Q2 2024 Hyzon Motors Inc Earnings Call
Thank you for standing by. My name is Gilles and I will be your conference operator today. At this time, I would like to welcome everyone to the Q2 2024 Heisen Inc. Earnings Conference Call.
Operator: At this time, I would like to welcome everyone to the Q2 2024 Hyzon Inc. Earnings Conference call. All lines have been placed on mute to prevent any background noise.
Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. I would now like to turn the conference over to Tom Crook, Managing Director of ICR. You may begin. Thank you, operator. And good morning, everyone.
All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.
If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. I would now like to turn the conference over to Tom Cook, Managing Director with ICR. You may begin.
Tom Crook: Welcome to Hyzon's second quarter 2024 earnings call. With me on the call today are Parker Meeks, Chief Executive Officer, and Steve Weiland, Chief Financial Officer. As a reminder, you can find a press release detailing our financial results and the presentation accompanying today's call in the investor relations section of our website. Today's discussions include forward-looking statements regarding future plans and expectations. However, actual results might differ materially from those stated, and factors that could cause actual results to differ are explained in the forward-looking statements at the end of this press release and page 2 of our earnings presentation. Forward-looking statements speak only as of the date on which they are made.
Tom Cook: Thank you, Operator, and good morning, everyone. Welcome to HIZON's second quarter 2024 earnings call. With me on the call today are Parker Meeks, Chief Executive Officer, and Steve Weiland, Chief Financial Officer.
Speaker Change: As a reminder, you can find a press release detailing our financial results and the presentation accompanying today's call in the Investor Relations section of our website.
Speaker Change: Today's discussions include forward-looking statements regarding future plans and expectations. Actual results might differ materially from those stated, and factors that could cause actual results to differ are explained in the forward-looking statements at the end of the press release and page 2 of our earnings presentation.
Parker Meeks: Forward-looking statements speak only as of the date on which they are made. Be on caution not to put undue reliance on forward-looking statements. With that, I turn the call over to our CEO, Parker Meeks. Parker?
Tom Crook: Please use your caution not to put undue reliance on forward-looking statements. With that, I'll turn the call over to our CEO, Parker Meeks. Good morning, and thank you for joining our 2024 second quarter earnings call. I look forward to sharing the commercial, technology, and organizational progress we have made, which we believe strengthens our first-mover position in decarbonizing heavy motors on the technology side. These include continued advancements towards startup production of our leading 200 kilowatt fuel cell technology.
Parker Meeks: Good morning, and thank you for joining our 2024 Second Quarter Earnings Call.
Parker Meeks: I look forward to sharing the commercial, technology, and organizational progress we have made.
Speaker Change: which we believe strengthen our first-mover position in decarbonizing heavy mobility.
Speaker Change: On the technology side, these include continued advancements towards startup production of our leading 200-kilowatt fuel cell technology.
Tom Crook: On the commercial side, we are pleased to have launched our 200 kilowatt Class 8 Fuel Cell Truck Trial Program with multiple large fleets and positive Initial Customer Feedback, which I will expand upon. Steve Weiland will then review our financials in more detail.
Speaker Change: On the commercial side, we are pleased to have launched our 200 kilowatt Class 8 fuel cell truck trial program with multiple large fleets in July, with positive initial customer feedback, which I will expand upon later.
Speaker Change: Stephen Weiland will then review our financials in more detail.
Parker Meeks: First, let me address the announcement we made last month to focus on our core North American Class VIII and Refuse Vehicle after reviewing our strategic options. We decided to focus our operations on the market and applications with the highest immediate commercial potential. The Class A Tractor and Refuge Truck Markets in North America. After considering our options and completing a full assessment of challenging international market conditions and Wayneing Government Support outside of North America, We have decided to halt our operations in the Netherlands and Australia, in collaboration with our Board of Directors.
Stephen Weiland: First, let me address the announcement we made last month to focus on our core North American Class VIII and Refuse Vehicle Markets.
Speaker Change: After reviewing our strategic options, we decided to focus our operations on the market and applications with the highest immediate commercial potential, the Class A tractor and refuse truck markets in North America.
Speaker Change: After considering our options and completing a full assessment of challenging international market conditions and waning government support outside of North America, we decided to halt our operations in the Netherlands and Australia.
Parker Meeks: This was deemed the best path to support the active commercial development of the North American business and our 200 kilowatt starter production stop. This decision allows us to concentrate our financial resources and investments on our first to market single stack 200 kilowatt fuel sub technology in our North American class eight and refugees truck platforms. We have launched in largely trial programs in the U.S., supported by continued customer interest and advancing government subsidy programs.
Speaker Change: In collaboration with our Board of Directors, this was deemed the best path to support the active commercial development of the North American business and our 200-kilowatt starter production, or SOP.
Speaker Change: This decision allows us to concentrate our financial resources and investments on our first-to-market, single-stack, 200-kilowatt fuel cell technology in our North American Class VIII and Refuge truck platforms.
Speaker Change: which we have launched in largely trial programs in the U.S. supported by continued customer interest and advancing government subsidy programs.
Parker Meeks: Steve will provide more color in a moment on the financial impact of this decision. This quarter, we are proud to have met our guidance and delivered a monthly average cash burn at the low end of that after halting operations in the international markets, based on how we are operating now. We estimate our average recurring monthly cash burn to be further reduced to approximately $6.5 million by year-end. Additionally, given our strategic transition to a single region, we are no longer providing deployment guidance for the ballot in 2024 as we narrow our focus to the opportunities in the North American Class 8 and Refugee. We plan to provide updated guidance on the North American market in the future as our customer trial program. Alongside focusing our research.
Speaker Change: Steve will provide more color in a moment on the financial impact of this decision.
Steve: This quarter, we are proud to have met our guidance and delivered a monthly average cash burn at the low end of that guidance.
Steve: After halting operations in the international markets, based on how we are operating now,
Steve: We estimate our average recurring monthly cash burn to be further reduced to approximately $6.5 million by year-end.
Steve: Additionally, given our strategic transition to a single region, we are no longer providing deployment guidance for the balance of 2024, as we narrow our focus to the opportunities in the North American Class VIII and Refuse Markets.
Steve: We plan to provide updated guidance on the North American market in the future as our customer trial programs advance.
Parker Meeks: We've continued our capital raise, working with our financial advisor, PJT Partners, to evaluate potential strategic capital investment and strategic alternatives to support commercialization of our 200 kilowatt fuel sub-technologist, and late July, upon becoming shelf eligible, we raised $4.5 million in gross proceeds via a registered direct offering in a difficult market environment to increase our runway and improve the liquidity of our. This represents the first capital the company has raised since going public in July 2021. Set this race.
Steve: Alongside focusing our resources, we have continued our capital raise efforts.
Steve: Working with our financial advisor, PJT Partners, to evaluate potential strategic capital investment and strategic alternatives to support commercialization of our 200-kilowatt fuel cell technology.
Steve: In late July, upon becoming shelf-eligible, we raised $4.5 million in gross proceeds via a registered direct offering in a difficult market environment to increase our runway and improve the liquidity of our stock.
Steve: This represents the first capital the company has raised since going public in July 2021.
Parker Meeks: Hyzon's average daily trading volume has increased approximately 22 times, to 13 million shares per day, when comparing the 30 days prior to the transaction to the 16 trading days post-transaction, ending in August. We believe that this capital raise and improve the liquidity combined with continued commercialization of our proprietary fuel cell technology. Physicians us to pursue additional finance things later this year. We believe in successful trials of our leading fuel cell truck platform, converting to a large fleet customer contract.
Steve: Since this raise, Hizal's average daily trading volume has increased approximately 22 times, to 13 million shares per day, when comparing the 30 days prior to the transaction.
Steve: to the 16 trading days post-transaction ending on August 9th.
Steve: We believe that this capital raise and improved liquidity combined with continued commercialization of our proprietary fuel cell technology positions us to pursue additional financings later this year.
Steve: We believe that successful trials of our leading fuel cell truck platforms, converting to large fleet customer contracts, combined with the expected near-term SOP of our 200-kilowatt fuel cell system, will serve as important commercial, equity market, and strategic investment catalysts.
Parker Meeks: Combined with the expected near-term SOP of our 200-kilowatt fuel cell system, will serve as important commercial, equity markets, and strategic investment catalysts. We recognize the capital markets for early stage growth, particularly those operating in the hydrogen fuel cell and clean transportation, have been in a prolonged period of, once this challenging environment subsides. We expect to have broader access to less expensive capital, while Strategic Capital remains our primary focus in the near term. We continue to work with our strategic partners and customers to find ways to advance the commercialization of our technology, which includes recent proposals regarding fuel cell and fuel cell truck orders and potential investment into our, The polls, we hope will convert to defend agreements in the near future. Now, let me turn to our commercial and technology progress, where we continue to make important decisions both Turning first to our commercialite.
Steve: We recognize the capital markets for early-stage growth companies.
Steve: particularly those operating in the hydrogen fuel cell and clean transportation sectors.
Steve: have been in a prolonged period of upheaval.
Steve: Once this challenging environment subsides, we expect to have broader access to less expensive capital, while strategic capital remains our primary focus in the near term.
Steve: We continue to work with our strategic partners and customers to find ways to advance the commercialization of our technology, which includes recent proposals regarding fuel cell and fuel cell truck orders and potential investment into our company.
Steve: Proposals we hope will convert to definitive agreements in the near future.
Steve: Now, let me turn to our commercial and technology progress, where we continue to make important strides, driving both near-term and long-term value.
Parker Meeks: In the second quarter, we delivered one additional 110 kilowatt-gill self-truck to our customer performance food group, or PFG, for a total of five vehicles deployed with PFG. We continue to gather critical on-road experience through these trucks' commercial operations. We plan to continue working with PFG on an agreement for up to 15 200 kilowatt fuel cell trucks following a successful 200 kilowatt truck trial and a possible option to purchase an additional 30 fuel cell liquids. An example of the multi-year commercial order pattern we prioritize with large.
Steve: Turning first to our commercial activity, in the second quarter we delivered one additional 110 kilowatt fuel cell truck to our customer performance food group or PFG for a total of five vehicles deployed with PFG in California.
Steve: We continue to gather critical on-road experience through these trucks' commercial operations.
Steve: We plan to continue working with PFG on an agreement for up to 15 200 kilowatt fuel cell trucks following a successful 200 kilowatt truck trial.
Steve: and a possible option to purchase an additional 30 fuel cell electric trucks.
Steve: An example of the multi-year commercial order pattern we prioritize with large fleets.
Parker Meeks: Additionally, our 200 kilowatt Class A fuel cell truck large fleet customer trial program launched with multiple customers in July, and the initial operational performance and telematics data are about encouraging and exceeding our expectations. The truck has proven its ability to complete double. Ending the day with FuelTech. Accomplishing Full Day Combustion Engine Operations, many other major OEM's battery electric trucks could not. One-trowel customers' experience underscores the outperformance we are seeing in a key metric fuel efficiency, on a heavy haul, steep route, double shift, where the customer's standard diesel truck averages four miles per gallon. Hyzon's fuel cell electric truck has averaged over 6 miles per gallon equivalent, roughly 50% better than that. This fuel efficiency is critical because fuel comprises 50% of the total cost of ownership for a heavy-duty truck.
Steve: Additionally, our 200 kilowatt Class A fuel cell truck large fleet customer trial program launched with multiple customers in July, and the initial operational performance and telematics data is both encouraging and exceeding our expectations.
Steve: The truck has proven its ability to complete double shifts, ending the day with fuel to spare. Accomplishing full-day combustion engine operations, many other major OEMs' battery electric trucks could not complete.
Steve: One trial customer's experience underscores the outperformance we are seeing in a key metric, fuel efficiency.
Steve: On a heavy haul, steep route, double shift day, where the customer's standard diesel truck averages 4 miles per gallon.
Speaker Change: Hyzon's fuel cell electric truck has averaged over 6 miles per gallon equivalent, roughly 50% better than diesel.
Speaker Change: This fuel efficiency is critical because fuel comprises 50% of the total cost of ownership for a heavy-duty truck.
Parker Meeks: Based on our calculations, with this level of fuel efficiency, Total Cost of Ownership Parity with Diesel is achieved today, even with fuel that is 40% more expensive than- We look forward to sharing more information from these trials as they progress. On the refuse collection vehicle front, customers, partners, and stakeholders across the industry are demonstrating commercial interest in our refuse collection vehicles. As a reminder, in May... We unveiled the first fuel-selective refuse truck for the U.S. market with the new H, the largest private refugee equipment manufacturer in North America.
Speaker Change: Based on our calculations, with this level of fuel efficiency,
Speaker Change: Total cost of ownership parity with diesel is achieved today, even with fuel that is 40% more expensive than diesel.
Speaker Change: We look forward to sharing more information from these trials as they progress.
Speaker Change: On the refuse collection vehicle front, customers, partners, and stakeholders across the industry are demonstrating commercial interest for our refuse collection truck.
Speaker Change: As a reminder, in May, we unveiled the first fuel cell electric refuse truck for the U.S. market with New Way Trucks, the largest private refuse equipment manufacturer in North America.
Parker Meeks: Together, we are embarking on customer trials in the U.S. and Canada to prove the viability of the technology and showcase its potential. Luke Spectral launched the first trial with San Francisco-based Wasteland Management Company, Rheology, across the two vehicle plates.
Speaker Change: Together, we are embarking on customer trials in the U.S. and Canada to prove the viability of the technology and showcase its performance.
Speaker Change: We expect to launch the first trial with San Francisco-based waste and recycling management company Recology this month.
Parker Meeks: [inaudible] We remain oversubscribed for our trial, with 25 large fleets in the schedule across the 200-kilowatt Class VIII and Refuge through January 2020. These fleets represent many of the largest fleets in the North American Class VIII Refuge Truck Market. Averaging more than 4,200 trucks per fleet, including 10 fleets with at least 5,000 trucks and discussed in the previous quarters, we prioritized large fleets as they have strong motivation to purchase zero-emission vehicles because of government incentives, their customers' requirements, and, in many cases, their own sustainability.
Speaker Change: Across the two vehicle platforms, we remain oversubscribed for our trial program, with 25 large fleets in the schedule across the 200-kilowatt Class VIII and Refuse trucks through January 2025.
Speaker Change: These fleets represent many of the largest fleets in the North American Class 8 and Refuge Truck Markets.
Speaker Change: averaging more than 4,200 trucks per fleet, including 10 fleets with at least 5,000 trucks each.
Speaker Change: As discussed in previous quarters, we prioritize large fleets as they have strong motivation to purchase zero-emission vehicles because of government incentives, their customers' requirements, and in many cases, their own sustainability commitments.
Parker Meeks: Subject to the success of these trials, we expect to enter into initial definitive commercial agreements in the second half of 2024, with commercial deliveries beginning in 2020. We are excited by the potential for our trial and commercial agreement program to provide a strong order pipeline and foundation for commercial growth for Hyzon. Any material success in converting these 25 large-sleeve trials to our targeted 50-100-truck multi-year commercial agreements per would yield sizable year-end order backlog for the Beyond our vehicle platforms, we're also seeing increased commercial interest in our Fuel Cell Technology and our Fuel Cell Vehicles from the Stationary Power
Speaker Change: Subject to the success of these trials, we expect to enter into initial definitive commercial agreements in the second half of 2024, with commercial deliveries beginning in 2025.
Speaker Change: We are excited by the potential for our trial and commercial agreement program.
Speaker Change: to provide a strong order pipeline and foundation for commercial growth for HIZON.
Speaker Change: Any material success in converting these 25 large-square trials
Speaker Change: to our targeted 50 to 100 truck multi-year commercial agreements per fleet.
Woody: what yields sizable year-end order backlog for the company.
Woody: Beyond our vehicle platforms, we are also seeing increased commercial interest in our fuel cell technology from the stationary power market.
Parker Meeks: Including in such applications as backup and primary power for data, The combination of rapid data center storage demand growth driven by AI and cloud computing alongside data center owners and customers' significant ESG goals is, in turn, driving demand for clean hydrogen fuel cell power in the data center expansion process. We are now in advanced customer discussions for the near term. With these trends in mind, and the Stationary Fuel Cell Power Market, estimated to be $3.5 billion in the U.S. by 2030, poses an attractive future application for Hyzon's heavy-duty fuel cell technology.
Woody: including in such applications as backup and primary power for data centers.
Woody: The combination of rapid data center storage demand growth, driven by AI and cloud computing, alongside data center owners and customers' significant ESG goals,
Woody: is in turn driving demand for clean hydrogen fuel cell power in data center expansion projects.
Speaker Change: We are now in advanced customer discussions for near-term deployments.
Woody: With these trends in mind, the stationary fuel cell power market, estimated at $3.5 billion in the U.S. by 2030, poses an attractive future application for Hyzon's heavy-duty fuel cell technology.
Parker Meeks: Moving to our fields of technology, we're continuing to make progress with our C-sample development at our Bowling Broke, Illinois facility and remain on track for SOP in the second half of 2020. As a reminder, Hyzon's fuel cell system generates a net 200 kilowatts from a single fuel cell, which offers a 30% lighter, 30% smaller, more cost-effective, and more fuel-efficient option when compared to the conventional approach of combining two systems or stacks to reach the same output.
Woody: it
Speaker Change: Moving to our fuel cell technology, we're continuing to make progress with our C-sample development in our Bolingbrook, Illinois facility, and remain on track for SOP in the second half of 2024.
Heizan: As a reminder, Hyzon's fuel cell system generates a net 200 kilowatts from a single fuel cell stack.
Heizan: which offers a 30% lighter, 30% smaller, more cost-effective, and more fuel-efficient option when compared to the conventional approach of combining two systems or stacks to reach equivalent power.
Parker Meeks: In the second quarter, we built 16.. for a total of 21 sea samples built in the first half of 2024. We also progressed with our rigorous durability. This webinar is supported by commissioning our eighth Fuel Cell Test Stand in Q2, which expands our capability for in-house, end-to-end fuel cell testing today and ongoing quality control once we begin. Our remaining CapEx spend to achieve SOP is significantly lower, at which point we expect annual capacity to be 700, 200 kilowatt fuel cell systems on three ships.
Heizan: In the second quarter, we built 16 sea samples.
Heizan: for a total of 21 sea samples built in the first half of 2024.
Heizan: We also progressed our rigorous durability testing, supported by commissioning our eighth fuel cell test stand in Q2, which expands our capability for in-house, end-to-end fuel cell testing today and ongoing quality control once we begin production.
Heizan: Our remaining CAPEX spend to achieve SOP is substantially complete, at which point we expect annual capacity to be 700-200 kW fuel cell systems on three shifts.
Parker Meeks: We expect this to sustain our planned production rates for the next two years and initial capacity testing. Our team confirmed this production rate, along with our capital-efficient future capacity expansion plans in line with anticipated demand and customer scale-up. Finally, let me touch on the market and while government support has waned in international markets, we are seeing continued and growing strong support here in the U.S., This includes the $2.6 billion Environmental Protection Agency's Clean Ports Program and Carbs HVIP program in California.
Heizan: We expect this to sustain our planned production rates for the next two years.
Heizan: In initial capacity testing, our team confirmed this production rate, along with our capital-efficient future capacity expansion plans in line with anticipated demand and customer scale-up programs.
Heizan: Finally, let me touch on the market environments.
Speaker Change: While government support has waned in international markets,
Heizan: We are seeing continued and growing strong support here in the U.S.
Heizan: This includes the 2.6 billion dollar Environmental Protection Agency's Clean Ports Program.
Parker Meeks: The Internal Revenue Code, Section 45W, the $40,000 Commercial Clean Vehicle Tax Credit, and the administration's Hydrogen Hub, which recently funded its first three regional hubs, including a $12.6 billion agreement. California's Hydrogen Hub application. We expect additional hydrogen hubs to be funded before the end of the year, and the potential first award under the Clean Porch Program to be granted by year-end. Highland and supported several clean ports applications, the largest of which could yield an order of up to 100 fuel cell trucks.
Heizan: CARB's HVIP program in California
Heizan: The Internal Revenue Code, Section 45W, $40,000 Commercial Clean Vehicle Tax Credits
Heizan: and the Administration's Hydrogen Hub Program.
Heizan: which recently funded its first three regional hubs, including a $12.6 billion agreement for California's hydrogen hub application, Arches.
Heizan: We expect additional hydrogen hubs to be funded before the end of the year.
Heizan: and potential first awards under the Clean Porch Program to be granted by year-end as well.
Speaker Change: Hyzon has supported several clean ports applications, the largest of which could yield an order of up to 100 fuel cell trucks, if selected.
Parker Meeks: Hyzon has also recently submitted an application under the bipartisan infrastructure laws advanced energy manufacturing and recycling rep. If selected, the grant could provide up to $19.9 million, and a 50% match structure, to help fund future expansions of our Bolingbroke Fuel Cell Manufacturing Facility to annual production of 2,800 fuel cell systems, well beyond our anticipated cash flow breakeven. Despite the potential for political changes in November, we were made bullish on the long-term prospects of our industry and our company.
Speaker Change: Highline has also recently submitted an application under the Bipartisan Infrastructure Law's Advanced Energy Manufacturing and Recycling Grant Program.
Speaker Change: If selected, the grant could provide up to $19.9 million.
Speaker Change: and a 50% match structure to help fund future expansions of our Bolingbroke Fuel Cell Manufacturing Facility to annual production of 2,800 fuel cell systems, well beyond our anticipated cash flow break-even production rate.
Speaker Change: Despite the potential for political changes in November,
Speaker Change: We remain bullish on the long-term prospects for our industry and our company, thanks to the support we see from states such as California, which are committed to decarbonization.
Parker Meeks: Thanks to the support we see from states such as California, which are committed to decarbonizing, and the federal program that I mentioned before, which has shown continued momentum over the past several years, on the forehand of the call to Steve, I would like to reiterate the two primary and Anticipated Miles for 2020, which we discussed last week.
Speaker Change: and the federal programs I mentioned before, which have shown continued momentum over the past several months.
Speaker Change: Before handing the call over to Steve, I would like to reiterate the two primary goals and anticipated milestones for 2024, which we discussed last quarter.
Parker Meeks: First, SOP of our 200 kilowatt fuel cell system and Class 8 fuel cell truck platform. We expect to reach SOP for a single stack to earn a kilowatt-fueled [inaudible] and our 200 kilowatt Class 8 Fuel Cell Truck Plus in the second half of 2024. These will be major technology and commercial, clearing the path for commercial scale-up of our leading fields of technology to largely and second, large fleet commercial, subject to successful trials.
Steve: First, SOP of our 200-kilowatt fuel cell system and Class VIII fuel cell truck platform.
Steve: We expect to reach SOP for our single-stack 200-kilowatt fuel cell system and our 200-kilowatt Class 8 fuel cell truck platform in the second half of 2024.
Steve: These will be major technology and commercial achievements, clearing the path for commercial scale-up of our leading fields of technology to large fleet customers.
Parker Meeks: We anticipate signing new large fleet multi-year commercial agreements in 2020, on the back of the 25 large fleet trials planned through January 2025. These trials launched on the 200-kilowatt Class A platform in July, with Todd citing the results thus far, and are expected to launch on the refuse drug platform with ecology, this. Additionally, we anticipate advancing fleets under existing commercial agreements to the second tranche of their multi-stage commercial, as I stated previously, any material success in converting trials to new, large-leaked countries, which has significant progress in setting Hyzon's commercial pipeline foundation alongside evidence of large fleet scale-up. Finally, we are focused on strengthening our balance sheet and securing additional capital to fund our operations. With that, I'll hand it over to Steve to discuss our financial results in more detail. Steve
Steve: And second, large fleet commercial agreements.
Steve: Subject to successful trials, we anticipate signing new large-fleet multi-year commercial agreements in 2024.
Steve: on the back of the 25 large fleet trials planned through January 2025.
Steve: These trials launched on the 200-kilowatt Class A truck platform in July, with positive results thus far, and are expected to launch on the refuse truck platform with Recology this month.
Operator: At this time, I would like to welcome everyone to the Q2 2024 Hyzon Inc, earnings conference call. All lines have been placed on mute to prevent any background noise. Not to the speakers or mics, there will be a question in the answer session. If you'd like to ask questioning this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again.
Steve: Additionally, we anticipate advancing fleets under existing commercial agreements to the second tranche of their multi-stage commercial agreements.
Steve: As I stated previously, any material success in converting trials to new large fleet contracts would show significant progress in setting Highstone's commercial pipeline foundation alongside evidence of large fleet scale-up progression.
Tom Cook: Oh, now let's turn conference over to Tom Cook, managing director with ICR, you may begin. Thank you operator and good morning, everyone. Welcome to Hyzon 2nd quarter 2024 earnings call with me on the call today are Parker Meeks, Chief Executive Officer and Steve Weiland, Chief Financial Officer.
Steve: Finally, we are focused on strengthening our balance sheet and securing additional capital to fund our business.
Tom Cook: As a reminder, you can find a press release detailing our financial results and the presentation accompanying today's call and the investor relations section of our website. Today's discussions include four looking statements regarding future plans and expectations. Actual results might differ material from those stated and factors that could cause actual results differ are explained in the four looking statements at the end of the press release and page two of our earnings presentation. For looking statements speak only as of the date on which they are made, your caution not to put undue reliance on four looking statements.
Steve: With that, I'll hand it over to Steve to discuss our financial results in more detail. Steve? Thank you, Parker. Just to recap our prior disclosures and what Parker discussed on our strategic repositioning, after a comprehensive review, we are focusing on the North American Class VIII and refuse markets.
Steve Weiland: Thank you, Parker. Just to recap our prior disclosures and what Parker discussed in our strategic repositioning, after a comprehensive review, we are focusing on North American Class A and Refuse. We believe that there is a tremendous opportunity in these markets with the support of the regulatory environment and that the difficult decisions we took to preserve our balance sheet and narrow our focus will ultimately put us in a position to succeed. In connection with the exit activities in Europe and Australia, we now estimate that we will incur charges of approximately $21 million, of which approximately $4 million is capped.
Steve: We believe that there is a tremendous opportunity in these markets with the support of regulatory environment and that the difficult decisions we took to preserve our balance sheet and narrow our focus will ultimately put us in a position to succeed.
Steve: In connection with the exit activities in Europe and Australia, we now estimate that we will incur charges of approximately $21 million, of which approximately $4 million is cash.
Parker Meeks: With that, turn the call over to CEO Parker Meeks, Parker. Good morning and thank you for joining our 2024 2nd quarter earnings call. I look forward to sharing the commercial technology and organizational progress we have made, which we believe strengthen our first mover position in decarbonizing heavy mobility. On the technology side, these include continued advancements towards started production of our leading 200 kilowatt fuel cell technology. On the commercial side, we are pleased to have launched our 200 kilowatt class a fuel cell truck trial program with multiple large plates in July with positive initial customer feedback, which I will expand upon later.
Steve Weiland: Steve Weiland will then review our financials in more detail.
Steve Weiland: While the total estimated amount has increased since our initial disclosure, the estimated cash impact has come down. We incurred substantially all of these costs in the second quarter and anticipate making the related cash payments in the third and fourth quarters of 2024. However, we do believe that once our announced actions are complete based on how we are operating now, our average monthly recurring net cash burn will drop to approximately $6.5 million by the end of the year, while still supporting our core issues. (Inaudible) These were difficult but necessary actions, and we are deeply appreciative of our employees' accomplishments in these regions and continued support as we wind down impacted operations. Here are your results for the second quarter of 2020.
Speaker Change: While the total estimated amount has increased since our initial disclosure, the estimated cash impact has come down. We incurred substantially all of these costs in the second quarter and anticipate making the related cash payments in the third and fourth quarters of 2024.
Speaker Change: However, we do believe that once our announced actions are complete, based on how we are operating now, our average monthly recurring net cash burn will drop to approximately $6.5 million by the end of the year, while still supporting our core initiatives.
Speaker Change: [inaudible]
Speaker Change: These were difficult but necessary actions, and we are deeply appreciative of our employees' accomplishments in these regions and continued support as we wind down impacted operations.
Parker Meeks: First, let me address the announcement we made last month to focus on our core North American class eight and refuse vehicle markets. After reviewing our strategic options, we decided to focus our operations on the market and applications with the highest immediate commercial potential to class a tractor and refuse truck markets in North America.
Steve Weiland: Our second quarter 2024 revenue was $0.3 million compared to zero revenue in Q2 2020. Our revenue this quarter primarily reflected continued recognition of the trucks delivered to PFG that are treated as an operating lease for accounting purposes, and Fair Park Sales, to a couple. Cost of revenue came to $18.4 million in the second quarter of 2024 versus $2.4 million in the prior year period.
Speaker Change: Turn to the results for the second quarter of 2024.
Speaker Change: Our second quarter 2024 revenue was $0.3 million, compared to zero revenue in Q2 2023.
Speaker Change: Our revenue this quarter primarily reflected continued recognition of the trucks delivered to PFG that are treated as an operating lease for accounting purposes, and spare parts sales to a customer.
Parker Meeks: After considering our options and completing a full assessment of challenging international market conditions and waning government support outside of North America, we decided to halt our operations in the Netherlands and Australia. In collaboration with our board of directors, this was deemed the best path to support the active commercial development of the North American business and our 200 kilowatt sort of production or SOP. This decision allows us to concentrate our financial resources and investments on our first to market single stack 200 kilowatt fuel cell technology in our North American class eight and refuse truck platforms, which we have launched in largely trial programs in the US supported by continued customer interest and advancing government subsidy programs. Steve will provide more color in a moment on the financial impact of this decision.
Speaker Change: Cost of revenue came to $18.4 million in the second quarter of 2024 versus $2.4 million in the prior year period.
Steve Weiland: Cost of revenue for this quarter was primarily related to inventory write-downs associated with the restructuring actions in Australia and Europe, as well as in the US for 110 kilowatt inventory given the transition to our 200 kilowatt platform. Cost of revenue for the Comparable Prior Period was primarily related to cost provisions approved for customer contract activities in inventory write-downs in Europe. We are pleased to report that R&D, SG&A, and Net Cash Firm all came in at or below the low end of our guidance ranges, reflecting our concerted efforts to manage spend.
Speaker Change: Cost of revenue for this quarter was primarily related to inventory write-downs associated with the restructuring actions in Australia and Europe, as well as in the U.S., for 110-kilowatt inventory given the transition to our 200-kilowatt platform.
Speaker Change: Cost of revenue for the comparable prior year period primarily related to cost provisions accrued for customer contract activities and inventory write-downs in Europe.
Speaker Change: We are pleased to report that R&D, SG&A, and Net Cash Firm all came in at or below the low end of our guidance ranges, reflecting our concerted efforts to manage spend.
Steve Weiland: R&D expenses came to $9.8 million in the second quarter of 2024 versus $12.6 million in the prior year period, reflecting lower R&D material costs partially offset by higher R&D personnel costs. Second quarter R&D came in below our quarterly guidance range of 11 to $13 million, primarily due to continued efforts at reducing spend, certain development costs coming in less than anticipated, and the timing of certain development activities in support of our fuel cell SOP.
Speaker Change: R&D expenses came to $9.8 million in the second quarter of 2024 versus $12.6 million in the prior year period, reflecting lower R&D material costs partially offset by higher R&D personnel costs.
Parker Meeks: This quarter, we are proud to have met our guidance and delivered a monthly average cash burn at the low end of the by Guidance. After halting operations in the international markets, based on how we are operating now, we estimate our average recurring monthly cash burn to be further reduced to approximately $6.5 million by year rent.
Speaker Change: Second quarter R&D came in below our quarterly guidance range of 11 to 13 million dollars, primarily due to continued efforts on reducing spend, certain development costs coming in less than anticipated, and the timing of certain development activities in support of our fuel cell SOP.
Steve Weiland: SG&A came in at $25.5 million in the second quarter of 2024 versus $49.1 million in the prior year period. The year-over-year decrease in SG&A was primarily driven by the $22 million SEC settlement recorded in the second quarter of last year, an overall reduction in legal and professional fees, and spend reduction efforts partially offset by higher stock-based compensation and a write-down of certain supplier deposits.
Speaker Change: SG&A came in at $25.5 million in the second quarter of 2024 versus $49.1 million in the prior year period.
Parker Meeks: Additionally, given our strategic transition to a single region, we are no longer providing deployment guidance for the ballot in 2024, as we narrow our focus to the opportunities in the North American class eight and refuse markets. We plan to provide updated guidance on the North American market in the future as our customer trial programs advance. Alongside focusing our resources, we have continued our capital rates efforts, working with our financial advisor PJT partners to evaluate potential strategic capital investment and strategic alternatives to support commercialization of our 200 kilowatt fuel sub-technology.
Speaker Change: The year-over-year decrease in SG&A was primarily driven by the $22 million SEC settlement recorded in the second quarter of last year, an overall reduction in legal and professional fees, and spend reduction efforts partially offset by higher stock-based compensation and a write-down of certain supplier deposits.
Steve Weiland: In the second quarter, SGNA came in just below the bottom end of our 26 to 30 million dollar guidance. We also recognize restructuring charges of $2.7 million in the second quarter of 2024 compared to no charges in the prior period. Restructuring charges this quarter include affin impairment and employee-related charges related to or winding down activities in Australia and Europe.
Speaker Change: Second quarter SG&A came in just below the bottom end of our $26 to $30 million guidance range.
Speaker Change: We also recognize restructuring charges of $2.7 million in the second quarter of 2024 compared to no charges in the prior period. Restructuring charges this quarter include asset impairment and employee-related charges related to our wind-down activities in Australia and Europe.
Parker Meeks: In late July, upon becoming shelf eligible, we raised $4.5 million in gross proceeds via a registered direct offering in a difficult market environment to increase our runway and improve the liquidity of our stock. This represents the first capital the company has raised since going public in July 2021. Since this raise, highs on average daily trading volume has increased approximately 22 times to 13 million shares per day when comparing the 30 days prior to the transaction to the 16 trading days post-transaction ending on August 9.
Steve Weiland: Our average monthly net cash burn for the second quarter of 2024 was $9.2 million, for a total $27.5 million for the quarter, coming in at the low end of our quarterly guidance range of $27 to $30 million. Although down from the $9.9 million first quarter average monthly net burn, this was up slightly from the first quarter $8 million average monthly net cash burn, excluding the first SEC settlement payment and proceeds from the sale of the Rochester facility, which reflects the slight uptick we spoke about last quarter due to the timing of working capital and payroll.
Speaker Change: Our average monthly net cash earn for the second quarter of 2024 was $9.2 million.
Speaker Change: For a total of $27.5 million for the quarter, coming in at the low end of our quarterly guidance range of $27 to $30 million.
Speaker Change: Although down from the $9.9 million first quarter average monthly net burn, this was up slightly from the first quarter $8 million average monthly net cash burn, excluding the first SEC settlement payment and proceeds from the sale of the Rochester facility.
Speaker Change: which reflects the slight uptick we spoke about last quarter due to timing of working capital and payroll.
Steve Weiland: Based on how we're operating at the moment, we estimate that our increased focus and restructuring actions will further reduce our average monthly recurring net cash burn to an estimated $6.5 million by year. Our cash, cash equivalents, and short-term investments will be so that $55.1 million as of June 30, 2024. I'd like to provide some additional color on our first capital race since our company was listed in July 2021. We have been actively laying out this path with actions such as our shelf filing and authorized sharing. It's also worth noting that we were unable to raise registered capital, which is critical in this market, until we became shelf eligible in June. Once that happened, we executed against it promptly.
Speaker Change: Based on how we are operating at the moment, we estimate that our increased focus and restructuring actions will further reduce our average monthly recurring net cash burn to an estimated $6.5 million by year-end.
Parker Meeks: We believe that this capital raise and improve the liquidity combined with continued commercialization of our proprietary fuel sub-technology positions us to pursue additional financing later this year. We believe that successful trials of our leading fuel sub-track platforms converting to largely customer contracts combined with the expected near-term SOP of our 200 kilowatt fuel sub-system will serve as important commercial equity markets and strategic investment catalysts.
Speaker Change: Our cash, cash equivalents, and short-term investments stood at $55.1 million as of June 30, 2024.
Speaker Change: I'd like to provide some additional color on our first capital raise since our company was listed in July 2021. We have been actively laying out this path with actions such as our shelf filing and authorized share increase.
Speaker Change: It's also worth noting that we had been unable to raise registered capital, which is critical in this market, until we became shelf-eligible in June. Once that occurred, we executed against it promptly.
Parker Meeks: We recognize the capital markets for early stage growth companies, particularly those operating in the hydrogen fuel cell and clean transportation sectors have been in a prolonged period of appeal. Once this challenging environment subsides, we expect to have broader access to less expensive capital while strategic capital remains our primary focus in the near-term. We continue to work with our strategic partners and customers to find ways to advance the commercialization of our technology, which includes recent proposals regarding fuel cell and fuel sub-track orders and potential investment into our company, proposals we hope will convert to definitive agreements in the near future.
Steve Weiland: While capital raising in the current market is very challenging, we believe that this offering helps provide the groundwork for better trading liquidity, a key ingredient for an improved ability to raise capital. We have seen this play out as our average daily trading volume increased approximately 22 times to 13 million shares a day from the 30 days prior to the offering to the 16 trading days following. We believe that this groundwork, combined with continued successful 200 KW trials, will help provide a path to more meaningful capital raises and potential strategic investment interest. Lastly, given the dynamic conditions, our ongoing cost actions, and capital raise efforts, we are not providing further financial guidance at this time. With that, I'll hand it back to Parker for closing.
Speaker Change: While capital raising in the current market is very challenging, we believe that this offering helps provide the groundwork for better trading liquidity, a key ingredient for an improved ability to raise capital.
Speaker Change: We have seen this play out as our average daily trading volume increased approximately 22 times to 13 million shares a day from the 30 days prior to the offering to the 16 trading days following it.
Speaker Change: We believe that this groundwork, combined with continued successful 200 KW trials, will help provide a path to more meaningful capital raises and potential strategic investment interest.
Speaker Change: Lastly, given the dynamic conditions, our ongoing cost actions, and capital raise efforts, we are not providing further financial guidance at this time. With that, I'll hand it back to Parker for closing remarks.
Parker Meeks: Now let me turn to our commercial and technology progress, where we continue to make important strides, driving both near-term and long-term value. Turning first to our commercial activity, in the second quarter we delivered one additional 110 kilowatt fuel cell truck to our customer performance food group or PFG for a total of five vehicles deployed with PFG in California. We continue to gather critical on-road experience through these trucks commercial operations. We plan to continue working with PFG on an agreement for up to 15 200 kilowatt fuel cell trucks following a successful 200 kilowatt truck trial and a possible option to purchase an additional 30 fuel cell electric trucks.
Parker Meeks: Thank you, Steve. We are encouraged by the data and feedback. The first vehicles deployed with PFG and from our first trials with a 200 kilowatt class A fuel pump, our trial customers tell us that Hyzon trucks are outperforming. Battery Electric, and completing daily operations, as well as, and in some cases better than, diesel charging, with fuel efficiency that's up to 50% better than diesel and some major customers. We are excited to begin trials of the U.S.
Parker Meeks: Thank you, Steve.
Parker Meeks: We are encouraged by the data and feedback from the first vehicles deployed with PFG and from our first trials with a 200 kW Class A fuel cell truck.
Parker Meeks: Our trial customers tell us that Hyzon trucks are outperforming battery electric and completing daily operations, as well as, in some cases, better than diesel trucks.
Parker Meeks: With fuel efficiency that's up to 50% better than diesel in some major customer use cases.
Parker Meeks: Refuse Truck Dispensary. And to progress the 25 large fleets currently in our full trial schedule, determining the conversion of multi-year commercial... on the back of the and success. This would serve as a strong pipeline and commercial growth foundation for Hyzon.
Parker Meeks: We are excited to begin trials of the U.S. Refuse Truck this summer.
Parker Meeks: An example of a multi-year commercial order pattern we prioritize was large fleets. Additionally, our 200 kilowatt class a fuel cell truck large fleet customer trial program launched with multiple customers in July. And the initial operational performance and telematics data is about encouraging and exceeding our expectations. The truck has proven its ability to complete double shifts, ending the day with fuel to spare, accomplishing full day combustion engine operations, many other major OEMs battery electric trucks could not complete.
Parker Meeks: and to progress the 25 large fleets currently in our full trial schedule, determining conversion of multi-year commercial agreements on the back of those trials.
Parker Meeks: If successful, this would serve as a strong pipeline and commercial growth foundation for HIZON, heading into 2025 and beyond.
Parker Meeks: Heading into 2025 and beyond, we remain on track for SOP of our single stack 200 kilowatt fuel cell system in the second half of this year while improving our manufacturing efficiencies and expanding our facility capabilities in Bolingbrook, Illinois. I would like to thank the whole Hyzon team for their continued dedication.
Parker Meeks: We remain on track for SOP of our single-stack 200-kilowatt fuel cell system in the second half of this year while improving our manufacturing efficiencies and expanding our facility capabilities in Bolingbrook, Illinois.
Parker Meeks: I would like to thank the whole HIZON team for their continued dedication.
Parker Meeks: One truck customers experience underscores the out performance we are seeing in a key metric fuel efficiency. On a heavy haul steep route double shift day where the customer standard diesel truck averages four miles per gallon. Hyzon's fuel electric truck has averaged over six miles per gallon equivalent, roughly 50% better than diesel. This fuel efficiency is critical, just fuel comprises 50% of the total cost of ownership for a heavy duty truck. Based on our calculations, with this level of fuel efficiency, total cost of ownership parity with diesel is achieved today, even with fuel that is 40% more expensive than diesel.
Parker Meeks: Finally, I'd like to thank our customers and stay for their continued partnership and for sharing our goal of reducing emissions across the heavy-duty industry through hydrogen fuel cell tanks. With that, Operator, we are now ready for questions. Thank you. The floor is now open for questions. If you are called upon to ask a question and are listening via the loudspeaker on your device, please pick up your handset to ensure that your phone is not on mute when asking your question.
Parker Meeks: Finally, I would like to thank our customers and stakeholders.
Parker Meeks: for their continued partnership and for sharing our goal of reducing emissions across the heavy-duty industry through hydrogen fuel cell technology.
Parker Meeks: With that, Operator, we are now ready for questions.
Speaker Change: Thank you. The floor is now open for questions. If you are called upon to ask a question and are listening via a loudspeaker on your device, please pick up your handset to ensure that your phone is not on mute when asking your question.
Operator: Your first question comes from a line from Craig Irwin of Roth MKM. Your line is up. Good morning, and thanks for taking my question. That was a really busy quarter in there, so I'm not completely sure where to start. I guess we could probably start with the discussion of refuse trucks. Parker, when we were at ACT Expo, we heard people say that the practicalities of actually doing a battery-electric refuse truck are actually quite limiting. They don't have the range or the performance necessary, and it's actually hard to mount enough batteries on the vehicles.
Speaker Change: Your first question comes from the line of Craig Irwin of Roth MKM. Your line is open.
Craig Irwin: Good morning and thanks for taking my questions.
Parker Meeks: We look forward to sharing more information from these trials as they progress. On the refuse collection vehicle front, customers, partners and stakeholders across the industry are demonstrating commercial interest for our refuse collection truck. As a reminder in May, we unveiled the first fuel selectric refuse truck for the US market with new way trucks, the largest private refuse equipment manufacturer in North America. Together, we are embarking on customer trials in the US and Canada to prove the viability of the technology and showcase its performance.
Craig Irwin: That was a really busy quarter in there, so I'm not completely sure where to start. I guess we could probably start with the discussion of refuse trucks. Parker, when we were at ACT Expo, we heard people say that
Parker Meeks: The practicalities of actually doing a battery electric refuse truck.
Parker Meeks: are actually quite limiting. They don't have the ranges or the performance necessary. And it's actually hard to mount enough batteries on the vehicles. So, you know, the superior economics versus diesel you discussed in your prepared remarks,
Craig Irwin: So, you know, the superior economics versus diesel you discussed in your prepared remarks really is just the tip of the iceberg. Can you maybe unpack for people the practicalities of a hydrogen fuel cell implementation on a refuse truck and why your customers are showing such strong interest? Hey, Craig, good morning.
Parker Meeks: really is just the tip of the iceberg. Can you maybe unpack for people the practicalities of a hydrogen fuel cell implementation on on a refuse truck and why your customers are showing such strong interest?
Parker Meeks: We expect to launch the first trial with San Francisco based waste recycling management company Recology this month. Across the two vehicle platforms, we remain oversubscribed for our trial program with 25 large fleets in the schedule across the 200 kilowatt class eight and refuse trucks. Through January 2025, these fleets represent many of the largest fleets in the North American class eight and refuse truck markets, averaging more than 4,200 trucks per fleet, including 10 fleets with at least 5,000 trucks each.
Parker Meeks: Thanks so much for the question and great to hear from you. So, you know, this is a topic that we love to really dive into because, Frankly, it's changed so much in terms of R and the market, where our customers are standing, and what are the credible options for zero emission refuse collection going forward. You know, a year ago, we thought this platform would be a great platform, one that could outperform the fuel cell category, but we thought the space would have, you know, a sniffle in the room for bioelectric solutions, given the theory was that those low speed start-stop region breaking driven use case batteries would be able to do it.
Parker Meeks: Hey Craig, good morning. Thanks so much for the question and great to hear from you. So, you know, this is a topic that we love to really dive into because
Speaker Change: Frankly, it's changed so much in terms of our and the market, our customers' understanding.
Speaker Change: of what are the credible options for
Speaker Change: Zero Emission Refuse Collection going forward, you know, a year ago
Parker Meeks: As discussed in previous quarters, we prioritize large fleets as they have strong motivation to purchase zero-mission vehicles. Because of government incentives, their customers requirements, and in many cases their own sustainability commitments. Subject to the success of these trials, we expect to enter into initial definitive commercial agreements in the second half of 2024 with commercial deliveries beginning in 2025. We are excited by the potential for our trial and commercial agreement program, to provide a strong order pipeline and foundation for commercial growth for Hyzon.
Speaker Change: We thought this platform would be a great platform, one that could outperform the fuel cell category, but we thought the space would have, you know, a significant amount of room for bioelectric solutions given the theory.
Speaker Change: was that low-speed, start-stop, regen-braking-driven use case that I just wouldn't be able to perform it, but I think you hit the nail on the head as to what we and our customers have realized.
Parker Meeks: But I think you hit the nail on the head as to what we and our customers have realized. As many of our customers, particularly large fleets in North America, have been trawling for battery trucks for some time, when you're talking about a refuse collection vehicle, those vehicles need to do several things really to perform the same job that combustion engine trucks do today, right? They need to be able to carry a certain amount of payload, so that's really one of the most important things.
Parker Meeks: Any material success in converting these 25 large fleet trials to our targeted 50-100 truck multi-year commercial agreements per fleet would yield sizable year-end order backlog for the company. Beyond our vehicle platforms, we are also seeing increased commercial interests in our fuel cell technology from the stationary power market, including in such applications as backup and primary power for data centers. The combination of rapid data center storage demand growth driven by AI and cloud computing alongside data center owners and customers significant ESG goals is in turn driving demand for clean hydrogen fuel cell power in data center expansion projects.
Speaker Change: As many of our customers, particularly the large fleets in North America, have been trying battery trucks for some time.
Speaker Change: When you're talking about a refugee collection vehicle,
Speaker Change: You know, those vehicles need to do several things really to perform the same job that the combustion engine trucks do today, right? They need to be able to carry a certain amount of payload.
Parker Meeks: Of course, they need to operate safely. They need to be able to handle, in some cases, hilly, steep climbs in neighborhoods and on the way to and from a landfill. They've got to be able to also handle the power requirements for these advanced garbage truck bodies, right? When you look at the garbage truck of today, it's incredible the innovation that the garbage truck body manufacturers have put into these garbage truck bodies, the ability to pack the trash while the truck is moving, for instance, all the efficiencies that they can build in, but all that creates power.
Speaker Change: It's really one of the most important things. Of course, we need to operate safely, we need to be able to handle, you know, in some cases, hilly, steep climbs and neighborhoods and on the way to and from a landfill.
Speaker Change: They've got to be able to also handle the power requirements for these advanced garbage truck bodies, right? When you look at the garbage truck of today,
Speaker Change: It's incredible the innovation that the garbage truck body manufacturers have put into these garbage truck bodies. The ability to pack the trash while the truck is moving, for instance, all the efficiencies that they can build in, but all that creates power.
Parker Meeks: So we add all that demand up, and the need to carry payload where some garbage truck applications need to carry up to 10 tons of trash payload to stay on track in terms of the number of trips they're having to make to a landfill to complete their route. They need to be able to carry them up and downhill; they need to be able to power a body which has a steadily increasing power demand based on what it can do.
Speaker Change: So we add all that demand up, a need to carry payload, where some garbage truck applications need to carry up to 10 tons of trash payload.
Parker Meeks: We are now at advanced customer discussions for near-term deployments. With these trends in mind, the stationary fuel cell power market estimated $3.5 billion in the US by 2030 poses an attractive future application for Hyzon's heavy-duty fuel cell technology. Moving to our fuel cell technology, we're continuing to make progress with our sea sample development in our bowling brook Illinois facility and remain on track for SOP in the second half of 2024. As a reminder, Hyzon's fuel cell system generates a net 200 kilowatts from a single fuel cell stack which offers a 30% lighter, 30% smaller, more cost effective and more fuel-efficient option when compared to the conventional approach of combining two systems or stacks to reach equivalent power.
Speaker Change: to stay on track in terms of the number of trips they're having to make to a landfill to complete their route. They need to be able to carry up and downhill. They need to be able to power a body which has a steadily increasing power demand based on what it can do.
Parker Meeks: In trials, our customers tell us that most of the battery-powered garbage trucks on the road today really can only complete about a half to maybe two-thirds of a day's work, right, because of all that power needs, because of the weight of the batteries. And the biggest part of that is the payload penalty. We're seeing payload penalties on battery refuse collection vehicles of, you know, up to 40 percent, which obviously means they can carry less refuse and need to make more trips and or just have more trucks to complete the same amount of refuse collection and hit the same number of houses. To give you some numbers from our initial refuse truck trial in Australia, you know, that route tree required about 125 miles plus. 1,200 garbage can lifts for a day. Think about it as 1,200 households, right?
Speaker Change: In trials, our customers tell us that most of the battered garbage trucks on the road today really can only complete about a half to maybe two-thirds of a day's work.
Speaker Change: Right because of all that power need because of the way the batteries and the biggest part of that is the payload penalty We're seeing payload penalties on battery refuse collection vehicles You know up to 40%
Speaker Change: which obviously that means they can carry less refuse and need to make more trips and or just have more trucks to complete the same amount of refuse collection hit the same number of houses.
Parker Meeks: In the second quarter, we built 16 sea samples for a total of 21 sea samples built in the first half of 2024. We also progressed our rigorous durability testing, supported by commissioning our 8th fuel cell test stand in Q2, which expands our capability for in-house in-to-end fuel cell testing today and ongoing quality control once we begin production. Our remaining capExpane to achieve SOP is substantially complete, at which point we expect annual capacity to be 700 to 100 kilowatt fuel cell systems on three shifts. We expect this to sustain our planned production rates for the next two years.
Speaker Change: To give you some numbers from our initial refuse truck trial in Australia, you know that route tree required about 125 miles plus
Parker Meeks: That truck had to pick up. And that's what combustion could do on a route that had up to 18% grades, which are just massive hills in the suburbs of. I was on operation for four months, completed that 125 kilometer plus 1200 bin lift plus day with the steep hills without needing to refuel during the day, right? With battery trucks today, battery trucks now just cannot do what they used to. So that's the use case.
Speaker Change: 1,200 garbage can lifts per day. Think about it as 1,200 households, right, that truck had to pick up. And that's what combustion could do in a route that had up to 18% grades, which are just massive hills in the suburbs of Sydney.
Speaker Change: My truck was in operation for four months, completed that 125 kilometer plus 1200 bin lift plus day with the steep hills.
Speaker Change: without needing to refuel during the day, right? Which battery trucks today, battery trucks are now just simply.
Parker Meeks: And that's why we say, you know, given that we're the only fuel cell refuse collection vehicle that's close to coming to market, and the only one that we see announced at least for at least the next two, probably three years, and the fact that we don't see a single bioelectric truck that even comes close today, based on publicly announced results, to being able to meet the use case and meet the needs when your large refuse fleets These companies have been leaders in the drive towards lower emissions through the work they've done with CNG, for instance. But then you combine that with the customer and their willingness to pay. So particularly in a state like California, where you have customers at the city and county level, right?
Parker Meeks: In initial capacity testing, our team confirmed this production rate along with our capital-efficient future capacity expansion plans in line with anticipated demand and customer scale-up programs. Finally, let me touch on the market environment. While government support has waned in international markets, we are seeing continued and growing strong support here in the U.S. This includes the $2.6 billion Environmental Protection Agencies Clean Ports Program, CARB's HVIP Program in California, the Internal Revenue Code Section 45W $40,000 Commercial Clean Vehicle Tax Credit, and the Administration's Hydrogen Hub Program, which recently funded its first three regional hubs, including a $12.6 billion agreement for California's Hydrogen Hub application, CARB's HVIP Program We expect additional hydrogen hubs to be funded before the end of the year and potential first awards under the Queen Ports program to be granted by year end as well.
Speaker Change: cannot do. So that's the use case and that's why we say given that we're the only fuel cell refuse collection vehicle that's close to coming to market and the only one that we see announced at least for at least the next two probably three years
Speaker Change: And the fact that we don't see a single bioelectric truck that even comes close today, based on publicly announced results, to being able to meet the use case and meet the needs. When your larger abuse fleets...
Speaker Change: are facing both, in many cases, board-level sustainability goals of their tribes.
Speaker Change: to lower emissions to zero, which we're very thankful to partner with many of the large refuse companies in our upcoming trials.
Speaker Change: You know, these companies have been leaders in the drive towards lower emissions through the work they've done with CNG, for instance, but then you combine that with customer demand.
Parker Meeks: These are the customers for the large refuse management companies and fleets. They're putting in their RFPs and their bid packages, a goal and a scoring mechanism around how many zero emission trucks that refuse collection provider will have in their fleet on their routes by a certain year, 2026, 2027, 2028. And these are tens of trucks per major part of that route, and this is now a scoring requirement that the refuse collection fleets see if they want to compete, if they want to either retain the contracts that they already have in their portfolio, or if they want to expand their market share into big city, big county contracts that have these requirements.
Speaker Change: and willingness to pay. So particularly in the state of...
Speaker Change: California
Speaker Change: where you have customers at the city and county level, right? These are the customers for the large.
Parker Meeks: Hyzon has supported several Queen Ports applications, the largest of which could yield an order of up to 100 fuel cell trucks is selected. Hyzon has also recently submitted an application under the bipartisan infrastructure laws advanced energy manufacturing and recycling grant program. It selected the grant could provide up to $19.9 million and a 50% mass structure to help fund future expansions of our bowling broke fuel so manufacturing facility to annual production of 2800 fuel cell systems well beyond our anticipated cash flow breakeven production.
Speaker Change: refuse management companies and fleets.
Speaker Change: They're putting in their RFPs and their bid packages a goal and a scoring mechanism around how many zero-emission trucks that a refuse collection provider has in their fleet on their routes by a certain year, 2026, 2027, 2028.
Speaker Change: These are pins of trucks per major part of that route, and this is now a scoring requirement.
Speaker Change: that the Refuse Collection Fleet see if they will want to compete, if they want to either retain the contracts that they already have in their portfolio, or if they want to expand their market share into big city, big county contracts that have these requirements.
Parker Meeks: Despite the potential for political changes in November we remain bullish on the long-term prospects for our industry and our company thanks to the support we see from states to this California which are committed to decarbonization and the federal program's emissions before which have shown continued momentum over the past several months.
Parker Meeks: You know, they need to have the ability to raise their machine trucks in their fleet, and if they choose the battery business, today's technology, they have to buy like 25% or 40% more trucks to be able to deliver that service. So it's a performance gap that we think is substantial between fuel cell and battery. It's an economic gap that we think is substantial.
Speaker Change: You know, they need to have an ability to raise their emission trucks in their fleet, and if they choose battery, based on today's technology, they're going to have to buy, again, 25-40% more trucks.
Speaker Change: to be able to deliver that service. So it's a performance gap that we think is substantial between fuel cell and battery. It's an economic gap that we think is substantial.
Parker Meeks: Before handing the call over to Steve our light to reiterate the two primary goals and anticipated milestones for 2024 which we discussed last quarter. First, SOP of our 200 kilowatt fuel cell system and class eight fuel cell truck platform. We expect to reach SOP for a single stack 200 kilowatt fuel cell system and our 200 kilowatt class eight fuel cell truck platform in the second half of 2024. These will be major technology and commercial achievements clearing the path for commercial scale up of our leading fuel cell technology to large fleet customers.
Parker Meeks: And the most exciting thing that we see, frankly, is our expectations for fuel efficiency and what that means for the economic equation, particularly on the refuse flexing vehicle. So, based on our Sydney trial, we saw fuel efficiency of up to three times better on our fuel cell truck than diesel.
Speaker Change: And the most exciting thing that we see, frankly, is our expectations for fuel efficiency and what that means for the economic equation, particularly on the refuse flexing vehicle. So based on our Sydney trial, we saw fuel efficiency of up to three times
Speaker Change: Better fuel efficiency on our fuel cell truck than diesel.
Parker Meeks: What's the dramatic difference given half the cost of a truck over its life is fuel? Now, what that means is if that's over the whole tier of the US, you know, we that abuse case could support up to $15 per kilogram hydrogen pricing, assume diesel is at $5 a kilogram, and be at the same cost of fuel today without subsidy if that fuel is delivered at $15 a kilogram without subsidy. So there's, as you can see, it's a use case we're quite excited about, and we have very high demand from, particularly, large refuse containers across both the U.S. and Canada because of, again, the performance equivalency with combustion, the performance advances to climate close versus burst battery, and the economic advantages of fuel cells when it comes to the fuel efficiencies that we're saying that we expect to confirm and Thank you for that.
Speaker Change: Which is a dramatic difference given half the cost of a truck over its life is fuel. So what that means is, if that fuel efficiency holds here in the U.S.
Parker Meeks: And second, large fleet commercial agreements. Subject to successful trials we anticipate signing new large fleet multi-year commercial agreements in 2024. On the back of the 25 large fleet trials planned through January 2025. These trials launched on the 200 kilowatt class eight truck platform in July with positive results thus far and are expected to launch in the refugees truck platform with ecology this month. Additionally, we anticipate advancing fleets under existing commercial agreements to the second tranche of their multi-stage commercial agreements. And I stated previously, any material success in converting trials to new large fleet contracts which has significant progress in setting high funds commercial pipeline foundation alongside evidence of large fleet scale up progression.
Speaker Change: That use case could support up to $15 per kilogram hydrogen pricing, assuming diesel is at $5 a kilogram, and be at the same cost of fuel today without subsidy if that fuel is delivered at $15 a kilogram without subsidy.
Speaker Change: So there's, as you can see, it's a use case we're quite excited by, and we have very high demand from particularly the large refuse slates across both the U.S. and
Speaker Change: Canada
Speaker Change: Because of, again, the performance equivalency with combustion, the performance advantage to diamond closed versus battery, and the economic advantages.
Speaker Change: of FuelCell when it comes to the fuel efficiencies that we're seeing that we expect to confirm in trial very, very soon.
Speaker Change: Thank you for that.
Parker Meeks: Finally, we are focused on strengthening our balance sheet and securing additional capital to fund our business.
Craig Irwin: The investment communities are paying a lot of attention to infrastructure, as far as the ability to either fuel or charge the new drive train vehicles that are becoming available out there. You know, a lot of the EV truck companies have had challenges because they can't provide sufficient charging for the school bus fleets or for the anticipated truck fleets that people want. Can you talk about how you're handling refueling for your trials, not just on the refuse trucks but in other markets and the timelines and permitting necessary to put in the hydrogen refueling structure and whether or not there's pre-existing infrastructure may be available to similar customers that facilitates early adoption? Thanks, Craig.
Speaker Change: The
Speaker Change: investment communities is paying a lot of attention to infrastructure as far as the ability to either fuel or charge
Steve Weiland: With that, I'll hand it over to Steve to discuss our financial results in more detail. Steve, thank you Parker, just to recap our prior disclosures and what Parker discussed on our strategic repositioning. After a comprehensive review, we are focusing on the North American class eight and refugees markets. We believe that there is a tremendous opportunity in these markets with the support of regulatory environment and that the difficult decisions we took to preserve our balance sheet and narrower focus will ultimately put us in a position to succeed.
Speaker Change: the new drivetrain vehicles that are becoming available out there.
Speaker Change: A lot of the EV truck companies have had challenges because they can't cite sufficient charging for the school bus fleets or for the anticipated truck fleets that people want.
Speaker Change: Can you talk about how you're handling refueling for your trials, not just on the refuse trucks, but on other markets?
Steve Weiland: In connection with the exit activities in Europe and Australia, we now estimate that we will incur charges of approximately $21 million of which approximately $4 million is cash. Cash. While the total estimated amount has increased since our initial disclosure, the estimated cash impact has come down. We incurred substantially all of these costs in the second quarter and anticipate making the related cash payments in the third and fourth quarters of 2024. However, we do believe that once our announced actions are complete based on how we are operating now, our average monthly recurring net cash burn will drop to approximately $6.5 million by the end of the year, while still supporting our core initiatives.
Speaker Change: and the timelines and permitting necessary to put in hydrogen refueling structure and whether or not there's pre-existing infrastructure may be available to similar customers that facilitates early adoption.
Parker Meeks: And that's a critical area that we're actually working on. You know, my personal background actually is more on the energy infrastructure side. So something Hyzon has been in deep collaboration with partners around really since its inception, right, bringing the molecule and the infrastructure required to our fuel cell technology and to our trucks, in this case, is vital. And again, going back to what I just said, given it's half the cost of the truck over its life, and because both technologies have infrastructure challenges to overcome, but we do see the path for hydrogen fuel cell technology on infrastructure to be an easier one than battery electric and a less expensive one. And so let me explain why and update you on what we're doing and what we're seeing. You know, starting with battery electric cars because that is part of the comparable.
Speaker Change: Thanks, Craig. And that's a critical area that we're actually working on is, you know, my personal background actually is more on the energy and infrastructure side.
Speaker Change: something Hyzon has been in deep collaboration with partners around really since Hyzon's inception, right, bringing the molecule and the infrastructure required to our fuel cell technology and to our trucks in this case.
Speaker Change: It's vital, and again, going back to what I just said, given it's half the cost of the truck over its life.
Steve Weiland: These were difficult but necessary actions and we are deeply appreciative of our employees accomplishments in these regions and continued support as we wind down impacted operations.
Speaker Change: and because both technologies have had infrastructure challenges to overcome but we do see the path for hydrogen fuels and technology on infrastructure to be an easier one.
Steve Weiland: Turning to results for the second quarter of 2024, our second quarter 2024 revenue was $0.3 million compared to zero revenue in Q2 2023. Our revenues this quarter primarily reflected continued recognition of the trucks delivered to PSG that are treated as an operating lease for accounting purposes and spare parts sales to a customer. Cost of revenue came to $18.4 million in the second quarter of 2024 versus $2.4 million in a prior year period.
Speaker Change: and Battery Electric and a less expensive one. And so let me explain why and update in line with your question as to what we're doing and what we are seeing. You know, starting with Battery Electric, because that is part of the comparable,
Parker Meeks: You know, again, both on the Class A fleet platform and with the refuse collection vehicle, all of us in zero emission are going to scale, whether it's battery trucks or fuel cell trucks in back to base use cases, right? We're not going to scale these solutions in markets and over the road, point to point, you know, long haul type of a setup. That means we typically have anywhere from 50 to 500 trucks behind the warehouse fences, behind intermodal yard fences, behind refuse collection landfill fences that are all being fueled typically on site today.
Speaker Change: Again, both on the Class A fleet platform and with the Refuse Collection Vehicle, all of us in Zero Emission are going to scale, whether it's battery trucks or fuel cell trucks,
Steve Weiland: Cost of revenue for this quarter was primarily related to inventory write down associated with the restructuring actions in Australia and Europe as well as the US for 110 kilowatt inventory given the transition to our 200 kilowatt platform. Cost of revenue for the comparable prior year period primarily related to cost provisions accrued for customer contract activities and inventory write down in Europe. We are pleased for report that R&D, SGNA and net cash burn all came in at or below the low end of our guidance ranges reflecting our concerted efforts to manage spent.
Speaker Change: and back-to-base use cases.
Speaker Change: We're not going to scale these solutions and markets and over the road, point to point, you know, long haul type of a setup. That means we have typically, you know, anywhere from
Parker Meeks: Right? They're being fueled with diesel, they're being fueled with C and G, and that actually helps us from a hydrogen perspective because these fleets are used to handling fuel that's either being produced onsite, in the case of C and G, collected and or distributed, and if it's diesel, they're typically receiving diesel deliveries at least weekly, if not daily.
Speaker Change: You know, 50 to 500.
Speaker Change: trucks behind the warehouse fences.
Speaker Change: behind intermodal yard fences, behind refuse collection landfill fences that are all being fueled typically on-site today. They're being fueled with diesel, they're being fueled with C&G and that actually helps us from a hydro perspective because these places are used to handling
Steve Weiland: R&D expenses came to $9.8 million in the second quarter of 2024 versus $12.6 million in the prior year period. Reflecting lower R&D material costs partially offset by higher R&D personnel costs. Second quarter R&D came in below our quarterly guidance range of $11 to $13 million primarily due to continued efforts on reducing spend. Certain development costs coming in less than anticipated and the timing of certain development activities in support of our fuel cell SOP.
Parker Meeks: So that is normal for almost every fleet from a large fleet perspective that we are working with. That's how they run their operations today, on-site fueling, regular deliveries, or collection of fuel. In some cases, and particularly in the refuse industry, they're already producing their own fuel for many of these fleets from the C and G perspective. When you look at battery electric, right, the transition for a fleet to try and do battery charging for any concentration of trucks is dramatic, right?
Speaker Change: fuel that's either being produced on-site, in the case of C&G, collected
Speaker Change: and or distributed, and if it's diesel, they're receiving typically diesel deliveries.
Speaker Change: at least weekly, if not daily.
Speaker Change: Right, so that is normal for almost every fleet, from a large fleet perspective that we are working with. That's how they run their operations today. Outside fueling, regular deliveries, or collection of fuel.
Speaker Change: In some cases, particularly in the refugees industry, they're already producing their own fuel for many of these leaks from a C&G perspective.
Steve Weiland: SGNA came in at $25.5 million in the second quarter of 2024 versus $49.1 million in the prior year period. The year over your decrease in SGNA was primarily driven by the $22 million SEC settlement recorded in the second quarter last year in overall reduction in legal and professional fees and spend reduction efforts partially offset by higher stock based compensation and a write down of certain supplier deposits. Second quarter SGNA came in just below the bottom end of our $26 to $30 million guidance range.
Parker Meeks: If you're talking about any meaningful number of trucks, you know, 40, 100, 150 battery-powered trucks, you quickly get into megawatts of power that's required behind these fences. When we look at where these trucks are, right, where there are trucks, there are people typically, and where there are people in this factory-based environment, there's a grid typically that is challenged, be it either in generation or, more likely, transmission, distribution And all that is the real cost.
Speaker Change: When you look at battery electric, right, the transition for a fleet to try and do battery charging for any concentration
Speaker Change: of trucks is dramatic, right? If you're talking about any meaningful number of trucks, you know, 40, 100, 150 battery trucks, you're quickly getting into megawatts of power that's required behind these fences.
Speaker Change: When we look at where these trucks are, right, where there's trucks, there's...
Steve Weiland: We also recognized restructuring charges of $2.7 million in the second quarter of 2024 compared to no charges in the prior year period. Restructuring charges this quarter include affid impairment and employee related charges related to our wind down activities in Australia and Europe. Our average monthly net cash burn for the second quarter of 2024 was $9.2 million. For a total $27.5 million for the quarter coming in at the low end of our quarterly guidance range of $27 to $30 million.
Speaker Change: There's people, typically, and where there's people in this back-to-base environment, there's a grid, typically, that is challenged, be it either in generation or in, more likely, transmission, distribution, and substation infrastructure.
Parker Meeks: So when you see some estimates that people put out on battery electric charging, they're only counting the cost of power and using the cost of power, assuming that all the equipment's there, which is almost never the case.
Speaker Change: Capacity.
Speaker Change: and all that is real cost. So when you see some estimates that people put out on battery electric charging, they're only counting the cost of power, I'm using cost of power, assuming that all the equipment's there.
Parker Meeks: We're talking about this level of installed charging if you're getting into the tens and tens and potentially hundreds of trucks behind a sink. So the police are seeing that, and some of the more advanced police are quantifying it, and the cost of battery electric vehicles and the time it will take. You know, in some cases, we've had customers who tell us they've come in for applications with the power authority for a couple hundred trucks with charging stations, and they've been told it's going to take, you know, working for two to six years, to get the infrastructure online that they would And again, when you think about places like L.A. and San Francisco, you can imagine the challenges. Whereas, from a higher standpoint, the transition can be grid independent, right?
Speaker Change: which is almost never the case when you're talking about this level of installed charging if you're getting into the tens and tens and potentially hundreds of trucks behind a single fence.
Steve Weiland: Although down from the $9.9 million first quarter average monthly net burn this was up slightly from the first quarter $8 million average monthly net cash fund excluding the first SEC settlement payment and proceeds from the sale of the Rochester facility. Which reflects the slight uptick we spoke about last quarter due to timing of working capital and pay of $8 million, based on how we are operating at the moment, we estimate that our increased focus in restructuring actions will further reduce our average monthly recurring net cash fund to an estimated $6.5 million by year end. Our cash equivalent in short-term investments so that $55.1 million as of June 30th, 2024.
Speaker Change: So the fleets are seeing that, and some of the more advanced fleets are quantifying it.
Speaker Change: and the cost of battery electric and the time it will take. In some cases, we've had customers who told us they've come in for applications with the power authority for a couple hundred trucks worth of charging and they've been told it's going to take anywhere from two to six years.
Speaker Change: to get the infrastructure online that they would need to get to 200 trucks.
Speaker Change: were the electrical infrastructure capacity at a single point. Then again, you think about places like LA, San Francisco, you can imagine the challenges. Whereas from our standpoint, the transition can be grid independent.
Parker Meeks: When you talk about onsite fueling for mobile fuelers to start, which is what we're doing today, so we just go topically, for instance, in the launch of the first truck delivered to Port Student Group, that the pilot is providing the mobile fuelers for that facility. These typically are mobile fuelers that carry anywhere from 200 kilograms to up to 1 to 4 tons of fuel, depending on whether it's gaseous or liquid, and have dispensers onsite that allow for, in our case, given our gaseous 350 bar tanks, typical fueling for the Class A truck of anywhere from 15 to 20, 25 minutes.
Steve Weiland: I'd like to provide some additional color on our first capital race since our company was listed in July 2021. We have been actively laying out this path with actions such as our shelf filing and authorized share increase. It's also worth noting that we had been unable to raise registered capital, which is critical in this market until we became shelf eligible in June. Once that occurred, we executed against it properly. While capital raising in the current market is very challenging, we believe that this offering helps provide the groundwork for better trading and liquidity, a key ingredient for an improved ability to raise capital.
Speaker Change: Right, when you talk about
Speaker Change: on-site fueling for mobile fuelers to start, which is what we're doing today.
Speaker Change: We just closed Topically for instance, and the launch of the first trust-delivered reports to the group.
Speaker Change: the pilots providing the mobile fuelers for that facility.
Speaker Change: These typically are mobile fuelers that carry anywhere from
Steve Weiland: We have seen this play out as our average daily trading volume increased approximately 22 times to 13 million shares a day from the 30 days prior to the offering to the 16 trading days following it. We believe that this groundwork combined with continued successful 200 GW trials will help provide a path to more meaningful capital raises and potential strategic investment interests.
Speaker Change: 200 kilograms to up to one to four tons of fuel, depending on if it's gaseous or liquid, and have dispensers on site that allow for, in our case, given our gaseous 350 bar tanks.
Parker Meeks: And for the garbage truck, given the onboard packaging is less fuel, doesn't need as much fuel onboard, where are we fueling the garbage truck typically in 10 to 15 minutes, right? Which is important because, going back to the use case, that's also an advantage for us in terms of range. In fact, in some of our trials, the range today that we're seeing on our truck in typical use cases is 300 to 350 bar tanks.
Speaker Change: Typical fueling for the Class A truck of anywhere from 15 to 20-25 minutes, and for the garbage truck, given the onboard packaging is less fuel, doesn't need as much fuel onboard, we're refueling the garbage truck typically in 10 to 15 minutes, right, which is important.
Steve Weiland: Lastly, given the dynamic conditions are ongoing cost actions and capillaries efforts, we are not providing further financial guidance at this time.
Speaker Change: because going back to the use case...
Speaker Change: That's also an advantage for...
Speaker Change: in terms of rates. In fact, in some of our trials...
Parker Meeks: With that, I'll hand it back to Parker for closing remarks. Thank you Steve. We are encouraged by the data and feedback from the first vehicles deployed with PFG and from our first trials with a 200 kilowatt class A fuel cell truck. Our trial customers tell us that high zone trucks are outperforming battery electric and completing daily operations as well as in some cases better than diesel trucks. With fuel efficiency, there's up to 50% better than diesel in some major customer use cases.
Speaker Change: You know, the range today that we're seeing on our truck in typical use cases is 300 to 350 miles.
Parker Meeks: So, for a truck that's going to do 350 miles on the Class A truck, even if they want to do a 600 mile day, it's really only a 15 to 25 minute fill for them to double the range, basically. Whereas, Battery doesn't have that option.
Speaker Change: on the Class A truck, even if they want to do a 600 mile day, it's really only a 15 to 25 minute fill for them to double the range basically, whereas battery doesn't have that option.
Parker Meeks: So we start with mobile fuelers that are available today. We have partners that provide that, and then we have a plan with the customer in line with our multi-year commercial agreement to evaluate, select, permit, and install on-site dispensing, right? So again, going back to the mobile fuelers, if you have a one-ton mobile fueler in a typical use case on a Class A truck, that probably fuels 25 to 30 trucks per day, right?
Speaker Change: So we start with mobile fuelers. That's available today. We have partners that provide that. And then we have a plan with the customer in line with our multi-year commercial agreement.
Speaker Change: to evaluate select, permit, and install.
Speaker Change: on-site dispensing right so again going back to the mobile fuelers if you have a one-ton mobile fueler in a typical use case on a class A truck that probably fuels 25 to 30 trucks
Parker Meeks: We are excited to begin trials of the US Refuge truck this summer and to progress the 25 large police currently in our full trial schedule, targeting conversion of multi-year commercial agreements on the back of those trials. It's successful. This would serve as a strong pipeline and commercial growth foundation for high zone heading into 2025 and beyond.
Parker Meeks: And when you look at our typical multi-year commercial structure, the first year, maybe 5 to 10 trucks; the second year, you know, maybe anywhere from 15 to 30 trucks; you're getting beyond the first year, well into the second year of deliveries on that mobile fueler, and there are options to go to higher capacities. And if you're using a liquid mobile fueler, you can add up to 4 tons of fuel to that trailer while we're working with a customer and our fuel partners to site, permit, and have them construct the onsite fueling facility that will fuel the first scale up to 50 to 100 trucks on that site, with plans to expand that capacity over time.
Speaker Change: per day, right? And we look at our typical multi-year commercial structure, the first year maybe five to ten trucks, the second year, you know, maybe anywhere from 15 to 30 trucks. You're getting beyond the first year well into the second year deliveries.
Parker Meeks: We remain on track for SOP of our single stack 200 kilowatt fuel cell system in the second half of this year while improving our manufacturing efficiencies and expanding our facility capabilities and building Brook Illinois.
Speaker Change: on that mobile fueler, and there's options to go to higher capacity, and if you're using a liquid mobile fueler, you can add up to four tons, potentially, of fuel.
Speaker Change: in that trailer while we're working with the customer and our field partners.
Speaker Change: to site in and permit and have them construct the on-site fueling facility that will fuel, you know, the first scale up to 50 to 100 trucks on that site. We have plans to expand that capacity.
Parker Meeks: I would like to thank the whole high zone team for their continued dedication.
Parker Meeks: Finally, I would like to thank our customers and stakeholders for their continued partnership and for sharing our goal of reducing emissions across the heavy-duty industry through hydrogen fuel cell technology.
Speaker Change: over time. And all that is really, you know, the long lead items in that development are permitting, certainly, just like it is for bioelectric and the supply chain of equipment, but it's an already fundamentally different profile.
Parker Meeks: And all that is really, you know, the long lead items in that development are permitting, certainly, just like it is for bioelectric. And the supply chain of equipment, but it's already a fundamentally different profile of the development structure and timing versus bioelectric, which again, you've got to transform typically all the local infrastructure back to the grid with the utility and the expense that has to come with that.
Operator: With that operator, we are now ready for questions. Thank you.
Operator: The floor is not open for questions. If you're called upon to ask you a question and are listening via loudspeaker on your device, please pick up your handset to ensure that your phone is not on mute when asking your question.
Speaker Change: of a development structure and timing versus by electric, which again, you've got to transform typically all the local infrastructure back to the grid with utility.
Craig Irwin: Your first question comes from a line of Craig Irwin of Roth MKM. Good morning and thanks for taking my questions. That was a really busy quarter in there.
Speaker Change: and the expense that has to come with that. So we're very fortunate to have many infrastructure collaborators, in some cases, that are committed.
Parker Meeks: So we're very fortunate to have many infrastructure partners, I'd say collaborators in some cases, they're committed partners who are actively engaging with our customers to lay out this infrastructure path, starting with global fuelers to get us to the first, you know, 18 to 24 months with a clear plan to design, permit, and install permit dispensing. And it's one that as people see this come to life with our fleets over the next, you know, 12 to 24 months, I think they'll see that the infrastructure advantage lies with fuel cells. Excellent Last question, if I may.
Parker Meeks: So I'm not completely sure where to start. I guess we could probably start with the discussion of refuse trucks. Parker, when we were at Act Expo, we heard people say that the practicalities of actually doing a battery electric refuse truck are actually quite limiting. They don't have the ranges or the performance necessary. And it's actually hard to mount enough batteries on the vehicles. So, you know, the superior economics versus diesel you discussed in your prepared remarks. Really is just the tip of the iceberg. Can you maybe unpack for people the practicalities of a hydrogen fuel cell implementation on on a refuse truck and why your customers are showing such strong interest.
Speaker Change: partners who are actively engaging with our customers to lay out this
Speaker Change: infrastructure path starting with mobile fuelers to get us to the first you know 18 to 24 months.
Speaker Change: with a clear plan to design, permit, and install permit dispensing. And it's one that as people see this come to life with our fleets over the next, you know, 12 to 24 months, I think they'll see that the infrastructure advantage lies with fuel cell.
Craig Irwin: It's really encouraging to see the seed samples tracking exactly how you said they would. And it's nice to hear that the 200 kilowatt stack is on track for on-time commercial production later this year. Can you maybe lay out for us how this might change things in the Class 8 market for you?
Speaker Change: Excellent. Last question, if I may. It's really encouraging to see the seed samples tracking exactly how you said they would, you know, and, you know, it's nice to hear that the 200 kilowatt stack is on track for on-time commercial production later on this year.
Parker Meeks: Craig, good morning. Thanks so much for the question and great to hear from you. So, you know, this is the topic that we love really dive into because frankly, it's changed so much in terms of our market or customers understanding. One of the incredible options for zero emission and refuse collection going forward. You know, a year ago, we thought this platform would be a great platform one that could not perform the fuel cell category, but we thought the space would have, you know, a significant room for biological solutions given the theory was that that that low speed starts to stop region breaking driven use case that just would be able to perform it.
Speaker Change: Can you maybe...
Speaker Change: Lay out for us how this might change things in the class 8 market for you Do you think that this is something that you know has some of the customers that are maybe sitting on the bench right now? Stand up and say okay I'm willing to take my first 10 trucks. I'm willing to take my first 20 trucks
Parker Meeks: Do you think that this is something that, you know, has some of the customers that are maybe sitting on the bench right now stand up and say, okay, I'm willing to take my first 10 trucks. I'm willing to take my first 20 trucks. Is this something where, you know, it's an important proof point to the customer? It certainly is, Craig.
Speaker Change: Is this something where, you know, it's an important proof point to the customer base?
Parker Meeks: And I think, as you know, when you look at the large Class 8 fleets that are in our trial schedule, which again, we are quite proud to have across the Class 8 platform, the refuge truck platform, 25 large fleets in our trial schedule, which we're very excited to have that trial schedule launched last month with our first two large fleets actively in that trial. These fleets are focused on quality. They're focused on durability and longevity.
Speaker Change: It certainly is, Craig, and I think as...
Craig Irwin: Thank you.
Speaker Change: You know, when you look at the large Class 8 fleets that are in our trial schedule, which again, we are quite proud to have across the Class 8 platform, the Refuse Truck platform, 25 large fleets in our trial schedule, which we're very excited to have that trial schedule launched last month with our first two large fleets.
Parker Meeks: But I think you've hit the nail in the head. So, what we customers are realized as many of our customers, particularly the large fleets in North America have been trolling battery trucks for some time. When you're talking about a refuse collection vehicle, you know, those vehicles need to do several things really perform the same job that the combustion engine trucks do today right need to be able to carry a certain amount of payload.
Speaker Change: actively in that trial.
Speaker Change: These fleets are focused on quality. They're focused on durability. They're focused on longevity. You know, they've, you know, been driving a business that's successful, that in the end is a low-margin business. Trucking, typically, is a...
Parker Meeks: You know, they've been driving a business that's successful, but in the end, it is a low margin business. Trucking is typically a low margin business because they focus on the longevity of the products they put into their operation and the overall sort of profit structure of those trucks. So that is a very high bar to me, which is why Hyzon, from the start, we followed a very typical OEM, automotive SOP process, making sure that we're communicating in a way that these colleagues are used to, one that they understand, when we're able to bring them into our facility and show them how we're progressing, not just in our SOP, but in our quality control, in our durability testing, and very transparent It's about the process to improve where we show learnings, right?
Parker Meeks: There's really one of the most important things. Of course, they'd operate safely in the end to be able to handle, you know, in some cases, hilly steep climbs and neighborhoods, by the way, too in front of the landfill. And they've got to be able to also handle the power requirements for these advanced garbage truck bodies, right? When you look at the garbage truck today, it's incredible innovation that the garbage truck bodyguards are put into these garbage truck bodies.
Speaker Change: A Low Margin Business because they focus on the longevity of the products they put into their shop.
Speaker Change: operation and the overall sort of profit structure of those trucks. So that is a very high bar to me, which is why Heimsall, from the start, we followed a very typical OEM
Parker Meeks: The ability to pack the trash while the truck is moving, for instance, all the efficiencies that they can build in, but all that creates power. So, we add all that demand a need to carry payload where some garbage truck applications need to carry up to 10 tons of trash payload to stay on track in terms of the number of trips they're having to make to a landfill to complete their route. They need to be able to carry up and down hill, they need to be able to power a body which has a silly increase in power demand based on what it can do.
Speaker Change: Automotive SOP Process
Speaker Change: making sure that we're communicating in a way that these cliques are used to, one that they understand, when we're able to bring it into our facility and show them how we're progressing, not just in our SOP, but in our quality control.
Speaker Change: in our durability testing and very transparently in what we're seeing, what we're finding. It's not just about
Parker Meeks: Whether it's in fuel cell development, testing, and design, or on trial, right? There are learnings, and our fleets want to see learnings. If we're not showing learnings, they know they're not seeing the full picture.
Speaker Change: You know, the fuel cell works great. Don't worry. It's about the process to improve where we show learnings, right? Whether it's in the fuel cell development, testing, and design.
Parker Meeks: In trials, our customers tell us that most of the garbage truck from the road today really can only come to lead about a half to maybe two hours of a day's work, right? Because of all that power need, because of the way the batteries. And the biggest part of that is the payload penalty. We're seeing payload penalties on battery, refuse collection vehicles of up to 40%. Which obviously that means they can carry less refuse and these make more trips and or just have more trucks to complete the same amount of refuse collection hits in number of houses.
Speaker Change: or on trial, right? There are learnings and our fleets want to see learnings. If we're not showing learnings, they know they're not seeing the full picture because many of them have been through this before, right? They were part of the C&G transition. They're part of the LNG transition and part of the battery electric truck.
Parker Meeks: Many of them have been through this before, right? They were part of the C&G transition, they were part of the L&G transition, and now they are part of the battery electric truck. And so, it's about transparency, it's about a process that they see as standard for the industry, and one that they can touch, feel, and trust. And whenever we tell them that we've implemented over 40 design changes in the fuel cell, in the Toyota Co-op fuel cell, since the start of the SOP, that gives them actual confidence, right? That the process is working, that it's showing results that you would expect to have.
Speaker Change: Thank you for watching. Please subscribe to our channel. Please like and share this video. Please leave a comment if you have any questions. Thank you for watching.
Speaker Change: Markets.
Speaker Change: And so it's about transparency. It's about it's about a process that they see as standard for the industry and and one that that they can touch and feel and trust. And whenever we tell them that we've, you know, implemented over 40 design changes in the fuel cell, in the Toyota Co-op fuel cell since the start of the SOP, that gives an actual
Parker Meeks: To give you some numbers from our initial refuse truck trial in Australia, you know, that route tree required about 125 miles plus 1200 garbage can lifts per day. Think about it as 1200 households, right? That truck had to pick up and that's what combustion could do. And a route that had up to 18% grades which are just massive hills and suburbs. That was an operation for four months. We did that 125-kilometer-plus, 12-motor bin with plus day with those deep pills without the insurvy fuel during the day, right? Which battery trucks today, battery trucks, and honestly, they cannot do.
Speaker Change: confidence, right, that the process is working, that it's showing results that you would expect to have. When we show them the camera-based quality control that we put in, the efficiencies that we've been able to realize in the production process.
Parker Meeks: When we show them the camera-based quality control that we put in, the efficiencies that we've been able to realize in the production process, the additional testing that we brought online to further expand our end-to-end, in-house testing capabilities from single-cell all the way to full-stack and full-systems, and why we have confidence that, assuming that we declare the SOP later this year, we'll have passed all those milestones, and we'll have a product that truly is commercially viable, because it speaks their language, because it's something that's been done in a way that they can see and touch and feel, and we're very open and transparent about it. I think it absolutely is a critical validation for our fleet customers who want to see a product that they can rely on, and that they understand what state it is at.
Speaker Change: the additional test stands that we brought online to further expand our end-to-end in-house testing capabilities from single cell all the way to full stack and full systems.
Speaker Change: and why we have confidence that, assuming that we declare the SOP later this year, we'll have passed all those milestones and we'll have a product that truly is commercially viable.
Speaker Change: Because it speaks their language, because it's something that's been done in a way that they can see and touch and feel, and we're very open and transparent about it, I think it absolutely is a critical...
Parker Meeks: So that's the use case, and that's why we say, you know, given that we're the only fuel cell representation vehicle that's close to coming to market, and the only one that we see announced at least for at least the next two, probably three years. And the fact that we don't see a single biometric truck that even costs close today based on publicly announced results to being able to meet the use case and meet the needs.
Speaker Change: Validation for our client customers.
Speaker Change: who, you know, want to see a product that they can rely on and that they understand what state it is at. They fully understand this is not diesel.
Parker Meeks: They fully understand this is not diesel, right? Diesel's been going through decades of innovation and maturity, and they're okay with that, right? As long as they understand that we are ahead, which we think our customers see, they understand that our performance is going to get the job done, that the path to achieve the longevity, the durability, and the quality that they desire is on track, and that we are on the path to have a product that has an economics that needs subsidies today but won't need subsidies in the future.
Speaker Change: Right, these have all been going through decades of innovation and...
Speaker Change: Thank you for joining us today. Thank you.
Parker Meeks: When your large-review suites are facing both, you know, in many cases, board-level sustainability goals of their drive to low emissions is zero, which are very thankful to partner with many of the large-reviews companies in our upcoming trials. You know, these companies have been leaders in the drive towards lower emissions through the work they've done with CNG Princess. But then you combine that with customer demand and willingness to pay. So particularly in the state of California, where you have customers at the city and county level, right?
Speaker Change: Okay with that right as long as they understand that we are ahead which we think our customers see that
Speaker Change: They understand that our performance is going to get the job done, that the path to achieve the longevity, the durability, and the quality that they desire is on track, and that we are on path to have a product which has economics.
Parker Meeks: It can scale along with the ambition that they have for zero-emission trucks, and that's what we think we have put on the table for them. Great. Well, congratulations on all the progress in the quarter. I'll go ahead and hop back in the queue.
Speaker Change: that need subsea today, but don't need subsea in the future. It can scale along with the ambition that they have for zero-emission trucks. And that's what we think we put on the table for them.
Parker Meeks: These are the customers from a large-reviews management companies in Deathleaf. They're putting in their RFPs and their bid packages of a goal and a scoring mechanism around how many zero-mission trucks that refuse collection provider has in their fleet on their routes by a certain year, 226, 227, 228. And these are at either the end of trucks per major part of that route. And this is now a scoring requirement that the refuse collection fleet see if they want to compete, if they want to either retain the contracts that they already have in their portfolio, or if they want to expand their market share and the big city-big county contracts that have these re-acquirements, you know, they need to have the ability to raise service to trucks in their fleet, and if they choose battery business with today's technology, they have to buy, again, 25% to 40% more trucks to be able to deliver that service.
Speaker Change: Great. Well, congratulations for all the progress in the quarter. I'll go ahead and hop back in the queue. Thanks.
Craig Irwin: Thank you. Thanks a lot, Craig. Your next question. Stephen Fox of Fox Advisors. Your line is open. Hey, good morning, everybody.
Greg: Thanks a lot, Greg.
Speaker Change: Your next question comes from the line of Stephen Fox of Fox Advisors. Your line is open.
Stephen FOX: I guess, first of all, can you, Parker, clarify a couple of things you said relative to PFG? So, from a standpoint of potentially ramping up to maybe 30 vehicle orders and PFG operating, you know, say 20 to 30 vehicles at a time, how do you and your partner envisage that working? And can you just sort of specifically talk about how the fueling infrastructure would work with what would be your, you know, your first large fleet customer at scale? And then I had a couple of follow-ups. Great. Hey, it's Didn't Get Rewarded.
Stephen FOX: Hey, good morning, everybody. I guess, first of all, can you, Parker, can you clarify a couple of things?
Stephen FOX: You said relative to PFG, so from a standpoint of potentially ramping to maybe 30 vehicle orders and PFG operating, you know, say 20 to 30 vehicles at a time, how do you and
Speaker Change: Your partner Envision Networking, and can you just sort of specifically talk about how the fueling infrastructure would work with what would be your, you know, your first large fleet customers at scale? And then I had a couple follow-ups.
Speaker Change: Have a great day, see you in the morning. Thanks for the...
Parker Meeks: Thanks. Thanks for the feedback. Questions. So, specifically with regard to Horns Food Group, you know, again, we're quite thankful to have PFG as a core anchor fleet customer here in the U.S. market. For those that aren't aware, you know, PFG is the fifth largest private fleet in the U.S. with 7,000 trucks, and we think that they are a real leader in the industry in terms of decarbonization goals and driving innovation into their fleet.
Speaker Change: questions. So specifically with regard to the performance food group, you know we're again we're we're quite thankful to have PFG as a core anchor fleet customer here in the US market. Those that aren't aware, you know PFG is the fifth largest private fleet in the US with 7,000 trucks and we think that they are a real leader.
Parker Meeks: So it's a performance gap that we think is substantial between fuel cell and battery, it's an economic gap that we think is substantial. And the most exciting thing that we see frankly is expectations for fuel efficiency, and what that means for the economic equation, particularly on the refuse collection vehicle. So based on our Sydney trial, we saw fuel efficiency a lot of three times better fuel efficiency on our fuel cell truck than diesel, right?
Parker Meeks: They've shown that through, you know, public announcements they've made on the battery electric side, and now we're the first fuel cell truck supplier. So, you know, now five, we're very proud to have five 19-kilowatt trucks deployed to PFG over the past few quarters. And those five are the first five of a potential total 50-truck commercial agreement that we signed with PFG last year.
Speaker Change: in the industry in terms of decarbonization goals and driving innovation into their fleet. They've shown that through, you know, public announcements they've made on the battery electric side and now we're the first fuel cell truck supplier to, you know, mount five. We're very proud to have five non-fit kilowatt trucks.
Speaker Change: deployed the PFG over the past the past few quarters.
Parker Meeks: Was it a dramatic difference given half the cost of a truck over its life is fuel? And what that means is, if that fuel efficiency holds here in the U.S., that abuse case could support up to $15 per kilogram hydrogen pricing, assuming diesel is at $5 per kilogram and be at the same cost of fuel today, without subsidy if that fuel is delivered at $15 per kilogram without subsidy. So there's, as you can see, it's used case for quite a sudden by, and we have very high demand from particularly the large refuse waste across both the U.S, and the Canada.
Speaker Change: And those five are the first five of a potential total 50 truck commercial agreement that we signed with PFG last year. The next tranche is 15 trucks, up to 15 trucks.
Parker Meeks: The next tranche is 15 trucks, up to 15 trucks on the back of the 200-kilowatt trial that we hope is successful. Assuming that trial succeeds, PFG will have the option to purchase up to 15 trucks in the next tranche, and then there's a further 30-truck option for PFG beyond that. So, we're currently, you know, delivering those trucks to their Fontana facility, which we had a celebration event for in January at that facility and when the first four trucks were put into operation there.
Speaker Change: on the back of a 200 kilowatt trial that we hope is successful. Assuming that trial succeeds, you know, PFG will have the option to purchase up to 15.
Speaker Change: trucks in the next launch, and then there's a further 30 truck option for PFG beyond that. So we're currently, you know, delivering those trucks.
Speaker Change: in their Fontana facility, which we had a celebration event in January at that facility.
Parker Meeks: And, you know, I can't speak deeply on PFG's plans, but what I will say is we work very closely with PFG as an example of a large customer who does, you know, fuel their truck, their diesel fleet onsite today. So, it fits right in the model that I just walked through as to how we see the infrastructure evolving over time.
Parker Meeks: Because of, again, the performance equivalency with combustion, the performance advances to slightly closed versus burst battery and the economic advantages of fuel cell when it comes to the fuel efficiencies that we're saying that we expect to confirm in trial very, very soon.
Speaker Change: and one of the first four trucks were put into ops there.
Speaker Change: and I can't speak deeply on PFG's plans, but what I will say is we work very closely with PFG as an example of a large state customer.
Speaker Change: who does, you know, fuel their truck, their diesel fleet onsite today. So it's very, fits right in the model that I just walked through.
Unknown Executive: Thank you for that.
Unknown Executive: So the investment community is paying a lot of attention to infrastructure as far as the ability to either fuel or charge the new drivetrain vehicles that are becoming available out there. You know, a lot of the EV truck companies have had challenges because they can't cite sufficient charging for the school bus fleets or for the anticipated truck fleets.
Parker Meeks: Today, those trucks, as we announced publicly, are being fueled by a few different fueling sources. Initially, it was fueled by a trailer provided by Pilot, and we're, you know, in the middle, as I mentioned before, in line with how we typically approach things with our fleets, working with PFG on their midterm and long-term fueling solution for Fontana and then for the potential other locations where they're considering, you know, expanding fuel cell trucks, you know, as we get into, deeper into that total 50 truck potential order pattern over a time.
Speaker Change: as to how we see the infrastructure evolving over time. Today, the trucks, as we announced publicly, are being fueled by a few different fueling sources. Initially, it was fueled by a trailer provided by Pilot.
Speaker Change: And we are, you know, in the middle, as I mentioned before, in line with how we typically approach things with our fleets.
Speaker Change: I'm working with PFG on their midterm and long-term fueling solution for Fontana and then sort of potential other locations where they're considering, you know, expanding fuel cell trucks.
Parker Meeks: But people want, can you talk about how you're charging out, or sorry, how you're handling refueling for your trials, not just on the refuse trucks, but on, on, on other markets? And the timelines and permitting necessary to put in hydrogen refueling structure and whether or not there's pre existing infrastructure, maybe available to similar customers that facilitates early adoption.
Speaker Change: you know, as we get into, deeper into that total 50 truck potential order pattern over, over a time.
Parker Meeks: So, you know, the transition for a fleet like PFG, you know, will be on mobile fuelers, and again, based on the capacity that I mentioned before, you know, they can fuel on mobile or temporary fueling solutions, you know, well into, basically through this entire second tranche, if you add it together, it's five on the ground today, and another 15 in the second tranche for a 20 total. As you progress to a total of 50, should they take their option to bring in the full 15 from the second tranche and the further 30 if they go through that entire pattern, you know, 50 trucks, you theoretically can fuel from a, you know, a liquid fueling trailer solution, but at that point, you start to look at, you know, the permanent install solution for a facility, and the good news is you really only need about 30 to 40 trucks in a single facility to baseload a permanent install station, right?
Speaker Change: The transition for a fleet like PFG will be on mobile fuelers, and again, based on the capacities I mentioned before, they can fuel on mobile or temporary fueling solutions.
Parker Meeks: Now, thanks for having me. That's a critical area that we're actually working on is, you know, my, my first American actually is more on the energy infrastructure side. So something high zone has been in deep collaboration with partners around really some times on inception, bring the molecule and the infrastructure required to our fuel cell technology to our truck in this case is vital. And again, my next one I just said given its half the cost of the truck over its life. And because both technologies have infrastructure challenges to overcome. But we do see the path for hydrogen fuels and technology infrastructure to be an easier one. And battery electric and on that expensive one.
Speaker Change: basically through this entire second trough, if you add them together, it's five on the ground today, another 15.
Speaker Change: Thank you.
Speaker Change: You theoretically can fuel from a, you know, a liquid fueling trailer solution.
Speaker Change: But at that point, you start to look at
Speaker Change: you know, the permanent install solution for a facility. And the good news is you really only need about 30 to 40 trucks at a single facility to baseload a permanent install station.
Parker Meeks: And so let me explain line and update and I'm in line with the question as to what we're doing and what, what we're seeing. You know, starting with battery electric is that it's part of the comparable. You know, again, both on the class, they fleet platform and with the refugees question vehicle. You know, all of us in zero mission are going to scale whether spider trucks or fuel cell trucks. In fact, it's use cases, right?
Parker Meeks: So, even, you know, that 50 truck order pattern should be fulfilled; there are plenty of trucks to fully economically baseload an onsite fueling installation permanent solution, and you can imagine that's exactly the type of planning that we're going through with PFG, which we've been in for some time as we get ahead of that transition from mobile fueling. So, in short, mobile fuelers and additional capacity from the existing stations that are online in the area and that are being brought online are all viable solutions for a customer like PFG well into the 30 plus truck range. And then as we get into that, you know, third and fourth tranche of an order pattern, we want to make sure we've got that installed solution onsite, where there's plenty of capacity and truck volume to make that a viable solution.
Speaker Change: Right, so even, you know, that 50-truck work pattern should be fulfilled, there's plenty of trucks to fully economically baseload an on-site fueling and install permanent solution. And you can imagine that's exactly the type of planning that we're going through with PFG, which we've been in for some time.
Speaker Change: as we get ahead of that transition from mobile fueling. So, in short, mobile fueler and additional capacity from the existing stations that are online in the area and that are being
Parker Meeks: We're not going to scale these. These solutions and markets and over the road point to point, you know, long haul type of a set up. That means we have typically, you know, anywhere from, you know, 50 to 500 trucks behind the warehouse fences, behind intermole yard fences, behind refugees collection landfills that are all being fueled differently on site today, right? They're being fueled, diesel, the big fuel, fuel of CNG. And that actually helps us from a hydrogen perspective.
Speaker Change: Brought online!
Speaker Change: are all viable solutions for a customer like PFG well into the 30-plus truck range. And as we get into that, you know, third and fourth trunk of an order pattern, we want to make sure we've got that thought solution on site, which there's plenty of capacity and truck volume to make that a viable solution.
Parker Meeks: That's really helpful. And then, just as a follow-up, you mentioned how you're oversubscribed in terms of future trials for the 25 fleets you highlighted. Can you talk about just your confidence level in being able to execute that many trials over a short period of time? In the next, I guess, year or two. Yeah, no, thanks.
Speaker Change: That's really helpful. And then just as a follow-up...
Parker Meeks: Because these weeks are used to handling fuel that's either being produced on site in the case of CNG collected and or distributed. And it's diesel, they're receiving typically diesel deliveries, at least weekly, if not daily, right? So that, that is normal for almost every fleet from a large thing perspective that we are working with. That's how they run the operation outside fueling regular deliveries or collection of fuel. In some cases, particularly in the refugees industry, they're already producing their own fuel for many of these of these, these late CNG, when you look at battered electric, right, the transition for flea to try and do battery charging for any concentration of trucks is dramatic, right?
Speaker Change: You mentioned how you're oversubscribed in terms of future trials of 25 fleets you highlighted. Can you talk about just your confidence level in being able to execute, you know, that many trials over a short period of time in the next, I guess, year or two?
Parker Meeks: Thanks, Stephen. You know, it's critical for our business, obviously, as we've said for some time, the trial really is the final stage in the customer development journey. Typically, when a trial launches with a large fleet, we've been through months of joint customer shaping where, at both the executive level and the direct sort of fleet operator level, we're deep into fuel cell technology, economics, where it fits in a use case, where it should outperform battery electric vehicles, and where it should be on par with the combustion alternative, where the fuel system comes from, and how it's going to scale over time
Speaker Change: Yeah, no, thanks. Thanks, Stephen. You know, it's critical for our business, obviously, as we've said for some time, the trial really is the final stage in the customer development journey. Typically, when a trial launches with a large fleet, we've been through months of joint customer shaping where, at both the executive level and the direct sort of fleet opco level,
Speaker Change: We're deep into, you know, fuel cell technology, economics, where it fits in a use case, where it should outperform battery electric.
Parker Meeks: If you're talking about any meaningful number of trucks, you know, 40, 100, 150 battery trucks, you can look at into mega lots of power is required behind these fences. When we look at where these trucks are, right, where there's trucks, there's, there's people typically, and where there's people in this activation environment, there's a grid typically that is challenged. It be it either is generation or in more likely transmission distribution and substation, infrastructure capacity.
Parker Meeks: All that work is done over months to prove to ourselves and to the customer that this is worth doing, and then the trial launches are sort of the final proof step before finalizing contract negotiations and potential fuel supply for the scale-up. So, the 25 large fleets, the majority are at that stage, right? And that's across both platforms.
Speaker Change: and where it should be on par with the combustion alternative, where the fuel is going to come from, how it's going to scale over time.
Speaker Change: done over a month to prove to ourselves and to the customer this is worth doing. And then the trial launches as sort of the final proof step before finalizing contract negotiations and potential fuel supply for the scale-up.
Speaker Change: So the 25 large fleets, the majority are at that stage, right? And that's across both platforms. So the Class 8 is already in trial. Our first trial truck is what's already been now in two different large fleets in July into August.
Parker Meeks: So, the Class 8 is already in trial. Our first trial truck is now in two different large fleets from July to August. And the refuge truck, we're still on track to have that trial launch with Procology starting in the San Francisco Bay Area this month. And while 25 is a significant number over, you know, the remaining four and a half months of the year with two truck platforms and additional trial trucks coming online later in the year. We're comfortable and confident, particularly given that the majority of the trials across both platforms are in California or California. So they're, they're concentrated in geography.
Parker Meeks: And all that is real cost. So when you see some estimates that people put out on bag of charging, they're only counting the cost of power and using cost of power, assuming that all the equipment's there, which is almost never the case when we're talking about this level of install charging, if you're getting into that 10s and 10s and potentially hundreds of trucks financing, but so the fleas are seen that and some of the more advanced fleas are quantifying it.
Speaker Change: and the Refuse Truck were still on track to have that trial launched with.
Speaker Change: Procology, starting in the San Francisco Bay Area in this month.
Speaker Change: And while 25 is a significant number over the remaining four and a half months of the year, with two truck platforms and additional trial trucks coming online later in the year,
Parker Meeks: And the cost of battery electric and the time it will take, you know, in some cases, we've had customers who told us, they kind of grab applications with the power authority for a couple hundred trucks from the charging and they've been told it's going to take, you know, they've been working two to six years to get the infrastructure on the line that they would need to get to 200 trucks, or the electrical infrastructure capacity at a single point. But again, we think about places like L.A., San Francisco, you can imagine the challenges.
Speaker Change: We're comfortable and confident, particularly given that the majority of the trials across both platforms are in California or Alberta, so they're they're concentrated in geography. It helps us in how we support the trials.
Parker Meeks: It helps us in how we support the trials. Are we able to have our vehicle and fuel cell tech available both remotely and on the ground as needed? Helps us also from a fueling standpoint, right? If we're fueling on mobile fuelers, those mobile fuelers can just rotate and sort of follow the trucks. So we don't need, you know, it really minimizes the number of mobile fuelers that we need. It's a very cloud-packed administration trial schedule where those platforms are operating in kind of the same regional areas.
Speaker Change: are able to have our both vehicle and fuel cell techs available both remotely and on the ground as needed. Helps us also from a fueling standpoint, right? If we're fueling on mobile fuelers,
Parker Meeks: Whereas from Irish standpoint, the transition can be grid independent, right? When you talk about, on the side, if you link from mobile fuel or to start, which is what we're doing today. So, when this goes publicly, for instance, in the launch of the first drug delivered to the fourth group, that the pilot is providing the mobile fuelers for that facility. These typically are mobile fuelers that carry anywhere from 200 kilograms up to one to four tons of fuel, depending on if it's gaseous or liquid, and have dispensers on site that allow for, in our case, given our gaseous 350 bar tanks, typical fueling for the class day truck of anywhere from 15 to 20, 25 minutes.
Speaker Change: and the Global Fuelers can just rotate and sort of follow the trucks. So we don't need, you know, it really minimizes the number of mobile fuelers that we need. It's a very compact administration trial schedule where the truck platforms are operating in kind of the same regional areas.
Parker Meeks: And in terms of performance, we're quite enthused by the performance of the Class A truck, which has already been in trial, as we noted in the pre-prepared remarks. To have the challenging use case that one of our customers put that truck through, to have that truck deliver in a trial, a very, very heavy haul, very steep grade. You're talking about a 3000 foot climb as part of this trial route, and to do that work that combustion does, and to do work that all the battery trucks they tried were not able to do.
Speaker Change: And in terms of performance, we're quite enthused by the performance of the Class A drug, which has already been in trial, as we noted in the
Speaker Change: prepared, re-enlarged.
Speaker Change: You know to have the challenging use case that one of our customers put that truck through To have that truck deliver in a use case a very very heavy haul very steep grade
Parker Meeks: And for the garbage truck, given the own board packaging, is less fuel that doesn't need it as much fuel on board, where are we fueling the garbage truck typically in 10 to 15 minutes, right? Which is important because going back to the use case, that's also an advantage for us in terms of range. In fact, in some of our trials, you know, the range that they were seeing on our truck in typical use cases is 300 to 350 miles on the class day truck, even if they want to do a 600-mile day, it's really only a 15 to 25-minute fill than to double the range, basically, whereas that at least doesn't have that option.
Speaker Change: You're talking about a 3,000 foot climb as part of this trial route, and to do that work that combustion does, and to do work that all the battery trucks they tried was not able to do.
Parker Meeks: I think it's a really great immediate result that we're quite proud of. And to do it with fuel efficiency that was roughly 50% in that class A use case, better than diesel. Again, that's a tremendous foundation for scalability. And even with fuel that was, you know, let's say $7, $8 a kilogram today, if that were the price to the fleet, we would already be at TCO parity with that level of fuel efficiency.
Speaker Change: I think it's a really great immediate result that we're quite proud of and to do it with fuel efficiency that was roughly 50% in that class A use case.
Speaker Change: better than diesel. Again, that's a tremendous foundation for scalability and even with fuel that was, you know, let's say $7, $8 a kilogram today, if that were the price to the fleets, we would already be at TCO parity with that level of fuel efficiency.
Parker Meeks: So, you know, we're quite confident in the performance of the truck given the early returns on Class A. The refuge truck, we can't wait to get that truck out on the route and on trial. We're also assuming, in fact, today it's going through its final paces in Iowa. You know, New Age facility, which has been going through its final shakedown, is in the great state of Iowa, and it's actually on route collecting refugees as we speak in Carroll, Iowa.
Parker Meeks: So, we start with the mobile fuelers, that's available today. We have partners that provide that, and then we have a plan with the customer in line with our multi-year commercial agreement to evaluate, select, permit, install, on-site, dispensing, right? So, we get going back to the mobile fuelers. If you have a one-time mobile fueler in a typical use case on the class day truck, that's probably fuel of 25 to 30 trucks, for death, right?
Speaker Change: So,
Speaker Change: You know, we're quite confident in the performance of the truck compared to the early returns on the Class A. We're not too struck, we can't wait to get that truck out on route and trial.
Speaker Change: We assume, in fact, you know, today it's going through its final paces in Iowa, you know, new age facility, which we're going through its final shakedown is
Speaker Change: is in the great state of Iowa, and it's actually en route, collecting refugees as we speak in Carroll, Iowa, so if you're calling from Carroll, Iowa,
Parker Meeks: So, if you're calling from Carroll, Iowa, look out on the streets for a Hyzon truck collecting trash. But getting that truck into operation, we think it's going to prove what its sister truck did in Sydney. And I think as we progress through this trial program, it's going to show both our electric customers and the market that fuel cell technology is ready to power heavy-duty trucks now.
Parker Meeks: And we look at our typical multi-year commercial structure. The first year, maybe five to ten trucks a second year, you know, maybe anywhere from 15 to 30 trucks. You're getting beyond the first year, well, it's the second year deliveries of that mobile fueler. And there are options to go with higher capacity. And if you're using a liquid mobile fueler, you get out the port, port tons, potentially, a fuel in that trailer, while we're working with the customer in our and our field partners to cite in and permit and have them construct the onsite fuel in a facility that will fuel, you know, the first scale up to 52 hundred trucks on that site.
Speaker Change: Look out in the streets for a high-ton truck.
Speaker Change: Collecting trash. But getting that truck into operation, we think is going to prove what its sister truck did.
Speaker Change: Sydney, and I think as we progress through this trial program, it's going to show both our largely customers in the market.
Speaker Change: The fuel cell technology is ready to power heavy-duty trucks now.
Stephen FOX: Great. That's all very helpful. Thank you. Thanks Steve! That concludes our Q&A session. I will now turn the conference back over to CEO Parker Meeks for closing remarks. Thank you, operator. And thank you all for joining us. We look forward to continuing to update you as we drive our commercialization goals to realization this year. Take care. This concludes today's conference call. You may now disconnect. [music]
Speaker Change: Great, that's all very helpful. Thank you.
Steve: Thanks, Steve.
Steve: That concludes our Q&A session. I will now turn the conference back over to CEO Parker Meeks for closing remarks.
Parker Meeks: We're planning to expand that capacity over time. And all that is really, you know, but the long lead items in that development are permitting, certainly just like it is for biometric. And it's applied chain of equipment, but it's already fundamentally different profile of development structure and timing versus biometric, which again, that transform typically all the local infrastructure back to the grid with utility and the expense that that has come at that.
Parker Meeks: Thank you, Operator, and thank you all for joining us. We look forward to continuing to update you as we drive our commercialization goals to realization this year. Take care.
Speaker Change: This concludes today's conference call. You may now disconnect.
Parker Meeks: So we're very fortunate to have many infrastructure IC collaborators in some case, their committed partners who are actively engaging with our customers to lay out this infrastructure path, starting with mobile fuelers to get us to the first 18 to 24 months with the clear plan to decide from it and install permit dispensing. And it's one that as people see this come to life with our fleet over the next, you know, 12 to 24 months. I think they'll see that the infrastructure advantage lies with fuel cell.
Unknown Executive: Excellent.
Speaker Change: Thanks for watching!
Craig Irwin: Last question, if I may. It's really encouraging to see the sea samples tracking exactly how you said they would, you know, and, and, you know, it's nice to hear that the 200 kilowatt stack is on track for on time commercial production later on this year. Can you maybe lay out for us how this might change things in the class eight market for you? Do you think that this is something that, you know, has some of the customers that are maybe sitting on the bench right now, stand up and say, okay, I'm willing to take my first 10 trucks.
Craig Irwin: I'm willing to take my first 20 trucks. Is this something where, you know, it's an important proof point to the customer base? Right. It's certainly just Craig. And I think as, as, you know, when we look at the large plastic fleet that are in our in our trial schedule, which again, we are quite proud to have across the class eight platform, the record, platform 25 large fleets in our trial schedule, which we're very excited to have that trial schedule launched last month with our first two large fleets actively in in in our trial.
Craig Irwin: These fleets are focused on quality. They're focused on durability. They're focused on longevity. You know, they've, you know, been driving businesses successful. That in the end is a low margin business trucking typically as a low margin business because they focused on the longevity of the products they put it to their operation. And the trucks. So that is a very high forward meeting, which is why it hides on and from the start, we follow a very typical OEM automotive SOP process, making sure that we're communicating in a way that these fleets are used to.
Speaker Change: [music]
Craig Irwin: One, that they understand when we're able to bring them into our facility and show them how we're progressing, not just in our SOP, but in our quality control in our durability testing. And very transparently in what we're seeing, we're finding it's not just about, you know, the fuel cell works great, don't worry. It's about the process done through where we showed learnings, right? Whether it's in a fuel cell development testing and design or on trial, right?
Speaker Change: [music]
Craig Irwin: There are learnings and our fleets want to seal it. If we're not showing them learnings, they know that they're not seeing the full picture, made them have been through this before, right? They're part of the C&G transition, they're part of the L&G transition, and part of the battery electric truck market. And so it's about transparency, it's about it's about a process that they see as standard for the industry and one that they could touch and feel and trust.
Craig Irwin: And whenever we tell them that we, you know, implemented over 40 design changes in the fuel cell and the total fuel cell since the start of the SOP, that gives them actual confidence, right? That the process is working, that it's showing results that you would expect to have. When we show them the camera grade quality control that we put in, the efficiencies that we've been able to realize in the production process, the additional test ends that we brought online to further expand our end-to-end in-house test capabilities from single cell the way the full stack and full systems.
Craig Irwin: And why, you know, we have confidence that assuming that we declare the SOP later this year will pass all those milestones and will have a product that truly is commercially viable because it speaks to the language because it's something that's been done in a way that they can see and touch and feel. And we're very open to transparent about it. I think absolutely is a critical validation for our fleet customers who, you know, want to see a product that they can rely on and that they understand what state is that they fully understand this is not diesel, right?
Craig Irwin: Diesel's been going through decades of innovation and matured and they're okay with that, right? As long as they understand that we are ahead, which we think our customers see that, they understand that our performance is going to get the job done, that the path to achieve the longevity, the durability and the quality that they desire is on track and that we are on path to have a product which has economics that needs succeed today, but definitely in the future it can scale along with the ambition that they have for zero-emission trucks. And that's what we think we put on the table. Good. Great. Well, congratulations for all the progress in the quarter. I'll go ahead and hop back into you.
Parker Meeks: Thanks.
Constantine: Thanks for your next question.
Constantine: Constantine of Stephen Fox, the Fox advisors. Your line is open.
Parker Meeks: Hey, good morning, everybody. I guess first of all, can you, Parker, can you clarify a couple of things? You said relative to PFG. So from a, from a standpoint of potentially ramping to maybe 30 vehicle orders. And PFG operating, you know, say 20 to 30 vehicles at a time. How do you and your partner envision that working? And can you just sort of specifically talk about how the fueling infrastructure would work with what would be your, you know, your first large fleet customer at scale?
Parker Meeks: And then I had a couple of follow ups. Very nice. Thanks for the question. So specifically with regard to performance food group. You know, we're again, we're quite thankful to have PFG as a core anchor. Fleet customer here in the US market. Those don't aren't aware of the PFG is the fifth largest private fleet in the US, the 7,000 trucks. And we think that they are a real leader in the industry in terms of decarbonization goals and driving innovation.
Parker Meeks: In their fleet, they've shown that through drive, you know, open up as they've made in the battery electric side. And now we're the first fuel truck supplier to have, you know, now five. We're very proud to have 500 kilowatt trucks deployed to PFG over the past few quarters. And those five are the first five of a potential total 50 truck commercial agreement that we signed the PFG last last year. The next tranches is 15 trucks up to 15 trucks on the back of a total kilowatt trial that we hope is successful.
Parker Meeks: Assuming that trials exceed, you know, P.o.t, will have the option to purchase up to 15 trucks in the next launch. And then there's a further 30 truck option for PFG beyond beyond beyond that. So, so we're currently, you know, living those trucks in their positive facility, which we had a celebration event January that facility and when the first four trucks were put into ops there. And, you know, I can't speak deeply on P.o.t.s plans, but what I will say is we were very close to the P.o.t, is example of a largely customer who does, you know, fuel their truck.
Parker Meeks: They're the diesel fleet on site today. So it's very fits right in the model that I just walked through as to how we see the infrastructure evolving over over time today. The truck has been as publicly are being fueled by a few different fuel and sources initially was fueled by a trailer provided by Thailand. And we're, you know, in the middle, as I've, as I've mentioned before, in line with how we typically approach things with our police, I'm working with P.o.t.s on their mid-term and long term fueling solution for Montana.
Parker Meeks: And then for the potential of other locations where they're considering, you know, expanding fuel cell trucks, you know, as we get into a deeper into that total 50 truck potential order pattern over over over time. So, you know, the transition for a quick IPFG, you know, will be on mobile fuelers. And again, based on the capacity of the mission before, you know, they can fuel on mobile or temporary fueling solutions. You know, well, basically through this entire second truck, if you have together, it's five on the ground today, another 15 in the second truck for 20 total.
Parker Meeks: As you progress to a total of 50, should they take their option to bring in the whole 15th of the second truck and the further 30 if they go through that entire pattern? You know, 50 trucks, you theoretically can fuel from a, you know, a liquid fueling trailer solution. But at that point, you start to look at, you know, the permanent installed solution for a facility. And the goodness is you really only need about 30 to 40 trucks at a single facility to base load a permanent installed station, right?
Parker Meeks: So even, you know, that 50 truck work pattern should have been fulfilled is plenty of trucks to fully economically base load and onsite fueling install permanent solution. And you can imagine that's exactly the type of planning that we're going through with the IPFG, which we've been in for some time as we get ahead of that transition from mobile fuel load. So it's insured mobile fueler and additional capacity from the existing, you know, stations that are online in the area and that are being brought online are all vital solutions for a customer like PFG well into the 30 plus truck range.
Parker Meeks: And as we get into that, you know, third and fourth charge of an order pattern, we want to make sure we've got that installed solution onsite, where there's plenty of capacity and truck volume to make that a viable solution.
Parker Meeks: That's really helpful. And then just as a follow-up, you mentioned how you're oversubscribed in terms of future trials of 25 fleets you've highlighted. Can you talk about just your confidence level in being able to execute, you know, that many trials over a short period of time in the next, I guess, year or two? Yeah, no thanks, thanks Steven. You know, it's critical for our business, obviously, as we've said for some time, the trial really is the final stage in the customer development journey.
Parker Meeks: Typically when a trial launches with a large fleet, we've been through lots joint customer shape being where, at both the executive level and the indirect sort of fleet off-kill level, we're deep into, you know, fuel cell technology economics, we're in the use case, where it should out for more battery electric, and where it should be on par with the conventional alternative, where the system comes from, how it's going to scale over time. All that work is done over a month to prove to ourselves, and the customer, this is worth doing, and then the trial launches, this sort of final proof step before finalizing the contract negotiations and potential fuel supply for the scale up.
Parker Meeks: So at the 25 large fleets, the majority are at that stage, right? And that's across both platforms. So the class eight is already in trial, our first trial truck is what's already been now in two different large fleets in July and in August, and the refuse truck, we're still on track to have that trial launched with Procology starting in the San Francisco Bay area in in this month. And while 25 is a significant number over the, you know, the remaining, you know, 4.5 months of the year with two truck platforms and additional trial trucks coming in on line later in the year, we're comfortable and confident, particularly given that the majority of the trials across both platforms are in California or outward.
Parker Meeks: So they're, they're concentrated in GRB, it helps us in how we support the trials. How we're able to have our both vehicle and fuel self-safe available both remotely and on the ground as needed helps us also from a fueling standpoint, right? If we're fueling them on mobile fuelers, the mobile fuelers can just rotate and sort of follow the the trucks. So we don't need, you know, it will minimize the number of mobile fuelers that that we need.
Parker Meeks: So I'll pack, you know, an industry in trial schedule, where the platform's operating kind of the same regional areas. And in terms of performance, we're quiet and focused by the performance of the class eight truck, which has already been in in the trial. As we noted in the in the pre-prepared read, in large, you know, to have the challenging use case that one of our customers put that truck through, now that truck deliver in a use case, very, very heavy haul, very steep grade.
Parker Meeks: I'm talking about a 3,000 foot climb as part of this trial route. And to do that work, combustion does. And to do work is all the battery trucks they tried that was not able to do. I think it's really great immediate result that we're proud of. And to do it with fuel efficiency that was roughly 50% in that class eight use case, better than diesel. Again, that's a tremendous foundation for scalability.
Parker Meeks: And even with fuel that was, you know, let's say $78 a kilogram around the day, if that were the price to the fleet, we would already be at DCO with that level of fuel efficiency. So, you know, we're quite confident in the performance of the truck company, the early returns on the class day, but after you've struck, we can't wait to get that truck out on route and trial. We certainly fact, you know, today is going through its final paces in Iowa in a new age facility, which we've been going through its final shutdown is in the great state of Iowa and it's actually on a route, collecting reps used as we speed in Carol Iowa.
Parker Meeks: So, if you're calling Carol Iowa, look at the streets for a hyzon truck collecting trash, but getting that truck into operation, we think it's going to prove what its sister truck did in sitting and I think as we progress through this truck program, it's in a show about our luxury customers in the market, the fuel cell technology is ready to power heavy duty trucks now.
Constantine: Great, that's all very helpful.
Unknown Executive: Thank you.
Operator: Thanks to you.
Parker Meeks: That concludes our Q&A session.
Parker Meeks: I will not turn the conference back over to CEO Parker Meeks for closing remarks. Thank you, operator, and thank you all for joining us. We look forward to continuing to update you as we drive our commercialization goals to realization this year.
Operator: Thank you.
Operator: This concludes today's conference call. You may notice, connect.
Unknown Executive: Thank you. John Williams, John Williams, Craig Irwin, Robert Wertheimer, Parker Meeks, John Williams, John Williams, Craig Irwin, Robert Wertheimer, Parker Meeks, Henry Kwon, John Williams, Craig Irwin, Robert Wertheimer, Parker Meeks, John Williams, Craig Irwin, Robert Wertheimer, Parker Meeks, John Williams, Craig Irwin, Robert Wertheimer,[inaudible]