HYLN

Hello, everyone. Thank you for joining us, and welcome to Hyliion Holdings' first quarter 2026 earnings conference 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 one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Greg Standley, Chief Accounting Officer. Please go ahead.

Thank you, and good morning, everyone. Welcome to Hyliion Holdings' first quarter 2026 earnings conference call. Joining us today are Thomas Healy, Chief Executive Officer, and Jon Panzer, Chief Financial Officer. A slide presentation accompanying today's call is available on Hyliion's investor relations website at investors.hyliion.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 that, such, are subject to risk and uncertainties. Many factors could cause actual results to differ materially from forward-looking statements made on this call. Factors that may cause such differences are discussed in 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 except as required by applicable law. With that, I'll turn the call over to Thomas.

Hello, and thank you for joining us for Hyliion's first quarter 2026 earnings call. On our last call, we had said 2026 would be the year we shifted from development to deployment of the KARNO Power Module. The first quarter delivered tangible progress against that plan. We successfully completed the UL certification non-recurring test milestone for the KARNO Power Module. We signed a new data center partnership with VFG Holdings, broadened our military engagement, and further demonstrated multi-fuel flexibility. We also saw a significant increase in revenue growth, recording $2.8 million this quarter, a fourfold increase from the prior quarter. This growth reflects the accelerating pace of work with the military. Today, I'll walk through each of these areas in more detail, then turn the call over to Jon for the financial update. Starting with UL certification.

This was a high-priority milestone for us, and I am pleased to share that we successfully passed the UL certification non-recurring test for the KARNO Power Module. This is the gating item we discussed last quarter, and clearing it now enables us to begin delivering early adopter units to customer sites. To frame what this means going forward, each individual Power Module will still undergo a final operating test prior to receiving its nameplate certification, but the foundational testing we have completed does not need to be repeated. As a reminder, this testing covers the electric motor, battery system, and the complete Power Module, with each subsystem undergoing separate UL certification. As we continue working towards our full 200 kilowatt design power rating, we expect to move to facility-level certification, after which we will no longer need to certify each unit independently.

That progression is an important step towards enabling production at scale. Turning to deployments, we continue to operate KARNO units at our Cincinnati facility while building additional systems. We remain on track to complete the approximately 10 early adopter units this year, ahead of commercialization, which we expect around year-end, depending on the timing of the early deployments. With UL non-recurring testing now complete, we are beginning to work with customers to move these systems to their sites. This is an important transition. Until now, customer units have been operating at our facility under controlled conditions. Over the next couple of quarters, we expect these same units to begin operating in real-world customer environments. We continue to see strong interest from the military in deploying our KARNO technology.

We are now in active discussions not only with the Navy and Air Force, but with additional branches of the U.S. military as well. This interest is being driven by the platform's differentiated capabilities, including true fuel-agnostic operation, low maintenance requirements, and low acoustic and thermal signature, which are particularly important for applications such as autonomous operation and mobile power generation. We continue to expect to sign $40 million-$50 million of additional military contracts this year on top of the approximately $20 million in ONR contracts we are currently executing. We are also seeing strong and growing demand from data center customers. The need for on-site fuel-flexible power generation is becoming increasingly important. We are actively engaging with the leading players in the market. In that context, I am pleased to announce a new strategic partnership with VFG Holdings.

Hyliion and VFG Holdings have executed a non-binding letter of intent to deploy up to 250 KARNO cores, or approximately 50 MW of power, over the next five years. VFG is a developer of advanced next-generation data centers and offers turnkey solutions including power, infrastructure, compute, and financing. The team at VFG is comprised of industry veterans from some of the largest data center companies and is planning multiple gigawatts of power production in the years ahead. Under this partnership, the parties plan to deploy KARNO Power Modules at VFG data center sites to demonstrate the unique benefits of the KARNO platform, including lower than grid electricity production costs, true fuel agnostic operation, and direct 800 volt DC integration. We plan to share more details on the partnership in the periods ahead.

The LOI between Hyliion and VFG is subject to the execution of a definitive purchase agreement. Building on our partnership with ABM Industries, which we announced in early 2026, we have been engaging prospective customers alongside ABM. The opportunities span light and heavy commercial applications from single unit 200 kilowatt deployments to multi-megawatt installations. ABM brings deep capabilities in site engineering, integration, construction, and ongoing site management, which complements our focus on advancing and commercializing the KARNO Power Module. Now shifting to updates on our product development. We continue to make progress towards our full 200 kilowatt design power rating. During the quarter, the team conducted isolated testing on new software and component improvements that yielded additional power and efficiency gains.

We plan to incorporate these and other advancements into the product over the coming quarters and remain on track to reach the full design power rating by year end. Beyond the broader fuel flexibility we have previously demonstrated, the first quarter included a particularly meaningful product development milestone. We successfully demonstrated dynamic fuel switching within the KARNO reactor across diesel, natural gas, and hydrogen without shutting the system down. Said differently, the system can operate on both gaseous and liquid fuels with very different characteristics. This achievement validates true fuel flexibility on the platform, not just dual fuel, but the ability to operate on liquid fuel, pipeline gas, and zero carbon fuel through a single architecture with the ability to transition seamlessly between them during operation. The strategic significance of this capability is meaningful as many of our target applications desire this kind of flexibility.

For example, data center operators often prefer pipeline natural gas as their primary fuel source while maintaining diesel fuel on site as a backup in the event of a disruption in natural gas supply. The KARNO Power Module enables both within a single platform, eliminating the need for separate primary and backup generation systems. This capability also expands our addressable market in defense applications, where mission requirements frequently depend on fuel availability and the ability to adapt in real time. With diesel fuel operation now demonstrated, we have commenced building an 800 kilowatt KARNO Power Module for the U.S. Navy. This system will be deployed on an unmanned Navy vessel as part of our existing ONR program. We expect to complete this build during 2026 alongside other Navy product performance and reliability milestones.

Importantly, the 800 kilowatt system we are building for the Navy serves as the same architectural building block for our data center offering. By combining multiple 800 kilowatt units, we can scale to 1.6 megawatts, 2.4 megawatts, 3.2 megawatts and higher, aligning with the modular power configurations required by data center customers. On manufacturing capacity, our focus today remains on building systems, establishing the supply chain to meet our quality requirements, and continuing to scale print capacity. We are continuing to make meaningful progress with our additive printers, particularly in improving part production speeds. We expect to install a few additional printers this year, and with those additions, our existing fleet is expected to support our planned production needs for 2026, 2027, and into 2028.

We remain on track to take delivery of and begin testing 1 or more printers equipped with the latest laser technology from GE Colibrium later this year. We believe that technology has the potential to further improve print speed and throughput. On supply chain, we noted last quarter that magnet supply was a potential risk given export constraints from China. I'm pleased to share that during the 1st quarter, we began to see progress with alternate sourcing options for the high strength magnets we require, increasing our confidence in our ability to support planned production. To recap our 2026 milestones, at the start of the year, we outlined a clear set of objectives. With 1 quarter complete, we are making solid progress. We have completed UL non-recurring testing on the KARNO Power Module.

We have demonstrated multi-fuel switching, including liquid fuel operation, and have begun building the 800 kilowatt Navy system. Looking ahead, we remain on track to achieve our full 200 kilowatt design power rating, complete our remaining early adopter unit deployments, secure $40 million-$50 million in additional military contracts, and deliver approximately $10 million of revenue for this year. Looking beyond this year, our 3-year outlook remains unchanged. In 2027, we expect to ramp commercial deliveries and expand the range of KARNO deployments, specifically with the military and data center customers. We view 2027 as the year we transition from initial commercialization into meaningful production scale. By 2028 and beyond, we expect to accelerate commercial growth as production capacity enables us to serve a broader portion of customer demand, including expansion into multi-megawatt configurations for data center customers.

With that, I'll turn the call over to Jon to walk through the financial results for the quarter.

Thank you, Thomas, and good morning, everyone. In the first quarter, we recorded revenue of $2.8 million from research and development services. This compares with revenue of about a half a million dollars in the first quarter of 2025 and $700,000 last quarter. The significant growth reflects an acceleration of work under our contracts with the Office of Naval Research. Cost of revenues was $2.6 million, resulting in a gross margin gain of $210,000. As a reminder, R&D services revenue with the Navy reflects the sale of KARNO cores and systems, including the 800 kilowatt power module we are building and the work we perform to test and validate these units. Operating expenses for the first quarter were $13.4 million, down from $19.7 million in the first quarter of 2025.

The decrease was driven primarily by lower research and development spending. R&D spending in the first quarter was $7.7 million, down 37% from the $12.2 million we spent a year ago. While the absolute level of R&D spending was down compared to a year ago, most of the year-over-year decrease related to a shift to revenue-generating services for the Navy versus other research and development work. This shift included approximately $1.9 million in lower R&D expenses this quarter as we capitalized inventory and utilized less labor and materials performing R&D activities. This inventory is primarily work-in-process components that we expect to utilize in future periods for building KARNO systems for the Navy.

On the powertrain exit and termination expense line, we recorded a credit of $414,000 compared to an expense of $1.4 million in the first quarter last year. This credit reflects ongoing asset sales related to our former powertrain business during the quarter and is not expected to be recurring. SG&A costs were relatively flat, with an increase of $100,000 attributable to higher personnel expense, partly offset by lower spending in other areas. Our total net loss in the first quarter was $11.7 million, down 32% from the $17.3 million loss we recorded in the first quarter of 2025. Turning to our cash and investment position, we spent $13 million during the first quarter.

Capital spending was $1.9 million and consisted primarily of payments for additive printing machines, along with some facility investments to support printer operations. Cash generated from asset sales for the quarter was $1.6 million. Asset sales related to the monetization of equipment previously used in our powertrain division and are largely complete. We finished the first quarter with $139.3 million of cash and short and long-term investments on our balance sheet. We are reaffirming our guidance for 2026, including approximately $10 million in revenue this year from both R&D services and possibly some commercial customer sales. As Thomas noted, we plan to slow capital spending in 2026 compared to 2025 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 later this year, although that amount may shift up or down based on terms and availability of lease capital. Overall, for 2026, higher revenue, expense control, lower capital spending, and planned equipment financing are expected to result in 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. We continue to believe that the capital we have on hand today is sufficient to carry us through commercialization of the KARNO Power Module. We anticipate additional capital will eventually be required to support production growth, particularly for the purchase of additional additive manufacturing equipment to more rapidly ramp up production in future years.

Now, I'll turn the call back over to Thomas.

To wrap up, the first quarter delivered against the deployment and commercialization plan we outlined at the start of the year. We completed UL non-recurring testing, signed a meaningful data center partnership with VFG, and generated 4 times the revenue of the prior quarter. We also broadened our engagement across the U.S. military, demonstrated true multi-fuel flexibility, and commenced the build of our first 800 kilowatt U.S. Navy system. The themes we identified last quarter, namely the shift toward 800 volt DC architecture in next-generation AI data centers and the demand for resilient, mission-critical power across the U.S. military, became more tangible in the first quarter. The VFG partnership positions us within the next-generation data center deployments, where 800 volt DC native operation is a clear architectural advantage.

While our expanding military engagements reflect strong demand for the platform's differentiated capabilities. For the remainder of 2026, our focus is execution, delivering the remaining early adopter units, completing the 800 kilowatt Navy system, securing $40 million-$50 million of additional military contracts, achieving full 200 kilowatt design power, and commercializing the KARNO Power Module by year-end. We are excited about the opportunity ahead and the position we are in to capitalize on it. I will now hand the call over to our 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 one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from Edward Jackson with Northland. Please go ahead.

Thanks. Good morning, Jon. Good morning, Thomas.

Morning.

Yeah, congratulations on all the progress towards commercialization. You really kind of moved the change, if you would, in the field. I got a slew of questions for you. I wanted to start out on, you know, some of the R&D and contracting stuff around the Navy. You had $12 million I mean, you had a $20 million contract, you got about $12 million of it left, and you had a pretty big number for it this quarter. How do we think about how that? It seems like it's, you know, from your own conversation, like, you know, the activity around that contract's accelerating. Can we expect similar kind of numbers in terms of print, you know, as we go through the remainder of this year against that contract?

Just kind of tying in that into the $40-50 million of additional, you know, military opportunity in front of you know, what's the timing for you to, you know, maybe bring some of that home in terms of contract? Would it be fair to assume that, given the progress you've had with the Navy, that the ability for you to, you know, kind of bring that revenue into the P&L would be a little quicker, you know, because you're building on a foundation that's already been laid? That's my first question. More questions. Thanks.

Edward Jackson, this is Jon Panzer. I'll try and answer that. The first part was just about the $20 million in contracts that we have today and the pace of that revenue. Last year and the year before, I think we booked somewhere around $5 million total, and you know, just under $3 million this quarter. It's a really good start to the year, especially on our forecast of $10 million. We do expect that strength to continue, and it's really been a matter of us getting a lot of traction with that contract and getting work done, particularly around the 800 kilowatt KARNO Power Module that we talked about.

Leading into later in the year, you know, we do expect to sign additional contracts, as you mentioned, somewhere between $40 million and $50 million. That would be a second half of the year expectation in terms of when those get signed. That will allow us to continue that momentum into the fourth quarter and into 2027. We, you know, we feel very good about our military opportunities. I think that's one thing Thomas was really trying to emphasize during his prepared remarks today is we do see the military as a huge opportunity, and we are starting now to get some big traction on the revenue side. You should expect that to continue to grow.

Okay. My next question, and then I have more, but I'll step aside and, you know, not be a hog, is on the efforts to get the, you know, the certification for 200 kilowatt. You know, I know it's kind of like a whack-a-mole as you kind of go through and make different changes. Maybe you can talk a bit about, you know, what you've accomplished towards that end, during the first quarter and, you know, where we, you know, stand in the current second quarter and what you need to finish to get to that, you know, 200 kilowatt, you know, rate and be able to certify.

Yeah, happy to share more on that one. Maybe I'll start with where we were last quarter. We had shared that we have produced a gross of 175 kilowatts out of the dyno, and that was about 3 months ago. The focus over this quarter was around actually independently testing some advancements. In great news, I mean, we were seeing double-digit kilowatts of improvement out of those independent tests that we were running. Now what we'll work on over the next quarter, as well as the quarters ahead by year-end, is rolling in those improvements. We've got other ones that we're working on as well that we'll be rolling in, but ultimately, it's all pointing towards we should be at that 200 kilowatts of power rating by the year-end.

One nice thing is with the UL testing that we've done, the non-recurring testing, even with improved power levels, we do not need to go back and redo any of that testing. That's a big win, and it's just that isolated, you know, final test that happens on each system, which will have the power rating of it. It's not like as we increase power, we need to go back and redo all of UL. That puts us on a good trajectory to be, you know, going into next year starting to scale production, get more units out there, and have them be at that higher power level.

Okay. I'll step out and get back in line for more questions next time.

Your next question comes from Martin Malloy with Johnson Rice. Please go ahead.

good morning. Congratulations on your progress.

Morning, Martin.

first question, Good morning. I want to talk about the military applications if with respect to the stationary power military applications, if we could see those the testing and the move in the orders, could that be quicker than what you're seeing with the Navy? Also on that, are you seeing any change in the interest from the U.S. military following the recent conflict in the Middle East?

Yeah. Let me start with the first one of stationary power. This Office of Naval Research contract that we have, we often talk about the on-ship platform and this 800 kilowatt. One thing that we probably under-emphasize is that contract also has stationary deployments planned into it as well. That's something that, you know, as we go through this year into next year, we'll be working on those stationary deployments as well. We also, as, you know, Jon highlighted a little bit earlier, you know, the $40 million to $50 million of additional military contracts, that is both for on-ship applications as well as stationary applications as well.

To your point, you know, the stationary, does have an accelerated factor to it where it really is just that commercial box that we've already been working on and developed that we'd be deploying. The military has plans to put it into hot weather environments, put it into very humid environments. They've got cold weather environments they're gonna be operating it in. They're really looking to run it through its paces in order to ensure that it's suitable for any type of operation that they might need to be able to be producing power in. Going into, the second part of your question,

About the conflict.

Yeah. Around the conflict and is that accelerating, you know, the demand. What I would say is, I would kind of look at it outside of the conflict itself. I would say that the interest from the military is just growing overall. Just over the last quarter, I've had a handful of meetings with various generals of both, you know, in the military. I was up at West Point just recently, was up at Fort Hood recently, and we're seeing that, you know, this product just touches a lot of the pain points they have, whether it's not knowing what fuel is going to be available, and so our system can run on various fuels.

Whether it be that they need a low heat signature, low noise profile, we deliver that. Also just even the low maintenance. One of the generals expressed that where the military often struggles is in logistics and moving parts around and getting assets to where they're needed. If you can move to a lower maintenance system, a system that requires less parts, now, you've improved the logistics of the military. I think overall we're seeing a very fast growth in interest and demand out of the military, and I suspect that next year, the military will be where, you know, we actually focus a lot of our deployments with them.

That's very helpful. Then, for a follow-up question, just wanted to focus on the commercial, non-military side and the placement of the KARNO generators this year. Can you maybe help us in how to think about the timetable for testing with the customers? How much time that they'll need before those pilot tests turn into orders? Is it a three-month testing process or six or nine months with these customers? This is all, you know, assuming it works as expected.

The numbers you threw out were spot on. We've got some that have said it's in the 3-month. We've got some that have told us it's more than 9-month timeframe. You know, as we highlighted in today's call, we've got nearly 750 units of interest and LOIs signed with various customers. What I envision happening is that, you know, this year we'll get some initial units out with various commercial customers, and then we'll start deploying initial units with other customers as well, and then we'll start layering in repeat orders from those first customers, but we'll also be deploying new units with new customers as well. I don't think, you know, backlog interest, that's not our issue.

Our issue right now is how do we get these units out into the field? How do we start scaling production and hopefully, you know, deliver more units to customers next year, whether that be through repeat orders or through just brand-new opportunity. You know, I think next year we're gonna be focusing heavily on both military, as I just mentioned, also the data center side of things. We've been engaging with many of the key players in the data center space, they're excited and eager to see our product, they're doing trips up to our Cincinnati facility. We've had one this week. We've had multiple this week. We've got more next week visits happening with various data center players.

I think that's gonna be a long-term growth opportunity for us.

That's great. Thank you. I'll turn it back.

Your next question comes from Sean Milligan with Needham & Company. Please go ahead.

Hey, Thomas. Great update today. You hit on the printer side and just the capacity you have for this year and next year. Curious about the human element in terms of the assembly, kind of what the plans are to scale up there, and do you see any headwinds on the assembly side? You know, I guess, personnel and then also maybe, like, changes you're making to the system to make it easier and quicker to assemble.

Yeah, great question. We're working on all of the above. Maybe just walking you through the journey. Initially, all the very first assemblies were happening and all the very first printing was all happening out of our Cincinnati R&D facility. The first thing that we started to scale was printing, and that's where we set up, we've probably got about 3x of print capacity in Texas that we do in Cincinnati now. You know, we moved that to our larger facility here and built up the team around it. Over the last handful of months, we also then moved Power Module assembly to Texas. That was happening in Ohio, now it's happening here in Texas. The next stage of the journey will be moving the actual KARNO Core assembly to Texas.

That's something that we've already started building out the team. They're actually traveling to Cincinnati, learning how to build the system properly, and then we'll move that operation here. I think we have a very good setup where we kind of go through the learnings, the hurdles, the development in our Cincinnati facility that allows the engineers to be alongside the assembly line and kind of educating and iterating that process. Once it's more stable, then we move it to Texas, and it's more of a focus of, let's start scaling and growing it. You know, to that point, as I mentioned, we've already started building out the team to work on that.

You know, do feel confident the facility, you know, has the space and the infrastructure we need in order to scale, and, you know, we'll also be adding in parallel assembly lines as well, which is something we've already started exploring.

Awesome. On the, you mentioned you're having, like, a lot of conversations with data center customers today. Curious kind of what they see as the most unique or, like, in-demand piece. Is it the 800 volt architecture? Is it the fuel agnostic? Just curious about what do you think they view as, like, the differentiator for Hyliion.

First is they just need power. I think any data center provider you talk to, if you had even an old used turbine sitting around, they would buy it right now. It is unbelievable the need for power that they have. Outside of that, I mean, that's actually, you know, one of the things that they wish we had more of. They would love to have more capacity out of us. Obviously, we're just scaling up as we've talked about. What they're seeing as unique about the KARNO Power Module is, 1, it truly enables behind the meter or on-site power generation. It's got very high efficiency for its form factor, as well as it's got very low maintenance. Those are exciting factors.

The other things that you touched on, let's talk about fuel agnostic at first. Pipeline natural gas is going to be what data centers run on 99% of the time. The reliability standards that the data centers are held to, pipeline natural gas doesn't actually meet those reliability metrics. That then forces the data center to have fuel stored on-site as well. Normally in, you know, most data centers, the on-site fuel storage is diesel. What data centers are being forced to do right now is not only buy a set of natural gas generators, they also then have to go buy a set of diesel generators to be able to handle both those requirements. With the KARNO power modules, you can run both of those fuels off of the same power module and have redundancy built in.

That's a big win. The last one that you highlighted, the 800 volt architecture. Just coincidentally had the opportunity to meet both Jensen Huang from NVIDIA this past weekend, as well as Lip-Bu Tan, the CEO of Intel. That was discussions I had with both of them. They see 800 volt architecture as where the industry is heading. NVIDIA has been probably the most, kind of, you know, progressive on that end of saying that this is where data centers are going to head. Right now, you would normally have to convert the 480 volt AC power from the grid, convert that into DC to go into the racks. Versus with the KARNO Power Module, you can go straight 800 volt DC power out, straight into the actual rack.

That's going to reduce your need for transformers. It's gonna reduce your need for copper lines in the facility. It's just all around a better solution, more efficient solution.

That's great. Thank you. Thank you for the update today.

Your next question comes from Edward Jackson with Northland. Please go ahead.

Thank you very much. Thomas, one way to talk about your pipeline and growth prospects is, you know that a year ago, your LOI covered 100 KARNOs, and now it's at 750. That's in 12 months. Just a stat you might have missed yourself. My follow-up questions. There, I got that up there for you. My follow-up question for you is, you know, as you're moving towards commercialization and the data center opportunity, and, you know, we're talking roughly 10 units.

You know, you had indicated earlier in the year that because of the data center opportunity and the evaluations and trials, that you were really gonna, you know, hold back, you know, call it 2 or 3 units and just maybe be able to use them for demonstrations, you know, with regards to this data center opportunity. You assigned a contract with the VFG or an LOI with VFG, which really expanded your pipeline in terms of, or backlog or whatever you wanna call it, in terms of KARNO units that are under LOI. Is there any tie-in between those two, or are they mutually exclusive?

I guess you know where I'm going with it is, you know, given the relationship with VFG and what they do, I mean, is that, you know, where you are looking at perhaps putting, you know, some of these units where you're wanting to have them for data center, potential data center customers to, you know, kind of kick around? That's my first question.

Yeah. I do see some overlap with those. You know, what we're envisioning with these couple of demonstration units, we're actually already in the process of, you know, one of them's gonna be mounted on a trailer. It can be moved around from location to location. What we've seen is when people actually get a chance to see the product, you know, and I'll kind of try to put a story to it. Like, you know, up in our Cincinnati facility, you walk out of the building, you can see the KARNOs there. You're maybe 30 feet away. You can't tell whether the product is on or off because of how quiet it is, right? It's not until you actually get closer to the system that then you can actually, you know, hear some of the fans running.

That's not the experience that people normally have with an internal combustion engine or a turbine. Data centers are actually running into problems of neighbors complaining about how loud systems are. When people get to experience the product, see it firsthand, you know, see the, how easy it is to operate, and how simple it is, you truly just feed fuel in, and you're gonna get electrons out. The product, in a lot of ways, sells itself. From that end, you know, whether it's with VFG or other data centers, you know, just yesterday, another data center provider was in and, you know, they were talking about, let's take a, you know, a system, put it in their, like AI test facility.

You know, all these data center providers have not only the true data centers they're building, they also have facilities where they're testing new technologies, new architectures like the 800 volt. They wanna get systems deployed and really prove out the use cases we're talking about. As we go into 2027, you know, as mentioned, whether it's with VFG and/or others, the plan will be to be showcasing some of those demonstrations.

Yeah. Well, having been to your facilities, I mean, I stood and had a full conversation with you, not like, I mean, literally right next to a unit, and we didn't have to yell. I mean, they are definitely, they aren't that loud. The next question is, you know, you're talking about 2027 being the year of kind of ramp and 2028, and that you have capacity to handle, you know, what you view as your needs until you kind of get through 2028. Can you perhaps, you know, give us some kind of sense with regards to what you think your, you know, your current capacity level is or, you know, some kind of range in terms of, you know, what your capacity level will be in 2027?

I mean, I assume we're talking units and, you know, just it doesn't have to be exact. I mean, maybe kind of like a low and a high and just to kind of, you know, for, you know, frame out what we could think of in terms of your ability to produce the KARNO.

I'll start with apologizing. We're not ready to share that just yet. We do anticipate later this year we'll start leaning in and sharing more on what we expect capacity for next year and the year after to be. You know, we obviously are expecting growth behind it. The reason that we don't want to lean in just yet and share those expected numbers is because we wanna see how these initial units go when we get them out to customer sites. I mean, just being transparent, it would be naive for us to think that there won't be any learnings, and it'll just be full steam ahead, right? I mean, there definitely will be learnings. Every new technology has it.

You know, the question's going to be, what are they and how fast can we respond and adapt and, you know, and fix them? Our focus right now, let's get these the approximately 10 early adopter units out there. Depending on how those are performing, that's what will then set what we expect production to be next year. Obviously, our goal is to accelerate it and get a good bit more units out there next year and so on in 2028. We're just not ready to actually put numbers to that yet.

Well, I had to ask. My last question: When you think about your revenue, you know, there's kind of the, you know, right now the revenue that you're putting out there is, you know, really coming, it's coming, you know, really from, you know, like, development work for the military. At what point. I know that there's, you know, there's actually KARNO units kind of within that. Will your revenue from the military as you move forward always kind of be in that sort of other revenue bucket? As you hit commercialization, will we see another revenue line that will have revenue for your commercial customers? Will your military revenue, or at least some portion of it, shift into that line?

Yeah, Edward, this is Jon. I'll take a shot at that. I think it's more the latter. Our initial contract with the U.S. Navy is more R&D, and if you can imagine a new ship platform, they're going to do a lot of R&D work before they put a new power source in that. As Thomas Healy was talking about, there's a lot of interest for mobile power, for example, in the United States Army and the U.S. Air Force. Those types of systems, they could initially be R&D, but those will certainly turn into some kind of commercial unit. It won't all be R&D. You know, I think from our standpoint, at least now, we're happy to have revenue on both lines.

It is beneficial both ways and is, you know, a good signal of interest in the system, and also us making progress and, you know, offering these types of R&D services to the military. It should continue to grow in both areas.

Edward, just to add to that one. Last week we had a gentleman in from the military, and it's still on our whiteboard here in the conference room that we're all sitting in. He walked us through the how do you move from the R&D phase with the military into actually just being purchase orders that are being placed and how to effectively do that. It's obviously something we're thinking about and do expect that it's, you know, long-term, this isn't just R&D. This is just we want it to be a product that they just purchase.

Yeah, that would be ideal. Okay. Thanks for taking all the questions, and congrats again on the progress in the quarter.

Thank you.

Thanks, Ted.

If you would like to ask a question please press star one to raise your hand. To withdraw your question press star one again. We ask that you pick your handset when asking your question to allow for optimum sound quality. As well, if you are muted locally please remember to unmute your device. Your next question comes from Martin Malloy with Johnson Rice. Please go ahead.

Thank you. I just had one quick follow-up question just regarding the UL testing. Does that clear the way for placing the KARNO units at the customer sites, or is there some final certification that is needed?

We've done all the non-recurring tests in just a little more detail. It's both on the linear electric motor, the battery pack, as well as then the full power module. The last thing that we need to do in order to put it at a customer's site is just go through a final run of the system, and then that will then put the nameplate on it for UL certification. The way that UL structures this is until you get facility-level certification, every unit you produce still needs to go through a final end-of-line run. It does not need to redo all those recurring tests I mentioned. It's just a final end-of-line run, that will get the nameplate.

Once later this year we move into the facility-level certification, then we no longer have to independently run every single system prior to nameplate being put on it. The way for, you know, you to really look at this is, you know, we've successfully passed those UL tests that were needed in order to move to the next phase of customer sites. Each one that we build will just go through a final run prior to that nameplate being put on them.

Got it. Great. Thank you very much. Appreciate it.

We have reached the end of the Q&A session. I will now turn the call back to Thomas for closing remarks.

Thank you all for joining today's call. Hopefully you can see a lot of excitement on our end. A huge milestone for us to get through that UL certification testing. It's been something we've been talking about for a few quarters now. Obviously excited about the collaboration with VFG and moving the signed LOIs, non-binding LOIs to a potential of about $400 million of revenue at today's current pricing. You know, we talked about a lot as well the opportunities ahead of us with the military and excited to get those $40 million-$50 million of contracts signed and executed and then, you know, be able to share a little bit more of what some of those opportunities are with all of you.

Once again, thanks for joining for this quarter, and we look forward to sharing more on the next earnings call.

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

Hello, everyone. Thank you for joining us and welcome to the Hyliion Holdings Fourth Quarter 2025 Earnings Call. [Operator Instructions] I will now hand the call over to Greg Standley, Chief Accounting Officer. Please go ahead.

Thank you, and good morning, everyone. Welcome to Hyliion Holdings Fourth Quarter 2025 Earnings Conference Call. On today's call are Thomas Healy, our Chief Executive Officer; and Jon Panzer, our Chief Financial Officer. A slide presentation accompanying today's call is available on Hyliion's Investor Relations website at investors.hyliion.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 risks 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 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 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 KARNO 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 KARNO power module occurs at 3 levels: the linear electric motor, the battery pack and the full power 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 2 of the 3 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 the certification in the second quarter. Overall, we are very encouraged by the progress and view UL certification for early adopter units as a near-term gating item towards delivering units to customer sites. Beyond certification progress, we now have 5 KARNO units at our facility, 2 development units and 3 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 cylinder liner material to enhance heat retention within the system. Importantly, we do not believe reaching the full rating will require any fundamental architecture changes, but rather a series of incremental optimizations across the platform. The steady progress we have made in 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 KARNO system, and we have made meaningful progress in this area during the quarter. We successfully demonstrated dynamic fuel switching with the KARNO 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 changed 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 KARNO core on diesel fuel and being able to export power to the grid while meeting Tier 4 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 KARNO power modules 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 capability. We are entering 2026 with strong demand across commercial, data center and military markets. As previously shared, we have nearly 500 units under nonbinding 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 development 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 2 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 customers' 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 KARNO 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 simplified 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 KARNO 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 KARNO technology with nuclear power generation. We have identified several near-term opportunities across multiple branches of the military that are moving towards potential contract awards, which we expect to finalize this year. We believe these opportunities could represent $40 million to $50 million worth of new revenue opportunities on top of the approximately $20 million of contracts with O&R that we are currently executing on today. As part of our current Navy program, we plan to deliver additional KARNO 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 KARNO 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 plans for a previously discussed 2-megawatt KARNO 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-KARNO 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 2-megawatt system comprised of 10 200-kilowatt KARNO 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 architectures. 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 deployments. We recently entered into a strategic partnership with ABM Industries to support the deployment of integrated distributed energy solutions. This collaboration, combines KARNO technology with ABM 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 KARNO platform while leveraging an experienced partner to support end-to-end customer solutions. Next, I will 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 span 3 different machine models with configurations that are able to produce 1, 2 or 4 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 capability 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 Colibrium, 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 the 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 KARNO core on liquid fuel and meeting emissions requirements. Looking ahead, we expect to achieve UL certification for the early adopter KARNO 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 KARNO power module in late 2026 which will then allow us to begin scaling production. In addition, we expect to complete a multi-KARNO 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 KARNO system designed to support data centers and other customers with high power requirements. We expect to secure additional U.S. military contracts with a total revenue opportunity of $40 million 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 3 years, we plan to build on the progress to achieve in 2026 as the KARNO power module transitions from early deployment into scaled commercialization. In 2027, we expect to ramp commercial deliveries and expand the range of applications where KARNO is deployed. This includes advancing the development of our multi-megawatt KARNO 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 capability in preparation for anticipated growth in 2028. By '28 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 KARNO 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 Jon 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 a $100,000 gross margin gain. As a reminder, R&D services revenue reflects the sale of KARNO cores and related components to the U.S. Navy and the work we perform 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 a $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 '24 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 '24. 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 additive 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 related 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 KARNO 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 in 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 KARNO power module. Based on our current plans, that continues to be the case. Last quarter, we noted that we anticipate that 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 towards an 800-volt DC architecture in next-generation AI data centers aligns directly with KARNO's design and we believe our modular and fuel flexible platform is well positioned to position this evolution. At the same time, resilient and mission-critical power remains a priority for the U.S. 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.

[Operator Instructions] Our first question comes from the line of Martin Malloy with Johnson Rice.

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 customer interest from? You mentioned data centers. Is that where the other half of the units are going?

Sure. Appreciate the question. So military is a huge focus for us this year. We're at the point where we're actually starting to put the systems together, that will go into that unmanned autonomous ships. 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 2.4, 3.2-megawatt system. But one of the focuses for this year is we can really showcase and 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.

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 are highlighting. So that's going to be a big focus for this year. 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 will 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've 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.

Our next question comes from Sean Milligan with Needham & Co.

When you talk about the incremental $40 million 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 -- could scale beyond that $40 million to $50 million range?

Yes. 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 KARNO 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.

Great. And then on this new 800-kilowatt module that you're talking about. I think historically, you gave some numbers around KPIs for the KARNO versus like fuel cells or traditional gas. I was curious if there's any update in terms of like how this module might change that? Does it look more attractive for you as you scale up to 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 kilowatt. And maybe I'll use -- 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 solutions. 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 $0.5 million. As you look at fuel cells, you're up closer to around that $700,000. So it really still puts us in the middle of those 2, which is what we -- where we're targeting to be. And then 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 investment. 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 risk you asked about of going from 200 to 800 to then the 3.2. So the key thing here is the actual power generation unit that 200-kilowatt KARNO 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 KARNO 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 in the -- for the Navy. And then from there, what we said is, well, as opposed to going and doing a reengineering and doing a 2-megawatt system, why don't we just take that 800-kilowatt and make that modular so that those can be stacked together. So we're 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 end markets they are stronger in?

Absolutely. So ABM has a lot of breadth and experience in this space in power generation. And 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 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 power gen. So ABM very well versed in this space, one of the large players there. And then there focuses range everywhere from things like airports to data centers, to mission-critical application. So we've already started discussions with ABM and end customers together, and we're excited to see where that will take us here in '26 and beyond.

Our next question comes from Ted Jackson with Northland.

So I've got a few questions for you. Let's start with just making sure I understand kind of CapEx and capacity. So right now, exiting, say, exiting '25 at 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?

Yes. Ted, 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 2, 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 has mentioned 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 that just make the printers run faster. So 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 yes, 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 is everything from -- there's the older ones with one laser, and then you have some with 2 and then you've had some with 4. And these -- the one we'd be purchasing will be more of these -- of the 4 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.

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

The cost -- what are you asking? For a printer or for...

Yes.

I mean these are commercially available printers. So our exact cost we can't share, but 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 some machines can actually come in less than $1 million and then other machines can be in the low single-digit millions.

And then going over to the kind of your revenue forecast and the development work you do, you're guiding to $10 million of revenue mix between development work and I assume some unit revenue recognition. Starting with the development work. You had $20 million of revenue with the U.S. Navy. If you kind of go through it, you rolled through about $5 million of that so far. So you've got about $15 million of that kind of left to work through. You got another, let's call it, $40 million or $50 million across other things that you think you can bring in. When we look at -- start with the older stuff, I mean, will you recognize a significant piece of that remaining $15 million in '26? How do we think about that? And then what would be the time line if you would, for the new revenue related to 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?

There's a lot of pieces there. So remind me if I forget one of them. So the -- you're correct that 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 -- we hope to get those under contract and those will -- are really more kind of next fiscal year and really will provide us that runway and pathway into 2027 and beyond. See, again, the time line 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 customers' hands, finished testing 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. And then on the 10 systems, I mean, I know 10 Systems it's a rough guestimate 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'm going to assume those are not like the boxes, if you would, that I've seen in new testing facilities, but a little more bespoke, let's call it, the remaining, will you recognize revenue on any of those? I mean I'm hard-pressed to see like if you're going to do 10 that -- and you have $10 million in revenue that you're going to recognize revenue on all 10 units that you're kind of circling in for kind of being put to customers? But would you recognize revenue on KARNO modules outside of the military [ during '26 ]?

Sure. So maybe just to start off with the color of the units. So yes, about half of them going to military now. That is actually a split of some of them in at 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, some of those will be going out to customer sites deployed. 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 then some of those units, a couple of them, we're also anticipating having them as units that we can -- as we were talking about bringing out the data center, showcase the abilities there, integrate into customer sites and really prove that application because as we look at '28, '29, 2030, 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 Jon on how it works in terms of actually recognizing that early adopter unit revenue though.

Yes. 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 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 yes, that's the point of commercialization that we can recognize revenue and the earliest ones that we deliver would be the prime candidates for that recognition right away.

Yes. 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 in terms of your P&L, it's 10 units that you're actually going to -- for a lack of a better term, you're going to ship them? They're going to be -- saying they might not have been accepted and revenue recognized...

Yes, you're correct. And maybe just to decompose the revenue a little bit further, there's going to be services related to R&D services, so testing and engineering work, even stuff we contract out. And then the deliveries that Thomas just mentioned on 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.

And then my very last question because I've taken up more time than I'm allowed, I think. But with -- you're up to 175 kilowatts with regards to the KARNO now, Thomas. You've got -- you said as you've kind of gone through testing. I mean, it's part of the process of why you go through beta and everything else under the sun is -- 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 need -- 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 we can -- so that you can get to that 200-kilowatt goal? That's my last question.

Perfect. All right. So yes, obviously, great progress in the quarter getting to that 175. We -- 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, like 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. And so we talked about earlier in the year of '25 the regens, that's really -- that fine mesh, the thermal battery, we saw a deficiency there. Once we solve that, it was like squeezing the balloon in that area to 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.

Our next question comes from Martin Malloy with Johnson Rice.

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, the design 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 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 KARNO power module, and we can communicate directly with that and even control the battery. And 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. We're -- 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.

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

[Operator Instructions] 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 glad we were able to get that resolved. And just setting the stage again for 2026, this is a 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 2 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 2 areas throughout this year. Thank you again for joining the call. We look forward to chatting again on our next earnings call.

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