Stark Novus Financial Inc.

Q4 revenue was recognized on deliveries of 3 Endurance vehicles; no dollar revenue figure was stated on the call. Full-year 2022 SG&A and R&D totaled $246.1 million. Q4 SG&A and R&D were $37.8 million, and Q4 reported cost of sales totaled approximately $30 million, including $635,000 of production costs, $8.3 million of depreciation on production equipment and tooling, and $21 million of inventory write-down charges. For 2022, other operating items totaled $111.4 million, including an approximately $75 million Q3 impairment and an approximately $21 million incremental impairment in Q4. Cash and short-term investments ended 2022 at almost $222 million, approximately $18 million higher than Q3, and the company said the fourth quarter beat its cash-burn/liquidity outlook by $57 million, or 34% above the top end of the range. For Q1 2023, management expects cash and short-term investments of $150 million to $170 million, excluding additional Foxconn funding, other equity sales or contingent liabilities. They said aggregate SG&A and R&D should decline slightly versus Q4, CapEx should be modestly higher, and working capital should consume less cash. Management also said roughly $100 million of Foxconn preferred-stock funding is expected to support new-program predevelopment, while an additional $117 million remains contingent on conditions and milestones.

Edward Hightower focused on the temporary production pause and recalls, saying the company identified root causes across propulsion, chassis, infotainment and braking and now has “line of sight” to corrective actions. He framed the decision as customer-first and consistent with company values, while emphasizing that new vehicle launches require time and diligence. Strategically, he said the Endurance remains a platform to build OEM partnership interest, but the next program with Foxconn and MIH is becoming a larger share of the company’s focus and is intended to serve different commercial fleet segments.

Adam Kroll highlighted a 2022 turnaround in spending discipline, saying Lordstown reduced cash burn, fixed costs and operating complexity and raised $263 million in capital during the year, including $210 million from Foxconn. He said the company ended 2022 with almost $222 million in cash and short-term investments, and that the Q4 cash result beat the company’s outlook by $57 million. Kroll also broke out the Q4 cost structure: approximately $30 million of reported cost of sales, $37.8 million of SG&A and R&D, and the annual $111.4 million impairment charge. For Q1 2023, he guided to $150 million to $170 million of cash, slightly lower SG&A/R&D ex-items, modestly higher CapEx, and less working-capital use; he also cautioned that additional capital will be needed to bring the next program to market and that litigation contingencies could be material.

Analysts pressed on whether the Endurance’s customer interest changed after the first sales and whether the company could move beyond initial deliveries; management said interest remains and customers are still awaiting deliveries, but production must resume first. Questions also focused on the new Foxconn vehicle program, with management saying it will target other commercial fleet segments and rely on shared components and scale across the Foxconn EV ecosystem, but that significant additional capital will be required beyond the $100 million predevelopment allocation. On the Endurance quality issues, management said the fixes should not materially change bill-of-materials costs and declined to give a repair-cost estimate or a firm timing until corrective actions are fully implemented.