Hyliion Holdings Corp. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparisons are with the three months ended March 31, 2020. Hyliion develops hybrid and electric-range-extender powertrains for Class 8 trucks and remained pre-commercialization, with no revenue from core operations.
Key financial results
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | No core-business revenue | No core-business revenue |
| Research and development expense | $9.3 million | $2.7 million |
| Selling, general and administrative expense | $7.4 million | $0.7 million |
| Operating loss | $16.7 million | $3.4 million |
| Other income (expense), net | $0.2 million income | $2.2 million expense |
| Net loss | $16.6 million | $5.6 million |
| Net loss per share, basic and diluted | $0.10 | $0.06 |
| Operating cash flow | $(10.8) million | $(3.3) million |
Revenue-based margins are not meaningful because the company had no core-business revenue. Expenses and losses increased as Hyliion expanded product development and public-company operations.
Financial position and liquidity
- At March 31, 2021, cash and cash equivalents were $334.7 million and investments totaled $297.3 million at amortized cost ($296.6 million fair value).
- Current assets were $483.2 million; current liabilities were $7.9 million. Total assets were $642.4 million and total liabilities were $12.7 million.
- No debt was outstanding at quarter-end. The company repaid its $0.9 million Paycheck Protection Program loan during the quarter; operating lease liabilities remained.
- Cash declined by $55.0 million during the quarter. Investing activities used $59.8 million, mainly reflecting net purchases of investments; financing activities provided $15.6 million, principally from warrant exercises.
- Management stated that available funds were sufficient to execute its strategy for at least the next 12 months. The filing expects continued losses and increased investment in product development and operations.
Material changes and management commentary
- R&D expense rose $6.7 million year over year, driven by consulting, vehicle and equipment testing, personnel, and development components for the Hybrid and Hypertruck ERX systems.
- SG&A expense rose $6.7 million, primarily from personnel and benefits, directors’ and officers’ insurance, and legal and professional costs associated with scaling and operating as a public company.
- Other income improved year over year because convertible-note interest and derivative remeasurement expense did not recur after the notes converted in the October 2020 business combination; investment interest income also contributed.
- Cash from warrant exercises included $16.3 million received in Q1 2021, related to the prior warrant redemption and exercise process.
Outlook, risks and contingencies
- Management expected an improved Hybrid system for customer deliveries in late 2021, with further improvements in 2022. Hypertruck ERX demonstrations for customer evaluation were projected to begin in late 2021, with commercial availability projected for 2022. These are forward-looking plans, not guarantees.
- The company expected R&D, SG&A, capital spending, and investing in equipment and manufacturing capabilities to increase as it pursues commercialization and scales operations.
- Key risks include successful commercialization, meeting product milestones, customer adoption of alternative-fuel and electric trucks, and potential effects of COVID-19. Management said the pandemic’s cumulative impact could be material but could not be predicted.
- Investment holdings had $0.7 million of unrealized losses, which management considered temporary. The filing also notes potential investment valuation, earnings, and liquidity risks.
- No material legal proceedings were reported. Management said there were no material changes to the previously disclosed risk factors.
- Disclosure controls were not effective as of March 31, 2021 because previously identified material weaknesses in segregation of duties, IT controls, and financial close/reporting had not been fully remediated. Remediation steps were underway.
Important facts for investors to verify
- Progress against the stated Hybrid and Hypertruck ERX testing, delivery, and commercialization timelines.
- Whether customer demonstrations convert into orders and revenue, and the pace of future adoption.
- Cash consumption, capital spending, and the remaining liquidity runway as development and scaling costs rise.
- Completion and effectiveness of remediation for the disclosed material weaknesses in internal controls.
- Any subsequent changes in investment portfolio value or liquidity, and any material impact from COVID-19 or other operating risks.