Nikola (NKLA) Q2 2024 Earnings Call Transcript

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Nikola (NKLA 8.21%)
Q2 2024 Earnings Call
Aug 09, 2024, 10:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to Nikola Corporation’s second-quarter 2024 earnings and business update call. Currently, all participants are in a listen-only mode. We begin today’s call with a short video presentation followed by management’s prepared remarks. A question-and-answer session will follow the prepared remarks.

As a reminder, this conference is being recorded.

Unknown speaker — — Analyst

You have to prompt us when the [Inaudible] ends because we don’t hear it.

Tom Okray — Chief Financial Officer

Soei, remind me. You’re going to read the Say questions?

Unknown speaker — — Analyst

We’re live. Please stand by. We’re live, folks. Stand by.

Soei Shin — Head of Investor Relations

Thank you, operator, and good morning, everyone. My name is Soei Shin, head of investor relations. I’d like to welcome those listening by phone and those on the webcast to Nikola Corporation’s second-quarter 2024 earnings and business update call. Joining me today are Steve Girsky, president and CEO; and Tom Okray, chief financial officer.

A press release detailing our financial and business results was distributed earlier this morning. This release can be found on the Investor Relations section of our website along with presentation slides accompanying today’s call. Today’s discussion includes references to non-GAAP measures. The presentation includes adjusted EBITDA, earnings per share, adjusted free cash flow, and other non-GAAP measures.

These measures are reconciled to the most comparable U.S. GAAP measures and can be found at the end of the Q2 earnings press release we issued today. Today’s discussion also includes forward-looking statements about our future results, expectations, and plans. Actual results may differ materially from those stated, and some factors that cause actual results to differ are also explained at the end of today’s earnings press release on Page 2 of our earnings call deck and 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 Steve and Tom’s prepared remarks, we’ll take questions from our stockholders and then conclude with questions from analysts.

Steve Girsky — President and Chief Executive Officer

Thanks, Soei, and good morning, everyone. Welcome to our second-quarter 2024 earnings and business update call. Last quarter, I talked about executing plays competing and cultivating green shoots. Today, I want to talk about how Nikola is starting to bring together a purpose-driven coalition to build the hydrogen ecosystem.

Like-minded partners include our dealers, fleet customers, suppliers, and strategic partners such as automotive OEMs, hydrogen producers, and big energy who have vested interests in the hydrogen economy and want to see it succeed as much as we do. There is a need and urgency to accelerate our efforts. In the last three quarters of zero production, we have demonstrated that Nikola is the offtake. We are the catalyst to disrupt Class 8 trucking to make zero-emission a reality program.

Program to date, Nikola fuel cell electric trucks and battery electric trucks have accumulated over 3 million road and test miles, avoiding 4,700 metric tons of CO2 emissions, which is like taking 1,100 gasoline-powered cars off the road for one year. We’re the only OEM with Class 8 FCEVs commercially available in North America today. Our trucks are put to the test every day by end-fleet users hauling freight and delivering to their customers. Q2 is an example of how we’re approaching the intersection of mission and reality and how Nikola is out front charting the course.

First, we’re doing what we said we would do. At the end of Q2, we announced we had wholesaled 72 hydrogen fuel cell electric trucks, which exceeded the high end of the guidance range of 50 to 60 trucks by 20%. Q2 wholesale deliveries were up 80% from Q1 and comprised of several repeat customers, which is a testament to the performance of our trucks and customer satisfaction. We’re delivering HYLA fueling solutions to support volume ramp up.

Since the Q1 call, we opened a HYLA-branded station in Toronto, Canada and completed commissioning a modular station in Santa Fe Springs in Southern California. One of the resounding benefits of our modular refueling strategy is our ability to quickly pivot to meet the demands of end fleets. As such, we added another modular fueler at our existing station in Ontario, California to double capacity. Likewise, we provided access for Nikola and Fleets to fuel at Shell’s heavy-duty station in Ontario, California where density has been clearly growing.

Second, we are demonstrating national account interest. Last quarter, we talked about the importance of expanding our reach to meet the demands of end fleets virtually anywhere in North America. Walmart Canada is the first major retailer in Canada to introduce a hydrogen fuel cell electric semi-truck to its fleet. We also received repeat orders from two national accounts.

Nikola’s profitability flywheel is beginning to gain momentum with these national accounts as each end fleet grows its zero emission presence to achieve decarbonization goals. Third, we are creating and monetizing alternative revenue and profit streams. Nikola realized its initial sale of CARB regulatory credits from the sale of NOx and PM credits. As volume ramps up and new CARB regulations go into effect, these new revenue streams will grow.

Fourth, Nikola is in a unique position to attract prospective partners. Again, Nikola FCEVs are the only Class 8 hydrogen fuel cell trucks commercially available in North America today. The market acceptance of our FCEVs bears out with every zero-emission mile driven. Therefore, not only are we getting more calls from fleets interested in deploying fuel cell trucks, but also from strategic partners like automotive OEMs, suppliers, hydrogen producers, and big energy who recognize our key role as a first mover in the hydrogen economy.

Now, let’s get to the business update. We are executing our plan. We said we’d wholesale 50 to 60 fuel cell trucks in Q2, and we delivered 72 trucks to our dealer network, beating guidance by 20%. This marks the third consecutive quarter where we either met or beat volume guidance.

We said we were focused on national accounts to scale, and we signed our first deal with Walmart Canada and received repeat orders from two other national accounts. Walmart Canada is the first major retailer in North America to introduce a Nikola Class 8 fuel cell electric vehicle to its fleet. This collaboration aligns perfectly with our mission to drive innovation and environmental responsibility in the transportation industry. Repeat fleet customer IMC, the largest marine drayage company in the U.S., ordered another 10 fuel cell trucks from our dealer network in Q2.

Year to date, this marks a total of 30 Nikola fuel cell trucks in its fleet. IMC has a goal to replace all diesel tractors by 2028. An existing carrier and one of the largest intermodal fleets in North America placed a double-digit order with our dealer network in Q2. They too have stated decarbonization goals to be achieved in the next decade.

On Chart 6, we demonstrate how we’re meeting the use case of end fleets with data-driven quality and performance. To date, 12 in-service end fleets have accumulated over 550,000 miles, validating our average fuel economy benchmark of 7.2 miles per kilogram. It’s important to note that fuel economy varies with driver usage, freight routes, and payloads. Some drayage fleet users, for example, achieve fuel economy greater than eight miles a kilogram, while other fleet users that travel longer distances with heavier payloads achieve fuel economy slightly lower than the benchmark.

If you’re a beverage hauler, the heavier payload per range of the fuel cell vehicle makes it the right truck for you. Early field data tells us that the average trip distance between refueling is 260 miles or twice as far as the BEV 2.0 between charges. If your distribution routes are near either Ontario or Long Beach, one fill may be enough for your entire route. We’ve also observed that over 40 end fleet users have traveled 400-plus miles between refueling.

In fact, this longer distance, which is like driving from the Port of Oakland to the Port of Los Angeles or Long Beach, has been completed roughly 130 times since we’ve been tracking data. It’s all about the use case and how our trucks are meeting unique demands of end fleets. The increased payload capacity per mile with significantly reduced refueling time compared to the BEV ultimately means increased truck uptime for end fleet users. As we deploy more HYLA refueling stations, we expect the in-service range to increase.

Likewise, if you’re a first mile logistics operator, the BEV 2.0 may be the right truck for you. Early field data collected so far tells us that the average trip distance between charging is 130 miles. If you’re running loads from the port to the warehouse and charging is available at the depot, then the BEV 2.0 will fit your needs. Again, we’re on the field collecting data and learning how our trucks are being deployed.

We’re here to help our end fleets optimize their trucks so they perform the way they are built to. Lastly, we often get questions about comparing our fuel cell electric vehicle to a traditional diesel truck. On a converted basis, our FCEVs outperform the average Class 8 truck on fuel economy and avoidance of tailpipe emissions. We estimate the average miles per gallon diesel equivalent of our FCEV is eight or 23% better than the Class 8 fuel economy average of 6.5 miles per diesel gallon equivalent per the DOE.

Moreover, in-service FCEVs have consumed over 77 metric tons of hydrogen dispensed at various Nikola fueling solutions. In total, we estimate our FCEV end fleet operations have avoided approximately 867 metric tons of CO2 tailpipe emissions. With our end fleet partners, Nikola is decarbonizing Class 8 trucking now. Moving to Chart 7.

We’re also executing on the HYLA front, our energy supply and infrastructure solutions brand. As a strategy, we’re launching stations and deploying assets where we anticipate demand. It is our objective to stay ahead of the FCEV deployment so that fueling solutions are ready and available for end fleets. To that end, since Q1 earnings call, we opened a HYLA-branded station in Toronto, Canada, and completed commissioning a modular station in Santa Fe Springs in Southern California.

Toronto helps open Nikola fleet users to the Eastern Canadian market where population density and busy freight corridors, such as highways 401, 427 and the QEW, make it a natural fit for FCEVs. It is also the headquarters of ITD, our full-service Canadian dealer network, which is well-equipped to provide skilled service and maintenance to end fleets such as Walmart Canada. Santa Fe Springs helps support the growing density and hydrogen demand in Southern California. This is the second fueling station on a dealer site, which shows strong collaboration between Nikola and our dealers.

Santa Fe Springs is also the midpoint between Ontario and the Port of LA, along the busy 605 freight corridor. This newest HYLA station is scheduled to be open for business operations on August 12th, 2024. We added another modular fueler at our HYLA Ontario station doubling capacity, which effectively adds another station in that area. We recently had a record day at Ontario with 28 FCEVs refueled and more than 850 kilograms of hydrogen dispensed in one day.

Again, our modular strategy allows us to stay nimble and pivot to support the demands of our end fleets. Lastly, through our work with Shell, our fleet customers have been able to fuel at Shell’s heavy-duty station in Ontario, California. Ontario and the surrounding area near the Port of Los Angeles and the Port of Long Beach have proven to be critical refueling areas that are amassing density quickly. Our FY ’24 HYLA guidance remains unchanged.

We remain on track to provide 14 fueling solutions in North America by year-end. Now, that we’ve passed the midway point of our HYLA hydrogen highway plant, and we’ve been operational, on Chart 9 we wanted to provide some data on our ramp-up. At our Coolidge facility, since we began tracking fueling data on February 1st, we have completed over 1,300 fueling events and dispensed over 40 metric tons of hydrogen through July month-end. Coolidge is where we perform first fills for trucks that come off the manufacturing line and refuel trucks that are part of our testing and demo fleets.

We also fuel fleets that have routes into Southern California and return to Coolidge. At our Ontario station, where HYLA began fueling events on December 14th, 2023, we have completed over 1,100 fueling events and dispensed over 45 metric tons of hydrogen. Another important metric is the volume dispensed per fill. On average, each fill was 41 kilograms, which means that our customers are driving routes out of Ontario that are roughly 300 miles.

Our Long Beach station, which just launched in early May, shows strong ramp-up data, having just over 700 fills in three months. Long Beach has dispensed 27 metric tons of hydrogen so far, with an average fill of 38 kilograms. The key message here is that Nikola FCEVs are on the road and refueling with consistent frequency and significant volume at HYLA fueling solutions. Nikola is the offtake and the catalyst for the hydrogen economy in North America.

Moving on to regulatory tailwinds on Chart 10. We continue to maintain our dominant share of HVIP vouchers in California. At quarter-end, we had 99% share of the fuel cell vouchers and 23% share of the battery vouchers. We added a net of 11 fuel cell vouchers despite double-digit redemptions, demonstrating continued strong demand in California.

Next, we’re creating alternative revenue and profit streams from the sale of regulatory credits. We recognized the first sale of NOx and PM credits in Q2. EPA Clean Ports is another bright spot in green policies. Nikola has been named in 8 Clean Port Project applications across the U.S.

for joint funding. Strategic ports include western, eastern, and gulf regions. Together with fleet partners, Nikola is to provide FCEVs and BEVs as eligible zero-emission vehicle port equipment and or HYLA fueling as eligible clean energy infrastructure. Project selections are expected to be announced by the EPA in September.

Lastly, and perhaps the strongest tailwind of all, is at ARCHES. The California-based Western Regional Hydrogen Hub is the first of seven regional hubs to officially sign an agreement with the Department of Energy. A total of $12.6 billion will be available to support projects and to build and expand clean hydrogen infrastructure in California. $1.2 billion will be funded from the DoE and the rest from public and private matching funds.

We are excited to hear that $30 million, the first tranche of funding, will be deployed shortly as it’s a positive and encouraging sign that the hydrogen economy is growing. Nikola is well poised to partner with ARCHES and the DoE for hydrogen station deployment and is named as a network partner. Our HYLA mobile refueling stations offer compelling evidence that heavy-duty offtake is significant and growing. To give you an example of the size of the offtake that exists with Nikola trucks now, consider that the average fuel consumption for a typical fuel cell passenger car in the U.S.

is 0.6 kilograms per day based on annual mileage. Our trucks fuel on average 35 kilograms per fill. One Nikola truck is close to 60 fuel cell passenger cars. There are over 18,000 fuel cell passenger cars in the U.S.

and growing. That’s equivalent to 300 Nikola fuel cell electric vehicles. By the end of 2024, we will have doubled the hydrogen offtake for transportation in the market with just our in-service trucks alone. In short, we provide density and scale for the hydrogen ecosystem.

Before handing it over to Tom, I want to circle back to the purpose-driven coalition. Building a zero-emission ecosystem piece by piece takes enormous time and resources. We cannot do it alone. We’ve been walking the talk with our Class 8 zero-emission trucks and hydrogen refueling stations.

We have 147 fuel cell electric vehicles wholesale through the end of Q2 and roughly 115 metric tons of hydrogen dispensed. We’re all in, and there’s no turning back. Two trucks, one platform, all zero emissions. This is all we do.

I, along with our 1,000-plus employees, come to work every day with a singular focus to ensure Nikola not only survives, but thrives. We are attracting prospective partners such as large logo and fleets, big energy, hydrogen producers, and automotive OEMs who recognize the need for a zero-emission world. Seeing is believing. The more fuel cells we deliver, the more like-minded partners want to work with us.

These include national fleet partners who have stated corporatewide decarbonization goals for the next decade. Demos are ongoing with large logos in the U.S. and Canada; big energy, or traditional industrial gas companies who recognize the potential for significant hydrogen offtake and the need for fixed stations to accelerate large-scale adoption; hydrogen producers who view hydrogen as a growth vector and want to play a critical role in supporting this energy transition; automotive OEMs who are eager to find synergies across product development, sourcing, and hydrogen infrastructure to not only support the light-duty market, but also penetrate the Class 8 heavy-duty market. Now, I’ll pass it to Tom to cover the financial results.

Tom Okray — Chief Financial Officer

Thanks, Steve. Moving to Chart 12. We introduced the Nikola profitability flywheel last quarter. We talked about the importance of national accounts to build meaningful volume to scale our operations.

Growing a significant and consistent order book enables us to optimize costs both internally and with our external partners. The flywheel is gaining momentum. As Steve mentioned earlier, we’re beginning to demonstrate national interest with initial orders from Walmart Canada and other large fleets. With demos and discussions in process.

Many of these orders are important because they are the first order for hydrogen fuel cell trucks for their respective fleets. They are testing the new technology and demonstrating that they are committed to growing with us. Chart 13 contains our financial highlights. Regarding the top line, in Q2, we posted the strongest revenue quarter in the history of Nikola.

Total revenue was $31.3 million, up 318% from Q1. Revenue growth was impacted by higher wholesale deliveries, service and other, and stronger average sales price. The average sales price improved sequentially by $7,000 per unit to $388,000 from $381,000 in Q1. This is the third consecutive quarter of stronger ASP for our fuel cell trucks.

For the second quarter, we reported a gross loss of $54.7 million, compared to a gross loss of $57.6 million in Q1. Stronger revenue driven by increased volume and higher ASP were partially offset by higher costs related to the higher volume. With respect to cash, our unrestricted cash declined $89.3 million in the quarter. Therefore, we ended the quarter with $256.3 million in unrestricted cash.

Larger disbursements to suppliers as we scale volume and an additional payroll period were partially offset by higher receipts due to higher volume and ATM proceeds of $52.2 million. Moving on to Chart 14. For fiscal year 2024, our fuel cell wholesale delivery guidance remains unchanged at 300 to 350 fuel cell trucks, with Q3 being between 80 and 100 wholesale deliveries. We are continuing to execute our plan in the third quarter of 2024, including ensuring that we have the capital required so that the business can scale and become profitable.

Back to Steve for closing remarks.

Steve Girsky — President and Chief Executive Officer

Thanks, Tom. I recently traveled on a world tour that started in China, then proceeded to Japan, Paris, and ended in London. The hydrogen ecosystem, while nascent in North America, is on solid footing globally. Substantial investments are being made in Asia, Europe, and the Middle East.

My team and I met with prospective strategic partners and investors who recognized the opportunity at hand and the role Nikola can play in unlocking the hydrogen economy here. The purpose-driven coalition is growing, and Nikola is key to prove to the world that zero emissions and the hydrogen economy is real. This concludes our prepared remarks. I’ll now hand the call back to Soei for stockholder questions.

Soei Shin — Head of Investor Relations

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