Nikola Corporation Q1 2023 Earnings Call
[music].
Good morning, and welcome Kidney Cola Corporation first quarter 2023 earnings and business update call. Currently all participants are in a listen only mode.
We'll begin today's call with a short video presentation, followed by managements prepared remarks, a brief question and answer session will follow the formal prepared remarks, if anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad as a reminder, this conference is being.
We recorded it is my pleasure to introduce Bill and send you from Investor relations. Thank.
Thank you operator, and good morning, everyone welcome to <unk> corporations first quarter 2023 earnings and business update call. Joining me today are Michael <unk>, Chief Executive Officer, Stacy Hysteric, Chief Financial Officer, and Kerry Mendez President of energy.
A press release detailing our financial and business results was distributed earlier. This morning. The release can be found on the Investor Relations section of our website along with presentation slides accompanying today's call. Today's discussions include references to non-GAAP measures. These measures are reconciled to the most comparable U S. GAAP.
<unk> and can be found at the <unk>.
And of the Q1 earnings press release, we issued today.
Days discussions also include forward looking statements about our future expectations and plans actual results may differ materially from those stated and some factors that could cause actual results to differ are also explained at the end of today's earnings press release and on page two of our earnings call deck and also in.
Our filings with the SEC.
Forward looking statements speak only as of the date on which they are made you are cautioned not to put undue reliance on forward looking statements.
After the video presentation, Michael and Stacy will give their prepared remarks, followed by analyst Q&A, We will conclude with questions from our shareholders. Please begin video presentation. Thank you.
Thank you.
Today in Southern California, We had a wonderful Scott Thanks, Paul and good morning, everybody I had the opportunity to give the first keynote speech this morning.
And then have the opportunity to show the Governor of California power.
California has an enormous impact on the U S. But also on the west.
Okay.
Nicola share a common vision.
Nearing solutions for zero emission.
Okay.
In a time of uncertainty and challenges you have to focus on what you are really good at.
We've got the right product at the right time.
You've taken diesel trucks off the road, we've got a solution for that.
We've got the fuel cell trucks, we've got the mobile <unk> and we've got the supply.
Okay.
And this thing gets up to speed.
Nicholas business model depends on changing the world. This is not a side hustle for US. This is the business. We're in so I think it's absolutely focused on what the customer wants and that's what we're delivering.
Yes.
Thank you Dylan and good morning, everyone again, welcome to our first quarter 2023 earnings call.
During the call we will update you on our truck programs and energy business and of course, Stacy will cover our financials.
Before jumping into this.
I want to let you know one thing.
Nicola is the real deal.
We have real trucks that are being ordered and delivered and operating and customer fleets now.
We have world class software and technology, and elegant zero emissions product Decarbonizing, the high polluting commercial transportation markets.
We are building a real hydrogen business via our highlight brands with solutions for the entire ecosystem.
Production supply and refueling.
We recently signed a deal with both Terra for up to 50 refueling stations.
Advancing progress with highly mobile fuel us.
And I'm moving forward on the Phoenix hydrogen hop in Arizona.
We are doing these things at a time when governments are offering incentives for transitioning to zero emissions now and.
And introducing regulations, requiring a transition in the near future.
We think we are the best positioned company to spearhead the zero emission transition.
And accelerates the hydrogen economy with our trucks consuming our hydrogen fuel on the highway.
So with that in mind, let's get started.
The last few years with Nikola we have been laying a foundation.
This foundation allows us to gain many skiffs.
Great technology, great products.
Great people.
And a bit of humility as we hit some speed bumps along the way.
But the strong spirit of the company remained constant.
With this foundation and spirit comes one zinc.
Focus.
Focus on our mission to pioneer solutions for a zero emissions to woods.
Let me laid out very plainly the future of Nicola is hydrogen.
Hydrogen with our highlight energy branch too.
Together with our class eight hydrogen fuel cell truck.
And for more efficiency.
Integrated autonomous technology software and vehicle controls and our purpose built trucks.
Our market.
North America that's it.
With that focus comes important decisions.
Part of the plan for the new and refocused Nicola is to be geographically focused on the North American market.
The United States is a leader in the energy transition with revolutionary Federal incentives such as the inflation reduction Act and many states like California, New Jersey, and New York offering both truck and fueling incentives.
California is also mandating zero emissions vehicles through the advanced clean fleet through establishing targets for drayage fleets government fleets and fleets over 50 vehicles.
Beginning January 1st 2024.
Only zero emission drayage trucks May register and the Cop online system.
Or drayage trucks, entering seaports and intermodal rail yards.
What would be required to be zero emissions by 2035.
As part of this transition we are selling our stake in the European joint venture to <unk>.
This will reduce nikolas cash spent and capital commitments and allow us to dedicate our resources to the task at hand in North America.
<unk> is and will remain an important partner and key supplier for Nikola.
The vehicle will also maintain a substantial stake in Nikola and continue to cheer for us.
Our long term success.
We are grateful for the partnership and expertise we have gained.
And look forward to continuing our work with them.
As we get our fuel cell truck ready for production, we are posting production of our battery electric truck.
The battery electric truck is a great product.
Its development has allowed us to create many of the critical components and software systems that.
And that we can apply to the hydrogen fuel cell truck.
We have sufficient inventory of battery electric trucks for our customers.
When production resumes. This July the battery electric will be built to order at our facility in Coolidge, Arizona to better align with our capital allocation plans and improve working capital.
I am confident to say, we have best in class products and no. Other company can do what we have set out to do.
This direction is exciting for all of US we are creating an ecosystem that will allow nikolas customers to own a hydrogen fuel cell zero emission trucks.
And with highlight fueled that truck was readily available hydrogen.
It has already started the U S and Canada have put themselves on the forefront of hydrogen production.
And the countries and states or provinces have created incentives to make it possible to dedicate all of our efforts to capture a sizable share of the commercial trucking market.
As well as a quickly growing hydrogen infrastructure business.
The upside potential on both businesses is virtually.
Unlimited.
And we are well on our way to making it happen.
Nikola fuel cell trucks and heavy testing.
Along with higher hydrogen mobile fuel us.
All of which will be available to customers later this year.
Economists technology with our plus AI partner is being tested today on a battery electric truck and will be available next year.
Availability on the fuel cell following shortly afterward.
It is truly amazing to see what this technology does to the trucking experience.
Improving safety easing stress for the driver and adding even more energy efficiency to each trip.
We have made changes to our business as well we have a new CFO a revised sales organization more focused board.
And have transitioned out or promoted the right people to the right positions.
We have new partnerships and have continued progress with our previously announced partners.
On the energy side, especially recently.
Recently announcing our joint development with Terra to create the largest north American open network of commercial hydrogen refueling stations.
Yeah.
And we have a stronger sales commercial and service network with new dealerships and salespeople eager to sell our trucks and energy solutions.
Our employees and team members, including everyone listening in on this call.
Our focus.
We are all in making this happen together.
Does this mean.
The future looks bright if we do as we say build and sell trucks continue constructing the hydro business and drive costs down.
There is no doubt we can be successful.
Beginning with our energy business.
On may 2nd we announced the execution of definite documentation with Terra power sub.
A subsidiary of EQT, one of the largest clean infrastructure funds to develop the refueling infrastructure required to support nikolas hydrogen fuel cell electric vehicles.
We plan to develop up to 50 stations with both Terra throughout North America over the next five years.
Tara intends to supply the capital for the station cost as well as operating the stations.
Nicola will provide the hydrogen fuel and the technical expertise for the station construction.
And the stations I expect it to provide both hydrogen refueling and electric charging for class eight trucks, we have made significant progress on the Phoenix hydrogen hub.
Recently, receiving unanimous approval from the city of Buckeye on our General plan Amendment and rezoning application.
We continue to progress on ordering long lead time equipment.
In addition to the progress made on the Phoenix hydrogen hub.
Continue to work on completing phase two of the department of Energy loan program office application process.
And worked closely with for <unk> future industry on the co development of large scale U S green hydrogen production facilities.
Cross North America.
We believe these two strategic partnerships along with many others announced over the last several months.
Further validates our business strategy to be capital efficient and proof the demand for financial partners and the build out of our hydrogen refueling ecosystem.
The most critical components for early adoption, we believe our flexible fueling solutions.
We believe mobile fueling will be an important part of our business moving forward.
We look to provide customers with refueling while at the same time remaining capital efficient and matching fuel cell truck network fueling demand.
We are pleased to announce to date, we have commissioned for hyla hydrogen mobile fuel us.
During the quarter, we announced our partnership with chart industry, which includes collaboration for the development of new mobile users and modular hydrogen refueling stations.
We have also signed agreements for additional mobile fuel us from other third party partners, including Taylor Wharton.
Mobile fueling solutions can be rapidly deployed in any geography, and with lower capital requirements than permanent station infrastructure.
Mobile is seamless and modulus stations allow us to match the hydrogen fueling requirements and geographies as trucks are introduced into the area.
In our hydrogen fuel cell program, we remain on track to deliver trucks to customers later this year.
We are currently building 10 gamma trucks Gamat trucks will be used for customer pilot testing and to finalize vehicle validation as of today. We have completed the first two trucks and are in the process of finishing the next four trucks the.
The remaining four will be built and commissioned by the end of June .
Pilot fleets include BRG, Walmart Lindy and AGR trucking.
Leading carrier for the United States Postal service, who recently announced an order for 50 trucks.
The first production units are anticipated to be built in July .
We believe Nicola will be the only company with a production class eight hydrogen fuel cell truck available for purchase this year.
Our dealers have already received more than 100 orders for the fuel cell truck from end customers.
Our commercial team is working diligently to secure additional orders and fill our remaining backlog for 2023 and 2024.
The hydrogen fuel cell truck and our energy business will be long term value creation opportunities for Nicola.
We believe we are the best positioned company to take advantage of the massive incentives provided by state and federal governments and can take a significant market share as a first mover in the class eight zero emissions vehicle market.
We are also beginning to build sales momentum with a battery electric program. During the first quarter. We produced 63 battery electric trucks, delivering 31 to dealers.
In the quarter, we achieved 33 retail sales.
<unk> increase from 2022.
Our revamped commercial and sales organization and strength of the dealer network have improved the go to market strategy and we believe we will continue to improve and customer delivery numbers.
This will be made possible through new financing options and providing customers with fully integrated mobility solutions.
We believe these positive changes will continue to compound and build momentum.
We look to reduce inventory and move trucks into customer hands.
And we will continue to provide these battery electric trucks to customers on a build to order basis.
In Coolidge, we continued with progress on the Phase II Assembly expansion Hall, which will be complete by the end of Q2.
At the end of May we will temporarily post production and Coolidge as we convert the assembly line to accommodate both the battery electric and hydrogen fuel cell trucks.
We will resume production in July as we begin fuel cell production.
We also plan to begin battery module and pack manufacturing in Coolidge by July 2023.
And we'll begin Bosch fuel cell power module Assembly in Coolidge by December 2023.
I will now pass it onto our new CFO Stacey.
I am happy to have Stacy join me on the leadership team. She has great knowledge of our business and a passion for the company is evident in her work.
She is off to a flying start and will be a great partner with me and the rest of the leadership team.
Thank you Michael and good morning, everyone I would like to begin by saying I'm thrilled to be nickel as new CFO and I'm thankful for your support.
My love for years with Nicola I have the opportunity to develop a deep understanding of the company's operations and financial by joining the leadership team alongside Michael and our board I'm excited to be in a position to make a positive impact on our strategy of our business with a greater focus on financial discipline.
I believe Nikola is the leader in class eight zero emission transportation and hydrogen economy and can capitalize on the virtually unlimited opportunities in the marketplace.
To get that opportunity, we need to navigate a highly challenging macro environment.
Make the right business decision and unlock the long term value of our business and the positive impact Nicola can have on the world.
My number one goal is to align our spend with our strategic priorities.
Focusing on fuel cell hydrogen and the North American market.
It is critical that we optimize our cost structure.
So our cash burn and achieved positive EBITDA by 2025.
Now, let's review our Q1 results.
During the first quarter, we delivered 31 trucks to dealers and recognized total revenue of $11 1 million.
Cost of revenues for the quarter was $44 million generating a gross loss of approximately $32 9 million or a negative 296% versus nearly negative 700% in Q4.
This is a substantial improvement.
They're able to higher delivery volumes lower inventory costs, specifically related to transitioning out of cypress.
Improved inbound freight costs as we manage inventory receipts, while the pivot our manufacturing strategy for battery electric to build to order.
And improvements in plant in labor overhead cost structure.
R&D expenses came in below our Q1 guidance and below Q4 levels at $64 4 million.
Including $9 1 million in stock based compensation.
SG&A expenses came in at the midpoint of our guidance and significantly below Q4 levels.
Totaling $53 7 million, including $14 7 million of stock based compensation.
With the new executive compensation plan and cancellation of the remaining market based or a few award.
Back to the stock compensation run rate to be substantially lower moving forward at roughly $16 million per quarter in the second half of 2023.
GAAP net loss for the first quarter totaled $169 1 million.
And on a non-GAAP basis totaled $143 6 million.
GAAP net loss per share was 31 basic and diluted and non-GAAP basis was 26 basic and diluted.
Turning to the balance sheet.
We ended the quarter with approximately $206 3 million in cash, including $85 2 million of restricted cash.
Not included in our Q1 cash balance is $96 5 million of net proceeds received from the follow on in direct offerings, which closed in April .
Texas Capital is approximately 796 million and this comprised off.
$206 3 million of cash on the balance sheet, including restricted cash.
$243 million available on <unk>.
$200 million available on ATM.
$50 million available of convertible debt.
And 9% to $6 5 million of net proceeds received in April from the follow on offering we want to be clear much of this capital availability is dependent upon additional shares been authorized by our stockholders in June .
In registering the shares for the applicable agreements along with certain other contractual limitations and market conditions, including stock price.
In addition to facilities, we already have in place, we're vigilantly monitoring opportunities to raise capital, including monetizing the existing assets on our balance sheet.
At the end of the quarter.
Accounts receivable balance was approximately $27 6 million down by approximately $4 million from Q4, despite higher sales volume.
Through April we have been able to secure $20 million and floor plan facilities, resulting in our collections of $15 4 million.
We know it is important for our customers to have financing available and they're working hard to substantially improve our financing options.
On the dealer and retail site to enable sales and faster cash conversion.
At the end of Q1, we.
We held approximately $123 6 million in inventory flat versus Q4 levels.
This includes $80 million of finished and weapon inventory, including 152 battery electric trucks in Coolidge.
Now that we have sufficient stocked inventory, we are adjusting our manufacturing strategy from build to stock to build to order to improve cash burn and optimize working capital requirements by minimizing raw materials.
Capex for the first quarter totaled approximately $52 3 million and was predominantly spending kulich manufacturing facility expansion, which is now substantially complete.
Supplier parts tooling for the fuel cell trucks.
Hydrogen production equipment.
Hydrogen mobile <unk> and the fuel cell power module production line.
As Michael said earlier, we are exiting the JV, if alcoa in Europe , allowing us to exclusively focus on our most important market North America.
In exchange for our 50% stake in the JV tobacco pain, Nicola 35 million cash and delivered 20 million shares of our common stock back the Nikola.
By shifting our focus to the North American market, we expect to realize near term benefits consisting of savings from European development spend future.
Future JV contribution commitment.
The return of investments from tobacco and being able to utilize the 20 million shares for additional capital raise activities.
We see improved sales momentum from our new commercial team and remain focused on hitting our delivery numbers this year.
The product mix may shift from battery electric and hydrogen fuel cell as we see strong demand for that technology.
For full year 2023 guidance and it's too early in the year to update as we're working through cost center alignment and prioritization.
At this time full year 2023 guidance remains unchanged from the last call.
We do have a line of sight to reduce capex by at least $20 million by optimizing our manufacturing footprint and being capital assertion on their energy infrastructure.
We're also taking a critical look at our operating expenses and we will provide an update on our Q2 call in August .
In Q2, we expect to deliver 30 to 60 battery electric trucks for revenues of $10 $5 million to $21 million and.
And generate gross margins of negative 240%, 230%.
We expect gross margins to continue to improve as the scale or volume throughout the year once production commences.
We expect the gross margin on the hydrogen fuel cell trucks to be substantially and immediately superior to the battery electric.
Due to higher ASP and lower bill of material costs.
Our goal is to reach gross margin breakeven point by the end of 2024.
Our estimated R&D for Q2 is in the range of $75 million to $80 million, including 8 million and stock compensation.
2023, R&D expenses are frontloaded due to the beta fuel cell built in Q1 gamma fuel so build in Q2 and fuel cell validation activities ahead of launch.
We expect our R&D run rate to drop by approximately 30% in the second half of the year SG&A will be in the range of 60 to 65 million, including $20 million in stock based compensation expenses.
Stock compensation will be higher than Q2 due to the cancellation of the remaining market based stock awards for executives of $7 2 million.
And impact of executive retirement of $3 3 million.
We anticipate Q2 capex to be 45 million.
<unk> really focused on the modification of the production line and courage.
To accommodate the hydrogen fuel cell truck the fuel cell power module Assembly line and fuel cell supplier parts tooling.
Going forward, we expect our capex spending to reduce significantly as.
We will have the footprint and capacity to build trucks with minimal additional investment.
In Q2, we expect the weighted average shares outstanding for the quarter to be approximately $687 million.
And the total shares outstanding to be approximately $698 5 million.
Our redefined focus with Nicola will allow us a much lower cash burn as we realign our cost structure.
In 2022, our cash burn was approximately $200 million per quarter.
And $204 million in Q1 of 2023.
Q1, cash burn was inflated by almost $40 million of costs related to cyber separations and sovereign.
This level of cash burn is not sustainable for our business and we're looking at every option for reductions in spending.
We are already beginning to see some progress was April cash burn coming in at $46 million I am personally driving renewed focus on aggressive management of all three pillars of working capital.
Cost reductions.
Specifically payables inventory procurement and management and of course cash collection.
Already have a line of sight to achieve approximately 150 million cash burn per quarter and they are working intensely to reduce quarterly cash burn further with targets of $120 million by the end of 2023 and $200 million and 2024.
This will take focus to find further opportunities to improve our cash position and show tangible progress towards reaching profitability.
Now I will pass it back to Michael for closing remarks.
Thank you Stacey letting.
Let me summarize our priorities and how this focus will make nikola better.
We will focus on our hydrogen refueling business and the fuel cell truck in North America.
This is where we have clear competitive advantages.
We are the first in the market with our hydrogen fuel cell truck and have a leading role with our energy infrastructure.
We will change our model to build to order for the battery electric truck and focus on autonomous technologies, which helped drive us and fleets.
We expect this focus will reduce our cash burn and in turn had nikola achieve profitability sooner.
By focusing on our strengths, we will continue to increase our sales momentum in both hydrogen fuel cell and battery electric trucks and capture a meaningful share of the market.
This concludes our prepared remarks, operator, please open the line for analyst questions.
Thank you if he would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue.
For participants using speaker equipment that may be necessary to pick up your handset before pressing the star teams.
Our first question is from Jeff Kauffman with vertical research partners. Please proceed.
Thank you very much and thank you for that very detailed rundown.
Stacy first of all congratulations on your promotion and best of luck to you.
I just wanted to follow up on your comment on a line of sight to 150 million cash burn per quarter.
<unk> hundred 25 at the end of the year.
Could you give us a better feel for what types of programs.
Have visibility on.
Kind of do we is it mostly second half where we're going to see some of these adjustments or is it going to be more of a constant reengineering.
Throughout this year and the beginning of next year.
Thanks, Jeff and thank you I appreciate the kind words, it's good to be here I'm excited obviously would have a lot of work to do.
So something in talking about the cash burn as I mentioned, we already have made some progress coming in at $45 million in April and that's comparatively if you look at our monthly average in Q1, which was $75 million, what we're doing much better still got a lot of work to do to get to the level of 100 million.
My ultimate goal here and together it will be really a combination of things we need to improve truck economics for one reduced opex limit Capex, which we've mentioned briefly in the call and of course manage working capital.
<unk> will be critical as we ramp up our fuel cells. So a lot of that will come in in the second half of 2023 once they get into fuel cell production really roughly half of our cash burn will be attributable to working capital. So if we can manage that more effectively by managing our inventory switching to built to order, making sure we are.
Financing available that we can drastically improve it.
Okay. Thank you and then just one follow up and this is more for the energy business.
With the announcements that have been made moving with the mobile fuel or <unk> and the partnership with full Terra how does this change the economics of the energy business does it should we just think of the Voltaire deal as nickel and not having to put out the money for.
Capital for these.
Stations in terms of the energy model, how do these recent announcements change anything or do they at all.
Yes, Jeff It's karri Mendes here President of the Energy Division and Great question I think we have a very detailed economic model. When we look at the ownership business center negotiating with our partners.
The bolter deal actually Youre, absolutely right to release, a significant capital burden for US building these patients and partnering with them actually enables us to get a first mover advantage in this whole ecosystem building this patients having the mobile theaters.
As an energy person with a lot of experience.
Getting a first mover advantage of infrastructure. It gives you a leg up on the competition plain and simple. So ultra has been a great partner that the economics of how we model. This.
Don't change.
What we negotiated with them as a fair competitive rates, we understand that we are first movers and are partnering with us So I'd say.
Go forward.
Looking at our model this release, the capital burden and the economics don't don't change.
Okay, well, congratulations and thank you very much.
Our next question is from Bill Peterson with Jpmorgan. Please proceed.
Yeah, Hi, thanks for taking my questions.
Sydney last week, Michael So that <unk> shown both your trucks and presumably having a lot of conversations with fleets and then if.
You are now with our gas clean fleets.
Theres more fixed come in.
Especially in California, but I guess my question is were working where are most of your discussions focused on coming out of that conference where people really gravitating more towards the fuel cell or our bedroom, particularly talking about maybe newer fleets that you don't have current arrangements with.
Yeah. Thanks Bill for your question. So first of all I mean export what was a very big show last week I mean, it was really overwhelmed I think there were 11000 people and we had a very very good opportunity to discuss all kinds of business topics with our customers.
See a couple of very important trend. So first of all I mean is there.
Emission mobility is coming right in the sticks out of California. So obvious so the level of interest was much much higher than a year before in terms of battery electric truck and few et cetera, we see still both very relevant for our customers, but it depends on the applications right. So like the ports in California, They prefer a battery.
Trick truck and we are happy to continue to produce a battery electric truck right, while we pulse in our production, but we are happy to build this truck going forward at the same time I will say and that's why I think Nikola is uniquely positioned there is a very strong interest in the few et cetera, right. The range of 500 miles is very competitive as best in class.
And who else is out there in terms of a fuel cell truck now I mean, we produce the fuel cell truck now in July So my takeaway from from exports. Yes. There is interest in the battery electric truck, especially for port, but overall the topic is really hydrogen and what Gary just mentioned on the infrastructure that is where most customers.
We'll go and I think youll see it in the numbers I mean, we have 140 firm orders from customers to our dealers.
And we're very positively surprised about that because it shows and actually this number is going up kind of on a daily basis, I mean I got to the next order. This morning. So it shows that people want to have this truck now and don't wait. So I think we see a clear trend in terms of fuel cell and hydrogen.
Okay. Thanks for that my second question is for safety. So you've been in the role here for some period of time I guess, how do you think about the options you have for raising capital and in particular preferences. I think you mentioned that there may be some options and other things you could do.
Please.
I don't have the balance sheet, if you could just maybe elaborate on that.
What options you have from here given by the way, it's executing for cash burn come down the disruptions you have going forward.
Yeah. Thank you Bill.
Good question, obviously capital races.
A very high on the priority life care, along with limiting the cash burn for me.
And we all know market conditions are very tough right now, but we remain positive and we have demonstrated the ability to raise capital in Q1, we raised $120 million to the existing instruments and also we went out right after the quarter end.
And raised an additional $100 million through the follow on offering in August they can in a difficult market not a lot of companies are able to pull that off so where I remain cautiously optimistic.
As far as the remaining access to capital on existing facilities with covered is about $500 million and as you mentioned, but also exploring other opportunities to raise money, including monetizing the assets that we have if.
If you look at our balance sheet would have a lot of their balance sheet in terms of.
PP&E land buildings and things of that nature as well as IP. So we're working a massive parallel to make sure we always have options available.
And we will continue to access capital as needed while cutting costs.
Thank you.
Our next question is from Dillon Cumming with Morgan Stanley . Please proceed.
Hey, good morning. Thanks for the question wanted to go back to one of the ones that was asked earlier in terms of just I guess it ties into the cash burn, but Stacy you made a comment in terms of still being confident or so targeting a positive EBITDA breakeven EBITDA fell by 125 as you go into the cost structure right and I think this ties into some of the comments you made on the cash burn, but what level of truck production.
And our deliveries I guess would support that I'll come at this point relative to some of your cost reduction actions.
Yeah. Thank you for your question. So the way we think about it one now this will realign things.
Everything I just talked about will have a better path to get there to be profitable on an EBITDA level by 'twenty five step one is when you can make money on the truck.
And to do that when you reduce our bom cost.
And primarily on the fuel cells, where we have a lot more opportunity to reduce costs. There's a lot less of the bottleneck field trial is coming from battery pack and battery cell and then Chris our sales volumes. So while we haven't given guidance for 'twenty four we expect in 'twenty four we at least needs to be able to sell from anywhere from 1000 1500 truck.
Depending on the mix to breakeven.
And therefore, you would need to close to double in 2025 for us to be able to cover our current level of cash flow back again level mentioned that we're working on a cash effect that will come down as well, but that's currently where we are.
Okay sorry.
Go ahead.
No.
The only other thing I wanted to launch it obviously on the fuel cell, we have a lot of opportunity with our pricing. So it's not just reducing the bomb where we have a very specific bomb reductions that we're working on but also the pricing given what Michael talked about we're going to be first to market, but we'll have a little bit more pricing power there.
And we'll be able to get better margins on the fuel cell.
Okay, Great. That's super helpful. Thank you and then if I could ask a quick question on the Iveco partnership as well curious flush out I guess, what the end game looks like in terms of that collaboration with them I think so.
And in the press release, you are planning to license the S way kind of framework and technology from them going forward.
Does I guess the dissolution of the JV opens the door to potentially test out new platforms for hydrogen fuel cell I'll, probably go back I'm asking in the context of the market is solving some concerns that were under a lot of capital. We're truck is the right model for the U S or not so just be curious on your thoughts there.
Yes, Thanks, Dan let me take that Michael here. So first of all the partnership with Iveco will obviously continue I mean do you think it will stay.
Shareholder of Nikola in a meaningful way we from the Nikola side will continue to have a supply agreement with Iveco. So the cab and also the extra so in a way that partnership continues but in a more focused way and why does this make so much sense for both partners.
It's much better that Iveco industrial business in Europe , and we focus here on North America and with all the positive momentum we have on the fuel cell truck I also need my engineers here focusing on the fuel cell trucks. So we will actually help both companies to implement much faster because let me tell you in terms of operational experience, sometimes it's not a good idea to have like.
Engineers on the other side of the World was nine hour time difference so implementation will be much faster in terms of your cap over great point and also their export was very good.
Feedback from me. So there are many people who love the Cape over in particular once there are in the truck is it an unusual type over yes, absolutely and not everybody loves it but once people are in their people actually delighted. They see also our infotainment. So I'm very very positive about the Cabo, but yes, you will find one or two customers and they say look we.
Don't like it and that's okay.
Got it very helpful. Thanks, guys.
Our next question is from Mike <unk> with D. A Davidson. Please proceed.
Good morning, and thanks for taking my question and Michael It was great to meet you last week and that bodes well.
I wanted to ask about the.
The Highland mobile fewer business.
I guess the altera deal.
They'll be paying for the for the stations.
<unk> Terrace Bay count with the mobile pillars are you paying for those for customers to use as either a branch or an area, where theres no stations being developed as I kind of walk to show a lot of tanks.
They are coming down, but it's still a few million dollars it seems per.
For those units.
I'm curious who is going to be paying for the.
For each of those.
Was there.
Yeah. Thanks, Mike It's Terry Mendes again good question.
And again I think this is one area, where nickel is leading the ecosystem here with these mobile theaters. The first one that came out in December we developed our own seven.
700, <unk> pressure, which enables a faster refueling time, we've got three more now that we've developed support her own and then we've got another 16 or so coming for the rest of this year and then more next year and those are from third party suppliers some of which we've mentioned in the press release and Michael talked about chart industries being one Taylor Wharton being another.
These will be liquid mobile pillars, we've got good terms with each one of those suppliers.
In terms of being able to lease those from them and the value of these partnerships as they are keen to see greater use of these mobile theaters, so theyre being really good partners and I think we've.
Thats good terms with each of them I think the next question then as this business scales up I think it is a really profitable business I think to have these mobile theorist because patients take a couple of years to build these mobile peelers come on stream a lot faster. So we are also looking at okay. What's the partnership model for those and.
I think especially since the inflation reduction act that you have seen the bolter announcement and others. There is a lot of people with solid balance sheets capital looking to get into this space take advantage of the various incentives and the fact that we're bringing demand to the market first off and hydrogen so I'm confident that with partners like chart Taylor Wharton as well as others that are looking to get into that.
Space will have similar solutions for <unk> four are spreading the capital cost and the risk.
Okay, just to clarify the customer is not going to be paying the person.
Regarding the vehicle.
It was not paying for the mobile fewer at their location.
Yes, no. Good clarification question at the end of the day that mobile theater has a cost as part of dispensing hydrogen. So we will be building it into our economics are just like a station in mobile theaters temporary station in a way and so the customer ultimately the sales price we have will reflect that.
Okay Outstanding and then I wanted to clarify the plans for the trade Bev going forward.
Mentioned.
This is a build to order basis, I guess I'm not sure what that what that what.
What that means when you no longer have dealer inventories once the current ones are completed.
You have to kind of shutdown production entirely of Coolidge once you changeover to the fuel cell.
Make any small orders, but we have enough volume to keep.
One line running with the trade that I'm just kind of curious.
How many trade areas are in the mix going forward and how that might affect your production process.
Yes, thanks for bringing this up Michael you're happy to clarify this I mean first of all we report battery electric production at the end of May why do we do that because we launched a fuel cell truck in July and with all the experience. We have it's important that the factory line has time for training preparation and Thats exactly what we do at the same time, we have inventory.
On our site to be precise 152 trucks. So there is inventory now we wanted to obviously move to our dealers and then through to end customers. So therefore, we will post a battery electric production and then once we see then orders coming through we will resume battery electric production, but I think it's also fair to say the level of inventory is.
A little higher than we would like to have it. So I mean, we basically have two advantage out of this production pause, but again, we will continue to produce a battery electric truck once we have the order level.
Just like just to clarify if someone orders two trucks to their list of Chuck's, let's say.
Next year.
I have to do you have to shut everything down is just to make those two trucks will they be will be inserted into the lineup of the fuel cell trucks, and how will it help us once you're out of inventory and you have to build some more.
Yeah, no great point, but it's very clear so we have the capabilities to produce both trucks on our lines. So battery electric truck and fuel cell truck can be produced on exactly the same manufacturing line that is actually also what we set up so whatever the customer wants to have let's say at the end of.
This year or next year, we will be able to produce but we will do it on a broader basis, because obviously the working capital is high we need to bring this down optimized our cash burn what we discussed but no very clear our production line can produce both trucks of battery electric and fuel cell truck.
I'll pass it along thanks, so much for the.
Commentary.
Our next question is from Winnie Dong with Deutsche Bank. Please proceed.
Hi, Thanks, so much for taking my questions.
First question is on the Q1 results.
In providing a bridge to.
The Q1 gross margin.
Improved quite a bit sequentially, but what are the drivers for the more negative margin versus the guidance expectation.
And then if you can also reiterate sort of the bridge to the full year gross margin guidance.
Thanks.
Okay.
Nice to talk to you again good question on the margin. So I think we've been very open that our margins, obviously will only improve as the volumes improve right. We have a high level of fixed costs and when do you think that gets more trucks.
Finally to be able to cover that cost that's number one and that's partly why we're a little bit below where we want to be also cypress operations have contributed pretty significantly to the negative margin in Q4, and Q1 and we've talked about that so as we're able to move our operations added.
Cypress.
<unk> established a manufacturing line and Coolidge, which is happening in July we'll be able to limit a lot of the labor and overhead that comes into manufacturing at back of the separate facility. So that's really the key here to get to the range of the gross margin as we have communicated for the rest of the year.
Got it thank you so much.
Then a follow up question on.
The VEB.
<unk> strategy is now built to order.
But we did see quite a bit of improvement.
In terms of retail deliveries from Dallas to Amtrust.
Maybe can you can you talk to us about.
Some observations that you've made.
In the end market. There is some it seems the encouraging signs that you know.
And customers are taking they took them every quarter.
Yes, thanks for bringing this up and happy to give some more color on this I mean first of all.
You are totally right I mean, we have seen an uptick on the retail side with 36 trucks being retailed in the quarter actually that's much more than we retailed in the total year 2022. So there there is momentum building.
A lot of things we have done I mean first of all we had some important changes on the dealer side and we have really active engaged dealers now in particular in California. They do a good job. Then also frankly speaking time is helping the more people we bring into the truck the more people like it right and experience like coming back to the Expo, we had 200 tests.
<unk> like within three days those things are helping a lot. So we see momentum on the sales side and of course I want to go direct because we have inventory available and Thats also a benefit I mean, having inventory in these days is a great thing because if people that are interested in zero emission mobility enough to wait 24 months.
That is not a good thing, but I think Nikola is probably the only one at the moment with inventory available while we want to bring it down very quickly in terms of financial aspect. It's also a benefit right. So I think we see good momentum and want to go much faster.
Yes.
Great. Thank you so much I'll.
I'll pass it on.
As a reminder, this star one on your telephone keypad, if he would like to ask a question.
Our next question is from Tyler <unk> with BTG. Please proceed.
Hi, everyone. Thanks for taking the question Michael I wanted to follow up on the <unk>.
You'll sell a vehicle as you look to roll that out.
More towards the end of this year and the order book continues to grow at a higher level. How are you thinking about prioritizing those orders, presumably as your order book continues to increase while youre trying to bring all of these pieces in house, just any way to think about that any more color there.
Sure, Greg Quintile or happy to add some color I mean first of all as we said in terms of the manufacturing line. We have total flexibility so whatever customers really want we will be able to produce it but what is very obvious.
It was confirmed last week, when we were all in California.
He is a strong trend in terms of the fuel cell truck and why is that first of all the range of the fuel cell truck is 500 miles.
Zero emission mobility truck can do 500 miles at the moment I think we have a unique selling point then the fueling time is only 20 minutes. So in an industry, where it's all about uptime that you have to drive the truck. It's a very big benefit and then what also obvious with everything being decided now in California.
Lot of people pay attention to that and it's really pushing people into the zero emission mobility. So thats why we think.
Fuel cell truck has much more potential going forward and Thats. Why this focus is also important for us North American market is very big fuel cell truck can play a big role there and also fair to say, we have a unique selling proposition because at the moment. We are the only ones in the market starting production in July so we feel very good about that.
And also it's our second track relaunch right I think we have demonstrated with a battery electric truck that we can develop manufacturing and manage to have a world class truck and how we do it. The second time. So we came back last year with a lot of optimism in terms of the fuel cell truck.
Again people order it without really having driven it I mean, a few customers have demo trucks. So we are cautiously optimistic on this side.
Okay, Great and then I wanted to follow up on the financing piece clearly retail orders.
Quarter were pretty good.
Just what are you hearing from customers on the financing piece what are they telling you as you look to rollout more trucks on the bad side, and then really hit the ground running almost your sell side. What are you hearing in the market from customers.
Yes clear feedback.
Trend towards leasing no no question people wanted to have like a monthly.
Monthly rates.
And then every customer is very similar very detailed comparison of true <unk>. So what is the current level of <unk> what is the <unk> with our truck and we can actually match that in various states already to date and I think this is this is great. I mean, you can get zero emission trucks, so no emission.
And can keep your diesel cost and total cost of ownership.
This is very very strong we can't do it in Allstate Thats also true we need some some support some incentives, but clearly customers are focusing on the monthly rate total costs.
Okay, great. Thanks for the time, guys I'll turn it back to the queue.
Our next question is Jeff Osborne with TD Cowen. Please proceed.
Yes, thanks for taking the questions just a couple on my end I was curious if the.
The recall on the BV had any impact on your decision to narrow the focus of a.
Part of the decision.
The outcome. So I'm just curious if the recall was a variable in your thinking there.
No not at all and thanks for bringing that up now I mean this this was a recall we worked through this had no impact on our decision whatsoever.
Got it good to hear and then is there any one time cash items for the remainder of this year and next I was just trying to recall the details from the SEC settlement that you entered into some time ago I think the payments were made over multiple installments over two years did you already reserve the cash for that or have you already paid that or is that something to.
On the come.
Hey, Jeff So yes, we are.
Sure.
Making very small incremental payments for that.
To the tune of like one and a half million dollars. So we're stretching that out it's another liabilities right now.
Got it.
Is there any.
Gave the gross margin or cash burn.
Gross margin, but I didn't know if you could provide more incremental details on the path to EBITDA positive.
Yes, again, I think it kind of goes back to two things one we need to improve our margins on the fuel cell first next year and get to a fuel cell breakeven and so how we can do that right now on the fuel cell, we need to improve our bom cost.
We're going to have production at about $4 40 per truck material costs and our target is to get to 275 K per truck.
In 2025, and we can do that by one bringing the appeal of our power module manufacturing in college, and also just having higher volume and getting better pricing power with suppliers and then well reach touched on on the average selling price on the F. C V. We expect that to be better just being first to market.
Got it. Thank you that's all I had.
Thank you I will now hand, the call back over to Dylan for shareholder questions. Thank you operator. The first question is how many trucks have you sold so far and how many orders from companies do you have.
Through Q1, we have made 162 wholesale deliveries of the battery electric truck.
Our improved sales and commercial team in conjunction with our dealer network have been improving retail sales as we work with them and customers through infrastructure challenges.
Additional financing partners and make product improvements.
33 retail sales were completed in Q1, and we see good momentum building to increases.
As we showed on the slide earlier.
Andrey electric retail customers include Tsi Univar solutions and <unk> got other logistics is using our trucks to deliver Nissan electric vehicles to Dallas.
The hydrogen fuel cell truck dealers have received orders from over seven and customer fleets for more than 100 hydrogen fuel cell trucks, we have announced previously orders from BRG brothers plug power and recently a jr.
The second question is what plans are being made to advance hydrogen technologies that will bring equal out to the top.
Sure. So right now we on the verge of bringing the hydrogen fuel cell truck to market. We believe we will be the first company with a production hydrogen fuel cell electric vehicles available for purchase.
And have a significant head start on the competition.
In conjunction with the truck we have made great progress on the energy side recently announcing the joint station development agreement with with Terra and making good progress on the mobile <unk>.
No other company is coming with both trucks and energy.
No one else is doing this in fact, our competitors may be coming to us for hydrogen fuel.
So we are excited about our hydrogen fuel cell truck and energy business. There is a massive potential.
Thank you Michael Stacy there are a few questions surrounding breakeven.
Profitability and what production volume, we would need to hit to achieve those metrics. So maybe we can go over those now.
Sure. Thank you Don now that we have refocused our business model, we have a better path to achieve positive EBITDA by 2025.
But before we talk about profitability first we need to be able to make money on the trucks with cell by reaching gross margin breakeven in 2024.
Come from several places.
We have to reduce our bom cost.
Typically on fuel cell, we have a lower material cost to begin with as it only have two battery packs versus nine battery packs on the Bev.
As you know for Bob the battery packs and south make up over 50% of the Bom cost.
For our fuel cell, but currently anticipate hitting serial production at 440 K per truck.
And we will be driving that cost down to 375, K by bringing FCB in manufacturing to Coolidge and achieving higher volume.
With the eventual goal of getting to 275000 per truck by 2025.
For Bath, we're currently at 396000 Bom cost with a line of sight to improve that to 340000 once we sell through the current stock of finished trucks and batteries on hand.
That improvement will come through battery pack cost reduction we have discussed previously as well as picking up lower battery cell pricing feature material purchases with lithium prices have come down significantly.
While we are not giving guidance for 2024, we expect we will need to sell at least thousand to 500 trucks, depending on the next to breakeven on our business.
And the gross margin level that volume needs to close to double in 2025 for us to be able to cover our cash opex and get to positive EBITDA.
Yeah.
Thank you all for listening to our first quarter earnings call and for your ongoing support as we discussed we are very focused and we will continue executing our business plan, which you wonderful day Goodbye here soon.
Thank you. This now concludes today's conference you may disconnect. Your lines at this time and thank you for your participation.
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