Hyzon Motors Inc. (NASDAQ:HYZN) Q1 2023 Earnings Call Transcript

Hyzon Motors Inc. (NASDAQ:HYZN) Q1 2023 Earnings Call Transcript June 8, 2023

Operator: Good morning and welcome to the Hyzon Motors First Quarter 2023 Conference Call. As a reminder, today’s call is being recorded. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. At this time, I would like to turn the call over to Henry Kwon, Head of Investor Relations, for opening remarks and introductions. Please go ahead.

Henry Kwon: Thank you, operator. Good morning and welcome to Hyzon’s first quarter 2023 earnings call. On today’s call are Parker Meeks, our Chief Executive Officer, Jiajia Wu, Interim Chief Financial Officer, and Sayanta Dutta, Senior Vice president of Corporate Development. The earnings press release and presentation deck can be found on the Investor Relations section of our website. With that now I will turn it over to Hyzon Motor’s Chief Executive Officer, Parker Meeks.

Parker Meeks: Thanks, Henry, and thank you, everyone for taking the time to join our call. This is Hyzon’s first earnings call since May of 2022. I would like to briefly address that filing and formal communication gap. As you are likely aware, the company experienced challenges in governance and in providing robust and timely reports. In response to which the company has invested significantly internally along with Hyzon’s board commissioning and concluding a thorough special committee investigation. With yesterday’s filing of our quarterly report on Form 10-Q for Q1 2023, we are now current with our periodic reporting obligations and intend to provide our periodic reports on a timely basis going forward. I am proud that in my first earnings call as Hyzon CEO, I get to share the significant achievements that Hyzon team has accomplished over the past year, including those internal investments and improvements we have progressed.

Since you last heard from us, our team at Hyzon has been busy on two fronts. First, we have restructured, integrated and simplified the company to build a strong foundation across technology, product, geography and organization while making progress in strengthening our governance, including ongoing implementation of the recommendations from the special committee investigation. This put the company on solid footing to then restart focused execution with a new strategic plan and to restart customer engagement, many of which had paused until the company had clarity on our filing path forward and our governance, which we have now been able to provide. I’m excited by the significant strides we have made to date, both in the advancement of our 200 kilowatt fuel cell technology and in the commercialization of our heavy duty fuel cell electric truck.

And while internally we have been busy relaunching a stronger Hyzon, externally regulatory and government support for hydrogen and zero emission mobility in general, along with trucking, have all grown stronger. Today, we are focused on our core strength developing and commercializing our fuel cell technology. We have streamlined our vehicle offerings, operations and geographies to support this fuel cell commercialization focus in an asset-light vehicle assembly model. Later in today’s call, we will discuss the exciting benefits we are already seeing in early execution of this powerful combination. In-house fuel cell technology combined with an asset-light approach to commercialization. I look forward to sharing details of this progress with you.

The competitive and economic implications we are seeing in that progress and to preview the goals we have set for the rest of the year and beyond. Hyzon’s fundamental strength is its proprietary in-house design, development and assembly of high power fuel cell systems. Starting from in-house production of our proprietary membrane electrode assembly or MEA. In our restructuring, we therefore prioritized and accelerated hiring and CapEx investments for the development and commercialization of our single stack 200 kilowatt fuel cell system, which we believe is a major step forward for the industry. We are proud of the progress we have already made at our end-to-end US fuel cell system production facility, which is advancing well into prototype production today and on track for start of production or SOP of the 200 kilowatt fuel cell system in 2024.

We are utilizing an accelerated A-Sample through SOP methodology to measure the maturity of the 200 kilowatt in its development, which is summarized in the presentation posted with this earnings release. You will hear us talk about our progress against these major development declarations today and expected in the future. So we are providing the table as reference. Measure our progress towards declaring this SOP. We determined specific milestones for 2023 throughout the year. We have already achieved several of those milestones in the first half of 2023. A few of the priority milestones that we anticipate achieving later this year include assembling and testing nine fuel cell systems by end of June at a B-Sample stage, completing initial major milestones of durability, testing and design and process verification and a final goal of assembling and testing 25 200 kilowatt fuel cell system prototypes along with a C-Sample declaration by year-end.

Sitting here today, we are on track to reach that goal. We have started production on our continuous roll-to-roll MEA production line and have begun semi-automation and full automation activities across single cell fuel cell stack and system assembly. Beyond fuel cell system manufacturing and bench testing, the initial on vehicle testing of our Alpha 200 kilowatt US Class eight fuel cell EV truck is showing many of the improvements we expected as compared with a common competitor approach of using two approximately 100 kilowatt fuel cell systems to achieve the same power. These advantages include 30% lower volume and weight with our single 200 kilowatt fuel cell system versus two Hyzon 110 kilowatt systems and 25% lower manufacturing costs.

Our early on-vehicle testing also indicates 20% improvements in fuel efficiency, which is a critical measure given fuel makes up over 50% of the total cost of ownership over a typical truck’s commercial life cycle. Our ability to develop and produce a single 200 kilowatt fuel cell system is rooted firmly in Hyzon’s IP, which protects our technology edge. Our IP includes a total of 157 patents. Putting 120 relating to proprietary materials, designs and processes across the entire MEA bipolar plate stack and fuel cell system spectrum. These patents are exclusive to Hyzon and mobility in our focused markets of North America, Europe and Australia and New Zealand. 200 kilowatt will serve as our base to develop future generations of our fuel cell, including a single stack 300 kilowatt system, which remains central to our development roadmap.

Beyond the fuel cell technology in vehicle R&D, we have only maintained those R&D programs which are vital to the fuel cell EV powertrain and have reduced the number of vehicle R&D programs by about two-thirds compared to those in place in July 2022. One example is in battery technology, where we are transitioning to a similar asset-light development model by collaborating with suppliers in development and outsourcing manufacturing, while Hyzon continues to own the relevant IP. Support this technology development focus, we significantly streamlined and simplified our approach to our vehicle offering, engineering organization and assembly model during the restructuring. First, we rationalize the product portfolio. Previously we were advancing over 20 distinct vehicle variants.

Going forward, we are focusing on one vehicle platform for development in each region. The conventional truck developed in the US. The cab-over truck developed in Europe and the rigid truck, the base for our refuse vehicle developed in Australia. Second, we have streamlined our 200 kilowatt powertrain development around modular standardized components, which are being designed to acquire minimum modifications across all three platforms. Simplifying global supply chain and inventory management, serviceability and maintenance. Lastly, we are in the process of duplicating our US approach to vehicle assembly and development in Europe. In the US, Hyzon has been prototyping and trialling a single vehicle platform with fleets since March 2022, and we are now transitioning the informed and improved design into pre-production with our third-party assembly partner, Fontaine Modification.

By leveraging an established at scale third-party vehicle assembler, we can scale assembly of fuel cell EV trucks upfit with Hyzon fuel cell systems and powertrain components for delivery. The first US commercial truck is expected to ship from Fontaine to a customer later this year. We look forward to providing further updates in the future on our transition to third-party assembly in Europe. In the US, this asset-light model is expected to reduce assembled vehicle cost, particularly at initial assembly volumes. As you can see on slide 11, we expect our third-party truck assembly costs to represent a relatively small portion of our total assembled vehicle costs. By combining this expected benefit with the previously mentioned cost advantages of our in-house fuel cell technology, we expect to yield a positive contribution margin today on the US, 110 kilowatt trucks slated to be deployed to customers later this year.

We also currently estimate a smaller positive contribution margin within the first year of 200 kilowatt truck assembly, which we expect to expand as we scale the 200 kilowatt fuel cell EV platform. Additionally, in the US, many large fleets have pre-orders for internal combustion trucks with dealers which can serve as the base trucks for our upfit fuel cell EVs. When this is the case, base vehicles can be shipped directly from dealers to Fontaine for upfit. In this scenario, Hyzon does not put up the working capital for the base truck, which results in a meaningful reduction in Hyzon’s total working capital carry or complete fuel cell truck. With scale and further cost and fuel efficiency improvements in both the 200 kilowatt fuel cell system and the broader vehicle powertrain.

We expect our US business model to approach TCO parity with diesel even without the benefit of truck subsidies once we reach 1000 annual units of production. Today we are already at or near TCO parity with diesel with the benefit of subsidies, all including the positive contribution margin mentioned previously. Turning now to our commercial progress, we are happy to have largely maintained and now restarted our priority engagements in all three regions. This includes anchor fleet customers under signed agreements with initial commercial activation in all three regions anticipated this year. We expect to deploy between 10 and 20 vehicles to customers globally under commercial agreements by year-end. We also have a healthy pipeline of potential large fleet customers globally.

In addition to those anchor fleet customers. But our pipeline is particularly strong in North America, where we have completed over ten vehicle trials and have over ten fleets engaged in trial and or commercial agreement shaping. In total with 11 customers globally under commercial agreements and 24 fleets globally in active trial planning. Trial execution and or commercial agreement discussions. We believe our commercial pipeline is in good shape. As an example, yesterday we announced our first agreement for fuel cell electric trucks in the US with Performance Food Group or PFG. One of the largest food and food service distribution companies in North America. First five vehicles will be upfitted with Hyzon Class 8 110 kilowatt fuel cell systems and an additional 15 fuel cell EVs will be upfitted with Hyzon’s next generation single 200 kilowatt fuel cell system which is conditional on a successful 200 kilowatt vehicle trial.

Following the initial deliveries PFG and Hyzon also have agreed to work together regarding a mutually agreeable option for 30 additional fuel cell EVs. We are excited to partner with PFG as part of their decarbonization mission. Additionally, we recently activated our commercial relationships with Hylane in Germany and JuVe in Austria, with whom we have launched the first customer trials of cab-over 120 kilowatt vehicles in Europe. As I mentioned previously, we are focused on large fleets who are actively seeking decarbonization solutions for their fleets. Many of these large fleets order several hundred ice trucks per year today. However, most will start the decarbonization journey with just a few trucks in an initial delivery year. We aim to collaborate with these fleets in multiyear order programs to scale the decarbonization impact in their fleet as we and they are able to validate performance of the initial trucks in their fleets to secure additional subsidies and stand-up fueling.

With this focused customer collaboration model, we believe many large fleets may eventually scale to 100 trucks per year in as few as four years. If this general model is realized, just ten major fleet customers in each region would be sufficient to ramp to 1000 trucks annually. But not every customer will scale to this potential. Several of our anchor fleets are capable of scaling well beyond 100 trucks per year in the future, given their fleet size and decarbonization aspirations. Finally, our global extension of our vehicle platforms is also underway with the ISO certified Australian Design Rigid platform currently in commercialisation, paving the way for the first US fuel cell electric refuse based vehicle, which is also been built in Australia based on the same design.

The fuel cell powered truck will ship to the US later this year for further development prior to launch of a vehicle trial program. Refuse is a fantastic use case for fuel cell EV heavy duty powertrains. Combination of the near term publicly funded fleet mandates in California, along with the newly created refuse voucher bonus in California’s HVIP Voucher program provides a government supported pathway to zero emission refuse vehicle adoption. It’s also pairs well with a circular ecosystem and dual concept. Given the potential for hydrogen production from landfills. We will discuss the first waste to hydrogen production project we invested in with Chevron and Raven SR in California later this morning. Additionally, our previously announced liquid hydrogen truck in development with Chart Industries is now assembled and on the test track in Michigan in planning with the fleet for a 600 mile targeted demonstration.

Our belief remains that 350 bar hydrogen storage is the cost effective approach for back to base operations well-suited to fuel cell EV applications and liquid hydrogen is the optimal future approach where longer range is required. Given the significant cost and reliability concerns with 700 bar dispensing and on-board tankage. This is a natural extension of our existing conventional truck platform by incorporating Charts liquid hydrogen tankage on that platform. We anticipate opening the long haul market once the refueling infrastructure is developed. In addition to Hyzon’s technology and business model advantages, we are also encouraged by the continued expansion of government support for zero and low emission transportation in our priority markets and a further focus our efforts in these geographies.

In the US, the addition or advancement over the past 12 months of many programs in California, including the recently passed Advanced Clean Fleet Rule, combined with the Inflation Reduction Act and its zero emission port equipment funds, which are expected to include drayage truck subsidies at ports nationwide. Along with the progression of the Department of Energy’s Hydrogen Hub program, provides significant truck deployment opportunities in California today. Port drayage nationwide in the relatively near term and hydrogen hubs across the country as that program progresses mid-decade. Given the subsidy and grant programs in place today in stages of detailed definition or proposed for future implementation. We see opportunities for the industry to put thousands of zero emission trucks on the road under subsidy programs that are now or are expected to be soon, commercially available and economically viable for customers.

Finally, we also decided to stop delivering trucks commercially into China and started to monetize our existing China lease truck portfolio with a first announced transaction in December 2022. As part of our restructuring assessment and related special committee investigation, we identified commercial governance concerns in our China operation, challenging our ability to operate commercially in China. Additionally FCEV profitability and collectibility in China has been significantly challenged versus the relatively attractive US, Europe and Australia-New Zealand markets on those fronts. This combination of economic and risk challenges led to our decision to exit China commercially to focus on our core markets. The organizational reset we completed has been foundational to our ability to start executing with quality, efficiency, high levels of performance management and stronger governance.

Throughout the past ten months, we have significantly rebuilt our organization structure, creating globally integrated functions, strengthening our senior leadership team and centralizing technology and vehicle development. Additionally, we are supporting our skilled and talented workforce with a focus on communication, employee engagement and culture building, building strong retention despite our reset. I am proud of and grateful for the resilience and dedication our global team has demonstrated to Hyzon and our goal of decarbonization during the past year. With our rationalized vehicle portfolio and standardized approach to component development, we moved from regionally based engineering and operations to a globally integrated function.

Combining and collaborating across Hyzon’s global expertise helped us progress rapidly enabling much of the technology and vehicle progress I previously described along with resource efficiency. Dr. Bappa Banerjee joined us as Hyzon’s first Chief Operating Officer, bringing more than two decades of experience leading global operations, engineering and commercial functions for multinational companies, including Caterpillar to continue driving Hyzon forward and globally integrated delivery. To further Hyzon’s priority of investing in our people and their development. Sue Sun-Lasovage joined us as Chief Human Resources Officer, bringing both an engineering background and extensive HR experience at automotive and manufacturing companies. We also welcomed the new director to our board, Andrea Farace, formerly a global leader at Citigroup.

As you can see, Hyzon is a fundamentally different company than it was a year ago. We use this time not only to reset and develop a simplified fuel cell focused commercialization plan, but to start driving execution of this plan across each part of our business. As the hydrogen ecosystem expands, we continue to see a significant opportunity in the hydrogen production and supply segment through our active relationships and investment rights with a broad set of companies we have announced previously. Just to illustrate, we announced in January 2023, a collaboration with Raven SR and Chevron to commercialise operations of a waste of hydrogen production facility in Richmond, California, which will supply hydrogen to transportation markets in Northern California.

Okay. Chevron has a 50% equity stake. Raven holds 30% and we hold the remaining 20%. Raven will develop and operate the facility currently targeted to come online in 2024, producing up to five tons per day of low to zero carbon hydrogen from organic waste through Raven’s non combustion reforming process. Hyzon’s share can provide fuel for our truck customers at an estimated cost basis that both enables TCO parity fuel cell EV conversion and additional margin upside for Hyzon. Hyzon intends to be an integral player as the world pivots to clean energy. We are excited by our progress thus far. The milestones we have achieved and the upcoming milestones we are closing in on. For 2023, we have laid out several of these milestones, including deliver our first commercial Class 8 Hyzon fuel cell EV to a major US fleet customer.

Produce and validate 25 200 kilowatt fuel cell prototypes. Declares C-Sample of the 200 kilowatt fuel cell system and execute additional commercial agreements with major fleet customers in the US and Europe. Reaching these milestones will keep us on track to achieve our targeted SOP in second half 2024 and commercialization. Of course, a core focus for us and executing this plan is cash and capital management along with financial performance. With that, I’ll hand it over the discussion to Jiajia who will go over the numbers and our plans going forward.

Jiajia Wu: Thank you, Parker, and good morning, everyone. Thank you for joining us today. I’m pleased to serve as Interim Chief Financial Officer at Hyzon Motors. I’m excited about the opportunity to contribute to the company’s success alongside the talented team here at Hyzon. As Parker mentioned at the beginning of this call, as of yesterday, we successfully filed our Q1 2023 quarterly report with the SEC. And we are now current in our periodic reporting obligations. The past 12 months have required a substantial amount of work for our company. And I want to thank all of our dedicated employees as well as our valued customers, partners, suppliers for their support and trust. Under my new role, my team and I have three top priorities.

Establishing a solid control environment reducing cash burn by balancing initiatives and strategically raising capital. To begin with the control environment. In the summer of 2022, we reported various issues regarding revenue recognition and internal control and procedures to our board. Our board formed a special committee of independent directors to investigate with the assistance of outside counsel and other advisors these issues. During this period, we identified several material weaknesses and have been diligently working on measures to improve our governance framework. Our remediation work is ongoing, but significant progress has been made. First, in terms of the governance structure, we strengthened Hyzon’s executive management team in a newly integrated global organization.

By appointing a new CEO and an interim CFO and creating new roles, including COO, CHRO, president of international operations and president of North America. We also hired additional finance and accounting professionals and engaged big four accounting firms to assist in analyzing complex accounting matters. We’re in the process of improving IT related controls such as tightening IT system access control internally and also with our vendors and contractors. Microsoft Dynamics 365 implementation is underway. The US finance, inventory and procurement modules went live in May 2023. Having a Global ERP system is expected to create efficiency, consistency across the regions, both from accounting finance and operation perspectives. Moreover, we kicked off our Sarbanes-Oxley implementation project in early 2023.

We’re continuing to review and refine our internal controls in our efforts to ensure the robust enough to remediate control gaps and deficiencies. We believe that a strong governance foundation is crucial for our long-term success and to create sustainable value. For details on our internal control enhancements, please refer to Item Four Control and Procedures in our recently released quarterly report on Form 10-Q. Now I’ll dive into our financial results for the first quarter of 2023 and provide an update on our outlook for this year. It’s important to note that our discussion today will be based on GAAP financial results unless stated otherwise or make reference to non-GAAP measures, including EBITDA and adjusted EBITDA. For detail information and reconciliations to their most comparable GAAP measures, please refer to the tables at the end of the press release and slides which are available in the investors section of our website.

The critical organization realignment launched in 2022, created additional expenses which were necessary for Hyzon to reprioritize and focus on our core. As I walk you through our results, I would point out those items not only from a GAAP perspective, but also from a cash spend perspective. On to Q1 results. During this quarter, we did not recognized revenue, but we recorded 0.8 million in cost of sales, which related to cost provisions accrued for customer contract activities and inventory write-downs in Europe. Our loss from operations amounted to 41 million in Q1 2023 from 24.5 million in Q1 2022. Operating expenses increased by 50% year-over-year to 41 million in Q1 2023. Notably, 15.7 million represents legal, accounting and consulting fees, which rose from 6.3 million in Q1 2022.

Within this figure, expenses incurred in connection with the special committee investigation, the SEC and the regulatory investigations and other litigation matters totaled 7.7 million, reflecting a substantial 184% increase compared to Q1 2022. The outcome of any particular legal matter cannot be predicted. Therefore, legal and regulatory expenses could vary significantly from quarter-to-quarter. But one thing to note is that the special committee completed its investigation in March 2023. The cost associated with that were fully accounted for in this quarter. But certain invoices were paid in the subsequent month. To support the streamlined focus on fuel cell technology discussed by Parker earlier, we realigned our employee mix, reducing the headcount in both China and Europe while adding strategic hires in the United States.

This resulted in a stable headcount of approximately 330 at the end of both Q1 2023 and year-end 2022. We exited the China commercial vehicle market in part due to the negative gross margin and extended payment terms. As of today, we have not been successful in collecting the remaining outstanding balances from this customers. We also eliminated research and development programs in China, which were deemed not vital to our fuel cell or vehicle platform commercialization in the near term. We anticipate the annual savings for those programs to be utilized to advance our fuel cell technology. Below the operating line is important to note that net loss attributable to minority interests decreased to 10,000 in Q1 2023 from 2.3 million in Q1 2022 because we acquired the remaining equity interest of Hyzon Europe in December 2022 from Holthausen Clean Technology Investments B.V. Consequently, the net loss attributable to Hyzon for this quarter amounted to 30.2 million, compared to 6.5 million in Q1 2022.

Loss per share stood at $0.12 in Q1 2023 versus $0.03 in Q1 2022. Now, I would like to turn your attention to our non-GAAP measures as compared to net loss, we believe EBITDA and adjusted EBITDA provide a clear view of our operational performance by removing the effects of legal expenses related to the special committee and SEC and the regulatory investigation. And the changes in estimated fair value of private placement warrants and earnout liabilities. In Q1 2023, our EBITDA stood at negative 29.3 million compared to negative 7.4 million in Q1 2022. Our adjusted EBITDA for Q1 2023 amounted to negative 27.3 million compared to negative 20.8 million in Q1 2022. On the balance sheet, we concluded Q1 2023 with 209 million in unrestricted cash and short-term investments down from 255.3 million at the end of 2022.

Hyzon used 189.8 million and 46.3 million cash during the fiscal year 2022 and Q1 2023 respectively. As I discussed earlier, in 2022, there were many changes. We incurred additional expenses to realign our business, complete the restatements and file our delinquent periodic reports. Within the net cash used in operating activities, Hyzon had cash outlays of 16.2 million and 11.4 million for regulatory and legal matters related to the SEC and special committee investigation in 2022 and Q1 2023 respectively. There were 4.9 million and 4.7 million cash paid for strategic consulting support services for 2022 and Q1 2023 respectively. There were another 4.9 million and 1.1 million in cash paid to cancel the autumn business combination in 2022 and Q1 2023 respectively.

In addition, due to the recent restatement effort, we incurred additional accounting and auditing fees, 2.7 million of which was paid in 2022 and 1 million was paid in Q1 2023. Additionally, cash used in the operating activities included severance payments of 0.7 million made to our Former Executive Chairman and Retired CTO in 2022. We’re focused on prudent cash management and have taken or plan to take the following steps to improve our cost structure and monthly cash burn rate, further reducing the number of vehicle platforms for development and deployment, focusing on anchor customers and their use case demands. Centralizing supply chain and engineering functions to drive efficiencies. Transition Hyzon Europe vehicle manufacturing to third-party contract assemblers and evaluate options to expand Hyzon Australia assembly capacities.

Prioritize hiring around fuel cell and fuel cell powertrain. Monetize excess inventory at Hyzon Europe and further optimize net working capital. We are beginning to see progress. As of May 31st, 2023, unrestricted cash and short-term investments were approximately 185 million down 24 million from Q1 2023. Turning to our outlook. As we navigate through the remainder of the year, our key focus will be on advancing the development of our 200 kilowatt fuel cell technology and our manufacturing capabilities, while maintaining a vigilant approach to cash management. The anticipated fuel cell related CapEx for the full year of 2023 is around 5 million in part due to anticipated investment in automated single cell manufacturing line in Bolingbrook, Illinois.

To support our growth strategy, we’re committed to invest in our fuel cell R&D and production. Hydrogen cost and availability have a sizable impact on R&D material costs. If the commodity price of hydrogen remained the same, we anticipate 2023 R&D expense to be comparable to prior year. Additionally, we anticipate stock based comp to increase modestly as we plan to use this to drive alignment between employee performance and company operational results. This approach supports both employee retention and prudent cash management. Lastly, in addition to cash management, raising additional capital remains a key priority for the company going forward. The broader hydrogen industry is in its early days. So until we can generate sufficient revenues from product sales and services to cover our CapEx, OpEx and working capital needs, we will need to raise additional capital to execute the plan outlined by Parker today during our call.

Now, I will hand it over to Sayanta, who will provide insights on our strategic options and capital raising plans.

Sayanta Dutta: Thank you, Jiajia. At the core, our value is in developing and commercializing our in-house fuel cell technology. Our proprietary single stack 200 kilowatt fuel cell system is expected to be a significant differentiator in the market due to the cost, weight and volume advantages mentioned previously. This was even more evident when we were on the floor with other low and zero emissions truck suppliers at the Advanced Clean Transportation Expo in Anaheim earlier this year. As you heard from Parker, we are in the process of commercializing our fuel cell manufacturing capabilities from soup to nuts. Starting from catalysting formulation to building and testing complete fuel cell systems. Paired with our streamlined operations, focused platforms, proprietary fuel cell EV powertrain and asset-light assembly model, we anticipate positive contribution margin for our 110 kilowatt US fuel cell EVs to be deployed commercially this year.

This provides us with a basic foundation today, a unique economic contribution margin positive product to build on towards achieving corporate cash flow breakeven. As we look at our liquidity position today and our cash burn in the coming quarters and years, we are positioning ourselves in an effort to provide flexibility for the future while retaining our core value. Essentially, we are dual tracking our path forward. One, as Jiajia mentioned previously, we have identified additional cash management levers available to us which we are prepared to implement if necessary to extend liquidity balanced against impact to business execution plan, and two, working through strategic options to raise capital being structured or transaction agnostic at this stage as we evaluate these pathways.

To that effect, we have retained a financial adviser and have launched a structured strategic capital raise process proactively. We are currently in confidential discussions with a range of potential strategic counterparties that participate in prioritized segments of the hydrogen ecosystem, ranging from energy producers to technology and product-driven companies. Current market conditions represent formidable headwinds to raising cash through public markets, not just for us, but for all publicly traded early stage growth companies. Our initial stages of engagement with the prioritized counterparties shows potential interest in Hyzon’s technology and execution plan combined with the value they see in potential joint offerings that our technology can stimulate.

We will remain opportunistic to explore various structures and funding sources that may additionally present themselves to us in the coming quarters as we continue to evaluate these potential opportunities for strategic capital. With that I will turn the mic back to Parker for closing remarks. Parker?

Parker Meeks: Thanks, Sayanta. We’ve made positive and impactful changes to our organization during our quiet period. We have refocused on commercialization of our fuel cell technology and three standard vehicle platforms. We anticipate our proprietary 200 kilowatt fuel cell system will pave the way for our customers to achieve fuel cell electric vehicle diesel parity, while our asset-light business model will allow us to achieve positive contribution margin at the truck level from the outset. In the long run, we aim to apply our fuel cell technology expertise beyond vehicles to establish ourselves as leaders in the growing hydrogen economy. All within a company that is better positioned today in governance, performance management and integrated global execution while closely managing cash and capital.

In the meantime, we will continue progressing towards our primary milestones for 2023. We believe that we have differentiated technology, a strengthened team and a clear vision to commercialize in a hydrogen market that is only accelerating, grounded in our strong IP and in-house US based fuel cell production. Thank you for engaging with us today in our re-emergence. I look forward to engaging with you regularly in this forum going forward. With that, let’s open it up for Q&A. Operator?

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Q&A Session

Operator: Thank you. [Operator Instructions] Our first question comes from Rob Wertheimer from Melius Research. Your line is now open. Please go ahead.

Rob Wertheimer: Thank you. Good morning, everybody. So I had kind of a question on go-to market strategy and competitive advantage, and I guess there’s a specific part in the general part, but does any of the durability advantage that you saw from the past history of Hyzon and [indiscernible] carry over into the kilowatt? And then could you comment on, if so, what your experience is, how many trucks running not in the 200, obviously what the uptime is like, what the delivery has been like, and whether there’s any positive flow through for your customers from that experience?

Parker Meeks: Great questions that we’re very focused on. So on the first question on durability, experience and what we’re building on. We certainly do have a long history of the fuel cell technology development over two decades in the same IP and the same technology. The truck deployments that we’ve done this year under Hyzon just focused on that for a second, which covers a bit of both of your questions. We do have six of our trial trucks in the US that have been on the road since March of 2022 with customers and prior to that, in track testing, they have accumulated approximately 30,000 miles across those six trucks. So building experience, a lot of additional learnings built into those trucks over that approximately 15 month plus trial testing period with customers in real operations along with the track testing that we continue to do beyond that.

On the 200 kilowatt truck to take that for a second. It is early, but we have accumulated 2000 miles already on the Alpha 200 kilowatt fuel cell truck. So seeing how our learnings from the 120 kilowatt, 110 kilowatt series translate to that has been quite positive as we do have some changes in terms of the thermal management and power management with the 200 kilowatt larger fuel cell power. On the fuel cell itself, again, we do look to incorporate durability results from the 110 over its history, but we are at Hyzon starting from scratch, so to speak, in our durability testing for the 200 kilowatt as we run through our proper SOP process. So there’s a detailed durability testing plan we’re executing against the 200 kilowatt with the three B-Samples that we’ve announced.

We’ve tested and are in detailed durability testing today at Hyzon leveraging our in-house testing capabilities where we have two full 250 kilowatt gross power banks that are full system test stands active, along with short stack testing, along with unit cell testing and MEA testing that we combined with some outsourced testing labs as well. We’re accelerating and really driving durability testing on the fuel cell itself. Still targeting first 15,000 hour durability and then ultimately 20,000 hour durability, which would equate to 800,000 miles at an average speed of 40 miles per hour. So that durability testing is progressing. Again, it is building on the 110, but we want to be clear when we go to an SOP with customers, the durability that will stand behind is all on the 200 kilowatt and where we stand at the end of 2023.

We look forward to updating, which will be significant progress.

Rob Wertheimer: Thank you. That’s a great response. And then could you just talk more I don’t know qualitatively about what customers are looking for when you go see them. Obviously, 200, you know, a step-up in power. Obviously, I understand the packaging issues, etcetera. Could you maybe just delineate the competitive landscape, what people like about Hyzon at this moment, whether you expect trials with half a dozen different fuel cell providers, just what it’s like out there when you’re going to market?