On November 13 after the market closed, start-up electric vehicle (EV) maker Fisker Inc. (NYSE: FSR) delivered 3Q 2023 earnings news that neither the company nor the much-maligned EV industry needs. The company slashed its 2023 unit production forecast to 13,000-17,000 units from 20,000+, but unfortunately such a cut no longer qualifies as especially surprising news in this sector.
The more worrying news is Fisker’s disclosure that as it prepared the earnings report, the company “determined that it has material weaknesses in [its] internal control over financial reporting.” A further cautionary note: Fisker’s chief accounting officer left the company effective October 27, 2023.
Aside from the production estimate cuts and the internal control issues, another concern is operating cash flow of negative US$308 million during the quarter, an extremely large amount for a company of Fisker’s size. About US$226 million of this shortfall was due to an increase in working capital (primarily a large inventory build), so some reversal may be expected in 4Q 2023. However, a US$308 million cash flow deficit in one quarter is enormous in relation to Fisker’s September 30, 2023 cash balance of US$527 million.
FISKER INC. – Summary Financial Statistics
|(in thousands of US $, except for shares outstanding and number of vehicles produced)||Full-Year 2023 Forecast||September 30, 2023||June 30, 2023||March 31, 2023||December 31, 2022|
|Number of Vehicles Produced||13,000 to 17,000||4,725||1,022|
|Number of Vehicles Delivered||1,097|
|Gross Margin, in Percentage Terms||-16.9%||7.9%||32.3%||22.2%|
|Operating Cash Flow||($308,168)||($128,067)||($83,742)||($111,107)|
|Adjusted EBITDA||Not provided.||($63,216)||($114,150)|
|Shares Outstanding (Millions)||343.1||335.9||320.1||314.9|
There were a few positives in the quarter however. Fisker produced 4,725 of its flagship Ocean SUVs in 3Q 2023 and delivered 1,097 of them. Furthermore, the company delivered more than 1,200 Ocean SUVs in October 2023, more than the entire 3Q 2023 figure.
Fisker raised US$450 million in capital in 3Q 2023 from an existing (unidentified) institutional investor. In September, the investor purchased US$170 million (principal amount) of zero coupon convertible notes due in 2025. Fisker received US$150 million in proceeds from the offering. The stock conversion price reflected in the notes offering has not been disclosed, so the potential shareholder dilution cannot be computed.
The same investor purchased US$340 million of Fisker convertible notes in a similar zero coupon convertible offering in July 2023. Fisker received proceeds of US$300 million from that transaction. These notes also mature in 2025 and reflect a Fisker stock conversion price of US$7.80 per share.
The degree of true consumer demand for Fisker’s vehicles is hard to estimate, especially given its now reduced 2023 manufacturing forecast. As of early May 2023, about 65,000 Fisker customers had placed reservations for the vehicle. The company has not updated reservation data since that time.
Fisker has more than US$500 million of cash, so it will likely be able to survive for some time; but, uncertainty about the ultimate level of demand for the company’s vehicles and its cash generation ability suggest that investors may want to limit exposure to the stock.
Fisker Inc. last traded on the NYSE at US$2.43.
Information for this briefing was found via Edgar and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.