Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Nikola Corp (NKLA, Financial) exceeded its Q2 guidance by delivering 72 hydrogen fuel cell electric trucks, 20% above the high end of their range.
- The company has demonstrated strong customer satisfaction with several repeat orders from national accounts.
- Nikola Corp (NKLA) opened new HYLA branded fueling stations in Toronto, Canada, and Santa Fe Springs, California, enhancing their refueling infrastructure.
- The company reported its strongest revenue quarter in history with $31.3 million, up 318% from Q1.
- Nikola Corp (NKLA) is the only OEM with Class 8 hydrogen fuel cell electric vehicles (FCEVs) commercially available in North America, positioning them as a first mover in the hydrogen economy.
Negative Points
- Nikola Corp (NKLA) reported a gross loss of $54.7 million in Q2, although this was a slight improvement from Q1.
- Unrestricted cash declined by $89.3 million in the quarter, ending with $256.3 million, raising concerns about future cash flow.
- The company faces significant challenges in reducing the bill of materials and optimizing costs, which are critical for achieving profitability.
- There are ongoing concerns about the political risk and potential changes in regulations that could impact the hydrogen and EV markets.
- Nikola Corp (NKLA) is still in the early stages of building out its hydrogen infrastructure, which requires significant investment and coordination with multiple partners.
Q & A Highlights
Q: What is the strategic plan to increase shareholder returns? What measures are being taken to enhance profitability?
A: (Thomas Okray, CFO) Execution is key to improving Nikola's profitability and increasing shareholder returns. Nikola is on the road today with customers and in stations, and we have numerous proof points with customers. We are positioned ahead of competitor OEMs and have a passionate team developing the hydrogen ecosystem. The profitability wheel is gaining momentum, and growing a significant and consistent order book is crucial for optimizing costs both internally and with external partners.
Q: What is being done to develop the necessary hydrogen infrastructure for the future?
A: (Stephen Girsky, CEO) The buildout of the hydrogen highway is on track, with plans to provide 14 fueling solutions in North America by year-end. Our objective is to deliver a safe, reliable fueling network that enables customers to refuel hydrogen fuel cell electric trucks at convenient locations. We are launching stations and deploying assets where we anticipate demand, focusing on modular sites while simultaneously developing permanent stations both independently and through partnerships.
Q: How is Nikola attracting bigger logos?
A: (Thomas Okray, CFO) Prioritization is key, considering factors like product fit, geographical overlay with our hydrogen infrastructure, and fleet sustainability goals. We engage national accounts, describe how Nikola fits into their strategic priorities, and offer demos. Our demo list includes national beverage distributors, grocers, healthcare, chemical companies, and 3PLs. The more fuel cells we deliver, the more credibility is gained for hydrogen, attracting like-minded partners.
Q: Do you have an additional round of reductions to the bill of materials coming?
A: (Thomas Okray, CFO) Yes, we are working with key suppliers to ensure volume thresholds that reduce the bill of material costs. We are also looking at localization activities and redesigning parts to make them more efficient and cost-effective. Our next-gen vehicle offers a significant opportunity for further cost reductions. We are confident in our plans for the next year and beyond.
Q: Are you seeing any customers asking you to hold off deliveries until next year due to rate changes or election changes?
A: (Stephen Girsky, CEO) Most of our customers are trying to cycle vouchers now, especially in California. No one buys 500 trucks immediately; they start with demos and small orders. Our business is in its infancy, and customers are trying different routes and cycling vouchers.
Q: Could you talk about potential strategic partnerships to expand Nikola's footprint?
A: (Stephen Girsky, CEO) We are building a coalition of purpose-driven partners who believe in the hydrogen ecosystem. This includes H2 supply, H2 cost, H2 components, and sourcing. Hydrogen is bigger in Asia, and we are looking at partnerships with hydrogen component players and fuel cell power module players. We aim to lower costs, defer capital, and fund our business through these partnerships.
Q: How do you think about competition from EV trucks, like Tesla, coming to market?
A: (Stephen Girsky, CEO) Battery trucks don't work everywhere, especially in high altitude and cold weather. Our fuel cell trucks offer longer range and quicker refueling times, making them more efficient for certain use cases. We have customers who prefer our trucks over others due to these advantages. We believe having both BEV and fuel cell options will help us scale and meet customer needs.
Q: How do you view political risk going forward?
A: (Stephen Girsky, CEO) There are as many hydrogen projects in red states as in blue states. While the approach to creating hydrogen may differ, we believe there will be continued activity around hydrogen regardless of political changes.
Q: How should we think about contribution to the bottom line from credits and fueling?
A: (Thomas Okray, CFO) We have two types of CARB credits that can be worth $45,000 to $50,000 per unit. This is 100% gross profit. As volume grows, this revenue stream will become more significant. We are also seeing other states adopting similar regulations, which will further enhance this revenue stream.
Q: What is the right cash level for Nikola, and what levers are available to bring in cash?
A: (Thomas Okray, CFO) Ideally, we want enough cash to operate for a full fiscal year without going to the market continuously. We are confident in our ability to secure the necessary funds through discussions with investors and strategic partners. Our focus is on improving our cash conversion cycle, optimizing costs, and increasing volume to reduce cash burn.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
