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Good day, and thank you for standing by. Welcome to Polestar First Quarter 2026 Select Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be question-and-answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star one and one again. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Anna Gavrilova, Head of Investor Relations. Please go ahead.

Thank you, operator. Hello, everyone. I'm Anna Gavrilova, Head of Investor Relations at Polestar. Thank you for joining this call covering Polestar's select results for the first quarter 2026. I am joined by Michael Lohscheller, Polestar CEO; and Jean-François Mady, Polestar CFO, who will comment on the performance. 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'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, 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 their 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.

Thank you, Anna. Hello, everyone, and thank you for joining us today as we present our first quarter 2026 select financial and operational results. Looking at the first quarter, I'm pleased with what the team has delivered in terms of volume growth. In a very challenging market, we grew our volumes in the first quarter by 7% to over 13,100 cars, a record first quarter number for Polestar. In Europe, we grew by 11%, and that now represents 78% of our total sales. It's especially encouraging that we are doing well in key markets such as the U.K., where we grew by 20%, Germany, where we grew by 35%, and Sweden, where we grew by 17%.

We also saw strong growth in South Korea and Australia, two markets where we enjoy a strong brand position and where Polestar 4 is proving to be a success. In the USA, the EV market as a whole has been impacted by the removal of incentives, but the launch of Polestar 4 across North America has started well with strong media reviews and growing interest amongst customers both in Canada and the USA. The last time we met, I referenced what we are all aware of, that the world around us continues to throw up challenges. This is reflected in our results for the first quarter. Headwinds in the form of market conditions becoming more challenging, the impact of EU and U.S. tariffs, and the overall seasonality of the quarter more than offsetting the steps we have taken to improve our cost base.

Facing this reality, we have accelerated our business model transformation, changing our commercial setup by increasing retailer locations, evolving to a single group architecture, consolidating our manufacturing footprint to the regions in which we operate, and creating a leaner organization. The commercial transformation we started 18 months ago isn't just about growing our number of dealers. It is also about how we work with them. As an example, we have recently changed our setup with dealers in Germany. As a result, we now have more flexibility in how we operate in Europe's largest market. We have dealers with a clearer incentive to sell more cars and agreed plans to grow our number of sales points in Germany from 12 to 30 by 2027.

In total, we expect to end 2026 with approximately 250 sales points globally, up from 150 just over a year ago. This is a significant step for a young brand to take. Expansion is of course an important element here, equally important is a shift in locations. We are moving from smaller, often city center-based spaces to fully fledged dealerships, located where customers go to test drives, make it easier for more people to experience our great cars and providing a natural destination for new car sales, service, and pre-owned sales. Since I joined, we have taken a lot of steps to reduce complexity in the organization and reduce our overall cost base. In total, these steps have resulted in a reduction in staff of about 25% to just approximately 1,700.

We will continue to realize activity-based savings across the organization by identifying and implementing further leaner ways of working. We are also working hard with our partners to realize efficiencies in our sourcing and manufacturing processes. The planned consolidation of Polestar 3 production in South Carolina, moving from 2 to 1 factory, will support these efforts further from the latter part of 2026. The same focus on efficiency gains is in place for Polestar 4, and adding a new variant to the lineup to be produced in the Busan, South Korea factory will further support those efforts as volumes continue to grow. Regionalization of manufacturing is probably the most significant shift happening in the industry right now and one of the most important for our future success. This is why our decision to produce Polestar 7, the compact SUV in Europe, is so important.

Rest assured that as market conditions continue to become more challenging, so will our focus on these topics. Last week, we started the global media test drive for Polestar 5, and the reaction and feedback I got from my discussions with journalists confirms what a unique car this is. By having journalists drive from Sweden to the Sahara, we are really showing what this electric car can do. It's a real head turner with clean Scandinavian design, performance, and sustainability that simply put, no one else offers. The next step on our model offensive after the summer is the launch of the Polestar 4 SUV, followed by the all-new Polestar 2 successor early next year, addressing much wider segments with more customers and bigger profit pools. Our product offensive is in full swing.

With that said, I'll hand over to Jean-François and look forward to taking your questions in a few minutes. Thank you.

Thank you, Michael. Good morning, good afternoon, everyone. Our retail expansion is continuing, as Michael stated, driving the retail sale volume growth of 7% in the 1st quarter. Remember, we enjoy strong quarterly growth last year, so the comparison is harder this time, not least because of tougher pricing environment amid intensified competition. If we look at the result of the 1st quarter, retail sale exceeded 13,100 cars, an increase of 7% year-on-year. Revenue was $633 million, broadly stable year-on-year. The key positive drivers were higher volume driven by Polestar 4 and positive foreign exchange impact from appreciation of pound sterling and euro against US dollar.

These positive driver were, however, offset by pressure on pricing the car line mix, which included fewer high-priced Polestar 3 cars, 9% versus 20% a year earlier, but higher contribution from Polestar 4 cars, 67% of the volume versus 49% a year earlier, and lower carbon credit sales in the quarter. Carbon credit sales amounted to $21 million in Q1 2026 versus $29 million in Q1 2025. Carbon credit sales are expected to follow the same pattern as last year, with revenues weighted toward the second half of the year. As mentioned during the full year result call, we expect carbon credit sales in 2026 in line with 2025 for the full year. We continue to grow the proportion of Polestar 4 cars in the sale mix, and in line with our expectation, it support profitability of our operations.

Despite this continued development in the right direction, alongside volume growth and continued product cost reduction, gross margin was -3.2% and adjusted gross margin was -3.3%. The lower margin was predominantly a result of pressure on pricing, EU and U.S. tariff impact, lower carbon credit sale in the quarter, and Q1 2025 included positive one-off impact. Net loss for the quarter was $383 million compared to net loss of $166 million a year earlier, mainly due to factors impacting gross margin and foreign exchange impact related to Chinese yuan movements in Q1 2026 on other operating and financing liabilities.

At the same time, we continue to exercise strict cost discipline across SG&A. However, in the period, SG&A expenses were higher as sales agent remuneration increased proportionally with growth of volume and due to one-off personal related costs and timing of marketing event. While R&D costs were stable year-on-year. Adjusted EBITDA loss of $235 million, compared to adjusted EBITDA loss of $96 million in the prior period, was due to adjusted gross margin result explained earlier, increase in SG&A expenses, and mainly negative foreign exchange movements on operating liabilities. On the funding of our operation and liquidity, we provided a detailed picture at the full year results.

We will report to the market in due course on the debt to equity conversion by Geely Sweden of approximately $300 million, expected later this quarter, followed by the second debt to equity conversion by Volvo Cars of approximately $65 million. Polestar was in compliance with all its covenant at the end of the first quarter. Our cash position at the end of March 2026 was approximately $676 million. The change in the cash position was primarily driven by higher adjusted EBITDA loss, net negative movement in working capital, and net repayment of financing facilities. These elements were offset by equity proceed in the first quarter of 2026. On the working capital movement, while inventory level reduced, this positive impact was more than offset by cash outflow from settlement of payable.

To conclude, I would like to reiterate our priorities in this challenging environment, which is made more difficult by expectation for lower economic growth and continued inflationary pressure due to recent geopolitical development that are shaping consumer spending. First, driving growth through the active selling model, expanding sale network, and by leveraging our attractive and growing model lineup. We continue to make good progress on this front. Second, improving processes, streamlining the organization, and realizing further operational synergies. Structurally, Polestar is in significantly better shape today than 18 months ago, but there is still work to do. Third, extracting efficiencies and sustaining cost-cutting and financial discipline. We see tangible progress on product cost reduction and discipline SG&A control, although this is a continuous drive across both the organization and in our engagement with suppliers and partners.

Last but not least, focusing always on cash conversion, cycle management, and exploring sources of future funding. I will hand over back to the operator.

To ask a question now, please press star one one on your telephone keypad and wait for your name to be announced. To withdraw your question, please press star one one again. There may be a short pause as participants register for questions. We will now take our first question from the line of Anand Balaji of Cantor Fitzgerald. Please ask your question. Your line is open.

Hey, this is Anand for Andres at Cantor. Congrats on the quarter, and thanks for taking our question. I was wondering, as you expand to the 250 sales points by the end of the year, and you ramp up Polestar 4, maybe how should we think about the ASP and the mix trends throughout 2026, especially given these tariffs and intensified EV competition that you talked about on the call? Thank you.

Thanks, Anand, for the question. First of all, on the retail location, I think it's a linear development. We add every month kind of the same number of location, which is helpful because that brings us closer to the customer, especially on the private retail channel we want to improve. Obviously, timing is very good because with the launch of the Polestar 4 SUV in the second half, we have then a much better footprint going into this important part of the year. Maybe Jean-François, on the ASP level, you want to comment?

Yes. Yes, to complement, I think it's fair to say that those sale points are going to mature over the time. With the current pump anxiety that we are seeing now, the private sale channel we've developed, and we all know that this private sale channel, sorry, is less consuming in term of discount. Normally, the average ASP should improve, so the profitability, and it should be even more true with the launch of the new Polestar 4 SUV, which will happen at the end of the year, which will be a new product with even less discount when it will be launched.

Gotcha. Thanks. I appreciate the color. Maybe as a quick follow-up, as we look at the financials, can you talk a little bit about the balance sheet, given the cash on hand and the burn? Can you walk us through how you see the capital runway and the milestones on the path to free cash flow positivity? Thank you.

As we mentioned during the last call, we had a cash burn in average of $120 million in 2025, showing a little progress versus 2024. We mentioned that structurally, we are improving because profitability is improving. We are cutting the EBITDA loss, and we are improving the working cap, reducing the inventory. We did it significantly in 2025 compared to 2024. As well in term of CapEx, we mentioned that last year we had some legacy CapEx cash out, which should reduce significantly during 2026. In term of cash consumption and reduction of the cash balance at the end of Q1 2026, this is under different effects. First, the EBITDA loss, which is mostly driven by the seasonality.

As you know, Q1 is usually a low quarter in terms of volume, so it is not proper to develop profitability. We had as well some cash out payable, more important in Q1, driven by the activity we had in Q4. We had as well some net repayment of some financing, but which has been offset as well by the proceed of the new equity that we got. For me, the positive from still in Q1 is that when you're looking at the working cap, we are still making progress on managing the cash flow and inventory, which are reducing, and we're also optimizing the collection of our receivable. It's going into the right direction and looking for the next quarter with the seasonality, which will be more in our favor, profitability improving, our level of cash burn should improve.

Gotcha. Thanks so much for the color, and I appreciate the detailed answer. I'll pass it on.

Thank you. As a reminder, to ask a question now, please press star one one on your telephone keypad and wait for your name to be announced. Once again, that's star one one for questions. We will now take our next question from the line of Winnie Dong of Deutsche Bank. Please go ahead, Winnie. Your line is open.

Hi. Yes, thank you so much for taking my questions. I was wondering if just for, you know, the quarter itself, on growth margin, can you help us dimensionalize the impacts from, you know, pricing pressure, the EU and U.S. tariffs? You know, there has been a number of tariff changes recently, including the IEEPA decision, which had credited that OEM some tariff that was previously paid. Just curious if that's something that you would be benefiting from. You know, overall, can you just remind us what is, you know, Polestar's tariff mitigation strategy as of late? Thanks.

Maybe I start, Winnie, thanks for the question, with the tariff mitigation, because that's obviously a key topic. Lots of uncertainty. The principal idea is that we want to manufacture regionally, right? Where our customers are. Best example is the U.S., right? Where we can use the Volvo plant in South Carolina and Charleston manufacture cars there. Same obviously for Asia and also our product strategy going forward with the Polestar 7 coming to Europe. That's the best way to mitigate this, right? Obviously, this takes some time to set it up, but we try to be as flexible and agile as possible. Maybe, Jean-François, a few comments on the tariffs.

Yes. Maybe some color regarding the evolution of the gross margin year-on-year. Indeed, as you know, the competition has significantly increased all over during 2025, the pressure on the pricing. When you compare the gross margin and the impact of the discount year-on-year, it's really impacted the level of our gross margin. When it's come about tariff, we started 2025 with a high level of inventory, which was already custom clear. For the car that we sold in Q1 2025, the new tariff, which has been put in place late in 2024, was not impacting our sale in Q1 2025. Now that we're in a steady state, it reflects as well another impact.

We had some negative impact due to less carbon credit sales. As we mentioned during the last call, carbon credit sales are expected to be in line with 2025 total sale of more than $210 million. This is just for me a timing difference. We should not forget that this Q1 is impacting by low seasonality. When we are comparing Q1 to Q4 2025, this seasonality is impacting us considering that Q4 2025 was quite heavy loaded in term of carbon credit sales for $88 million.

Okay. Got it. Thanks so much for the details. Just to follow up on, you know, the retail expansion, you're obviously, you know, going through a ramp right now. I guess just curious how maybe that's opening up the sales channels, and could this represent some, you know, upside to your low double-digit growth, you know, volume guidance for this year? Or is that more or less sort of embedded within that original outlook? Thank you.

Yeah. Thanks, Winnie. We have considered that obviously in our volume projection because it's important to be closer to our customers. The increased number of retail location has two big important benefits. First one, we are closer to our private customers, right? Because they want to go to physical stores, but also to smaller fleets, right? This is really embedded and also one of the reason, in addition with our product lineup, which obviously is going to be much better and much more competitive going forward. These two elements are embedded in our volume guidance we gave in February of this year.

Got it. Thank you. I'll pass it on.

Thank you. Once again, this is star one and one on your telephone keypad if you wish to ask a question. I'm showing no further questions. I'll now turn the conference back to Michael Lohscheller, CEO of Polestar, for his closing comments.

Thanks, everybody, for joining. I wish you a wonderful day and obviously speak to you very soon. Thank you, everybody.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.

Good day, and thank you for standing by. Welcome to the Polestar fourth quarter and full year 2025 results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer 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 and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speakers today, Anna Gavrilova. Please go ahead.

Thank you, operator. Hello, everyone. I'm Anna Gavrilova, Head of Investor Relations at Polestar. Thank you for joining this call covering Polestar's results for the fourth quarter and full year 2025. I'm joined by Michael Lohscheller, Polestar CEO, and Jean-François 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'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.

Hello, everyone, and thank you for joining us today as we present our full year 2025 results and provide an update on recent developments across the business. As you are all aware, the world around us continues to throw up challenges, but we are making good progress, and we are focusing on delivering against our strategy. I want to update you on the most recent developments within technology, our financing situation, and future model lineup expansion. Before that, a few words on the year that just passed. 2025 was a record year for Polestar in terms of retail sales. We delivered over 60,100 cars during the year, in line with our guidance of 30%-35% growth and a new record for our young brand, an achievement to be proud of given the competition and market conditions.

2025 was also a year in which we took significant steps to adapt our commercial strategy and footprint, an important foundation for our future growth and journey towards profitability. We accelerated the expansion of our network of retailers by 50%, from 140 to 210 retail sales points, and have worked hard to improve our operational efficiency while also preparing for the company's largest ever model offensive, which we presented in February. During the fourth quarter, we made several announcements that reinforce our position as a technology leader in the EV segment. The upgraded model year 2026 Polestar 3, which is being tested by the world's leading automotive media in the U.K. this week, has received several upgrades, including an 800-volt architecture. This means our flagship SUV offers customers charging speeds of up to 350 kW, up to 500 kW of power, and 6% better efficiency.

It also has an upgraded NVIDIA processor, taking its computing power from 30 to 254 trillion operations per second. The same upgrade is also being offered to all existing Polestar 3 customers. We are the first OEM to integrate Google's Live Lane Guidance in our cars. It's already being rolled out to Polestar 4 customers across the U.S. and Sweden, with more to come. Further evidence of our strong relationship with Google came in November when we demoed Google's AI-based Gemini assistant in Polestar 5. This service brings a whole new level of interaction and experience to our cars, and it will be rolled out via over-the-air updates to existing Polestar customers.

We have made solid progress on securing additional financing in the last months. Starting in December 2025, through a series of the three equity financing rounds, we have raised $1 billion of new external equity with the support of Geely Sweden Holdings. These placements strengthen our balance sheet and widen our shareholder base. Concurrently, we have announced agreements with Volvo Cars and Geely Sweden Holdings for the conversion of approximately $640 million of shareholder loans to equity. These conversions, once completed, will reinforce our liquidity profile and maintain Volvo Cars ownership in Polestar at approximately 19.9%. Both the equity funding rounds and the debt-to-equity conversions are a clear sign of the continued support that we enjoy from our major shareholders. In February, we presented the details of our largest ever model lineup expansion with four new cars planned in the next three years.

Polestar 5, our four-door GT, which was presented during the end of last year, is expected to start deliveries in the summer. This car sets a whole new standard in EV performance segment, combining design, performance, and luxury in a way that has never been done before. Later this year, we will bring a new variant of Polestar 4 to the market. Our global best seller, which represented 65% of our deliveries in the first quarter of this year, will bring even more versatility to an already incredible car. This will help us to address a wider segment and offer more customers an alternative based on their lifestyle and needs. First deliveries are expected to start in the fourth quarter, with production for all markets taking place in Busan, South Korea. Our next model will be the next-generation Polestar 2, the car that built Polestar's brand.

With over 190,000 Polestar 2 on the road, this car already has a huge following and customer base, which we have an opportunity to capitalize on. Completely redesigned with the latest in drivetrain, battery, and UX technology, Polestar 2 will play an important role in our future success. Our compact premium SUV, Polestar 7, provides an attractive entry point to the brand, offering a level of performance and design that this segment lacks today. The pace at which we are developing and bringing those models to market is a testament to the value of our asset-light model, our ability to work in close collaboration with partners, and a sign of our underlying ambitions for more profitable growth, targeting wider, more profitable segments. Before handing over to Jean-François for the financial details, I'd like to just spend a moment reflecting on the first quarter of this year, 2026.

Our sales team has worked incredibly hard to carry over our record performance in 2025 into the start of this year. Our retail sales in the first quarter totaled some 13,100 cars, a record number for a first quarter, translating into a year-on-year growth of 7%. Europe remains our largest region, and we saw particularly strong sales increase in some of our most important markets, including the U.K., which grew by 20%, Sweden, which grew by 17%, and Germany, which grew by 35%. Outside of Europe, we performed well across several markets, most notably in Australia and South Korea, two established markets that delivered strong growth. In the U.S., changes to government policies have had a negative impact on EV demand in general, but the launch of Polestar 4 across North America is off to a good start with strong media reviews and good customer feedback.

Growing at near double digit in the current market, given our relatively young age compared to the competition, shows what's possible when you have an engaged and growing network of retailers, an established service network, and great cars. Interest from existing and potential retail partners remains high, and we expect to grow our network to reach approximately 250 sales points by the end of this year, a growth of 20% compared to the end of 2025. Market conditions are becoming more challenging amid ongoing geopolitical developments. As I've said before, we are fully focused on proactively handling the issues and challenges that are within our control and building a stronger Polestar. I'll hand now over to Jean-François and look forward to taking your questions in a few minutes. Thank you.

Thank you, Michael. Good morning, good afternoon, everyone. 2025 was a year of record retail sales for Polestar, as Michael highlighted, and consequently, we achieved substantial revenue growth and a near breakeven adjusted gross profit. We also made meaningful progress on cost discipline and organizational efficiency, and we improved our capital structure profile and liquidity position. This performance was delivered despite a challenging market exerting pressure on pricing and the geopolitical environment that led to higher tariffs and duties in 2025. Looking at the financial results for the full year 2025, as announced, retail sales exceeded 60,000 cars. This represented an increase of 34% year-on-year, in line with our growth target of 30%-35%. The growth was driven by the continued transition to an active selling model and consequently an accelerated retail sales network expansion, leveraging our attractive model lineup.

Polestar 4 Coupé is our best-selling model, and it made up just over half of the volume. By geography, we saw particularly strong performances in Europe, led by the U.K., Germany, Belgium, and the Nordic region, and in Asia Pacific with South Korea. Europe, including the Nordics, delivered 78% of our total volume. Throughout last year, our U.S. business was challenged by higher tariff, regulation, and policy changes. For example, changes in regulation meant that value of compliance credits used by company to offset lower efficiency fleet decreased. Furthermore, at the end of the third quarter, the tax credit for EV purchase expired. This market represented 7% of our retail sale, down from 14% in 2024. We operate in 28 countries worldwide, including 17 in our key region of Europe. In cooperation with our partners, we opened 71 new sale points and signed up 54 new retailers in 2025.

Most of this expansion was in Europe. Volume growth and our offer of three models translated into significant revenue growth of 50% year-on-year to surpass $3 billion. The increase in revenue of over $1 billion was driven by higher volume effect of $559 million, higher revenue per vehicle as a result of favorable mix development of $271 million. Carbon credit revenue was higher by $181 million under the new EU pool agreement. However, this positive factor was partially offset by pressure on pricing. Of the total sale of carbon credit of $211 million, $192 million is booked in revenue, and $19 million is booked in other operating income. We have achieved the target of a three-digit million-dollar amount in 2025, as we guided in January 2025 and expect a similar level in 2026.

Gross margin was -35% in 2025 due to impairment expenses of $1.1 billion for Polestar 2, Polestar 3, an internal development project which includes Polestar 5. The key factors driving the impairment were changes in regulation and policies and tariffs leading to higher production costs, mounting pressure on pricing, and slower demand in the upper EV premium segment and competitive dynamics. Overall, adjusted gross margin, which excludes the impairment expenses and other unusual items, improved to a near breakeven level of -0.7% from -12.5% a year ago. Positive developments contributing to the improvement of the adjusted gross margin were, first, a growing share of Polestar 4 and the improvement of geographical mix. Secondly, increase in carbon credit revenue of $181 million. Finally, continuous product cost reduction is being delivered through commercial negotiation and decontenting initiative, driving lower cost of material, contents, and batteries.

Cost of sales, excluding impairment expenses, increased in line with higher volume and related production. There was further impact of higher duties and tariffs. Selling, general, and administrative expenses improved by $34 million compared to 2024. Headcount reduction of almost 25%, optimized marketing and administrative spending, and overall cost discipline resulted in cost savings worth $100 million, a 12% decrease year-on-year. However, this saving within SG&A expenses were partially offset by higher sales agent remuneration, which increased by $65 million, in line with higher sales volume. Research and development expenses were $78 million, up from $38 million in the prior year, driven by additional spending on new programs with a lower capitalization rate. In 2025, net loss results primarily reflect the impairment expenses.

Adjusted EBITDA loss of $783 million narrowed by 27% or close to $300 million of improvement as we reach the near breakeven adjusted gross profit and optimize SG&A. If we look at the result of the fourth quarter, retail sales exceeded 15,600 cars in the quarter, an increase of 27% compared with the fourth quarter of 2024. Revenue was $887 million, up 54% year-over-year, supported mainly by higher volume, a favorable model mix and channel mix evolution, carbon credit sales of $88 million, lower adjustment of residual value guarantee related to the North American markets, and positive foreign exchange impact, partly offset by pressure on pricing.

Gross margin improved in the quarter year-over-year by 109 percentage points, but remain still negative at 38%, largely due to significantly lower impairment expenses of $340 million booked in the fourth quarter of 2025, compared to $622 million booked in the fourth quarter of 2024. Adjusted gross margin improved to a +2% versus negative margin of 39% in the comparable period, supported by a favorable product and geographical sales mix, with proportion of Polestar 4 in the sales mix at 66%, of which 84% of Polestar 4 cars were sold in Europe. Higher carbon credit sales of $88 million versus $11 million in the comparable period, and lower residual value guarantee adjustments related to the North American markets. The positive effect were partially offset by pressure on pricing and higher duties and tariffs.

The net loss for the quarter was $799 million, an improvement of 32% compared to the prior year period, mainly due to factors explained earlier, and lower impairment expenses in the quarter. Adjusted EBITDA improved substantially to -$223 million, compared with -$470 million in the fourth quarter of 2024. This improvement was driven by adjusted gross profit, turning from -$224 million in the fourth quarter of 2024 to +$17 million in the fourth quarter of 2025. On the funding of our operation and liquidity, with strong support of Geely Holding, Polestar secured in total $1.2 billion of new equity investment from existing investors and external financial institutions from June 2025 to March 2026. In June 2025, we raised $200 million of new equity from PSD Investment, an existing investor, and an entity that is controlled by Mr. Li Shufu, founder and chairman of Geely Holding Group.

Since December 25, we have raised a further $1 billion from a number of institutions over three rounds. The share price at which these investments were raised was $19.34. Through this transaction, we broaden our shareholder base and improve our free float to over 40%. Moreover, our partners, Geely Sweden and Volvo Cars, agreed to convert into Polestar equity approximately $639 million of the respective outstanding shareholder loan owned by Polestar under relevant agreement, of which Volvo Cars converted the first tranche into Polestar equity, and the maturity of the remaining balance of the shareholder loan was extended to December 2031. Geely Sweden is expected to convert about $300 million into Polestar equity later this quarter. After this event, Volvo Cars is expected to convert a further $65 million to maintain its shareholding in Polestar at 19.9%.

This transaction, raising equity from existing and external sources, and debt-to-equity conversion by our partners, is a major step toward enhancing our capital structure and liquidity position and helping Polestar strengthen its balance sheet. We are grateful for the continued support shown by Geely Holding and their confidence in Polestar's vision. In terms of loan facilities in 2025, we secured about $1.6 billion worth of new 12-month term facilities and renewed about $3 billion of existing 12-month term facilities. These facilities allow for efficient funding of Polestar operating and investing activities. Our cash position at the end of December 2025 was approximately $1.2 billion. We continuously engage in a constructive dialogue with our club loan lenders. Polestar exited the year in compliance with all its covenants, and the club loan lenders agreed to amend covenants for 2026.

In terms of guidance for 2026, we reiterate low double-digit growth rate for retail sales volume with progress through the year and in line with seasonality. The sales mix will continue to evolve to include a greater share of Polestar 4 Coupé, our best-selling model, and later in 2026, the new Polestar 4 variant, Polestar 4 SUV. To conclude, our priorities remain, first, driving growth through the active selling model and our expanding sales network and leveraging our attractive model lineup. Second, improving processes, streamlining the organization, and finding further operational synergies. Third, extracting efficiencies and sustaining cost-cutting and financial discipline. Last but not least, focusing on cash conversion cycle management and exploring sources of future funding. Now, I will hand it back to the operator.

As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We will now take the first question. From the line of Andres Sheppard from Cantor Fitzgerald. Please go ahead.

Hey, guys. This is Ananda for Andres. Thanks for the update, and thanks for taking our questions. Just to kick us off, maybe, I was wondering how much of a headwind do you expect from tariffs and geopolitics, given the significant manufacturing in China, and do you expect the plant in the U.S. and South Carolina to offset this a little bit? Can you give us some color there?

Yeah. Thanks, Andres. Obviously, it's a time of uncertainty, that's fair to say, right? I think the manufacturing footprint we set up is quite good because obviously, as you know, we produce also in North America, also now in South Korea and in China. There is uncertainty, and obviously we make sure we try to balance this as best as we can. That's also why then in the midterm, we want to localize more here in Europe, as we outlined, right? The Polestar 7 as a compact SUV car coming then into a European facility. I think we do the right things. We have flexibility, and that's also why we consolidated the Polestar 3 in Charleston, right? To have then one manufacturing footprint for the Polestar 3. It's fair to say it's a time of uncertainty.

Gotcha. I appreciate the color. Separately, with autonomy really becoming a significant theme in EVs, I was wondering if you could talk to us about how you view the space and maybe remind us of what your autonomy plans are with Polestar.

Yeah, that's an important topic for us because obviously we stand for innovation. We have documented several times, right? We brought innovations early to our cars. For example, the Google built-in was one element. Autonomous driving is an important topic. It will not come overnight, in steps, and that's why, for example, the partnership with Mobileye, but also the access to the Geely ecosystem is important. Obviously we will go to Level 2, Level 2 plus, and then go step by step. It's obvious a topic for the future because it makes life easier for consumers. We see that. It comes gradually, so not overnight and also not from Level 2 to Level 4, but it's something we are very focused on. The good thing is that we have access to the technology through various partners, right? It's a very dynamic field.

Obviously, we also want to take a leading position there.

Gotcha. Thanks for the color and then thanks for the update. I'll pass it on.

Thank you. We will now take the next question. From the line of Dan Levy from Barclays. Please go ahead.

Morning. It's Josh Young on for Dan Levy. Thank you for taking my questions. I have one and then a follow-up. First question for you. After the headcount initiative last year, can you just walk us through the latest cost initiatives and maybe the cadence of those?

Okay. Thanks, Dan, for the question. Indeed, we have achieved quite significant fixed cost reduction when it comes to headcount in 2025. We have decreased headcount by 25%, which is a significant achievement. On top of that, we have optimized our marketing and communication spending. I will say that we will continue as well to look out for more synergies moving forward. When it comes to cost reduction also, I just would like to stop a bit on the product cost reduction, where we have achieved also some relevant result in 2025 compared to 2024. Especially on the Polestar 4, where we have reduced the product cost reduction by low double digits level year-over-year, which is a great achievement, not only on material but also on battery. Of course, we don't want to stop here.

We'll continue focusing on those product cost reductions through commercial negotiation, but also decontenting of our product, while not compromising on the premium positioning. I would say we are continuing marching. For us, it's very much important to improve, I would say, our cost, not only the product cost but also our fixed cost. We are well-oriented entering 2026, but more to come on those two topics.

Great. Thank you. Just in terms of the latest outlook for monthly cash burn, could you walk us through the puts and takes there, and what we should keep in mind for this year and then going forward?

Yes. In 2025, the level of cash burn is in average around $120 million per year. I would say it's very similar to 2024. One could say that we're not improving, but structurally, the cash burn is improving in a sense that we are improving our operating results. We have cut the losses when it comes to adjusted EBITDA by $300 million year-over-year. When you look at also the working capital, we have decreased significantly the level of inventory by around 7,000 new vehicles year-over-year. However, this positive impact has been compensated by higher activity when it comes to receivables due to the increase of volume, but also higher cash outs when it comes to our payables due to 2024 payables entering 2025.

It is fair to recognize that when you look at the level of indebtedness, we have a heavy weight in terms of financial interest, and also looking at the cash out related to our investing activities. We still had, in 2025, a tail of cash out related to legacy program. Entering 2026, so we are going to continue improving the operating results with all the action that we have put in place, with the improvement of the volume, sales mix, but also other action on the cost as we just discussed. Also fair also to comment that due to the restructuring of our capital structure with the recent debt-to-equity conversion, the weight of financial interest in our operating cash flow will reduce. Same as well for the CapEx cash out.

During the last strategy day on the eighteenth of February, we reiterated the fact that we wanted to move on the unique platform strategy, and we wanted to rely also on Geely Group technologies. Of course, that's going to help us, I will say, to reduce the CapEx cash out moving forward. We are confident that the cash burn in 2026 should improve versus 2025.

Great. Thank you. I'll pass it back.

Thank you. There are no further questions at this time. I would now like to turn the conference back to Michael Lohscheller, Polestar CEO, to conclude the call.

Yeah. Thanks everybody for joining, and we'll be in touch as we will review the Q1 results in three weeks time together. Wish you a wonderful day, and talk to you soon. Bye-bye.

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