[Technical Difficulty] conference call. As a reminder, today’s call is being recorded. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. At this time for opening remarks and introduction, I would like turn the call over to Darla Rivera, Investor Relations Manager of HYZON..

Good morning, and welcome to HYZON’s third quarter 2021 earnings call. I’m Darla Rivera, Senior Manager of Investor Relations. On today’s call are Craig Knight, our Chief Executive Officer; Parker Meeks, Chief Strategy Officer; and Mark Gordon, our chief financial officer; and Mark Gordon, our Chief Financial Officer.

HYZON issued our results today in a press release that can be found on our website hyzonmotors.com in the investors section. As a reminder, our comments within this call may contain Forward-Looking Statements, which may include expectations and assumptions regarding the Company’s future operations and financial performance.

Including the impact of COVID-19 pandemic, and are subject to various risks and uncertainties. Please refer to our forward looking statement posted on our website under the investor section. For a more complete discussion of the risks and uncertainties that could cause actual results to differ materially from any forward-looking statements.

Please refer to our filings with the SEC, including the press release issued this morning, which was furnished on form 8-K with the SEC. Except as required by law, we assume no responsibility for updating forward-looking statements.

During this call, we also refer to certain non-GAAP financial measures, including EBITDA and adjusted EBITDA, more detailed information about these measures and a reconciliation to the nearest U.S.

GAAP measures is contained in the press release issued this morning, which is available in the Investor section of our website and was furnish on Form 8-K with the SEC. And with that, I’m pleased to turn the call over to Craig Knight, Chief Executive Officer of Hyzon..

Thank you, Darla. And thanks to everyone for joining us this morning. Just a quick sound check Darla..

You are good..

Hyzon’s third quarter was a very successful one from both an operational and financial perspective. During the quarter, Hyzon executed to plan, furthered the strategy we have been communicating and continue to build out our high caliber team.

We achieved several milestones in terms of equal deployment, revenue, receiving additional orders, significant advances in our hydrogen infrastructure partnerships and ongoing investment in extending our technology advantage.

Hyzon has made solid progress, even in the face of well-documented supply chain challenges that have deeply affected the manufacturing industry globally. Today, we are again reaffirming our guidance of expecting to ship 85 vehicles by the end of 2021.

We continue to expect to meet this target due to the strength of the global footprint of Hyzon’s business with facilities and operations in Asia, North America and Europe. A feature which has shown enormous benefits during the current dislocations and which we expect will underpin our competitive advantage well into the future.

Hyzon belief the progress we have made within a few short months of becoming a public company, it is testament to our technology, our hardworking operations and technical personnel, and an experienced management team that is working hard to protect shareholder interests.

Hyzon is a purpose driven company, determined to play an important role in accelerating the energy transition.

As a result of that global footprint and our deep historical relationships within Asia, when global supply chain challenges worsened especially in the last few months, we were able to make a conscious decision to shift the mix of delivery locations from predominantly European to predominantly Asian customers, in China, specifically.

We did that because we could. Hyzon’s near-term focus is getting our vehicles on the road and into customer’s hands and wherever we can do that, letting customers see for themselves the advantages of fuel solar electric vehicles that are available today, we will do it. And we have done exactly that.

During the third quarter, Hyzon delivered to vehicles, to customers in Europe, one to the Municipality of Groningen, one to the Municipality of Rotterdam, both in the Netherlands. In earlier communications, Hyzon had flagged several government agencies in Europe as early adopters in validating fuel cell trucks for their needs.

And we highlighted that the commercial sector was following closely behind. These first two deliveries are not trials they were deliveries of vehicles to be used by these customers in real-world everyday applications. This resulted in Hyzon’s first legal revenues, which total $1 million in the third quarter.

In our previous earnings call, we noted our expectation was to have first vehicle deliveries and revenue recorded in the third quarter. And that is exactly what we accomplished. We are proud to reach this milestone, but these sales are obviously just the beginning.

The seed sales that many of you have heard me talk about for some time, we are currently engaged in discussions to expand our relationships with many repeat customers who have previously placed orders, including some who have not yet received their first deliveries.

With one example of the recently announced agreement with a subsidiary of Sha Steel Group, the world’s largest private steel company for a 60-day trial at Sha Steel Group’s operating base in China.

For those new to the HYZON story, we have always articulated our view that the market for our use cases would develop through a series of seed or pilot sales, then batch orders, then fleet conversions and we are seeing the market progress just as we have articulated and believed it would.

Importantly, given the pivot we were able to make in our near-term focus from Europe to Asia, we haven’t had a slowdown in the pace of our orders. As we announced this morning, HYZON has received the first two purchase orders from Shanghai Hydrogen HongYun Automotive in China for a total of 62 trucks.

The end user of these trucks is a large industrial conglomerate. Along with the milestones in Europe and Asia, we also continue our push into the North American market, where the build out of our facilities in Rochester, New York and Bolingbrook, Illinois are anticipated to be online by mid 2022. While the commencement of U.S.

operations is slightly delayed due to availability of manufacturing equipment, the HYZON Motor’s is designed to ensure that we limit the damage.

As we continue to source fuel cell systems from the parent company in the interim, while we obviously benefit from the parent Company’s installed base of fuel cell manufacturing in these early stages, we are eager to get these two additional U.S. manufacturing facilities up in running to complement our existing R&D facility in Detroit.

The North American market has seen enthusiasm for hydrogen powered commercial transport and grow quickly, even since the beginning of the year and HYZON plans to be among the first to deliver hydrogen fuel cell electric trucks to customers in the U.S., if the fleet interest shown during the ride and drive event of our two HYZON Class-8 Fuel Cell Electric Trucks at the September FCET8 clean fleet expo in Long Beach, California is anything to go by.

We have plenty to look forward to it. A soon to be signed U.S. $1.2 trillion infrastructure bill, supporting the energy transition includes $8 billion for hydrogen hubs, which closely aligns with the hydrogen supply strategy already being pursued by HYZON to support back to base fleet operations.

We are actively shaping HYZON’s participation in submissions under the hydrogen hub program amongst other grant activities. Along with the entire leadership team at HYZON, I’m incredibly proud of what we have been able to accomplish since becoming a public company in the second half of July, 2021.

We believe that commercial and operational progress has been consistent with the plans we outlined and we continue to do everything we can to maintain our leading position, including the expansion of our portfolio of intellectual property and continued robust spend on R&D.

You can expect us to hear us speak of the increase in HYZON content within our fuel cell electric vehicles. Over time, we expect this Hyzon content to account for the majority of the specialized parts and components in the vehicle. Expected to account for around 70% of the vehicles cost of production.

This ensures the opportunity to consistently earn robust margins on sales. To summarize our priorities, Hyzon has sharpened our focus into three value pools; vehicles, fuel, and service.

I have spoken a lot about the success of our vehicle operations and commercial efforts, and now to discuss our strategy around fueling and hydrogen infrastructure, I would like to turn the call over to our Chief Strategy Officer Parker Meeks..

Thanks, Craig. And thanks again to everyone on the call. As Craig just laid out, Hyzon’s business has made significant strides in putting vehicles on the road.

At the same time, Hyzon has been working to expand supply side of the equation, supporting the build-out of hydrogen production and dispensing infrastructure to ensure commercial transport is able to continue to decarbonize at scale and at pace through adoption of fuel cell electric vehicles.

We often hear from investors looking to us for guidance to frame the question of hydrogen supply and infrastructure build out necessary to support the downstream adoption of fuel cell electric trucks. And we thought we would spent some time with you this morning to talk you through a bit more detail on our growing conviction on this topic.

To conclusion is that we are more confident than ever before. Not only is the required infrastructure build out more modest than many might assume to support our growth targets that the wave of build-out in our four key geographies, North America, Asia, Australia, and Europe as well underway.

The transition to zero emission commercial transport will require many different partners working together to create a sustainable ecosystem of feedstocks, hydrogen production and dispensing facilities and financing structures that reinforce each other and provide a seamless and efficient user experience as possible.

Hyzon is committed to being a large part of meeting these challenges along with our partners. Recently, Hyzon has done this through a series of agreements with both innovative early stage, as well as large established global companies. In particular, Hyzon has made significant strides in our partnership with Raven SR.

Earlier this year, Raven SR and now for strategic investment from Chevron, ITOCHU and Hyzon.

Raven’s technology is capable of converting municipal solid waste or many forms of renewable methane into emissions free hydrant supply institute or supply a decentralized hubs, which are deployed as depots supporting fleets of trucks complimenting our back to base model.

The first of these waste-to-hydrogen hubs is slated to come online in the San Francisco Bay area and the second of 2022, and the second waste-to-hydrogen hub is set to be operational in sort of just 12-months thereafter.

Additionally, the first Raven Blue, Renewable Natural Gas or RNG to hydrogen hub is inciting now expected to also come online in 2022. These Raven Blue hubs and waste-to-hydrogen hubs can be brought to market in between six and 12-months when citing and permitting are complete. And it can produce five pounds of hydrogen per day or more.

As we will discuss in a moment, just one single hub at 500 hydrogen per day took you forward approximately 75 to 100 hydrogen fuel cell electric class A trucks, assuming average utilization. We were very excited about the progress we have made with Raven SR and plan to expand well beyond initial three hubs in the coming years.

Hyzon announced earlier this week our partnership with TC Energy, formerly TransCanada. To build operate and own hydrogen production facilities across North America, we are extremely excited to be working with a company who is deep infrastructure at feedstock and technical expertise is expected to lend high value to the scale-up.

Together, we have ambitious goals for this new collaboration, targeting delivery of hydrogen fuel to commercial vehicles as soon as 2022, with production at each hub of up to 20 tons of hydrogen per day. In connection with our merger, we articulated projections of just over 17,000 trucks sold in 2025.

We think it is useful to frame what is required on the supply side to support those vehicles sales and the opportunity that presents. In fact of the 17,000 vehicles, roughly 9,800 of those forecasted vehicles in the heavy duty, medium duty and bus categories, which required more hydrogen fuels and Class-3 trucks and vans.

Based on average use cases, the 17,000 HYZON trucks and buses would require just 650 tons of hydrogen per day to operate.

Now, obviously, the consumption needs will differ based on usage, long haul versus heavy duty or vehicle type Class-8 versus Class-3, but that roughly 35 kilograms per day on average per truck across the portfolio, it is a fairly widely quarter consumption metric.

And we also have actual data from fuel cell EVs on the road today to give us real time information. So what does one need to believe to see supply of 650 tons of hydrogen per day in Asia, Europe, Australia and North America, it would be able to support 17,000 vehicles. To be honest, not very much.

Set aside for a moment, our stated strategy of HYZON zero carbon through our partnerships with TC Energy, Raven and many others we expect to announce in the coming quarters, which we expect to all play an instrumental role in providing hydrogen to our customers. Instead, let’s just look at externally to the third party hydrogen supply marketplace.

The market is telling us that the buildup of hydrogen supply is happening now. It is more than sufficient to meet our volume case in 2025.

Just a representative sampling of supply though supply build out underway today include plug power’s publicly stated in finance plans for its networks to supply 500 tons of green hydrogen by 2025, shows construction now underway the 10 megawatt - electrolyzer to produce a remarkable 1300 tons pre hydrogen in Germany.

Air product hydrogen plant construction currently underway in China, plan $5 billion green hydrogen plant in Saudi Arabia and plan $4.5 billion blue hydrogen context and Louisiana, and Mitsubishi’s plans to develop nearly a thousand tons per day of hydrogen in North Dakota. The conclusion is straightforward. From the growth coast, the U.S.

Heartland from the provinces of Canada to continental Europe, from Australia to Asia, the hydrogen industry has moved beyond signaling interests or intention, and is now in the mobilization and scale-up phase.

Many of the most sophisticated well capitalized and global industrial companies with very public plans are being driven by startups and modern technology platforms to deliver these projects. This estimates that China is already the world’s largest hydrogen producer with 22 million tons already produced in 2019. Here in the U.S.

Congress just passed and President Biden is expected to sign that bipartisan infrastructure bill the next few days.

And as Craig mentioned, $8 billion was dedicated to clean hydrogen hubs, additional $5 billion to zero in low emissions buttons and $73 billion to rebuilding electric grid with renewable energy and essential feed stocks for green hydrogen.

If pass the build back better plan within just a $500 billion in clean energy tax credits would represent the largest ever federal investment in clean energy with specific incentives for green hydrogen, as well as the clean power feed stocks that we believe we even further galvanized the acceleration and cost down of green hydrogen, even more rapidly than we are already seeing.

In summary, we are seeing the precise intersection of aggressive top-down policy architecture formulations and multiple OECD economies, simultaneous with bottoms up industrial investment decisions.

The results introductory has not been clear since the day we announced our merger and intention to be in the public markets that the hydrogen supply infrastructure build out is underway.

Yet, as we deploy our trucks, buses and coasters globally, we won’t play a waiting game or allow other market entrance to provide solutions for our customers, we can do it ourselves on the back of our proprietary relationships and technology.

We intend to be an active part in developing the hydrogen supply infrastructure in all the markets where our vehicles operate.

Many of the large products I just mentioned are sniggered for 2025 or later online dates and we have the opportunity to meet significant vehicle demand much sooner with zero to negative carbon intensity hydrogen available in 2022 a diesel payer need to support hydrogen fuel cell EV fleets.

We could not be more pleased with where we are headed in helping enable the broad conversion of commercial vehicles to clean hydrogen fuel and the broadening our partnerships with like-minded companies to accelerate the transition even further. Now, I would like the hand the call over to Hyzon’s CFO, Mark Gordon..

Thanks, Parker. And thanks again to everyone on the call. Hyzon finished third quarter with 498 million in cash from the balance sheet, as the company continues to manage its expense prudently with an eye to making every dollar count. For the third quarter, revenues were $1 million.

Total operating expenses were $50.6 million and net income was $32.4 million. Operating expenses for the third quarter were comprised mainly of $4.8 million of R&D costs and $44.8 million of SG&A costs.

Within SG&A, chargers totaling $34.1 million, which were essentially one time in nature relating to foundational equity grants for senior executives and expense related to the retirement of our former CTO and to deal expenses.

Hyzon also reported a positive EBITDA of $31.7 million due to changes in the fair value of earn-out and private placement warrant liabilities.

Adjusted EBITDA for the third quarter was negative $15.2 million after backing out the one-time items related to the fair value of the earn-out and private placement warrant liabilities and other one-time charges. Hyzon remains on track to meet our forecasted full year 2021 EBITDA and to have more cash on the balance sheet than our original plan.

We reiterate our plan to ship 85 vehicles by year end. Looking over the medium to longer-term, we have become more optimistic about our margin outlook. This is a direct consequence of the energy crisis, which has begun to unfold globally.

As the price of oil increases the total cost of ownership of hydrogen vehicles becomes more competitive and the selling price of our vehicles needed to drive widespread adoption will be higher. Hyzon is the technology company, which also command higher margins.

We already have a leading fuel cell and we are innovating with e-axles, batteries and other components of the vehicle powertrain. The energy crisis has actually shown up in the grid before it has shown up in oil.

A lack of investment in natural gas and coal driven by climate change concerns as caused record commodity prices for natural gas outside of North America, and for coal globally. The high commodity prices are leading to higher electricity prices and this trend is only set to become worse.

Blackouts are becoming more common from China to Lebanon to California. Many European countries are now making electricity price records with electricity prices in the U.S. at decade highs. A widespread rollout of battery electric vehicles will only exacerbate the situation with the grid and cause a regressive tax on the consumer.

The energy transition needs a solution, which is not grid dependent. HYZON with the help of our partners will produce hydrogen off grid. Widespread local hydrogen production has the potential to create energy security while avoiding a regressive tax. Fuel cells are not fuel cells. They are the answer to the current crisis.

A widespread adoption of battery electric will add to the problem. And with that, I would like to turn to call back to Craig for closing remarks..

Thank you, Mark. As you have all heard, HYZON continues to make strides across our three value pulls of vehicles, fuel and service. We have delivered trucks in Europe that are operating today. We have received orders that we are on target to fulfill by the end of the year in Asia and Europe.

We are building out hydrogen supply infrastructure with our partners and we are making progress on U.S. facility capabilities. In short, we are executing. We are executing to the plan we laid out with the ability to pivot where needed. We aren’t here to make excuses for challenges.

We are here to be careful and thoughtful stewards of our shareholders money and to become the clear category leader in zero emission commercial vehicles. In addition to our financial and operational progress, I would like to highlight two other important events of the last quarter.

The hiring of Patrick Griffin, President of Vehicle Operations, as well as Jiajia Wu as Chief Accounting Officer, both bring deep experience in their respective fields and further strengthen the team at HYZON, working to achieve our corporate vision of zero emissions with zero compromise.

Thank you all again for your time and attention and with that, I’m excited to share a video we captured while engraining in about HYZON fuel cell electric truck, rising diesel truck, before we open up the call for questions..

[Operator Instructions] Our first question will come from Rob Wertheimer from Melius Research. You may begin..

Hi thanks everybody. And you have got a lot going on. So congratulations on that. Craig, I don’t know how much you are willing to talk about this, but you mentioned in the recent update that you are still working with lot of the customers that have been trialing your product or looking at it or whatever across last several months.

So I wonder do you track number of potential entities that you are working with a number of potential orders. And maybe you could just expand to the extent you are willing on the process there on the not backlog, but on the book of business that you are working on the funnel of sales and how that is developing? Thank you..

Sure Rob, thanks for the question. Obviously, the Hyzon Motors selling processes is a typical kind of prospecting sales funnel if you like with the added complexity that we are promoting a new technology that most of our customers haven’t really had any experience with any prior experience with.

So definitely, there is tend to be some drawn out processes of becoming familiar with the technology and accepting it.

And that is why we sometimes talk about those kinds of three phases of how the business will develop from these seed or kind of sales of ones and twos through these batch sales and fives and tens before we get to a real serious kind of point scale adoption. What we are seeing though is a kind of compression of the process and the timing involved.

So while the earliest sales to customers to evaluate this technology could take 12-months to 18-months to go from initial confirmation of a seed sale through to getting some commitments for decent volumes. We have seen that compress. So I don’t want to speculate exactly how much that compresses, but there is two real drivers there.

One is the increasing urgency with which corporations and governments are moving to address climate change. As we have seen through announcements in the wake of a lot of the cop meetings in the last two weeks. Governments and corporations are really becoming more urgent about all this.

And then the second factor is the increasing acceptance of hydrogen as a part of a solution. So it is no longer really a thing that we sit in front of customers talking about why hydrogen. So typically today we are sitting in front of customers, who have already evaluated their options and already considered how to decarbonize their activities.

And we are typically talking to fleet Operators with trucks that have payload imperative, very high daily uptimes, and back to base operating characteristics. And they have already decided they want hydrogen. So all that accelerates the rate at which this happens.

Now, of course, yes, we do monitor our pipeline and try and kind of maximize our chance of success. But I wouldn’t say it is an overly mature process yet, because there is still a degree of education and degree of a kind of journey we go on with the customers.

But I just do want to comment that the process is compressing because of those two tailwinds. And I think that that is a really important implication for our business and the rate at which we can scale up in the next two to three years..

That is an interesting response. Thank you.

And there is level activity is as high as it has been in recent months or higher?.

Yes. Higher, continual interest the industry events we participate in we were at a claim fleet event in the Netherlands few weeks back and great interest there. We had a truck in the booth, we were at the act clean fleet expo that some of the analysts can do to see us.

And we had to ride and drive them, I mentioned in the call, huge interest there from fleet operators and it is just increasing all the time. And as I said, the acceptance of hydrogen as a part of a solution is growing and that is the most important thing..

Perfect. And then just one small one, and I will get back in line.

You mentioned sort of the nimbleness of which you are you have shifted and taken advantage of some of the rising demand, I suppose in China, did anything slip out of out of backlog or slipped? I guess some of the North American nor or European, must have slipped a little bit into 2022, but is there anything that sort of fell out and I will stop there? Thank you.

Backlog might be the wrong word..

The timing is definitely a factor. We are not seeing customers lose faith, but we are seeing some deliveries delayed for a few different reasons. We have had some customer scenarios where the hydrogen infrastructure rollout is a little delayed. So therefore there is not really much point delivering vehicles without the hydrogen being available.

That is one factor. And then the other factor of course, is access to vehicle platforms and electronic equipment and so on to assemble the finished products, the finished vehicles. So some delays from the customer side, some delays from outside, of course so some of the deliveries we expect to make in 2021, we will now make in 2022.

However, with the pivot you mentioned towards a much more liquid and fast moving market in China, we are able to continue to deliver and gain that real world on-road experience and valuable customer interaction that we crave, that is why we will continue taking orders and making deliveries, at a pace consistent with our business plan..

And just to be clear, nothing has fallen out of backlog. There are some deliveries that have slipped, the backlog continues to grow strongly and we will update the market on that in the fourth quarter or on the fourth quarter call..

Thank you..

Thank you. Our next question comes from a line of Jerry Revich from Goldman Sachs. You may begin..

Yes. Hi, good morning everyone. I apologize. My video is not on, but I think I know who won that race, Craig.

Can talk about the 83 units that you folks are planning to ship in the fourth quarter, obviously, we don’t expect folks who provide month-by-month updates, but considering we are halfway through the quarter, just to help us build comfort with what is left to deliver out of those 82 units.

What has the progress been quarter to date because obviously that is a pretty significant step up..

So Jerry, we are going to have an update on that some point in the next few weeks with videos and photographs is for people to see. So for now, we will just tell you that we are on track to make these forecasts..

And obviously that implies Jerry, that there are quite a few vehicles that are in field and approaching being finished and tested. And Mark’s point in the next couple of weeks, we will be able to show some photos and videos of deliveries that convey that very clearly..

And can you folks talk about your sequential build plan it beyond the fourth quarter, should we think about production coming down seasonally in the first quarter in China. Just flush that out for us in terms of what the cadence looks like over the next couple of quarters, given the a lumpiness in deliveries in trying to in particular..

We still expect 600 to 700 vehicles to be delivered next year and we expect it to grow through the year on a quarterly basis..

So Mark, just to make sure we are on the same page, you are anticipating production to be up sequentially first quarter of 2022 versus fourth quarter of 2021..

Correct..

Okay and in terms of the types of orders that you folks are seeing and interest rate you described over the course of the call, can you talk about what are the specifications that you are seeing increasing interest.

It sounds like it is at the heavy end of your product range based on what you described, but maybe, you can just give us some more color on what products you are seeing in terms of orders that are coming in?.

Yes. I can take that, Jerry. Definitely the heavier trucks have an automatically - kind of enthusiastic response from the customers that have started to try this technology and the potential customers. There is really isn’t a broad acceptance that for heavy duty trucks with that I used driven many hours a day.

People just don’t see any other option besides hydrogen. So we kind of naturally have a very receptive audience for me, speak to customers about our heavy truck offerings.

We will say though, that it is not only heavy trucks that have a lot of promise here, and we do expect to be supplying quite a few of the kind of medium duty rigid trucks as well in the next couple of years.

And we have also got in our plan, Class-3, a light trucks within the next couple of years becoming a significant feature and becoming a volume driver over time. And there is a very good reason for that, Jerry.

As we penetrate the really low-hanging fruit that kind of sweet spot markets of the heavy trucks, high daily use case back to base, as we penetrate these markets, what we are doing is we are justifying and even sponsoring the investment in the hydrogen infrastructure, which comes with very compelling economics when you have substantial demand right next door.

So with those local hydrogen humps, that Parker was speaking of that before close to the strong demand centers for heavy trucks, driving a whole new set of economics around the hub.

And then that will immediately translate to adjacency vehicle application and adjacency for hubs, all of a sudden becoming very compelling on hydrogen, because the driven mile on hydrogen will be cheaper than driven mile on either diesel or electricity..

I appreciate the discussion. Thanks..

Thank you..

Our next question comes from the line of Will Peterson from J.P. Morgan. You may begin..

Yes, hi. Good morning thanks for taking the question. First just housekeeping. When you said the deliveries of 83, that also your expected revenue recognition on those are some of these for some sort of trials.

And I guess more importantly, when you look at your 2022 plans, it seems like you are mitigating the supply constraints 30 well, are you guys executing take or pay much earlier on than other people like what gives you the confidence in your vehicle delivery, expectations for next year? And are there any areas of supply that you still need to overcome as it relates to your bill trend for next year?.

You want me to take that Craig?.

Yes. So revenues we absolutely expect to recognize on those trucks, the 85 trucks, we anticipate being delivered by year end. What I will point out though is the reason we are able to do this as Craig mentioned in his opening remarks is that, the pivot towards China.

The supply chain constraints in China are obviously a lot less, because everything is made there. So it is easier for us to execute, there. But as we have said in the past, the ASP is the vehicles in China are substantially below what they are in Europe.

So our backlog continues to grow, and it is mostly European vehicles which have got sort of caught in the pipe, like the pig and the python or whatever analogy you want to use, but we are confident that we can see large deliveries, and it is really thankful, thanks to us being a global company..

And let me come back Bill to the question on the expectations and whether or not there is any differentiation there versus others. I mean, partly if you look at the physical numbers of forecasts you might want to look at comparable groups of recently day backs new energy vehicle sector players.

If you look at forecast numbers, when we rank, we had to look at these kind of peer group of 16 companies. We were the fourth most conservative on margin forecasts and second, most conservative in terms of number of vehicles expecting to ship here in the next few years.

So probably the volumes themselves are a little smaller and so access to the parts and components may not be as much of a challenge with this smaller physical numbers.

The second thing on that is that part of what happens in the first half of 2022 is that we finally have in our hands, a lot of the inventory that we ordered back around the middle of the year, which we were anticipating would have enabled us to deploy dozens of vehicles in Europe, for example.

So these vehicles are all of a sudden delivered in the first half of next year. So we actually do have a backlog of inventory that was ordered earlier that didn’t get here in time for assembly and deployment facility as we would have liked but it is still coming in.

The other thing we did is we ordered substantial inventories for 2022 production some months back with the worsening lead times, particularly in Europe we pulled the trigger on a lot of orders.

Well ahead of when you would normally order that actually will have a detrimental effect on some cash position numbers before the end of this year, but it’ll have a beneficial effect on our ability to assemble vehicles and deliver them and recognize the revenue in 2022..

Yes. Thanks for that color. The way I interpreted some of the your prepared remarks, when you say focus on vehicles and hydrogen and service I sense, that means you are not looking to sell to fuel cell. And I think you shift the fuel cell to an aviation customer, if I’m not mistaken or we are going to.

So just want to understand is this a pivot? And when you say you are more focused on hydrogen, is that to say - and I think we would like to go through that some of the economics of when you look at the analysis of Raven and TC.

Can you help us understand, are you going to see more upside in the fueling over the coming years? And what are your contributions in terms of capital expenditures or OpEx or whatever for this hydrogen infrastructure and maybe no?.

So two parts to that question, I will just make a brief comment on the first part of the question around focus on fuel cells or otherwise. The supply of fuel cells for off-road applications, for example, mining ships, trains, aircraft whatever.

It hasn’t been a core focus, but it is always been part of our business model and our capability because we own that core technology. So we have always acknowledged that we will sell fuel cells into other applications besides the on road trucks.

But in terms of where we invest our money and resources and build our teams and execution capabilities, that is really around the vehicle applications that we have continued to focus on and highlight.

So it is not like we want sell fuel sales, but it definitely is not where we are investing in the facilities and the teams that we have been speaking about as we speak about building out capabilities. So that is one thing.

Because the ability to sell fuel sales goes back more to the core technology itself, and of course, we continue to invest in that core technology, but we don’t invest heavily in the applications beyond our tracking and heavy vehicle applications.

So, I just assuming that is reasonably for you, I will hand over to Parker for some comment on the hydrogen hub strategy partnering model and what we expect to see for the Hyzon business in terms of the investments we are likely to make and the value that those investments are likely to bring to the company..

Thanks so much Craig. Thanks for the question. So, as we elaborated in the commentary, we do have our first hub coming online in second half of 2022 and two more hubs lined up behind that.

In terms of the model Bill, we are building partnerships across the full ecosystem from feed stocks, through production, through short haul distribution from our decentralized hubs to very near dispensing points, if not onsite and dispensing.

You know the model for Hyzon as we mentioned before, is to invest in the production step to lock in that very attractive cost structure.

And examples are announced a partnership with Raven, where we have the right to invest a significant amount of equity in each hub and we have right to a 100 of the first 200 waste-to-hydrogen hubs, and 150 of the renewable methane hubs.

In terms of the opportunity, the economics, what I can tell you is, as we are fine tuning designing in final stages of the hub, that is coming online first in the San Francisco Bay area, when you have a very low to zero to negative carbon intensity hydrogen production in a state like California, where a low carbon fuel subsidy has in place, and Oregon has one as well, Washington’s right behind it.

Other states like New York are progressing well.

When your zero carbon intensity, where are the California credits sitting today, I know conservatively that can easily be a $4 per kilogram subsidy as you go significantly negative on carbon intensity, which you achieve by sources like biomass, where you are mitigating methane release and other renewable gases.

Negative carbon intensity can actually - and some of these processes go very negative and that subsidy grows even further.

So the subsidy combined with a very economic CapEx and efficiency in the process like Raven and many of our other production partners have enabled us to have very attractive economics, while still providing a net cost of hydrogen dispense the vehicles that were very comfortable will be at or below diesel parody as soon as that first job comes online.

And the opportunity really in the decentralized model is speed to market, right. So when you think about the differentiation between our strategy and the scale of housing, we are playing to build close to fleets at some of the large scale announcements that I mentioned before.

The capital costs for a five ton per day hydrogen production hub is likely a 10th or less of some of these massive projects that you are saying put out there. Many of whom can climb into the hundreds of millions of dollars of capital.

Anyone who has studied capital projects knows the big significant risks that comes with a 200 million, 500 million billion dollar capital project.

Not many of those come in on time and on schedule, whereas we can build on a scale of projects, right close to demand in lockstep with fleets, in that six to 12-month timeframe post permitting, inciting pre or construction time that I mentioned before. So this was our back to based model fits with our speed to market model.

And we are required side to being the first hub online. So you can have a 2022 to show we will produce low to negative carbon intensity hydrogen diesel truck..

So I will just add to it. Parker said, we have $150 million of CapEx in our five-year plan, which is slated for four hydrogen hubs. We have been in conversations with a number of different banks and the appetite to debt finance these hubs is extreme and the interest rates actually very low.

So that is the first couple of hubs, we plan to work out debt financing for them in off balance sheet, SPV type vehicle, and we are excited about the ability to make that happen as you are I’m sure aware a lot of people who want to invest in green infrastructure.

And then also I point out that in Parker’s remarks, he talked about Raven Blue that will be cited and come online this year. So that is actually another hub. We haven’t determined where it will go exactly and that is because there is a number of different sites that are sort of competing for it.

But what I would point out is that the CapEx for the Raven blues is the very, very low, and it can produce five tons of hydrogen per day, each Raven blue, and we have the right to 150 of those hubs. So, that is effectively at another hub that in the last quarter we are not talking about, which is new, and we anticipate coming online next year..

Okay. Thanks for that. It kind of somewhat dove tails in - these are U.S. based hydrogen. So the first one being in California, I’m really trying to understand, it seems like you have some supply constraints maybe shipping some of your trucks from let’s say Europe or U.S. into 2022 and you are making up for China. That is reasonable.

But I guess my question is the supplies constraints that are maybe holding back, is it truly supply constraints or you have seeing any slowdowns from Europe or U.S. based off of maybe concerns around these short reports. I guess, really what I’m getting at I think you were supposed to have some sort of trial especially in the U.S.

for one of these port customers, is that still on track or is that going to ship in the next year? And just trying to understand some of the ramifications of some of the sort of supply and demand statements?.

The first trial will still start this quarter in California. And of course nothing has happened as fast as we would like in 2021. It is definitely been quite a year in terms of supply chains and everybody knows very well.

So yes, some things have slipped, as I said earlier that relates to some slippage around their own capacity and a bypass and materials, but it also, sometimes you license the capacity of the infrastructure to be built, because they also have passive materials lead time issues.

I don’t believe that there is really any meaningful slowdown in the end user interest and commitment and buy in to what we are doing. It is just a mixture of those factors around some delays on some supply chain factors and all the rest of it. And to that as what Mark said earlier, no parts of that backlog have evaporated.

The timeframe in which we deliver against some of the backlog has changed a little, but we don’t see any reduction in interest or commitment from customers. It is just continuing to increase over time. We are definitely very inspired by the current round of conversations we are having with the customers in North America, in Europe and in AsiaPac..

You mentioned specifically the short report basically wasted three weeks a management’s time, but it has not changed our reception in the marketplace. And we have a whole host of agreements and partnerships and sales that we anticipate announced over the coming weeks and months..

That is great. thank you guys. I will jump back..

Our next question comes from the line of Dan Ives from Wedbush. You may begin..

Thanks. So, can you just talk about - Craig, with your conversations in the group marker ion China, how key is it to have an actual truck on the road? Obviously there two patterns that talk about it in the PowerPoint. Could you just talk about that in terms like in your customers conversations how big that is with driving product line demand..

Why don’t we turn the question around and ask yourself, and some of the other folks on the line, how their perception of this stuff changes when they get in and drive a fuel cell truck?.

I think that - maybe hard to..

But you cannot replace the personal experience of driving in these trucks, physically seeing them work, et cetera.

And that is one of the reasons why we continually host customers throughout our facility in the Netherlands and we had over 20 folks from the UK visiting the Netherlands earlier this week for some drives and also some walking around to see what goes into a fuel cell electric truck, for example.

So we have had a lot of major fleet operators and some hydrogen infrastructure partners come visit us from the UK. As I said, just this week and the reaction is it is very consistent. And you saw for yourself, Dan, the reaction of professional drivers in these vehicles too.

You can put basically any professional driver that is lived with diesel trucks into one of these trucks and without any kind of coaching or any kind of training. They just get out and they say I mean it is quiet, I mean it is quiet, it doesn’t vibrate, it doesn’t smell.

It is got better acceleration that feels more comfortable, more powerful and therefore more safe in merging in traffic and all the rest of it. There is nothing like getting your hands on a vehicle frankly.

So that is one of the reasons why we are so determined to be the first mover in many different markets, because what it will do is it will dramatically facilitate the uptake. So that is why it is really important.

We get these trials started in different corners of the world and those seed sales remain talking about and then we can move on to substituting diesel trucks and fleets at volume.

And that is really the goal here, really the goal is to accelerate the rate at which diesel trucks can be replaced with zero emission trucks but zero emission trucks that don’t come with compromisers..

As a follow-up, I mean now that you are on track to deliver that you need 83 to 85, by the end of the year, do you see that and from your conversations, it is just going to need where you go back to perspective customers and be like, we delivered them, do you want to have a conversation - does it feel like that is going to be another cascading positive end?.

Well Dan, the markets are quite localized. So for example, the customers in Europe, they want to come and see us putting trucks together in Europe.

The customers in China learn from the other customers in China, what is going on there and customers in Australia are starting to get interested because now that we have been driving a hydrogen truck around down there and demonstrating a for some people, they are starting to relate more to it and demonstrating trucks and the act of clean fleet expo in the early September was also a great experience in North America for people to see and feel the trust.

We find that is quite localized. We don’t see a lot of translation when someone in Europe working with the truck and saying how great it is. We don’t see that translating easily across the Atlantic.

People want to see stuff in their own backyard, and they want to relate to it, and it helps them believe in it when it is operating down the road or in the next state..

Great, thanks..

Our next question comes from line of Mike Shlisky from D.A. Davidson. Your line is open..

Yes. Hey guys. Good morning. I wanted to ask quickly on the TC Energy announcement, one of your competitors also has to deal with TC Energy to make hydrogen hubs on their own.

And if I read them correctly, you have smaller hubs plan then there might because you want to get too close to your fleet customers closer, and maybe keep the transportation costs to a minimum.

But, but I’m just curious how is this going to work are you guys going to have any shared infrastructure with your competitors that are also working with TC or anything we should be thinking about they own the off-take to the hydrogen hub that they are going to build, and you will own all the off take of yours.

Are there plans to maybe sell that to the grid? Just some of the things that might be different between when your deal is and where there deal is?.

Craig can you take that one?.

I’m going to hand over to Parker in one second, but by way of background, obviously hydrogen is not yet a common fuel, but it increasingly will be a common fuel.

And we feel inevitably in need distribution and local supply and you need a lot of relationships and interconnections and swap deals, and all that sort of stuff to be able to supply we everywhere it is needed.

So I will just say that while hydrogen doesn’t travel easily, there is absolutely no reason why models around leveraging non-exclusive supply of fuel where it makes sense, if there is no reason why that doesn’t work just as well in hydrogen as it does in anything else, that is a fuel.

But I want to hand over to Parker, because there are some very specific rationale for the way that we go about our hydrogen infrastructure efforts and some differences with what some other proponents of hygiene infrastructure are doing..

Yes. Thanks Craig and thanks Mike for the question. So I will comments on TC with other parties, but I will say here is your question on our strategy versus other large-scale projects to make you see the difference between what you are referencing in the announcement, the scale, about hubs.

As I mentioned in my commentary, our view is clear on the lowest TCO, lowest carbon intensity approach to provide fuel to our fleet to this close to the fleet as possible.

And the issue is when you start moving hydrant around, even with the most efficient liquefiers today, you liquefy and ship it long distances, which when you are talking about a scale of hydrogen production at the scales from a very large hubs other than thinking about.

We see a liquefaction costs, a distribution costs to get it to the same pressurized end point, which is not yet to dispensing that we will have at our production site, easily can add $2 a kilogram, if not more, before you even get into the cost of actually producing and dispensing.

And given that diesel parity needs to be in our view, conservatively $4 a kilo delivered into the vehicle, if diesel stays where it is, which it may or may not. We find it very challenging to think about large scale projects and moving more fuels over a very, very long distance.

So we are very excited about the collaboration and the partnership with TC.

We think their backbone of feedstock supplies through their RNG interconnects and other assets, their appetite to drive into low to negative carbon hydrogen with us envision of how that model fits very nicely with the transportation market and the TCO needs to make use of case work.

Along with just the bill trends, I mentioned before a large part of my career has been in design and construction and any capital project that goes over a $100 million of CapEx on a single location, but can’t use our success and cost and schedule, and the risks of that project go up significantly.

Particularly when you are talking about projects that have production and then long large distribution was going to cause could include pipelines or other supply chain assets to manage.

So for lots of reasons, we see that the smaller scale modular decentralized model as absolutely the best answer for both for TCO and cost and also ability to leverage local feedstocks.

And the last thing I will say is, what is also exciting about that approach is it is amazing how many customers, we talked to that the conversation starts about trucks, and then we get into their operation and then realize they are actually producing tens of tons of waste per day.

And we can actually point to their waste and say, you know what that is? That is fuel. And we can build it right here for you. We can use your waste and your operation, which not only again, saves cost in terms of total delivered cost of the vehicle plus fuel also helps customers with therein and sustainability story.

So hope this answers the question Mike..

Mike just other point, just kind of listing. Clearly, increasing announcements by some of our partners who are also working with other groups around collaboration, when it was approved an announcement recently between Total and [Dimer] (Ph) on oxygen supply as well. Obviously, we have relationships with Total.

None of this is exclusive, because we are all trying to create a market here. We are trying to grow this - we want to fund build this momentum, I should say, towards this energy transitions tipping point, and it is only at scale that we will see that happen.

So as far as I’m concerned, every announcement I read about one of our direct competitors or one of the competitors of our hydrogen production partners or any of these guys doing more projects, throwing more capital at the same end goal, the happier I am. The more I know we are in the right place.

We are investing our energy on the right things, and that we will make these happen. We will be able to facilitate this energy transition if there are enough people pulling on the same rope in the same direction, but it takes a lot of people to make it happen. It is a very big change.

As I like to say to pick, we have got a hundred years of incumbency that we are trying to unwind in 15-years, this requires not one successful fuel cell vehicle company.

This requires a concerted effort by hundreds of successful companies with technologies, hundreds of successful companies with hydrogen infrastructure, hundreds of successful companies with fleets operating on zero emissions. I mean, it requires very, very big shift..

Got it. Thanks for that color. Can I also ask, I want to ask about the APV have got plans for the fourth quarter here.

Can you help us characterize what vehicles are in the build plan? Do you need to have an additional order from Shanghai HongYun to fill the fully three or are there other, you may tell us if you have two other vehicles that have been announced that are going to be delivered in the quarter, like a [Korea Link] (Ph), or other customers that are already announced.

Can you tell us where those folks are in the plan for the next year..

Yes there are some revenue recognition events that are going to happen with some of the partnerships we have announced.

If you kind of look back through some of our press releases you would have remembered probably some European retailer and European industrial customers and some other European customers that some of which would probably have liked to have their hands on trucks by the end of this year Mike. But it didn’t quite happen.

Things didn’t plan in some ways as we have spoken about, but some of those are definitely going to occur in fourth quarter, but some will move into next year. So really just there are more or orders expected in Asia as well..

But you asked do we need another order to make the sales forecast, and the answer to that is no, we do not need another order..

[Audio Disturbance].

We have the orders. We need to make the forecasts. There is no issue with that. It is now just a matter of execution..

Yes. Sorry, Mike. It is all about deliveries. Yes..

Got you. Perfect. I will pass it along guys, thank you..

Thank you Mike..

And our next question comes from line of Steven Fox from Fox Advisory. You may begin..

Hi, good morning. Two questions, if I could, first of all, just getting back to the infrastructure bill.

Craig, what do you think the rough timeline is for some of these funds to run inspire companies to maybe investigate one the hub side of it and also trucks, and two have quickly could turn into orders and then three, one would it sort of generate revenues for you guys what would be the, a reasonable timeline for that? And then as a follow-up, can you, you mentioned, you know, the goal of having specialized parts being 70% across the production.

Can you just give us a sense where you are at now and from now that 70%, what does that do the margins? Thanks..

Excellent question. So the first one if only I knew, how quickly we could make some of that stuff happen, but the good news is Steven in terms of major corporations and big fleet operators looking at the option to go to zero emissions to hydrogen.

Obviously, they have already been some very interesting conversations that now are accelerated or enabled by some of the infrastructure build initiatives. So we don’t need to start from square one, with those conversations there are already some very interesting conversations underway naturally.

So that is one thing it is really an accelerator of conversations that are already happening. How quickly does that materialize into big fancy orders and lots of delivery and lots of hydrogen hubs on the ground, checking out hydrogen, I mean that is a little harder to anticipate of course. But we would hope..

I was just going to say Craig that one thing we expect though, as soon as the first Raven waste-to-hydrogen hub is up and running. As soon as the first Raven blue was up and running, we expect to be able to raise large amounts of debt finance.

So, that will be sort of an inflection point and we think we will accelerate as soon quickly after those events happen. That will be like late next year..

And the important of note as well, Steven, on top of Mark’s comment about how quickly we can make some of that happen towards the end of 2022. Obviously, the Hyzon offering of the vehicle with the service kind of zero emission mobility as a service, if you like.

The ability to offer fleet operators, the flexibility and the kind of low risk option of by the vehicle, but they don’t necessarily need to pay for on day one, but they can subscribe to on a monthly basis for instance, combined with a long-term future locked in fuel price. This is very attractive to a lot of customers.

So I don’t know anybody who can tell you what the price of electricity will be in three to five years from now. But I can tell you what the price of your hydrogen will be three to five-years from now, as we sit down and model the project we will do for you, if you are a big fleet operator.

So this is something that I believe is very attractive for the fleet operators. And I do feel that as Mark said, as soon as we have got these first. Raven hubs running and we are able to just earn a lot of confidence in buy-in from the market when people physically see that happening.

Then I believe that we will get some rapid uptake from probably the first half of 2023..

I will just add to what you said, Craig, which was looking at it, the electricity price a couple of years out and the hydrogen price a couple of years out, what we think is most likely the hydrant price will be a lot lower and the electricity and oil price will be higher as the way it looks right now.

So our economics are improving and the economics for our competitors not hydrating competitors, but other vehicle competitors is getting worse..

And the second question related to the Hyzon content, if you like, so how much Hyzon content in a vehicle? So today, I think it is probably fair to say that we operate in a 35% to 40% of the kind of BOM cost of the vehicle range. It would typical, which is Hyzon content. We are looking at getting that up towards the 70% Mark.

And that essentially means that you are replacing a lot of those kind of specialized parts and components we have spoken about, and the commodity parts of the vehicle, like the chaises and doors and windows and wheels and brakes and so on. These are sourced from obviously from third parties.

It just happens to be that the commoditized parts of the vehicles are also those that usually require a lot of capital to set up manufacturing for those. So in fact, getting into the production and supply of the more specialized components within these fuel cell electric vehicles is not as burdensome on the capital front as people might think.

So we believe we can get to a higher content in the vehicle with very attractive capital efficiency.

And just like we are able to build out fuel cell manufacturing, which has a very large barrier to entry, technology-wise, we are able to build that out with a modest capital commitment and that is why we don’t need billions of dollars to build this business model and this company.

We are very happy with the working capital we have got on hand at the moment, and we believe that we can get up to this 70 odd percent Hyzon content over the course of the next two or three years.

And what that means for margins back to your question is that we believe that it is sustained better than average vehicle margin for a larger portion of the vehicles.

So obviously anything you are doing in the vehicle, that is got a large barrier to entry are as well, differentiated is going to enjoy a better margin than the more commoditized parts of the vehicle.

So if we are doing the majority of the vehicle, when our margins are higher than average for a whole vehicle, and the margins for the commodity parts are lower than the average for the whole vehicle, I think you can see that we are planning towards enjoying sustained margin substantially better than the overall vehicle margins in a non-differentiated vehicle space..

And I want to sort of highlight something on this margin point. If you look at our long-term forecast, we have a 15.4% EBITDA margin in 2025. I mean we think that is a relatively conservative forecast. If you look at the 16 other new energy vehicles stocks that went public, we have the fourth lowest margin forecast out there.

And we actually have a whole bunch of proprietary technology. So we think that the market is not recognizing how conservative our forecast is on a relative basis. When you have proprietary technology, as Craig has pointed out, you should have a higher margin and we do, but we modeled the forecast in a way to we have upsided there..

Thank you. That is very helpful..

I’m trying to own an outsize margin in an easy car business is very challenging. If you are buying batteries, buying electric motors in Europe, you are really just kind of a designer of the vehicle platform. That is pretty hard to earn an outside margin, unless you have a great degree of internal integration.

And you have seen from Tesla, it took them years and years and years to build up their competitive advantage that enables them to enjoy nice and differentiated margins, but you can get there, but look how well integrated they are everything from the batteries, through to almost every part of the vehicle.

It is difficult to get through outside margins unless you have got a very differentiated technology..

Makes sense to me. Thank you..

Thanks Steven..

Thank you. And I’m not showing any further questions in the queue. I would like to turn the call back over to speakers for any closing remarks..

Thank you very much. We appreciate your attention and we look forward to taking questions on a one-on-one basis over the coming weeks. We are always open and available to talk to people. Thank you..

Thank you very much, everybody. We appreciate your time..

This does conclude our conference call for today. Thank you for participating. You may now disconnect..