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01/11 03:36
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The company has revised its revenue forecast downwards and delayed the commercialization of its key product, KARNO Power Module, to 2026. Despite achieving technical milestones and signing significant partnerships, the financial performance has been weak, with increased net losses and reduced interest income. The Q&A session revealed some uncertainties, including delays in customer acceptance and manufacturing scale-up challenges. These factors, combined with a lack of immediate positive catalysts, suggest a negative sentiment, likely leading to a stock price decline of -2% to -8% over the next two weeks.
Revenue $800,000 from research and development services in Q3 2025, compared to no revenue in Q3 2024. This increase is attributed to contracts with the Office of Naval Research, including the sale of KARNO Cores and related components, as well as testing and validation work.
Cost of Sales Approximately $800,000 in Q3 2025, resulting in a small gross loss. There was no cost of sales in Q3 2024.
Operating Expenses $15.3 million in Q3 2025, up from $14.2 million in Q3 2024. The increase is due to higher research and development costs and lower gains from asset sales in the powertrain exit and termination line.
SG&A Expenses $5.2 million in Q3 2025, down $0.5 million from Q3 2024. The decrease is due to lower facilities and insurance costs, partially offset by a small increase in labor costs.
Interest Income $2 million in Q3 2025, down from $3 million in Q3 2024. The decrease is due to a lower level of investments and lower interest rates.
Net Loss $13.3 million in Q3 2025, up from $11.2 million in Q3 2024. The increase is attributed to higher operating expenses and lower interest income.
Year-to-Date Revenue Nearly $2.8 million in 2025, all from R&D services, compared to no revenue in the same period in 2024.
Year-to-Date Operating Expenses $50.7 million in 2025, up from $47.2 million in the first three quarters of 2024. The increase is due to higher R&D expenses, partially offset by lower SG&A and powertrain exit and termination expenses.
Year-to-Date Net Loss $44 million in 2025, compared to $37.7 million in 2024. The increase is due to higher operating expenses and lower interest income.
Cash and Investment Position $164.7 million as of the end of Q3 2025, with year-to-date capital spending of $22 million primarily on additive printing machines and related equipment.
KARNO Power Module Performance: The KARNO Power Module now meets or exceeds key performance benchmarks, achieving over 200 kilowatts of mechanical power and 150 kilowatts of electrical power generation. It is expected to reach 200 kilowatts of electrical power generation with further refinements.
Regulatory Milestones: The KARNO Power Module meets California's stringent air quality standards and is not classified as an internal combustion engine by the EPA, removing significant regulatory hurdles.
Reliability: The KARNO Power Module completed over 100 days of operational testing without unplanned hardware-related downtime, demonstrating high reliability.
Fuel Flexibility: The KARNO Power Module can operate on over 20 different fuel types and seamlessly switch between fuels during operation.
UL Certification: The UL certification process for the KARNO Power Module is progressing well, with some components passing all tests on the first attempt.
Customer Demand: Nonbinding letters of intent have been signed for nearly 500 KARNO Cores, with strong interest across multiple sectors, including data centers and the U.S. military.
Military Engagement: The U.S. Navy plans to use KARNO Cores in autonomous vessels, with initial deployments expected in 2026.
Nuclear Collaboration: Hyliion is exploring the use of KARNO technology with small modular reactors (SMRs) to improve electricity generation efficiency.
Data Center Applications: The KARNO Power Module aligns with NVIDIA's shift to 800-volt DC architectures, positioning it as a fit for modern data centers.
Manufacturing Expansion: Production activities are transitioning to a larger facility in Austin, with 30 additive manufacturing machines in operation.
Supply Chain Challenges: Challenges in sourcing high-strength magnets from China are being actively managed, with sufficient inventory for the next few quarters.
Leadership Addition: Darrell Preble has been appointed as Vice President of Operations to lead scalable manufacturing programs.
Tax Incentives: The KARNO Power Module and its infrastructure qualify for a 30% tax credit, enhancing adoption and commercial ramp-up.
Capital Position: Hyliion has $165 million in cash and investments, sufficient to carry through KARNO commercialization, with plans for additional capital to support production growth.
Regenerative Component Performance: The regen component of the KARNO core had been underperforming relative to expectations, which required redesign and improvements to meet power and efficiency needs.
Supply Chain Challenges: The company is experiencing challenges in sourcing high-strength magnets from China, which are critical for the linear electric motor. This could impact production schedules if alternative sourcing strategies are not successful.
Customer Deployment Delays: One early adopter customer has delayed their project timeline into 2026, which has caused adjustments in delivery schedules and the repurposing of units for demonstration purposes.
Regulatory Compliance: While the KARNO Power Module has achieved significant regulatory milestones, ongoing compliance with stringent air quality and other regulations remains a critical area to monitor.
Financial Losses: The company reported a net loss of $13.3 million in Q3 2025, up from $11.2 million in Q3 2024, and year-to-date losses of $44 million, which could impact financial sustainability.
Capital Requirements: Additional capital will eventually be required to support production growth, particularly for additive manufacturing equipment, which could pose a financial risk if not secured timely.
R&D Revenue Delays: R&D services revenue ramped up slower than expected due to deferred delivery of early deployment units, impacting short-term financial performance.
KARNO Power Module Commercialization: The KARNO Power Module is expected to achieve full commercialization in 2026. Electrical power generation is anticipated to reach 200 kilowatts with further design refinements. Customer deployments will continue at a steady pace, with initial units being used for field trials and demonstrations.
Regulatory and Certification Milestones: The KARNO Power Module has met stringent air quality standards and is not classified as an internal combustion engine under federal regulations. UL certification is progressing and expected to be completed in the coming months, enabling large-scale commercial deployments.
Customer Deployment Plans: Deliveries of early adopter units are expected to continue through the remainder of 2025 and into early 2026. Some units will be used for demonstrations and customer showcases, particularly in data center applications and third-party demonstration centers.
Customer Demand and Supply Constraints: Nonbinding letters of intent have been signed for nearly 500 KARNO Cores. Demand is expected to outpace supply in the coming years, with strong interest across multiple sectors, including the U.S. military and data centers.
U.S. Military Engagement: Additional KARNO Power Modules and Cores will be delivered in 2026 for specialized testing under an R&D contract with the Navy. The first autonomous Navy vessel powered by KARNO Cores is undergoing sea trials and will be outfitted with initial units in 2026.
Exploration in Nuclear Energy: Hyliion is exploring the integration of KARNO technology with small modular reactors (SMRs) to replace traditional steam turbines for electricity generation. This represents a longer-term opportunity in the growing nuclear energy sector.
Data Center Market Alignment: The KARNO Power Module's native 800-volt DC output aligns with the next-generation data center architectures, particularly for AI workloads. This positions the technology as a natural fit for modern data center and AI infrastructure.
Production Capacity and Supply Chain: Production capacity is expanding with a focus on additive manufacturing. Challenges in sourcing high-strength magnets from China are being actively managed. Current inventories are sufficient for the next few quarters.
Financial Guidance: Full-year 2025 revenue is expected to be approximately $4 million, primarily from R&D services. Additional capital will be required to support production growth, but current cash reserves are sufficient to carry through KARNO commercialization.
The selected topic was not discussed during the call.
The company has revised its revenue forecast downwards and delayed the commercialization of its key product, KARNO Power Module, to 2026. Despite achieving technical milestones and signing significant partnerships, the financial performance has been weak, with increased net losses and reduced interest income. The Q&A session revealed some uncertainties, including delays in customer acceptance and manufacturing scale-up challenges. These factors, combined with a lack of immediate positive catalysts, suggest a negative sentiment, likely leading to a stock price decline of -2% to -8% over the next two weeks.
The earnings call reveals multiple negative factors: delayed commercialization of the KARNO Power Module, reduced revenue forecasts, and increased net losses. The Q&A section did not alleviate concerns, as major issues like LEMs and regen redesigns were only recently addressed, with commercialization pushed to 2026. Although new military contracts and tax credits offer some positives, the overall financial outlook and manufacturing challenges lead to a negative sentiment.
The earnings call reveals several challenges: increased cash outlays, production issues, regulatory risks, and a widening net loss. The lack of a shareholder return plan and unclear guidance on commercialization timelines contribute to a negative sentiment. Despite some positive aspects like stable cash reserves and potential gross margin improvements, the overall outlook is marred by uncertainties and financial pressures, likely leading to a negative stock price reaction in the short term.
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