Hyliion Holdings Corp. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; filed May 9, 2023. Hyliion develops electrified powertrain systems for Class 8 trucks. Its Hybrid system was being sold; Hypertruck ERX remained in design verification. The company was also developing its fuel-agnostic KARNO generator and, with Hyzon Motors, a fuel-cell vehicle prototype.
Financial results and liquidity
Amounts below are in millions of dollars, except per-share data.
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $0.31 | $0.34 |
| Gross loss | $(0.38) | $(1.76) |
| Operating expenses | $31.90 | $25.63 |
| Operating loss | $(32.28) | $(27.39) |
| Interest income | $3.46 | $0.29 |
| Net loss | $(28.83) | $(27.11) |
| Loss per share, basic and diluted | $(0.16) | $(0.16) |
| Operating cash used | $33.24 | $29.30 |
Gross margin remained negative; gross loss improved largely because inventory write-downs and warranty costs were lower. At March 31, cash and cash equivalents were $85.2 million, short-term investments $196.8 million, and long-term investments $103.4 million. Total cash and investments at carrying value were approximately $385.4 million. Current assets were $299.0 million versus current liabilities of $14.0 million. Total liabilities were $22.2 million; the filing reports no debt balance. Cash, cash equivalents and restricted cash declined $34.3 million during the quarter.
Changes versus prior year
- Revenue declined 8.8% to $0.31 million; sales included $0.26 million from a truck prepared for Hybrid upfit and $0.05 million from Hybrid systems and other sales.
- Operating expenses rose 24.4%. R&D increased $5.1 million, including $3.4 million for KARNO development and $1.7 million for ERX design and testing; SG&A rose $1.2 million.
- Net loss increased 6.4%, despite interest income rising by $3.2 million, primarily due to higher operating expenses.
- Operating cash use increased by $3.9 million. Weighted-average shares rose 3.8% to 180.1 million.
Outlook, commentary and risks
- Management stated that available resources were sufficient to execute its strategy and meet capital requirements for at least the next 12 months from the financial statement issuance date. It also expected near-term net losses to continue.
- Hyliion described ERX commercialization as planned for the second half of 2023, with production planned to begin in Q3. The program still required design verification, extended fleet trials, testing and regulatory certifications; the development timeline extended into late 2023.
- The Founders Program’s initial 210 ERX units were based on non-binding customer agreements. Hyliion was revisiting terms to improve its economics, including seeking to have fleets absorb more component inflation; the resulting customer mix and program size could change.
- Management said it was reducing capital spending, hiring and other expenses, scaling back the truck-production ramp, and renegotiating customer terms to extend available funding.
- Key risks include commercialization and customer-demand uncertainty, supply-chain constraints and dependence on single-source suppliers, continued cash burn, and possible volatility or liquidity challenges in investments. Management reported no material changes to previously disclosed risk factors and no material legal proceedings.
- After quarter-end, the board adopted an executive severance plan and a form of change-in-control agreement on May 4, 2023. The filing describes potential salary, benefits and equity-related payments for qualifying separations.
Important facts for investors to verify
- Progress against ERX verification, customer trials, required certifications, and the stated 2023 production and commercialization timetable.
- Whether Founders Program customer agreements become binding, and the final order volume, pricing and cost allocation.
- Quarterly operating cash use, spending-reduction results, and management’s stated liquidity runway as development and production needs evolve.
- Hybrid sales traction and the ability to improve gross economics; Q1 revenue remained very small relative to operating costs.
- Investment portfolio credit quality, liquidity and fair-value changes; reported held-to-maturity investments had approximately $3.0 million of gross unrealized losses at quarter-end.