Hyliion Holdings Corp. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Hyliion develops electrified powertrain systems for Class 8 trucks. It was in the pre-commercialization stage and reported no revenue from core operations through September 30, 2021.
Financial performance and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | No core-business revenue reported | No core-business revenue reported | No core-business revenue reported | No core-business revenue reported |
| Research and development expense | $18.2 million | $2.9 million | $40.9 million | $8.1 million |
| Selling, general and administrative expense | $8.7 million | $2.1 million | $26.1 million | $3.7 million |
| Operating loss | $26.8 million | $5.0 million | $67.0 million | $11.8 million |
| Net loss | $26.6 million | $9.1 million | $66.4 million | $18.7 million |
| Net loss per share, basic and diluted | $0.15 | $0.10 | $0.39 | $0.21 |
At September 30, 2021, cash and cash equivalents were $289.5 million and investments totaled $299.4 million; current assets were $439.8 million and current liabilities were $16.0 million. Total assets were $607.3 million and total liabilities were $24.7 million. The balance sheet reported no debt; the prior-year $0.9 million PPP loan had been repaid in Q1 2021. Nine-month operating cash use was $49.8 million, investing cash use was $65.6 million, and financing cash inflow was $15.9 million. Cash and cash equivalents declined $100.2 million from year-end 2020 to $289.5 million. The filing states resources were sufficient to execute the strategy for at least twelve months. Profit margins are not meaningful because the company reported no core-business revenue.
Changes versus comparable periods
- Q3 net loss widened by $17.5 million year over year; nine-month net loss widened by $47.8 million. Higher R&D and SG&A spending drove the increases.
- R&D growth reflected product-development components, engineering and operations staffing, external consultants, and testing. SG&A growth included public-company costs, staffing, professional fees, and directors’ and officers’ insurance.
- Interest and derivative expenses recorded in 2020 did not recur in 2021 because the convertible notes converted in connection with the October 2020 business combination. Investment interest income was $0.2 million for Q3 and $0.6 million for the first nine months of 2021.
- Weighted-average shares were approximately 173.0 million for Q3 2021 versus 87.4 million in Q3 2020, reflecting the post-business-combination capital structure and subsequent share issuance.
Outlook, developments, and risks
- Hybrid eX launched in August 2021; the company expected to begin recognizing revenue on Hybrid eX units in Q4 2021. Supply constraints were delaying some deliveries, and management was assessing potential demand amid competitive changes.
- Hypertruck ERX remained in development. The timeline had been extended for design verification, seasonal testing, and up to one million miles of testing. Management expected design verification and initial controlled fleet trials by the end of 2022.
- Management cited semiconductor and other component shortages, extended truck lead times, and the need to secure chassis build slots as risks to development and commercialization. It had ordered Peterbilt chassis for 2022 and was working to secure 2023 production slots.
- Detmar Logistics reserved 300 Hypertruck ERX units, but a final purchase and sale agreement remained outstanding. The company also reported positive feedback on an earlier Hybrid deployment and customer interest in ERX.
- Management expected continued net losses and higher R&D, SG&A, and investment spending as it develops products, scales operations, and hires. The filing identifies commercialization, customer adoption, supply availability, execution of product milestones, and COVID-19 impacts among material uncertainties.
- Held-to-maturity investments had $0.3 million of unrealized losses, which management considered temporary. The investment portfolio was subject to market-value and liquidity risks.
- Disclosure controls were ineffective as of September 30, 2021 because material weaknesses remained in segregation of duties, IT general controls, and closing and financial-reporting processes, including accounting for unusual transactions. Remediation was in progress; management targeted completion by year-end 2021, subject to sufficient operation of controls.
- No material legal proceedings or material changes to previously disclosed risk factors were reported. Management stated it was not currently involved in material legal proceedings.
Most important facts for investors to verify
- Whether Hybrid eX deliveries and revenue began as expected, and the extent of supply-chain-related delays and demand changes.
- Progress against the revised ERX testing and commercialization schedule, including the 2022 trials and chassis availability.
- Whether Detmar’s 300-unit reservation became a definitive order and what other customer commitments represent firm purchases versus interest or reservations.
- Cash burn, investment liquidity and valuation, and whether the stated twelve-month funding runway remains adequate as spending grows.
- Whether the identified internal-control material weaknesses were fully remediated and controls operated effectively for a sufficient period.