Nikola Corp (NKLA) 2021 Q1 法說會逐字稿

Greetings, and welcome to Nikola Corporation's First Quarter 2021 Earnings Conference Call.

(Operator Instructions) As a reminder, this conference is being recorded.

we will now begin the video presentation.

(presentation)

It is now my pleasure to introduce Britton Worthen.

Britton, you may begin.

Thank you, and good morning, everyone.

Welcome to Nikola Corporation's First Quarter 2021 Earnings Call.

With me today is Mark Russell, Chief Executive Officer of Nikola; and Kim Brady, Chief Financial Officer.

During today's call, we will share our views on the business environment and our financial results for the March 2021 quarter and our outlook for the June 2021 quarter and the full year 2021.

The press release detailing our financial results was distributed a little after 6 a.m.

Pacific Time earlier this morning.

The release can be found on our Investor Relations section of the company's website, along with the presentation slides that accompany today's call.

Today's presentation and Q&A includes certain forward-looking statements within the meaning of the federal securities laws.

Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions, and as a result, are subject to risks and uncertainties.

Many factors could cause actual future events to differ materially from the forward-looking statements in this communication.

For more information about factors that may cause actual results to materially differ from forward-looking statements, please refer to the earnings press release we issued today as well as the Risk Factors section of our annual report on Form 10-K and our quarterly report Form 10-Q filed with the Securities and Exchange Commission in addition to the company's subsequent filings with the SEC.

Forward-looking statements speak only as of the date they are made.

Readers should be cautioned not to put undue reliance on forward-looking statements.

With that, I will now hand the call over to Mark.

Thanks, Britton.

Welcome to our first quarter 2021 earnings call.

We're going to provide you an overview of what we've achieved, including updates on the Nikola Tre BEV testing and validation; progress on our manufacturing facilities in Ulm, Germany and Coolidge, Arizona; provide you an update on the recent developments and announcements, including our sales and service partnership with RIG360; our collaboration with OGE and IVECO in Germany for hydrogen infrastructure; our collaboration to install hydrogen stations at existing TravelCenters of America locations; and the announcement of our collaboration with Total Transportation Services.

After this business update, I'll turn it over to Kim, and he'll discuss financial results for the quarter.

And of course, we'll do our best after that to answer your questions.

Let's kick off with an update on the status of the Nikola Tre BEV, battery electric vehicle, or BEV.

We'll begin with the first batch of 5 trucks, which we've commissioned and are going through validation testing.

That progress continuing the first quarter.

The trucks are exceeding our expectations so far in the winter testing.

We're working to complete the commissioning and the validation of those first batch.

#1 is still on the proving grounds for powertrain validation; #2 is in the process of road load data, acquisition and n-poster correlation; the #3 remains in Arizona for software, HMI and controls development; #4 is also in Arizona for commissioning and is preparing for customer demos and other events, which have been happening this past week; and #5 remains in Germany for continued braking validation testing.

The next batch is 9 trucks on top of that first 5. And as of today, we have assembled 8 of those, 3 of the trucks that are at our headquarters here in Arizona, one has been sent to a facility in Indiana for crash testing, 4 trucks are in various stages of transit to our headquarters here.

We anticipate the ninth truck will be finished by May 10, and that the 4 trucks in transit and the ninth truck completed on the 10th will all get here to the headquarters by the end of the month of May.

Now into our joint venture manufacturing facility at IVECO's industrial complex in Ulm, Germany.

As of today, we've nearly completed the building modifications to the facility.

The dismantling and building restructuring have been completed.

The automatic guided vehicle system installation is nearly complete, and 4 of the 32 AGVs that we'll be using there have been installed for validation on that track, and the hardware and software is now complete.

We anticipate the remaining 28 AGVs that we'll have for production will be installed over the next few weeks.

And tooling and equipment installation of our 14 separate workstations in that production line will be completed by the end of the month.

Critical parts and components to build the trucks have already started arriving at the facility, and we've hired about 50 employees so far to prepare for vehicle trial production starting in June 2021, just less than 2 months away.

In Coolidge, Arizona, where we have our greenfield manufacturing facility, during the first quarter, we made significant progress on the construction.

The facility is really starting to take form now.

The building has been substantially enclosed, with the floor slab, the roofing.

The walls are complete.

Electrical and mechanical construction and installation is nearing completion, and the manufacturing equipment is beginning to be installed.

The road paving is ongoing.

The utilities have been installed.

As you can see from the photos in the deck, the progress that we've made in Coolidge since we went vertical in December has been quite remarkable.

We'll continue to be as efficient as possible through our construction process as we continue our expansion plans in Coolidge.

We'll begin vehicle trial production there in the first phase in July.

And concurrently, we'll be building out the rest of the phase 1 assembly expansion area.

And upon completion of phase 1, and concluding that assembly expansion area, the Coolidge plant capacity will be approximately 2,500 trucks per year.

And then, of course, we'll be going up from there in the future phases.

With respect to our assembly tax, the Nikola technicians that we've had in Ulm, Germany have been building prototype trucks since we started that process.

They've been there for over 3 months now.

By the end of this quarter, they'll come back to Arizona and start building trucks here in Coolidge.

We've also begun assembly of our first Tre fuel cell electric vehicle, alpha vehicle here in Coolidge, and Coolidge will now become another base for us to assemble prototype and production trucks shortly.

On April 8, just passed, Nikola and RIG360 announced an expansive sales and service dealer network spanning more than 65 service center locations.

RIG360 service centers are ideally located in the key metropolitan areas and that major intersections of the interstate highway system throughout the Southeast, the Northeast and the Midwest.

This agreement provides a service and maintenance network for us and a reputable sales channel for our customers.

Service and maintenance are key points for our fleet customers, and they expect reliability and uptime from these vehicles.

So having top-notch service and maintenance providers is key.

And our agreement with RIG360 will provide our customers with the confidence that these vehicles are going to achieve the desired uptime.

On April 14, just passed, in conjunction with IVECO and OGE, we announced our intent to deploy hydrogen infrastructure and fueling solutions throughout Germany.

Nikola will install hydrogen fueling locations for OEM FCEVs, not just our own, but these will be open to the public, at key locations supported by OGE's hydrogen delivery system pipelines.

The collaboration between Nikola, IVECO and OGE is expected to enable cost-effective distribution of hydrogen from production to storage and to fueling and dispensing locations in Germany.

This is an important first step for us in building out our hydrogen infrastructure footprint in Europe.

On April 22, just passed, Nikola and TravelCenters of America agreed to collaborate on the installation of hydrogen fueling stations for heavy-duty trucks at 2 existing TA sites in California.

The first 2 stations are expected to be commercially operational by the first quarter of 2023.

And this agreement with TA sets the foundation for the build-out of hydrogen fueling infrastructure across the country here in the United States.

We anticipate that we'll be able to announce the exact station locations with TA sometime in late second quarter or early third quarter this year.

This is another important step in building out our hydrogen ecosystem here in the United States.

As you know, we already have an innovative electricity rate schedule in place with Arizona Public Service Co., which should allow us to produce hydrogen fuel at price parity with diesel or lower.

Now our collaboration with TA gives us the station locations along the highly traveled truck corridors to dispense fuel to Nikola customers.

On May 6, just a couple of days ago, we announced our collaboration with Total Transportation Services Inc., which is one of Southern California's prominent port trucking companies, to expedite zero-emission transportation at the Port of Los Angeles/Long Beach.

The collaboration includes vehicle trials that they'll do with us and a letter of intent for them to order 100 Nikola Class 8 BEVs and fuel cell electric vehicle semi-trucks.

This is a great accomplishment for us.

We now have a dual customer that is purchasing and will be using both battery electric vehicles and fuel cell electric vehicles.

It's a testament to the product lineup we have and the competitive advantage of being able to cover both short, regional and long haul with our different vehicle solutions.

Our BEVs are ideal for port drayage and metro distribution operations, and our FCEVs address the needs of customers who have higher range requirements or need to refuel faster than battery charging can give them.

All right.

I'll now pass it on to Kim, and he'll go over the numbers.

Thanks, Mark, and good morning, everyone.

In the first quarter, net loss was $120.2 million.

And on a non-GAAP basis, adjusted EBITDA totaled negative $53.4 million.

Adjusted EBITDA excludes, among other items: one, $50.3 million in stock-based compensation; two, $14.9 million on regulatory and legal matters and other professional service fees incurred in connection with the short-seller article from September 2020; and three, $1.8 million in normal depreciation and amortization.

Research and development expenses for the first quarter were $55.2 million, including $10.3 million of stock-based compensation expense.

R&D expenses consist mainly of costs incurred in the development, building, testing and validation of Nikola Tre battery electric and fuel cell trucks.

SG&A expenses were approximately $65.4 million, of which $39.9 million is stock-based compensation expense and $14.9 million is legal and regulatory cost.

As of March 31, 2021, our total headcount exceeded 530 employees and is growing at a rapid pace as we continue to build our teams in engineering, manufacturing and energy.

Turning to the balance sheet.

We ended the first quarter with $763.8 million of cash and cash equivalents.

We have no debt outstanding as of March 31 aside from our Phoenix headquarters lease obligation.

Our capital expenditures totaled $24.5 million year-to-date and are comprised of the construction of our Coolidge greenfield manufacturing facility and equipment as well as investments in supplier tooling related to Tre BEV production.

We ended the quarter with approximately 394 million shares outstanding.

Weighted average shares, both basic and diluted, for the first quarter were approximately 392.2 million and 392.5 million, respectively.

Diluted weighted average shares includes the impact of the private warrants.

Basic and diluted GAAP net loss per share for the first quarter was $0.31.

Basic and diluted non-GAAP net loss per share was $0.14.

Non-GAAP net loss per share excludes stock-based compensation, gain on revaluation of private warrant liability and regulatory and legal matters.

Next, we wanted to provide an update on the warrant accounting developments that, as you know, many companies have been working through in the past several weeks.

In light of the recently issued SEC staff statement, we have reevaluated our historical accounting for the private warrants assumed from VectoIQ in the SPAC merger and determined the private warrants should have been accounted for as a liability and mark-to-market at the end of this quarter in 2020.

Previously, we had accounted for those warrants as equity, similar to other SPAC and these SPAC companies.

We have worked with our auditor and our Board to complete the restatement of our 2020 financial statements accordingly and filed an amended Form 10-K yesterday.

This restatement resulted in additional noncurrent liabilities of $7.3 million and a noncash gain of $13.4 million in the financial statement for the year ended December 31, 2020.

Though restatement did not impact our previously reported operating expenses or cash flows, we consider the matter concluded.

This change in the accounting treatment has no effect on Nikola's cash position, ongoing operations or future plans.

Now turning to our Q2 and fiscal year 2021 outlook and guidance.

For the first quarter of 2021, we came in below our previously communicated expense ranges.

We continue to be laser-focused on managing cash and disbursements.

For the second quarter of 2021, estimated R&D is in the range of $87.5 million to $92.5 million, including $10 million of stock-based compensation expense.

Estimated SG&A is in the range of $62.5 million to $67.5 million, which includes $43 million of stock-based compensation.

Total estimated operating expenses will be in the range of $150 million to $160 million, which includes approximately $53 million of stock-based compensation.

Our anticipated capital expenditures for the second quarter are $60 million to $65 million.

We have revised 2021 guidance for operating expenses solely due to an anticipated increase in stock compensation expense of approximately $30 million, of which $13 million is R&D and $17 million is SG&A.

Previously, our full year 2021 guidance for R&D was in the range of $305 million to $315 million.

Because R&D stock compensation is expected to increase from $27 million to $40 million, our updated R&D guidance range is now $318 million to $328 million.

Our previous full year 2021 guidance for SG&A was in the range of $235 million to $245 million due to our anticipated increase of SG&A-related stock compensation from $152 million to $169 million.

Our new SG&A guidance range is $252 million to $262 million.

Our revised total estimated operating expenses will be in the range of $570 million to $590 million.

On a non-GAAP basis, total operating expenses remain unchanged in the range of $360 million to $380 million, excluding stock-based compensation.

Total shares outstanding at the end of 2021 will be about 400 million, and we expect the weighted average shares for the full year ending December 31, 2021, will be approximately 396 million.

We expect that we will fulfill our hiring plan in the coming quarters.

By the end of 2021, we will have approximately 1,000 employees, comprised of roughly 180 manufacturing plant employees and 820 corporate and engineering employees.

Our anticipated capital expenditures for the fiscal year 2021 remain unchanged in the range of $210 million to $230 million.

Our capital investment plans include phase 1 Coolidge manufacturing plant and equipment, supplier tooling, hydrogen infrastructure and fuel cell electric vehicle engineering equipment.

As we continue to move forward and execute on our business plan, we look forward to achieving the following milestones in 2021: start of vehicle trial production at the joint venture manufacturing facility in Ulm, Germany, in June 2021; start of vehicle trial production at the greenfield manufacturing facility in Coolidge, Arizona, in July 2021; break ground on our first commercial hydrogen station; announce additional hydrogen infrastructure and ecosystem partners; announce additional fleet testing customers; and deliver the first Nikola Tre BEVs to customers during the fourth quarter of 2021.

This concludes our prepared remarks.

We will now open the line for questions.

Operator?

(Operator Instructions) Our first question is from Paul Coster of JPMorgan.

Mark, I've got a sort of bundle of questions to start with, which is you're now starting to show the BEV vehicles to customers.

What is the response?

Do you think that you're going to get customer orders soon?

Do you believe that you still are on track for that target of potentially as much of 600 sales by the fourth quarter?

I know you can only fulfill 100 because of the supply constraints.

But do all of those numbers still mesh?

And finally, on that bundle of questions, what's the latest on the supply constraints around the battery?

Of course, yes.

So the response so far to the Tre BEV production prototypes has been very positive.

We actually had fleets in here to our Phoenix headquarters and on our local Phoenix test track this week.

We had 25 fleets represented in our customer days this week that came in and actually had a chance to riding the trucks, look under the hoods, metaphorically speaking, and have some technical presentations.

And then they, of course, had a good tour of our facilities here and an update on the Coolidge greenfield and the Germany brownfield.

So very positive reception.

At this point, we don't know of a longer-range truck that's coming to the market.

Our Tre BEV is coming to the market with a 750-kilowatt battery.

The closest we know of competitively right now is 550.

So we're 200 kilowatts more energy onboard the truck that will translate into longer range.

We're continuing to validate the actual range that we're going to advertise, but it should be the longest range truck out there.

It's also a relatively short wheel base compared to a lot of U.S. Class 8 trucks.

It's got great visibility for the driver -- outstanding visibility for the driver.

And with a short -- wheel base has a great turning radius.

It's very maneuverable.

And of course, for applications for metropolitan deliveries, regional return to base kind of routes, that's going to be an ideal truck.

And again, range is always an issue and almost always an issue for these customers.

And so having a long-range truck, we think, is going to be really a great thing for customers in the market.

So very positive reception.

Again, we are trying to finalize agreement for launch.

And the model for our launch customers is Anheuser-Busch, that's been our launch customer for the fuel cell vehicles for a long time because they stepped up early and said we'd like to be a launch customer and partner with you in developing the vehicles.

That's the kind of relationship we're looking for, for the Tre BEV.

Anybody will -- I've yet to talk to any customer who doesn't want a truck to test and wouldn't be willing to buy one for testing and evaluation.

What we're looking for at this point is to launch customers.

So those negotiations are ongoing, and we had a number of those target customers in here this week.

So we are cautiously optimistic that we'll be able to put that in place in the near future.

Second question on the production delays.

We've already explained to you the situation on battery cells.

We do believe -- and we have confirmation from our supply chain that we were -- are going to receive enough cells to complete enough trucks to stick with our current guidance of between 50 and 100 units that we'll be able to finish this calendar year.

Other parts are now of greater concern.

We are looking, of course, for chips, touchscreens.

There are potential shortages of a number of different parts at this point.

I think all of you who follow companies in the space know that the supply chain is under strain for a number of parts.

We're confident we're going to be able to build trucks, and we were sticking with our guidance of 50 to 100 because we don't know of any reason why we can't do that at this point, but there is the possibility that shortages will affect us because they're just across the industry and across the globe at this point.

And we'll keep you updated on that.

We'll know more, of course, at the end of -- by the end of the next quarter, and we'll keep you updated on that.

Quick follow-up.

The pace at which you're executing now is really breathtaking.

And of course, it -- with it will eventually become a nice problem to have, which is that you'll need more capital to build out the infrastructure.

When do you think the need to -- for new capital will arise?

And can you just give us some sense of how you're prepping for that eventuality?

Paul, thank you.

As you know, we have been consistent in our communication about going to market sometime this year.

In terms of preparation, we are well prepared, and we are in conversations with our underwriters.

And we feel confident at the right time that we'll be able to execute additional capital raise.

Our next question is from Jeff Osborne of Cowen & Company.

Yes.

I was wondering if we can go back to the battery supply commentary.

How are things shaping up for next year, just given a lot of folks are having to put deposits down for the year ahead?

Do you have confidence and the ability to -- go ahead.

Jeff, that's a great question because the suppliers that we rely on, which are Korean-based -- home-based.

They have other production facilities, but they're based in Korea.

They are holding off on 2022 commitments until -- at least until June, and probably my guess is we won't be able to firm that up until July.

So you probably have to wait another quarter before we get final commitments on allocation for '22.

And that's the situation.

Everybody is going to be on allocation.

You're going to get what they're willing to give you, and we're doing our best to make sure that we get as much as we need to be able to build the trucks that we can build and that we know we can sell without constraint because of battery cells.

But we won't know for sure for at least another, I'd say, 45 to 90 days what the allocation is going to be for 2022.

Jeff, having that said, we want you to recognize that we are having active discussions with the cell suppliers about 2022 as well as 2023 suppliers.

And as you stated, some of the cell suppliers are requesting that we make initial down payments or potential support in terms of dedicated lines.

And so that's something that we are actively evaluating and having discussions.

And in fact, we have a supplier that will be here next week.

That's good to hear.

The second area I wanted to pivot to was on the hydrogen side.

Can you just remind us or refresh us what the strategy is there in terms of the 5 stations?

I think when you initially went public, you had place an order with now for 5 electrolyzers.

You've now, I guess, identified 3 sites with the 2 from TA.

Looking out more broadly in '22 and '23, do you still have this ambitious plan for a nationwide network over the next 4 or 5, 6 years?

Or are you going to do that more scaled back and much more regionally focused, say, on the Southwest?

No, Jeff.

We absolutely are committed to the plan that we outlined previously, and we'll start that network here in North America with stations in California and Arizona.

Given the APS rate schedule that we have in the coverage area of that utility, which extends to the California border, along Interstate 10, that's going to allow us to produce hydrogen very cost effectively, competitive with diesel.

And so in addition to stations where we might produce and dispense on-site here in Arizona because we have the right power structure on the -- in the western part of Arizona, accessible, particularly to the corridors that lead into California, we're likely to do a hub facility that will likely be a dispensing station, but we're going to be producing a lot more hydrogen than is required for that location because we're going to move that hydrogen into higher cost locations, in this case, in Southern California.

So while we don't give the electric rate to make competitively priced hydrogen, we'll make it nearby, in this case, just over the border in Arizona, and then we'll move the hydrogen into those dispensing locations.

So that the 2 locations that will be making public with TA in the very near future are very strategically located, particularly for our launch customer, Anheuser-Busch, which has a brewery in Van Nuys, California, to be able to fuel their loads in and out.

So we feel better about this than ever.

And it's no longer theoretical but we have all the building blocks in place, including electricity, which is up to 90% of the total cost of the hydrogen over the life of the station.

And we have that in place now, and then we'll be adding additional city piers in geographic regions in various parts of the country and following probably the same model, which will be a mix of producing and dispensing locations and then hub locations where we will move hydrogen to dispensing locations only.

And that model will probably be what we follow across the United States.

Similarly in Europe, we will be doing something similar with the possible difference of what we just announced with OGE.

So IVECO is also participating in that consortium with OGE, which is the largest pipeline operator in Germany, and they are going to be distributing very green hydrogen, by the way.

And a lot of that hydrogen will be sourced from North Sea Wind Power, and they'll make that with electrolyzer facilities onshore in the Northern Netherlands.

And then it will be pipeline distributed throughout Northern Europe, and we'll start dispensing that from pipeline distribution with stations that we're going to build in Germany.

That should be the most cost effective and green hydrogen in the world when we start, actually.

It's a very exciting way to start there in Europe.

That will be -- that should be very cost effective and competitive.

Our next question is from Jeff Kauffman of Vertical Research Partners.

Thank you for that video.

I think it was great to see the trucks in motion, at least until we can see them live.

I was just curious, you're measuring top speed and efficiency upgrades.

Do you have any measurements yet on what your realized, I guess, miles per gallon equivalent on the battery trucks are?

And also in terms of range testing, have you -- how are the maximum drivable ranges testing out so far?

Well, Jeff, the range is, as I mentioned earlier, one of the chief selling points of this vehicle.

It should be the longest range battery electric vehicle that we know of, Class 8 heavy truck in the world that we know of at this point, 750 kilowatts on board.

We know it's going to translate into really good range.

We've already had some range testing results, and they are -- I'll just tell you, they're very impressive.

This is going to be a really long-range battery truck.

And we have -- of course, there's a lot of work yet to be done before we can actually translate that into a representation of miles per gallon equivalent.

But right now, the results are very encouraging, very positive so far.

Okay.

And I think you answered this in your commentary in terms of what the trucks are doing to get commissioned.

So there are no customers actually testing the trucks themselves yet, correct?

That is correct.

All of our testing is internal.

Although this past week, we allowed customers in the vehicles.

And of course, they were doing their own inspections, and we're -- we've got their physical hands on the vehicle, but they were at the test track facilities.

We won't have customer fleet testing for a little bit for a few more months.

Our next question is from Chris McNally with Evercore ISI.

Two questions.

The first is maybe a little bit more detail on the hydrogen station strategy if we look at the TA announcement.

You answered a little bit of the question with Jeff, but I just wanted to dive in.

High level, just over the next 2 years, how much of sort of your needs are covered by the 2 stations with TA, plus the central hub?

Is it 30%, 50%, something much more?

Just to understand how many more of these separate agreements may be coming.

So Chris, our target is to supply 100% of the trucks that we deliver -- 100% of our fuel with the stations that we provide.

That's -- it's a bundled lease.

So the city pier we're targeting first is Phoenix and Los Angeles.

So we need fuel in Los Angeles.

We need fuel here in Phoenix.

We have a 1,000-ton dispensing station at our headquarters here in Phoenix, which has been operating on a prototype test basis for some time now, but we'll be adding to that so that we have a retail -- open-to-the-public retail station here in the Phoenix metropolitan area.

We'll have -- we'll start with the 2 stations in Los Angeles.

And then in between, on the board, we will -- we are planning to build a hub facility, as I've described.

So that will allow us to provide fuel between Phoenix and Los Angeles.

It will also provide fuel for out and back routes from Phoenix and from Los Angeles out and back, up to half the range of the vehicle, of course.

And then the next thing -- the next stage for this region will be to provide coverage in Central California, somewhere in the Bay Area, most likely, which is just about the right distance, about 400 miles from the Los Angeles -- nearest Los Angeles station.

And then, of course, eventually infill stations for those -- for that area so that you can provide the coverage that you need.

The idea is that we have enough fuel to fuel the trucks that we deliver in that geography.

And we'll be doing that same thing, delivering the trucks and the fuel synchronized as we move to other city piers and other geographies around the country.

Chris, as you recall, our 2023 forecast for hydrogen truck is approximately 2,000 units.

And we assume that represents about 10 stations in terms of an 8-ton commercial station equivalent.

As Mark indicated, that in some locations, we will have stations where we generate hydrogen on site.

Other locations, we may have a hub and transport to dispensing stations, and there may be areas where we may actually procure hydrogen via long-term offtake agreements.

And so I think that probably gives -- give you some combination of how we're looking at ultimately delivering hydrogen at the pump level, but you shouldn't assume that it will be all 10 8-ton dispensing stations where we generate hydrogen on site.

Although we do have, as was, I think, somebody asked earlier about the longer lead time item, which is the electrolyzers themselves, we do have a $30 million electrolyzer order in process with Nel.

So they'll be producing and delivering the electrolyzers for up to the first 5 stations.

If there are 8 tons a piece, we made -- we may adjust the sizing, depending on the needs of the local -- the exact location, of course.

And Mark, and Kim, I very much appreciate the math and the 2 15 rolls is super helpful as well.

I guess what I'm thinking about high level is how much actually is the TA agreement where you sort of have this ability to expand, right, this could be a foundation agreement, sort of the 2 stations work out and then there are your partners for other cities and geographies versus maybe having a couple of partners.

So a couple of agreements that look like TA.

That way -- maybe for different geographies or different economics, different revenue models.

I guess that was a little bit more the focus of my question as opposed to the actual math on the station.

I understand, Chris, and that's absolutely true.

We're very pleased to be partnering up with TA.

They have a very good coverage of stations in the places where we're going to need to be.

They also have -- tend to have larger locations.

They have -- they never have skimped on the land for their stations.

So they -- the actual amount of land that they have in each location is a little bit higher than some of their competitors or larger than their competitors, which is very helpful for us.

We don't need a lot of land for dispensing.

Usually, a truck stock will have enough space for us to put the dispensing equipment in there if we're only dispensing.

And these first 2 stations, by the way, will be dispensing only.

We'll be moving the hydrogen in there.

They're in high-cost locations for electricity in California than in the Los Angeles basin.

So we'll be moving the hydrogen in.

So those will be relatively simple and relatively inexpensive stations compared to ones where we are producing and dispensing on site.

So we'll be looking at other potential partnerships as well.

We're already doing that, have been in discussions for some time with a lot of potential partners on the hydrogen infrastructure side.

You'll see us do other things on that front as we go forward.

Great.

Super appreciate the detail.

And then the second is on order progression.

Nice to see the orders from -- in Total in California.

I just was curious if we could maybe get an update on whether we could also see a launch customer for the BEV, particularly in Europe.

Does that still make sense to think about a major launch customer for Europe?

Or could it be an accumulation of several smaller orders, but specifically for Europe?

So Chris, at this point, we do like having a launch customer.

We've been very fortunate to have Anheuser-Busch as a partner for the launch of the fuel cell vehicle now for several years where they've helped us to develop the vehicles, they helped us in testing.

We're going to have a couple of prototypes in their fleet.

We'll tell you more about that coming up here in the next couple of quarters.

And that's just a really excellent way to bring new vehicles to market.

And so we're looking for that kind of launch customer with the Tre BEV.

TTSI, which we just announced a couple of days ago, is going to be one of our launches, and that's going to be a great place for us to test the Tre BEVs applicability in a port and drayage application.

They agreed to take up to 30 of the Tre BEVs there.

The agreements that we do the testing, and they'll take up to 30 of the 100 will be Tre BEVs.

And then 70 will be Tre fuel cells, which, of course, in a drayage operation have the advantage of additional range and run time and quicker refueling.

But there's a lot of applications for drayage that we think the battery electric vehicle will be just fine, and they do, too.

So that's a good place to launch.

We're still -- we're in discussions with other potential launch customers on other applications for the Tre BEV, which, of course, are focused on metropolitan deliveries, regional deliveries, where you can stay within the range constraints of the Tre BEV.

And again, we're going to have the longest range of any battery electric heavy truck that we know of at this point.

So we feel really good about that.

As I mentioned, we have 25 fleets represented here this week to come in and kick the tires, metaphorically speaking, and had a great week with them.

Those discussions are continuing.

We, of course, can always place test vehicles, 1s and 2s, with customers.

Everybody -- the only question people have is when can I get my test, when can I try one, but we're focused at this point of our development on launch customers because we know we can sell -- we can put the 1s and 2s into the market without much problem.

But we'd rather, at this point, have 1 or 2 and maybe 3 launch customers.

And so we're working on that if we can do it.

Our next question is from Edison Yu of Deutsche back.

It's Edison on for Emmanuel.

First topic I wanted to cover is the Total Transportation order for 100 trucks or letter intent.

Could you maybe drill down more into the mix of that for BEV versus FCEV?

Are these based on -- is the order based on a specific range, performance commitments?

And also what kind of pricing would you expect?

And also, what sort of the operational plan to kind of convert this to firm orders?

Sure.

Edison, the split -- the anticipated split is going to be 70-30, 30 battery trucks, 70 fuel cell trucks.

And the 4 operations that TTSI is running in Los Angeles and Long Beach requires them to get 2 full shifts every 24 hours, at least.

So they turn these trucks very quickly.

Typically, they have a one quick turn between the 2 shifts and then a longer turn where you can actually have the truck off-line a little bit longer.

So the first -- between the first and second shift, they call that hot seat because the driver -- the next driver gets in while the seat is still warm that quick and you got to be able to fuel really quickly.

That's the reason that's skewed to the fuel cell trucks because the -- that quick change doesn't allow for a battery charge.

You have to be able to fill in the same time frame that you can fill a diesel truck, which we can do.

With the fuel cell truck, we can -- that refueling can be accomplished in 10 to 15 minutes, which is about the same time as a diesel.

And so that is really suitable, and that's why they've skewed the order 70 to fuel cell and 30 battery.

But battery works just fine for range.

You don't need the long range that you get from a fuel cell truck in a drayage operation.

Typically, you need run time, but not so much range.

They're usually not exceeding -- they will certainly not exceed the range normally for a lot of their use cases of the Tre BEV.

It's going to be the longest range truck out there at 750 kilowatts on board.

So that's not a problem.

The challenge is the recharge time.

Right now, our fastest recharge units that we're using are 350 kilowatts and to go from the lowest recommended stated charge for recharging to 80%, which is the ideal recharge target for battery life.

It takes about 99 minutes at this point for us in our testing.

So that's a little bit longer than they need for a hot seat shift change, but they can recharge on the longer turn after the second shift.

So this is stuff we're working on with TTSI, great partner for us.

They're really committed to greening out their fleet, and we're really excited to be working with them to figure out how to solve the challenge for drayage operations, which, as you know, in Southern California is one of the biggest problems for carbon and other emissions in Southern California because they -- it's one of the busiest ports in the world there.

Edison, in regards to your question in terms of timing of converting this into a firm order, we do have commitment to deliver test vehicles sometime next year for hydrogen fuel cell trucks as well as battery electric trucks.

And we are working also with TTSI and helping them in terms of procuring government subsidies on these trucks.

In terms of pricing, it's more favorable than what we have dialed in into our model.

Understood.

That's really helpful and insightful.

Just one last question.

Just trying to get a sense after the customer days.

You're still aiming for 4Q deliveries.

When could we maybe expect to know who those initial 50 to 100 truck customers will be -- or who will be -- will there be some sort of announcements communicated about the profile or who exactly those are?

Sure.

So obviously, TTSI is one.

They will be -- they'll be in launch.

They'll be getting early units.

We'll be working with them for sure.

And we -- as I mentioned before, we'd like to add to that another 1 or 2 launch customers who we would be able to partner with them in a similar vein.

And we're working on that right now.

We made some really good progress on that front this week, and we hope to be able to announce those soon.

Our next question is from Joseph Spak of RBC Capital.

Look, you've highlighted Anheuser-Busch as a key partner and customer, and again, sort of talked about even using them for this phase 2 for this TA announcement.

Can you just talk a little bit more about how that relationship has progressed over maybe the past couple of months?

And I think you're required to get them some hydrogen prototypes by the end of the year.

Is that still the case?

And is that on target?

Yes.

Joseph, so they -- we have shared a goal with them to be on the cutting edge of this from the beginning.

That was -- their corporate objective includes some very strong targets for them to hit by 2025 for actual operations and emissions reductions.

And that's for them as part of invest worldwide commitments.

So very strong corporate commitment, a lot of able corporate commitment, they're kind of partner that we're looking for who's really committed.

And as you know, we -- we're able to do a demo run, hauling beer from the flagship brewing in St.

Louis using a fuel cell prototype.

We did that a lot over a year ago, right?

Just over a year ago.

And we do share a goal to have regular deliveries being made on a pilot basis by the end of 2021 with Anheuser-Busch.

And so we're working on that very diligently.

The 2 prototype vehicles that we're targeting for that purpose are actually underway in the shop, and we're on track for that at this point.

Okay.

I thought -- maybe I misheard, but I was wondering if you could clarify.

I thought you said in the prepared remarks today, Coolidge capacity was 2,500.

I thought that was supposed to be about 5,000 in phase 1. Did something change?

Or are you talking about different points along the goal here?

So Joe, as you know, we are building out the Coolidge facility in phases.

And by end of phase 1, we do believe that capacity will be approximately 2,500 to 3,000.

And then when we start phase 2 beginning of 2022, and that will be accomplished by the beginning of 2020 -- end of 2022, and that capacity will likely increase to something around 15,000 units.

And then when we actually start phase 3 of our facility in the beginning of 2023 and then complete that by end of 2023, the capacity will be about 35,000 units running 2 shifts.

And so I think what you may be referring to is something that we shared last year, and we have decided in terms of phase 1 to phase 2 to delay some of the capacity.

We will have plenty of capacity in terms of what we have committed to the market, as you know.

The next year volume commitment for battery electric truck is 1,200 units.

Okay.

Last one for me.

I know during -- or about a month ago or so, there was a report that the Head of Nikola fuel cell development left, and like I realize employees coming out all the time.

But I don't think investors have a great sense for maybe the venture of the team.

So can you just provide an update on that -- on leadership there and that team?

Absolutely.

That transition was not unexpected.

That employee has -- staying in the space, by the way.

Joined and helped start a fueling and dispensing company.

So our understanding is that's what he left to do.

We have more resources, leadership, people, capacity in that space than we've ever had at this point.

That team is so much bigger and more capable than it was previously.

That particular employee did great work while they were here, but we are absolutely not missing a beat and going forward with a really strong team on that front.

The people who -- customers, other people that we're working with that works with that team are what we -- inevitably very impressed with what we've been able to do there.

We've got some of the best people from around the world on the team.

Our next question is from Mike Shlisky of Colliers Securities.

I wanted to ask first about the TravelCenters arrangement.

I was kind of wondering if you could tell us a little bit about what's in it for TravelCenters.

Are you going to be paying them rent to use part of their real estate?

Are they going to take a cut of the sales of hydrogen?

Just give us a sense as to what they might be getting out of the deal from what you can tell.

Great question.

Right now, as you know, we are still working on some of those details.

But at its foundation, it is anticipated when it comes to dispensing economics that we will share 50-50 in terms of revenue and profit.

I just recognize these are dispensing stations only, which means that we will provide hydrogen from hub, and we will transport it.

So a significant portion of the margin we expect to capture at the production facility on our side.

So it's a true partnership.

There'll be a transfer price from Nikola to the station for hydrogen, and then the margin over that will be split between us.

That'll also be the approach we take on the infrastructure capital requirement.

Okay.

Okay.

Got it.

And then I wanted to ask secondly about RIG360.

I guess, first, how have they communicated to you about their availability with technicians -- train technicians to service electric vehicles, knowing that it takes roughly 12 months to train somebody new at the Lincoln or UTI type of schools out there?

And maybe secondly, can you give us a sense on, are you looking at partnerships with other dealership networks elsewhere in the country at this time?

Great question, Mike.

So that's one of the great benefits of the RIG360 agreement.

And to answer the last part first, we are absolutely looking at adding to that.

We intend to have continental coverage dealerships here in North America.

We'll be doing the same in Europe, by the way.

So we're looking for sales and service support through our dealers coast-to-coast, in North to Southern Europe, coast-to-coast in North America.

So what the dealers are providing and their commitment that they're making is to provide both sales and service support.

So they're adding salespeople, and then they're training service technicians on both fronts.

We're -- their service technician training is cooperative with us.

We have our existing service and support group here at corporate.

And they have their own techs, and they'll be -- the dealer techs will be training alongside us.

So the dealers have made a commitment, and future dealers will be making a commitment to hire and train techs, and we'll cooperate with them in that training and help provide it.

And then they will be also adding sales representation.

They also are going to be flooring vehicles.

So they'll have vehicles for display, for demo, and in some cases, for immediate delivery from inventory.

So they actually fulfill part of the purpose of a launch customer for us and that they are going to be helping us get the vehicles sold, distributed, serviced and supported and launched here.

Our next question is from Daniel Ives with Wedbush Securities.

Just one question.

So when you talk about Q4, whether it's 50 to 100, and just some of the orders, especially going to 2022, like, at this point is the only constrained supply from a chip perspective rather than on the demand side, could you just be clear about that in terms of just hitting those goals?

Is it really just pure supply constraints?

Daniel, that's a great question.

And I -- my answer is yes.

It's going to be constrained.

We could certainly do more if we had all of the parts that we're going to need.

We are going to -- we're already constrained by cells, as we mentioned.

We do have commitment now to have enough cells from the supplier to get in that 50 to 100 range, but not more.

We are looking at the other possible constraints, chips being a prominent one, of course.

And we're trying our best to make sure that one of those things doesn't drop us below that number.

If we could get all of the parts to do more, we would definitely look at doing more.

You got to remember that the demand for these vehicles has not gone down at any time.

The combination of carrots and sticks out there gets more and more compelling.

We call it carrots and sticks because there are incentives, the carrot side, where people are increasing the incentives.

And by the way, there was just an increase in the incentive on carbon capture for blue hydrogen just in the last couple of weeks, I understand.

And -- but other people are looking to follow California in terms of their incentive scheme.

A number of states have announced that recently that they want to follow the California model, which will increase the carrot here, more incentives to move.

On the other side, you've got the sticks.

You've got people who are passing sale bands and then even operation bands within specific jurisdictions, and that's worldwide.

And we don't see anybody backing off on us.

We haven't seen anybody back off, and yet we see people -- the number of jurisdictions that are doing that being added to pretty much every month at this point.

So the demand is not going to go down.

The demand is not going to be the problem for this industry, which is one of the reasons why we're -- we welcome and encourage our erstwhile competition.

It's going to take the best efforts of all of us to meet this demand.

We're going to have to, in the next period of years -- we have to figure out how to completely replace the internal combustion fleet.

And right now, it's not a matter of, that would be nice.

In many cases, it's a matter of a regulatory requirement or a law.

So between the incentives and the requirements and the mandates, the demand is not going to go down.

I don't see how it goes down from here.

Thank you.

There are no further questions at this time.

I would like to turn the floor back to Mark Russell for closing remarks.

We appreciate everybody being here this morning and being interested in Nikola, following us.

We're grateful for your support, and we'll talk to you next quarter.

Thanks.

Thank you.

This concludes today's conference.

You may disconnect your lines at this time.

Thank you for your participation.

Have a great day.