Hyliion Holdings Corp. Q1 FY2026 earnings call

Core 2026 Strategic Transition

• Hyliion is executing its 2026 plan to shift from development to commercial deployment of the Carno Power Module, with tangible first-quarter progress against key milestones.
• The company successfully completed non-recurring UL certification testing for the Carno Power Module, a required gating milestone that enables delivery of early adopter units to customer sites. Only final individual end-of-line testing is required for each unit moving forward, with no need to repeat the foundational non-recurring testing.

Customer and Partnership Progress

• Expanded U.S. military engagement beyond the Navy and Air Force to additional branches, driven by the Carno platform's unique value propositions: fuel-agnostic operation, low maintenance, and low acoustic/thermal signature ideal for autonomous and mobile power applications.
• Signed a non-binding letter of intent (LOI) for a strategic data center partnership with VFG Holdings, a next-generation data center developer, to deploy up to 250 Carno cores (approximately 50 megawatts of power) over five years. The partnership will demonstrate the platform's benefits including lower on-site power costs, fuel flexibility, and native 800-volt DC output.
• Continued progress on commercial customer development alongside strategic partner ABM Industries, spanning light to heavy commercial applications from 200-kilowatt single-unit deployments to multi-megawatt installations.

Product Development Milestones

• Successfully demonstrated dynamic on-the-fly fuel switching across diesel, natural gas, and hydrogen without system shutdown, validating true multi-fuel flexibility (not just dual-fuel capability) within a single architecture. This capability eliminates the need for separate primary and backup generation systems for data centers and expands addressable market for defense applications.
• Progressed toward the full 200 kilowatt design power rating, achieving double-digit kilowatt improvements from component and software testing in Q1, and remains on track to hit the full 200 kilowatt rating by year end. No repeat UL testing is required for the increased power output.
• Commenced construction of an 800 kilowatt Carno power module for the U.S. Navy, to be deployed on an unmanned vessel under the existing ONR program. The 800 kilowatt architecture is also reusable for scalable multi-megawatt data center configurations by combining multiple units.

Manufacturing and Supply Chain Updates

• Scaled additive manufacturing (3D printing) capacity, with improved part production speeds. Existing printer fleet, plus a few additional printers to be installed in 2026, is expected to meet production needs through 2028. The company remains on track to test new GE Calibrium laser-powered printers later this year for potential further speed and throughput improvements.
• Resolved prior supply chain risk for high-strength magnets, securing alternate sourcing options outside of China that support planned production after prior export constraint concerns.

Hyliion currently generates nearly all revenue from research and development services for military contracts, with no large-scale commercial product revenue yet in Q1 2026. Total Q1 2026 revenue was $2.8 million, up 460% year-over-year from $0.5 million in Q1 2025 and 300% quarter-over-quarter from $0.7 million in Q4 2025. 100% of Q1 2026 revenue came from contracts with the U.S. Office of Naval Research, driven by accelerating work on power module development and builds for the military. Cost of revenue for Q1 2026 was $2.6 million, resulting in a gross profit of $210,000. Operating expenses totaled $13.4 million, down 32% from $19.7 million in Q1 2025, with R&D spending of $7.7 million (down 37% YoY) accounting for most of the decrease due to a shift from non-revenue R&D to revenue-generating military work. Net loss for the quarter was $11.7 million, a 32% decrease from the $17.3 million net loss in Q1 2025.

• Full year 2026 revenue guidance is reaffirmed at approximately $10 million, consisting of R&D services revenue and potential early commercial customer sales.
• Management maintains its long-term three-year outlook unchanged: 2027 will see a ramp of commercial deliveries and transition from initial commercialization to meaningful production scale, with 2028 and beyond bringing accelerated commercial growth as capacity expands to serve broader demand.
• 2026 capital spending is expected to be lower than 2025 as the company optimizes output of existing printers. The company plans to secure up to $10 million in equipment financing in 2026, with the final amount subject to market terms and availability.
• Full year 2026 net spending is forecasted to be just over $50 million, resulting in an end-of-2026 cash and investment balance of approximately $80 million, down from the Q1 2026 closing balance of $139.3 million.
• Management confirms that existing capital on hand is sufficient to fund the company through commercialization of the Carno Power Module. Additional capital will eventually be required to support production growth, particularly for purchasing additional additive manufacturing equipment to accelerate ramping in future years.
• The company expects to sign $40 million to $50 million in new additional military contracts in 2026, on top of the $20 million in ONR contracts currently being executed. It remains on track to complete approximately 10 early adopter units in 2026 ahead of full commercialization around year end.

• Additional capital will be required in future years to fund production scale-up, particularly for the purchase of additional additive manufacturing equipment to meet growing demand.
• Early adopter units have not yet been tested in real-world customer operating environments, and unforeseen technical or performance learnings could impact production ramp timelines and capacity targets.
• The non-binding LOI with VFG Holdings is subject to negotiation and execution of a definitive purchase agreement, with no guarantee the partnership will move forward as planned.
• While alternate sourcing for high-strength magnets has been secured, supply chain disruptions could still impact production timelines and costs.

Q: On the existing $20 million ONR Navy contract, can we expect continued strong revenue similar to Q1 2026 for the rest of 2026? When do you expect the $40-$50 million in new military contracts to be signed, and will revenue recognition be faster given your existing foundation with the Navy? / A: Management expects the strong revenue pace from the existing $20 million ONR contract to continue through 2026, driven by work on the 800 kilowatt Navy power module. New additional military contracts worth $40-$50 million are expected to be signed in the second half of 2026, which will sustain momentum into Q4 2026 and 2027. Military opportunities are a core growth priority, and revenue traction is already accelerating after years of development work.

Q: What progress have you made toward the 200 kilowatt full power certification, and what remains to be done to hit the year-end target? / A: Three months ago, the company hit 175 kilowatts in dyno testing. In Q1 2026, independent testing of new software and component improvements delivered double-digit kilowatt gains, putting the company on track to reach the full 200 kilowatt rating by year end. A major benefit is that no redoing of the completed UL non-recurring testing is required for the higher power rating, only a final individual unit test, keeping the program on schedule.

Q: What core differentiators do data center customers highlight for the Carno Power Module? / A: First, data centers have an extremely high immediate unmet demand for on-site power generation, so any available capacity is in high demand. The key unique advantages are: 1) Fuel agnostic operation, which allows running primary pipeline natural gas and backup diesel on the same unit, eliminating the need for separate natural gas and diesel generator sets; 2) Native 800-volt DC output, which aligns with the industry's shift to 800-volt architectures for AI data centers, eliminating conversion losses and reducing the need for extra transformers and copper wiring. Low noise and low maintenance are additional key benefits that solve common data center pain points.

Q: Can you share a range for 2027 production capacity? / A: Management is not ready to share specific production capacity numbers for 2027 at this time. The company plans to release capacity guidance later in 2026 after gaining operational learnings from the approximately 10 early adopter units deployed to customer sites. The company acknowledges all new technology brings unforeseen learnings, and wants to confirm performance in real-world conditions before committing to public capacity targets, though the goal is to accelerate production meaningfully in 2027 and 2028.

Q: Does completed UL non-recurring testing clear the way for customer site deployments? / A: Completed non-recurring UL testing clears the path to deployments, as all the required foundational testing for the motor, battery, and full power module is done. Each individual unit still requires a final end-of-line performance test to receive its UL nameplate before shipment to customer sites, but no repeated destructive or foundational testing is needed. Once facility-level UL certification is completed later in 2026, individual end-of-line testing for each unit will no longer be required, enabling faster scaled production.