Hyliion Holdings Corp. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Hyliion develops electrified powertrain systems for Class 8 trucks. Its Hybrid system had launched commercially in low volumes; Hypertruck ERX remained in design verification.
Financial performance and liquidity
- Q3 revenue: $0.5 million, all from Hybrid-related sales, versus none in Q3 2021. Nine-month revenue was $1.0 million, versus none in the prior-year period.
- Gross loss: $2.4 million in Q3 and $6.1 million for nine months; cost of revenue exceeded sales. Inventory write-downs were $2.3 million in Q3 and $5.6 million year to date.
- Net loss: $63.4 million in Q3 ($0.36 per share), versus $26.6 million ($0.15 per share) a year earlier. Nine-month net loss was $124.0 million ($0.71 per share), versus $66.4 million ($0.39 per share).
- Operating expenses: Q3 R&D was $52.7 million and SG&A $10.3 million. Nine-month R&D was $88.5 million and SG&A $32.3 million. The R&D increase included $28.8 million of acquired in-process R&D.
- Cash flow: Nine-month operating cash use was $83.4 million, compared with $49.8 million in 2021. Investing cash use was $20.8 million; financing cash use was $0.1 million. Cash, cash equivalents and restricted cash declined by $104.3 million to $154.8 million.
- Liquidity and debt: At quarter-end, cash and cash equivalents were $154.2 million and investments were $301.3 million at amortized cost ($296.0 million fair value). Current assets were $394.0 million and current liabilities $16.8 million. The balance sheet reports no borrowings.
- Equity and shares: Stockholders’ equity was $451.2 million. Shares outstanding were 179.6 million at September 30, including 5.5 million issued as acquisition consideration.
Material changes and unusual items
- Net loss rose substantially year over year, primarily reflecting higher product-development spending and the $28.8 million KARNO acquired-IPR&D charge. Higher interest income on investments partly offset the increase in losses.
- In September, Hyliion acquired certain GE Additive assets and fuel-agnostic generator technology for total consideration of $32.3 million: $15.0 million cash, 5.5 million shares valued at $16.1 million, and $1.2 million transaction costs. The transaction was accounted for as an asset acquisition; no goodwill was recorded.
- Held-to-maturity investments had $5.4 million of gross unrealized losses at quarter-end. Management said market valuations could remain volatile, though its investment approach emphasizes capital preservation and liquidity.
Outlook, commentary and risks
- Management said available resources should fund the strategy and capital requirements for the next 12 months, while expecting continued losses in the near term. It identified product development, Hybrid production-related costs, hiring and scaling operations as cash needs.
- Management expected to complete ERX design verification and begin controlled fleet trials by the end of 2022; it planned an initial ERX release in late 2023 using a natural-gas generator. KARNO commercialization was expected a few years after ERX. These are forward-looking expectations, not reported outcomes.
- Supply-chain shortages and extended truck and component lead times were delaying some Hybrid orders and posed risks to the ERX development schedule. The company also cited early-stage commercialization, customer demand, technology execution and its ability to meet product milestones as risks.
- Management stated that Hypertruck ERX could qualify fleets for a federal tax credit of 30%, up to $40,000 per vehicle, and expected the credit to support interest and demand.
- The company reported no material legal proceedings and no material changes to previously disclosed risk factors. Disclosure controls were considered effective; acquisition-related controls were expanded during the quarter.
Important facts for investors to verify
- Whether Hybrid sales and gross margins improve, particularly as inventory write-downs and warranty costs affect reported cost of revenue.
- Progress against ERX design-verification, controlled-trial and late-2023 release expectations, including resolution of supply constraints.
- Development progress, funding needs and commercialization timing for KARNO, and whether its projected performance and fuel flexibility are validated.
- Actual cash burn and investment liquidity relative to management’s stated 12-month funding assessment.
- Eligibility and practical value of the cited vehicle tax credit, and whether customer interest translates into orders and deliveries.