Q1 2022 Nikola Corp Earnings Call
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Good morning, welcome to Nikola Corporation first quarter 2022 earnings call. At this time all participants are in a listen only mode. We will begin today's call with a short video presentations followed by managements prepared remarks, a brief question and answer session will.
Follow the.
For my prepared remarks, if anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference call is being recorded it's my pleasure to introduce Nicole as director of Investor Relations Henry Kwon. They do Henry you may begin.
Thank you operator, and good morning, everyone welcome to Nicola Corporation's first quarter 2022 earnings call with me today are Mark Russell Chief Executive Officer of Nikola Kim Brady, Chief Financial Officer, and Michael <unk> President of Nickel is motor Division during today's call, we will share our views on the business environment.
Financial results for Q1, 2022, and our outlook for Q2 and the full year 2022.
The press release detailing our financial results was distributed shortly after six am 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 federal Securities laws forward looking statements are predictions plans 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 first page of the presentation. The earnings press release as well as the risk factors section of our annual report.
On Form 10-K, and our quarterly report on Form 10-Q filed with the Securities and Exchange Commission.
In addition to the company's subsequent filings with the SEC.
We're looking statements speak only as of the date. They are made and readers should be cautioned not to put undue reliance on forward looking statements.
We will now begin a brief video presentation, followed by prepared remarks from Mark Russell and Kim Brady.
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And on average that we run about 50 something per ship.
105 active employees, including some of the training.
Although our fleet that we run.
Although the greatest concern so I'm thinking about full containers from the port of L. A or long reason, we are either pre stage I'm on one of our yards or deliver them to the distribution centers that are in the California.
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Right now we are going to work hard.
Martina.
Peter.
And then from there obviously go to support the rest of <unk>.
Really.
This trust is a whole different view.
All of you in front of it.
Power on it.
Okay.
I'll follow up on.
So you have to be shifting.
<unk> should be.
Those views.
The game changer for me for me.
The drivers love it the two drivers that have been assigned since January six have been to work each day.
They know that if they miss a day, we're going to put another driver in that seat probably might get that truck.
This is actually for me it feels like the future normally if I'm driving traffic.
Traffic days.
Hey, Amit.
I'm exhausted already downloaded Dean and then worrying about people cutting you off not listening Hakim distant places now that you are waiting for a little idle.
I have a bunch of windows down.
They are waiting.
Hattori coal with this drug.
It will be waiting churn on the AC Nobody's Nozomi.
<unk> is on or off because electric.
Those trucks are really performing very well they are exceeding the expectations.
Now we've been dealing with electric trucks since 2015 and with the early adopters you know we can only move operate those trucks two hours a day didn't come back in and plug that these trucks here, we're able to get eight and 10 hours a day out of those and those trucks are coming back 47% to 58% State of chart and then leave it out at 80.
<unk> state of charge.
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We operate and report our long Beach, and Los Angeles, 18% to 20 hours a day. So every time that customer calls us to pick up that container. We must have a reliable product you got to look at the beneficial cargo owner that hire us to move their containers. They have schedules that they've got to keep to their customers to their workers.
We got to make sure that we have reliable truck that can pick up that container and deliberate their scheduled time that the customers. Happy then we are happy and it's a mutual benefit for both of those.
The support that's been a major part I mean, having guys that we can call them that there are there either here on the yard support and those with whatever we need them for and that's been the major part of the whole project and Youre not finding that with the other Oems are absolutely not I know, it's a five minute tutorial on the out the door and we're on our own from there on.
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Beautiful like always it's running nice and smooth coming up that hill no problem.
Non stop being coming out Fontana back and forward Havent had no issues.
Yes.
That was my fear like man it might be good right now like these other truck. They are good at the beginning like maybe one week to week. The third week. They started deteriorating batteries won't start the <unk>.
Shuts off and with this one it's been I'm trying to say like a month in two weeks around there.
And it's been running the same women no issues speed on it is crazy man.
It just takes off in what a load we just dropped the low rate hearing a furniture, Ontario, California, and we're picking up this MP one right now and we're going to take it back to us.
The port of San Pedro Morris.
Wrapping it there and then get another law firm, there well I started driving because.
I like the big trucks.
When I was a kid you know when you're pulling next to somebody a big rig telling them to do the horn.
And that always are gone.
Got my attention.
I really like driving.
And relaxes me.
Yes.
Thanks.
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Yes.
And then there's a pfizer zero fixed paper I'm here at art furniture picking up on MP.
A couple of years ago. There was a survey that approximately 27000 trucks to service the ports of La and long Beach each day.
Not a week each day that is a lot of trucks.
If you take those number of trucks and convert them to zero emission vehicles to think of what has come due for the environment around here.
Yes.
Absolutely good feedback and we have no <unk> in this specific drug I have no loan.
No negative feedback at all in.
All of these negative things that will be that people are stopping those all the time and asking them what kind of tracking is how does it operate and all of that.
The biggest factor is that this truck is worth.
We believe they took the right approach just took it at the speed that the company needed to proceed.
The end result is this trait is Oregon perfect.
Thanks for joining us for our first quarter call.
We are so grateful for the overwhelmingly positive customer feedback you just saw in that video.
Everything we've done over the years it's been.
Focused on getting to the point of delighting our target customers like this.
We're anxiously engaged every day.
And continuing to build on this kind of customer success.
A big Thank you to everyone at <unk> and our partners for their exceptional and extraordinary efforts.
Especially in these last few months.
To ensure that our production and delivery targets were met.
Fight every obstacle, including our supply chain crisis that just won't quit.
The war in Ukraine, and Covid related shutdowns in China.
I've put new and additional pressure and uncertainty on the global manufacturing landscape.
I'm very grateful to be part of a team that.
Has made steady and remarkable progress in achieving our milestones in spite of all of this.
Alright, Let's review our progress on the vehicle side of the business since we talked to you last quarter.
Slide four the final 10 pre serious stay Babs came off the assembly line in Toulouse during the quarter.
Which completed our total pre series fleet of 40 trucks.
These continue to be utilized in customer pilot test programs dealer demos and our own continued R&D testing.
The trade ban.
The pilot program at TTS is southern California Port operations.
It was successfully completed in April .
These two trucks accumulated over a 11000 combined miles with tsi.
93% total uptime and using an average of only 25% of their state of charge to go 102 miles every day.
As we previously agreed with ETF by they began issuing pose with the first 10 submitted under the California, H VIP incentive program.
We also completed a pilot with Univar solutions and in April resulting in <unk>, four six trucks utilizing California HBO.
Pilots underway, but not yet complete include covenant logistics amongst others.
We're now gaining significant traction with our launch customers and from here, we'll be looking at shorter demo and pilot programs.
Let's go to slide five.
Since cereal trade Bev production started on March 21, we received a 134, California HVAC purchase orders through April .
And the total of all Nikola Tre Bev purchase orders and LOI as we've received to date is 510, which is just over our upside target for production for this year.
Turning to the tray FC EV program on slide six.
At the end of April we successfully completed the tray S. EV Alpha pilot program with Anheuser Busch in California.
These trucks logged over 12000 miles and <unk> 2 million pounds of freight and <unk> operations.
We will start FCB Alpha pilot testing with Tsi by the end of May.
All the learnings from the Alpha pilot testing will be incorporated into our beta truck builds.
With the first batch of six beta trucks set to commence production.
By the end of this quarter.
By the end of Q4, we should have a total bethe fleet of 19 tray Ftes.
Data validation testing and is scheduled to continue through the first half of 2023, followed by serial production in the second half of the year.
As of the end of April we had 1010, Trey SUV trucks.
Under either contract or LOI.
Let's go to slide seven and update you on the energy business.
We selected our first dispensing station location with our station partner travel centers of America during the quarter.
We intend to jointly build hydrogen refueling infrastructure within a relatively large footprint of Tas existing station in Ontario, California adjacent to Interstate 10.
Along with our partner TC energy were very close to sharing the location of our first hydrogen production hub in Arizona, which we plan to break ground on this year.
This hub is intended to supply hydrogen to our joint Ta station in Ontario, and many others in the region.
Utilizing the groundbreaking hydrogen production electric rate schedule.
And in place by Aps here in Arizona.
TC Energy also announced in April the evaluation of our hydrogen production hub in crossville to Alberta.
That could produce an estimated 60 tons of hydrogen per day and will be able to scale up to a 150 tonnes per day in the future.
Nikola is committed to being the hubs anchor customer.
This is an excellent opportunity for TCE to continue investing in low carbon hydrogen solutions, while providing <unk> with a significant hydrogen fuel source for our long haul ftes in the region onto slide eight we completed the phase one assembly expansion area in coolers during the quarter.
Which gives us a production capacity of 2005 hundred units per year there.
We started the phase II expansion in April and we expect that to be complete in the first quarter of 2023.
<unk> will provide us with a 20000 unit annual capacity in <unk>.
From their phase III will take us to our original announced nameplate capacity.
Next slide in March we announced an expansion of our partnership with Alta equipment group within.
With an agreement for them to also cover the Arizona sales and service territory are.
Our sales and service network now covers 27 states and over 127 locations.
We're looking forward to our expanded partnership with Alpha and two the continued growth of our sales and service footprint through additional partnerships.
We believe the strength and expertise of our extraordinary dealer network sets Nikola apart and customer conversations.
In March we also entered into an agreement with <unk> commercial finance company to help facilitate the sale of Nikola vehicles.
<unk> will work directly with the Nikola dealer network to offer customers financing solutions for the purchase of Nikola vehicles.
Charging assets and infrastructure.
Alright over to Kevin now to go over the numbers.
Thanks, Mark and good morning, everyone, let's begin with our Q1 2022 results.
In the first quarter, we reported revenues of $1 9 million from the sale of 10, Nicola mobile charging trailers, while we do not expect MCT sales to become a key growth driver for us in the coming years, the product generates approximately 20% gross profit margin, which we expect to be sustainable.
Research and development expenses were $74 6 million, including $8 7 million of stock based compensation expenses R&D expenses consist of costs incurred in developing building testing and validating Nikola Tre Bev and fuel cell trucks.
SG&A expenses were approximately $77 2 million, including $44 8 million in stock based compensation and $14 1 million in legal and regulatory costs, which we back out for non-GAAP reporting.
Net loss was $152 9 million basic and diluted net loss per share for the quarter was 37.
Basic and diluted non-GAAP net loss per share came to 21.
On a non-GAAP basis, adjusted EBITDA totaled a negative $79 2 million.
Adjusted EBITDA excludes $153 5 million in stock based compensation to $14 1 million for legal matters related to expenses for Mr. Milton Attorney's fees under his indemnification agreement and three $3 1 million in <unk>.
<unk> and amortization turning to the balance sheet. We ended the first quarter with $385 million of cash and cash equivalent including restricted cash balances.
In addition, we also have approximately $409 million of available liquidity through our two equity lines with too many.
Letting us with roughly $794 million of total liquidity as of March 31.
Our capital expenditures totaled $33 5 million year to date and are comprised of the construction of our Coolidge Greenfield manufacturing facility and equipment purchases renovations for office space expansion and hydrogen storage testing building in Phoenix.
In mobile <unk> supplier tooling and investments made into our European JV.
A large part of what we had anticipated in our Q1 Capex guidance.
<unk> significantly below due to the timing of spending.
Our full year Capex guidance remains unchanged on May two we announced an agreement with an institutional investor to invest and Nicola by purchasing $200 million of senior convertible notes, we expect a notes to fund in early June .
We view this investment as a validation of the recent accomplishments our company has made on the operational and strategic plans, including the $200 million of convertible notes Nicola would have had a total cash and liquidity position of approximately 1.0.
$1 billion as of March 31, 2022.
The net proceeds from the sale of notes along with our other liquidity sources.
To be used for business expansion related to scaling truck manufacturing and tooling setup accelerating the development of our hydrogen infrastructure as well as for general corporate purposes. We ended the quarter with approximately $418 3 million shares outstanding.
Weighted average basic and diluted shares for the first quarter were approximately $415 2 million.
Our head count as of March 31 was 1040 employees, we continue to grow as we hire new talent in engineering and product development manufacturing supply chain and.
And other corporate functions.
Moving onto our Q2 2022 guidance.
We anticipate we will produce and deliver 50 to 60, new collateral beth's for revenues between $15 million to $18 million, we anticipate gross margin to be negative, but improved as fixed costs are spread over increased number of units as we scale production.
We began shipping saleable trade Bev.
Our dealers on April 29 for delivery to customers and look forward to continuing deliveries of our zero emission trucks at scale.
Estimated R&D expenses for the second quarter is in the range of 70, 252, $77 5 million.
Which includes approximately $11 million of stock based compensation.
SG&A expense ranges are estimated between 72, 5% to $77 5 million include.
Including roughly $48 million of stock based compensation.
Actual SG&A expenses will likely to be higher due to legal fees associated with Robert Milton Defense.
These fees are difficult to predict so we do not forecast them and for non-GAAP guidance. They are excluded capex for the second quarter is in the range of $85 million to $90 million.
At the end of Q2, we anticipate having approximately 433 5 million shares outstanding and the weighted average shares outstanding of $426 5 million. We've made no revisions to our full year 2022 guidance concerning deliveries revenue.
Gross margin or expenses.
However, weighted average shares outstanding could fluctuate depending on the market conditions.
As we draw down on our equity line with too many or if we raise additional capital.
Additionally, going forward, we are expanding the activities of our European joint venture with Iveco to include EU product development activities previously the JV acted solely as a contract manufacturer.
Accordingly, the R&D expenses within the JV are expected to increase.
50% of that increase will flow through our earnings in the equity and net earnings or loss of affiliate line item.
This will result in increased losses for the remainder of the year.
Next I would like to provide some color on supply chain challenges embedded in our guidance the ongoing war in Ukraine and the recent Covid outbreak in China were factors that we did not anticipate when we last discussed supply chain issues back in February These euro Covid policy in China has led to additional bottle.
Mix and cost pressures in more recent months.
While there is still uncertainty about the magnitude and duration of any other supply chain impact from this event.
We continue to have full supplier commitment and are confident in our ability to achieve our full year target range without making revisions based on our current line of sight, we reconfirm the key electrical components available to meet our delivery targets.
Battery cells to build more than 500, Nikola Tre bes.
Battery packs to build 300 to 500 Nikola Tre Beth.
Our supply chain team is working closely with battery pack supplier to ensure no gaps in the battery module chip supply so as to not disrupt Nicholas Bill schedule.
<unk> and sub components to build more than 500, Nikola Tre deaths.
Displace to build more than 500, Nikola Tre Beth.
E axles to build more than 500 nickel actuary Beth.
And in order to build the more than 500, new collateral Beth.
We continue to strengthen our supply chain team by adding talent and growing head count during the first quarter.
We strive to ensure we have the critical components necessary.
For trade their production and trade fuel cell beta bills. We are pleased to report that we shipped production Nikola Tre Bev trucks to dealers for revenue in April and successfully completed trade fuel cell electric vehicle Alpha pilot testing with E.
On our Q4 earnings call, we established five milestones to hit in 2022.
And we are well on our way to achieving the strategic and operational goals.
One deliver 300 to 500 production trade best trucks.
<unk> successful.
Fuel cell EV alpha testing with an Azure Bush and tsi.
Three build validate and test trade fuel cell beta trucks for announced location break ground and commence construction of the first hydrogen production hub in Arizona.
And five announced two or more dispensing station partners in California.
This concludes our prepared remarks, we will use the remainder of the time to address your questions.
Operator, please open the line.
Thank you I think I would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in.
In the question queue, you May press star two if he would like to remove.
Suddenly Q for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Our first question is from Chris Mcnally with Evercore ISI. Please proceed.
Thanks, so much team.
Okay. So wanted to talk about the progression of the.
The unit deliveries over the course of the year I appreciate that.
Q2 numbers.
Wanted to see if you could confirm at the analyst day, you kind of gave broad comments about producing one truck per day now I am getting to two trucks per day by the end of Q2 and that progressing all the way to at the end of the year hopefully something like five trucks per day that gives a general sense of how we can pace out Q2 to Q4.
Do those numbers still hold and also if you could just put a little bit of meat behind what is the key things that you have to do internally to ramp from that wants to trucks towards five over that over the next.
Eight months.
Chris Thanks for the question. If you recall when you were actually on site visiting our facility in Coolidge, what we have stated was that.
When it comes to transition from Q2 to Q3 and Q4, it's really not about manufacturing ramp.
It's really about supply chain issues and we have also stated previously in our earnings call.
<unk> deliveries that skew towards second half of the year. So what we have suggested is that approximately 20% of the deliveries for this year based on 500 units.
We're going to be delivered in Q2, and Q3 and Q4 will represent about 80% and thats really due to the timing of our battery packs as well as certain chip supply that will be available in the second half of the year. So as we have confirmation and easing efforts supply chain with respect to chips then we connect.
You build more trucks and has nothing to do with our ability to actually scale at our manufacturing plant.
That's great is the best way then to paraphrase that of all the components that you. Just described the only one that really have that variability between the 300 to 500 appears.
To be the packs I guess chips on August on a secondary and if you could just remind us which of the chips there.
And the variability and that really is it's an external issue for the Q3 into Q4 ramp because it's obviously a big range, but most of that will fall in terms of just timing. So if you can get the tax because youll have the cells and by year end is that a good paraphrase.
Yes.
What we have stated that two main risks delivery of the modules and packs and so we need to make sure that we're working closely with our supplier when it comes to manufacturing efficiency and yield and then the second when it comes to BMS chips, a couple awards and a couple of hundred components, but there are.
Few chips microprocessors that are critical and important and we're trying to make sure that we have supply of those such that there is kind of disruption in our build.
Okay.
Perfect and then just one housekeeping given I think you mentioned again.
In Phoenix $650 million is the new sort of financing number that you would expect the bridge to the end of 'twenty three two.
202, the convert.
Just wanted to make sure thats reiterated that essentially.
<unk> 450 <unk>.
This app is convertible.
I think that's reasonable what we have stated is that we are always looking to ensure that we have adequate liquidity for the following 12 months of operation and we have also stated that by end of this year that we are targeting to have anywhere from $900 million of cash and liquidity on hand 2 billion.
So I think thats reasonable.
Perfect.
Thanks, so much.
Yeah.
Our next question is from Mike <unk> with D. A Davidson. Please proceed.
Yes, Hello, and good morning.
I wanted to follow up on some of your comments about Europe .
Did I hear this correctly.
Developing a truck with Rebecca that will be Iveco badge for Europe or will it be Nikola badged.
And all of the expenses.
Net.
New to the previous guidance you had last quarter.
Thanks, Mike This is mark.
I'll put up the joint venture in Europe will be all batch Nikon.
Everything that we produce there will be.
From the joint venture will carry the Nikola brand name.
And then the joint venture remains a 50 50 proposition in terms of the specific numbers I will defer to Kevin go ahead.
And Mike what we're doing is that we're expanding our JV relationship which will include development of European version of trucks. What that means is that we are actually giving greater responsibility.
The JV.
And so what that means is that going forward.
Both iveco and nuclear will be making additional investments for R&D. Most of this R&D is related to <unk>.
Now as well as outside engineering services.
It will impact in terms of loss.
From.
Before relates to our equity.
From our affiliates.
We will be able to give you a better guidance right now we are going through an exercise where we are working through the details what that incremental cost and investment in the JV and in Q2.
It will be minimal low going forward Q3, and Q4, the impact will be larger and we will be able to share with you what that guidance would be.
Okay great.
If I could switch to the.
Alberto location that you guys are you on your Carters have identified Florida for a new hub.
Can you maybe share.
Is it really far from any of the.
The fleets, we're talking with as far as just as in dispensing stations.
And because it might be located on the property OTC cleared some of the hydrogen coming out of that facility flow in our pipeline or would that be trucked into various.
Dispensing stations in that area.
Great question Mike.
Location is.
Strategic in that it's it's close enough to two Canada one.
Canada Highway one is the transcontinental routes that goes all the way across Canada for Pacific to Atlantic.
And Thats the major route in Canada, and then of course, we can.
<unk> hydrogen throughout the region because.
This should be a very cost effective operation for producing hydrogen.
Essentially capturing carbon.
Yes, one of the reasons for the strong logic of a partnership with TC energy as they do control a substantial pipeline assets across North America.
There is also pipeline assets near where we were going to be locating things here in Arizona eventually.
And.
Eventually.
The pipelines that now carry natural gas are very likely to be destined to carry hydrogen at some point in the future.
I would defer you to refer you to.
Tc energy.
Investor.
Relations for some of that planning.
Most of the industrial uses of natural gas today can't be replaced by direct electricity something substituting.
Natural gas will have to be it needs to be developed.
And pretty much everybody has agreed and that's going to be hydrogen so being being close to our pipeline is important in the long run in the short run we will be the anchor customer we have the demand you.
You might have seen some of the.
Process materials that came out of a recent conference in Calgary that we participated in actually had a fuel cell truck up there we have a lot of customer demand up there. So that will be an early launch geography for us, particularly since we are.
Looking confident feeling confident about the fuel from this new cross jokes facility.
Okay great.
Maybe one last quick one for me I want to get too granular here, but.
But.
I appreciate your guidance this quarter.
The STB.
Testing.
That you are still planning to get through the ones, we have with AB and GTS side, it's great.
Last quarter, you had mentioned in that same part of your discussion it was <unk> <unk> and others.
You've dropped the end under this part this quarter.
The change to the other tests, you're running besides those two potential customers.
No there will be others as we mentioned earlier in this presentation covenant is.
Also.
Current test pilot.
And there will be others as we gain more confidence as I said in my prepared remarks, as we gain more confidence with customers, which we are doing daily at this point.
The.
The length of the testing and pilot programs and demos will reduce we don't have to do the long because it really long ones like we're doing now.
Okay, great Mark him. Thanks, so much.
Thank you.
As a reminder, this star one on your telephone keypad, if he would like to ask a question.
Our next question is from Joseph Spak with RBC capital markets. Please proceed.
Thanks, so much everyone.
A couple of questions and clarifications, just going back to the liquidity.
I know you.
You sort of ran through the math I mean, and then Moreover, over 400, which which is I guess equal to the amount you have left on the <unk>. So that so if you need it I guess you you you can get it.
Is that your sort of current understanding I mean, you might look for additional sources, but thats sort of available too.
Is your view right now correct.
I think we've made it clear.
Our spending plan for 2022.
We anticipate fully drawing down on our existing <unk>, one and two.
And we have approximately $400 million remaining on our one and two.
Okay.
I guess just building upon that and I know you know thanks.
Can you sort of have to take it.
Especially in this environment sort of day by day, but if I look at your guidance.
And look at sort of the.
Expected cash burn.
It looks like and this is without working capital I guess, which could add a little bit more but looks like it comes to about $180 million.
Quarter.
I think it which that would suggest and if it's higher that sort of five six quarters. If you have 1 billion kind of liquidity and I think it's reasonable to assume that the burn probably goes higher before it goes lower as you sort of continue to ramp so.
Do like.
As you clearly want to ramp supply chain that might constrain your pace.
But how do we think about the needs here.
Beyond sort of the balance of this year that were sort of really gets you towards the early stages of production by when you really need to go at.
At a much or want to go at a much higher level.
Next year.
Joe we have not provided any guidance for 2020 through yet but.
But we have clearly stated that we will have adequate liquidity. We believe for 2022 operation by end of 2022 based on capital raise that we are contemplating and what we have stated.
When you look out for 2023, we believe it will still be some <unk>.
Supply chain issues with respect to <unk>.
Battery cell availability as well as packs what we have stated previously is that we have enough cells.
To build approximately 2300 trucks for next year. So that sales volume has been secured we have some idea in terms of what our capex are going to be as well as operating expenses.
We have not heard that at this point, we feel confident that approximately <unk> 1 billion of liquidity will be able to address 2023 any capital that we raised in 2023 is really planning for 2024.
Okay. Thank you for that and then just.
The clarification on the shares which I don't think.
That guidance change, but that does.
I'm just reading the footnote it says.
It considers future purchase notices issued to the tumor.
And so that does kind of contemplate.
Further drawdown of the Iraq and then also.
What about the convert and how are you going to be accounting for that or is that sort of.
Converted or how should we how are you going to handle that.
So with respect to drawdown <unk> have already anticipated that as we have suggested there can always be somewhat.
A lot of fluctuation depending on the stock price at that point, while we drawdown, but we make some general assumptions about what the stock price maybe during the period.
When it comes to convert when it happens and obviously, we will adjust the sheer numbers.
Okay. Thank.
Thank you.
Our next question is from Bill Peterson with Jpmorgan. Please proceed.
Yes.
Yes, hi, thanks for taking the questions.
I have some questions on the on the debt program and some of it's kind of more near term, but just wanted to get some understanding so.
I think last pretty mentioned, 98% uptime, you mentioned 93 for TTS side.
Can you provide some context around that I guess, how important is it just just for one hand.
And again I think at the Investor Day, you mentioned that.
I was going to be starting in April , but you Didnt mentioned that one year. So.
I guess, what I understand is the Hamburg are still on schedule for June he talks about seven plus I guess second quarters Im just trying to understand what.
The near term outlook looks like for the bed program and then what kind of.
Applications Drayage still interesting things like that nature.
Bill. Thank you great question.
Uptime is critical in any class eight uptime is critical as you know.
These are these are the machines that our customers based on our business on.
So you don't operate they don't make money.
And we are very pleased with the results of the pilots we've run so far.
With TTS.
<unk> and.
And others.
We have a lot going on on this front that we haven't.
We havent publicly disclosed we're working with lots of customers or dealers are working with lots of customers all dealers have trucks at this point.
And our running demos.
And working with customers. So the demand is pretty seismic.
If you can get somebody a zero emission trucks that is reliable and capable like ours is then everybody wants one.
And then it becomes a discussion about the terms.
At this point.
So we're very pleased with how we're doing so far as you saw in the video the feedback we're getting so far it's just tremendous.
These trucks are proving very reliable and very capable and the drivers love them.
In the case of TTS side, they've tested more trucks than anybody I know of more than 20 different zero emission trucks reduced emission trucks alternative fuel trucks that they have tested they say.
And as you saw the feedback in the video.
The leaders of <unk>.
That were interviewed on the video.
So that's the.
Lay of the land there.
And youll be hearing a lot more about more customers as we as we ramp up production and Theres a lot going on in this front right now.
But it does sound like some some demos either were pushed or pulled or whatever but.
Just two guys. It feels like at least based on what you said six weeks ago, some things have shifted.
No. We haven't we haven't stopped any demos, we haven't pulled any demos nothing has.
We havent now everything's going forward okay.
We will be able to share additional information, but I would say that we have actually expanded our demo and pilot testing.
Sure dramatically as I said.
R.
Our theaters have their own programs going right now in addition to our to our direct right.
Mark.
Okay.
I guess on the cost it's good to see the reiteration really for the full year, including including even the margin.
<unk>.
Considering for example, we have an inflationary assignment I assume the reiteration is largely because maybe some of the take or pay agreements you've had.
Some of the inventory you've collected thus far but I guess, how should we think about gross margin trajectory as we look into next year.
I wouldn't want to provide full guidance, but.
Given that D C battery price materials minerals, increasing.
How should we think about the impacts broadly from this sort of inflationary and supplies constrain environment as we look into next year.
And Bill is a challenge as you know.
Andy is somewhat premature in terms of exactly where we'll be for next year, but what we have guided is that when it comes to neglect right. There for 2023 by end of 2023, we plan to be in a positive gross profit margin territory.
We are working hard and we have line of sight as well as the visibility we have targets by components in categories, and we know we'll pull that lever.
As we've talked about a couple of the biggest challenging areas are with respect to battery cells.
And the pricing and raw materials related to that as well.
Components, and we'll have to see in the second half of the year.
How those shake out and whether there will be softening of demand with respect to sales and what kind of pricing pressure that we may see when it comes to raw materials.
And then what we will see when it comes to chip supply.
But we have stated and we haven't backed away at this point with respect to where we want to be by the end of 2023.
Okay. Thanks for the color.
Our next question is from Jeff Osborne with Cowen <unk> Company. Please proceed.
Hey, Good morning, guys had a couple of questions on the H VIP process.
Two orders you announced or both on your 10.
I guess as part of the small fleet small fleet provision is there any risk to the guidance that folks that might want more than 10 trucks and the ability to get funding.
For larger orders.
Yes, Jeff Great question.
As we said the total of the Hbf covered purchase orders, we've gotten so far 134.
That.
That's obviously a big number.
For the program.
And we're working on others, depending on how the program goes again this is completely under the control.
State officials in California.
But we have a lot of customers who are interested in taking advantage of it we're working with them.
Directly and we have a great team on this by the way and that's the reason why.
500 trucks, we're targeting to deliver this year up to 500 trucks.
We've got 134, so far that are covered by <unk>, that's pretty good I think.
No absolutely, but are any of the orders for individual fleet over 10 trucks.
I don't know the answer to that will check and see if we can get today as I said before we hang up your hang on.
No worries and then is there as we think about pricing are you pricing at one level in California, and perhaps a different level everywhere else just given california's anywhere between call it a 3rd% to 20% of that.
The guidance.
Yes, we're definitely looking at that and we should anticipate that there will be pricing for different.
Geography.
We have guided in our guidance of 300000, we can tell you that our.
Our actual pricing that we're realizing is higher than that.
Got it and the last one I had is just on the the 93% uptime could you share what the number one and two reasons for the downtime was 93 is obviously still a great number but I'm just curious like what the leading factors for downtime were and what youre doing to address those.
We have a parade of the downtime causes.
A number of factors.
I don't have the distribution in front of me.
But everybody is super pleased with the uptime.
No. It's the same customer that was highlighted in the video.
Hey, Jeff we want to make sure.
Yes.
We want assessment expectation, even towards diesel trucks, if youre, achieving uptime anywhere from 90% to 95 is actually pretty good. So while we are trying to improve our performance we want to make sure that we set the right expectations and that we are hitting the target that our customers are looking for.
Thanks, So much that's all I had I appreciate it.
Thanks, Jeff.
We have reached the end of our question and answer session I would like to turn the conference back over to management for closing comments.
Thank you for participating in our call and we will talk to you next quarter.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
Sure.
Okay.
Sure.
Okay.
Yes.