Hyliion Holdings Corp.

Good day and thank you for standing by. Welcome to the highly on third quarter 2022 earnings conference call. At this time, all participants are in a listen only mode. After the speaker's prepared remarks, there will be a question and answer session. If you would like to ask a question at that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. I would now like to turn the conference over to Adam Bresser, Hyliion's Senior Director of FP&A and Investor Relations. Please go ahead.

Thank you. Good morning, everyone. Welcome to Hyliion Holdings' third quarter 2022 earnings conference call. On the call today are Thomas Healy, our Chief Executive Officer, and Jon Panzer, our Chief Financial Officer. A slide presentation accompanies this conference call and is available on Hyliion's Investor Relations website at investors.hyliion.com. Please note that during today's call, we will make certain forward-looking statements regarding the company's business outlook. Forward-looking statements are predictions, projections, and other statements about anticipated events that are based on current expectations and assumptions and, as such, are subject to risks and uncertainties. Many factors could cause actual results to differ materially from the forward-looking statements on this call. For more information about factors that may cause the company's results to differ materially from such forward-looking statements, please refer to our earnings press release, as well as our filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made. You are cautioned not to put undue reliance on forward-looking statements, and we undertake no duty to update this information unless required by applicable law. With that, I'll turn the call over to Thomas.

Hello, and thank you for joining us today for our third quarter 2022 earnings call. I'd like to start off by taking a moment to welcome John Panzer, who is with me here today as Hyliion's new CFO. Almost two months ago, John joined the company and has already made a powerful impact on the organization. He joins us after a long tenure at Union Pacific and brings a wealth of experience in financial leadership, investor relations, strategic technologies, and transportation operations. In addition to leading numerous financial departments at Union Pacific, John previously led their IT departments as well as their strategic planning. In today's call, we will cover progress and results from Q3 as well as add more color to how we are going to commercialize the HyperTruck ERX system and what we anticipate our initial go-to-market pricing to be. This past quarter has been a very exciting time at Hyliion as we've hit some key milestones on our path to commercialization. I will highlight a few and then provide more details later in the presentation. We started controlled fleet trials with our HyperTruck ERX system. This includes a trial with Greenpath Logistics and more recently with Wegmans and Detmar. We also closed the acquisition of an innovative fuel agnostic generator technology from GE Additive, which we first announced back in August. We are pleased to share that we closed the third quarter with $455 million of cash and investments on our balance sheet. Finally, on this call, we will be sharing more details on our Founders Program, which is an initiative around the early deployments of HyperTruck ERX powertrains. As I mentioned, we started our controlled fleet trials in Q3 as planned. Our first controlled fleet trial was executed with Greenpath Logistics, one of the leading clean technology fleets in the United States. Greenpath operates out of Dallas and hauls freight for some of the largest retail shippers in the United States. We're frequently asked, what do these controlled fleet trials entail? To put it simply, it is a deployment of our technology into standard fleet operations as conventional trucks would be used on a daily basis. In the course of a day, we've seen fleets put hundreds of miles on these trucks to deliver various goods. As we've executed these trials, we've had both Hyliion engineers and technicians on hand to monitor the vehicles. Customer feedback is very important to us, especially the feedback from drivers, and I'm proud to say that drivers are telling us how impressed they are with how the vehicle drives and performs. Moreover, it is easy to get in the vehicle and quickly understand how the powertrain works. Additionally, the natural gas infrastructure already in place has alleviated concerns about fueling. Lastly, fleets are saying that they can pull forward a strong ESG benefit by reducing their emissions without having to give up the standard operating features that they have grown accustomed to. Fleets have also shared with us their experience with plug-in electric vehicles, and it is clear that range and the lack of charging infrastructure continues to be a concern for the trucking industry. As we heard from some of the other companies in the electrification space this past week, fleets are seeing plug-in trucks as only being able to work for a small percentage of their fleet because of range limitations. They are also questioning the extremely capital-intensive deployment of chargers. While this is an issue being experienced today with battery electric trucks, we see it as being an even larger problem with hydrogen fuel cell trucks upon initial adoption, given the scarcity of hydrogen. This is where we see Hyliion's product roadmap as truly benefiting fleets and limiting their concerns of shifting into electrification. We're now beginning to see this firsthand with fleets, They will be able to operate the HyperTruck ERX powertrain without range anxiety because of its ability to achieve up to 1,000 miles between refueling stops, as well as leverage the breadth of existing natural gas infrastructure. Now, shifting to some of the milestones we've accomplished. The start of controlled fleet trials checked another box on our path to commercialization. It has been one year since we set out these milestones, and I'm proud of how we've continued to execute on time and on track with our path to commercialization of the HyperTruck ERX system. During the quarter, we have also conducted summer testing of the HyperTruck ERX powertrain by taking four vehicles out to Davis Dam in Arizona and putting the trucks through their paces in various test conditions. This included driving up a steep grade fully loaded and then turning around and heading back down the same grade. Davis Dam, for any of you who aren't familiar with it, features one of the toughest terrains in the nation, including a 6% grade that is sustained for over 11 miles. Not only is the road itself difficult, but we were also testing in temperatures of up to 110 degrees Fahrenheit. I am pleased to say that all four trucks successfully completed the testing. Turning to our deployment plan for the HyperTruck ERX system, I'd first like to discuss pricing. As I'm sure many of you are aware, it is well known in the industry that electric trucks are expected to be more expensive than diesel trucks. This will be the case for trucks outfitted with the HyperTruck ERX system as well. But one of our key advantages is that we expect operating costs for trucks with our system to be significantly lower thanks to the low cost of natural gas and renewable natural gas when compared to diesel. Let's take a moment to compare the three options of electrification, BEV plug-in, hydrogen fuel cell, and the hyper truck ERX powertrain. When a fleet considers its options and thinks about adopting a hydrogen fuel cell vehicle, not only is the vehicle expected to be more expensive, but the fuel is going to be significantly more expensive than diesel as well. For plug-in electric, the trucks are expected to be more expensive, but the cost of fuel will be about the same as diesel. However, when you look at our solution, the HyperTruck ERX Quick Truck will cost more than a diesel truck, but the fuel is about one-third to one-fourth the cost of diesel fuel, which gives Hyliion a big advantage. As we bring our product to market, one of Hyliion's key focus areas is to be able to offer fleets a cost benefit over other electrified solutions, as well as to give them a product that can be comparable to diesel when taking into account the upfront purchase price and lifetime fueling costs. What we've heard from fleets and others in the industry is that hydrogen fuel cell trucks are expected to come to market around $500,000 to $600,000. BEV plug-in vehicles are expected to be in the mid $400,000 range. We are planning to offer our solution at a price in the high $300,000, with flexibility to adjust that number based on component cost inflation. All the foregoing prices include the benefit of the $40,000 Inflation Reduction Act tax credit, As such, we expect to be on the lower end of price compared to other electrified solutions in terms of upfront vehicle costs, while keeping our distinct advantage in fueling costs as well. Turning to our go-to-market strategy, as we've previously shared, our long-term strategy is that Hyliion is a powertrain company, and we expect to sell our solutions directly to the OEMs for them to integrate into their production lines. However, as we launch the product, We plan to source decontented chassis from the OEM, and then we'll utilize our facility here in Austin, Texas, and mod centers that are close to the OEM's factory to install our HyperTruck ERX product. In the beginning, when we are not in the OEM's data book and not yet on their production lines, we will sell the entire vehicle. And then over time, we'll transition to selling just the powertrain to the OEM's as we scale volumes. Through this model, we will procure the chassis from the OEM, and they will stand behind their warranty on the actual chassis and the cab itself, while Hyliion will be responsible for the powertrain and the associated components. As we've previously shared, we'll first go to market with the Peterbilt 579 truck, and then look to expand to other OEMs as we go forward. Now, I would like to share a little bit more about the launch of our HyperTruck ERX system that will begin late next year. Earlier this year, we set out to secure orders for our first 200 production slots for what we are calling our Founders Program. As we look at the learnings from our hybrid system and what it took to be successful, we realize that one of the biggest hurdles is having trucks deployed across the country, where they are more difficult to support. So, the Founders Program trucks will be deployed out of a highly-on-launch facility in Dallas, Texas. If any of you have ever been to the southern Dallas area, you know that it is filled with many warehouses operated by some of the largest logistics companies in the country. We decided that there is no better place than Dallas to roll out our new technology. The Founders Program will feature white glove service and support from the launch facility as we deploy our initial units. At the launch facility, we will not only have service bays for supporting and maintaining our solution, but we will also plan to have on-site fueling to make it convenient for fleets to fill up on renewable natural gas. We will encourage our fleet customers to utilize the launch facility at their convenience, but we are also working on a nationwide service plan with partners who will be authorized to work on our powertrain. As we go forward, we'll share more details on where our launch facility site will be located and who some of our service partners will be. Fleet interest in the Founders Program and desired participation in the initial 200 trucks was oversubscribed, but we believe this is an appropriate number needed to confirm the performance and reliability of the first HyperTruck ERX production units. This past quarter, we rounded out our first 200 orders by adding a 10-truck order from Ruan, one of our HyperTruck Innovation Council members. Ruan is one of the many fleets to have participated in our ride-and-drive events and were impressed with how the vehicle performed and saw our powertrain as a strong solution for their path to electrification. As previously mentioned, we believe that the successful completion of testing, validation, and certification work that we are doing, as well as the continued deployment of fleet trials, will be an inflection point for orders. As these milestones are achieved, and now that we've announced our target pricing, We will move forward with continuing to grow our order backlog for delivery in 2024 and beyond. Finally, I would like to reiterate that we are still on track to start production in late 2023 and plan to deliver all 200 Founder Program trucks to our customers by the end of Q1 of 2024. Now I'd like to shift gears and talk a little bit about our hybrid solution and some of the progress we've made. We are pleased to share that we recognized half a million dollars in revenue this past quarter. While we continue to deliver more and more vehicles, we also have a backlog of orders of over one million for this solution. As we shared in past quarters, truck availability continues to be an issue along with supply chain delays, which is one of the reasons we've started deploying our hybrid systems pre-installed on trucks as well. As a result, we have shifted some of our installs out to the right. As we look to 2023, our plan is to continue to recognize quarterly revenue from our hybrid solution that is comparable to this quarter as we move to the commercial launch of our hyper truck ERX system. I now would like to spend a few minutes talking about our recent acquisition of GE Additive's Carnot technology. On September 26, we closed on the acquisition of a new innovative generator technology out of GE's additive division. We paid $15 million in cash and $16 million in stock, or 5.5 million shares. GE's level of share ownership in Hyliion equates to about 3% of our total equity. Through the acquisition, we not only acquired the Carnot generator technology and its associated IP, but we also received an exceptionally talented group of engineers who are experts in the generator technology as well as fuel injection, flameless oxidation, emissions, and 3D printing or additive manufacturing. As a little background for anyone who isn't familiar with the Carnot technology, it is a fuel-agnostic generator that will be utilized in our HyperTruck powertrain platform in the years ahead. The generator can operate on over 20 different fuel sources, including hydrogen, and pulls forward efficiencies that are significantly higher than today's conventional generators, It also offers superior emissions performance, especially when running on hydrogen. We have been working with GE for over a year on this technology. They initially approached us back in 2021 because they saw that our powertrain solution was a strong fit with the generator they were designing. We decided to kick off a development agreement, but when we saw the performance levels of the generator and recognized how revolutionary it can be, we decided that the best move for Hyliion was to acquire the technology outright and bring it in-house. Many have asked us what makes this technology so unique, and there are two key areas to highlight. The first is the flameless oxidation fuel injection process. This is the same or similar technology that is utilized in GE Aviation's jet engines, and Hyliion has secured a license to use this in the Carno generator. In addition to superior fuel handling, the key components of the generator are produced on a metal 3D additive manufacturing printer, as opposed to using conventional manufacturing processes. This will allow us to truly rethink how parts are designed and manufactured. These unique parts enable us to achieve much higher efficiencies out of the generator. As we commercialize this generator, we see it is not only a solution that can be utilized in our powertrains on board the truck, but it could be used for other applications as well. For example, these generators could actually be used for stationary power generation to charge electric vehicles. Our fleet customers are seeing on a daily basis that the grid is not able to support the power needs of electric semi-trucks. With the Carno generator, we believe we may have a strong solution to this problem. Our plan is for the technology to be commercially launched a few years after the HyperTruck ERX solution. To recap, Hyliad's roadmap for the HyperTruck powertrain is to first start with a natural gas internal combustion engine made by Cummins as the generator. This variant of the product is called the ERX. After that, we will launch the HyperTruck Carno, which will use the new Carno generator in order to produce electricity onboard the truck. The third evolution will utilize fuel cell technology as the generator. Our plan is to work with others who produce fuel cells in order to integrate their solutions into our powertrain. As you look at the HyperTruck roadmap, we've designed a powertrain platform that can evolve with new fuels and revolutionary generator technology. This is one of the key reasons we have invested so much time and effort into our proprietary software integration, as this will be utilized across all three platforms. With that, I would like to turn the call over to John to discuss our financial results.