Q3 2024 Hyliion Holdings Corp Earnings Call

Thomas Healy, Jon Panzer, Unknown Executive

Thanks for watching!

Speaker Change: All lines have been placed on mute to prevent any background noise.

Speaker Change: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press the star one again. Thank you. I would now like to hand the conference over to Greg Stanley. Please go ahead.

Greg Stanley: Thank you and good morning, everyone. Welcome to Hyliion Holdings third quarter 2024 earnings conference call. On the call today are Thomas Healy, our Chief Executive Officer, and Jon Panzer, our Chief Financial Officer.

Speaker Change: A slide presentation accompanies this conference call and is available on Hyliion's investor relations website at investors.hyliion.com.

Speaker Change: Please note that during today's call, we will make certain forward-looking statements regarding the company's business outlook. Forward-looking statements are predictions, projections, and other statements about anticipated events that are based on current expectations and assumptions.

As such, are subject to risk and uncertainties.

Speaker Change: Many factors could cause actual results to differ materially from forward-looking statements made on this call.

Speaker Change: For more information on both factors that may cause a company's results to differ materially from such forward-looking statements,

Speaker Change: Please refer to our presentation and press release, as well as our filings with the Securities and Exchange Commission. You are cautioned not to put undue reliance on forward-looking statements, and we undertake no duty to update this information unless required by applicable law.

Speaker Change: Thank you, and I will now turn the call over to Thomas.

Speaker Change: Hello and thank you for joining us for Hylian's third quarter 2024 earnings call. Today I am joined by our CFO Jon Panzer.

Thomas Healy: Over the past quarter, we've made substantial strides on the road to commercialization of the Carnot generator, and I'm excited to share key updates as we approach the start of early adopter customer deliveries in the coming weeks.

Thomas Healy: Today, I'll cover our progress on development, early deployments and our commercialization plans, the growing market interest we're seeing, especially from the data center sector, and additional details on our recent Office of Naval Research contract.

Thomas Healy: To start, I'd like to provide an update on our product development progress. I'm pleased to announce that we've achieved the second-to-last milestone in our commercialization timeline.

Completing beta development work for the 200 kilowatt Carnot generator.

Thomas Healy: With this phase finished, the data generator and its components have now moved to the testing and validation stage as we prepare for early adopter customer deliveries.

Thomas Healy: Over the past year of testing the Carnot Generator, we've seen promising results that highlight its high efficiency, fuel flexibility, and low emissions.

Thomas Healy: These qualities align closely with the needs of customers in our target markets, and we believe they will differentiate the Carnot generator from other power generation solutions in the industry.

Thomas Healy: In both our Cincinnati and Austin facilities, we're currently manufacturing components, running our additive manufacturing printers 24-7, and are receiving parts from vendors to kick off the assembly of the first generators.

Thomas Healy: The key takeaway here is that while we still have further testing and validation steps to complete in the coming weeks, we plan to deliver a couple of customer units before the end of the year.

Thomas Healy: Our plan is to produce about a dozen early adopter units.

Thomas Healy: Initially, we had planned that all early adopter units would be deployed in the field at customer sites.

Thomas Healy: However, some of these early units will initially be deployed at our facility to perform customer-specific requirements testing.

Thomas Healy: before being moved to their final location, while others will go directly to customer sites in 2025.

Thomas Healy: As we've mentioned in previous calls, the goal of the Early Deployment Unit is to integrate Carnot generators into various customer use cases to showcase their performance.

Thomas Healy: We will closely monitor the performance of these units, provide immediate operational support, and make any necessary adjustments to ensure the technology is ready to scale.

Thomas Healy: As noted previously, revenue recognition for units will occur once we've confirmed that the generators meet design specifications, including key performance criteria, in line with the terms of sale.

Thomas Healy: Starting at the end of this year and going through the first half of next year, we'll deliver early adopter units and incorporate insights gained from their operation into design modifications and enhancements for future units.

Thomas Healy: This iterative process is essential to ensuring we deliver the highest quality product to our customers.

Thomas Healy: As we continue scaling production, we expect commercial deployments to begin around mid-2025.

Thomas Healy: This approach allows us to incorporate any feedback and necessary fixes identified from early adopter deployments into the system before we officially commercialize the 200-kilowatt Carnot generator and begin recognizing revenue on sales starting sometime around mid-2025.

Thomas Healy: Shifting now to some significant recent accomplishments, I'm excited to highlight our contract win with the U.S. Office of Naval Research for up to $16 million, announced earlier in the quarter.

Thomas Healy: Through this collaboration, we'll be working with the Navy to explore the Carnot Generator's potential for use in naval vessels and stationary power applications.

Thomas Healy: This contract includes the sale of up to seven Carnot generator systems, which the Navy will deploy in various environments to validate the generator's unique performance characteristics.

Thomas Healy: Key attributes like fuel flexibility, low noise, and low maintenance align closely with the Navy's operational objectives, supporting their goal of identifying advanced power solutions for future vessels.

Speaker Change: I'm also pleased to share a new development in our business strategy.

Speaker Change: With the addition of the new Office of Naval Research contract,

Speaker Change: We will now begin recognizing revenue from R&D services as part of our core business services, along with the development and sale of Carnot generators.

Speaker Change: Including this contract, along with two earlier government awarded agreements, we expect the total value of our R&D services and Carnot generator sales with the Office of Naval Research in the future periods will be up to $17.2 million.

Speaker Change: This will enable us to begin recognizing revenue from these and future R&D contracts starting in Q4.

Speaker Change: We're enthusiastic about this partnership with the Office of Naval Research and believe we have considerable potential for similar contracts in the future, both within the military and across other sectors that stand to benefit from our technology.

Speaker Change: We also recently announced a successful demonstration of the Carnot generator operating seamlessly on multiple fuel sources.

Speaker Change: The test began with natural gas, then shifted to a nitrogen-rich syngas, and finally transitioned through various mixtures of hydrogen and natural gas.

Speaker Change: This demonstration highlights the generator's unique capability to adapt to different fuel sources mid-operation, offering unmatched flexibility.

Speaker Change: This adaptability is particularly beneficial for customers in sectors like renewable fuels and oil and gas, where fuel composition may vary during operation.

Speaker Change: Now turning to some exciting market updates, I'm pleased to report that we have secured letters of intent that exceed the number of units we plan to ship in 2025. We expect to deliver several dozen units over the course of the year, aligning with our previously shared guidance of achieving low double-digit millions in revenue next year.

Speaker Change: This early interest highlights the strong demand and market confidence in the Carnot generator's potential to transform power generation across multiple industries.

Speaker Change: Please note that these letters of intent are non-binding and subject to the execution of definitive sales agreements.

Speaker Change: A few weeks ago, we also signed an LOI with ANA, Inc., a leader in mobile industrial equipment, to pilot the deployment of up to six Carnot generators in mobile power rental applications.

Speaker Change: We expect that this partnership will provide us with a strategic entry into the rental power generation market, allowing us to accelerate adoption with an established industry leader.

Speaker Change: ANA plans to start their initial deployment of the Carnot generator in 2025 after the parties execute a definitive agreement.

Speaker Change: In recent quarters, we've seen increased interest in the kernel generator from the data center sector.

Speaker Change: The rapid growth of cloud computing, artificial intelligence, and data analytics is driving demand for more data centers, each requiring substantial power.

Speaker Change: Our generator can serve as both a primary and backup power source, ensuring uninterrupted operation, a critical requirement for data centers.

Speaker Change: Power demands at data centers in development usually range from 20 megawatts for smaller facilities to over 100 megawatts for large-scale centers, equivalent to deploying 100 200 kilowatt Carnot generators on the low end and more than 500 for larger sites.

Speaker Change: This scale is like customers to request an accelerated timeline for our two megawatt Carnot generator system.

Speaker Change: We plan to begin development of this system early next year, with the first units expected to be available in 2026.

Speaker Change: One major advantage of the Carnot Generator is its modular design. Each 2-megawatt system contains 10 200-kilowatt 4-shaft arrays integrated into a single operating unit to achieve higher power levels.

Speaker Change: These generators can operate together or independently, providing flexible power output to meet diverse demand.

Speaker Change: Lastly, we announced this past quarter that the Carnot Generator now qualifies under California's Renewable Portfolio Standard.

Speaker Change: This qualification is a major milestone as it opens new opportunities within California, a leader in renewable energy adoption and emissions reduction.

Speaker Change: The RPS legislation requires utilities to source a portion of their electricity from renewable sources and the Carnot Generator's capability to operate on renewable fuels like hydrogen and biofuels.

Speaker Change: Make it an attractive option for utilities and other organizations aiming to meet these requirements.

[inaudible]

Speaker Change: To meet demand, we've been rapidly expanding our additive manufacturing capabilities in Austin. Over the past six months, we've grown our fleet of additive print machines with additional units scheduled for delivery through the second half of next year. In the coming weeks, we expect to take delivery of our first M-line production printers from Collibrium Additive, a GE Aerospace company.

Speaker Change: These advanced printers, specifically designed for volume manufacturing, will significantly support our scale-up by providing more lasers, a larger print area, and enhanced production capacity.

Speaker Change: In parallel, we're working to improve the throughput of our existing machines, consolidating prints for greater efficiency, and reducing the number of added parts by transitioning select, less complex components to conventional manufacturing.

Speaker Change: Together, these efforts aim to increase production capacity while also reducing system costs.

Speaker Change: In conclusion, we continue to make excellent progress on multiple fronts, product development, market engagement, and strategic growth initiatives.

Speaker Change: All of this culminates with initial deliveries beginning in the coming weeks, followed by a commercial launch and production ramp up in 2025. With that, I'll now hand the call over to Jon to cover our financial results and outlook.

Jon Panzer: Thank you, Thomas. And good morning, everyone. Operating expenses for the third quarter were $14.2 million, flat with the second quarter of this year, and down compared to the $33.3 million in the third quarter of 2023. This decrease in expenses are related to the wind down of our powertrain business, partly offset by an increase in Carnot spending this year.

Jon Panzer: During the quarter, we recorded a $929,000 credit in powertrain exit and termination expenses, which was driven by the sale of certain assets of the discontinued powertrain business, partly offset by ongoing shutdown costs.

Jon Panzer: Our total net loss in the third quarter was $11.2 million, about flat compared to the second quarter, but down from $30.3 million in the third quarter of 2023.

Jon Panzer: Year-to-date operating expenses totaled $47.2 million compared to $103.7 million in the first three quarters of 2023.

Jon Panzer: Expenses in 2024 include $2.9 million of powertrain exit and termination costs, net of asset sale gains.

Jon Panzer: As we noted last quarter, the wind-down of Powertrain is mostly complete, except we do expect to continue to realize income and cash in the coming quarters from the sale of assets.

Jon Panzer: As of early May, we suspended our share repurchases due to the recent strengthening of our share price and do not expect to execute upon further repurchases, but may resume repurchasing activity at a later date if and as deemed appropriate.

Jon Panzer: Since program inception, we repurchased 10.6 million shares for an aggregate cost of $14 million, resulting in an average purchase price of $1.32.

Jon Panzer: net of asset sales and interest income. Year-to-date cash use was $62 million, including previously restricted cash. We finished the third quarter with $238 million of cash and investments on our balance sheet.

Jon Panzer: Breaking down uses of cash and investments for the years thus far, spending on core carnal development activities totaled about 39 million dollars, including capital investments of 10.5 million dollars.

Jon Panzer: Capital investments were directed mostly towards the purchase of additive printing machines and related equipment. In addition to the 14 million dollars spent on share repurchases, we also spent approximately nine million dollars on powertrain shutdown activities net of asset sale proceeds.

Jon Panzer: We expect that Carnot operating expenses, excluding powertrain exit and termination costs.

Jon Panzer: will grow slightly in the fourth quarter compared to the third quarter and that capital spending will be a little higher than the run rate so far this year due to faster deliveries of additive printers in Texas.

Jon Panzer: For the full year, we continue to expect that total cash expenditures for our Carnot generator business in 2024 will be approximately $55 million.

Jon Panzer: As a reminder, our cash forecast includes operating expenses, capital spending and interest income, but excludes cash spent for share repurchases, powertrain shutdown activities and asset sale proceeds.

Jon Panzer: Note also that this forecast could fluctuate up or down based upon the timing of printer deliveries between now and the end of the year.

Speaker Change: As Thomas mentioned earlier, we expect to begin recognizing revenue from R&D services in the fourth quarter of this year and to ramp up Carnot generator deployments with early adopter customers in the first quarter of 2025.

Speaker Change: While these will be paid deployments, the timing of the payments to Hylion and the recognition of payments as revenue will be subject to the terms of sale and the timing of Carnot generator commercialization.

Speaker Change: These terms include certification and permitting of the generator, as well as achievement of operating performance criteria. We currently expect commercialization of the generator to occur sometime around mid-2025.

Speaker Change: For the fourth quarter of this year, we expect to realize revenue of less than one million dollars related to research and development activities.

Speaker Change: We are maintaining previous guidance that we expect revenue in 2025 to be in the low double-digit millions of dollars, including for R&D services.

Speaker Change: Initially, we expect gross margins to be negative, but also to improve quickly as we realize scale efficiencies in production and purchasing.

Speaker Change: We are currently targeting gross margins to be approximately break-even, measured on a cash basis, by late 2025 or early 2026. Beyond that time frame, we haven't yet developed a firm forecast.

Speaker Change: Finally, we continue to expect that capital we have on hand today will be sufficient for the foreseeable future, including commercialization of Carnot generator sales.

Now I'll turn the call back over to Thomas.

Thomas Healy: Thank you, Jon. Before we open the call to questions, I'd like to reiterate our excitement about the quarters ahead and the future beyond that. We've seen the need for more power and demand for distributed generation solutions significantly increase over the past year.

Thomas Healy: With our unique technology and the growing market interest, we believe Hyliion is well positioned to play a pivotal role in this energy transition.

Operator, we can now open the call for questions.

[inaudible]

Speaker Change: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, simply press the star followed by the number one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press the star one again. If you are called upon to ask your question and are listening by a loud speaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Once again, please press the star one to join the queue.

Speaker Change: And your first question comes from the line of Shan Milligan with Genepi, go ahead.

Speaker Change: I thank you for taking the questions this morning. This first question is just as you exit the beta period, and you head into delivering, I'm curious, you know, kind of what your experience has been in the beta period in terms of learnings or any key takeaways, or is the system kind of operating like as you would expect?

Speaker Change: So what we did is we incorporated a lot of those learnings into the alpha version to be able to test them out. We got that operating at a great level, you know, very pleased with it.

Speaker Change: Unknown Speaker And then, as you as you saw, we completed the development of the beta, which net that really means is all the design was done, it's moved into the testing validation phase, we're still in that phase, but things are looking very promising. And that will put us on track to being able to start customer deliveries by end of this year. So thankfully, a lot of the learnings of kind of new product development, it seems like we're able to catch on the alpha side of things and make great advancements there. And that's really helped with getting us ready for these initial customer deliveries.

Speaker Change: As highlighted on this call, we've done a great job of just lining up these early adopter units to where this is really a partnership with these customers. They realize they're getting early units and we'll be working closely with them to get their feedback and if there are any learnings while these units are being run in the field, then we'll be able to make those improvements.

Thank you.

Speaker Change: Okay, and then I was hoping you could talk about the data center.

Speaker Change: Product a little bit more. I just wanted to confirm is so is there it's just 10 Carno generators inside of a housing like is there any risk

Speaker Change: to upsizing Karno's size there, or you're just stringing it together?

guys you've already kind of worked on.

Speaker Change: Yeah, great question. So inside that enclosure, the plan is there'll be 10 foreshaft systems, but then all of the accessories around that. So when you think about like the cooling system, the air handling system, that'll be integrated together. And so from a development risk, this is more down the packaging side of things, as opposed to redesigning the actual generator. And so from that standpoint, you know, we carry over all the learnings of developing this 200 kilowatt, the genset really isn't changing. More what's changing is the packaging, the accessories that go around the generator to make it run. So that's where you know, we do believe we'll be in a good position to be able to make initial

Deliveries of those two megawatt systems in 2026.

Speaker Change: And then from there we do see the data center space as being just a great driver of market demand. Actually today we recently saw an announcement out of Bloom Energy for up to a gigawatt of power generation for their fuel cell solutions. So I think that points very positively just to the demand we're seeing out of the space and the need for onsite power generation and looking for alternative solutions like fuel cells or like our solution, a linear generator.

Speaker Change: That's great. And that kind of segues to my next question, if I can ask a couple more, but like in terms of Carnot competing versus fuel cells or traditional gen sets, like, how do you stack up? I realize you're not at scale yet, but just.

Speaker Change: cost efficiency, like, how are your customers thinking about those metrics in terms of, you know, potentially buying Carnot's and 26 and 27.

Speaker Change: Yeah, so there's a couple of things that really stand out as differentiators. So one is upfront cost, which we plan on the Carnot generator being less expensive than what we've seen.

Fuel Cell Providers offering.

Speaker Change: The next is just the size of the system. So we're looking at probably in the order of magnitude of about a third the size of a fuel cell.

Speaker Change: So that will help with, you know, one of the things you may have seen in the Bloom announcement is just they had an emphasis on energy density and how much power can be provided out of an acre of land. This is really important stuff for data centers because, you know, they're looking for a lot of power. They have land constraints. And so if you can provide more power out of the same amount of land, that's a big positive.

Speaker Change: And then the other advantage we see, and obviously more of this will be proven out over time, but maintenance and reliability, one of the downsides with fuel cells is the membranes do deteriorate over time, those need to be replaced, and so that's where we see an advantage with the Carnot generator as well.

Speaker Change: Okay, thank you so much. I'll turn it over if there are other people in the queue. If not, I can come back and ask some more. Thank you.

Speaker Change: Thank you and once again if you would like to ask a question simply press star 1.

Speaker Change: And your next question comes from the line of Ted Jackson with Northland Peace. Go ahead.

Thanks very much. Good morning.

Morning Ted. Morning.

Speaker Change: So a couple of questions. You know, actually, I had a lot of questions around bloom fuel cells and you and you guys just went right into it. So that was the meat of my q&a. But when we talk when you you you comment on

Speaker Change: you have sold your production capacity for 2025. And I know, you know, producing and revenue don't necessarily, they're not a linear thing. But, you know, with regards to your production capacity for 2025, you know, what is it on a unit basis? Unknown Speaker

Speaker Change: Yeah, so we're expecting to ship several dozens of units next year and and so we'll get you know as we go through it we'll get more definitive but at this time you know several dozen of units is what we're expecting and then that will generate in the low double-digit millions of revenue for the year.

Speaker Change: When would you expect to recognize revenue on all those units or will some of them you know have to go through their you know qualification and compliance if that makes sense you know that

Speaker Change: If you were say, I don't know, could just call it 24 units, 2000 units, you know, how many of those do you think you would be would be revenue generating for you during the fiscal year?

Speaker Change: I'll take that one, Ted. So maybe I can summarize what Thomas was saying earlier about revenue recognition.

Ted: Just to recap, so we are expecting to start delivering units to customers later this year and then we're going to ramp that up into the first quarter with the early deployment units and then we're going to be addressing any issues and opportunities that come out of those learnings.

Ted: And then what we said is mid-next year, sometime around there, we think we'll be done with R&D and we'll officially commercialize the product. At that point,

Ted: We expect to be able to recognize revenue from all of those previous sales and then all the sales going forward from that point. So I think the safe way to think about it is if Thomas, as he was talking about, our estimate of...

Ted: A few dozen units, we would be able to recognize revenue on all of those units that we sold both this year and next year.

Unknown Speaker

And then with regards to the

Production capacity that you're looking for in 2025.

Speaker Change: Is that predicated on the installation of the new equipment that you referenced in the call earlier, or is that equipment to be installed and then part of the growth strategy beyond 2025?

Speaker Change: Yeah, so the equipment that has been installed over the last quarter will be assisting us with volume for 2025. Now, as we shared during the call, we do have more machines on order into the second half of next year, actually, anticipated deliveries from GE. And we also shared we're weeks away from just taking delivery of the next latest and greatest additive machine out of GE. So those units that will come more later next year are more focused towards 2026 volume. Obviously, units that are installed earlier in the year will assist with volume for 2025. But then as we look at 2026, we'll also plan

Transcript by Transcription Outsourcing, LLC.

Speaker Change: And then you mentioned that the GE equipment that you have on order that's coming in will increase capacity, not just because it's just

Speaker Change: more of the same machines, but it's machines that are capable of producing more for you. So when we think about 2026, if your current capacity, manufacturing capacity, is a couple of dozen units, where does the investment?

Speaker Change: take you in terms of production capacity in 2026? And, you know, I mean, for the best of your ability, how much will it cost to put that capacity in place?

Speaker Change: I'll take a I'll take a shot at that. You know, as Thomas mentioned, it's not it's more like a several dozen units next year, versus a couple dozen units. So

Speaker Change: We're going to be taking delivery of units of additive printers throughout next year, so that's going to continuously.

Speaker Change: Unknown Speaker 05.02.10 Transcription by CastingWords Transcription by CastingWords Transcription by CastingWords

Speaker Change: If you start to look into 2026, we're also looking at

Speaker Change: additional, potential additional capacity beyond that. So it's, you should think of it as a growing number just because of several things. One is we're getting more printers.

Speaker Change: The printers we're getting have higher capacity, and then all of the printing units that we have, we're getting more throughput over time from those.

Speaker Change: through various means. So it's going to, I mean, it's the way to think about it. That is, it's going to be continuously growing. What we gave you for next year is just our...

Speaker Change: Our estimate just based upon what we know and the timing of deliveries and so forth that we should be at least a few dozen units next year, plus or minus, and then it will grow in 26. We just don't have a definitive number yet what that looks like.

Speaker Change: No, and I know it's pretty far away. And I mean, the fact that you're giving the color you're giving on 25 is more than many companies do at this stage of the game. So I do appreciate it.

Speaker Change: I can add one thing, Ted, you had asked about capital.

Speaker Change: You know, so just maybe just give you a little more color on that.

Speaker Change: If you look at what we said, we said about $15 million in capital this year.

for that for that capacity and then.

Speaker Change: Okay, thank you for that. And then my last question for you, going over into, you know, the

Speaker Change: The research revenue that's going to be coming into play with the Navy contract.

Speaker Change: Unknown Speaker So less than a million for this year. Can you put some brackets around in terms of you know, what's the

Speaker Change: sort of, I guess, the length of the contract in terms of timing, you know, how we should think about, you know, how, you know, make some color about how you actually generate the revenue. And then I'm curious, are there any costs associated with that kind of revenue? Or is it a pure margin play?

Speaker Change: Yeah, I'll answer that. So first of all, we mentioned we have actually a number of contracts right now with the ONR, which is the Office of Naval Research.

Speaker Change: on behalf of the Navy, and we are actively pursuing more. So this isn't a one-and-done type of a thing, but more of a continuous process. In fact, we've been executing under agreements, much smaller ones, just going back even a little bit in the past. So it'll be more of a continuous process.

Speaker Change: That you know, so we will be you know, fairly significant amount of revenue we mentioned it includes

Speaker Change: 7 Carnot units and it's really based upon, there is definitely work and cost associated with it.

in terms of building and selling carnal units.

Doing testing

Speaker Change: Developing new capabilities like testing different fuels and so on. There will be cost associated with it and that's...

Speaker Change: That's built into our revenue forecast for next year. But it is very positive for the company for a number of reasons. It does support a lot of our R&D work. It's setting us up for future sales for the military and other applications.

Speaker Change: We look at it as a positive and the fact that we are recognizing it as revenue means we do expect it to be a base part of our core service offerings going into the future.

Speaker Change: It's nothing but positive. I mean, it's obvious, you know, that you could see over the military would have a lot of interest, interest in the Carnot generator. I'm just kind of, you know, trying to understand like, you know, what drives the revenue, you know, in terms of activity on your part. So delivery of Carnot, I guess, is one and then just, I guess, milestones and such as others. Yeah, yeah, exactly. How I would think about it, how I think about it flowing through your P&L. That's all.

Speaker Change: Yes, exactly. It's engineering work, so it's direct services, it's purchase of materials, it's sale of kernel units, and even the fourth thing would be outsource of services that we oversee to other test labs and so on. So it's a little bit of all of that.

Speaker Change: The nice thing, just to add to that, is the system for the military is the same. It's a 200 kilowatt genset, so obviously any testing validation that's done with the military, in good news, it carries over into our other deployments as well. So the nice thing is, you know, it's one 200 kilowatt system.

Speaker Change: Okay, all right. Well, it's all exciting. I will step out of line and see if there's anyone else who wants to ask some questions

Thanks. Thanks, Ted.

Speaker Change: Thank you and your next question comes from the line of Sean Milligan with JANI, please go ahead.

Speaker Change: Thank you. I just wanted to go back to ask a question about the manufacturing side.

Speaker Change: just the supply chain there and you know lead times for the printers and the equipment that you're ordering and just thinking ahead kind of to 2026 when you talk about delivering.

Speaker Change: You know, at least from a testing side, one of the data center ones like that's obviously 10 gen sets right there and data center market is very big. The orders coming out of there. So just kind of like.

Speaker Change: If you could talk about how quickly you could ramp printer orders and how quickly those deliver after you order them.

Speaker Change: Yeah, so it's a multiple quarter lag between when we place orders for the printers and then when we receive them. Now, one thing to note, though, is we are taking delivery here of the latest and greatest machine out of GE. So I think

Speaker Change: We do expect that time between order and delivery of machines to decrease as we go forward as GE starts ramping up the production of those machines.

Speaker Change: Now, in other great news, GE's additive, which is called Calibrium Additive, is a very established business within GE. I actually, just this past quarter, was over at their Germany facility, and they've got tremendous amounts of production capabilities, so we have a great relationship with them. We'll plan on continuing to scale with them, but there are also other printer companies out there that we would be able to source from as well if we needed to. So I think, you know, as we think about, you know, can we get the printers we need in order to scale capacity, I think that's something we'll work closely with GE on, and or others as we need more capacity.

Speaker Change: But, but the other thing that we're going to focus on is how do we get more out of the existing printers that we have. So, for those who are familiar with additive manufacturing, you know, there are levers you can pull, you can increase the number of lasers, you can increase laser power, you can increase the depth of the powder that's being welded, all these things will make the machines more productive.

Speaker Change: And so that's an effort we're going to be focusing on in 2025, is how do we take the existing printer base we have and get more out of it in order to make these machines as productive as possible.

Okay, great. Thank you.

Speaker Change: And again, if you would like to ask a question, simply press the star followed by the number one on your telephone keypad.

Speaker Change: And I'm showing no further questions at this time. I would like to turn the call back to Thomas Healy for closing remarks.

The End

Thomas Healy: Well, thank you, everyone, for joining our third quarter 2024 earnings call. As you heard today, a lot of progress has been made on the commercial front with having LOIs in place that exceed our expected production capacity next year, as well as this interest we're seeing coming out of the data center market and that acceleration of the two megawatt solution to really be able to address the demand we're seeing from that space. So with all that, though, the most important and exciting milestone is just weeks away of getting the initial customer deliveries out there. So we're looking forward to that and being able to share more as we update you on the next earnings call. Thank you very much for joining us.

Speaker Change: Thank you, presenters, and ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.