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Christian Mohrdieck; CTO and Interim Managing Director of Europe; Hyzon Motors Inc.
Henri Kwon
Parker Stewart Meeks; executive director and director; Hyzon Motors Inc.
Stephen Paul Weiland; CHIEF FINANCIAL OFFICER; Hyzon Motors Inc.
Craig Irwin; MD and Senior Research Analyst; ROTH MKM Partners, LLC, Research Division
Robert Cameron Wertheimer; Founding Partner, Research Director and Research Analyst; Melius Research LLC
Steven Bryant Fox; Founder & CEO; Fox Advisors LLC
Operator
Hello and welcome to Hyzon’s Q4 2023 earnings call. (Operator’s Instructions) Now I’ll move on to Henry Kwon. Please come in.
Henri Kwon
Thank you operator and hello everyone. Welcome to Hyzon’s Q4 2023 earnings call. With me are Parker Meeks, CEO; Stephen Weiland, CFO; and Dr. Christian Mohrdieck, chief technology officer. As a reminder, you can find the press release detailing our monetary effects and the presentation accompanying the call in the Investor Relations segment of our website. Today’s discussions come with references to non-GAAP measures. These measures are reconciled to the most comparable US GAAP measures and can be found at the end of the fourth quarter earnings press release. This morning’s discussions come with forward-looking statements regarding long-term plans and expectations. Actual effects could possibly differ materially from those indicated, and points that could also cause actual effects to differ are explained in the forward-looking statements at the end of the press release and on page 2 of our effects presentation. Forward-looking statements speak only as of the date on which they are made. You are cautioned not to place undue reliance on forward-looking statements. With that, I turn it over to our CEO, Parker Meeks.
Parker Stewart Meeks
Christian Mohrdieck
Thank you, Parker, and thank you for having me. I would first like to start by saying how excited I am to sign up for the Hyzon team. Having spent two-thirds of my career working in mobile fuel generation at automotive OEMs, most recently as Sales Director at Cellcentric, a joint venture between Daimler Truck AG and Volvo AB Group. It’s refreshing to work for a company solely committed to driving the mobile generation, especially at this level of scale and commercialization. What has kept me fuel mobile for over 25 years is that my source of energy is based on the 3 P’s: product, other people and purpose. Use products are based on a desirable generation, which delights my physical center and my brain. Competent people who are passionate about demanding situations are the greatest asset in this sector and motivate me to work every day. The assistance of fuel mobiles creates a better and emission-free world. This compelling purpose allows me to pass at maximum speed and with full force at all times. I am signing up for Hyzon because of its existing strength in terms of products and people and because, as a company, we are absolutely focused on our decarbonization goal. Product-wise, one of my biggest motivations for signing up with Hyzon was the significant merit in mobile fuel generation and the corresponding intellectual assets we possess. Hyzon has developed a two hundred kilowatt single mobile fuel cell formulation, which brings significant advantages in terms of weight, size, force efficiency, production load and product loading. Lately there are very few companies that propose a two hundred kilowatt single cell mobile fuel formula. And Hyzon is the first to implement a heavy vehicle with a two-hundred-kilowatt single-cell mobile fuel formula, which brings me to another reason: Hyzon’s generation has merit. Hyzon not only develops and manufactures its mobile fuel formulation, but also integrates it into heavy-duty automobiles. We have deployed these vehicles on three continents and work directly with fleet customers to understand their real-world operations. Using this data, we can intelligently manage and adjust our fuel generation to increase durability, reliability and functionality in other environmental circumstances. In doing so, we are constantly expanding our portfolio of intellectual assets, maintaining and strengthening our competitive merit. As we continue to drive fuel mobile development, we expect new use cases to emerge in new industries, whether for two hundred kilowatts or long-term generations of fuel mobiles. Our purpose is to achieve forced decarbonization by hydrogen not only for road transport, but also in the mobility sectors of tomorrow, adding mining, construction, railway, maritime and airport ecoformulas. Earlier this month, we introduced the first truck equipped with Hyzon’s mobile fuel formula and a two hundred kilowatt power train in Australia. As Parker mentioned, we plan to introduce two hundred kilowatt cars in North America and Europe later this year. As the hydrogen economy grows, Hyzon has the opportunity to decarbonize emerging sectors, all based on the same mobile generation of fuel. I look forward to working with our team of qualified engineers to develop Hyzon’s competitive merit by bringing the two hundred kilowatt mobile fuel formula to the SOP this year and proceeding to advance fuel generation beyond the two hundred kilowatt formula in the long term. With that, I’d like to turn it over to Steve to take a closer look at the numbers. Steve?
Stephen Paul Weiland
Thanks Christian. It’s wonderful to have you on the team. One of the main reasons I joined Hyzon last November was our differentiated generation and intellectual assets. I think our ability to attract mobile fuel experts like you is a confirmation of that value. This shows that the Hyzon generation is convincing and I look forward to racing with you. I am proud of the execution we have demonstrated throughout 2023 by meeting vital operational milestones set at the beginning of the year. Moving into Phase C sampling of our two-hundred-kilowatt mobile fuel formulation puts us on track to begin production later this year and also deploy our first two-hundred-kilowatt FCEV trials. Our continued commercial progress was recently highlighted through our client, PFG’s waste market opportunity with New Way Trucks and its trial activities. In addition to achieving our operating objectives, we also met or exceeded the financial guidance established at the beginning of the year, both for the second part and for the full year with respect to sales expenses, matrix administration, R&D and net consumption of money. I will highlight this in more detail the next time we provide our results. I would like to begin my discussion by highlighting our fourth quarter and 2023 profit of approximately $0. 3 million compared to $3. 7 million in 2022. The fourth quarter profit reflects our first U. S. truck sale, one of our 19 truck deployments. We also delivered four trucks to PFG shortly before the end of the year, so we will start to see profits from the first quarter of 2024. Although this was structured as a sale and we raised money in the first quarter of 2024, taking into account the terms of the contract , this is really taken into account. as a monetary lease in our monetary statements and identified over time. The remaining four deployments in 2023 will be profitable if certain contractual conditions are met and visitor acceptance is provided. The sales charge amounted to $15. 7 million in 2023 compared to $23. 3 million in 2022. The 2023 sales charge essentially provides inventory write-downs and provisions for contract pricing customers. The 2022 reduction is primarily due to costs incurred in 2022 in China and Europe for FCEV, upgrade facilities and other costs that did not occur in 2023. R&D spending increased to $43. 7 million in 2023 in compared to $39. 1 million in 2022 and slightly below our planned diversity. from forty-five to four and nine million dollars. The main driving force for the increase in R&D compared to 2022 is the increase in costs for artists who help our progress efforts. General and administrative expenses were $121. 2 million in 2023, compared to $114. 1 million in 2022 and below our forecast range of $130 million to $134 million. The number one explanation why we fall under diversity guidance is that we must begin accounting for asset impairment rates as a separate line item in the third quarter of 2023. The factors driving the increase in general and administrative rates compared with 2022 are the SEC fee of $25 million, offset by certain activities that did not happen. in 2023, such as order canmobileation fees. A significant portion of our 2023 general and administrative expenses came from increased legal and accounting advisory fees to make certain compliance filings and legal filings related to the SEC investigations, which are now behind us. We recorded $7. 8 million in asset impairment and restructuring fees in 2023, driven primarily through fees in Europe and the United States. On the balance sheet, we ended 2023 with $112. 3 million in cash and equivalents, which represents a net money burn of $25. 5 million in the fourth quarter. This represents our lowest net quarterly money burn in the last nine quarters and the fourth consecutive quarter of lowest burn. Our full-year 2023 net cash burn of $143 million is lower than our guidance of $148 million to $156 million due to the timing of our first $8. 5 million SEC payment tranche, and we would have fallen into that diversity if this payment had happened in the fourth quarter. This payment was made in January, as opposed to the fourth quarter, due to the timing of court approval may also occur, as reported in the future. Another $8. 5 million is expected by the end of 2024 and the remaining $8 million in January 2026. Let’s move on to the forecast. We do not provide annual net cash burn forecasts for 2024 at this time, but we are lately reviewing our full-year assumptions. And to a large extent, the timing of any capital raise could affect our view. However, we would like to offer a review of our first quarter. We are targeting a net cash burn of approximately $24 million to $27 million in the first quarter, excluding the impact of the $8. 5 million SEC payment in January. We also do not receive the impact of approximately $3 million from the sale of our Rochester facility on this diversity, as the timing of this payment may fall toward the end of the first quarter or around get get get. started in the second quarter of 202four. Excluding those one-off items, we believe this diversity reflects how we operate lately with average net recurring consumption of $10 million per month. We expect that our selling, general and administrative expenses in the first quarter of 2024 will likely be between $22 million and $2. 4 million and our R&D expenses will likely be between $12 million and $1. 4 million. We continue to focus primarily on raising capital. We will provide updates as appropriate. I would also like to emphasize that, when necessary, we have known levers to decrease our money consumption and deplete our liquidity until 2025 as financing activities continue. We are working hard to maintain our monetary flexibility while ensuring we are well placed to achieve our near-term expansion goals. One point that investors have raised in our discussions over the last quarter is: as we look to prove the monetary field in 2024, what is our priority. The answer is obviously that our fuel mobile intellectual assets are core to our generation and strategic value. We will continue to prioritize our mobile fuel progression efforts, and the fact that Christian has signed on as CTO at this time obviously demonstrates our continued commitment to our generation and its strategic value. Thanks for your attention. And now I’m going to call Parker back.
Parker Stewart Meeks
Thanks Steve. I am incredibly excited about 2024 as it promises to pave the way for our long-term growth. Our experienced control team and board of directors provide us with the perfect combination of expertise, experience and governance, allowing us to fully concentrate on our streamlined, re-focused and centralized style of business with a transparent vision for the future, focused on generating and driving advertising in 2024. We are confident in the capabilities of our generation and our differentiated, asset-light business style. We anticipate very broad advertising growth and minimal capital expenditure requirements to achieve core production of our two hundred kilowatt mobile fuel formula in the second half of 2024, which positions us favorably as we work to capture capital reviews and expand our agreements advertising and activations with our giant fleet consumers. Array strengthening the balance sheet, while maintaining our pioneering merit in a developing movement towards carbonized road transport. The addition of the mobile fuel refuse vehicle as a foreign platform that provides significant functionality and economic merit over battery electric opportunities is another example that heavy industry needs mobile fuel generation. hydrogen fuel to perform the task you want to perform. We expect an increasing number of US giant waste fleets to experience this next-generation trucking and generation platform in the first part of this year. I would like to thank all my colleagues here at Hyzon for their determination and execution throughout 2023. Finally, we appreciate your continued commitment as we work with consumers and partners to bring Hyzon’s next-generation mobile hydrogen fuel generation to the forefront . From the market. the trucking industry today and various other programs in the future. Now I’ll hand it back to the operator if you have any questions. Operator?
Operator
(Operator Instructions) The first comes from Steven Fox’s lineage with Fox Advisors.
Steven Bryant Fox
I guess I had 2 questions. First of all, I was wondering if I could communicate a little bit about the classes learned in the tests you did from 2023 to 2024, which maybe will help you interact with other fleets or programs or just speed up the tests. Process? And then I had a follow-up.
Parker Stewart Meeks
Steve, thank you very much for the question and we are happy to tell you about the procedure to verify, be informed and improve your fuel generation and powertrain. So, as we’ve noted on previous calls, we’ve been in litigation for quite some time. We introduced our Class 8 check program in March 2022. We’ve completed 20 primary checks in North America alone as an example since March 22, 14 checks in calendar year 2023. And we’re excited that this is growing, right? ? We have 24 overall tests planned for 2024 on the Class 8 truck and garbage truck in the United States alone. And classes have been important during this constant period. The interesting thing is that we still have the first trucks that we built, of course. When you look at those Class 8 trucks, the first trucks revised throughout the Lacheck generation, a lot of things have changed, from the powertrain to the integration approach, even the look and feel of the truck to the powertrain, where They find the steps. They are positioned, how they get on and off the truck, how they drive the truck. And frankly, the feedback for us has been as much about the functionality of the truck and optimizing and updating it as it has been about how we interact with the fleet, how we improve the powertrain experience. And I will give some examples. First, when we brought the first mobile fuel trucks to market in Texas at Port Houston in December 2022, what we did was show that America’s mobile fuel trucks are fit to be transported, not just in California, but in all the country. which we are excited about and hope to expand upon with investments for the Mission Zero Port apparatus that will soon be provided under the Inflation Reduction Act. This test was the next step in our verification in various climatic environments. So we checked the cold weather test in Edmonton, Canada, starting this winter of 2022, and the truck was showing up in constant temperatures of -20, -30 degrees, which required information on preheating and other things to have worked. 2 consecutive winters in Canada. We conduct warm weather checks in the Los Angeles Basin and Central Texas in the summer, with temperatures consistently as high as one hundred to 105 degrees Fahrenheit. We are told a lot about what will keep the truck and generation of this experience fresh in Houston. I call it our rainy weather test because I’m from Houston, monsoon season is coming up in Houston. When we started this test on the first day, there had been a primary storm the night before. We tell the visitor drivers in our fleet to take this truck anywhere they want to go. We literally want to check it out and be informed. Simply put, there is a foot of standing water on Houston’s south service road near the port, raising speeds to forty-five miles per hour. And when you do that, through a foot of drinking water that wants to soak into each and every crevice of this truck. He actually realized that the maximum voltage would prevent the truck from operating safely. We took it back to the service dock, dried it, closed the consistent hole, about 24 hours later and completed the rest of this test with wonderful success. We discovered the source of the sealing defect and replaced it in the design and have not noticed this factor reappear since. That’s why we are very transparent about the classes, they inform us of the tests and our consumers see that they appreciate it. And we are very grateful to have major clients like Performance Food Group who we have been working with for over 2 years since their trial. And at the (inaudible) Port of Houston, who performed this test for us and has been a wonderful spouse ever since. And those leaders, those fleets of visiting leaders who are literally motivated not only to get started, but to stay informed and help everyone improve, are the reason we were able to enjoy this experience. We have traveled tens of thousands of people. of miles and miles around the world with our powertrain and we are very confident in the powertrain that we have developed and are now launching.
Steven Bryant Fox
Super. Super. That’s useful. Just from an investment/regulatory standpoint, as you mentioned, there are a number of opportunities where generation can be complex through new investments in the United States. investment or its ability to have a more pronounced position in the chain of origin as hydrogen develops. Is there anything I can point out that we’ll be on the lookout for 24 years?It will be somehow, if not a game-changer or a step further positive outcome. The next. . .
Parker Stewart Meeks
Absolutely, Steven. Thanks for that too. We are very excited about the tailwinds that have continued to grow globally, specifically here in the United States, to implement subsidies and begin decarbonizing trucks. Here we see a transparent three-step path to subsidy. So that we evolve with our consumers according to our production capacity and according to their appetite in a progression plan of 3 to four years. The first level is active today and it is very deep, it is California, right? The State of California still has more than $300 million available right now for Class 8 maintenance trucks, with a base truck bonus of $240,000 for large fleets increasing to more than $400,000 for small fleets. fleets and the duration of some other programs that accumulate various underwater resources in most HVIP card vouchers. It is active now. We said in our last conference call that while we only have our. . . what we consider our consistent percentage of opportunity for mobile fuel trucks in California, there is what we expect from mobile fuel trucks to meet California’s decarbonization goals until 2030. However, we would bring the company to balance the cash flow until 2030, only with California. The second step is the ports, right? And it is a component of the Inflation Reduction Act’s Clean Ports Fund, which includes the $2. 6 billion Zero Emissions Port Equipment Fund, with programs underway and awards expected to be made beginning in December of this year. . And that means up to $500 million for port fees, which includes hauling trucks and hydrogen supply infrastructure. And we really touched on it in the comments, we are delighted that our joint application with a visitor and bunkering component was decided through Port Houston as part of their application for this program. This is the first example of a Hyzon compatible application, let’s see it; We hope this application arrives. There are other ports that we are in talks with. And we see this as a critical program to install drayage trucks and fueling infrastructure at major ports, whether coastal or inland. And then the third step is, of course, the DOE hydrogen cluster program, which I think we all gained $7 billion allocated to 7 clusters. Hyzon is proud to have supported several of the award-winning groups and has been actively applying to help them lately. centers with and our fleet consumers with applications. So we have huge opportunities on the trucking side. When it comes to fuel, the IRA 45V Production Tax Credit is also critical for us and the industry. Now, I think anyone who is interested in hydrogen has noted the vital discussions that have taken place in Congress about how that initial direction has been returned and what we all think are prudent adjustments that need to be made. ‘bring. Even without those forty-five VPTCs, we still see a clear path and opportunity given that we have said publicly that with 1,000 trucks per year, 1,000 mobile fuel systems per year of capacity, we will be on a significant path to TCO. parity without achieving subsidies for trucks. But I think it turns out later and is vital for us. The last thing I will say is that there are other provisions that go unnoticed that help us reduce this cost. One of them is the 45W Clean Truck Tax Credit, which provides us with the $40,000 per truck we’ve been applying for lately to make sure Hyzon trucks qualify. So we see a very transparent path for subsidies. I think some of the most important things to keep in mind are continued implementations in batch programs through Hyzon consumers under California’s CARB HVIP program, and then we are all focused on that first application of hope that would come from the investment in the zero-emission port apparatus with the words lately are consistent with December 2024.
Operator
The next one comes from Craig Irwin’s lineage with ROTH MKM.
Craig Irwin
Parker, I just wanted to start with a greater use of cash. Does it look like it’s ahead of what’s guiding us ahead of 2023?And even before I was talking about the prospects for the 24th. Describe what works for you? Perhaps some of the moves you made have yielded those results?
Parker Stewart Meeks
Thank you so much, Craig, and it’s a pleasure to hear your voice. So I’ll pass it on to Steve for comment.
Stephen Paul Weiland
Yes. Craig, thanks for the question and thanks for mentioning it. In fact, we’re proud of our money-spending functionality here at Hyzon. I think if you look at the numbers, you’ll see that in the first quarter of 2023, our net money burn was about $46 million. And here in the fourth quarter, about $25. 5 million, right? So that’s a significant relief for the year. And even if we had included that SEC payment in the fourth quarter, as I mentioned, we would still be in that range. And that actually represents a number of things. This is our renewed strategic direction to actually focus the business on the things that matter most as we implement our new strategy at the beginning of the year. This generates savings. And, of course, we will also benefit from a decrease in legal, consulting and accounting prices as we emerge from this investigation. So right now, during this fourth quarter, that was about $8. 5 million on average, consistent with the recurring money burn for the month. This level, less than $10 million per month, is pretty representative of how the business is evolving lately and we don’t provide full year guidance, but I think it’s pretty indicative of what we’re doing. And it also allows us to continue. prioritize and invest in key spaces of our generation and move things forward.
Parker Stewart Meeks
Yeah. I’ll just add that we’re really proud of the fact that I think we’re showing significant progress and a genuine inflection point that we’re achieving commercialization, not just progression to PCOS, formula two. hundred kilowatt mobile fuel plant and our factory here in Bolingbrook in the Chicago area, which makes us very excited about the next SOP that we are making plans for this part of this year. I mean it’s a major milestone, not only for us, but for the mobile fuel industry in the United States and to get a plant like this up and running, and the most sensible thing about that, with this global powertrain, we just implement the Australian system. waste control program and platform in the United States, and we hope to test this state-of-the-art garbage truck here in the United States soon. Furthermore, the launch of the two hundred kilowatt powertrain in the Cabover 64 right-hand drive truck in Australia last month, making all this progress while reducing money spent, shows in our opinion that we have been effective in staying up to date and drive. commercialization of Hyzon, our technology, while we proceed to locate opportunities to generate money losses. Therefore, our goal remains to manage the inflow of money and manage it. We have a transparent view of the levers that we can continue to pull to properly manage the expenditure of money and ensure that we are maximizing the price for shareholders and how we move the business forward and are prudent with our resources.
Craig Irwin
So as the company changes, that’s right, going from B samples to C samples, testing more commonly, I guess, platforms, I guess we call them, not big rigs, but tabletop rigs, right, to shoot this. year before the SOP, all those efficiencies you’ve achieved by tightening the screws, see some savings in how you execute your strategy. Are those adjustments likely to continue to be reflected in the coming months?Those minor things that are applicable in the long run?
Parker Stewart Meeks
They are. Yes. This is a very important topic for us, Craig. So as we see verification, verification is a complete formula. And I’m going to give a reaction and ask Dr. Mohrdieck to post any opinions he may have. But it works from bench verification at our full scale verification facility with 250 kilowatt load (inaudible) here in Bolingbrook, which is a laboratory that we believe is very productive and a real showcase for the company that we love to showcase. Every time other people come to stop by us to see the track program we conduct in the control truck used in Michigan, here in the United States, and at the control tracks in Europe and Australia, we have to review both one of our truck platforms and our scale control programs. Also. And what is vital is a multi-step program, check durability, check functionality and check fuel power that allows us to optimize either one or both details of the powertrain. Of course, this starts with the fuel cell itself. Our two hundred kilowatt mobile fuel formula, SOP, doesn’t just check the formula, right? It checks a single mobile, it checks a short stack and it checks a full stack, it is the complete formula, it documents the learnings and integrates them into the entire SOP. So I can tell you that even in the two hundred kilowatt mobile fuel formula, we are already employing several sub-generations of this generation, because we have known and incorporated new improvements in the design, even during the last 12 months. And that’s exciting, because we’re confident that when we provide this formula in the SOP here at Bolingbrook, we’re still on track for later this year, this formula may not just be a high functionality mobile fuel formula that we think. we are ahead. others that are in trucks today, but this is also an issue in which we have already begun to improve the price-performance ratio and quality in the balance of factories and the MEA the design of the catalyst while optimizing and improving it based to effects received from our very rigorous A samples through C sample pre-production and SOP process. And when it comes to trucks, as I said before, all the checks we’ve done over tens of thousands of miles and miles seem, in the grand scheme of this generation, that all of us in the industry have a A long way to go. go. to verify, validate and improve functionality in the use case. But we’ve already shown massive gains in functionality and optimization of the powertrain and functionality of the truck, even going from 110 kilowatt generation in the truck to two hundred kilowatt generation in the truck, we’re seeing an expectation. 20% more fuel power on the test track with that 200 kilowatt powertrain in the truck in the same use case, which, by the way, is 20% better than diesel. And when part of a truck’s lifetime cost is spent on fuel, it has a big impact on our progress toward overall cost of ownership parity with diesel. So all of this learning is applied and what’s also exciting for the business in the long run, so it has a direct effect on the trucking use case today, right? And that is what we want to be able to commercialize the generation. But if you look at Hyzon’s valuation, the option price and benefits and use of the same two hundred kilowatts of generation in ground assist devices at airports and rural and desktop power concepts are at a relatively near term. in the grand scheme of the evolution of this industry. And all those learnings about the fuel mobile are the functionality, the integration of the propulsion system provides us with genuine merit in all cases that will also come. So we are excited. Our consumers see this and that is why they are with us. And the other example that I will give you, which shows the progress, is the first truck that we checked with the 110 kilowatt American truck in March 2022. Since then, the American truck has gone through all the checks that we have done. , the fuel mobile went through all the controls we talked about. We introduce the truck in Europe. We introduced the garbage vehicle to Australia. This garbage vehicle in Australia, I can’t emphasize enough how excited we are about this. This truck ran for four months with REMONDIS without stress, on 18% slopes near Sydney, Australia, and had no unplanned stops, which is a wonderful result for our generation at this level and one that must be taken advantage of, which which we believe proves. progression. Not only our generation of fuel-powered mobiles, but also our propulsion system.
Craig Irwin
Excelente. Es awesome. So, Parker, my next question, I guess, I deserve to start, right?We all know you use very conservative accounting, right? Their visitor acceptance tests are solid. When the visitor accepts a product, they don’t come back, right? But if we were to go to the other end of the spectrum, if we looked at FOB, as if we were promoting devices, wouldn’t this be technological?innovation that I imagined we were promoting undeniable widgets, what would the profits look like for 2023?Would we have potentially noticed something in the teens, in half the teens of the 19 trucks he delivered?Just so we can perceive how the separation of shipments and popularity of earnings works and perceives how to compare that to others who might not be employing their custodial account.
Parker Stewart Meeks
Yeah. Look, that’s a wonderful question, Craig. I appreciate its popularity which we are trying to achieve to achieve transparency and proper accounting principles. I’ll give you a high-level answer and then hand it over to Steve. But at a higher level, you are right, as we are rolling out cars this year; sorry, last year and this year we are implementing them in the advertising construction, which sometimes reflects the advertising agreement we have with Performance. Food Group, PFG in the United States, which is a multi-year advertising agreement with a total of five possible cars in total in the case of PFG, divided into three stages where the first five are binding and the following tranches are gradually released. while we deliver the previous section. And we’ve said this before, for this first tranche of deliveries, sometimes we’ll have some kind of threat exchange mechanism in the advertising agreement, like a termination clause that pushes us more to account for rentals – exploitation if we look at this from a monetary perspective. Although the money can arrive in advance, something that is obviously very important to us and we are pleased that it has. The accounting itself is a little more conservative, given some of the threat exchange mechanisms that are in place in most of our contracts (not all, but most). So when this changes, when it will change, we will see – our hope is that once the first tranche has been delivered to a fleet and has been shown and the generation has been shown in the use case. Organize this stretch for now, we will have been able to release those buyback provisions during a more classic sale, but all of this remains to be shown as we move towards the current orders that we expect to unload with our first fleets this year. Steven, do you need to add?
Stephen Paul Weiland
Yes. Thanks, Parker. I’m just going to upload a few things, Craig. Of course, at Hyzon we take compliance and accounting and reporting very seriously, right?Therefore, we abide by all the right rules. We recognize the gains and work a lot with orders to make sure everything is solid. So, I don’t necessarily need to say what pro forma earnings would have looked like from a 2023 perspective. I guess the best thing I can do here to help you is just we give you the financials and we take a look at our remaining functionality obligation, it’s true, on the balance sheet, it’s about $14. 8 million and our disclosure about. . . We expect 72% of that amount to translate over the next 12 months. I think you can take a look at it and feel it.
Craig Irwin
That’s what I was looking for. So it’s smart to hear it. Last query, if I may. President Biden’s help in the IRA for hydrogen infrastructure, the $7 billion that we’ve noticed awarded for infrastructure hubs, that’s not something that was planned a year or two ago, is it?It’s really positive and helpful for long-term progress. Can you tell us whether or not this widens the circle of fleets that are seriously interested in hydrogen?Does this replace the speed of activity in certain parts of the country?I know that in the short term, this has an effect on deliveries as other people figure out where to get the most productive investment opportunity. But maybe you can explain what you did to replace your long-term in the long-term?
Parker Stewart Meeks
Yes. No, I would love to do it, because it’s a really exciting long term considering how this generation and the decarbonization of trucking is going to grow across the United States. And this central program is essential in that sense. What that did for our fleets, right? The really fantastic thing has been over the last 18 months, once we started our testing program in March 2022 and started to move forward with it. We have a very transparent concept of where fleets would like those trucks to go. In California, everyone is focused on this because of very significant funding, as I said before, 300 million dollars available and a voucher, which increases the value of the truck for the visitor in a position where the economy is viable today in day. But everyone needs running trucks: peak need for running trucks in Texas, peak need for running trucks in the Midwest or also trucks on the East Coast, wherever they are and wherever there’s volume. The Texas Triangle, Houston, Dallas, San Antonio are a wonderful example. This triangle is preferably suitable for feeding the mobile generation in its current stage. That’s about two hundred miles consistent with the side of the triangle which matches very well with the existing diversity of our truck. And the projects are already underway. There are small scale projects, for example Interstate 45 between Houston and Dallas is a federal hydrogen highway with 3 hydrogen stations that are already in structure under a pre-investment mechanism. And as I mentioned before, Port Houston has been quite competitive in handling decarbonization grant programs like the one that we were fortunate that our constituents decided to implement for investment ports (inaudible). And so what we see the subreddit doing, as an example, Houston-based High Velocity Hub is one of the 7, right? Therefore, we believe that this center is a consistent opportunity for fleets to establish projects with us and for fuel providers to be part of this center and drive trucks once this center is preferably funded and deployed in this Texas triangle with significant load. traffic. call and opportunity. So this has given our fleet customers tangible visibility into how they can operate trucks outside of California in the medium term, as the budget we expect to receive began to flow throughout the year. of the decade. And one more thing is when you combine that with the other thing for fleets, which is the functionality of mobile fuel trucks as opposed to the functionality and availability of battery trucks. Frankly, this has been an even bigger driving force for fleets and fleets coming to us that probably wouldn’t have considered hydrogen before. The joy we got from looking at battery electric trucks for 6-12 months, right? And then make decisions on purchasing prices for battery electric trucks and seek authorization and pricing from chargers behind warehouse expenses for those battery trucks. The fact is that in many parts of the country, including parts of California, where there are consumers, where there is cargo. You also have a grid that is stressed. You have substations that do not have the capacity, in some cases, to accommodate more than 20 trucks with chargers tied to a single warehouse fence. And it has lead times of 5 to 6 years, some consumers tell us to get a significant number of chargers with enough charger strength so they don’t have to sit there for 8 hours, something many Class 8 fleets may not they would have. 8 hours of charge. Therefore, motivated fleets will also broaden their view of the mobile fuel truck use case and what wants to be part of their future, given the friction in the weight, the friction in the national functionality profile, in the autonomy and then in infrastructure. availability. If you get on the battery truck demanding situations, which is the most important thing, if you ask us, why is there $300 million in California, the CARB HVIP program today. When I joined Hyzon in June 2021, when CARB opened investment in HVIP, they released about $50 million to $100 million at a time. It’s still 20 minutes. Battery-powered trucks were used in significant numbers. That money accumulates and stays in the market as mobile fuel trucks come to market, in part because of all this friction on the battery truck side. We are therefore witnessing a transparent movement towards hydrogen. We see the use case for hydrogen trucks developing because of the demanding situations for battery trucks to perform the task that diesel performs today. And to your point, the clear trail that the federal and state governments are leaving in this three-step strategy to invest this program out of California and towards the ports, in fact with the centers.
Operator
The following is from Rob Wertheimer of Melius Research.
Robert Cameron Wertheimer
I’ll take 2, if I can. I guess you mentioned that with the two hundred, the prospect, at least for expansion into other commercial finishing markets, adding railroads, desks, and others, is this more of a pass awareness program?Or is it a call to attraction? And does this extend to potential strategic partners?I mean, can you describe this ecosystem and a point of interest and what’s driving those comments?
Parker Stewart Meeks
Rob, the future of fuel cell generation is vital and we are excited to report on the next markets we will visit after trucks. So, to answer directly, the opportunity lies both in bringing in strategic counterparts and other entities that need to come on board and have genuine decarbonization steps and in us pushing and identifying where that might happen. And let me give you some case studies on this. First of all, desktop and mobile strength, we announced in the past a joint progression agreement with Schlumberger for this purpose. There is a strong appetite from many in the commercial and remote operating sectors for a decarbonized solution to the force that can work. So these are partner and customer inflows, and that represents a pretty broad set of opportunities. These are intermediate knowledge operators, from the entertainment industry, who use diesel turbines to film movies, television shows and other things, to commercial operators, who use gas oilArray, electrical energy and chemicals who will have to upgrade the force of the generator. diesel today with anything that is 0 carbon and discover that batteries are a complicated solution. The other example that I will give is that of the airport ecosystem and the ground support teams. Today there are investment systems in airports, both in the United States and in Europe, to begin to decarbonize airports. I think other people are realizing that we expect fuel cells to be really clear, but it’s going on a while. When airplanes are excluded from the equation at an airport, 75% of the emissions profile corresponds to ground support equipment. And those use cases, like aircraft tanks and surface force assemblies, are the best use cases for integrating two hundred kilowatt fuel cell force into airports, airlines, and other industries today. other actors in the aeronautical ecosystem, very interested in the objectives they will have to achieve. So those are things that we are actively executing and would like to see come to market as we launch and scale the trucks. We have followed a prudent technique to manage our current capital and resources. But those are markets we will be in a position to overcome as soon as the trucks are launched.
Robert Cameron Wertheimer
It is ok. And then Parker, touched on this topic in 2 questions in other ways. But just put California in context: Blank truck mandates are hard to enforce. I think he argued that the strength of the battery just isn’t up to the duty cycle, etc. What are your consumers saying? Are they waiting for fuel phones to be fully revised and mature?Do they expect to have to buy batteries? I’m just curious about what that environment looks like and if there’s a genuine release on the 26 or whatever, wait for it and chase it. And if I may, when you deal with your test consumers, do they regularly put it at the festival and compare it to other fuel mobile suppliers?Or does everyone like to locate a visitor and check them out right now?There is no genuine festival among all of you when it comes to fuel mobiles. I’ll avoid it. I know it’s 2 questions.
Parker Stewart Meeks
No, it’s great. Thanks, Rob. I feel satisfied to be able to describe with transparency what this is like and how we see it today. So first of all, we took a look at our pipeline to focus on all the fleets that we work with, right? We think we only want at least 10 gigantic Performance Food Group fleets, to scale on a 4 year program to 1000 trucks per year total, or up to a hundred trucks per fleet, right? So we’re very focused on giant fleets back to base, as well as concentrated ports, right? But let’s get back to the basics of giant fleets, the need to concentrate spending on warehouses, and the use case that extends beyond the other type of two hundred mile prevention point. That’s probably cutting 150 miles where the battery has problems, right? And with that in mind, all of our fleets review each and every detail, right? Fleets that are really motivated and those like Performance Food Group tend to be leaders, right? PFG therefore has a stated goal of decarbonizing to particularly reduce diesel consumption to stretch its fleet until 2030. This is a genuine goal. And you see them taking the lead in putting our trucks into service because they want to hit the ground running, right? And they are very proud of it. These are the fleets we are focusing on. There are a significant number of them. As I mentioned before, there have been 20 tests in North America alone since March 2022. Every fleet tests multiple solutions, right? And we want it because we are convinced, first and foremost, that mobile fuel generation is the right answer for the use cases we are addressing, which is most of what the Class 8 does. fundamental transition long-term. And then as we compare ourselves to other mobile fuel vehicle technologies, we are pleased every time fleets try another mobile fuel vehicle design because we fundamentally believe that our two hundred kilowatt single cell mobile fuel vehicle formulation has a significant advantage by weight, a volume. advantage, a loading advantage. Set that allows our trucks to have a positive monetary contribution margin to today’s giant fleets, which is unique in this industry compared to others that have a particularly negative financial margin. And the fleets see it, they see the next generation and they see a style of business that can scale.
Operator
That’s all the time we had for questions. I’ll leave it to Parker Meeks for his final remarks.
Parker Stewart Meeks
Thank you very much, operator, and thank you all for your participation and for the wonderful questions and discussions today. As you can see, we’re incredibly excited about the year 2024. This promises to pave the way for Hyzon’s long-term growth. Look forward to continuing to keep you updated as we achieve our industry citation goals this year, and thank you so much for taking the time to interact with us. Take care.
Operator
This concludes the convening of today’s convention. Thank you for your participation. You can now disconnect your lines.