Hyzon Motors Inc. (NASDAQ:HYZN) Q3 2023 Earnings Call Transcript

Getting experience with and learnings from real-world operations for future fuel cell truck deployments. In Australia last month, we announced the global launch of Hyzon’s Heavy Rigid refuse truck platform. Partnering with REMONDIS, one of the world’s largest waste service and recycling companies, we rolled out Australia’s first zero-emission, hydrogen-powered garbage truck in a commercial trial. The commercial trial is expected to convert to a full vehicle purchase if certain trial performance targets are met. After quarter-end, we also announced a vehicle agreement for up to 20 vehicles powered by our 200kW fuel cell system. The agreement with TR Group, New Zealand’s largest heavy-duty truck fleet owner, is expected to start with a trial of two vehicles in March 2024.

Any vehicle purchases under the agreement are at TR Group’s option following this initial commercial trial. And finally, in Europe, we continue to successfully gain operational experience with vehicles in commercial operation with DB Schenker and M-Price through our channel partners hylane and [Yuva] respectively. Looking ahead, we are on track to deliver the first 110kW Class A trucks to Performance Food Group this year. Initial vehicles are currently well into assembly. Our agreement has the potential for up to 50 vehicles if all tranches, conditions and options are met and executed. We are also on track to launch the first US trial of our refuse truck in the first half of 2024 in California with customer deliveries expected to begin in 2025.

We remain focused on converting the next large fleet customer contracts in the US and Europe with several negotiations on the back of successful initial trials. The growing commercial conversion is also a testament to Hyzon’s best-in-class fuel cell technology, which we have significantly progressed since we last spoke. Our fuel cell technology enables 200kW of power output from one stack, which we estimate is 30% smaller and lighter, 20% more fuel efficient, and 25% lower-cost to manufacture than other fuel cell providers who need to combine multiple smaller fuel cell units to reach 200kW of power output. This expected lower cost and improved fuel efficiency advantage provides the core foundation for our business model and we believe is the only single stack 200kW fuel cell system in trucks with customer commercial agreements in place.

Our world-class fuel cell production facility in Bolingbrook, Illinois is on track for SOP in the second half of 2024. We anticipate needing to invest less than $5 million in capital to complete the SOP and meet our volume forecast for 2025. With just the equipment installed to date, once commissioned, the facility is expected to have the capacity to produce over 700, 200kW fuel cell systems annually across three shifts. We believe we can increase capacity through further debottlenecking to the point that we can reach corporate cash breakeven at the fuel cell system manufacturing level from the Bolingbrook facility. Simultaneously, we have completed planning with our third party vehicle assembly partner, Fontaine Modifications, with the goal of ensuring fuel cell electric truck assembly capacity scaling is on plan in line with those production numbers through our intended corporate cash breakeven volumes.

Turning to the specific progress on the 200kW fuel cell technology, we continue to follow the standard automotive product development process, producing and validating fuel cell system B samples before moving to C sample and then declaring SOP. So far, we have completed nine B samples in the second half of 2023. And have completed a total of 18 B samples through factory acceptance testing so far this year. This achievement shows growth in the company’s prototype assembly rate as we produced three units in Q1, six units in Q2, and nine in the first four months of second half 2023. We remain on track to complete the additional seven B samples in the fourth quarter, bringing the full year total to 25 200kW B samples. We also continue our durability testing, completing approximately 20% of total durability testing with an accelerated drive cycle and are on track to complete the accelerated system durability testing in line with our 2024 SOP.

The successful progress of the 200kW fuel cell system B samples confirms the viability of our design, equipment, and procedures to date, essential to eventual commercialization. We continue strengthening our leadership in the third quarter. At the executive team level, I’m personally thrilled to welcome Steve Weiland to the team at CFO. His capital markets experience will be particularly valuable to us at this stage in the company’s evolution. Steve previously served as CFO at an early stage technology led company and prior to that was CFO for multiple divisions at Caterpillar. He brings capital markets, financial services, and corporate financial leadership experience critical to Hyzon’s continued drive toward long-term capital stability. Additionally, the board announced the appointment of Matthew Foulston, who serves as chair of both the audit and compensation committees.

Matthew is an accomplished financial executive having served as Chief Financial Officer for three publicly listed companies throughout his career. The board also elected Erik Anderson as Chairman, bringing years of experience as a global innovation leader and investor across various sectors. The board also elected Andrea Farace as Vice Chairman of Hyzon’s Board. Andrea is an accomplished executive with a global career spanning more than 40 years in finance and general business management. Finally, I want to thank JiaJia Wu for serving as Interim CFO during a pivotal time for our company. Hyzon would not be at this point without JiaJia’s critical contributions and leadership. Over the past six months, JiaJia and her teams worked tirelessly to get our financials current and strengthen Hyzon’s financial, accounting, and governance processes, which we look forward to building upon with her and Steve.