Hyzon Motors Inc.

Good morning and welcome to the Hyzon Motors second quarter 2023 earnings conference call. Please note that this call is being recorded. All lines have been placed on listen-only mode at this time. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at this time, please press star followed by the number one on your telephone keypad. To withdraw your question, again press star one. I would now like to turn today's call over to Henry Guan, Head of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to Hyzon Motors Q2 2023 earnings call. With me on the call today are Parker Meeks, Chief Executive Officer, Bapa Banerjee, Chief Operating Officer, and Jiajia Wu, Interim Chief Financial Officer. The press release detailing our financial results was distributed this morning. The release can be found on the investor relations section of the company's website with presentation slides accompanying today's call. Today's discussions include references to non-GAAP measures. These measures are reconciled to the most comparable US GAAP measures and can be found at the end of the Q2 earnings press release we issued today. This morning's discussions also include forward looking statements about our future plans and expectations. Actual results may differ materially from those stated and factors that could cause actual results to differ are also explained in the forward-looking statements at the end of today's earnings press release and the forward-looking statements on page two of our earnings presentation. Forward-looking statements speak only as of the date on which they are made. Your caution not to put undue reliance on forward-looking statements. Before I turn over the call, I would just like to provide an update on an upcoming IR event this week in New York. On Thursday, August 10th, Parker will be doing a fireside chat at the JPMorgan Automotive Conference with analyst Bill Peterson at 11 a.m. Eastern. With that, I will hand the discussion over to Parker.

Good morning, everyone, and thank you for taking the time to join our call today. Hyzon remains steadfast in its mission to accelerate the global clean energy transition by developing and commercializing our zero-emissions, fuel cell technology as quickly as possible. 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 platforms. As I mentioned on our Q1 earnings call, Hyzone has been hard at work streamlining our vehicle offerings, operations, and geographies to support this fuel cell commercialization focus through our asset light vehicle assembly model. Today, we are progressing toward commercialization of our fuel cell EV truck platforms, the conventional platform developed in the U.S., the capital platform developed in Europe, and the rigid platform developed in Australia. We are grateful to our customers for continued commercial progress on these platforms over the past quarter. We have made significant progress against our previous guidance of 10 to 20 vehicles deployed under commercial agreements in 2023. As of NQ2 2023, we had already deployed seven vehicles under commercial agreements to customers in 2023 and have deployed an additional three vehicles between July 1st and August 7th for a total of 10 vehicles to date. Of those vehicles, three were deployed to customers in Europe, while seven coach buses were deployed to a customer in Australia and are currently in the process of completing final site acceptance steps. We have also collected $2.9 million in cash receipts year-to-date against those vehicles deployed commercially in 2023. We are pleased to have already met the bottom end of our guidance range and are increasingly confident about our potential to meet the upper end of the previous guidance range, although risks remain, including our customers' ability to permit, install, and commission onsite fueling prior to vehicles being delivered and ongoing supply chain risks. As we discussed in our Q1 earnings call, We are focused on large fleet customers in each region, working collaboratively with each to frame a multi-year commercial delivery structure post-trial and tailoring the commercial framework to balance risk sharing, particularly in the first-year allotment of Hyzon trucks deployed under that agreement. These collaborative first-year commercial structures vary between direct sales, sales of buyback provisions, sales conditional on successful trials, unpaid trials, paid trials, and others. To provide transparency as we move forward, we will refer to all cash generating contracts as commercial orders, commercial trials, or commercial deployments in line with those variations. We will also focus equally on cash received along with revenue recognition, as the timing and nature of that revenue recognition will vary depending on the nature of the first year vehicle supply risk sharing arrangements. Diving into specific regions, in the U.S., we announced a commercial agreement with Performance Food Group, or PFG, one of the largest food and food service distribution companies in North America. If all tranches and options are executed, this agreement has a potential for up to 50 vehicles. First five trucks, powered by Hyzone's Class 8 110-kilowatt fuel cell system, are still on track to be delivered by year-end. Our trial program in North America has also continued to expand and progress our focused potential fleet customers through our development pipelines. As we recently updated, we have now completed 15 trials in North America since March of 2022, with seven completed in 2023. We have accumulated over 40,000 miles on our conventional truck platform in customer trial and track testing, providing us with important experience and learnings from real-world operations across a broad range of use cases and fleet operators, maturing our fuel cell EV platform even further in future deployments as we move into production. As discussed on our Q1 earnings call, In Europe, we recently deployed our first cab over 120 kilowatt 4x2 vehicles under full commercial agreements into trial to start, activating our commercial relationships with Highland in Germany and Juva in Austria. In Q2, we deployed one additional vehicle as part of these commercial trials for a total of three Hyzon FCEVs and European commercial trials at the end of Q2, and we anticipate deploying up to another six fuel cell EVs in second half 2023 in Europe as we transition toward the next-generation 200-kilowatt fuel cell EV cabover. Additionally, our cabover fuel cell EVs have accumulated a total of over 20,000 miles in customer operations and track testing since February 2023, building experience across our expanding customer-deployed and internal testing vehicle fleet, shifting from our vehicle progress to our core fuel cell technology focus. We are proud of the progress we have already made at our U.S. Fuel Cell System Production Facility in Bolingbrook, Illinois, which is advancing well into prototype production today and remains on track for startup production or SOP of our 200 kilowatt fuel cell system in 2024. When we last spoke, I mentioned a major priority of ours was to assemble and test nine fuel cell systems at a B-sample stage by end of Q2. I'm incredibly proud that we recently announced the successful completion and factory acceptance testing of these nine single stack 200 kilowatt fuel cell system B-samples. This achievement shows growth in the company's prototype assembly rates, as we produced three units in Q1, six units in Q2, and are on track to produce 16 additional units in the second half of this year, bringing the full year total to 25 in 2023. In part, we were able to achieve this production efficiency improvement by successfully commissioning Heisen's proprietary automated roll-to-roll membrane electrode assembly production line, the semi-automated single-cell manufacturing line, and the fully automated fuel cell stack manufacturing line. Progression of the 200-kilowatt fuel cell system, or FCS, B samples validates the design, equipment, and operating procedures, which are all critical to the final tooling and production of C samples and the eventual commercialization of the FCS. Pivoting to events announced after quarter end, we achieved several additional important updates and milestones in governance, and commercialization of our vehicle platform. Last week, we achieved another major milestone. We completed our first U.S. 110 kilowatt truck that was production tool components. The vehicle is now progressing to the test track in Michigan for durability testing. With this vehicle, our U.S. 110 kilowatt truck program moved from prototype to production. This achievement, completed in collaboration with Hyzon's third-party assembly partner, Fontaine Modification, launches Hyzon's truck production for customers in North America, and starts to transition to at-scale assembly with Fontaine. By working to commercialize the 110-kilowatt vehicle in the near term, we are building experience and know-how with Fontaine and our customers. And internally, we're creating a foundation from which to accelerate our 200-kilowatt vehicle commercialization and deployment. As a reminder, our 200-kilowatt fuel cell LED program is currently in prototype track testing on track for commercial SOP in 2024. We also continue to strengthen our governance, finance, and accounting operations with the appointment of Matthew Folston to our board of directors. He serves as chair of the audit committee and as a member of the compensation committee. Matthew is a seasoned financial executive, having served as CFO for three publicly listed companies throughout his career. He also brings extensive international expertise with more than 30 years of experience working globally across the automotive, commercial truck, mining, and other sectors. We believe his financial experience in the heavy-duty trucking industry will provide invaluable guidance as we further strengthen our governance, finance, and accounting operations. Hyzone 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. As we sit here today, we are working towards several exciting milestones. to drive Hyzon's single-stack 200-kilowatt FCS technology to commercialization for the rest of 2023, including delivering our first commercial Class 8 Hyzon fuel cell EV to a major U.S. fleet customer, producing and validating 25 200-kilowatt fuel cell B samples, declaring C-sample the 200-kilowatt fuel cell system, and executing additional commercial agreements with major fleet customers in the U.S. and Europe. As we mentioned last quarter, we are focused on efficiency, cash preservation, and expense control. We must ensure we are taking a balanced, prudent approach to cash management while continuing to develop and commercialize a proprietary, single-stack, 200-kilowatt fuel cell system, which we see as a true technology, product performance, and economic advantage, and driving commercialization of our heavy-duty fuel cell truck platforms. As we mentioned last quarter, we've already taken several important steps in simplifying our strategic focus and operational footprint, which our COO, Dr. Bapa Banerjee, will expand upon later in this call. I'd like to spend a moment discussing our outlook for expenses, on which both Bapa and Jaja will go into greater detail. As we look to the second half of the year, we expect to minimize headcount additions and see lower expenses relating to legal, consulting, and accounting fees. So, while the ultimate timing and outcome of the ongoing SEC investigations remain unclear, on a normalized recurring basis, we should expect to see a clear improvement from the SG&A and R&D expenses in the first half of 2023 and second half of 2022. In 2024, we will target bringing down our annual net cash outflow to a range of 110 to 120 million for the full year from the additional cost efficiencies we are now driving under the additional simplification and restructuring efforts Bapa will outline in more detail today. We will come back to you with a more detailed guidance for fiscal year 2024 as we close 2023. In the meantime, market conditions remain volatile, but as always, we remain opportunistic and proactive. We further continue to review all options available to us to raise additional capital, including full merger and acquisition, while seeking to minimize solution and to maximize value for our shareholders. We are focusing our efforts on strategic investors and partners who are interested in our technology. We are pleased with the progress we've made throughout this process. We will keep you posted on important updates when appropriate. In closing, we have and continue to make significant progress in advancing our proprietary fuel cell technology and remain on track for SOP and commercialization of our single-stack 200-kilowatt fuel cell system in the second half of 2024. Additionally, we are excited by the continued advancement of our commercial pipeline across our focused fuel cell EV platforms, with commercial deployments ongoing for our 10 to 20 vehicle goal this year, of which we have already achieved 10 so far, with $2.9 million of cash received against those vehicles. I am confident that our differentiated technology, strong IT, and in-house U.S.-based fuel cell production, combined with our significantly streamlined organization and meaningfully reduced expenses, positions us well in this fast-growing market. Now, I am pleased to introduce and turn things over to Dr. Bapa Banerjee. As previously announced, Bapa joined us as Hyzone's first Chief Operating Officer earlier this year. Bapa is leading the operations team to ensure delivery of high-quality products to customers and provide strategic direction for Hyzone's continued growth as the company develops and delivers hydrogen-powered fuel cell vehicles throughout its target markets. In its first few months on board, Bapa has been conducting a complete review of our operations, portfolio, and footprint. And we're pleased that he has already developed a revised operational efficiency plan to reduce expenses, the first steps of which are already in active implementation. I'll now turn it over to Bapa to discuss these updates.