Nikola Corporation

truck, we will be there to provide it for them. That regulation is one of the sticks. On the carrot side, California is offering numerous incentives, including HVIP for up to $288,000 and ISEF for up to $408,000 for hydrogen fuel cell electric truck purchases. We think in the California ports alone, there is a tremendous opportunity for us to sell trucks and hydrogen at scale. So what's our plan to focus on California? One, first mover. We believe we are the first OEM in the market with a hydrogen fuel cell electric truck. We believe the competition is well behind us and anticipate there is white space for us to capitalize on our first mover advantage. Two, boots on the ground. We have Nicholas sales team members supplementing dealer sales teams to find every opportunity there is to sell our trucks. Selling new technology to a long-established industry is not easy, and we are educating customers so they understand and experience how great our technology is, the value it brings, and how we can support their operations with the fueling and charging required to keep their trucks running. Three, chicken and the egg, providing a fully integrated mobility solution. As transportation and logistics companies adopt this new technology, They want assurance they will have the energy required to keep their trucks operating. We are in the process of establishing fueling solutions for our customers in Northern and Southern California. In a tough macro environment, working with partners is critical to ensure there is adequate capital to complete these projects. How are we doing on our execution of these initiatives? It is difficult to analyze a nascent market. However, prior to the voluntary battery electric recall, we were second in market share for zero emissions vehicles with 21% share of registrations, outperforming some of the larger OEMs. That was based on our battery electric truck alone. If you go on the HVIP website and look at voucher data for vouchers requested in 2023, as of October 27th, you'd see Nikola has approximately 96% of the created vouchers for the hydrogen fuel cell electric truck tractors and about 50% of the created vouchers for the battery electric truck tractors. We're also seeing considerable momentum in the northeastern states like New York for up to $185,000 and New Jersey for up to $175,000. In addition, there is solid movement in Canada where there are incentives across all provinces, territories and municipalities for up to 200,000 Canadian dollars for the hydrogen fuel cell and 150,000 Canadian dollars for the battery electric truck. And in British Columbia, The BC Go Electric rebate provides another stackable $150,000 incentive, bringing that total to $300,000 Canadian dollars for a battery electric truck and $350,000 Canadian dollars for a hydrogen fuel cell electric truck. We are continuing to build sales momentum for both trucks, recently receiving wholesale purchase orders for 47 battery electric trucks from one dealer, despite the product and recall status. There are 277 non-binding fuel cell electric truck orders that have been placed from 35 customers with Nikola and our dealers, more than we can produce and deliver this year. In fact, if a fleet orders a hydrogen fuel cell electric truck today, they will likely not receive the truck until late Q2, 2024. Executing on our business plan requires top flight talent. During the third quarter, we announced the hiring of Mary Chan as Chief Operating Officer and Joe Capella as President of Energy. I previously worked with Mary at General Motors, where she served as President of the Global Connected Services Group. Mary is a recognized automotive leader who also serves on the board of Magna International. Joe joins us from Iwatani, where he served as Chairman and CEO of Iwatani Corporation of America. Joe and his team bring years of real on-the-ground knowledge of the hydrogen industry to Nicola. These two hard-charging folks have built and scaled businesses in infrastructure, connectivity, and technology, and their expertise will push Nikola towards even greater success. These are people who don't need to be here. They've had lots of success throughout their careers. Mary and Joe are here because they want to help make a difference and believe in Nikola's mission. Let's move into the business updates. First, the hydrogen fuel cell electric truck. We are incredibly proud of the entire team and all stakeholders playing a part in the development of the hydrogen fuel cell electric truck. We started serial production on July 31st and began delivering the first production vehicles to capture test fleets for commercial operations and customer validation late last month. In parallel, we started running customer demos in Southern California, supported by refueling with mobile fuelers and that existing hydrogen fueling infrastructure. To date, trucks and customer demos have accumulated more than 6,000 miles while achieving 98% uptime, receiving outstanding driver feedback. On the battery electric front, Nikola is committed to providing customers with a premium trucking experience, and safety is always at the top of mind. We issued a voluntary recall for the battery electric truck in August, asking customers and dealers to send their trucks back to Nikola for monitoring and repairs which also allowed us to investigate the cause of the battery issues. Extensive investigations have been commissioned and are currently ongoing, including assessments from three independent groups alongside the NECLA team. During these investigations, it was discovered that additional process and design changes may be necessary and that cell level issues may need to be addressed beyond the initially identified coolant manifold replacement. While we continue to identify the root causes of battery malfunctions to minimize vehicle downtime and maximize customer safety and satisfaction, we will retrofit existing customer trucks containing Romeo design battery packs with ones from an alternative supplier. Stacy will provide updates regarding how that affects the numbers. Despite the recall, we continue to see increased demand for the battery electric truck. This is happening while the truck is not currently available for sale. a testament to our position in the market as one of the few companies able to provide hardworking zero-emissions trucks to fleet customers at scale. We expect to have the first trucks back in customer hands in Q1 2024, and I've taken to call it 2.0, because not only will it have improved battery packs, but new features including scheduled departure charging, improved HMI, and Bluetooth functionality, all at a lower material cost. On the energy side, we continue working with industry-leading partners to ensure we have the hydrogen supply, transport logistics, storage solutions, and dispensing locations to support the operations of our hydrogen fuel cell electric trucks in customer fleets this year and beyond. We're pleased to say we have secured enough energy offtake to support customer operations in 2023 and the beginning of 2024. The team is diligently working with partners to secure additional hydrogen offtake to support future sales alongside securing fueling assets and locations to fuel the trucks. We also continue to see positive momentum on the federal incentive front with $50 billion allocated from the Investing in America agenda and another $7 billion in support from a DOE grant. This is a massive amount of funding and will accelerate the development of hydrogen infrastructure required to scale and lower the cost of hydrogen. We are excited to demonstrate the fully integrated mobility solution provided to customers with the fuel cell truck and hydrogen fuel, and look forward to sharing more progress with you on the hydrogen highway as we continue developing the refueling ecosystem. Now we'll hand it off to Christian Appel, our head of vehicle platform, to provide you with details on the hydrogen fuel cell truck, and then Stacy will share our financials. Christian.

Thank you, Steve. We're incredibly excited to show the world the model year 2024 hydrogen fuel cell electric truck. We believe this is the first zero tailpipe emissions truck available in North America that is truly capable of servicing the majority of day cab regional and medium haul freight operations. The truck's up to 500 mile range gives fleets the flexibility in operations capable of servicing longer range medium and regional deliveries. and providing fleets who run slip-seed operations a similar refueling time to diesel cabs without disrupting logistic operations. Furthermore, the payload capacity of the hydrogen fuel cell electric truck can be much better than other long-range zero-emission trucks. And as we continue making enhancements to the product, we expect to continue closing the gap to diesel payload parity. One of the most critical things to building the best products is that we are vertically integrated with our vehicle controls and software development. This allows us to optimize the operation of the truck across incredibly complex systems and includes functions such as mountain mode and in the future predictive energy management. The software on the truck can optimize the drivetrain to power the vehicle with both the fuel cell power module and the battery or by one system independently of the other. Mountain Mode optimizes the battery energy usage on the vehicle, allowing for maximum regenerative braking power downhill and consistent performance uphill. The truck provides drivers with an advanced HMI, a mobile app, and comfortable drive, while being optimized for performance, efficiency, and durability, supporting the fleet customer's most critical KPIs, such as uptime and cost of operation. This is merely a bit of what the truck can do. I could speak all day about the truck and I invite you to look at our website, social media channels and send us questions to learn more. Passing it to Stacey to cover the numbers.

Good morning everyone. Huge thank you and congratulations to Christian and the entire Nikola team for officially launching the fuel cell truck. We've been developing this track for many years, and this is a huge milestone for the team, turning a new page for the company. Now onto the Q3 results. Despite tackling numerous headwinds during the quarter, I am pleased with the team's commitment to operate with financial discipline by continuing to reduce cash burn and focusing our spend on things that matter to our future. We were successful this quarter in accessing capital markets, raising approximately $250 million primarily through convertible notes and the ATM, thus increasing our unrestricted cash position by $136.2 million from Q2 and nearly tripling unrestricted cash since the first quarter of this year. We are making good progress towards our goal of having 12 months of liquidity on hand. Quarterly cash use came in at $111.9 million, well below our target of $120 million, reflecting a 25% improvement from Q2 cash use of $148.3 million. The improvement came from $50 million benefit realized from cost cutting initiatives we executed upon in Q2, offset by $20 million use of working capital to scale up hydrogen fuel cell inventory and the impact of slower than expected AR collections due to the battery electric truck recall. We have a lot more work to do and we're always looking to make improvements to our cost structure and cash use. There is a lot to digest this quarter, beginning with revenue. Due to the battery electric truck recall, we halted deliveries in early Q3. Prior to the recall, we delivered three battery electric trucks to dealers. However, this was offset by the repurchase of seven battery electric trucks due to the cancellation of dealer agreements as we refocused our sales efforts in California, as well as dealer rebates and financing charges, resulting in net truck revenue of negative $2.4 million. We generated $636,000 in service and other revenue, primarily driven by service revenue, the sale of charging assets, and third-party hydrogen sales. Cost of revenue in the third quarter was $123.8 million. Cost of revenue includes a $45.7 million write-down of excess and obsolete inventory, of which $32.7 million is attributable to the write-down of battery packs on the 140 battery electric trucks held in Nikola inventory, and $13 million for other battery electric truck components, including battery cells. It also includes a $61.8 million warranty reserve to remedy the battery electric truck recall. This includes the estimated cost to re-engineer, validate, and retrofit the battery electric trucks that were previously sold to customers and dealers with an alternative battery pack solution. To be clear, the warranty reserve is an accrued liability. Actual cash disbursements will take place over the next 9 to 12 months as we validate the new components and work through the retrofits. We anticipate seeing the majority of that cash spent in the first half of 2024. Our goal is to offset the estimated $61.8 million cash impact with the collection of approximately $10.7 million in accounts receivable and an expected positive cash contribution margin of another $13 million from the sale of existing best trucks in our inventory once those trucks are updated with the new battery packs. resulting in a net cash spent of $38.1 million. Total operating expenses came in at $100.7 million, including $18.7 million of stock-based compensation expense and $9.8 million of accelerated battery electric demo truck depreciation. Absent of the demo truck depreciation, operating expenses fell within the previously communicated guidance range. Q3 operating expenses have improved by more than 27% versus the prior four quarters average, driven by the impact of cost reductions we have executed in Q2. Other non-operating expenses for the quarter were driven by the loss on the realization of the conversion features embedded in the April 2023 and June 2023 convertible toggle nodes. partially offset by a gain due to the changes in the fair value of our common stock receivable as a part of the JV sale to IVECO. These are non-cash P&L items and have no impact on our cash burden. At the end of the quarter, we maintain total cash and access to capital of $705.8 million, subject to our stock price and market conditions. Given our current cash burn rate, we believe we have adequate cash on the balance sheet to sustain us into 2024 and maintain enough access to capital to continue funding operations and execution of our business plan, including costs associated with the remediation of the battery electric recall. We also had success in strengthening our balance sheet by reducing total debt by $87.3 million and total liabilities by 67.1 million during the quarter. We have previously indicated we would need to raise approximately 600 million to fund their business to EBITDA positive by the end of 2025. This long-term thinking to fund the truck business remains the same. During the third quarter, we raised approximately 250 million of that However, we anticipate increased costs over the next 9 to 12 months associated with the battery electric truck recall, which would take the new capital requirement to approximately 400 million. This number also assumes the majority of hydrogen infrastructure would be financed by partners. As we explore opportunities in the hydrogen production and dispensing ecosystem and continue to develop our energy strategy, we may require additional capital in order to participate in hydrogen production and dispensing economics. We may elect to invest into projects where we see a compelling return on investment. Participating in these projects would allow us the opportunity to achieve economies of scale and drive down hydrogen costs. We see a growing opportunity in both hydrogen production and dispensing as we scale truck production and deliveries and other OEMs come to market. Moving to guidance. In Q4, we anticipate delivering between 30 to 50 hydrogen fuel cell electric trucks for revenues between $11.3 million and $18.8 million. Fuel cell production is currently constrained due to supply chain ramp-ups. Due to lower production and delivery numbers for the fuel cell and the pause on the battery electric production and deliveries until the recall is remedied, we expect the gross loss margin will be outsized between negative 215 to negative 135 percent. We expect total operating expenses to be between 82.5 million and 92.5 million including approximately $15.4 million of stock-based compensation expense and CapEx to be approximately $35 million. Despite the challenges facing the market and the business headwinds, we remain focused on achieving profitability and we have further optimized cost structures and put in place a strong team focused on execution. We are working diligently to find additional cost reduction opportunities without jeopardizing our first mover advantage and monitoring capital markets to raise additional cash. During the third quarter, we beat our cash burn target of $120 million and strengthened our balance sheet, raising $250 million, increasing our liquidity runway despite the new expenses for the battery electric truck and hydrogen infrastructure. We maintain strong liquidity in our stock and have continued to demonstrate our ability to raise capital. As new regulations begin to take effect in California, we believe there is demand to scale production on both the battery electric and hydrogen fuel cell electric truck in 2024 and achieve the production and delivery volume scale that is necessary to reach positive gross margins and eventually reach profitability. I will now pass it back to Steve for closing remarks.

Thanks, Stacey. To close the call, I'd like to talk about green shoots, a typical sign of a recovering plant and positive momentum for health and life. We told you we would begin hydrogen fuel cell electric truck production in Q3, and we did. We told you we would continue reducing our cash burn and improve our liquidity, and we have. We have strengthened our leadership and operational expertise, including adding our COO, Mary, and President of Energy, Joe. And we continue to work diligently to assist our customers with the recall of our battery electric truck and the introduction of our hydrogen fuel cell electric truck. These are all strong signs for green shoots. And if we're continuing the green shoot analogy, we're getting fed by the momentum of the marketplace and government regulation, especially in California. There are two sayings that I use repeatedly here at Nikola, which are applicable to our growth. First, audviam inveniam aud faciam. It means find a way or make one. The resilience of the Nikola team is unmatched. We have endured plenty and will continue driving forward in our mission to decarbonize heavy-duty commercial transportation. We have government regulation and incentive tailwinds at our back. the first commercially available hydrogen fuel cell electric truck in North America, and the team to execute. Second, we say, don't chew on yesterday's breakfast, an effective way to make sure we can learn and benefit from the past and move forward. Yes, we've had setbacks, but we are moving forward, and today we are in an incredibly strong position to capitalize on our first mover advantage with our fuel cell truck and lay the foundation for the hydrogen highway beginning in California. and we will continue to keep our commitments and remain transparent. This concludes our prepared remarks. Operator, please open the line for analyst questions.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. and for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Jeff Osborne with TD Cowan. Please proceed.

Hi, Jeff. Hello. Hello. Hi, Jeff.

Curious on your observations, you know, the first quarter on the job as it relates to the interfacing with customers around both the fuel cell and the , you know, putting aside the recall issues. You know, great to see the policy moving in the right direction, but what's the readiness level of some of the fleets that you're having dialogues with?

The, so good question. The customers are super interested in this. You saw the order bank increased. uh to 277 um and i would argue the crm what's at the top of the funnel is growing every day um so and i would say it's uh two to one uh high fuel cell over bev right now and maybe even a little more outside of the customers any other observations you know first quarter on the job in terms of you know shifting from an investor role board member role So, you know, people laugh at me around here, but you learn pretty quickly in this place that every day is an amazing day at Nikola and some are good and some are less so. But the goal when I got here was to not screw up the momentum that was continuing. And I think if you saw one of the slides, the cash is up, the burn is down and the orders are up. Certainly there's challenges here like there are being first in anything, but the interesting thing about this place is there's nobody running away from these challenges. And I would tell you this, Jeff, one of the highlights of the quarter was the event in Coolidge on the 28th. There were 900 people at that event launching, celebrating the launch of the fuel cell truck. 900 people. Suppliers were showing their stuff. Many of you people were there. Suppliers were showing their stuff. It was the customers who were there, the dealers were there, and there was a who's who of the hydrogen industry was there. And if anything turns the page on the path at Nikola, it's that event. There is no way a year ago, two years ago, Nikola could have hosted an event like that, and it was really just spectacular.

Perfect. Maybe one quick follow-up. On the BEV side, I was surprised to see the orders. What's the readiness on the charging side that's been an obstacle, you know, for beyond one or two at a location? So are these the one dealer with the 40-odd units, I think you said, 47? Is that multiple customers just sort of one truck, or are people, you know, truly planning for 10, 15 trucks at one depot?

So that dealer has experience around this. So in general, the charging is better than it was, but it's still an issue that customers are going to have to understand and deal with. We can help them with e-skids and things like that, but that dealer in particular has experience around this and has customers that are up to date on this. And their customers are taking chunks of trucks. Got it.

That's all I have. Thank you.

Our next question is from Jeff Kluffman with Vertical Research Partners. Please proceed.

Thank you very much. Hey, how you doing, Steve? Congratulations. And welcome. Not that you've been away from this story. So a question for you and a question for Stacey. I want to talk a little more about the hydrogen highway because you're not the only one using that phrase. I think it means different things to different people. But can you talk about the opportunity here, not just in California, but as we expand across the country and how you see that developing and how Nikola is going to participate in that, not just through the truck sales, but also on the energy side of that opportunity?

Sure. So To make this model work, Jeff, we need focus and we need density. Okay, this can't be just blow out a bunch of trucks to wholesale on the dealers and have them jam them into the market. We need to know where the hydrogen is, where the routes are, who are the customers that run those routes, and that's our target market. So California is the most incentive friendly as we said in the video. It's got carrots and sticks We are deploying lots of people in California and it's not just dealers. We're deploying our people as well to educate people To educate customers how it works and you know this incentive Maze is not that easy to navigate. So having people on the ground is super helpful here. So start in California and There's seven hydrogen hubs that have been funded around the country. Those are logical places for us to go. And it's about connecting these hubs. In California, it's south, north, and then connect in between, and then we can move all the way up. But right now, the focus is California. We need to be very super efficient, super capital efficient. We need to prove the IRR of these first sort of hubs, so to speak, and then we can develop more.

Okay. And then the energy side of the business.

Well, the energy, the energy side in what sense?

Well, just help us understand how the company participates. I mean, selling trucks, that's pretty easy to visualize. But what is the energy business look like as we build out along this highway?

So it start and then Stacey will chime in, but it, you know, there's, there's three, You can participate in the hydrogen economics. You can transport, and you can dispense, and you purchase. So those are call it 4 buckets of hydrogen. We are, we'd like to be in the, in the, in the hydrogen economic side. We don't have the capital to be there as we develop our business. We'd like to work our way back into that right now. It's about acquiring large quantities of hydrogen for our customers and getting them where they need to be in dispensing them in an efficient manner. You want to add anything?

Yeah, of course. Just quickly to add to that, so as far as the financial aspect of the energy business, how we look at it right now, so there is a near term, as Steve had mentioned, and there is a longer term. In the near term, we're less focused on profit, and we're more focused on making sure we have that customer experience, and we're enabling the early fuel cell truck operations, right? I mean, we are first to market. We want to make sure our customers have hydrogen where and when they need it, and it will take time to ramp up that hydrogen revenue. I think we've shared in the last call with you guys. It's about 60 to 80K annually revenue per truck in hydrogen, right, per truck that's in operation. So you'll only start seeing meaningful revenue stream as we start scaling up the truck fleet in the next, say, 12 months. And in the short term, hydrogen will likely have negative margins. However, we are doing several things to make sure that we can manage that, right, and eventually get to the positive margins. One, what Steve had mentioned is We need to find customers that are willing or have to pay a premium, right, for that integrative energy and truck solution because of regulations, because of the incentives. We need to build out density, so make sure we're utilizing the assets that we have. Utilization of the assets is number one right factor that will help us get down the hydrogen cost in the short term. And in the longer term, as the more supply comes online, And as we are able to finance our ability to come in and participate in producer economics, dispensing economics, that obviously will also help us drive the hydrogen cost down.

Okay. And then, Stacy, if I can, just one final follow-up. Thank you for the detailed 4Q guidance. The story has evolved. from where it was just a quarter ago or two quarters ago. And I remember we were talking about trying to get down to a cash burn of about a 400 million run rate by the end of the year. I want to look through the recall because that's going to play itself out in the next few quarters. But if I look at the underlying business, where do you think the cash burn target should be in terms of a run rate at the end of this year? And where are you targeting as a run rate at the end of next year?

Sure, great question. So just, you know, cash burn, the story, you're right, the story has evolved and it will continue evolving, but our financial targets are not changing. So we are focused. We are having some challenges like the bad recalls that we're managing through. As a result of that, our ultimate target for this year in Q4 was $100 million. There will be a temporary increase to that of about 40, so 140 for Q4 is what I'm expecting here. And that's driven by two things. So BAB recall, obviously we can't sell through the BAB inventory in Q4. And then the fuel cell delivery guidance effectively is being reduced due to supply chain challenges. So those two factors are working capital, right, items that are driving that cash burn up to 140. They are temporary and they'll reverse in 2024 as it works through those challenges and start selling the trucks. That's for this year. For next year, the goal, again, the goal remains the same, $100 million a quarter average cash burn for 2024. So that has not changed. We will see a little bit heavier of a cash burn in the first half of the year as we execute and work through the BEV recall, and then we expect to see see some of the benefits from that, the offsetting benefits from collecting the BAP-AR and selling through the remaining BAP inventory, as well as the benefits of reaching our BOM reduction targets later in the year. So 2024 will average out to about $100 million a quarter.

And so let me just add something to that, Jeff. The early trucks this quarter and next quarter are going to be the least profitable trucks we produce. They're going to have the highest bomb because we're doing whatever we can to get the trucks out the door. And the prices on these trucks were from commitments that we made some time ago to the early launch customers. As we move through, and Stacey mentioned it before, as we get more volume, the bomb comes down, and the goal of the team is to find the customers that value being in the front end of zero emission. And they're out there, and they're willing to pay a premium for this.

Well, congratulations, and thank you for the clarity on this call.

Thank you. Our next question is from Bill Peterson with J.P. Morgan. Please proceed. Hi, Bill.

Yeah, good morning. Thanks for providing all the details as usual. I want to pick up on this last question. So I think in the prior call, maybe two calls ago, the team had provided guidance around 1,000 total trucks in 24, 15 to 2025 being kind of a tipping point to break even. I guess, how should we think about that one quarter on? Do you still feel confident in that guidance in terms of timing, volumes? I guess, could the fuel cell make up the majority of that? I think you talked about that's where the majority of the interest is. I'm basically trying to get a sense of where the break even points for BEVs and fuel cell trucks. And I think earlier in this call, you mentioned that BEVs, the 2.0 has a cheaper pack, so maybe that changes some of the economics as well.

Sure. Yes, happy to expand on that. The break-even goal remains the same. We are seeing a little bit of a challenge with some of the things that I've mentioned, right, for 2024. So one of the things to highlight, right, obviously we reduced the volumes for Q4 of this year, and a lot of those FCV sales, things that we already have in order, we'll push into the first half of 2024, some of the early customers. you have lower preferential pricing, right, because they're early adopters. So that's something that we need to work through, and we'll have to offset that, as Steve said, finding other customers that are willing to pay premium or have to pay premium. Supply chain challenges, right, we're working through making sure that, We can manage our bond targets, which, again, remain the same ultimate bond target for fuel cell trucks to get to 275 by the end of 2025. And for the bath, obviously, with the new pack and with the volumes, that's the thing we can achieve. We can get to, you know, below 250. That's, you know, two years from now. Obviously, it's a step at a time. On the normal run rate, once we get to our bond targets, assuming we can maintain average selling price of about $400 for fuel cell, if we sell about 300 to 350 trucks a quarter, we can break even on a gross margin basis. So that's really the magic number we're looking for. Again, as I mentioned, we have to make sure we maintain certain level of ASP and hit our bond targets.

And the only thing, just to reiterate, Bill, One of the things we've learned in this BEV recall is people actually like our trucks. and are willing to pay for it. And we're getting a lot of complaints. Why don't I get my truck back? And we're finding out that our truck performs better than other trucks. And what we're trying to do, and because of that, we're learning a lot from lots of things. The early hydrogen trucks as well, people are willing to pay up. And we haven't tested how much people value being on the front end of zero emission, but we know that they're out there.

Okay. Yeah, no, thanks for that additional context. There's, you know, it looks like there's just a lot less information in your release as well as presentation versus prior as it relates to the energy business. And, you know, I know you have a new head of this, so maybe we'll get more information as you move forward. But I wanted to kind of check in on some of the milestones. I mean, you had a, you talked about a partnership with Volterra with, you know, some aid stations. The first station was supposed to be coming online here by the end of this year. Of course, you acquired the Hydron Hub. Kind of like to get an understanding of maybe that's waiting for a 45E tax credit clarity, but try to get an update there as well. And then I think you're supposed to deploy nine mobile refuelers in California by 2023. So I'd like to try to get a sense of where these projects are, maybe what they're waiting on. I know you provided some context and color around investing where it makes sense, but Where do we stand?

Yeah, so just to be clear, when you think about this model, you've got customers, you've got energy, and you've got a truck. And at any one point, somebody's going to be ahead and somebody's going to be behind. And to be very efficient, you need to keep those as close as you can. So we're in a case where if the truck has got supply chain issues, we don't want to get over our skis on getting stations and fuelers and things like that in place. So given the assumptions we made, we don't need nine mobile fuelers in California this year. We need something less. And frankly, we were using a 300 mile assumption on truck driving every day. And early drivers are doing about 170 is what we're seeing. So that also enables us to use less here. And there's opportunities if we want to be capital efficient to use other people's sites. So again, this is about just satisfying the customer is number one here. Being capital efficient is number two here.

um so that's sort of where we're going okay yeah no thanks for that if i can speak in one more it's kind of related to the the question on supply chain so on the fuel cells is the issue can you expand more on the supply chain issues is this on the battery side you know i know you heard your supplier is going through bankruptcy are you able to to get sufficient pack volumes at this point and then you know you talked about a third player for beth is that the same supplier for fuel cell or is that a different supplier and if so can this Can the fuel cell truck utilize that too, given it apparently has a better cost structure?

So, we're not talking about the BEV supplier yet. It's premature to talk about that. I'm sure it'll come out when it comes out. On the supply chain front, the battery supplier is going through normal launch issues. I wouldn't describe their launch issues as any different than any other, but there are other suppliers out there that are launching new technology that are creating, you know, hiccups, nothing insurmountable. It's just about they're going through their launches. We're going through ours. You've got new technology launching in a number of different places. And that's basically all it is. Nothing insurmountable. Things are moving ahead. They're not moving at the pace we wanted them to be, but they are moving ahead.

And if I can just add to that quickly, you know, seeing kind of the supply chain challenges with the BAB launch, while we do have challenges on the fuel cell side, it's significantly better, I think, comparatively, because we've learned a lot. Our supply chain base is a lot more stable. And also, we've learned to get ahead of issues. So, a lot of the things, right, we're kind of running parallel paths and looking at alternatives as we anticipate those issues coming up.

Okay. It makes sense. Thanks for the insights. Thank you.

Our next question is from Tyler Dumiteo with BTIG. Please proceed.

Yeah, hi, good morning, everyone. Thanks for taking the questions. Steve, I wanted to follow up on the comments related to some of your assumptions and the fuel cell in Southern California. I mean, what has some of that initial feedback been and the interplay with regards to the fuel cell truck, the third party, mobile fuelers, your mobile fuelers? Can you just add a little bit more color related to that, please?

So, we've been running demos in California. I think we've done over 6000 miles in demos. We've got 98% uptime. We're fueling it our spots and other people's spots to get fuel into these demos. Most of our demos right now are focused on Southern California. We will start demoing in the North. TBD, but probably in the next quarter or so, we'll start demoing in the north, maybe first quarter, something like that. And that's, I think that's, I don't know, anything else? Anything else you, I think that covers it.

Okay, great. And then I want to follow up on your comments related to the sales network with regards to your internal sales team as well as maybe the dealer's sales team. Can you just provide a little more color in terms of how you're thinking about utilizing the both of those together to really go to market and source more orders?

Yeah, so this selling new technology to an old industry is complicated. And we need to educate the dealers and we need to educate the customers and having our own team on the ground supplementing the dealers I think is super helpful here. California is a great state with a tremendous amount of opportunity for us. It's also pretty tricky to navigate these vouchers, the whole voucher system. And frankly, a lot of the voucher stuff is targeted towards smaller fleets, which is a prime target for us.

Okay, great. Thank you for the time, guys. Really appreciate it. I'll turn it back to the keel.

Thank you. Our next question is from Mike Schlitzke with DA Davidson. Please proceed.

Good morning, and thanks for taking my questions. I wanted to first touch on the non-binding orders you had mentioned in 277 as of today. Can you refresh my memory? What has to happen to make those into binding orders? Do you have to go through a test with one or two first, or is it infrastructure being built in the vicinity of those fleets, or is it something else? Stacy?

Yeah, sure. I think that there's a few things that have to happen, and no things haven't really changed. But what has changed is, you know, we're making very good progress on them. So number one, right, a lot of customers do require demos, which, you know, for some of them we have started already. Some of them we're about to start here. The demos can take anywhere from a couple of weeks to a couple of months, depending on the size of the customer. Oftentimes, a larger customer, like a larger fleet, will require more time, right, because large companies take time to go through their processes. Incentives, right, so having, we've disclosed essentially all of the vouchers, HP vouchers in California for hydrogen fuel cell truck, or NICOLA applications for NICOLA trucks. But for a lot of people, this is a new process, and we're helping and working stuff, you know, very closely with them and with dealers to get those incentives in and go through the process. Once the demo is done, the incentive application is in, the next big thing obviously is making sure we have customers comfortable with the hydrogen infrastructure, which we're working right with third parties. We have our own mobile fueling locations we plan to have to by early next year operating in California for customer purposes. So, those are kind of the main things that need to happen to tournament to binding orders. Obviously, there's a lot of pricing negotiations and things like that. I will say we're already out of the 277. we've turned 20 already into the dealer orders that have been received by Nicola. So, that's, you know, that's that essentially covers, you know, given our guidance half of your production for key for.

And you know, we mentioned on the call that if you order a truck today, you're probably not going to get it until the end of the second quarter. So part of the challenge is prioritizing these customers to the ones that value being zero emission most or highly.

Got it. Got it. And I appreciate those details. I wanted to turn secondly to the dealer network. If I understood correctly, Stacey, you implied that perhaps a dealer dropped out during the quarter and some inventory had to be bought back. I wasn't sure what that was all about. And can you share, and it sounded like that was an outside California dealership, but can you share the status of just kind of the broader outside California dealership assistance today and your plan to develop that? Thank you.

Yes, I think that the current, you know, the buyback, the two dealers from which we bought back trucks that were contractually required when we choose to terminate a dealership relationship to buy back those trucks, those decisions are made, you know, by Nikola. A lot of times they're made, you know, in combination with the dealer, depending on demand, depending on how much time and resources the dealer has to dedicate to Nikola business. So it's not necessarily just because the dealers happen to be outside of California. We are focusing primarily on California. So expecting that, you know, if we do sign up future dealers, they're most likely going to be more likely than not they will be in California going forward. But we don't necessarily have any active plans to cancel any other dealership relationships at this point.

Great. I appreciate those details. I'll pass it along.

Thank you. And the call back over to Dylan for the investor questions.

Thank you, operator. We received a series of questions from retail investors through the SAIT platform, the majority of which can be summed up into three topics. One, hydrogen fuel cell electric truck production, deliveries, and orders. Two, battery electric truck repair and strategy. And three, liquidity. So Steve, let's start off with the first question. How do we think about hydrogen fuel cell electric truck production, deliveries, and how many orders have been received to date?

Thank you, Dylan. We began serial production of the hydrogen fuel cell electric truck on July 31st and had our formal launch event on September 28th. We delivered the first trucks in late October for commercial operation in captured fleets and will soon begin delivering wholesale trucks to dealers. They will then start delivering the trucks to end customer fleets. In Coolidge, we have a production capacity of up to 2,400 trucks per year, so we have more than enough production capacity to meet our targets this year and next. And we are working with our suppliers to ensure we have the materials and components to meet our targets and customer demand. As I stated earlier, to date, Nikola and our dealers have received 277 non-binding orders for the hydrogen fuel cell electric truck from 35 different customers. That is more than our production and delivery guide for Q4. So customers ordering trucks now will likely not receive a truck until late Q2 of next year. We believe there will be a large appetite for our trucks in the California market beginning in 2024 when the advanced clean fleets rule goes into effect and DREAGE customers must begin replacing ICE trucks with zero emission vehicles.

Thank you, Steve. Many of the questions on today had to do with the recall remedy and how we plan to move forward with the battery electric truck. Can you provide some color on our strategy there?

Sure, as I discussed earlier, we're replacing the packs and the existing customer battery electric trucks with new packs from an alternative supplier. The battery electric truck 2.0 will also come with upgraded features. I want to reiterate that we are seeing strong demand for the truck receiving POs for 47 trucks from one dealer and deals in California continue to submit HVIP voucher applications. As of October, NEGLA had approximately 50% of the issued vouchers that were requested in 2023 for battery electric truck tractors. We have one truck platform with two power trains, which provides customers optionality depending on their duty cycle. And we believe having two products is the right option moving forward. As I stated before, we anticipate having the first battery electric trucks back in customer hands in Q1, 2024. Great. Onto the next topic.

Stacy, the investors asked how well capitalized are you to take new orders and ramp production?

So, on the liquidity front, we have done a good job strengthening our balance sheet. We raised $250 million during the third quarter, nearly tripling our unrestricted cash since Q1, and maintained cash and access to capital of approximately $705.8 million. We have completed the Phase 2 assembly hull expansion and mixed model line and coolage, allowing us to produce both battery electric truck and hydrogen fuel cell truck on the same line. So we anticipate we will not need to spend much on CapEx to scale the truck business for the next few years. We have demonstrated a strong ability to access the capital markets, and we're making good progress on increasing our liquidity runway.

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.