Donovan Schafer

Donovan Schafer questioned Hyliion's CapEx and capacity plans, including the number of printers, focus on throughput, and cost per unit. He also sought details on the $10 million revenue forecast, the timeline for new military contracts, and milestones for revenue recognition. Additionally, he asked about revenue recognition for the 10 early adopter units and the technical progress and remaining tweaks needed to reach the 200-kilowatt power goal.

Answer

Jon Panzer, CFO, confirmed the focus on optimizing existing printers and adding a handful of new ones, emphasizing increased output without significant investment. Thomas Healy, Founder and CEO, provided a cost range for printers. Mr. Panzer stated most 2026 revenue would be from R&D services, with commercial revenue post-commercialization, and new military contracts expected late 2026. Mr. Healy clarified that military units include both 800-kilowatt modules and 200-kilowatt enclosed units, and commercial units are paid for, with revenue recognition tied to commercialization and contractual requirements. Mr. Healy detailed the path to 200 kilowatts involves refinements like new cylinder wall sleeves, piston design, and thermal blankets, with current power sufficient for initial deployments.

Donovan Schafer of TD Cowen asked for quantification of the KARNO generator units corresponding to the fully booked 2024 capacity and the 50% booked 2025 capacity. He also inquired about the generator's physical footprint compared to conventional offerings for data centers and the primary drivers behind the increased 2024 spending guidance.

Answer

CEO Thomas Healy stated that 2024 deployments will be in the 'mid-range of single digits' for the 200-kilowatt BETA gensets, with 2025 volume being 'much more than in the teens' to align with the low double-digit million revenue target. Healy highlighted that KARNO's fuel flexibility allows it to serve as both a prime and backup power source, potentially reducing the overall footprint for data centers. CFO Jon Panzer explained the increased 2024 spending is for an accelerated ramp-up of the Texas production facility, driven by capital investments in new and used additive manufacturing machines.

Donovan Schafer of Northland Capital Markets inquired about the Delhi Field, asking for the specific location of Test Site V, the potential for larger expansion phases, the outlook for production recovery after a downturn, and the monetization strategy for new carbon capture certifications.

Answer

CEO Kelly Loyd and COO J. Bunch explained that Test Site V is an incremental extension of the current development, not a new phase, and is being developed with high-return producer wells. They noted that larger expansions are further down the queue. They expect Delhi production to increase, viewing the prior quarter's dip as an anomaly due to a temporary halt in CO2 purchases and a compressor issue, both of which are being resolved. Regarding carbon capture credits, Mr. Loyd stated that the monetization timeline and strategy are still being developed.

Donovan Schafer of Northland Capital Markets asked for clarification on the DSA portfolio, questioning if the 1.7 GW of Italian BESS projects were a subset of the 2 GW total contracted DSA portfolio. He also inquired about the specific trigger for the recent project write-offs and whether monetizing 400-500 MW of advanced-stage projects remains a priority for the year.

Answer

CEO Yumin Liu confirmed that the Italian BESS (Battery Energy Storage System) projects do indeed represent over 80% of the currently contracted DSA portfolio. He explained that the recent $2 million write-off was specifically triggered by interconnection approval challenges in markets like the U.S. and Spain. Liu also affirmed that monetizing 400-500 MW of advanced-stage projects is 'absolutely true' and remains a priority, explaining it was not highlighted in the shareholder letter because it is considered part of their 'normal business,' unlike the newer DSA strategy.

Donovan Schafer inquired about a significant change in the Spanish battery storage pipeline, where about 1 GWh was moved from advanced-stage to early-stage. He also asked about the reduction in Germany's early-stage solar pipeline and whether it triggered an impairment charge, and questioned the potential risk of Chinese government retaliation impacting Emeren's business.

Answer

CEO Yumin Liu explained the Spanish storage pipeline was reclassified to early-stage as a conservative measure due to anticipated interconnection approval delays, not because the projects were cancelled. CFO Ke Chen clarified the German pipeline reduction was due to losing bids on two projects, which resulted in a minimal impairment of less than $50,000. Regarding China risk, both executives stated they see no impact, as their IPP business in China serves local enterprises, and Mr. Liu highlighted China's cost-effective and dominant position in the global solar supply chain.

Asked for clarification on what makes a well 'high impact,' questioned the potential conservatism in the full-year production guidance given the strong Q2 results, and inquired about any potential shut-ins due to offset completion activity.

Answer

'High impact' refers to wells in high initial production rate areas like the Haynesville. The company confirmed there is a layer of conservatism in their guidance to normalize for quarterly volatility. They are not currently seeing significant negative impacts from shut-ins for offset completions; in fact, they've seen some positive impacts.

Asked for clarification on well classification (in-progress vs. converted), the potential for an accelerated production ramp-up from shut-in wells, the production mix of the SpringBoard III asset, and any impactful NGL infrastructure developments.

Answer

Management clarified that wells are 'in progress' until they are producing. They don't expect a sudden surge from all DUCs coming online at once, but rather a more normal conversion rate driving growth in 2025. The SpringBoard III asset has a balanced mix of roughly one-third each of oil, NGLs, and gas. While there is no new NGL infrastructure directly impacting them, they see a potential pricing benefit from strong future global demand for U.S. NGLs.

Asked about the rationale for the dividend increase, specifically if it was based on the legacy business or enabled by recent acquisitions. Also asked for modeling guidance on the future oil/gas mix and transportation costs, and for macro thoughts on the natural gas market given conflicting supply signals.

Answer

The dividend increase was primarily driven by completing the divestiture of non-op working interest assets, which provides much clearer visibility into future royalty cash flow. On modeling, the gas mix should stay around 80% and transportation costs should stabilize at current levels. On the macro, executives stated that while weather causes short-term volatility, underlying fundamentals show a tight market. They expect new associated gas supply in late 2024 to be balanced by new LNG export facilities coming online.

Donovan Schafer questioned TZE's motivations with its majority stake, asking if TZE would prioritize Maxeon as the beneficiary of its IP. He also asked if the company had considered an IP-backed loan among its financing alternatives.

Answer

CEO Bill Mulligan affirmed that TZE has always valued Maxeon's independent operation and unique access to Western markets, viewing the partnership as synergistic to leverage TZE's scale while keeping Maxeon independent. CFO Kai Strohbecke responded that while multiple alternatives were explored, the announced transaction with TZE was the only credible option that provided the necessary long-term capital and deleveraging to secure the company's future.

Asked for clarification on a reported $2.4 billion revenue bond request for the Albuquerque factory and whether that figure is a useful cost estimate. Also questioned if there was an interplay between the DOE loan and offtake agreement timelines, and inquired about the warranty for Maxeon 7 and its relation to the past SunPower warranty dispute.

Answer

The company clarified that the $2.4 billion figure is not a useful reference point for the factory's investment cost, which will be much lower. The timing of updates on the DOE loan and customer agreements is coincidental, as both are expected to close contemporaneously. They are happy with the current 40-year warranty and don't see demand for an extension on Maxeon 7. The past warranty dispute with SunPower was unrelated to the solar panels themselves.

Schafer asked about the impact of new U.S. tariffs on Chinese EVs and batteries, whether recent deliveries were recognized as revenue, and if there was any new customer feedback.

Answer

Aquila stated that Canoo is well-positioned regarding the tariffs, having proactively moved its supply chain away from China years ago. He confirmed the tariffs provide a competitive advantage. He also confirmed that deliveries are generating revenue but emphasized the focus is on long-term customer satisfaction over immediate billing, and that specific customer feedback will be kept confidential.

Asked how the company leverages the user experience from high-profile, low-volume customers like NASA and how it addresses EV charging infrastructure challenges for its fleet customers.

Answer

Partnerships like NASA provide invaluable R&D on critical elements like ingress/egress and safety, which builds credibility and is applicable across the platform. For charging, the company ensures customers have infrastructure in place before delivery, de-risking the rollout by focusing on known routes and using vehicle software to manage range.

Asked for a detailed explanation of the significant increase in customer 'terminations, payoffs and expirations' and whether this trend was economically positive.

Answer

The company clarified that the vast majority of this number represents customer loan payoffs, not terminations. They view this as an economically positive event because it accelerates the return of capital, and they would be happy to see the trend continue.