Nikola(US:NKLA)2024-05-07 15:32PART I - FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements Q1 2024 saw Nikola Corporation report $7.5 million revenues, a $147.7 million net loss, declining cash, and substantial doubt about its going concern Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets | Account | March 31, 2024 ($ thousands) | December 31, 2023 ($ thousands) | Change | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash and cash equivalents | 345,637 | 464,715 | ▼ -25.6% | | Total current assets | 469,309 | 572,412 | ▼ -18.0% | | Total assets | 1,152,153 | 1,274,857 | ▼ -9.6% | | Liabilities & Equity | | | | | Total current liabilities | 271,293 | 260,105 | ▲ +4.3% | | Total liabilities | 565,878 | 555,683 | ▲ +1.8% | | Total stockholders' equity | 586,275 | 719,174 | ▼ -18.5% | Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations | Metric | Three Months Ended Mar 31, 2024 ($ thousands) | Three Months Ended Mar 31, 2023 ($ thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Total revenues | 7,497 | 10,677 | ▼ -29.8% | | Gross loss | (57,575) | (22,697) | ▲ 153.7% | | Loss from operations | (145,363) | (127,200) | ▲ 14.3% | | Net loss from continuing operations | (147,722) | (145,251) | ▲ 1.7% | | Net loss | (147,722) | (169,094) | ▼ -12.6% | | Basic and diluted net loss per share | (0.11) | (0.31) | Improved | - The net loss from continuing operations remained relatively stable YoY, but the total net loss improved significantly due to a $23.8 million loss from discontinued operations (Romeo Power) in Q1 2023 which did not recur in Q1 202415 Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Three Months Ended Mar 31, 2024 ($ thousands) | Three Months Ended Mar 31, 2023 ($ thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | (115,603) | (176,022) | | Net cash provided by (used in) investing activities | 4,940 | (50,517) | | Net cash provided by (used in) financing activities | (5,055) | 115,916 | - Cash used in operating activities decreased to $115.6 million from $176.0 million YoY23 - Investing activities generated $4.9 million in cash, a significant shift from a $50.5 million use of cash in the prior year, primarily due to $21.4 million in proceeds from asset sales23 - Financing activities used $5.1 million, compared to providing $115.9 million in the prior year period which included proceeds from stock and convertible note issuances23 Notes to Condensed Consolidated Financial Statements - The company has concluded there is substantial doubt about its ability to continue as a going concern for the next twelve months due to its history of losses and the need to raise additional capital to fund operations323337 - In Q3 2023, the company initiated a voluntary recall for its BEV trucks related to battery pack issues, accruing $65.0 million for the recall, with $9.7 million incurred as of March 31, 202455190 - The company's former subsidiary, Romeo Power, Inc., was transferred via an Assignment for the Benefit of Creditors on June 30, 2023, with its results reported as discontinued operations for Q1 202331157 - The company is involved in multiple legal proceedings, including a consolidated securities class action lawsuit, shareholder derivative actions, and is seeking to enforce a $165 million arbitration award against its founder, Trevor Milton168169172 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 financial performance, highlighting $7.5 million revenues, a 30% decrease, increased gross loss, and substantial going concern doubt Results of Continuing Operations Results of Continuing Operations | Metric | Q1 2024 ($ thousands) | Q1 2023 ($ thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Truck Sales | 7,418 | 10,055 | ▼ 26% | | Total Revenues | 7,497 | 10,677 | ▼ 30% | | Gross Loss | (57,575) | (22,697) | ▲ 154% | | R&D Expense | 39,497 | 61,806 | ▼ 36% | | SG&A Expense | 48,291 | 42,697 | ▲ 13% | | Net Loss from Continuing Operations | (147,722) | (145,251) | ▲ 2% | - Truck sales decreased by 26% YoY, primarily due to an $8.0 million return reserve related to a dealer agreement cancellation, offsetting revenue from increased truck shipments (40 FCEVs in Q1 2024 vs 31 BEVs in Q1 2023)212216 - Cost of revenues for truck sales increased 87% to $61.7 million, driven by a $12.6 million provision for net realizable value reserves, a $7.0 million increase in estimated warranty costs for FCEV trucks, and a $3.6 million increase in depreciation expense219 - R&D expenses fell by 36% due to lower spending on FCEV prototype builds ($15.0 million) and a decrease in stock compensation ($6.2 million)223 - SG&A expenses increased by 13%, primarily driven by a one-time $15.6 million fee for an equipment purchase cancellation, partially offset by a $9.1 million decrease in stock-based compensation225 Liquidity and Capital Resources - The company has substantial doubt about its ability to continue as a going concern for the next 12 months, as it needs to raise additional capital to fund operations243246 - As of March 31, 2024, principal sources of liquidity were cash and cash equivalents of $345.6 million247 - The company anticipates capital expenditures for the remainder of fiscal year 2024 will be approximately $90.0 million263 - As of March 31, 2024, approximately $311.7 million remained available under the Equity Distribution Agreement with Citi, though access is dependent on market conditions and share availability252 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from changes in interest rates, inflation, and foreign currency exchange rates, with a $1.0 million foreign currency gain in Q1 2024 - The company's primary market risk exposure is related to interest rates on its cash and cash equivalents of $345.6 million, but a 10% change in rates is not expected to be material due to short-term maturities282 - The company is exposed to foreign currency risk, recording a gain of $1.0 million in Q1 2024 versus a loss of $1.1 million in Q1 2023 from foreign currency exchange adjustments283 Item 4. Controls and Procedures Management concluded that as of March 31, 2024, the company's disclosure controls and procedures were not effective due to a material weakness in ITGCs - As of March 31, 2024, management concluded that the company's disclosure controls and procedures were not effective285 - The ineffectiveness is due to a material weakness in internal control over financial reporting related to information technology general controls (ITGCs), specifically concerning user access and change management285425 - The company has implemented a remediation plan and anticipates that the material weakness will be remediated during fiscal year 2024, once the new controls have operated effectively for a sufficient period288 PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is subject to various material pending legal proceedings, including regulatory investigations, shareholder securities litigation, and derivative lawsuits - The company refers to Note 11, Commitments and Contingencies, for a description of its material pending legal proceedings291 Item 1A. Risk Factors The company faces numerous significant risks, including substantial doubt about its going concern ability, the need for additional capital, product recalls, and a material weakness in internal controls Risks Related to Our Business and Industry - The company has a history of losses, an accumulated deficit of $3.2 billion, and there is substantial doubt about its ability to satisfy obligations and continue as a going concern for the next 12 months292 - Nikola needs to raise additional capital but may be unable to issue sufficient shares without stockholder approval for a reverse stock split, which is critical for financing operations and maintaining its Nasdaq listing298304305 - A voluntary recall of BEV trucks was announced in August 2023 due to battery pack thermal events, with $65.0 million accrued for the recall and $9.7 million incurred through March 31, 2024, resulting in a temporary hold on new BEV shipments324325 - The company is dependent on its dealer network, with four dealers individually accounting for over 10% of total revenue in 2023315 Risks Related to Our Convertible Indebtedness - As of March 31, 2024, the company had significant outstanding principal on its convertible notes, including $123.5 million on the June 2022 Toggle Notes and $14.0 million on the 8.25% Convertible Notes416 - Servicing its substantial debt requires significant cash, and the company's business may not generate sufficient cash flow, potentially forcing asset sales, debt restructuring, or dilutive equity financing417 - The company may not have the ability to raise the funds necessary to repurchase its convertible notes upon a fundamental change or change of control, which could lead to a default421 General Risk Factors - The company's stock price is highly volatile and has been negatively impacted by a short-seller report and other public announcements436439 - The company received a notice from Nasdaq on January 19, 2024, for non-compliance with the $1.00 minimum bid price requirement, with potential delisting if compliance is not regained by July 17, 2024444 - A reverse stock split is being proposed at the 2024 annual meeting to address the Nasdaq minimum bid price requirement, but stockholder approval is not guaranteed445 Item 5. Other Information During the quarter ended March 31, 2024, no director or officer of the company adopted or terminated any Rule 10b5-1 trading plan or non-Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a Rule 10b5-1 trading plan during the first quarter of 2024456 Item 6. Exhibits This section lists all the exhibits filed with the Form 10-Q, including the company's amended certificate of incorporation and bylaws, executive employment agreements, and officer certifications - Key exhibits filed include executive employment agreements for Dirk Ole Hoefelmann and Thomas B Okray, and a termination agreement with Nel ASA458