Nikola Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 9, 2023

There are 13 speakers on the call.

Operator

Morning, and welcome to the Nicola Corporation First Quarter 2023 Earnings and Business Update Call. Currently, all participants are in a listen only mode. We'll begin today's call with a short video presentation followed by management's prepared remarks. A brief question and answer session will follow the formal As a reminder, this conference is being recorded. It is my pleasure to introduce Dylan Sandeau from Investor Relations.

Speaker 1

Thank you, operator, and good morning, everyone. Welcome to Nikola Corporation's Q1 2023 Earnings and Business Update Call. Joining me today are Michael Loeschuller, Chief Executive Officer Stacy Pasteric, Chief Financial Officer and Carey Mendez, President of Energy. A press release detailing our financial and business results was distributed earlier this morning. The release can be found on the Investor Relations section of our website, along with presentation slides accompanying today's call.

Speaker 1

Today's discussions include references to non GAAP measures. These measures are reconciled to the most comparable U. S. GAAP measures and can be found at the End of the Q1 earnings press release we issued today. Today's discussions also include forward looking statements about our future expectations and plans.

Speaker 1

Actual results may differ materially from those stated and some factors that could cause actual results To differ are also explained at the end of today's earnings press release and on Page 2 of our earnings call deck and also in our filings with the SEC. Forward looking statements speak only as of the date on which they are made. You are cautioned not to put undue reliance on forward looking statements. After the video presentation, Michael and Stacy will give their prepared remarks,

Speaker 2

Today in Southern California, we had a wonderful start I had the opportunity to give the first keynote speech this morning. We also then had the opportunity to show the Governor of California our fuel cell truck. California has an enormous impact People at Nicolas share the common vision, pioneering Solutions for 0 emission world. In a time of uncertainty and challenges, You have to focus on what you're really good at.

Speaker 3

We've got the right product at the right time. You're taking diesel trucks off the road, We've got a solution for that. We've got the fuel cell truck, we've got the mobile fueler, and we've got the

Speaker 4

And this thing gets up to speed. It does.

Speaker 3

Nikola's business model depends on changing the world.

Speaker 5

This is

Speaker 3

not a side hustle for us. This is the business we're in. So I think it's absolute focus on what the customer wants and that's what we're delivering.

Speaker 2

Thank you, Dylan, and good morning, everyone. Again, welcome to our Q1 2023 earnings call. During the call, we will update you on our Truck Programs And of course, Stacy will cover our financials. Before hopping into this, I want to let you know one thing. Nicolas is the real deal.

Speaker 2

We have real trucks that are being ordered, delivered and operating in customer fleets Now we have world class software and technology and elegant zero emissions products Decarbonizing the High Polluting Commercial Transportation Market. We are building a real hydrogen business via our Hyla brand with solutions for the entire ecosystem, production, supply and refueling. We recently signed a deal with Volterra for up to 50 refueling stations, are advancing progress with Hyland Mobile Fuelers and are moving forward on the Phoenix Hydrogen Hub in Arizona. We are doing these things at a time when governments are offering incentives for transitioning to 0 emissions now and introducing regulations requiring the transition in the near future. We think we are the best positioned company to spearhead the 0 emission transition and accelerate The hydrogen economy with our trucks consuming our hydrogen fuel on the highway.

Speaker 2

So with that in mind, let's get started. The last few years at Nicolas, We have been laying a foundation. This foundation allowed us to gain many skills, great technology, Great products, great people and a bit of humility as we hit some speed bumps along the way. But the strong spirit of the company remained constant. With this foundation In spirit comes one thing, focus, focus on our mission Let me lay it out very plainly.

Speaker 2

The future of Nikola is hydrogen. Hydrogen with our Hyla Energy brand together with our Class 8 Hydrogen Fuel Cell Truck. And for more efficiency, integrated autonomous technology, Software and vehicle controls in our purpose built trucks. Our market, North America, that's it. With that focus comes important decisions.

Speaker 2

Part of the plan for the new And refocused, Nicolas, is to be geographically focused on the North American market. The United States is a leader In the energy transition with revolutionary federal incentives such as the Inflation Reduction Act and many states like California, New Jersey and New York, offering both truck and fueling incentives. California is also mandating 0 emissions vehicles through the advanced clean fleets rule, Establishing targets for drayage fleets, government fleets and fleets over 50 vehicles. Beginning January 1, 2024, only 0 emission drayage trucks may register in the CARB online system. All drayage trucks entering seaports and intermodal rail yards would be required to be 0 emissions by 2,035.

Speaker 2

As part of this transition, we are selling our stake in the European joint venture This will reduce Nicolas' cash spend and capital commitments and allow us to dedicate our resources to the task at hand in North America. Iveco is and will remain an important partner and key supplier for Nikola. Iveco will also maintain a substantial stake in Nikola and continue to cheer for us in our long term success. We are grateful for the partnership and expertise we have gained and look forward to continuing our work with them. As we get our fuel cell truck ready for production, we are pausing production of our battery electric truck.

Speaker 2

The battery electric truck is a great product, and its development has allowed us to create many of the critical components and software systems that we can apply to the hydrogen fuel cell truck. We have sufficient inventory of battery electric trucks for our customers. And when production resumes this July, the battery electric will be built to order at our facility in Coolidge, Arizona to better align with our capital allocation plans and improve working capital. I am confident to say we have best in class products and no other company This direction is exciting for all of us. We are creating an ecosystem that will allow Nikola's customers to own a hydrogen fuel cell 0 emission truck and with Hylab, fuel that truck with readily available hydrogen.

Speaker 2

It has already started. The U. S. And Canada have put themselves on the forefront of hydrogen production and the countries and states or provinces have created incentives to make it possible to dedicate all of our efforts to capture a sizable share of the commercial trucking market as well as a quickly growing hydrogen infrastructure business. The upside potential on both businesses is virtually unlimited.

Speaker 2

And we are well on our way to making it happen. Nikola fuel cell trucks are in heavy testing, along with Hyalar Hydrogen Mobile Fuelers, all of which will be available to customers later this year. Autonomous technology with our Plus AI partner is being tested today on the battery electric truck and will be available next year with availability on the fuel cell following shortly afterwards. It is truly amazing to see what this technology does to the trucking experience, improving safety, easing stress for the driver and adding even more energy efficiency to each trip. We have made changes to our business as well.

Speaker 2

We have a new CFO, a revised sales organization, a more focused Board and have transitioned out or promoted the right people to the right positions. We have new partnerships and have continued progress with our previously announced partners. On the energy side, especially, Recently announcing our joint development with Volterra to create the largest North American open network of commercial hydrogen refueling stations. And we have a stronger sales, commercial and service network with new dealerships and salespeople eager to sell our trucks and energy solutions. Our employees and team members, including everyone listening in on this call, are our focus.

Speaker 2

We are all in making this happen together. What does this mean? The future looks bright If we do as we say, build and sell trucks, continue constructing the Hyla business and drive costs down. There is no doubt We can be successful. Beginning with our Energy business, on May 2, we announced of definite documentation with Volterra Power, a subsidiary of EQT, one of the largest clean infrastructure funds, To develop the refueling infrastructure required to support Nikola's hydrogen fuel cell electric vehicles.

Speaker 2

We plan to develop up to 50 stations with Volterra throughout North America over the next 5 years. Waterra intends to supply the capital for the station cost as well as operating the stations. Nicolas will provide the hydrogen fuel and the technical expertise for the station construction. And the stations are expected To provide both hydrogen refueling and electric charging for Class 8 trucks. We have made significant progress on the Pfenex Hydrogen Hub, recently receiving unanimous approval from the City of Buckeye on our general plan amendment and rezoning application and continue to progress on ordering long lead time equipment.

Speaker 2

In addition to the progress made on the Pfenex Hydrogen Hub, we continue to work on completing Phase 2 of Department of Energy Loan Program Office Application Process and work closely with Fortescue Future Industry on the co development of large scale U. S. Green hydrogen production facilities across North America. We believe these two strategic partnerships, along with the many others announced over the last several months, Further validate our business strategy to be capital efficient, improve the demand for financial partners in the build out Our hydrogen refueling ecosystem. The most critical component for early adoption, we believe, Our flexible fueling solutions.

Speaker 2

We believe mobile fueling will be an important part of our business moving forward as we look to provide customers with refueling, while at the same time remaining capital efficient and matching fuel cell truck network fueling demands. We are pleased to announce to date we have commissioned 4 Hilah Hydrogen Mobile Fuelers. During the quarter, we announced our partnership with Chart Industry, which includes collaboration for the development of new mobile fuelers and modular hydrogen refueling stations. We have also signed agreements for additional mobile fuelers from other third party partners, including Taylor Wharton. Mobile fueling solutions can be rapidly deployed in any geography and with lower capital requirements than permanent station infrastructure.

Speaker 2

Sure. Mobile fuelers and modular stations allow us to match the hydrogen fueling requirements in geographies as trucks are introduced into the area. In our hydrogen fuel cell program, we remain on track to deliver trucks to customers later this year. We are currently building 10 gamma trucks. Gamma trucks will be used for customer pilot testing and to finalize vehicle validation.

Speaker 2

As of today, we have completed the first two trucks and are in the process of finishing the next 4 trucks. The remaining 4 will be built and commissioned by the end of June. Pilot fleets include BRG, Walmart, Linde and AGR Trucking, a leading carrier for the United States Postal Service, We recently announced an order for 50 trucks. The first production units are anticipated to be built in July. We believe Nikola will be the only company with a production Class 8 hydrogen fuel cell truck available for purchase this year.

Speaker 2

Our dealers have already received more than 100 orders for the fuel cell truck from end customers. Our commercial team is working diligently to secure additional orders and fill our remaining backlog for 2023 in 2024. The hydrogen fuel cell truck and our energy business will be long term value creation opportunities for Nikola. We believe we are the best positioned company to take advantage of the massive incentives provided by state and federal governments and can take a significant market share as a first mover in the Class A 0 emissions vehicle market. We are also beginning to build sales momentum with the battery electric program.

Speaker 2

During the Q1, we produced 63 battery electric trucks, delivering 31 to dealers. In the quarter, we achieved 33 retail sales, a significant increase from 2022. Our revamped commercial and sales organization and strengthened dealer network have improved the go to market strategy, and we believe we will continue to improve end customer delivery numbers. This will be made possible through new financing options and providing customers with fully integrated mobility solutions. We believe these positive changes We'll continue to compound and build momentum as we look to reduce inventory and move trucks into customer hands.

Speaker 2

And we will continue to provide these battery electric trucks to customers on a build to order basis. In Coolidge, we continued with progress on the Phase 2 assembly expansion hall, which will be complete by the end of Q2. At the end of May, we will temporarily post production in Coolidge as we convert the assembly line to accommodate both the battery electric and hydrogen fuel cell trucks. We will resume production in July as we begin fuel cell production. We also plan to begin battery module and pack manufacturing in Coolidge by July 2023.

Speaker 2

And will begin Bosch Fuel Cell Power Module Assembly in Coolidge by December 2023. I will now pass it on to our new CFO, Stacy. I am happy to have Stacy join me on the leadership team. She has great knowledge of our business and her passion for the company is evident in her work. She is off to a flying start and will be a great partner with me and the rest of the leadership team.

Speaker 6

Thank you, Michael, and good morning, everyone. I would like to begin by saying I'm thrilled to be Nicola's new CFO, and I'm thankful for your support. In my last 4 years with Nicola, I have the opportunity to develop a deep understanding of the company's operations and financials. By joining the leadership team alongside Michael and our Board, I am excited to be in a position to make a positive impact on the strategy of our business with a greater focus on financial I believe Nicola is the leader in Class A 0 emission transportation and hydrogen economy and can capitalize on the virtually unlimited opportunities in the marketplace. To get that opportunity, we need to navigate a Highly challenging macro environment, make the right business decisions and unlock the long term value of our business and the positive impact Nicola can have on the world.

Speaker 6

My number one goal is to align our spend with our strategic priorities, focusing on Fuel cell, hydrogen and the North American market. It is critical that we optimize our cost structure, slower cash burn and achieve positive EBITDA by 2025. Now let's review our Q1 results. During the Q1, we delivered 31 trucks to dealers and recognized total revenues of 11,100,000 Cost of revenues for the quarter was $44,000,000 generating a gross loss of approximately $32,900,000 or negative 296% versus nearly negative 700% in Q4. This is a substantial improvement attributable to higher delivery volumes, lower inventory costs specifically related to transitioning out of Cyprus, Improved inbound freight costs as we manage inventory receipts, while we pivot our manufacturing strategy for battery electric to build to order and improvements in plant and labor overhead cost structure.

Speaker 6

R and D expenses came in below our Q1 guidance and below Q4 levels at 64,400,000 including $9,100,000 in stock based compensation. SG and A expenses came in at the midpoint of our guidance and significantly below Q4 levels, totaling $53,700,000 including $14,700,000 of stock based compensation. With the new executive compensation plan and cancellation of remaining market based RSV awards, We expect the stock compensation run rate to be substantially lower moving forward at roughly $16,000,000 per quarter in the second half of twenty 23. GAAP net loss for the Q1 totaled 169,100,000 and on a non GAAP basis, totaled $143,600,000 GAAP net loss per share was $0.31 basic and diluted and on non GAAP basis was $0.26 basic and diluted. Turning to the balance sheet.

Speaker 6

We ended the quarter with approximately $206,300,000 in cash, including $85,200,000 of restricted cash. Not included in our Q1 cash balance Is $96,500,000 of net proceeds we received from the follow on and direct offerings, which closed in April. Our current access to capital is approximately $796,000,000 and is comprised of 206,300,000 Cash on the balance sheet, including restricted cash $243,000,000 available on Tumum Elox $200,000,000 available on ATM, dollars 50,000,000 available of convertible debt and $96,500,000 of net proceeds received in April from the follow on offering. We want to be clear, Much of this capital availability is dependent upon additional shares being authorized by our stockholders in June. And registering those shares for the applicable agreements along with certain other contractual limitations and market conditions, including stock price.

Speaker 6

In addition to facilities we already have in place, we are vigilantly monitoring opportunities to raise capital, including monetizing the existing assets on our balance sheet. At the end of the quarter, accounts receivable balance was approximately 27,600,000 down by approximately $4,000,000 from Q4 despite higher sales volume. Through April, we have been able to secure $20,000,000 in floor plan facilities, resulting in AR collections of $15,400,000 We know it is important for our customers to have financing available and are working hard to substantially improve our financing options, both on the dealer and retail side to enable sales and faster cash conversion. At the end of Q1, We held approximately $123,600,000 in inventory, flat versus Q4 levels. This includes $80,000,000 of finished and WIP inventory, including 152 battery electric trucks and Coolidge.

Speaker 6

Now that we have sufficient stocked inventory, we are adjusting our manufacturing strategy from build to CapEx for the Q1 totaled approximately $52,300,000 and was predominantly spent on Coolidge Manufacturing Facility expansion, which is now substantially complete supplier part tooling for the fuel cell truck hydrogen production equipment Hydrogen Mobile Fuelers and the Fuel Cell Power Module Production Line. As Michael said earlier, we are exiting the JV with IVACO in Europe, allowing us to exclusively focus on our most important market, North America. In exchange for our 50% stake in the JV, Iveca will pay Nicola $35,000,000 cash and deliver $20,000,000 shares of our common stock back to Nicola. By shifting our focus to the North American market, we expect to realize near term benefit consisting of Savings from European Development Spend, future JV contribution commitments, return of investment from IVECO and being able to utilize the 20,000,000 shares for additional capital raise activities. We see improved sales momentum from our new commercial team and remain focused on hitting our delivery numbers this year.

Speaker 6

The product mix may shift from battery electric to hydrogen fuel cell as we see strong demand for the technology. For full year 2023 guidance, it is too early in the year to update as we are working through cost center alignment and prioritization. At this time, full year 2023 guide remains unchanged from the last call. We do have a line of sight to reduce CapEx by at least $20,000,000 by optimizing our manufacturing footprint and being Capital efficient on our energy infrastructure. We are also taking a critical look into our operating expenses and will provide an update on our Q2 call in August.

Speaker 6

In Q2, we expect to deliver 30 to 60 battery electric trucks for revenues of 10,500,000 to 21,000,000 and generate gross margins of negative 240% to 130%. We expect gross margins to continue to improve as we scale our volumes throughout the year. Once production commences, We expect the gross margin on the hydrogen fuel cell truck to be substantially and immediately superior to the battery electric due to higher ASP and lower bill of material costs. Our goal is to reach gross margin breakeven point by the end of 2024. Our estimated R and D for Q2 is in the range of $75,000,000 to $80,000,000 including $8,000,000 in stock compensation.

Speaker 6

2023 R and D expenses are front loaded due to the beta fuel cell build in Q1, gamma fuel cell Build in Q2 and fuel cell validation activities ahead of launch. We expect our R and D run rate to drop by approximately 30% in the second half of the year. SG and A will be in the range of $60,000,000 to $65,000,000 including $20,000,000 in stock based compensation expenses. Stock compensation will be higher in Q2 due to the cancellation of the remaining market based stock awards for executives of $7,200,000 and impact of executive retirement of $3,300,000 We anticipate Q2 CapEx to be $45,000,000 primarily focused on modification of the production line in Coolidge to accommodate the hydrogen fuel to accommodate the hydrogen fuel cell truck, the fuel cell power module assembly line and fuel cell supplier part tooling. Going forward, we expect our CapEx spending to reduce significantly as we will have the footprint and capacity to build trucks with minimal additional investment.

Speaker 6

In Q2, we expect the weighted average shares outstanding for the quarter to be approximately 687,000,000 and the total shares outstanding to be approximately 698,500,000. Our redefined focus at Nicola will allow us a much lower cash burn as we realign our cost structure. In 2022, our cash burn was approximately $200,000,000 per quarter and $240,000,000 in Q1 of 2023. Q1 cash burn was inflated by almost $40,000,000 of costs related to Cypress operations and severance. This level of cash burn is not sustainable for our business, and we are looking at every option for reductions in spending.

Speaker 6

We are already beginning to see some progress with April cash burn coming in at $46,000,000 I am personally driving Renewed focus on aggressive management of all three pillars of working capital, cost reductions, specifically payables, inventory procurement and management and of course, cash collection. We already have a line of sight to achieve Approximately $150,000,000 cash burn per quarter and they're working intently to reduce quarterly cash burn further with targets of $120,000,000 by the end of 2023 $100,000,000 in 2024. This will take focus to find further opportunities to improve our cash position and show tangible progress towards reaching profitability. Now I will pass it back to Michael

Speaker 2

Thank you, Stacy. Let me summarize our priorities and how this focus will make Nikola better. We will focus on our hydrogen refueling business and the fuel cell truck in North America. This is where we have clear competitive advantages. We are the 1st in the market with our hydrogen fuel cell truck and have a leading role with our energy infrastructure.

Speaker 2

We will change our model to build to order for the battery electric truck and focus on autonomous technologies, which help drivers and fleets. We expect this focus will reduce our cash burn and in turn help Nicola achieve profitability sooner. By focusing on our strength, We will continue to increase our sales momentum in both hydrogen fuel cell and battery electric trucks and capture a meaningful share of the market. This concludes our prepared remarks. Operator, please open the line for analyst questions.

Operator

Thank you. A confirmation tone will indicate your line is in the question 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 Kauffman with Vertical Research Partners. Please proceed.

Speaker 4

Thank you very much Thank you for that very detailed rundown. Stacy, first

Speaker 7

of all,

Speaker 4

congratulations on your promotion and best of luck to you. I just wanted to follow-up on your comment on a line of sight to $150,000,000 cash burn per quarter, 125

Speaker 1

at the

Speaker 4

end of the year. Could you give us a better feel for what types of programs you have visibility on? And Kind of do we is it mostly second half where we're going to see some of these adjustments? Or is it going to be more of a constant Reengineering throughout this year and the beginning of next year.

Speaker 6

Thanks, Jeff. And thank you. I appreciate the kind words. Good to be here. I'm excited.

Speaker 6

Obviously, we have a lot of work to do. So jumping in, talking about the cash burn. As I mentioned, we already have made some progress coming in at $45,000,000 in April. And that's comparatively, If you look at our monthly average in Q1, which was $75,000,000 we're doing much better. So again, a lot of work to do to get to below $100,000,000 which is my ultimate goal here.

Speaker 6

And to get there, it will be really a combination of things. We need to improve truck economics for 1, Reduce OpEx, limit CapEx, which we've mentioned briefly in the call and of course, manage working capital. And that will be critical as we ramp up our fuel cell. So a lot of that will come in, in second half of twenty twenty three. Once we get into fuel cell production, really roughly half of our cash burn will be attributable to working capital.

Speaker 6

So if we can manage that more effectively By managing our inventory, switching to build to order, making sure we have financing available, then we can drastically improve it.

Speaker 4

Okay. Thank you. And then just one follow-up and this is more for the Energy business. With the announcements that have been made, moving with the mobile fuelers and the partnership with Volterra, How does this change the economics of the Energy business? Does it should we just think of the Volterra deal as Nikola not having to put out the money for capital for these stations, in terms of the energy model, How do these recent announcements change anything or do they at all?

Speaker 5

Yes, Jeff, it's Terry Mendez here, President of the Energy Division and great question. I think we have a very detailed economic model when we look at the Energy business and are negotiating with our partners. The Volterra deal actually, you're absolutely right, Relieves a significant capital burden for us building these stations. And partnering with them actually enables us to get a 1st mover advantage In this whole ecosystem, right, building the stations, having the mobile dealers. As an energy person with a lot of experience in this, Getting a 1st mover advantage of infrastructure gives you a leg up on the competition, plain and simple.

Speaker 5

So Voltaire has been a great partner of that. The economics of how we model this don't change. What we've negotiated with them is a fair competitive rate. We understand that we are first movers and are partnering with us. So I'd say as we go forward looking at our model, this relieves the capital burden and the economics Don't change.

Speaker 4

Okay. Well, congratulations and thank you very much.

Operator

Our next question is from Bill Peterson with JPMorgan. Please proceed.

Speaker 8

Yes. Hi. Thanks for taking my questions. Nice seeing you last week, Michael. So at ACTX, you're selling both your trucks and Presumably having a lot of conversations with fleets.

Speaker 8

And then you announced that Advanced Clean Fleets, you mentioned that there's more sticks coming, especially in California. But I guess my question is, where are most of your discussions focused on coming out of that conference? Are people really gravitating more towards the I'm particularly talking about maybe newer fleets that you don't have current arrangements with.

Speaker 2

Yes. Thanks, Bill, for your questions. So first of all, I mean, EXFO was a very big show last week. I mean, I was really overwhelmed. I think there were 11,000 people.

Speaker 2

And we had a very, very good opportunity to discuss all kinds of business topics with our customers. I see a couple of very important trends. So first of all, I mean, 0 emission mobility is coming, right? And the stakes out of California are so obvious. So the level of interest was much, much higher than a year before.

Speaker 2

In terms of battery electric truck and fuel cell truck, we see still both very relevant for our customers, but it depends on the applications, right? So Like the ports in California, they prefer a battery electric truck, and we are happy to continue to produce the battery electric truck, right, while we pause now production, but we are happy to build this truck going forward. At the same time, I will say and that's why I think Nicolas is uniquely positioned, There is a very strong interest in the fuel cell truck, right? The range of 500 miles is very competitive, is best in class. And who else is out there in terms of a fuel cell truck now?

Speaker 2

I mean, we produce the fuel cell truck now in July. So my takeaway from ActharX was, Yes, there is interest in the battery electric truck, especially for ports. But overall, the topic is really hydrogen and what Carey just mentioned on the infrastructure, That is where most customers will go. And I think you see it in the numbers. I mean, we have 140 firm orders from customers to our dealers.

Speaker 2

And we're very positively surprised about that because it shows and actually this number is going up kind of on a daily basis. I mean, I got the next order this morning. So it shows that people want to have this truck now and don't wait. So I think we see a clear trend in terms of fuel cell and hydrogen.

Speaker 8

Okay. Thanks for that. My second question is for Stacy. So you've been on the role here for some period of time. I guess, How do you think about the options you have looking ahead for raising capital?

Speaker 8

Any particular preferences? I think you mentioned that there may be some options, things you could use, I don't know if you could just maybe elaborate on that. And what options do you have from here, given and by the way, it's nice to see the cash burn come down, but just what options do you have going forward.

Speaker 6

Yes. Thank you, Bill. Great question. Obviously, capital rates is Very high on the priority list here along with limiting the cash burn for me. And we all know market conditions are very tough right now, but we remain positive and we have demonstrated ability to raise capital.

Speaker 6

In Q1, we raised $120,000,000 to the existing instruments and also we went out right after the quarter end and raised additional $100,000,000 through the follow on offering. And Obviously, again, in a difficult market, not a lot of companies are able to pull that off. So we remain cautiously optimistic. As far as the remaining access Capital on existing facilities was covered is about $500,000,000 And as you mentioned, we're also exploring other opportunities to raise money, including monetizing the assets that we have. The assets that we have, if you look at our balance sheet, we have a lot on our balance sheet in terms of PP and E, land, buildings, things of that nature As well as IP.

Speaker 6

So, we're working on that in parallel to make sure we always have options available and we'll continue to access capital as needed while cutting costs.

Speaker 2

Thank you.

Operator

Our next Question is from Dylan Cumming with Morgan Stanley. Please proceed.

Speaker 7

Hey, good morning. Thanks for the question. Wanted to go back to one of the ones I was asked earlier in terms of just I guess it ties into the cash firm. But Stacy, you made a comment in terms of still being confident or still targeting positive EBITDA or breakeven EBITDA outcome by 2025. As we're going through the cost structure, right, and I think this ties into some of the comments you made on the cash burn, but what level of truck production and or deliveries, I guess, would support that outcome at this point relative to some of your cost reduction actions?

Speaker 6

Yes. Thank you for your question. So the way we think about it, one, now that we realign things on everything that we've talked about, we have a better path To get there to be profitable on EBITDA level by 25. Step 1 is we need to make money on the truck. And to do that, we need to reduce our bump cost and primarily on the fuel cells where we have a lot more opportunity to reduce costs because a lot less of the volume in the fuel cell is coming from battery pack and battery cells And increase our sales volume.

Speaker 6

So while we haven't given guidance for 2024, we expect in 2020 We at least need to be able to sell from anywhere from 1,000 to 1500 trucks depending on the mix to breakeven. And that's why we would need to close to double in 2025 for us to be able to cover our current level of cash OpEx. Again, I will mention that we're working on our cash outback, this will come down as well, but that's currently where we are.

Speaker 2

Okay. Sorry, go ahead.

Speaker 6

No. The only other thing, I wanted to mention obviously on the fuel cell, we have a lot of opportunity with our pricing. So it's not just reducing the BOM where we have a very specific BOM reductions that we're working on, but also the pricing given Michael talked about, we're going to be first to market, so we have a little bit more pricing power there, and we'll be able to get better margin on the fuel cell.

Speaker 7

Okay, great. That's super helpful. Thank you. And then if I could ask a quick question on the Iveco partnership as well. Can you just flesh out, I guess, what the endgame looks like in terms of that collaboration with them?

Speaker 7

I think you still mentioned in the press release you're planning to license the Sway kind of framework and technology from them going forward. Does I guess the dissolution of the JV opens the door to Test out new kind of platforms for your hydrogen fuel cell product. I think I'm asking in the context of the market solving some concerns of whether or not

Speaker 2

I mean, Iveco will stay shareholder of Nikola in a meaningful way. We from the Nikola side will continue to have a supply agreement with Iveco, so cab and also the e axle. So in a way, the partnership continues, but in a more focused way. And why does this make so much sense for both partners? I mean, it's much better that Iveco does the business in Europe and we focus here on North America.

Speaker 2

And with all the positive momentum we have on the fuel cell I also need my engineers here focusing on the fuel cell trucks. So it will actually help both companies to implement much faster because Let me tell you in terms of operational experience, sometimes it's not a good idea to have like engineers on the other side of the world with 9 hour time difference. So implementation will be much faster. In terms of your cap over, great point and also there, Act Expo was a very good Feedback for me. So there are many people who love the Cap Over, in particular, once they are in the truck.

Speaker 2

Is it an unusual Cap Over? Yes, absolutely. And not Everybody loves it. But once people are in there, people are actually delighted. They see also our infotainment.

Speaker 2

So I'm very, very positive about the cap over. But yes, you will find 1 or 2 customers and they say, look, we don't like it and that's okay.

Speaker 7

Got it. Very helpful. Thanks guys.

Operator

Our next question is from Mike Shlitzky with D. A. Davidson. Please proceed.

Speaker 9

Good morning and thanks for taking my question. And Michael, it was great to meet you last week at ACT Expo as well. I want to ask about The Hailo Mobile Fueler Business. I guess the Volterra deal, they'll be paying For the stations out of Volterra's bank account, but the mobile dealers, are you paying for those, for customers to use as either a bridge or In an area where there's no stations being developed. As I kind of walked the show, I saw a lot of tanks.

Speaker 9

Prices are coming down, but it's still A few $1,000,000 it seems per unit. So I'm curious who's going to be paying for the for each of those high load fuelers there?

Speaker 5

Yes. Thanks, Mike. It's Terry Mendez again. And good question. And again, I think this is one area where Nikola is leading the ecosystem here with these mobile fielders.

Speaker 5

The first one that came out in December, we developed on our own, 700 bar pressure, which enables a faster refueling time. We've got 3 more now that we've developed, so 4 of our own. And then we've got another 16 or so coming for the rest of this year and then more next year. And those are from 3rd party suppliers, some of which we've mentioned in the press release. And Michael talked about Chart Industries being 1, Taylor Wharton being another.

Speaker 5

These will be liquid mobile fillers. We've got good terms with each one of those suppliers in terms of being able to lease those from them. And look, the value in these partnerships is they are keen to see greater use of these mobile theaters. So they're being really good partners, and I think we've That's good terms with each of them. I think the next question then as this business scales up, I think it is a really Profitable business, I think to have these mobile dealers because stations take a couple of years to build.

Speaker 5

These mobile dealers come on stream a lot faster. So we are also looking at, okay, what's the partnership model for those? And I think especially since the Inflation Reduction Act, you've seen the Volterra announcement and others, There's a lot of people with solid balance sheets capital looking to get into the space, take advantage of the various incentives and the fact that we're bringing demand to the market First off, in hydrogen. So I'm confident that with partners like Chart, Taylor Wharton, as well as others that are looking to get into the space, We'll have similar solutions for spreading the capital cost and the risk.

Speaker 9

Okay. But just to clarify, the customer is not going to be paying. The person who's driving the vehicle that the end user is not paying for the mobile fueler at their location.

Speaker 5

Yes. No, good clarification question. At the end of the day, the mobile fueler is Cost as part of dispensing hydrogen. So we will be building it into our economics. Just like a station, the mobile theater is a temporary station in a way.

Speaker 5

And so the customer ultimately, the sales price we have will reflect that.

Speaker 9

Okay. Outstanding. And then I wanted to Clarify the plan for the trade bev going forward. You mentioned you'll be doing this on a build to order basis. I guess I'm not sure What that means, will you no longer have dealer inventories once the current ones are depleted?

Speaker 2

Will you have to kind of

Speaker 9

shut down production entirely at Coolidge once you change over to the fuel cell To kind of make any small orders, we have enough volumes to keep at least one line running with the trade bed. I'm just kind of curious How many trade guys are in the mix going forward and how that might affect your production process?

Speaker 2

Yes. Thanks for bringing this up. Michael, happy to clarify this. Mean, first of all, we paused battery electric production at the end of May. Why do we do that?

Speaker 2

Because we launched a fuel cell truck in July. With all the experience we have, it's important that the factory line has time for training, preparation, and that's exactly what we do. At the same time, we have inventory available on our side, to be precise, 152 trucks. So that is inventory now we wanted to obviously move to our dealers and then to end customers. So therefore, we will pause the battery electric production.

Speaker 2

And then once we see then orders coming through, We will resume battery electric production, but I think it's also fair to say the level of inventory is a little higher than we would like to have it. So I mean, we basically have 2 advantage out of this production course. But again, we will continue to produce a battery electric truck once we have the order level.

Speaker 9

Just to like just to clarify, if someone orders 2 trucks, 2 bags of trucks, let's say, next year, Do they have to do you have to shut everything down just to make those 2 trucks? Will they be will they just insert into the line of the fuel cell trucks? How will it happen once you're out of inventory and you have to build some more a period of time?

Speaker 2

Yes. No, great point, but It's very clear. So we have the capabilities to produce both trucks on our line. So battery electric truck and fuel cell truck can be produced on Exactly the same manufacturing line. That is actually also what we set up.

Speaker 2

So whatever the customer then wants to have, let's say, at the end of this year or next year, We will be able to produce, but we will do it on an order basis because obviously the working capital is high. We need to bring this down, optimize our cash burn, what we discussed. But now very clear, our production line can produce both trucks, the battery electric and the fuel cell truck.

Speaker 9

Super. I'll pass it along. Thanks so much for the commentary.

Operator

Our next question is from Winnie Dong with Deutsche Bank. Please proceed.

Speaker 10

Hi. Thanks so much for taking the questions. First question is on the one of the Q1 results. Can you provide a bridge The Q1 gross margin has improved quite a bit sequentially, but what are the drivers for the more Negative margin versus the guidance expectation. And then if you can also reiterate sort of the bridge to the full year gross margin guide as well in the near term.

Speaker 10

Thanks.

Speaker 6

Yes. Hi, Monique. Nice to talk to you again. Good question on the margin. So I think we've been very open that our margins obviously will only improve as the volumes improve, right?

Speaker 6

We have a high level of fixed costs and we need to produce more trucks Plainly, to be able to cover that cost, that's number 1. And that's partly why we're a little bit below where we want it to be. Also Cypress operations have contributed pretty significantly to the negative margin in Q4 and Q1 and just talked about that. So as we're able to move our operations out of Cypress and establish the manufacturing line in Coolidge, which is happening in July, We'll be able to limit a lot of the labor and overhead that comes into manufacturing a pack at a separate facility. So that's really the key here to get to the Range of the gross margin that we have communicated for the rest of the year.

Speaker 10

Got it. Thank you so much. And then a follow-up question on the BEZ as the new strategy is now built to order. But we did see quite a bit of improvement in terms of retail delivery from dealers to end customers. Maybe can you talk to us about some of the variations that you've made in the end market?

Speaker 10

There are some It seems like encouraging signs that end customers are taking retail deliveries in the quarter.

Speaker 2

Yes. Thanks for bringing this up Happy to give some more color on this. I mean, first of all, you're totally right. I mean, we have seen now uptick on the retail side with 30 seat trucks being retailed in the quarter. Actually, that's much more than we retailed in the total year 2022.

Speaker 2

So there is momentum building. Couple of things we have done. I mean, first of all, We had some important changes on the dealer side, and we have really active engaged dealers now. In particular, in California, they do a good job. Then also frankly speaking, time is helping.

Speaker 2

The more people we bring into the truck, the more people like it, right, and experience, like coming back to the ACT Expo. We had 200 test drives like within 3 days. Those things are helping a lot. So we see momentum on the sales side. And of course, I want to go faster, right, because we have inventory available.

Speaker 2

And that's also a benefit. I mean, Having inventory in these days is a great thing because if people then are interested in 0 emission mobility and have to wait 24 months, That is not a good thing, but I think Nicolas is probably the only one at the moment with inventory available. While we want to bring it down very quickly in terms of financial aspect, It's also a benefit, right? So I think we see first good momentum and want to go much faster.

Speaker 6

Great. Thank you so much.

Operator

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

Speaker 11

Hi, everyone. Thanks for taking the question. Michael, I wanted to follow-up on the fuel cell vehicle. As you look to roll that out more towards the end of this year and the order book continues to grow. Just at a higher level, how are you thinking about Prioritizing those orders, presumably as your order book continues to increase while you're trying to Bring all of these pieces in house.

Speaker 11

Just any way to think about that, any more color there?

Speaker 2

Sure. Great point, Tyler. Happy to add some color. I mean, first of all, As we said in terms of the manufacturing line, we have total flexibility. So whatever customers really want, we will be able to produce it.

Speaker 2

But what is very obvious, and it was confirmed last week when we were all in California, there is a strong trend in terms of The fuel cell truck and why is that? First of all, the range of the fuel cell truck is 500 miles. We have a 0 emission mobility truck can do 500 miles at the moment. I think we have a unique selling point. Then the fueling time is only 20 minutes.

Speaker 2

So in an industry where it's all about uptime that you have to drive the truck, it's a very big benefit. And then what's also obvious, with everything being decided now in California, a lot of people pay attention to that, and It's really pushing people into the 0 emission mobility. So that's why we think that the fuel cell truck has much more potential going forward. And that's why this focus is also important for us. North American market is very big.

Speaker 2

Fuel cell truck can play a big role there. And also fair to say, we have a unique selling proposition because at the moment, we are the only ones in the market starting production in July. So we feel very good about that. And also, it's our 2nd truck we launched, right? I think we have demonstrated with a battery electric truck that we can Develop, manufacturing and manage to have a world class truck and now we do it the second time.

Speaker 2

So We came back last year with a lot of optimism in terms of the fuel cell truck. And again, people order it without really having driven it. I mean, a few customers have demo trucks. So we are cautiously optimistic on this side.

Speaker 11

Okay, great. And then I wanted to follow-up on the financing Clearly, retail orders this quarter were pretty good. Just what are you hearing from customers on the financing Pete, what are they telling you as you look to roll out more trucks on the bedside and then really hit the ground running on the fuel cell side? What are you hearing in the market

Speaker 2

Yes. Clear feedback is trend towards leasing, no question. People want to have like monthly rates. And then every customer is very similar, very detailed comparison to TCO of diesel. So what is the current level of TCO?

Speaker 2

What is the TCO then with our truck? And we can actually match that in various states already today. And I think this is great. I mean, you can get 0 emission truck, so no emissions and can keep your diesel costs and we have the total cost of ownership. This is very, very strong.

Speaker 2

We can't do it in all states. That's also true. We need some support, some incentives. But clearly, customers are focusing on the monthly rate, Total

Speaker 11

cost. Okay, great. Thanks for the time guys. We'll turn it back to the queue.

Operator

Our next question is from Jeff Osborne with TD Cowen. Please proceed.

Speaker 12

Yes, thanks for taking the questions. Just a couple on my end. I was curious if the recall on the BEV had any impact on your decision to narrow the focus. I I applaud the decision like the outcome, but I'm just curious if the recall was a variable in your thinking there.

Speaker 2

No, not at all. And thanks, Stefaan, for bringing this up. No, I mean, this was a recall. We worked through this, had no impact on our decision whatsoever.

Speaker 12

Got it. Good to hear. And then is there any one time cash items for the remainder of this year or next? I was just trying to recall the details from the SEC settlement that you entered into some time ago. I think the payments were made over multiple installments over 2 years.

Speaker 12

You already reserve the cash for that? Or have you already paid that? Or is that something to on the come?

Speaker 6

Hey, Jack. So yes, we are Looking at making very small incremental payments to the SEC to the tune of like $1,500,000 So we're stretching that out. It's in our liabilities right now.

Speaker 12

Got it. And then is there any you gave the gross margin or cash burn in the target of gross margin, but I didn't know if you could provide more incremental details on the path to EBITDA positive.

Speaker 6

Yes. Again, I think it kind of goes back to 2 things, right? 1, we need to improve our margins on the fuel cell first next And get to fuel cell breakeven. And so how we can do that, right? Right now on the fuel cell, we need to improve our BOM cost.

Speaker 6

We are going to hit production at about $4.40 per truck material cost and our target is to get to $275,000 For truck in 2025, and we can do that by, 1, bringing the PFO power module manufacturing and coolage And also just having higher volume and getting better pricing power with suppliers. And then Valerie, you touched on, on the average selling price on the We expect that to be better, just being first to market.

Speaker 12

Got it. Thank you. That's all I had.

Operator

Thank you. I will now hand the call back over to Dylan for shareholder questions.

Speaker 1

Thank you, operator. The first question is, how many trucks have you sold so far and how many orders from companies do

Speaker 2

you have? Through Q1, we have made 162 wholesale deliveries of the battery electric truck. Our improved sales and commercial team, In conjunction with our dealer network, we have been improving retail sales as we work with them and customers through infrastructure challenges, Add additional financing partners and make product improvements. 33 retail sales were completed in Q1, and we see good momentum building to increases. As we showed on the slide earlier, battery electric retail customers include TTSI, Univar Solutions and Avangard Auto Logistics is using our truck to deliver Nissan electric vehicles to dealers.

Speaker 2

On the hydrogen fuel cell truck, dealers have received orders from over 7 end customer fleets for more than 100 hydrogen fuel cell trucks. We have announced previously orders from BRG Brothers, Plaque Power and recently AJR. The second question is, What plans are being made to advance hydrogen technologies that will bring Nikola to the top? Sure. So right now, We are on the verge of bringing the hydrogen fuel cell truck to market.

Speaker 2

We believe we will be the 1st company with a production hydrogen fuel cell electric vehicle available for purchase and have a significant head start on the competition. In conjunction with the truck, we have made Great progress on the energy side, recently announcing the joint station development agreement with Volterra and making good progress on the mobile fuelers. No other company is coming with both trucks and energy. No one else is doing this. In fact, our competitors may be coming to us for hydrogen fuel.

Speaker 2

So we are excited about our hydrogen fuel cell truck and energy business. There is a massive potential.

Speaker 1

Thank you, Michael. Stacy, there are a few questions surrounding breakeven, Profitability and what production volume we would need to hit to achieve those metrics. So maybe we can go over those now.

Speaker 6

Sure. Thank you, Dylan. Now that we have refocused our business model, we have a better path to achieve positive EBITDA by 2025. But before we talk about profitability, First, we need to be able to make money on the trucks we sell by reaching gross margin breakeven in 2024. This will come from several places.

Speaker 6

We have to reduce our BOM cost, specifically on fuel cell, where we have a lower material cost to begin with, as it only has 2 battery packs versus 9 battery packs on the BEV. As you know, for BEV, the battery packs themselves make up over 50% of the BOM cost. For fuel cell, we currently anticipate hitting serial production at 440 ks per truck, and we will be driving that cost down to 375,000 by bringing FCPM manufacturing to Coolidge and achieving higher volume, with eventual goal of getting to 275,000 per truck by 2025. For BEV, we're currently at 396,000 BOEM cost with a line of sight to improve that to 340,000 once we sell through the current stock of finished trucks and batteries on hand. That improvement will come through battery pack cost reduction we have discussed Previously, as well as picking up lower battery cell pricing and future material purchases as lithium prices have come down significantly.

Speaker 6

While we are not giving guidance for 2024, we expect we will need to sell at least 1,000 to 1500 trucks depending on the mix to breakeven on our at the gross margin level. That volume needs to close to double in 2025 for us to be able to cover our cash OpEx and get to positive EBITDA.

Speaker 2

Thank you all for listening to our Q1 earnings call and for your ongoing support. As we discussed, we are very focused and will continue executing our business plan. Wish you a wonderful day. Goodbye. See you soon.

Operator

Thank you. This now concludes today's conference. You may disconnect your lines at this time and thank you for your

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Earnings Conference Call
Nikola Q1 2023
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