Hyliion Holdings Corp. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Amounts are in U.S. dollars; financial statement amounts are in millions unless otherwise noted.
Business context
Hyliion develops electrified powertrain systems for Class 8 trucks. It continues low-volume sales of its Hybrid system while focusing development and planned commercialization on the Hypertruck ERX range-extended electric platform and the KARNO fuel-agnostic generator. The company reported beginning assembly of its first ERX production truck in late Q2.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $0.266 | $0.172 | $0.576 | $0.512 |
| Gross loss | $(0.041) | $(1.973) | $(0.422) | $(3.732) |
| Gross margin | -15.4% | -1,147.1% | -73.3% | -728.9% |
| Operating expenses | $38.537 | $32.224 | $70.436 | $57.856 |
| Operating loss | $(38.578) | $(34.197) | $(70.858) | $(61.588) |
| Net loss | $(35.227) | $(33.475) | $(64.058) | $(60.583) |
| Net loss per share | $(0.19) | $(0.19) | $(0.35) | $(0.35) |
Revenue remained very small and came from Hybrid-related sales. Q2 revenue rose 54.7% year over year; six-month revenue increased $0.064 million. Gross loss narrowed substantially, mainly because prior-period cost of revenue included larger inventory write-downs. Q2 R&D expense increased 36.8% to $27.4 million, reflecting ERX and KARNO development; six-month R&D rose 34.8% to $48.4 million. Higher interest income partly offset operating losses.
Cash, liquidity and obligations
- At June 30, cash and cash equivalents were $48.2 million; short- and long-term investments totaled $306.1 million. Current assets were $249.2 million and current liabilities were $18.4 million.
- Total liabilities were $27.8 million, principally accounts payable, accrued expenses and operating lease liabilities. The filing reports no borrowings or debt balance.
- Cash used in operating activities was $63.6 million for the first six months, versus $55.6 million in the prior-year period. Cash and restricted cash declined $71.3 million to $48.9 million; investing cash use was $7.5 million and financing cash use was $0.1 million.
- Management stated existing resources were sufficient for at least the next 12 months from issuance of the financial statements. It expected approximately $275 million in cash and investments at year-end 2023, based on current projections, and said it had no plan to raise capital in 2023, while retaining the option to raise capital in 2024 or later.
Material changes, outlook and risks
- Management now expects to deliver 30 Hypertruck ERX systems by year-end 2023, while slowing the originally anticipated production ramp to conserve cash and working capital. The initial Founders Program commitment for 210 units is non-binding; Hyliion is renegotiating terms, including seeking improved economics.
- Supply-chain delays, including wiring harness availability, reduced the number of verification vehicles and pushed planned extended fleet trials from Q2 to Q3 2023. Certification and successful trials remain prerequisites to customer deliveries.
- The initial ERX variant uses a 12-liter generator. Management said its CARB certification expires at year-end 2023; it expects the 12-liter system to be sellable in all states except California in 2024. A 15-liter variant is expected in late 2024 or early 2025. A day-cab model is planned for commercialization in 2025.
- For KARNO, the company expected to demonstrate an operational prototype in the second half of 2023, pursue stationary-power deployments with initial revenue-generating operations in 2024, and begin early fleet trials of the truck system in 2026. A Hyzon fuel-cell vehicle prototype was expected in Q4 2023.
- Management expects continued near-term losses and is reducing capital spending, hiring and other costs while shifting toward powertrain sales rather than full-truck sales. Key risks include commercialization, customer demand and renegotiation of non-binding orders, certification, supplier concentration and delays, investment-market volatility, and the need to manage cash use.
- The company reported no material legal proceedings, no material changes to previously disclosed risk factors, and effective disclosure controls as of June 30, 2023.
Important facts for investors to verify
- Progress on ERX testing, certification, fleet trials and actual year-end deliveries against the 30-unit expectation.
- Whether the Founders Program agreements become binding and their final volumes, timing and economics.
- Cash and investment balances, operating cash burn, and whether the projected year-end balance and stated runway remain achievable.
- Timing, cost and customer validation for KARNO and the Hyzon fuel-cell prototype, including whether planned 2024 stationary deployments generate revenue.
- Whether certification and product plans address the 12-liter CARB expiration and the transition to the 15-liter variant.