Polestar(PSNY) - 2022 Q3 - Quarterly Report

Unaudited Condensed Consolidated Financial Statements Unaudited Condensed Consolidated Statement of Income (Loss) and Comprehensive Income (Loss) Revenue nearly doubled to $1.48 billion, gross profit increased, and net loss improved to $203.3 million despite a widened operating loss Consolidated Statement of Income (Loss) Highlights (in thousands of U.S. dollars) | Metric | For the nine months ended Sep 30, 2022 | For the nine months ended Sep 30, 2021 | | :--- | :--- | :--- | | Revenue | 1,476,746 | 747,674 | | Gross profit | 57,475 | 1,060 | | Operating loss | (1,081,581) | (657,544) | | Listing expense | (372,318) | — | | Fair value change - Earn-out rights | 965,668 | — | | Net loss | (203,347) | (670,668) | | Basic and Diluted Net loss per share (in USD) | (0.22) | (2.94) | Unaudited Condensed Consolidated Statement of Financial Position Total assets grew to $3.65 billion, liabilities increased to $3.51 billion, and total equity remained negative at -$136.7 million Consolidated Statement of Financial Position Highlights (in thousands of U.S. dollars) | Metric | As of Sep 30, 2022 | As of Dec 31, 2021 | | :--- | :--- | :--- | | Total assets | 3,649,462 | 3,309,693 | | Cash and cash equivalents | 988,259 | 756,677 | | Inventories | 686,572 | 545,743 | | Intangible assets and goodwill | 1,299,877 | 1,368,356 | | Total liabilities | (3,512,782) | (3,187,197) | | Trade payables - related parties | (817,780) | (1,427,678) | | Liabilities to credit institutions | (1,176,582) | (642,338) | | Earn-out liability | (534,970) | — | | Total equity | (136,680) | (122,496) | Unaudited Condensed Consolidated Statement of Cash Flows Operating cash outflow significantly increased to $1.02 billion, offset by $1.97 billion from financing activities, resulting in a $231.6 million net cash increase Consolidated Statement of Cash Flows Highlights (in thousands of U.S. dollars) | Metric | For the nine months ended Sep 30, 2022 | For the nine months ended Sep 30, 2021 | | :--- | :--- | :--- | | Cash used for operating activities | (1,023,425) | (155,078) | | Cash used for investing activities | (652,778) | (72,171) | | Cash provided by financing activities | 1,965,753 | 536,603 | | Net increase in cash and cash equivalents | 231,582 | 290,648 | | Cash and cash equivalents at end of period | 988,259 | 607,072 | - Financing activities were primarily driven by $1.42 billion in proceeds from the issuance of share capital and other contributed capital, net of transaction costs[12] Unaudited Condensed Consolidated Statement of Changes in Equity Total equity increased to $136.7 million, driven by a $193.8 million contribution from the Gores Guggenheim Inc. merger, despite a $203.3 million net loss Changes in Equity for the Nine Months Ended Sep 30, 2022 (in thousands of U.S. dollars) | Description | Amount | | :--- | :--- | | Balance as of December 31, 2021 | 122,496 | | Net loss | (203,347) | | Other comprehensive loss | 15,347 | | Merger with Gores Guggenheim Inc. | 193,774 | | Equity-settled share-based payment | 6,898 | | Balance as of September 30, 2022 | 136,680 | Notes to Unaudited Condensed Consolidated Financial Statements Note 1 - Significant accounting policies and judgements This note details the GGI merger, IAS 34 basis, and management's substantial doubt about going concern due to losses and financing needs - On June 23, 2022, the company completed a reverse recapitalization with GGI, raising net cash proceeds of $1.42 billion and began trading on Nasdaq under the ticker PSNY[20][21][22] - Management has determined there is substantial doubt about the Group's ability to continue as a going concern due to recurring operating losses, negative cash flows, and the need for additional financing to fund its 2022-2025 business plan[29][31][32] - The financial statements are prepared in accordance with International Accounting Standards (IAS) 34, Interim Financial Reporting[23] Note 2 - Revenue Revenue nearly doubled to $1.48 billion, primarily from vehicle sales, with USA, Sweden, and UK as top markets Revenue by Category (in thousands of U.S. dollars) | Category | For the nine months ended Sep 30, 2022 | For the nine months ended Sep 30, 2021 | | :--- | :--- | :--- | | Sales of vehicles and related services | 1,442,116 | 722,152 | | Sales of software and performance engineered kits | 15,313 | 19,817 | | Vehicle leasing revenue | 12,493 | 2,155 | | Total | 1,476,746 | 747,674 | Revenue by Geographical Location (Top 5) (in thousands of U.S. dollars) | Region | For the nine months ended Sep 30, 2022 | For the nine months ended Sep 30, 2021 | | :--- | :--- | :--- | | USA | 317,251 | 80,844 | | Sweden | 222,838 | 110,024 | | United Kingdom | 187,209 | 127,427 | | Germany | 154,391 | 81,683 | | Norway | 142,121 | 167,340 | Note 3 - Leases Right-of-use assets totaled $76.0 million, lease liabilities were $78.9 million, and vehicle leasing revenue significantly increased to $12.5 million Lease Liabilities (in thousands of U.S. dollars) | Liability Type | As of Sep 30, 2022 | As of Dec 31, 2021 | | :--- | :--- | :--- | | Current lease liability | 16,936 | 10,250 | | Non-current lease liability | 61,992 | 66,575 | | Total | 78,928 | 76,825 | - Vehicle leasing revenue as a lessor increased significantly to $12.5 million for the nine months ended Sep 30, 2022, compared to $2.2 million in the prior year period[66] Note 4 - Net income (loss) per share Basic and diluted net loss per share improved to $0.22, based on a $203.3 million net loss and 913.1 million shares outstanding Net Loss Per Share Calculation | Metric | For the nine months ended Sep 30, 2022 | For the nine months ended Sep 30, 2021 | | :--- | :--- | :--- | | Net loss attributable to common shareholders (in thousands) | (203,347) | (670,668) | | Weighted-average shares outstanding | 913,056,665 | 228,309,237 | | Net loss per share (in USD) | (0.22) | (2.94) | Note 5 - Intangible assets and goodwill Intangible assets and goodwill totaled $1.30 billion, with $275.4 million in additions primarily for IP related to Polestar 2, 3, and 4 models - The carrying amount of intangible assets was $1.25 billion as of September 30, 2022[73] - Additions to intangible assets in the first nine months of 2022 totaled $275.4 million, primarily for IP related to the Polestar 2, Polestar 3, and Polestar 4 models acquired from related parties Volvo Cars and Geely[73][74] Note 6 - Equity Polestar's equity structure includes Class A and Class B shares, with Class B shares holding ten votes per share, granting significant control - The company has a dual-class share structure: Class A shares have one vote per share, and Class B shares have ten votes per share[78] Shares Issued and Outstanding as of Sep 30, 2022 | Share Class | Number of Shares | | :--- | :--- | | Class A | 467,144,972 | | Class B | 1,642,233,575 | | Class C-1 | 15,999,965 | | Class C-2 | 9,000,000 | Note 7 - Liabilities to credit institutions Total liabilities to credit institutions significantly increased to $1.18 billion, primarily due to a rise in working capital loans Liabilities to Credit Institutions (in thousands of U.S. dollars) | Facility Type | As of Sep 30, 2022 | As of Dec 31, 2021 | | :--- | :--- | :--- | | Working capital loans from banks | 1,143,011 | 609,209 | | Floorplan facilities | 18,759 | 18,664 | | Sale-leaseback facilities | 14,812 | 14,465 | | Total | 1,176,582 | 642,338 | Note 8 - Related party transactions Polestar has extensive related party transactions with Volvo Cars and Geely, with purchases totaling $1.68 billion and amounts due at $1.06 billion - The Group has extensive agreements with Volvo Cars and Geely for product development (including IP for PS4), procurement, manufacturing, sales, and IT services[88][89][90] Purchases from Related Parties (in thousands of U.S. dollars) | Related Party | For the nine months ended Sep 30, 2022 | For the nine months ended Sep 30, 2021 | | :--- | :--- | :--- | | Volvo Cars | 1,485,201 | 271,647 | | Geely | 193,482 | 739,960 | | Total | 1,679,126 | 1,011,976 | Amounts Due to Related Parties (in thousands of U.S. dollars) | Related Party | As of Sep 30, 2022 | As of Dec 31, 2021 | | :--- | :--- | :--- | | Volvo Cars | 1,018,148 | 1,507,308 | | Geely | 38,639 | 235,622 | | Total | 1,056,787 | 1,743,434 | Note 9 - Reverse recapitalization The GGI merger was a reverse recapitalization, resulting in a $372.3 million listing expense and a combined fair value gain of over $1 billion on derivative liabilities - The merger with GGI was accounted for as a reverse recapitalization, resulting in a one-time, non-cash IFRS 2 listing expense of $372.3 million[116][119] - Class C Shares (warrants) and contingent earn-out rights are accounted for as derivative liabilities at fair value through profit and loss (FVTPL)[122][127] Fair Value Changes of Derivative Liabilities (in thousands of U.S. dollars) | Liability | Fair Value at Closing (June 23, 2022) | Fair Value at Sep 30, 2022 | Gain on Fair Value Change (9 months) | | :--- | :--- | :--- | :--- | | Earn-out rights | 1,500,638 | 534,970 | 965,668 | | Class C Shares | 63,090 | 27,500 | 35,590 | Note 10 - Financial instruments Financial instruments measured at fair value include $562.5 million in derivative liabilities and a $2.5 million Level 3 investment in StoreDot Financial Liabilities at Fair Value (FVTPL) as of Sep 30, 2022 (in thousands of U.S. dollars) | Instrument | Fair Value Level | Carrying Amount | | :--- | :--- | :--- | | Earn out rights | Level 3 | 534,970 | | Class C-1 Shares | Level 1 | 17,600 | | Class C-2 Shares | Level 2 | 9,900 | | Total | | 562,470 | - In the first nine months of 2022, Polestar invested $2.48 million in the fast-charging innovator, StoreDot. This investment is measured at fair value using Level 3 inputs[133] Note 11 - Share-based payments Polestar implemented new equity-settled share-based payment plans, granting 1.82 million shares, resulting in a $6.9 million compensation expense - The company introduced new share-based payment plans in 2022: At-listing, Post-listing, and Free Share Plan, granting a total of 1,823,114 shares (PSUs, RSUs, and free shares)[134] - Vesting for the Post-listing plan PSUs is tied to conditions including relative total shareholder return (rTSR), cash flow targets, ESG goals, and operational milestones[137][138][139] Share-Based Compensation Expense (in thousands of U.S. dollars) | Expense Category | For the nine months ended Sep 30, 2022 | For the nine months ended Sep 30, 2021 | | :--- | :--- | :--- | | Selling, general and administrative | 6,776 | 0 | | Research and development | 122 | 0 | | Total | 6,898 | — | Note 12 - Commitments and contingencies Polestar had significant investment commitments totaling $192.2 million for PPE and $323.7 million for intangible assets, primarily for Polestar 3 and 4 production Commitments as of Sep 30, 2022 (in thousands of U.S. dollars) | Commitment Type | Amount | | :--- | :--- | | To acquire PPE | 192,238 | | To acquire intangible assets | 323,704 | - These commitments are contractual obligations to invest in PPE and intangible assets for the production of the upcoming PS3 and PS4 vehicle models[144] Note 13 - Subsequent events Subsequent events include the October 2022 reveal of Polestar 3 and a new $800 million credit facility from Volvo Cars in November 2022 - On October 12, 2022, Polestar officially revealed its first SUV, the Polestar 3, with production expected to begin in mid-2023[147] - On November 3, 2022, Polestar entered into an 18-month credit facility with Volvo Cars for up to $800 million, providing additional liquidity[148]