Q4 2021 Nikola Corp Earnings Call
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Good morning, and welcome the Nikola Corporation fourth quarter, and full year 2021 earnings call.
At this time all participants are in a listen only mode.
We begin today's call with a short video presentations followed by managements prepared remarks, a brief question and answer session will follow the formal prepared remarks.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Minder This conference is being recorded.
It is now my pleasure to introduce Nicholas Chief Legal Officer Britain worsen.
Britain you may begin.
Okay.
Thank you and good morning, everyone welcome to <unk> Corporation's fourth quarter and full year 2021 earnings call.
With me today are 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 Q4, 2021, and our outlook for Q1 and the full year 2022.
A press release detailing our financial results was distributed a little after six a M. Pacific time. This morning. The release can be found on the Investor Relations section of the Companys website, along with the presentation slides accompanying 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 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 filed with the Securities and Exchange Commission. In addition to the Companys subsequent filings with the SEC.
Forward looking statements speak only as to the date. They are made readers should be cautioned not to put undue reliance on forward looking statements.
We will now begin a brief video presentation, which will be followed by prepared remarks from Mark Russell and can Brady.
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What an extraordinary year, we had in 2021 as you saw on the video we got manufacturing facilities completed on two continents.
We delivered the first trade babs to customers.
Significantly expanded our sales and service network and added more strategic partnerships for hydrogen production hubs distribution and dispensing.
It was a great day, just this last December 17th when we delivered the first two Nikola Tre beds to one of our great launch partners in the port of Los Angeles.
And long Beach T Tsi.
The trucks are performing extraordinarily well.
They've completed 200 plus mile journeys on a single charge.
And they've run routes ranging from nearby long Beach, all the way to Fontana with 98% uptime so far.
Tsi tells us that no other battery electric truck they've tested.
It has gone as far on a single charge.
The range and the reliability of the tray BV.
As a testament to the capability and dedication of the extraordinary engineering and manufacturing teams, we have here at Nucor.
The official start of our series production is scheduled late next month and.
And we're looking forward to delivering revenue generating trucks starting in Q2.
We produced 30 pre series <unk> on the line and Coolidge, Arizona during the fourth quarter.
Because of constraints in the supply of battery components.
<unk> displays are chips only 11 of these vehicles have been commissioned and released to customers or an equal as public road test fleet. So far the remaining 19 trucks are staged at the end of the production line and are waiting for.
Production spec component or for final commissioning.
As soon as we complete commissioning we can release these trucks to the customers and dealers who are anxiously waiting for them.
Just to be clear.
All production line work on these remaining pre series trucks is complete they are off the end of the line completing the remaining commissioning of these trucks is straightforward offline work and.
And it won't conflict with the March 'twenty, one start a series production on the line or the delivery of salable production of trucks in the second quarter.
Turning to the tray FC EV <unk>.
As you know during the third and fourth quarter of 2021, we completed seven Trey FCB alphas five in Coolidge and two in <unk>, Germany.
We're pleased with the momentum of the tray FCB and validation testing two vehicles are with Anheuser Busch in southern California as part of a three month pilot program, there, including an unprecedented zero emission zero carb beer delivery.
On February 11 in conjunction with this year's Super Bowl at Tso Five stadium.
<unk> has long been committed to reducing its emission.
By 25% across its U S value chain by 2025, and we've been honored to partner with AB and achieving there are extraordinary commitment to sustainability.
After completing the pilot program with Abbvie will continue pilot testing with Tsi.
And the port of long Beach with FC Evs and from there with other customers valve.
Validation of the Alpha fleet will continue through the rest of the year.
In Q2 will be building beta versions of the tray, FTE, which will incorporate ongoing improvements learned from continuing testing with the Alpha fleet.
Beta vehicles will start their validation in both the U S and in Europe in the second half of 2022 and continue in the first half of 2023.
And then Trey FCB series production is scheduled to start in the second half of 2023.
We're very pleased with the growth of our Coolidge manufacturing facility, where we're operating in the first phase and shortly we will expand into the next phase, giving us production capacity of 2500 trucks for the year 2022.
We have already begun work on the next phase of expansion, which is expected to be complete by the first quarter of 2023 at that time. The plant will have a production capacity of 20000 trucks per year on two shifts.
We're similarly pleased with the ramp up of our joint venture manufacturing facility in <unk>, Germany. The plant there has a production capacity of 2000 vehicles per year.
With the ability to expand that up to 10000 per year.
25, <unk> that will be delivered to the Hamburg Port authority by the end of 2022 will be built and all.
During Q4 2021 and in January 2022, we've made additional customer announcements, including <unk>.
An LOI with Hana transportation systems for up to a 100 <unk>.
Through our dealer network.
Thompson truck centers.
And LOI with USA truck for up to 100, VEB trucks also through Thompson truck centers.
An LOI with <unk> for up to 100 BV trucks.
An LOI with Covenant logistics group for up to 50 trucks <unk> and <unk>.
In total we've entered into contracts LOI <unk> used for 1385 trucks, comprising 375, bvs and 1010 fuel cell trucks led by our long standing agreement with Anheuser Busch for up to 800 SUV trucks.
Under the terms of all of these agreements. We anticipate continued success in plywood operations will resolve in binding purchase orders.
Turning to government incentives, which influenced customer demand and certainly have the potential to accelerate the transition to zero emission vehicles.
On January 13th we announced the Nikola Tre VEB was ruled eligible for the H VIP incentive program by the California Air Resources Board. This means that.
Nikola Tre VEB buyers can qualify for up to $120000 incentive to reduce the vehicles upfront costs in.
In fact, it's up to a 150000 in the case of drayage trucks in the ports.
And we're working to educate our dealers and customers on which of these incentives are available by state when they're purchasing a nickel of vehicle additional states are considering and passing legislation to incentivize zero emission vehicle purchases.
As well as charging and refueling infrastructure development incentives.
For example, the state of New York has a pending voucher program that could be worth up to 185000 per vehicle and we've already submitted an application for that which would make.
The <unk> one of the first heavy duty trucks.
On their approved vehicle list.
Our commercial and government affairs team diligently monitors federal and state incentives.
It works with policy makers and helps accelerate the inevitable transition to zero emission vehicles.
In response to customer needs for charging solutions Nikola has developed a mobile charging trailer or MCT that allows fleets to charge there'll be evs with maximum flexibility.
With Nicholas MCT fleets can charge their vehicles at their depot or in the field with alternative power charging infrastructure as one of the key challenges fleet space when considering bvs and.
And in the first quarter of 2022, we sold and delivered six mct's to dealers and we have received purchase orders for six more units so far.
On January 18, 2022, we entered into a long term supply agreement with pro Tara.
Our battery modules and packs, including selves.
For both our <unk> and our FC Evs we.
We expect to receive prototype packs in Q2 from <unk> and production packs for the trade that by the end of the fourth quarter, our supply our supply chain team continues to diversify our supplier base and.
And build more robust supply chains as we ramp up production.
On January 20th we announced our partnership with core centric fleet funding solutions to help facilitate nickel of vehicle sales.
The agreement allows nikola and its dealer network.
Reach more customers by providing a financing solution to dealers and customers.
We may not otherwise have a financing option.
On December 21, 2021, we confirmed our settlement with the SEC.
And we'll pay the SEC $125 million civil penalty in five installments over two years, we have made the first of these payments in December .
As we've shared before the company has already taken action to seek reimbursement from charter Milton for costs and damages in connection with the matters the SEC investigated.
2021 was also a great year for our energy business, we continued to establish strategic partnerships to build our Hyatt hydrogen refueling production distribution and dispensing network.
We anticipate adding additional hydrogen refueling ecosystem partners.
And we also look forward to announcing breaking ground and commencing construction of our first hydrogen production hub and station locations later this year.
We're pleased with the progress we made in 2021 and so far in 2022, and we are thrilled with the prospects in front of US this year and beyond.
I'll pass it over to Ken now to take you through the numbers.
Thanks, Mark and good morning, everyone Les.
Let's begin with our 2021 results our operating expenses.
Came in at the low end of our guidance range for the year and certain hydrogen infrastructure capital expenditures.
Were deferred to 2023.
We remain disciplined and spending and capital allocation decisions.
Our net loss for the year was $694 million and on a non-GAAP basis, adjusted EBITDA totaled negative $302 7 million as Mark previously mentioned in Q4, we built 30 Nicolette trade best.
And five trucks were fully commission for customer delivery, and R&D testing and road mileage accumulation.
Two downward flex were recorded as assets on the balance sheet.
And the remaining three R&D trucks were expensed.
In the fourth quarter net loss was $159 4 million and on a non-GAAP basis, adjusted EBITDA totaled negative $94 million.
<unk> EBITDA excludes.
$153 7 million in stock based compensation.
$12 2 million for regulatory and legal matters, which include legal advisory and other professional fees incurred in connection with the Doj and the SEC investigation, and three $2 3 million and depreciation and amortization.
Basic and diluted net loss per share for the quarter was 39.
Basic and diluted non-GAAP net loss per share.
Was 23.
Research and development expenses were $91 2 million, including $9 2 million of stock based compensation expenses.
R&D expenses consist of costs incurred in developing building testing and validating nicolette trade Bev and fuel cell trucks.
SG&A expenses were approximately $71 5 million.
Including $44 5 million in stock based compensation and $12 2 million in legal and regulatory cost.
Turning to the balance sheet.
We ended the fourth quarter with $522 million of cash and cash equivalents, including restricted cash balances.
In addition, we also have approximately $436 million of available liquidity through our two equity lines with tuning providing us with roughly $958 million of total liquidity as of 12 31 2021, our capital expenditures total.
<unk> hundred $79 3 million year to date and are comprised of the construction of our Coolidge Greenfield manufacturing facility equipment purchases and supplier tooling.
<unk> two tray Bev production, we ended the quarter with approximately $413 3 million shares outstanding.
Weighted average shares both basic and diluted.
For the fourth quarter were about $407 4 million.
Our head count inclusive of accepted offers as of December 31 was 905 employees.
Moving to our Q1 2022 guidance.
We plan to build and commission.
Eight to 10 pre series neglect trade bets in Q1.
We are purposely limiting the production of pre series vehicles since they are not scalable and will be used as demo and pilot testing vehicles.
Besides critical components will become more readily available in the second half of the year.
As such Q1 pretty serious trucks will be recorded on our balance sheet as assets.
Estimated R&D expenses for the first quarter is in the range of.
70, $752 $82 5 million, which includes approximately 10.25 million of stock based compensation.
SG&A expense ranges from $72 five to $77 5 million <unk>.
Including roughly 47 75 million of stock based compensation.
Capex for the first quarter.
Is in the range of 117, five $222 5 million.
At the end of Q1, we anticipate having approximately 419 million shares outstanding and the weighted average shares outstanding of $415 3 million.
Now to fiscal year 'twenty two guidance.
We expect to deliver the first saleable production trade bets to customers in Q2.
Our delivery commitments for the full year is 300 to 500 trucks with anticipated revenue of approximately $90 million $250 million.
The full year gross margin is expected to be negative 75% to negative 60% due.
Due to lower production volume and the high cost of battery cells impacts.
As we ramp up production volume and have a second pack supplier in place.
Including potentially in sourcing some modules and packs in 2023, the gross margin for <unk> is expected to improve steadily and should ultimately get into positive territory. In 2023 estimated R&D for the full year 2022 is too.
295 million to $305 million, which includes $47 million of stock based compensation.
SG&A for the full year 'twenty, two is expected to be 305 million to $315 million, including approximately 194 million of stock based compensation.
Capital expenditures for the fiscal year 2020 to range from 295.
$305 million.
Our capital investment plans include phase III Cooley to manufacturing facility and associated manufacturing equipment.
Supplier tooling hydrogen infrastructure.
Fuel cell engineering equipment and other capex.
In light of the current market volatility and uncertainty we will be highly disciplined in our spending including careful consideration.
The timing of capital expenditures.
We plan to finance manufacturing equipment, rather than paying with cash whenever possible at year end, if no additional capital raise.
And we fully utilize our equity line of credit with to NIM.
Our anticipated cash balance will be approximately $225 million to $250 million, we plan to make sure. We always have adequate liquidity to fund. The next 12 months of operations throughout 2022.
We will monitor the equity capital markets closely and raise additional capital when appropriate in 2022.
We estimate total shares outstanding at the end of 2022 up about $461 6 million and.
And weighted average shares for the full year ending December 31 2022.
Approximately $435 $6 million.
This includes estimated employee stock option exercises.
Restricted stock unit distributions.
<unk> estimated purchase notice.
Issue to to maybe some capital LLC next.
Next we would like to provide some insight into the supply chain constraints concerning our guidance.
Apply chains limit, what we can produce and deliver.
We had not only confirming and validating our suppliers delivery dates, but also addressing their tier two and tier three supply chain constraints base.
Based on our current visibility the availability of critical components is skewed towards the second half of the year.
And the quantity that suppliers have confirmed is not the same for critical components.
However in the spirit of transparency, we have a line of sight for critical components and can confirm that following quantities.
Battery cells to build 500, Nicola trade best trucks.
We are working with our supplier for additional cell application in the second half of 2022.
Battery packs to build 300 to 500 Nikola Tre Beth.
This is dependent on the suppliers battery module chips manufacturing execution and improving the yields to MIT Nicholas production schedule. We are closely working with the supplier to optimize the output electronic control module chips and sub components to build more than five.
Hundred Nikola Tre Bes.
<unk> down and securing microprocessors have been incredibly challenging, but we believe that chip constraints will start to ease a bit in the second half of the year.
Displays to build more than 500, Nikola Tre bes.
E axle to build more than 500, Nikola Tre Bev.
The suppliers, adding a second and third shift to meet our volume.
And inverters to build more than 500, Nicholas <unk> beds to be clear in today's environment. There is no guarantee when it comes to the EPA for critical components.
It remains very fluid and we are vigilant and paranoid.
Meaning confirming double checking.
And verifying trying to navigate the parts shortages everyday and not cost delays to the serious production.
Trade Bev build schedule, we plan to provide supply chain status updates of key components each quarter.
We have also intentionally strengthened our supply chain team with new and existing leadership.
Which has led to greater focus and better execution.
Our top priority is ensuring we have critical components available for trade <unk> startup production and trade fuel cell beta built.
Contrary to what has been erroneously reported in the press, we have been and will continue to hire strategically for important supply chain and other roles.
Broadly speaking, we anticipate our head count will increase from 905 employees at the end of 2021 to approximately 1300 to 1400 employees by the end of 2022.
Many investors have asked the best way to gauge Nicholas progress in 2022, we suggest you pay attention to and closely monitor our milestones they are as follows.
One deliver 300 to 500 production trade that trucks.
Two successful pilot testing of trade fuel cell alpha flux with AP.
And tsi and others.
Three build validate and test Trey fuel cell electric vehicle beta trucks.
Four announce location break ground and commence construction of the first hydrogen production hub in Arizona.
Five announced two or more dispensing station partners in California.
This wraps up our prepared remarks, we will use the remainder of the time to address your questions.
Operator, please open the line.
Thank you we will now be conducting a question and answer session.
Like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that Youre line is in the question queue.
Timothy we'd like to remove your question from the queue.
So participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
Yes.
Yes.
Thank you. Our first question is from Jeff Kauffman with vertical Research partners. Please proceed with your question.
Thank you very much and thank you as well for all of the detailed today very very helpful.
I just wanted to ask you now that we have trucks in customers' hands and they're running on a highway driven by customers that your own people on the test track.
I was just kind of curious.
What's your discovery about the trucks the feedback on the vehicles.
What needs to be.
Retuned what are some of the positive.
Surprises that youre discovering I know you mentioned the range on the trucks going to Fontana and then secondly.
How are your discussions with customers starting to change we're a.
You're further into now we've got battery electric trucks that are real that we can put it in your hands and I think customers are moving up the learning curve as well on <unk>. So I was just wondering if you could address those topics.
Thanks, Jeff that's a great question for several years now we've been using.
Using prototypes and specs to talk to customers.
So.
We've just been looking forward to this for so long, it's actually half the trucks in customer hands and have them running them every day.
And as you said.
Yes.
Most important thing that we're getting verification.
Both with the fuel cell alphas and with the.
The battery electric vehicles.
Those pre production pretty serious preproduction vehicles.
The range.
The range is paramount.
And the reason, we build a fuel cell vehicle because the battery range is restricted we think we have the longest range battery truck out there today that we know of.
With the highest battery capacity and.
<unk> already told us that.
They test every truck they can get their hands on by their count they've tested tested.
Approximately 20 trucks.
Trucks, and they've never seen one with the range that this one has.
We run this truck further than they've ever run any other truck.
And of course on the fuel cell side, the trucks that we are running everyday with Anheuser Busch.
On regular public roads regular workloads every day those made the run from Phoenix to Los Angeles with fuel the sphere.
And of course that trucks designed to go up to 500 miles on it and the batter trucks designed to go up to $3 50, and Thats absolutely critical because range is everything in commercial commercial transportation.
Of course, they have to also be reliable.
Gtsi, so far is reporting a 98% uptime.
And Thats the kind of time, you need for for a commercial truck they have to be available all the time.
Because when they are not moving the operators not making money.
So the uptime has also been very important and has been very good so far.
And then we get to the driving characteristics and so far the driving feedback is very positive.
Chuck has a relatively tight turning radius.
Compared to most trucks, it's got great visibility compared to most north American trucks.
It's got great torque and power characteristics.
We have a lot of one of those common.
Feedback, we get from drivers as I don't even I can't even tell there is a trailer on.
Of course, not the case with a diesel truck.
So quiet cleaning of course this comes with the territory with zero emission vehicles, and we get that feedback as well comfortable they enjoy that the driver interface.
The power.
Alright.