HYLN - NYSE

Thank you for standing by. Welcome to Hyliion Holdings Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the management remarks, there will be a question-and-answer session. I would now like to turn the conference over to Kellen Ferris, Hyliion's Director of Investor Relations. Kellen, please go ahead.

Thank you and good morning, everyone. Welcome to Hyliion Holdings' second quarter earnings conference call. On the call today, are Thomas Healy, our Chief Executive Officer and Jon Panzer, our chief financial officer. A slide presentation that accompanies this conference call and is available on Hyliion's Investor Relations website at investors.hyliion.com. Please note that during today's call, we will make certain forward-looking statements regarding the company's business outlook. Forward-looking statements are predictions, projections and other statements about anticipated events that are based on current expectations and assumptions, as such are subject to risks and uncertainties. Many factors could cause actual results to differ materially from forward-looking statements made on this call. For more information about factors that may cause the company's results to differ materially from such forward-looking statements, please refer to our presentation and press release as well as our filings with the Securities and Exchange Commission. You are cautioned not to put undue reliance on forward-looking statements and we undertake no duty to update this information unless required by applicable law. Now I will turn the call over to Thomas.

Welcome to Hyliion second quarter 2023 earnings call. During the second quarter, we hosted our first ever Investor Day on June 27, in Austin, Texas at our headquarters. We had more than 60 in-person attendees and over 400 viewers on the webcast to tune in to learn more about Hyliion's go forward strategy. We showcased the building of our first production Hypertruck ERX powertrain as well as unveiled newly planned product offering and what the go forward market strategy will be for these products. To start today's call, I'd like to share an update on the market landscape and perspectives on some recent events that have taken place in the electrification space. As you may be aware, last Monday, another leader in the space filed for bankruptcy and unfortunately, they are one of a number of companies in our industry that have faced financial and other issues in recent months. We've also seen some providers experienced significant losses on their initial units as they see the market with their products. Hyliion faces many challenges as well and we are working diligently to avoid the same outcome and to grow shareholder value. Hyliion has been trading near or below our cash value over the last few quarters. However, one of the differences between Hyliion and others in the space is our cash position. In light of this, we continue to assess our business model and strategic priorities to ensure we utilize our capital as effectively as possible. We have seen significant shifts in the electrification space over the past few years that have impacted us and our peers. And we expect that these shifts will continue to impact Hyliion's business model. For example, we continue to see component price increases from our suppliers have experienced supply chain constraints that have impacted our development timeline, and have seen both positive development and potentially wavering on regulatory mandates. As a result, we see fleets adjusting their electrification strategies as they move further along the path to adoption. Going forward, we will continue to look for ways to optimize our business, conserve our cash position, bolster our product offerings to help prevent the de-contenting by OEMs and deliver solutions that meets fleet's needs. We've already executed on opportunities like our acquisition of the KARNO Generator Technology and our development partnership with Hyzon to build a fuel cell-powered vehicle. We will continue to look for ways to strengthen our business model and to optimize our business conserve cash and deliver products to customers. Shifting now to the Hypertruck ERX. I'd like to share an update on where we are with respect to launching the Hypertruck ERX powertrain later this year. As just mentioned, we have begun the installation of our first production truck and we plan to ship 30 trucks by the end of the year. On our Hypertruck ERX commercialization timeline that we unveiled seven quarters ago, we had planned to begin extended fleet trials in the second quarter of this year. Unfortunately, we have pushed the start of these trials out into the third quarter due to delays in receiving components needed to build our latest fleet of pre-production vehicles. However, we expect to start these trials in the coming weeks. We're presently working with fleets to confirm orders and delivery timing for their initial production trucks. With the extended fleet trials as the final stage for many fleets and their decision process of procuring our solution, we are presently completely booked through Q4 with trials with various fleets. With the discussions we have ongoing and the interest we have received from fleets, we are confident in our ability to deliver 30 trucks by the end of this year. As we get feedback from these fleet trials and initial adoption, we will assess our ramp up plans for 2024 and come back with further clarity on our projected volume ramp. Even since last quarter when we shared that we'll be shifting our delivery ramp and restructuring or founders' agreements, we've seen further unexpected price increases from our supply base. This speaks to how the electrification market is still in its early stages, and manufacturing supply base and pricing are still being worked out. As we've previously shared, we're working to pass along some of these price increases onto fleets, which will allow us to sell the trucks while reducing the gross loss we expect to realize on the first units. Another milestone on our commercialization journey is to achieve or complete our CARB, EPA and NHTSA certifications relating to the powertrain. I am pleased to share that we have successfully passed all required Federal Motor Vehicle Safety Standards or FMVSS. To satisfy our NHTSA requirements. We also remain on track with CARB and believe we'll have this complete in Q3. Thus, we are confident in our readiness to begin shipping trucks in the fourth quarter. Also, during Investor Day, we unveiled that the next variant of the Hypertruck ERX will be the powertrain in a daycab truck. When we initially selected the launch of the Hypertruck ERX on a sleeper truck, we believe that fleets would adopt plug and electric trucks for daycab applications and range-extender electric for sleeper truck applications. As fleet to begun adopting plug-in electric trucks, they are finding that the range is much more limited than they expected, and the charging infrastructure either doesn't exist or is difficult and costly to install. Thus, over the last couple of quarters, we have seen increasing interest from fleets in a Hypertruck ERX powertrain on a daycab vehicle. We are therefore moving forward with initial development and are planning to have the powertrain ready in 2025. As we embark on this development, we also plan to incorporate design improvements to help with cost and weight. We've heard from fleets that the additional weight of the Hypertruck ERX sleeper variant will hinder its ability to operate in weighed out hauling applications. Thus, for the daycab, we are exploring ways to reduce battery and tank sizes to remove weight in addition to the savings of moving to a daycab. In Q2, CARB passed the Advanced Clean Fleet or ACF mandate, which will require fleets to start adopting vehicles that qualify for the

Thank you, Thomas. And good morning, everyone. Turning to our financial results. For the second quarter we reported revenue of $266,000 from hybrid system sales, compared to $172,000 in the second quarter of a year ago. Operating expenses totaled $38.5 million, an increase of $6.3 million compared to the second quarter of last year. The year-over-year increase in spending is due to growth and research and development costs partly offset by lower SG&A expenses. R&D costs were up $7.4 million in the quarter due to higher expenses related to Hypertruck ERX powertrain development and KARNO. Powertrain development costs went up $3.7 million as we expense production truck components that were received in the quarter. I mentioned last quarter that until we complete R&D work on the Hypertruck ERX system, all component purchases will continue to be expensed even if those parts will ultimately be used in production power trains that are later sold to customers. The impact of this expensing was partly offset by lower expenses related to other R&D work on the Hypertruck ERX system in the quarter. Going forward, we expect that expensing of production component purchases will have a negligible impact on our R&D costs, as we make progress towards Hypertruck ERX system commercialization. The second driver of higher R&D costs in the quarter was KARNO expenses that we did not have in 2022. As a reminder, we purchased KARNO Technology from GE, late in the third quarter of 2022 and therefore, comparisons of year-over-year expenses in the first three quarters of this year need to account for this difference. Total KARNO expenses in the second quarter, were $3.7 million. In total, Hyliion reported a net loss of $35.2 million for the second quarter, which is up from the $33.5 million loss the company reported a year ago, as lower cost of sales and higher interest income this year nearly offset higher operating expenses. Looking at year-to-date performance for the first half of the year, revenue was $576,000, compared to $512,000 in 2022. Total operating expenses were $70.4 million, compared to $57.9 million in 2022. Again, the increase in expenses was driven by higher R&D expenses of $12.5 million, of which $5.4 million consisted of the expensing of production component purchases, partly offset by lower costs for other powertrain R&D work. The remaining $7.1 million of higher year-over-year R&D cost was driven by KARNO expenses in the first half. Finally, SG&A expenses in the first half were approximately flat with 2022. Our net loss year-to-date was $64.1 million, compared to $60.6 million in the first half of 2022. We ended the quarter with total cash, short term and long-term investments of $354 million, compared to $422 million at the end of 2022 and $385 million at the end of the first quarter of this year. We spent $31 million in the second quarter, compared to $37 million in the first quarter and $27 million in the second quarter of 2022. As we discussed last quarter, we are taking actions that will help reduce cash burn and expect that these actions will significantly reduce operating expenses, capital spending and working capital growth. We continue to hold to the guidance that we shared at our Investor Day back in June of approximately $130 million total operating expenses, despite the unexpected impact of production truck component expensing this year. Also, we continue to project cash consumption of less than $150 million, including cash operating expenses, working capital growth, and capital expenditures. As previously noted, we ended the second quarter with $354 million of total capital which gives us flexibility to continue Hypertruck ERX commercialization work, including initial truck deliveries, as well as KARNO development work. We expect to finish the year with a total capital balance of around $275 million, which will give us financial flexibility into the future. We have no plans to raise capital this year, but we'll remain opportunistic in 2024 and beyond if market conditions are favorable for raising additional equity capital. With that, I'll turn it back over to Thomas.

Thanks, Jon. As we wrap up this call and move to Q&A, I'd like to encourage anyone who hasn't yet watched our Investor Day video to do so. This presentation offers a great overview on both the Hypertruck powertrain technology, as well as the KARNO generator. The recording can be found on Hyliion's YouTube channel. We will now open the call up to Q&A.

Thank you. [Operator Instructions] The first question comes from line of Donovan Schafer. Please go ahead.

Yes. Hi, guys. Thanks for taking the question. So, I want to first talk about the Hypertruck ERX, doing those 30 units. Sounds like you said you're, you feel pretty comfortable, like you're on track. But being there at the Investor Day, and kind of seeing the list and everything and the crews working on it. I'm just curious, there's a learning curve was anything like this, and this is kind of the start of being into being in like production mode on these. So is that at a point right now, where you're already, the crews that are doing this, the teams that are doing this, they're already kind of at a run-rate, where if they just keep pumping them out at the current pace, you'll hit that 30 --those 30 units? Or is there kind of the expected or baked in certain amount of well, every day, they get a little bit better. So it's not strictly kind of a linear improvement. So there's a certain amount of just expected kind of timing and improvements that will help you get to the 30 units. Just kind of curious to the nature there, if you can talk to that.

Yeah, it's a good question, Donovan. You had the opportunity to actually see it all firsthand. But we are in the ballpark right now from a production standpoint to be able to achieve those 30, with no drastic changes, or no big changes at all. And so from that standpoint, your other comment, we are getting faster at installs every single day. Actually, that that times that the teams have been able to improve have been quite impressive, and we don't think we've gotten all the time out of it yet either. So from that standpoint, we have high competence and the ability with the team that we have. The facility operations setup that we have to be able to achieve those 30 units by end of year. The other thing I'll note is we are also in parallel path teeing up [Indiscernible] ability capability to be able to do Hypertruck ERX installs as well. And so that's going to allow us to be able to go scale volume as we have systems from our centers.

Okay. That's helpful. And then the second question is related [indiscernible] Hypertruck ERX being kind of the high-300,000s. I'm curious with the cost increases that you've seen, are we moving toward that may crossover to hit that kind of 400,000 mark, or not. And if you can give any color around how we could think about the daycab, as I understand it, you can actually even do a smaller battery and still get the full credit on the daycab. So if you can just, if we can get kind of a rough sense of if it's under 100k lower or 50k lower. How the daytab would kind of compare?

Sure. So let's first start with the sleeper cab variant of it. So as we mentioned, in previous call, we've expressed high-300,000, and that is still where we're targeting. Now, that is already taking into account the benefit that will be received from the Inflation Reduction Act that 40,000. So we're still on track for that high-300s. With respect to the daycab, it's still too early to put numbers on that in terms of cost and price of that system. As you mentioned, we are targeting some improvements so one is just obviously the shift of going from a sleeper truck to a daycab. Daycabs are conventionally less expensive in the market. And then we are also looking at smaller battery pack, while still being able to achieve that ACF credit, even looking at someplace to push us towards reducing the size of the tanks on the vehicle just because the range of a daycab is less than what a sleeper is. So more to come on what the pricing of a daycab though would actually look like.

Okay. And then if I can squeeze just one more in on the stationary KARNO generator. In the release, you talk about having demo sets deployed in '24, and also generating revenue. So I'm curious are those kind of two separate buckets of the same thing? You have -- would you have one set of demo units, and a separate set of units that are out there generating revenue? Or is it kind of like, you'd have, you deploy some of these, and you call them demo units, because maybe the revenue model. You're selling the electricity, but you keep ownership of the unit, and it's still sort of helping to prove out the concept and allows you to show it off to people and stuff like that. Would they be the same units or kind of two separate groups or batches?

I think that's where to look at it will be the same unit. Now obviously, as we go deploy these, and as I mentioned on the call, we are in discussions right now with the likely early adopter. We'll be working with each one of them and looking at what their potential long-term use cases and then structuring these agreements appropriately. And so I think, from your standpoint, though, look at them as in the same bucket. Our goal is these early units that that we'll be deploying in 2024, we will be able to generate revenue off of those units and then see that as a great kind of, speeding into the market to be able to then hopefully go scale volume from there.

Okay, great. Thanks, guys. I'll take rest of my questions offline.

Your next question comes from the line of Steven Fisher of UBS. Your line is open.

Thanks. Good morning. Just to follow up on that KARNO question. I know you plan to generate revenues in 2024. Can you just give us a sense of the path and timing to gross margin positivity on that KARNO stationary generator, is that something that can be sort of even having your line of sight at this point or is that somebody that's much further out and you need a bigger scale?

Hi, Steven, this is Jon. Hey, great question. We're excited that next year, even though we just acquire the current technology that we have an opportunity to put some units and demonstration service and even get some revenue for them. We haven't projected yet or shared our expectations in terms of gross margin. But we don't think as we ramp up KARNO, we'll do the demo units. But then we do expect that we'll be able to ramping up sales in 2025 and beyond that there's not a long pathway to positive gross margins. But I wouldn't want to give you any specific numbers just yet as we kind of work through the engineering on it. But we think KARNO overall is a pretty good story and that story is not a long one in terms of getting to being able to forecast those things, but we're just not quite ready yet.

Got it. That's helpful. And then in terms of the daycab. How does the development of that product affect your cash burn?

Yeah, I'll start it off. And Jon can chime in more as well. So we'll be utilizing a lot of the same team that we already have in Austin, Texas, taking the knowledge. And a lot of the development we've already done on the sleeper truck carrying it over to a daycab. But as we mentioned, there'll be some improved cost benefits and weight benefits onto that solution, so there still is engineering spend. And, I'll let Jon touch on that.

Yeah, I've been I've been trying to share when we talked about this a little bit at Investor Day around our cash or expense outlook for next year. And I did that in the context of what we spent the last couple of years. And also and look through the comments that I made today about our expenses with taking out some of the unusual costs related to R&D component expensing. We're flattening out. I projected this at the beginning of the year that SG&A would be flattening out. And R&D is looking to flatten out too even with the addition of KARNO. So as Thomas mentioned, as we complete the R&D work on the sleeper truck, those people will be shifting over and that money that we had spent, over the past towards sleeper truck development will shift over to these other things including the 15-liter and the daycab. So I guess what I'm getting at here is, I don't want to forecast too precisely, but we don't expect a big ramp up and spend or a big additional cash burn to get the daycab. It's the next follow-on product that we're really talking about there with the daycab of 15-liter.

Okay, terrific. Thank you very much.

Your next question comes from the line of Bill Peterson of JPMorgan. Your line is open.

Hi, good morning. This is Mihima Kakani [ph] on for Bill. Thanks so much for taking our questions. Maybe start, can we get some clarification around what type of component issues you've been seeing that's led to delays in building electrification vehicles? And what the expected if any impacts would be on your deliveries later this year for the ERX?

Yeah, so I think what we saw was really components that were coming in ensuring that they met the proper quality specifications that we were laying out to our supply base. We saw that there were some deficiencies there. And then we were able to work with the suppliers and make improvements in the products that they were producing for us to be able to meet those standards. So things like sheet metal, making sure that tolerances are correct, the paint specs are correct, as well as wiring harnesses, making sure they were built to build the spec that we had outlined. And to make sure that those specs were we're going to meet the harsh conditions of the roads out there. That's really what led to some of those delays. So I think our team had done a great job in forecasting out when we needed components and supplies. Unfortunately, we just saw that some of the material that was coming in, didn't quite meet the specifications and the demands that we were looking for to meet. And the supply chain base worked very well and diligently to then correct those issues. And I'm pleased to say that we're now in the process of building out those remaining pre-production development trucks.

That's really helpful color. Thank you. And then maybe a second one. Can you tell us a little bit about your philosophy on building up ERX inventory versus getting these initial 30 trucks to customers? Like is there a certain level of inventory that you feel comfortable having as you ramp up in 2024 and beyond?

Yeah. So the focus right now is obviously those 30, both securing the orders and then getting those trucks built out and in the hands of customers. As we look at 2024, one of the things that we're looking at closely is how does these extended fleet trials go? How these initial adoption of units go, the founders units later this year, and using that input to really look at what the 2024 volumes are expected to be? So we plan on coming back with further information on that as we get a little bit further ahead. But as you mentioned on today's call, we think we're weeks away from being able to start these extended fleet trials, which for many places is kind of their final gating item before making order commitments. And that's expected at it is something that I think the industry is, is demanding and rightfully so. As they want to actually experience technology in their operations first for a period of time before they're willing to place order commitments. And that's something that is not uncommon to just Hyliion.

Okay, great. Thanks so much for taking your questions.

Your next question comes from the line of Andres Sheppard of Cantor Fitzgerald. Your line is open.

Great, thank you. Good morning, everyone. Congrats on the quarter. And thanks for taking our questions. I just wanted to maybe start off by clarifying the cadence of the 30-unit delivery for this year. Should we expect the vast majority in Q4 or might there be some material deliveries in Q3? Just trying to understand that, what that breakdown might look like. Thanks.

Yeah, so later this year. So Q4 target, so it will be going through the sale the trucks. We actually started the first build of a production truck during Investor Day. And then we're looking at more the Q4 timing of when deliveries will start taking place. And just to walk through the process. So what we've lined up is, we'll be sourcing the content to chasis from PACCAR Peterbilt will be then doing the upfit of our powertrain technology in Austin. As I mentioned going forward will also have the ability to do that at Mod Centers as well as in Austin. And then that vehicle will go back to PACCAR, go through final end of line certification, the VIN will be put on the vehicle, and then it would be ready to go out to customers. And that will enable these vehicles to also achieve that ACT credit that we've been talking about. So that's the process. But in terms of when these deliveries will get back -- completes, we're looking at Q4

Got it. Okay, that's what I thought. Thanks, Thomas. And maybe a question for Jon. In terms of gross margins, I know we're not providing too much visibility around those but is it realistic to target positive gross margins at some point throughout 2024 or is this perhaps more of a 2025 story? Thank you.

Yeah, I think it is still a little bit early to tell. As we noted, we're still working on our order book for next year. And that's contingent upon these extended fleet trials that we're about ready to kick off. And so, volume drives, costs and so getting that order book in place, and also some of the design changes we're working on, and also working on getting the powertrain and getting to the point where we're selling powertrains. Those all play into our expectations for timing on gross margin. As we noted, we're not expecting big losses right out of the gate, but we do expect some reading. So it's a little bit early for us to share expectations there because of all of those things. So, but you can assured we're working on it very hard.

Got it. Okay. Thanks, Jon. And maybe just one last one, if I may. You mentioned, given your current liquidity, you don't anticipate any capital raises this year, but that you will remain opportunistic for next year. So I'm just wondering if you can be elaborate a little bit further, as it pertains to next year. How are you thinking about potential capital raises, are you leading towards equity or debt or one way more than other? Just trying to better understand how you are thinking about it as it pertains to next year? Thank you.

Yeah, sure. I've shared at Investor Day that we're slowing cash burn. We've reduced our estimates for this whole year by $50 million from where we started the year down to expectation that it would be no more than $50 million, we still feel good about that. We're trying to keep it as low as possible, to extend our options. And so you could extrapolate what we've shown, what we show today on the slides and say, hey we don't really need to raise capital next year, in addition to this year. The point about being opportunistic is a, if the opportunity arises, and we've seen some boxes, some companies, increase a lot, due to better prospects and so on. If that were to show up, we would probably look to the capital markets, I don't see, I see that being probably more of an equity, pure equity type of a play versus anything else. So again, the whole idea is to give us some flexibility to execute on our strategy. As Thomas outlined, that we see big opportunities out there. There's a little bit more work to do to get a daycab and get the KARNO opportunities, figure out the best way to build the sleeper cab ERX. So all of those things, and then the other strategic opportunities that we hinted at today, just keeping open minded about what those might look like, and how they might unfold. Those are all things that are playing into our capital forecasts. I think the good news is, we have a lot of flexibility. We've created that flexibility and runway for ourselves. And we're not just assuming that things are going to turn around in six months or so. So we're being very strategic about how we think about using our capital and how that aligns with our strategic plan. So again, we've got flexibility, we're really watching it carefully. And we'll just see how things go.

Got it. Okay. No, that's super helpful. I appreciate that. Thanks, again. Congrats on the quarter. And I'll pass it on. Thank you.

Thank you.

Your next question comes from the line of Mark Delaney of Goldman Sachs. Your line is open.

Good morning. Thank you for taking my questions. And thanks for all the details on the KARNO. I believe you mentioned in your prepared remarks that some suppliers have been increasing prices and therefore the bond cost of the ERX could be higher than you've been thinking earlier this year. I'm hoping if you could clarify a bit more on that topic. Are you able to give us a better sense of the magnitude of the increase that you're now thinking about in terms of the ERX costs? Maybe give us a sense of the breadth of suppliers doing this as a single component or two, that's driving the increase or is it a broader base set of changes?

Sure. So I'll first start with kind of the overall theme for maybe it's even more than a year, a couple of years is just a significant component price increases. And what we shared on the last earnings call was, that was one of the reasons that it drove us to go back and revisit these Founders' agreements, we need to pass some of those price increases on to and customers that you as we heard -- as we shared on today's call. Even since then, we've seen some more component increases, you mentioned that, those are in the thousands of dollars range. And so what we're seeing is that that price increasing from suppliers is not lightening up just yet. And so, from that I don't see that it's going to change our pricing at this stage, but we just wanted to add that color to the market of still seeing price increases. And this is not unique to Hyliion, by any means. One of the things that we've seen is as others are reporting earnings. Some are taking very significant losses on shipping out vehicles. And so as Jon touched on that a little, we don't see that we're in the same boat. We are going to be operating at a loss on these initial trucks, but we'll be working diligently to pull that cost out of the product, as we go forward here. And then we see daycab as another market opportunity for us to go after as well.

Mark, I might add to that. As people would expect, when you've got a new industry forming and a lot of especially in the Class 8 market that doesn't have a lot of volume. And you're talking about things like battery systems and E-Axles and so forth. The industry really needs to mature and get to the higher volumes. And I think naturally, you'll see pricing coming down overtime. It's just, we haven't yet reached that volume driven inflection point on pricing. And we're dealing more with inflationary sides of it that are working the other way. So it's just part of its time part of its design part of its procurement and so forth. So those are the things that are affecting us.

Yeah, that all makes sense. And appreciate the color. I guess to kind of follow up on that topic. As you're thinking about price cost, in terms of some of these factors, what you can pass on and what Hyliion may have to absorb? Do you think that price cost dynamic gates production in 2024? I realize you're still formulating the exact build plan, as you said in your prepared comments. But I'm curious if the potential losses maybe limit how many ERX units in '24 you may want to manufacture and sell? Thanks.

Yeah, Mark. That's a great question. And we've actually addressed this a little bit in the past. Just recently that -- as you think about the changes in cost, the shift in strategy that we outlined a quarter ago, where we said, hey, we really want to control and meter the ramp up of this product, because of all of these challenges. And you add to that, that we see all these the other opportunity around the daycab and KARNO and so forth, that we definitely want to get our trucks out there get miles on it improve our powertrain technology and reliability. We do have this this change where that fit the 12-liter engine that we have won't be certified in California next year. That doesn't mean we can't sell trucks, we'll continue to sell them. But, we're not rushing to put out trucks as quickly as we were maybe a year ago or even further back, because that's not necessarily going to get where we want to be, which is to have, like I said, the daycab truck working on design changes that will take cost and weight out. So, 2024 will be a year we're going to continue to sell. But it's not -- it's not a strategy where the more we get out there, the better. We want to be very thoughtful about the volumes and the ramp up as we work on these other things that we've outlined today. So, again, that would kind of help us really in all areas of proving up the product, managing our capital, cash flow, and those types of things. So yeah, so you might say there is -- there could be some metering of that just depending on the factors the interest level that the price level component level, so forth as we get through next year.

Understood, thank you.

[Operator Instructions] Your next question comes from the line of Chris Fibs of CP Investments [ph]. Your line is open.

Hey, guys, can you hear me okay?

Yeah.

All right. Thanks. Regarding sales is far as your plan for the market. Are you guys planning on having like field sales, like reps in the field or mostly working with like OEMs, or doing more of like online presence or combination of all?

Sure. So it's definitely not an online presence type of a market. The commercial vehicle space is very used to meetings in-person face-to-face discussions about how they're going to be specking their trucks. What's conventional for Tier 1 suppliers in this space is that you do have a field sales team, but you're also working closely with the OEM. So you want to go out and educate the fleet on your technology and on your solutions. So that then as they're going in placing brand new truck orders through their dealers, they're specking your product. And so that will be our goal, as we move to that, that model of being a powertrain provider as opposed to the full vehicle seller. And that is something that is very customary in the industry, and a model that we look to slot into.

And do you guys currently have any reps in the field? Or when would you start actually ramping up sales reps.

We do already have sales reps that are doing exactly what I just mentioned, as well as right now in the beginning, we'll be transacting the entire truck sale, but then looking close -- looking to close -- quickly move over to selling the powertrain as opposed to the entire vehicle.

Awesome. All right. Thank you.

There are no further questions at this time. I will now turn the call over to Thomas for closing remarks.

Thank you everyone for joining today's call. And also appreciate everyone who had attended in-person or virtually during Investor Day. For those of you who haven't, strongly encourage you to go to our YouTube channel and watch that presentation. It's a couple hours long but it gives you a great amount of detail both on the Hypertruck powertrain solution as well as the KARNO. So thank you for joining today's call.