Polestar Automotive (NASDAQ:PSNY) reported quarterly financial results on Thursday. The transcript from the company's quarterly earnings call has been provided below.

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Summary

Polestar Automotive reported a record first half of 2026 with retail sales reaching 30,423 cars, primarily driven by the Polestar 4 Coupe.

The company's operating loss improved significantly, decreasing by 43% year over year, due to cost discipline and reduced headcount expenses.

Polestar anticipates low- to mid-single-digit growth for the full year, reflecting ongoing market pressures and regulatory challenges, particularly in the U.S.

The company strengthened its financial position through equity funding, debt-to-equity conversions, and extended loans, enhancing its capital structure and liquidity.

The Polestar 4 SUV launch is expected to drive profitability, while the Polestar 5 is positioned as the brand's flagship for sustainability and performance.

The U.S. Department of Commerce's decision restricts Polestar from selling model year 27 cars in the U.S., impacting the company's future operations in this market.

Full Transcript

OPERATOR

Q&A session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Anna Gavrilova. Please go ahead. Thank you.

Anna Gavrilova, Head of Investor Relations at Polestar Automotive

Hello everyone, I'm Anna Gavrilova, Head of Investor Relations at Polestar. Thank you for joining this call covering Polestar's results for the second quarter and the first half of 2026. I'm joined by Michael Lohscheller, Polestar CEO, and Jean‑Francois Mady, Polestar CFO, who will comment on the performance and then we will open the floor to analysts' questions. Before we start, I would like to remind participants that many of our comments today will be considered forward-looking statements under the U.S. federal securities laws and are subject to numerous risks and uncertainties that may cause Polestar Automotive's actual results to differ materially from what has been communicated. These forward-looking statements include, but are not limited to statements regarding the future financial performance of the company, production and delivery volumes, financial and operating results, near-term outlook and medium-term targets, fundraising and funding requirements, macroeconomic and industry trends, company initiatives and other future events.

Forward-looking statements made today are effective only as of today and Polestar undertakes no obligation to update any of its forward-looking statements. For a discussion of some of the factors that could cause our actual results to differ, please review the risk factors contained in our SEC filings. In addition, management may make references to non-GAAP financial measures during the call. A discussion of why we use non-GAAP financial measures and a reconciliation to the most directly comparable GAAP measure can be found in the appendix of the press release and in the Form 6-K published today.

Now I will hand over to Michael.

Michael Lohscheller, Chief Executive Officer

Thank you, Anna. Hello everyone, and thank you for joining us today as we present our second quarter and first half 2026 financial and operational results. I am pleased with the commercial progress we have achieved in light of the market conditions, which remain challenging. We delivered a record first half with retail sales of 30,423 cars. This growth has been supported by the continued transition to our active selling model, the expansion of our retail network, and a stronger contribution from Polestar 4 Coupe, which is our best-selling car.

This has happened during one of the most challenging and competitive times I've experienced in the automotive industry, and delivering record sales in this environment confirms that customers want our cars. At the same time, we are realistic about the challenges we face. Competition in the EV market continues to intensify, pricing pressure remains significant, and geopolitical developments continue to impact the industry. We have also seen regulatory headwinds, particularly in the U.S., which affected our performance during the first half.

This, combined with factors mentioned above, further impacted our financial results. As was announced in late June, the U.S. Department of Commerce denied Polestar's application for an authorization under the current Connected Vehicle Rule to sell vehicles in the U.S. from model year 27 onwards. In light of all this, we have updated our full-year volume outlook to low- to mid-single-digit growth. This reflects the continued market pressure across our industry as well as portfolio transition.

Polestar 4 SUV customer deliveries will start in the fourth quarter and ramp up into next year. Our focus remains on building the right product and channel mix and strengthening the underlying performance of the business. The most important thing is that the operational improvements we have been implementing are beginning to show results. Our reported operating loss improved significantly compared with the first half of last year, which included substantial impairment charges.

At the same time, cost discipline measures contributed to lower general and administrative expenses. When I joined Polestar two years ago, we had to address a number of structural challenges. For the past two years we have worked to build a leaner, more focused, and more resilient company. We are not trying to be everything, everywhere, all at once. Instead, we are concentrating on the areas where we can create sustainable value, improve profitability, capex allocation, and position Polestar for long-term success.

We are doing the right things, and we are beginning to see the benefits of those actions. A key part of that transformation has been our shift from an online-first model to a retailer-led commercial sales model. Today we work with 235 sales points and 178 retail partners across 28 markets, and our retail footprint has expanded by 39% year on year. But this transformation is about much more than opening new locations. It's about working more closely with our partners, improving the customer experience, and giving retailers a business model they can invest in with confidence.

We have also continued to strengthen the company's financial foundations. During the first half, we have enhanced our capital structure through new external equity funding, debt-to-equity conversion with Volvo Cars and Geely Sweden, and the extension of the remaining Volvo Cars shareholder loan. These actions have increased our financial flexibility as we execute our strategy and prepare for upcoming launches. Yesterday we opened the order books for the new Polestar 4 SUV as a sibling to our best-selling Polestar 4 Coupe.

It brings everything customers already love about the car to a broader audience, with vehicle-to-load capability, Google Gemini integration, one of the lowest carbon footprints in our portfolio, and a price starting at €57,900. It is a very compelling addition to our product range. Over 900 cars are already on their way from the factory in Busan, South Korea, and customer deliveries will begin in the fourth quarter. We are also preparing for the imminent first customer deliveries of Polestar 5.

Feedback from journalists who have driven the car has been exceptional. As our halo car, Polestar 5 embodies everything the brand stands for: design, performance, technology, and sustainability. Simply put, it is the Polestar brand on wheels. So while market conditions remain challenging, our priorities are clear. We are growing our retail business, we are improving our operational performance, we are strengthening our financial position, we are launching the strongest product portfolio in our history.

The transformation of Polestar continues, and we remain focused on disciplined execution and building a stronger company for the long term. With that, I'll hand over to Jean‑Francois and look forward to taking your questions. Thank you.

Jean-Francois MADY, Group Chief Financial Officer

Thank you, Michael. Good morning. Good afternoon, everyone. Looking at the financial result for the first six months of 2026, operating loss reduced by 43%. In summary, these results were supported by carline mix evolution toward higher-margin models driven by Polestar 4, positive adjustment of net realizable value of inventory except in the U.S., continued cost discipline measures and lower headcount spend, and the net impairment expense recognized in the first half of 2025 with no impairment expense recognized in H1 2026.

These positive developments were offset by a number of adverse factors in the period, mainly continued pressure on pricing, lower sales of carbon credit, adverse foreign exchange movement, positive one-off in first half 2025, and material adjustments related to the U.S. restructuring measures. The U.S. material adjustment related to the decision by the U.S. Department of Commerce, Bureau of Industry and Security, the BIS, amounted to an estimated US$130 million.

The impact regarding the U.S. operation is mainly recognized in the following: residual value guarantee cost within revenues; net realizable value of inventory within other cost of sale; and organizational changes impact on investment and suppliers, which are included in other operating expense. These are based on current estimates and information available as of the reporting date. Additional costs and charges may arise as further assessments are completed and the full effect of the BIS decision continues to develop.

Starting with the result for the first six months of 2026, retail sales of over 13,400 cars were supported by the continued transition to an active selling model, retail sales network expansion, and Polestar's attractive model lineup. Polestar 4 coupe remained our best-selling model, and it made up two thirds of the volume. By geography, we saw particularly strong performance in Europe, led by the UK, Germany, and Southern Europe, and in Asia Pacific by South Korea.

Europe delivered 78% of our total volume. Our U.S. business continued to be affected by higher tariffs and changes in the regulatory environment. In the first half 2026, the U.S. market represented 6% of our retail sales, down from 9% in the same period in 2025. In the period, we were active in 28 markets worldwide, including 17 in our key region of Europe. We launched sales in Estonia at the end of June. We have sales to start in two more Baltic countries, Latvia and Lithuania, imminently.

In cooperation with our partners, we opened 24 new sales points and signed up 20 new retailers in the first half of 2026. Most of this expansion was in Europe. Revenue of US$1.36 billion was 4% lower year on year. The positive effect from volume, carline mix, and foreign exchange tailwinds was offset by significant pressure on pricing, residual value guarantee cost mainly in the U.S. and related to the BIS decision, and lower carbon credit sales of 52 million versus 72 million last year.

In addition, we recognized 4 million of carbon credit sales booked in other operating income compared to 18 million last year. The decrease in revenue related to sale of carbon credit primarily reflects the increased competition in the EU, while the decrease in other operating income is mainly driven by regulatory changes in the U.S. Gross margin was a negative 8% in the period, an improvement of 41 percentage points as the comparable period result was impacted by net impairment expense of 724 million.

Adjusted gross margin was a negative 9%. The key drivers impacting profitability negatively were lower revenue; growth in cost of sale due to higher production cost associated with the carline mix; EU and U.S. tariff impact; limited product cost reduction due to higher raw material cost; and 2025 one-off positive items which did not repeat in 2026. The profitability was further impacted by material adjustments included in the reported results, specifically adjustment of inventory to net realizable value in the U.S. related to the U.S. restructuring. These negative key drivers were, however, partially offset by positive margin development due to the carline mix attributable to Polestar 4 and positive adjustment of inventory to net realizable value excluding in the U.S. market. Selling, general and administrative expenses of 431 million were flat year on year. Savings in general and administrative expenses driven by continuous cost discipline and lower headcount spend were offset by higher sales agent remuneration and increased marketing activities, following the launch in France in June 2025 and the launch of the Polestar 5 in different markets.

Research and development expenses were 15 million, down from 31 million, due to reduced headcount and spending on new program with higher capitalization rate compared to the prior period. Operating loss of 629 million and net loss of 842 million narrowed year on year, respectively by 43% and 29%, mainly due to net impairment expense of 724 million recognized in the prior period. This development was mainly offset by factors previously mentioned and by foreign exchange headwinds and costs related to the U.S. restructuring related to the U.S. Polestar organizational changes, investment and suppliers impacting the other operating expenses. Other operating income were as well impacted by lower sale of carbon credit and H1 2025 positive one-off impact driven by the commercial termination of our operation in China in Polestar Time Technology Company. Higher finance expense and net foreign exchange losses on financial activities were further factors contributing to net loss.

Adjusted EBITDA loss for the first half of 2026 of 521 million increased year on year despite margin improvement due to model mix driven by Polestar 4, due to adverse evolution of profitability with adjusted gross loss in the period, which included the impact of the U.S. restructuring measures, H1 2025 positive one-off, unfavorable foreign exchange movement, and negative other income effect. As previously mentioned, if we look at the result of the second quarter, retail sales were close to 17,300 cars, a decrease of 4% year on year.

Revenue was US$727 million, down 8% year on year on lower volume, pressure on pricing, lower sale of carbon credit, and residual value guarantee cost in the U.S. connected with the U.S. restructuring measures. Sale of carbon credit amounted to 36 million in Q2 2026 versus 42 million in Q2 2025. In Q2 2025 we also recorded 19 million of carbon credit sales in other operating income. Carbon credit sales are expected to follow the same pattern with revenue weighted toward the second half of the year.

Gross margin was negative at 13%, representing an improvement from the last year result of a negative margin of 97%, which reflected the net impairment expense of 724 million recognized in the second quarter 2025. Adjusted gross margin was negative 13% from negative 6% last year. The lower margin was predominantly a result of lower revenues, adjustment of inventory to net realizable value in the U.S. due to the U.S. restructuring measures, and Q2 2025 positive one-off impact.

These were, however, partially offset by positive margin development due to the carline mix driven by Polestar 4 and positive adjustment of inventory to net realizable value excluding in the U.S. market. Net loss for the quarter was 459 million, an improvement of 55% compared to net loss of 1 billion and 27 million a year earlier, mainly due to the fact that no impairment expense was recognized in the reporting period compared to a year ago. Adjusted EBITDA loss of $286 million, compared to adjusted EBITDA loss of $206 million in the prior year period, was due to adjusted gross loss result explained earlier, unfavorable foreign exchange movement, and negative other operating income item. These impacts were offset by lower selling, general and administrative expenses driven by cost discipline and reduced headcount, despite higher sales agent remuneration due to the carline mix, and lower net research and development expenses due to the reduced headcount and spending on new program with higher capitalization rate compared to the prior period. On the funding of our operation and liquidity, we provided a detailed update at the full year results in April.

Since then, GD Sweden and Volvo Cars completed the conversion of approximately 640 million of loan outstanding to Polestar, including accrued interest, into equity. In the meantime, Volvo Cars extended the maturity of its remaining shareholder loan of 660 million to December 2031. This transaction further strengthened our capital structure, reduced leverage, and enhanced our financial flexibility. It demonstrates as well the continued support of our key shareholders.

Also, Polestar Automotive was in compliance with all its covenants at the end of the second quarter 2026. Our cash position at the end of June 2026 was US$888 million, from 1,159,000,000 at the end of 2025. The change in cash position was primarily driven by operating cash outflow of 850 million, mainly reflecting the operating loss net of non-cash adjustment, financial interest expense, and a negative movement in working capital driven primarily by negative change in trade payables, partly offset by favorable movement in inventory and trade receivable.

Within investing outflow, capital expenditure amounted to 211 million, and within positive net financing inflow of 769 million, primarily driven by the new equity proceeds of 700 million previously announced and a net increase in borrowing, partially offset by repayment of debt financing. To conclude, I would like to reiterate our priorities in this challenging environment. First, driving growth through the active selling model, expanding sales network, and by leveraging our attractive and broadened model lineup.

And as Michael mentioned earlier, we continue to make progress with Polestar 5 and Polestar 4 SUV. We have updated our volume guidance to low- to mid-single-digit volume growth to reflect current market condition, portfolio changes, and our focus on quality growth. Second, continuing to reduce losses and improve profitability through, as well, cost discipline, efficiency measures, and relentless focus on operational execution. Third, maintaining financial flexibility through disciplined working capital management, improved cash conversion, and prudent capital allocation.

And finally, continuing to strengthen our capital structure and securing appropriate sources of future funding. Now I will hand over back to the operator.

OPERATOR

Thank you. As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Once again, that's star one and one to ask a question. We will now take our first question from the line of George Young from Barclays. Please go ahead.

Josh Young, Analyst at Barclays

Good morning, Josh Young on for Dan Levy, Barclays. Thank you for taking the questions. So first off, it's great to see the early looks at the Polestar 4 SUV. Are you able to share any early indications on how demand is trending, as well as any learnings or maybe some enhancements? This might translate—how this might translate to other models and variants. And then similarly, what are the latest reads for the Polestar 5? Thank you.

Michael Lohscheller, Chief Executive Officer

Yeah, thanks, Josh, Michael here for the question. So let me talk a little bit about the Polestar 4 SUV, which obviously we started with the launch yesterday, and very, very good feedback. And why is it so positive? It's actually very simple. First of all, the SUV trend is very strong, right? And with that the Polestar 4 really goes into the mainstream. And wherever the big segment is, the coupe is always a bit in the niche, right? So that's a big, big improvement car.

Very well received, especially by fleet people, but also private demand. But again, we just start with this, right? So early days, but very optimistic because the coupe was a little bit in the niche. Now with the SUV we go right into the sweet spot of the market. So very, very important car for us. And early days, right. Polestar 5 also just the beginning, obviously very, very different segment. Right. Also the role of the car is different. It's about positioning the brand, but also there we get a lot of attention and start to deliver now the first cars, and people obviously want to test drive the car, right?

It's a very unique, it's a very specific car. But both cars are, I see, off to a very good start.

Josh Young, Analyst at Barclays

Okay, great, thank you. And then as a brief follow-up, while it remains early, are you able to share volume expectations for 2027, or maybe just some broad puts and takes there?

Michael Lohscheller, Chief Executive Officer

Yeah. Obviously, as we highlighted during this call, we have changed the guidance for 2026 because market conditions are slightly different, right. Obviously for 27, we work through this. I mean, the reason why we are cautiously optimistic for 27 is because the product lineup is different. As we have announced in February of this year, we obviously launched the Polestar 4 SUV, as we were just talking about. But in addition to that, also the Polestar 2 successor.

Both cars go right into the big segments of the market. So the profit pool is, the volume potential is much, much bigger. And also both segments are growing, right. So more to come on this, what that means in precise volume numbers, right. But obviously it's a big shift from where Polestar was very much into niche segments, right, going into much bigger segments. So also there we are doing the right things. And now it depends obviously on the market conditions, and we will update on this further when we come to 27.

But again, I want to highlight the importance of those two cars which go right into the sweet spot of the market. Thank you so much.

OPERATOR

We will now take our next question from the line of Andres Shepherd from Cantor Fitzgerald. Please go ahead.

Andres Shepherd, Analyst at Cantor Fitzgerald

Hi, everyone. Good morning. Good afternoon. Thank you for taking our questions. I wanted to maybe follow up on one of the last questions there. You know, as we look into next year now with the Polestar 4 SUV and Polestar 5, can you give us a sense of, you know, how are you thinking about unit mix for next year? Any kind of expectations there that you can mention? Thank you.

Michael Lohscheller, Chief Executive Officer

Yeah. So needless to say, Polestar 4 is our best seller, right. Also, if you look at the data for the first half of this year, increasing trend. So Polestar 4 gets more and more the dominant role in terms of our portfolio. Now we add another variant to it, right. So you have the SUV and the coupe. So obviously Polestar 4 will play the dominant role next year. Then Polestar 2 successor will also play a key role, obviously then depending on the launch and the ramp-up and so on, which will be in the second half of the year.

But clearly then Polestar 2 will take a prominent role, whereas obviously the Polestar 5 is very important for the brand and the positioning, but will be less important in terms of overall volume. So clear feedback: Polestar 4 with the two variants and Polestar 2 will be the dominant volume drivers in 2027.

Andres Shepherd, Analyst at Cantor Fitzgerald

Got it. That's super helpful, thank you. And maybe as a follow-up just on liquidity. So now with the 888 million as of Q2, just can you remind us how you are thinking about capital needs and cash runway? Thank you.

Jean-Francois MADY, Group Chief Financial Officer

Yes, thanks, Andres, for the question. So as you know, we have set up at Polestar a record in terms of raising equity as we have raised 1.2 billion over the last 15 months. We have completed as well the debt-to-equity conversion from our shareholders for 640 million at the end of June. We have as well extended the maturity of a loan from one of our shareholders until 2031. And during the first six months of 2026 we have renewed or increased 1.7 billion of banking facilities.

So of course it has contributed to increase the robustness of our balance sheet, improving the capital structure and also improving our liquidity position. When we are looking at H2, as mentioned by Michael, the Polestar 4 coupe and SUV will play a pivotal role, especially in terms of profitability, as those are not only volume makers but those are the most profitable cars. And when you look at the cash flow evolution, that will help in terms of net cash-in in addition to having a very strong working capital.

But also I would like to point out the fact that in terms of CapEx spending, we have cut about one-third our CapEx spending. So we should expect entering H2, I would say, a significant reduction in terms of cash burn, which has been quite driven by seasonality, especially coming back to Q1 2026. So we are doing everything to cut our losses. We have a very exciting product launch addressing segments with the biggest volume but also profitable pool, and we are accelerating to cut those losses, reducing our needs.

And of course we are exploring any opportunity to improve our capital funding. But so far there is nothing to call out on this matter.

Andres Shepherd, Analyst at Cantor Fitzgerald

Got it. Very helpful. Thank you for all that detail. If I could squeeze maybe one last one just on the U.S. restructuring and the decision by the Department of Commerce or Bureau of Industry, is there an opportunity perhaps to appeal this decision, or is there an opportunity that perhaps this is changed at all? Or just curious how you're thinking about it, or is this now kind of final and moving on from 2027 onwards? Thank you.

Michael Lohscheller, Chief Executive Officer

Yeah, thanks, Andres, for the question. So we will not appeal and accept this decision, right. And that means we will sell model year 26 now in the U.S. but are not able to sell model year 27, and obviously will continue with service and used car business in the U.S., right. So we'll stay there, but we will not appeal that decision.

Andres Shepherd, Analyst at Cantor Fitzgerald

Great. Okay, thank you very much. Congrats and we'll pass it on.

Michael Lohscheller, Chief Executive Officer

Thank you. Thank you.

OPERATOR

Thank you. There are no further questions at this time. I would like to turn the conference back to Michael Lohscheller for closing remarks.

Michael Lohscheller, Chief Executive Officer

Yeah. Thank you, everybody, for joining for this conference call in terms of Q2 and H1 results. So keep in touch and wish you a wonderful day. Talk to you soon. Bye.

OPERATOR

This concludes today's conference call. Thank you for participating. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.