Hyliion Holdings Corp. — FY2020 Form 10-K
Reporting period: Year ended December 31, 2020; filed February 25, 2021. This is an annual report, not a standalone Q4 report. Hyliion completed its business combination and began trading on the NYSE as HYLN on October 1, 2020. Legacy Hyliion is treated as the accounting acquirer, so historical results primarily reflect its operations; comparisons may not be directly comparable.
Business context and operating status
Hyliion develops electrified powertrain systems for Class 8 trucks. Its Hybrid system had limited customer deployments; its Hypertruck ERX range-extender system remained in development and testing. The company was pre-commercialization and reported no revenue from core operations in either 2020 or 2019.
Financial performance and liquidity
| Metric | FY2020 | FY2019 |
|---|---|---|
| Revenue from core operations | None | None |
| Research and development expense | $12.6 million | $9.3 million |
| Selling, general and administrative expense | $9.6 million | $2.7 million |
| Operating loss | $22.2 million | $12.0 million |
| Net loss | $39.2 million | $14.1 million |
| Net loss per share, basic and diluted | $0.38 | $0.16 |
| Cash used in operating activities | $22.9 million | $11.1 million |
Operating expenses rose as Hyliion increased engineering and component spending and incurred public-company costs. The net loss also included $10.2 million from extinguishing convertible debt, $5.5 million of interest expense, and a $1.4 million loss from changes in the fair value of convertible-note derivatives. No operating margin is meaningful because the company had no core revenue.
At year-end, cash and cash equivalents were $389.7 million; short- and long-term investments totaled $237.9 million. Current assets were $608.1 million versus current liabilities of $4.7 million. Total liabilities were $10.6 million, including $0.9 million of PPP debt and $0.05 million of finance lease debt; the convertible notes had converted to equity, and the 2020 term loan had been repaid. Operating lease liabilities were $5.8 million.
Financing cash flow was $644.5 million, principally from $516.5 million net proceeds from the business combination and PIPE and $124.5 million of warrant exercises. Investing cash flow was a $238.1 million outflow, mainly reflecting purchases of investments, not capital expenditures. Management said available resources were sufficient for at least the next 12 months, while expecting continuing losses and increased investment needs.
Material changes versus the prior year
- Net loss increased by $25.1 million, or 177.6%; operating loss increased by $10.2 million.
- R&D expense increased 35.9%, while SG&A increased 251.1%, principally reflecting development activity and public-company expenses.
- The October 2020 business combination, PIPE, and warrant exercises substantially increased cash, investments, and stockholders’ equity; year-end shares outstanding were 169.3 million versus 86.8 million a year earlier.
- Convertible notes and accrued interest converted to equity at the business combination, generating the $10.2 million extinguishment loss. Warrant exercises raised gross proceeds of $140.8 million; $16.3 million was collected in Q1 2021.
Outlook, risks, and unusual items
- Management targeted next-generation Hybrid customer deliveries in late 2021, ERX demonstration vehicles in late 2021, and ERX commercial availability in 2022. These are plans, not assured outcomes, and the filing warns of possible delays or failure to commercialize.
- Agility Transport’s pre-launch agreement contemplated up to 1,000 ERX trucks, subject to performance, timing, future purchase-order terms, and termination rights. ANG’s agreement included a pre-order of up to 250 ERX vehicles. These commitments are conditional and should not be treated as firm, non-cancellable backlog.
- Key risks include early-stage products and limited commercial experience; customer adoption and cancellable orders; production scale-up and reliance on outsourcing partners and single- or limited-source suppliers; product reliability, warranty and liability exposure; competition; regulatory and incentive changes; and COVID-19-related disruption.
- Hyliion reported material weaknesses in internal control over financial reporting, including segregation of duties and IT general controls. Management said it was implementing NetSuite workflows and expanding accounting resources; remediation would require testing. Disclosure controls and ICFR were ineffective at year-end. The auditor gave an unmodified opinion on the financial statements but did not opine on ICFR.
- The company reported $82.2 million of federal NOL carryforwards and a full valuation allowance against deferred tax assets; prior ownership changes limit use of some tax attributes. A $0.2 million economic-development grant remained recorded as a liability and may be refundable if requirements are not met.
Important facts for investors to verify
- Whether Hybrid deployments convert into recurring commercial sales and whether the stated 2021 delivery plans were achieved.
- Whether ERX development, testing, certification, production, and customer delivery milestones were met, and the binding status and cancellation terms of Agility and ANG orders.
- Cash burn, investment liquidity, future capital requirements, and the treatment and collection of warrant proceeds outstanding at year-end.
- Progress in remediating internal-control weaknesses and whether subsequent testing established effective controls.
- Supplier and manufacturing capacity, product performance and warranty exposure, and any changes to natural-gas/RNG economics, infrastructure, or regulatory incentives.