Hyliion Holdings Corp. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Dollar amounts below are in millions unless otherwise stated.
Business context
Hyliion designs and develops hybrid and range-extending electric powertrain systems for Class 8 trucks. Its Hybrid system had launched and was being sold in low volumes; the Hypertruck ERX remained in design verification and testing. The company reported 174.0 million common shares outstanding as of June 30, 2022.
Financial results and liquidity
- Revenue: Q2 revenue was $0.172 million, versus none in Q2 2021; first-half revenue was $0.512 million, versus none in the prior-year period. Revenue came from Hybrid system sales.
- Gross loss: $1.973 million in Q2 and $3.732 million for the first half. Cost of revenue was $2.145 million and $4.244 million, respectively; it included inventory write-downs of $2.0 million in Q2 and $3.3 million for the first half. The filing does not provide a meaningful positive gross margin.
- Operating expenses and losses: Q2 R&D was $20.057 million and SG&A was $12.167 million; operating loss was $34.197 million and net loss was $33.475 million, or $0.19 per diluted share. For the first half, R&D was $35.865 million, SG&A was $21.991 million, operating loss was $61.588 million and net loss was $60.583 million, or $0.35 per diluted share.
- Cash flow: First-half operating cash use was $55.571 million, compared with $24.159 million in first-half 2021. Investing activities used $2.864 million and financing activities used $0.077 million. Cash, cash equivalents and restricted cash declined by $58.512 million to $200.598 million.
- Liquidity and debt: At June 30, current assets were $397.455 million and current liabilities were $14.155 million. Cash and cash equivalents were $199.933 million, with investments at amortized cost of $300.167 million ($188.868 million short-term and $111.299 million long-term). Investment fair value was $295.390 million. Total liabilities were $23.264 million, largely lease obligations and operating liabilities; the filing reports no financial borrowings at period end.
Changes versus prior comparable periods
- Net loss increased 44.0% in Q2 and 52.2% for the first half versus 2021. First-half operating cash use also increased substantially, from $24.159 million to $55.571 million.
- R&D increased 49.8% in Q2 and 57.8% for the first half, primarily reflecting Hypertruck design and testing and growth in engineering, operations and supply-chain teams. SG&A increased 21.0% and 26.0%, respectively, reflecting personnel, software, legal and professional costs.
- Hybrid sales generated the company’s first reported revenue in these comparison periods, but associated cost of revenue exceeded revenue. Inventory write-downs were recorded in 2022; none were reported for 2021.
- Interest income rose to $0.855 million in Q2 and $1.140 million for the first half, primarily due to investment income.
Outlook, risks and other notable items
- Management said available resources were sufficient to execute its strategy and meet capital requirements for the next 12 months, while expecting continued near-term losses and significant development and commercialization spending. No specific revenue, earnings or cash-flow guidance was provided.
- Hyliion extended the Hypertruck ERX development schedule to include design verification, summer and winter testing, and up to one million miles of testing. It expected to complete design verification and begin initial controlled fleet trials by the end of 2022.
- Supply-chain shortages and extended component and truck lead times were delaying some Hybrid orders and could affect development schedules. The company said it had ordered chassis needed for 2022 and was working to secure 2023 build slots and alternative component sources.
- Investments are held to maturity, but market-value changes, possible investment losses, and reduced liquidity or earnings remain risks. The portfolio had $4.777 million of gross unrealized losses at June 30, 2022.
- The company cited early-stage operating history, ongoing losses, commercialization and customer-demand uncertainty, supplier dependence, inflation and COVID-19 among relevant risks. It reported no material legal proceedings and no material changes to previously disclosed risk factors. Disclosure controls were deemed effective.
Investor facts to verify
- Progress against the stated Hypertruck ERX design-verification and controlled-fleet-trial timing, including any subsequent changes to the development plan.
- Whether Hybrid order volumes, delivery timing and unit economics improve, particularly given low revenue and inventory write-downs.
- Cash burn relative to the $55.571 million first-half operating cash use, and the assumptions supporting management’s stated 12-month funding sufficiency.
- Effects of supply constraints, inventory valuation and investment-market losses on liquidity and operating results.
- Execution of customer, supplier and manufacturing plans needed to commercialize the products.