Nikola Corporation

wholesale electric trucks, all designated for end fleets. This exceeded the high end of the guidance range. That makes 75 wholesale fuel cell trucks in the first two quarters of serial production. We're seeing green shoots with repeat and new fleets, some in new markets such as New York. While our initial focus has been California and Canada, we can expand our reach to meet the demands of end fleet users virtually anywhere in the U.S. We've spoken about the chicken and egg challenge for years. We've expanded Hyla's North American reach in the quarter with the grand opening of our Ontario, California modular refueling station. And with our partners at ITD in Canada, we announced the first commercial modular refueling station in Edmonton, Alberta. Hyla's hydrogen highway plan remains on track for 2024. In fact, we recently opened another modular refueling station near the Port of Long Beach, California, to support primarily drayage fleets in this high density area. We continue to be encouraged by opportunities in constructive green policies. We are pioneers for our zero emissions world to decarbonize the trucking industry. We cannot do this alone. We need both private and public partners. The tailwinds we see from the Inflation Reduction Act of 2022, EPA Clean Ports Program, and state-specific policies at CARB, to name a few, support our mission. We've spoken many times of the one truck, two powertrain strategy. We promised that the first delivery of our improved battery electric truck, which we refer to as the BEV 2.0, would be completed by the end of Q1. We delivered on this commitment. Now let's get to the business update. Again, we exceeded Q1 expectations and wholesaled 40 hydrogen fuel cell electric trucks, all designated for end fleet users. Repeat fleet customer IMC, the largest marine drayage company in the U.S., with more than 2,000 trucks in their fleet and operations coast to coast, ordered 10 fuel cell electric vehicles from our dealer network in Q1. This was after their initial order of 10 in Q4, and they've announced that they're taking 30 more for a total of 50. IMC has expressed strong interest in growing with us as we continue to build out modular hydrogen refueling stations near critical ports such as Long Beach and along busy freight corridors where they operate. Fleets such as AJR demonstrate our focus to fulfill prior commitments and align ourselves with their business needs. AJR, with a total fleet of more than 500 trucks, is a leading carrier for the United States Postal Service and a major drayage operator in the ports of Los Angeles and Long Beach. They announced a 50-unit purchase order for Nikola fuel cell trucks in May of 2023. We delivered the first 15 fuel cell trucks of this order to our dealer network in Q1, and we are working to continue our relationship with them as fueling solutions come online in freight corridors critical to their operations. New fuel cell electric vehicle fleet users, such as Green Transportation Group, or GTG, help Nikola enter new markets in the Northeast. GTG is a large, full-service, 100% emissions-free freight and logistics provider in the New York tri-state area. We delivered 10 fuel cell trucks to our dealer network designated for GTG. Notably, GTG will locally source hydrogen from an authorized fueling provider independent from NEGLA. Non-California or Canada customers such as GTG demonstrate that the sale of fuel cell electric vehicles can be decoupled from HILA-sourced hydrogen, which enable us to penetrate new markets with less capital. As Tom will explain later in the call, expanding geographical focus, especially with large volume accounts, including national accounts, is an important priority of ours going forward. Enabling our fleet users to access hydrogen independently is a growth factor in this strategy. Programmed to date, Nikola fuel cell electric vehicles have accumulated over 830,000 miles with an average fuel economy exceeding our target of 7.2 miles per kilogram. We're doing what it takes to delight prospective and existing customers with the best possible experience. Moving to Chart 7, we maintained our dominant market share of HVIP vouchers for Class 8 fuel cell electric vehicles and in the quarter with 362,000 of 367 or 99% of the vouchers that were requested in 2023 through March of 2024. We remained under soft cap review at CARB for much of Q1 after reaching a ceiling on unredeemed vouchers. For context, in response to the strong demand of our zero emission trucks, we have been requesting higher soft caps at CARB throughout 2023. Our most recent soft cap request for 500 unredeemed vouchers was granted in early April. On the battery electric vehicle side, we ended Q1 with 85 unredeemed vouchers or 30% market share during the same period. Being a pioneer is not easy, and again, we cannot do it alone. We share an aligned mission with CARB to help California achieve its air quality and emissions reductions goals. HVIP is only one program. and we continue to be encouraged by opportunities in other constructive green policies. Two, in particular, help us fund our business. CARB's heavy duty omnibus regulation allows us to monetize the NOx and particulate matter or PM credits we generate from selling zero emission trucks on a model year basis. Other OEMs or engine manufacturers that sell products above emission standards in California must purchase credits to enable sales of combustion engines. We are pleased to confirm that Nikola has executed its first sale agreement for credits generated from model year 22, and revenue from this transaction will be recognized in Q2 2024. We expect future revenue from the sale of CARB credits to grow over time and be meaningful. California Advanced Clean Truck, ACT Credits, is another program that supports Nikola's to decarbonize trucking. Again, we generate credits for selling zero-emission trucks in California on a model year basis. OEMs that sell combustion trucks in California generate deficits that must be offset by purchase credits. We have an opportunity to be a market maker in this space and are actively negotiating with counterparties to monetize credits. In addition, the EPA Clean Ports Program provides $3 billion to fund zero-emission port equipment and infrastructure, as well as climate and air quality planning at U.S. ports. Nikola has engaged with several private and public entities at strategic ports across the U.S. to apply together for funding to help ports decarbonize and transition to zero emissions. Our HILA team is executing its hydrogen highway plan, and we remain on track. Previously, we had committed to nine additional high-level refueling stations in California by year-end 2024. Now, we are expecting to provide nine hydrogen fueling solutions by mid-year 2024 and 14 by year-end 2024. These solutions include modular fuelers and partner stations in California, Canada, and our home station at our Coolidge, Arizona manufacturing facility. We want to emphasize that building the hydrogen ecosystem requires industry-wide collaboration for the benefit of all. We need partners, and they come in different forms and stages of infrastructure development. The shared mission is to build an open ecosystem accessible to all. As mentioned during Q1, we launched HILA's first modular fueling station in Ontario, California. This station is live with 24-7 operations to support fleets. We also recently opened a refueling station near the port of Long Beach. This is a critical site for us to support the heavy drayage operations out of the port for fleets like IMC. Lastly, we announced Alberta's first commercial hydrogen refueling station along Highway 2, a vital freight corridor connecting Edmonton to Calgary. This station supports our close collaboration with the Alberta Motor Transport Association and our Canadian dealer ITD Industries. Finally, we completed the first delivery of the remediated BEV in Q1. We continue to prioritize returning BEVs to customers and dealers and now expect to complete remediation of these units by year-end 2024. Our ability to sell Nikola's on-hand inventory, however, will be dependent upon future battery supply. We now expect to opportunistically sell on-hand inventory for revenue in 2025. We've also taken this opportunity to future-proof the BEV 2.0 as it now shares significant software commonality with the battery and operating systems of the fuel cell electric vehicle, allowing customers to receive next-generation upgrades seamlessly over the air as they are deployed. We've kept our fleet users front and center as we've engineered over-the-air enhancements, including dynamic data gathering for predictive diagnostics, improved truck performance, and field issue identification. We've also deployed new advanced driver assistance systems features to effectively manage powertrain demand in aggressive route conditions such as mountainous driving. Again, growing Nikola is about being nimble, learning as we go, and adapting to meet the demands of our customers. Passing it to Tom to cover the financial results. Welcome, Tom.

Thanks, Steve. I've learned a great deal in the two months I've been at Nikola. The energy and unflinching spirit I see here is inspirational. We're pioneers at Nikola and bringing the world closer to our zero emissions vision. Remaining committed to our mission and consistently following through on what we say we're going to do will make our vision a reality. Moving to chart 12, the profitability flywheel. As we have highlighted, We are excited about being in serial production and delivering 40 fuel cell trucks in the quarter and 75 trucks in the last two quarters. There is a market for our trucks, and we've begun to demonstrate that. That said, profitability will not be where we want it to be until we can build scale. Simply put, it is not practical to optimize our cost structure without a meaningful level of volume. So what are we doing differently to build the volume? There are a few things I would like to highlight. First, we are putting a greater focus on selling to national accounts, which we define as fleets greater than 1,000 trucks. Second, we are being more forgiving on the economics of the initial deal to build confidence with our end fleet users. We are confident Once EnFleet users drive our trucks, they will be delighted and want more. Finally, we're expanding our geographical focus beyond California and Canada. In short, we will leverage partnerships to build volume across North America. With meaningful volume, we will be able to provide our supplier partners with a consistent order book. The order book will enable suppliers to optimize their cost structure by enabling economies of scale to reduce our bill of material. In addition, we will utilize the scale to optimize our cost, reducing our operating expenses and optimizing our manufacturing costs. The flywheel described above will not only lead to profitability, but also put Nikola in the driver's seat of the hydrogen economy, attracting partners who believe in this mission and want to get a head start. Chart 13 contains our financial highlights. As noted previously, absent meaningful volume, profitability will be below our expectations. For the quarter, we had a gross loss of $57.6 million. That said, we're making progress. With respect to the top line, we exceeded the high end of our volume guidance by delivering 40 fuel cell trucks with revenue of approximately $15 million, also above the high end of guidance, after adjusting for BEV returns associated with dealer cancellations. The average sales price of the 40 fuel cell trucks improved sequentially by $30,000 per unit to $381,000. On the operating side, R&D and SG&A, on an adjusted basis, were favorable to guidance. With respect to cash, our unrestricted cash declined $119 million sequentially. Our cash burn improved sequentially versus the fourth quarter in 2023. We have a lot of work to do, but we are making progress. Moving on to chart 14. For fiscal year 2024, our fuel cell wholesale delivery guidance remains unchanged, at 300 to 350 trucks, with Q2 being between 50 and 60 wholesale deliveries. For the reasons highlighted earlier, with respect to the BEV, we will look to sell our on-hand inventory opportunistically in 2025. Profitability is related to execution of the flywheel discussed earlier in the call. As we will be focused on gaining momentum. Finally, we have demonstrated an ability to raise capital, and as we continue to execute our plan, it will only increase as the flywheel gains momentum. Back to Steve for closing remarks.

Thanks, Tom. We're glad you're here. To close on a personal note, I've invested more than four years in Nikola and have been through the ups and downs of the company. I believe in our leadership team, our board, and what the team has created. As a leader, I am financially invested in the company, and I have never sold one share of Nikola's stock outside of paying tax obligations, period. I am focused on removing unnecessary distractions, growing our business, and progressing on the path to profitability. As Nikola moves forward, we will keep hitting on milestones. On April 29th, our 100th production fuel cell electric vehicle drove off our Coolidge line. This is truly a testament to our Arizona teams in Phoenix, Coolidge, and supplier partners around the world. This is just the beginning. I remain inspired by the people at Nikola, the faith of our stockholders, and the mission that we all share to decarbonize trucking and pioneer solutions for a zero emissions world. These words are what our team lives by, and we thank you for being part of it. This concludes our prepared remarks. Operator, please open the line for analyst questions.