Q1 2022 Hyliion Holdings Corp Earnings Call
Ladies and gentlemen, thank you for standing by today's conference will begin momentarily.
Until that time your lines will again be placed on music hold thank you for your patience.
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Good day and thank you for standing by welcome to the Hawaiian Holdings first quarter 2022 earnings Conference call. At this time all participants are in a listen only mode. After the Speakers' prepared remarks, there'll be a question and answer session.
Now I'd like to turn the conference over to Adam brother, I Leon's director of S. P. N a investor Relations. Please go ahead.
Thank you and good morning, everyone.
Come to high land Holdings first quarter 2022 earnings conference call on the call.
Today, our commentary, our Chief Executive Officer, and Sherri Baker, our Chief Financial Officer a.
A slide presentation that accompanies this conference call is available on hiring on the Investor Relations website at investors don't highly on Dot com.
Please note that during today's call, we will make certain forward looking statements regarding the company's business outlook.
Looking statements are predictions projections and other statements about anticipated events that are based on current expectations and assumptions and as such are subject to risks and uncertainties.
Many factors could cause actual results to differ materially.
<unk> looking statements on this call for more information about factors that may cause the company's results to differ materially from such forward looking statements. Please refer to our earnings press release as well as our filings with the Securities and Exchange Commission.
Forward looking statements speak only as of the date they're made.
So as not to put undue reliance on forward looking statements and we undertake no duty to update this information unless required by applicable law.
That I will turn the call over to Thomas Thank you, Adam and Hello, everyone. Thank you for joining US today, it's an exciting week for highly and we are at the Act Expo in long Beach, California, one of the largest trade shows in the industry.
We have a number of hyper truck the ore and hybrid trucks on display so that fleet suppliers investors and analysts can you get a look at our technology.
We are also hosting right along events at the Exco for those interested in getting to experience the hyper truck the Rx firsthand.
Now shifting into some updates on highly on.
The trucking industry is increasingly recognizing highly on potential to revolutionize the market for class eight semi truck as reflected in our initial sales and positive stakeholder feedback.
Electrification is happening, but we are hearing some fleets about the challenges they encounter in the transition to plug in technology.
However, we are pleased to hear that the hydro truck <unk> released most of those concerns specifically around range anxiety infrastructure.
Quarter for highly on the recent expansion of our sales force has paid immediate dividends as we are.
Execute upon our plans in the first quarter, we secured a 170 orders for production thoughts of our hybrid truck <unk> and have received nearly two we continued our deployment efforts.
For our hybrid powertrain system.
Our sales.
Shifting to some updates on the hyper truck the Rx development.
First we are happy to share that we are on track with our previously communicated.
Patrick solution into production.
Late 2023.
We have the initial production thoughts already committed and we continue to see strong interest from fleets.
They are seeing obligation of up to 1000 miles.
Sales between refueling stops.
That compares with current EV plug a solution that can only travel about 100 to two.
Gas infrastructure of about 700.
North America.
Sure.
Turning to slide five you can see that we continue to make progress with our development milestone vehicle build of trucks that we will.
This build leverages the performance.
With data and invaluable stakeholder feedback from our initial demo unit.
I'm pleased to announce.
Thank you <unk> unit as previously discussed we expect to build at least 10 more units to further test before we begin product validation multi phase development program timeline.
<unk> includes design verification.
Okay inclusive of summer and winter season, and the accumulation of up to $1 million.
The initial in field testing.
Later, this year, which will allow us to closely monitor performance.
Looking ahead.
In the first half of 2023.
For the completion of product validation and for continuously.
Alright, we will seek final certification from carb EPA and data.
Okay and can you late 2023.
As we head into production one of the important factors. We are focusing on is making sure. Our electric vehicle can assist with obtaining carb mandated credits for both the fleet and the Oems.
On previous earnings calls, we have mentioned, how our launch hypertrophy Rx will qualify for 75% of a <unk> credit under the carb advanced clean truck ruling.
And what percentage of the vehicles they ship needs to be the qualifying.
This past quarter Carb released draft language for a new mandate.
Steve or ACF with a goal of achieving a zero emission truck and bus fleet in California.
This initiative actually puts.
What vehicles they can purchase.
I'm happy to share that as the mandate as currently written in Thailand.
As hyper Trekkie Rx will qualify for full credits for the fleet.
We see this.
Mandated to adopt technology like ours.
As I mentioned earlier, we have secured orders for early production slots for a total of 170 units.
It's about 100 units, we mentioned on our last earnings call.
This reflects not only our R&D achievements, but also the success of our ongoing ride and drive events. In addition to the orders we have received reservations for nearly 2000 units to date. These.
These orders and reservations remains subject to the Finalization of commercial terms, but all of the orders are backed by deposits.
In February we secured a 50 unit order for Green path logistics, one of our hyper truck innovation Council members and a customer of our hybrid product.
As they only operate alternative fuel vehicles and ship for some of the largest logistics companies, including Amazon UBS and the United States Postal service.
First deploy hypertrophy Rx units and controlled fleet trials later.
March <unk> transport Julien.
And then on placing orders to secure production slots.
Which in their fleet had also previously.
You see it placed a 40 unit reservations for the hyper truck here at <unk>.
After their ride and drive experience, though they converted 20 of those 40 reservations into orders to secure production slots.
Based in Laredo, Texas, Monet, as a dedicated provider servicing the 48 contiguous states and an early adopter of Green technology.
We want to share some additional color on the feedback we received from fleet at a ride and drive events.
Overall.
Need of a solution like the hyper truck the ore that can offer a low cost of operation leverage existing <unk> station and ultimately offer a far superior emissions benefit.
We expect to increase our order count as we near production while at the same time building a backlog of reservations, which reflect how our customers recognize the capabilities and value proposition of our technology.
Now shifting to some updates on our hybrid product.
Highly on hybrid products provides a great cost effective entry solution for customers, who want a greener alternative now, but may not be ready to commit to a fully electric powertrain.
Over the first quarter, we continued to ship more units and have booked additional revenue.
Targeted use cases with Matt.
Actual performance needs to our hybrid.
Solution.
Areas with hilly terrain that need additional power assist our we continue to see an influx of interest.
Interest with fleet, who wants to embark on a greener path forward and see our hybrid solution is a positive step in their ESG efforts.
We view these customers as a strong potential not only for our hybrid solution, but ultimately as long term highly on customers as they evolve and invest more meaningfully and electrification.
On the manifest.
We will supply disruptions are continuing to lengthen delivery time, but we continue to work closely with our partners to secure the parts we need to fulfill these orders.
With our current order book and sales pipeline, we remain confident in achieving our sales targets for 2022. Looking ahead, we are continuously assessing opportunities to create shareholder value. While the majority of our organization is focused on commercializing our current product roadmap.
See opportunities to expand our offerings into new products and Adjacencies.
We have designed our hyper truck product platform to be generator agnostic today, we utilized natural gas when the time is right. We will transition into hydrogen we've showcased a three stage approach. It starts with our current natural gas engine, then shifts to a fuel agnostic generator that can run on both natural gas and hydrogen.
And eventually.
Solution.
Additionally, our proprietary software solutions are a primary competitive differentiator and have the potential new revenue streams.
For now of course, our primary focus continues to be getting our first hyper Truckee Rx units on the road as quickly and safely as possible.
We continue to move aggressively with our commercialization and business development plan to build on our recent run of success.
Moreover, 2022 should be an instrumental year for our product development and continued product shipment as we evolve our technology solution to address the transportation sector environmental impact.
With that I will turn the call over to Sherri.
Thank you Thomas and good morning, everyone I will now review, our first quarter financial highlights.
As Tommy mentioned, we continue to recognize revenue on our hybrid powertrain installation, which totaled 340000 in Q1 and represents a 70% increase in revenue versus prior quarter.
At the same time, we are investing in R&D to support our product development roadmap in Q1, R&D spend was $15 8 million down $1 6 million sequentially and up $6 5 million year over year.
SG&A spend which included the expansion of key infrastructure for our commercialization initiatives and operation with $9 8 million in the first quarter.
$6 million sequentially, and up $2 $4 million year over year.
Operating expenses for Q1 totaled $25 6 million compared with $16 7 million in the year ago period, as our product development and company and share gain momentum.
Overall highly <unk> reported a net loss from operations at $27 4 million for the first quarter compared with a net loss from operations at $29 1 million in Q4, and a net loss from operations of 16 great.
$7 million in Q1 of 2021.
Turning to the balance sheet, we ended the first quarter with over $527 million available to fund our commercialization plans for both the hybrid and the hypertrophic <unk>. This figure includes $227 $1 million in cash and cash in February .
$134 2 million in short term investments and $166 million in long term investments.
Our short term and long term investments are high quality credit instrument with no maturities beyond 36 months and a weighted average maturity of 13 months across our portfolio.
Our long term investments are designed to preserve capital, while providing liquidity to meet the company's operating requirement.
Turning now to our outlook.
As discussed on our last earnings call for full year 2022, we reiterate our revenue guidance in the range of 2 million to $3 million in hybrid sales. The actual amount of revenue recognized will depend on the number of unity <unk> and the mix of retrofit versus new installations, we still expect full year operating expenses.
To be between $135 million and $145 million driven primarily by an increase in R&D costs to support commercialization at the hybrid.
Lastly, we expect to remain well capitalized to the key development miles.
And outlined in today's presentation.
With that I'll turn it back to Thomas <unk>.
Thanks, Jerry I'd like to.
To leave you with five key thoughts.
First the time for electrification is now.
To transform the industry.
Our market is large and growing.
Based on <unk> research estimates.
Okay.
There are 8 million class eight commercial vehicles currently in operation globally that the active class eight.
Commercial vehicle population will grow by approximately 452022 to 2020.
Third our solution is.
We leverage existing infrastructure.
Offer a lower cost of operation and qualify for credits today.
For the Oems and for the fleets and we do all this while bringing forward a net negative capable emission solution.
Fourth drivers and fleets want our solution feedback.
Feedback at our.
That can refuel at about 10% to 15 minutes and they have been impressed with how smooth and quiet they have EBIT express they see it as well.
Alright to better retain drivers.
Our long term growth strategy is a logical approach on how.
We can leverage what is it.
Available today to deliver a superior.
All of that over time into a hydrogen.
Howard range extender.
Because of all of these reasons, we are very bullish on our Q&A operator, if you would like to ask a question.
Followed by the number one on your telephone.
Key part.
If you.
Press Star one again, you will exit the queue.
Foster.
Our first question comes from Bill Peterson with Jpmorgan. Your line is open.
Yes, hi, thanks for taking my questions I guess I guess.
And ample supply.
And so forth.
I'm curious on the fuel elastic or fuel cell do you anticipate at least beginning work on this before commercialization of the Rx in the second half of 2023.
Thanks, Bill and look forward to seeing yet.
Got it out tomorrow and to answer the question about going into hydrogen in the future we've already actually begun development on those solutions specifically around the Felix.
Large differentiator for us now.
In terms of actually releasing both appealing not thick in the fuel cell solution to market. It will happen. After after the hydro Truckee Rx the natural gas Ice's solution. So.
It will have a staged rollout, but it is something that we are already well into development with.
Okay. Thanks for that and we'll look forward to hearing more of US here at the conference.
I guess on the highest.
Hybrid I know youre reiterating the the <unk>.
Revenue targets for this year, but I think in the past you've mentioned that there is any.
Competition, including from some natural gas powertrains I'm wondering how we should think about that business in terms of repeat orders or how we should think about the growth of that as we look beyond this year.
So we have seen continued interest growing in it but as we mentioned in the past earnings call. We do see the release of the 15 liter Cummins engine as a competitive threat, but we have seen is just a overall market shift to wanting to move to full electric vehicles, whereas the hybrid.
Where it is more of a step into electrification, but it doesn't give you quite the benefits of a full electric drive vehicle now with that said there are some pretty strong benefits that come from hybrid it's easy step into getting into electric and a relatively low cost step into electric and Thats where were seeing some fleets are willing to make the jump and say, yes I want to.
Start this journey of electrification hybrid makes a lot of sense for me I get some strong ESG benefits from it I can get some fuel savings benefit from it in the right training and Thats where were seeing some of this early adoption. As you mentioned, we have seen some repeat orders companies like Wegmans Green path logistics detmar have placed repeat orders.
Orders and some others on it and.
So we continue to deliver the hybrid solution, but ultimately we do see the hypertrophy Rx as being the long term backbone solution for Eylea.
Yes understood. Thanks, I'll jump back in the queue. Thank you.
We look forward to seeing you in the coming days.
Yes, it should be a fun Joe.
Our next question comes from Mark Delaney with Goldman Sachs. Your line is open.
I understand if youre seeing any added interest from fleets and the ear X given the carb ruling that you spoke about and especially being in California. This week.
Again, I'm wondering what you've maybe seen from from fleets may Sir.
Absolutely so interest in the hybrid truck is continuing to grow in the ride and drive events for us have been extremely valuable fleets get to see the vehicle experience. It firsthand play that's what's driving some of these orders coming in as well as the reservations.
Just to add some more color to us theres really.
Two different mandates that are coming out right now we've previously spoken about ACP, which is a mandate on the Oems.
We're going to qualify for 75% of <unk> credit and.
The new mandate is this ACF ruling, which is actually a mandate being put directly on the fleets themselves and this is specifying what types of vehicles, while mix of vehicles, they're going to need to adopt going forward and we're going to be able to qualify for full credit under the ACF rolling as it's written today, So I definitely see this as something that.
Going to help us pulling customer interest we have already seen the AC app side of things or the ICT side of things on the Oems that has been a strong pull for our products and we envision ACF is going to do the exact same thing. So I think <unk> see this as a very practical solution for the long haul space to move into electrification and.
And the fact that we're able to get them. The same credits as ABB plug in vehicle, that's a huge win for us.
That's helpful. And then second question, hoping to understand how youre thinking about managing the supply chain related to the <unk>.
So to what extent this highly on need to lock in parse supply for the Rx now, perhaps reflecting our current costs are which maybe are somewhat elevated but would maybe give you some visibility and some supply.
Assurances.
Or do you have the opportunity of maybe waiting and hoping that.
<unk> cost for the supply chain comes down.
So we've taken the approach at this stage of let's make sure we lock in supply that we need based on the timelines are ahead of us so for the 2022 milestones and going into 2023, we've already started locking down all the critical components and that includes the trucks that we're going to need the electrification components, we need really all of the key.
Supply chain.
Specs, we've already placed those orders and we have strong relationships with the suppliers and we're working with them to make sure that it does not add any impacts to the timeline that we've laid out and we feel pretty confident on that and then so.
The near term this year going into next year, we've really lock that in and then obviously, we're looking at how the supply chain markets are evolving and making sure that it doesn't add.
Further delays in the timeline.
Understood. Thank you.
Our next question comes from Andres Sheppard with Cantor Fitzgerald.
Your line is open.
Hi, Good morning, Thomas Good morning, Sharon Congrats on the quarter and thanks for taking our questions.
Quick question for me in terms of the revenue guidance, which remains unchanged I'm wondering should we account for some seasonality throughout the next quarters or should we kind of thinking more is ramping up.
Q4, a little bit more back loaded.
Yes, that's a great question and thank you for that so yes, we fully expect that our revenue will be ramping up as we're moving throughout the year just keep in mind in Q4, you do have some some holidays and some shut downtime that youll have that will affect that a little bit differently in Q4 versus Q3, but based off of the full year guidance you should expect it to.
Increased sequentially as we're moving throughout the year.
Got it thank Sharon maybe one quick follow up.
Following up in terms of the.
The supply shortages, which again are affecting every industry not just you guys.
Can you give us a little more granularity in terms of what that impact to delivery might look like.
Is that.
Based on this.
This year next year.
And which components specifically the ones that are being mostly constrained.
Thanks.
We see the supply chain hurdles is kind of twofold. It's one is actually getting delivery of the vehicles for the OEM and so as we look at the hybrid system, we've actually experienced some of the truck deliveries from the various Oems in the industry is getting industry getting pushed out to the right and then ultimately that's causing us to have to push out our delivery of our hybrid.
System to the right because we obviously need a truck to be able to install it on then the other aspect of this is actually getting some of the components that go in our system. So very similar to most.
Hi chain hurdles you can have 90% of your bill of material figured out or 95% and it's that last 5% that is.
The long pole in the tent.
We're seeing various components, whether it be wiring harnesses down to connectors electronic components that we've seen some push outs.
Timing of timing.
And ultimately we're working through that we have had to push some of our hybrid deliveries from one quarter to the next but through all of this we're continuing to make deliveries of it and we're working on it very closely to make sure that we have line of sight to supply in the quarter is that.
Got it thanks, very much Thomas I'll pass it on.
Again, if you would like to ask a question Press Star One our next question comes from Brian <unk>.
Johnson with Barclays. Your line is open.
Yes.
1000, a little bit late I apologize if I missed this just I'll go back to the transcript but.
It's not lost on us.
I assume your fleet customers that diesel has gone from $3 to $5 65 to $6 a gallon Barclays.
Even more in California.
So what does that meant for interest in the hybrid or in the hyper tracking I guess question number one natural gas prices have been volatile but.
How is the PTO economics change between diesel and Nat gas either for the hybrid or are accurate for the hybrid.
Since the economic.
Great.
And that's in the back half.
Bruce's diesel fuel and the economics of the hybrid truck.
Thanks, Brian really great question, because obviously as diesel fuel prices increase the demand for alternative fuel vehicles for fuel saving technologies greatly increases and we're seeing that right fleets are looking at it let's take the hypertrophic first for example, natural gas prices while the actual.
Commodity price of natural gas has fluctuated the actual pump prices have not fluctuated all that much and the reason for this is the actual commodity of natural gas and like the dollar per gallon. The actual Nat gas pricing is only about maybe 20% to 30% of that overall pricing. So while we do see some fluctuations in the actual commodity.
The price that's not seeing a big impact on the pump pricing, which is great for us because fleets are looking at this value proposition and saying, okay. I can pull into a diesel station and pay five or $6, a gallon or I can go to a natural gas station and pay around $1 per gallon and that just helps drive that Tcl economics of the hydro trucks. So is strong.
Benefits there from having a higher diesel pricing and then that same thing goes true for the hybrid solution as well in the right range, we're able to apply fuel.
Fuel saving assessed to the truck and with higher diesel prices I mean, theres greater savings for the fleet. So similarly, we see that strong pulpwood.
And kind of a follow on question, maybe something that we kicked around out in long beach for my colleague Jason won't be at 17.
California in some circles as getting some deep for the renewable fuel standard.
Thats, pushing biodiesel and taking.
Particular, corn oil palm oil you name it.
The pressure on those pricing you have similar pressures in Europe . So do you see any sort of either whether it's going to be a regulatory change or fleet owners looking at this and say look I believe in cutting CMT, but.
Taking cooking oil away from third world countries isn't the best way to do it even if it helps meet mine carbon targets and therefore paying more interest in this solution potentially be the solution.
Sure.
Can't comment too much on the renewable fuel standards with biodiesel. It's just not something that we've spent a ton of time looking at but because obviously our focus has been more on the natural gas side, but the RIN credits. The lcs's credits that are going towards Nat gas and specifically renewable natural gas are holding strong and ultimately there is some.
Pretty interesting that's coming out around renewable natural gas and kind of the benefits ahead. This past year, we actually saw that over half of the fuel sold at natural gas stations already came from renewable natural gas and probably one of the most exciting things is that there are just as many RMG capturing facilities in development or is there already.
In existence, and so that just conceptually, we're going to see probably around a doubling of renewable natural gas available in the not too distant future and so I think fleets are well aware of this and one of the things that we've heard time and time again as we've met with these fleets as they are all set for many of them are assessed is going to.
Net zero emissions profiles.
And ultimately if we can deliver them a solution that actually is below zero emissions from their other parts of their business. So that's that's resonated very well with fleets and they see this as a cause.
Cost effective viable way to actually move to an electric solution that has net negative capable emissions profile.
Great and then just as a follow up I might note that if a company is worried about the S part of ESG.
Impact using.
To make your sales pitch for you, but using renewable gas, which takes methane from the food production system out of the atmosphere versus diverting foodstuffs into making by DSO, which seem to be something they should think about that on the <unk> part of their ESG scores.
Yes.
The best way I can explain it is like you are taking you're taking what would've been pollution that would've gone up into the atmosphere and we're now going to use that pollution in order to charge our battery pack of itself.
As you are alluding to it can drive that really positive emissions benefit.
Okay. Thank you.
Our final question comes from the line of Avi.
Charles <unk> with UBS Your line is open.
Hey, good morning, guys.
Good morning.
Just wanted to hear.
Can you speak a little bit about the over level overall level of confidence in the timeline around the commercialization for the hydro truck.
Late 'twenty three seems like it should be achievable, given where you have trucks, but as we saw through this past winter on winter testing wasn't able to be completed so had to be pushed out.
To the end of this year, even some relatively small delays can be magnified at this stage. So just wondering how you think all of that.
Thanks Avi.
Where we stand today strong confidence on the timeline and I think the fact that we've been able to reiterate this timeline over the last couple of earnings calls alludes.
So that we've got a strong confidence in it as we mentioned on this call. We've completed the first of our design verification vehicle builds which these are ultimately the ones that are going to be going through that winter testing. So we are in good shape on that and to make sure that these vehicles can go through the appropriate testing we've already got.
Up on test tracks up in Michigan, which is great to see and so strong confidence that we'll be able to at the timing of bulk.
Both the design verification and product validation and then ultimately that leaves us with the hurdles of getting through NIST carb and the EPA certification, which we're already working on and then that puts us on track to launching production in late 'twenty or the ability to get trucks for the hyper truckload how are lead times changing.
There may be any chance for new partnerships.
On the strategy there.
Sure.
Okay, Great point, because we actually expect that to.
<unk> three is going to be another record year of close to a record year for trucks right. I mean, the demand is through the roof right now fleets are when they are actually placing truck orders theyre having to wait.
Over a year in order to get new trucks. So we do see this as something that's a big impact on the industry now one of the things we've already done as we mentioned earlier today was we've placed all of the trucks, we need for 2022, and then similarly going into 'twenty three we've been looking at the timelines and making sure that we place trucks on order to be able to accomplish that.
Yes.
But ultimately as we've mentioned before we're working with Peterbilt on the launch of these trucks and they've done a great group to work with in order to ensure these truck delivery times.
And we see that we're going to be able to lineup just fine for those late 'twenty three deliveries. So ultimately you're in and the nail on the head of truck delivery timing has been a hurdle for the industry fleets just can't get trucks right now, but we've been able to place these orders long enough in advance.
Working closely with peterbilt on it in order to ensure that the end of the question and answer session I will turn the call back over to Thomas for closing remarks.
Well. Thank you all for joining R. R.
Earnings call as I mentioned, leading into this call. This week as the ATT Expo at in long Beach, California will be out there we have trucks on display offering.
Right and drive.
<unk> for those who are interested and I want to thank some of those who are on the call today, Bill Andreas and Jason who are going to be joining us out there at the conference and it's an exciting time for highly on and we look forward to for your joining us on our next earnings call.
Thank you Eric.
This concludes today's conference call you may now disconnect.
Okay.
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Yes.