Hyliion Holdings Corp. Q1 FY2025 earnings call

• Unveiled KARNO Power Module at ACT Expo, received positive response, and changed the generator's name to KARNO Power Module.
• First unit with U.S. Navy in development and testing, showing good performance and reliability.
• Progress made on addressing challenges: resuming in-house linear electric motor (LEM) production by end of March, and having a solution for depowdering regen parts with positive lab test results.
• Signed non-binding LOI with Mesa Natural Gas Solution for joint demonstration and potential business for 12 KARNO units; over 100 LOIs across various markets.
• Initial definitive agreements in place with early adopter customers including the Navy and Fortune 500 companies.
• Over 20 additive printers installed, with plans to receive more, enhancing scaling ability.

In the first quarter of 2025, Hyliion recorded revenue of $500,000 for research and development services related to contracts with the Office of Naval Research. Cost of sales was also $500,000, resulting in approximately break-even operating income. R&D services revenue was lower than the fourth quarter of 2024 due to deployment delays of early adopter customer units. Operating expenses for Q1 were $19.7 million, with R&D costs at $12.2 million (up from $8 million in 2024), SG&A expenses at $6.1 million (down from $6.6 million in 2024), exit and termination costs at $1.4 million, and a non-cash expense of $1.6 million for writing down powertrain assets. Net loss was $17.3 million, up from $15.6 million in Q1 2024. Cash and investments at the end of Q1 were $198.8 million.

• Expect revenue between $10 million and $15 million in 2025, driven by early adopter unit deployments and R&D activities.
• Anticipate R&D revenue to increase in future quarters as deployments resume.
• Gross margin for R&D services expected to be positive in 2025; potential positive gross margin for KARNO product sales depending on commercialization timing.
• Aim to achieve break-even gross margin on a cash basis near the end of 2026.
• On track to commercialize the KARNO module late in 2025.

• Exposure to tariffs, particularly on additive printers from GE assembled in Germany, which could increase capital spending by $2 million to $3 million.
• Opportunistic investment in used additive printing machines could add to capital outlays.
• R&D expenses higher than expected due to ramp-up in KARNO Power Module production and addressing production issues.

Q: Can you tell us more about the Navy's unit performance?

A: The Navy's KARNO core in a power module at the Cincinnati facility has been running daily through various test parameters. It has shown very consistent reliability with no unplanned downtime since March. Software improvements are being made to enhance performance.

Q: Given where you are and the challenges that you discussed today, how will this impact your growth plans for next year?

A: We anticipated learnings like those with LEM production and regen depowdering during the early adopter program. We allocated time for these in the schedule. LEM manufacturing was the bottleneck, so we're ramping up in-house assembly. We're still on track to commercialize late this year, and this shouldn't negatively impact next year's scaling of production