Hyliion Holdings Corp. Q2 FY2025 earnings call

• Resumption of deliveries after resolving engineering and manufacturing challenges.
• The One Big Beautiful Bill Act established a 30% investment tax credit for customers deploying linear generators or fuel cells, applicable to projects starting in 2026 or later for 10 years.
• Delivered second Early Adopter unit to U.S. Navy; expect to complete assembly of 2 more KARNO Power Modules, including one for UL certification and one for a commercial customer.
• Transitioned LEM production in-house due to ongoing quality issues with contract manufacturer, and scaling in-house production for 2026.
• Confirmed effective powder removal from KARNO Core regen, allowing upgrade to a more complex mesh design for improved performance.
• Awarded Phase II SBIR contract with U.S. Navy for shipboard and stationary applications; KARNO Power Module designated as awardable technology by U.S. Air Force and DoD.
• Signed MOU with Alkhorayef Industries for potential $1 billion KARNO deployment in Saudi Arabia, with initial units expected in 2026; signed LOI with MMR Group for purchase of 3 KARNO Power Modules.

In Q2 2025, Hyliion recorded revenue of $1.5 million from research and development services related to contracts with the Office of Naval Research. Cost of sales was $1.4 million, resulting in a gross profit of $131,000. Year-to-date, revenue was $2 million from R&D services with a gross profit of $143,000. Operating expenses in Q2 were $15.8 million, up from $14 million in Q2 2024, primarily due to increased R&D costs. SG&A expenses were $6 million, down from $6.3 million in 2024. Net loss in Q2 was $13.4 million, up from $10.9 million in Q2 2024 but down from $17.3 million in Q1 2025. Year-to-date net loss was $30.7 million compared to $26.4 million in the prior year.

• Adjusted 2025 revenue forecast down to $5 million to $10 million due to commercialization shifting to 2026.
• Maintaining cash spending forecast of $65 million for the year, with year-end cash and investments expected to be approximately $155 million.
• Capital spending forecast remains with total expenditures of $65 million, assuming offset of cash capital spending with around $10 million of equipment financing if favorable terms are available.

Q: Can you share more on the 30% tax credit, and how does this compare to previous ITC credits?

A: The 30% tax credit from the One Big Beautiful Bill Act is a flat 30% credit, simple in structure, applies to linear generators/fuel cells like KARNO, no stipulations on fuel used, and is in place for 10 years. Previous ITC had stipulations on fuel dependency and thresholds, this new structure is simpler.

Q: On product development, you spoke about LEMs and depowdering. Are there other large issues that need to be resolved prior to shipping?

A: LEMs and regens were major issues addressed. LEMs production is in-house and going well. Regen design was redesigned after confirming effective depowdering, and now in process of manufacturing components for full power operation testing. Goal is to get 10 Early Adopter units out by year-end with learnings for 2026 commercialization.

Q: On the Navy contract, can you share more on how the Navy is planning to use the KARNO? And are you pursuing other military contracts as well?

A: Navy KARNO units are for autonomous unmanned vessels and stationary applications at military bases. Received SBIR Phase II award and awardable status by U.S. Air Force, continuing to pursue military applications for KARNO technology.