Hyzon Motors Inc.

Thank you for holding and welcome everyone to the Hyzon Motors third quarter 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. To withdraw your question, again, press star one. Thank you. I will now turn the call over to Henry Kwan, head of investor relations. Mr. Kwon, please go ahead.

Thank you, operator, and good morning, everyone. Welcome to Hizan's Q3 2023 earnings call. With me on the call today are Parker Meeks, Chief Executive Officer, Stephen Weiland, Chief Financial Officer, and Zha Zha Wu, Senior Vice President of Finance and Accounting. As a reminder, you can find the press release detailing our financial results and the presentation accompanying today's call in the investor relations section of our website. Today's discussions include 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 Q3 earnings press release. This morning's discussions include forward-looking statements regarding future plans and expectations. Actual results might differ materially from those stated, and factors that could cause actual results to differ are explained in the forward-looking statements at the end of the press release and page two of our earnings presentation. 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. With that, I will turn the call over to Parker. Thank you, Henry.

Good morning, everyone. And thank you for joining today's call. This was a remarkable quarter. Hyzon continues to accelerate the global transition to clean energy by developing and commercializing our proprietary leading zero emission fuel cell technology. Our company is at an inflection point as we made our first commercial delivery in the U.S. this month. We expect to have less than $5 million of capital spend left to reach startup production in 2024, and with that, we'll start the transition to ramping production. The hydrogen economy also gained significant tailwinds from recently progressed government programs and policies, further supporting Hyzon's technology and business model advantages. Those advantages, our leading 200 kilowatt fuel cell technology, our state-of-the-art fuel cell production facility, and our asset light business model are being sharpened and deployed by a strengthened leadership team and supported by industry leading partners. Hyzon's fuel cell technology is the foundation of our company and is being monetized over two investment horizons. Our core commercialization and heavy duty fuel cell trucks today and substantial option value over time in deploying the same technology and additional fuel cell advantage in markets. We have an early mover advantage and a scalable business model that we expect to generate a positive cash contribution margin at the truck level on the trucks we deliver to large fleets in the fourth quarter of 2023. This is made possible by five key advantages. our in-house fuel cell technology and manufacturing leadership, driving expected lower cost and higher fuel efficiency fuel cell power, an asset light business model with relatively low cost third party truck assembly, an accelerating hydrogen market powered by customer and government tailwinds, a series of additional fuel cell advantaged in markets with substantial option value, and a proven and driven leadership team that continues to strengthen. bolstered by a powerful combination of near-term government-supported subsidies and government-mandated emissions reduction regulations. We believe Hyzon is on a pathway to corporate cash flow break-even, focusing on those most attractive zero-emission truck markets first. To put that into perspective, California's current mandates and funding structures estimate the conversion of 24,000 heavy-duty port drayage trucks to zero emission alone by 2030, along with 10 to 25 percent of the higher emission portion of the California heavy-duty truck fleet. Hyzon believes 50 percent of those conversions will be to fuel cell trucks. As one of only two companies with fuel cell trucks in commercial delivery to customers in the U.S., if Hyzon achieves a 25% share of those projected fuel cell truck deployments, we anticipate Hyzon will be on track to our corporate cash break-even goals by 2030 with California deliveries alone. That break-even moves forward, of course, when adding the potential for the rest of the U.S., Europe, and Australia and New Zealand. Our single-stack 200-kilowatt fuel cell technology is a key differentiator which we expect will be in operation ahead of the competition, demonstrating its durability, performance, weight, and cost advantages. This early mover advantage, we believe, will secure our place with large fleets who are acting on the available subsidy programs and approaching mandates now, and who desire to scale assuming successful initial fuel cell truck deployments. Beyond trucks, we see significant opportunity for deploying our fuel cell technology and other use cases with high power density requirements, such as rail, aviation, mining, and stationary power, several of which we are already shaping with leading partners. In each of these ecosystems, we see fuel cell products that are well positioned to decarbonize, which we plan to action once the fuel cell truck platforms are commercially stable, continuing to expand our addressable markets and unlocking option value for our technology. As a whole, the market for zero-emission, heavy-duty power continues to grow as governments incentivize the transition to hydrogen. benefiting both our core fuel cell truck commercialization and additional in-market applications. For example, the Biden administration recently allocated $7 billion to seven hydrogen hubs, several of which Hyzon directly supported. The Inflation Reduction Act earmarks $2.6 billion to decarbonize coastal and inland ports nationwide, including drainage trucks and fueling infrastructure. And California's HVIP program has over $250 million for heavy-duty zero-emission trucks and another $147 million set aside for drainage trucks specifically, totaling close to $400 million available to heavy-duty trucks today. These are all major long-term investments in the hydrogen economy at both the federal and state level, which we estimate could stimulate thousands of fuel cell trucks in the U.S. this decade. And as these funding programs scale, Hyzon and our customers will also have the opportunity to scale with them. Beyond the increase in government support, customer interest in fuel cell trucks is expanding as our large fleet customers are seeing the limitations of heavy-duty battery electric trucks through, in many cases, months of attempting to utilize them in their operations. Our customers are confirming to us their reality, in many cases, shows even shorter than expected usable range, long charging times, and the need for substantial charging infrastructure, which in many cases is years away at any real scale. Our large fleet customers have described the need in some cases to deploy two battery electric trucks to complete the work of one of their regular diesel trucks, primarily due to wait and charge time. Our fuel cell trucks are much closer to diesel in their expected operating performance. Fuel cell trucks offer a potential solution thanks to their range, quick refueling time, and payload performance. And customers are recognizing that, increasing the addressable market for fuel cell trucks. The market support for fuel cell trucks continues to increase as we have made significant strides this quarter in parallel. We have seen continued commercial deployments of our fuel cell technology to truck customers, open additional future markets for our fuel cell technology and hydrogen investment rights, and done all of this while managing our cash and capital in line with prior guidance. Our commercial progress reflects this momentum, and we believe we are approaching an inflection point in customer pipeline conversion with our large fleet trial customers. We also continue to drive our commercial deployments, including a significant recent milestone moment for the company, completing our first revenue delivery in the U.S. Earlier this month, we saw our first delivery of a fuel cell truck in the US to a customer through a sale, for which we expect to record revenue in the fourth quarter of 2023. We believe this is the industry's first publicly announced commercial delivery of a heavy-duty fuel cell truck to a customer in North America. What's more, we delivered it into operations at the Port of L.A. and Long Beach, where 20,000 dredge trucks operate and where the Advanced Clean Fleet Rule requires dredge trucks to begin decarbonizing their operations in January 2024. This is a major market which Hyzon has now commercially entered, which we believe provides significant opportunity due to its concentrated back-to-base operations, conversion mandates, subsidy availability, and multiple layers of funding opportunities via the previously mentioned existing CARB HVIP DRAID set-aside funding, IRA, and DOE Hydrogen Hub awards. By the end of the third quarter, we had deployed 13 vehicles under commercial agreements to customers in 2023. Since quarter end, we deployed an additional truck under commercial agreements. With that, we are raising the low end of our 2023 vehicle guidance to 15 to 20 vehicles deployed by year end, up from 10 to 20. Our model for commercial agreements envisions the potential for up to 50 trucks over multiple years, with defined contingencies and or customer options. These agreements typically start with a few trucks, which allows the fleets to validate performance, secure additional subsidies, and stand up fueling as a precedent to confirming the next tranches. The company's North American trial program continued to expand, with 18 trials completed since March 2022, of which 10 trials were completed in 2023, gaining experience with and learnings from real-world operations for future fuel cell truck deployments. In Australia last month, we announced the global launch of Hyzon's heavy, rigid refuse truck platform. Partnering with Remondis, one of the world's largest waste service and recycling companies, we rolled out Australia's first zero-emission, hydrogen-powered garbage truck in a commercial trial. The commercial trial is expected to convert to a full vehicle purchase if certain trial performance targets are met. After quarter end, we also announced a vehicle agreement for up to 20 vehicles powered by our 200 kilowatt fuel cell system. The agreement with TR Group, New Zealand's largest heavy-duty truck fleet owner, is expected to start with a trial of two vehicles in March 2024. Any vehicle purchases under the agreement are at TR Group's option following this initial commercial trial. And finally, in Europe... we continue to successfully gain operational experience with vehicles in commercial operation with DB Shanker and M-Price through our channel partners Highlane and UVA, respectively. Looking ahead, we are on track to deliver the first 110-kilowatt Class 8 trucks to Performance Food Group this year. The initial vehicles are currently well into assembly. Our agreement has the potential for up to 50 vehicles if all tranches, conditions, and options are met and executed. We're also on track to launch the first U.S. trial of our refuse truck in the first half of 2024 in California, with customer deliveries expected to begin in 2025. We remain focused on converting the next large fleet customer contracts in the U.S. and Europe, with several negotiations on the back of successful initial trials. The growing commercial conversion is also a testament to Hyzon's best-in-class fuel cell technology, which we have significantly progressed since we last spoke. Our fuel cell technology enables 200 kilowatts of power output from one stack, which we estimate is 30% smaller and lighter, 20% more fuel efficient, and 25% lower cost to manufacture than other fuel cell providers who need to combine multiple smaller fuel cell units to reach 200 kilowatts of power output. This expected lower cost and improved fuel efficiency advantage provides the core foundation for our business model, and we believe is the only single-stack 200-kilowatt fuel cell system in trucks with customer commercial agreements in place. Our world-class fuel cell production facility in Bolingbrook, Illinois, is on track for SOP in the second half of 2024. We anticipate needing to invest less than $5 million in capital to complete the SOP and meet our volume forecast through 2025. With just the equipment installed to date once commissioned, the facility is expected to have the capacity to produce over 700 200-kilowatt fuel cell systems annually across three shifts. We believe we can increase capacity through further de-bottlenecking to the point that we can reach corporate cash break-even at the fuel cell system manufacturing level from the Bolingbrook facility. Simultaneously, we have completed planning with our third-party vehicle assembly partner, Fontaine Modification, with the goal of ensuring fuel cell electric truck assembly capacity scaling is on plan in line with those production numbers through our intended corporate cash break-even volumes. Turning to the specific progress on the 200 kilowatt fuel cell technology, we continue to follow the standard automotive product development process, producing and validating fuel cell system B samples before moving to C sample and then declaring SOP. So far, we have completed nine B samples in the second half of 2023 and have completed a total of 18 B samples through factory acceptance testing so far this year. This achievement shows growth in the company's prototype assembly rate as we produced three units in Q1, six units in Q2, and nine in the first four months of second half 2023. We remain on track to complete the additional seven B samples in the fourth quarter, bringing the full year total to 25 200-kilowatt B samples. We also continue our durability testing, completing approximately 20% of total durability testing with an accelerated drive cycle, and are on track to complete the accelerated system durability testing in line with our 2024 SOP. The successful progress of the 200 kilowatt fuel cell system B samples confirms the viability of our design, equipment, and procedures to date, essential to eventual commercialization. We continued strengthening our leadership in the third quarter. At the executive team level, I'm personally thrilled to welcome Steve Weiland to the team as CFO. His capital markets experience will be particularly valuable to us at this stage in the company's evolution. Steve previously served as CFO at an early stage technology-led company, and prior to that was CFO for multiple divisions at Caterpillar. He brings capital markets, financial services, and corporate financial leadership experience critical to Hyzon's continued drive toward long-term capital stability. Additionally, the board announced the appointment of Matthew Folston, who serves as chair of both the audit and compensation committees. Matthew is an accomplished financial executive, having served as chief financial officer for three publicly listed companies throughout his career. The board also elected Eric Anderson as chairman, bringing years of experience as a global innovation leader and investor across various sectors. The board also elected Andrea Ferracci as vice chairman of Hyzon's board. Andrea is an accomplished executive with a global career spanning more than 40 years in finance and general business management. Finally, I want to thank Jiajia Wu for serving as interim CFO during a pivotal time for our company. Hazem would not be at this point without Jaja's critical contributions and leadership. Over the past six months, Jaja and her teams worked tirelessly to get our financials current and strengthen Hazem's financial, accounting, and governance processes, which we look forward to building upon with her and Steve. I have the utmost confidence in her as our new Senior Vice President of Finance and Accounting. We are excited about the continued growth and experience and depth of our board and management team, who bring expertise in our near-term priorities of commercialization, cash, and capital management. We're also proud to show a continued track record of attracting top talent to Hyzon's management team, board, and staff, reflective of the technology, value, and opportunity people see in Hyzon. Turning to our financial performance this quarter, we are pleased to have delivered the lowest quarterly cash burn in the last eight quarters, driven by our operational focus, lower headcount, and lower legal and professional services expenses. We will comment further on the quarter and outlook, but these results give us confidence to keep our cash burn guidance unchanged for both the second half of 2023 and the full year of 2024. We also demonstrated our ability to drive below $10 million per month core cash burn in the month of October, 2023. We continue to remain focused on raising capital and the resolution of the SEC investigation removed a significant obstacle. We believe Hyzon has a significant strategic value with leading technology, minimal remaining capital spending requirements through SOP and increasing customer agreements and deliveries. We are engaging with a further focused set of potential strategics and evaluating additional financing alternatives. While remaining opportunistic, we need to balance alternatives against our belief that today's valuation does not reflect the intrinsic value of the company. We continue to focus on executing our strategy with the goal of continuing to meet and possibly exceed our expected targets and guidance. I'm confident our differentiated technology, strong IP, and in-house U.S.-based fuel cell production, the growing commercial momentum, and our significantly streamlined organization all position us well in this accelerating market. With that, I will hand over the discussion to Jaja, who will go over our third quarter results, and then to Steve, who will cover our plans going forward. Jaja?