Polestar(PLSAY) - 2024 Q4 - Annual Report

PART I ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS This section is not applicable as per the report - The report states that this item is not applicable[72] ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE This section is not applicable as per the report - The report states that this item is not applicable[73] ITEM 3. KEY INFORMATION This section outlines the significant risks facing Polestar, categorized into business and industry, cybersecurity, personnel, litigation, intellectual property, tax, financing, and security ownership Risk Factors Polestar's business is subject to numerous significant risks, including dependence on new models, strategic partners, and the need for additional capital, leading to a going concern warning - The company has determined there is substantial doubt about its ability to continue as a going concern, as it is highly leveraged and requires additional capital to support its operations, liquidity, and growth[133] - Polestar's future growth is heavily dependent on the successful production and sale of its new vehicle models (Polestar 3 and 4) on schedule and within anticipated cost and pricing structures[86][90] - The company relies significantly on strategic partners, particularly Volvo Cars and Geely, for manufacturing, R&D, intellectual property, and supply chain management, exposing it to risks if these partnerships are disrupted[105][107] - Polestar has identified material weaknesses in its internal control over financial reporting related to control environment, control activities, and information/communication, which could lead to errors in financial reporting[84][307] - The company faces significant risks from international trade policies, including recently imposed U.S. and E.U. tariffs on Chinese-made electric vehicles, which could increase costs or reduce margins[151][152] - Polestar's dual-class voting structure, with Class B shares holding 10 votes each, gives significant control to major shareholders like PSD Investment Limited, potentially limiting the influence of Class A shareholders[314][315] ITEM 4. INFORMATION ON THE COMPANY This section details Polestar's history, business model, and operational structure, highlighting its asset-light approach through strategic partnerships History and Development of the Company Polestar Automotive Holding UK PLC was incorporated in England and Wales in 2021, becoming a public limited company in 2022, with increasing capital expenditures for R&D and production tooling Capital Expenditures (USD in millions) | Year | Amount (USD) | | :--- | :--- | | 2024 | $540.8 million | | 2023 | $555.3 million | | 2022 | $416.5 million | - The company consummated its Business Combination with GGI on June 23, 2022, which included a Pre-Closing Reorganization making Polestar Singapore and Polestar Sweden wholly owned subsidiaries[344] - Capital expenditures are expected to increase in the near term to support investment in intellectual property, unique tooling, and equipment, financed through equity, debt, and credit facilities[347] Business Overview Polestar is a premium electric performance car brand leveraging an asset-light model through partnerships to expand its vehicle lineup and global presence, focusing on sustainability and cost discipline Revenue by Type (USD in thousands) | Revenue Type | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Sales of vehicles | $1,975,864 | $2,313,124 | $2,386,685 | | Sales of software and performance engineered kits | $15,344 | $18,994 | $21,308 | | Sales of carbon credits | $10,918 | $1,452 | $10,984 | | Vehicle leasing revenue | $17,175 | $17,421 | $16,719 | | Other revenue | $14,960 | $17,094 | $5,122 | | Total | $2,034,261 | $2,368,085 | $2,440,818 | Revenue by Geographical Region (USD in thousands) | Region | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Europe, the Middle East, and Africa | $1,569,007 | $1,661,483 | $1,591,706 | | North America | $296,911 | $517,289 | $599,931 | | Asia and Australia | $168,343 | $189,313 | $249,181 | | Total | $2,034,261 | $2,368,085 | $2,440,818 | - Polestar is accelerating its transition to an active selling model, expanding its retail presence, and optimizing its manufacturing footprint (USA, China, South Korea) to minimize tariff impacts[369][370] - As of December 31, 2024, Polestar operated in 27 markets with 193 Polestar Spaces, 175 Sales Points, and access to 1,170 service points through the Volvo Cars network[360] - The company has a goal to create a truly climate-neutral car by 2030 (Polestar 0 project) and become a climate-neutral company by 2040[354][421] Organizational Structure The report illustrates the company's organizational structure, with Polestar Automotive Holding UK PLC as the parent and key wholly-owned subsidiaries in Sweden and Singapore - The company's structure consists of the UK-based parent, Polestar Automotive Holding UK PLC, with significant operating subsidiaries in Sweden and Singapore[497][502] - A comprehensive list of significant subsidiaries is provided, detailing their jurisdiction of incorporation and the company's 100% ownership stake in each[501][502] Property, Plants and Equipment Polestar operates with an asset-light model, utilizing manufacturing facilities owned by partners Volvo Cars and Geely, with headquarters in Gothenburg, Sweden, and R&D in Coventry, UK - Polestar 2 is produced at the Volvo Cars-owned Taizhou facility[505] - Polestar 3 is manufactured at Volvo Cars' facilities in Charleston, South Carolina (for US/EU markets) and Chengdu, China[506] - Polestar 4 is produced at the Geely-owned Hangzhou Bay plant and will also be manufactured in Busan, South Korea, starting in the second half of 2025[507] - Polestar 5 is expected to be produced at the Geely-owned Chongqing plant, with production starting in the second half of 2025[508] ITEM 4A. UNRESOLVED STAFF COMMENTS This section is not applicable as per the report - The report states that this item is not applicable[516] ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS This section provides a detailed analysis of Polestar's financial performance and condition, highlighting a 14% revenue decrease in 2024, a widening net loss, and ongoing liquidity challenges Consolidated Statement of Loss (USD in thousands) | | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Revenue | 2,034,261 | 2,368,085 | 2,440,818 | | Gross (loss) profit | (876,167) | (410,137) | 101,122 | | Operating loss | (1,813,311) | (1,469,514) | (1,286,568) | | Net loss | (2,049,897) | (1,181,875) | (479,017) | - Revenue for 2024 decreased by 14% to $2.03 billion, primarily due to lower sales volumes of the Polestar 2 and delays in the sales ramp-up of new car lines, partially offset by a better sales mix with the introduction of the higher-priced Polestar 3 and 4[565][567][571] - Cost of sales increased by 5% in 2024, driven by a $282.5 million increase in impairment charges, despite lower inventory costs from reduced sales volumes[573] - The company recognized significant impairment charges in 2024 totaling $622.1 million, primarily related to assets for the Polestar 3, 5, and 6, due to decreased forecasts for pricing and demand[170][1288] - Polestar continues to face liquidity risk and has a going concern warning, relying on short-term and long-term debt from credit institutions and related parties (Volvo Cars, Geely) to fund its operations and investments[591][592] Results of Operations In fiscal year 2024, Polestar's revenue decreased by 14% to $2.03 billion, while gross loss widened significantly to $876.2 million due to impairment charges, resulting in a net loss of $2.05 billion Key Operational Metrics | Key metrics | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Retail sales (units) | 44,851 | 52,796 | 50,510 | | Markets | 27 | 27 | 27 | | Spaces | 193 | 192 | 158 | | Sales Points | 175 | 153 | 99 | | Service points | 1,170 | 1,149 | 1,116 | Revenue Breakdown (USD in thousands) | Revenue Type | 2024 | 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Sales of vehicles | 1,975,864 | 2,313,124 | (15%) | | Sales of software and performance engineered kits | 15,344 | 18,994 | (19%) | | Sales of carbon credits | 10,918 | 1,452 | 652% | | Vehicle leasing revenue | 17,175 | 17,421 | (1%) | | Other revenue | 14,960 | 17,094 | (12%) | | Total Revenue | 2,034,261 | 2,368,085 | (14%) | - Gross loss for 2024 was $876.2 million, a significant increase from the $410.1 million gross loss in 2023, primarily due to higher impairment charges and lower revenues[575] - R&D expenses decreased by 76% in 2024 to $38.4 million, mainly due to a change in accounting for amortization of certain IP, which is now capitalized into inventory rather than expensed to R&D[579] Liquidity and Capital Resources Polestar's liquidity is under significant pressure, with a material uncertainty about its ability to continue as a going concern, relying heavily on debt financing from related parties and credit institutions - Management has identified a material uncertainty that casts significant doubt on the company's ability to continue as a going concern due to its need for additional financing[591][1166] Cash Flow Summary (USD in thousands) | Cash Flow Activity | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Cash used for operating activities | (991,209) | (1,893,841) | (1,080,951) | | Cash used for investing activities | (412,562) | (417,619) | (709,044) | | Cash provided by financing activities | 1,424,192 | 2,104,361 | 2,074,161 | - As of December 31, 2024, Polestar had cash and cash equivalents of $739.2 million, compared to $768.3 million at the end of 2023[593] - The company has significant debt facilities, including a $1 billion term loan from Volvo Cars (Snita) and a $250 million term loan from Geely, both with optional equity conversion features[606][607][608] - Polestar's non-current syndicated loan is subject to financial covenants, including minimum revenue and cash levels, for which lenders waived and amended certain covenants for the 2024 fiscal year[603] ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES This section details Polestar's leadership, compensation, board structure, and employee numbers, noting recent CEO and CFO appointments and the absence of 2024 bonuses - Michael Lohscheller was appointed CEO and Jean-François Mady was appointed CFO in October 2024, marking a significant change in senior leadership[652][654] - Aggregate compensation for executive officers for the year ended December 31, 2024, was approximately 36.8 million SEK (or $3.36 million USD)[677] - No bonus was paid out under the 2024 Polestar Bonus Program due to the company's financial situation, despite meeting some performance targets[679] - The Board is classified into three classes (I, II, III) with staggered three-year terms, and as of year-end 2024, seven of the ten directors qualified as independent under Nasdaq rules[740][741] - As of December 31, 2024, the company had over 2,547 employees, primarily located in Sweden, China, the UK, and the USA[763] ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS This section details Polestar's ownership structure, with Li Shufu as the ultimate beneficial owner of approximately 81.8% of shares, and extensive operational and financial agreements with Volvo Cars and Geely - As of December 31, 2024, Li Shufu is the ultimate beneficial owner of approximately 81.8% of Polestar's outstanding shares through his control of PSD Investment Limited and Geely, which in turn has a majority stake in Volvo Cars[774][776] - Polestar has a $1 billion term loan facility with Snita (a Volvo Cars subsidiary), with a maturity date extended to December 29, 2028[790][791] - The company also has a $250 million term loan facility with Geely Sweden Automotive Investment AB, maturing on June 30, 2027[792] - Polestar has a vast number of operational agreements with Volvo Cars and Geely for services including R&D, IP licensing, procurement, manufacturing engineering, logistics, and customer service, which are crucial to its asset-light model[448][449][451] - In April 2025, Polestar terminated its joint venture with Xingji Meizu in China, transferring PRC distribution rights back to Polestar to resume direct control over sales and service in the Chinese market[438] ITEM 8. FINANCIAL INFORMATION This section confirms that the consolidated financial statements are provided under Item 18 and states that the company does not intend to pay cash dividends in the foreseeable future - The company's audited consolidated financial statements are included in Item 18 of this report[935] - Polestar has not paid any cash dividends and does not plan to in the foreseeable future, intending to reinvest earnings for operational expansion[937] ITEM 9. THE OFFER AND LISTING This section provides details on the company's stock listing, with Polestar's Class A and Class C-1 American Depositary Shares listed on Nasdaq under 'PSNY' and 'PSNYW' respectively - Class A ADSs are listed on Nasdaq under the symbol 'PSNY'[941] - Class C-1 ADSs are listed on Nasdaq under the symbol 'PSNYW'[941] ITEM 10. ADDITIONAL INFORMATION This section provides supplementary information, including references to corporate documents, confirmation of no exchange controls in England and Wales, and U.S. and U.K. tax considerations for ADS holders - The company's Articles of Association and other material contracts are filed as exhibits to the report[949][950] - There is no exchange control legislation in England or Wales that affects the company[955] - Based on its income and asset composition, the company does not believe it was a Passive Foreign Investment Company (PFIC) for the 2024 taxable year but notes that this is subject to uncertainty and no assurance can be given for future years[988] - The company does not believe it should be treated as a U.S. corporation for U.S. federal tax purposes under Section 7874 of the Code as a result of the business combination[962] ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section states that Polestar is exposed to market risks, including foreign exchange risk, interest rate risk, credit risk, and liquidity risk, with detailed analyses provided in the financial statements - The company is exposed to market risks such as foreign exchange, interest rate, credit, and liquidity risk[1007] - Detailed discussion and sensitivity analyses of these risks are provided in Note 3 to the Consolidated Financial Statements[1007] ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES This section details the fees and charges applicable to holders of the company's American Depositary Shares (ADSs), including issuance, cancellation, and distribution fees ADS Holder Fees and Charges | Service | Fees | | :--- | :--- | | Issuance of ADSs | Up to US$0.05 per ADS issued | | Cancellation of ADSs | Up to US$0.05 per ADS cancelled | | Distribution of cash dividends | Up to US$0.05 per ADS held | | Distribution of ADSs (stock dividends, etc.) | Up to US$0.05 per ADS held | | ADS Services (annual fee) | Up to US$0.05 per ADS held on record date | | Registration of ADS transfers | Up to US$0.05 per ADS transferred | | Conversion of ADS series | Up to US$0.05 per ADS converted | - ADS holders are also responsible for paying taxes (including stamp duty or SDRT), registration fees, and other out-of-pocket expenses incurred by the Depositary[1015] PART II ITEM 13. DEFAULTS, DIVIDENDS ARREARAGES AND DELINQUENCIES This section is not applicable as per the report - The report states that this item is not applicable[1020] ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS This section is not applicable as per the report - The report states that this item is not applicable[1021] ITEM 15. CONTROLS AND PROCEDURES Management concluded that the company's disclosure controls and procedures were not effective as of December 31, 2024, due to material weaknesses in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective as of December 31, 2024, due to material weaknesses in internal control over financial reporting[1022] - Material weaknesses were identified in three COSO components: Control Environment (insufficient finance expertise), Control Activities (multiple areas including revenue, inventory, and impairment), and Information & Communication (ineffective IT general controls)[1030][1031][1034] - The independent registered public accounting firm, Deloitte AB, issued an adverse opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2024[1041][1042] - While the company remediated two material weaknesses from the prior year (related to monitoring and HR system controls), several others remain, and remediation efforts were hindered by financial restatements, workforce reductions, and leadership changes[1024][1025][1026] ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT The Board of Directors has determined that Christine Gorjanc qualifies as an 'audit committee financial expert' as defined by SEC rules and is independent under Nasdaq listing rules - The Board has identified Christine Gorjanc as the 'audit committee financial expert'[1057] ITEM 16B. CODE OF ETHICS The company has adopted a code of conduct applicable to all directors, officers, and employees, covering ethical standards, conflicts of interest, legal compliance, and confidentiality - Polestar has adopted a code of conduct for all directors, officers, and employees, which is available on its website[1058] ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES Deloitte AB served as Polestar's principal external auditor for 2024 and 2023, with total fees billed approximately $15.9 million in 2024, primarily for audit services Principal Accountant Fees (USD in thousands) | Fee Type | 2024 | 2023 | | :--- | :--- | :--- | | Audit fees | 15,746 | 15,720 | | Audit-related fees | 200 | 268 | | Tax fees | — | 3 | | All other fees | — | 10 | | Total | $15,946 | $16,001 | - The Audit Committee pre-approves all audit and permissible non-audit services provided by Deloitte AB[1061] ITEM 16G. CORPORATE GOVERNANCE As a foreign private issuer and a controlled company, Polestar is exempt from certain Nasdaq corporate governance requirements, utilizing exemptions for committee independence - Polestar is a foreign private issuer and is exempt from certain Nasdaq corporate governance rules[1066] - The company avails itself of exemptions related to the independence of its compensation and nominating/governance committees[1066] - As a controlled company, Polestar may also elect not to comply with requirements for a majority-independent board, though it currently does so under its Articles[1069][1073] ITEM 16J. INSIDER TRADING POLICIES The company has adopted an Insider Trading Policy to promote compliance with insider trading laws, prohibiting trading on material, nonpublic information and establishing blackout periods - Polestar has an Insider Trading Policy to prevent trading on material, nonpublic information by its directors, officers, and employees[1072] ITEM 16K. CYBERSECURITY Polestar has established a cybersecurity risk management program overseen by the Audit Committee, with a dedicated Security Team and 24/7 monitoring, acknowledging potential material impacts from threats - The Audit Committee oversees cybersecurity risk management, receiving reports from the CISO/CSO at least twice a year[1079] - A unified security organization under a CISO/CSO manages information security, product cybersecurity, and corporate security[1080][1081] - The company uses a managed security service provider (MSSP) for 24/7 security monitoring of its enterprise and vehicle fleet systems[1076] - No material cybersecurity incidents were experienced during the last fiscal year, but the company acknowledges that such risks could materially affect future operations[1077][1078] PART III ITEM 17. FINANCIAL STATEMENTS The company has elected to provide financial statements pursuant to Item 18 - The company provides financial statements under Item 18, which typically offers more comprehensive disclosure than Item 17[1085] ITEM 18. FINANCIAL STATEMENTS This section contains Polestar's audited consolidated financial statements, highlighting a 'going concern' uncertainty, an adverse opinion on internal controls, and a $2.05 billion net loss in 2024 - The independent auditor's report includes an explanatory paragraph regarding substantial doubt about the company's ability to continue as a going concern[1131] - The auditor issued an adverse opinion on the company's internal control over financial reporting as of December 31, 2024, due to identified material weaknesses[1130] Consolidated Statement of Financial Position (Assets - USD in thousands) | | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total non-current assets | 1,756,023 | 2,019,452 | | Total current assets | 2,298,327 | 2,272,758 | | Total assets | 4,054,350 | 4,292,210 | Consolidated Statement of Financial Position (Equity & Liabilities - USD in thousands) | | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total equity | 3,328,560 | 1,250,991 | | Total non-current liabilities | (2,641,976) | (1,920,617) | | Total current liabilities | (4,740,934) | (3,622,584) | | Total equity and liabilities | (4,054,350) | (4,292,210) | ITEM 19. EXHIBITS This section provides an index of all exhibits filed with the annual report, including corporate documents, securities agreements, material contracts with related parties, and CEO/CFO certifications - The exhibit index lists key corporate governance documents, including the Articles of Association (Exhibit 1.1) and various ADS Deposit Agreements (Exhibits 2.1, 2.3, 2.5)[1088] - Numerous material contracts are filed as exhibits, including the Business Combination Agreement (Exhibit 4.1) and a wide range of service, license, and manufacturing agreements with related parties like Volvo Cars and Geely[1090][1092] - Certifications by the Principal Executive Officer and Principal Financial Officer pursuant to Sarbanes-Oxley Sections 302 and 906 are included as exhibits (Exhibits 12.1, 12.2, 13.1, 13.2)[1121]