Hyliion (HYLN) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) For the first quarter of 2022, Hyliion reported its first product revenues of $0.34 million but incurred a gross loss of $1.76 million, with the net loss increasing to $27.1 million from $16.6 million year-over-year due to higher operating expenses, particularly in research and development, while maintaining a strong liquidity position with $227.1 million in cash and cash equivalents and $300.1 million in investments despite a decrease in total assets and stockholders' equity since year-end 2021, and significantly increased cash used in operating activities to $29.3 million Condensed Consolidated Balance Sheets As of March 31, 2022, Hyliion's total assets were $548.8 million, a decrease from $578.4 million at the end of 2021, primarily due to a reduction in cash and cash equivalents, while total liabilities also decreased to $20.5 million from $24.5 million, mainly from a reduction in accounts payable, with total stockholders' equity standing at $528.3 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $227,107 | $258,445 | | Total current assets | $371,083 | $386,484 | | Total assets | $548,823 | $578,440 | | Liabilities & Stockholders' Equity | | | | Accounts payable | $3,258 | $7,455 | | Total current liabilities | $11,308 | $15,235 | | Total liabilities | $20,545 | $24,525 | | Total stockholders' equity | $528,278 | $553,915 | Condensed Consolidated Statements of Operations For the three months ended March 31, 2022, Hyliion generated its first revenues of $340 thousand, but with a cost of revenues of $2.1 million, the company posted a gross loss of $1.76 million, and operating expenses increased significantly to $25.6 million from $16.7 million in the prior-year period, leading to a net loss of $27.1 million, or ($0.16) per share, compared to a net loss of $16.6 million, or ($0.10) per share, in Q1 2021 Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Total revenues | $340 | $— | | Gross loss | $(1,759) | $— | | Research and development | $(15,808) | $(9,332) | | Selling, general and administrative | $(9,824) | $(7,399) | | Loss from operations | $(27,391) | $(16,731) | | Net loss | $(27,108) | $(16,562) | | Net loss per share, basic and diluted | $(0.16) | $(0.10) | Condensed Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity decreased from $553.9 million at the end of 2021 to $528.3 million at March 31, 2022, primarily driven by the net loss of $27.1 million for the quarter, partially offset by $1.6 million in share-based compensation - Total stockholders' equity decreased by $25.6 million during Q1 2022, from $553.9 million to $528.3 million[14] - The decrease was primarily caused by a net loss of $27.1 million, slightly offset by $1.6 million in share-based compensation and minor impacts from stock option exercises[14] Condensed Consolidated Statements of Cash Flows For Q1 2022, net cash used in operating activities was $29.3 million, a significant increase from $10.8 million in Q1 2021, mainly due to a higher net loss, while net cash used in investing activities was $1.9 million, primarily for net purchases of investments, and financing activities used a negligible $0.1 million, resulting in a net decrease in cash of $31.3 million for the quarter Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(29,303) | $(10,757) | | Net cash used in investing activities | $(1,943) | $(59,817) | | Net cash (used in) provided by financing activities | $(92) | $15,587 | | Net decrease in cash | $(31,338) | $(54,987) | Notes to Condensed Consolidated Financial Statements The notes detail the company's business of developing electrified powertrain systems for Class 8 trucks, with key policies including recognizing revenue upon delivery and acceptance, and accounting for warranties, while acknowledging its early-stage nature but confirming sufficient funds for the next twelve months, and highlighting dependence on single-source suppliers, with $300.1 million in held-to-maturity investments and a $1.3 million inventory write-down recorded as of March 31, 2022 - The company designs and develops hybrid (Hybrid) and fully electric range extender (Hypertruck ERX) powertrain systems for Class 8 semi-trucks[18] - Management believes the company has sufficient funds to execute its business strategy for the next twelve months, with $528.3 million in total equity, including $227.1 million in cash and $300.1 million in investments as of March 31, 2022[20] - The company is dependent on certain single-source suppliers, and an inability to secure components could have a material adverse effect[24] - During Q1 2022, the company recorded an inventory write-down of $1.3 million, included in cost of revenues[43] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's mission to provide electrified powertrain solutions for Class 8 trucks, focusing on the commercialized Hybrid system and the in-development Hypertruck ERX, while facing challenges from supply chain disruptions that have extended delivery times for the Hybrid system and impacted the development timeline for the Hypertruck ERX, leading to operating expenses rising 53.2% year-over-year to $25.6 million, driven by increased R&D for the Hypertruck ERX and higher SG&A costs, and despite a net loss of $27.1 million and $29.3 million in cash used for operations, the company believes its current assets of $371.1 million are sufficient to fund operations for the next twelve months Overview Hyliion's mission is to be the leading provider of electrified powertrain solutions for the commercial vehicle industry, aiming to reduce GHG emissions and total cost of ownership (TCO), offering two main products: the Hybrid system, an add-on to augment power, and the Hypertruck ERX, a complete, fully electric drive powertrain with an onboard generator, designed to be fuel-agnostic, initially launching with a CNG/RNG generator and planning for future hydrogen-based solutions - Hyliion's goal is to reduce carbon intensity and GHG emissions by providing electrified powertrain solutions for Class 8 semi-trucks with a low TCO[51] - The company offers two product lines: the Hybrid system (currently selling) and the Hypertruck ERX (in development)[51][52] - The Hypertruck ERX platform is designed to be fuel-agnostic, starting with a CNG/RNG generator and evolving to offer hydrogen-based solutions in the future[54] Key Factors Affecting Operating Results The company's success hinges on the successful commercialization of its drivetrain solutions, but global supply chain disruptions are causing delivery delays for the Hybrid system and have extended the development timeline for the Hypertruck ERX, with initial controlled fleet trials expected by the end of 2022, and to mitigate supply risks, Hyliion has placed orders with Peterbilt for all chassis needed in 2022 and is working to secure slots for 2023 - Global supply chain disruptions are causing longer delivery times for the Hybrid system[57] - The development timeline for the Hypertruck ERX has been extended to allow for more comprehensive testing, with initial controlled fleet trials expected by the end of 2022[58] - To mitigate supply chain impacts, the company has ordered all Peterbilt chassis needed for 2022 and is working to secure 2023 build slots[59] Results of Operations Comparing Q1 2022 to Q1 2021, the company recorded its first revenue of $0.3 million from Hybrid system sales, with cost of revenues at $2.1 million, including a $1.3 million inventory write-down, while R&D expenses increased by 69.4% to $15.8 million, primarily for the design and testing of the Hypertruck ERX, and SG&A expenses rose 32.8% to $9.8 million due to increased personnel and professional services costs, resulting in a 63.7% increase in the net loss to $27.1 million Results of Operations Comparison (in thousands) | Metric | Q1 2022 | Q1 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $340 | $— | $340 | N/A | | Gross loss | $(1,759) | $— | $(1,759) | N/A | | Research and development | $(15,808) | $(9,332) | $(6,476) | 69.4% | | Selling, general and administrative | $(9,824) | $(7,399) | $(2,425) | 32.8% | | Net loss | $(27,108) | $(16,562) | $(10,546) | 63.7% | - Cost of revenues of $2.1 million included $1.3 million in inventory write-downs and $0.2 million in warranty costs[72] - The $6.5 million increase in R&D expenses was primarily due to design and testing of the Hypertruck ERX system and increased personnel[72] Liquidity and Capital Resources As of March 31, 2022, Hyliion had $371.1 million in current assets, including $227.1 million in cash and cash equivalents and $134.2 million in short-term investments, which management believes are sufficient to meet capital requirements for the next twelve months, employing a conservative investment strategy focused on capital preservation and liquidity, with net cash used in operating activities at $29.3 million for the quarter - At March 31, 2022, the company had current assets of $371.1 million, including $227.1 million in cash and cash equivalents[74] - Management believes current assets are sufficient to execute its business strategy and meet capital requirements for the next twelve months[76] Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Cash from operating activities | $(29,303) | $(10,757) | | Cash from investing activities | $(1,943) | $(59,817) | | Cash from financing activities | $(92) | $15,587 | Quantitative and Qualitative Disclosures About Market Risk The company states that there have been no material changes to its market risks as reported in its 2021 Annual Report - There have been no material changes to the market risks previously reported in the company's 2021 Annual Report[86] Controls and Procedures Management, including the CEO and CFO, concluded that as of March 31, 2022, the company's disclosure controls and procedures were effective, with no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls - Management concluded that as of March 31, 2022, the company's disclosure controls and procedures were effective[87] - No changes in internal control over financial reporting occurred during the quarter that have materially affected or are reasonably likely to materially affect internal controls[88] PART II. OTHER INFORMATION Legal Proceedings The company reports that it is not currently involved in any material legal proceedings - The company is not currently involved in any material legal proceedings[91] Risk Factors The company states that there have been no material changes to the risk factors previously disclosed in its 2021 Annual Report - There have been no material changes to the risk factors as reported in the company's 2021 Annual Report[92] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - None[93] Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[94] Mine Safety Disclosures This item is not applicable to the company - Not applicable[95] Other Information The company reported no other information for this item - None[96] Exhibits This section lists the exhibits filed with the Form 10-Q, including amended employment agreements, officer certifications required by the Sarbanes-Oxley Act, and XBRL data files - Exhibits filed include amended employment agreements for executives, CEO and CFO certifications (Sections 302 and 906), and XBRL interactive data files[98]