Q2 2022 Hyliion Holdings Corp Earnings Call
[music].
Good day, and thank you for standing by and welcome to the highly on second quarter 2022 earnings Conference call. At this time all participants are in a listen only mode. After the Speakers' prepared remarks, there will be a question and answer session.
If you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad I would now like to turn the conference call over to Adam Bresser highly ons senior director of F P and <unk> and Investor Relations. Please go ahead.
Thank you and good morning, everyone welcome to highly I'm Holdings second quarter 2022 earnings conference call on the call today are Thomas <unk>, Our Chief Executive Officer, and Sherri Baker, Our Chief Financial Officer, a slide presentation accompanies This conference call and is available on <unk> Investor Relations website at investors that highly.
On Dot com.
Please note that during today's call, we will make certain forward looking statements regarding the company's business outlook.
Forward looking statements are predictions projections and other statements that I 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 from the forward looking statements on this call.
For more information about factors that may cause the companys 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 are made you are cautioned not to put undue reliance on forward looking statements and we undertake no duty to update this information unless required by applicable law with that I'll turn the call over to Thomas.
Thank you Adam Hello, everyone. Thank you for joining us today.
When we last spoke with you it was from the advanced clean Transportation Expo in long Beach, one of our industry's largest trade shows we had a number of hypertrophic <unk> and hybrid trucks on display and we're able to meet with dozens of fleet operators suppliers investors and analysts where we gathered valuable insights on the industry trends and.
The evolving needs of our customers.
Additionally, during the conference we were able to host over 70 ride alongs in our hybrid truck ear ex.
The transportation and energy markets are changing rapidly and despite persistent macroeconomic headwinds hiring and remains poised to revolutionize the market for class eight semi trucks.
We are turning industry interest in our technology into orders and to date. We have received 200 orders backed by deposit to secure hybrid Truckee Rx production slots. Moreover, we remain on track and on schedule with our development and design verification milestones, including on road testing.
Importantly, we recently achieved a significant milestone in our hyper Truckee RF development by completing our first delivery of freight to one of the nation's largest retailers. The movement of freight was accomplished with an alpha version truck one of the early development trucks. This wasn't partnership with Green pass logistics, a hypertrophic <unk>.
<unk> Council member, who has placed an order for 50 hyper Truckee, our access and is an active adopter of our hybrid product. In addition yesterday afternoon, we released a video of Green past president sharing more and their experience with their shift towards electrification. Please go take a look.
In the second quarter as previously announced we formalize what has been a successful and productive collaboration with comments.
All of this collaboration is to optimize the Cummins natural gas engine as the generator for the hyper Truckee Rx powertrain.
This engine Leverages, a north American network of approximately 700 publicly available natural gas fueling stations.
Working together with the comments, we will pursue key environmental certifications for the natural gas engine that will serve as a range extender bright providing onboard power generation to recharge the hyper Truckee Rx is batteries.
As I mentioned earlier, we have secured orders backed by deposits for early production slots for 200 units of the hypertrophic <unk> 190 of these orders were placed by the end of the second quarter and another 10 of them were recently announced.
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 approximately 2000 units to date.
These orders and reservations remains subject to the Finalization of commercial terms.
In the second quarter as previously announced <unk> industries order 10 units of hypertrophy or X production slots. In addition to being a founding member of Helios Hypertrophic Innovation Council <unk> is a fully integrated north American supply chain solutions provider with a 90 year history and a fleet of more than.
4500 trucks.
And if I approaches sustainability from a strategic perspective, and their commitment to tracking and reducing greenhouse gas emissions make them a clear leader in the drive to zero emission transportation.
Also previously announced in the second quarter Wholesome U S. A global leader in innovative and sustainable building solutions with a focus on low carbon construction order 10 units of hyper Truckee Rx production slots.
They plan to utilize the hybrid Truckee Rx units in their Texas and Oklahoma operations.
In July we announced that grew on a hypertrophic innovation Council member ordered 10 units of hyper Truckee Rx production slots rune as a proponent of alternative fuels and was an early adopter of CMG fueled trucks. Their order came shortly after a visit to highly <unk> office in Austin, where they participated in our hypertrophy.
<unk> ride and drive experience.
We continue to hear positive feedback from our ride and drive events as well as some of the struggles that fleets are facing as they attempt to shift towards plug in electric vehicles.
This underscores the fact that fleets are in need of a practical and low operating cost solution like the hybrid truck erect that can ultimately offer a far superior emissions benefit.
Our orders to date represent approximately 2% of our current customers' fleet size and we expect to continue to increase our order count as we near the start of production.
At the same time building a backlog of reservations.
This reflects that our customers truly recognize the capabilities and value proposition of our technology.
On previous earnings calls, we have mentioned hypertrophic <unk> will qualify for zeb credits under carbs mandate for the Oems as well as the mandate for fleets as currently written.
We are pleased to announce that as currently drafted the recently announced inflation reduction Act will allow for a 30% tax credit are up to $40000 for all near zero and zero emission heavy duty vehicles, including the hyper Truckee Rx. This is a federal initiative, which means that vehicles deployed in any state will qualify.
We are excited to work with our elected officials as this bill makes its way through Congress.
This potential legislation will decrease the upfront vehicle cost of electric trucks, which is often one of the main hurdles fleet face when adopting new technology.
A reduced upfront costs, coupled with highly on low operating cost is a major win for fleets and our shift towards cleaner transportation.
Turning to updates on our hybrid product as.
As we have stated the highly on hybrid provides a great cost effective solution for customers, who want a greener alternative now without the financial commitment of a fully electric powertrain.
In Q2, we continued to ship more units to fleet and booked additional revenue while our second quarter revenue was down on a sequential basis. We are pleased to share that we have established a sales backlog of approximately $1 5 million and still plan to hit our revenue targets for this year.
Our sequential reduction in revenue from last quarter is primarily related to continued global supply chain disruptions.
It's typically around receiving trucks and being able to install our hybrid system.
We continue to target use cases that matched the performance characteristics of our hybrid solution such as areas with rolling in hilly terrain.
Also we continue to generate interest from fleets, who see our hybrid solution as a good fit for their broader ESG plans.
For the balance of the year, we will continue outfitting customer trucks with the hybrid product and we will explore the possibility of selling full trucks with our hybrid product installed as another path to market for the hybrid system.
While persistent and global supply disruptions can contribute to longer delivery times, we continue to work closely with our partners to secure the parts we need to fill orders.
With our current order book and sales pipeline, we remain confident in achieving our sales targets for 2022.
Turning to our hyper Truckee Rx milestones you can see that we continue to hit new development milestone on our hyper Truckee Rx.
Our growing team continues to work diligently through these milestones and this marks the third consecutive quarter. We have met the commercialization milestones laid out on our fourth quarter 2021 earnings call.
In the second quarter, we began the second phase of our hyper Truckee RF design verification process with the start of on road testing.
We remain on schedule to complete design verification, including initial controlled fleet trials and the start of winter testing by the end of this year.
As we've shared before our multi phased development program includes up to 1 million ton miles as we bring this product into production.
At the same time, we are pursuing final regulatory approvals with a goal of starting formal production late next year.
With that goal in mind, we continue to work closely with our suppliers to secure delivery of key components to reach our development and commercial milestones.
Looking further ahead, we will grow and evolve with the industry. We have designed our hyper truck product platform to be generator agnostic today.
We utilized natural gas in the future, we will transition to hydrogen when it is more readily available and economically viable for our customers our.
Our approach consists of three stages.
With our current natural gas engine, then shifts to a fuel agnostic generator that can run on both natural gas and hydrogen and eventually moves into a hydrogen fuel cell solution.
I know everyone is highly on shares my passion for our technology and my confidence in our commercialization and business development plans I look forward to updating you on our progress over the second half of the year with that I will turn the call over to Sherry. Thank you Thomas and good morning, everyone. I will now review our second quarter financial.
Highlights as Thomas mentioned, we continued to recognize revenue on our hybrid powertrain solution, which totaled $2 million in Q2 at the same time, we are investing in R&D to support our product development roadmap.
In Q2, R&D spend was roughly $20 million at $4 million sequentially and up nearly $7 million year over year.
SG&A spend which included the expansion of key infrastructure for our commercialization initiatives in operations was approximately $12 million in the second quarter at $2 million sequentially and up $2 million year over year.
Operating expenses for Q2 totaled approximately $32 million compared with $23 million in the year ago period, as we ramped up our product development.
Overall highly on reported a net loss of approximately $34 million for the second quarter compared with a net loss of $27 million in Q1, and a net loss of $23 million in Q2 of 2021.
Turning to the balance sheet. We ended the second quarter was $500 million available to fund our commercialization plans for both the hybrid and the hypertext ear ex this figure includes nearly $200 million in cash and cash equivalents of $190 million in short term investments and $111 million in long term investments.
Our short term and long term investments are high quality credit instruments with no maturities beyond 36 months and a weighted average maturity of 11 months across our portfolio.
Our long term investments are designed to preserve capital, while providing liquidity to meet the company's operating requirements turning now to our outlook.
For full year 2022, we expect our revenue to be in the range of 2 million to $3 million from hybrid sales and the potential sale of full trucks with our hybrid system installed.
Actual amount of revenue recognized will depend on the number of units, we sell full truck sales with hybrid and the mix of retrofit versus new installations.
Additionally, we are lowering our full year operating expenses to be between $130 million and 149, representing a 5 million reduction in our range. This is driven primarily due to timing associated with R&D cost to support the commercialization of the hypertrophic <unk> with no expected impact to that.
Commercialization milestones, we have laid out today.
Moreover, we expect to remain well capitalized through the key development milestones, we've discussed on todays call and outlined in today's presentation with that I will turn it back to Thomas for a few closing remarks.
Thank you Sherry the turmoil in the worlds energy markets underscores how the time for electrification and Decarbonization is now based on recent conversations and feedback from stakeholders and others interested in the de Carbonization journey. We have recently launched an educational video series to better inform everyone on the current.
And future of electrification, our first videos on our website and there will be more to come soon.
For those of you who don't have the opportunity to ask questions on todays call. We posted last Friday to collect questions. You may have this will give us a chance to address any additional questions that arent covered during today's Q&A, we will be posting a video with these answers on our social media shortly.
Lastly, I am excited to share that we will be hosting a virtual ride and drive event on September 13th for all investors and analysts who are interested.
During this call we will not only showcase what it's like driving the hybrid truck <unk> and how it compares to a diesel truck, but we will share more on our businesses go forward strategy.
And the next few weeks, we will share and linked to the event and we encourage all of you to join us for the video call.
The commercial vehicle industry is at an inflection point and early adopters of highly <unk> technology recognize our potential to transform the industry.
Our solution is innovative yet practical due to its ability to leverage existing and widespread infrastructure to offer lower cost of operation.
With that we will open the call to Q&A operator. Please go ahead.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Your first question comes from the line of Steven Fisher from UBS. Your line is open.
Great. Thanks, good morning, and congrats on hitting your commercialization.
<unk>.
Just on the hybrid you have a $1 $5 million backlog, what kind of visibility do you have for for Q3 and Q4 I know you reiterated the guidance. There is there any further kind of risk that those slipped a little bit more and what might it take to improve that certainty.
Thanks, Steve and yes. So first off we were excited to share the $1 5 million in backlog, while we did see sequential sequentially a dip in our revenue recognition for this past quarter I think that backlog shows that there is strong customer interest still in the product and you know a lot of the slip really just came from supply chain issues.
Specifically around availability of trucks and so we did have installs over scheduled for Q2 that are sent slipped into Q3, just because of truck availability. So we've got a high confidence that we'll be able to do those installs in Q3, and Q4 and that's why we feel confident with reiterating the $2 million to $3 million in overall yearly.
<unk>.
That's helpful. I mean, just to clarify I mean it has the.
Has the supply chain stabilized enough that you are now as of now.
Receiving all the components and everything you need to achieve that run rate.
Yes. So we are feeling good on our side in terms of the supply chain and a lot of that just came from having placed orders a while back and working closely with our supply base to actually get those components in and that's where our hyper truck development still stays on track with where we wanted it to be with the hybrid specifically really just came down to.
We were awaiting trucks to come in from fleets and so theres kind of two different aspects of this one is some of the fleets were working with were actually waiting for the trucks from the OEM. So they had placed brand new trucks and they're waiting for those to get delivered to then come to us to us install them to then ship them back. The other aspect is we actually had some fleets that.
Had placed hybrid orders and we're planning on doing up fits of existing trucks in their fleet, but they are just so busy on the logistics side that they couldnt down the trucks for a couple of weeks, while we do the install so so that was what also played into the reduction in revenue for this quarter, but we're working closely with those fleets and.
We feel confident that.
The two quarters ahead here, we will we'll be in good shape to be able to hit that total year target.
Okay, Great and then shifting gears over to the <unk> just curious if there's a particular catalyst point for bringing in a bigger wave of orders or converting.
Some of the.
The reservations you have into orders as it is.
<unk> that you need is it really just getting the production started late next year and kind of being proven out.
I'm curious in the near term over the next few quarters. Obviously, you had 10 additional orders in the quarter.
What's kind of the reasonable level to expect as we proceed here for the rest of the year and into next year are ahead of that commercialization.
Okay.
I'll start off with saying I mean, the goal going forward here is to continue to increase the demand of the hyper trucking continued to grow that backlog of both orders and reservations and to your question. I think there is a couple of different catalyst points. The first that we've already experienced is starting the actual ride and drives and that's when we really started the the orders.
Which just to reiterate in order is our commitment to our production slot, it's backed by a deposit and so we've booked out the first 200 of those the catalysts. There was really starting the ride and drive events with fleets letting them get in the truck can actually experience it firsthand and that's what ultimately stemmed.
Round of orders, we see another catalyst point when we actually go into fleet trials, which just as a reminder, later this year. The second half of this year, we will be launching controlled fleet trials and we will carry those through into next year expanding how many fleet trials are doing as we move into production I think that's going to be another catalyst for us as fleets get to really.
Run these trucks in their operations.
As we noted on this call we actually did our first freight delivery with Green path logistics this past quarter and then the other catalysts.
We obviously see is probably the largest one is actually moving this into production, which as a reminder, we will start in late 'twenty. Three so I think as we go through this journey will continue to look to grow that backlog and for different fleets just depending on what they are buying cycles are some are confident and ready to go just after a ride and drive and others are wanted to do it in trial.
Experience is and others want to see it in production first.
Okay. Thanks Thomas.
Your next question comes from the line of Bill Peterson from Jpmorgan. Your line is open.
Yes, hi, guys and thanks for taking my questions.
Just to see the hyper trucks you qualified for the.
The incentives under the inflation reduction Act I.
I guess as we look at the 2024 and beyond models, you should I guess, assuming you get up to the 40 K benefit.
But that said, there's a lot of other.
Truck companies will also benefit from that too. So wondering as we think about our models how should we think about pricing at this stage I mean, obviously theres been a lot of inflation until now so any sort of older models I'm not sure we should rely on but how should we think about pricing.
Obviously as it relates to the cost of ownership for your.
Your customers.
Yeah, Thanks, Bill and I guess that first we have not come out with formal MSRP guidance on the hybrid trucks system reason being is just over the last year, specifically, we've seen a lot of fluctuation in the market both from the supply market standpoint, we've seen drastic increases in just even diesel truck pricing.
Pretty substantial increases actually so so from that standpoint, we're looking at it closely we're working with the customers that are there.
We've announced orders with some reservations on to make sure that we're able to supply them a solution that works well for their operations works well from a T C O standpoint, but.
But ultimately as obviously.
Bringing forward the best return for our shareholders as well so.
With that being said, we the thing that we see as really positive with the the inflation reduction Act is ultimately it's going to decrease the upfront cost of the vehicle, which is great and one of the things that we reiterated in the past is our operating costs. Our actual running this truck in our fleet the cost of that operation is.
Less with our vehicle than it is with a conventional BV or it is with the conventional hydrogen fuel cell trucks. So if we can reduce that upfront cost and coupled with a lower operating cost that's a win win for our fleet.
Okay. Thanks for that color I wanted to ask about the relationship with Cummins on one hand, a few quarters ago, you announced that.
Cummins 15 meter would actually be a competitor.
Maybe with your hybrid on the other hand, you've now announced comments as you generate a partner.
I guess, how should we view this as an existing competitor or our collaborator, especially as it relates to hybrid and I guess are there other areas for further collaboration as we think about it.
Products things like agnostic or fuel cell.
Any update there would be helpful.
Sure. So I think you gave a good high level overview on a couple of quarters ago. We did express that we saw Cummins, new 15 liter as a competitive threat to the hybrid system and really just reducing the total market opportunity that we would go after with hybrid, but obviously, we've announced they are a strong partner with us collaborator with us on the hyper truck.
And we're really pleased to express that collaboration because I think it shows just the confidence they're bringing forward in the product line. It also increases our confidence levels as we go through the carb certification. So I think a lot of benefits that come from that ultimately as we go forward. We will continue to work with Cummins and look at what are other opportunities or what.
As we can collaborate.
Bill as you've as we've chatted about it as I know you know we've laid out a three step approach to ultimately get the company to a hydrogen based future.
The fuel agnostic solution as well as a fuel cell solution, which we plan on being able to share more as we go forward and you know well.
We'll look at we're looking at various partners are ways that we can bring those solutions to the market.
Thanks.
Okay.
Your next question comes from the line of Andre Shepard from Cantor Fitzgerald. Your line is open.
Hey, Thomas say, Terry Congrats on the quarter and thanks for taking my question.
I wanted to maybe ask about the <unk>.
The order book and the reservations right. So you've updated the backlog grew by.
<unk> if you include the.
The recent announcement from with one and so bringing the total to 200 orders and ended 2000 reservations.
Im just wondering can we get your thoughts is the expectation to convert all 200 orders and 2000 reservations or should we maybe conservatively assume that maybe some of those don't materialize I am just wondering if you could maybe help us try to quantify those.
Going forward.
Yes.
Sure. So on the order side. These are really commitments for production slots build slots of these trucks so from our end.
As we've shared already we're working towards a late 'twenty three launch these in.
As we've discussed as we go into 'twenty four we will have those those vehicles delivered back to the fleets in the early part of 'twenty four so late 'twenty three started deliveries rolling into the early 'twenty four time frame.
For the reservation. So those are really indications from fleets of their interest levels of how many units they want to be adopting into their operations.
Those milestones I mentioned before when talking about with Steve about what are some of the key catalysts that we should be looking at those are the things fleets are going to be wanting to see so we do expect to be able to take some of those reservations and convert them into orders as we hit those different milestones and we already accomplished one of those we had announcement around Monet.
Who had placed the reservation with US and then we were successfully able to shift some of those reservations over to orders just after even a ride and drive experience.
Got it okay.
That's very helpful. Thanks for that color Thomas and maybe to follow up on Bill's questions.
Regarding the <unk>.
Inflation reduction apps right I think it's great that the <unk> will qualify for that 30% tax credit.
Do you have a sense of when you might be able to provide.
Asp's for the <unk>.
I'm wondering if with this tax credit.
Did they become obviously they become more competitive.
Are they.
Still competitive with traditional diesel counterparts, I'm, just wondering if any plans and providing those asp's or any additional comments that you can share there. Thank you.
Sure. So we do envision being able to supply more as we go forward on that end, but ultimately just the changes that have happened in supply chain as of recent and even the changes in cost of fuel as of recent we've seen natural gas stay pretty stable in terms of actual pump pricing, we've seen diesel skyrocket right.
If we look at the last year, we've probably seen.
Doubling maybe even close to a tripling of of diesel pricing and so we're really looking at this and looking at it from a standpoint of we understand our fleets were working with want to see a strong <unk> model around the product they want to make sure that it works from a cost standpoint, and their operations and we're targeting being able to provide that to them.
But we also want to make sure that we're setting the pricing accordingly, accordingly for our business model just as we look at what are the Cogs and what are the benefits, we're able to supply to the fleets and making sure. There's a strong return for highly on that end as well.
Got it okay. Thanks, Thomas and maybe sorry, one last one if I may in regards to the continued supply chain disruptions right. Those are affecting not just highly in but those are industries industrywide at a global scale I'm just wondering.
Do you expect those to continue and if so.
What kind of impact might that have on the orders and the reservations.
We look to 2023, thank you.
So we're hopeful that it is going to ease up I don't think we've seen it yet though on the supply chain side of things.
It's still a I think everyone's being affected by it not just highly on by any means I think to our advantage what are what's working out well is a few quarters ago, we really buckled down and looking at what do we need over the years add from a supply basis, specifically as we go through the hybrid Truckee Rx development cycle, and we've been working with those <unk>.
Players for a while now to make sure that we're able to obtain and secure those components and that's why you've seen us for three quarters now consecutively, we've been able to.
Hit what we told you we were going to do on the hyper truck development and we have strong confidence in the continued plan forward on that development cycle. So.
Huge props to our supply chain team on just working closely with the supply base.
Wonderful. Thanks, so much Thomas congrats on the quarter I'll pass it on thank you.
Your next question comes from the line of Jason <unk> from Barclays. Your line is open.
Hey team.
Hey, guys, if there's background noise here.
I wanted to follow up on the hybrid comment this quarter.
I think I heard it but I just wanted to confirm the holdups or really just on truck availability nothing on your material or installed.
Install process and then as I look at the revenue you've done to date about 500000, and then your backlog backlog of about $1 5 million. It seems like the low end of that guidance range is kind of best case scenario.
And I think about that right.
Yeah. So I'll take the first part and then Sherry can sure. So the first part is really yes. It is driven by truck availability, we obviously at our own supply hurdles on just components, but we've been working through those but the biggest driver was truck availability and getting those in from fleets. That's what also has stemmed us saying well, maybe we will supply the entire vehicle.
As well to a fleet just to help break down that barrier.
But sure do you want to take the second part sure and so I think youre going to see a combination of two things one youll see not only the backlog of our system installations, but also a portion of that will include full truck sales with our system installed. So the exact mix of that revenue is going to be really dependent on their truck availability not only.
The OEM, but the customer availability that that Thomas has said, but given the line of sight that we have today, we still have confidence that we're going to be able to achieve that guidance range.
Understood and as we think about hybrid over the next.
Four to six quarters.
Have we seen any anybody cancel hybrid orders because of truck availability and Thomas to your point, maybe they don't want to idle their trucks for you to do the install.
Any sort of headwind there.
Yes, I think its more just been are pushing to the right. We have fleets that still remain very interested in it.
And they are working closely with the Oems that theyre getting trucks from and and then we're working closely with the fleet and in some instances directly with the OEM. So I'd say, it's more just shifts to the right and that's why we felt confident in this call coming out and just sharing some more of the backlog we have been able to establish on the hybrid product because I think that that showcases theres fleets.
There that are interested in taking delivery, we just need to work on.
And actually getting them installed and back in the fleet hands.
Yes, okay understood.
And I guess Sherri.
Yeah, just financial questions or it may be for Thomas as well, but as we think of good to see Opex in control as we think about.
Are you guys will exit the year from a head count perspective.
Sort of expect patient should investors have about head count growth.
Next year kind of versus the exit rate this year.
No. That's a great question. So we will continue to invest in head count for the balance of the year and the majority of the head count that we're going to be adding is really in the engineering group. So that we can really complete our product development roadmap and timelines that we've talked about but our expectation would be that as we are starting to exit the year that we will start to <unk>.
Latin out that head count because we believe that we will have the appropriate level not only from a back office perspective, but also from a product development perspective, So I would anticipate that we will start flattening out as we as we start to exit the year.
Understood very helpful.
One more if I could just sneak it in on hyper truck.
A few questions Thomas maybe what what keeps you up at night.
In terms of the milestones from here to Sop in 'twenty three.
It sounds like there's not going to be really neat need for design changes or anything like that so what are sort of the biggest risk factors in your mind and then when I think about the 200 units reservation slots.
Is the expectation of kind of convert those into sales call. It 12 months after SLP and you talk about truck availability on the hybrid side, how is truck availability on a hybrid truck side for this initial 200 units.
Yeah. Thanks, Jason So a couple of different parts there so.
In terms of what keeps me up at night.
I Wouldnt say theres, a theres anything that's like jumping out as Oh. This is this has been a problem that we've been running into I mean, I think we're just going through normal development cycles of a new technology. It's been very impressed with what the team has been able to do on that and actually.
When <unk> got my CDL and did a couple of hundred mile trip in the truck and it was honestly a fantastic driving an unbelievable experience. So really pleased with how the development is going obviously, we do need to go through carb EPA and knits are certifications and those things move out of our control a little bit we have confidence that we're going to be passing them with with no issues.
But.
That's obviously just.
Barrier that we need to go through.
Check point, we need to go through.
In terms of the.
200 orders and just how we're looking at deploying those so we will start later in 'twenty three with the actual deployments and then our plan is to have those delivered back into fleets hands by the end of Q1 of 'twenty four so.
You had mentioned, maybe a 12 month period, where more thinking of shorter period that by Q1 of 'twenty for all those vehicles will be in operation and deployed with fleets.
And so all the trucks are available then like you feel confident in just the capacity to be able to meet that from a capacity standpoint.
We do so just to reiterate one other thing we shared so we're going to be going to market with the peterbilt chassis.
And we've been working very closely with peterbilt and have confidence in the delivery schedule of those 200 trucks, we've been working with them on kind of when we need to be having the orders placed in order to get the build slot secured and we believe we have the right amount of time in between now and when we need the trucks that there won't be any issues, but.
Our relationship with Peterbilt has been going very well and they've been a great group to collaborate with as we're bringing this technology to market.
Okay very good thanks, thanks, guys.
And again, if you would like to ask a question Press Star then the number one on your telephone keypad.
Our next question comes from the line of Mark Delaney from Goldman Sachs. Your line is open.
Yes, hi, good morning. Thank you very much for taking the question Thomas you spoke about potentially offering the hybrid by signing a full truck.
There'll be a change in approach I was hoping you can elaborate on why you may make that change and talk about some of the mechanics of how you could potentially implement that.
Yeah, absolutely so to add a little more color. So what we shared in the past is the hybrid is a up fit add onto an existing truck were brand new vehicle one of the things. We're pursuing is actually bundling the entire vehicle. So the truck from the OEM plus our hybrid system and theyre not supplying that full package to the fleet.
A couple of reasons and benefits that actually come from doing this one.
One is that as we source brand new trucks from the Oems, if we actually spec the truck appropriately as it comes off the production line. It can actually reduce our installed cost and thus improve the margins on the vehicle. So obviously, that's a big positive. The other is just as we've been going through the supply chain issues with fleets and having.
Issues arise, where theyre not able to down trucks for a period of time in order for us to do the install we're looking at it as if we can supply them the entire asset that allows them to move quicker and ultimately ought to be able to deploy hybrid systems more efficiently and effectively into fleets operation. So that's what really stemmed it.
Makes sense.
Could you speak to potential timing of when that may be available and how many trucking providers ECP could potentially partner with.
Well thanks for that question.
One that we are on our hybrid system. We are OEM agnostic. So that is a system that we are able to install on any of the Oems that is one component. This year, we expect to do probably low single digits from a full truck perspective, but again I'm going to go back to the earlier comment that.
The mix of our revenue is still really dependent on the availability of the trucks at the Oems.
Understood. Thank you.
And your final question comes from the line of Noel Parks from Chihuahua Brothers investment Research. Your line is open.
Hi, good morning.
Good morning.
I was interested in.
The innovation Council and some of the.
Announcements you've made about orders have been from members of the Council I was just wondering.
You know how far you are along with commitments from the council and for those who.
Haven't yet made commitments if there are any.
Are they envisioning.
Any.
Designer or function functional refinements before they're there you know.
For their specific businesses before they are ready to commit.
Sure. So just as a little background for those listening in the hybrid truck Innovation Council was a group of fleet, So we announced probably approaching a year ago or so now and our goal with them was really have them be a part of the development cycle, along with us have them experience the vehicles.
For others to really give us feedback on what they like or what areas do we have to improve and we've done exactly that that the.
Innovation Council members have come down to Austin, they've gone for ride and drives in the trucks. They have given us that feedback and thats been invaluable as we've gone through this development cycle as you've noted some of them have made the jump to actually placing orders for production slots specifically some of the recent ones around you ruin NFIB Green path logistics.
Or all our members in the council some of the other council members.
Chose to a lot of excitement in the technology, but they want to get through some of those later milestones that we had mentioned before they want to go through fleet trials. They want to get initial trucks into their operations and run them firsthand and so we plan on executing upon that control fleet trials to start later this year as mentioned before and carry into next year. So.
We look to continue to expand the relationship with the innovation Council member.
Members as well as we've been really pleased to see strong interest coming in from fleets outside of that council as well.
Great and.
Just a question I know, it's super early to even have a feel for this but with the.
Inflation.
Okay.
Act.
The tax credit.
Sure.
Okay.
Are there any concerns about maybe that coming onboard and it actually delaying.
People, making orders just as they are awaiting sort of more details on the rule, making process and so forth or do you think that just is going to be sort of incorporated in <unk>.
Overall pricing negotiations going forward anyway.
So I think from a timing standpoint from what we're seeing it's going to line up well because as a reminder, the hybrid truck goes into production in late 'twenty. Three so that's one fleets will actually be purchasing the vehicles. So.
I think it is going to timing wise be fine. What we see is is more of an accelerant as opposed to potentially a slowdown in the reason being is just if we reduce that upfront purchase cost of the fleet that allows them to jump in more easily or quickly into the product and we.
We see one of the as mentioned before one of the really benefits with our product is our low operating cost so reducing the upfront cost helps a bunch providing them the low operating cost because of the low cost natural gas.
It's a big win for the fleets.
Okay, great. Thanks, a lot.
Thank you.
And this concludes the question and answer portion of today's call. At this time I would like to turn the conference over to highly on CEO Thomas Healey for closing remarks.
Thank you everyone for joining today's call as you heard throughout the call. There's a lot of exciting developments and milestones that are being achieved within highly on and we foresee a lot more excitement in the near future here and so with that we will be hosting a call on September 13th that's going to be a called a virtual ride and drive event.
We encourage everyone to please dial in and join us for that we're not only going to be showcasing the operations here in Austin showcasing the truck and what it's like from an experience standpoint, as well as sharing more on the business strategy on a go forward basis. So please join in September 13th in the weeks ahead here will be sharing a link so you can dial in with.
Have a great rest of your week.
Ladies and gentlemen, this does conclude today's conference call you may all disconnect and have a wonderful day.
Please wait the conference will begin shortly.
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