Hyzon Motors Inc.

Good morning and welcome to the Huysens Motors first quarter 2023 conference call. As a reminder, today's call is being recorded. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. At this time, I would like to turn the call over to Henry Kwan, Head of Investor Relations, for opening remarks and introductions. Please go ahead.

Thank you, Operator. Good morning, and welcome to Hyzon's first quarter 2023 earnings call. On today's call are Parker Meeks, our Chief Executive Officer, Zsa Zsa Wu, Interim Chief Financial Officer, and Sayanta Dutta, Senior Vice President of Corporate Development. The earnings press release and presentation deck can be found on the Investor Relations section of our website. With that, now I will turn it over to Hyzon Motors' Chief Executive Officer, Parker Meeks.

Thanks, Henry, and thank you, everyone, for taking the time to join our call. This is Hyzon's first earnings call since May of 2022. I would like to briefly address that filing and formal communication gap. As you are likely aware, the company experienced challenges in governance and in providing robust and timely reports, in response to which the company has invested significantly internally, along with Hyzon's board commissioning and concluding a thorough special committee investigation. With yesterday's filing of our quarterly report on Form 10-Q for Q1 2023, we are now current with our periodic reporting obligations and intend to provide our periodic reports on a timely basis going forward. I am proud that in my first earnings call as Hyzon's CEO, I get to share the significant achievements the Hyzon team has accomplished over the past year, including those internal investments and improvements we have progressed. Since you last heard from us, Our team at Heisman has been busy on two fronts. First, we have restructured, integrated, and simplified the company to build a strong foundation across technology, product, geography, and organization, while making progress in strengthening our governance, including ongoing implementation of the recommendations from the special committee investigation. This put the company on solid footing to then restart focused execution with a new strategic plan and to restart customer engagement. many of which had paused until the company had clarity on our filing path forward and our governance, which we have now been able to provide. I'm excited by the significant strides we have made to date, both in the advancement of our 200-kilowatt fuel cell technology and in the commercialization of our heavy-duty fuel cell electric truck. And while internally we have been busy relaunching a stronger Hyzon, externally, the regulatory and government support for hydrogen and zero-emission mobility in general, along with trucking, have all grown stronger. Today, we are focused on our core strength, developing and commercializing our fuel cell technology. We have streamlined our vehicle offering, operation, and geographies to support this fuel cell commercialization focus in an asset light vehicle assembly model. Later in today's call, we will discuss the exciting benefits we are already seeing in early execution of this powerful combination, in-house fuel cell technology combined with an asset-led approach to commercialization. I look forward to sharing details of this progress with you, the competitive and economic implications we are seeing in that progress, and to preview the goals we have set for the rest of the year and beyond. Hyzon's fundamental strength is its proprietary in-house design, development, and assembly of high-power fuel cell systems, starting from in-house production of our proprietary membrane electrode assembly, or MEA. In our restructure, we therefore prioritized and accelerated hiring and CapEx investments for the development and commercialization of our single-stack 200-kilowatt fuel cell system, which we believe is a major step forward for the industry. We are proud of the progress we have already made in our end-to-end U.S. fuel cell system production facility, which is advancing well into prototype production today and on track for startup production, or SOP, of the 200-kilowatt fuel cell system in 2024. We are utilizing an accelerated A-sample through SOP methodology to measure the maturity of the 200 kilowatt in its development, which is summarized in the presentation posted with this earnings release. You will hear us talk about our progress against these major development declarations today and expected in the future, so we are providing the table as reference. To measure our progress towards declaring this SOP, we determined specific milestones for 2020-30 throughout the year. We have already achieved several of those milestones in the first half of 2023. A few of the priority milestones that we anticipate achieving later this year include assembling and testing nine fuel cell systems by end of June at a B-sample stage, completing initial major milestones of durability testing and design and process verification, and a final goal of assembling and testing 25 200-kilowatt fuel cell system prototypes, along with a C-sample declaration, by year end. Sitting here today, we are on track to reach that goal. We have started production on our continuous roll-to-roll MEA production line and have begun semi-automation and full automation activities across single cell, fuel cell stack, and system assembly. Beyond fuel cell system manufacturing and bench testing, the initial on-vehicle testing of our alpha 200 kilowatt US Class 8 fuel cell EV truck is showing many of the improvements we expected as compared with a common competitor approach of using two approximately 100 kilowatt fuel cell systems to achieve the same power. These advantages include 30% lower volume and weight with our single 200 kilowatt fuel cell system versus two Hyzon 110 kilowatt systems, and 25% lower manufacturing costs. Our early on-vehicle testing also indicates 20% improvements in fuel efficiency, which is a critical measure given fuel makes up over 50% of the total cost of ownership over a typical truck's commercial lifecycle. Our ability to develop and produce a single 200-kilowatt fuel cell system is rooted firmly in Hyzon's IP, which protects our technology edge. Our IP includes a total of 157 patents, including 120 relating to proprietary materials, designs, and processes across the entire MEA, bipolar plate, stack, and fuel cell system spectrum. These patents are exclusive to Hyzon in mobility in our focused markets of North America, Europe, and Australia and New Zealand. 200 kilowatt will serve as our base to develop future generations of our fuel cell, including a single-stack 300 kilowatt system, which remains central to our development roadmap. Beyond the fuel cell technology, in vehicle R&D, we have only maintained those R&D programs which are vital to the fuel cell EV powertrain. and have reduced the number of vehicle R&D programs by about two-thirds compared to those in place in July 2022. One example is in battery technology, where we are transitioning to a similar asset light development model by collaborating with suppliers in development and outsourcing manufacturing, while Hyzon continues to own the relevant IP. To support this technology development focus, we significantly streamlined and simplified our approach to our vehicle offering engineering organization, and assembly model during the restructuring. First, we rationalized the product portfolio. Previously, we were advancing over 20 distinct vehicle variants. Going forward, we are focusing on one vehicle platform for development in each region. The conventional truck developed in the US, the cab-over truck developed in Europe, and the rigid truck, the base for our refuse vehicle, developed in Australia. Second, we have streamlined our 200-kilowatt powertrain development around modular standardized components, which are being designed to acquire minimum modifications across all three platforms, simplifying global supply chain and inventory management, serviceability, and maintenance. Lastly, we are in the process of duplicating our U.S. approach to vehicle assembly and development in Europe. In the U.S., Hyzon has been prototyping and trialing a single vehicle platform with fleets since March 2022. and we are now transitioning the informed and improved design into pre-production with our third-party assembly partner, Fontaine Modification. By leveraging an established at-scale third-party vehicle assembler, we can scale assembly of fuel cell EV trucks up fit with Hyzon fuel cell systems and powertrain components for delivery. The first US commercial truck is expected to ship from Fontaine to a customer later this year. We look forward to providing further updates in the future on our transition to third-party assembly in Europe. In the U.S., this asset-light model is expected to reduce assembled vehicle costs, particularly at initial assembly volumes. As you can see on slide 11, we expect our third-party truck assembly costs to represent a relatively small portion of our total assembled vehicle costs. By combining this expected benefit with the previously mentioned cost advantages of our in-house fuel cell technology, we expect to yield a positive contribution margin today on the U.S. 110-kilowatt trucks slated to be deployed to customers later this year. We also currently estimate a smaller positive contribution margin within the first year of 200-kilowatt U.S. truck assembly, which we expect to expand as we scale the 200-kilowatt fuel cell EV platform. Additionally, in the U.S., many large fleets have pre-orders for internal combustion trucks with dealers, which can serve as the base trucks for our upfit fuel cell EVs. When this is the case, base vehicles can be shipped directly from dealers to Fontaine for upfit. In this scenario, Hyzon does not put up the working capital for the base truck, which results in a meaningful reduction in Hyzon's total working capital carry for a complete fuel cell truck. With scale and further cost and fuel efficiency improvements in both the 200-kilowatt fuel cell system and the broader vehicle powertrain, we expect our U.S. business model to approach TCO parity with diesel even without the benefit of truck subsidies once we reach 1,000 annual units of production. Today, we are already at or near TCO parity with diesel with the benefit of subsidies, all including the positive contribution margin mentioned previously. Turning now to our commercial progress, we are happy to have largely maintained and now restarted our priority engagements in all three regions. This includes anchor fleet customers under signed agreements with initial commercial activation in all three regions anticipated this year. We expect to deploy between 10 and 20 vehicles to customers globally under commercial agreements by year end. We also have a healthy pipeline of potential large fleet customers globally, in addition to those anchor fleet customers. Today, our pipeline is particularly strong in North America, where we have completed over 10 vehicle trials. and have over 10 fleets engaged in trial and or commercial agreement shaping. In total, with 11 customers globally under commercial agreements, and 24 fleets globally in active trial planning, trial execution, and or commercial agreement discussions, we believe our commercial pipeline is in good shape. As an example, yesterday we announced our first agreement for fuel cell electric trucks in the U.S. with Performance Food Group, or PFG. one of the largest food and food service distribution companies in North America. First five vehicles will be upfitted with Hyzon Class 8 110 kilowatt fuel cell systems, and an additional 15 fuel cell EVs will be upfitted with Hyzon's next generation single 200 kilowatt fuel cell system, which is conditional on a successful 200 kilowatt vehicle trial. Following the initial deliveries, PFG and Hyzon also have agreed to work together regarding a mutually agreeable option for 30 additional fuel cell EVs. We are excited to partner with PFG as part of their decarbonization mission. Additionally, we recently activated our commercial relationships with Hi-Lane in Germany and Juve in Austria, with whom we have launched the first customer trials of cab over 120 kilowatt vehicles in Europe. As I mentioned previously, we are focused on large fleets who are actively seeking decarbonization solutions for their fleet. Many of these large fleets order several hundred ICE trucks per year today. However, most will start the decarbonization journey with just a few trucks in an initial delivery year. We aim to collaborate with these fleets in multi-year order programs to scale the decarbonization impact in their fleet as we and they are able to validate performance of the initial trucks in their fleet, secure additional subsidies, and stand up fueling. With this focused customer collaboration model, We believe many large fleets may eventually scale to 100 trucks per year in as few as four years. If this general model is realized, just 10 major fleet customers in each region would be sufficient to ramp to 1,000 trucks annually. Though not every customer will scale to this potential, several of our anchor fleets are capable of scaling well beyond 100 trucks per year in the future, given their fleet size and decarbonization aspirations. Finally, our global extension of our vehicle platforms is also underway, with the ISO-certified Australian-designed RIDGID platform currently in commercialization, paving the way for the first U.S. fuel cell electric refuse-based vehicle, which has also been built in Australia based on the same design. The fuel cell power truck will ship to the U.S. later this year for further development prior to launch of a vehicle trial program. Refuse is a fantastic use case for fuel cell EV heavy-duty powertrain. Combination of the near-term publicly funded fleet mandates in California, along with the newly created refuse voucher bonus in California's HVIP voucher program, provides a government-supported pathway to zero-emission refuse vehicle adoption. It also pairs well with a circular ecosystem and fuel concept, given the potential for hydrogen production from landfills. We will discuss the first waste-to-hydrogen production project we invested in with Chevron and Raven SR in California later this morning. Additionally, our previously announced liquid hydrogen truck in development with Chart Industries is now assembled and on the test track in Michigan and planning with the fleet for a 600-mile targeted demonstration. Our belief remains that 350-bar hydrogen storage is the cost-effective approach for back-to-base operations, well suited to fuel cell EV applications, and liquid hydrogen is the optimal future approach where longer range is required. Given the significant cost and reliability concerns, with 700-bar dispensing and onboard tankage. This is a natural extension of our existing conventional truck platform. By incorporating Chart's liquid hydrogen tankage on that platform, we anticipate opening the long-haul market once the refueling infrastructure is developed. In addition to Hyzen's technology and business model advantages, we are also encouraged by the continued expansion of government support for zero- and low-emission transportation in our priority market, and have further focused our efforts in these geographies. In the U.S., the addition or advancement over the past 12 months of many programs in California, including the recently passed Advanced Clean Fleet Rule, combined with the Inflation Reduction Act and its Zero Emission Port Equipment Fund, which are expected to include drainage truck subsidies at ports nationwide, along with the progression of the Department of Energy's Hydrogen Hub Program, provide significant truck deployment opportunities in California today, port drainage nationwide in the relatively near term, and hydrogen hubs across the country as that program progresses mid-decade. Given the subsidy and grant programs in place today, in stages of detailed definition, or proposed for future implementation, we see opportunities for the industry to put thousands of zero-emission trucks on the road under subsidy programs that are now or are expected to be soon commercially available and economically viable for customers. Finally, we also decided to stop delivering trucks commercially into China, and started to monetize our existing China leased truck portfolio for the first announced transaction in December 2022. As part of our restructuring assessment and related special committee investigation, we identified commercial governance concerns in our China operation, challenging our ability to operate commercially in China. Additionally, relative FCEV profitability and collectability in China has been significantly challenged versus the relatively attractive U.S., Europe, and Australia-New Zealand markets on those fronts. This combination of economic and risk challenges led to our decision to exit China commercially to focus on our core markets. The organizational reset we completed has been foundational to our ability to start executing with quality, efficiency, high levels of performance management, and stronger governance. Throughout the past 10 months, we have significantly rebuilt our organization structure, creating globally integrated functions, strengthening our senior leadership team, and centralizing technology and vehicle development. Additionally, we are supporting our skilled and talented workforce with a focus on communication, employee engagement, and culture building, building strong retention despite our reset. I am proud of and grateful for the resilience and dedication our global team has demonstrated to Hyzon and our goal of decarbonization during the past year. With our rationalized vehicle portfolio and standardized approach to component development, we moved from regionally-based engineering and operations to a globally integrated function. Combining and collaborating across Hyzon's global expertise helped us progress rapidly, enabling much of the technology and vehicle progress I previously described, along with resource efficiency. Dr. Bapa Banerjee joined us as Hyzon's first Chief Operating Officer, bringing more than two decades of experience leading global operations, engineering, and commercial functions for multinational companies, including Caterpillar, to continue driving Hyzon forward in globally integrated delivery. To further Hyzen's priority of investing in our people and their development, Sue Sun LaSavage joined us as Chief Human Resources Officer, bringing both an engineering background and extensive HR experience at automotive and manufacturing companies. We also welcome the new director to our board, Andrea Faraci, formerly a global leader at Citigroup. As you can see, Hyzen is a fundamentally different company than it was a year ago. We used this time not only to reset and develop a simplified fuel cell-focused commercialization plan, but to start driving execution of this plan across each part of our business. As the hydrogen ecosystem expands, we continue to see a significant opportunity in the hydrogen production and supply segment through our active relationships and investment rights with a broad set of companies we have announced previously. Just to illustrate, we announced in January 2023 a collaboration with Raven SR and Chevron to commercialize operations of a waste-to-hydrogen production facility in Richmond, California, which will supply hydrogen to transportation markets in Northern California. Chevron has a 50% equity stake, Raven holds 30%, and we hold the remaining 20%. Raven will develop and operate the facility, currently targeted to come online in 2024, producing up to five tons per day of low to zero carbon hydrogen from organic waste through Raven's non-combustion reforming process. Eyes on Share can provide fuel for our truck customers at an estimated cost basis that both enables TCO parity fuel cell EV conversions and additional margin upside for Hyzon. Hyzon intends to be an integral player as the world pivots to clean energy. We are excited by our progress thus far, the milestones we have achieved, and the upcoming milestones we are closing in on. For 2023, we have laid out several of these milestones, including deliver our first commercial Class 8 Hyzon fuel cell EV to a major U.S. fleet customer, produce and validate 25 200-kilowatt fuel cell prototypes, declare sea sample of the 200-kilowatt fuel cell system, and execute additional commercial agreements with major fleet customers in the U.S. and Europe. Reaching these milestones will keep us on track to achieve our targeted SOP in second half 2024 and commercialization. Of course, a core focus for us in executing this plan is cash and capital management, along with financial performance. With that, I will hand over the discussion to Jaja, who will go over the numbers and our plans going forward.