicle sales up 6% in 2023 to 54,600 cars, but revenue down 3%. - Gross result negative $415 million including $450 million non-cash impairment. - SG&A costs up 14%, with strategic cost and headcount reductions initiated in 2023. ### Q1 2024 and 2024 Outlook - Q1 2024 revenue down $200 million due to lower volumes, higher discounts, and revenue recognition issues. - Operating cash outflow $230 million, with early inventory improvements. - Q2 sales showed positive impact on inventory levels and cash flow. - Focus on selling Polestar 2 and preparing network for Polestar 3 and 4 ramp-up. - Thomas Ingenlath discussed Q2 delivery figures (13,000 cars), strong retail order intake, positive reviews for Polestar 3 and 4, changes in retail sales model, and plans for new market launches in 2025.

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 non-cash impairment charge of approximately $450 million. For Q1 2024, revenue was down about $200 million due to lower volumes, higher discounts, and revenue recognition complexities. Gross profit margin was negative around 9%. SG&A expenses were down 1% despite marketing for Polestar 3 and 4.

2024 and Beyond - Targeting cash flow break-even in 2025, but adapting business plan due to import duties and pricing pressure. - Expect strong deliveries in the second half of 2024 driven by Polestar 3 and 4. - Plan to provide updated guidance later in 2024. - Model expansion and seven new market launches in 2025 as key growth drivers.

Risks - Impact of import duties and pricing pressure in global EV markets, including China. - Need to mitigate effects through production shifts and other strategic actions.

Q: What was the volume of Polestar 4 sold in Q2 to the Chinese joint venture?

A: Per Ansgar said there were very few, around 200 or so.

Q: How have tariffs impacted Polestar and how will production in South Carolina help?

A: Thomas Ingenlath said 100% tariffs on US imports were almost mitigated by Polestar 3 production in South Carolina, with duty drawback mechanisms also helping. Per Ansgar added they are well hedged on duty topics.

Q: What are the capital needs for the year and how is Polestar thinking about it?

A: Per Ansgar said they are working on improving cash flow, with over 90% of a EUR470 million trade financing facility undrawn, and confident in adapting plans to improve cash flow.

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

A: Per Ansgar said Q2 revenue was on track, and Q3 and Q4 expected to show continued growth, looking good to hit the covenant.

Q: How does the shift to non-genuine agency model in Europe impact gross margins, operating margins, and working capital?

A: Per Ansgar said net gain expected from the model, with no negative impact on gross margin, some cost offloading to dealers, and potential working capital improvements through more active selling.

Q: Plan to aid in recovering Polestar's stock price?

A: Thomas Ingenlath said the current share price doesn't reflect the company's value, with strong belief in the cars, brand, and diversified manufacturing footprint, expecting share price recovery in 12-24 months.

Q: Any news on share buyback?

A: Thomas Ingenlath clarified no share buyback announced, but executive team, board, and employees have significant share investments as they believe in the company's potential.

Q: Confidence in bringing up sales numbers?

A: Thomas Ingenlath was absolutely confident, citing strong Q2 delivery growth, positive reviews of new SUVs, and diversified manufacturing footprint as reasons for confidence.