Nikola Q3 2024 Earnings Call Transcript

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Provided by Quartr
October 31, 2024

Key Takeaways

  • Nikola wholesaled a record 88 hydrogen fuel cell electric trucks in Q3, meeting its guidance range of 80–100 units and maintaining over 90% market share in North America.
  • Year-to-date fuel cell electric vehicle fleet adoption grew by 78% to 16 end fleets, with a total of 32 distinct fleets operating zero-emission Class 8 trucks across both powertrains.
  • Hydrogen fueling activity at Nikola stations increased by 350% year-to-date, with over 5,900 fueling events and plans to deploy 10 Hyla mobile refueling solutions by year-end to strengthen the California corridor.
  • The BEV 2.0 recall campaign progressed with 78 trucks returned to service, garnering overwhelmingly positive feedback on performance, range, and reliability.
  • Unrestricted cash fell to $198 million, with a cash burn of $162 million in Q3, providing runway only into Q1 2025 and prompting the company to seek additional capital.
AI Generated. May Contain Errors.
Earnings Conference Call
Nikola Q3 2024
00:00 / 00:00

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Operator

Good morning and welcome to Nikola Corporation's third quarter 2024 earnings and business update call. Currently, all participants are in a listen-only mode. We will begin today's call with a short video presentation followed by management's prepared remarks. A question-and-answer session will follow the prepared remarks. As a reminder, this conference is being recorded.

Operator

Hello from the Coolidge Assembly Factory. One of the key features of our factory is its flexibility. Remember, we're a one-truck platform and two powertrain options: battery electric or a hydrogen fuel cell truck. Agility, flexibility, super important in this business. Market demand shifts from month to month, and we need the ability to react to that shift. So within the line, we have the flexibility to switch back and forth depending upon market demand. One-truck platform, two powertrain options, all zero emission.

Operator

This is where trucking is going. This is where the future is.

Operator

We haven't seen anything that's as advanced as the Nikola.

Operator

The technology has actually made us more efficient.

Operator

The power, maneuverability, it can turn on a dime. It's just a smooth-driving vehicle.

Operator

The power that it has going up the hill, there's no comparison.

Operator

It's faster than anything I've driven.

Operator

After a shift, recovery on, I'd say on the body, is definitely a lot better than before.

Operator

I love that it's, you know, not a lot of noise.

Operator

Being in the truck is like almost like soundproof. You don't really hear the outside.

Operator

It's a keyless entry. You know, everyone has an app that they can utilize to get into the truck.

Operator

Drivers like the fact they're just cool. They're neat. They're fun to drive.

Operator

I find it very convenient that a lot of features are built into the HMI system. It just makes my job overall easier.

Operator

It's cutting-edge equipment, and it's really, it's a great vehicle on the road.

Operator

If you take a trip to Coolidge, you go walk the factory floor, you meet the people that are manufacturing this product, you actually really gain an understanding of their commitment to excellence and the shared mission that the company has, which is sustainability.

Soei Shin
Soei Shin
Head of Investor Relations at Nikola Corporation

Thank you, operator, and good morning, everyone. My name is Soei Shin, Head of Investor Relations. I'd like to welcome those listening by phone and those on the webcast to Nikola Corporation's third quarter 2024 earnings and business update call. Joining me today are Steve Girsky, President and CEO, and Tom Okray, Chief Financial Officer. A press release detailing our financial and business results was distributed earlier this morning. This release can be found on the Investor Relations section of our website, along with presentation slides accompanying today's call. Today's discussion includes references to non-GAAP measures. The presentation includes adjusted EBITDA, non-GAAP earnings per share, adjusted free cash flow, and other non-GAAP measures. These measures are reconciled to the most comparable U.S. GAAP measures and can be found at the end of the Q3 earnings press release we issued today.

Soei Shin
Soei Shin
Head of Investor Relations at Nikola Corporation

Today's discussion also includes forward-looking statements about our future results, expectations, and plans. Actual results may differ materially from those stated, and some factors that could cause actual results to differ are also explained at the end of today's earnings press release on page two of our earnings call deck and in our filings with the SEC. Forward-looking statements speak only as of the date on which they are made. You are cautioned not to put undue reliance on forward-looking statements. After Steve and Tom's prepared remarks, we'll take questions from our stockholders and then conclude with questions from analysts.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

Thanks, Soei, and good morning, everyone. Welcome to our Third Quarter 2024 Earnings and Business Update Call. Year-to-date through the third quarter, we had record sales of hydrogen fuel cell electric trucks, a 78% growth in fuel cell electric vehicle fleet adoption, and a nearly 350% increase in hydrogen fuel dispensed at our commercial stations. We also returned 78 BEV 2.0 trucks back to end fleets and dealers. With every truck delivered and fueled at our stations, we continue to deliver proof points to the market that zero-emission trucks are driving the future of Class 8 mobility. Programmed to date, Nikola fuel cell electric trucks and battery electric trucks have accumulated over four million validation miles, avoiding over 6,000 metric tons of CO2 tailpipe emissions, which is equivalent to the emissions generated by over 1,500 gasoline-powered passenger cars in one year.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

The third quarter is an example of how we're executing our strategic and operational objectives by strengthening our resolve to push forward, meet the demands of our end fleets, and lay a path for a sustainable future. First, at the end of Q3, we announced we had wholesaled a record 88 hydrogen fuel cell electric trucks, firmly within the guidance range of 80-100. We continue to dominate the heavy-duty fuel cell electric vehicle market in North America with over 90% share based on the most recent Polk registration data. We also expanded our dealer network for the first time since the launch of the fuel cell electric vehicle in Q3 2023, allowing more access to both Nikola fuel cells and BEVs in Southern California. Second, we are building momentum in the zero-emission ecosystem.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

Currently, we're the only OEM to offer two zero-emission powertrains on one commercial Class 8 platform in North America. This speaks to our unique ability to meet the diverse business needs of our end fleets. Regarding fuel cell electric vehicles, we're the only OEM expanding the market or increasing the pie. As the market leader and pioneer, we're also driving end fleet adoption. Year-to-date, in-service fleets have grown 78% to 16 distinct end fleets from nine in Q1. Across both powertrains, 32 discrete end fleets have deployed Nikola fuel cell or battery electric trucks. Quarter to quarter, we're proving there's a market for heavy-duty zero-emission vehicles in North America. Third, we are reiterating our year-end fuel cell electric vehicle guidance volume of 300 to 350 trucks. Fourth, as we mentioned, the BEV 2.0 is back on the road.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

Year to date, we've made solid progress on the recall and have returned 78 BEVs back to end fleets and dealers with overwhelmingly positive feedback. Moving on to the business update, we had record sales of 88 fuel cell electric vehicles to our dealer network, up from 22% last quarter. On the retail front, we continue to see strong organic growth from existing end fleets. National fleet partners such as J.B. Hunt, Kenan Advantage Group, and DHL recently announced deployment of Nikola fuel cell electric vehicles and noted the important role we play in not only helping them meet their sustainability goals, but those of their end customers, Nestlé and Diageo. Nikola will support Diageo operations with the deployment of its first behind-the-fence hydrogen fueler at its campus in Plainfield, Illinois. End fleets are delivering household goods to their final destinations, wherever that may be, all with zero tailpipe emissions.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

Sustainability drives good business, and Nikola stands tall with them. We're also excited to welcome GTS Group into the Nikola dealer network in Southern California. GTS introduced Next Generation Truck, or NGT, as a new division created for the sales and service of Nikola trucks. What's exciting is that Nikola is a catalyst for dealers like GTS who find value in diversifying their business into zero-emission Class 8 trucks. The additional dealer brings the number of Nikola sales and service locations up to 19 across the U.S. We're pleased by the traction we're gaining from demos, especially in Canada. Loblaw Supermarkets completed its trial of the BEV 2.0 with high praise for its performance and range. Tim Hortons Restaurants will begin demos of both the fuel cell and BEV shortly as they evaluate the best fit for its short and long-distance routes.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

Our dealer partner, ITD, is ready and waiting to support max charging as it has recently built a 400-kilowatt charging station in Toronto. As a reminder, we launched Canada's first modular refueling station at a dealer with ITD last quarter. Together, we are building out the zero-emission ecosystem for the benefit of all. We're building momentum in the zero-emission ecosystem, exploring uncharted territory, testing new technologies, and leading the way for others to follow. Every day, our in-service trucks transmit extensive field data that is analyzed and used to make our trucks a better experience for our end fleets. Likewise, every kilogram dispensed within the HYLA network helps inform our fueling partners and suppliers with the continuous development needed to sufficiently meet the off-take demands on this largest scale. The more trucks we deploy, the more they fuel, and the faster the ecosystem reaches stabilization in the learning curve.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

Nikola stands alone in these pioneering efforts. To date, 16 fuel cell electric vehicle in-service end fleets have accumulated over 1 million road miles, up from nine fleets and 120,000 miles in Q1, validating the average fuel economy benchmark of 7.2 miles per kilogram. The data point that's really telling of the fuel cell electric vehicle's capabilities is that since last quarter, the total number of runs exceeding 400 miles before fueling has increased to 285 from 192 runs, up 48%. We are seeing that as fuel availability increases and fleet operators get more comfortable with the technology, they are pushing the fuel cell electric vehicle to perform the way it is built to. For the battery electric vehicle, nineteen end fleets have accumulated over 715,000 road miles since putting the BEV 2.0 back into service.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

The average distance between charging has increased 10% to 143 miles from 130 miles last quarter. Like the fuel cell electric vehicle, end fleets are pushing the BEV to perform to expectations. Since its return to the market, the total number of runs exceeding 200 miles before charging has grown to nearly 950, or 27% of all runs. On a converted-to-diesel basis, our FCEVs continue to outperform the average Class 8 truck on fuel economy and avoidance of tailpipe emissions. The average miles per gallon diesel equivalent of our fuel cell electric vehicle remains constant at 8.0, or 23% better than the Class 8 fuel economy average of 6.5 miles per diesel gallon equivalent per the DOE. In total, across both powertrains, we estimate our end fleet operations have avoided 2,700 metric tons of CO2 tailpipe emissions.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

Moving to chart seven, we expect to deliver 10 HYLA fueling solutions by year-end. We are focusing our strategy on providing more support at existing stations to better serve our customers as we scale. Meanwhile, we continue to make progress on stations slated for Q4 as the HYLA team engages daily with local jurisdictions for site approvals and permitting. In fact, we're in the final stages of approvals for several Northern and Central California cities, which further strengthens the North-South I-5 freight corridor. Operationally, over the lifetime of the entire HYLA network, we have recorded over 5,900 fueling events, dispensing over 210 metric tons of hydrogen for an average of 36 kilograms per fill. The year-to-date ramp-up in mobile hydrogen refueling stations has been very strong. Since we began measuring commercial fueling operations in Q1, total hydrogen dispensing has grown nearly 350%.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

Moving on to chart nine, we are excited that the BEV 2.0 is back on the road, hauling freight and validating its use case. Produced to date, we've returned 78 BEVs back to the market to overwhelmingly positive feedback. Of the many lessons we've learned, one is of its resiliency. These last 12 months have been a story about the BEV's ability to withstand challenges, recover from failures, and emerge as an adaptive and evolving truck without compromising performance. For example, one end fleet carrier optimizes its line haul operations for a major consumer company by carrying high-value, low payloads from Northeast ports to the Midwest with our BEV 2.0. When the load has cubed out before it has weighed out, the BEV 2.0 is a perfect fit.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

Field data tells us that this VIN completes the over 800-mile run over two days with five charges at an average distance of nearly 160 miles between charges. Overall efficiency for this run is 2.5 kilowatt-hours per mile, a more than decent measure considering the average speed of 60 to 70 miles per hour with limited regenerative braking on this relatively flat route. Most importantly, the BEV 2.0 is the truck of choice for this end fleet carrier to meet its client's sustainability guidelines to source low-carbon or carbon-free logistics services. Another carrier deploys the BEV 2.0 to haul for a major steel manufacturer in the southeastern U.S. This end fleet maximizes load capacity with route optimization, all the while meeting its client's preference for zero-emission routes. In fact, one quick midday charge enables the end fleet to double its productivity by running the 160-mile run twice a day.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

According to the end fleet, no other BEV has the range nor the capability to manage the payload against the strong winds along this route on one charge, let alone twice. These anecdotes are examples of how the BEV 2.0 is adapted in the marketplace to meet and exceed end fleet expectations. It is the truck of choice not only for its performance, but also to meet the sustainability goals of end fleet partners. The BEV 2.0 is back.

Thomas Okray
Thomas Okray
CFO at Nikola Corporation

Passing it over to Tom to cover the financial results. Thanks, Steve. Chart 10 contains our financial highlights. Regarding the top line, in Q3, we posted gross revenue of $33 million versus the record of $31 million revenue reported last quarter. The increase in revenue was primarily due to higher wholesale deliveries. On a net basis, revenue was negatively impacted by $8 million associated with the repurchase of 20 BEVs.

Thomas Okray
Thomas Okray
CFO at Nikola Corporation

We view this as a timing event as we have a PO in hand to deliver these units to another dealer. ASP for the fuel cell vehicles in the quarter was $361,000, down 7% from Q2. While we expect softer ASP as volume increases, we are pleased that over the last four quarters of sales, the average ASP for fuel cells has held at approximately 370,000 units per truck. For the third quarter, we reported a gross loss of $62 million compared to a gross loss of $55 million in Q2. Again, the BEV returns were the biggest headwind, partially offset by higher fuel cell wholesale volume. With respect to cash, our unrestricted cash declined $58 million from Q2, ending the quarter with $198 million. Cash was helped by net ATM proceeds of $20 million and other financing activities of $75 million. We are examining every opportunity to optimize cash.

Thomas Okray
Thomas Okray
CFO at Nikola Corporation

We estimate that our existing cash is sufficient to fund our forecasted operating costs and meet our obligations into, but not beyond, Q1 2025. We continue to seek to maintain sufficient capital to support our business. Moving on to Chart 11. For fiscal year 2024, our guidance for fuel cell wholesale deliveries remains unchanged at 300 to 350 trucks. Our flywheel-based business plan remains unchanged, building scale to enable us and our supplier partners to improve and optimize the unit economics. While we believe that the fuel cell truck is the best option for most of our customers' use cases, we also believe that our BEV truck plays a role in most national fleets. Therefore, we continue to manage allocations between producing fuel cells and remanufacturing BEVs to support the needs of our customers while meeting market expectations. Back to Steve for closing remarks. Thanks, Tom.

Thomas Okray
Thomas Okray
CFO at Nikola Corporation

I'd like to close with a video reiterating the key message that we have two powertrains, one platform, both zero-emission. A few weeks ago, our team drove two trucks, one fully loaded, from our Phoenix headquarters to Bentonville, Arkansas. The team drove up 6% grades to Payson and then on to Winslow, Arizona. They followed I-40 through New Mexico the second day, Texas and Oklahoma the third day, and reached Arkansas on the fourth day. The trucks were charged over the driver's lunch breaks and over dinner in the evenings. The loaded BEV's range was 210-310 miles per charge, while the bobtail range was 380-490 miles per charge. Both trucks kept pace with the highway semi-truck speeds of 65-70 miles an hour and performed as expected.

Thomas Okray
Thomas Okray
CFO at Nikola Corporation

The trucks were 100% reliable and had plenty of power to conquer the grades and arrived quietly and efficiently after traveling 1,200 miles to Bentonville.Operator, please start the video. \This morning, we're preparing to go on an adventure to the south. We're taking two battery electric trucks, one bobtail and one with a box trailer, from Phoenix, Arizona, across country to Arkansas, demonstrating that we can pull 80,000 pounds across the country using charging stations along the way. You'll pass the 101 south, and then as soon as the 101 north lanes open, we could have shipped these trucks on the back of a lowboy, but we decided to drive them, and we will get these trucks there under their own power. All right, there we go. I've been a CDL driver for going on 17 years.

Thomas Okray
Thomas Okray
CFO at Nikola Corporation

The ease of actually driving one of our Nikola trucks is beyond what I've ever experienced at any other diesel conventional truck I've driven.

Thomas Okray
Thomas Okray
CFO at Nikola Corporation

Very easy maneuver. The steering's light, great visibility. There's no noise. There's no exhaust fumes from the diesel. There's no diesel smell. The trucks have performed amazing. The 6% and 7% grades we come to, we go up with ease.

Thomas Okray
Thomas Okray
CFO at Nikola Corporation

The chargers so far have been excellent. We've been able to pull straight up to a charger. We'll plug it right in. It'll accept our payment, and we start charging at our max charge rate. And you can virtually walk away from it and even monitor it remotely. It was easy to do this trip with these trucks. We charged two times per day over four days. This is the furthest that we've driven the BEVs on a single trip. We covered 1,200 miles.

Thomas Okray
Thomas Okray
CFO at Nikola Corporation

It's been an awesome trip. The trucks have performed amazing. It's just a greater passion to know that we're driving across country with clean energy. It's just amazing.

Operator

This concludes our prepared remarks. I will now hand the call back to Soei for stockholder questions.

Soei Shin
Soei Shin
Head of Investor Relations at Nikola Corporation

Thank you, Operator. We received questions from retail investors through the Say platform, most of which can be summed up into three questions. The first question, in the long run, how and when do you see the company being profitable?

Thomas Okray
Thomas Okray
CFO at Nikola Corporation

Thanks, Soei. I'll take that one. Just to be clear, and as we said in the prepared remarks, our flywheel-based business plan remains unchanged. That said, we're optimizing our operations to ensure that all aspects of the business are lean and ready to scale.

Thomas Okray
Thomas Okray
CFO at Nikola Corporation

In this regard, even though it doesn't jump out at you in a lot of the numbers, we've improved on many fronts. Winning national accounts remains key to executing this strategy. And as evidenced by the past quarter, we're getting traction and we're making headway here. From a corporate sustainability perspective, Nikola is the first mover advantage that allows us to meet the needs of companies who seek to reduce their Scope 3 emissions now. We have the fuel cell, the battery electric truck. They offer real zero-emission solutions for any company that relies on logistics services to transport and deliver their goods. We're working with these national accounts, and they're demoing with us and buying from us.

Soei Shin
Soei Shin
Head of Investor Relations at Nikola Corporation

The second question, Nikola has the ability to flex production of both the FCEV and BEV. Which truck is more profitable? Will you continue to offer both?

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

I'll take this one, Soei and Tom. So we've always harped on one truck platform, two powertrain options, all zero-emission. But up till now, we've really only had one or the other in the market, either the BEV or the fuel cell. As we move into next year, we will actually have the ability to offer both in the market as we continue to return these BEVs, and we can flex demand to what customers want. So as we make progress through the recall next year, we are getting a pull from the BEVs, and we will start selling these BEVs from Nikola inventory. And I should point out the BEVs we will be selling from Nikola inventory will be cash contribution margin positive.

Soei Shin
Soei Shin
Head of Investor Relations at Nikola Corporation

Thanks, Steve. The last question, is Nikola actively looking for partners that can provide capital to support the company?

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

I'll take this one also.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

We are actively talking to lots of potential different partners who value what we do and value what we've built. It's because we've been doing the hard work out front, building the framework, and we have proof points. We're on the road today with customers. We're building stations. We now, after working on this for a year, have the ability to connect Northern California and Southern California. We have 32 distinct end fleets and growing that have deployed our trucks, and there's a market for Class 8 zero-emission trucks. So we are looking to build the coalition of the willing, coalition of like-minded companies that want to pursue and push zero-emission forward because that's all we do. Companies that value our battery truck that have value range versus others and user experience. Companies that value our fuel cell truck, which gives you even more range and less weight.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

And companies that value the network we built in California, the hydrogen refueling network we built in California. So we're actively pursuing all of them. Yeah, if I could just amplify that a little bit with Steve's side. We are looking for these like-minded partners who have stated corporate-wide decarbonization goals for the next decade, hydrogen producers who view hydrogen as a viable energy growth vector, and automotive OEMs who bring either light-duty or heavy-duty fuel cells to the market. Together, we form a hydrogen economy that we believe can thrive.

Soei Shin
Soei Shin
Head of Investor Relations at Nikola Corporation

Operator, you can open the line for analyst Q&A.

Operator

Thank you. If you would like to ask a question, you may signal by pressing star one on your telephone keypad. Please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, star one for questions.

Operator

We'll go first to Mike Shlisky with D.A. Davidson.

Michael Shlisky
Michael Shlisky
Managing Director & Senior Equity Research Analyst at D.A. Davidson

Yes, hi. Good morning. Thanks for taking my questions. Your commentary around the BEVs sounded quite positive and what people have been saying about it so far. But last I heard, and we've been going through a lot, but last I heard the plan was to kind of build those to order or only if a certain request comes in. It didn't sound like you were going to be marketing the product all that much. But now with them back on the road and some good feedback here, is there going to be a change in the strategy around that product? Do you actually intend to go out there and more actively market the BEV starting next year, or is it still going to be much kind of a build-to-order, smaller volume product here?

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

So basically, we have the flexibility, Mike, to do wherever the customer wants. And we seem to be getting a pull on this product. Right now, we're going to send back what we have in our inventory, which will be margin positive. So once we grind through that, we can make a decision on what to do. But we are getting a pull from this product. And remember, we could sell this product anywhere in the country. So TBD, but we will be grinding through. Go ahead, Tom.

Thomas Okray
Thomas Okray
CFO at Nikola Corporation

Yeah, just to put a little bit more specificity on it, in terms of the actual recall, we've returned 78 trucks, as the prepared remarks said, and we've got another 81 trucks in the recall that are pending. In addition to that, we've got almost 150, which is in Nikola inventory and not part of the recall.

Thomas Okray
Thomas Okray
CFO at Nikola Corporation

So we're going to leverage that optionality to do what's best for the market. As Steve said, and just to repeat, as we return these BEVs, we are getting a strong pull for the market for use cases which are conducive to the BEV. So we're going to play those two cards that we have for us in the right way.

Michael Shlisky
Michael Shlisky
Managing Director & Senior Equity Research Analyst at D.A. Davidson

Okay, great. I'm going to ask a quick pricing question I had for you. I think I might have missed what you were talking about as far as why the ASPs were down. Maybe just review that part again. What was the BEV part of that? And I know there still was some introductory pricing you mentioned on the fuel cell product.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

Any sense as to when introductory pricing and kind of a more everyday pricing strategy is going to start at your company, or are we still just trying to get people to just try the product here?

Thomas Okray
Thomas Okray
CFO at Nikola Corporation

Yeah, so I think you have a couple of questions in there. Because of the 20 BEV return/repurchases, that impacts our revenue, not our gross revenue, but our total revenue, our net revenue, and it impacts the financials going through. So to get a true picture, you need to really normalize for that. We believe these returns are just a point in time because we've got a customer for them in Q4, and so therefore, it's going to be just Q3 to Q4 point in time. As it relates to ASP, we've kept about $370,000 per truck over the last several quarters. We think that that's a reasonable number.

Thomas Okray
Thomas Okray
CFO at Nikola Corporation

We're constantly balancing volume versus ASP. We think it's probably more important, at least at this point in time, to be able to get some scale for our operations. And therefore, in some cases, we are more forgiving on ASP. But obviously, over the long haul, our intention would be to work that up and work the BOM cost down.

Michael Shlisky
Michael Shlisky
Managing Director & Senior Equity Research Analyst at D.A. Davidson

Oh, okay. Okay. And then one last one for me. I just heard the last few days or so, another company has successfully tested a 200-kilowatt fuel cell truck. So that can get all the power that you need with just a single module, or that's at least what it seems like to me. Can you update us on your R&D? Do you have a lot of improvement projects underway, or is a lot of that kind of suspended until the capital situation is ironed out?

Michael Shlisky
Michael Shlisky
Managing Director & Senior Equity Research Analyst at D.A. Davidson

Just kind of a bit. I'm worried there are other companies out there that are also making some products and are getting there to market, and there's only so much that can go around at the current time.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

Yeah, so I'll take that. So we continue to work to make the existing product better. So the new BEV we put into the market is better than the old BEV. We continue to focus on the cost and weight of our existing truck with an eye towards a next-gen truck, which will be much more efficient than the current truck. And just to be clear, we're happy other people are coming because this is a lonely business, hydrogen right now. So we're happy that other people are coming, big companies, small companies, more the merrier because we're trying to build out an ecosystem here.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

So yes, we are making incremental improvements to the existing truck, making it better, improving reliability. And then the fuelers also, by the way, we're making incremental improvements on that with our partners. But we are actively looking at a next-gen product which will leapfrog what we have now.

Michael Shlisky
Michael Shlisky
Managing Director & Senior Equity Research Analyst at D.A. Davidson

Okay, thanks. I appreciate the discussion. I'll pass it along.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

Thanks, Mike.

Operator

We'll take our next question from Cole Cousins with Wolfe Research.

Operator

Hey, guys. It's Cole on for Scott Group. Thanks for taking my questions. I think I heard earlier on the call that you guys mentioned that you'd have sufficient capital last through the first quarter of 2025. Do you guys expect that you'll need to raise capital after that at some point in 2025? And kind of what are the internal expectations for when you expect free cash flow to actually inflect positive?

Thomas Okray
Thomas Okray
CFO at Nikola Corporation

Yeah, so let me try to unpack the cash flow. We mentioned it in the prepared remarks that you're referencing, but let me take a little bit of time to try to unpack it for everyone. We finished the quarter with approximately $198 million unrestricted cash. So let's just round that to $200 million because it makes the math easier. The cash burn for the quarter was $162 million. That is higher than the prior quarter, which had a cash burn of $145 million and higher than the first half, which was $135 million per quarter. What's important to note in this quarter is there were some one-time and some annual payments related to settlements, insurance policies. There were also some supplier negotiations in terms of payments. If you normalize for those, then our $162 million gets very close to $145 million, which was the last quarter.

Thomas Okray
Thomas Okray
CFO at Nikola Corporation

Now, if you do the math and you take the first half cash burn down from the $45 million a month to $30 million-$40 million a month, that gives you five to six and a half months runway, which is the basis for our prepared remarks. So what we're doing now, as we've said in the answer to some of our questions, we are talking to a number of strategics, a number of people who are interested. And by the way, they continue to be excited by what we're building. As Steve says, we're one of the few out on the field with the hydrogen network. We're not only making the trucks, but we're putting in the infrastructure as well. So there's very good interest from that. In addition, we're also working on our own self-help.

Thomas Okray
Thomas Okray
CFO at Nikola Corporation

If you do the math, our cash conversion cycle, for example, improved 45 days since the end of Q1. We're working with CARB in terms of their speed to improve voucher processing. We're working with dealers in terms of floor planning issues. We're looking at our organization structure to make sure it's lean. We're being very rigorous and vigilant on discretionary cash. So to sum it all up, we think we've got that runway of five to six months at $30million-$40 million per month. And therefore, we're working right now to try to raise the necessary capital to give us the runway to go much further into 2025.

Michael Shlisky
Michael Shlisky
Managing Director & Senior Equity Research Analyst at D.A. Davidson

Okay, great. That's a helpful color. And maybe just on deliveries, can you provide kind of how are deliveries trending quarter to date through October?

Michael Shlisky
Michael Shlisky
Managing Director & Senior Equity Research Analyst at D.A. Davidson

And maybe just given we're getting close to the end of the year, what are some early expectations for 2025 deliveries? And if you could talk through maybe how customer conversations are progressing there and maybe informing your view would be helpful.

Thomas Okray
Thomas Okray
CFO at Nikola Corporation

Yeah, we've got more potential than what we're guiding to in terms of wholesale deliveries for Q4. Now, obviously, you need to cut the deal and make that happen. But whenever you've got more prospects and more potential, that gives you confidence, and it's why we've guided as such. With respect to 2025, we'll talk to you about that at the Q4 earnings call.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

Yeah, and just the feedback, the customer feedback is good. The momentum is positive. Customer sat is positive. You see lots of testimonials. We get lots of feedback on that. So it's about building a business.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

Again, we have the flexibility to switch between the two, which we haven't been taking advantage of, and we'll be able to start taking advantage of that next year.

Thomas Okray
Thomas Okray
CFO at Nikola Corporation

Yeah. The business is really poised. When you look at it, you've got government incentives which are assisting for a hydrogen economy. You've got automotive OEMs that have been working on fuel cells for quite some time and see this as a growth factor. You've got industrial gas producers that are looking for growth factors, and hydrogen can be a growth factor for them. You've also got all of these national accounts. If you read their sustainability reports, zero emissions is very important to them, and either for their trucking or their trucking partners. The pieces are all set.

Thomas Okray
Thomas Okray
CFO at Nikola Corporation

We just need to pull it together with the right partners, and we're optimistic this thing can really take off.

Michael Shlisky
Michael Shlisky
Managing Director & Senior Equity Research Analyst at D.A. Davidson

Okay, so I'll turn it back.

Thomas Okray
Thomas Okray
CFO at Nikola Corporation

Thank you, Cole.

Operator

We'll take our next question from Tyler DiMatteo with BTIG.

Tyler DiMatteo
Tyler DiMatteo
TMT Equity Research, Vice President at BTIG

Hi, everyone. Good morning. Thanks for taking the questions here. I appreciate it. Steve, I wanted to follow up on your comments there in terms of the flexibility between the two trucks. How early of a decision and how quickly can you kind of manage the manufacturability of the two trucks? And maybe how early do you really need to make a decision if you were to have a line of sight that, "Hey, BEV capacity is pushing incremental demand," as you were alluding to before? Just curious how you kind of think about that decision a little bit more nuanced.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

We would need to make it three to six months in advance because there's some long lead items that we would have to buy to get the truck back, high voltage cables, things like that. So we're in the market now. As Tom said, we're putting these back in the market. We have our own internal that'll go back to the market. We can get that back. At the same time, we're doing price discovery, demand discovery. We're learning what people want. And if people want this truck and are willing to pay for it, we're happy to give it to them. Yeah, and I think the important point to repeat is approximately 150 in our inventory and another 81 as part of the recall.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

So you put those together, you got approximately 230 trucks that we have optionality with, and we can use that to ease into any production ramp-up if we decide to. It's also important to note that the battery packs, the BEV takes nine of them versus the fuel cell, which takes two. So we're balancing that in terms of mix also. Yeah, but just to be clear, we're rebuilding these. These are on a reman line to get the other ones. The BEVs back into the line will take three to six months. So that would be a third, fourth quarter benefit.

Tyler DiMatteo
Tyler DiMatteo
TMT Equity Research, Vice President at BTIG

Okay. Okay, helpful. And then in general.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

And just to add to that, the reason the flexibility is important is we're managing customers, we're managing fuel, and we're managing the truck on the fuel cell side. So sometimes the customers and the trucks get ahead of the fuel.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

Sometimes they get behind. So if we need to play catch-up a little bit with the market, we could supplement the market with BEVs. Okay, great. Thank you for that. And then in terms of the wholesales for the fuel cells for the remainder of the year, as you kind of look at the order book here through the end of the year, what are the key factors here dictating the range in terms of the 300-350 for the rest of the year? And I guess, how do you kind of think about the puts and takes there in terms of the low versus the high on that front? I mean, we have a funnel that's fairly large. Whether they want to pull the trigger this year or next year remains to be seen.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

And then there's all this, there's a bunch of incentive activity that's in play that may benefit this year versus next year, but time will tell. Yeah, I think whenever, Tyler, you're looking at a new technology and you're looking at new customers, national account customers, it's really hard to pinpoint where you're going to be in the range. That's why the range in Q4, you could argue maybe is a little bit wide. But as you can imagine, new technology, new customers have never done hydrogen before. It takes discussions, and it takes time to really decide how much of that funnel is really going to be executed in terms of a wholesale delivery.

Tyler DiMatteo
Tyler DiMatteo
TMT Equity Research, Vice President at BTIG

Okay, thank you, guys. Really appreciate the time today. I will turn it back to the queue.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

Thanks, Tyler.

Operator

We'll take our next question from Ben Kallo with Baird. Hi, good morning, guys.

Ben Kallo
Ben Kallo
Senior Research Analyst at Baird

Thank you for taking my question. Just kind of following on the last question, could you just talk about the rate of purchasing from existing customers, how you see that trending? If they're piloting and then it moves on to bigger orders, or is it a wait-and-see for infrastructure? Any kind of color you can give us on that?

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

So we have repeat customers. Some are fairly large. Some require fuel. Connecting north to south will be a big enabler here because we haven't really sold a lot of trucks in Northern California yet. But listen, part of our strategy, Ben, is to seed the market with a lot of different fleets doing a lot of different things. So 16, 17 different fleets are running the fuel cell, 19 are running the BEVs. We're accumulating data around this.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

We're ecstatic because the ultimate say on the truck is, "Do you buy more?" We're ecstatic that they want to buy more, but we really want to seed lots of different fleets so we can accumulate data on what's the best use case of a fuel cell versus a BEV. Ben, maybe I can add a little bit more color in terms of that national account purchase. I mean, typically, it requires a pilot, and those pilots can vary in duration depending on companies' desire. I think it's also important to note there's a natural tension within any sort of national account company. You've got the sustainability arm, which is really looking at putting this into their fleet. You've got the logistics arm, which is pennies per mile in terms of cost.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

And then you've got the senior leadership that is trying to put this all together in way the sustainability commitment with the cost commitment with the new technology. So it's not a layup, so to speak. It's not a half-court shot either, but it's something that we're getting better at working at, building the connections within those companies. And it's building the relationships, letting them demo the truck, demystifying the hydrogen, making sure that we can commit to them that the fueling is going to be up and reliable. So it's a process, but it's a great prize at the end because these companies that care about the environment and care about the hydrogen economy get to actually utilize one of our vehicles to execute to that. And remember, Ben, this isn't just about doing what everybody else is doing and trying to do it better.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

We're doing something that nobody else has done yet, and it's not easy. We grind through it every day, but that's why people show up to work here.

Ben Kallo
Ben Kallo
Senior Research Analyst at Baird

Thank you for that. In the past, you guys had given a number of trucks to get to break even here, but is there a number? Has that changed? Or if you remind us of what that number is, I know you guys are doing a lot on the cost front too, and just if we could revisit that. Thank you.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

Yeah, it's a good question, Ben. No, the neighborhood or the zip code of the number hasn't changed. Don't want to talk about it specifically on the call, but I would point you back to the flywheel. I mean, the only way that we are going to improve the unit economics is to build the scale.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

So it gives the supplier partners confidence that they can invest and optimize the lines that produce the material that comes to us. So the volume is key. Won't mention a number today, but that is a very key part of the flywheel.

Ben Kallo
Ben Kallo
Senior Research Analyst at Baird

Okay, thank you, guys.

Steve Girsky
Steve Girsky
President and CEO at Nikola Corporation

Thanks, Ben.

Operator

That will conclude our question-and-answer session. I'd like to turn the call back over to Soei for any additional or closing remarks.

Soei Shin
Soei Shin
Head of Investor Relations at Nikola Corporation

Thank you, Operator. We appreciate everyone joining us this morning, and on behalf of all Nikola employees, we thank you. Have a great day.

Operator

That will conclude today's call. We appreciate your participation.

Executives
    • Soei Shin
      Soei Shin
      Head of Investor Relations
    • Steve Girsky
      Steve Girsky
      President and CEO
    • Thomas Okray
      Thomas Okray
      CFO
Analysts
    • Video Narrator 2
    • Video Narrator 3
    • Video Narrator 12
    • Tyler DiMatteo
      TMT Equity Research, Vice President at BTIG
    • Video Narrator 8
    • Analyst
    • Michael Shlisky
      Managing Director & Senior Equity Research Analyst at D.A. Davidson
    • Ben Kallo
      Senior Research Analyst at Baird
    • Video Narrator 10
    • Video Narrator 1
    • Video Narrator 4
    • Video Narrator 9
    • Video Narrator 6
    • Video Narrator 5
    • Video Narrator 7
    • Video Narrator 11
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