Hyliion (HYLN) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) For the quarter ended March 31, 2023, Hyliion reported total revenues of $310 thousand and a net loss of $28.8 million, with total assets decreasing to $418.8 million from $446.7 million, and management asserting sufficient funds for the next twelve months Condensed Consolidated Balance Sheets As of March 31, 2023, Hyliion's total assets decreased to $418.8 million from $446.7 million at December 31, 2022, primarily due to a reduction in cash and cash equivalents Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 (Unaudited) | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $85,206 | $119,468 | | Short-term investments | $196,768 | $193,740 | | Total current assets | $298,962 | $324,213 | | Total assets | $418,762 | $446,743 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $14,049 | $14,682 | | Total liabilities | $22,155 | $23,169 | | Total stockholders' equity | $396,607 | $423,574 | | Total liabilities and stockholders' equity | $418,762 | $446,743 | Condensed Consolidated Statements of Operations For the three months ended March 31, 2023, Hyliion reported total revenues of $310 thousand and an increased net loss of $28.8 million, primarily due to higher Research and Development costs Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Total revenues | $310 | $340 | | Gross loss | ($381) | ($1,759) | | Research and development | $20,918 | $15,808 | | Selling, general and administrative | $10,981 | $9,824 | | Loss from operations | ($32,280) | ($27,391) | | Net loss | ($28,831) | ($27,108) | | Net loss per share, basic and diluted | ($0.16) | ($0.16) | Condensed Consolidated Statements of Cash Flows For the first quarter of 2023, net cash used in operating activities increased to $33.2 million, resulting in a net decrease in cash and cash equivalents to $85.9 million by period-end Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($33,239) | ($29,303) | | Net cash used in investing activities | ($847) | ($1,943) | | Net cash used in financing activities | ($176) | ($92) | | Net decrease in cash and cash equivalents | ($34,262) | ($31,338) | | Cash and cash equivalents, end of period | $85,871 | $227,772 | Notes to Condensed Consolidated Financial Statements The notes detail Hyliion's business of developing powertrain systems for Class 8 semi-trucks, highlighting dependence on single-source suppliers, customer concentration, and management's belief in sufficient funds for the next twelve months - The company designs and develops hybrid (Hybrid) and fully electric (Hypertruck ERX, Hypertruck KARNO) powertrain systems for Class 8 semi-trucks, with the Hybrid system currently being sold and the Hypertruck ERX in design verification[18] - The company is dependent on certain single-source suppliers, and any disruption could have a material adverse effect on business operations[22][23] Significant Customer Revenue Concentration | Customer | % of Revenue (Q1 2023) | % of Revenue (Q1 2022) | | :--- | :--- | :--- | | Customer A | 87% | 26% | | Customer F | 13% | — | - The company believes its current financial position, with $396.6 million in total equity including $85.2 million in cash and $300.2 million in investments, is sufficient to fund operations for the next twelve months[20] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Hyliion's mission to provide electrified solutions for commercial vehicles, highlighting flat revenue, improved gross loss, increased operating expenses, and a strong liquidity position with ongoing spending reduction efforts Overview and Key Factors Affecting Operating Results Hyliion's strategy focuses on commercializing its multi-stage product roadmap, including the Hybrid system, Hypertruck ERX, and KARNO, while managing demand and supply chain risks, with the Inflation Reduction Act expected to boost demand - The company plans to begin commercialization of the Hypertruck ERX system in the second half of 2023, following design verification, testing, and fleet trials[57][65] - The company is developing the Hypertruck KARNO system, featuring a fuel-agnostic generator acquired from GE, and is also jointly developing a fuel cell vehicle with Hyzon Motors[61][62] - The company is restructuring its 'Founders Program' for the first 210 Hypertruck ERX units to improve economic terms for Hyliion, which may shift the customer mix[74][75] - The Hypertruck ERX system qualifies for a 30% tax credit up to $40,000 per vehicle under the Inflation Reduction Act of 2022, which is expected to drive demand[77] Results of Operations Q1 2023 revenues were flat at $0.3 million, gross loss improved due to reduced inventory write-downs, but increased R&D expenses for Hypertruck ERX and KARNO systems led to a higher operating loss, partially offset by increased interest income Comparison of Operations (in thousands) | Metric | Q1 2023 | Q1 2022 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $310 | $340 | ($30) | (8.8)% | | Gross loss | ($381) | ($1,759) | $1,378 | (78.3)% | | Research and development | $20,918 | $15,808 | $5,110 | 32.3% | | Selling, general and administrative | $10,981 | $9,824 | $1,157 | 11.8% | | Loss from operations | ($32,280) | ($27,391) | ($4,889) | 17.8% | | Net loss | ($28,831) | ($27,108) | ($1,723) | 6.4% | - Cost of revenues decreased by $1.4 million, primarily due to a $1.1 million decrease in inventory write-downs compared to the prior-year period[87] - R&D expenses increased by $5.1 million, driven by a $1.7 million increase for the Hypertruck ERX system and a $3.4 million increase for the Hypertruck KARNO system[87][88] Liquidity and Capital Resources As of March 31, 2023, Hyliion had $299.0 million in current assets, including $85.2 million in cash and $196.8 million in short-term investments, which management believes are sufficient for the next twelve months, while actively reducing spending to extend its financial runway - The company holds $85.2 million in cash and cash equivalents and $300.2 million in total investments as of March 31, 2023[20][90] - Management believes current assets are sufficient to execute its business strategy and meet capital requirements for the next twelve months[92] - The company has begun actions to reduce spending, such as reducing capital spending and hiring, to extend the timeline that existing capital can fund operations[93] 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 2022 Annual Report - There have been no material changes to the company's market risks from those previously reported in the 2022 Annual Report[102] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2023, with no material changes in internal control over financial reporting during the quarter - Management concluded that as of March 31, 2023, the company's disclosure controls and procedures were effective[103][104] - No changes in internal control over financial reporting occurred during the quarter that have materially affected or are likely to materially affect internal controls[105] 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[108] Risk Factors The company states that there have been no material changes to the risk factors previously disclosed in its 2022 Annual Report - There have been no material changes to the company's Risk Factors as reported in the 2022 Annual Report[109] Other Information On May 4, 2023, the Board of Directors adopted a new Executive Severance Plan and a Form of Change in Control Agreement, providing benefits for qualifying terminations and enhanced severance for executives following a change in control - On May 4, 2023, the company adopted the Hyliion Holdings Corp. Executive Severance Plan to provide severance benefits to eligible executives upon certain qualifying terminations[113] - The company also adopted a Form of Change in Control (CIC) Agreement, providing enhanced 'double trigger' severance benefits to named executive officers in the event of a qualifying termination following a change in control[116][117] Exhibits This section lists the exhibits filed with the 10-Q report, including the newly adopted Executive Severance Plan, the Form of Change in Control Agreement, and officer certifications - Exhibits filed include the Executive Severance Plan (10.1), Form of Change in Control Agreement (10.2), and various officer certifications (31.1, 31.2, 32.1, 32.2)[121]