Q3 2024 Hyzon Motors Inc Earnings Call
Speaker Change: Good morning and welcome to HIZON's 3rd Quarter 2024 Earnings Call. All participants are in a listen-only mode. After the speaker's remarks, we'll have a question and answer session. To ask a question, please press star followed by the number 1 on your telephone keypad.
As a reminder, this conference call is being recorded.
Speaker Change: I would now like to turn the call over to Tom Crook, Managing Director at ICR. Thank you, please go ahead.
Tom Crook: Today's discussions include four looking statements regarding future plans and expectations.
Speaker Change: Actual results might differ materially from those stated and factors that could cause actual results to differ are explained in the forward-looking statement at the end of the press release and page 2 of our earnings presentation.
Speaker Change: Forward-looking statements speak only as of the date on which they are made. You are cautioned not to put undue reliance on forward-looking statements.
Speaker Change: With that, I will turn the call over to our CEO, Parker Meeks. Parker?
Parker Meeks: Good morning, and thank you for joining our 2024 third quarter earnings call.
Parker Meeks: I am pleased to be sharing significant updates from the quarter, which show continued commercial and technology advancement, including several major milestone achievements.
Parker Meeks: At the beginning of the year, we laid out our core objectives for 2024 on the back of a successful 2023.
Parker Meeks: Among those, we highlighted achieving start-up production of both our leading Class VIII fuel cell electric truck,
and our 200 kilowatt single stack fuel cell system technology.
Parker Meeks: Launching trial programs with major fleets on both our Refuse and Class A truck platforms.
Parker Meeks: and securing orders with some of those customers on the back of successful trials.
I am proud to sit before you today.
Parker Meeks: on behalf of our tremendous HIZON team to showcase their strong execution.
Parker Meeks: as we achieve these goals and more during the quarter, and have importantly transitioned.
Parker Meeks: to the next phase of growth, commercialization, and with it, another significant inflection point.
Parker Meeks: We committed to significant milestones in 2023 and 2024, and HIZON has done what we said we would do.
Parker Meeks: accomplishing all publicly stated milestones to date over the past two years. With confidence, we will complete the final two that remain in 2024 by year end, both being commercial in nature.
Speaker Change: Additionally, Hison's performance in the third quarter shows significant advancement in commercialization and maturation of both Hison and the customer and market landscape, evidenced in four key areas.
Speaker Change: First, HIZON continues to deliver on our commitments across technical, commercial, and financial.
Speaker Change: Second, Hison's large fleet trial program has exceeded expectations, proving to our customers that the Class 8 tractor and refuse fuel cell electric trucks are ready to perform today with clear market leadership.
Third.
The hydrogen fuel supply market is improving significantly.
Speaker Change: and at levels that allow Hyzon's fuel cell electric trucks to be operating cost-competitively now due to our fuel efficiency advantages.
Speaker Change: And fourth, our latest commercial agreement with GreenWaste, the first ever in North America for a fuel cell electric refuse truck, is a clear proof point.
Beginning now with just that, our building momentum and commercialization.
Speaker Change: We recently announced our purchase agreement with GreenWaste, a leader in recycling and sustainability, for North America's first hydrogen-powered refuse collection vehicles.
Speaker Change: This order for 12 fuel cell electric trucks followed successful trials throughout the Bay Area and Silicon Valley.
Speaker Change: where our vehicles demonstrated exceptional performance across critical refuse collection industry metrics.
Speaker Change: including payload capacity, can lifts, and range requirements, all essential elements for the demanding duty cycles of waste collection.
Speaker Change: What makes this partnership particularly compelling is Greenway's track record of leadership in sustainable innovation.
Speaker Change: Seven years ago, they made history by commercially operating the world's first full-sized electric side-loading waste collection truck.
Speaker Change: Now, they are the first company in North America under contract to commercially deploy hydrogen-powered refuse vehicles.
Speaker Change: The refuge sector represents an ideal application for our high-performance fuel cell technology.
Speaker Change: Where the demands for power, payload, and reliable operation align with the capabilities of our 200-kilowatt fuel cell system and powertrain to run a full day's shift without refueling or recharging.
Speaker Change: As you might recall, we are executing this program in partnership with New Way Trucks.
a leading refuse truck body manufacturer.
combining their deep industry expertise with our zero-emission technology.
Speaker Change: Together in August, we embarked on a North American trial program to prove real-world viability of the technology.
Speaker Change: Proof which we believe is shown with the completion of each successful trial and further evidence with the green waste purchase order representing the first commercial agreement on the back of a refuse truck trial.
Speaker Change: With delivery scheduled to begin as soon as Q4 2025, the Green Waste Agreement represents more than just a single order.
Speaker Change: It's a crucial validation of our technology and yet another demanding heavy-duty application.
Speaker Change: It demonstrates the growing recognition that hydrogen fuel cells offer a compelling solution for hard to decarbonize sectors where battery electric alternatives face significant operational constraints.
Speaker Change: Moreover, it positions Hyzon at the forefront of innovation in the waste management industry.
Speaker Change: An industry that is showing substantial market opportunity for our technology, given its advantages, combined with many California city and county end customers requiring zero emission trucks in their upcoming RFPs for refuse collection services.
Speaker Change: This milestone adds to our growing commercial momentum and showcases our ability to pioneer zero-emission solutions in sectors that are essential to our economy, but historically difficult to decarbonize.
We believe this first mover advantage in the refuse sector.
combined with our proven technology and strong partnership approach.
Speaker Change: positions us well to capture additional opportunities as more waste management fleet operators look to transition to zero-emission truck solutions.
Speaker Change: As announced on our second quarter call, we had 25 trials scheduled for both our Class VIII Fuel Cell Electric Truck and our Refuse Fuel Cell Electric Truck.
Speaker Change: We have completed 10 of these trials in the first three months of the program.
and all have been deemed a success.
As a reminder, the trial, typically 2-3 weeks in length,
Speaker Change: is most often the final step in our development process with fleets.
after which we move into commercial negotiations and activation.
Speaker Change: Commercial negotiations can vary in duration to reach an agreement and order.
Speaker Change: driven by factors including fuel pricing and availability, which is proposed by Hyzon's fuel partners in parallel, along with internal large fleet approval processes.
Speaker Change: Noting that conditions on both of these fronts have improved materially in the past three to four months.
Speaker Change: particularly fuel pricing and availability, providing what we hope is improved timing to contracts.
Speaker Change: Feedback from the trials has been overwhelmingly positive from drivers, fleet managers, and executives.
Speaker Change: Drivers have a full range of typically strong positive feedback, including the combination of the truck's quiet, low vibration, and odor-free operation.
Speaker Change: with its ability to perform all the work of combustion without compromise.
Speaker Change: Even with added safety improvements, such as our truck's ability to drive at the speed of passenger car traffic when entering the freeway or when climbing steep grades with a full load, both high-risk situations for diesel trucks.
Speaker Change: and many more. Thank you for watching. I hope you enjoyed the video. If you did, please subscribe and give this video a thumbs up. I'd also like to thank my patrons on Patreon, who have been a great help to me in making this video. If you have any questions, or would like to request a new video, please feel free to leave a comment. I'll see you next time.
Speaker Change: Fleet managers have noted our refuse trucks fuel efficiency and potential for operating cost parity with diesel at fuel prices as high as $12 per kilogram.
Speaker Change: along with our Class A 200 kilowatt trucks combination of power and lightweight as the lightest zero-emission Class A truck on the market with at least 250 miles range and up to 5,000 pounds lighter than some competitors.
Speaker Change: and Fleet Executives have noted the positive response from end customers.
Speaker Change: such as cities and counties, along with citizens and communities who experience our trucks in trial, a key component of their buying decision, and the revenue-generating potential for fleets where zero-emission trucks are part of upcoming RFPs for refuse collection services.
Speaker Change: In that situation, Heisman is providing not only a zero-emission technology in-truck, but also a potential source of competitive advantage, revenue, and market share for fleets.
Speaker Change: From a performance perspective, our latest generation fuel cell electric trucks have also been operating with near 100% uptime.
Speaker Change: With range, hill climb, and fuel efficiency performance that is far beyond our and our customers' expectations and experience in zero-emission trucks.
Speaker Change: Our talks have been executing well on a variety of different use cases and situations.
Speaker Change: Their strong uptime and performance is a result of over three years of technology and powertrain development, testing, and optimization, which now includes over 300,000 miles of on-road experience for the high zone fuel cell powertrain globally since 2021.
Speaker Change: For example, our refuse collection truck's stellar performance includes operating routes with significant inclines of up to 27 percent.
Speaker Change: Picking up trash with high daily bin counts of over 1,300 or more bins per day through neighborhoods.
Speaker Change: Along with heavy trash, which is akin to yard waste, holding well over 25 tons of trash in a single day without refueling.
Speaker Change: These results both match diesel's performance and go far beyond the range of any battery electric refuse truck on the market today.
Speaker Change: where most battery electric trucks can only perform 50 to 60 percent of the work our fuel cell electric refuge truck can perform in a day before needing to stop and recharge overnight.
Unknown Executive, Christian Mohrdieck
Speaker Change: Meaning fleets would need to buy 50 to 75% more battery electric refuse trucks.
Speaker Change: to do the same work as a Hyzon fuel cell refuse truck.
Speaker Change: Reliability and range are paramount and we have seen strong performance for our deployed trial vehicles.
Speaker Change: Our Kwasi 200-kilowatt fuel cell electric truck has shown similarly impressive results in customer trials, including climbing 3,000-foot inclines with full customer loads,
Speaker Change: Keeping up with diesel trucks, and in some cases, keeping up with passenger car traffic, a significant safety benefit, as mentioned before.
Speaker Change: The Class 8 200-kilowatt has been fully tested across a full range of challenging routes, operating days, and customer use cases.
Speaker Change: That's performed at least as well as diesel in all cases, including performing over 500-mile days and tackling routes that no other major OEM battery truck has been able to complete.
Speaker Change: Additionally, fuel efficiency, a critical metric for total cost of ownership and economic viability of zero-emission trucks, has outperformed our expectations.
Speaker Change: Our refuse collection vehicle has shown fuel efficiency that is 2.3 to 3 times better than diesel.
Speaker Change: Which means foods can absorb a $10 to $12 per kilogram price of fuel, which is available today, and still be at the same operating cost as diesel trucks.
Speaker Change: Our Class A 200-kilowatt trucks are also showing material benefits in fuel efficiency and operating costs.
Speaker Change: with 25-50% better fuel efficiency than diesel in customer trials to date.
Speaker Change: This performance in real customer operations provides our fleet customers confidence that the economics of our trucks can meet diesel and operating costs and total cost of ownership today with subsidies available.
Speaker Change: and have a direct path to meeting cost parity with diesel as we scale manufacturing over the coming years.
Moving to technology.
Speaker Change: We're thrilled to announce several significant milestones that underscore HIZON's leadership in zero-emission heavy-duty transportation and fuel cell technology specifically.
On October 8th, National Hydrogen and Fuel Cell Day.
Speaker Change: We announce the start of production, or SOP, for our revolutionary, single-stack, 200-kilowatt fuel cell system at our Bolingbrook, Illinois facility.
This achievement marks a pivotal moment in our journey.
Speaker Change: Establishing one of the largest fully integrated fuel cell production facilities in the United States.
Speaker Change: Our proprietary technology, including the in-house design and production of our 7-Layer Membrane Electrode Assembly, or MEA, enables us to manufacture standardized fuel cell systems at volume, accelerating the decarbonization of heavy-duty industries.
Speaker Change: We have worked tirelessly to bring this facility online and completed 25 A and B sample units, 27 C sample and pre-production units, durability testing, and additional design and supply chain validation to finally reach this point.
Speaker Change: This milestone falls closely on the heels of another crucial development.
Speaker Change: The start of production for our innovative Class A 200 kilowatt diesel electric truck announced on September 16th.
Speaker Change: Through our collaboration with Fontaine Modification in Charlotte, North Carolina, we've successfully transitioned from prototype to production.
Speaker Change: Our 200-kilowatt fuel cell system, which is 30% lighter and smaller, and 25% more cost-efficient than two 110-kilowatt systems combined,
Speaker Change: allows for a compact yet powerful vehicle that meets the demanding operational requirements
Speaker Change: of Heavy Duty Road Transport, while adding the significant fuel efficiency advantages previously mentioned.
Speaker Change: Underpinning all of this, we are proud to report that our commitment to quality and excellence has been recognized with ISO 9001 2015 certification.
Speaker Change: for our Fuel Cell Manufacturing, Design, and Research and Development activities.
Speaker Change: This certification validates that our development and production processes meet the highest international standards for quality.
Speaker Change: It reflects our dedication to delivering cutting-edge hydrogen fuel cell solutions that are safe, reliable, and of the highest quality that our customers expect.
Speaker Change: Additionally, it positions HIZON well on our primary strategic path in the future to supply fuel cell systems to truck OEM partners and stationary power projects at the level of quality those partners require.
These achievements collectively represent a new chapter for High Zone.
and for the decarbonization of heavy-duty industries.
Speaker Change: Our Bollingbrook facility is now capable of producing 700 fuel cell systems per year over a three-shift operation.
All passing through rigorous quality gates and end-of-line tests.
As we scale up production, we're not just manufacturing products.
Speaker Change: We're setting new standards for zero-emission technology in the United States.
Speaker Change: These milestones reinforce our position as a leader in high-performance, zero-emission solutions, and underscore our commitment to building a cleaner, more sustainable future for heavy-duty transportation.
Speaker Change: Before wrapping up with what we expect for the balance of the year and beyond, I'd like to spend a minute on the broader market.
Speaker Change: We continue to see a U.S. market that remains supportive of clean energy initiatives.
with several significant programs in place.
Speaker Change: These include the EPA's $2.6 billion Clean Ports Program, which just awarded over $475 million to hydrogen projects across six ports.
including hydrogen-powered raised trucks and fueling.
California's HVIP Program
Speaker Change: and the $40,000 Commercial Clean Vehicle Tax Credits under IRA Section 45W.
Speaker Change: The DOE's Hydrogen Hub Program has begun funding the seven awarded regional hubs.
Speaker Change: with a notable $12.6 billion agreement, including the up to $1.2 billion in federal funding for California's Arches Project.
Speaker Change: among the landmark Hydrogen Ecosystem Funding Agreements that are now being reached.
Speaker Change: Tyson has been actively engaging with these opportunities, supporting clean ports applications that could lead to substantial orders, and supporting fleets and several other subsidy and grant programs.
https://www.youtube.com.uk
Speaker Change: Additionally, we are seeing strengthening demand for fuel cell electric trucks from large fleets, particularly in the refuse industry, driven by their end customers, the cities, counties, and other entities who contract refuse collection services.
Unknown Executive, Christian Mohrdieck
or scoring bitter responses higher if zero-emission trucks are included.
Speaker Change: Given hyzons, fuel cell electric trucks are materially outperforming battery electric trucks.
Speaker Change: and that Hyzon's Refuse Collection Truck is the only fuel cell electric refuse truck in the market today.
Speaker Change: Several customers see Hyzon's trucks and fuel cell technology as a market share and revenue enabler, not just a decarbonization enabler.
Speaker Change: Finally, a brief update on a critical enabler for our commercial pathway, fuel availability and economics.
Speaker Change: Hydrogen fuel has been a significant challenge which we have commented on over the past year.
Speaker Change: We have seen very positive progress in both field availability and pricing.
Speaker Change: and our fleet customers are seeing the same as we work with them to finalize potential hydrogen fuel subcontracts alongside fuel agreements with our hydrogen fueling partners.
Speaker Change: While available fuel pricing spiked to about $40 per kilogram as recently as six months ago,
Speaker Change: We are now seeing fuel pricing quotations for 2025 dispense supply that is in some cases as low as $10 per kilogram dispense.
Speaker Change: which enables cost structures that many fleets can't absorb today while looking forward to further price declines as additional lower cost supply comes online.
Speaker Change: Before handing the call over to Steve, I'd like to provide some thoughts on the balance of the year and into 2025.
Speaker Change: We expect to make continued progress on the commercial front as we seek to turn trial success into firm commercial orders.
Speaker Change: On the commercial front, we expect to continue executing more than 20 remaining Class VIII and Refuse Truck Trials, driving the total of 30-plus trial opportunities to commercial negotiations on the back of those trials, each providing an opportunity for major commercial agreements and backlog building.
Speaker Change: As a reminder, we target 50-plus truck multi-year agreements with large fleets, so even a 40-percent success rate in converting trials to contracts of that scale could lead to a 500-plus truck potential order book in Q1 of 2025.
Speaker Change: On the technology side, in the fourth quarter we will continue advancing our ongoing durability testing.
Speaker Change: and Continuous Improvement Activities for the Fuel Cell System and Powertrain.
Speaker Change: Including incorporation of results and learnings from our expanding customer trial programs, activities will continue into the first half of 2025.
Speaker Change: We plan to provide updates on our durability, cost, and design optimizations for our next generation 200 kilowatt fuel cell system next year.
Speaker Change: From a product perspective, in the fourth quarter, we will drive manufacturing, planning, and execution for the Class A 200-kilowatt truck with Fontaine.
Speaker Change: Additionally, we have launched development of our next generation 200 kilowatt fuels electric refuse truck.
Speaker Change: which will be the production intent of the Refuge Truck Platform at its SOP.
Speaker Change: The refuse collection truck is already achieving tremendous performance results in line with combustion and fuel efficiencies that are up to three times better than diesel with a 110 kilowatt fuel cell system.
Speaker Change: And we expect to see even better performance, including materially better fuel efficiency and range, from the production intent 200 kilowatt fuel cell refuse truck once it achieves its SOP.
Speaker Change: As always, we are going to continue to remain laser-focused in positioning this business to be an attractive investment for shareholders and manage our cash resources appropriately to ensure our longevity.
Speaker Change: With that, I'll hand it over to Steve to discuss our financial results in more detail. Steve?
Steve: Thank you, Parker. Just to reiterate, we are excited for what's to come after reaching these SOP milestones for our revolutionary, single-stack, U.S.-manufactured, 200-kilowatt fuel cell system and Class A, 200-kilowatt fuel cell electric truck that we were able to complete on time and within budget.
Steve: These important milestones support our commercialization as we transition to the new 200-kilowatt platform and focus on converting our active trial program into contracts with customers.
Steve: I'm also personally very enthusiastic about our unique refuse collection FCET, the only one in the industry.
Steve: Our trial partners are not only telling us that it is delivering performance unmatched by other zero emission vehicles, but also that it is delivering fuel efficiency significantly better than diesel.
Steve: During the quarter, we made substantial progress on the wind down of our operations in Australia and Europe. In terms of status, the wind down of these operations is now largely complete in support of our strategic focus on the North American market and cost reduction goals.
Steve: We remain on track for our previously stated target of reaching an average monthly recurring net cash burn of approximately 6.5 million dollars per year end.
Steve: To put that in perspective, our average monthly net cash burn in the first quarter of 2023 was $15.4 million.
Steve: While our cost reduction journey has been difficult, I'm very proud of our entire team, and especially in the leadership I see from our accounting, finance, and IT professionals driving this forward.
Unknown Speaker.
Speaker Change: Now turning to our results for the third quarter of 2024. Our third quarter 2024 revenue was $0.1 million compared to zero revenue in the prior year period.
Speaker Change: Given the transition to our 200-kilowatt platform and trial activity, our revenue this quarter primarily reflected continued recognition of five previously delivered trucks that are treated as an operating lease for accounting purposes.
Speaker Change: Cost of revenue came to $0.3 million in the third quarter of 2024 versus $3.3 million in the prior year period. Cost of revenue in the prior period was elevated by inventory write downs in Europe under the 2023 restructuring program.
Speaker Change: R&D expenses came to $8.1 million in the third quarter of 2024 versus $10.9 million in the prior year period, primarily reflecting lower spend on R&D activities given the advancement to fuel cell SOP and general spend reduction efforts.
Speaker Change: SG&A came in at $29.7 million in the third quarter of 2024 versus $21 million in the prior period.
Speaker Change: SG&A in the current quarter includes a non-cash $11.1 million dollar impairment charge.
Speaker Change: Excluding the impairment charge, SG&A declined by approximately $2.4 million year-over-year, primarily driven by a charge taken in the year-ago quarter for the SEC settlement, partially offset by higher legal fees incurred in the current quarter.
Speaker Change: During the third quarter, we recognized restructuring and related charges of $1.6 million versus $4.9 million in the prior year period. Restructuring charges this quarter consist primarily of retention programs to drive alignment with HIZON's new strategic focus.
Speaker Change: We also recognize the gain on lease termination of $2.1 million in the third quarter of 2024. The gain arises from the closure of our European facilities and a negotiated settlement with the landlord.
Speaker Change: Our average monthly net cash burn for the second quarter of 2024 was $8.2 million.
for a total $24.7 million for the quarter.
Speaker Change: This reflects continued spend discipline, initial cost benefits from the Australia and Europe wind-down, and net proceeds from the July capital raise, offset by approximately $8 million in some significant non-operating items such as the annual D&O insurance premium and elevated legal and consulting spend in the quarter.
Speaker Change: As mentioned earlier, we continue to anticipate that our average recurring monthly net cash burn will reach approximately $6.5 million by year end.
Speaker Change: As of September 30, 2024, our cash, cash equivalents, and short-term investment stood at $30.4 million.
Speaker Change: Moving to our capital raising efforts and as mentioned on the last call, after we became shelf eligible in June, we worked quickly to put in place a shelf filing enabling us to execute a small equity raise and begin laying the groundwork for better trading liquidity, a critical element for us in this market.
Speaker Change: Subsequently, just before quarter end, we also put in place an at-the-market program and have been selectively using it to support our cash position.
Speaker Change: having raised approximately $5 million in proceeds, primarily in the fourth quarter. This helps to extend the runway for our trial program to convert into potential commercial agreements, a critical funding catalyst.
Speaker Change: We continue to remain focused on raising capital and also on the potential for strategic investment, which we believe only gets stronger as we continue commercialization.
With that, I'll hand it to Parker for closing remarks.
Parker Meeks: We are invigorated by the recent progress and are excited about the future ahead of us.
Parker Meeks: There is significant demand in industries like refuse and Class A trucking for zero-emission truck solutions.
Parker Meeks: With Hyzon's fuel cell electric trucks clearly showing that they can do the work of combustion with material advantages.
Parker Meeks: over battery electric and fuel cell truck competitors in weight, range, and overall performance.
Our industry-leading platforms are actively in commercial activation today.
Parker Meeks: And we are excited to continue driving that commercialization, building on 10 successful trials to date.
Over 20 major fleet trials to come.
and our first commercial agreements with major fleets in hand.
Parker Meeks: I would like to thank the whole HIZON team for their continued dedication.
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 heavy-duty industries through hydrogen fuel cell technology.
With that, Operator, we are now ready for questions.
Speaker Change: Thank you. As a reminder to ask a question, please press star followed by the number one on your telephone keypad. Our first question comes from Stephen Fox from Fox Advisors. Please go ahead. Your line is open.
Stephen FOX: Hey, good morning, everyone. I had a few questions if I could.
Stephen FOX: First of all, I think at one point, Parker, you mentioned during your prepared remarks that
Stephen FOX: the performance of these trials is exceeding estimates. And I was curious if you could sort of give us a sense for what is doing better, either relative to your expectations in the trials or to the customers, and then I had a couple of follow-ups.
Parker Meeks: Great. Hey, Steve, good morning. Thanks for joining and great question. We'd love to dive in and talk about the performance of our trucks, particularly those that have been in trial, because, as you mentioned,
Speaker Change: The performance has been exceptional and far beyond both our expectations and
Speaker Change: the customers that we've trialed with. You know, across all 10 trials that have been completed thus far.
Speaker Change: We set goals with our customers on performance, right? And you can imagine, given several of those fleets actually trialed the 110-kilowatt Class A truck, they understand, for the most part, zero emission truck performance. They understand, obviously, their diesel or CNG truck performance.
Speaker Change: And they understand, you know, that the goal for this, which they tell us, is for these trucks to work as a complete replacement for combustion without compromise. That's what they need. And in some cases, for instance, in Class VIII,
Speaker Change: You know, if you're a warehouse-based delivery business, you may have 30, 50, 100, 200 trucks going out from the same warehouse every day on a wide variance of routes, some shorter, some longer, some lighter load, some heavier load, but for the most part, every truck in a facility has to do every route.
Speaker Change: Right. So when you think about what's the standard for these trials, what's the expectation, it essentially is that our truck for that facility can do every route that that facility does. And when you're in the L.A. basin, for instance,
Speaker Change: If you're going anywhere longer than, say, 60 miles, 70 miles radius from a facility, you're probably climbing some pretty steep hills. So the performance expectations that we set with our customers, that they set, which we accept…
Speaker Change: They have to do with flow, they have to do with range, they have to do with how long they operate during a day. In some cases, they have to do with doing double shifts.
Speaker Change: For the class date, for instance, you know, a typical day on trial can be anywhere from 150 miles to 500 miles across these trials.
Speaker Change: loads. And in some cases, we're climbing 3,000 foot climbs, 68% grades. And again, the goal is to do all the work that diesel can do. On the refuse truck,
Speaker Change: You know to do all the work of combustion in refuse
Speaker Change: It depends on the route. It depends on the type of waste that you're picking up. If you're a classic neighborhood bin pickup,
Speaker Change: You know, the standard typically is somewhere between 1,000 and 1,500 bin lifts or trash can lifts per day. And some of these routes, you're picking up, you know, 20 to 25 tons.
of waste in a single day, right?
Speaker Change: So those are some of the standards that we set on top of the even more critical standard that very few zero emission trucks can meet, which is on the cost to operate the vehicle, which comes down to fuel efficiency, and it comes down to the overall cost of that fuel.
Speaker Change: have completed some days with up to 500 miles in a single day with a 20-minute refueling at the base.
in between shifts.
Speaker Change: they're showing up to 50% better fuel efficiency than diesel, which is critical, right? Because fuel, as we've mentioned many times before,
Speaker Change: is up to half of the total cost of ownership for a Class A truck. So when you're 50% better than diesel, let's say that's diesel getting six miles per gallon, sorry, four miles per gallon, and our truck getting six miles per gallon each.
Speaker Change: equivalent, that's a significant impact on proving to the customer not only can this truck do the work but the truck can also be cost competitive to diesel at a hydrogen price of call it you know seven to eight dollars
Akilo
Speaker Change: On the refuse truck it's even better. So on the refuse truck, again I mentioned, in neighborhood waste collection you're anywhere from 1,000 to 1,500 trash can lifts per day.
Speaker Change: Our trucks have consistently completed every route they've had put in front of them, every operating day, either without having to refuel, or only having to top up to avoid range anxiety on extremely long routes that in some cases are longer than what
Combustion does.
Speaker Change: consistently across all of our trials, we look at how much work the truck did during a day, again, completing the full day's work without having to refuel. And based on the fuel that's left over, we project how much work the truck could have done. And we're consistently showing over 1500 bins per day.
Speaker Change: per day of potential range, which is tremendous. Throw that to battery trucks.
Speaker Change: Most battery trucks can only do about 800 bin lifts per day, so we're literally doubling the work rate of battery electric. And by the way, if for some reason there's an extreme route where we have 2,000 bins to pick up in a day, because these trucks are typically coming back to base multiple times in a single day,
Speaker Change: We can refill those trucks in about 15 minutes, so you can basically get up to 3,000 bin lifts arranged with a 15-minute fill, whereas Battery Electric does half a day's work and can charge for anywhere from four to eight hours.
Speaker Change: And then finally, on fuel efficiency for the refuge truck, it's just been...
Speaker Change: Tremendous. We're seeing up to 300% better fuel efficiency than diesel. I think the average for our US trials has been about 250% better fuel efficiency than diesel in the exact same routes.
Speaker Change: Having 2.5 times better fuel efficiency means that we can support the same operating cost as diesel with up to a $15 per kilogram price of hydrogen, which is available now.
Speaker Change: All right, so with the refuse truck tackling 27% grade hill content.
Speaker Change: Up to 30 tons of trash in a single day. And in some route structures, we're doing multiple days of work.
Speaker Change: Without having to refuel, it is a tremendously advantaged truck versus all other zero-emission trucks that are out there in North America that we've seen. It's the only...
Speaker Change: Fuel cell powered truck in North America on the road now and the battery trucks just really can't can't can't come close So that's why these 10 trials we've completed half on each platform have gotten us in our fleet
Speaker Change: customers so excited as it's proven and for some of them for the very first time it's the first zero emission truck they've tried that actually can do the work and that the economics are actually better than they expected given the fuel efficiency advantages that we are showing.
Speaker Change: Great, that's really interesting and very helpful. And then just a couple quick follow-ups. On slide nine, there's only...
Speaker Change: you know, fleet agreements and advancing the second order tranches, he just sort of handicapped the ability to get that done by, you know, the end of the year.
Speaker Change: and any kind of preview on what that could mean. And then just along with that, can you just remind us on the revenue opportunity per 100 trucks or ever how you want to sort of gauge it for us longer term? Thanks.
Speaker Change: Absolutely. Thanks, Stephen. And again, we're thrilled to be at the stage today where we believe we're showing that the high-zone fuel cell technology and high-zone fuel cell powertrain is proving in the field it can do the toughest jobs in the heaviest and the longest-running trucks in zero-E emission, and we have customers with a market backdrop that is, if anything, accelerating in
Speaker Change: California that are continuing and that are well funded for zero emission trucks. We have federal programs that we're excited to be supporting, whether it's the DOE, H2 hubs.
Speaker Change: or the poor programs that were just awarded under the Clean Ports Program and the Inflation Reduction Act, and several others are now being put forward. And alongside that, our customers, particularly in refuse,
have cities and counties who are now requiring.
Speaker Change: Zero Emission Trucks as a part of the application and there are fees to award refuse collection services. So if you're a large city in California, and many times they're awarding 2026, 2027, you know, five to 10 year contracts.
Speaker Change: where for some of the large fleets, it's an incumbent contract that they don't want to lose. And for other fleets, large and small, it's an opportunity for them to step in and actually win a contract, where part of that RFP response includes advantaged zero-emission trucks.
given how well our garbage truck in particular is performing.
Speaker Change: With that backdrop of a strong market backdrop and accelerating, in some cases in refuse, customer view of the opportunity to not just have our trucks be a decarbonization enabler for their ESG goals, but also a revenue enabler, a market share enabler, either defensive or
Speaker Change: offensive, given the RFPs that are coming out from the cities and counties.
large fleet multi-year customer
Speaker Change: Today's truck being de-employed and the customers are excited to get to get going. So we certainly will look forward to updating the market as
Speaker Change: as we're able to push these customers across the line. And again, we feel good about where we are today and putting check marks next to those final two. To your question on revenue potential, what I can comment on that we've released...
Speaker Change: Previously, you know, we said last year that the 110 kilowatt truck on figures, you know, was roughly $500,000
headline price and of course that varies by customer.
Speaker Change: The 200 kilowatt, we haven't commented publicly on the price of that truck and the economics to us from a powertrain point of view. You can imagine 200 kilowatt is a bit more expensive than a 110 kilowatt, although it's not dramatically so. So, you know, if you're talking about 100 trucks, if you did it on the 110 kilowatt economics that we put out before at a whole truck.
Speaker Change: revenue, you're talking about, you know, $50 million of revenue, if it is a full sale, full stop, no lease arrangement, no holdbacks, no accounting concerns as to how that revenue is recognized. In some cases,
Speaker Change: with our contracts from 2023 and they're now in 2024. We do have trucks that are commercially deployed under a contract where there may be a performance guarantee, there may be
Speaker Change: a buyback clause, and maybe other restrictions that are our finance team conspiracy. But long story short, what's the cash potential for Hyzon and what's the potential cash generation for the company?
Speaker Change: total cash generation potential for a truck. The refuse truck is a bit more expensive than that, given there's a body attached to it as well. And what we're, you know, excited to hopefully show is conversion of these trials to
Speaker Change: Contracts, the Green Waste Agreement being the first of those to be announced in the back of trials, and then to be able to talk more openly in 2025 about how that's translating to
Speaker Change: cash generation to revenue potential, including potential concepts like deposits that we are, you know, hoping to land. Tough to do that in the US market. It's not normal for truck companies to pay deposits on trucks.
Speaker Change: But our customers also understand that this is a different technology with a different cash profile. And so all those are terms and concepts that we're excited to hopefully talk about in more detail as we push forward on the back of this trial program in Q4 and 2025.
Super, that's all very helpful. Thank you.
Our next question comes from...
Speaker Change: Our next question comes from Craig Irwin from Roth Capital. Please go ahead, your line is open.
Speaker Change: Hey guys, this is Andrew on for Craig and congrats on the operational progress.
Unknown Speaker ... Unknown Speaker ...
Speaker Change: First one for me, you know, you guys received an order very quickly after your trial from GreenWaste. Seems like those guys were, you know, ready and waiting. What does this mean for other customers out there with trials? Is it possible we see, you know, an accelerated timeline for orders?
Speaker Change: Hey Andrew, thanks so much for joining and that's a that's a great topic to dig into because, you know, the most critical aspect of commercializing these trucks, once you are, you know, clearly comfortable with the performance of the truck, the quality of the truck and ability to perform in trial, is how you prioritize your pipeline. How you look at the fleets that are out there because there's a lot of fleets that want to try a zero emission truck.
Speaker Change: who has history with the 110 kilowatt truck trial program which started back in 2021.
Speaker Change: We were doing a lot of trials just to get the truck out there, to get it into the environment to learn.
Speaker Change: Now we're confident in the performance of these trucks with all that, you know, three years of learning, over 300,000 miles globally on road for the Kaizen fuel cell powertrain, and we're very focused on our pipeline. These are fleets that, it's not just about fleet size.
Speaker Change: It's about what is certainly the buying opportunity and the buying capability of that fleet, which fleet size is a good indicator of, but also what's their motivation, what's their ambition, what's driving their buying decision.
Speaker Change: to their customers that they are making a difference in transitioning their fleet from carbon to less.
Speaker Change: And when you put that together, you see a picture of these of these fleets that may change your view based on just sort of rough ranking based on fleet size. So green waste
Speaker Change: is a great example of that. They're a fleet that has a number of trucks is in the hundreds, not the thousands. On a pure screen, if you're trying to sell trucks, you would never put them at the top of the list based on the fleet size.
Speaker Change: Atherton both have the means to invest in their community for their citizens to put zero emission trucks into their refuse fleet, but that they're willing to also, you know, put that into the contracts and the RFPs that they are putting forward. So,
Speaker Change: GreenWaste is a great example of exactly the kind of customer that we focus on in our pipeline. One that is motivated and driven to be a leader in sustainability, one that has real goals that they need to achieve, and one that sees the commercial opportunity in front of them based on how their customers and their stakeholders will react.
Speaker Change: into their fleet. So the rest of our trial program certainly has many large fleets in it. We've updated before the average fleet size in our trial program across the now 30 plus fleets that are in it.
Speaker Change: is 4,200 trucks. There's 10 fleets over 5,000 trucks. So some of the largest fleets in North America certainly are in our trial program, so they'll have completed trials.
Speaker Change: But it's a great example of how Hyzon looks at our customer prioritization and why we are hopeful that we can move as quickly as Greenway's moved to contracts. Because these are fleets that aren't just trying a truck to see how it works. They're fleets with a real thesis as to why, if this works, it could make sense for them.
Speaker Change: Perfect. Now, thank you for the color. And a quick follow-up from me, you know, we're still in the early days of the production of the 200 kilowatt stack truck. Can you just kind of talk about what you guys have learned so far through early production?
Unknown Executive, Christian Mohrdieck
on the ViewCell system itself.
Speaker Change: Oh yeah, sorry, just something, yeah, I'm not on the 200 kilowatt system.
Speaker Change: Yeah, so again, we were thrilled to achieve a milestone that we've been working for, for some time in declaring commercial sort of production of the 200 kilowatt single stack fuel cell system. You know, we believe it is the highest power output, most compact mobile fuel cell system that's in trucks today. The facility here in Bolingbrook
Illinois
we believe is one of the largest fully integrated.
Speaker Change: M.E.A. through complete system assembly, fuel cell system assembly plants in the U.S. and one that we're quite proud aligns, we think, well with goals that many cities, counties, and parts of the federal government have.
to take this kind of text.
Thank you.
Speaker Change: And that SOP process was also culminated, importantly, with us receiving our ISO 9001 certification, which is a tremendous accomplishment for our team.
Speaker Change: to have a company like Heisman, who is only, you know, three and a half years post our public listing on the NASDAQ.
Speaker Change: to achieve an ISO 9001 cert shows our partners and our customers the type of quality that we are not just designing into the fuel cell system but in designing our supply chain and in our manufacturing
process. So through that process...
Speaker Change: We learned a lot. We produced close to 50 units from the A-sample through pre-production phases, A-sample, B-sample, C-sample, pre-production.
was about 50 units that we produced.
Speaker Change: and all those units had a number of things that we observed both.
Speaker Change: performance and different variants that were stronger, and performance and different components and design factors that we said, oh, we can actually improve here. I think there were over 50 major significant design changes as we went through that process from a sample to
Speaker Change: sort of pro induction. And that's a good thing. You know, when you're making design changes to the process at that scale, you can be comfortable that you're thoroughly testing, that you're doing your durability testing well, that you're testing it at all the right levels, both at the full system level, at the stack level, at the short stack level, and at the single cell level. So all that, you know, leads us to a first generation post SOP 200 kilowatt fuel cell design that we have a lot of confidence in the quality and the durability. We have additional opportunities, we've already identified that we're working into the next generation design.
Speaker Change: for 2025 that will have even better durability and start us driving down the cost curve as well.
Speaker Change: Because again, while we believe we're two to three years ahead of all others outside of China and getting to a 200 kilowatt plus single stack system for
for Trucks, we have to maintain that edge.
and the first step in that is
Speaker Change: that when they finally do come to market with a 200-kilowatt-plus single stack system, we're hopefully...
Speaker Change: Right, and that we're at some point working on our 300 kilowatt plus single stack system for stationary power. So a lot of learnings, a lot of great advancements, and we're very focused on an efficient path to keep that going to maintain our edge.
Speaker Change: Great, well thank you for the details, thank you for taking the questions and I'll hop back in the queue.
Thanks, Andrew.
Speaker Change: As a reminder, to ask a question, please press star 1 on your telephone keypad.
Speaker Change: Our last question comes from Robert Wertheimer from Melius Research. Please go ahead, your line is open.
Speaker Change: Hi, good morning, everybody. Congrats on the progress you've made. I had a few questions just around that. Could you talk about the timeline from here to delivery of the green waste purchase order? What are the steps? I mean, I don't know if there's further testing. Obviously, you have to get the trucks and convert them. I don't know if there's fuel issues. Just what's the timeline there, and what would a…
Speaker Change: A typical or hoped for timeline would be on any potential future orders.
Speaker Change: Hey, Rob. Great to hear your voice. Thanks so much for the question. Yeah, we'd love to talk about the path forward for the Refuge Truck. Obviously, it is performing even better than we hoped it would in what is basically an Alpha slash Beta truck. It is the sister truck to the first Refuge Truck deployed.
Australia about a year and a half ago.
Speaker Change: This truck came to market for the U.S. market, and based on its performance, we're starting on a very strong basis, if you think about that, right? This is basically, at best case, a B-sample prototype truck, which has had
Speaker Change: nearly a hundred percent availability in five major trials thus far, result you just don't expect, right, which I think builds on the quality of the power train.
Speaker Change: because it is a powertrain that's been that's been in development now and testing for three years on the basis of the Class 8. Additionally, this is a truck that right now, that refuge truck has a 110 kilowatt fuel cell in it.
Speaker Change: Right, and it's showing up to 300% better fuel efficiency than diesel and be able to perform full day's work up to 30 tons of refuse haul.
Speaker Change: 27% grade without the 200 kilowatt in it. And with the 200 kilowatt in that truck, we believe the fuel efficiency gets even better. And the performance, it's even a bigger separation from the existing battery electric trucks.
Speaker Change: So part of that timeline, you know, which we're already in, is developing the refuse truck towards its start of production, right? So the Class 8 has completed its 200 kilowatt start of production that we announced in September. The refuse truck has to go through that.
Speaker Change: process now. It will be a faster SOP than a Class VIII given that we're building on a very similar set of components.
Speaker Change: it will include adopting the 200 kilowatt into that design. So some of the milestones to look out for in 2025, you know, when we have our first trial truck available.
Speaker Change: will be a big milestone for us as we finalize the BOM and the design towards the end of the SOP process.
Speaker Change: And we're putting that truck in the customer trial as the final pieces of the SOP will be big milestones for us in the 2025. And we did mention in the green waste contract.
Speaker Change: Announcement that we, you know, could deliver initial vehicles to them commercially as soon as the fourth quarter of 2025. We're not committing to the fourth quarter of 2025, but that's how fast this theoretically could go. And it may obviously slip into 2026. So with that, obviously, the majority of what we do in 2025 commercially will be on the Class A 200 kilowatt. The refuse truck, we're quite excited to, you know, accelerate start production process on that as much as we can, building on the back of the Class A.
Speaker Change: and we're excited to put that truck out in the market with a 200 kilowatt power train at 7.2025, an update on our timing for that SOP for refuse at some point next year.
Speaker Change: Perfect thank you and I'm not sure how much you're going to want to comment on this so so I understand you may not but
Speaker Change: Any discussion of where you stand with potential strategic partners? I don't know if you're in active conversations or if you're waiting for...
Speaker Change: Potentially more orders to come in or potential partners are and then any comment on where your potential customers You know feel about the financing whether they're making potentially making orders contingent on on you obtaining a partner or more financing or Whether they could finance it. I mean there's lots of options out there, and I'm curious if you could explore any of them with us Thank you
Speaker Change: Yeah, no, thanks for both critical topics for us. So on the strategic partners, what I can say is, you know, when we talked about strategic partners in the past, who also could be
Speaker Change: partners both in the in the ecosystem supplying their with its fuel
Speaker Change: or their base, you know, Chassis is part of our truck.
Speaker Change: or dispensing capital or lease capital. It's both a potential place in the value chain on the back of our customer pipeline, which has only gotten better, right? As we've proven, the truck's in priority. We're now announcing the first contract with GreenWaste in the back of those trials.
Speaker Change: and we're now negotiating with several fleets on the back of their successful trials.
Based Loaded Capital as a part of that.
re-relationship. So all those partners.
Speaker Change: look to our commercial success as the foundation for partnership and as a foundation for potentially providing capital as a part of that. And clearly today, we're in a stronger position in terms of our commercial positioning than we were even three months back, right? With 10 trials complete, all successful, with the first order announced, that's proof that we can transact even to your point in a very uncertain time, right?
Speaker Change: Our customers are certainly well aware of where we are as a company. The customers that experience our truck typically are very excited that they have a service truck that actually works.
Speaker Change: And that they have a fuel cell truck with a powertrain that is clearly advantaged in all the ways that we speak to it. And that they have a truck that's based on a legacy OEM chassis that they know and that can be serviced well. So on the partnership side, what I can say is...
Speaker Change: We're in the strongest position we've ever been with these potential partners. The fuel side continues to lead, right? So fuel providers are clearly to be able to sell trucks. Customers have to see where the fuel is going to come from.
Speaker Change: It's not that they have to have the fuel contract in place when they sign the truck order, but at the same time, they're not going to sign a truck order without having a clear view as to who's going to provide the fuel with pricing that is generally understood. So fuel providers are putting in their fuel proposals alongside our trucks. These include
Speaker Change: many of the larger players in that space and some of the newer companies that are trying to to forge their way. We're very comfortable, as I mentioned in my comments, that the cost of fuel has come down dramatically from the $40 a kilogram that we saw six months ago with all the supply disruptions to we're now getting bids for our customers.
Speaker Change: in the $10 to $12 a kilogram range as soon as 2025.
Speaker Change: And so that provides an environment where these partners see the path, right? So we do need to sign a few more contracts to build a pipeline so that these partners see that this is commercially viable for them to commit. And hopefully once that happens, and with the 30 trials that we're conducting between July and February,
Speaker Change: you know, even with a 40% success rate, that's 10 to 12 potential contracts.
Stephen Mohrdieck, Unknown Executive, Christian Mohrdieck, Unknown Executive, Christian Mohrdieck,
Speaker Change: That's going to show these partners a foundation that can create a lot of value for them, and we hope that means that they're going to participate in HIZONS.
Success.
Speaker Change: On the financing front, I'll comment and hand it over to Steve, but I can say to your question on our customers holding back for some reason based on, you know, wanting to see us make more progress from a financing standpoint, we are very open with our customers on wherever you are. Obviously, it's part of their diligence process.
Steve: Now you see customers signing contracts. That's a good sign, right? Those customers have gotten comfortable with where we are. If we announce more contracts, clearly those customers, most of these are conservative companies.
Steve: We're very open with them about how we're going to do that. They see our ability to raise capital recently, and they understand that we are hopeful to have similar opportunities to continue to raise capital.
through the financial markets, should that make sense.
who are proposing fuel and other things to them.
Steve: and that also we hope is part of our plan. So I can say thus far, our contracts and our negotiations have not included terms like that, holdbacks based on financing or things like that. And generally, our customers are understanding and frankly supportive given we're very transparent with them on our plans to make sure we do all we can to...
succeed. Steve, do you want to add to that?
Steve: Yeah, I think Parker really hit the main points. I'd just, you know, add, I think, at the end of the day, it really comes down to, now that we've proven our technical and operational capabilities,
Steve: our ability to convince the market and our customers with commercial contracts.
Steve: And I think we saw recently when we announced the order with our fantastic first partner in refuse, GreenWaste.
what we saw the stock do on that day.
Steve: and we now put in place the tools through our prior actions.
Steve: of being able to capitalize on equity fundraising opportunities when the price and the volume react. So in terms of, you know, near-term comfort and being able to balance that capital raising strategy with commercial progress, I think we feel pretty good that we've got a lot of the tools in place to do that. And then on the back of that, we also believe, as Parker said, that that only increases our attractiveness from a strategic standpoint.
Steve: I believe we're the only fully integrated U.S. producer of fuel cells here. And as we see large customers, large fleets.
Steve: Advanced with us, and you can imagine the ecosystems that are attached to that with their preferred vendors, for example, through the OEM system. In our stated pathway to become a fuel system OEM provider, a lot of opportunities and interesting things may pop up that we're actively pursuing.
Speaker Change: Wonderful. Thank you for the answers. I'll talk to you later. Thanks.
Thanks a lot. Thanks Rob.
Speaker Change: Thank you, Operator. And thank you all for joining us. As we at Heisenau continue to drive our leading technology forward to achieve our commercialization goals, I certainly look forward to updating you all on our progress in the coming months. Thanks so much and take care.
Speaker Change: This concludes today's conference call. Thank you for your participation. You may now disconnect.