Editor’s note: UPDATES and edits throughout with comments from analyst call
Startup electric truck maker Nikola Corp. (NASDAQ: NKLA) reported an $86.6 million operating loss in the second quarter, its first earnings report as a public company.
The loss of 16 cents a share related to design and other expenses. Nikola is preparing to build heavy-duty electric trucks in a joint venture with CNH Industrial N.V., (NYSE: CNHI) subsidiary IVECO at a plant in Germany. It will test some early builds with customers before regular production begins in the fourth quarter of 2021.
German plant can build 10,000 trucks a year
When modifications to the IVECO plant are complete in Ulm, Germany, it can produce up to 10,000 trucks a year, Nikola said in a statement. CNHI invested $250 million in Nikola in November. Of that, $150 million was in-kind support for retooling the German plant. Test units of the Nikola Tre are expected to be completed in the fourth quarter of 2020.
“In the second quarter of 2020, Nikola met predetermined milestones on our journey toward becoming the zero-emissions transportation leader in the global heavy truck market,” Nikola CEO Mark Russell said in a statement.
Completing its reverse merger VectoIQ, a special purpose acquisition company (SPAC), highlighted the quarter. Nikola added $616.7 million to its balance sheet when VectoIQ pledged $230 million raised in its own initial public offering (IPO). It also received $525 million from discounted shares VectoIQ sold in a private investment in public equity (PIPE).
Nikola gave up some of the money as early investors exercised their rights to sell Nikola stock. But the company also added $208 million in cash from the exercise of 79% of 23 million warrants equal to 23 million additional shares.
Monitor milestones, not revenue
On a call with analysts following the earnings release, Chief Financial Officer Kim Brady said Nikola should be evaluated on meeting its stated milestones, not on the revenue it isn’t generating. Those milestones include:
— A major commercial agreement before the end of the year. Neither Brady nor Russell would share details other than to say it would be comparable to a 2018 order of up to 800 fuel cell trucks by beverage maker Anheuser-Busch. Nikola claims an uncommitted order book of 14,000 trucks valued at $10 billion.
— Naming a manufacturing partner for its Badger hybrid battery electric-fuel cell pickup truck by the end of the year. Russell said a partnership is in the “quiet period” so he could not discuss it further. Nikola has thousands of deposits of up to $5,000 for the Badger. It decided to add the pickup after getting 89,000 expressions of interest on the internet once Tesla Inc. (NASDAQ: TSLA) revealed its Cybertruck.
— Building its first commercial hydrogen station by the end of 2020. That likely will be along Interstate 10 between Phoenix and Los Angeles. That is a dedicated route that Anheuser-Busch uses to move beer from Van Nuys, California, to a Chandler, Arizona, distribution center.
— Completing the makeover of the Ulm manufacturing plant by the end of 2020 and completing the first phase of a $600 million greenfield plant in Coolidge, Arizona, by the third quarter of 2021.
Wild ride for Nikola stock
Nikola’s stock moves define the word volatile. It soared 103.7% on its third day of trading on June 8 to more than $90 a share. It closed Tuesday at $38.84, up 6.44%. But shares plummeted more than 13% in after-hours trading. One of the major PIPE investors, ValueAct, disclosed it had sold its 5.65% stake in Nikola.
The earlier sell-off by PIPE investors, including mutual fund giant Fidelity, created a greater supply of Nikola shares than demand could absorb.
Deutsche Bank was among major banks and brokerage firms that initiated coverage on Nikola. All agree the company’s business plan to market hydrogen-powered fuel cell Class 8 trucks with hydrogen and maintenance in a seven-year lease is a potentially transformative move in the diesel-power-dominated trucking industry.
But without any significant revenue — Nikola earned $6 million on the sale of solar power in the second quarter — it is too soon to be bullish on the stock, analysts caution.
In addition to the Ulm pre-production, Nikola broke ground in Coolidge on July 23. The plant will be capable of producing up to 35,000 trucks a year at full capacity on two shifts.
On the hydrogen side of its business, Nikola in June signed a purchase order with Nel ASA for 85 megawatts of alkaline electrolyzer capacity. That would support five generating and dispensing stations capable of generating up to 40,000 kilograms of hydrogen fuel each day — enough to fuel up to 1,100 Nikola Two fuel cell electric trucks.