Q4 2023 Earnings Summary
- First-Mover Advantage in Hydrogen Fuel Cell Electric Trucks: Nikola is the first manufacturer to deliver Class 8 hydrogen fuel cell electric trucks to customers in North America, giving them a significant lead over competitors. They have captured a dominant share of 99% of HVIP vouchers for hydrogen fuel cell trucks in California, indicating strong demand and market acceptance.
- Strong Customer Demand and Repeat Orders: Nikola is experiencing heightened customer interest, with initial orders from large fleets. For example, they sold 10 trucks to two different fleets and 5 trucks to another, and one of the customers who bought 10 trucks wants 40 more. This demonstrates customer satisfaction and the potential for scalable growth in sales.
- Superior Product Features and Technology: Nikola's hydrogen fuel cell electric trucks offer an extended range of up to 500 miles, similar weight to other electric trucks but with almost 3 times the range and faster refueling times. Customers prefer the trucks' tighter turning radius, driver assistance features, smoother ride, and over-the-air updates that enhance functionality and reduce downtime. These advantages set Nikola apart from competitors.
- High cash burn and potential need for additional capital: Analyst Jeffrey Kauffman estimated a cash burn of "somewhere in the low $400 million" and asked if Nikola would need to raise capital before the end of the year. CEO Stephen Girsky responded, "we have assets we could sell that we could monetize. So we'll figure out what we need to do when we need to do it, but we don't need to do it right now." This suggests that Nikola may need to raise funds or sell assets in the future to support operations.
- Supply chain constraints impacting production and deliveries: The company acknowledged experiencing delays due to supplier part constraints. When asked about resolving these issues, Dhillon Sandhu stated, "on the truck side, they're starting to resolve. And on the fueling side, they're actually also starting to resolve with the truck side resolving a little faster." Ongoing supply chain challenges could hinder Nikola's ability to meet its production and delivery targets.
- Uncertainty regarding profitability and margin targets: When questioned about the gross margin profile for the battery electric vehicles (BEVs) post-delivery of 100 units, the company did not provide specific guidance. Stephen Girsky said, "We have not provided gross margin guidance, and we'll continue to update you guys as we get closer to that target time frame." This lack of clarity on future profitability may raise concerns for investors.
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Cash Burn and Funding Needs
Q: Do you need to raise capital again before year-end?
A: We have the highest unrestricted cash we've had in two years, covering our cash burn. The second half will see materially lower cash burn than the first half, and we have assets we could monetize. We'll decide on raising capital if needed, but we don't need to do it right now. -
EBITDA Positive Target
Q: Any updates on reaching EBITDA positive in 2025?
A: We're focused on achieving a positive cash contribution margin per truck by year-end. As we ramp up volume next year, we expect to move towards EBITDA positive, maintaining our target. -
Production Cadence for Fuel Cell Trucks
Q: What's the production cadence for fuel cell truck deliveries?
A: Using "farmer's math," we estimate delivering 30, 60, 90, 120 trucks per quarter on the low end. As supply constraints ease, we'll accelerate production. -
Supply Chain Constraints
Q: Have component constraints affecting production been resolved?
A: On the truck side, constraints are starting to resolve, with fueling side constraints also improving but resolving a bit slower. -
Battery Electric Truck Inventory and Margins
Q: Are the 100 BEV trucks you're selling from inventory, and what's the margin outlook?
A: Yes, the 100 BEV trucks are from our inventory of 150 units and will require new battery packs. We expect a positive cash contribution on these trucks this year. For future rebuilds next year, we haven't provided gross margin guidance yet but will update closer to that time. -
Market Expansion Plans
Q: Plans for entering markets outside California?
A: We focus where incentives are best—currently California and Canada. There are 30,000 trucks serving California ports moving to zero emissions. We'll eventually expand, but right now, California and Canada are our best markets. -
Opportunities in Ports
Q: Can you talk more about opportunities at the ports?
A: The ports are huge, with 30,000 trucks serving them. We're targeting these markets, deploying most of our fuelers there. It's an enormous opportunity, both in Southern and Northern California. -
Revenue Streams Beyond Truck Sales
Q: Are you generating revenue from fuel or maintenance?
A: We have some small energy revenue, about $10 to $12 million this year, mostly around energy. We're just getting started, and it's a significant future revenue piece. -
Hydrogen Fueling Network Expansion
Q: Progress on hydrogen fueling stations?
A: We have line of sight on six modular sites in the South and another three in the North. It's a moving target, but we're on target with our plans. -
Customer Purchase Patterns
Q: How do customers approach buying fuel cell trucks compared to BEVs?
A: Customers are buying fuel cell trucks in larger quantities; for example, we sold 10 trucks to two different fleets and 5 trucks to another. One customer who bought 10 trucks wants 40 more. They prefer fuel cell trucks due to similar weight, almost 3× the range, and faster refueling compared to BEVs. -
Dealer Inventory Stocks
Q: Are dealers requesting inventory to stock?
A: We're still filling customer demand with customers attached to every order. Dealers may eventually have demo vehicles, but it'll be a while before they can physically stock trucks. -
Badger Program and Social Media Posts
Q: What happened with the Badger program?
A: The Badger program was initiated by Trevor Milton but discontinued after his departure in 2020. We sold the assets to Ember with stipulations that Milton would have no involvement. We remain focused on our core business of Class 8 trucks and will push back against any efforts by Milton to take control of Nikola.
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