Q3 2021 Nikola Corporation Earnings Call
[music].
Good morning, and welcome to Nikola Corporation third quarter 2021 earnings call. At this time all participants are in a listen only mode. You begin today's call with a short video presentation, followed by managements prepared remarks, a brief question and answer session will follow the formal presentation.
If anyone should 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.
Yeah.
Everything that we have.
With what we see when it leaves our boat how does it get to.
So it's natural.
What would the Nikola truck high voltage battery.
No carbon.
That's our future.
We're in Foxborough, Massachusetts is also innovate 21 conference. This is an annual event that we do here at Gillette Stadium every year, it's a feature of our product.
We pride ourselves in being change agents and being early adopters of emerging technology and so we see nickel as an innovator as a first mover we're excited to be part of their distribution network.
Yeah.
Most of our clients read about this in the news.
They don't realize that the trucks going into production, but when they hear that they want equipment right now.
Wanted to start the conversation right now.
I want to put money in their budgets for next year for this type of equipment and they want to move.
Yes.
Okay.
We feel like the Nikola relationship is going to provide more opportunities for our employees to hone their skills work on something that's really cool work on something that can can change the world.
Okay.
[laughter] throw.
[laughter], you've kind of coined the phrase we're riding to believing they can see the trucks. They can touch the truck they can ride on the truck it's real.
Okay.
I think the Smile says it all.
Wow, that's a change in that.
So this is fantastic.
Yes.
Okay.
It was right at really nice very impressive there's a lot of room in the tablet.
Let's move to with.
Incredible incredible.
Okay.
Torque months. He told me he would be quiet, but it is unbelievably quiet.
We're gonna be a pure play for electrification and really position <unk> as the solution for the future I would recommend and if you have any thought of looking at an electrified place you should get into the truckers and try it out and then it will make your mind on the play out.
Yeah.
Thank you. It is my pleasure to now introduce Nicole as Chief legal Officer of Britain with it. Thank you.
You may begin.
Thank you and good morning, everyone welcome to <unk> Corporation's third quarter 2021 earnings call.
With me today is Mark Russell, Chief Executive Officer of Nicola 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 September 2021 quarter and for outlook for the December 2021 quarter and full year 2021 the.
The press release detailing our financial results was distributed a little after <unk> am Pacific time earlier this morning.
The release can be found on the Investor Relations section of the Companys website, along with presentation slides accompanying today's call.
Today's presentation and Q&A includes certain forward looking statements within the meanings 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 in 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 of our annual report on Form 10-K, and our quarterly report Form 10-Q filed with the Securities and Exchange Commission.
In addition to the company's subsequent filings with the SEC readers should be cautioned not to put undue reliance on forward looking statements with that I will now hand, the call over to Mark.
Thanks Britain.
And welcome to the call.
Before getting into the details of the quarter I want to start by addressing the $125 million in reserve loss contingency.
Related to the potential FCC settlement that we disclosed today.
As you know we've been engaged in discussions in cooperation with the SEC for some time regarding their investigation.
We believe now.
That we have a potential settlement with them on the horizon, which is why we have reserved this amount. It reflects our best estimate of the civil penalty at this time.
We expect it will be paid in installments over a two year period.
We're looking forward to bringing this chapter to a close with this potential settlement.
So focusing with renewed determination on building our future.
Additionally, we intend to seek reimbursement for Mr. Milton for costs and damages arising from the actions that are the subject.
I understand that you likely have questions about the potential settlement, but what I've. Just told you is all that we can say at this point.
Alright, let's go through what we got done this quarter.
Let's start with the huge strides and moving the Nikola Tre Bev into commercialization.
And the path to delivering trucks to dealers and customers yet this year.
Earlier in the quarter, we began building pre series trucks in Europe and in the U S, including 10 trucks in AUM and 30 in Coolidge. These pre series trucks will be continuing.
Continuing our durability testing and are focused on mileage accumulation, including a number of units that will be delivered to dealers and customers for testing and mileage accumulation on public roads holding customer loads.
The Nikola Tre Bev has been on public roads now here in Arizona since October 15th.
We also continue to hit milestones for the development of the trait of fuel cell electric vehicle or FCB, we built two alpha trucks in AUM and five incurred so far. These trucks are currently undergoing track testing at various locations in Europe and in the United States in preparation for our public road release, which is scheduled.
By the end of the year the road release will follow.
10 week validation and testing period, after which we will start road trials with several customers in California in January.
Even though we refer to these suvs as the alphas, they're actually quite mature for this space since many of the components carryover directly.
With slight modifications such as with the chassis and cab from trade Bev.
One difference between the offers and the series version will be fueled capacity. Since the offers have $62 five kilos of 700 bar hydrogen on board and the series structured have at least 70 kilos between the three storage tanks in the backpack and the two in the saddle position.
And they will fuel the integrated 200 kilowatt net fuel cell power module system, which we will be assembling and Coolidge.
In accordance with their licensing agreement with our longtime partner Bosch.
We're very much looking forward to getting real road miles on the fuel cell power modules and with these trucks.
Later next year, we'll move to beta phase testing.
And otherwise get prepared for the start of FCB serial production in the second half of 2023 by then we will have accumulated hundreds of thousands of miles and tens of thousands of hours of real world customer data that will prove the durability.
And optimize the overall efficiency of this world class heavy duty fuel cell powertrain.
Moving on to the latest on our Coolidge manufacturing facility, we've completed and are building trucks and what we call phase five of the facility and at the same time, we're building out the assembly expansion area, which will mark the end of phase one that work should be done in the first quarter of next year and then we'll move directly to phase II, which should be.
<unk> in early 2023 and at that point the facility will be capable of building up to 20000, Nikola Tre bvs in Suvs on the same line and also of assembling Bosch fuel cell modules.
And from there it will be a matter of ramping up over time towards our total nameplate capacity.
50000 units in Coolidge.
Next we're very excited about the inauguration of our joint venture manufacturing facility in <unk>, Germany. The facility is complete and as I mentioned previously. We're currently building 10, Trey BV pre series trucks. The facility has a production capacity of up to 2000 units per year on two shifts.
And we have the option to expand the line up to 10000 vehicles per year as the eurozone demand for Nicola <unk> and <unk> ramps up.
In addition over the last few months, we've made some important customer announcements, including a.
I joined Mou between Nikola and Iveco, which we announced at the opening with the Hamburg Port authority to deliver up to 25, Nikola Tre bvs through 2022.
Our collaboration with PGP trucking that includes an LOI to lease 100, Nikola Tre Ftes.
The bundled leases include the Nikola Tre FCB hydrogen fuel and service and maintenance and support PTT.
The first truck order announced through our dealer network with the agreement with triangle sales to lease 10, Nikola Tre Abv's from Marine Power Corporation, one of our dealers.
We expect the Nikola dealer network to continue to play an integral role in delivering zero emissions products to our customers.
In addition to providing the trucks.
In parts and service ring power in this case will also provide the charging infrastructure for triangle.
We've made strong progress in the expansion of our sales and service network.
We announced the additions of Alta equipment group and Quinn company.
I will say equipment will provide coverage in the northeast, including New York, New Jersey, and Eastern Pennsylvania and.
In select areas in the New England region.
Quinn company will provide sales and service coverage throughout central and Southern California will continue to make announcements as we enter into agreements and expand our sales and service footprint.
Which is a mission critical item for us as we begin to deliver vehicles to customers.
Uptime and reliability are of the utmost importance to our customers and we plan to provide them with a service network to meet their needs and keep their trucks on the road.
Next let's update the recent announcements we've made regarding our hydrogen refueling partnerships with <unk> and Tc energy.
We continue to build the infrastructure and ecosystem that will provide the hydrogen supply logistics and fueling stations that will support our FC Evs and others, who would wish to utilize it.
The hydrogen fueling value chain development will eventually have to be as large and complex as the current fossil fuel system is and ultimately that will require the work and contributions of many companies. Our strategy continues to be to bring together world class partners, who have the resources and expertise to help us rapidly scale the infrastructure.
We need.
To serve the growing demand as represented by <unk>.
Just in these past few months, we've put two major building blocks in place with the addition of TC energy, who will help us develop large scale hydrogen production hubs storage and transmission by leveraging their assets and expertise and their desire to deploy capital into these scalable low carbon infrastructure projects.
We also created a partnership with Opel to leverage their in depth experience building low carbon fueling station infrastructure and customer facilities behind the fence.
We anticipate adding other collaboration partners, including with major equipment suppliers, which we expect to announce in the near future.
As we've said, we believe hydrogen refueling solutions will come in three forms.
One on site gaseous generation stations to centralized production hub and spoke dispensing locations and three hydrogen offtake agreements.
Last quarter, we announced our investment in WV, our first major offtake agreement the partnership with Dolby B R allows us the option to offtake up to 50 tons of hydrogen per day in the Midwest, which is a critical trucking geography.
With the TC energy announcement, we have our first hydrogen production hub partnership we.
We will continue to update you on the development of our hydrogen refueling ecosystem and additional partnerships as we go forward.
We also have some positive news on our supply chain in the form of a long term supply agreement with LG energy solutions for battery cells. The supply agreement, we will provide additional battery cell supply for our trucks from 2022 through 2029.
Finally to recap in the quarter, we continued to meet our commitments and hit important milestones on our way to bringing our zero emissions products to market.
We're pleased with the results and we're confident and excited about our future.
Alright.
Over to Ken to review the numbers.
Thanks, Mark and good morning, everyone before going over our Q3 results I would like to provide some color on the second purchase agreement executed.
With two main stone capital in September.
Which allows us to issue up to $300 million of Nikola common stock.
We view the equity line as a valuable addition to our capital markets toolkit.
To leverage the liquidity in our shares while also giving us considerable flexibility around issuance timing.
We have no obligation to utilize the enlarged facility and continue to monitor the broader capital markets, which we view as our principal source of financing for Nicola to date Nikola has issued three purchased notices.
<unk> under the first purchase agreement.
Belting and approximately 72 9 million in net proceeds.
Moving onto our Q3 results in the third quarter net loss was $267 6 million.
On a non-GAAP basis.
Adjusted EBITDA totaled negative $85 million.
Adjusted EBITDA excludes among other items one.
$25 million and reserved loss contingency related to the potential FTC settlement.
$49 million in stock based compensation $309 8 million for regulatory and legal matters, which include legal advisory and other professional service fees incurred in connection with the short seller article from September 2020.
For $2 2 million and depreciation and amortization.
Five $4 8 million gain on the revaluation.
Of the one.
Derivative liabilities basic net loss per share for the third quarter was 67.
And diluted net loss per share was <unk> 68.
Basic and diluted non-GAAP net loss per share was 22.
Non-GAAP net loss per share exclude reserve loss contingency for the potential settlement TD.
The SEC investigation.
<unk> based compensation.
Regulatory and legal matters and gain from the revaluation of private funds and <unk>.
The relative liabilities that third quarters research and development expenses.
$78 9 million, including $6 4 million of stock based compensation expense.
R&D expenses consist mainly costs incurred in developing building testing and validating new collateral Bev and fuel cell trucks.
SG&A expenses were approximately $192 9 million.
Including under $25 million in reserved loss contingency for the potential SEC settlement.
$42 6 million in stock based compensation expense.
And $9 8 million in legal and regulatory cost.
While the contemplated payment of $125 million is expected to be spread over two years, we accrued the entire $125 million.
SG&A expense this quarter.
As a result on a GAAP basis, we were unfavorable to the expense guidance for Q3. However.
However, excluding the $125 million loss contingency reserve for a potential settlement to the SEC investigation, we were within the GAAP expense guidance given for the quarter.
Turning to the balance sheet we.
We ended the third quarter with $587 million of cash and cash equivalents.
In addition, we also have approximately $527 1 billion of available liquidity through our two equity lines with $2 million.
Providing us with roughly $1 1 billion of total liquidity as of the quarter sand our capital expenditures totaled $113 7 million year to date and our.
Comprise of the construction of our Coolidge Greenfield manufacturing facility equipment purchases.
And supplier tooling related to trade Bev production.
We also invested.
And additional $25 million and W. VR, we ended the quarter with approximately $404 3 million shares outstanding.
Weighted average shares both basic and diluted for the third quarter were about $400 2 million.
Moving onto our Q4 2021 guidance.
We remain committed to our goal of delivering up to 25 pre series trade best trucks to dealers for demos and to customers for freight hauling on public roads. However.
As we have previously mentioned nicolai not insulated from the ongoing global supply chain constraints in.
Impacting production ready semiconductor components and subsequent validation testing that could impact completing tried bev trucks in Q4.
These pre serious vehicles that we are building in Q4 may not have huggard set of the production parts and may not be considered saleable in that case, we plan to capitalize this trucks on our balance sheet.
Estimated R&D expense for the fourth quarter is in the range of $100 million to $105 million, which includes approximately.
$11 5 million of stock based compensation.
Estimated SG&A expense ranges from 70% to $75 million.
Which includes roughly $44 5 million of stock based compensation.
Now to fiscal year 2021 guidance.
Due to accruing the $125 million reserved loss contingency in Q3.
The potential FCC settlement.
We are adjusting our full year total operating expense range it too.
695% to $715 million.
The change in GAAP operating expense range is solely due to the accrued $125 million loss contingency.
We have also reallocated some of the budgets from R&D to SG&A.
Our updated R&D budget is now in the range of $300 million to $310 million.
Including $40 million of stock based compensation.
Our updated SG&A budget is now in the range of $395 million to $405 million, including $169 million of stock based compensation.
And a $125 million loss contingency reserved for potential assesses settlement.
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, one coolidge manufacturing plant and associated manufacturing equipment supplier tooling hydrogen infrastructure.
And fuel cell electric vehicle engineering equipment at the yearend if no additional capital is raised and we do not issue additional purchased notices to tune in.
Our anticipated cash balance will be approximately $340 million to $306 million.
Total liquidity of the company is expected to be roughly $867 million to $887 million incur.
Including cash on hand, plus.
The remaining $520 million equity line of credit we estimate 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 $399 1 million.
This includes estimated employee stock option exercises restricted stock unit distributions and estimated purchased notices.
<unk> two <unk> stone capital.
Our head count inclusive of accepted offers as of October 31 is 851 employees.
By the end of 2021, we anticipate having approximately 900 to 1000 employees.
Comprised of 160% to 100% manufacturing and operations employees, and 742, a 20% corporate and engineering employees.
We are growing rapidly as we continue to build our engineering manufacturing and energy teams as previously mentioned being a pre revenue company the best way for investors to monitor Nicholas progress is.
As to hold us accountable for achieving certain milestones.
I want to recap the critical milestones we have achieved over the past nine months.
Milestone one regarding hydrogen refueling infrastructure, we have made several partnership announcements across the hydrogen value chain, including hydrogen production distribution and dispensing.
We have secured an electricity rates schedule with Aps in Arizona, which we anticipate will allow us to produce hydrogen fuel that.
Or the low price parity with diesel.
On April 20 <unk>.
We announced our partnership with travel centers of America, where we will leverage existing <unk> infrastructure.
And plan to initially build hydrogen dispensing stations at existing Ta locations in southern California.
On July 20, <unk>, we announced a strategic investment in La Bash Valley resources, allowing us the option to offtake up to 50 tonnes of clean hydrogen per day and the critical trucking geography.
On September 30, we announced our partnership with Apple to collaborate on the co development and co marketing of our hydrogen refueling stations behind defense.
And on October <unk>, we announced our collaboration with TC energy to co develop construct operate and on large scale hydrogen production hubs and potentially leverage tcs existing pipelines storage and power assets, which could lower the cost and increase the speed.
Investigation, we have a potential settlement on the horizon.
Tien tsin on the FCC Commissioner's approval.
We believe the company is a better position to succeed than ever as we bring our zero emission products to the market. We now have vehicles being tested on public roads and look forward to delivering tray bes to dealers and customers in the coming months.
As you continue to monitor our progress in Q4 <unk>.
Here are the milestones we believe investors should track.
One deliver pre serious Nikola tre bass for use on public rose heartland customer freight.
<unk> announced additional fleet testing customers and dealers.
Three purchase plan for first centralized hydrogen hub production facility and or commercial onsite gaseous hydrogen station.
And four announced additional hydrogen infrastructure ecosystem partners.
Before we conclude we will like to provide some high level preliminary color on the potential impact of the 175 trillion reconciliation bill.
The current draft includes language regarding H to production tax credit.
The ultimate question is whether the hydrogen production tax credit will remain in the reconciliation bill as drafted.
If past we believe this will significantly impact our energy business as we start producing hydrogen as centralized hubs and onsite gaseous generation stations.
The proposed new tax credit anticipated to take effect in 2022 is for producing clean hydrogen at qualified clean hydrogen production facilities.
Facilities will be eligible to receive a tax credit for 10 years.
Beginning on the date the facility is placed into service.
The production tax credit cost for <unk>.
Essentially up to $3 per kilogram base rate for hydrogen production multiplied by the applicable percentage the applicable percentage is determined by the percentage of reduction in lifecycle greenhouse gas emissions compared to SMIC produce is too.
The 8% to production tax credits could be substantial for Nicola.
You would lower our cost of hydrogen production and we anticipate it could create significant shareholder value.
This concludes our prepared remarks, we will now open the line for questions operator.
Thank you.
This time, we'll be conducting a question and answer session I'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would 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.
Also ask that you please limit yourself to one question and one follow up per person.
One moment please poll for questions.
Our first question is from Jeff Kauffman of vertical Research partners. Please proceed with your question.
Thank you very much good morning, everybody you guys have been busy.
Could you kind of tie together the dealership platform in terms of where it stands today, how many locations and if we look at that geographic map relative to where your customers look to be.
Or do you still need to fill in at this point and then where do you want this to be say in the next one to two years in terms of size and coverage.
Thanks, Jeff Great question.
We're really pleased with the deals we've signed up so far and each of the geographies, where we establish the dealership relationship. We think we are working with one of the premier folks and.
In terms of their ability to support and service.
Customers in that area.
And as you heard we just signed up our first customer through a dealer.
Power signed up triangle, and we'll be providing triangle with sales and service support as well as a charging infrastructure in that case.
So we've got pretty good coverage at this point and most of the critical geographies.
The the gaps that we still have we're working on actively so and the timeframe you're talking about.
The two year period, we expect we will have we will have coast to coast.
Full geographic coverage.
States.
Into Canada so.
We're looking to have.
No geography uncovered by our dealer.
And we're.
Certainly with inside of being able to do that and we're pretty confident that we'll be able to do that and you'll you'll hear a few.
Further announcements on additional dealers.
That will add into what we've already got in place, which does cover a good chunk of the continental United States at this point.
Okay, and I know, it's a little early but if I ask the same question of the hydrogen production distribution.
So if I look at the map with your partners today, you would say Midwest southwest.
Where are the critical areas youll need to add for where you want to be when the fuel cell trucks start coming out commercially.
Again, we also have to have a coast to coast coverage for hydrogen fuel and infrastructure as well.
Correct at the first.
Infrastructure is going in in the southwest.
In the Midwest with.
The hub that will be working on with TC energy here in the southwest near the California border.
And then the WB are <unk>.
Project, which will serve as a hub for us in the Midwest.
And we'll add others into the other critical geographies. We again, we have to cover the whole space, but youll see hubs along major transportation corridors across the continent.
So southeast north.
Northeast northwest.
And all through the mid section so.
Jeff We have always stated that we will be quite targeted especially for the first three to four years with respect to hydrogen ecosystem.
We believe we are putting the puzzles together with respect to production distribution and dispensing and as Mark talked about.
An ideal location will be in Arizona, California order as our first hub.
And we have already socialized this with Tc energy.
But we will be very much focused on how we rollout and the sequence of rollout.
Okay, Great. That's all I have thanks, guys.
Thanks, Jeff.
Our next question is from Jeff Osborne of Cowen. Please proceed with your question.
Hey, good morning, guys two questions on my end one I was wondering if you could put into perspective, the scope of the LG agreement is there anything you can share as it relates to gigawatt hours over time or on an annual basis, especially just given it starts next year and then I noticed you said it was for sales what's.
What's the strategy on pack production. So that was question one and then question. Two is just really around the <unk> process can you just walk through what's left I know you said the 25 trucks might not be salable, but do you anticipate that the testing and validation phase will be complete in calendar 'twenty, one or is some of that can I slip into next.
Here as well.
Great questions, Jeff with respect to the cells from LG.
We don't want to go into the details of the terms.
Sure.
Confidential in some ways.
However, what we have been able to lock in is that is something that that will give us substantial volume.
We are making sure that we have in ourselves and that we are not single thread.
So of course, we're looking at more than just one cell supplier as well as more than one pack suppliers.
But we're trying to make sure that we have sufficient volume to address.
<unk> 23, and 2024 as you know the market is still very tight in 2003, we believe we will have better idea in 2022 as to perhaps if there will be more cells available for 2023, what we can tell you though is that we had LG team come out.
From Korea.
Signing ceremony at our Coolidge plant. We believe we are building a great relationship with them and we have also requested additional sell allocation than what they have allocated to us for 2023, and so we are working very hard to ensure that we have sufficient.
Sufficient battery cell volume locked in.
Okay.
In fact production.
Hmm obligation question.
With respect Homologation, we are working hard as you know any time.
When there are any delays with respect to commissioning.
Validation person gets delayed we plan to accomplish a substantial portion of validation in 2021, but it is quite possible that some of that value validation could spill into beginning of 2023, we talked about there are certain components such as display chipsets, where we were.
We'll not have the production sample that may not arrive until December what that means is that some of the value validation that testing well.
In early January.
And Jeff I think you. This is Marc I think you also asked a question about pack production.
Which we have more control over than we do to sell supply chain, although we feel we're in a much better position now.
Two sources of supply between.
The two major suppliers of cells that we now have a half.
Agreements with.
So we do have more control over the over pack production.
The the pack.
Design is ours and <unk>.
Design that we're using at this point is from Romeo.
And we.
More control over that part of the supply chain and so a little bit more comfortable about that if we can get the cells were pretty confident that over time, we'll get the packs.
So turning to the Homologation question.
We are in the mode now of pulp.
Like road miles and hours.
For the <unk>.
And that is a matter of miles and hours and we are planning on having all of the test vehicles through their putting.
Put through their paces of course, we've been getting track hours are pretty much the entire calendar year.
But we are getting now a public road miles, which is essential part of the process and it's a matter of getting to the required number of hours in miles.
And that's a function of how many trucks were able to complete which as Kim said there is a function of how many parts we can get.
And this supply chain short condition.
We're trying to get the bulk of this work done in this calendar year, but it will certainly.
Spill into 2022.
We are at this point, we still think we'll be able to make the startup production.
Four.
Regular series production at the end of the first quarter.
Excellent that's all I had I appreciate it.
Our next question comes from Mike Sulewski of D. A Davidson. Please proceed with your question.
Hey, guys good morning.
Want to follow up on the last couple of questions there.
If you if you if your first 25 trucks produced this quarter are not really scalable do you have the ability.
Hi.
Is there a point, where you will you've made all announced available choices you can make you have to start making more non salable trough in the first quarter is there a point where everyone's got their demo unit everyone's got what they need for marketing purposes.
Is it kind of stop and kind of wait until youre able to get the full truck available.
Available for on road use.
Let me address the first part when we say they are not saleable, what we're suggesting is that they may not have all the final production components. They will be retrofitted to the extent that that can be accomplished and they can become available in Q1 2022.
Okay.
Alright, I guess I can follow up offline on that one.
I also wanted to ask its been a very tight market to get a class eight truck in general whether it's isd.
Or battery electric.
Now that you've gotten any additional inquiries from any customers that.
I may have not heard from in the past we were just trying to find any thoughts if they can get and Keith kind of take us behind how you been able to capitalize on any new customer inquiries, just trying to get themselves a chuck of any type and how convinced them that.
<unk>.
It is.
Kind of going to be available in 2022 of our other brands might not be available.
Yes, Mike I think that is also related to your first question, which is would we make more than 25 trucks, if we could and the answer is absolutely yes.
We have not talked to any customer.
In recent months, who does not want to at least get a.
Tests are.
Trial vehicles.
Everybody wants wants trucks as we said trucks are short generally.
And especially anybody who is looking for zero emission trucks.
It's very tight to the extent that if somebody calls us now out of the blue that who's not contract on their contract with us before.
They're going to get back on the line.
Unless they can come in with.
Something thats makes it otherwise of interest in terms of volume or or scope or assistance in partnership. So we have a lot of conversations going on with a lot of customers around the world.
And.
That's why it's so imperative that we work the supply chain issue, which we're doing pretty much 24 seven at this point to make sure we get all the parts we need to build the trucks that we need to go through the validation. So that we can continue to get.
Trucks into dealer and to launch customer hands.
We're getting some help in some respects.
In some geographies for example, we have.
We have one customer in Europe, so far.
Come up with a local.
Geographic exception to European.
Im obligation.
The port of Hamburg, Theyre going to take up the 25 trucks on the U S spec.
Which we can give them faster because we're getting the U S spec first.
Completed first so that we can deliver those trucks to them more quickly because they're getting a local geographic exception there in the port of Hamburg. So.
We're going to go as fast as we can we're going to do as many trucks as we can and get them out as fast as we can because it's not just a market of temporary market shortage that we're trying to address we're trying to get zero emission trucks out there too to make to change the world and make it more sustainable for commercial transportation.
Forever.
And Michael just a bit more insight in terms of demand side. When do we think about sales funnel, we've talked about LOI signed which we already discussed but there are.
Final discussions with number of parties as well as ongoing discussions and there is always timing in terms of given LOI signed to when we announced as well as final discussions that goes into LOI and that eventually announcements so stay tuned.
Okay I'll leave it there. Thank you so much.
Our next question is from Joseph Spak of RBC capital markets. Please proceed with your question.
Thanks, Good morning, everyone.
Yeah.
I had some questions on.
Some of the capacity language.
And early today so.
The 2400 on on two shifts that's unchanged I just wanted to confirm that that's a run rate capacity by year end not what your actual sort of full year capacity will be.
But then also you talked about 20000 by phase two by early 'twenty three I think before that was 15 K for phase III, but it was also a little bit earlier by year end 'twenty, three and then year to phase III, which was 35 by the year end 'twenty three so it seems like there's some moving pieces going on.
The capacity expansion and then just I was wondering if you could.
Help us understand what's going on.
Absolutely so.
The thing to remember is the.
The number it depends on where you draw the line the ramp up in total for that for the Coolidge facility is up to our nameplate.
[music].
Sure.
[music].
Yes.
[music].
And that's true in both hemispheres.
Facilities are ready to go and on schedule and they're going to the limit is going to be.
<unk> supply chain.
One is on Germany is ready to go we had the.
The opening ceremony back in September.
And they are they are doing what they can possibly can get.
And then Coolidge in this first phase is.
It's operational and they're doing everything they can work with as many parts as we can get them.
Okay.
Okay.
Maybe that's a good segue to my second question, which is.
You haven't touched.
The 22 or really the out of your targets since April of 2020, and as we all know a lot has changed since then and now that we're approaching 2002 and Im sure Youre planning for 'twenty. Two I was wondering if you can give us some guardrails to sort of how to think about that because like how realistic.
Is that goal of 1.2 thousand trucks, given everything you just mentioned.
And we will share more detail.
And the next earnings call and at that point, I think we will be able to give you a much better.
With respect to your 2020 volume and our production ramp.
And the situation is very fluid and we're in the same situations pretty much every OEM out there.
This affects everybody and.
And it's your guess is as good as ours in terms of when things will begin to abate.
But we will give you much more specificity in terms of what we've got going.
Next quarter.
Thank you.
Our next question is from Douglas <unk> of Evercore ISI. Please proceed with your question.
Hi, Good morning, Mark you can just sort of follow up on Joseph question there.
One of the factors I guess externally and internally outside of the supply chain issues that you are looking at that could allow for sort of a faster or slower production than the stated rates that we just talked about I mean is it really purely the supply chain or are there other internal factors just looking for some color on that thank you.
Look we've done a great job in terms of making sure that our capacity is available.
Production lines are.
And we have labor in place until we feel confident about that some capacity for 2022 as well as 2023.
And right now.
The element that we can't control and we're trying to influence as much as possible and working with various cell suppliers as well as Pac suppliers to ensure that we have.
<unk> locked in with respect to battery packs as well.
Integrated circuits that those are two key.
Clients, where we have to.
We are working with our suppliers to ensure that we can lock in.
That supply so that when we give you guidance for 2022 that will be in a much better position to have some certainty about how we think about our production ramp but the ability to produce trucks.
Up to 2400 units for next year, we have that capacity.
Available and we believe our manufacturing team is preferred.
Accelerate to the extent that the demand is greater than what we have stated previously our guidance.
Okay, great stuff. Thank you very much.
Our next question is from Bill Peterson of Jpmorgan. Please proceed with your question.
Yes.
Thanks for taking the questions you've spoken a lot on this call about hydrogen infrastructure projects.
But I'm also wondering about electrical charging infrastructure and missed it seems as though of course, you get some relief on the supply.
Constraints you have for your vehicles and we've seen we've seen some announcements for example, part of Los Angeles for some high power Chargers, but in U S. It's our impression that some of our infrastructure is harder to come by maybe harder to predict harder to install compared to lower power passenger vehicles.
In other words, it could take longer to install so again, you mentioned earlier that well.
Margin for triangle, but I guess the first question is what is Nicola dealing with other potential customers and partners in Europe, and USA share charging capability.
For your electric truck and I guess, what is your role with working with multi utilities and I guess in the case of radio build and operate.
Build own and operate.
When you think about the model I'm, just trying to understand how Nicola will enable the bev ecosystem.
Just making sure the ecosystem doesn't become a limiter.
They are able to start shipping trucks in volume.
No that's a great question because.
On the EV side, we are increasingly.
Finding ourselves talking about a solution like we have for hydrogen for for several years now.
The only difference I would I would highlight between.
Hydrogen.
Infrastructure and charging infrastructure is that the charging infrastructure for commercial vehicles is pretty much exclusively behind the fence.
These kind of vehicles are you won't see these kind of vehicles at public stations typically these customers all want to have charging and their terminal.
On their property, what we call behind the fence.
And that's a big difference and as you said that it is not.
A simple prospect in every case to have the kind of charging capacity that you need for commercial vehicles.
Our vehicles will be capable of taking charges up to 350 kilowatts.
For fast charging purposes.
And that's if you've got 10 of those that's a lot of power.
And so you are usually usually are talking about the power supply to the facility.
So that needs upgrading that takes time.
There are things that can be done to get started we have a temporary solution that we have been using for testing purposes and a lot of places most.
Most of the test tracks, we use don't have the charging we need so we have to put in temporary charging that which we're able to do so.
One of the neat things about our dealer network so far.
Most of these deals.
Dealers at this point.
The majority of our dealers at this point are also specialists and providing temporary power.
Most of them are also dealers for caterpillar.
And they are really good at providing temporary power solutions and even long term temporary power solutions. So thats, what green power was able to do for triangle and I can tell you theres a lot of other discussions going on just like that.
We're going to work really hard to make sure that we can provide the solution.
In terms of the vehicle and the charging and in the case of the dealers.
They are offering the whole bundle just like we are on the hydrogen side. If you get the truck you get the service and the support the maintenance and you get the charging or the energy, but you need to get the truck to move.
So that's a great question and I think youre going to see us.
Do more on that on this front and youre going to hear more from us about this.
Going on in the future as well as some of the implications for the utilities.
And the grid operators.
For two for two way power I'll, just give you a teaser on that front.
Two way power is going to be a big deal for commercial power for commercial vehicles going forward I'll make that prediction right here.
Well that makes a lot of sense. Thanks for thanks for that answer and update I do.
We want to come back to the hydrogen ecosystem.
A lot of these were announced earlier this year for example, the five electrolyze, it which I think were targeting for 2022.
Travel centers, I think youre going to update on locations as mentioned during our first quarter earnings call.
In light of obviously, the supply constraints and maybe some of the Gal for fuel cell vehicles, maybe not on the road as fast as you thought I can keep pushing but I guess the question is what are what are Nicholas specific commitments in terms of.
Capital deployment, as we think about hydrogen enabling for 2022.
Youre seeing a lot of these are going to be in the southwest of California, given the subsidy regime, but.
Any color you can provide on that would be helpful.
Alright, let me see if I can get all the parts of that down here Bill.
Let's start with Ta, which is which will be dispensing locations at existing facilities.
We do have the first two of those facilities.
Identified.
Hang on one second.
All right just checking to make sure we haven't announced that yet, which we have not announced what the two the two first two facilities that have been identified.
I will tell you they are in the southwest.
And you can guess, which state there and actually probably.
Because that's where we're going to be started.
Yes.
But so those locations are identified we'll work will going forward those are fairly straightforward because they are dispensing only.
So we just have to have storage and dispensing on location in Ta is such a great partner for us because they are facilities in general are so large.
In general our Ta facilities tend to be bigger than the average truck stop and that gives us plenty of room to to put the infrastructure.
Infrastructure and that we need to be able to fuel trucks.
And of course that means that they are dispensing only we have to get the hydrogen there which is why we are working on the southwest hub, which will be in the state of Arizona.
That's something that we have announced because we have.
Agreement with Aps and the Corporation Commission here in Arizona for a 21 year.
For making hydrogen out of water using electricity in electrolysis, which also relates to the electrolyzed. The capacity that we put on order we have $30 million of Electrolyzed was on order and in process with now which you referenced those will be available for hub service to make to make large amounts of clean hydrogen from from.
Electricity.
At this hub, we may have other methods of making hydrogen at this hub that will be redundant and add to the capacity and as you asked our commitment to our customers is that the hydrogen will be there in time for the truck to make its first run so the hydrogen has to lead the trucks slightly.
And so and you'll see that we'll put in hydrogen capacity before the trucks need it.
In some cases, where you have got a temporary need we have.
<unk> solution as well just like we have mobile charging for battery trucks, we have mobile hydrogen fueling for hydrogen trucks, and we can put them in temporarily but youll see the infrastructure going into place for the target geographies in advance of the trucks, starting with that Arizona southwest hub for hydrogen production and starting with those two first ta stage.
<unk>.
And our initial geography.
And Bill will share a lot more detail beginning of next year when we host.
Analyst day, but it is something that we want you to think about.
For example, assuming 40 kilograms per day for fuel or trade fuel cell and for Nicola to 65% slow ramp of fuel.
Per day by 2025, we need to approximately 900.
Tons of hydrogen per day and assuming.
And on site generation.
Stations eight tonnes per day that would represent approximately 110 stations.
It could also be addressed by let's say.
Six.
Major hydrogen house at 150 tons per day.
The hub and BTC partnership that we have talked about we have the right to own equity up to 50%, but not the obligation. So it is quite possible in many of those locations Tc energy made essentially own substantial equity ownership, yet we control the molecules in terms of off take agreements and so.
So what we're suggesting is that we are going to be very creative we are going to be capital efficient and we will be able to give you better insights in terms of how we're thinking about ultimately capital allocation.
But we are very excited about what we have structured and we have a pretty good insight in terms of how we may want to think about for the next four years.
Thanks for the color and best wishes to manage these these acute supply constraints.
Thanks Bill.
Our next question is from Jacob Green of BPI.
Please proceed with your question.
Hey, guys quick one for me you have this 2000 truck capacity and all and then I guess firstly have you received any orders in Europe were built that any of the dealer network out. There can you talk more broadly on your go forward strategy overseas or should we.
Expect the AUM volumes to supplement Coolidge in say the near to mid term.
And that's a great question. So let me start first with with European customers, our launch customer for Europe will be reported Homburg.
They are.
Hi.
I'm going to take 25 trucks that are U S stack, because they can use them.
Our expansive port there in Hamburg.
And that allows them to your spec trucks, so that kicks us off there and the port of Hamburg, we are talking to a number of other customers in Europe.
Our dealer network in Europe, we have the advantage of the existing tobacco dealer network in Europe, which has good coverage.
We have the.
The ability to use any of those dealers.
To support our customers and of course that goes customers.
<unk> is also going to be.
Selling trading.
<unk> as well.
Both of those will be Nikola branded but tobacco will be selling their portion of the output of the factory, which is 50%.
So.
That partnership with tobacco, so valuable to us on a number of fronts, but especially especially on the property. We're talking about now with dealer service and support because they have great dealers in place. These are dealers, who are used to fueling alternative fuel heavy equipment.
At Becker was.
As the market leader for natural gas fueled heavy trucks in Europe.
And all of their dealers have the ability to service gaseous fuel.
Heavy trucks and of course ours will be hydrogen fuel, but so there is a slight difference, but generally they have a lot of experience in dealing with alternative fuel vehicles already and that dealership network is already in place for US there. So while we are building in the U S is already in place in Europe.
Okay.
Okay.
Operator.
Yes, we're still here.
I think we might have lost Jacob Bill Alright, Thank you might be right. Okay. One on it.
And our next question is from Edison <unk> of Deutsche Bank. Please proceed with your question.
Hey, Thanks for squeezing me in.
Question I didn't care too much about the agreement LG, but directionally are you finding that the costs are coming in higher just given kind of everything that's going on.
So a quick question and then second question any updated thoughts on I guess capital raise.
I know you obviously have too many they are very supportive, but I guess beyond that.
Can you maybe just go over to Neil.
This does about that thanks.
Edison both great questions.
When we went public last year, we assumed that ultimately battery cell price.
Climb in 2023 and 2004 at.
At this point, we know with certainty that price will not be declining for 2023, we have a pretty good idea based on what we have signed.
When it comes to anything beyond 2023, we do believe there are significant capacities worldwide.
It would be online by self suppliers and we do believe that would be possible in 2024. However, when it comes to dropping overall Bom cost is something that we're working on.
And as you know battery represents approximately 50% of your bond cost per battery electric trucks. So we are looking at for the remaining components.
If we can drop that quicker than we have anticipated and so this is a lot of work that we are engaged in and we will have a much better idea next quarter in terms of giving you. Some perspective in terms of how we think about the bump cost as well as groups gross margin.
Going to your second question.
We believe right now we have ample liquidity at the end of Q3.
We have 500 about.
$50 million of cash and we have it.
A lot of availability of 530, and so we have approximately $1 1 billion in terms of liquidity by the year end, we will have approximately $850 million in terms of what's available liquidity. We have always indicated that our preference would be that at all times that we have sufficient cash.
For the following 12 months and so of course, some time next year, we are going to address in terms of additional capital and the potential follow on offering, but we wanted to be flexible and be.
We are attuned to market conditions, and ultimately where when we go and we have fair amount of flexibility based on our current liquidity.
Okay. Thank you very much.
We have reached the end of the question and answer session I will now turn the call back over to Mark Russell for closing remarks.
Thanks, everybody for joining in on our call and we'll be looking forward to talking to you again in a quarter.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great day.
Yes.