Hyliion Holdings Corp.

Good day and thank you for standing by. Welcome to the Hyliion Holdings Q121 Business Update conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Louis Baltimore, Senior Director of Investor Relations at Hyliion. Thank you. Please go ahead.

Louis Baltimore Thank you, and good morning, everyone. Welcome to the Hyliion Holdings First Quarter 2021 Business Update Conference Call. With us today, we have Thomas Healy, our Chief Executive Officer, and Sherry Baker, our Chief Financial Officer. During today's call, we will make certain forward-looking statements regarding our future business expectations, which involve risks and uncertainties. Forward-looking statements are predictions, projections, and other statements about future events that are based on current expectations and assumptions, and as a result, are subject to risk and uncertainties. Many factors could cause actual future events to differ materially from the forward-looking statements on this call. For more information about factors that may cause actual results to materially differ from forward-looking statements, please refer to the press release we issued yesterday after the market closed. Forward-looking statements speak only as of the date they are made. You are cautioned not to put undue reliance on forward-looking statements. We undertake no duty to update this information unless required by law. With that, I will now hand the call over to our CEO, Thomas Healy.

Good morning, everyone, and welcome to Hyliion's first quarter 2021 business update call. 2021 is off to a great start for Hyliion as we've achieved some major milestones, most notably around the formation of our HyperTruck Innovation Council, which I'll talk more about today. During the quarter, we continue to make meaningful progress on our mission to bringing electrified powertrain solutions to the Class 8 commercial semi-truck space. I'd like to start off by turning to page three. There are a few key topics that I'd like to cover today. I'll be discussing the growth of our team, our continued progress with our hybrid product, including the shipments of additional units and our improvements to the product, our continued progress towards the commercialization of the HyperTruck ERX, and some of the key milestones we've achieved. I'll highlight our Innovation Council and how critical this is for the success and launch of our product, and conclude with some important facts and figures around both renewable natural gas and our battery technology. I'll then turn it over to Sherry to address the restatement of our 2020 TENKEG. One of the key focuses at Hyliion is continuing to grow our talented team, and over the past quarter, we've added an additional 43 employees that span in skill sets from automotive engineering, advanced algorithms and controls engineering, to supply chain and operations and other core business functions. I'm continually impressed by the level of talent, enthusiasm, and dedication our entire team has demonstrated as we all work to achieve our key milestones. Since we are growing our team at an ever-increasing rate, we are also expanding our headquarters in Austin, Texas, and doing a facility redesign to meet both the headcount and anticipated customer demand growth. This facility will allow us the production and install space we need to launch both our products, as well as handle the significant employee growth planned for the years ahead. We will share more on these improvements in the coming months. Now turning to page six, Let's shift to some important updates on the hybrid product. Our goal for this past quarter was to continue to ship out early low-volume units of our hybrid system, and I am pleased to share that we did this by installing our hybrid electric product on an additional 10 trucks during the quarter. By continuing to ship these hybrid products to fleets, we are laying a strong foundation to be able to ramp up our product volumes. Through our deployment of units, we are refining our assembly process, improving our installation methods both internally and with third-party mod centers, and growing our field service knowledge and improving our customer experience. This is giving Hyliion an advantage of actually having a product out in the field and is allowing us to carry the learnings forward not only into our hybrid systems but also into our ERX development. As we've previously discussed, Hyliion is continuing to improve the hybrid solution. As I mentioned in our last earnings call, we have experienced delays on the development of the hybrid improvements because of learnings that came from the design process and added testing and validation to the development cycle. One key testing and development milestone accomplished in Q1 was taking our hybrid unit for cold weather testing at approving grounds in Minnesota. The learnings from this and other testings will allow us to make our current and future products even stronger and more reliable for delivery to customers. This same method of testing will take place on the HyperTruck ERX next winter. We'll be implementing major enhancements to the hybrid product beginning in the second half of this year, followed by future rolling improvements. Once we start deploying an improved iteration of the hybrid system, we expect to ramp our quarterly volumes and begin recognizing revenue in the second half of this year. We will continue to take key learnings that will enable Hyliion to maintain our research and development momentum with the hybrid systems and allow us to continue to build strong relationships with our customers. Shifting to slide seven, fleet utilization of our hybrid solution in the first quarter continued to be strong as we've now logged millions of miles from our hybrid systems that are on the road. Every day, each of these trucks can generate over a gigabyte of data from both our system and the actual truck, and then we transmit select data to the cloud. Our team of software engineers use this data to continuously improve our proprietary control algorithms onboard the trucks to optimize its performance. We believe all of this data we collect, store, and analyze will give us a truly competitive advantage and help us maintain and grow our lead in the Class A electrification space. These advances in software are all directly translatable to our HyperTruck ERX, allowing our platform to be able to build upon itself. Shifting to slide nine, now I'd like to turn to the HyperTruck ERX. For those of you who may be new to the Hyliion story, this is our game-changing powertrain that is fully electric and uses an onboard generator to recharge the batteries. Producing electricity locally on the truck through a natural gas generator can be less expensive than charging from the grid and can be cleaner too. Additionally, we eliminate the downtime associated with waiting for a conventional plug-in BEV to charge And with a range of over 1,000 miles of our HyperTruck ERX, range anxiety is not a concern here. Let's start off by talking about where we are in the HyperTruck ERX development process and the upcoming milestones you can watch out for on our path to commercialization. We announced last quarter that we had selected Peterbilt as the truck manufacturer for the initial demonstrator units that will be going out to members of our Innovation Council and others. On slide 10, you'll see that we've since taken delivery of these first units of Peterbilt, and we had the natural gas tanks and generator installed by Peterbilt and an adjacent mod center. The trucks are now undergoing the design and systems integration process for the rest of the Hyliion component. After the installation is complete, which we expect to be done towards the end of this summer, we will begin the testing and validation process on these units. We will then utilize these as demonstrator units to showcase the technology with our Innovation Council partners and others. This is the first stage to the multi-phase product development approach we are using to ultimately reach commercialization of the HyperTruck ERX. While many of you have seen the photos and videos of the HyperTruck ERX prototype on the road, we plan to take these initial demo units to major trade shows later this summer and into the fall to showcase our technology. We are full steam ahead on the development of the HyperTruck ERX, and we have engaged in our leveraging numerous outside firms to assist us with this development. Most notably, we've engaged FEV, one of the industry-leading automotive engineering consulting firms, to assist us through this commercialization process. While we have made significant progress over the and the strong customer interest that we've highlighted, we have encountered some challenges along the way. The commercialization development plan is requiring additional time. We've added incremental testing and validation to our plan. We've implemented a more formal phased rollout approach, and we have been faced with some supply issues and constraints, which I will cover later. That said, with where we stand today in the development cycle, we are still on track for showcasing demo trucks with fleets later this year, and we will carry this into mid-2022. We will then provide initial units to fleets in 2022, but it will be towards the latter part of the year. This will then be followed by commercialization volume ramp-up of the HyperTruck ERX powertrain. On slide 11, you'll see that in early April, we were thrilled to announce the formation of the HyperTruck Innovation Council, a select group of fleets, logistics, and transportation industry leaders that will actively support the development of Hyliion's HyperTruck powertrain solution. This council is committed to leading the industry towards zero-emissions commercial transportation while working to build a more sustainable future. We're thrilled to have been able to pull together some of the industry's top and leading fleets, including Anheuser-Busch, Penske, Ryder, Warner, and others. These fleets represent over 100,000 Class A commercial semi-trucks globally, and the Council will collaborate closely with Hyliion to provide key user insights in the development of the hyper truck. company's electric powertrain for Class 8 commercial trucks that aims to provide superior performance, emissions reductions, and lower operating costs. Additionally, this council is a major step for us along the path to commercialization as council members have committed to be among the first to have access to put real-world miles on the HyperTruck ERX demonstrator units, providing valuable fleet and driver feedback. We believe the best way to generate interest and demand for our HyperTruck ERX is to let fleets experience it firsthand in their operations. We believe our HyperTruck Innovation Council, along with others outside the council, is the most professional and reliable way to generate demand for our powertrains. Councils like this are used by large established reputable players across the transportation industry, and we believe that this is the right path for Hyliion as well. Overall, our long-term goal is to generate demand that leads to long-term partnerships and orders from these fleets as we scale up volume production. I'd like to point out that numerous fleets on the Council are current users of our hybrid solution. This demonstrates not just the importance of the hybrid on its own, but also the ability of our hybrid product to drive demand for our game-changing hyper-truck platform. While going green is at the forefront of many trucking fleet's minds, both our hybrid and hyper truck ERX products should enable fleets to reduce costs while doing so. This combination of performance, abundance of filling infrastructure, reductions in carbon emissions, and reduction in total cost of ownership will make Highlands products appealing to fleets. While there is so much excitement and demand for electric trucks, today's lack of heavy-duty commercial charging stations infrastructure is a major problem, and our ability to generate power on board is a major advantage for Hyliion. If we think about the North American commercial truck natural gas filling station infrastructure, there are over 700 stations, which is about where Tesla's North American passenger car supercharging station infrastructure was in 2019. meaning we are starting with an already existing and robust fueling infrastructure across the U.S. In last quarter's earnings call, we began discussing some of our roadmap for the hyper truck, and we'd like to continue to expand on this discussion. We expect our HyperTruck ERX powertrains will be customizable from a vehicle range of both the BEV and total mileage along with different payload capacity and horsepower options. This will allow us to truly deliver a solution that is refined to a fleet's needs and to match their operations. Shifting to slide 12, while our HyperTruck ERX currently utilizes natural gas, ideally renewable natural gas, to generate its electricity onboard, I'd like to remind you that our HyperTruck powertrain has the ability to evolve with the changing transportation fuel dynamics both at home in the U.S. and abroad. While many see hydrogen as the energy carrier of the future, we are developing our HyperTruck platform with the flexibility to utilize hydrogen fuel cells to ultimately power the battery electric drivetrain. However, to accommodate the time required to complete the hydrogen infrastructure build-out, we are also developing a clean fuel agnostic solution, which will provide our customers the flexibility to use hydrogen or natural gas, depending on fuel availability. This fuel-agnostic power source represents an attractive value proposition in the medium term while hydrogen infrastructure is being built out and hydrogen fuel cells are very expensive. Whether our system uses a hydrogen fuel cell, our future fuel-agnostic solution, or our natural gas generator that we are first releasing, Our hyper truck will continue to utilize the existing battery electric drivetrain, which provides this platform with a very long runway for future growth and relevance. We believe this multistage approach to leveraging an existing fuel in natural gas today and evolving to hydrogen in the future is a key differentiator for Hyliion. It allows us to start deploying viable solutions in the near term and to have a competitive advantage when hydrogen is ready. Over the past quarter, we have made great progress with partners who are teaming up with us in the development of these future generation systems. We will have more to share on these programs with you throughout 2021. As one of our Innovation Council members told us, this is truly an exciting time, and they can't wait to get their hands on a truck and get it out on the road to be able to experience them firsthand. Now I'd like to shift to slide 13 and talk about some of the updates on renewable natural gas. As many of you know, an important part towards driving net carbon negative emissions is having access to renewable natural gas. Last month, we received some impressive numbers from the U.S. Department of Energy and the Coalition of Renewable Natural Gas in partnership with NGVA America about the usage and production of renewable natural gas here in the U.S., along with its impacts on reducing the carbon footprint of the U.S. transportation sector. In 2020, we were impressed to see that just over half of all of the on-road fuel used in natural gas vehicles was renewable natural gas. This is up from 40% of the total in 2019 and up 25% in absolute volumes. More impressively, RNG used in transportation fuels has grown 267% over the past five years. RNG is a pipeline-spec purified form of natural gas captured, rather than emitted, from organic material in agriculture, wastewater, landfill, or food waste that can produce carbon-negative results when fueling on-road vehicles like our Hyliion Hybrid or HyperTruck powertrains. To put this into context on how important this is for climate change and reducing emissions, RNG is a transportation fuel in 2020 lowered greenhouse gas emissions equivalent to eliminating 8.8 billion passenger car miles driven by the average car. Said another way, this RNG use has sequestered carbon equal to growing almost 58 million tree seedlings for a decade or 4.3 million acres of U.S. forests for one year. As of April 1st, 2021, there are over 157 RNG production facilities in operation, with another 155 under construction or in the development stage. So this production should continue to grow considerably in the future. As renewable natural gas continues to gain momentum here in the U.S., Hyliion is a beneficiary of and well-positioned to capitalize on this megatrend. Before turning it over to Sherry to talk more about the recent SEC announcements regarding warrants and our path to revenue recognition, I'd like to talk some more about the battery technology and our supply chain. One of the drawbacks of conventional BEVs, both in terms of cost and environmental impact, is the degradation of their large lithium-ion batteries that may need to be replaced during the life cycle of a long-haul Class A truck. This is not the case with Hyliion's batteries, as we anticipate them to outlive the truck. Coupling this with the extremely high power density and improved general stability and safety aspects of our batteries, our battery solution is a strong competitive advantage for us and also reduces the environmental impact. Depending on the ERX customer configuration, the battery can be as small as a 20th the size of a conventional Class 8 BEV battery, which means that ours is also less resource intensive during the resource extraction process. As we think about shortages at various stages of the supply chain that many different industries, including ours, are experiencing today, our batteries are orders of magnitude smaller and lower cost than a conventional lithium ion truck battery, which should allow us to get more trucks onto the roads with fewer battery cells than our competitors can. Once we have our battery solutions fully commercialized in our own products, we will explore opportunities of selling these modules into other applications as well. Lastly, our supply chain and supplier base is a critical part to being able to scale up volumes. We do see supply risk with some of the components that are utilized in our hybrid and hyper truck solutions. Thus, we have been working closely with these suppliers to either match their lead time constraints or identify alternative suppliers or components that could be utilized. Some of these alternate components are undergoing or about to begin a validation process within Hyliion. Some of these sourcing issues have also contributed to the timing and availability of the hybrid and hyper truck that we mentioned previously. Overall, we are working diligently on mitigating any issues that are forthcoming with our suppliers, as it is paramount to the success and scale-up of volumes. As I said leading into this call, it is an unbelievably exciting time at Hyliion right now. We've made significant progress during this quarter, including organizational developments, facility expansion, generating customer interest, and improved testing and validation, all supporting our commercialization efforts. We have a number of key milestones ahead, which include implementing hybrid improvements and beginning to ramp up volumes later this year, in addition to showcasing demo hyper truck ERX units with fleets starting later this year. With that, I'd like to turn it over to Sherry to discuss some updates on the financial side.