Hyzon Motors has hurdles to full health ahead, but the heavy-duty fuel cell startup has filed its overdue financial reports with the Nasdaq and begun settlement talks with the Securities and Exchange Commission over allegations about fictitious sales in China.
It’s quite a recovery since the company told the SEC 10 months ago that it wouldn’t report its second-quarter 2022 financials and that its reports for the first quarter and full-year 2021 were unreliable.
“From a Nasdaq perspective, we are current with our financial filings,” CEO Parker Meeks told FreightWaves in an interview. “It’s a major accomplishment.”
Yet with a stock price under $1 a share, the company still faces possible delisting from the Nasdaq. But that won’t happen until at least Nov. 6 because of an automatic 180-day stay. Hyzon could ask for an additional 180-day extension. Shares (Nasdaq: HYZN) closed Wednesday at 74 cents.
Hyzon could follow other startups with anemic stock prices and conduct a reverse split that would artificially prop up its price. Or the current bull market could see Hyzon shares rise above $1. If they stay there for 10 consecutive trading sessions, the delisting threat would be moot.
An internal investigation into the China situation has concluded. The SEC could still fine Hyzon an undetermined amount. Hyzon is still spending significant money dealing with the SEC investigation and a shareholder lawsuit.
“We have no indication as to how long that might take to fully resolve, but we look forward to continuing to collaborate with them,” Meeks said.
Refocusing Hyzon’s business
The spinoff of Singapore’s Horizon Fuel Cell Technologies went public in a reverse merger with special purpose acquisition company Decarbonization Plus Acquisition Corp. in July 2021. It received $550 million in proceeds at the time of the business combination. That money is all but gone.
Hyzon reported a Q1 loss of $30.6 million with $209 million in cash and equivalents on its books as of March 31, slightly higher than its $177 million market capitalization.
Hyzon is focused on making fuel cells for upfitting into a conventional truck in the U.S., a cabover in Europe and a rigid platform in Australia. Its previous portfolio stretched to 20 vehicles under former CEO Craig Knight, who was fired in August 2022 and replaced by Meeks as interim CEO. Hyzon dropped the interim tag in March. He joined the board of directors in May.
“Historically before the restructure that we had kicked off with the leadership change, we were spending too much on the vehicle side,” Meeks said. “We were not spending enough focus on the fuel cell side. And we were doing way too many different vehicle variants in way too many different places.”
Exiting China
So, even as the company head count has remained stable, the mix of work has changed. The company has all but exited China, where questions by a short seller led to SEC scrutiny.
“We reduced our R&D activity on the vehicle side by about two-thirds,” Meeks said. “That’s a lot of the stuff that was going on in China.” A targeted research and supply chain operation remains, but China proved to be a tough place to do business. Complex subsidy programs, vehicle data acquisition, commercial governance concerns and pricing were among the issues.
“Even back at the end of 2021, our average sales price in China was roughly half the average sales price in Europe and the U.S.,” he said. “So,economically [it’s] not a great market despite the volume potential. It just made sense for us to exit and start to monetize the contracts and the trucks that we do have deployed there.”
Reducing cash burn
The company’s cash burn has fallen from about $15 million a month in the first quarter to $12 million a month in April and May. Meeks thinks that even without new capital, the company has sufficient runway to get its 200-kilowatt heavy-duty fuel cell into production next year.
The bigger and more powerful fuel cell is 30% lighter than lashing together two 110kW fuel cells, which is Hyzon’s current product. The larger fuel cell costs 25% less to make with a 20% improvement in fuel efficiency in early testing.
Hyzon retrofitted eight Freightliner Cascadias with its fuel cell in 2021 and has 30,000 miles of driving. Though Meeks acknowledges the “repowered” Cascadia as the product for the U.S. market, he is careful not to use the name.
Hyzon’s asset-light approach
Fontaine Modifications upfits trucks ordered through normal channels by fleet customers. Removing existing diesel powertrains is part of the job. Fleets either keep those as spares or sell them.
Hyzon is the very definition of asset-light. It never handles the trucks, which so far are only Freightliner Cascadias. A fuel cell retrofit of a Hyliion Holdings hybrid truck from Peterbilt will double the manufacturers Hyzon can work with.
“We are providing the fuel cell and the support on integrations with Hyliion focusing on the actual truck development resources,” Meeks said.
Editor’s note: Corrects number of Freightliner Cascadias retrofitted to eight from 10, per company spokesman.
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