Earnings call transcript: Hyliion Holdings misses Q1 2025 forecasts, stock drops

Hyliion Holdings (HYLN) reported its financial results for the first quarter of 2025, revealing a wider-than-expected loss and lower-than-anticipated revenue. The company posted an earnings per share (EPS) of -$0.10, missing the forecasted -$0.07. Revenue fell short of expectations, coming in at $489,000 against a forecast of $800,000. In response, Hyliion’s stock price dropped 18.9% to $1.91 in after-hours trading, nearing its 52-week low of $1.17. According to InvestingPro data, the company maintains impressive gross profit margins of 76.13% despite operational challenges. InvestingPro analysis suggests the stock is currently undervalued based on its Fair Value model.

Key Takeaways

• Hyliion reported a net loss of $17.3 million for Q1 2025, up from $15.6 million in Q1 2024.
• Revenue from R&D services totaled $500,000, sourced from the Office of Naval Research.
• The company expects to launch its Carnot Power Module commercially by the end of 2025.
• Hyliion’s stock fell 18.9% in after-hours trading following the earnings release.

Company Performance

Hyliion Holdings faced a challenging first quarter in 2025, with a net loss increasing to $17.3 million from $15.6 million in the same period last year. Despite unveiling new products and making strides in innovation, the company struggled with revenue generation and operational expenses. InvestingPro analysis reveals the company holds more cash than debt on its balance sheet, with a strong current ratio of 13.85, providing financial flexibility during this growth phase. The market for alternative power generation technologies continues to grow, but Hyliion’s financial performance indicates it is still in the early stages of capitalizing on this trend. For deeper insights into Hyliion’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.

Financial Highlights

• Revenue: $489,000, compared to a forecast of $800,000
• Net loss: $17.3 million, up from $15.6 million YoY
• Cash and investments: $198.8 million
• Expected 2025 revenue: $10-15 million

Earnings vs. Forecast

Hyliion’s EPS of -$0.10 missed the forecasted -$0.07, marking a significant deviation from expectations. The revenue shortfall was also notable, with actual revenue at $489,000 compared to the $800,000 forecast. This performance contrasts with the company’s historical results, where deviations from forecasts were less pronounced.

Market Reaction

Following the earnings announcement, Hyliion’s stock dropped by 18.9% to $1.91, approaching its 52-week low of $1.17. This sharp decline reflects investor disappointment with the financial results and uncertainty about the company’s near-term prospects, particularly as it continues to navigate production and operational challenges. InvestingPro data shows the stock has experienced significant volatility, with a -26.82% return over the past six months, though analysts anticipate sales growth in the current year. The company’s market capitalization currently stands at $264.78 million, with analysts setting a consensus price target of $2.00.

Outlook & Guidance

Hyliion plans to deliver 10 early adopter units in 2025 and expects some deployments to shift to the second half of the year. The company aims for a commercial launch of its Carnot Power Module by year-end and anticipates reaching breakeven gross margin by the end of 2026. Capital expenditures are projected to be $30 million, up from an initial estimate of $25 million.

Executive Commentary

CEO Thomas Healy expressed optimism about the company’s product performance, stating, "We are encouraged with how the initial Carnot systems are performing." He also noted strong customer interest, saying, "Customer traction remains strong and we’re seeing increasing demand for distributed clean power solutions." CFO John Kanzer reassured stakeholders about financial stability, stating, "We continue to expect the capital we have on hand today will be sufficient through the commercialization of Carnot power module sales."

Risks and Challenges

• Production challenges, particularly with linear electric motors, could delay product launches.
• Increasing capital expenditures may strain financial resources.
• Market competition from other clean power technology companies is intensifying.
• The company’s ability to meet revenue and profitability targets remains uncertain.

Q&A

During the earnings call, analysts questioned the performance of the Navy unit, which was reported to be highly reliable with no unplanned downtime. Other inquiries focused on production challenges and growth plans, with management affirming their commitment to addressing manufacturing issues and scaling up production by 2026.

Full transcript - Hyliion Holdings Corp (HYLN) Q1 2025:

Tiffany, Conference Operator: 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 Hialeahan Holdings First Quarter twenty twenty five Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session.

Thank you. I would now like to turn the call over to Chief Accounting Officer, Greg Stanley. Please go ahead.

Greg Stanley, Chief Accounting Officer, Hialeahan Holdings: Thank you, and good morning, everyone. Welcome to Hialion Holdings first quarter twenty twenty five earnings conference call. On today’s call are Thomas Healy, our Chief Executive Officer and John Kanzer, our Chief Financial Officer. A slide presentation accompanying this call is available on Hyalion’s Investor Relations website at investors.hyalion.com. Please note that during today’s call, 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. With that, I’ll now turn the call over to Thomas.

Thomas Healy, Chief Executive Officer, Hylion Holdings: Hello, and thank you for joining us for HailiON’s first quarter twenty twenty five 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 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. 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. 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, Hyleon was one of only a few companies at the show presenting alternative power generation technologies.

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. 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 $250,000,000 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, Monro Live, a popular YouTube channel known for deep dives on new technologies, released a walkthrough video of our R and D center in Ohio and the Carnot power module.

The video continues to draw significant traction and has further expanded visibility of our solution. 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 Karno Power Module works. I’m 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 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. 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.

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 startstop 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. Our engineering team has been implementing software improvements and system upgrades based on operating feedback and those upgrades are progressing well. 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. 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. In fact, we expect to resume in house LEM production before the end of this month, which will supplement capacity from our contract manufacturer. Second, on depowdering, we previously noted challenges removing trapped powder from a mesh like section of a kernel 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 d powder solution in place, we are able to revert to a more tightly packed mesh, which we believe will address the power deficit. 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. 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 twenty twenty five. 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. 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. To wrap up, we’re encouraged with how the initial Carnot 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 $10,000,000 and $15,000,000 for full year 2025, driven by early adopter unit deployments and R and D activities. With that, I’ll now turn the call over to John for the financial update.

John Kanzer, Chief Financial Officer, Hylion Holdings: Thank you, Thomas, and good morning, everyone. Starting with our twenty twenty five 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 operating income of approximately breakeven. In the first quarter of twenty twenty four, we recorded no revenue or cost of sales. R and D services revenue was lower than the fourth quarter of twenty twenty four due to the delays and deployment of early adopter customer units Thomas discussed earlier.

We do expect R and D revenue to be higher in future quarters this year as deployments resume. Operating expenses for the first quarter were $19,700,000 compared to $19,000,000 in the first quarter of twenty twenty four. Research and development costs were $12,200,000 compared to $8,000,000 in 2024. This increase reflects a ramp up in R and D work, growth in the production of additive components and the procurement of parts for our initial KARNAL power module deployments this year. SG and A expenses were $6,100,000 down from $6,600,000 in 2024 due primarily to lower facilities and insurance costs.

Exit and termination costs in the quarter were $1,400,000 and were related to the shutdown of our former powertrain business that began in late twenty twenty three. We recognized a non cash expense of approximately $1,600,000 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 twenty twenty four, powertrain exit and termination costs were $4,400,000 We recorded $2,500,000 of interest income during the first quarter, which is down from $3,400,000 in the prior year quarter due to a lower level of investments this year. Our total net loss in the first quarter was $17,300,000 up from $15,600,000 in the first quarter of twenty twenty four.

Turning to our cash and investment position, we spent $20,900,000 during the first quarter of this year. Capital spending was $7,300,000 and primarily consisted of additive printing machines and related equipment. Asset sales were $219,000 and the remaining $13,700,000 of spending was related to ongoing business operations. We finished the first quarter with $198,800,000 of cash and short and long term investments on our balance sheet. I want to next address our planned cash spending for the year and highlight several risks and opportunities that we see.

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 2,000,000 to $3,000,000 this year. 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. 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.

Finally,

Greg Stanley, Chief Accounting Officer, Hialeahan Holdings: R

John Kanzer, Chief Financial Officer, Hylion Holdings: and 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 Carnal power module production and as we address the production issues Thomas mentioned earlier. We previously expected that capital expenditures for 2025 will be approximately $25,000,000 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 $30,000,000 although that number could vary based on the timing of printer deliveries and opportunities for additional printer purchases as we plan for production growth in 2026. We plan to offset cash capital spending with around $10,000,000 of equipment financing if favorable terms are available. To summarize these changes, we previously stated that we expected total cash outlays this year to be around $60,000,000 We now expect that spending could be closer to $65,000,000 due to the impact of the items I just discussed, leaving our year end cash and investment balance at approximately 155,000,000 As Thomas mentioned earlier, we expect to generate between 10,000,000 and $15,000,000 of revenue for 2025, including both R and D services and sales of 200 kilowatt Carnot power modules to customers.

Implicit in this assumption is our expectation of commercializing the Carno 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. As we reported last quarter, we expect gross margin for R and D services this year to be positive. We may also report positive gross margin for Carnival product sales depending on the timing of commercialization due to the current expensing of purchased components as R and D cost.

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 Corona module in the future. Our current outlook for achieving breakeven gross margin on a cash basis is near the end of twenty twenty six. Finally, we continue to expect the capital we have on hand today will be sufficient through the commercialization of Carnot power module sales. Now, I’ll turn the call back over to Comms.

Thomas Healy, Chief Executive Officer, Hylion Holdings: Thank you, John. Q1 was an important quarter for Hylion 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. 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 for Q and A.

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

Greg Stanley, Chief Accounting Officer, Hialeahan Holdings: Thank you. 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?

Thomas Healy, Chief Executive Officer, Hylion Holdings: Thanks, Greg. Absolutely. 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, so you can understand kind of what we’re running on the system. So we’ve got the Navy’s Cardinal Core in a power module at our Cincinnati facility that we’re running on a daily basis.

And so we’re running 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 Carnival core out of the power module at all. 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 as 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, Chief Accounting Officer, Hialeahan Holdings: Given where you are and the challenges that you discussed today, how will this impact your growth plans for next year?

Thomas Healy, Chief Executive Officer, Hylion Holdings: Yes. So on today’s call, did give updates of things that we highlighted on the last earnings around LEMS production as well as the depowdering of 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 roll in regen improvements. The LEMS 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. Thankfully the regen is a very easy part to replace in the genset and then LEMS 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 next year.

Greg Stanley, Chief Accounting Officer, Hialeahan Holdings: That addresses all the questions. I’ll turn the call back over to Thomas for closing remarks.

Thomas Healy, Chief Executive Officer, Hylion Holdings: Thank you, Greg. So thank you everyone for joining today’s earnings call. 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 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. In addition to that, I just wanted to highlight that our team was participating in and 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.

Tiffany, Conference Operator: Ladies and gentlemen, this concludes today’s call. Thank you all for joining. You may now disconnect.

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