Q2 2021 Nikola Corporation Earnings Call
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Good morning, and welcome to Nico on corporations second quarter 2021 earnings Conference call. At this time all participants are on a listen only mode. We begin today's call with a short video presentation, followed by a management's prepared remarks, a brief question and answer session will follow the formal prepared remarks, if and I want to.
Require operator assistance during the conference. Please press Star Zero on your telephone keypad. As a reminder, this conference is being recorded we will now begin the video presentation.
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So wherever and upper Midwest and pruning around doing some durability data acquisition.
We are on and finally caught me now and our time line since you've always aggressive price would sign up to putting this level of instrumentation on the vehicle, it's a big job, even buy and instrumentation Group Center deal.
These guys did before we started the work in 2 weeks, what they're doing is they're collecting low data we're measuring what the road is doing to the truck.
What does a typical road put into the chassis you put it into the vehicle.
And we went through 2 or 3 schools and the strain gauge wire and that's 1000 and seem to be 60, and accelerometer cables and other or 50 foot or 30 floaters and it was it.
And I would you know a couple of weeks.
And so there's probably 100 times and on a.
More sensors than we typically capture and we have 2 hour 64 sensors on there and we'll force transducers measure and what's coming on the wheels, and we've got accelerometers measuring the frames the cabs and seats. So that way, we can take that data and give that to CA groups and they can do simulations based on that makes it much on load cases they can.
And do predictive modeling and those things so we can do on virtually.
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Yeah right now, we're just doing a cortex.
As part of our regular inspections and thanks fair enough is enough on these transitory.
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And we're here at the Supreme and graphical solely beautiful facility around it and lots of different areas and what they can get up here to the and the durability area. There's an interest ROE and that comes up here and this is a 12% grade on a first entrance to that road show and we pulled and legal load 82000 pounds helped that 12% growth.
And so we're traveling up that hill at least 4 times every and series of events and were doing 100 events and pass somebody go on uphill on controlling your legal work.
And where do you need and.
Some of the events are targeted to doing just standard roadmaps and and events like cobblestone and residence roads and impact strips and those are and Russell type maneuvers and doesn't matter, where you are going to survive and spend a function that's going to give me what GDP.
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And for it.
And we abuse it to make sure that way and you abuse, it and just to say physical and online.
Not every day 30000 mile vehicle that you lease on.
Hundreds of thousands of miles on those trucks is going to be in service and their needs.
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And then do on this 23 years, where we are now is hands down the fastest.
Nothing to something and getting and rolling and getting a testing.
And that I've ever experienced and the rate of success that we've seen is further than expectations I think internally and externally.
It's just been a short time frame, we're pushing real hard you know everybody's committed to hitting our deliverables and that's why we're out here.
Sun goes down and still testing.
And of course, and I'm proud of what I'm doing or I wouldn't be here.
And I have to believe and what I do.
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When do on.
And our days I didn't notice and itself.
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So we're investing our time.
And to a vehicle that we know.
And there's going to be safe and we will change you know the trucking industry as we know it.
Yes.
Thank you. It is my pleasure to now introduce Nicola Chief legal officer Brightened worthy.
And thank you, Brian and you may begin.
Please wait for the tone and the recording will begin.
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Please be patient we are having a slight technical difficulties, we will be on board momentarily please be patient.
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We thank you for your patience would be up and running momentarily.
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Yeah.
Thank you and good morning, everyone.
Welcome to Nikola corporations second quarter 2021 earnings call.
With me today is Mark Russell, Chief Executive Officer of Nikola and Kim Brady Chief Financial Officer.
During today's call, we will share our views on the business environment and our financial results for the June 2021 quarter and our outlook for the September 2021 quarter and the full year 2021.
The press release detailing our financial results was distributed a little after 6 a M Pacific time earlier this morning.
The release can be found on the Investor Relations section of the Companys website, along with the presentation slides that accompany today's call.
Today's presentation and Q&A includes certain forward looking statements within the meaning of the federal Securities laws.
Forward looking statements are predictions projections and other statements about future events 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 and this communication.
For more information about factors that may cause actual results to materially differ from forward looking statements. Please refer to the earnings press release, we issued today as well as the risk factors section and our annual report on form 10-K.
And our quarterly report form 10-Q filed with the Securities and Exchange Commission and addition to the company's subsequent filings with the SEC.
Forward looking statements speak only as of the day. They are made readers should be cautioned not to put undue reliance on forward looking statements with that I will now hand, the call over to Mark.
Britain and welcome to our second quarter 2021 earnings call.
Today, we will provide you with an update of what we accomplished during the second quarter.
And I'll begin with an overview of the status of the validation and progress of.
The Nikola Tre and some updates on our joint venture manufacturing facility and on Germany, and our facility and Coolidge, Arizona.
And our announced investment and a 20% stake in Wabash Valley resources, a clean hydrogen project and Indiana.
And then lastly, I'll update you on the most recent development.
Was and expansion of our sales and service network.
After the business update Kim will discuss our financial results give you some color on our purchase agreement with Tim and stone capital and of course, we'll do our best and after that to answer your questions. So let's kick off with the Nikola Tre battery electric vehicle update.
Validation activities continue on the first batch of the 5 Alpha trucks. We've also now completed all 9 of the beta trucks from the second batch.
3 of the trucks and that second batch had been commissioned and are undergoing validation at various proving grounds around the United States.
The remaining 6 of that batch or and commissioning here in Arizona right now and then we'll be at various proving grounds for validation and testing by the end of this month.
This second batch of beta trucks have incorporated.
The component improvements and systems improvements that came from testing the batch 1 alpha trucks. Today. We've also started building gamma trucks and Coolidge and on plants.
For our manufacturing process validation and are working.
Diligently to mature these vehicles as we prepared to deliver pre series trucks to customers and the fourth quarter of this year.
1 of our biggest challenges at the moment no surprise to anyone is the supply chain.
For the Nikola Tre as you know the entire automotive industry is facing a global parts and material shortage.
And the situation has only gotten more acute over the last 90 days.
Our supply chain team is working diligently to overcome the constraints.
And to continue to grow our part maturity levels as we ramp up for pre series build and aim to deliver trucks and the fourth quarter.
And as we mentioned and our previous earnings call last quarter, we have supplier confirmation.
Fair enough battery cells cells to build up to 80 trucks in the fourth quarter, but we're experiencing delays in receiving numerous other parts at this point.
Particular concern on our vehicle head units crash sensors touch screens and other displays.
And the common root cause for many of these as the worldwide shortage of integrated circuits and critical chipsets.
And at suppliers continue to push back the receiving dates of critical semiconductor components.
And as a result, our validation and testing timelines are subject to delay accordingly.
As a result, we've got.
And the manufacturing capability to build and up to 80 trucks and college and arm and the fourth quarter, but we may not receive enough of those components by early December to deliver saleable trucks to regular customers.
While we will still expect to do is substantially complete these vehicles and place them and.
And our dealers demo fleets or with select launch customers or even use them for our own freight needs to accumulate miles on public roads and the fourth quarter. Even if those units are not technically salable due to these critical components not being available to us and time.
Meanwhile, at this moment.
<unk> fuel cell electric vehicle Alpha prototypes are being built and Coolidge 5 units there and in on the Germany 2 vehicles there.
This will be followed by commissioning and validation of these trucks and the third and fourth quarters this year, where.
And we're targeting a road release under limited conditions to start pilot runs within hydro Bush between Los Angeles, and Phoenix by the end of the year.
The start of production for the tray a fuel cell vehicle is still planned for the second half of 2020.3 looking forward from there. We're also still planning for the start of production for the ultra long range Nikola 2 fuel cell vehicle and the second half of 2024.
And we're very pleased that we've completed this first phase of the Greenfield Coolidge, Arizona facility, we're calling a 0.5, where we're currently building the 7 trucks, we referenced the 2 battery electric pre builds and the 5 fuel cell alphas and.
And as we ramp up this first phase of the facility. We are concurrently building out the next phase.
And that will significantly expand the assembly area and will bring our manufacturing capacity to unexpected 2400 units a year by the end of 2021.
And then we'll be we'll begin phase 2 of the build out in January of 2022.
And complete that phase by the first quarter into the first quarter and 2023 and at that point and we expect our nameplate capacity to jump to 20000 per year and Coolidge.
Things are moving with similar speed and our sister or joint venture facility and.
On Germany, which is on the Iveco industrial complex there.
The facility and building modifications have been needed and all 32 of our automatic guided vehicles had been incorporated into the and Assembly line area and.
They've been installed there the accompanying equipment and tooling are currently undergoing calibration.
And currently there are those 2 Nikola Tre battery electric vehicle gamma builds on our line being assembled.
And we look forward to begin increasing production of the Nikola Tre battery electric vehicle and on and the fourth quarter of this year.
On June 22, we announced the purchase of a 20% interest and the Wabash Valley resources clean hydrogen and project now.
And now being developed and West Terre Haute, Indiana.
This facility was originally operated as an industrial scale gasification plant and is now being converted to a world class hydrogen production facility with carbon capture and geologic sequestration.
Well I wish value resources recently receive significant government funding from the department of energy as part of its carbon storage program.
The new plant will use biomass and addition to commodity petroleum Coke too.
And to create clean and sustainable hydrogen with the resulting.
Our result, and carbon emission is expected to be permanently stored deep underground.
As we previously explained building out our hydrogen fueling system will involve leveraging 3 value streams. The onsite electrolysis based hydrogen generating and dispensing stations, which we've talked about in previous quarters.
Also centralized hub production of hydrogen and with spoke dispensing locations, which we've also talked about and previous quarters.
And then hydrogen and off take agreements from other efficient and competitive projects.
And W V or as an example of how and off take agreement can provide hydrogen at or below the cost of diesel and.
Especially in areas, where favorable electricity rates may not be available for production by electrolysis.
And the W. B, our agreement will enable us to offtake up to 50 tons of hydrogen per day.
At a target cost of less and the dollar per kilogram Hell.
Helping pave the way for us to provide clean and affordable hydrogen to our customers throughout the Midwest. The location, they're in Indiana is a critical geography, among highly travelled truck corridors, it's within 250 miles of major cities.
Including Chicago, Illinois, and Milwaukee, Wisconsin, and Columbus, Ohio, and St. Louis, Missouri, and even Nashville, Tennessee as you can see there on the map.
On July 15, we announced and expansion of our sales and service network, adding an additional 51 locations spanning Texas, Arizona, California, Colorado, New Mexico, Florida, Delaware, Virginia, and Maryland.
In conjunction with the rig 360 announcement that we made previously in April.
We now have a total number of sales and service locations and 116 and as you can see from the map on slide 10.
And we're well on our way to our ultimate goal.
Customer coverage from coast to coast.
We are working on additional locations, which we expect will fill out the remainder of this map.
And sales and service support are critical for our customers.
Up time and reliability are of the utmost importance to their operations.
Along with the announced station collaboration agreement with travel centers of America.
The hydrogen and offtake agreement with W. P R and the latest expansion of our sales and service network constitute the building blocks of our bundled lease ecosystem. That's.
It's going to allow us to provide customers with the fuel to power their vehicles.
And the service and maintenance network that will be needed to keep their trucks on the road I'll now pass it on to Kim and he'll go over the numbers.
Thanks, Mark and good morning, everyone before going over our second quarter results.
I would like to provide some color on our agreement with 2 men still and capital L. L C.
The agreement with Chilean provides nikola with up to $300 million of additional liquidity.
That purchase agreement gives us the right, but not the obligation to issue shares of our common stock to tune in and at the market price -3% discount and our sole discretion.
This is a flexible liquidity solution, allowing us to issue purchased notices to to NIM when Nikola stock price is strong and minimizing dilution to our shareholders.
Moving on to our Q2 results in the second quarter net loss was $143.2 million and.
And on a non-GAAP basis, adjusted EBITDA totaled negative $73.9 million.
Adjusted EBITDA excludes among other items, $152.7 million and stock based compensation to $11 million and regulatory and legal matters.
And other professional services incurred in connection with the Hindenburg short seller article from September 2020.
Fourth 1.9 million and normal depreciation and amortization and.
And 5.2.
$2.5 million loss on revaluation of warrant liability.
The second quarters research and development expenses were $67.7 million incurred.
Including $10.2 million and stock based compensation expense.
R&D expenses consist mainly of cost incurred and developing building and testing and validating Nikola Tre battery electric and fuel cell trucks.
SG&A expenses were approximately $77 million, including $42.4 million and stock based compensation expense.
And $11 million and legal and regulatory cost.
As of June 32021, our total head count was 630 employees and it's grown rapidly as we continue to build our teams and engineering manufacturing and energy.
Turning to the balance sheet, we ended the second quarter with $632.7 million on cash and cash equivalents, we have no outstanding debt as of June 30, aside from our Phoenix headquarters lease obligation.
Our capital expenditures totaled $64.8 million year to date and are comprised of deconstruction of alcoholic Greenfield manufacturing facility and equipment and investments and supplier tooling related to trade that production.
We ended the quarter with approximately 397 million shares outstanding.
Weighted average shares both basic and diluted for the second quarter were about $394.6 million.
Basic and diluted GAAP net loss per share for the second quarter was 36 cents.
Basic and diluted non-GAAP net loss per share was <unk> 20.
Non-GAAP net loss per share excludes stock based compensation.
Loss on revaluation of private warrant liability and regulatory and legal matters.
For the second quarter of 2021, we came in below our plan expense ranges as we continue to be laser focused on managing cash and disbursement.
However, we are being aggressive and sourcing battery cells, and semiconductor components, including Peng deposits and higher prices to ensure allocation and shorten the lead time, if possible now turning to our Q3.2021 guidance.
Estimated R&D is in the range of $90 million to $95 million and.
Including $10 million of stock based compensation expense.
S estimated SG&A is in the range of $65 million to $70 million, which includes $43 million of stock based compensation.
Total estimated operating expenses would be and the range of $155.265 million, which includes 53 million of stock based compensation.
Our anticipated capital expenditures for the third quarter, our $75 million to $85 million.
Moving on to our fiscal year 2021 guidance.
As Mark previously discussed.
Pending on the receiving date of sea samples vehicle semiconductor components and subsequent validation and testing.
<unk> vehicles may not be available until early 2022.
However, we intend to build and place pre serious trade deaths at our dealers for demo and and the customer's hand, and Q4.2021 for freight hauling on public roads if possible.
Because some of this vehicles may not be salable, and we may not be able to recognize revenue upon delivery of the vehicles.
Accordingly.
We are revising our delivery guidance from 50 to 100 vehicles 225 to 50 vehicles.
And revenue guidance from $15 million to $30 million, 2 zero to 7.5 million.
The anticipated gross margin of approximately negative 190%.
Will remain the same.
But the gross profit could improve by approximately $6 million to $10 million.
And mainly due to decrease and truck delivery guidance.
Total expense guidance remains intact with no changes R&D guidance remains at 318 to 328 million inclusive of $40 million of stock based compensation.
And the SG&A guidance range is 252 to 262 million inclusive of 169 million of stock based compensation.
Our anticipated capital expenditures for the fiscal year 2021 remain unchanged in the range of $210 million to $230 million.
Our capital investment plans include phase, 1 cooler manufacturing plant and associated manufacturing equipment supplier tooling hydrogen infrastructure and fuel cell electric vehicle engineering equipment.
Our anticipated ending cash balance range at year end.
If no additional capital is raised and Nikola exercises, the full $300 million and 2 named purchase right.
Is $500 million to $530 million.
We are estimating total shares outstanding at the end of 2021 of about $418 million and weighted average shares for the full year ending December 31.2021.
Approximately $413.5 million. This includes 1 estimated employee stock option exercises to restricted stock unit distributions and 3 estimated purchased notices issued to <unk> stone capital LLC.
We expect debt, we will fulfill our hiring plan in the coming quarters, our head count as of July 31 is.
705 Ftes.
By the end of 2021.
We should have approximately 1000 employees comprised of roughly 180 manufacturing plant employees and.
And 820, corporate and engineering employees.
We continue to move forward and execute on.
Our business plan, despite challenging supply chain constraints, we look forward to achieving the following milestones in 2021.
Deliver per series Nikola Tre baths for use on public roads hull and customer freight.
And now and additional fleet testing.
Customers and dealers.
Break ground on our first commercial hydrogen and station and was centralized hydrogen production facility.
And on.
Ounce additional hydrogen infrastructure.
And ecosystem partners.
This concludes our prepared remarks, we will now open the line for questions operator.
Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star 1 on your telephone keypad and confirmation and tailwind Kate Your line is and the question queue.
You May press star, 2 and if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, 1 moment, please while we poll for questions.
Alright first question comes from Chris Mcnally with Evercore. Please proceed with your question.
Thanks, so much gentlemen.
2 questions I guess, the first thing is really on the elephant in the room and travelers lawsuits.
I think it's clear that the lawsuit and against the person and not bet. The company, which is obviously a positive development and 1 of the questions we always get from investors.
Current management was obviously around and equal.
Next day travel when the majority of these.
Statements and.
Question were made and so I guess my first question is how would you answer that line of questioning to investors and maybe.
What other questions I guess said otherwise do you think that.
And that you've answered this on the back of your knowledge all of the debt.
The statements that came out of the and the broken apart, which which started on this.
Thanks, Chris and obviously that is an elephant in the room and I appreciate you, bringing it up first.
As you mentioned the.
And <unk>.
Approximately hundred pages of charges against Trevor.
And against Trevor personally and.
And if you read through those Youll see that net.
Al and Bob statements made by <unk> personally and nothing the company said or filed and.
The thing by anybody else at the company said.
Reported.
Was mentioned and the indictment.
And so we're very focused on our objectives going forward.
And this is a potential distraction, there's lots of potential distractions out there and our job is to keep everybody focused on delivering on the milestones that we just overview for you.
Okay, Great and then and then maybe on on.
On the second and business development clearly 1 of the most important questions for investors after the progress of actually building.
As you know who.
Moving to buy it and then what that level of demand.
And you talk about announcing additional launch customers.
And by the end of the year could you give us an idea about what size order batches.
We would expect to see are we talking about 100 vehicles ordered for lunch and go launch customer.
And again this is on orders as opposed to deliveries.
So we can have and under understanding of how broad the order book may be by the end of the year.
Good question Thanks, Chris.
The current announced customer for the Bev TTS Si and the current announced customer for the fuel cell, which is behind that of course.
Anheuser Busch.
Those were very carefully.
Crafted relationships and agreements.
Contracts that we have in place in both cases and.
And we're not going to take any reservations and not.
And we're not we're taking any and raises or anything like that for the for the trade battery electric vehicle, we are only going to be doing contracts and of course for a launch customer and <unk>.
Tsi, we're asking them to do development work with us and to share risk with US for example, as we mentioned we will place vehicles with Tsi.
Even if theyre not.
Completely validated because of delays in receiving chip dependent components.
And because we need to start mileage accumulation in spite of this global parts shortage. So we're going to get trucks on the road and theyre going to be harming customer loads and we're going to accumulate miles starting on the fourth quarter, but we have to be very careful who we partner with on that.
Beyond that and we've.
Said before that.
Everybody is interested and instruct everybody needs these trucks.
Pretty much every customer I've ever talked to is willing to take trucks for evaluation and would like 1.
But what we're focused on now is major customers, who are willing to make long term commitments and syn.
Broad based relationship partnerships with us.
And so.
If we announce further it's going to be likely on that front before we start.
Opening up the order book and publicly disclosing who is going to be taking.
Small amounts for evaluation because that list will be very long.
And remember that there is almost 4 million per class a trucks on the road and North America, Theres more and in Europe and.
And all of them must be replaced and nobody is working on new diesel vehicles.
The undertaking that we got here and a huge and the need.
For our truck that is proven and can be produced and quantity is massive.
So I'm, not saying trust us on the demand, but you're.
There are some macro effects going on here everybody needs zero emission trucks, everybody wants them. What they want is 1 that's proven and they can get and volume and 1 that is reliable.
Net serviced and supported and the field that's what we're building we're building for the long haul here.
And no pun intended.
Building, so that we have on.
And ecosystem, that's sustainable that customers can rely on and that we can partner with on over and over many years. That's our objective here. So.
You will see further announcements we're not rushing any of these things. We've got right now we've got plenty of people to take trucks and the NIM and near term, we're not producing and volume at first we are ramping up slowly and what we need to do is get these pre series actually assembly line produced trucks and customer hands and and our data enhance.
Our dealers will run them for their own purposes. Most of our dealers are on their own fleets and then there'll be doing demos for their customers and they will be representing us and most of the smaller customers and their respective geographies and then we will do more deals most likely do more deals like <unk> and Anheuser Busch.
And as things come along right now.
The trucks that will produce and the fourth quarter I'll have a home.
And as we go forward, we will announce further deals on those going forward going further out.
Chris We'd previously mentioned debt by the end of this year debt, we will be in a position to disclose however.
Backlog order book, and we intend to do that as Mark talked about dozens of conversations that are going on with major customers now and.
We anticipate as we continue to announce.
On to customers as well as other customers that we should be in a position and Q4.
And start sharing backlog and the order book with respect to our battery electric truck.
And we've had many customers with us on and the test track and validation facilities there.
Seeing the trucks are getting ryzen and the trucks they are getting a chance to.
To review everything with US we have great customer conversations going on and we'll bring those to you and let you know more about them in due course.
And so to paraphrase basically by the end of the year, we'll find out about the larger backlog, but basically launch customers, which will be selective youre looking for long term arrangements, where there'll be sharing development costs and and the ecosystem and just the last 1 real quick and we should expect those launch customers primarily focused on the U S.
To start and then maybe Europe.
And for next year.
That's all correct, that's well said.
Okay. Thanks, guys.
Our next question comes from Jeff Osborne with Cowen. Please proceed with your question.
Hey, Good morning, guys. Just a couple of questions on my and Kim and I was wondering if we can just go back to the cash burn can you talk about what the current burn rate is per quarter and then the 500 to 530 that you talked about does that assuming or is that assuming that all of the tumor and capital.
Extra size by year end.
Jeff Great question.
The first 3 months of why.
Why do we think about cash burn and we think about both from operating activities as well as from Capex and for the first 3 months.
And Q2, we averaged approximately $35 million for the first 6 months between operating activities and capex around $31 million.
We were.
Highly favorable with respect to Capex and the first half and so in the second half of the year, we anticipate our capex.
And while the increase and then by the end of the year, what we have.
Stated is that in terms of all of our.
Guidance with respect to Opex as well as Capex, we have not changed and they will remain the same.
And so we feel pretty confident about what we have forecasted and then the ending cash.
Cash assumes that if we were to exercise all of our lives with respect to <unk> capital will and with approximately 200.
$510 million to $530 million on cash.
Got it and.
And then Mark can you update us on where we are with FM DSS and carb certification is that something that youll have before the fourth quarter. So that you could start deliveries and a compliant fashion or can you deliver prior to having those.
We can certainly deliver prior to that.
But and.
We're working as fast as we can and the timing of that and of course depends partly on the on the regulators and the.
And if you see that we're working with there.
And I can't give you an exact date when everything will be in place, but we're working on all of that very rapidly as you know.
California is a target launch geography for us.
And both vehicles.
Both the fuel cell on and the battery vehicles will be launched and California, our combination and California, and Arizona and case and the long range trucks.
So just to follow up on that.
Sorry to interrupt and go ahead.
Right.
Follow up on that and event that you don't get carb certification by the fourth quarter or is there any risk to deliveries where people want the credit for.
And for that until Youre certified.
I'd like to take delivery.
No I don't.
We haven't heard anything on that in that vein, everybody wants and we want the trucks on the road, we need mileage accumulation at this point.
So we wouldn't let that stop us.
Perfect Thats all I had thank you.
Our next question comes from Emmanuel Rosner with Deutsche Bank. Please proceed with your question.
Hi, good morning, everybody.
I have.
3 quick questions if I may.
First 1 can you give a little.
More detail around some of the critical components debt.
And are missing and that are difficult to stores right now.
No.
What are the prospects for that supply to improve and.
Hakan.
Is it possible to use and you mentioned using these trucks protesting potentially so I guess, just curious what sort of components, we're talking about.
So the.
The ones that were worried most about are the ones that are dependent on on ships.
So electronic components.
And our sensors.
Touch screens and things like that those are the ones that were most worried about.
And most cases, we have the components, we need to operate the truck just not for example, some of the displays might not be there because we don't have the validated.
A fully validated production versions of those displays on time because.
All of that is delayed around the world for everyone.
And as mezzanine.
And as you've heard from other Oems.
And so we can and we believe that we'll be able to finish these trucks.
<unk> be completely.
Finished in terms of every single part, but it looks like there's a good chance that they will be usable.
And that favorable we can't transfer titles, we cant put the official Vin number on them until they are scalable, but in that case, if theyre drivable, then we're going to we're going to put them.
And places, where we can get mileage accumulation and other than on the track. So that we built 14 vehicles per day for testing and validation, but all of that mileage accumulation is on private property, mostly test track facilities are here on our own facilities.
We need public road mileage accumulation with with customer load. So that's why we're going on we're going to go out and place and with our dealers.
And put them on their own fleet.
Or and use them as demos with their own drivers.
And our train driver on our dealer traffic driver.
And then we have select customers TTS is 1 who are willing to get.
Hi.
On the road with our vehicles for miles and accumulation purposes, even if they don't get to take title.
And at least not immediately our goal would be to retrofit those trucks on the parts arrive and then some of them will probably become available at that point and we can transfer title at that point.
Emmanuel.
As we alluded earlier, we are doing everything we can.
Price as well, let's try and to improve lead time, there are 2 key critical components and debt.
And see simple perspective, likely well not arrive until late Q4 debt would be vehicle head unit and display. So what that maintenance is debt, we will have to validate and test and pending on the arrival of those components and <unk>.
May spill over to January in terms of final validation and testing before it can have available vehicles and so what we're trying to do is bring that forward as much as we can at this point, we cannot confirm that but we are working actively with chip suppliers to.
And to make sure that we can accomplish that and so what we do and that cases, we'll put it will put us substitute screen and there won't be the screen and that's intended for production and we put on a screen and that for engineering purposes, and then the truckers operable and just not favorable.
Okay, that's great detail.
And then secondly, focusing on another important component.
The batteries.
I think it is and last update you had mentioned that.
Maybe in June and July you'd have some of the compensation for our on sourcing batteries and available supply for 2022.
Can you give us any sense of and how these discussions are progressing and toward.
To what extent you.
You may or may not be constrained on the batteries and probably for next year.
Sure.
For Q4, I think we previously mentioned that we received confirmation.
Or battery cell on location up to 80 trucks and so we should not have problem in terms of having capacity buildup day to trucks other than component supply issues going on 2022, as we talked about we are laying on more than just 1 source in terms of our battery cells and we have been and.
And <unk> with battery suppliers I.
And I can tell you debt those negotiations are going well and we have recently.
And having detailed discussions with respect to.
Battery cell supplier.
And we could receive significant battery cells and we are obviously still working through and as you know the battery cell challenges will likely last through 2022, and potentially 2023 and what we have committed at this time for.
And for next year is approximately 1200 battery electric vehicles.
At this time, while we have not revise any guidance or optimally, we will have a better idea by the end of Q3 and terms. So what we have been able to procure.
For 2022, I can tell you that we are well underway.
At this time and.
So we have.
A reasonable confidence that we should be in a reasonably good position, but once again, we will know much better by end of Q3 in terms of what we have been able to.
Confirm and.
And the long term agreements that we have enabled per site.
Okay. That's helpful and then just.
And finally.
Okay and can you just.
And the update us on how youre thinking about.
And all.
Equity raised.
The optimal.
They needed and the timing for this.
I guess is the.
Net capital from.
2 amendment and the slower service line ramp up as debt.
And often pushed us back a little bit later in the year on.
The summer is still although we do think about it.
Sure and this is.
Is something that we are constantly thinking about it as you know 2 main capital.
Equity lineup facility that gives us the flexibility so that we do have a longer runway.
And we said that we have always been clear about our intention to raise additional capital and and go back out to market for our follow on offering and.
Of course on many factors 1 of them reevaluate that 1 obviously being the market condition and with respect to.
Equity market as well as convertible debt market, that's something that we're evaluating we also want to make sure that we try to optimize and timing as much as possible with respect to Nicola and day milestones and right now as you know our stock price is somewhat weak and so thats something that we will definitely consider as we think about.
Tightening, but as of now our current thinking is still to go out to market and the second half of the year.
That would be towards the end of Q3 or potentially even early Q4 right now our intention is not changed and back out the market.
Great. Thank you so much.
Our next question comes from Joseph Spak with RBC capital markets. Please proceed with your question.
Thanks, Good morning, everyone.
Maybe just sort of another point of clarification here.
And just talked about delivery of the trade bags and <unk>.
Later this year.
And now you are calling that pre series and I get that that's it seems like that's because maybe there are some.
Non validated parts, but is that is.
Is that really what changed here or is that was that always the case and the system new.
Language and perhaps the lawyers sort of made you maybe throw and narrower maybe you could just really talk about the change and then the vehicles, you're actually talking about delivering.
Those are fully.
I guess the prior defined deliveries like I guess I just to understand the change and the language.
And that's exactly right, we're trying to distinguish between trucks that.
Our.
So scalable and the number.
Because they are completely validated every part is there and we can sign off on them and those debt.
Looking lacking 1 or more on our.
Parks that are fully validated so that's exactly how to look at it.
We are this is the regular assembly line and a regular facilities. These are the trucks as designed for series production.
But they're not they may not be available and so it will come on pretty serious and.
So we are officially available.
But the 25 to 50 or <unk> or those are the old definition and saleable trucks.
They will be pre series until we can we may be able to make it turned some are maybe potentially all of them and to sell trucks.
But we won't know that until we get the parts zone.
Okay. So just to.
To be clear then on the change before it was 50 to 100 salable and now it's 25% to 50 price areas, although youre hopeful that some of those confirmed sellable.
That's right and.
We have the facilities, we have most of the components.
But we're gonna lacks a few.
And the very least we will lack.
The hedging on SMA touch screens.
And what's the delta and process on on others.
I guess and these are still I guess somewhat prototype so whats the process here do they give you feedback and.
And you sort of can go back and refine or is this like.
They go into sort of customer testing and and they decide if they want to place a larger order.
No it's pretty straightforward actually they have to do their own testing of the component, which we have specified and they have to prove to us that it meets all the requirements, including durability.
Shock vibration and everything like that so the component has to meet.
Specifications from the from the supplier at the component level and then we have to put it in the truck and then it has to be in the truck for the for the validation and testing of the truck.
And I would include debt component so.
So what we'll get from them is their test fully tested component, but it is late.
And then we have to actually put it in the truck that's why mileage accumulation and so important for us we have to execute and the truck and we have to get enough hours and then certain conditions that tests, usually can only be done on a test track because it's such an extreme edge case, a corner case use debt.
And only replicate that on a reliably on a test track.
So that's the.
And that's the timing constraint here as we were planning to have all of this stuff by certain dates and the Master Gantt chart to be able to put those trucks off the assembly line and and the customer hands fully scalable with transfer of title and we're going to be short because of certainly because of these.
These components, we just mentioned.
As possible other shortages to theres, a ton of shortage to grow and there's lots of shortage to go around right. Now this is the worst and I've seen it in my career.
Over 3 decades now.
Last time it was even close to this that I think was back in 2009.
And and.
And past experience holds it will turn.
Faster than acute Dennis.
Became apparent.
Think back in 2019 was.
The July shutdown and.
When it turned and I think when everybody came back from a shutdown and everybody suddenly started placing orders and suddenly we went from.
And from being.
Nobody wanted anything to everybody want everything now.
That was the opposite situation where demand has collapsed recovered very rapidly in this case I think you could see a turn rapidly nobody knows the future.
But based on past experience these things off and turn quickly.
Okay, and then mark or Ken I guess, you started both touched on that.
It sounds like Youre later, this year, you'll sort of be better and update us for for.
2022.
And I think consensus is already well below what those initial deal presentation showed which is which is fair.
I guess, what I want to better understand is.
You really also haven't really talked much about those mid decade targets, but I think you are willing to admit a ton has changed.
And about the company and the industry and Mark I appreciate that you said the net.
Long term average when you saw great you still believe there is a lot of demand, but it seems reasonable to assume that even if that is true.
<unk> is different or the slope is different so are you willing to update us on on some of those mid term targets or when can investors expect on opex on that.
Well in terms of timing, we will definitely do that towards the end of this year and 1 of them.
Talk about 2022.
It is still too early.
We are working.
Ensure that we have critical components and for next year.
And we are in active negotiation and we will have much better idea of that final allocations with respect to components, what may slow us down.
And how we do not able to procure.
Please allocation or what we need but right now we're making good progress and because we're still in active negotiations, we're not prepared to share in terms of whether we have fully.
Procured allocated for next year, but.
But we will keep you more updates in Q3 as well as Q4 earnings calls and if Youre talking about further on $23.24 and then.
5 and Thats, what Youre talking about no we're not changing those.
There has been another 1 and I was referring to and then.
No there's been no mandate changed no pushout of dates anywhere in the world.
On the jurisdictions in Europe, and North America, and other places that have announced.
Hard numbers that must be met and even outright bans of internal combustion engines and geographies, but none of those are being pushed back. So what this does interest increased the pressure for people like us to ramp up faster once we can ramp up. So we believe we still have a great chance to overcome these near term short term.
<unk>.
On strength, and then ramp up to the numbers, we were talking about and in fact, I think the pressure will be on us to push it higher faster than then we can't do and we have.
To be able to meet the deadlines that are better looming.
Okay. Thank you very much.
Our next question comes from the line of Bill Peterson with Jpmorgan. Please proceed with your question.
Yes, hi, good morning, and thanks for taking my questions sorry to come back to the supply constraints and I realize theres some uncertainty.
And maybe and it sounds like a little bit of a whack a mole, but do you think this is kind of the peak of the constraints it starts to get better from here or maybe and <unk>.
<unk> that youre, having with your suppliers what are they telling you. When these these constraints will moderate at this stage.
And I'll, let Ken talk about specific suppliers and he is managing that personally right now with the supply chain team.
And for expediting and everything else and done a great job, but as I said as I said before this is the worst I have seen it in my career.
So in that sense I think it's.
Really hard to 2.
And how do we informed opinion because it's just unprecedented.
And how.
Widespread it is.
And and how acute it is for many parts and it's.
Right now and appears to be spreading a little bit.
And we're having people.
That we didn't expect say hey, just in case, we may be a little bit delayed.
On other parts.
Nobody's made those official yet that I'm aware of but other people that and these are pretty run on the metal parts that have nothing to do with the all the components that we have innovated and the vehicles. These are more run on the metal parts.
And having to do with chassis and frames and things like that closures and things like that.
But in my experience, just 1 and it seems like.
It's going to get so bad debt you cant standard is often when it turns.
So and.
And I also I also know that everybody around the world is.
Scrambling as fast as they can and.
And the reason that you also know that debt, it's going to get better is because you're starting to see people push price.
So we're seeing.
As Kim mentioned before we're using price to try to get supply everybody else on the world is doing the same thing and so if the law of supply and demand still holds true on this planet then it's going on.
Is going to be addressed sooner rather than later because everybody is scrambling as fast as they can to get to make more of what they do make because that's how they're going to make money.
And I expect it to turn and not sure when.
And Mike My estimation is it will not be.
Long term I think youre going to see improvements pretty rapidly and that depends to off and on the lead time for capacity additions for certain things that new parks, and especially needs additional capacity, but for the old line parts.
People, who are just shut down for Covid and got caught with demand coming back those people will catch up pretty quick and the people.
We have to actually add factory capacity like us actually.
Asset those ramp ups can't happen overnight, they have to happen and orderly fashion.
And that might take a little bit longer. So that's why we're focused on the things that might require additional capacity like battery cells and chipsets.
And as you know this is complex.
And it's not clear in terms of visibility, although we are getting better indications 2 categories materials, Cody and Mark talked about battery cells.
And semiconductor components when it comes to battery cells. As you note. There are 67 major battery cell manufacturers I think they are all surprised by demand and.
And they're all scrambling, we know that and the next 3 years out likely they are starting to add capacity. So we said that by 2024 timeframe and told us much better but supply is tight for 2022 and 2023 and what we're trying to make sure is that we have batteries.
<unk> available for 2022, and 2023, as we think about demand and that's where a lot of active discussions are going when it comes to chipsets right now we have been able to issue appeals.
All of our needs for 2022 and 2023, while there are some references by a large semiconductor.
On our manufacturers that perhaps this challenge could last until 2022.
However, there are some indication that things might improve by end of 2021, we are.
And we're hopeful at this point based on peers that we have already placed for 2022 key critical semiconductor components.
We will be confirmed.
And that will be able to receive our allocation that we need.
But once again biggest challenge really is addressing 2022 and beginning of 2023.
Okay. Thanks, and thanks for that color on that you guys have announced a lot of the sales and service agreements and looking at the map. It looks like you have a good chunk of the U S covered.
I guess, how much further do we have to go here I think you say like a 116.
Expect to have 116 sales and service locations I guess, how fast and how largely expect this network to grow on the U S and and I guess can you give us an update on your partnerships are expected partnerships in Europe, and how to think about that and then I guess, just finally related to sales and service in terms of the economics are.
These channels incentivized.
However, the economic share between Nikola and your partners on this I guess any color you can provide on sales and service channel will be helpful.
Absolutely so.
Starting first with your question about coverage.
Yes, we are getting good coverage and and critical geographies. There are some critical geographies uncovered you can see on the map, that's where our focus is on the short term.
We'll probably you'll see it's also probably tried to increase the coverage.
And critical areas.
Our only marginally covered at this point. So our focus is is getting the uncovered parts of the U S map.
On filled in and I think youll see us successfully do that and on.
And orderly fashion over the next few quarters.
And maybe the next year or 2.
But that is critical for us to have we intend to go to market through our dealers.
These are extremely capable dealers, who have and in most cases has been in place and their geographies for a long long time.
Generations and in many cases.
And so they have great infrastructure, they have great relationships with customers that are currently servicing those customers.
And the customers are really happy about the fact that theyre going to be help with this transition by there are known and trusted local dealer.
So our dealership relationships are very similar to other dealer relationships that you would see from.
Between and OEM and dealer.
They get some incentive for selling and truck and then they get paid for servicing and supporting that truck and.
And thats, how they are on their money.
And they're really good at it.
We're taking the exact same approach and Europe will go to market through our dealers, we have an advantage and Europe, because we haven't and existing dealer network that we are able to utilize and the form of the iveco dealers.
And we're able to use equity dealers, where we choose and iveco have some outstanding dealers and in many geographies throughout Europe and so we've got a built in place relationship there.
And with our joint venture partner over there and they are existing dealer network. So.
If we showed you the map of the Iveco dealer network, you'd see that pretty good coverage and the major markets in Europe.
And Mara and very importantly, and Europe. Those deals are already used to servicing and supporting alternative fuel vehicles because of echo is the leader and natural gas powered vehicles and Europe.
Led and the natural gas transmission, which made it cleaner and lower emissions already and now theyre going to be the leader with us and making it zero. So those dealers are already cutting edge and helping the market transition towards a cleaner sustainable fleet and they are ready to take the next step most of them have service.
Facilities that are ready to service, our fuel cell and battery vehicles.
Some modifications that have to be made by a dealer.
Who has been only servicing diesel engines they have to put.
Some sensors and on some venting and and maybe do a little bit of electrical retrofitting to be able to service a hydrogen vehicle safely.
And a lot of that work has already been done by the dealer network in Europe that will be using through our background.
And here in North America.
Dealers that are signing up have agreed to make the necessary modifications and time for them to be able to service. The vehicles. When they are delivered so we really feel good about all of that and Youll see us youll.
And Youll see more dealer announcements as we feel on the gaps on the map.
Thanks, and thanks.
Our next question comes from the line of Jeff Kauffman with vertical. Please proceed with your question.
Thank you very much I just wanted to go back to the question.
Realize youre not looking at your long term guidance right now and I guess my interpretation of the guidance on the trucks waiting for touch screens is we're going to get those sales and 2022 is there any reason to think everything gets pushed back and 22 with the chip shortage and the delays or is your feeling that.
And hopefully we're going to get caught up at some point in 2022 and no reason at this point to alter that forecast.
We're not all kind of forecast at this point, but as you know as we continue to negotiate and try to lock and all of our supply will have much better idea in Q3, and we wont be able to share that in our earnings call I believe and Q3 as well as Q4 and.
Once again, we are trying to make sure that we have adequate supply with respect to battery cells.
And as well as key critical semiconductor components.
While we.
To have some confidence about 2022 semiconductor components. Once again things are changing and very fluid and 1 of the reasons why we're awaiting is to make sure that.
We have a day.
Best.
Information possible and because of <unk>.
Suppliers have been shifting date at this point that we're not confident as to ultimately what will receive and once we have greater assurance and confidence that supply will be completely locked in I think at that point, then we'll be able to give you a better idea about 2022 expectations as well as debt.
And I understand about our demand.
Understood, but the hope is at least right now that at some point and 22 Youre caught up and these.
These situations by the second half of next year resolved.
Question for Mark.
If I take out the challenges on the supply chain.
Right now because that's something everybody is dealing with and I.
Look at the things that the company is more or less able to control.
Where you sit today are you, where you want to be or where you thought you'd be to the extent and youre not and I know there was a fair amount of projects that were delayed for damage control a year ago.
Where do you think.
The biggest areas are to catch up and the next 6 to 9 months.
Great question and first of all we outlined the current milestones and and.
Objectives.
Working toward.
And last fall.
And I.
I think we're where we intended to be generally.
We're currently delayed because of these supply chain constraints and as you accurately summarized we have no choice, but to catch up once once the constraints are past us because and.
And people have to have the trucks.
So the good news is is everything that we do have under our control the completion of the facilities in Germany and in and Arizona.
The validation and testing of the trucks.
On the progress on the building blocks of the fueling service and support and charging infrastructure all of that is moving at the pace debt that we needed to move on the Master Gantt chart.
Workflow, so I feel good about where we are and execution for the things that we can control that as a great way to describe it and.
And the things that are currently not in our control that are slowing us down this global.
Supply chain.
And strength.
And that will not continue and at some point, we don't know.
Nobody knows when but when thats when thats done and we have no choice, but to try to catch up and make up for lost ground, because that's what the world and the market and the customer's name.
Alright, Thank you Kevin last question.
And the detail of your earnings release, you identified about $25 million year to date, that's been spent related to legal expenses and in Bergen and others such items.
Do we recapture some of that at some point through insurance or other items are these payments above and beyond that and how much more debt.
Anticipate we will need to sequester capital for this.
Over the next say 6 to 12 months.
Great question, we do anticipate capturing approximately $10 million and Q3 from our D&O insurance and.
And then after debt there may be additional possibility of $2.5 million in terms of local spend and the.
And next.
5 months also.
And <unk> tricky in terms of anticipating what the legal costs are and so we don't try to.
GAAP debt, because we have been consistently consistently wrong.
And when it comes to what debt cost might be.
But this is something that Britain is managing tightly and we are hopeful that and the next 5 months debt our legal costs will continue to go down.
And then some of this will be recaptured through D&O.
Yes.
That's all I have guys. Thank you and congratulations.
Thank you.
We have reached and the question and answer session. At this time I'd like to turn the call back over to Mark Russell for closing comments.
We're very grateful for your participation today and.
Thankful for your support and we look forward to talking to you again and another 90 day. Thanks.
This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.