Hyzon Motors Inc. (HYZN)·Q1 2024 Earnings Summary

Executive Summary

• Q1 2024 delivered Hyzon’s first material revenue inflection: $10.0M recognized (vs. $0.0M in Q1 2023), driven by customer acceptance of 10 Fortescue coach buses, a refuse truck sale to REMONDIS, a drayage truck sale, and recognition on PFG trucks accounted as operating leases. Management cautions near‑term revenue “lumpiness” given contract risk‑sharing terms .
• Cash and short-term investments ended at $82.6M; net cash burn was $29.6M (or $24.0M excluding the $8.5M SEC settlement and ~$2.9M Rochester proceeds), marking the lowest quarterly burn in 10 quarters and the fifth consecutive quarterly decline .
• Technology and commercialization milestones remain on track: five 200kW C-sample fuel cell systems completed in Q1 and five more in April; SOP for the single-stack 200kW FCS and initial Class 8 200kW FCEV is targeted for 2H 2024 .
• Catalysts: U.S. refuse truck unveiled with New Way; trials to start with Recology and other fleets this summer (9+ trials scheduled/planning), plus a pending second tranche with PFG for 15 200kW trucks contingent on trials .
• Q2 2024 guidance: R&D $11–13M, SG&A $26–30M, net cash burn $27–30M (slight uptick vs. Q1 driven by working capital and payroll timing) .

What Went Well and What Went Wrong

What Went Well

• Material revenue recognition and commercial cycle completion: “first quarter revenue of $10.0 million compared to no revenue in the comparable prior-year period… approximately equal to the total revenue recorded prior to this quarter since inception,” with acceptance of Fortescue buses and the REMONDIS refuse truck sale .
• Strong early operating data with PFG: since late January the fleet completed ~1,575 deliveries, ~23,000 miles, and ~2,900 operating hours; pending a successful 200kW truck trial, PFG’s second tranche is 15 trucks with an option for 30 more .
• Manufacturing progress: five 200kW C-sample FCS completed in Q1, five more in April; daily single-cell production rate increased >2.5x; SOP in 2H 2024 remains on track with <~$3M Capex to SOP and targeted 700 systems/year capacity on 3 shifts .

What Went Wrong

• Losses persist with revenue-cost dynamics that are not yet steady-state: Net loss was $34.2M; cost of revenue was affected by warranty accrual reversals and inventory sales; management warns the implied Rev/COR relationship should not be extrapolated .
• Funding dependency and guidance caveats: management remains focused on capital raising; Q2 guidance is “subject to change based on our capital raise outcomes,” with levers to reduce burn if needed .
• Fuel supply/infrastructure headwinds near-term: California heavy-duty hydrogen stations remain constrained; fleets and OEMs rely on mobile fuelers at higher fuel costs vs. expected future economics .

Financial Results

Notes:

• Q1 revenue growth was substantial vs. prior quarter and prior year; management highlighted expected near-term “lumpiness” due to buyback provisions and other risk-sharing terms in first-tranche deliveries .
• Q1 gross margin reflects unique items (e.g., warranty accrual reversals and inventory sales); management cautioned against extrapolating Q1 Rev/COR relationships .

Operational KPIs

Guidance Changes

Management noted the Q2 net cash burn uptick is largely driven by working capital timing, annual bonus payments, and pay period timing; Q2 ranges are subject to change based on capital raise outcomes .

Earnings Call Themes & Trends

Management Commentary

• CEO: “I am pleased with our start to 2024… We unveiled the first U.S. fuel cell refuse vehicle with New Way, and we eagerly anticipate commencing trials for this vehicle and the 200kW Class 8 fuel cell truck this summer. We remain on schedule for the SOP of our single stack 200kW fuel cell system in the latter half of this year” .
• CFO: “We recognized first quarter revenue of $10.0 million compared to no revenue in the comparable prior-year period… an important validator and reflection of customer acceptance… we expect near-term fluctuations in revenue recognition given the timing of deployments and contract terms” .
• CEO (PFG operations): “Since the last week of January, the PFG fleet has made more than 1,575 deliveries and traveled nearly 23,000 miles with approximately 2,900 total operating hours” .
• CEO (manufacturing): “We progressed toward SOP by completing 5 C-sample systems using production tooling in the first quarter, with another 5 completed in April… increased our daily single cell production rate by over 2.5x” .

Q&A Highlights

• Validation of 200kW C‑samples: Management detailed MEA-to-system durability testing and BOP optimization; target is to stay ahead on the cost/performance curve as others reach 200kW .
• Deployment mix and timing: 2024 deployments expected to be a mix of 110kW (refuse) and 200kW (Class 8); back‑half weighted with trials converting to multi‑year agreements and potential tranche 2 deliveries (e.g., PFG) .
• SOP Capex and risks: <~$3M remaining; risk more about commissioning and durability validation than supply chain; SOP timing unchanged (2H’24) .
• Revenue recognition mechanics: Trials convert to multi‑year contracts; first‑tranche risk‑sharing (e.g., buyback) can delay revenue recognition; ~$7M remaining performance obligations expected over the next 12 months .
• Competitive dynamics: Others pursuing volume at negative contribution margins; Hyzon emphasizes cash‑positive contribution margins at truck level and structural advantages in refuse and 200kW single stack .
• Refuse vs. BEV: Battery refuse trucks face weight penalties and duty cycle limits; hydrogen offers comparable diesel‑like performance, supporting rapid adoption in refuse and related Class 8 transfer applications .

Estimates Context

• S&P Global Wall Street consensus estimates for HYZN Q1 2024 EPS and revenue were unavailable via our SPGI data integration at time of analysis (missing CIQ mapping). As a result, we cannot provide beats/misses vs. consensus and recommend treating estimate comparisons as unavailable for Q1 2024 [SpgiEstimatesError].

Key Takeaways for Investors

• Revenue inflection and commercial validation: First material quarterly revenue ($10.0M) from customer acceptance and sales marks tangible progress through the trial→contract→deliver→accept cycle; expect lumpiness near‑term given buyback/risk‑sharing structures .
• Execution toward SOP: Ten 200kW C‑sample units completed by April and higher single‑cell throughput underpin confidence in 2H’24 SOP for both FCS and 200kW Class 8 platform; <~$3M Capex remains .
• Refuse is a near‑term wedge: U.S. refuse truck unveiled; trials starting with Recology and others; hydrogen’s structural advantages over BEV in refuse (weight/duty cycle) suggest strong adoption potential and early commercial agreements in 2H’24 .
• Large fleet scaling pathway: PFG operating data is encouraging; pending 200kW trial could unlock tranche 2 (15 trucks) and option for 30 more—this is a key 2H’24 contract conversion catalyst .
• Cash discipline with controlled burn: Q1 burn at low end of guidance excluding one‑time items; Q2 guidance reflects working capital/payroll timing; management retains levers to reduce burn if capital raising timing warrants .
• Policy tailwinds and credits: Final Treasury regs support $45W clean vehicle credits for upfitters like Hyzon; broader IRA/DOE programs and CARB HVIP provide multi‑layered support for trucks and fueling infrastructure, aiding commercialization .
• Watch for near‑term catalysts: 200kW U.S. trials commencement; refuse trials and initial U.S. refuse agreements; PFG tranche 2 conversion; progress on capital raise; and any updates on fueling partnerships to mitigate current station constraints .

Appendix: Additional Relevant Press Releases (Q1/Q2 timing around Q1 results)

• Date announcement for Q1 results and call logistics .
• Treasury final regulations supporting $45W clean vehicle tax credits for upfitters (Hyzon eligible) .
• New Way + Hyzon unveil North America’s first hydrogen refuse truck; Recology demo to follow .