Nikola Corporation (NKLA) Q2 2021 Earnings Call Transcript

Nikola Corporation (NKLA 0.76%)
Q2 2021 Earnings Call
Aug 03, 2021, 9:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the Nikola Corporation's second-quarter 2021 earnings conference call. [Operator instructions] As a reminder, this conference is being recorded. We will now begin the video presentation. [Presentation] Thank you.

It is my pleasure to now introduce Nikola's chief legal officer, Britton Worthen. Thank you, Britton, you may begin. Please be patient, we are having slight technically difficulty. We will be onboard momentarily.

Please be patient. Thank you. [Technical difficulty]

Britton Worthen -- Chief Legal Officer

Thank you, and good morning everyone. Welcome to Nikola Corporation's second-quarter 2021 earnings call. With me today is Mark Russell, chief executive officer of Nikola; and Kim Brady, chief financial officer. During today's call, we will share our views on the business environment and our financial results for the June 2021 quarter and our outlook for the September 2021 quarter and the full-year 2021.

The press release detailing our financial results was distributed a little after 6 a.m. Pacific Time earlier this morning. The release can be found on our investor relations section of the company website, along with presentation slides that accompany today's call. Today's presentation and Q&A includes certain forward-looking statements within the meaning of the Federal Securities laws.

Forward-looking statements are predictions, projections, and other statements about future events based on current expectations and assumptions and as a result are subject to risks and uncertainties. Many factors could cause actual future events to differ materially from the forward-looking statements in this communication. For more information about factors that may cause actual results to materially differ from forward-looking statements, please refer to the earnings press release we issued today, as well as the risk factors section of our annual report on Form 10-K and our quarterly report Form 10-Q filed with the Securities and Exchange Commission, in addition to the company's subsequent filings with the SEC. Forward-looking statements speak only as of the day they are made.

Readers should be cautioned not to put undue reliance on forward-looking statements. With that, I will now hand the call over to Mark.

Mark Russell -- Chief Executive Officer

Thanks Britton. Welcome to our second-quarter 2021 earnings call. Today, we'll provide you with an update of what we accomplished during the second quarter, and I'll begin with an overview of the status of the validation progress of the Nikola Tre and some updates on our joint venture manufacturing facility in Ulm, Germany and our facility in Coolidge, Arizona; our announced investment in 20% stake in Wabash Valley Resources, a clean hydrogen Project in Indiana; and lastly, I'll update you on the most recent development, which was an expansion of our sales and service network. After the business update, Kim will discuss the financial results, give you some color on our purchase agreement with Tumim Stone Capital, and of course, we'll do our best after that to answer your questions.

So let's kick off with the Nikola Tre battery-electric vehicle update. Validation activities continue on the first batch of the five alpha trucks. We've also now completed all nine of the beta trucks from the second batch. Three of the trucks from that second batch have been commissioned and are undergoing validation at various proving grounds around the United States.

The remaining six of that batch are in commissioning here in Arizona right now and then, will be at various proving grounds for validation testing by the end of this month, this second batch of beta trucks have incorporated the component improvements and systems improvements that came from testing the batch one alpha trucks today. We've also started building gamma trucks in Coolidge and own plants for manufacturing process validation. And we're working diligently to mature these vehicles, as we prepare to deliver pre-series trucks to customers in the fourth quarter of this year. One of our biggest challenges at the moment, no surprise to anyone, is the supply chain.

For the Nikola Tre, as you know, the entire automotive industry is facing a global parts and material shortage, and the situation has only gotten more acute over the last 90 days. Our supply chain team is working diligently to overcome the constraints. And to continue to grow our part maturity levels as we ramp up for pre series builds and aim to deliver trucks in the fourth quarter. And as we mentioned in our previous earnings call last quarter, we have supplier confirmation for enough battery cells to build up to 80 trucks in the fourth quarter, but we're experiencing delays receiving in numerous other parts of this point particularly concerning our vehicle head units, crash sensors, touch screens and other displays.

And the common root cause for many of these is a worldwide shortage of integrated circuits and critical chipsets. And as suppliers continue to push back the receiving dates of critical semiconductor components, and as a result, our validation and testing timelines are subject to delay, accordingly. As a result, we've got the manufacturing capability to build, up to 80 trucks, encouraging on in the fourth quarter, but we may not receive enough of those components by early December to deliver saleable trucks to regular customers. What we'll still expect to do is substantially complete these vehicles and place them in our dealers demo fleets, or with select launch customers or even use them for our own freight needs to accumulate miles on public roads in the fourth quarter, even if those units are not technically saleable, due to these critical components not being available to us in time.

Meanwhile, at this moment, Tre fuel-cell electric vehicle alpha prototypes are being built in Coolidge, five units there and in Ulm in Germany two vehicles there. This will be followed by commissioning and validation of these trucks in the third and fourth quarters this year. We're targeting a road release under limited conditions to start pilot runs within Hydro box between Los Angeles and Phoenix by the end of the year. The start of production for the Tre fuel-cell vehicle is still planned for the second half of 2023.

Looking forward from there we're also still planning, for the start of production for the ultra-long-range Nikola two fuel-cell vehicle in the second half of 2024. We're very pleased that we've completed this first phase of the Greenfield Coolidge, Arizona facility, we are calling it point five, where we're currently building the seven trucks, we reference the two-battery electric prebuilds and the five fuel-cell alphas. And as we ramp up this first phase of the facility, we're concurrently building out the next phase. And that will typically expand the assembly area.

And we'll bring our manufacturing capacity to an expected 2,400 units a year, by the end of 2021. And then, we'll begin Phase 2 of the build out in January of 2022. And complete that phase by the first quarter or end of the first quarter in 2023. And at that point, we expect our nameplate capacity to jump to 20,000 per year and Coolidge.

Things are moving with similar speed, at our sister joint venture facility on Germany, which is on the IVECO industrial complex there. The facility and building modifications have heated and all 32 of our automatic-guided vehicles have been incorporated into the assembly line area, and they've been installed there. The company equipment and tooling are currently undergoing calibration. And currently there are those two Nikola Tre battery-electric vehicle gamma builds on the line being assembled.

And we look forward to beginning pre-service production of the Nikola Tre battery-electric vehicle and on in the fourth quarter of this year. On June 22, we announced the purchase of a 20% interest in the Wabash Valley Resources clean hydrogen project, now being developed in West Terre Haute, Indiana. This facility was originally operated as an industrial scale gasification plant, and is now being converted to a world class hydrogen production facility with carbon capture and geologic sequestration. Wabash Valley Resources recently received significant government funding from the Department of Energy, as part of its carbon storage program.

The new plant will use biomass in addition to commodity petroleum coke to create clean and sustainable hydrogen, with the resulting carbon emissions expected to be permanently stored deep underground. As we previously explained, building out our hydrogen fueling system will involve leveraging three value streams. The on-site electrolysis-based hydrogen generating and dispensing stations, which we've talked about in previous quarters. Also centralized hub production of hydrogen and with spoke dispensing locations, which we've also talked about in previous quarters, and then, hydrogen offtake agreements from other efficient and competitive projects.

And WVR is an example of how an offtake agreement can provide hydrogen at or below the cost of diesel, especially in areas where favorable electricity rates may not be available for production by electrolysis. The WVR agreement will enable us to offtake up to 50 tons of hydrogen per day at a target cost of less than $1 per kilogram, helping pave the way for us to provide clean and affordable hydrogen to our customers throughout the Midwest. The location there in Indiana is a critical geography among highly traveled truck corridors. It's within 250 miles of major cities, including Chicago, Illinois, Milwaukee, Wisconsin, Columbus, Ohio, St.

Louis, Missouri, and even Nashville, Tennessee as you can see there on the map. On July 15, we announced an expansion of our sales and service network, adding an additional 51 locations, spanning Texas, Arizona, California, Colorado, New Mexico, Florida, Delaware, Virginia and Maryland. In conjunction with the rig 360 announcement that we made previously in April, we now have our total number of sales and service locations at 116. And as you can see from the map on Slide 10, we're well on our way to our ultimate goal of customer coverage from coast to coast.

We are working on additional locations, which we expect will fill out the remainder of this map. And sales and service support are critical for our customers. Uptime and reliability are of the utmost importance to their operations. Along with the announced station collaboration agreement with travel centers of America, the hydrogen offtake agreement with WVR and the latest expansion of our sales and service network, constitute the building blocks of our bundled lease ecosystem.

It's going to allow us to provide customers with the fuel to power their vehicles and the service and maintenance network that will be needed to keep their trucks on the road. I'll now pass it on to Kim, and he'll go over the numbers.

Kim Brady -- Chief Financial Officer

Thanks, Mark, and good morning, everyone. Before going over our second-quarter results, I would like to provide some color on our agreement with Tumim Stone Capital LLC. The agreement with Tumim provides Nikola with up to $300 million of additional liquidity. The purchase agreement gives us the right, but not the obligation to issue shares of our common stock to Tumim at the market price, minus a 3% discount at our sole discretion.

This is a flexible liquidity solution, allowing us to issue purchase notices to Tumim when Nikola's stock prices strong and minimizing dilution to our shareholders. Moving on to our Q2 results. In the second quarter, net loss was $143.2 million. And on a non-GAAP basis, adjusted EBITDA totaled negative $73.9 million.

Adjusted EBITDA excludes, among other items, one, $52.7 million in stock-based compensation; two, $11 million on regulatory and legal matters and other professional service fees incurred in connection with the Hindenburg short seller article from September 2020; four, $1.9 million in normal depreciation and amortization; and five, $2.5 million loss on revaluation of warrant mobility. The second-quarter research and development expenses were $67.7 million, including $10.2 million of stock-based compensation expense. R&D expenses consist mainly of costs incurred in the developing building, testing, and validation of Nikola trade battery-electric and fuel-cell trucks. SG&A expenses were approximately $70.7 million, including $42.4 million is stock-based compensation expense, and $11 million is legal and regulatory cost.

As of June 30, 2021, our total headcount was 630 employees and is growing at a rapidly as we continue to build our teams in engineering, manufacturing and energy. Turning to the balance sheet. We ended the second quarter with $632.7 million of cash and cash equivalent. We have no outstanding debt as of June 31 aside from our Phoenix headquarters lease obligation.

Our capital expenditures totaled $64.8 million year to date and are comprise of the construction of our Coolidge Greenfield manufacturing facility, and equipment and investments in supplier tooling related to trade BEV production. We ended the quarter with approximately 397 million shares outstanding. Weighted average shares in both basic and diluted for the second quarter were approximately $394.6 million. Basic and diluted GAAP net loss per share for the second quarter was $0.36.

Basic and diluted non-GAAP net loss per share was $0.20. Non-GAAP net loss per share excludes stock-based compensation; loss on revaluation of private warrant liability and regulatory and legal matters. For the second quarter of 2021, we came in below our plan expense ranges, as we continue to be laser focused on managing cash and disbursements. However, we are being aggressive in sourcing battery cells and semiconductor components, including paying deposits and higher prices to ensure our location and shorten the lead time, if possible.

Now turning to our Q3 2021 guidance. Estimated R&D is in the range of $90 million to $95 million, including $10 million of stock-based compensation expense. Estimated SG&A is in the range of $65 million to $70 million, which includes $43 million of stock-based compensation. Total estimated operating expenses will be in the range of $155 million to $265 million, which includes $53 million of stock-based compensation.

Our anticipated capital expenditures for the third quarter are $75 million to $85 million. Moving on to our fiscal-year 2021 guidance. As Mark previously discussed, depending on the receiving date of C-sample vehicle semiconductor components and subsequent validation and testing, saleable vehicles may not be available until early 2022. However, we intend to build and place pre-series trade desks at our dealers for demo and in the customers hand in Q4 2021, for freight hauling on public roads, if possible.

Because some of these vehicles may not be saleable, we may not be able to recognize revenue upon delivery of the vehicles. Accordingly, we are revising our delivery guidance from 50 to 100 vehicles to 25 to 50 vehicles, and revenue guidance from $15 million to $30 million to $0 million to $7.5 million. The anticipated gross margin of approximately negative 190% will remain the same, but the gross profit could improve by approximately $6 million to $10 million, mainly due to decrease in truck delivery guidance. Total expense guidance remains intact, with no changes.

R&D guidance remains at $318 million to $328 million, inclusive of $40 million of stock-based compensation. And the SG&A guidance range is $252 million to $262 million, inclusive of $169 million of stock-based compensation. Our anticipated capital expenditures for the fiscal-year 2021 remain unchanged in the range of $210 million to $230 million. Our capital investment plans include Phase 1 Coolidge manufacturing plant and associated manufacturing equipment, supplier tooling, hydrogen infrastructure, and fuel-cell electric vehicle engineering equipment.

Our anticipated ending cash balance range at the year end, if no additional capital is raised, and Nikola exercises the full $300 million in Tumim purchase rights, is $500 million to $530 million. We are estimating total shares outstanding at the end of 2021 of about 418 million and weighted average shares for the full year ending December 31, 2021 of approximately 413.5 million. This includes: one, estimated employee stock option exercises; two, restricted the stock unit distributions; and three, estimated purchase notices issued to Tumim Stone Capital LLC. We expect that we will fulfill our hiring plan in the coming quarters.

Our headcount as of July 31, is 705 FTEs. By the end of 2021, we should have approximately 1,000 employees comprised of roughly 180 manufacturing plant employees, and 820 corporate and engineering employees. We continue to move forward and execute our business plan despite challenging supply chain constraints. We look forward to achieving the following milestones in 2021.

Deliver pre-series Nikola Tre BEV for use on public roads, hauling customer freight. And now as additional fleet testing, customers and dealers break ground on our first commercial hydrogen station and/or centralized hydrogen production facility and announced additional hydrogen infrastructure and ecosystem partners. This concludes our prepared remarks. We will now open the line for questions.

Operator?

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question comes from Chris McNally with Evercore. Please proceed with your question.

Chris McNally -- Evercore ISI -- Analyst

Thanks so much, gentlemen. So two questions. I guess, the first is really on the elephant in the room and Trevor's lawsuits. So I think, it's clear that the lawsuit is against the person and not the company, which is, obviously, a positive development.

But one of the questions we always get from investors, is your current management was, obviously, around Nikola, next to Trevor, when majority of these statements in question were made. So I guess, my first question is, how would you answer that line of questioning to investors? And maybe, what other questions, I guess, said otherwise? Do you think that you've answered – sort of, best of your knowledge, all the -- the statements that came out of the Hindenburg report, which started off?

Mark Russell -- Chief Executive Officer

Thanks, Chris. Obviously, that is an elephant in the room. And I appreciate you bringing it up first. As you mentioned, the approximately 100 pages of charges against Trevor are against Trevor, personally.

And if you read through those, you'll see that that they all involve statements made by Trevor personally, and nothing the company said or filed. And know nothing by anybody else at the company said or recorded was mentioned in the indictment. So we're very focused on our objectives going forward. This is a potential distraction.

There's lots of potential distractions out there. And our job is to keep everybody focused on delivering on the milestones that we just overview for you.

Chris McNally -- Evercore ISI -- Analyst

OK, great. And then, other -- maybe on the second to business development, clearly, one of the most important questions for investors. After the progress of actually building to EBS is who's going to buy them, and what that level of demand. You've talked about announcing additional launch customers, by the end of the year could you give us an idea about what size order batches? We would expect to see, are we talking about hundreds of vehicles ordered for launch – to launch customers, 1,000, again, this is on orders as opposed to deliveries, just so we can have an under understanding of how broad the order book maybe by the end of the year.

Mark Russell -- Chief Executive Officer

Good question. Thanks, Chris. The current announced customer for the BEV is TTSI. And they current announced customer for the fuel cell, which is behind that, of course, is Anheuser Busch.

Those were very carefully crafted relationships and agreements, contracts that we have in place in both cases. We're not going to take any reservations and nothing around – we are not taking any hand raises or anything like that for the trade battery-electric vehicle. We're only going to be doing contracts. And of course, for a launch customer, like TTSI, we're asking them to do development work with us, and to share risk with us.

For example, as we mentioned, we'll place vehicles with TTSI, even if they're not completely validated because of delays in receiving chip dependent components and because we need to start mileage accumulation in spite of this global part shortage. So we're going to get trucks on the road. They're going to be hauling customer loads. And we're going to accumulate miles starting in the fourth quarter.

But we have to be very careful who we partner with on that. Beyond that, and we've said before, that everybody is interested in these trucks, everybody needs these trucks. Pretty much every customer I've ever talked to is willing to take trucks for evaluation, and we would like one. But what we're focused on now is major customers, who are willing to make long-term commitments and sign broad-based relationship, partnerships with us.

And so if we announced further, it's going to be likely on that front before we start opening-up the order book, and publicly disclosing who's going to be taking, small amounts for evaluation, because that list will be very long. Remember that there's almost 4 million Class 8 trucks on the road in North America, there's more in Europe, and all of them must be replaced. And nobody's working on new diesel vehicles. So the undertaking that we got here is huge than the need for a truck that is proven and can be produced in quantity is massive.

So I'm not saying trust us on the demand. But if you do, there are some macro effects going on here. Everybody needs zero emission trucks. Everybody wants them.

What they want is one that's proven and they can get in volume and when that's reliable, that's that service can support it in the field. That's what we are building. We're building for the long-haul here. No pun intended.

We're building so that we have an ecosystem that's sustainable, that customers can rely on and that we can partner with on over many years. That's our objective here, so you'll see further announcements. We're not rushing any of these things. We got – right now, we've got plenty of people to take trucks in the near term.

We're not producing in volume at first, we are ramping up slowly. And what we need to do is give these pre-series, actually assembly line produced trucks in customer hands and in our dealer hands. Our dealers will run them for their own purposes most of our dealers run their own fleets. And then, they'll be doing demos for their customers.

And they'll be representing us to most of the smaller customers in their respective geographies. And then, we'll do more deals most likely do more deals like TTSI and Anheuser-Busch. As things come along right now, the trucks that will produce in the fourth quarter, all have a home. And as we go forward, we'll announce further deals on those going – going further out.

Kim Brady -- Chief Financial Officer

Chris, we previously mentioned that by the end of this year, that we will be in a position to disclose our backlog, order book and we intend to do that. As Mark talked about, there are dozens of conversations that are going with major customers now. And we anticipate as we continue to announce alliance customers, as well as other customers, that we should be in a position in Q4, where we can start sharing that blog and the order book with respect to our battery-electric truck.

Mark Russell -- Chief Executive Officer

We've had many customers with us on -- in the test track and validation facilities. They're seeing the trucks, they're getting rides in the trucks. They're getting a chance to review everything with us. We have great customer conversations going on.

And we'll bring those to you and let you know more about them in due course.

Chris McNally -- Evercore ISI -- Analyst

Thanks. And sort of paraphrase basically, by the end of the year, we'll find out about the larger backlog, but basically launch customers which will be selective, you're looking for long-term arrangements where they'll be sharing development costs and the ecosystem. And just as the last, real quick, as we should expect those launch customers, primarily focused on the U.S. to start then maybe Europe is something for next year.

Mark Russell -- Chief Executive Officer

That's all correct. That's well said.

Chris McNally -- Evercore ISI -- Analyst

OK, thanks.

Operator

Our next question comes from Jeff Osborne with Cowen. Please proceed with your question.

Jeff Osborne -- Cowen and Company -- Analyst

Yeah, good morning, guys. Just a couple of questions on my end. Kim, I was wondering if we can just go back to the cash burn? Can you talk about what the current burn rate is for quarter? And then, the $500 million to $530 million that you talked about? Is that assuming -- is that assuming that all the human capital is exercised by your end?

Kim Brady -- Chief Financial Officer

Yeah, a great question. For the first three months, when we think about cash burn, we think about both from operating activities, as well as from capex and for first three months, in Q2, we average approximately $35 million for the first six months between operating activities and capex around $31 million. As you know, we were highly favorable with respect to capex in the first half. And so in the second half of the year, we anticipate our capex currently will increase.

And then, by the end of the year, what we have stated is that in terms of all of our guidance with respect to opex, as well as capex we have not changed and they will remain the same. And so we feel pretty confident about what we have forecasted. And then, the ending cash assumes that if we were to exercise all of our foot rights with respect to two main capital, we'll end with approximately $510 million to $530 million of cash.

Jeff Osborne -- Cowen and Company -- Analyst

Got it. And then, Mark, can you update us on where we are with FMVSS and Carb Certification? Is that something that you'll have before the fourth quarter, so that you could start deliveries in a compliant fashion or can you deliver prior to having those?

Mark Russell -- Chief Executive Officer

We certainly deliver prior to that. But and we're working as fast as we can. And the timing of that, of course, depends partly on the regulators and the bureaucracy that we're working with there. So I can't give you an exact date when everything will be in place.

But we're working on all that very rapidly. As you know, California is the target launch, geography for us for both vehicles. Both the fuel cell and the battery vehicles will be launched in California or combination, California. Arizona in case of a long-range trucks.

Jeff Osborne -- Cowen and Company -- Analyst

Just to follow up on that.

Mark Russell -- Chief Executive Officer

So we can --

Jeff Osborne -- Cowen and Company -- Analyst

Sorry to interrupt.

Mark Russell -- Chief Executive Officer

Go ahead. Go ahead.

Jeff Osborne -- Cowen and Company -- Analyst

Just to follow up on that in the event that you don't get carb certification by the fourth quarter, is there any risk to deliveries where people want the credit for that, until you're certified that they won't elect to take delivery?

Mark Russell -- Chief Executive Officer

No, I don't -- we haven't heard anything in that vein. Everybody wants and we want the trucks on the road. We need mileage accumulation at this point. So we wouldn't let that stop us.

Jeff Osborne -- Cowen and Company -- Analyst

Perfect. That's all I had. Thank you.

Operator

Our next question comes from Emmanuel Rosner with Deutsche Bank. Please proceed with your question.

Emmanuel Rosner -- Deutsche Bank -- Analyst

Hi, good morning, everybody. I have three quick questions, if I may. The first one, can you give a little more detail around some of the critical components that are missing, that are difficult to source right now? Know what is -- what are the prospects for that surprise to improve? And how can -- is it possible to use these -- you mentioned using these trucks for testing potentially. So I guess, just curious what sort of components we're talking about?

Mark Russell -- Chief Executive Officer

The ones that we're worried most about are the ones that are dependent on chips. So the electronic components, sensors, touchscreens, things like that, those are the ones that we're most worried about. In most cases, we have the components, we need to operate the truck, just not all of -- for example, some of the displays might not be there, because we don't have the validated -- fully validated production versions of those displays on time because all that's delayed around the world for everyone, as you mentioned, and as you've heard from other OEMs. And so we can -- we believe that we'll be able to finish these trucks, they won't be completely finished in terms of every single part.

But it looks like there's a good chance that they will be usable, just not saleable. We can't transfer titles. We can't put the official VIN number on them until they're saleable. But in that case, if they're drivable, then we're going to put them in places where we can get mileage accumulation other than on the track so that we built 14 vehicles today for testing and validation.

But all of that mileage accumulation is on private property, mostly test track facilities or here at our own facility. So we need we public road mileage accumulation with customer load. So that's why we're going to -- we are going to go in place with our dealers, who can put them in their own fleet, or use them as demos with their own drivers, our trained driver or dealer trained driver. And then, we have select customers, TTSI is one who are willing to get loads on the road with our vehicles for mileage accumulation purposes.

Even if they don't get to take title, at least not immediately. Our goal would be to retrofit those trucks when the parts arrive. And then, some of them will probably become saleable at that point, we can transfer title at that point.

Britton Worthen -- Chief Legal Officer

Emmanuel, as we alluded earlier, we are doing everything we can to pay higher price, as well as trying to improve lead time. There are two key critical components that -- sample perspective likely will not arrive until late Q4 that would be vehicle head unit and display. So what that means is that we will have to validate and test. And depending on the arrival of those components, it may spillover to January in terms of Final Validation and testing before we can have saleable vehicles.

And so what we're trying to do is bring that forward as much as we can. At this point, we cannot confirm that, but we are working actively with chip suppliers to make sure that we can accomplish that. So what we do in that case is we'll put a substitute screen and that won't be the screen that's intended for production. But we put a screen in there for engineering purposes, and then, the truck is operable, just not available.

Emmanuel Rosner -- Deutsche Bank -- Analyst

OK, that's great detail. Then secondly, focusing another important component, the batteries, I think at the last update, you had mentioned that around maybe June and July you have some of the conversations for around sourcing batteries and available supply for 2022. Can you give us any sense of in how these discussions are progressing and to what the extent you may or may not be constrained on the battery supply for next year?

Mark Russell -- Chief Executive Officer

Sure. For Q4, I think, we previously mentioned that we received confirmation for battery cell allocation up to 80 trucks. And so we should not have problem in terms of having capacity build up pay to trucks other than component supply issues. Going to 2022, as we talked about, we are relying on more than just one source in terms of our battery cells.

And we have been in negotiation with battery suppliers, I can tell you that those negotiations are going well. And we have recently started having detailed discussions with respect to battery cell supplier, where we could receive significant battery cells. And we are, obviously, still working through and as you know, the battery cell challenges will likely last 2022 and potentially 2023. And what we have committed at this time, for next year is approximately 1,200 battery-electric vehicles.

Of course, at this time, while we have not revised any guidance, ultimately we will have a better idea by end of Q3 in terms of what we have enabled to procure for 2022, I can tell you that we're well underway at this time. And so we have reasonable confidence that we should be in a reasonably good position. But once again, we will know much better by end of Q3 in terms of what we have been able to confirm and the long-term agreements that we have been able to sign.

Emmanuel Rosner -- Deutsche Bank -- Analyst

OK, that's helpful. And then, just very finally, Kim, can you just update us on how you're thinking about additional equity race, what is sort of like the optimal, or the immediate timing for this, I guess, is the capital from $2 million, and then, the slower sort of like ramp up, is that enough to like push this back a little bit later in the year? Or is the summer still the way to think about it?

Kim Brady -- Chief Financial Officer

Sure. And this is something that we are constantly thinking about, as you know, $2 million capital, equity line of solidity that gives us the flexibility, so that we do have a longer runway. Having said that, we have always been clear about our intention to raise additional capital and go back out to market for follow-on offerings. And of course, there are many factors when we evaluate that one, obviously, being market conditioning with respect to equity market, as well as convertible debt market.

That's something that we're evaluating. We also want to make sure that we try to optimize the timing as much as possible with respect to Nikola and the milestones, and right now, as you know, our stock price is somewhat weak. And so that's something that we'll definitely consider as we think about the timing. But as of now, our current thinking is still to go out to market in the second half of the year, whether that would be toward the end of Q3, or potentially even we're looking for.

Right now, our intention has not changed on that at the market.

Emmanuel Rosner -- Deutsche Bank -- Analyst

Great. Thank you so much.

Operator

Our next question comes from Joseph Spak with RBC Capital Markets. Please proceed with your question.

Joseph Spak -- RBC Capital Markets -- Analyst

Thanks. Good morning, everyone. Maybe just sort of another point of clarification here. You previously talked about delivery of the trade BEVs later this year.

Now you're calling that pre-series, and I get that that's -- it seems like that's because maybe there's some non-validated parts. But is that really what changed here? Or is that -- was that always the case? And is this some new language that, perhaps the lawyers sort of, made you throw in there, or maybe just they really talking about the change. And then, the vehicles you're actually talking about delivering. Are those are fully, I guess, sort of the prior-defined deliveries, like, I guess, I just want to understand the change in the language.

Mark Russell -- Chief Executive Officer

That's exactly right. If we're trying to distinguish between trucks that are saleable and then number, because they're completely validated, every part is there and when we can sign off on them, and those that we would be looking -- lacking one or more parts that are fully validated. So that's exactly how to look at it. We are -- this is the regular assembly line and the regular facilities.

These are the trucks as designed for series production. But they're not -- they may not be saleable. And so we'll call them pre-series until we are officially saleable.

Joseph Spak -- RBC Capital Markets -- Analyst

But the 25 to 50 are pre-series or those are the older finishing saleable trucks?

Mark Russell -- Chief Executive Officer

They will be pre-series until we can make -- if we may be able to make turn some or maybe potentially all of them into saleable trucks. But we won't know that until we get the parts, so.

Joseph Spak -- RBC Capital Markets -- Analyst

OK. So just to be clear then on the change, before it was 50 to 100, saleable now it's 25 to 50 pre-series, although you're hopeful that some of those different saleable?

Mark Russell -- Chief Executive Officer

That's right. And we have the facilities. We have most of the components. But we're going to lacks a few.

The very least will lack the head units and the touch screens.

Joseph Spak -- RBC Capital Markets -- Analyst

And what's the adjustment process on -- I mean, others, I guess, these are still I guess, somewhat prototype. So what's the process here? Do they give you feedback? And then, you sort of can go back and refine? Or is this like, they go into sort of customer testing, and then, they decide if they want to place a larger order.

Mark Russell -- Chief Executive Officer

No. it's pretty straightforward actually. They have to do their own testing of the component, which we have specified. And they have to prove to us that it meets all the requirements, including durability, shock, vibration; everything like that.

So that the component has to meet its specifications from the supplier at the component level, and then, we have to put it in the truck and then, has to be in the truck for the validation and testing of the truck that would include that component. So that -- what we'll get from them is their test -- fully tested component, but it's late, and that then we have to actually put it in the truck. That's why mileage accumulation so important for us. We have to actually get in the truck and we have to get enough hours.

And then, certain conditions that have that test, usually can only be done on a test track, because it's such an extreme edge case or corner case of the use, is that we can only replicate that on -- reliably on a test track. And so that's the timing constraint here. As we were planning to have all this stuff by certain dates in the master Gantt chart, to be able to put those trucks off the assembly line and into customer hands, fully saleable with transfer of title. And we're going to be short because of -- certainly because of these components we just mentioned.

There's possible other shortages, too. There's a ton of shortage to go -- there's lots of shortage to go around right now. This is the worst I've seen it in my career over three decades now. The last time it was even close to this bad, I think was back in 2009.

And if past experience holds that it will turn faster than -- acute than it became apparent. I think back in 2009, it was -- the July shutdown is when it turned, I think. When everybody came back from the shutdown, everybody suddenly started placing orders. And suddenly we went from being nobody want anything to everybody want everything now.

That was the opposite situation where demand has collapsed, and then, it recovered very rapidly. In this case, I think, you could see a turn rapidly. Nobody knows the future. But based on past experience, these things often turn quickly.

Joseph Spak -- RBC Capital Markets -- Analyst

OK. And then, Mark or Kim, I guess, you sort of both touched on this. It sounds like later this year, you all sort of be better to update us for 2022. I think, consensus is already well below what those initial deal presentation showed, which is fair.

I guess, what I want to better understand is, you really also haven't really talked much about those mid-decade targets. But I think, you're willing to admit a ton has changed, both at the company and the industry. And Mark, I appreciate that you said the long-term opportunity is still great. You still believe there's a lot of demand.

But it seems reasonable to assume that even if that is true, the path is different, or the slope is different. So are you willing to update us on some of those midterm targets or when can investors expect an update on that?

Mark Russell -- Chief Executive Officer

Well, in terms of timing, we will definitely do that toward the end of this year. I want to talk about 2022, but as you know, it's still too early. While we are working hard to ensure that we have critical components. And for next year, we are in active negotiation and we will have much better idea about final allocations with respect to components and what may slow us down, is that somehow we do not able to procure a complete allocation for what we need.

But right now, we're making good progress. And because we're still in active negotiations, we're not prepared to share in terms of whether we have fully procured allocation for next year. But we will give you more updates in Q3, as well as Q4 earnings calls.

Kim Brady -- Chief Financial Officer

And if you're talking about further out 2023, 2024.

Mark Russell -- Chief Executive Officer

Yeah.

Kim Brady -- Chief Financial Officer

And on to 25, that's what you're talking about; no, we're not changing those. There's been no mandate change, no push out of dates anywhere in the world. The jurisdictions in Europe and North America and other places that have announced hard numbers that must be met and even outright bans of internal combustion engines in geographies, but none of those are being pushed back. So what this does is, just increase the pressure for people like us to ramp up faster, once we can ramp up.

So we believe we still have a great chance to overcome these near-term, short-term constraints and then, ramp up to the numbers we were talking about. In fact, I think, the pressure will be on us to push it higher, faster than we can -- than we have to be able to meet the deadlines that are looming.

Joseph Spak -- RBC Capital Markets -- Analyst

Thank you very much.

Operator

Our next question comes in a line of Bill Peterson with J.P. Morgan. Please proceed with your question.

Bill Peterson -- J.P. Morgan -- Analyst

Yeah, hi, good morning, and thanks for taking my questions. Starting to come back to this supply constraints. And I realized there's some, uncertainty and maybe even sound like a little bit of a lack of all, but do you? Do you think this is kind of a peek at the constraints? And it starts to get better from here? Or maybe in the discussions that you're having with your suppliers? What are they telling you when these constraints will moderate at this stage?

Mark Russell -- Chief Executive Officer

I'll let Kim, talk about specific suppliers. He's managing that personally, right now with the supply chain team. And for expediting, and everything else and doing a great job. But as I said before, this is the worst I have seen it in my career.

So in that sense, I think it's really hard to get have an informed opinion, because it's just unprecedented how, how widespread it is, and how acute it is, for many parts. And it's right now it appears to be spreading a little bit. We're having people that that we didn't expect, say, hey, just in case, we may be a little bit delayed on other parts, and nobody's made those official yet that I'm aware of, but other people that you know, and these are pretty run of the mill parts that have nothing to do with all the components that we have innovated in the vehicle. These are more run of the mill parts, and having to do with chassis frames and things like that, closures and things like that.

But in my experience, just when it seems like it's, it's going to get so bad that you can't stand it as often when it turns. So I and -- I also know that everybody around the world is scrambling as fast as they can. And the reason that you also know that that it's going to get better is because you're starting to see people push price. So we are seeing, as Kim mentioned before, we're using price to try to get supply everybody else in the world is doing the same thing.

And so if the law of supply and demand still holds true on this planet, then it's going to it's going to be addressed sooner rather than later. Because everybody's scrambling as fast as they can to get to make more of what they do make, because that's how they're going to make money. So I expect it to turn. I'm not sure when -- my estimation is that it will not be long term, I think you're going to see improvements pretty rapidly.

And that depends often on the lead time for capacity additions for certain things. And the new parts especially, needs additional capacity. But for the old line parts for the people that just shut down for COVID and got caught with demand coming back, those people will catch up pretty quick. The people who have to actually add factory capacity like us, actually, you don't have to have those ramp ups can't happen overnight, they have to happen in an orderly fashion.

And that might take a little bit longer. So that's why we're focused on the things that might require additional capacity, like battery cells and chipsets

Kim Brady -- Chief Financial Officer

And as you notice its complex. And it's not clear in terms of visibility although we are getting better indications, two categories of materials storage that Mark talked about the battery cells and semiconductor components. When it comes to battery cells as you know, there are six seven major better cell manufacturers. I think, they're all surprised by demand and they're all scrambling.

We know that in the next three years out, likely they are trying to add capacity. So we suspect by 2024 timeframe, things will look much better, but suffice for 2022 and 2023. And what we're trying to make sure is that we have battery cells available for 2022 and 2023 as we think about demand, and that's where a lot of active discussions are going. When it comes to chipsets, right now, we have been able to issue POs for all of our needs for 2022 and 2023.

While there are some references by a large semiconductor component manufacturers, that perhaps this challenge could last until 2022. However, there are some indication that things might improve by end of 2021. We are reasonably hopeful at this point based on POs that we have already placed for 2022, key critical semiconductor components will be confirmed. And that will be able to receive our allocation that we need.

But once again, biggest challenge really is addressing 2022 and beginning of 2023.

Bill Peterson -- J.P. Morgan -- Analyst

OK, thanks for the color on that. You guys have announced a lot of the sales and service agreements and you're looking at the map, it looks like you have a good chunk of the U.S. covered. I guess, how much further do you have to go here? I think, you say like 116 -- expect to have 116 sales and service locations, I guess, how fast and how large do you expect this network to grow in the U.S.? And I guess, can you give us an update on your partnerships or expected partnerships in Europe? And how to think about that? And then, I guess, just finally related to sales and service, in terms of the economics, how are these channels incentivized? I guess, how are they economic share between Nikola and your partners on this? I guess, any color you can provide sales and service channel would be helpful?

Kim Brady -- Chief Financial Officer

Absolutely. So starting first with your question about coverage. Yeah, we are getting good coverage in critical geographies. Three are some critical geographies uncovered, as you can see on the map, that's where our focus is in the short term.

We'll probably -- you'll see us also probably try to increase the coverage in critical areas that are only marginally covered at this point. So our focus is getting the uncovered parts of that U.S. map filled in. And I think, you'll see us successfully do that in an orderly fashion over the next few quarters, and maybe the next year or two.

But that is critical for us to have. We intend to go to market through our dealers. These are extremely capable dealers who have in most cases been in place in their geographies for a long, long time, several generations in many cases. So they have great infrastructure, they have great relationships with customers, they are currently servicing those customers.

And their customers are really happy about the fact that they're going to be helped with this transition by they're known and trusted local dealer. So our dealership relationships are very similar to other dealer relationships that you would see from -- between an OEM and a dealer, and they get some incentive for selling a truck, and then, they get paid for servicing and supporting that truck. And that's how they earn their money and they're really good at it. We're taking the exact same approach in Europe, we'll go to market through our dealers.

We have an advantage in Europe, because we have an existing dealer network that we are able to utilize in the form of the IVECO dealers. We're able to use as IVECO dealers where we choose and IVECO has some outstanding dealers in many geographies throughout Europe. And so we've got a built-in-place relationship there with our joint venture partner over there, and their existing dealer network. So if we showed you the map of the IVECO dealer network, you see they have pretty good coverage in the major markets in Europe.

And very importantly, in Europe, those dealers are already used to servicing and supporting alternative fuel vehicles, because IVECO is the leader in natural gas-powered vehicles in Europe. So IVECO led in the natural gas transition, which made it cleaner and lower emissions already. And now they're going to be the leader with us and making it zero. So those dealers are already cutting-edge in helping the market transition toward a cleaner, sustainable fleet.

And they're ready to take the next step. Most of them have service facilities that are ready to service fuel, cell and battery vehicles. There's some modifications that have to be made by a dealer, who's been the only servicing diesel engines. They have to put some sensors in and some venting and maybe do a little bit of electrical retrofitting, to be able to service a hydrogen vehicle safely.

And a lot of that works already been done by the dealer network in Europe that we'll be using through IVECO. And here in North America, those dealers that are we're signing up have agreed to make the necessary modifications in time for them to be able to service the vehicles when they're delivered. So we really feel good about all of that. And you'll see us – you'll see more dealer announcements as we fill in the gaps on the map.

Bill Peterson -- J.P. Morgan -- Analyst

Thanks.

Operator

Our next question comes from the line of Jeff Kaufman with Vertical. Please proceed with your question.

Jeff Kaufman -- Vertical Research Partners -- Analyst

Thank you very much. I just want to Kim, go back to the question. I realize you're not looking at your long-term guidance right now. And I guess, my interpretation of the guidance on the trucks waiting for touchscreens is we're going to get those sales in 2022.

Is there any reason to think everything gets pushed back in 2022, with the chip shortage and the delays, or is your feeling that hopefully, we are going to get caught up at some point in 2022, and no reason at this point to alter that forecast?

Kim Brady -- Chief Financial Officer

We're not altering the forecast at this point. But as you know, as we continue to negotiate and try to locked in all of our supply, we will have a much better idea in Q3. And we will be able to share that in our earnings call, I believe in Q3, as well as Q4. And once again, we are trying to make sure that we have adequate supply with respect to battery cells, and as well as key critical semiconductor components.

While we appear to have some confidence about 2022 semiconductor components, once again, things are changing and very fluid. And one of the reasons why we're awaiting is to make sure that we have the best information possible. And because suppliers have been shifting dates at this point that we are not confident as to ultimately what we'll receive. And once we have greater assurance and confidence, that supply will be completely locked in, I think, at that point then we'll be able to give you a better idea about 2022 expectations, as well as better incentive about our demand.

Jeff Kaufman -- Vertical Research Partners -- Analyst

Understood, but the hope is at least right now that at some point in 2022, you're caught up and these situations by the second half of next year are resolved. Question for Mark. If I take out the challenges on the supply chain right now, because that's something everybody is dealing with, and I look at the things that the company has more or less able to control. Or you sit today, are you where you want to be? Or where you thought you would be to the extent you're not.

And I know there was a fair amount of projects that were delayed for damage control a year ago. Where do you think the biggest areas are to catch up in the next six to nine months?

Kim Brady -- Chief Financial Officer

Great question. First of all, we outlined the current milestones and objectives that we're working toward last fall. And I think, where we intended to be generally, we're currently delayed because of the supply chain constraints. And as you've accurately summarized, we have no choice but to catch up once the constraints are past us, because people have to have the trucks.

So the good news is everything that we do have under our control, the completion of the facilities in Germany and in Arizona, the validation and testing of the trucks, the progress on the building blocks of the fueling, service and support and charging infrastructure, all of that's moving at the pace that that we needed to move on the master chart of workflow. So I feel good about where we are in execution for the things that we can control. That is a great way to describe it. And the things that are currently not in our control that are slowing us down this global supply chain constraint, that will not continue.

At some point, we don't know -- nobody knows when. But when that's done, then we have no choice, but try to catch up and make up for lost ground, because that's what the world in the market and the customers need.

Jeff Kaufman -- Vertical Research Partners -- Analyst

All right. Thank you. Kim, last question. In the detail of your earnings release sheet identified about $25 million year to date that's spent related to legal expenses of Hindenburg and others such items.

Do we recapture some of that at some point through insurance or other items? Are these payments above and beyond that, and how much more do you anticipate we'll need to sequester capital for this over the next say six months to 12 months?

Kim Brady -- Chief Financial Officer

Great question. We do anticipate capturing approximately $10 million in Q3 from our D&O insurance. And then, after that there may be additional possibility of $2.5 million in terms of local spend in the next five months also. It's always tricky in terms of anticipating what the legal costs are.

And so we don't try to project that because we have been consistently wrong, when it comes to what that cost might be. But this is something that Britton is managing tightly. And we are hopeful that in the next five months that our legal costs will continue to go down.

Jeff Kaufman -- Vertical Research Partners -- Analyst

And then, some of this will be recaptured through D&O.

Kim Brady -- Chief Financial Officer

Yes.

Jeff Kaufman -- Vertical Research Partners -- Analyst

That's all I have, guys. Thank you, and congratulations.

Mark Russell -- Chief Executive Officer

Thank you.

Operator

We have reached the end of the question-and-answer session. At this time, I would like to turn the call back over to Mark Russell for closing comments.

Mark Russell -- Chief Executive Officer

Very grateful for your participation today and thankful for your support. And we look forward to talking to you again in another 90 days. Thanks.

Operator

[Operator signoff]

Duration: 68 minutes

Call participants:

Britton Worthen -- Chief Legal Officer

Mark Russell -- Chief Executive Officer

Kim Brady -- Chief Financial Officer

Chris McNally -- Evercore ISI -- Analyst

Jeff Osborne -- Cowen and Company -- Analyst

Emmanuel Rosner -- Deutsche Bank -- Analyst

Joseph Spak -- RBC Capital Markets -- Analyst

Bill Peterson -- J.P. Morgan -- Analyst

Jeff Kaufman -- Vertical Research Partners -- Analyst

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