It's taken years for Fisker (FSRN -12.70%) to reach a material production level, but the big moment is finally here as the company just reported meaningful revenue for the first time in its history.
In its third-quarter earnings report, Fisker reported production of 4,725 vehicles and delivered 1,097 vehicles. The gap between production and deliveries was mainly due to logistics challenges, though management said it had improved its logistics network and delivered more than 1,200 vehicles in October.
Despite achieving the milestone of material deliveries and revenue, Fisker stock still fell double digits on the earnings report after hours on Monday. It reported revenue of $71.8 million, which was well short of the analyst consensus of $109 million, and its per-share loss of $0.27 was worse than expectations of a loss of $0.19. On a generally accepted accounting principles (GAAP) basis, the company reported a $91 million net loss. It also cut its production target for the year from at least 20,000 vehicles to 13,000-17,000.
Like its EV start-up peers including Lucid (LCID 0.41%) and Rivian (RIVN 6.10%), Fisker still faces a lot of uphill challenges, especially as there are signs that overall EV demand is starting to weaken and as the industry has become more price-competitive. That's led Fisker to cut the price of its high-end Ocean Extreme SUV, though it raised prices modestly on its two lower-cost trims.
The company continues to burn cash with a free cash flow loss of $339 million in the quarter, and it finished the quarter with $527.4 million in cash and cash equivalents. It also has the ability to raise another $550 million as part of a recent sale of convertible notes.
Fisker stock has steadily declined over the last couple of years and was trading at an all-time low after-hours as the company has faced production delays and the hype around electric vehicles has seemed to fade. However, there was one particular bright spot in the earnings report that shouldn't get lost in the sell-off.
Image source: Fisker.
The good news for Fisker
Rivian, Lucid, and Fisker are all ramping up production and are deeply unprofitable, but Fisker has a surprising edge over its start-up peers.
All three of these companies are reporting negative gross profit, meaning they are losing money on the sale of each vehicle even before they account for overhead costs. However, Fisker has the lowest negative gross profit of these three companies, both on a per-vehicle basis and on a margin basis, meaning as a percentage of revenue. That is partly because the company outsources its manufacturing to Magna International, but it gives the company some downside protection from the steep start-up costs.
In the third quarter, the company reported a gross profit loss of $12.1 million on $71.8 million in revenue or a gross margin of negative 17%. On a per-vehicle basis, the company had a negative gross profit of $11,000. By comparison, Rivian, which is the largest of these three start-ups, reported a negative gross profit of $30,600 per vehicle in the quarter and a negative gross margin of 36%. Lucid, meanwhile, had a negative gross margin of 140%, and a gross loss of $228,000 per vehicle delivered in the quarter.
Those numbers seem to indicate that Fisker is closer than either of its two start-up peers to making a profit. Reaching gross profitability is a crucial milestone for all three of these companies because it shows they can adequately fund their own manufacturing, though Fisker has taken a different approach from Rivian and Lucid, which have both built their own production facilities.
Overhead costs like selling, general and administrative expenses and research and development tend to be more flexible than costs of goods sold, and companies can slash marketing or R&D spending to save money when they need to. Cutting costs on manufacturing is more difficult.
While Fisker won't enjoy the same scale benefits as Rivian and Lucid, its decision to outsource manufacturing could help it beat those competitors to gross and even overall profitability over the long term.
What it means for investors
EV stocks have come under pressure in recent months on signs of waning demand in the industry, but Fisker's expected production ramp and the relatively solid gross margin numbers should give investors some encouragement.
While the stock still has a lot of challenges to overcome to be successful, it's a mistake to write off Fisker now. Keep an eye on the gross profit figure in the coming quarters. If it can improve that number and continue to grow production, the company could be well on its way to profitability.
