Nikola Corp (NKLA) 2020 Q2 法說會逐字稿

Thank you and good afternoon everyone.

Welcome to Nikola Corporation's second-quarter 2020 earnings call.

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

During today's call we will make 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 Factor section of our current report on Form 8-K is amended that we filed with the Securities and Exchange Commission June 8 and June 9, 2020, in addition to the Company's subsequent filings with the Securities and Exchange Commission.

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

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

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

Thanks Britton.

This is really exciting.

Nikola's first conference call as a public company.

Going public through a business combination with VectoIQ was a critical step for us.

It has laid the groundwork for us to accomplish our objective of becoming the global leader in zero emissions transportation.

I will start with an overview of the business, cover the milestones we were able to hit in the quarter, and then, finally, overview our strategy for executing going forward.

Kim will then go over the numbers.

Nikola is a vertically integrated zero emissions transportation systems provider.

We design and manufacture battery electric and hydrogen fuel cell electric vehicles, along with the battery charging systems and hydrogen fueling stations to power them.

Our core global offering centers on heavy commercial trucks.

Our long-haul commercial transport solution is especially unique with a revolutionary bundled lease or freight-as-a-service model.

We provide customers with a fuel-cell electric truck, the hydrogen fuel it needs, and all scheduled maintenance for a fixed total cost.

All the customer needs to provide is a driver.

This approach has proven very attractive and many customers are finding that they will be able to transition to zero emissions without an increase in total cost compared to their current fossil fuel solution.

Our fuel-cell electric truck reservation book exceeded 14,000 units or approximately $10 billion in potential revenue some time ago.

Since then we focused our efforts on direct partnerships with customers who have dedicated routes.

Rolling out our hydrogen station network along corporate customers' dedicated routes, or milk runs, allows us to guarantee a high degree of hydrogen station utilization and avoid speculative investments in fueling infrastructure.

Stations are being developed based on known customer demand along established dedicated routes.

During the quarter we signed an order for 85 megawatts of alkaline electrolyzer capacity from Nel ASA, which is enough to build five of our base 8-ton hydrogen production and dispensing stations.

At full capacity these stations can produce 40,000 kilos of hydrogen every day.

which is enough to fuel up to 1,100 trucks.

This milestone marks the beginning of the construction of our hydrogen station network.

During the quarter we also hired Pablo Koziner as President of Nikola's energy company.

Pablo is a 19-year veteran of Caterpillar who most recently served as President of Cat's solar turbine subsidiary.

Pablo brings extensive experience in global energy generation and distribution to our team and he will be leading the implementation of our energy strategy across the globe starting with the initial tranche of stations I just referenced.

Nikola and IVECO started modifications to our dedicated facility in Ulm, Germany during the quarter to meet our target of commencing serial production of the Nikola Tre there in 2021.

The first trucks produced from this facility will be exported to customers in the United States, but it will eventually be dedicated solely to supplying customers in Europe.

The facility will have a capacity of up to 10,000 trucks per year when complete.

Nikola also recently broke ground on its greenfield manufacturing facility in Coolidge, Arizona.

We expect Phase 1 of this facility to be complete about a year from now with limited manufacturing starting there before the end of 2021.

Once Phase 2 and 3 are completed in 2022 and 2023, respectively, the facility will have a capacity of 35,000 units a year on two shifts.

We estimate we will have spent a total of $600 million by the time all three phases are complete.

We've partnered with Walbridge, a leading facility construction expert, to ensure that we complete the facility on time and on budget.

All of our manufacturing activity is now being overseen by Mark Duchesne.

He is our newly hired Head of Global Manufacturing.

Mark is a 22-year veteran of Toyota and a five year veteran of Tesla.

As Director of Operations at Tesla, he oversaw the installation of the innovative Model S and Model X production lines at Tesla Fremont and he was subsequently responsible for assembly, manufacturing and engineering there.

At Toyota, Mark developed a $900 million greenfield facility from beginning to end, and was subsequently responsible for process efficiency, product quality, and capacity improvements there.

With that I will turn it over to Kim to review the numbers.

Thanks Mark.

I would like to provide a review of our public market activity and second-quarter financial results.

On June 3, we completed our business combination with VectoIQ and subsequently listed on the NASDAQ under the ticker symbol NKLA.

The transaction provided an additional $616.7 million of cash on the balance sheet and put us in a strong liquidity position to execute our business plan.

As a result of the transaction we incurred one-time cost of $51.5 million, including advisory, legal, accounting, and other fees.

Following the close of the transaction on June 3, 2020, our ownership structure consisted of 77.2% ownership by legacy Nikola shareholders, 8.2% ownership by public VectoIQ shareholders and spec sponsors, and 14.6% by pipe investors.

Total outstanding shares before warrants were 360.9 million.

In June and July 2020, as required by the terms of the business combination agreement, we filed two separate resale S-1s to register 52.5 million pipe investor shares, 23.9 million public and private warrants and 249.8 million shares of common stock comprised mainly of legacy Nikola shares.

Both S-1s have since been declared effective by the SEC.

On July 22, we announced the redemption of public warrants.

Assuming all public warrants are exercised into common shares, this will provide Nikola up to an additional $265 million of cash on the balance sheet.

As of July 30, 2020, approximately 18,070,302 warrants representing 78% of all outstanding public warrants have been exercised providing Nikola with an additional $207.8 million of cash on the balance sheet.

As of July 27, all 360.9 million outstanding shares post-business combination have been fully registered, as well as additional 23 million shares from warrant redemption had become part of the float.

Focusing on the results in the second quarter, net loss was $86.6 million and, on a non-GAAP basis, adjusted EBITDA totaled negative $47 million.

Adjusted EBITDA excludes $38.2 million in stock-based compensation and $1.5 million in depreciation and amortization.

Research and development expenses were $42.5 million, which includes $2.9 million of stock-based compensation expense.

R&D expenses consist mainly of costs incurred in the development of Nikola Tre BEV and Nikola Two fuel cell electric vehicle trucks, as well as power sports products.

This cost includes the following: personnel costs for our in-house engineering and research functions; expenses related to materials, supplies, and third-party services; fees paid to third parties such for outside development; Iveco in-kind services for vehicle integration, product validation, and engineering support; and depreciation for our R&D facilities and prototyping equipment.

We expect our research and development costs to increase for the foreseeable future to achieve our technology and product roadmap.

During the second quarter of 2020, we incurred approximately $44.1 million of SG&A expenses, of which $35.3 million is stock-based compensation expense.

SG&A expenses consist principally of the following costs: personnel related to expenses for corporate departments; professional fees related to legal, accounting, and financial advisory fees; public company costs such as insurance, SEC fees, and compliance costs.

We expect our SG&A expenses to increase for the foreseeable future as we scale headcount with the growth of our business and as a result of operating as a public company.

Our total headcount now exceeds 370 FTEs and is growing at a major but steady pace as we continue to build our team.

The net loss per share basic and diluted in the second quarter was negative $0.33 per share on a GAAP basis and $0.16 per share on a non-GAAP basis.

The weighted average shares outstanding were 303.8 million.

As we are in a net loss position, the fully diluted share count is not utilized for our EPS calculation.

Turning to the balance sheet, we ended the second quarter with approximately $698 million of cash and cash equivalents on our balance sheet, excluding $8.9 million of restricted cash.

We currently have no debt outstanding aside from 4.1 million equipment loan fully secured by restricted cash on our balance sheet.

Our capital expenditures totaled $6.9 million year to date, which comprised mostly of investments in R&D equipment.

With the groundbreaking of Phase 1 of our greenfield manufacturing city in Coolidge, Arizona, we anticipate CapEx to increase significantly over the next 12 months.

Now to the full year 2020 Outlook.

As a pre-revenue company, the best way to monitor our progress and execution would be to hold us accountable for achieving certain milestones rather than earnings.

However, the following provides our general expectations for the year in regards to our operating expenses.

Estimated R&D for 2020 is in the range of $190 million to $200 million, which includes approximately $10 million of stock compensation expense.

Estimated SG&A for 2020 is in the range of $175 million to $185 million, which includes approximately $130 million of stock compensation expense.

We expect average shares outstanding of approximately $385 million in the second half of 2020.

The milestones that we should be measured against are as follows: announcement of a significant commercial agreement for Nikola Zero Emission BEV trucks by end of 2020; announcement of an OEM partner for the Nikola Badger by end of 2020; announcement of a hydrogen station collaboration by end of 2020; completion of modification to our JV manufacturing facility in Ulm, Germany by end of 2020; completion of Phase 1 of our greenfield manufacturing facility in Coolidge, Arizona by Q4 2021.

This concludes our prepared marks and we'll now open the line for questions.

Jeff Osborne, Cowen and Company.

Thanks for the detail on the call.

Just a couple questions on my end.

I appreciate the commentary about the expense structure, that's certainly helpful.

Kim, how should we think about CapEx for the year?

Great question.

For CapEx, as you know, especially for the second half of the year, we have a number of CapEx items in mind in terms of tooling equipment as well as kicking off hydrogen stations as well as other software.

We also have kickoff of CapEx related to Phase 1 manufacturing.

We suspect that the second half of the year that our CapEx will be approximately $87 million.

In addition, on top of that, we should see around $25 million.

So, essentially you've got about $100 million of CapEx in the second half of the year including Phase 1 manufacturing.

Got it.

And then I appreciate you setting out the milestones.

A couple questions on those, recognizing you're Limited.

Is there any way you can frame what a significant commercial agreement is?

Is that order of magnitude of what Budweiser was for fuel cells or are these sort of onesie twosies?

I didn't know for the BEV product in particular how you think about visibility building for that as people anxiously await the units coming in from Ulm.

So, our target customers for the BEV are very similar to our target customers for the fuel cell truck.

So, we're targeting large fleets.

And so, we expect those orders to be significant.

So, the kind of orders you've seen in the way of Anheuser-Busch, that should be exemplary of what we are going to do going forward.

Got it.

And then is the intent to communicate all of this at Nikola World?

It's a bit confusing trying to follow Trevor and his various social media outlets about the timing and cadence of communication of the different variables that you're talking about.

Jess, as you're aware, we have a number of initiatives that we anticipate that we'll be able to announce in the second half of the year and we'll announce them as we execute them.

The goal is not to simply wait until the year-end, but we believe that we'll be able to announce several initiatives that we have working on over the next six months.

Paul Coster, JPMorgan.

Welcome to the public market.

It has been fun so far.

So, Mark, I just ponder is this all we get (laughter)?

It's kind of a joke really, but -- it's so much already.

But I imagine you've had conversations with many customers that are not in these verticals and with partners that are not in these verticals.

Is it possible that we'll see this business model expand over the next 12 months beyond trucking and beyond the fuel stations?

Well, what you have to trust us is there's a lot more going on than you see in the announcements.

As you know, we're talking to lots of folks.

We were talking to lots of folks before, but now it seems like just about everybody in the world knows about us.

We are having lots of conversations with lots of people.

And when we are able to announce those publicly we're going to do it, just as Kim said.

A lot of the people we're talking to would like to keep those conversations confidential for now.

And so, that's one of the reasons we don't announce everything that we have going on.

But when we have something that we can publicly announce you're going to hear about it.

I will make one additional to Kim's point before.

There's going to be a lot of cool things at Nikola World.

You want to be there.

We won't wait.

If we have something that's material, of course, we're going to announce it.

We are required to do that.

But there's going to be a lot of cool stuff that happens at Nikola World.

It's going to be the place to be.

Right.

But there's going to be trade-offs, right, in terms of how much capital you've got to throw at initiatives and the possibility you're pulled in many directions and timelines suffer.

What is it you're not prepared to sacrifice in evaluating those adjacencies?

Well, obviously, being focused makes it as important to say no as to say yes.

The things that we say no to we are very objective and careful to make sure we stay focused on delivering the things that we have to deliver.

That's why we've laid out the milestones we think you should hold us accountable for and we're going to make sure we deliver those things.

Paul, we've always communicated that capital efficiency and allocation is very important.

And we understand from investors' perspective that we are being wise about our spending.

We recognize that, while we have different product lines, what you will find is that we are -- as we announce initiatives you will find that we are de-risking the process and you will get a better appreciation in terms of how we allocate capital.

And we understand from your perspective that this is very important.

Okay, just a couple of other quick ones.

At the conclusion of Phase 1 of the Coolidge build out, what will you be producing at that plant?

We will be producing the Nikola Tre BEV, the battery electric version of the Nikola Tre there.

Right.

Mark, can you just elaborate what then subsequently happens and when the fuel-cell gets produced?

And will it be from the same facility but the second phase thereof?

The fuel-cell truck will not be built until Phase 3. So, 2023 is the projected start of the fuel-cell build.

Now remember, we're building this facility to be flexible between the different models.

So, we should be able to build a One, a Two or a Tre on the same line in this facility.

We're following the Toyota discipline of being able to build any one of those three related models on the same line any day.

My last question is, and I know there's some concern that you need to put up a lot of miles of field testing of the fuel-cell truck in real-world conditions, hundreds of thousands, potentially millions of miles.

At the moment, as far as we can tell, there's just one prototype running around.

Can you just talk us through how you get the prototypes out there in real-world conditions as quickly as possible and when that might be?

Yes, well first of all we have a couple of prototypes that have been accumulating track miles since we built them.

And we will get prototypes in the hands of our launch customers very first.

So, they will get the prototypes the very first.

For example, Anheuser-Busch long ago earned the right to get prototypes from us first.

So, Anheuser-Busch will be testing trucks from us.

We've already pulled a load of beer from the St.

Louis brewery to the distribution center there in Missouri.

You can see some pictures of that on our website.

And when we have the working first production version for testing you're going to see them pulling red trailers.

So, we are going to utilize our best customers and our pilot and launch customers, the ones that have shared some risk with us, we are going to utilize them to do the testing as well.

And that's imminent or already underway?

As I said we've already hauled a load with one of our prototypes for AB.

Emmanuel Rosner, Deutsche Bank.

So, appreciate the list of milestones that you're committed to before the end of the year.

I was hoping you'd be willing to share with us some elements of progress and how these various milestones are going.

How some of these discussions are.

It feels like some information about it was already parsed out I guess throughout the last few weeks or month.

I think there was some discussion around a certain specific number of OEM potential partners on the Badger.

I think that at some point there was discussion of some of the commercial partner for the hydrogen stations, some interest in there from oil -- big oil companies.

Just anything you can give us in terms of how these various initiatives are going so far.

Well, we can't go further than what we put out there at this point.

But I will remind everybody that we did have a public ground breaking ceremony.

So, you're going to see the activity at the site.

We are on track to get Phase 1 up on time and on budget.

And we have talked about the fact that we are going to announce a partner for the Badger and the other milestones that Kim mentioned.

So, you're going to see evidence of progress on that as we go.

As soon as we can announce something we're going to tell you.

Okay.

Any sense on the -- can you give us on the deposits for the Badger?

I know at some point you discussed it was initially getting 1,500 or so a day.

Is that a number you're prepared to update yet?

Yes.

Obviously we were intending to continue to give you updates.

But I'll tell you, this Badger story is just incredible because I mean we -- a year ago we didn't believe we'd be building a pickup truck.

We had some concepts, we have a great design team, and Trevor is extremely creative with this stuff, and we have built several off-road vehicle type prototypes.

And they had a concept for a pickup truck that they had, just in concept, just as a conceptual exercise.

And we didn't intend to do anything with it until we saw the Cybertruck.

And a lot of people didn't like the look of the Cybertruck, including me.

I think it looks like a doorstop.

But they got lots of reservations for it and so there's -- more power to them.

We're trying to get the whole world to zero and it's going to take more than so we give it -- we cheer them on.

But a lot of people didn't like the look of that thing.

So, Trevor just released the concept that we had for the pickup truck and people just went nuts over it.

So much so that we said, hey, let's put a thing on the website that allows people to go in there and fill out a form and sign up for -- and say that we're interested.

We ended up with over 89,000 of those people signed up.

So, that's when we get serious about it and said, I think the world wants us to build this darn thing.

But it wasn't in the plan before.

So, we said, hey, if we're going to do it we're going to need a partner.

That's our model.

If we are facing a big challenge with lots of risk we are looking for partners and help, and so we said we'll look for a partner.

And we got lots of people who were interested in partnering with us.

That has gone so far and so fast that we are now in a quiet period.

We can't talk about it until it's done.

So, you're just going to have to wait on that one.

That's exciting.

So, that's 89,000 deposits anywhere between $250 and $5,000 a piece?

No, no, no, no.

The 89,000 was the registration on the website.

That's just them raising their hand filling out a form saying I'm interested.

We haven't announced a pay reservation since we announced -- since we said for the first few days.

But as I said, now we're in a quiet period at this point.

We can't go further until that's done and as soon as it's done we'll announce it.

Okay.

Thank you.

And then just there finally, in our initial discussion with investors, I think that if there's one area maybe of questions or a little bit skepticism is around some of the assumptions around your cost of electricity in the future when supplying hydrogen.

Can you maybe give us some elements around -- have you had discussions with electricity companies yet?

Any sort of strong indication that this kind of input cost is actually realistic?

Or that you would have partners who are willing to work with you on this?

Absolutely, it's a great question.

So, we can make hydrogen for about a decimal move or better on the cost of electricity.

So, if we can get electricity to $0.035, then we should be able to make hydrogen at 350 a kilo or better, given our current technology and the current design of our stations.

So, the key for us to have our target hydrogen cost is for us to get the electricity at the right cost.

So, what you want to look at is you want to look at the price of renewable electricity.

That's what we're targeting.

We are trying to use the wind and the solar and the other renewable source of electricity.

We want to be all green; that's our target is 100% green.

We're going to get as close to it as we can everywhere we go.

And look at the price of the renewable, the big renewable projects that are out there.

This is one of the reasons we got a big investment from a solar provider out there.

We had a big investment in our private rounds from Hanwha, which is a big solar panel provider and solar array manufacturer.

Because they can profitably build solar arrays and sell the electricity on a long-term basis, for the projected life of our stations even, on a fixed cost basis for our target price.

They can do that.

Wind -- big wind projects, you're going to see the same.

The other thing you want to pay attention to is the wholesale price of electricity at the major trading points in places where it's free to trade.

You're going to see that that price -- when it's being driven by the renewables, that price falls way down there.

It even goes to zero once and occasionally goes negative when one grid has too much of it.

That's the reason we have faith that we're going to be able to hit this number, especially on the average.

Some places will be a little lower, some places a little bit higher, but we're going to be on our average, we're very confident.

And Emmanuel, we are having some conversations in the Phoenix area and we're getting some indications that it can be below $0.035 per kilowatt hour.

And we are also having some number of discussions in various areas about collaboration and various projects where we can achieve that.

And that's why that's one of our milestones.

I think you're going to see us announce some collaboration on the electric energy front and the energy front generally.

Joseph Spak, RBC Capital Markets.

Thanks for the color so far.

Maybe can you just follow on that last point?

Can you comment on, I guess, the overlap of renewable electricity or, I guess, broadly cheap electricity?

And the map for dedicated high-volume routes that I think you're going after for the initial fuel cells?

Because I guess you sort of need both.

Or maybe you can just help us understand which is leading which.

It seems like when you first presented the opportunity it was going after some of these dedicated routes that you could quickly sell.

And how does the overlap with cheap electricity fall into that plan?

That's a great question.

That is the challenge and the opportunity in front of us is to cover those dedicated routes that are our target customers.

Our target customers' dedicated routes between the city pairs that are too far apart to service with a battery electric truck.

And to get the trucks to that route and to get the fuel to that route at the same time.

That's our challenge, to provide the chicken and the egg.

That's always been the challenge for hydrogen is to get vehicles and fuel in the same place at the same time, especially in the kind of volumes that we need for heavy duty trucking.

So, that's been our focus.

I'll give you a test case.

One of the city pairs we know we are going to tie together is Phoenix and Los Angeles.

Los Angeles is the location of one of the largest breweries of our launch customer for the fuel-cell vehicle, Anheuser-Busch.

They have a very large brewery in Van Nuys.

Pretty much all the beer that is drunk here in Arizona comes from that Van Nuys brewery because there's no brewery in Arizona.

So they have to truck it all.

It comes down Interstate 10 to a distribution center in Chandler and then from Chandler it goes to the points of sale here in the Phoenix Metro area and around Arizona.

So, that's over a 400-mile route and, in order to cover that without losing case -- pallets of beer off your load because you're too heavy because of too much batteries, you've got to have a fuel-cell truck.

Anheuser-Busch recognized that early on, that's why they placed the 800-unit order with us early on.

So, we had to tie Phoenix and Los Angeles together, which means we need a station somewhere on Interstate 10 and accessible to Interstate 10 in the Phoenix Metro area preferably on the west side for that city pair.

And then another station somewhere in the Los Angeles basin or nearby on Interstate 10.

Those two stations will service those trucks.

And we can size those stations anywhere from about 210 trucks capacity to 1,000 trucks capacity plus.

So, we can fuel up to -- from 400 up to 2,000 trucks with just two stations for that city pair.

And then we build it from there.

Los Angeles we then tie to San Francisco.

There's an Anheuser-Busch facility in Fairfield, California in the Bay Area that's also about 400 miles away from Van Nuys.

So, that'll be another city pair that we tie together early on.

Getting the electricity for these stations, again, is the great challenge and opportunity for us.

And we are well on our way to having the electricity arrangements in place for those facilities.

And as (inaudible).

Sorry, go ahead.

Just for a bit more nuance in terms of the way we think about in terms of when we lock in demand and utilization.

We've always talked about we will want to lock in demand first so that we are not risking or speculating.

So, if you think about it, we'll do our best in terms of locking in demand.

But as you know, hydrogen station lead time is around 18 months.

So, while ideally we'd like to have about 90%-plus utilization, it doesn't mean that we will always have locked-in demand two years in advance.

We'll have demand locked in, and then over the next 18 months, during the lead time, we will continue to develop and gain customers so that ultimately, by the time the station is ready for our customers, we will have over 90% utilization.

Okay.

Maybe I think I saw in one of your filings that there was a requirement to deliver some of the test fuel-cell vehicles to Anheuser-Busch by 2021.

Maybe you could just confirm that and let us know if you're sort of up to date on that timing or timeline, if that's a milestone.

And also I understand that you can't talk about certain things without customer permission, but you did mention sort of your newfound publicity.

Can you just maybe qualitatively talk about the funnel of your opportunity now versus maybe 6 or 12 months ago?

Yes, let's take that in both parts there.

So, the first question is Anheuser-Busch will be our launch customer for the fuel-cell vehicle.

How soon will they get prototypes?

We do believe that we'll be able to give them test prototypes before the end of 2021.

Serial production or mass production of the fuel-cell truck will not begin until 2023.

But they're going to test with us.

They've been a risk sharing partner from the beginning.

They've helped us with development from the beginning.

So, they're going to take test trucks and accumulate miles for us and get data for us.

Okay.

And the funnel of opportunity.

Yes, so one of the great things about all the publicity that's come from our public listing and this process as it continues is there's not very many people that haven't heard of Nikola now.

So, people that weren't engaged in discussions with us, they are now.

We had lots of discussions going on before, but it's just -- it's increased greatly since this public listing process.

So, the good news is everybody wants to do business with us and we are in a position of being able to pick and purposefully choose who our partners will be going forward.

Can I squeeze in one more on Europe?

IVECO Talked about the JV you set up with them.

Is everything you're going to do in Europe through this JV -- I think it's for both battery and fuel cells.

They also talked about this sort of complete turnkey offering for customers.

Is that similar to your fuel-cell lease solution in the United States?

Now remember, the joint venture with IVECO is to produce trucks in Europe.

So, we have a facility that's being modified for mass production of our trucks in Europe.

It will start with the Tre battery electric vehicle first and then it'll eventually add the fuel-cell version over there.

And it will build those two versions of our vehicles out of the Ulm, Germany facility that we are just about to finish.

We actually have the first five prototypes coming off the end of the facility at this point.

And they'll go on the test track here in the next couple months.

And we'll go from there.

So, that's the plan for Europe.

That joint venture is just to build those trucks.

Each partner has right to 50% of the output of the facility and the production lines there.

So, everything else is -- the energy side of the business and everything else in Europe will be Nikola alone.

And not to downplay the joint venture, it's an outstanding joint venture.

IVECO has been an outstanding partner for us in getting our vehicles ready for production here.

The commercial offering in Europe will vary slightly, but that will be in common.

We are going to offer a bundled lease in Europe just like we do in the United States for the fuel-cell vehicle.

Battery electric vehicles, we think, around the world so far most customers want to purchase those outright.

So, we don't think we will be leasing battery electric vehicles.

We think we'll sell those outright and customers will put in charging infrastructure, which we are going to help them with, but they're going to do it themselves in their terminal or their depot.

They want to charge those trucks overnight, which is an ideal solution for battery electric vehicles and in their depot in their terminal.

The fuel-cell electric vehicles, that's different.

We need to provide the fuel in addition.

And that's why the bundled lease makes sense in Europe as it does in North America.

We'll be offering the fuel, the truck, the maintenance all in a bundled package ready to service in Europe just like we do here.

Joe Osha, JMPSecurities.

This is actually Hilary on for Joe.

Thank you for taking my question.

I just kind of wanted to touch on the grid and how hydrogen can potentially kind of play a role in helping to balance that energy demand.

And secondly, if you would potentially think about building some of that extra storage kind of in the earlier phase of building out some of these stations or if that's something we would expect to come at a later time?

Hilary, that's an outstanding question.

One of the great benefits of what Nikola is bringing to the world is the ability to balance the renewable energy that's coming into the grids.

As you know, the huge challenge as the world transitions from fossil fuels to renewable sources of electricity is that these renewable sources do not produce on demand.

They only produce when the wind blows and the sun shines typically.

And that's not what the grids are designed for.

And that's not what people expect, that when they flip switches things turn on.

They expect to have electricity on demand.

But the generating sources that are renewable don't produce on demand, they are interruptible and they're variable.

So, one of the great things that Nikola offers to the world is when we put these hydrogen stations in and we start to get a lot of them in there, it represents a tremendous amount of demand for electricity that can match up to the supply.

So, we can make hydrogen when the electricity is available and then we don't have to add significant demand to the peak.

So, typically most grids around the world have peak of demand somewhere in the late afternoon or early evening hours, and the peak of renewable production typically around the world is about solar noon in each location.

That's when the solar peaks, and so you've got this mismatch between the peak of renewable production.

If the wind happens to be blowing optimally around noon and the sun always shines optimally at noon, then you've got way too much power at that point.

And then, but sometime around -- between 4 and 7 o'clock you don't have enough.

Well guess what?

When Nikola is there in bulk, which we are going to be in volume, we can take a lot of that extra power at the peak and turn it into hydrogen.

And then we don't have to be pulling power when the rest of the grid needs it so badly at the peak of demand.

And then on the rest of the off hours we can be taking some of that power that's otherwise wasted right now.

When the wind is blowing nicely at night a lot of that today is just wasted.

We'll use that to make hydrogen which we'll then put in vehicles and that will be useful to mankind.

So, in answer to prayer to grid operators worldwide, because we are going to help balance these renewable energy sources into their grids.

And we represent a great grid buffer.

Remember how much power we're talking about here.

When you're talking about 1,000 trucks represents 100 megawatts, 10,000 trucks is basically a gigawatt.

Every 10,000 trucks is a gigawatt of power to keep those trucks on the road if you are using zero emissions.

So, once you talk about replacing the entire North American fleet of millions of vehicles then you're talking about hundreds of gigawatts of power.

And that's one of the problems with looking at the battery side of this.

Our battery trucks represent a problem for the grid too because, guess what?

People want to charge their batteries.

If they're on the open highway they want to charge their batteries at the same time as they stop for diesel fuel today, which is breakfast, lunch and dinner time.

So, that 5 o'clock stop for fuel is an enormous problem for grid if they want to charge their batteries quickly at that point.

The power is not there and that's a challenge for battery electric vehicles.

That's why we like battery electric vehicles for local deliveries and short-haul and metro areas where they can return to base and charge overnight, where they don't burden the grid.

And we like fuel cells that not only have the long range, but can fuel up with hydrogen that we make when the electricity is available.

It's really an elegant solution.

Regarding your second question about storage tank, that can be somewhat nuanced.

As you know, the supply chain is still very early and immature and storage tanks can cost a significant amount.

But at the same time, as you know, we anticipate on all of our locations we will have at least 30 hours of storage.

And when you think about depending on the locations and cost of electricity, we understand that in certain locations we may need to have greater flexibility.

And certainly as we think about over time, we know that storage tank cost is going to come down as we have new entrants from supplier perspective.

So, we will size approximately depending on the geography as well as the cost of electricity.

We want to make sure that we have plenty of flexibility.

Okay, great.

That was the only question I had for you.

Thanks so much.

There are no further questions at this time.

At this point I'd like to turn the call back over to management for closing comments.

So, we are grateful for your interest and thanks for dialing in.

Thanks for covering us.

We're grateful for you guys doing a great service to explain what we're trying to do to the investing public.

We're grateful to have such a great result.

We spent I think $11 million less than you guys were projecting in the quarter.

So, we're showing good discipline on the spending front.

And since we're in pre-revenue position every one of those dollars has to come from our investors.

So, we know that that's critical and we take that trust very seriously and we are committed to continuing that discipline going forward.

So, appreciate your questions and we'll look forward to talking to you again in 90 days.

Thanks.