Q1 2021 Hyliion Holdings Corp Earnings Call
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Earlier.
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Good day, and thank you for standing by.
Welcome to the highly on holdings Q1, 'twenty, one business update conference call.
At this time all participants are in a listen only mode.
After the Speakers' presentation there.
Will be a question and answer session.
You asked a question during this session you will need to press star one on your telephone.
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I would now like to hand, the conference over to your Speaker today, Louis Baltimore Senior director of Investor Relations at <unk>. Thank you. Please go ahead.
Thank you and good morning, everyone welcome to the highly on holdings first quarter 2021 business update conference call with US today, we have Thomas Healy, our Chief Executive Officer, and Sherri Baker, our Chief Financial Officer. During today's call, we will make certain forward looking statements regarding our future business expectations, which involve.
For risks and uncertainties.
Forward looking statements are predictions projections and other statements about future events that are based on current expectations and assumptions and as a result are subject to risks and uncertainties. Many factors could cause actual future events to differ materially from the forward looking statements on this call for more information about factors that may cause actual results to materially differ.
From forward looking statements. Please refer to the press release, we issued yesterday after the market close.
Forward looking statements speak only as of the day. They are made you are cautioned not to put undue reliance on forward looking statements. We undertake no duty to update this information unless required by law with that I will now hand, the call over to our CEO Thomas Healy.
Good morning, everyone and welcome to highly on first quarter 2021 business update call.
'twenty one is off to a great start for highly on as we've achieved some major milestones most notably around the formation of our hyper truck innovation Council, which I'll talk more about today during the quarter, we continued to make meaningful progress on our mission to bringing electrified powertrain solution to the class eight commercial semi truck space.
Yes.
I'd like to start off by turning to page three.
There are a few key topics that I'd like to cover today.
I'll be discussing the growth for our team our continued progress with our hybrid product, including the shipments of additional units and our improvements to the product our continued progress towards the commercialization of the hyper Truckee Rx and some of the key milestones we've achieved I'll highlight our innovation Council and how critical this is for the.
Our success and launch of our product and conclude with some important facts and figures around both renewable natural gas and our battery technology All day.
Ill turn it over to Sherri to address the restatement of our 2020 10-K.
One of the key focuses that highly on is continuing to grow our talented team and over the past quarter. We've added an additional 43 employees that span and skill sets from automotive engineering advanced algorithms and controls engineering to supply chain and operations and other core business functions I'm continually impressed by the level of Tam.
<unk> enthusiasm and dedication of our entire team has demonstrated as we all work to achieve our key milestones since we are growing our team at an ever increasing rate. We are also expanding our headquarters in Austin, Texas and doing a facility redesigned to meet both the head count and anticipated customer demand growth. This.
<unk> will allow us the production and install space, we need to launch both our products as well as handle the significant employee growth plan for the years ahead.
We will share more on these improvements in the coming months.
Now turning to page six let's shift to some important updates on our hybrid product. Our goal for this past quarter was to continue to ship out early low volume units of our hybrid system and I am pleased to share that we did this by installing our hybrid electric product on an additional 10 trucks during the quarter by.
Continuing to ship these hybrid products to fleet, we are laying a strong foundation to be able to ramp up our product volumes.
For our deployment of units, we are refining our assembly process, improving our installation methods, both internally and with third party mud centers and growing our field service knowledge and improving our customer experience. This.
This is giving highly on an advantage of actually having a product out in the field and is allowing us to carry the learnings forward not only into our hybrid systems, but also into our <unk> development.
As we've previously discussed <unk> is continuing to improve the hybrid solution as I mentioned in our last earnings call. We have experienced delays on the development of the hybrid improvements because of learnings that came from the design process and added testing and validation to the development cycle.
One key testing and development milestone accomplished in Q1 was taking our hybrid unit for cold weather testing at a proving ground in Minnesota.
The learnings from this and other test things will allow us to make our current and future products, even stronger and more reliable for delivery to customers. The same method of testing will take place on the hyper Truckee Rx next winter.
We'll be implementing major enhancements to the hybrid product beginning in the second half of this year, followed by future rolling improvements.
Once we start deploying an improved iteration of the hybrid system, we expect to ramp our quarterly volumes and begin recognizing revenue in the second half of this year.
We will continue to take key learnings that will enable highly on to maintain our research and development momentum with the hybrid systems and allow us to continue to build strong relationships with our customers.
Shifting to slide seven fleet utilization of our hybrid solution in the first quarter continued to be strong as we have now logged millions of miles from our hybrid systems that are on the road every day each of these trucks can generate over a gigabyte of data from both our system and the actual truck and then we transmit select data to the.
Cloud.
Our team of software engineers uses data to continuously improve our proprietary control algorithms onboard the trucks to optimize its performance.
We believe all of this data, we collect store and analyze will give us a truly competitive advantage and help us maintain and grow our lead in the class eight electrification space.
These advances in software are all directly translatable to our hyper truck <unk>, allowing our platform to be able to build upon itself.
Shifting to slide nine now I would like to turn to the hyper Truckee Rx for those of you who may be new to the highly on story. This is our game changing powertrain that is fully electric and uses an onboard generator to recharge the batteries for <unk>.
<unk> electricity locally on the truck through a natural gas generator can be less expensive and charging from the grid and can be cleaner to additionally.
Additionally, we eliminate the downtime associated with waiting for a conventional plug and <unk> to charge.
And with a range of over 1000 miles of our hyper Truckee Rx ranging variety is not a concern here.
Let's start off by talking about where we are in the hypertrophy, Eric development process and the upcoming milestones you can watch out for on our path to commercialization.
We announced last quarter that we had selected peterbilt as the truck manufacturer for the initial demonstrator units that will be going out to members of our innovation Council and the others.
On slide 10, you'll see that we've since taken delivery of these first units of Peter belts, and we have the natural gas tanks and generator installed by Peterbilt and an adjacent Mod Center.
The trucks are now undergoing the design and systems integration process for the rest of the highly on components.
After the installation is complete which we expect to be done towards the end of this summer we will begin the testing and validation process on these units.
We will then utilize these as demonstrator units to showcase the technology with our innovation Council partners and others.
This is the first stage to the multi phase of product development approach, we are using to ultimately reach commercialization of the hyper Truckee Rx while many of you have seen the photos and videos of the hyper Truckee Rx prototype on the road we plan to take these initial demo units to major Tradeshows later, this summer and into the fall to showcase our technology.
We are full steam ahead on the development of the hyper truck <unk> and we are engaged and are leveraging numerous outside firms to assist us with this development most notably we've engaged FTB one of the industry, leading automotive engineering consulting firms to assist us through this commercialization process.
While we have made significant progress over the last quarter and some of this is beginning to be seen with the demo trucks currently being built and the strong customer interest that we've highlighted we have encountered some challenges along the way the.
The commercialization development plan is requiring additional time, we've added incremental testing and validation to our plan we've implemented a more formal phased rollout approach and we have been faced with some supply issues and constraints, which which I'll cover later.
That said with where we stand today on the development cycle. We are still on track for showcasing demo trucks with fleet later this year and we will carry this into mid 2022.
We will then provide initial units to fleets in 2022, but it will be towards the latter part of the year.
This will then be followed by commercialization volume ramp up of the hyper truck E Rx powertrain.
On slide 11, Youll see that in early April we were thrilled to announce the formation of the hyper truck innovation Council, a select group of fleets logistics and transportation industry leaders that will actively support the development of hiring on hyper truck powertrain solution. This.
For this council is committed to leading the industry towards zero emission commercial transportation, while working to build a more sustainable future work.
We're thrilled to have been able to pull together some of the industry's top and leading fleets, including Anheuser Busch Penske Ryder Warner and others. These fleets represent over 100000 class eight commercial semi trucks globally and the council will collaborate closely with highway on to provide key user insights and the development of the hybrid truck companies.
<unk> electric powertrain for class eight commercial trucks that aims to provide superior performance emissions reductions and lower operating costs. Additionally, This council is a major step for us along the path to commercialization as council members have committed to be among the first to have access to put real world miles on the hyper.
Truckee Rx demonstrator units.
Providing valuable fleets and driver feedback.
We believe the best way to generate interest and demand for our hyper Truckee Rx is select fleets experienced it firsthand and their operations. We believe our hypertrophic innovation Council along with others outside the council is the most professional and reliable way to generate demand for our powertrains.
Council's like this are used by large established reputable players across the transportation industry and we believe that this is the right path for highly on as well.
Overall, our long term goal is to generate demand that leads from long term partnerships and orders from these fleets as we scale up volume production I'd like to point out that numerous fleets on the council are current users of our hybrid solution. This demonstrates not just the importance of the hybrid on its own but also the ability of our hybrid.
To drive demand for our game changing hypertrophic platform.
While going Green is at the forefront of many trucking fleets minds, both our hybrid and hybrid truck eurex products should enable fleets to reduce cost while doing so.
This combination of performance abundance of selling infrastructure reductions in carbon emissions and reduction in total cost of ownership will make highlanders products appealing to fleets.
While there is so much excitement and demand for electric trucks, today's lack of heavy duty commercial charging station infrastructure is a major problem and our ability to generate power onboard is a major advantage for highly on.
If we think about the north American commercial truck natural gas fueling station infrastructure. There are over 700 stations, which is about where Tesla is north American passenger car Super charging station infrastructure was in 2019, meaning we are starting with an already existing and robust fueling infrastructure across.
The U S. In last quarter's earnings call. We began discussing some of our roadmap for the hyper Chuck and we'd like to continue to expand on this discussion we expect our hyper Truckee Rx powertrains will be customizable from a vehicle range of both the <unk> and total mileage along with different payload capacity and horsepower options.
This will allow us to truly deliver a solution that is refined to our fleet needs and to match their operations shifting to slide 12, while our hypertrophic <unk> currently utilizes natural gas ideally renewable natural gas to generate electricity onboard I'd like to remind you that our hyper truck powertrain has the ability to lift.
<unk> with the changing transportation fuel dynamics, both at home in the U S and abroad.
While many see hydrogen as the energy carrier of the future. We are developing our hyper truck platform with the flexibility to utilize hydrogen and fuel cells to ultimately power. The battery electric drivetrain, however to accommodate the time required to complete the hydrogen and infrastructure build out we are also developing a clean fuel.
<unk> agnostic solution, which will provide our customers the flexibility to use hydrogen for natural gas depending on fuel availability.
This fueling gnostic power source represents an attractive value proposition in the medium term, while hydrogen infrastructure is being built out and hydrogen fuel cells are very expensive.
Whether our system uses of hydrogen fuel cell or future fueling gnostic solution or our natural gas generator that we are first releasing our hyper Chuck will continue to utilize the existing battery electric drivetrain, which provides for this platform with a very long runway for future growth and relevance.
We believe this multi stage approach to leveraging an existing fuel and natural gas today and evolving confusion in the future is a key differentiator for highly on it allows us to start deploying viable solutions in the near term and to have a competitive advantage when hydrogen is ready over the past quarter, we have made great progress with.
Partners, who are teaming up with us in the development of these future generation systems, we will have more to share on these programs with you throughout 2021.
As one of our innovation Council members told US. This is truly an exciting time and they can't wait to get their hands on a truck and get it out on the road to be able to experience them firsthand.
Now I'd like to shift to slide 13, and talk about some of the updates on the renewable natural gas.
As many of you know an important part towards driving net carbon negative emissions is having access to renewable natural gas.
Last month, we received some impressive numbers from the U S Department of energy and the coalition of renewable natural gas in partnership with N. GBA America about the usage and production of renewable natural gas here in the U S along with its impacts on reducing the carbon footprint of the U S transportation sector.
In 2020.
We were impressed to see that just over half of all of the coupon road fuel used in natural gas vehicles was renewable natural gas.
This is up from 40% of the total in 2019 and up 25% in absolute volumes more impressively RMG used in transportation fuels has grown 267% over the past five years.
<unk> is a pipeline spec purified form of natural gas captured rather than emitted from organic material and agriculture wastewater landfill or food waste that can produce carbon negative results when fueling on road vehicles like our hiring on hybrid or hyper truck powertrains.
To put this into context on how important this is for climate change and reducing emissions R&D as a transportation fuel in 2020 lowered greenhouse gas emissions equivalent to eliminating eight 8 billion passenger car miles driven by the average car.
And other way this R&D use has sequestered carbon equal to growing almost $58 million tree seedlings for a decade or for 3 million acres of U S for us for one year.
As of April one 2021, there are over 157, R&D production facilities and operations with another 155 under construction or in the development stage. So this production should continue to grow considerably in the future as renewable natural gas continues to gain momentum here in the U S.
Hi, Leon is a beneficiary of and well positioned to capitalize on this megatrend.
Before turning it over to Sherri to talk more about the recent SEC announcements regarding warrants and our path to revenue recognition I'd like to talk some more about the battery technology and our supply chain.
One of the drawbacks of conventional <unk>, both in terms of cost and environmental impact is the degradation of their large lithium ion batteries that may need to be replaced during the lifecycle of a long haul class eight truck.
This is not the case with highly on batteries as we anticipate them to outlive the truck.
Coupling this with the extremely high power density and improved general stability and safety aspects of our batteries or battery solution is a strong competitive advantage for us and also reduces the environmental impact.
Pending on the Rx customer configuration, the battery can be as small as a 20th for the size of a conventional class eight EV battery.
Which means that <unk> is also less resource intensive during the resource extraction process as.
As we think about shortages at various stages of the supply chain that many different industries, including ours are experiencing today, our batteries are orders of magnitude smaller and lower cost than a conventional lithium ion truck battery, which should allow us to get more trucks onto the roads with fewer battery cells than our competitors can.
Once we have our battery solutions fully commercialized in our own products, we will explore opportunities of selling these modules into other applications as well.
Lastly, our supply chain and supplier base is a critical part to being able to scale up volumes, we do see supply risk with some of the components that are utilized in our hybrid and hybrid truck solutions.
Thus, we have been working closely with the suppliers to either match their lead time constraints or identify alternative suppliers or components that could be utilized some of these alternate components are undergoing or are about to begin a validation process within highly on some of the sourcing issues have also contributed to the timing and availability.
<unk> of the hybrid and hybrid truck that we mentioned previously overall, we're working diligently on mitigating any issues that are forthcoming with our suppliers. It is paramount to the success and scale up of volumes.
As I said, leading into this call. It is an unbelievably exciting time at highly on right. Now we have made significant progress during the quarter, including organizational developments facility expansion generating customer interest and improved testing and validation all supporting our commercialization efforts.
Have a number of key milestones ahead, which include implementing hybrid improvements and beginning to ramp up volumes. Later. This year. In addition to showcasing demo hypertrophy Rx units with fleet. Starting later this year.
With that I'd like to turn it over to Sherri to discuss some updates on the financial side.
E Commerce and good morning, everyone as you've likely seen in mid April the SEC released a public statement highlighting the potential accounting implications and certain terms comment to warrant issuance backed transactions, especially related to the balance sheet classification of these instruments as equity.
For an asset or liability.
In response to this guidance similar to nearly 80 other specs we are in the process and restating, our 2020 financial statements to change the accounting treatment of our warrants.
Consistent with previous practice amongst backs. These warrants have been accounted for as equity.
Ali on now plans to restate its fourth quarter and full year 2020 financial statements to account for the warrants as liabilities that will be mark to market with noncash fair value adjustment.
On November 32020, how Leon redeemed its public warrants for cash, leaving no outstanding warrants at year end 2020, the impacts of these onetime restatements are expected to be entirely non cash and have no material impact on highly on ongoing business operations future plans already.
Information that we will now turn to.
We expect to file the amended form 10-K for 2020 and the form 10-Q for the first quarter of 2021 by May 24 2021.
Now, let's talk about revenue recognition during the first quarter, while we shipped 10 hybrid units, we did not yet recognized revenue at this stage in highly on lifecycle, we are working with our customers to continually refine and improve our hybrid product offering.
It's still a bit early.
Net process as the real World on road use by our customers is the best way to truly understand how these powertrains perform in various conditions on the road.
As we incorporate the learnings from our customers and to feature designs, we're getting closer to the point, where we will have a commercially viable product.
As it relates to ASC six other fixed we have outlined in our recent 10-K filed in February the five steps that we take to recognize revenue from contracts with our customers.
The most relevant steps here to revenue recognition involve dissatisfaction at performance obligations and our contract base.
On our extensive work in building detailed commercialization plans that incorporate key learnings from our current hybrid offering we expect to begin delivering units of hybrid product with rolling improvements that will begin to generate recognizable revenue in the second half of this year. This.
This concludes our prepared remarks, and now I would like to turn the call back over to the operator to open the line up for questions.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound or hash key.
Your first question from Paul Coster with JP Morgan.
Yes. Thank you very much for taking my questions a few quick ones. Please.
First of all.
When do you start to scale.
The products.
Quickly do you believe you will be gross margin closer to.
Yes.
Good to hear from you Paul I will address the scaling of the products first year. So yes, as we mentioned on the hybrid side later this year.
We're bringing some pretty big improvements for the product, which will then allow us to really be able to take that solution and scale. It up as well as Youll will continue for the years ahead here to continue to iterate and improve that solution, but youre going to see that scale up start to happen. Later this year one of the things that I think is also key to that story is even in the first quarter here.
We we already started utilizing mud centers to assist us with the installs on those vehicles.
That allows us really to have those partnerships in place that allow us to be able to scale. So that's on the hybrid side youre going to start to see that scale up happen. Later this year. Obviously following into next year and then on the hyper truck side, we're going to make the first units available as fleets in 2022, but it's going to be towards the latter part of that year and then after.
That is one we will start that scale up and one of the big things there that will carry forward a lot of those relationships and Mod center installed and working with the Oems specifically peterbilt on the hybrid truck that will be carried forward with what we're doing today into that hyper truck solution.
In terms of interest.
From a variable and fixed cost for spirits, you believe you'll be gross margin profitable.
<unk> will.
Initially the absorption cost be so hard that youll be negative gross margins on boots from one or other products.
I think upon the initial launch it would be gross margin negative, but as we are starting to scale up to higher volumes that we would expect to start to see us getting to that gross margin positive as part of building out. The commercialization plans. We are also building on very detailed bill of materials for our products. So once we reach that scalable.
Level, we would expect to be getting to that gross margin positive.
Sure Okay.
So we're seeing more demand for gas powered.
And just.
Emerging markets from a few months.
As for Europe.
India and.
China.
I know that your primary credit Suisse North America.
<unk>.
International market figure into your thinking at all.
It definitely does and in some ways. The international market has some aspects that are even more attractive than the U S market, where you've got higher fuel prices diesel fuel prices overseas. You also have some areas that are more focused on emission reductions that maybe we are here in the U S and so.
Give you an example to it I was meeting with a fleet debt and as an international fleet and the first question. They ask you is what are the emissions savings from these solutions and then the second question is what are the cost savings versus here in the North America U S.
Theres more of a focus on that cost savings also being coupled with the emissions savings. So international is definitely a strong focus but we are going to launch the product here in North America and the U S. First because thats, where we have the most experience we have the strongest success for being able to have a <unk>.
Boston successful launch of the product and then from there it will scale international.
And my last question is you talked about supply constraints.
Clearly the numbers because you are much smaller but true.
And you use different chemistries, so you're kind of in a different part of the supply chain, but the.
The question I've got really is worried about the rest of <unk>.
Supply chain.
And metals.
The other stuff was what share count even think of at the moment.
It seems like Everything's fine so.
<unk> out there.
Do you have problems beyond the battery.
Constraint that you referred to.
Yes, so it's a pretty interesting time in the supply chain side I mean, we've seen even over this past quarter. Some of the major automotive or truck manufacturers have you been at the slowdown or shutdown their manufacturing plant because of the supply chain limitations. So we've had a keen focus on this over the last quarter here and we have seen the lead time for some.
For the components, we are using outside of batteries.
Start to push out and we've also seen some of the other components that we were planning on using we've had to shift and start sourcing other components just because of the in availability.
Of those solutions. So overall supply chain is an interesting time right now, but I think we've got a good grasp on it and we're definitely taking into account as we're going to start rolling up these volumes here.
Making sure that we have those strong connections and lead times planned out with the supply chain base.
Okay. Thanks, so much.
Your next question comes the line of Steven Fisher with UBS.
Thanks, Good morning.
I'm wondering if you could just give a little more color on the revenue recognition I know, it's going to be still pretty small numbers as we get started here, but should we assume more Q4 than Q3 in the context of the second half and then I guess, just maybe bigger picture.
How does that revenue recognition evolve.
The units start to grow on the hybrid will there be an ongoing lag between delivery and recognition.
And then how do we think about the revenue recognition on the hyper truck.
Yes.
I'll take those in the individual component so from from a timing perspective, we'll be launching the product as we move throughout the quarter and the scale up of that will depend on the timing of that launch. So it will essentially ramp up as you were moving throughout the second quarter.
From a hybrid truck perspective, we expect to be delivering the demo units in 'twenty two to our customers and then revenue recognition would follow after we.
Complete the launches of those debt was down on a unit.
Okay, and then in terms of cash burn.
How should we think about that.
Over the balance of this year in for next year, I guess a bit of a slower ramp up.
How does that cash burn evolve when do you envision being cash positive and what's your confidence we don't need to raise more capital.
Yeah at this point just due to the fact that we have the pending restatement of our 2020 financials I'm unable to really comment on any other that financials at this point in time, but once we are able to restate both for 2020 financials and file. Our 10-Q later this month, we will be able to provide more color commentary in there.
Okay, and then just lastly, nice to see the team growing how about 43.
People you've added to the team compare to what you were hoping for.
Over time, we still do not.
India for hiring, but how does that compare to what you were targeting and what do you hope to achieve in the second quarter and the rest of the year.
Yes.
The 43 number was slightly less than what we were hoping to achieve I mean, I think it's still a significant growth for the organization for my.
Aspect, it's been fun to see just with that many people coming into the organization how much that's been able to accelerate the development of what we're doing which which is obviously the goal and it's great to see that taking place, but the hiring continues to ramp up and continues to step on the gas there there's no slowing down of hiring we're still trying to scale out the team.
And I think in the Austin market here, we're seeing it be a really great place to have the company located as I'm sure you've been following I mean, theres a lot of organization moving headquarters here the Austin area a lot of people moving to this area and I think.
Look at highly on this is a really exciting opportunity and one that is on the cutting edge in forefront of.
A new technology a new.
Changing the changing the landscape of trucking. So we've seen that on the recruiting side, we've been relative to be able to bring in top talent individuals into the organization.
<unk>.
Thanks very much.
Your next question comes from Brian Johnson with Barclays.
Yes, a couple of questions. Thank you.
First.
Just in terms of the milestone for revenue recognition on the hybrid trucks that are out there on the roads can you give us sense.
How many trucks for.
And then what.
Specific as you can.
Technical milestone they have to achieve to.
Net revenue recognition and then it gets finally once theyre already cash put upfront for those trucks from the.
So customers.
Net.
And that will just bring them in to GAAP revenue or will they are actually also be payments for the trucks cash coming in from the customers.
Okay.
Yeah, and Brian just to clarify were you referring to hybrid or hyper truck hybrid hybrid.
Hybrid so at this stage, it's going to be those units that we start shipping in the second half of this year, which will be the ones that we start recognizing revenue on and the reason for that is really around there's been some pretty significant product advancements and improvements that we're rolling in there and as Sherry mentioned thats whats kind of classifying it as though.
Units being able to recognize revenue on those.
And then going forward, obviously, we will continue to recognize revenue on those those hybrid system. So it's really the second half of this year, where youre going to see those new shipments starting to take place, which will be the ones that.
We will have Rev rec on.
Okay and are those already orders for motors.
And secondly is there any kind of technical hurdle shipping those other than just the non production ramp in terms of.
For example.
Scale economy levels, they have to hit or other metrics that make the customer payments contingent.
Yes, so in terms of the orders first so we've actually started doing is even in the second quarter here, we started kind of pulling back on some of the deliveries of units and actually pushing those out so that we're we're incorporating them into the improved version of the hybrid system in the second half of this year. So we're kind of.
Slowing down and building up that demand for for that improved hybrid than we have.
Jumpstart to those units that are going to have revenue recognition to them. So.
In terms of the second part of that question, though the technical hurdles.
Some of these units are going to be go into fleets that have already been experiencing that technology and then other ones are going to be going to new fleets as well and what we've seen taking place is a significant amount of interest in the <unk> hybrid solution and that's very easy for our fleet to be able to experience that Ben.
Right you put this hybrid system on our CMG truck overnight youre, taking it from an underpowered vehicle to one that has power levels that are much more comparable to a diesel truck and it's much easier for our fleet to be able to kind of validate those improvements very quickly and so from that standpoint.
While we will still have some new fleets coming into the mix or a lot of new fleets coming into the mix debt.
We'll want to experience the technology kind of first before being able to recognize revenue on it we see that on that <unk> application. It is a quicker process to do that.
Okay and it almost sounds like what's going to then be the difference between the customer.
Taking share.
You are buying they're going to take an existing Sanjay truck and Brett.
Retrofitted with a hybrid solution I'm trying to understand between now and then.
The feature hybrid truck, which will actually have the CMG engine from the guest count.
Yes, so on the hybrid side, we can either do it as a retrofit to an existing truck debt of fleet operates or a brand new vehicle right. So we can do either versus the hyper truck will be more focused on brand new vehicles and when you compare the differences between the two the hyper truck bring forward bring forward a series of additional <unk>.
<unk> and improvements for the fleet right you've got.
Significantly more horsepower and torque performance than a diesel truck you have got the ability to drive that vehicle on purely EV. So that you have zero tailpipe emissions coming out of that that trucks. So if it's operating in cities or or port applications. You can have that zero emissions.
Standing and that's why we see really being the attractive side of the hybrid truck and I think over this past quarter, especially with the announcement of the fleet Council in pulling in some of the industry leading fleet you've got the.
Anheuser Busch's 10, Skus the riders in the world that are saying theyre going to be the first to really experience. This hyper truck solution.
Really seen the interest.
The increase from fleets over the past quarter.
Envision that slowing down at all I think.
And the market sees this as a really practical and logical way to start moving into electrification and one that they can do with reducing costs and not having a disruption and needing a bunch of infrastructure within their operations in order to deploy it. So a lot of strong customer interest has been coming forward over this past quarter.
Okay. Thank you.
Again, if you would like to ask a question press star one.
Next question comes from Mark Delaney with Goldman Sachs <unk> company.
Yes, hi, good morning, and thanks very much for taking the questions first question was on the.
Operational milestones for the hybrid product. So thank you for the update about doing a cold weather testing.
Having moved past that debt issue, maybe you could talk about what additional milestones other hybrid products don't needs to go through another day.
To meet that second half of this year to deliver a timeline for that next generation product.
Yes, so it's really continued validation internally and getting some miles on the system to really make sure that it is fully vetted before we're going to be putting it out into customers hands and one other things that we highlighted during this call is we're going to be implementing also a rolling improvement to that hybrid system. So we got one.
<unk> improvements that are going to be coming forward in the second half of this year and then those will carry forward for the years ahead of further improvement so in terms of.
What further validation needs to happening.
There's a myriad of things more on road testing software bring up and validation.
The cold weather testing that we mentioned great learnings came from that and at this day to I think the team has a very high confidence that the second half of this year, we are going to be in a good shape to be able to launch that.
<unk> hybrid version and then from there continuing to make improvements going forward.
Understood that's helpful and then.
Second question I'm trying to better understand the spending commentary I believe the company had previously guided for about $140 million of operating expenses I know youre, not giving quantitative guidance at this point, but.
If you can talk a little bit more qualitatively how to think about what's changing if anything and you talked about a number of hires in.
But also some timing changes for certain products. So just trying to think for other puts and takes relative to how.
The company is.
Perhaps managing it for operating expenses for the share. Thanks.
Yes, as I alluded to earlier, just due to the pending restatement on I'm really unable to provide any of the financial metrics that we would typically cover however, and we will have all of those metrics and the color commentary provided indicated that we will be filing here in a couple of weeks.
Okay alright, thank you.
There are no further questions I will now turn the call over to Thomas Healy founder and CEO for closing remarks.
I will share very well I appreciate everyone, taking the times of day to join us on our business update call.
I hope you saw throughout the presentation, a lot of exciting things happening within the organization right now a lot of great progress being made towards bringing these electrification solutions forward and look forward to much more exciting times to come and continuing to have you'd be a part of this journey and we'll chat again next quarter. Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
Thanks.
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Good day.
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Yeah.