Good day and thank you for standing by. Welcome to the Hyliion Holdings First Quarter 2022 Earnings Conference call. At this time, all participants are in a listen-only mode. After the speakers’ prepared remarks, there will be a question-and-answer session. I would now like to turn the conference over to Adam Bresser, Director of Financial Planning and Analysis. Please go ahead.

Thank you and good morning, everyone. Welcome to the Hyliion Holdings first quarter 2022 earnings conference call. On the call today are Thomas Healy, our Chief Executive Officer; and Sherri Baker, our Chief Financial Officer. The slide presentation accompanying this conference call is available on Hyliion’s Investor Relations website. Please note that during today's call, we will make certain forward-looking statements regarding the company's business outlook. Forward-looking statements are predictions, projections and other statements about anticipated events that are based on current expectations and assumptions, and as such are subject to risk and uncertainties. Many factors could cause actual results to differ materially from the forward-looking statements on this call. For more information about factors that may cause the company's results to differ materially from such forward-looking statements, please refer to the earnings press release as well as our filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made. You are cautioned not to put undue reliance on forward-looking statements and we undertake no duty to update this information unless required by applicable law. With that, I will turn the call over to Thomas.

Thank you, Adam, and hello everyone. Thank you for joining us today. It's an exciting week for Hyliion. We are at the ACT Expo in Long Beach, California, one of the largest trade shows in the industry. We have a number of Hypertruck ERX and Hybrid trucks on display so that fleets, suppliers, investors and analysts can get a look at our technology. We are also hosting ride-along events at the Expo for those interested in getting to experience the Hypertruck ERX firsthand. Now shifting into some updates on Hyliion. The trucking industry is increasingly recognizing Hyliion’s potential to revolutionize the market for Class 8 semi-trucks, as reflected in our initial sales and positive stakeholder feedback. Electrification is happening but we are hearing complaints about the challenges they encounter in the transition to plug-in technology. However, we are pleased to hear that the Hypertruck ERX relieves most of those concerns specifically around range anxiety, infrastructure and the cost of electricity. Q1 was another successful and productive quarter for Hyliion. The recent expansion of our sales force has paid immediate dividends as we execute upon our plans. In the first quarter, we secured 170 orders for production slots of our Hypertruck ERX and have received nearly 2,000 units in reservations to date. We continued our deployment efforts for our Hybrid Powertrain System and are beginning to see more momentum in our sales. Shifting to some updates on the Hypertruck ERX development. First, we are happy to share that we are on track with our previously communicated timeline in order to bring this fully electric solution into production in late 2023. We have the initial production slots already committed and we continue to see strong interest from fleets. They are seeing our solution as the practical choice for line-haul applications of up to 1,000 miles between refueling stops. That compares with current EV plug-in solutions that can only travel about 100 to 200 miles per charge. Moreover, the ERX leverages the natural gas infrastructure of about 700 stations already in place in North America. Turning to Slide 5. You can see that we continue to make progress with our development milestones. In the first quarter, we completed our initial vehicle build of the truck that we will use for design verification. This build leverages the performance data and invaluable stakeholder feedback from our initial demo units. I am pleased to announce that we are already underway building more units. As previously discussed, we expect to build at least 10 more units to further test before we begin product validation. Our multiphase development program timeline includes design verification and product validation testing, inclusive of summer and winter seasons and the accumulation of up to 1 million test miles prior to production. The initial infield testing will be done in controlled fleet trials later this year, which will allow us to closely monitor truck performance. Looking ahead, we plan to build at least 20 more units in the first half of 2023 for the completion of product validation and for continued fleet trials. During this time, we will seek final certification from CARB, EPA and NHTSA. This will put us on track for commencing production in late 2023. As we head into production, one of the important factors we are focusing on is making sure our electric vehicle can assist with obtaining card-mandated credits for both the fleet and the OEMs. On previous earnings calls, we have mentioned how our launch Hypertruck ERX will qualify for 75% of a ZEV credit under the CARB Advanced Clean Truck ruling. This mandate focuses on the OEMs and what percentage of the vehicles they ship need to be ZEV qualifying. This past quarter, CARB released draft language for a new mandate called Advanced Clean Fleet or ACF with a goal of achieving a zero-emission truck and bus fleet in California by 2045. This initiative actually puts requirements on the fleet around what vehicles they can purchase. I am happy to share that as the mandate is currently written, our Hypertruck ERX will qualify for full credit for the fleet. We see this as an instrumental advantage for generating demand for our product as fleets would also be mandated to adopt technology like ours. As I mentioned earlier, we have secured orders for early production thoughts for a total of 170 units of the Hypertruck ERX which is inclusive of the 100 units we mentioned on our last earnings call. This reflects not only our R&D achievements but also the success of our ongoing ride and drive events. In addition to the orders, we have received reservations for nearly 2,000 units to date. These orders and reservations remain subject to the finalization of commercial terms, but all of the orders are backed by deposits. In February, we secured a 50-unit order from GreenPath Logistics, one of our Hypertruck innovation council members and a customer of our hybrid product. GreenPath is a very unique fleet as they only operate alternative fuel vehicles and shipped for some of the largest logistics companies, including Amazon, UPS and the United States Postal Service. GreenPath Logistics will be among the first to deploy Hypertruck ERX units in controlled fleet trials later this year. In March, Mone Transport joined in on placing orders to secure production slots. Mone, which currently operates our hybrid product in their fleet, had also previously placed a 40-unit reservation for the Hypertruck ERX. After their Ride and Drive experience, they converted 20 of those 40 reservations into orders to secure production slots. Based in Laredo, Texas, Mone is a dedicated provider servicing the 48 contiguous states and an early adopter of green technology. We want to share some additional color on the feedback we received from fleets at our Ride and Drive events. Overall, it has further validated that fleets are in need of a solution like the Hypertruck ERX that can offer a low cost of operations, leverage existing CNG stations and ultimately offer a far superior emissions benefit. We expect to increase our order count as we near production, while at the same time building a backlog of reservations, which reflects how our customers recognize the capabilities and value proposition of our technology. Now shifting to some updates on our hybrid product. Hyliion's hybrid product provides a great cost-effective entry solution for customers who want a greener alternative now but may not be ready to commit to a fully electric powertrain. Over the first quarter, we continued to ship more units to fleets and have booked additional revenue. We have evolved our sales strategy to target use cases with matching performance needs to our hybrid solution. Areas with hilly terrain that need additional power assist are seeing strong results with our solution installed. We continue to see an influx of interest from fleets who want to embark on a greener path forward and see our hybrid solution as a positive step in their ESG efforts. We view these customers as strong potential not only for our hybrid solutions but ultimately, as long-term Hyliion customers as they evolve and invest more meaningfully in electrification. On the manufacturing side, persistent global supply disruptions are continuing to lengthen delivery times, but we continue to work closely with our partners to secure the parts we need to fulfill these orders. With our current order book and sales pipeline, we remain confident in achieving our sales targets for 2022. Looking ahead, we are continuously assessing opportunities to create shareholder value. While the majority of our organization is focused on commercializing our current product roadmap, we see opportunities to expand our offerings into new products and adjacencies. We have designed our Hypertruck product platform to be generator agnostic. Today, we utilize natural gas. When the time is right, we will transition into hydrogen. We've showcased a three-stage approach. It starts with our current natural gas engine, then shifts to a fuel-agnostic generator that can run on both natural gas and hydrogen, and eventually moves into a hydrogen fuel cell solution. Additionally, our proprietary software solutions are a primary competitive differentiator and have the potential to become new products and generate new revenue streams. For now, our primary focus continues to be getting our first Hypertruck ERX units on the road as quickly and safely as possible. We continue to move aggressively with our commercialization and business development plans to build on our recent run of success. Moreover, 2022 should be an instrumental year for our product development and continued product shipment as we evolve our technology solutions to address the transportation sector's environmental impact. With that, I will turn the call over to Sherri.

Thank you, Thomas, and good morning everyone. I will now review our first quarter financial highlights. As Thomas mentioned, we continue to recognize revenue on our Hybrid Powertrain solution, which totaled $340,000 in Q1 and represents a 70% increase in revenue compared to the prior quarter. At the same time, we are investing in R&D to support our product development roadmap. In Q1, R&D spend was $15.8 million, down $1.6 million sequentially and up $6.5 million year-over-year. SG&A spend, which included the expansion of key infrastructure for our commercialization initiatives and operations was $9.8 million in the first quarter, up $0.6 million sequentially and up $2.4 million year-over-year. Operating expenses for Q1 totaled $25.6 million compared to $16.7 million in the year-ago period, as our product development and company expansion gain momentum. Overall, Hyliion reported a net loss from operations of $27.4 million for the first quarter compared to a net loss from operations of $29.1 million in Q4 and a net loss from operations of $16.7 million in Q1 of 2021. Turning to the balance sheet. We ended the first quarter with over $527 million available to fund our commercialization plans for both the hybrid and the Hypertruck ERX. This figure includes $227.1 million in cash and cash equivalents, $134.2 million in short-term investments and $166 million in long-term investments. Our short-term and long-term investments are high-quality credit instruments with no maturities beyond 36 months and a weighted average maturity of 13 months across our portfolio. Our long-term investments are designed to preserve capital while providing liquidity to meet the company's operating requirements. Turning now to our outlook. As discussed on our last earnings call, for the full year 2022, we reiterate our revenue guidance in the range of $2 million to $3 million in Hybrid sales. The actual amount of revenue recognized will depend on the number of units we sell and the mix of retrofit versus new installations. We still expect full year operating expenses to be between $135 million and $145 million, driven primarily by an increase in R&D costs to support commercialization of the Hypertruck ERX. Lastly, we expect to remain well-capitalized through the key development milestones we discussed on today's call and outlined in today's presentation. With that, I'll turn it back to Thomas for a few closing remarks.

Thanks, Sherry. I want to share five important points. First, the time for electrification is now as the commercial vehicle industry is at a crucial turning point, and early users of our technology see Hyliion's potential to transform the industry. Second, our market is extensive and expanding. Research estimates indicate there are 8 million Class 8 commercial vehicles operating worldwide. Moreover, the active Class A commercial vehicle population is projected to grow by around 4.5% annually from 2022 to 2025. Third, our solution is both innovative and practical. We use existing infrastructure, provide a lower cost of operation, and qualify for credits today for both OEMs and fleets, all while advancing a net negative emissions solution. Fourth, both drivers and fleets are interested in our solution. Feedback from our Ride and Drive events has been highly positive. Fleets recognize the benefits of a truck with a thousand-mile range that can refuel in about 10 to 15 minutes, and they have been impressed with our vehicle's smoothness and quietness. They've indicated that they see it as a method to better retain drivers. Finally, our long-term growth strategy is a sensible way to transition to a hydrogen-based future. We can utilize current resources to provide an outstanding powertrain solution and gradually evolve into a hydrogen-powered range extender. For all these reasons, we are very optimistic about our future. With that, we will transition to the Q&A. Operator, please proceed.

Our first question comes from Bill Peterson with JPMorgan. Your line is open.

Yes hi. Thanks for taking my questions. I guess first question, I understand the point about focusing on our natural best solution and ample supply and so forth. But I'm curious about the fuel agnostic fuel cell, do you anticipate we're at least beginning work on this before commercialization of ERX in the second half of 2023, or is this really more 2024 and beyond timeframe for those programs?

Thanks Bill, and I look forward to seeing you out at the conference tomorrow. And to answer the question about going into hydrogen in the future, we've actually begun development on those solutions, specifically around the fuel agnostic technology. That is one that we're already well underway with, and we see that being a large differentiator for us. Now, in terms of actually releasing both the fuel agnostic and the fuel cell solution to market, it will happen after the Hypertruck ERX, the natural gas ICE solution. So, they will have a staged rollout, but it is something that we are already well under development with.

Okay. Thanks for that and we'll look forward to hearing more as here at the conference. I guess on the hybrid, I know you're reiterating the revenue targets for this year. But I think in the past, you've mentioned that there is increased competition, including from some natural gas powertrains. I'm wondering how we should think about that business in terms of repeat orders or how you think about the growth of that as we look beyond this year?

So, we have seen continued interest growing in it, but as we mentioned in the past earnings call, we do see the release of the 15-liter Cummins engine as a competitive threat to the hybrid, not necessarily to the Hypertruck. And then the other thing that we've seen is just an overall market shift to wanting to move to full electric vehicles, whereas the hybrid is more of a step into electrification, but it doesn't give you quite the benefits of a full electric drive vehicle. Now, with that said, there are some pretty strong benefits that come from hybrid. It's an easy step into getting into electric and a relatively low-cost step into electric. And that's where we're seeing some fleets are willing to make the jump and say, yes, I want to start this journey of electrification; hybrid makes a lot of sense for me. I get some strong ESG benefits from it. I can get some fuel savings benefit from it in the right terrains, and that's where we're seeing some of this early adoption. As you mentioned, we have seen some repeat orders, companies like Wegmans, GreenPath Logistics, and Detmar have placed repeat orders and some others on it. And so we continue to deliver the hybrid solution. But ultimately, we do see the Hypertruck ERX as being the long-term backbone solution for Hyliion.

Yeah. Understood. Thanks, I'll jump back in the queue. Thank you. I look forward to seeing you in the coming days.

Yeah, it should be a fun show.

Our next question comes from Mark Delaney with Goldman Sachs. Your line is open.

Understand if you're seeing any added interest from fleets in the ERX given the CARB ruling that you spoke about? And especially being in California this week, again, wondering what you may be seeing from the fleet space there?

Absolutely. So interest in the Hypertruck is continuing to grow and the Ride and Drive events for us have been extremely valuable. Fleets get to see the vehicle experience it firsthand and understand why we're so excited about it. And ultimately, that's what's driving some of these orders coming in as well as the reservations. Around the ruling, there are really two different mandates that are coming out right now. We've previously spoken about ACT, which is a mandate on the OEMs that we're going to qualify for 75% of a ZEV credit in. The new mandate is this ACF ruling, which is actually a mandate being put directly on the fleet themselves. And this is specifying what types of vehicles, what mix of vehicles they're going to need to adopt going forward. And we're going to be able to qualify for full credit under the ACF ruling as it's written today. So, I definitely see this as something that's going to help with pulling customer interest. We've already seen the ACT side of things for the OEMs. That has been a strong pull for our product, and we envision ACF is going to do the exact same thing. So I think fleets see this as a very practical solution for the long-haul space to move into electrification, and the fact that we're able to get them the same credits as a BEV plug-in vehicle, that's a huge win for us.

That's helpful. And then second question, hoping to understand, how you're thinking about managing the supply chain related to the ERX. So to what extent does Hyliion need to lock in parts supply for the ERX now, perhaps reflecting what current costs are which may be somewhat elevated, but would give you some visibility and some supply assurances, or do you have the opportunity of maybe waiting and hoping that costs for the supply chain go down?

We've more taken the approach at this stage of let's make sure we lock in supply that we need based on the timelines ahead of us. So for the 2022 milestones and going into 2023, we've already started locking down all the critical components and that includes the trucks that we're going to need, the electrification components we need, really all the key supply chain aspects. We've already placed those orders. And we have strong relationships with those suppliers, and we're working with them to make sure that it does not add any impact to the timeline that we've laid out. And we feel pretty confident on that end. The near-term, this year, going into next year, we've really locked that in. And then obviously, we're looking at how the supply chain markets are evolving and making sure that it doesn't add to further delays in this timeline.

Understood. Thank you.

Our next question comes from Andres Sheppard with Cantor Fitzgerald. Your line is open.

Hi. Good morning Thomas. Good morning Sherri. Congrats on the quarter. And thanks for taking my questions. Quick question for me, in terms of the revenue guidance, which remains unchanged, I'm wondering, should we account for some seasonality throughout the next quarters, or should we kind of think of it more as sort of ramping up and have Q4 a little bit more backloaded?

Yes, that's a great question, and thank you for that. So yes, we fully expect that our revenue will be ramping up as we're moving throughout the year. Just keep in mind in Q4, you do have some holidays and some shutdown time that you'll have that will affect that a little bit differently in Q4 versus Q3. But based off of the full year guidance, you should expect it to increase sequentially as we're moving throughout the year.

Got it. Thanks, Sherri. And maybe one quick follow-up. Following up in terms of the supply shortages, which, again, are affecting every industry, not just you guys. Can you give us a little more granularity in terms of what that impact to delivery might look like? And like is that based this year, next year, and which components specifically are the ones that are being mostly constrained? Thanks.

We see the supply chain hurdles as kind of twofold. One is actually getting delivery of the vehicles for the OEM. And so as we look at the hybrid system, we've actually experienced some of the truck deliveries from the various OEMs in the industry getting pushed out to the right. And then ultimately, that's causing us to have to push out our delivery of our hybrid system to the right because we obviously need a truck to be able to install it on. Then the other aspect of this is actually getting some of the components that go in our system. So very similar to most supply chain hurdles, you can have 90% of your bill material figured out or 95%, and it's that last 5% that is the long pole in the tent. And we're seeing various components, whether it be wiring harnesses down to connectors, electronic components that we've seen some pushouts of delayed timing for. And ultimately, we're working through that. We have had to push some of our hybrid deliveries from one quarter to the next. But through all this, we're continuing to make deliveries of it. And we're working on it very closely to make sure that we have line of sight to supply in the quarters ahead.

Got it. Thanks very much, Thomas. I'll pass it on.

Our next question comes from Brian Johnson with Barclays. Your line is open.

Yes, I apologize for joining the call a bit late. If I missed this, I'll refer back to the transcript. We're aware that diesel prices have significantly increased, going from $3 to $5 and then $5 to $6 a gallon, with even higher prices in California. How has this affected interest in the hybrid and the Hypertruck? Also, regarding natural gas prices, which have been volatile, how have the total cost of ownership (TCO) economics shifted between diesel and natural gas, specifically for the hybrid and how does it compare to diesel fuel in terms of the economics related to the Hypertruck?

Thanks, Brian. This really is a great question because as diesel fuel prices increase, the demand for alternative fuel vehicles for fuel-saving technologies greatly increases, and we're seeing that, right? Fleets are looking at, let's take the Hypertruck first, for example: natural gas prices, while the actual commodity price of natural gas has fluctuated, the actual pump prices have not fluctuated all that much. And the reason for this is the actual commodity of natural gas in like the $1 per gallon, the actual nat gas pricing is only about maybe 20% to 30% of that overall pricing. So while we do see some fluctuations in the actual commodity price, that's not seeing a big impact on the pump pricing, which is great for us, right, because fleets are looking at this value proposition and saying, okay, I can pull into a diesel station and pay $5 or $6 a gallon or I can go to a natural gas station and pay around $1 per gallon. And that just helps drive the TCO economics of the Hypertruck. So strong benefit there from having a higher diesel pricing. And then that same thing goes true for the hybrid solution as well. In the right terrains, we're able to apply fuel-saving assist to the truck and with higher diesel prices, that means there's greater savings for the fleet. So, similarly, we see that strong pull-through.

And kind of a follow-on question, maybe something that will be kicked around out of Long Beach, where my colleague, Jason will be out there with you. California, in some circles, is getting some heat for the renewable fuel standard. That's pushing biodiesel and taking particular corn oil, palm oil, you name it, putting pressure on those pricing, similar pressures in Europe. So do you see any sort of either whether it's going to be a regulatory change or fleet owners looking at this and say, look, I believe in cutting CO2 but taking cooking oil away from third-world countries isn't the best way to do it even if it helps me meet my carbon target and therefore, paying more interest in your solution, potentially a solution?

Sure. I can't comment too much on the renewable fuel standards with biodiesel. It's just not something that we've spent a ton of time looking at, but because obviously, our focus is then more on the natural gas side. But the RIN credits, the LCFS credits that are going towards nat gas and specifically renewable natural gas, are holding strong. And ultimately, there are some pretty interesting stats coming out around renewable natural gas and kind of the benefits ahead this past year. We actually saw that over half of the fuel sold at natural gas stations already came from renewable natural gas. And probably one of the most exciting things is that there are just as many RMG capturing facilities in development as they already are in existence. And so that just conceptually, we're going to see probably around a doubling of renewable natural gas available in the not-too-distant future. And so I think fleets are well aware of this. And one of the things that we've heard time and time again as we've met with these fleets is they've all set or many of the fleets are going to net zero emissions profiles. And ultimately, if we can deliver a solution that actually is below zero, a net carbon-negative solution, then that can offset some of the emissions from their other parts of their business. So that's resonated very well with fleets, and they see this as a cost-effective, viable way to actually move to an electric solution that has a negative capable emissions profile.

Great. And yes, just as a follow-up, I might note that if a company is worried about the S part of ESG, social impact, using renewable gas, which takes methane from the food production system out of the atmosphere versus diverting foodstuffs into making biodiesel would seem to be something they should think about on the S part of their ESG scores.

Yes, the best way I can explain it is that we are taking pollution that would have gone into the atmosphere and using it to charge our battery pack. This approach can lead to a significant reduction in emissions.

Okay. Thank you.

Our final question comes from the line of Avi Jaroslawicz with UBS. Your line is open.

Hey, good morning guys.

Good morning, Avi.

Just wanted to speak a little bit about the overall level of confidence in the timeline around the commercialization for the Hypertruck, like late 2023 seems like it should be achievable given where you have trucks. But, as we saw through this past winter, when winter testing wasn't able to be completed, it had to be pushed out to the end of this year, even some relatively small delays can be magnified at this stage. So just wondering how you're thinking of all that.

Thank you, Avi. Currently, we have strong confidence in our timeline, and our ability to reiterate it over the last few earnings calls reflects that confidence. We have successfully completed the first design verification vehicle builds, which are set to undergo winter testing. This positions us well to ensure these vehicles undergo the necessary evaluations. We have already begun testing on tracks in Michigan, which is encouraging. We are optimistic about meeting the timing for both design verification and product validation. After that, we will focus on the challenges of obtaining certifications from NHTSA, CARB, and EPA, which we are already addressing. This keeps us on track for launching production by late 2023. Everything we are observing indicates that we are set to achieve our goals.

Okay, great. And just a follow-up on what kind of trend are you seeing in the availability or the ability to get trucks for the Hypertruck? Like how are lead times changing? Is there maybe any chance for new partnerships or an update on the strategy there?

Sure. And it's a great point because we actually expect that 2023 is going to be another record year or close to a record year for trucks. The demand is through the roof right now. Fleets are, when they're actually placing truck orders, they're having to wait over a year in order to get new trucks. So, we do see this as something that's a big impact on the industry. Now, one of the things we've already done, as we mentioned earlier today, was we placed all the trucks we need for 2022. And then similarly, going into 2023, we've been looking at the timelines and making sure that we place trucks on order to be able to accomplish that. But ultimately, as we've mentioned before, we're working with Peterbilt on the launch of these trucks, and they've been a great group to work with in order to ensure these truck delivery times. We see that we're going to be able to line up just fine for those late 2023 deliveries. Ultimately, you're hitting the nail on the head; truck delivery timing has been a hurdle for the industry. Fleets just can't get trucks right now. But we've been able to place these orders long enough in advance, working closely with Peterbilt on it in order to ensure the delivery timing.

Great. Thanks, Thomas.

We have reached the end of the question-and-answer session. I'll turn the call back over to Thomas Healy for closing remarks.

Well, thank you all for joining our earnings call. As I mentioned, leading into this call this week is the ACT Expo out in Long Beach, California. We'll be out there. We have trucks on display. We're offering ride and drive events for those who are interested. And I want to thank some of those who are on the call today, Bill, Andres, and Jason, who are going to be joining us out there at the conference. It's an exciting time for Hyliion and we look forward to you joining us on our next earnings call. Thank you, everyone.

This concludes today's conference call. You may now disconnect.