Q1 2025 Hyliion Holdings Corp Earnings Call

Operator: Hello, and thank you for standing by.

Hello, and thank you for standing by my name is Tiffany and I will be your conference operator today at this time I would like to welcome everyone to the hardly on holdings first quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise.

Tiffany: My name is Tiffany, and I will be your conference operator today.

Operator: At this time, I would like to welcome everyone to the Hyliion Holdings First Quarter 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you.

Speaker Change: After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question during that time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star. One again. Thank you I would now like to turn the call over to Chief accounting <unk>.

Greg Standley: I would now like to turn the call over to Chief Accounting Officer Greg Standley. Please go ahead. Thank you and good morning everyone.

Officer, Greg Stanley. Please go ahead.

Speaker Change: Thank you and good morning, everyone and welcome to hiring on Holdings first quarter 2025 earnings Conference call on today's call are Thomas Healy, Our Chief Executive Officer, and John Kinzer, Our Chief Financial Officer, a slide presentation. During this.

Thomas Healy: Welcome to Hyliion Holdings' first quarter 2025 earnings conference call. On today's call are Thomas Healy, our Chief Executive Officer, and John Panzer, our Chief Financial Officer. The slide presentation accompanying this call is available on Hyliion's investor relations website at investors.hyliion.com.

Speaker Change: This call is available on highly arms.

Speaker Change: <unk> relations website at investors <unk> com.

Thomas Healy: Please note that during today's call we will be making 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 uncertainty. Many factors could cause actual results to differ materially from forward-looking statements made on this call. For more information on factors that may cause the company's results to differ materially from such forward-looking statements, please refer to our presentation and press release as well as our filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on forward-looking statements, and we undertake no duty to update this information unless required by applicable law.

Speaker Change: Please note that during today's call, we will be making 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.

Speaker Change: As such are subject to risks and uncertainties. Many factors could cause actual results to differ materially from forward looking statements made on this call for more information on factors that may cause the companys results to differ materially from such forward looking statements. Please refer to our presentation and press release as well.

Speaker Change: Well as our filings with the Securities and Exchange Commission.

Speaker Change: Youre cautioned not to place undue reliance on forward looking statements and we undertake no duty.

Speaker Change: Permission unless required by applicable law.

Thomas Healy: With that, I now turn the call over to Thomas. Hello, and thank you for joining us for Hyliion's first quarter 2025 earnings call. I'm joined today by our CFO, John Panzer. We're excited to share a number of updates on how we've advanced the Carnot program this past quarter. Just a few weeks ago, we unveiled our Carnot Power Module for the first time publicly at the ACT Expo, an industry-leading event focused on alternative energy solutions. The response was extremely positive, and we had the opportunity to meet with many current and prospective customers. We recently changed the naming structure of the Carnot Generator for marketing purposes.

Thomas Healy: And now I'll turn the call over to Thomas.

Speaker Change: Hello, and thank you for joining us for highly on its first quarter 2025 earnings call I'm joined today by our CFO John Panther.

Speaker Change: We're excited to share a number of updates on how we've advanced the Carno program. This past quarter, just a few weeks ago, we unveiled our Carnero power module for the first time publicly at the Act Expo and industry, leading event focused on alternative energy solutions.

Speaker Change: Sponsors are extremely positive and we had the opportunity to meet with many current and prospective customers.

Speaker Change: We recently changed the naming structure of the Carno generator for marketing purposes, we now refer to the generator as the Carnero power module, which is the complete fully integrated enclosed fueled agnostic power generation solution.

Thomas Healy: We now refer to the generator as the Carnot Power Module, which is the complete, fully integrated, enclosed fuel-agnostic power generation solution powered by the Carnot Core, a four-shaft system inside the power module that produces heat and converts thermal energy generated from oxidation of fuels into electricity. We also had our first unit with the U.S. Navy running through development and testing, and we're very pleased with the early indications of performance and reliability. Additionally, we've made solid progress addressing two key development challenges we discussed on our last call, specifically production of the linear electric motor and the depowdering of complex printed parts.

Speaker Change: Word by the Carnival core a four SaaS system inside the power module that produces heat and converts thermal energy generated from oxidation of fuels into electricity.

Speaker Change: We also had our first unit with the U S Navy running through development and testing and we're very pleased with the early indications of performance and reliability. Additionally.

Speaker Change: Additionally, we've made solid progress addressing two key development challenges, we discussed on our last call specifically production of the linear electric motor and the deep powdering of complex printed parts.

Thomas Healy: I'll provide details on both in a moment. Starting with commercial updates, the ACT Expo in Anaheim, California marked the first time we've shown the Carnot Power Module to the public. The show floor included many companies and technologies which need power, however Hyliion was one of only a few companies at the show presenting alternative power generation technology. That fact alone highlights how underdeveloped the power segment is and reinforces the need and uniqueness of our solution. We met with a number of existing and potential customers and partners across a wide range of applications, EV charging, waste gas utilization, hydrogen production, and microgrids.

Speaker Change: I'll provide details on both in a moment.

Speaker Change: Starting with commercial updates the act Expo in Anaheim, California, Mark the first time, we've shown the Carno power module to the public.

Speaker Change: The show floor included many companies and technologies, which need power. However, highly on was one of only a few companies at the show presenting alternative power generation technologies.

Speaker Change: Fact alone highlights how underdeveloped the power segment is and reinforces the need and uniqueness of our solution.

Speaker Change: We met with a number of existing and potential customers and partners across a wide range of applications EV charging waste gas utilization hydrogen production and micro grids.

Thomas Healy: They were all heavily represented, and the consistent message we heard was the need for power continues to grow. Also, it's worth noting that another linear generator producer recently raised over $250 million, a strong signal of investor confidence in this category and validation that the market for distributed power is expanding. A few weeks before ACT-Expo, Monroe Live, a popular YouTube channel known for deep dives on new technologies, released a walkthrough video of our R&D Center in Ohio and the Carno Power Module. The video continues to draw significant traction and has further expanded visibility of our solution.

Speaker Change: There were all heavily represented and the consistent message. We've heard was the need for power continues to grow.

Speaker Change: Also it's worth noting that another linear generator producer recently raised over $250 million, a strong signal of investor confidence in this category and validation that the market for distributed power is expanding.

Speaker Change: A few weeks before act Expo Munroe live a popular Youtube channel known for deep dives on New technologies released a walk through video of our R&D Center in Ohio, and the cargo power module.

Speaker Change: The video continues to draw significant traction and has further expanded visibility of our solution.

Thomas Healy: I'd strongly encourage everyone on this call to go watch this video if you'd like to gain a greater understanding of how the Carno Power Module works.

Speaker Change: I'd strongly encourage everyone on this call to go watch this video if you'd like to gain a greater understanding of how the carnal power module works.

Thomas Healy: I'm pleased to share that we recently signed a non-binding LOI with Mesa Natural Gas Solutions, a leader in power generation solutions within the oil and gas and industrial sectors. This LOI covers joint demonstration of the Carnot power module and a business potential for up to 12 Carnot units. The relationship represents another important step in expanding the variety of deployment applications for the Carnot platform. We now have well over 100 units under non-binding LOIs across a range of markets, including data centers, EV charging, waste gas utilization, industrial deployments, and military programs. These LOIs continue to build a healthy backlog of interest that we expect to convert into binding agreements as our deployments ramp.

Speaker Change: I am pleased to share that we recently signed a nonbinding LOI with Mesa natural gas solutions, a leader in power generation solutions within the oil and gas and industrial sectors. This LOI covers joint demonstration of the Carno power module and a business potential for up to 12 cargo unit.

The relationship represents another important step in expanding the variety of deployment applications for the Carnival platform.

Speaker Change: We now have well over 100 units under non binding LOI across a range of markets, including data centers EV charging waste gas utilization industrial deployments and military programs. These LOI has continued to build a healthy backlog of interest that we expect to convert into buying.

Speaker Change: Agreements as our deployments ramp.

Thomas Healy: We now have initial definitive agreements in place with all of our early adopter customers. This includes the Navy, as well as a couple of Fortune 500 companies. While we're not yet disclosing their names, we look forward to doing so once the units are successfully deployed and running at our customers' sites.

Speaker Change: We now have initial definitive agreements in place with all of our early adopter customers. This includes the navy as well as a couple of Fortune 500 companies, while we're not yet disclosing their names we look forward to doing so once the units are successfully deployed and running at our customer sites.

Thomas Healy: Now I'd like to provide an update on how our work is going with the U.S. Navy. As we mentioned on the last call, we delivered our first Carnot core to the Navy in Q1. This unit is operating at our Cincinnati facility, where it's been running through a range of development and validation tests, including frequent start-stop cycles, confirmation of its load-following capabilities, control panel functionality, cloud telemetry, and other software and safety checks. Overall, we are very encouraged by its performance and reliability, and are pleased to say that the system has experienced no unplanned downtime or availability issues since we began the regular operation of the unit back in March.

Speaker Change: Now I would like to provide an update on how our work is going with the U S. Navy.

Speaker Change: As we mentioned on the last call we delivered our first carnal core to the Navy in Q1. This unit is operating at our Cincinnati facility, where it's been running through a range of development and validation tests, including frequent start stop cycles confirmation of its load following capabilities control panel functionality.

Speaker Change: Cloud telemetry and other software and safety checks overall, we are very encouraged by its performance and reliability and are pleased to say that the system has experienced no unplanned downtime or availability issues. Since we began the regular operation of the unit back in March.

Thomas Healy: Our engineering team has been implementing software improvements and system upgrades based on operating feedback, and those upgrades are progressing well.

Speaker Change: Our engineering team has been implementing software improvements in system upgrades based on operating feedback and those upgrades are progressing well.

Thomas Healy: In addition, we completed a new diesel test rig for the Navy this quarter, which allows us to further validate operation on liquid fuels and refine the design of our reactor accordingly.

Speaker Change: In addition, we completed a new diesel test rate for the Navy this quarter, which allows us to further validate operation on liquid fuels and refine the design of our reactor accordingly.

Thomas Healy: Let me now touch on the two issues we flagged last quarter and the progress we've made addressing them. First, on the production of linear electric motors, the primary reason we haven't delivered more early adopter units during this quarter is the lack of available linear electric motors. As we shared on the last call, we had transitioned assembly of this part to a contract manufacturer, but production issues continue and have led us to start bringing manufacturing of certain parts of this component back in-house. Since we successfully built these motors internally before, we're confident in our ability to ramp production here in Austin.

Speaker Change: Let me now touch on the two issues, we flagged last quarter and the progress we've made addressing them.

Speaker Change: First on the production of linear electric Motors. The primary reason, we haven't delivered more early adopter units. During this quarter is the lack of available linear electric motors as we shared on the last call. We had transitioned assembly of this part to a contract manufacturer, but production issues continue and have led us to stop.

Speaker Change: Bringing manufacturing of certain parts of this component back in house since.

Speaker Change: Since we successfully built these motors internally before we're confident in our ability to ramp production here in Austin in fact, we expect to resume in house LM production before the end of this month, which will supplement capacity from our contract manufacturer.

Thomas Healy: In fact, we expect to resume in-house LEM production before the end of this month, which will supplement capacity from our contract manufacturer.

Thomas Healy: Second, on depowdering, we previously noted challenges removing trapped powder from a mesh-like section of a carnal part called the regen. I am happy to report that we now believe we have a solution to this problem using a combination of advanced cleaning methods. We are pleased with early lab testing results using these procedures. In early design iterations, we increased the mesh spacing to make powder removal easier, but that negatively impacted power output from the Carnot core. With the new depowder solution in place, we are able to revert to a more tightly packed mesh, which we believe will address the power deficit.

Speaker Change: Second on the Powdering, we previously noted challenges removing trapped powder from a mesh like section of a carnal part called the region.

Speaker Change: I'm happy to report that we now believe we have a solution to this problem using a combination of advanced cleaning methods.

Speaker Change: We are pleased with early lab testing results using these procedures in early design iterations, we increased the mesh spacing to make powder removal easier, but that negatively impacted power output from the carnal core.

Speaker Change: With the new <unk> powder solution in place, we are able to revert to a more tightly packed mesh, which we believe will address the power deficit.

Thomas Healy: Fortunately, this is a relatively simple part to swap out, so we are able to upgrade units once the new part design is validated and becomes widely available. We are in the process of validating the new part design and functionality and confirming our ability to remove residual powder. Printing of production regens will then follow.

Speaker Change: Fortunately this is a relatively simple part to swap out. So we are able to upgrade units once the new part design is validated and becomes widely available.

Speaker Change: We are in the process of validating the new part design and functionality and confirming our ability to remove residual powder.

Speaker Change: Printing of production regions will then follow.

Thomas Healy: These two issues have consumed part of our schedule flexibility this year, but are consistent with the type of challenges we anticipated during the pre-commercial phase. In the meantime, we've continued development of software improvements and other feature enhancements that were also anticipated. Although we did not ship additional early adopter units in Q1, we have continued building printed part component inventory, and our plan remains to deliver 10 early adopter units in 2025. That said, we are now expecting that some of these deployments will shift further out in the second half of 2025. This shift is due in part to delays in electric motor and regen production that I mentioned and also to complete testing and validation work when the Carnot module is operating at full power.

Speaker Change: These two issues have consume part of our schedule flexibility this year, but are consistent with the type of challenges we anticipated during the pre commercial phase.

Speaker Change: In the meantime, we've continued development of software improvements and other feature enhancements that we're also anticipated.

Speaker Change: Although we did not ship additional early adopter units in Q1, we have continued building printed part component inventory and our plan remains to deliver 10 early adopter units in 2025.

Speaker Change: Said, we are now expecting that some of these deployments will shift further out in the second half of 2025.

Speaker Change: This shift is due in part to delays in electric motor and re Gen production that I mentioned and also to complete testing and validation work when the cargo module is operating at full power.

Thomas Healy: We also believe that our commercialization timeline remains intact and we expect to launch commercially and deliver additional Karno modules to customers later this year. On the manufacturing front, we now have over 20 additive printers installed and operational. This includes multiple generations of machines, including GE's latest M-Line machine. We recently received our second M-Line printer, and additional printers are scheduled for delivery throughout the year. These machines significantly increase our ability to scale throughput and put us in a stronger position for ramping up production next year. We are also continuing to develop a broader supply base, working closely with vendors to improve component quality, reduce lead times, and drive cost efficiencies across the Carnot platform.

Speaker Change: We also believe that our commercialization timeline remains intact, and we expect to launch commercially and deliver additional carno modules to customers later this year.

Speaker Change: On the manufacturing front, we now have over 20 additive printers installed and operational this includes multiple generations of machines, including Ge's latest M-line machine. We recently received our second <unk> printer and additional printers are scheduled for delivery throughout the year. These machines.

Speaker Change: Significantly increase our ability to scale throughput and put us in a stronger position for ramping up production next year.

We are also continuing to develop a broader supply base working closely with vendors to improve component quality reduce lead times and drive cost efficiencies across the carnival platform.

Thomas Healy: To wrap up, we're encouraged with how the initial Karno systems are performing and are proud of the engineering progress made this quarter. Customer traction remains strong and we're seeing increasing demand for distributed clean power solutions like ours, validated both by our own growing pipeline and by the broader success of other players in this space. We are reiterating the guidance we shared last quarter. We remain on track to commercially launch the Carnot Power Module by year-end, and we continue to expect revenue between $10 million and $15 million for full year 2025, driven by early adopter unit deployments and R&D activities.

To wrap up we're encouraged with how the initial cargo systems are performing and are proud of the engineering progress made this quarter.

Customer traction remains strong and we're seeing increasing demand for distributed clean power solutions like ours.

Speaker Change: Validated both by our own growing pipeline and by the broader success of other players in the space.

Speaker Change: We are reiterating the guidance, we shared last quarter, we remain on track to commercially launch the Carno power module by year end and we continue to expect revenue between 10 million and $15 million for full year 2025, driven by early adopter unit deployments and R&D activities.

John Panzer: With that, I'll now turn the call over to John for the financial update. Thank you, Thomas. And good morning, everyone. Starting with our 2025 first quarter results, we recorded revenue of $500,000 for research and development services related to our contracts with the Office of Naval Research. Cost of sales was also $500,000, resulting in the operating income of approximately breakeven. In the first quarter of 2024, we recorded no revenue or cost of sales. R&D services revenue was lower than the fourth quarter of 2024 due to the delays and deployment of early adopter customer units Thomas discussed earlier.

Speaker Change: With that I'll now turn the call over to John for the financial update.

John: Thank you Thomas and good morning, everyone, starting with our 2025 first quarter results. We recorded revenue of $500000 for research and development services related to our contracts with the office of Naval research cost of sales was also $500000, resulting in the operating income of approximately.

John: Breakeven in the first quarter of 2024, we recorded no revenue or cost of sales.

John: R&D services revenue was lower than the fourth quarter of 2024 due to the delays in deployment of early adopter customer units Thomas discussed earlier we.

John Panzer: We do expect R&D revenue to be higher in future quarters this year as deployments resume. Operating expenses for the first quarter were $19.7 million compared to $19 million in the first quarter of 2024. Research and development costs were $12.2 million compared to $8 million in 2024. This increase reflects a ramp up in R&D work, growth in the production of additive components, and the procurement of parts for our initial Carnal power module deployments this year. SG&A expenses were $6.1 million down from $6.6 million in 2024 due primarily to lower facilities and insurance costs. Exit and termination costs in the quarter were $1.4 million and were related to the shutdown of our former powertrain business that began in late 2023.

John: We do expect R&D revenue to be higher in future quarters. This year as deployments result.

John: Operating expenses for the first quarter were $19 $7 million compared to $19 million in the first quarter of 2020 for research and development costs were $12 2 million compared to $8 million in 2020 for.

John: This increase reflects a ramp up in R&D work growth in the production of additive components.

John: And the procurement of parts for our initial carnal power module deployments this year.

John: SG&A expenses were $6 1 billion down from $6 6 million in 2024, due primarily to lower facilities and insurance costs exit and termination costs in the quarter were $1 $4 million and were related to the shutdown of our former powertrain business that began in late 2023.

John Panzer: We recognized a non-cash expense of approximately $1.6 million to write down the value of certain powertrain assets that we previously reported as held for sale. This expense was partly offset by approximately $200,000 of asset sale gains that we recorded during the period. In the first quarter of 2024, powertrain exit and termination costs were $4.4 million. We recorded $2.5 million of interest income during the first quarter, which is down from $3.4 million in the prior year quarter due to a lower level of investments this year. Our total net loss in the first quarter was $17.3 million, up from $15.6 million in the first quarter of 2024.

John: We recognized a noncash expense of approximately $1 6 million to write down the value of certain powertrain assets that we previously reported as held for sale.

John: This expense was partly offset by approximately $200000 of asset sale gains that we recorded during the period and the first quarter of 2020 for powertrain exit and termination costs were $4 4 million.

John: We recorded $2 5 million of interest income during the first quarter, which is down from $3 4 million in the prior year quarter due to a lower level of investments. This year. Our total net loss in the first quarter was $17 3 million up from $15 6 million in the first quarter of 2020.

John: Four.

John Panzer: Turning to our cash and investment position, we spent $20.9 million during the first quarter of this year. Capital spending was $7.3 million and primarily consisted of additive printing machines and related equipment. Asset sales were $219,000 and the remaining $13.7 million of spending was related to ongoing business operations. We finished the first quarter with $198.8 million of cash and short and long-term investments on our balance sheet.

John: Turning to our cash and investment position, we spent $29 million during the first quarter of this year capital spending was $7 3 million and primarily consisted of additive printing machines and related equipment.

John: <unk> sales were $219000 and the remaining $13 $7 million of spending was related to ongoing business operations. We finished the first quarter with $198 8 million of cash and short and long term investments on our balance sheet.

John Panzer: I want to next address our plan cash spending for the year and highlight several risks and opportunities that we First, we have some exposure to tariffs, the largest of which relates to the purchase of additive printers from GE, which are assembled in Germany. The 10% tariff that is currently in place with EU countries is expected to increase our capital spending by $2 to $3 million this year. While we source most carnal power module parts from domestic suppliers, there are some parts or subcomponents that are made overseas, and thus also subject to tariffs that could raise other spending.

John: I want to next address our plan cash spending for the year and highlight several risks and opportunities that we see.

John: First we have some exposure to tariffs the largest of which relates to the purchase of additive printers from GE, which are assembled in Germany. The.

John: The 10% tariff that is currently in place with EU countries is expected to increase our capital spending by $2 million to $3 million this year.

John: While we source most carnal power module parts from domestic suppliers. There are some parts or sub components that are made overseas and thus also subject to tariffs that could raise other spending.

John Panzer: Next, we remain opportunistic about investing in used additive printing machines that are of the same models we operate today. We've identified a number of such machines that could also add to our capital outlays this year.

John: Next we remain opportunistic about investing in used additive printing machines that are of the same models. We operate today, we've identified a number of such machines that could also add to our capital outlays this year.

John Panzer: Finally, R&D expenses are running somewhat higher than we expected this year due primarily to more rapid printing and component sourcing operations as we ramp up Carnot power module production and as we address the production issues Thomas mentioned earlier.

Speaker Change: Finally, R&D expenses are running somewhat higher than we expected. This year due primarily to more rapid printing and components sourcing operations as we ramp up carnell power module production and as we address the production issues Thomas mentioned earlier, we previously.

John Panzer: We previously expected that capital expenditures for 2025 will be approximately $25 million, primarily related to purchases of new additive printing machines, facility upgrades, and other assets needed to ramp up Carnot power module production. We now expect capital expenditures could be closer to $30 million, although that number could vary based on the timing of printer deliveries and opportunities for additional printer purchases.

Speaker Change: As expected the capital expenditures for 2025 will be approximately $25 million, primarily related to purchases of new additive printing machines facility upgrades and other assets needed to ramp up cargo power module production.

Speaker Change: We now expect capital expenditures could be closer to $30 million, although that number could vary based on the timing of deliveries and opportunities for additional purchases as we plan for production growth in 2026, we plan to offset cash capital spending with around $10 million of equipment financing.

John Panzer: As we plan for production growth in 2026, we plan to offset cash capital spending with around $10 million of equipment financing if favorable terms are available.

Speaker Change: <unk> terms are available to summarize these changes we previously stated that we expected total cash outlays this year to be around $60 million.

John Panzer: To summarize these changes, we previously stated that we expected total cash outlays this year to be around $60 million. We now expect that spending could be closer to $65 million due to the impact of the items I just discussed, leaving our year-end cash and investment balance at approximately $155 million.

Speaker Change: We now expect the spending could be closer to $65 million due to the impact of the items I just discussed, leaving our yearend cash and investment balance at approximately $155 million.

John Panzer: As Thomas mentioned earlier, we expect to generate between 10 and 15 million dollars of revenue for 2025, including both R&D services and sales of 200 kilowatt Carnot power modules to customers. Implicit in this assumption is our expectation of commercializing the Karna module late in the year when we would also expect to recognize revenue from customer early adopter units. The recognition of payments as revenue will be subject to the Terms of Sale and the actual timing of Carnot Power Module Commercialization. These terms include certification and permitting of the power module, as well as achievement of operating performance criteria.

Thomas Healy: As Thomas mentioned earlier, we expect to generate between 10 and $15 million of revenue for 2025, including both R&D services and sales of 200 kilowatt cargo power modules to customers.

Thomas Healy: <unk> and this assumption is our expectation of commercializing the carnal module late in the year. When we would also expect to recognize revenue from customer early adopter units.

Thomas Healy: The recognition of payments as revenue will be subject to the terms of sale and the actual timing of Carnival power module commercialization. These.

Thomas Healy: These terms include certification and permitting of the power module as well as achievement of operating performance criteria.

John Panzer: As we reported last quarter, we expect gross margin for R&D services this year to be positive. We may also report positive gross margin for Carnot product sales depending on the timing of commercialization due to the current expensing of purchase components as R&D costs. We continue to expect that we will quickly drive down production costs as we scale manufacturing volume and as we roll out the two-megawatt Carnot module in the future.

Thomas Healy: As we reported last quarter, we expect gross margin for R&D services this year to be positive.

Thomas Healy: <unk> also report positive gross margin for carnal product sales, depending on the timing of commercialization due to the current expensing of purchase components as R&D cost. We continue to expect that we will quickly drive down production costs as we scale manufacturing volume.

Thomas Healy: And as we rollout the two megawatt Cardinal module in the future.

John Panzer: Our current outlook for achieving break-even gross margin on a cash basis is near the end of 2026. Finally, we continue to expect the capital we have on hand today will be sufficient through the commercialization of Carno power module sales.

Thomas Healy: Our current outlook for achieving breakeven gross margin on a cash basis is near the end of 2026.

Speaker Change: Finally, we continue to expect the capital we have on hand today will be sufficient through the commercialization of carnal power module sales now I'll turn the call back over to comps.

Thomas Healy: Now I'll turn the call back over to Thank you, John. Q1 was an important quarter for Hyliion as we transitioned from early stage development into our first deployment and public showcasing of the Carnot Power Module. From unveiling the system at ACT Expo to demonstrating strong performance with the U.S. Navy, we've laid a solid foundation for the remainder of the year. We're encouraged by the growing customer demand, the progress made in resolving key production challenges, and the continued expansion of our additive manufacturing capabilities. As always, our focus remains on delivering reliable, fuel flexible, and scalable power solutions to customers in critical sectors.

Speaker Change: John Q1 was an important quarter for highly on as we transitioned from early stage development into our first deployment.

Speaker Change: And public showcasing of the Carno power module from.

Speaker Change: Unveiling the system at Act Expo to demonstrating strong performance with the U S. Navy we've laid a solid foundation for the remainder of the year. We're encouraged by the growing customer demand. The progress made in resolving key production challenges and the continued expansion of our additive manufacturing capabilities.

Speaker Change: As always our focus remains on delivering reliable fuel flexible and scalable power solutions to customers in critical sectors. We look forward to updating you on additional deployments technical milestones and commercial traction on our next earnings call with that we'll now turn the call back over to the operator.

Thomas Healy: We look forward to updating you on additional deployments, technical milestones, and commercial traction on our next earnings call.

Operator: With that, we'll now turn the call back over to the operator for Q&A. There are no audio questions at this time.

Speaker Change: <unk> for Q&A.

Greg Stanley: There are no audio questions at this time I will now turn the call back over to Greg Stanley.

Greg Standley: I will now turn the call back over to Greg Standley. Thank you.

Greg Stanley: Thank you.

Greg Standley: We have a few questions that have come in from shareholders. The first question is, can you tell us more about the Navy's unit performance? Thanks, Greg. Absolutely. So we've been, as you shared on the call, pleased with the reliability that we've seen out of the system.

Speaker Change: We have a few questions that have come in from shareholders and the first question is can you tell us more about the Navy's performance.

Greg Stanley: Thanks, Greg.

So we've been as we shared on the call pleased with the reliability that we've seen out of the system so to set the stage.

Greg Standley: So to set the stage, so you can understand kind of what we're running on the system. So we've got the Navy's Carnot core in a power module at our Cincinnati facility that we're running on a daily basis. And so we're running it through different test parameters where we've got it connected to a load bank where we're turning it on, turning it off, running it through different power levels. And I think the biggest thing to note of it is we've seen very consistent reliability out of it. So since we started running it a couple of months ago, we haven't had to take the Carnot core out of the power module at all.

Greg Stanley: So you can understand and kind of what we're running on the system. So we've got the Navy's Carnival core in a power module at our Cincinnati facility that we're running on a daily basis, and so we're running it through different test parameters, where we've got it connected to a load bank, where we are.

Greg Stanley: Turning at Ontario, running through different power levels, and I think the biggest thing to note is we've seen very consistent reliability out of it so.

Greg Stanley: Since we started running at a couple of months ago, we haven't had to take the carnal core out of the power module to all we havent had to tear it down do any rebuilds of it.

Greg Standley: We haven't had to tear it down, do any rebuilds of it. It's just been a stable, reliable system. We are going through making software improvements and changes to it to improve the performance of it. But I think the reliability is something that has really stood out for a very early unit to get out there and have that sort of reliability is something we expected, but also something that we're very pleased about.

Greg Stanley: It's been a stable reliable system, we are going through making software improvements and changes to it to improve the performance of it but I think the reliability is something that has really stood out.

Greg Stanley: For very early unit to get out there and have that sort of.

Greg Stanley: Reliability is something we expected, but also something that we're very pleased about.

Greg Standley: Given where you are and the challenges that you discussed today, how will this impact your growth plans for next year? So, on today's call, we did give updates, things that we highlighted on the last earnings around lens production, as well as the depowdering of the regen, and then being able to redesign the regen in order to achieve full power. And these are things that we did anticipate having learnings like this throughout this year as we go through the early adopter program. And so, we did allocate time for this in the schedule, however, some of these learnings came earlier in the rollout, and so we decided, okay, let's roll in regen improvements.

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

Greg Stanley: Yeah. So on today's call, we did give updates things.

Greg Stanley: Things that we highlighted on our last earnings around lemon production as well as the deep powder in the region, and then being able to redesign the region in order to achieve full power.

And these are things that we did anticipate having learnings like this throughout this year as we go through the early adopter program and so we did allocate time for this in the schedule. However, some of these learnings came earlier in the rollout and so we decided okay, let's let's roll in <unk> improvement.

Greg Standley: The lens manufacturing has really been what's prevented us from shipping more units to date. That's really been the bottleneck on the supply chain, hence why we've decided, in addition to having a contract manufacturer, we're also standing up in-house assembly of that component to hopefully overcome that deficit of units that we have. So, with that, we are still on track to be able to move into commercialization late this year, which then we don't envision has an impact into the amount of units and scale up of production that we'll do next year. As we've been going through these couple of improvements that we're working on, we've been continuing to make parts.

Greg Stanley: <unk> manufacturing has really been what's prevented us from shipping more units to date, that's really been the bottleneck on the supply chain. Hence why we've decided in addition to having a contract manufacturer. We're also standing up in house Assembly of that component to hope hopefully overcome that that deficit of units that we.

Greg Stanley: So with that we are still on track to be able to move into commercialization late this year, which then we don't envision has an impact into the amount of units and scale up of production that we will do next year.

Greg Stanley: As we've been going through these these couple of improvements that we're working on we've been continuing to make parts thankfully. The region is a very easy part to replace in the Gen set and then <unk> is obviously a core component that we cant make additionally units without having but in terms of next year, we don't see.

Greg Standley: Thankfully, the regen is a very easy part to replace in the genset, and then lens is obviously a core component that we can't make additional units without having. But in terms of next year, we don't see anything that we discussed on today's call having a negative impact on our ability to scale manufacturing.

Greg Stanley: Any of anything that we discuss on today's call, having a negative impact on our ability to scale manufacturing next year.

Greg Stanley: Yeah.

Greg Standley: That addresses all the questions.

Thomas Healy: That addresses all of the questions I will turn the call back over to Thomas for closing remarks.

Thomas Healy: I'll turn the call back over to Thomas for closing remarks. Thank you, Greg.

Thomas Healy: Thank you Greg.

Thomas Healy: So thank you, everyone, for joining today's earnings call. As you know, as noted, we thought it was a successful quarter with being able to show strong reliability out of the Navy unit, and then a lot of progress made on addressing a couple of those key issues in the regens and the LEMs, that then once we have those in place, we'll be able to continue deploying additional early adopter units with still being on track to getting 10 of those out through this year and getting to commercial launch later in this year.

Thomas Healy: You everyone for joining today's earnings call.

Thomas Healy: As you know as noted we thought it was a successful quarter with being able to show strong reliability out of the Navy unit and then a lot of progress made on addressing a couple of those key issues in the region and lens that then once we have those in place we'll be able to continue.

Thomas Healy: Cloying additional early adopter units with still being on track to getting 10 of those out through this year and getting to commercial launch later in this year. In addition to that I just wanted to highlight that our team was participating in and part of.

Thomas Healy: In addition to that, I just wanted to highlight that our team was participating in part of the visit that President Trump had over to Saudi Arabia over the last couple of days here. We've been doing that in partnership with a company there in Saudi Arabia, and we hope to share more on that visit here in the coming days. So with that, thank you for joining today's earnings call, and we look forward to sharing further updates on the continued deployment of these early adopter units on our next earnings call. Thank you, everyone.

The visit that President Trump had over to Salvi, Saudi Arabia over the last couple of days here.

Thomas Healy: We've been doing that in partnership with a company there in Saudi Arabia, and we hope to share more on that visit here in the coming days. So with that thank you for joining today's earnings call and we look forward to sharing further updates on the continued deployment of these early adopter units on our next earnings call. Thank you everyone.

Thomas Healy: Yes.

Operator: Ladies and gentlemen, this concludes today's call. Thank you all for joining.

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

Operator: You may now disconnect.

Yeah.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yeah.