Ladies and gentlemen, thank you for standing by, and welcome to the Hyliion Holdings Third Quarter 2020 Results Call. [Operator Instructions] I would now like to turn the conference over to Bob Gujavarty, Head of Investor Relations.

Thank you, and good morning, everyone. Welcome to Hyliion Holdings Corp. Third Quarter 2020 Results Conference Call. With me today is Thomas Healy, our Chief Executive Officer; and Greg Van de Vere, our Chief Financial Officer. During today's call, we will make certain forward-looking statements regarding our future business expectations, which involve risks and uncertainties. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and as a result are subject to risks and uncertainties. Many factors could cause actual future events to differ materially from the forward-looking statements on this call. For more information about factors that may cause actual results to materially differ from forward-looking statements, please refer to the earnings press release we issued today 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. We undertake no duty to update those information unless required by law. With that, I'll now hand the call over to Thomas Healy.

Thanks to all those joining us on Hyliion's first conference call as a public company. Since many of those joining us today are new to the Hyliion story, I want to start off with a brief overview of Hyliion's market, our products, value proposition and our go-forward strategy. Later, I will cover key developments in the quarter before turning it over to Greg to go over the numbers and discuss our outlook. So starting at the high level, I'd like to share Hyliion's mission, which is to bring electrified solutions to the commercial vehicle space. We're in a time today where the trucking industry is ever increasing moving towards electrified solution, and fleets are at a point where they're trying to figure out what electrified solutions are going to be right for their operation. And as we look at the global emission standings today, the transportation sector is the #1 source of pollutions globally. And with Hyliion, our solutions are able to offer a net carbon-negative savings compared to other vehicles. This means that our trucks can actually help improve the environment as opposed to creating more harm. One of the other key factors with Hyliion is that we are a powertrain company. That means that we're leveraging the existing chassis produced by OEMs and delivering our powertrains on their vehicles. I'd first like to start by addressing the market opportunity. We've got an $800 billion global market opportunity ahead of us, and Hyliion is focused on the long haul, over-the-road trucking market. This offers a very unique sales opportunity for us as it's very different than the conventional automotive sales cycle for passenger cars. The commercial vehicle space is addressing fleets who operate hundreds or thousands of vehicles and are replacing these vehicles every quarter within their operations in…

Thank you, Thomas. Good morning. I have 3 items to highlight this morning. First, the successful completion of our business combination with Tortoise Acquisition Corp., followed by the results of our third quarter operations and a quick update relating to our 2021 plans. On October 1, we successfully completed our business combination with Tortoise Acquisition Corp. By combining the funds provided by both the SPAC's IPO and the PIPE raised in connection with our business combination with Hyliion's product development expertise, sales prospects and operating capabilities, we have enhanced the value of each entity. Together, we have created a combined entity with strong potential to transform the transportation industry. The business combination provided Hyliion with approximately $520 million of proceeds net of transaction expenses. Provided certain share price and share registration criteria are met, Hyliion also has the potential to raise up to an additional $140 million through the outstanding public warrants. This incremental capital would help us to further enhance our efforts to commercialize our solutions and enable us to develop a robust and scaled infrastructure that can meet the demands of the large and growing Class 8 market. Given the October 1 business combination close date, each entity completed Q3 as independent corporations. In addition to the press release filed this morning, we filed a Form 10-Q presenting the SPAC's stand-alone Q3 operating results, and we filed an amended Form 8-K, which includes Hyliion's stand-alone Q3 operating results. These disclosures can be found on the SEC's EDGAR website. As I discuss the third quarter, my comments will be limited to Hyliion's operations. Turning to our results. During Q3, Hyliion began to ramp up R&D spending in anticipation of the business combination funding while also establishing the necessary framework and resources to meet our public reporting and governance responsibilities.…

[Operator Instructions] Your first question comes from Mark Delaney with Goldman Sachs.

I thought, first, I mean, just given that it's your first call as a public company and Hyliion recently began trading, can you just talk about any change in customer discussions that you may be seeing? Any increased interest, improved dialogue? You mentioned the preorders of -- the additional 250. But just any commentary around how the customer discussions may have changed since you've gone public?

Thanks for the question, Mark. This is Thomas. So what we've experienced since going public is that the customer sentiment has really increased in a very positive way, and the level of interest from fleets has also increased. And I think some of this is just being driven by kind of more publicity of Hyliion out there in the news and also being driven by the fact that we've announced the Hypertruck ERX. But what we've seen is that -- we've kind of shifted our sales cycle from doing outreach to customers to try to get them excited about what we're doing to actually now we're having some of the largest fleets here in North America proactively reaching out to us, wanting to engage and learn more about our solution and really being willing to dive into having those kind of deep discussions around, "How is this going to add value to my fleet? What's the actual payback metrics that we're looking at? And how can I realistically deploy these vehicles in my operations?" which we've been thrown through those discussions. And as we noted through the script, we've kind of heard some of the battle wounds that some of these other fleets have experienced with looking at electric and looking at hydro and fuel cell and how they've heard -- they've seen some hurdles that have made it impractical to really roll out in their fleet today.

That's helpful. And Thomas, you spoke about the agreement that was announced recently with American Natural Gas and potentially discounted pricing on RNG. Can you be any more specific about what types of RNG prices you would expect customers to be able to get?

So RNG pricing and natural gas pricing as a whole does vary across the U.S. What we put in our presentation that we put out there publicly was that $1 per diesel gallon equivalent is a good number to reference. We've got some fleets that we're working with that are already buying natural gas for under $1 per diesel gallon equivalent as well as some areas of the country where you're going to be over that number as well. So I think that's a fair metric. Now that doesn't include having credits associated with that fuel. There are many credits across the U.S., including LCFS and RIN credits that we are able take advantage of when using RNG.

Got it. And then I just wanted to better understand the sales cycle for the hybrid solution, and nice to hear about the units that you did in the most recent quarter. I think the investor presentation had talked about doing 20 units for 2020 overall. And I realize it was half the year when Hyliion was private, so maybe there was already some shipments in the first half of the year. But I'm just trying to think about where do you stand with the 20 units for the full year. Is that still your expectation? You talked about these being pre-revenue, and we certainly understand that's the life cycle where the company stands. But you talked about $1 million of revenue in 2020, and just curious if that's still your expectation to get the $1 million of revenue recognition this year. And if it's changed, why has it changed?

Yes. So in terms of unit shipments, we are still on track to do the 20 units. So far this year, we've installed 13 units up through Q3, and we plan to be able to achieve the last 7 units in Q4 here. So on track with being able to achieve the unit shipment numbers. One of the things that we've decided is to consider all of these units as pre-revenue. So that will impact that projection of being able to do $1 million in revenue this year. But that decision was really based off of when we looked at the actual shipments that we're doing, there are the ability for fleets to be able to return those units if they're not satisfied with them for any reason just because we are in that stage where these are early deployments. And so from a financial standpoint, we've decided to consider these units pre-revenue as opposed to accounting them as revenue for this year.

And your next question comes from Paul Coster with JPMorgan.

Welcome to the public equity markets, Greg and Thomas. The -- I've got a few questions. First up, just a technical one on the S-1. Has it been declared effective yet? Or when do you expect that to occur? And perhaps the tag question might be what -- how much cash do you expect to raise from warrants in -- when that's happened?

Yes. Thank you for the question. This is Greg. The S-1 has been filed and is under review with the SEC. We don't -- can't predict exact timing of when they'll submit their questions and our response there, too, but we don't anticipate a long cycle to get that through. As you know from the PIPE transaction, we did commit to a registration rights agreement with the PIPE investors, and we were fulfilling that commitment. The warrants, we have certain hurdles to achieve with the warrants, and part of that is the registration, the S-1 statement. And the other part is the price per share. We're currently on track to achieve both of those, and the Board will make a decision in the coming weeks as to whether or not or when to call the warrants do. If we call all the public warrants and each participant exercise their warrant, that would raise approximately $140 million.

Got you. Thomas, so perhaps you can talk us through the -- how the preorder activity you think translates ultimately into revenues. Perhaps you can -- so maybe, obviously, without naming names, kind of talk us through maybe a scenario in which the hybrid product starts to generate revenues at a specific fleet.

Absolutely. So first, to discuss the preorder side of things. So the 2 preorders we've announced publicly are the Agility preorder of up to 1,000 trucks as well as the ANG preorder of up to 250 trucks. And in terms of looking at the next couple of years here, we projected shipping 2,500 units in 2022. And as you know, the back half of next year in '21, we're going to be shipping early demo units to fleets. And so what we're structuring with fleets right now is those early initial units, we need to have line of sight to be able to achieve the 2,500 units in the following year as we deploy those trucks. And I think it's probably important to talk about just kind of the normal fleet adoption cycle, which is these fleets, they all want to experience the actual truck in their operation, get to see it firsthand experience. Is the reliability there? Is the performance there? Are they able to really achieve those cost benefits? And that's where that demo release of units at the back half of next year is going to be really critical. And as mentioned during the script, we've lined up. We've got great interest from fleets to be able to ship those demo units at the back half of next year. We're in that phase right now of just kind of solidifying the contracts with them, the commitments with them, and then we'll announce who those early deliveries are going to. In terms of the hybrid system, we projected 300 units for next year, and that's weighted towards the back half of the year. And so that's where -- and next year is when we'll be making that shift over to counting those as [ rev renewable ] units and being able to achieve that volume shipment.

Got you. My last question really is on the hydrogen front. And I hear you on every point you made, and they're all really excellent points. But there's also a scenario, I suppose, where perfection is the enemy of the good, right? And Europe, for instance, you could imagine essentially a switch being flipped and gas and diesel perhaps being sort of really pushed out of the picture by regulations. In such circumstances, if you see the opportunity in hydrogen, how long will it take for you to take the Hypertruck and convert it for an alternative generator using hydrogen?

So the great thing with the way the Hypertruck is architected from an engineering standpoint is that when we make that shift to a hydrogen fuel cell, the only thing we're changing in the powertrain is the generator and the actual tanks where the hydrogen is stored. Now hydrogen tanks and natural gas tanks have a ton of similarities, and then -- so it's really looking at that generator. And from our standpoint, the way we've been looking at it is when hydrogen is ready for the market, when that infrastructure is built out and when the costs are -- get to a point where they're low enough for fleets to be able to adopt this economically, then we'll be able to easily have our solution ready to be able to take that step towards hydrogen fuel cell. And I think -- actually, I read this in the report that you had put out on Hyliion where [ BNP ] had projected that hydrogen costs won't get to the cost parity of natural gas until about mid-century. So we're still about 30 years away to the point where we're going to be able to have a fleet economically adopt hydrogen fuel cells. And so we see that natural gas as being the very logical path until we get to that stage.

[Operator Instructions] Your next question comes from [ Dayton Dabbs with Lone Star ].

My question comes into the Hypertruck ERX. It's my understanding that the hardware in the Hypertruck is all third party. It's not -- there's no proprietary hardware in it. And if you can clarify that for me as well as the -- any patents that keep any competitors out of this after you do the research and development on the product.

Absolutely. So as we look at the Hypertruck solution, we are using some components from other suppliers. For instance, the actual drive motor of the vehicle is coming from Dana. We publicly announced that we've got a great partnership with Dana. They're one of our early investors in Hyliion. So that is a component we're sourcing as well as the battery pack. We are sourcing that from Toshiba as well. Now one thing to note on that is we're really just sourcing the cells from Toshiba, and then we are doing all the module, the battery management system. All the cooling and controls of it is being done by Hyliion. So that is all proprietary to us. And then also all of the system integration, all the software that controls the vehicle, all the algorithms in order to be able to improve the efficiencies of the vehicle, all the data capturing and being able to use that to continue to drive better algorithms for the performance of the truck, that's all developed and owned by Hyliion from an IP standpoint. And in terms of patents, we filed numerous patents both on hybrid and on Hypertruck. Some of the Hypertruck patents are still in a point where they haven't hit the actual patent office website yet just because of the date of when they were filed. But we do have patents filed around those, and we plan to continue to file around those as we move forward here.

There are no further questions in queue at this time. I would now like to turn the call back over to management for any closing remarks.

I appreciate everyone joining the call today here and look forward to a great rest of the year and chatting again in the early months of next year. Thank you.

All right. Thank you all.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation. You may now disconnect.