Hyliion Holdings Corp. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021; filed August 10, 2021. Hyliion develops electrified powertrain systems for Class 8 trucks and reported that it had not yet generated revenue from core operations. The company described itself as pre-commercialization: Hybrid systems had been installed in low volumes, while Hypertruck ERX vehicles were being developed for testing and validation.
Financial results and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Research and development expense | $13.4 million | $2.6 million | $22.7 million | $5.2 million |
| Selling, general and administrative expense | $10.1 million | $0.9 million | $17.5 million | $1.6 million |
| Operating loss | $23.4 million | $3.4 million | $40.2 million | $6.8 million |
| Net loss | $23.2 million | $4.0 million | $39.8 million | $9.6 million |
| Net loss per share, basic and diluted | $0.13 | $0.05 | $0.23 | $0.11 |
No revenue or gross margin was reported in the statements of operations. The filing does not provide a clear value for revenue in the presented results.
- Cash and investments at June 30: Cash and cash equivalents were $317.7 million; short- and long-term investments totaled approximately $299.7 million. Current assets were $461.6 million and current liabilities were $15.0 million.
- Balance sheet: Total assets were $632.5 million and stockholders’ equity was $608.6 million. No debt was reported at June 30; operating lease liabilities totaled approximately $9.7 million.
- Cash flows, six months: Operating activities used $24.2 million; investing activities used $63.7 million, primarily reflecting investment purchases net of sales; financing activities provided $15.9 million. Cash declined by $72.0 million to $317.7 million.
Changes versus prior comparable periods
- Q2 net loss increased by $19.2 million year over year; six-month net loss increased by $30.2 million. The company attributed higher operating expenses mainly to product development, engineering and operations hiring, external consultants, and public-company costs.
- Q2 R&D expense rose $10.8 million, driven principally by product components, labor and consultants. Six-month R&D expense rose $17.5 million, including increased testing vehicle and equipment costs.
- Q2 SG&A expense rose $9.2 million; six-month expense rose $15.9 million. Key increases included personnel, legal and professional fees, and directors’ and officers’ insurance.
- Prior-year interest expense and convertible-note derivative activity did not recur: the notes converted to equity in the October 2020 business combination. Investment interest income was $0.2 million for Q2 and $0.4 million for the first half of 2021.
Outlook, risks and other material items
- Management expected to introduce an improved Hybrid system for customer deliveries in late 2021. Hypertruck ERX demonstrations with fleets were projected for late 2021, evaluation and testing through 2022, and commercial availability in late 2022. These are forward-looking targets, not guarantees.
- Management expected continued losses and higher R&D, SG&A and investing cash needs as the company develops products, scales operations and hires. It stated that available funds were sufficient to execute its strategy for at least the next 12 months.
- Commercialization, customer adoption, product milestones, and the effects of COVID-19 were identified as uncertainties. Hyliion also noted that use of renewable natural gas is relevant to the Hypertruck ERX system’s potential net-negative carbon emissions claim.
- The investment portfolio had approximately $0.4 million of unrealized losses, which management considered temporary. The company cautioned that market changes could affect investment values, earnings and liquidity.
- Disclosure controls were deemed ineffective as of June 30 because material weaknesses in segregation of duties, IT general controls, and closing and financial-reporting processes remained unremediated. Management was implementing remediation and expected completion by year-end 2021.
- The company reported no material legal proceedings and no material changes to the risk factors in its 2020 amended annual report. Its corporate-office lease was amended to extend through 2028, increasing lease assets and liabilities by approximately $4.1 million.
Important facts for investors to verify
- Whether Hybrid customer deliveries and Hypertruck ERX demonstration, testing and commercialization milestones remain on schedule.
- Future revenue generation, customer orders and the pace at which low-volume Hybrid deployments convert into commercial sales.
- Operating cash burn and investment spending against the stated 12-month liquidity outlook.
- Progress and evidence of remediation of the reported material weaknesses in financial reporting controls.
- Execution risks around product performance, customer adoption, fuel availability and the assumptions underlying emissions and total-cost-of-ownership claims.