Hyzon Motors Inc.

Hello and welcome to the Hizan fourth 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. And if you would like to ask a question during this time, simply press star one on your telephone keypad. I will now turn the conference over to Henry Kwan. Please go ahead.

Thank you, operator. And good morning, everyone. Welcome to Hizan's fourth quarter 2023 earnings call. With me on the call today are Parker Meeks, Chief Executive Officer, Steven Weiland, Chief Financial Officer, and Dr. Christian Mordick, Chief Technology Officer. 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 U.S. GAAP measures and can be found at the end of the Q4 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 2 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. With that, I will turn the call over to our CEO, Parker Meeks.

Good morning, everyone, and thank you for joining our fourth quarter 2023 earnings call. I'm pleased to be joined by Steve today and to introduce Dr. Mordick, who we are thrilled to have as Hyzon's CTO. Hyzon continues to progress as a leader in the global transition to clean energy by developing and commercializing our proprietary, high-power, zero-emission fuel cell technology. Our leading technology provides a lighter, smaller, more cost-effective, and more fuel-efficient fuel cell system. Today, we deploy that fuel cell technology in heavy-duty fuel cell trucks. As the hydrogen ecosystem grows, we have the potential to deploy both our existing and our future generation fuel cell technology in additional heavy-duty industrial ecosystems, such as rail, mining, aviation, and stationary power, with several of these opportunities in early development. We believe 2024 will be a year of foundational commercialization for Hyzon. Our single-stack 200-kilowatt fuel cell technology is coming to start of production, or SOP. We are commercially deploying fuel cell trucks into customer operations in our prioritized markets on three continents, in government, commercial, and regulatory support for hydrogen continues to grow even stronger. We believe our accomplishments in the fourth quarter of 2023 demonstrate the inflection point we have achieved for Hyzone's technology commercialization, and I will take a few minutes to describe why. Turning first to technology and manufacturing, in the fourth quarter, we achieved our full year 2023 operational milestone of manufacturing 25 single-stack 200-kilowatt fuel cell system B-samples. in our fuel cell production facility outside Chicago, Illinois, here in the U.S. This includes factory acceptance testing, full design verification, and significant durability testing. We also progressed fuel cell system development to the C-sample stage, a crucial step in the standard automotive product development process, as C-samples are built with production tooling to meet all technical requirements for SOP. With this progress, we are on track for SOP of the 200-kilowatt fuel cell system in the second half of 2024, with minimal CapEx requirements remaining to achieve that SOP. Additionally, we expect the facility to have an annual capacity of 700 200-kilowatt fuel cell systems on three shifts at SOP, with plans to de-bottleneck further and efficiently manage associated de-bottlenecking CapEx in line with demand. We expect this approach to maintain the benefits of our asset-light business model. Fuel cell assembly capacity additions efficiently taken in line with anticipated demand increases from our customers over multi-year commercial agreements. On the commercial front, we're excited to have deployed 19 heavy-duty fuel cell electric vehicles under commercial agreements into customer operations across three continents in 2023, achieving the high end of our guidance of 15 to 20 vehicles commercially deployed. Of those vehicles, five were deployed in the U.S. to both Rage and Large Fleet customers, three in Europe, and 11 in Australia. I would like to briefly highlight our U.S. deliveries, four of which were to Performance Food Group, or PFG, in California. The deployment of these trucks is a foundational step toward achieving emission reduction goals shared by Hyzon, PFG, and the State of California. It also marks a crucial step in Hyzon's progress. as it demonstrates our ability to deliver vehicles with a positive cash contribution margin at the truck level to large fleet customers. As previously announced, pending a successful trial with Hyzon's 200-kilowatt heavy-duty fuel cell truck, Hyzon and PFG intend to work together on an agreement for 15 200-kilowatt fuel cell trucks and a potential further option for an additional 30 fuel cell trucks, bring the total potential to 50 fuel cell trucks if all options are fully exercised. This is exactly the customer profile and multi-year scaling commercial agreement structure we are focused on delivering to large fleets, with a number of fleets already through their trials and a full trial schedule anticipated for the U.S. 200-kilowatt fuel cell truck platform kicking off in the first half of this year. We remain focused on converting additional large fleets to similar multi-year commercial agreements on the back of our trial program. Outside North America, we also launched a commercial trial deployment of our first heavy-rigid fuel cell electric refuse collection truck platform in Australia with Remondis, a global recycling, service, and water company. After completing a successful four-month trial, the vehicle delivered performance in line with its combustion engine equivalents, completing full shifts with over 1,200 bin lifts with fuel left over at the end of the workday, no refueling required. That performance is significantly better than even the best battery electric refuse truck alternatives that our customers are seeing, in some cases doubling the daily work rate of battery electric, demonstrating our clear view that fuel cell trucks are the only viable decarbonization option in refuse to fully perform the work a combustion engine can deliver and that fleets need. Additionally, the operating cost of the Heisler fuel cell truck was equivalent to the operating cost of the diesel alternative without subsidies, proving that with the right fuel availability, fuel cell heavy-duty trucks can do the work at a similar operating cost today. With the trial complete and successful, the team is working with Remondis to transfer full ownership of the truck to the Remondis fleet under the existing commercial agreement. ISON also entered into a revised commercial agreement with TR Group, New Zealand's largest heavy-duty truck fleet owner. for up to 20 fuel cell trucks upfit with Hyzon's single-stack 200-kilowatt fuel cell system. Following the initial commercial trial, TR Group has an option to purchase the two trial trucks as well as to upfit another 18 trucks with Hyzon's 200-kilowatt fuel cell systems. Turning to governance, throughout 2023, we took significant steps to strengthen our board of directors and management, including appointing two new board members, a new chairman of the board, and accomplished leaders to the executive team. We completed the reinforcement of our leadership team by welcoming Dr. Christian Mordick to the team as our Chief Technology Officer. Christian is a globally respected leader in the fuel cell industry. He joins us from his role as Chief Commercial Officer at Cellcentric, a joint venture between Diamondware Truck AG and the Volvo Group, which Christian helped establish through his previous role as CEO of Mercedes-Benz Fuel Cell GmbH. Christian's combination of deep experience developing and critically commercializing fuel cell technology will both accelerate our leading U.S.-made 200-kilowatt fuel cell system and further bolster our ability to extend our leadership in fuel cell technology R&D and IP generation. With Christian joining an already strong management team and board, we are confident in the leadership and governance foundation we have in place to drive Hyzon forward into commercialization. Turning briefly to our financial performance, We delivered another quarter with declining net cash burn and met our second half 2023 net cash burn guidance by remaining disciplined in maximizing our technology development and commercialization progress while driving real efficiencies in Hyzon's cost structure and cash burn, which Steve will comment on further. We continue to evaluate financing options to support our commercialization, including potential strategic counterparties, while being thoughtful about valuation and dilution. With the operational and commercial milestones achieved in 2023, we start 2024 with strong momentum and a positive outlook. We expect 2024 will be the year Hyzone realizes meaningful commercialization by advancing our 200-kilowatt technology and heavy-duty fuel cell trucks, their respective SOPs, and cementing and advancing our large fleet customer portfolio as the foundation for scaling through multi-year commercial agreements and subsequent deployments. As mentioned previously, Hyzon's innovative single-stack 200-kilowatt fuel cell system continues to advance towards its SOP in the second half of 2024. We are currently completing durability testing, which is set to conclude around the midpoint of the year, and pending favorable results, we'll be ready to start production soon thereafter. By generating 200 kilowatts from a single fuel cell system, Hyzon can offer significantly lighter, smaller, more cost-effective, and more fuel-efficient fuel cell system when compared to the conventional approach of combining two systems or stacks to reach 200 kilowatts or more of fuel cell power. Our U.S.-based fuel cell production facility is nearing completion with less than $5 million in remaining capital investment to reach SOP. As I mentioned, the facility is projected to have an initial annual capacity for over 700 to 200 kilowatt fuel cell systems operating on three shifts. Alongside SOP of the fuel cell system, We also expect to reach SOP with two of our initial vehicle platforms, the 200 kilowatt conventional and the 200 kilowatt cab-over fuel cell trucks. The 200 kilowatt cab-over truck was unveiled last week in Australia as the first launch of Hyzon's 200 kilowatt fuel cell system and powertrain. The 200 kilowatt powertrain was designed in the U.S. and adapted regionally to maximize efficiencies from a common powertrain solution. As one of only two companies with heavy-duty fuel cell trucks commercially deployed in 2023 in the U.S. Starting production with these high-power vehicles positions us well to achieve our commercial targets in 2024, continuing the early mover advantages we established in 2023 with our first deployment to large fleets in each region. From a commercial standpoint, 2024 is focused on securing large fleet multi-year fuel cell truck commercial agreements, similar in design to the agreement in place with PFG. securing vehicle contracts with multi-year scaling potential with large fleets on the back of successful trials, activating several of these contracts with initial deliveries in this year, and then advancing multiple large fleets to their second stage orders and deliveries later in 2024, which will be a significant milestone for the company and the industry when it is achieved. These fleets with internal and government mandates to decarbonize are experiencing the limitations of heavy-duty battery electric trucks in their operations and are turning to fuel cell trucks for long routes with heavy payloads and minimal downtime for refueling. This real-world customer feedback bolsters our confidence that the mix of a decarbonized fleet is shifting clearly towards hydrogen. One application where battery electric today cannot compete with hydrogen fuel cell trucks is refuse collection or garbage trucks. As demonstrated in our trial with Remondis, our hydrogen refuse truck delivers similar operational capabilities as a traditional diesel truck. Typical battery electric version today completes roughly half of that work, goes home at lunch, and charges for the next day. The gap in performance is significant, leading us to believe the future of zero emission refuse collection is clear. It is one that only hydrogen fuel cell electric refuse trucks can deliver. We also see the refuse truck market as one that can develop more quickly, given the back-to-base nature of the use case and the ability to produce hydrogen on-site from landfill gas or solid waste. Hydrogen-powered refuse can create a circular zero-emission ecosystem, with an estimated 120,000 refuse trucks on the road in the U.S. alone and many publicly funded fleets in California facing expected near-term zero-emission purchase mandates under California's advanced clean fleet rule. With this in mind, we are accelerating our refuse program in North America, building off the development in Australia. We recently announced a joint development agreement for refuse trucks in the U.S. with Newway, the largest private refuse equipment manufacturer in North America. The first U.S. fuel cell waste collection truck is currently in assembly, with a full customer trial schedule expected to launch in the first half of 2024 and initial commercial deliveries projected in 2025. We are excited by the strong response Refuse Fleet customers have shown and the upcoming customer trial schedule. All of this is supported by strong tailwinds worldwide for hydrogen and zero-emission vehicles. Major markets globally have policies to accelerate adoption. In the U.S., for instance, the Biden administration has allocated $7 billion to seven hydrogen hubs, several of which Hyzon directly supported. The Inflation Reduction Act earmarks $2.6 billion under the EPA's Clean Ports Program to decarbonize coastal and inland ports nationwide, including drainage trucks and fueling infrastructure, which Hyzon is initially participating in as part of Fort Houston's application. California remains a well-funded zero-emission Class 8 truck subsidy market, with several hundred million dollars available as of the beginning of 2024, including over $300 million available through CARB's HVIP program, over $70 million from the Volkswagen Environmental Mitigation Trust, and funding specifically for drainage trucks to the Port of LA and Long Beach Clean Truck Fund. In short, we are excited to build on this momentum with the following milestones in focus for 2024. Again, we were on schedule to reach SOP for our single-stack 200-kilowatt fuel cell system in the second half of 2024, and for our 200-kilowatt vehicle platforms, with the U.S. 200-kilowatt truck platform SOP expected in the second half of 2024. These will be major technology and commercial milestones, clearing the path for commercial scale-up of our 200-kilowatt fuel cell technology to large fleet customers globally. Second, we are progressing well in our trial-based large fleet customer pipeline, with a focus on converting additional large fleets from trials to multi-year commercial agreements. We are focused on signing new large fleet multi-year customer agreements in 2024 and targeting the advancement of large fleet customers to the second stage of their multi-year order pattern as well. Third, we will be launching U.S. refuse truck trials in 2024 with initial commercial agreements expected in the second half of 2024. Fourth, we are targeting 20 to 40 fuel cell truck deployments under commercial agreements to customers in 2024 globally, purposely focusing on deployments to large fleet customers to activate their multi-year commercial agreements or to advance to the second delivery of their agreements. By deploying a smaller number of trucks per fleet to priority large fleets, we are purposefully managing working capital and associated net cash burn while maximizing the commercial foundation we have in place to enable scaling in 2025 and 2026. Lastly, we are focused on strengthening our balance sheet and securing additional capital to fund our business. I want to thank our global team for their tenacity and commitment. Our leading technology, in-house manufacturing, and partnerships make us ready to scale production and drive commercialization as an early mover in this fast-growing industry. Now, I would like to introduce our newly appointed Chief Technology Officer, Dr. Christian Mornick.