Hyliion Holdings Corp. (HYLN) Earnings Call Transcript & Summary

Good afternoon, everybody. Welcome to Hyliion's 2023 Investor Day. Thank you for everyone who came here to attend with us in-person, and thank you for everyone who has logged on to listen to us virtually. My name is Kellen Ferris, I'm the Director of Investor Relations here at Hyliion. We have a lot of exciting tours that some of you who have already went on this morning to experience, and those that haven't had the experience yet, we'll have the -- be able to experience that this afternoon. Again, thank you all for coming. A couple quick housekeeping items to get into before we get started. Safety is our number one concern here at Hyliion and today is extremely important. If there is an emergency, there's an exit door here to your left. The main door that you came into your right and the door by the kitchen is the best place to get out. So if there's an emergency, those are your exit points. And again, as some of you heard this morning, we're doing tours. So outside, there's trucks driving around. Be very careful, stay with your highly on employee in the shop, same story, heavy equipment, working on trucks back there. So please stay with your highly on employee. We design these tours to be fun and formative and keep you safe. So again, thanks for being here. And hopefully, everyone is having a good time so far. One last couple of quick housekeeping items. So a slide presentation will accompany this presentation and will be available on Hyliion's Investor Relations website at investors.hyliion.com. Please note that during today's presentation, certain forward-looking statements regarding -- 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 risks and uncertainties. Many factors could cause these results to differ materially from the forward-looking statements on this call. For more information about the factors that may cause the company's results to differ materially from such forward-looking statements, please refer to our presentation and press release as well as to our filings with the Securities and Exchange Commission. The statements today 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. Last housekeeping item for everybody here in-person and everyone that is logged on virtually, if you want to get a question in to scan the QR code that you see on your screen here, and we will get them in the queue. And if we aren't able to address any of your questions. We'll do our best to follow-up with you after. And if you want to follow-up with us directly. And with that, I will start it off with a quick video. Thank you very much. [Presentation]

Welcome to Investor Day 2023. It's been an exciting few years of development of the Hypertruck ERX powertrain solution as we've gone from our proof-of-concept vehicle to A sample, B sample and C sample trucks. All of these vehicles have gone through endless engineering and testing and validation to get them ready for start of production. Now we have an exciting announcement to make here at Investor Day, which is we have our first founders' truck, which will actually the beginning its installation process during the event. Thank you all for being here today. We've had people traveling far and wide to actually come here. International travelers have come in to join us, as well as I know we have hundreds of individuals online as well tuning in to hear what is the latest with Hyliion. So with that, for those of you who are here in-person, half of you have already gotten a chance to go on kind of the experience around the facility, everything from ride and drives outside to fuel cell technology, ERX walk-throughs seeing that first founders' truck actually starting its installation process as well as some in-depth overviews on the KARNO technology next to me here. So we have a very exciting event plan for you today. To kick things off, though, I want to just kind of show you a run of events for the next -- or for this presentation here. So I'll kick us off with a quick business update as well as kind of a state-of-the-industry, where things are at. Next will be our COO, Dennis Gallagher, who will talk about the Hypertruck ERX as well as the Hypertruck roadmap, and he'll be joined by Matt Detmar to talk about his own fleet experience in running Hyliion's technology. Next will be Josh Mook, our Chief Engineer for the KARNO technology. And the goal for this is to really give you guys an in-depth view as to how the KARNO works. It's a technology that we've spoken about at a high level publicly, but today, we're going to really show you what's the needier and how we're going to be deploying it in vehicles. Up after that will be Cheri Lantz, our Chief Strategy Officer, to kind of piggyback on what Josh talked about, about vehicle application for KARNO. Cheri is going to talk about how we can also use that same generator in stationary applications. After that, I'll do a quick fireside chat with Parker Meeks, the CEO of Hyzon, and we're going to discuss the joint fuel cell development program that we have underway. And then to wrap things up, Jon Panzer, our CFO, will talk about the business strategy going forward and give some financial updates. So let's kick it off with the state-of-the-industry. So as I think all of you that are here are aware, there's been a huge focus towards electrification in the commercial vehicle space. When I started Hyliion back in 2015, we were one of the only companies on trade show floor that was actually talking about moving to hybrid vehicles, moving to electric. Fast forward to where we are today, almost every single booth at these trade shows is focused on electrification almost to a point where it seems like they've forgotten about their conventional product lines to really showcase what's happening with electric. So if you were new to the industry outside looking in, you'd say, wow, there's got to be like tens and tens of thousands of electric vehicles deployed out on the roads and in the commercial vehicle space. It's not the case. We're at a point where there are hundreds of electric trucks, right? So we're still in the early innings of getting these vehicles deployed out there. And while there's so much excitement towards it, we're also seeing that there are hurdles. There are challenges, right? Infrastructure, big challenge. Regulatory, it's not coming into place until a few more years from now. As we think about vehicle performance for a battery electric plug-in truck, fleets just aren't getting the range that they thought they were going to out of these vehicles. And then the last point is also the financial landscape is changing. A couple of years ago, fleets were willing to kind of throw whatever money at it, they needed to, to experience an electric truck. Now they're actually looking at and saying, well, how does this work for my revenue, my ROI, what's the payback on the vehicle? Can I actually make it work in my fleet and have it cost competitive with diesel trucks? So all those challenges that I just mentioned, that's actually where Hyliion story really makes sense and work. So we're going to cover that in a little while here. But to kick things off, I also wanted to share 5 staggering stats around electrification, specifically towards some of the hurdles that fleets are facing with plug-in electric trucks. So I first gave this overview out ACT Expo, one of the industry-leading trade shows. It was a keynote presentation, and we had an amazing response to it. So we figured let's show it here today as well. So staggering stat number one. Is that a BEV plug-in electric trucks battery pack needs to be about 330% larger than you'd expect to get the desired range. Now the reason for this is because you can't go to full charge and full discharge. Batteries degrade over time, weather impacts the range, driver behavior impacts the range. So when you add up all these different factors, it actually means that you need a much, much larger battery pack to go the range you wanted to. Staggering stat number 2 is that if you were to plug in 10 fast-charge semi-trucks into the grid, those vehicles would draw the same amount of electricity as the entire Super Bowl stadium consumes during game time. Stat 3 is that as fleets are looking to adopt BEV electric plug-in trucks, the infrastructure is actually expected to be about 1.5x more expensive than the vehicles themselves. So if a fleet were to spend $10 million on buying a batch of trucks, they then need to expect to spend about $15 million to set up the charging infrastructure. Stat 4 is that while there's been this massive focus towards bringing in renewable electricity into the electric grid, we've only seen a 3% shift of how much of our grid electricity comes from renewable sources over the last 50 years. And then the last stat is that if you were to go build a brand-new natural gas power plant, it can take upwards of 10 years to actually get that commissioned. So to put that last out into comparison, these new regulatory mandates that are coming out that say you must adopt an electric vehicle start in 2024, more mandates come out in 2027. So if you wanted to do this all with battery electric plug-in trucks, we would have needed to start building more power plants back in 2014, 2017. So we're already behind the 8 ball. So I share all this because it kind of leads into what's Hyliion's advantage. So this is a slide that I'm guessing most of you are familiar with. It's not new to the Hyliion story. We released this about 2 years ago. And this is our projection of how the industry breaks down. So you're going to have plug-in electric trucks, which will be for final mile, short-haul, local delivery type applications. And then you're going to have range extender, which is going to be for that long haul over-the-road type application. Now our focus has been in this range extender market. So that's where you can see our product portfolio. We go from the ERX, which starts with natural gas, evolves into KARNO and into a hydrogen fuel cell vehicle. So we've structured this where we can evolve with the industry. But there's two things to note on this slide. So one thing we're going to be talking about today is that while this has been our focus for powertrains, we actually see that we can help solve the BEV plug-in problem as well by using our KARNO stationary unit to provide power to those charging applications. And then the other thing is while we came out with this slide 2 years ago, we figured at this point, we would have longer-range BEV electric trucks. The reality is it hasn't happened. Actually, as we were looking to update this slide for this presentation, we actually said, well, we should just use the same one we were using 2 years ago because this is still the state of where the industry is at. And so that means that we're seeing that range extender electric can actually take over more of the market as well. So we're going to cover that in today's presentation. But I also wanted to give an update on what are the key focus areas for Hyliion. So as we look at the next 12 to 18 months, these are the 5 things that within Hyliion we're going to be doing. So the one is start production of the Hypertruck ERX. You see that first vehicle getting installed today. We need to begin extended fleet trials, which means getting these vehicles that some of you went on riding drives in today, actually out into fleets hands and getting them experiencing them within their operations. We need to grow volume of the production of the Hypertruck ERX specifically as we go into 2024. And then the last two are around KARNO. So we need to continue to develop it. This is still a technology that is in the development phase, but we are positioning so that we will be ready to deploy initial stationary units of the KARNO generator next year. All right. So with all that, that's kind of the state-of-the-industry. That's where we're at. What's going on within Hyliion. So what about today? So here are the main announcements that we're going to be covering throughout the presentation. So up first is obviously the start of building these initial production trucks. So the first founder's vehicle is out in the shop. I think right now, they're working on installing the electric motor in that goes on to the generator. This is the kickoff to the build process of these initial 30 trucks that we plan on delivering out to fleets by the end of this year. So to step back, give a little bit more color on this. So on our last earnings call, we updated that -- we shared that our initial plan was to deliver 200 of the founders' trucks by the end of Q1 of 2024. What we shifted to is we're going to deliver the initial 30 by the end of this year with a couple of changes, 1 being that we're going to be passing through some of the price increases that we've experienced from our supply base onto those fleets. As well as we go into 2024, we're not going to take as aggressive of a ramp-up plan with the powertrain really from a -- being -- making smart economic decisions. So as we were trying to really aggressively ramp up, we were seeing very large surcharges on components and starting to do unnatural things to try to build these trucks as quickly as we could. So what we're going to do is give ourselves a little bit more time so that we can work on -- given the engineering team time to roll in some continued product advancements to pull costs down as well as taking some of the pressure off of the supply base. So where we're at right now is we are in discussions with fleets, having great discussions on solidifying those first 30 units that we plan on getting all of those out by the end of this year. Announcement #2 is, as we look at the Hypertruck ERX, going back to that slide where I said we got plug-in electric trucks and range extender trucks, we've actually seen that there's been customer demand, pretty strong customer demand for us to also have a day cab variant of the ERX. Now the reason for this is because we initially thought that we would do sleeper trucks, that would be range extender, day cab would be these plug-in electric trucks. Well, if fleets aren't getting the experience they need out of plug and electric, that gives them an opportunity to actually start using range extender electric in a day cab application as well. So while we're going into production with a sleeper truck, which you guys all saw today. In 2025, we plan on having a day cab variant of the solution ready as well. The next is the Hypertruck KARNO. So we've got this vehicle here today. This is -- it's still a new vehicle. We are still working through bugs with the vehicle, going through development, validation, getting the whole system working. But as some of you got a chance to actually go for a ride in this vehicle in electric-only mode to actually see what it's like. To our knowledge, this is actually a first-of-a-kind where vehicle, where it has the ability to actually be refueled with both natural gas and hydrogen. And that's thanks to how the KARNO is designed, right? It's a fuel-agnostic generator. So on that vehicle, there's actually both dual nat gas and hydrogen tanks and the generator can then take that electricity to recharge the battery pack. Now this means you get some of the inherent benefits of the KARNO. So that vehicle is extremely quiet. If the generator are running, that generator produces less noise than actually this conversation here today. So it's extremely quiet. If you went for a tour in the KARNO Room, you probably heard the team talk about that. It's inherently designed to have low maintenance. So if you think about an internal combustion engine, fleets are usually having to do engine overhauls, halfway through the life of the engine. Oil changes can be on a monthly cadence, right? Internal combustion engines need a lot of work to keep them up and running. Versus the KARNO, there is no oil. There are no lubricants and there's only one moving part per shaft. So from that standpoint, we expect that the actual maintenance around that vehicle will be much less than a conventional truck. And then the other thing we're going to talk about is why does this truck have a redesigned hood? We think it looks awesome, but there's actually some benefits to it as well. We can get more airflow and improved aerodynamics of the truck. So once again, this truck is still in its early innings of development. We plan on being in a position where we can do initial customer deployments out in 2026. We're still working through bugs today. There's a chance that while you're going on a ride, the team was maybe talking about some of those things, but we wanted to bring it here to just showcase what the opportunity or the potential is of this truck. And then the last one is around stationary power. So in some past calls, we've spoken about how we see the KARNO generator, not only is a solution that can go into trucks, but can also be used to power things like EV chargers, right, and put it in a stationary application. Well, up until now, it's kind of been conceptual talk about, but for today's presentation, we wanted to showcase what a 200-kilowatt generator system could look like. So there's a box in the KARNO over there, which represents the rough size and shape of what a 200-kilowatt KARNO generator would be. Now this is purely for representative purposes. There's actually not a KARNO gen set in there, but that is going to be the size of the enclosure that we're anticipating. So what's the important parts of this? Well, first is that, if you compare that to the size of a conventional generator, normally, they're 2 to 3x the size of that box. Even upwards of some other solutions are actually 10x the size of that box, which means they're more like the size of that 20-foot black shipping container over there. So consider -- we're the size of this box in the KARNO, some of the other solutions are actually 10x the size. But we also have some huge benefits that -- the same ones that I mentioned on the vehicle, we can see with stationary power. So it's quiet operation. It requires very low maintenance. And you can produce electricity actually cheaper than the electric grid. So Cheri is going to go into a lot of details on that. Now 200 kilowatts, it's tough to kind of wrap your head around like how much is that really? Well, that one box with a 200-kilowatt KARNO generator in it could actually provide enough electricity to power the entire facility that we're sitting in today. So that's a lot of power. So as we think about applications like could it power hospitals, hotels, warehouses, data centers, we can stack these KARNO generators up as well to provide more power. So within these systems, you've got a 4-kilowatt -- or I'm sorry, a 4-cylinder 200-kilowatt set up. So as we think about taking this into production, we can actually use those same cylinders that we're going to use in stationary power and use those on the vehicle as well. Those are the same cylinders that you saw on the truck that some of you got to go in today. So as we look to go grow scale, grow the kind of ramp up the volume of the production of the KARNO generator, we now have 1 system, 1 part, 1 cylinder stack that can go both in transportation and stationary power, which is very different than the industry is used to. Normally, you have engines that are designed to be gen sets or engines that are designed to be going in a vehicle. So we see there's a huge opportunity for us to also expand into the stationary power business as well. So that's my quick lead-in. With that, we're going to watch another quick video. And then we'll be joined by Dennis Gallagher to go into more details on the ERX. And then after that, we'll open the floor up to some Q&A. Stay tuned. [Presentation]

First of all, I'd like to thank our marketing team for putting together that great video as well as all the videos you're going to see today. Good afternoon, everyone. My name is Dennis Gallagher. I'm the Chief Operating Officer here at Hyliion. And I'm happy to announce that in a few minutes, I'm going to be joined with Matt Detmar, CEO of Detmar Logistics. So before I move into material just as a way of getting those grounded. We are not a truck OEM. We are powertrain design an integration company. We're starting off by selling trucks to seed the market. But as we move forward, we're going to transition to being a seller of powertrain systems. So how are we doing on our journey thus far? Many of you have seen this slide. This was generated 7 quarters ago as an opportunity to articulate and visualize the progress that we're making on the Hypertruck ERX. And I'm happy to say that over the last 6 quarters, the team has achieved all of the communicated milestones. Take a couple of minutes just to talk about a couple of the more current milestones. So we executed controlled fleet trials. And for us, the controlled fleet trial, we brought a truck to a customer. We had a highly on employee ride in that vehicle with the customer's driver, while they were hauling freight for a period of about 2 weeks. We have started and completed winter testing, and we are now moving into the product validation phase prior to starting extended fleet trials. More to come on that in a minute. Right now, the trucks are going through the required FMVSS testing, that's federal motor vehicle safety standards testing that is an obligation and a requirement prior to starting our EFTs. As we are still in the testing phase, the EFTs are not going to happen here in the end of Q2, we're going to move into July. Right now, we're scheduling our EFTs to start the second half of July. So unfortunately, we're going to miss one of our milestones. But I'm also equally happy to announce that we are on track for achieving all the required certifications for the Hypertruck ERX. That's CARB, California Air Resource Board, the EPA; and the NHTSA certifications. We expect to have all certifications complete in the third quarter of this year. And as Thomas has already mentioned, we are now in process of installing the first ERX powertrain on the first production truck. So Matt if you want to come up and join. Thanks or joining us.

Absolutely. Thank you, Dennis. Thank you, Thomas and Hyliion team. Great to be here.

So Matt if you could just give us a little overview of Detmar Logistics?

Absolutely, yes. Detmar Logistics, we are an asset-based carrier, primarily focused in serving the oil and gas Permian Basin with logistics of frac sand that we have since diversified out into industrials and to a regional and over-the-road freight. We're at about 130 assets today will be at 185 company truck assets, with about 270 trailers by the end of the year. And where the trucks will be adding this year will be majority CNG hybrids with you guys. So I'm really excited about that. I'm really excited about the movement we've been making, and we're partnering with you guys from our diesel hybrids to the CNG hybrids, and then on to the ERX in the future.

Matt, you were one of the controlled fleet customers, right? You're one of the fleets that we pilot this program with. What was the experience for your operations?

It was very positive. As you can see right here, Hyliion, so this is on a live frac side, as a matter of fact, when we offload sand, the gravity uses a bucket elevator to fill the silos. What people don't necessarily know more about what we do is we're doing probably 70 to 80-mile hauls on average. Most people would think that is, hey, this is a regional application. Well not so much because we're doing 3 for those a day, however much our drivers can push on their hours of service to make sure we're staying within the rule set. But you need an application that's going to be able to run those 14, 15-hour days, 15 when we're running in the Texas rule set. And you can't really get that from traditional battery electric tractors. So we trial this [indiscernible] believe is, as November of last year. And going into these frac sizes and these lease roads, the lease roads are they're not like paid roads. They're pretty rough. And so this truck held up extremely well in those types of conditions. I mean roads were pretty rough. This is actually a really nice credit road, but he was able to go into that, go on to the lease roads, go into a tight operating frac location, go on to the belt, which this truck very spec for OTR applications was able to go through all those hurdles with no problems. I mean no really issues with the truck. Drivers were really excited about it, love driving them. I mean if you've been in the Hypertruck ERX, which majority you've been in today, if not, you will be, the difference is, is pretty staggering compared to diesel. It drives similar to a golf cart. And our drivers are -- they really enjoy that, especially in the type of environments they have to work in day after day. So all in all, it was very positive, and we'll have to do our second fleet control trial with you guys here very soon.

Fantastic. And Matt, what are your go-forward plans for the Hypertruck ERX as it applies to your business?

Yes. So currently, we're working with 3 of our customers on deployments of these units. We are going into next year. We've had a lot of interest in it. And we've -- that's how we came to highly on initially with Hypertruck ERX, and we've had great success with the hybrid technologies. So the Hypertruck ERX, we're doing our second fleet-controlled trial, and we'll be splitting that between 2 customers. And a lot of that is going to start looking at the conversations on the deployment of those, but our customers are very excited about it. We're very excited to put in their application. So we're excited to see where it goes.

Matt, thanks so much. You are a great partner. We're glad you brought your team up here. Thanks.

Yes. Thank you, guys. Thank you, everybody.

So next round of trials. Our next set of fleet trials were calling extended fleet trials. Big differentiator from what we did last year. In this case, we're going to effectively throw the keys to the customer. So they'll take the keys. There'll be no Hyliion representative running in the vehicle with them. They'll take it in their operations, driver, they'll haul freight. And we're looking at a time frame typically on average about 2 weeks. They'll just take it run in their operations. Doing this is important because it allows the fleet to experience the vehicle in their operation prior to making a purchase decision. And we're happy to announce that we have currently more than 20 fleets signed up for our extended fleet trial program. So now we'll take a walk through the Hypertruck ERX architecture. I think many of you got out on the shop probably got a tour, got to walk around the vehicle, see some of the parts. What we'll do is we'll go into a little bit more detail of the components that make up the Hypertruck ERX. And then we'll touch on how does this all come together? So the current version of the Hypertruck ERX is based on a Peterbilt 579 ultra-low sleeper chassis. And if I start at the rear of the truck. Here we go. Start at the rear of the truck, we have dual accelera by Cummins e-axles draw propelling this vehicle. The e-axles that we've selected are capable of 670 peak horsepower. Just by way of comparison, a typical diesel truck is somewhere in the 450 to 500 range. As we move down the frame rail towards the front of the truck, we now get to our battery packs. We have 2 LFP battery packs mounted to the vehicle. These 2 battery packs have a storage capability of 210-kilowatt hours. This is what allows us to achieve our up to 75 miles of all electric range. Moving down, we now get to the thermal system, which regulates the heating and cooling as required for the powertrain components. Now we have our HCU, the Hyliion Control Unit, and the HDP, the Hyliion Drive Processor. These are the brains of the powertrain. Both of these components are based on proven industry hardware, and they contain all the proprietary Hyliion algorithms, controls and software. Moving forward to the front of the truck, we now get into what we're calling the e accessories. In a typical truck, many of these accessories run off of the engine belt. But for us to be able to accomplish and meet the requirements of the all-electric range of the vehicle, we needed to select components that could run off of a DC bus. So when we're in electric mode, the components we have is our e accessories are HVAC compressor, power steering, cabin heating and service air compressor. Next, we'll get to the generator. So in the Hypertruck ERX, the generator is a combination of an internal combustion natural gas engine coupled to a motor. In the case of the ERX launch version, the ICE, or the internal combustion motor we're using, is a Cummins 12-liter natural gas engine. Finally, we have a copilot. This is our in-cab display that allows for the operator or the driver of the vehicle to select the mode of operation, but also get real-time system information while they're driving in the vehicle. And the last component we add is our plug-in charge port. So if you could envision, just take the generator out of here. If you can just assume there's no generator in here, we have the same -- a similar architecture to a battery electric truck, meaning in the absence of the generator, the e accessories, the batteries, thermal management all the way through the e-axles, is representative and very similar to that of a pure battery electric truck. So how does this all come together? I'm sure it's a question people ask, how is this going to work? So Peterbilt manufactures the 579 chassis, specifically configured for the installation of the Hypertruck ERX powertrain. During that manufacturing process, they are installing the e-axles. This final vehicle is referred to as a rolling chassis. That rolling chassis comes down here to Hyliion, we then install the balance of the powertrain components. We then ship that vehicle back up to Peterbilt. They do the final end-of-line testing. And once it comes off the end of line at Peterbilt, the vehicle is now ready to be transacted to a customer. So Thomas touched on this in his opening about the road map for the Hypertruck. So really, in terms of just thinking about this, think of the Hypertruck as a family of powertrains, and we're changing the generator as we move forward. So we've engineered the powertrain architecture including the controls, the algorithms and the software to support multiple generator types. In the case of the ERX, it's an internal combustion generator, then we'll move over to the KARNO generator, then we'll move over to a fuel cell. When you're really thinking about these vehicles in this battery electric type architecture we've created, we need to think in terms of what is the source of power, whether it's the ICE-based generator, the KARNO generator or in the case of what the project would do with Hyzon on a fuel cell. So now we'll talk about a few of the attributes of the Hypertruck ERX. We have a TCO that's favorable versus diesel trucks. Jon is going to cover more of this in his presentation. I'm going to walk through some of the specific attributes. So as we've said and stated before, we have up to 1,000 miles of range. And that far exceeds the range of any existing battery electric trucks. We have up to 75 miles of all electric range. Meaning the driver can operate the vehicle with the generator off, have 75 miles of range. Where is that really important? Well, we've had a number of customers that we've been working with, that as a result of having the 75 miles of all electric range, meaning no generator operating like a BEV truck, it has opened up for them the ability of making new delivery routes. Whereas in some of the jurisdictions they were operating, they get off the motorway, have to go into a tie-dense area, they were not allowed at a certain hour of the day to operate an internal combustion engine in those regions. But by being able to get off the highway with their load, switching to battery electric mode with their -- up to 75 miles of AER, they were able to open up early delivery times for their retail shops of great value to them. Then we have our EAPU, which has up to 35 hours of capability. Why is that important? Why does that matter? If I'm a driver and I'm hoteling, I can now pull comfortably off into a rest stop, have my heat, have my AC, whatever other things I need to make myself comfortable in that cab without the engine running. We are also leveraging the approximately 700 publicly available natural gas stations in the U.S. and Canada. And when you look at that number, that far exceeds any number of publicly available stations for battery electric or fuel cell trucks at this point in time. One of the thing about the roadmap with the Hypertruck ERX. In 2024, we are going to start the engineering work to move from the 12-liter Cummins engine to the brand-new 15-liter Cummin engine, and that work will start next year, targeting at 2025 roll-in of that new engine. So just briefly on the Hypertruck KARNO. You can quickly see from the picture. If you look across the architecture of these 3 vehicles is similar to identical. In the case of the KARNO, we had to move the thermal loop where the KARNO's mounted. So we move the thermal in between the frame rails, which is why you don't see it represented in the image. But as you go to the far right on the fuel cell truck versus the ERX, they're identical architectures. So with our Hypertruck KARNO, it's a very low emissions. It's extremely low maintenance, high fuel efficiency, and it truly is a fuel-agnostic generator. Josh is going to give a lot more information during his presentation. Hypertruck fuel cell. We're really excited about this program. This is a collaboration that we're working on with Hyzon to take their 200-kilowatt fuel cell, which hopefully, people have seen right around the corner and integrate that into the Hypertruck ERX platform. We took single development vehicle right now. Happy to say that we are on track for completion of this demonstrating vehicle by the end of the year. Thomas and Parker will give more information about this during their upcoming chat. Future vision, our future version. Thomas talked a little bit about this earlier that the next variant of the Hypertruck ERX will be a day cab. I'm going to touch on a couple of the reasons why and give a little bit more detail. So Thomas mentioned, we've heard a lot from customers. And as we've been doing our VOC, or voice of the customer, over the last 12 to 18 months, we've sensed the shift over the last number of months. And that shift has been people are asking, requesting, needing a day cab solution that has a minimum of 500 miles of range. They're not going to find that with the existing battery electric trucks. So we're getting a lot of interest, a lot of push to execute on a ERX-type vehicle in a day cab format that has upwards of 500 miles of range and also qualifies for ACF credits because the fleets are now all looking at the regulatory landscape and want to ensure they make decisions that is going to fulfill their regulatory needs as well. The plan is we will use a significant majority of the ERX sleeper architecture, and we are targeting 2025 for that powertrain to be ready. Now some people could sit there and say, "Well, that's why so long? Well, if you look -- if you remember back in our milestones, there are a significant number of steps that need to be taken prior to releasing the powertrain into a commercial vehicle application. Finally, on the regulatory overview, we've broken this up into the federal level and the state level. So when we look at the federal level, really, we're focusing on the Inflation Reduction or the IRA. So this -- the IRA is a tax credit. And it's a 30% tax credit on the purchase price of the vehicle up to a maximum amount of $40,000. The Hypertruck ERX fully qualifies for that tax credit. When we look at the state level, and I'll focus specifically right now on California, CARB and then obviously, the states that will -- the signatories that will follow on to CARB regulations. There's two programs there. One is what's called ACT. An ACT is a regulation for the truck OEMs to sell more zero-emission vehicles in California and following states. The Hypertruck ERX qualifies for 3/4 of one of these credits. The next one is ACF. On the ACF, it is regulation for the fleets to purchase more zero-emission vehicles in California and following states. Right now, the planned rollout is -- for ACF is 2027 for day cab, 2030 for sleepers and the ERX qualifies for 1 full credit. Well, thank you for your attention. And I guess now Thomas will be taking questions.

So one of the first questions we had come in was, as we've spoken with fleets about their experience with BEV plug-in trucks, a lot of the fleets we're working with have tried these trucks, what's the pros and cons and how then do they look at the ERX?

Okay. So I'll start with some of the pros first. People we've talked or I've talked to specifically, again, some of these as reasons at ACT Expo. The BEV trucks that they're getting from suppliers right now, the OEMs making BEVs are very good trucks. The truck quality and performance is not the problem. It is purely about range. They're unable to get the range. But the bigger problem that fleets have articulated to us is the challenge with getting infrastructure, meaning how do I get the electricity from the grid to my depot, so I can plug-in and charge my BEVs? So assuming you can get the states to bring the power to you, anyone looked recently what the lead times are for switchgear? You just think about this, you could get your BEVs trucks quickly, you could wait years to be able to put those trucks in operation. So having that non-revenue-generating assets sitting on there a lot is a big problem, Thomas.

And we've heard this time and time again, like fleets that were talking they're going to their utility provider and they're getting like -- the response of, hey, the grid can maybe provide enough power for 5 trucks, and that's it. And this is fleets that operate hundreds and hundreds of trucks out of these depots. So infrastructure is a huge issue. We'll take another question, which is around, does the ERX and/or the KARNO qualify for ZEV credits? And how does California work? One thing I'll add to it is maybe we talk about the ports in California as well.

Yes. So the ERX, and I want to be just clear when we look at the 2 different types of credits, the ACT versus the ACF because they're slightly different. On the ACT credit, the Hypertruck ERX qualifies for 3 quarters. So it's not given the full credit of ZEV vehicle, but it is given partial credit. On the ACF, the one that impacts the fleets directly, in this case, the Hypertruck ERX range extender qualifies for a full credit, which is extremely important for our fleet customers and obviously for us. Now relative to the ports, specifically in California, the Hypertruck ERX does not meet the go-forward port requirements because they -- for the ports in California, they are driving towards a pure 100% ZEV, meaning no tail pipe. So battery electric or fuel cell trucks for the port registries or port operations in California.

And then with KARNO, I think it's a question mark at this stage as to exactly how CARB or some agencies like that are going to qualify KARNO, right, because it does have the ability to run-on hydrogen, but can also run on other fuels. So let's shift gears, let's talk a little bit about testing. So we want to -- you and I actually both flew out together. We went to the Laughlin, Nevada extreme hot of hots. I think it was 110, 115 when we were out there.

It was hot.

To then winter testing. So you want to touch on kind of how did the vehicle hold up?

Yes. So when we did our -- I'll start with the summer and work towards the winter. Did our summer testing, and it was a significant endeavor to the team. We brought multiple trucks out there, multiple different payloads. And really, what's -- what Laughlin is known for is Davis Dam. So Davis Dam is a location where a lot of vehicle and car people go to test their vehicle under extreme heat conditions. If you can imagine 11.3 miles at an average of about 6% grid, it's pretty steep. So you pulling 82,000 pounds up that in 110, 115 degrees, you're going to exercise the truck. So it was a great experience for the team, great learnings. If you don't mind, we had a little side bet. I wasn't sure if all of the trucks would make it back. We're happy to announce that all trucks performed well, and all trucks made it back into their own power. So the testing went well. We exercised our thermal systems, we exercised our powertrain, our e-axles, our electronics, a lot of great learnings that continue to get rolled forward into the vehicle. Winter testing. Winter testing is always broken up into segments. And the reason for that is when you do winter testing, which is really the complement cold chamber testing, which you can do at any time. Cold chamber testing is very effective for testing unique or specific components. But once you get outside in winter conditions in the snow on the ice, you're able to test traction control, you're able to see how chillers and heaters and electronic components will operate. So over the series of winter testing's that we completed, truck performed very, very well. We took all those learnings; we've rolled those in. And as Thomas said, now we're installing the ERX powertrain on the first production truck.

All right. So let's talk about volume ramp up. One of the questions is around what do we do here? One would it make sense to use mod centers? What does it look like to get on the OEM production line?

Okay. So as we've clearly stated, we're starting with the first 30 vehicles, which will be done here. I think, hopefully, I was clear what Peterbilt is doing for us with the rolling chassis, including some of the powertrain components, specifically the e-axles. So right now, from a capacity point of view, we're going to do the first 30 here. We're going to continue to plan on building here until the numbers get up significantly higher. We have had conversations with certain centers. We haven't moved forward with anybody yet. And then from a Peterbilt perspective, ultimately, we'd love to get on their line, but we have to continue to perform to execute, to get these trucks out and to really demonstrate that we have the reliability that the market is looking for as we continue to move forward.

All right. And we'll take one last question, which actually is from Steve Fisher, one of our sell-side analysts at UBS, which is around -- let's talk about the 15-liter, right? So the truck we're shipping now is the 12-liter solution -- or getting ready to ship to customers is a 12-liter solution, but we mentioned -- we also are going to integrate the 15?

Yes. So we're going to work with the transition from the 12 to the 15. People have probably asked them why are we doing this? Well, when you look at the road map for the natural gas component and the generator, the next generation is the 15-liter. The 15-liter engine from Cummins is going to create a lot of value. It weighs less than the 12, which is advantageous, and it will be their go-forward engine. So it will be the engine that Peterbilt will be implementing on their vehicles. So we're doing the work to get ahead of that. So when that is launched, we'll be ready to go with Peterbilt in the same fashion that we're operating now with the 12-liter.

Awesome. All right. So with that, that concludes what we're going to talk about around the Hypertruck powertrain, the ERX specifically. Now we're going to shift gears a little bit and start talking about the KARNO. So up next is going to be Josh Mook. But before we dive into that, we've got an exciting video we'd like to share. So thank you.

Thank you.

[Presentation]

Hello, everyone. My name is Josh Mook. I'm the Chief Engineer for the KARNO Technology. And today, I'm really excited to dig much deeper than we ever have before into the details of how the system works and to try to give you an appreciation for the advantages and the reasons why that we're able to achieve those great numbers. So let's get started. We're going to really take the system apart piece by piece and go through all the way from where we create heat to where we create electricity. So first things first. As a reminder, this is a heat-based technology. Meaning really the entire system is about taking heat and converting it to electricity. Now when you're onboard a Class 8 truck, as an example, a really convenient way to get that heat is to use fuel to release it as it's been stored in that chemical energy. So as an example here, for those that maybe haven't seen heat-based engines, I have a small toy essentially. This is something you could get online or at a hobby store. And it's sitting on just a -- you can see my hot water here. And as we let this heat up, what we'll do is we'll start it operating. And you can see it just continue to pump. And we'll let it sit here and run for the -- probably the entirety of my conversation quietly and without any byproducts. This is very, very similar to the technology that we have in here if you've seen these. And so it will just continue to sit here and run through the entire time. So what we're going to do is really dig in deep now. So let's first start at the highest level. What are the benefits of such a system? Well, number one, we've talked about this a couple of times, really fuel agnostic, truly, truly fuel agnostic, meaning no hardware changes, the ability to operate many different fuels and with low emissions. In addition, you get very advanced economics. So by creating efficiently taking chemical energy, converting it to electrical energy at a very low cost, that obviously helps share the total cost of ownership, or the LCOE, if you choose to use it in the stationary application. And finally, very easy to integrate. So we've mentioned there's no oils or other lubricants inside the system as an example. Take that a step further, we can also integrate this in any orientation that you choose. So let's say, the one in vertical like we have shown here in our stationary application or horizontal as we've been on the truck, that's completely fine. And we'll even get into some additional details later about other future enhancements of such a system. And finally, very low maintenance and very quiet, like Thomas mentioned, much quieter than our conversation that we're having right now. So -- for some of you, I saw you brought your thermodynamics textbooks, it's a good time to break those out because what we're going to do is really dig deep inside the system at this point. And we're going to start where we create that heat. So we're going to cross section 1 shaft. And for those that have maybe gone through the room, as an example and talk to the team, 1 shaft is able to produce about 50 kilowatts of electricity. So on the shaft, we're going to follow the air -- both air and fuel through the system and see how we both create that heat and transform it into electricity. So number one, the dark blue stream that you see here on the screen is air. So we're pulling air from the outside world. And what we're doing is we're first sending it through a series of heat exchangers. And then these heat exchangers, we call it the recuperator, is picking up a lot of what otherwise would have been waste heat from maybe the exhaust process, or they couldn't be leveraged as part of the initial run through the cycle. And we're actually recapturing it inside the system as to not lose it to the outside world. Second stream is this white stream or light blue stream, you see above my head here, that is going to be our fuel. We bring those together inside of a system we call the mixer, which premixes those to their optimal fuel-air ratio. And for those, again, that have studied the chemistry of oxidation processes, it's all about maintaining that perfect fuel-air ratio as a function of the fuel that you're using. But because we're premixing those, we're not injecting that as like a liquid or a gas directly into the oxidation process, we're able to accommodate many, many different fuels. So what's really interesting is that in a process such as this, you can tolerate both liquid and gaseous fuels as well as many that you may have never seen before. In fact, some of these fuels that you see listed here would consider it to be waste or byproducts of other potential industrial processes or biological processes that we can now use as primary fuel sources to create electricity. So maybe it would have otherwise been released into the atmosphere. We have the opportunity to now capture that and use it to our advantage. So let's keep digging deeper. So now that we've premixed the fuel in the air, now we're going to start the oxidation process. And that happens inside this area where you see, we call it the reaction chamber. So inside of there, what we're doing is we're releasing that chemical energy into heat and we're doing so in a very slow rate in comparison to like an internal combustion process. In fact, if you sort of compare those 2 processes, we have 10 to 20x longer to complete that chemical reaction than you would see in like an internal combustion process. You couple that with the preheating that we did through the reactor as the air comes in that we talked about earlier, and you can achieve extremely low emissions because we're not creating radicals or other partial process -- partial chemical reactions through here that would then result in greenhouse gas emissions as an example. So let's keep digging further, and then we'll circle back to some of those emissions numbers and what we can achieve. So now that we've created heat, you can see here it actually enters and makes contact with the hermetically sealed portion of the system. And so in this case, we just need to move that heat from where we've released it from this chemical energy, and we need to move it inside. And we do that as the video announced with additive manufacturing. And I hope that folks have been able to go into the room and see some of those very complex parts, we'll maybe dive into some of those a little later. But we're able to capture 90%, 95% of the heat that we generate and move it inside the system. Once the heat's moved inside the system, which is here shown in red on the screen, you're essentially expanding the trapped gas or heating the trapped gas, which caused it to expand, it applies force on this piston, which moves it to the right-hand side -- your right-hand side of the screen. And then we'll get into the steps afterwards. Finally, that -- with the heat that we couldn't capture on the first go around exits through the system like we previously described and is able to be recaptured before it's exhausted. So what's in that final exhaust product compared to maybe a conventional internal combustion application. So on this chart, I've got a few different really important compounds. So we've got CO2, CO and NOx. And across the top, we've levelized all of those at 100% for like a diesel internal combustion application. And these are all without any sort of after treatment. So these are all back-to-back from a comparison purpose. So those are all levelized at 100%. Now with the KARNO system on either natural gas or diesel, you're going to see a pretty significant reduction of CO2. That's primarily due to either the carbon content in that fuel or also the enhanced efficiency of the system. You just need use less fuel to get the same power output. But then you see extremely dramatic reductions, 98%, 99% compared to the baseline here for things such as carbon monoxide and nitrous oxides, which are really important for us to keep low from an environmental perspective and are also heavily regulated. Finally, when you're running on hydrogen, you eliminate the carbon out of the fuel altogether, and so we're able to bring both of those numbers to 0, while still maintaining very low nitrous oxide emissions, which has traditionally been very difficult in hydrogen applications where they will oxidize because of the higher temperatures involved. So really, really benefit -- huge benefits from an emissions perspective compared to sort of our baseline today. So let's keep moving. Now we're going to zoom out into the entire system. And as we look at the entire system, the reactor and the heater that we just talked to, you're going to see two of those on each side. And if you remember, we said, hey, that gas is going to expand, that gas is going to then push that piston to the other side. And then what -- now what you can notice is there's an equal and opposite system essentially opposing and working in harmony with it to then push it back at the appropriate time. So these two systems run 180 degrees out of phase with each other, and that's what causes this piston motion back and forth. We'll get into a minute how that creates electricity. But -- we'll finish the thermodynamic side of the equation first. If you watch the gas that's being pumped, it goes through the heater and then it's also moved into this outer section here that you see sort of rapidly changing between blue and red. That is a regenerator system. And so again, many, many layers of heat capture in that system, where we're able to recuperate all that energy for use from the next cycle. Finally, any little bit of heat that we couldn't pull out at the end of the day goes through the exit of the system to what we call the chiller, which will be traditionally connected to the cooling loop of the vehicle or potentially a heat capture loop for the stationary application. As the piston moves back and forth, you'll notice in the center, we have our linear electric machine as -- which is directly coupled to our pistons. On that linear electric machine, you have magnets moving within a series of coils, and that's what creates the electricity. So we can zoom into that a little bit, and you can see here. So there is no -- if you think about a traditional engine where you've got many different changes of motion -- directions of motion, meaning side loads, meaning the connecting arms, they produce a lot of wear on things like piston rings, you don't see any of that here. It's all stays colinear in the same orientation and just cleanly produces that electricity over and over. So now let's dig into what does this mean in terms of how does it compare to other systems? So this chart is a little bit complicated. Let me help walk through it, and then we'll kind of break it down into its pieces. On the y-axis, we have the net efficiency at the point of use, meaning where do you actually intend to use it? So in the case of the grid, this would be like your wall outlet. Or in the case of maybe a battery electric vehicle, this will be going into the battery or into the powertrain. And first one that we're going to focus on is the U.S. grid average. So this information comes straight from the Department of Energy. But the U.S. grid today runs at about a 35% efficiency at your wall outlet. So when you're plugging in, there's 65% of that initial energy that was used to create that electricity is wasted. 35% of that is converted and delivered to you. That is similar to what you see for diesel genset applications. They generally vary between 30% and 40%, depending on their size. and their generation of technology. Up at the top left, you see where we are with the KARNO generator, around 50% efficiency at the point of view. So it's a huge step change in terms of that -- we don't look at this as incremental. We look at it as sort of jump into a new technology S curve, if you've heard that terminology before, which that's a new bar for electrical efficiency. Finally, let's move all the way to the right. And just to give you a sense of scale, this is logarithmic, my X-axis here, which is the output. All the way on the right top is like best-in-class power plants. So these are power plants that are brand new, being installed today, the gigawatt scale, right? So these power plants take many hundreds of acres of space to set them up in and then distribute through the grid. And you're seeing the KARNO generator system is creating electricity essentially the same efficiency as those. And from our perspective, really starts to break down the benefit of being grid connected versus producing energy locally at where you want to use it. All right. Now that we've kind of looked through the interworking's of the system, let's assemble it all back together. So you saw there was 4 shafts on the location we showed. We have other configurations as well. But you may think, hey, when I bring all this efficiency and these other benefits to the table, I must be losing on maybe life or maintenance or noise, but that's not the case. Because of the low friction and the fact that it's a sealed system, we're able to maintain high life. We anticipate 10-plus years for that with very low maintenance. Again, no oil, no lubricating fluids, nothing that's going to wear, no silos resulting in low routine cost. And finally, low noise, right? There's a completely sealed system. There's no explosions occurring like you think about when you think of an internal combustion engine. All of those movements inside are naturally balanced in such a way that we have low vibration. And we typically measure numbers around 67 decibels when you're running. In fact, it's often quite a fun experience to have it turn on here in front of you and you don't even notice it, right? That it's an operation. So a tremendous amount of benefits of the system. So that's when we had the idea, let's deploy this in a truck scenario. So you saw the truck out driving around today, and hopefully, you got to see the technology kind of mounted to the side of it. A couple of really interesting points from that. Number one, the ease of integration really shines here because we were able to choose a pretty nontraditional location to kind of show off the flexibility of such a system which, as Thomas mentioned, allowed us completely recontour the front end of this vehicle for a demonstration. But what's really interesting about that is we're actually able to reduce the aerodynamic drag of the vehicle so much by eliminating the engine and clearing out that engine bay and doing some really tricky stuff to the way the flow goes through there that we are essentially able to reduce the power demand at cruise by another 20 kilowatts. Just to kind of give you an idea, that's the equivalent of adding 5% to 10% of efficiency to the power plant from a total cost of ownership perspective. So there's some really interesting advantages to still be had as we think about these systems. The other thing you may notice is that it does take a pretty limited space. I mean you couldn't obviously fit a traditional engine in such a location. And so just as a size comparison, if you look at the traditional system, typical space claim for the type of powers we're looking at 200-plus kilowatts, you're going to be in the 2 cubic meter sort of range, whereas the KARNO generator takes up just less than half of that. So highly powered dense, very, very flexible in terms of installation, along with all the other benefits that we mentioned. So what does this result in? Well, on the vehicle application, we have a chart here of efficiency. So this would be powertrain efficiency now. So we're taking it one step further than we did before. Now we're going all the way to the wheels, powertrain efficiency versus other systems that are also competing in the same space. And what we generally see is somewhere just shy of 50%. So in this case, 47% total powertrain efficiency compared to fuel cells, internal combustion engines and even the BEV with the grid. I think, again, it's a really overlooked fact that, that efficiency -- the electricity on the grid also has efficiency associated with it. In this case, we're taking that into account. But let's do a direct comparison to the internal combustion engine, but we're going to see about a 20% improvement over that system, which directly impacts your cost of ownership. All of this without eliminating the additional benefits that we have previously discussed, including the modularity, the low noise, low vibration and low maintenance. So a key to all of this, and we mentioned this in the video, and I even mentioned it earlier, is the additive manufacturing. I've got a long pedigree in additive manufacturing, especially in aerospace. And we're really bringing all of those learnings and that capability now to this power marketplace. And from a design perspective, it completely eliminates the restrictions that have been traditionally put on engineers and designers for what's even possible. If I would have gone back just a decade ago and said that we were going to achieve 95% heat capture in our heater, which is a picture that's shown here, people would -- textbooks would say that's not really feasible, right? The manufacturing technology to do that is not possible. But now today, and hopefully, you've seen some of these parts, and I have one up here just for a show. The number of passages and the complexity that we're able to achieve in here as a single piece, right, is staggering. And we often say this is the simplest, most complex components that you ever see because it is just one piece, totally computer manufactured, but in a most complex shape. The other interesting bit about the additive manufacturing process compared to traditional manufacturing processes is how we build it from a supply chain perspective. So a couple of things that are really interesting. Number one, you can have distributed supply chains. They don't all have to be co-located. It's not like a foundry where I'm going to invest $1 billion in a single building. And then that is sort of a landmark that is going to stand the test of time. We can build these not only in a distributed nature but also as we need them. So from a capital-light perspective, as you need more capability, you grow more capability, and you continue to do that over the years as you have great success. The other really benefit, which is -- aligns perfectly with what's really important to us here at Hyliion is the near 0 waste. Any -- all of our raw material is essentially powder. Any of the powder that we do not use actually solidifying it, making the components, we recycle and reuse as part of the process until we use almost 100% of it. This keeps our costs low, but it also keeps any of our waste streams very minimal. So we're not having to worry about those reentering a waste stream or needing to remelt those as an example. So additive manufacturing has really changed in the game, especially for heat engines that rely on this level of complexity and heat transfer to get the job done. Finally, the last thing I want to hit on is the future. So we talked about the modularity of the system, the benefits of the system. And now you've seen how we make it. So it's sort of made piece by piece and then those are assembled. The flexibility is really interesting and that a single shaft can be deployed in 3, 4 or any multiple of those combinations 6, 9, et cetera -- 8, 9 and such that we can achieve different power levels with identical part numbers. So you can almost imagine a scenario where we have these shafts. They're sitting on inventory as an example. And then if you have a vehicle that requires less power, you may deploy fewer of those. If you have a vehicle that requires more, we deploy -- we just essentially bolt more of those together, and we achieve different outputs. So highly scalable, highly modular. It gives us a lot of flexibility for future applications and really listening to where the market needs to be. So with that, we're going to dig into some Q&A now. So I'd be happy to take your questions, and Thomas will join me on stage.

By the way, we're still running.

We're still. It's still going away. So right after this, we'll take a pause to let everyone use the restroom, grab a snack, grab a drink. So a couple of Q&A questions. The first, which I saw a bunch of questions coming in on our emissions. And how is this going to be treated because it can be run on hydrogen, is it going to be qualified as a 0 emissions? Now I'll kick it off, hand it to you then. So as you saw Josh expressed, there will still be a small, small amount of NOx. Now laboratory equipment is needed to actually sense that I think you guys have run CARB's standard sensors that they put in a vehicle, they read 0.

They read 0.

So it's still a question mark, how is this going to be treated. But maybe you can talk about how does our emissions on hydrogen compared to a solid oxide fuel cell?

Yes. So very similar is the bottom line, right? So this oxidation process that we go through does produce very small amounts of nitrous oxide, as you mentioned. I think you bring up an excellent point, it usually requires lab grade equipment to actually sense it. But you'll find that it's almost comparable like like-for-like from a parts per million standpoint to that of the solid oxide fuel cell. So today, I would say regulators have -- to be fair, it's a new technology. So they haven't figured out how to treat that yet, and we're working through that. But from a like-to-like emission standpoint, very, very similar.

One question we got from Donovan here from Northland Capital is, I think you said BEV infrastructure is about 1.5 the vehicle cost. How would the KARNO compare? And is that on an all-in basis? And so talking -- I'll kick this off. So -- we were saying is the vehicle, so BEV plug-in truck costs and then infrastructure, if you spent $10 million on trucks [indiscernible] then you probably need $25 million total for trucks and infrastructure, right? What our goal is, is that, yes, this is going to be more expensive than an internal combustion engine I think based on all the benefits, that's no surprise. But we are not seeing that we're getting to that sort of levels of cost, right? This is not -- one thing to just level set on. I mean additive manufacturing has come an amazing way in the last decade. A lot of thanks to Josh's work when he was at GE. But it's getting to a point where now we can make this cost competitive; it will be on the higher end of what internal combustion engines cost. But this is not going to be -- we're expecting it to come in less than where fuel cells are at from a cost standpoint. So we think we're in a box that this makes a lot of sense for a fleet to adopt it. And then because of the efficiencies that we're getting, it can actually make sense over the long-term even compared to an ERX or a diesel truck from a cost standpoint. Yes?

[indiscernible]

Great question. So Donovan's question to -- second part of it, maybe this was really what you meant by it, I just interpreted wrong, was if you were to deploy one of these boxes with an EV charger, does the cost make sense? So Cheri is going to talk about this a lot within her slides, and we'll look at actual payback times and how much it can save you in a year. But the end answer is that we can produce electricity through that box significantly cheaper than grid electricity. And so yes, we see that EV charging is going to make sense as well. All right. So a question that towards KARNO, will the truck have a charging port? And maybe that's a question we should cover on all of the Hypertruck.

Yes, absolutely. So today, the answer is yes. I mean I think Dennis showed we have a charging port. I think the second part of that question, which is really interesting, was could it maybe -- could you anticipate vehicle-to-grid applications, right? And I think that is something that is certainly being looked at because of the cost of the electricity that can be produced, which is such -- so advantageous over other grid technologies, I think it really opens the door for that. And so something I think Cheri will dig into a little bit more as well, but we certainly see that as a potential.

Okay. You could almost see our truck pulling up to charge another BEV plug-in electric vehicle, right?

Charge vehicle.

And it would be cheaper than plugging into the grid.

That's right.

So no, a lot of opportunities there. All right. So someone that's obviously here today, you noted how -- hey, in the building right next door, there's actually an additive manufacturing company. So should Hyliion go partner with that company across the Street? Well, maybe that tees up, why don't we talk a little bit about plastic additive versus metal additive?

Yes. So plastic and metal additive are two different worlds. They're both additive technology and the fact that they build layer by layer. But the metal additive that we're using produces essentially metals that are indistinguishable from their forged or cast counterparts, such that they can be used in these really critical applications. In fact, just a fun tidbit for folks, if any of you flew here on an airplane, there's a very high probability that there were additive components in your engine powering you here. And that's really where it's made it and the capabilities of the industry. I think it's still not really well known how advanced it is, and we're really trying to lead the way and take advantage of that in the deployment of it on the KARNO technology.

One of the questions we have is around if an OEM were to start adopting the Hypertruck powertrain solution, I assume kind of an online type of an installation, how does it look when you go from ERX to KARNO, to fuel cell? So I'll kick it off is -- what we've done is we've designed it where we want this to be kind of generator agnostic. Parker and I will discuss this a little bit here in a little while when we talk about fuel cells, but we want the software integration to all be the same. Many of the components like the batteries, the thermal systems, the e-axles, that stuff doesn't need to change as we go from one to the next. So as an OEM is looking at adopting these solutions, our goal would be that if they've already started adopting the Hypertruck ERX, then it's a natural progression into the other solutions as well. So one of the questions then maybe as a second is, well, what do you do about these hoods? So maybe we can talk about, you don't need the hood, but you can use the hood.

You don't need it. I mean it's a technology demonstrator, right? It's to show what's possible and to start to maybe open some eyes for designers and engineers of the future to think about, well, hey, if I don't need to stick with the way it's always been done or maybe where it was always located, what could this mean to the entire system? But yes, we're seeing huge benefits of potentially taking full advantage of the ability to install maybe your power system in a nontraditional spot, which we're trying to showcase on the truck.

So one of the things you mentioned when you're giving your overviews around not needing to go spend $0.5 billion on a manufacturing plant. So let's talk about -- one of the questions around how do you scale additive 3D printing technology? And maybe you can give an overview there?

Yes, it's sort of machine-by-machine, right? So the machines are quite good today, and they're continuing to improve, right? They're still sort of on the Motors Law of speed and cost. And so what you see is each machine kind of has a certain output that it can produce on a daily basis. And as you scale, as your demand increases, you essentially deploy more and more of those. And so we see that it's a very economical way to scale, a, from an upfront cost perspective. But also from a long-term perspective, as the technology continues to also improve as you're scaling, you can take advantage of that. And so from a capital standpoint, it allows us to stay capital-light while also taking advantage of this distributed supply chain possibility.

All right. Last question we'll take here is just around, as batteries get more powerful and efficient in the future, will the scalability of bolting on KARNO units allow the units per truck to be reduced?

Yes. So the units per truck, I assume they mean like KARNO [indiscernible]...

How many shafts, right?

How many shafts is really more a function of the, I'll say, the mission of the vehicle, right? So if the vehicle is going down the road, let's say it's mostly a cruise-type mission where you're traveling down the road at some speed, some weight, that's going to set how many kilowatts you need to sustain that. That's really what sets the number of shafts that you need. The battery is really there as an intermediary or to give you that all electric range. And then as well, when we're doing like hill climbs, right, both of those can send their electricity straight to the power or the wheels to get that boost in power. So I would say it's more about these other benefits, like we talked about, the hood as an example, where we're getting a huge reduction in power. That allows us to reduce our power more so than battery technologies.

And to piggyback on that, so the truck that many of you rode in today, the Hypertruck ERX, that has a 75-mile capable battery, up to 75 miles. I think Dennis mentioned that's 210-kilowatt hours. We don't need that much stored capacity on the truck. Actually, we can get away with a much, much smaller battery. But the reason that for the Hypertruck ERX we're doing a up to 75-mile range vehicle on BEV or electric mode is purely because of regulations. That's what allows you to qualify for 75% of that ACT credit. So we do see a world as we go forward with KARNO as we go forward with fuel cell as well that we could actually make the battery pack much, much smaller because we don't really need that size of pack to get the same performance out of the truck or to have that drivability for our truck. If you want the 75 miles, you need that bigger battery pack. But -- so with that, we'll take a 10-minute break. So we'll regroup here at 35 past the hour, so at 1:35 for those here in Austin, and we'll dive into a little bit more about stationary power applications. Thanks, everyone. [Break]

kicked off again. Up next is Cheri Lantz, our Chief Strategy Officer, to discuss more about how the KARNO can be used in stationary applications.

Hello, everyone. It's really great to have you all here. So now that you've gotten in deep on the inside of the KARNO technology, I want to talk about the stationary market. I think Thomas and Dennis and Josh have alluded to it a little bit, but it really is an attractive market that we think we can address with the technology. So let's start with the context we're in. So our electric grid is challenged to deliver the power we need. Our demand continues to grow. And on a hot day like today in Texas, we're asked often to conserve our electricity use, and we're reminded that we're vulnerable -- the electric grid is vulnerable to rolling blackouts because we continue to push the demand. At the same time, renewable sources, like solar and wind, are coming online and they're helping curb emissions, so we love it, and we encourage it to go as fast as it can. But it also challenges the grid because by nature, it's transient power. And so it's sometimes available, sometimes not available and it becomes more complex to match the supply and demand of electricity. And finally, with EV charging. So the electrification of vehicles demands a lot from the grid. You heard Thomas stated in his opening that this is a big challenge for fleets who want to electrify is to get the charging they need. Well, it's also a really big ask for the electric grid because it demands instant power wherever and whenever charging is needed. So if we're to scale up our electric grid in the traditional way, in a centralized way, it would take a long time, it would be expensive and it may lead to overcapacity in any one place. So the way we see it, you need to start producing more of that power that you need right where you need it. And that's distributed power generation. Enter the KARNO stationary power gen unit. So as we've shown -- as you see, those of you with us in Cedar Park, we've got our KARNO stationary power gen unit off to the right of the stage. It's a relatively small unit. So about 6.5 feet wide by 8 feet tall. And within that package, we're able to deliver 200 kilowatts of power. So that's enough, as we've talked about, to power a Class 8 heavy truck. It's also enough power to support a whole neighborhood. So inside that package, you see we've got our 4 shaft system along the left. We've also got all of the accessories. So the radiator, the fan. So thermal management, fluid management, all of the electronics that we need to deliver usable electricity from this unit. And the KARNO delivers the same benefits that you heard Josh talk about for the technology itself. And you heard Dennis mention related to the Hypertruck KARNO. Those same attributes deliver a really differentiated solution to the stationary power gen market. In particular, when we talk to business owners about self-generation of power, there's a few detractors that come up. The few that is probably the ones that I hear most are; the footprint required, the space claim, the noise and the maintenance. So we've talked a little bit about the space claim. It's a much more compressed version of power generation. When we think about noise, so if any of you have a backup generator on your house and you happen to have been so lucky to be standing near it when it booted up for its weekly or monthly health check, it's extremely loud. So it's a whole lot louder than that 67 decibels that Josh was mentioning for the KARNO unit. Additionally, maintenance. So ICE engines, internal combustion engines, everyone knows that they require regular maintenance. There's a whole service industry around it. So we need oil changes, we need fuel filters, seal check, seal service and overhauls to those engines. So you really need to -- the idea is that you need to staff up a whole service department to kind of run your self-generation operation. So with KARNO, we can change that dynamic, and we can offer a road to self-generation of power that's quiet, that's modular, that's low maintenance, and it feels easy, like the grid. We also believe that the KARNO will deliver electricity at a cost that is lower than the grid. So in stationary power, we talk about levelized cost of electricity. And on the left-hand side, you see the levelized cost of electricity for the KARNO, which includes all of the capital costs to the question earlier. It includes the capital cost, it includes the fuel cost and all of the operating requirements, and it spreads that across the life of the unit. So at average natural gas costs in those shown states, you can see the range of the cost per kilowatt hour via KARNO. Now on top of those green bars, the white bars are the average electricity rate in those same states. Now the difference between the KARNO green bar and the white electricity rate, that's what we call the KARNO spark spread. It's an opportunity to create value through soft generation. And that KARNO spark spread varies on average across states. So if you look at our map, the dark green states are where we see the biggest difference. So California and some of the Northeast states. However, we do see a KARNO spark spread across all of the states. Additionally, the average is always imperfect. So there are individual situations, contracts, hours of the day, situations where people are running much higher than their average rates. And in fact, in conversations we've had to spec out early deployment units, all of the numbers we have seen have been well above the average. So we see a large economic opportunity here for operators, particularly where the spark spread is high or where they don't have access to power. So with KARNO, we expand our addressable market. We can now reach a whole set of stationary power users. So I've listed 5 of them here. These are 5 that have really compelling cases with our KARNO stationary unit in its current form: EV charging; renewables matching; peak shaving; waste gas; and prime power. And I'm going to walk through each of these briefly just to give you an idea of where we see the value. So first, zooming in on EV charging. So to meet our vision for electrification of mobility in the U.S. requires us to ramp up EV chargers, so fast DC and commercial L2 chargers, sevenfold between now and 2030. And when we talk with operators, their biggest challenge is getting the power they need behind their chargers. On average, they're getting quoted 1 to 3 years to connect them to the grid. And in fact, some of them are getting quoted numbers of 6 or 10 years where the grid is particularly constrained. So by deploying a KARNO or a set of KARNOs to support your EV charging station, you can get to market 1 to 3 years earlier and deliver that value to your customers or to your internal network. The second one is renewables matching. And we talked a little bit about how renewables are growing. The challenge with renewables is that they are not available all of the time. So with the installed capacity that we have for solar and wind in the U.S., currently, productive time is only about 25% to 30%. So in order to deal with that today, they oversized capacity in adjacent supplies or they backstop with batteries and store that energy. Now NREL has done a study and looked at what does it cost, how economic is using a battery for the storage to deliver my electricity? And they've estimated $0.35 per kilowatt hour. Now if you flash back to a page or 2 ago, when we were talking about the KARNO cost of electricity for a New York commercial operation, that's more like $0.09 per kilowatt hour. So we believe the KARNO is a more economic way to match your renewables. In the third use case, I wanted to talk about is peak shaving backup. So that map I shared with the shades of green, that was all at an average fuel costs and an average electricity cost. Reality is that those can vary quite a bit. And with peak -- during peak load, we see charges 2 to 3x that average rate. At the same time, commercial operations are often investing in backup power to solidify in the case of an outage. So a grocer, looking to protect their food from spoiling in an outage or a hospital who has to keep live sustaining equipment up and running in the case of a shutdown. Imagine if instead of just holding these assets idle and waiting for their chance to save the day, you could integrate them with the grid and smartly control when you're running from the grid and when are you using your KARNO. In that way, we think you can -- customers can solidify their power and also minimize their peak charges. Next is waste gas electrification. So waste gas is produced through biological methods, so landfill gas, also through industrial processes, chemical processing. In the U.S., 280 billion cubic feet of natural gas are either flared or vented because they're waste products of operation. If instead of just flaring that, we put it into a block of KARNOs, we could produce 30 billion-kilowatt hours of usable power. At average grid rates, if you can offset an electrical spend with that, that's worth $4 billion. That is just additional value opportunity from waste. And finally, as we really move towards distributed power generation, KARNO has a meaningful role to play, purely economically. Also -- not purely economically, also other valuable benefits. But on economics alone, you can make the case work. So we've shown you an example here. So we're looking at New York, again, just for simplicity. But at $0.17 a kilowatt hour, which is their average rate for commercial operators, comparing that to the cost to produce with KARNO, about $0.09 a kilowatt hour, operating at 80% for your prime power, that's reasonable, that will save you over $100,000 per year per KARNO you have deployed. So to go out and get those market opportunities that we think are so attractive. We've laid out our road map for the next few years. So similar to what you've seen on Hypertruck, and we've continued down our journey and checked off that list, we expect to do the same thing for KARNO. So where we are right now? We introduced the KARNO generator technology and first showed the truck at the ACT Conference earlier this year. You also get a chance to see it on the -- out in the parking lot on the road today in operation. We've also begun our generator unit testing and our development facility in Cincinnati. We're continuing to refine and learn about our design, and we plan to finalize it for production first quarter of next year. And because the certification path and stationary power is simpler, doesn't have as many steps to go through. We anticipate actual field deployments with customers late next year. At the same time, we'll be integrating this in a production way into the Hypertruck system over the next year and 2024 will be the bulk of that work. And then we've given ourselves 2 years, '25 and '26, to do the validation of the performance and the emissions of that unit on the Hypertruck. And we're targeting early fleet trials with customers late 2026. So everything we've talked about so far is related to the initial release, so the 200-kilowatt model. From there, we expect to expand into both bigger and smaller formats. So on the bigger side, we anticipate a large KARNO, starting at 2 megawatts and even stacking those. This will be more suited to industrial and utility type of sites. Given the power density of the KARNO, we can fit that 2 megawatts in a 20-foot shipping container space claim. We think that creates real advantage. On the other side of the spectrum, we can also envision a small KARNO. So sized at 10 to 25 kilowatts, this has in its target, the 140 million homes in the U.S. So we think in a smaller size format, they'll appreciate the same benefits of solidifying their power, a peak shaving where they've got high rates and potentially moving into things like combined heat and power, which is an opportunity to pull more heat out of the back end of the system. So we see huge opportunities to expand beyond the 200-kilowatt into larger formats, into smaller formats, into additional features like combined heat and power, advanced micro site management and going outside of the U.S. to other geographic opportunities. And we look forward to checking in with you and talking about our progress as we move forward with the road map. Thank you. And we're now opening up to questions. Have you seen some already?

I have. Usually, the first question is, so when can I get one of these from my house? But that's to come, as Cheri mentioned. But to start things off, there are a few different questions around, well, have we actually started talking to EV charging companies? And if so, what's their response?

Absolutely. So we have been talking to customers quite a bit. EV charging operators are extremely excited about a potential unlock here. So getting the power they need is really stalling what they want to do as far as their expansion plans. So we're getting into the details. We're talking about how we'd set it up. Do we put it at the front of the store? Do we have a block of an in the back that's shared? We're working through all of those details, but I can tell you they're very interested and see a large opportunity there.

Another question is around, well, how long does this thing actually take to start up? Like if we say go, when do we start getting electricity out of a start-up cycle?

So we get electricity very quickly. So seconds to power, we'll get to our highest efficiency over time, but seconds to power.

And then who are the likely buyers? Is this utilities? Is it end customers? What are we thinking?

So there is a long supply chain -- or there's a varied supply chain, I'll say. So right now, we're talking to EV operators themselves. We're talking to engineering firms that are setting those up and looking for a solution to that power gap. And we're also talking to business owners who would like to power their operations. So all of the above.

And then who are the closest competitors to having something like a KARNO technology?

So I think who competes today is traditional generators. So that's usually diesel small backup generators. And that's why I brought up some of the detractors we see today. Now there are a few upstarts that are looking to produce with cleaner fuels. But what we've seen so far is that the format of that can be much larger and the economics not quite as attractive.

So one of the things we've discussed, not a question necessarily, but it's around like why hasn't this been done before, right? Like why doesn't every warehouse have a power plant out back or hospitals or EV charging stations? And the reality is there's not really a solution that can, one, give you that efficiency that Josh spoke about earlier. I mean put that in comparison, like we're starting to play in the same ballpark as the world's best power plants from a -- if you eliminate all the line losses from that power plant to the end location, now we're getting to efficiencies that can rival that if you just make the electricity locally versus these normal diesel engines, natural gas engines, as you saw, have a much lower efficiency. But then the thing that I personally think is number one issue is maintenance, right? If you -- if we have a building like this, like we don't really want to be maintaining a generator out back.

Absolutely. I mean, I think that's why the grid is loved is because it's easy. So you plug in and you get the power you need. And I think there's a hesitancy to step into the business of having to run a power plant, which is what it feels like when you look at historical or today's offerings.

So one question that came in is just around, well, how does the KARNO play with or without batteries? Do we need batteries as an augment to it as well? Or can this be deployed all on its own?

So it depends a little bit. In fact, in some of the conversations we're having, we're going both ways. It wouldn't need a battery. But in some cases, that might be a nice way if you have a single kilowatt standby, say. Maybe that's something that you'd like to have a small battery support rather than booting up the KARNO to support that power. But in general, it should be able to ramp or run at different pressure levels to give you the power you need.

Then another question is, are you developing the switchgear that matches each size of generator?

No. Yes. That one, I will have to defer.

Yes. All right. So then as your KARNO technology strives to address the infrastructure challenges that battery and other new power technologies face in on-highway applications, do foresee a growing role for your technology in off-highway applications?

I certainly think there's a fit there. So one of the things you saw Josh talk through is the scalability of the shaft system. So we can use that to scale up or scale down and serve those missions -- different missions well. We can complement that in a Hypertruck system with the right-sized battery to support what their mission is and how far they need to go. And finally, I think the flexibility around orientation that you have with the sealed KARNO machine gives you a whole lot of flexibility. You don't need to worry about the same leveling, you can put it really wherever it fits.

Another question. I'm going to paraphrase a little here, but -- let's say we're in a storm or for a day like today, we're not a storm, but the grid is being pretty taxed because it's probably, what, 105 or something outside right now. But let's say the grid goes out, how does the power -- how does the KARNO generator work? Does that work just fine without any grid? How do -- what happens?

Yes, absolutely. So there will be some communication between the KARNO stationary unit and the grid. There are certain safety things you need to consider about shutoffs in between the two. But the vision is to seamlessly move between such that you can have smart on and smart off to understand what's going on in the environment and switch on when you need that power.

All right. And then I think last question here we'll take is let's talk a little bit about Hyliion's IP around this generator. Maybe even go back to -- this is something we acquired out of GE approaching about a year ago now. And what does that look like?

Yes. So this is all internally developed. So first with GE, it was built on the backbone of the advanced combustion and heat transfer and additive technologies. All of that, that is -- was developed by GE. We either have permanent access to or most of it actually came with the acquisition and also lives in the heads of the team that came with us. So I think IP protection or protecting our sustainability of the differentiation of the technology, I think, comes from physical IP. So actual IP that's protected out there and also just the expertise that we have. So it's decades and decades of additive combustion, thermodynamics, aerodynamics experience that is fitting together to make this solution possible.

Many, many patents. I forget the exact number, but it's a good number of patents.

40? 30?

No, somewhere up there. More than 40. All right. So with that, we're going to now transition to talking about our fuel cell collaboration with Parker at Hyzon. So we'll go ahead and transition over to him.

All right. Thank you.

Thank you. All right. So I think we got some slides to show that have a little bit of a look and feel what this truck is starting to come together and be. But to kick things off here, Parker, welcome. Thanks for joining us today.

Thanks for having me.

Do you want to give a little overview on Hyzon and what you guys do?

Glad to. Well, thanks for having me here today, Tom. It's exciting day. And at Hyzon, we're glad to be a small part of what you guys are doing here. So Hyzon's core is proprietary in-house design development and manufacturing of high-power fuel cell systems. And that fuel cell system development goes all the way back to the MEA, the membrane electrode assembly, which if you haven't heard the walk-through that is giving on our fuel cell system, it's great and goes through the basics of what a fuel cell is. That's being done today focused on high-power fuel cell systems. And that's where the core of what Hyzon is. That IP goes back to 20 years of development, and we're focused on bringing that 200-kilowatt single stack fuel cell system to commercialization at our Chicago area plant. We believe that trucks are ready to be commercialized now, and that's why we're focused on putting the first fuel cell truck together with our friends here.

So when we initially put out that road map of starting with the ERX, then going to KARNO, at that point, I think we're just saying fuel agnostic and then eventually to fuel cell, we don't know who we're going to work with on the fuel cell development. We knew fuel cells is not in our portfolio. It wasn't something we were going to do. But we spent a long time doing a full market deep dive research figuring out who had different solutions, which ones really made the most sense. One of the things that really stood out with Hyzon is the fact that you guys actually can power a truck off of one stack. So do you want to share a little bit more about how that differentiates to the competitors in the space?

Sure. And to start, I'll just -- I'll orient folks to the basics of a fuel cell. So a fuel cell was made up for ours with hundreds of single cells that cell starting with the membrane electrode assembly is where the power happened. It's an electrochemical process where hydrogen combines with oxygen from air to create that power. So to create a high-power density, you need an MEA, which has been developed to produce high-power density. We have IP that does that. The single cell has basically a frame of plate that holds the MEA called the -- for us, it's a bipolar plate. So plates are often either graphite or metal. Ours is a hybrid, it's graphite and metal. Each side is different, right? So that -- in all graphite or and all metal plate, each has their advantages and disadvantages. Our hybrid approach takes the best of both. And then finally, stacking that up in hundreds of cells, that stack design, the ability to do that at 250 kilowatts as a stack, the balance of plant around the stack consumes 50 kilowatts leading to a 200-kilowatt net system, that design and the ability to use 1 stack with 1 set of BOP is a significant edge. And so what that leads to is most fuel cell trucks out there use two complete systems to get to around 200, 240 kilowatts of power. Class 8 trucks need that kind of power in a fuel cell application with only 1 stack in 1 set of BOP, we're about 30% less weight, 30% less volume, so it fits in better and versus 2 of our 110-kilowatt systems, it's about 25% lower cost to manufacture.

And just to comment on like kind of the market study we did. So I think the smallest we saw was other providers being saying, "Hey, you need to put 2 fuel cells in the truck in order to get the power level." We even saw some suppliers saying, we need to put 3 fuel cell stacks in the vehicle in order to get the power level. But that's something when we dove in with you guys on this. It was, "Hey, this is one system that we can put in and integrate it with the powertrain." Now from our end, as we look at this joint development together, this is really leveraging what we've already built from a powertrain solution, right, because batteries, e-axles, the actual software integration, all that stays the same. And then do you want to talk a little bit about kind of the joint development building of this first truck where we're at with that?

That's right. So first, I'll just say that similar to the research that Thomas and his team did on us when we look at putting our resources to bring our fuel cell technology, the fuel cell control software and supporting the integration of that, there's only so many partners we want to work with to do that. So what Hyliion does in powertrain development, the componentry and what they have here that you're seeing, we just see a combination of -- they do really, really well on the vehicle side. We do really way they well on the fuel cell side, bringing again the fuel cell system, the integration support on the fuel cell side and the control software all that software is developed in-house and helps control the fuel cell to match up with the vehicle unit.

All right. So we talk to a lot of the same fleets, right? And we're kind of on the same side of the table of saying, look, range extender electric solutions, right? That's what both of our companies are doing. What have been some of the things you've heard because we shared it some from our vantage point. But around as fleets are trying out EV trucks and why or why not a range extender is really needed?

Yes. So when you look at fleets, what I love to hear, there's a lot of theoretical science out there that says, well, in the future, it should all be bioelectric because of conversion ratios, which may or may not take into account the great work that the team here has done on true losses in the grid. The facts are even if the conversion economics were different, fleets don't buy trucks based on theoretical science, right? Fleets buy trucks based and economics for their fleet. And most fleet applications are not super high margin for the end user. So they protect that cost and the revenue that's going into that truck. And when we talk to fleets, it's really, in our view, 3 types of fleets, right? There's fleets that are focused on load, maximizing that 80,000 pounds to 82,000 pound load. Body electric trucks have a huge challenge, typically, versus a fuel cell truck. All battery trucks are between 3,000 pounds and 6,000 pounds heavier. That's real revenue. That's real margin loss and a lot of fleets just can't do. Some fleets are either -- they either time out. I mean their drivers may go on to stop. So they can only drive so far before they have to stop or they pack out, meaning they hold a bunch of big light stuff like shoes or chips. For those 2 types, typically, it's about charge time, right? So the need to have to do with today's technology charge typically 4-plus hours minimum on a 350-kilowatt charger. Even in a future state of a 500-kilowatt to megawatt charger, that significantly higher charge times versus a 15- to 20-minute fuel up is a big impact and then separately range, right? So I think it was mentioned before, the fuel cell trucks today with 350 bar tanks go about 300, maybe 350 miles depending on the waiting. The future state, there's a liquid fuel truck that we're developing now that is going into demonstration soon that could -- we're targeting a minimum 600-mile range. So there's real reasons why we think a vast majority of the fleet use cases out there, battery electric just will not work for before you get to infrastructure. So you had some staggering stats, I'll add 2 more. So when you look at studies done by utilities that know power and you look at a future truck stop, dedicated just a BEV charging with this futuristic 1-megawatt charger, which will solve the charge time problem, right? One truck stop in the future with that technology would take the same power to power 100,000-person talent, right? And then beyond that, and when you talk about real commercial application, one of our competitors, a very large manufacturer told a story at a conference recently, they sold 300 all BEV trucks to a customer on the West Coast, right? Customers are excited, want to go get charges together. They go to the local utility to say, "Let's get chargers permitted for those 300 trucks ." They said you can have permits for 19 trucks. They said, okay, when can I get the other 281 trucks of chargers? They said 6 years, right? So there's real limits to how battery trucks can be deployed and scaled.

The thing we actually spoke together on a panel a couple of weeks ago in New York and one of the themes that we touched on a few times was practical adoption. And I think practical adoption even comes true when we're looking at hydrogen and hydrogen fuel cell vehicles. So hydrogen infrastructure is limited today, but how do you see that practical adoption taking place for a fuel cell truck?

Yes. And that's exactly where -- when you look at the commercial applications today, right, we've had fuel cell trucks in trial for about 15 months here in the U.S. We really understand the use case what the fleets can do with them and how the fueling infrastructure is going to scale up. We've invested our time and resources and partnerships in the hydrogen production space, and there's partners that we have on the dispensing side as well, and we're actively engaging with fleets on real scale-up plans. And what that looks like is a steady scale up with dispensing availability and with subsidy, that will happen and will start now, but it's going to take a few years to scale up. So today, there are mobile fuelers. The first trucks that a fleet takes, no one's going to take 50 or 100 trucks in their first year. They're going to trial a truck, they're going to order maybe a 50 to 100 truck intention, but take 5 to 10 trucks in the first year. And that matches with 500-kilogram to a ton mobile fueler. And then while they're experiencing those first 5 to 10 trucks, the second order maybe 15 to 25 trucks, you then permit install a small temporary behind-the-fence fueling setup because most of these fleets today fuel behind their own fence. The first fleets that adopt any -- whether it's a battery electric or hydrogen system are going to likely be behind the fence because you can have one fueling solution to fuel the whole of fleet. So it's 3- to 4-year scale-up vision, but we do believe that large fleets that buy 500 to 1,000 trucks a year that have real decarbonization goals to convert 10%, 15%, 20% of 5,000 truck fleet by 2030, they've got to start buying trucks now, start this process and within 3 or 4 years, can be buying 100-plus drugs a year with fuel that scales with it.

Anything else we didn't cover?

No, I just think what's great and what we love to see are fleets that want to be leaders. So you had one of your great fleets all on stage today. And the key really to this entire lower emission transition, I think, is about optionality, flexibility and finding the right solution for that, not just fleet, but for that use case. So the progression that Hyliion is making, we think is fantastic. We think hydrogen fuel cell can be a great part of that future, and we look forward to the future together.

Look forward to getting the truck out later this year.

Absolutely.

All right. Thanks, Parker.

Thanks so much, Thomas.

All right. So up next is Jon Panzer, our CFO, who's going to talk a little bit about our strategic path forward here and some financial updates.

Okay. Good afternoon, everybody. Glad you all could make it. I'm Jon Panzer, Chief Financial Officer. And as CFO, I'd like to thank you again for all coming today and all the people that are online. I'm going to start off by giving a brief update of Hyliion. I think there's a lot of new faces in the crowd that probably don't know our story. I'm the last speaker before a final Q&A, and I'm just going to give you a brief update on the financial implications of all the opportunities that we've discussed today. So first of all, you heard Dennis say this, we don't make trucks, we make and integrate powertrain systems. And I think you heard that loud and clear today as well as our KARNO system that differentiates us from a lot of others in our space. We are an asset-light company. In fact, if you look around this building, this is our primary asset. If you have a chance to tour it, it's a beautiful building. We can assemble trucks here. But our long-term goal is not to build trucks, that's not our core competency. Others like Peterbilt, that's what they do, and we just integrate our powertrain systems that you've heard about today into those trucks. We also have a facility in Cincinnati. That's where our KARNO team is at. It's also very asset light. They have some additive printers and engineering technology there. So also, if you've been following our story, you know that we are well capitalized. At the end of last quarter, we had $385 million of cash and investments on our balance sheet, and I'll go through that a little bit more and tell you how we expect that to help us. I think another thing if you've followed our story, if there's one takeaway from what you've heard today is the transition from fossil fuels, like diesel to clean transportation technology, is not going to happen in one step. You just heard Parker and Thomas talk about the challenges with battery electric trucks, whether it's charging or range whatever it is, we have fundamentally believed since the beginning of this company that the transition -- there's going to be a transition. And fundamentally, every step in that transition is going to include an onboard range extender to recharge the electric batteries. And you see that beginning with our natural gas range extender, which we're starting to produce the first truck today or assemble the first truck through the KARNO system, the KARNO generator, which can run on fossil fuels or clean fuels and then ultimately a fuel cell truck like what Hyzon has presented here over here today. That is what we believe. That is our mission, that is our underlying focus as a company. You heard Thomas talk about our initial orders. We're going to build and deliver. Our plan is to build and deliver 30 trucks this year. That's a slowdown from what we had initially anticipated. I'll talk more about that later. We are also doing extended fleet trials with customers. You heard Dennis talk about that. A lot of our fleet -- a lot of our potential customers want to actually get in the truck after it's been certified, safety tested certified, get a chance to get in the truck, drive it and experience it before they place orders. So we don't have any updates on the final customers for the 30 trucks today. Those discussions are ongoing or orders for next year. I will tell you we are ordering components for next year, and that's part of our financial story as well, but that is our plan. And I'll also address head on. The stock market has been very challenging for clean tech, clean transportation start-ups like ours, we're no exception to that. As I mentioned, we have a strong balance sheet. So we think we're in pretty good condition there, and I'll kind of update you on our thoughts about the future there. And again, opportunities. I think that's probably the second big message of the day is we at Hyliion believe that we have fantastic opportunities across the range of our powertrain solutions and with a KARNO generator. Now I'm going to switch gears real quick and I'm going to talk about TCO. Dennis mentioned that we believe that our range extender Hypertruck ERX offers a total cost of ownership benefit versus a diesel truck. I think, initially, what we thought was that if our truck costs roughly the same over the life of the asset, that fleets would buy it because it's -- with the natural gas range extender, it has lower emissions than a diesel truck. It's also better to drive, more comfortable with the drive. So we just did a quick example here of total cost of ownership versus diesel and really the main drivers of the cost of the truck and the cost of fuel and maintenance. So let's start with the cost of the truck. In both graphs that you see up here, we've assumed about $400,000 for the Hypertruck ERX system, and that is after the Inflation Reduction Act tax credit. And then a diesel truck is probably maybe half of that much. So you pay a little bit more upfront and then you start to run the truck, and the big benefit you get over time is really with fuel costs. You can get natural gas for $1, maybe a little over $1 per gallon, depending on where it's at, where you're buying it at on a diesel gallon equivalent basis. And diesel I'm sure you see pump prices, that varies as well, but it's somewhere $4 plus or minus. So there's really a cost benefit to burning natural gas as well as on emissions benefit. So over time, as you generate more miles, you're offsetting that initial cost of the truck. And again, included in there is maintenance as well. So we have a couple of examples here. On the left is 90,000 miles a year, on the right is 120,000 miles a year. So that cost of the green line, the cost of the ERX, you've got the initial cost of the truck and then added fuel and maintenance cost over time. It's not growing as fast as with diesel. So there's a breakeven point. And these are, to use a finance term, undiscounted numbers, just straight when's the breakeven point. And for 90,000 miles, that's roughly 4 or 5 years. And it's sooner, 3 years at 120,000 miles a year. And of course, all of these numbers depend on operating conditions and so forth. And in each case, running a truck for 4 or 5 years at these kind of range is nowhere near the life of the truck. So there's opportunities even beyond that to save money. And then again, there's the other operational benefits of the Hypertruck. So just a quick TCO calculation on that. And then I'm just going to talk a little bit about the future here. You've heard about some, I'll call them, strategic shifts in the company, not major shifts, but just reorienting towards the opportunities that we have. First of all, slowing the pace of Hypertruck ERX commercialization. We talked about that at our first quarter earnings release last year. We're going to -- we originally had planned to develop and sell 200 trucks by the end of the first quarter of next year. We've backed off that pace a little bit. We're still going to -- we need to get our truck out in the marketplace so people can tried out and see how it works. But the main benefit to us of that is ultimately wanting to be a developer of powertrain systems that we sell to other OEMs to integrate them. We don't need to get huge numbers of trucks out there. We just need to get the platform out there. And then, as Thomas mentioned earlier, what we're trying to do is reduce the cost and the -- of actually building the trucks. So it gives time for our engineers to be developing lower-cost solutions, the supply chains, our procurement processes to reduce the working capital impacts to us and building those powertrains. So there's still clearly some unanswered questions around, hey, what does next year look like? Again, we're buying components to build trucks next year and so forth. So that's a shift. It's -- at the same time, you heard that we are actually pulling ahead our plans for this year. We're starting -- instead of starting the build of the first truck in the second half, we're actually starting it today. So it's not a matter of the powertrain, development not being on track. We just want to get the right type of commercialization plan in place and be on the right track to ultimately be selling powertrain systems. And then the additional applications that you heard today, you could tell the way Thomas and Dennis described it. We didn't think we would be in the day cab space, but there's obviously demand there for it and then the KARNO truck. And then the KARNO opportunities are tremendous. So when we bought KARNO from GE back late September last year, we knew there would be stationary applications. But as we dug into it, I think we've really been excited about what those are and actually see them as being a big opportunity, okay? So we'll be focused on those. Let me talk about financial projections here for a minute. I'm going to reiterate some of the things that we said in the first quarter just around this year. So we think our total operating expenses will be around $130 million, plus or minus. We are now saying revenue around -- it should be a little bit north of $10 million by selling 30 trucks plus some of the hybrid sales that we have this year as well. And then again, capital or cash spending is very important to us. We think that will be no more than $150 million for the year. So let me talk about cash spending here a little bit. If you look at the chart that I put up here on the left, just to walk through the last couple of years. We started 2022 or finished 2021 with $557 million of capital, cash and investments. And last year, we spent $135 million. That included $15 million of cash we spent on KARNO, and that's the little blue bar there on top of the gray. And then there were some working capital and capital expenditures, all that added up to $135 million. This year, again, should be a little under $150 million. We don't have the KARNO expense. But the working capital that I talked about us buying components for trucks next year is impacting our cash a little bit, some capital spending in there. If you look at the gray bars, they're about the same, about the same amount of cash, operating expense spending in both years. And I'll add to that, this is -- this year, we have a full year of the KARNO team in those numbers where last year, we just had a quarter. So even though we've got all of KARNO this year, our total operating expenses from a cash perspective are about flat. So that leaves us with around $275 million at the end of this year. So let's look a little bit further forward. You've heard that there is market demand for -- increasing market demand for our range extender solution, and that's why we're integrating the 15-liter engine. We're working on a day cab variant. We're working on improving the manufacturability of the sleeper truck and selling more of those units and then, of course, the KARNO truck. So we have a lot of great things that we're working on this year. We believe that the cash that we have that we expect to have at the end of the year will be sufficient to fund our needs for all of that development work next year. So 2024 without raising additional capital. And if you just kind of extrapolate the numbers that you see here on the slide that we should feel like it makes sense to you. We also are expecting some revenue from the KARNO stationary applications next year. These are initial installations, but they will be generating power. So we should be able to generate some revenue from it. I think that will be a big milestone from us is to start to get some KARNO revenue next year -- late next year. And then just speaking kind of looking at it a little bit further, what we have said very clearly, we have no plans to need to raise capital in 2023. We don't -- as I just said, we don't need to raise capital next year either. But we will be -- we will remain opportunistic. What I mean by that is if the market conditions improve, mainly meaning our stock price, we might take advantage of improving conditions to supplement the capital that we have. But this economy is very hard to predict. So even if that isn't the case, we are in good shape through next year. So we feel very confident about that. So again, just a very quick overview of what you heard today and how it affects our near-term and financial outlook for the next couple of years. So you can see we're optimistic about the opportunities that we have, and we feel like we're in good condition to kind of continue to execute the vision that we have. So again, very brief, but that's a quick overview. And I think next, Thomas and I will take any questions that come up here.

So I don't know if it's a factor of its towards the end of the day or not, but we didn't really get many finance questions. Maybe you just did that good job covering it.

Okay. There's still time.

If you do have any questions, throw those in. But and I were just talking about is there were some still lingering questions from before. So we'll go ahead and dive into those. One question with Parker, I might put you on the spot again on this one here, if we can go live with your mic is. Let's talk about liquid hydrogen. What's the opportunities there I think you posed this question 700-mile range, hours of service? How does liquid hydrogen look?

Yes. So liquid hydrogen, like many of the technologies that we're talking about is still in development. Liquid hydrogen has been in use for a long time in different applications. But as I said before, we're in development right now of our first liquid hydrogen truck that has the same feel of technology in the truck, that truck is already on the test track, and that truck is about to go into customer demonstration soon. The range on that truck, we're targeting a minimum 600-mile range. And that's with the packaging for demonstration mule of unit. There's opportunity to package in more fuel in the future as we progress that technology forward. But we believe that technology over time could go well beyond 600-mile range. And it's one that we have time to develop that. When you think about the hydrogen market, it's going to be back to base centered for a period of time. The back-to-base operations in major cities will open up a long-haul market over time with dispensing across interstate map. And by that time, we expect to have liquid hydrogen fueling ready.

And just the high-level pros and cons, my understanding of it in layman's terms is pros is liquid hydrogen has a much, much higher energy density than gaseous hydrogen. It's longer range of the vehicle. The cons is you need to actually keep it cool onboard the truck.

That's right. And that's the big challenge that we're really talking now is more around keeping a cool in what happens. As liquid hydrogen warms up, that liquid converts to gas, and you have to vent it, which is waste. But there's opportunities for us to minimize that, that we're confident we can develop over the coming years.

Thank you.

Thanks.

All right. Do you know the expected revenue per KARNO unit?

We haven't talked about that. If you refer back to Cheri's presentation, she was quoting some numbers around what we think the levelized cost of electricity is with KARNO, and it was very competitive. Obviously, implicit in that. She was very clear that, that does include the cost of what we expect the cost of the KARNO engine to be. And we're thinking about it from a cost with some -- obviously, return to Hyliion. And I think just to summarize it, while we're not giving exact numbers on what we think the MSRP will be for the KARNO, we expect it to be very cost competitive, whether it's on a mobile application or stationary application. So if you think about current generators like diesel generators that you can buy on a per kilowatt hour -- per kilowatt basis, it will be -- we think it could be very competitive, and it's not like from a manufacturability perspective, we need a big premium to put this in the market. Now there are some steps by the way, just to be clear. We're very clear that we're continuing to develop the technology. We had it on the truck today, but it's still being developed. It still needs to be tested. Life cycle testing. But again, for everything we've seen, we're extremely optimistic. So we will know a lot over the next, call it, 18 months or so.

All right. So not a finance question, but one that came in from Trevor. So what are the early customers preferred fuel options for the KARNO generators and which options demands the lease maintenance of tanks? So in terms of KARNO on a truck and even in stationary applications, we see natural gas as being that very logical initial fuel to be used. Over time, we see hydrogen as a fuel option as well. But it really goes back to what Parker and I are discussing if you need hydrogen infrastructure built out. Now you could even go the other way with a KARNO on a truck and actually use diesel fuel KARNO, as Josh spoke about. This is truly a fuel-agnostic solution. But our push to fleets in the beginning is going to be used natural gas. And I'm going to use this as a way to pivot into another question that came in, which was around what efforts are being made to avoid using brown natural gas? So let's talk about where the natural gas and specifically renewable natural gas industry stands for trucking. So over 60% of the fuel sold today, so already across the U.S. at natural gas stations is already coming from renewable sources. So that means that over half of the fuel is already renewable, right? So that's a huge, huge win. That's actually very different than you saw Josh talk about grid electricity, 35% average efficiency, right? A lot of that is still coming from pollutive sources. One of the other big pushes in the hydrogen industry is moving towards green hydrogen. I think it's still upwards of 90 -- or I guess saying in a different way, about 10% or less than 10% of the hydrogen made today is actually coming from green sources of where we want it to come from long term, right? So natural gas has this leg up where most of it -- or the majority of it are sold to stations is already coming from renewable natural gas. I think in California, we are already over 90% or close to 100% of the fuel sold there is already renewable natural gas. So RNG is truly a great fuel to use that. Basically, the simplest way I've been able to describe it is, it's like you're using pollution to produce electricity onboard your vehicle.

I think I see one finance one down here, Thomas, around capital. I'll just touch real quick. The question was what do you need to see from the capital markets to raise sooner than you had expected? Again, we don't have a firm expectation. If you look at our valuation in the stock market, everybody thinks their stock should be higher. We do believe that we're undervalued. We're actually trading below what our cash value is. So that's not a place where we want to dilute the stock at all. So we would have to see it get quite a bit better from where it is today. But again, no firm plans. It's just we're very happy to say that we have the flexibility to be patient and actually let more of the technology and the solutions that we're working on make progress and get into the market before we have to make any tough decisions. So we are, again, very comfortable for the next couple of years or next 1.5 years.

One other question that came in was in the early stage of the Hyzon fuel cell integration, have you come across any modifications to the ERX powertrain that you need to make? If so, what are they? How does this compare to what your expectations were heading into this collaboration? So I think the -- probably, the biggest shift, obviously, other than having a different generator, just hydrogen fuel cell vehicles need more cooling. So greater amounts of radiators fans needed to go onto the vehicle in order to properly maintain the operating temperature of the fuel cell. From a powertrain to integrating the fuel cell stack, as Dennis spoke about, we had laid out our road map where we wanted to easily be able to shift from one generator to the next. So obviously, integrating a fuel cell does require some software changes. But it was not a major overhaul by any means of our software or the powertrain. Batteries stayed the same, e-axles stayed the same, cooling systems. A lot of the components stay the same. So some more fans to put it very simply. All right. And I think you covered this, but there is a question out there of, can you remind us how much the Hypertruck ERX is going to cost for fleets to bought?

Yes. We've said, I think, at the high 300s after the IRA. The IRA for us is worth $40,000 or for the buyer, not for us, but for the buyer of the truck. And we've said high 300s. On the example, if you remember the chart I showed, it was 400,000. So somewhere in that range is an initial price that we're thinking.

Last question is just around, can you share more on kind of what the revenue generation will look like for KARNO units as we deploy them into stationary applications? Do we charge for the kilowatt hour? Do we charge for the unit? It's early innings, but Jon, do you want to add?

Yes, it's early innings. Great creativity. We're not sure yet. I mean right now, we were just thinking, hey, we'll sell the units. But there's a lot for us to figure out in terms of just integrating manufacturing and distribution supply chains, potential partners. We can even contract out the manufacturing, the printing. Again, this is not -- it is leading technology, but there's lots of developer -- makers of the additive printers. So we have a lot of options. But the real value for us is that intellectual property and that technology that's really belongs to Hyliion.

All right. Well, I'll close this off with some closing remarks. So thank you, Jon.

Yes. Thanks.

All right. So I'm the final thing between the second group of individuals that are going to go for a tour, go for ride and drive in trucks. So I'll keep this nice and brief and short. But first, I want to say thank you for all of you for coming today. For those of you who logged in, we're looking at some stats. Hundreds and hundreds of people logged in virtually to attend this as well. So give yourselves a round of applause for making the trip out to Austin. Thank you. And then just the closing remarks is, hopefully, from the content that you just saw as well as from the experience that you're getting around the facility, you see why we're so excited about the journey that we're on. The slogan that we started to coin internally is it's innovation, but yet it's practicality, right? We can provide you an innovative solution, but it can actually be practical for you to adopt that. And that's what we see with the Hypertruck ERX, right? You don't need to go out and build a ton of new infrastructure. It's not going to cost you a gazillion dollars to do it. It actually can be cost competitive to where diesel trucks are, right? So those are some of the things that fleets need to see for them to be able to adopt the technology. Then as we look at the KARNO generator using in stationary applications. Practical? Yes. Complex from an engineering standpoint? Very much so, but we're letting Josh and his team take care of that one. But when you think about -- if you could get a box like this and put it outside of a building that you're already consuming many, many kilowatt hours or megawatt hours of electricity, that's a very practical solution and one that doesn't require a ton of maintenance and could be quiet and actually make electricity at a cost that's less than the grid electricity and at efficiencies that rival some of the best power plants out there today. So innovation, but practical is the slogan that we're going for. So -- and then as Jon closed out his presentation with Hyliion is positioned to go make this happen, right? We're well capitalized from a balance sheet standpoint. So we're not in a position where we need to go raise capital right now. Obviously, that's not what we want to be doing in today's capital markets. So the goal is, let's stay heads down, continue to execute, get these products out there. We're starting that first founders truck build today. And then as we go into next year, we'll also start putting some of these stationary units out in the field as well. So once again, thank you all for attending today. For those who did the tour earlier before this presentation, you're done. This is it. Feel free to grab a drink, grab snacks before you head out. For those of you who are part of the second half of the day tours, stick around in this area in just a little while here, we'll go ahead and get those kicked off. Thank you all for attending.