Hyliion Holdings Corp.

Hello everyone, thank you for joining us and welcome to the Hylion Holdings 4th Quarter 2025 Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. I will now hand the call over to Greg Stanley, Chief Accounting Officer. Please go ahead.

Welcome to Hyliion Holdings' fourth quarter 2025 earnings conference call. On today's call are Thomas Healy, our chief executive officer, and John Panzer, our chief financial officer. A slide presentation accompanying today's call is available on Hyliion's investor relations website at investors.hylion.com. 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 uncertainties. Many factors could cause actual results to differ materially from forward-looking statements made on this call. For more information on both factors that may cause a 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. With that, I will now turn the call over to Thomas.

Hello, and thank you for joining us for Hyliion's fourth quarter and full year 2025 earnings call. Heading into 2026, we are positioned strongly to deploy more early adopter units and move towards commercialization. As we shared on our last call, the Carno Power Module is now performing at a level that meets our initial customer needs. On today's call, we'll provide more details on our early customer deployment plans and cover the current status of UL certification and product performance, demand we're seeing across commercial and military markets, and how we are preparing to scale production to support growth. Turning first to UL certification. We made significant progress during the quarter and are now nearing completion of this important milestone. To provide additional context, UL certification for the Carnot power module occurs at three levels. The linear electric motor, the battery pack, and the full powered module. I'm pleased to share that we have successfully completed UL testing for both the linear electric motor and the battery pack, meaning we have completed two of the three certifications we need. We have completed our initial round of testing on the full power module. Through that process, we identified several small refinements, including gasket updates to further strengthen water ingress protection and the opportunity to incorporate recent power output improvements. With those enhancements now underway, we plan to begin our next round of UL testing shortly and expect to complete certification in the second quarter. Overall, we are very encouraged by the progress and view UL certification for the early adopter units as a near-term gating item towards delivering units to customer sites. Beyond certification progress, we now have five Carno units at our facility. two development units, and three early adopter customer units. These systems are being continuously exercised through a range of load profiles, extended duration testing, customer-specific operating scenarios, and military representative applications. As we shared last quarter, we achieved over 150 kilowatts of power generation, which is sufficient for initial customer deployments. We have since demonstrated 175 kilowatts of power production and testing following recent upgrades, and we expect to reach the full 200 kilowatt design power rating by year end as we transition into commercialization. These improvements include refinements to the piston design and updates to the cylinder liner material to enhance heat retention within the system. Importantly, we do not believe reaching the full power rating will require any fundamental architecture changes, but rather a series of incremental optimizations across the platform. The steady progress we have made the past couple of quarters reinforces our confidence in achieving the final 200 kilowatt design specifications this year. Fuel flexibility continues to be a key differentiator of the Carnot system, and we have made meaningful progress in this area during the quarter. We successfully demonstrated dynamic fuel switching with the Carnot power module transitioning between natural gas and propane. The system can automatically switch between fuels without shutting down and without any user input to indicate which type of fuel is being utilized. We simply change the incoming fuel supply and the unit continues to operate as designed, truly highlighting our unique fuel agnostic capability. Another recent accomplishment was successfully running a Carno core on diesel fuel and being able to export power to the grid while meeting tier four final emissions requirements without the use of exhaust after treatment systems. We expect to begin incorporating diesel capability into customer deployed systems this year. Diesel capability is particularly important for defense applications where it remains the dominant fuel source. More broadly, The majority of installed generators worldwide operate on diesel, which significantly expands the Carnot Power Module's addressable market in mission critical and prime power applications. For example, many data centers prefer pipeline natural gas for prime power, but still require on-site diesel for resiliency. We believe our ability to operate on both fuels will allow customers to avoid purchasing separate natural gas and diesel generators, instead relying on a single flexible platform for both primary and backup operations. Next, I'd like to share our outlook for 2026, including our deployment plans, product development priorities, business development activity, and manufacturing capacity. We are entering 2026 with strong demand across commercial, data center, and military markets. As previously shared, We have nearly 500 units under non-binding letters of intent, in addition to a broader set of customers actively evaluating the platform. The primary focus now is transitioning from development into real world field deployments and moving towards commercialization and scaling. From a deployment perspective, our overall plan remains consistent with what we have previously communicated. We expect to deploy approximately 10 early adopter units prior to commercialization, including the two units delivered to the Navy last year and a third unit that we have recently completed and that will go to a customer site following UL certification and product validation. Throughout 2026, we plan to deploy these systems into customer environments with commercialization to follow late in the year. One area where we are seeing particularly strong long-term interest is the data center market. With recent industry announcements pointing towards a shift to 800 volt DC architectures for next generation AI facilities, we believe our Carno technology is uniquely well positioned. Our platform already operates at 800 volts DC, which aligns directly with this emerging standard and has the potential to reduce conversion stages, lower equipment requirements, improve overall system reliability and efficiency, and simplify site electrical architecture. In 2026, we plan to demonstrate this capability in live environments to showcase the potential. Early this year, we successfully demonstrated a mission representative Navy load profile on a Navy-owned Carno asset. The system managed rapid load changes and sustained performance under high stress operating conditions, reinforcing its suitability for shipboard and defense use. This is an important validation milestone and has accelerated discussions around additional defense platforms and with NASA, who is exploring coupling our Carnot technology with nuclear power generation. We have identified several near-term opportunities across multiple branches of the military that are moving toward potential contract awards, which we expect to finalize this year. We believe these opportunities could represent $40 to $50 million of new revenue opportunities on top of the approximately $20 million of contracts with ONR that we are currently executing on today. As part of our current Navy program, We plan to deliver additional Carnot power modules and cores in 2026 for specialized shipboard testing. Once completed, these deliveries will represent about half of our early adopter units. One deliverable will be a multi Carnot power module for the ship, demonstrating our ability to create higher power systems through coupling our 200 kilowatt cores. Building on our work with the Navy, I'd like to provide an update on our plans for the previously discussed two megawatt Carnot power module, which we believe aligns well with the needs of data centers and other high power applications. In 2025, we spent significant time developing a multi Carnot power module configuration for shipboard use. Through that effort, we identified substantial overlap between the Navy architecture and what is required for higher power commercial deployments. As a result, we have leveraged that design foundation to advance a modular scalable configuration suitable for data center applications. Our initial concept was a two megawatt system comprised of 10, 200 kilowatt Carno cores integrated into a compact footprint, roughly the size of a 20 foot shipping container. Recent customer discussions have led us to evolve the configuration into a more flexible architecture. The system is designed to scale in approximately 800 kilowatt increments, allowing configurations such as 800 kilowatts, 1.6 megawatts, 2.4 megawatts, 3.2 megawatts, and so on. This modular approach aligns closely with feedback from data center customers where power requirements vary depending on site electrical architecture. By enabling expansion through the addition of core sets, we can tailor output to specific customer needs while maintaining high power density and resiliency. Moving on to our commercial customer developments, we recently entered into a strategic partnership with ABM Industries to support the deployment of integrated distributed energy solutions. This collaboration combines Carnot technology with ABM's site engineering, integration, and operational capabilities helping simplify deployment and broaden customer access across commercial, industrial, data center, and mission-critical applications. ABM is also equipped to offer energy-as-a-service contracts with their customers. This partnership allows us to remain focused on advancing and commercializing the Carno platform while leveraging an experienced partner to support end-to-end customer solutions. Next, I'll provide a brief update on our manufacturing readiness. Today, we operate more than 30 additive manufacturing machines, the majority of which are located at our Austin facility. These printers band three different machine models with configurations that are able to produce one, two, or four parts at once. We expect to take delivery of several additional printers this year that we've had on order from last year. With these additions, we believe our additive manufacturing capacity will be well positioned to meet planned production needs for 2026 and 2027, while providing a strong foundation for scaling further into 2028. Our current focus is on maximizing the speed, power, and productivity of each machine. During the first quarter of 2026, we initiated efforts to improve printer throughput, and we'll be dedicating both printer time and engineering resources to these optimization initiatives throughout the year. In parallel, we plan to take delivery of and begin testing one or more printers equipped with the latest laser technology from GE Calibrium, which we believe has the potential to further improve print speed and efficiency. On our last earnings call, we discussed the potential risk related to magnet supply, particularly given export constraints from China. We are pleased to share that we have made meaningful progress in mitigating that risk and have already begun receiving components. While this does not fully eliminate supply chain risk, it substantially reduces our exposure and improves our confidence in supporting planned production. To wrap up, I'd like to share our key milestones for 2026, which are summarized on this slide and highlight the achievements we expect to deliver over the course of the year. We began the year with an early win by successfully operating the Carno core on liquid fuel and meeting emissions requirements. Looking ahead, we expect to achieve UL certification for the early adopter Carno power modules during the second quarter of this year, which will enable broader customer site deployments. In parallel, we expect to achieve the full 200 kilowatt design power by the end of 2026. We also plan to complete the remaining early adopter units during the year. These deployments are an important step towards validating system performance across real-world applications and will support our plan to commercialize the 200 kilowatt Carnot power module in late 2026, which will then allow us to begin scaling production. In addition, we expect to complete a multi-Carno core platform featuring the systems and controls required to coordinate multiple units operating in tandem. This configuration will serve as a stepping stone towards a larger multi-megawatt Carno system designed to support data centers and other customers with high power requirements. We expect to secure additional US military contracts with a total revenue opportunity of $40 to $50 million. further advancing the development work underway to support autonomous Navy vessels and other mission-critical defense applications. Taken together, these milestones support our expectation of generating approximately $10 million of revenue during 2026 from a combination of commercial customer activity and R&D service contracts. Looking ahead over the next three years, we plan to build on the progress achieved in as the Carnot Power Module transitions from early deployments into scaled commercialization. In 2027, we expect to ramp commercial deliveries and expand the range of applications where Carnot is deployed. This includes advancing the development of a multi-megawatt Carnot Power Module for data center applications. We view 2027 as the year where we transition from initial commercialization into meaningful production scale. In parallel, we plan to expand our additive manufacturing capacity in preparation for anticipated growth in 2028. By 2028 and beyond, we expect to accelerate commercial growth as increased production capacity enables us to address a broader portion of customer demand. This includes fulfilling interest in multi-megawatt systems for data centers, as well as continued expansion within military applications. To wrap up, 2025 was a year focused on resolving product and production challenges, strengthening the core architecture of the Carno power module, expanding its operating capabilities across fuel and mission profiles, and improving performance. In 2026, our focus shifts from development to deployment and commercialization. With UL certification nearing completion, early adopter units moving into the field, growing military engagement, and strong data center interest, we believe we are well positioned to transition from validation to scaled execution over the coming years. With that, I'll turn the call over to John to walk through the financial update.

Thank you, Thomas, and good morning, everyone. In the fourth quarter, we recorded revenue of $700,000 from research and development services related to our contracts with the Office of Naval Research. Cost of sales was $600,000, resulting in a small gross margin gain. In the fourth quarter of 2024, we recorded 1.5 million of R&D revenue and $100,000 of gross margin. As a reminder, R&D services revenue reflects the sale of carnal cores and related components to the U.S. Navy and the work we performed to test and validate these units. Total operating expenses for the fourth quarter were $15 million, down from $17.2 million in the fourth quarter of 2024. The decrease was driven by lower R&D and SG&A costs, as well as $500,000 in gains from asset sales in connection with the powertrain exit and termination. R&D work continued at a strong pace in the quarter, but was lower than 2024 when we were purchasing components at a faster pace. SG&A expenses were down about 6% compared to the fourth quarter of 2024, due primarily to lower facilities and insurance costs, partly offset by a small increase in labor costs. Our total net loss in the fourth quarter was $13.2 million down from $14.4 million in the fourth quarter of 2024. For the full year 2025, we recorded revenue of $3.5 million all from R&D services and gross profit of $170,000. This compares with revenue of $1.5 million and gross profit of $100,000 in 2024. Full year operating expenses were $65.7 million compared to $64.4 million for all of 2024. The small increase compared to 24 is related to higher R&D expenses this year, partly offset by lower SG&A and powertrain exit and termination expenses. Our full year net loss was $57.2 million compared to $52 million in 2024. Turning to our cash and investment position, we spent $12.4 million during the fourth quarter and $67.4 million for all of 2025. Full year capital spending was $23.7 million and consisted primarily of added printing machines and related equipment along with facility investments to support printer operations. Cash generated from asset sales for the full year was $2.2 million. As a reminder, asset sales relate to the monetization of equipment previously used in our powertrain division and will continue into 2026. We finished the fourth quarter with $152.4 million of cash and short and long-term investments on our balance sheet. While this outcome is a little lower than the $155 million we projected for year end, we did end up deferring $10 million of planned equipment financing into 2026. Excluding that deferral, our year end cash and investment balance would have been about $7.5 million higher than projected, mostly due to lower capital spending and lower operating expenses. Looking forward into 2026, as Thomas noted earlier, we expect to generate approximately $10 million in revenue this year from both R&D services and commercial customers. Commercialization of the Carnal Power Module is expected to occur late in the year. Also, as Thomas mentioned, we plan to slow capital spending in 2026 as we work to optimize the output of the printers that we have on hand today. We are planning to execute equipment financing for up to $10 million this year, although that amount may shift up or down based on actual capital expenditures and available lease capital. Overall for 2026, higher revenue, thoughtful expense control, lower capital spending, and planned equipment financing are expected to result and a lower level of total spending compared to 2025. Our current forecast is for net spending of just over $50 million during the year, resulting in a year-end cash and investment balance of approximately $100 million. On past calls, we've consistently noted that we expect the capital we have on hand today to be sufficient to carry us through commercialization of the Carnal Power Module. Based on our current plans, that continues to be the case. Last quarter, we noted that we anticipate additional capital will eventually be required to support production growth, particularly for the purchase of additional additive manufacturing equipment. In anticipation of that eventuality, we have filed a standard S3 shelf registration statement with the SEC to provide us with additional capital raising flexibility in the future. An S3 is a valuable tool commonly used by established public companies to efficiently and opportunistically raise funds from time to time through the issuance of debt or equity. Now I'll turn the call back over to Thomas.

As we look ahead, our focus for 2026 is clear. We'll be building units and getting them into the field, expanding real-world operating experience, and moving into commercialization. We believe this year will be defining for Hyliion as customers begin operating the platform in live environments and we transition from development to scaled execution. Beyond initial deployments, we see significant opportunity in both data center infrastructure and military applications. The shift toward an 800-volt DC architecture in next-generation AI data centers aligns directly with Carnot's design, and we believe our modular and fuel-flexible platform is well positioned to support this evolution. At the same time, resilient and mission critical power remains a priority for the US military. We are excited by the opportunity ahead and our focus on execution as we move into the next phase of growth. I will now hand it over to the moderator to open up for Q&A.

We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. Please pick up your handset when asking a question, and if you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Our first question comes from the line of Martin Molloy with Johnson Rice. Your line is open. Please go ahead.

Good morning. Congratulations on all the progress you're making. Wanted to ask about the commercialization later this year. And you mentioned I think half the units will be going to the U.S. Navy. Could you talk maybe about the end markets for the other units and where you're seeing

um customer interest from um you mentioned data centers is that where the the other half of the units are going sure appreciate the question uh so military is a huge focus for us this year uh you know we're at the point where we're actually starting to put the systems together that will go into that unmanned autonomous ship so that's a very exciting one for us this year Other applications include just prime power. So think about like powering facilities, providing power for EV charging, those sort of opportunities. And then the last one is that data center side of things. So ultimately data centers are looking for that larger platform that, you know, 2.4, 3.2 megawatt system. But one of the focuses for this year is we can really showcase and, you know, provide the benefits to data centers, even on a 200 kilowatt system. And so one of the things that we decided to do is take some of these early adopter units and actually use them as mobile units that we can showcase in various applications. And so one of the ones we do plan on showcasing this year is a data center opportunity.

Thank you. And just for a follow up question, could you maybe talk about the capacity that you'll have as you exit this year in terms of manufacturing on a megawatt annual basis or give us some measures what it would cost to add additional megawatts per year in manufacturing capacity so we can get a feel for how 27 might look?

So, at this stage, we haven't shared exact specifics around what you're asking. Reason being is We really want to showcase improve this printer speed improvements that we were highlighting. So that's going to be a big focus of this year. You know, just to give a little background there as you buy an additive machine and you start utilizing it, there are levers you can pull, like how much power in the lasers, how many parts you're producing on a build plate, things like that to increase the throughput. And so that's going to be the focus for this year. And then with that, that'll give us a stronger clarity on exactly how much capacity we have with the existing installed base. But all that being said, we are highly confident that we have the strong production capacity for 26 and 27. And then as we look at 2028, that's where we envision we'll really need to start adding additional printers to start scaling capacity. So I know that does not give you the exact color you were looking for, but hopefully you understand why we want to focus on those printer speed improvements and proving that we can get to the throughput that we anticipate.

Thank you. Very helpful and I'll pass it back.

Our next question comes from Sean Milligan with Needham & Co. Your line is open. Please go ahead.

Hey, Thomas, thanks for taking the questions. When you talk about the incremental $40 to $50 million potential from the military, I'm trying to understand, is that, like, do you consider that skilled deployments or is that like additional testing across different platforms and different agencies, things like that, that would then scale, you know, could scale beyond that $40 to $50 million range?

Yeah, so it is really focused on additional applications and more unique development for the military. And so right now we have our Navy work we're doing. It's really focused around being the prime power on a fully unmanned autonomous ship platform. We are also looking at stationary power deployment. So think about like powering a base, doing that with the Navy. These additional contracts are both a continuation of that work, plus adding actually new applications, new opportunities. So think about like different ship platforms, think about other branches of the military, how they need prime power solutions as well, and starting to expand the use cases of the Carnot technology. It's not so much just placing a standard PO to just buy additional equipment, but obviously all this work we're doing with the military is in an effort to go to that stage.

Okay, great. Thank you. And then on this new 800 kilowatt module that you're talking about, I think historically you gave some numbers around KPIs for the Carnot versus like fuel cells or traditional gas. I was curious if there's any update in terms of like how this, you know, module might change that. Does it look more attractive for you? Um, as you scale up to the larger, you know, the larger platforms here, and then what kind of risks are there scaling up from the 200 to the 800 and then the 3.2 ultimately, what do you need to work through on your side to prove that up and get that done?

All right, so a few pieces to that question. So. First is around kind of how it compares against other solutions in the market. So we see customers looking at kind of the conventional internal combustion engines, looking at fuel cell, and then looking at technology like ours. In terms of how it shapes up, and I'll put some broad numbers to it, is with a normal internal combustion engine cost per And maybe I'll use, you know, if you look at our 200 kilowatt system, what the end numbers would be. If you bought a 200 kilowatt internal combustion engine really designed for prime power and natural gas solution, you're probably going to be approaching that $250,000, $300,000 for that actual solution. Then, as you look at our system, we're more around half a million dollars. As you look at fuel cells, you're up closer around that $700,000. So it really still puts us in the middle of those two, which is where we're targeting to be. And then, you know, obviously our system has benefits over those other solutions that really drive the payback, the return on investment. So that's improved efficiency. So you're actually going to use less fuel. And then on the maintenance side, having lower maintenance as well as what we're anticipating, which will then help you with driving a faster payback and return on your investments. So that's kind of how we shape up against competition. Now, another one of the benefits of this modular platform is it allows customers to really match the power they need with the amount of capacity we're giving them. So different data centers have different architectures and this 800 kilowatt system allows that flexibility. In terms of the risks you asked about of going from 200 to 800 to then the 3.2. So the core, the key thing here is the actual power generation unit, that 200 kilowatt Carnot core remains the same in every size iteration. And so once we validate and have confidence in that 200 kilowatt architecture, you're really just replicating it. I would equate it to think of like going and buying an electric vehicle. You can buy ones that have different ranges. At the end of the day, they're just putting more of the same batteries in the vehicle to get you longer range. We're taking the same approach to power generation where we're putting more of the same Carnot cores back together to give you more capacity. So in 25, we actually spent a lot of time, a lot of effort on developing this 800 kilowatt system because that is what's being utilized for the Navy. And then from there, what we said is, well, as opposed to going and doing a reengineering and doing a two megawatt system, why don't we just take that 800 kilowatt and make that modular so that those can be stacked together? So we are already well underway with the development of that system, actually.

And then on the ABM deal or partnership, can you just give us a little more background on ABM and maybe like their expertise in terms of power deployment and like what in markets they are, you know, stronger in?

Absolutely. So ABM has a lot of breadth and experience in this space in power generation. And, you know, their skills are widespread. Everything from They've got a strong customer base. Customers are already working with that are coming to them saying, hey, we need additional power. We need to scale and expand to then they can actually do the site engineering. So look at how do you integrate the actual power unit? Then they can actually do that integration work, the actual deployment. And then they're set up to also do the long term continuing service and upkeep of that site as well. And in addition to all that, they also offer energy as a service solutions to their own customer, which for background there, that means that, you know, ABM would actually come in and procure and buy the technology, the solutions, and then they would charge the end customer based on a cost per kilowatt type of a purchasing agreement to make it easier for customers to adopt solutions for PowerGen. So ABM, very well versed in this space, you know, one of the large players there. And then their focuses range everywhere from, you know, things like airports to data centers to mission-critical applications. So we've already started discussions with ABM and end customers together, and we're excited to see, you know, where that will take us here in 26 and beyond. Great. Thank you for the time.

Our next question comes from Ted Jackson with Northland. Your line is open. Please go ahead.

Hey, Thomas. Hey, John. Hi, Ted. So, I got a few questions for you. Let's start with just making sure I understand, you know, kind of, you know, CapEx and capacity. So, right now, exiting, say exiting 25 had 30 printers. And if I understand, then you're going to add 1 or 2 more during 26 and rather than expand the fleet, the effort is really focused on using it better. But when we exit this year, roughly speaking, you'll be at 32 units, but you'll be running them at a much higher throughput rate. Is that the message?

Yeah, I think I think you've got it. summarized accurately. We don't know exactly how many we'll add, maybe a handful this year, so I wouldn't say exactly two. It might be a little more than that, but those are units we had on order from last year. But you're thinking about it correctly. We've got a certain amount of capacity, and that capacity rate has been growing as we get more of these printers commissioned and operating to their optimum state. As Thomas was mentioning earlier, some of these are the latest generation printers which have higher laser power than what we're used to. So the work that we're going to do to increase print speed this year will be related to taking advantage of that higher power and also just other programming opportunities to just make the printers run faster. So, you know, that's a lot of the good news is that's a great increase in output with not a whole lot of investment in terms of dollars. So that's what our focus will be on this year. So, yeah, we'll end in 2026 with a handful more printers. and more throughput from the ones that we have.

And then the range of your printers, it's everything from, you know, there's the older ones with one laser, and then you have some with two, and then you have some with four, and these, the ones you'd be purchasing will be more of these, of the four laser printers. Is that correct?

Actually, it's a mix. It's a mix. So Thomas also mentioned that GE is working on some new laser technology, and we're excited to help them out on development of that or trying to test out what that's capable of. And that will actually be one of the printers with the smaller number of plates. So we've really got opportunities across the range of our printer fleet.

Okay. And then, I mean, I know you probably won't tell me this, but to kind of get a sense, you know, in terms of just sort of understanding as you roll through this and then you start, you know, your capacity expansion in the CapEx. I mean, roughly speaking, you know, for like the ideal printer, whatever, you know, whatever one it might be, what's the outlay for a singular unit?

The cost? Yep. What are you asking? For a printer or for?

You know,

Yeah, I mean, these are commercially available printers, so our exact cost, you know, we can't share, but, you know, that is information that if you're looking at what additive printing machines cost, that's pretty readily available.

Maybe, Ted, just to add slightly more, just, you know, some machines can actually come in less than a million dollars, and then other machines can be in the low single-digit millions.

Okay. Going over to the kind of your revenue forecast and and. You know, the development work you do, you know, you're, you're guiding to. 10Million dollars of revenue mix between. You know, development work and, you know, I assume some, some unit revenue recognition. Um. Starting with the development work, you know, you, you had 20Million dollars of revenue with the US Navy. Um, you know, if you kind of go through it, you, you, you. Rolled through about 5Million dollars of that so far. So you got about 15Million of that, you know, kind of left to work through. You got another, let's call it 40 or 50Million that, you know, across other things that you think you can, you can bring in when we look at. You know, let's start with, you know, the, the older stuff. I mean, when will you. Will you recognize. Um, you know, a significant piece of that remaining 15Million and and. How do we think about that? And then what would be the timeline, if you would, for the new revenue that if you get these contracts and where you would start seeing it happen? And then kind of what are the milestones that you have to do to recognize that and get paid? I guess that's my next question.

Okay. There's a lot of pieces there, so remind me if I forget one of them. So you're correct. most of the revenue that we project to earn this year would be from R&D services, although there will be commercial revenue from following commercialization of the very initial units that are early deployment units. And that part that is R&D services revenue is part of that 20 million roughly of R&D contracts that we have. Part of that we spent in 2024. Part of it last year, I think you're right, about 5 million spent so far. There is upside opportunity that just based upon the pace of our work. Some of that could roll into 2027 as well. The new contracts that we were talking about today, we plan to get those, you know, we hope to get those under contract and those will are really more of kind of next fiscal year and really will provide us that runway and pathway into into 2027 and beyond. Let's see. Again, the timeline for those new contracts, again, we expect it to be kind of late in the year. And then on the commercialization side, the milestones, obviously we want to get a lot of hours on the units that we have, get these initial early adopter customer units in the customer's hands, finish testing them at our location, put them on customer sites. They have to meet customer specifications in terms of their operating capabilities. We mentioned UL certification has to be completed. And there's some steps around just our manufacturing processes and so forth that have to be optimized and repeatable and so forth. So there's a lot of steps, fairly well-defined things that we have to do, which we expect to get done over the course of this year. Does that catch everything you were asking?

It did, it did, thanks. And then on the 10 systems, I mean, I know 10 systems, it's a rough guesstimate for what you think you'll be able to put out in the field during 26. half of those are from the military. So, I, I'm going to assume those are not like, you know, the, the boxes that you would that, you know, I've seen in, in, you know, the testing facilities, but, you know, a little more bespoke. Um, let's call it the remaining 5. Will you recognize revenue on any of those? I mean, I'm hard pressed to see, you know, like if you're going to do 10 that and you have 10 million in revenue that you're going to recognize revenue on, you know, all 10 units that you're, you know, kind of circling in for, you know, you're kind of being put to customers. You know what I mean? But will you recognize revenue on, you know, carnal modules outside of the military during 2020?

Sure. So maybe just to start off with the color of the unit. So, yes, about half of them going to military. Now, that is actually a split of some of them. And that's that 800 kilowatt module designed for going into the ship. Plus, actually, just to your point, Ted, about the military will also be taking delivery of boxes as well, units that are in a full 200-kilowatt enclosure, which is more focused on base deployment and prime power applications. So we're actually doing both with the military, which is pretty exciting. And then on the units, the remaining units, which are more commercial ones, uh some of those will be going out to customer sites you know deployed uh they are paying for these systems even though we won't recognize revenue right on the front end they are paying for the systems and uh and then uh some of those units a couple of them we're also anticipating having them as uh units that we can as we're talking about bring out the data center showcase the abilities there integrate into customer sites and uh and really prove that application because As we look at 28, 29, 20, 30, there is so much growth happening in the data center space that we want to make sure that people will view us this year as a viable solution in that market. And so that's where it's important for us to showcase that. I'll then hand it over to John on how it works in terms of actually recognizing that early adopter unit revenue, though.

Yeah, so just as an example of some of the early units that we expect to deploy initially here and some that are already built and operating. Once we have reached commercial, you know, official commercialization, then we would expect to recognize revenue for those. There could be some that are still in the process of acceptance and so on that may slip outside of that. But, yeah, that's the point of commercializations that we can recognize revenue. And the earliest ones that we deliver would be the prime candidates for that recognition right away.

Yeah, but just to make sure I understand, you will recognize some revenue, but when you talk about the 10 units, it's not 10 units that are going to flow through, you know, in terms of your P&L. It's 10 units that you're actually going to, for lack of a better term, you're going to ship them. They're going to be, you know what I'm saying, they may not have been accepted and revenue recognized.

Yeah, you're correct. And maybe just to decompose the revenue a little bit further, there's going to be services Uh, related to R and D services, so testing and engineering work, even even stuff we contract out and then the deliveries that Thomas just mentioned a full systems and 800 kilowatt system. And then what we would call commercial customers, the initial units that we're deploying now with our early adopter customers, those will turn into revenue. Once we've crossed the threshold of commercialization. As well, as making sure individually on those contracts that we've met the contract, the customer contractual requirements.

Okay, and then my, my very last question, because I've taken up more time than I'm allowed, I think, but, um, you know, with, you know, you're up to 175 kilowatts with regards to the car. No, now, Thomas. You've got, um, you said, you know, as you kind of gone through testing, I mean, as part of this part of the process of why you go through beta and everything else under the sun is. You know, you got more tweaks to do to get up to the 200 kilowatts. Can you take a little time and kind of talk about where the things are that you've discovered that you need to revise and kind of where you are in the process to resolving those issues, for lack of a better term, so that you can get to that 200 kilowatt goal? And that's my last question. Thanks very much.

Perfect. All right. Yeah, obviously, great progress in the quarter getting to that 175. Another core thing is we don't see it as fundamental architecture changes to get to the full 200 kilowatts. It's really about refinement. So to use an analogy, this is a heat-powered solution, right? And so it's almost like squeezing a balloon. When you go contain the heat in one area, like squeezing a balloon, it wants to expand and go out other areas. we talked about earlier in the year of 25 the regions that's really the fine mesh the thermal battery we saw a deficiency there once we solve that it was like squeezing the balloon in that area so then it showcased some other areas we needed to work on so to give examples those are over the past quarter we've been working on a new cylinder wall sleeve that has better thermal properties so it doesn't let heat transfer through as easily. We're working on a new piston design that reduces the amount of radiation, so heat that can actually flow through it, as well as smaller things like improved thermal blankets around the solution that keeps heat in better, some unique materials that can stop heat from transferring from one part to the other. All this, as noted, it's small changes. Some of the things that I mentioned just now have already been rolled in. That's what got us to those improved power levels. Others are at a stage where We just got the first batch of these new cylinder wall sleeves in just this past week. Pistons, we expect to get those in in the coming weeks. And so we are in the middle of still evolving that, but tying this all back together. It's important to note, like, we're at the point where the power that these systems are producing now is sufficient to get the initial units out there. And so that is the prime focus right now. And then in parallel, we'll work on continuing to get up to that 200 kilowatts. So hopefully that adds some helpful color.

It does. It does. Okay. Thanks very much, and thanks for all the time. Thanks, Ed.

Our next question comes from Martin Malloy with Johnson Rice. Your line is open. Please go ahead.

Thank you for taking a follow-up question. Just wanted to ask about the control systems that you mentioned. Is that something you're developing internally, or could we see some sort of partnership there?

We've really taken the approach of developing all the software in-house. So it is Hyliion's IP designed, developed in-house by Hyliion. And we see this as a key part of our solution and one that, I didn't mention this in Ted's last question, but we even see some software improvements that we can make that will even squeak out some additional kilowatts out of the system. So with all that in-house solution owned by us, where we will integrate with others is for site integration, right? So we will not be the primary controller on a site that is, something that we will integrate with other site systems or others, EV charging pedestals, things like that, and then let them operate it. It is key to note, though, we do have The ability to integrate into other DC architectures. So think about like a battery pack. You can plug a battery pack right into the car, no power module, and we can communicate directly with that and even control the battery. And so, uh, so we see it as a very advanced software and one that customers who have been on site have actually seen it as a little bit of like a Tesla moment where Tesla was the first to really put a large screen and display into their cars. I believe we're one of the first to really put a large screen and a lot of information that a user can look at real time on the actual power module and get feedback both at the unit or through the cloud.

Yeah, we've got a very strong software and controls team, and many of them were some of our top people back when we had our powertrain division. So we've been really able to leverage the skill set of those people.

Terrific, thank you for your time. Thank you.

If there are additional questions at this time, please raise your hand by pressing star one to join the queue. There are no further questions at this time. I will now turn the call back to Thomas for closing remarks.

Thank you everyone for joining today's call apologies again for the technical difficulties at the start there, but why we were able to get that result and just setting the stage again for 2026. this is the year that we're focused on getting units out there into the field, getting those customer deployments out there. and really showcasing the units working. We started the deployments of early adopter units last year, continue that this year and get units out into the field. And then as we look at the years ahead, I mean, a lot of exciting opportunities growing, not just in prime power, but then the other two that we mentioned heavily on this call with the military expanding upon military contracts and then also the data center space. So we look forward to hopefully sharing further good news in those two areas throughout this year. Thank you again for joining the call, and we look forward to chatting again on our next earnings call.

This concludes today's call. Thank you for attending. You may now disconnect.