Nikola Q3 2020 Earnings – Investors Remain Fixated on the Fate of the Company’s Partnership With General Motors
Nikola Corporation (NASDAQ:NKLA), the company that is attempting to retail electric and hydrogen-powered trucks, has endured a brutal quarter as its stock price was relentlessly hammered following the publication of a damning report by the short-seller, Hindenburg Research. Today, the company is again in the spotlight as it gears up to announce its earnings for the third quarter of 2020.
Bear in mind that Nikola is a pre-revenue company, thereby rendering its top-line and bottom-line growth metrics mostly inconsequential.
Nikola Corporation (NASDAQ: NKLA) Financial Scorecard
For the three months that ended on the 30th of September, Nikola earned $0 in revenue. Last quarter, the company had earned $30,000 in revenue.
(All figures are in thousands of dollars)
Bear in mind that last quarter’s revenue was primarily earned through the company’s solar business.
Other key financial metrics are as follows:
(All figures are in millions of dollars)
Finally, Nikola reported -$0.31 in GAAP EPS, beating consensus expectations by 6 percent.
(All figures are in dollars; all consensus estimates have been sourced from here)
Key business highlights during the third quarter of 2020 were:
- On September 8, 2020, Nikola announced a strategic partnership agreement with General Motors Co., which contemplates General Motors receiving equity stake in Nikola in exchange for various in-kind services.
- Made substantial progress toward completion of building modifications necessary to construct Tre BEV production line at Nikola's manufacturing facility on IVECO's industrial complex in Ulm, Germany. The civil works and building infrastructure have been completed, including the floor, heating system, and walls. The building of the work cells is currently in process.
- Broke ground on construction at Nikola's Coolidge, Arizona greenfield manufacturing facility. The facility's master site plan has been completed, submitted, and approved by Coolidge. Currently, the construction of the Phase 1 assembly shop is on track to be completed toward the end of 2021.
- Ended the quarter with a strong cash position of $908 million, net of $15 million in restricted cash.
Investors have reacted positively to Nikola’s Q3 2020 earnings announcement, with the stock posting a gain of around 2 percent in the after-hours trading. This is, in large part, due to the fact that negotiations with GM on the proposed partnership are still ongoing.
Crucially, the earnings release did not include any timeline for the formalization of Nikola’s proposed partnership with General Motors (NYSE:GM). Under the terms of this partnership, General Motors will manufacture the BEV and FCEV variants of the Nikola Badger electric pickup truck. It will also provide the Ultium battery system and Hydrotec fuel cell technology for Nikola’s Class 8 trucks. In return, GM will receive an 11 percent stake – corresponding to 47.7 million shares – in Nikola Corporation at zero additional cost. Additionally, it will also receive $2 billion as compensation for providing services as well as access to key parts and components, including $700 million in production-related costs. As an additional incentive, General Motors will receive preferential rights to at least 80 percent of the Badger truck’s tax credits. Moreover, GM will also get the right of first refusal to the residual 20 percent of tax credits. For its part, Nikola will be responsible for the sale and marketing of the Badger truck while also retaining control of the Badger brand.
Nikola stated in its earnings release regarding the status of negotiations with General Motors:
"The transaction has not closed, and Nikola is continuing its discussions with General Motors (GM). Nikola will provide further updates when appropriate or required."
We will update this post should any further details emerge during the earnings call.