Hyliion's Q3 2025: Contradictions Emerge on Military Contracts, Tax Credits, Delivery Delays, Manufacturing, and Customer Demand

Date of Call: November 12, 2025

Financials Results

• Revenue: $0.8M in Q3 2025 (R&D services), compared to $0 in Q3 2024; YTD revenue nearly $2.8M (all R&D services); full-year 2025 revenue likely ~ $4M (company view)
• Gross Margin: Small gross loss in Q3 2025 (revenue ~$800k; cost of sales ≈ $800k); Q3 2024 had no revenue or cost of sales; YTD gross profit $96k vs $0 YTD 2024

Guidance:

• Full-year 2025 revenue expected to be ~ $4M.
• KARNO commercialization expected in 2026; system sales revenue to begin in 2026.
• Forecasted total 2025 cash expenditures of $65M and year-end cash & investments ~ $155M (subject to timing/size of ~$10M equipment financing).
• Current cash (~$165M) expected to be sufficient through commercialization, but additional capital likely required later for production growth.

Business Commentary:

• KARNO Power Module Performance Improvement:
• Hyliion has achieved significant improvements in the performance of its KARNO Power Module, now delivering over 200 kilowatts of mechanical power and 150 kilowatts of electrical power generation.

• This improvement was driven by implementing a redesigned regen component, leading to enhanced power and efficiency.

• Regulatory Compliance and Emissions:

• The KARNO Power Module met stringent air quality standards, achieving NOx levels below 2.5 parts per million and carbon monoxide in the low single-digits parts per million.

• This was helped by the module's design, which eliminated the need for exhaust after-treatment systems, reducing compliance hurdles.

• Military Engagement and Deployment:

• Hyliion is engaged in delivering KARNO Power Modules to the U.S. military, with additional units planned for 2026.

• The Navy's interest was driven by the low maintenance design and suitability for powering autonomous vessels, enhancing energy security.

• Customer Demand and Orders:

• Hyliion has executed nonbinding letters of intent representing nearly 500 KARNO Cores, indicating strong customer interest.

• The increasing demand is supported by the differentiated attributes of the KARNO system, such as its ability to operate on various fuel types and high efficiency.

• Investment Tax Credit Impact:

• A new 30% investment tax credit is expected to accelerate KARNO adoption, enhancing the economics for customers.
• This tax incentive is anticipated to support the company's commercial ramp up over the next decade.

Sentiment Analysis:

Overall Tone: Positive

• Management: "KARNO Power Module is now performing at a level our initial customers require." EPA determination that KARNO is not an internal combustion engine and UL motor passed on first attempt; "nearly 500 KARNO Cores" under LOIs and strong customer demand; reliability milestone of 100+ days operational testing.

Q&A:

• Question from Edward Jackson (Northland Capital Markets): The customer that shifted acceptance from '25 into '26 — what vertical is that customer?
  Response: It's the U.S. Navy (unmanned ship); installation moved to 2026 and Hyliion will repurpose some early units as demonstration systems until ship installation.

• Question from Edward Jackson (Northland Capital Markets): On Slide 3 I saw KARNO units in the parking lot; are those customer units and is that an indication of progress?
  Response: Yes — multiple customer and company units are operating at the facility as part of testing and integration; this demonstrates build and test progress ahead of customer deployments.

• Question from Edward Jackson (Northland Capital Markets): When will you have all UL testing completed?
  Response: UL certification phases are expected to complete in the next few months; the linear electric motor has already passed on the first attempt.

• Question from Edward Jackson (Northland Capital Markets): Have you installed the rebuilt regen into units and tested it; will it go into initial beta units?
  Response: Yes — the redesigned regen is in both company and customer assets, delivering a step-change in performance (>150 kW) and moving toward the 200 kW commercialization target.

• Question from Sean Milligan (Needham & Company, LLC): For the 500 LOI units, what timing do you expect for customers to test and convert LOIs into purchase orders?
  Response: Some quantities will convert from LOI to firm agreements pre-deployment; customers typically run assets ~6–9 months of testing before committing to further purchases.

• Question from Sean Milligan (Needham & Company, LLC): The 500 units in LOIs — how many customers does that represent and how has the pipeline evolved?
  Response: LOIs represent dozens (not hundreds) of customers; pipeline is expanding, notably in data centers and commercial applications, and demand is expected to outstrip near-term supply.

• Question from Sean Milligan (Needham & Company, LLC): Thoughts on manufacturing scale-up, printer throughput and sourcing challenges (e.g., magnets)?
  Response: Manufacturing issues addressed: motor production brought in-house and regen/depowdering resolved; ~30 printers online (about 3 dozen ordered); focus now on increasing throughput of existing machines before adding capacity; magnet sourcing is a challenge but inventory covers next few quarters.

• Question from Edward Jackson (Northland Capital Markets): You mentioned a delay related to changes during UL work — can you repeat what was changed and why?
  Response: They incorporated high- and low-voltage assembly improvements into the UL unit pre-certification to avoid later recertification; this added time but was a strategic decision to avoid future rework.

• Question from Greg Standley (Hyliion): Why do you see KARNO as a good fit with nuclear and what timeline do you envision?
  Response: KARNO is a heat-powered generator that could replace steam turbines in SMRs to produce electricity more efficiently; Hyliion is in exploratory talks with an SMR organization, but this is a longer-term opportunity with an uncertain timeline.

• Question from Greg Standley (Hyliion): How does NVIDIA's 800‑volt DC architecture match Hyliion's existing architecture?
  Response: NVIDIA expects a shift to 800‑volt DC for data centers; KARNO natively outputs 800‑volt DC, enabling direct integration without additional converters and positioning Hyliion favorably for that market shift.

Contradiction Point 1

Military Contract Progress and Application

It involves the progress and application of the KARNO technology in military projects, which can impact strategic partnerships and revenue expectations.

When will the LOI for 500 units convert to purchase orders and what is the testing timeline? - Sean Milligan (Needham & Company, LLC, Research Division)

2025Q3: The KARNO is intended for use in autonomous unmanned vessels and stationary military base applications. The military plans to utilize the KARNO as a power source for these purposes. - Thomas J. Healy(CEO)

Regarding the Navy contract, can you explain how the Navy plans to use the KARNO and whether you're pursuing other military contracts? - Greg Standley

2025Q2: The KARNO is intended for use in autonomous unmanned vessels and stationary military base applications. The military plans to utilize the KARNO as a power source for these purposes. - Thomas J. Healy(CEO)

Contradiction Point 2

Tax Credit Structure and Benefits

It involves the explanation and benefits of the new tax credit structure, which can affect the company's financial outlook and regulatory environment.

Could you provide details on the industry or vertical market of the customer that shifted its project from 2025 to 2026? - Edward Jackson (Northland Capital Markets, Research Division)

2025Q3: Unlike previous ITCs, this new structure is simpler, with a flat 30% credit for 10 years, without fuel dependency or end-user thresholds. - Thomas J. Healy(CEO)

How does the 30% tax credit compare to previous ITC credits? - Greg Standley

2025Q2: The 30% tax credit for linear generators and fuel cells, like the KARNO, showcases its value for energy resiliency and security. - Thomas J. Healy(CEO)

Contradiction Point 3

Delivery Delays and Product Certifications

It involves changes in the delivery timeline and certification status of key products, which directly impacts customer satisfaction and revenue projections.

Can you explain the delay in deliveries for the 800 kW unit? - Edward Jackson (Northland Capital Markets, Research Division)

2025Q3: We've made some design improvements, and we've decided to implement those improvements in the system before we get the UL certification. So that's caused a little bit of delay in the delivery time. But the good thing is, we'll have a better product in the end. - Thomas Healy(CEO)

Can you deliver 800 kilowatt units to customers by year-end? - Peter Skibitski (Oppenheimer & Co. Inc., Research Division)

2025Q1: We are currently preparing the UL system for the 800 kilowatt unit. This is a separate process from the UL certification for the KARNO Core. Currently, we expect to obtain UL certification by mid-year 2025. - Thomas Healy(CEO)

Contradiction Point 4

Manufacturing Scale-up and Supply Chain Challenges

It involves the company's approach to scaling up manufacturing capacity and addressing supply chain constraints, which are crucial for meeting demand and revenue projections.

How are you scaling manufacturing challenges and sourcing high-strength magnets? - Sean Milligan (Needham & Company, LLC, Research Division)

2025Q3: We're focusing on improving the productivity of the existing machine rather than just adding more machines. The existing machine now will do a single part in less than 3 hours versus 4 hours. And we've got our new system that's supposed to take that down to less than 2 hours per print. So we're optimizing. - Thomas Healy(CEO)

How will the challenges discussed today impact your growth plans for next year? - Greg Standley (Collateral Research)

2025Q1: We're on track for commercialization late this year and do not foresee these issues impacting next year's manufacturing scale-up. We'll be running hot within the next 3 months, ramping our production rapidly. We'll be depowdering at a higher rate. We'll be printing at a higher rate. And we'll be assembling at a higher rate. - Thomas Healy(CEO)

Contradiction Point 5

Customer Demand and Delivery Timelines

It involves the company's expectations for customer demand and delivery timelines, which are critical for revenue forecasting and market positioning.

What is the timeline for converting LOIs to purchase orders for the 500 units and the testing schedule? - Sean Milligan (Needham & Company, LLC, Research Division)

2025Q3: But, you know, for these units, we generally see that there's a 6 to 9 month testing period before you get a final purchase order. - Thomas Healy(CEO)

What incremental changes have been made to the Blackwell GPU, and how do they affect revenue and customer reactions? - Vivek Arya (Bank of America Securities)

2025Q1: We're very confident in our production plans. We know what we need to do. We know the things that we need to work on, and we're working on them very aggressively. - Thomas Healy(CEO)