Hyliion (HYLN) Q2 2026 Earnings Call Transcript

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DATE

Wednesday, Aug. 12, 2026 at 11:00 a.m. ET

CALL PARTICIPANTS

• Chief Accounting Officer - Greg Standley
• Chief Executive Officer - Thomas J. Healy
• Chief Financial Officer - Jon T. Panzer

TAKEAWAYS

• Revenue -- $4.9 million in the second quarter, up from $1.5 million driven by increased production of components for the 800 kilowatt multimegawatt power module.
• Gross Profit -- $366,000 for the second quarter, reflecting revenue growth from research and development services.
• H1 Revenue -- $7.8 million for the first half of 2026, compared with $2.0 million.
• Net Loss -- $13.9 million for the second quarter, compared with $13.4 million.
• Net Loss Per Share -- $0.08, flat compared with the second quarter of 2025.
• Cash and Investments -- $132.4 million as of June 30, 2026, providing liquidity through the commercialization of the KARNO power module.
• Full-Year Revenue Guidance -- Raised to $15 million, a 50% increase from the previous $10 million projection.
• Military Contract Value -- $41.7 million awarded by the U.S. Navy to scale KARNO power into multimegawatt systems.
• 2026 Military Contract Goal -- nearly $50 million expected by year end, including an anticipated $7 million award from a different service branch.
• Letters of Intent -- 750 KARNO Cores represented in nonbinding LOIs, totaling approximately $400 million in potential revenue.
• Printer Fleet Capacity -- 15 megawatts per year of KARNO Core capacity from the existing installed base of 30 printers.
• Capital Efficiency -- $1.5 million in manufacturing capital investment required to support 1 megawatt of annual production capacity.
• Revenue Yield -- $2.5 million to $3.0 million in annual revenue supported by 1 megawatt of annual capacity at current pricing.
• Operating Expenses -- $15.7 million for the second quarter, remaining flat compared with last year.
• R&D Spending -- $9.5 million in the second quarter, a 6% decrease as spending shifted toward revenue-generating Navy contracts.
• Capital Spending -- $2.1 million for the first half of 2026, down from $11.6 million in the prior year period.
• Equipment Financing Proceeds -- $10 million to $15 million expected from a sale-leaseback or secured debt financing transaction in 2026.
• Year-End Cash Guidance -- $115 million to $120 million, improved from the previous forecast of $100 million.
• Net Cash Spending -- $30 million to $35 million for the full year, a reduction from the initial $50 million projection.
• Printer Speed -- Potential threefold increase in manufacturing throughput identified through software enhancements and design refinements.

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RISKS

• Healy stated, "the approximate 3x improvement in printer speed that I discussed earlier is still being validated and will require additional testing," regarding manufacturing scaling assumptions.

SUMMARY

Management reported a strategic shift toward military contract fulfillment and data center site deployments for the KARNO Power Module. The company reported a significant increase in revenue derived from research and development services, primarily supporting U.S. Navy projects for 800 kilowatt and multimegawatt systems. The commercialization timeline for the 200 kilowatt KARNO Power Module moved to 2027 as Hyliion prioritizes early adopter units and data center test facility deployments. Management stated that current capital reserves remain sufficient to reach commercialization, with plans to restart printer acquisitions in 2027 to meet anticipated demand from hyperscalers and military branches.

• CEO Healy identified three distinct data center project categories: small sites at low 10s of megawatts, medium sites at 100 megawatts, and gigawatt-scale builds where KARNO modules handle 10% to 20% of transient loads.
• The company entered a beta machine agreement with Colibrium Additive, a GE Aerospace company, to collaborate on next-generation additive manufacturing systems.
• Management confirmed that buyers of the KARNO Power Module are eligible for a 30% investment tax credit through 2036 under current law.
• Healy noted that the 800 kilowatt system for the USX-1 DEFIANCE autonomous navy ship is currently in assembly and serves as a modular building block for larger multimegawatt systems.
• The company engaged Abdul Sabani, a civilian aide to the Secretary of the Army, as a strategic advisor to broaden military relationships and expand the contract pipeline.
• Hyliion demonstrated multipower module operation, allowing multiple KARNO units to function as a single scalable power plant for large-scale customers.
• CFO Panzer noted that capital spending in the second half of 2026 is expected to remain in line with the $2 million spent during the first half.

INDUSTRY GLOSSARY

• KARNO Power Module: A modular, fuel-agnostic power generation platform using linear generator technology and additive manufacturing.
• Additive Manufacturing: An industrial production technique that builds 3D objects by adding layers of material, such as metal powder.
• KARNO Core: The central power-generating unit within the larger KARNO Power Module architecture.
• Hyperscaler: Large-scale cloud service providers that require massive amounts of power for data center operations.
• USX-1 DEFIANCE: An autonomous U.S. Navy vessel used for testing sea trials and auxiliary power systems.
• LOI: A nonbinding Letter of Intent used to quantify customer interest before definitive purchase agreements.
• Multimegawatt: Power systems capable of producing two or more megawatts of electricity.

Full Conference Call Transcript

Operator: Hello, everyone. Thank you for joining us, and welcome to the Hyliion Holdings Second Quarter 26 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 *1 to raise your hand. To withdraw your question, press *1 again. I will now hand the conference over to Greg Standley, chief accounting officer. Greg? Please go ahead.

Greg Standley: Thank you, and good morning, everyone. Welcome to Hyliion Holdings Second Quarter 26 Earnings Conference Call. Joining us today are Thomas J. Healy, Chief Executive Officer and Jon T. 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. As such, are subject to risk and uncertainties.

Many factors could cause actual results to differ materially from forward-looking statements made on this call 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 will turn the call over to Thomas.

Thomas J. Healy: Hello, and thank you for joining us for Hyliion's second quarter 26 earnings call. This was a strong quarter for Hyliion, and we have a lot to cover on today's call. I will organize my remarks around 3 topics. Military progress, product progression towards initial customer site deployments, along with customer demand, and speed improvements in additive manufacturing. First, a few highlights. We were awarded a $41.7 million contract with the US Navy, our largest military contract to date, and we still expect to secure additional military contracts before year end.

We are raising our full year revenue guidance from $10 million to 15 million Finally, we have identified additive manufacturing speed improvements that we believe have the potential to increase print speed and throughput by up to 3x. I will cover our progress against the 26 milestones we laid out at the start of the year update our 3-year outlook, and then turn the call over to Jon for the financial results. Starting with the military. Last month, we announced a $41.7 million contract with the US Navy to scale the KARNO power into multi-megawatt systems. Under the contract, we expect to deliver 2 power modules, 1 rated above 2 megawatts and the other rated above 3 megawatts.

Both are built on the same modular 800 kilowatt architecture we are developing today for data centers and the USX 1 DEFIANCE autonomous navy ship, which means we are scaling an existing building block rather than creating a new system. These larger modules expand the range of Navy applications from larger vessels to powering military bases. The contract also includes funding to further advance our additive manufacturing capabilities. Coming into the year, we set a goal of securing $40 to $50 million in new military contracts. This Navy award on its own achieves that goal. However, we expect to close additional military awards this year including 1 from a different service branch for approximately $7 million.

We expect these additional awards to bring us close to $50 million in new military contracts for 2026. The performance periods on these contracts run 2 to 3 years depending on the specific contract and our pace of execution. We expect additional military contracts next year and in the years to follow. Some will be cost plus development contracts similar to what we are executing on today. And increasingly, others will be for delivery of complete commercial power systems. The result is a steadily growing base of military and government contracts that support revenue growth in future years. This quarter, we engaged Abdul Sabani, as a strategic adviser for military opportunities.

Abdul serves as civilian aid to the secretary of the army for Texas, distinguished chair of innovation and senior adviser to the intendent of the United States Military Academy at West Point, and US technology adviser to the British Military Academy. Abdul is assisting us with building relationships with new contacts throughout the military particularly within the US Army, to broaden awareness of our CARNO technology and build on our contract pipeline. Our engagements across all branches of the military increased significantly this past quarter. We held numerous meetings with senior level officers to the potential of our power system.

We were also invited to participate in senator McCormick's defense and innovation summit, where president Trump, energy secretary Chris Wright, and secretary of war Pete Hegseth, all participated. Overall, it was a terrific quarter for defense progress, with more engagements and business opportunities expected in the quarters ahead. Shifting to product development. I will cover where we stand with our development work and deployment of early adopter units. Overall, commercial interest remains strong as we near initial customer site deployments. Ahead of moving units to customer sites, we are completing a block of design enhancements that capture improvements from what we have learned from initial operation.

The block consists of changes spanning airflow and cooling improvements, upgraded insulation blankets, and improved piston, and software and controls enhancements. Together, we are expecting to increase system durability, performance, and power. We have recently completed updating our first commercial customer unit with these upgrades, and that will be the first system deployed to a customer site. We are building a number of power modules in parallel including the 800 kilowatt Navy system, which is now in assembly. We are accumulating run hours across multiple systems simultaneously, and performing extended duration runs to build operating hours and validate durability. We are also expanding our manufacturing capacity including moving key assembly operations from Cincinnati to Austin.

We continue to expect to complete the remaining early adopter units approximately 10 KARNO Cores in total, this year. We expect our first customer site deployment to begin over the next quarter with multiple units going to that initial site, We are planning a data center deployment to follow, and the balance of units are navy assets including the 800 kilowatt system for the USX 1 DEFIANCE. Autonomous navy ship. We also recently announced the successful operation of multiple KARNO power modules functioning together as a single scalable power unit.

This matters for customers who will run more than 1 system at a site, and it completes another of the 26 milestones we set out at the start of this year. We also continue to make progress towards our 200 kilowatt target and expect to reach that power level by year end. We are testing improvements across several components, with our primary focus on continuing to iterate the design of the regenerator. Which we believe is the remaining key enabler to achieve full power. Shifting to customers, our 2 largest segments of opportunities are data centers and the military. In that order. Data centers represent our largest area of customer interest.

Driven by AI related power demand and the sheer size of the market. Over time, we expect a significant portion of our production capacity to be directed towards this segment. We have quantified part of that interest through nonbinding LOIs representing approximately 750 KARNO Cores which are subject to the execution of definitive purchase agreements. Most of the interest we are hearing from customers is not yet reflected in LOIs or purchase contracts. And while we have not announced new data center LOIs since our last update, we are engaged with a growing number of companies discussing interest in deployments ranging from 10s to 100s of megawatts. We are seeing 3 buckets of data center projects.

Low tens of megawatts, around 100 megawatts, and gigawatt scale. For the small and medium sites, our discussion center on the KARNO power module as the primary power solution, given its efficiency, scalability, and compact footprint. For gigawatt scale build, a combined cycle gas turbine will likely provide baseload power, and we are being considered to handle 10% to 20% of the overall need specifically to handle transient loads. Across all 3, there is a strong interest in our system's native 800 volt DC capability which is the architecture data centers are moving towards. On the military side, interest spans autonomous vessels, base power, and forward operating installation driven by mobility, fuel flexibility, and low maintenance requirements.

These opportunities include both R&D programs, like our current navy work, and, over time, deliveries of production systems. Turning to 27 deployments. We will focus on military deliveries against contracts we already hold which generates near term revenue. For data center customers, we plan to deploy 200 kilowatt power modules at their AI test facilities so they can experience the technology firsthand. Which we believe is the fastest path to larger volume orders of our multi-megawatt system that we plan to have initially ready in 2028. These early deployments may be structured as outright sales, loaned units, or power purchase agreements.

With this sequencing, we believe it will enable greater revenue in the near term It will move commercialization of the 200 kilowatt power module into 2027, but we believe it allows us to start deploying units sooner in the data center space and to build a substantially larger long term customer pipeline. Now switching to scaling and manufacturing. As we discussed previously, 1 of the key milestones we set for 2026 was to work on improving the speed and throughput of the additive manufacturing process.

I am pleased to report that we are making significant progress We have determined how to take advantage of the full laser power and capabilities available in the printers, implementing software enhancements that optimize how parts are printed, and are continuing to refine part design, including evaluating material changes where appropriate. Together, we believe these initiatives have the potential to increase overall printer speed and manufacturing throughput by up to 3x. Depending on the part. We have already begun demonstrating some of these speed improvements in print we are making today. Separately, we recently signed a beta machine agreement with Colibrium Additive a GE aerospace company, and the manufacturer of the additive printers we use at Hyliion.

Through this collaboration, we are working together on the next generation of additive manufacturing systems. Up to this point, we have not yet sized our production capacity expectation because we were still assessing the capabilities of our fleet of 30 printers spanning different generations sizes, and capabilities. Now that we have a better assessment of print speed capabilities, we have determined that our existing base of installed printers will be able to produce up to 15 megawatts per year of KARNO Core capacity. With the optimization work I described, we are now in a better position to share high-level view on the relationship between carno output and printer investment for printers we plan to purchase going forward.

Based on our current manufacturing road map, we believe the advancements we are working on will significantly improve the capital efficiency of scaling KARNO production once fully implemented. We currently estimate that approximately $1.5 million worth of investment in printers and related manufacturing equipment can support approximately 1 megawatt of annual KARNO power module production capacity, Based on our current pricing expectations, that 1 megawatt of annual capacity represents approximately $2.5 to $3 million worth of annual revenue. We believe this ratio of investment to output will provide an attractive return on investment once we reach efficient production volumes.

It is still too early to determine exactly when we will achieve that level of production volume, but we now have an additive platform capable of throughput that justifies further investment. As a note of caution, the approximate 3x improvement in printer speed that I discussed earlier is still being validated and will require additional testing. However, we have gained enough confidence in the improvements we are seeing that we now believe there is an opportunity to accelerate additional printer investment into 2027 that we have previously expected to make in 2028. We look forward to providing additional updates on printer throughput improvements and our manufacturing investment plan in the coming quarters.

Finally, I would like to remind everyone that buyers of the KARNO power module are eligible for a 30% investment tax credit on both the purchase price of the system and qualifying investments required for its installation. Under current law, that credit is available to customers through 2036. Turning to the 2026 performance milestones that we laid out for the year. We checked off 3 more this quarter. New military contracts, printer speed enhancements, and demonstrating multipower module operation. We are just over halfway through the year and have completed half of the milestones we set.

By our next earnings call, we expect to check off at least 2 more including surpassing our $10 million revenue milestone and completing our initial customer site deployment with 2 additional milestones expected by year end. As mentioned before, we will be prioritizing military opportunities and delivering 200 kilowatt systems to data center test facilities which will move commercialization of the 200 kilowatt system into 2027. We believe this plan will drive higher near term revenue and larger long term volume opportunities. On our 3-year outlook, the overall trajectory remains the same, although the sequencing of our deployments has changed some. Our 2027 expectations include commercialization and ramp up of 200 kilowatt deliveries.

The development of a multi-megawatt Karno system for the US Navy, and the resumption of printer acquisitions that will drive future production growth. For 2028, we plan to accelerate system deliveries and capital investment in growth assets while delivering our first multi-megawatt Karno system to data center customers. With that, I will turn the call over to Jon to walk through the financial results for the quarter.

Jon T. Panzer: Thank you, Thomas, and good morning, everyone. In the second quarter, we recorded revenue of $4.9 million from research and development services. This compares with revenue of $1.5 million in the second quarter of 25 and 2.8 million in the first quarter of this year. Revenue growth this year is primarily attributable to increased production of components for the 800 kilowatt power module we are building for the Office of Naval Research, including the 4 KARNO Cores that will power the system and other power module components. Cost of revenue was $4.6 million resulting in gross profit of 366 thousand. Operating expenses for the second quarter were 15.7 million approximately flat compared to the second quarter of 25.

R and D spending in the quarter was $9.5 million down 6% from $10.1 million a year ago. The year over year decrease primarily reflects a shift in spending towards revenue generating services for the Navy with the associated costs of that work reflected in cost of revenue. SG&A expenses were $6.4 million in the quarter, up approximately $0.5 million or 8% compared to the second quarter of 25. On the powertrain exit and termination expense line, we recorded a credit of $258 thousand related to asset sales. Our net loss for the second quarter was $13.9 million compared with a net loss of 13.4 million in the second quarter of 25.

Turning to our year to date results, revenue for the first half of 26 was $7.8 million up significantly from $2 million in the first half of 25. Cost of revenues was 7.2 million resulting in gross profit of $576 thousand. Compared with a $143 thousand the same period of 2025. Operating expenses for the first half were $29.1 million down 18% compared with the first half of 25 primarily reflecting a 23% reduction in R&D expenses. Our year to date net loss was $25.7 million, a 16% improvement compared with the $30.7 million net loss we recorded in the first half of 25.

Turning to our cash and investment position, we spent $6.9 million during the second quarter compared with $13.5 million in the second quarter of 25 and $13.1 million in the first quarter of this year. The key drivers of the lower cash spend compared with last year were a lower net loss and lower capital spending. Capital spending was approximately $200 thousand in the second quarter and $2.1 million year to date. This compares with 11.6 million in the first half of 25 when we had significantly higher spending on additive printing machines and related investments. Cash generated from asset sales was $1.9 million year to date.

We finished the second quarter with $132 million of cash and short and long term investments on our balance sheet. Next, I would like to update our outlook for the remainder of the year. Our research and development services work with the Navy has ramped up more quickly this year than we initially expected. We began the year projecting approximately $10 million of R&D services revenue for this year. But in the first half alone, we have recorded nearly $8 million of revenue.

The work scope and funding under our existing Navy contracts will begin to wind down during the second half of the year with a significant milestone expected completion of the 800 kilowatt KARNO power module around the end of the year. As that work nears completion, we will begin ramping up activity under the new $41.7 million Navy contract we signed a few weeks ago although most of the work under that contract is expected to be performed in 2027 and 2028. Consequently, we now expect third quarter revenue to be approximately in line with the second quarter at just under $5 million and total revenue for the year to be approximately $15 million.

As Thomas noted earlier, this represents a 50% increase from our previous 2026 revenue outlook and compares with total revenue of $3.5 million 2025. Turning to capital spending. Over the last couple of years, our investments have been directed primarily toward additive printing machines, related facility investments, and CNC machining equipment. As Thomas noted, this year, our focus has shifted towards optimizing our existing printer fleet and increasing the speed and throughput of those machines. As a result, we expect capital spending in the second half of this year to be approximately in line with the $2 million spent during the first half. This represents a significant decrease from total spending of nearly $24 million in 2025.

We have also previously discussed our expectation to enter into an equipment financing arrangement to monetize a portion of the value of our printer assets through either a sale leaseback or secured debt financing. We continue to expect this to close this year and generate between 10 million and 15 million of cash proceeds. The combination of higher revenue, lower expected capital spending, and the anticipated equipment financing has resulted in a meaningful improvement in our cash outlook for the year. We previously expected to spend approximately $50 million during 2026 net of the equipment financing, and to finish the year with approximately 100 million of cash and investments on our balance sheet.

We now expect to finish the year with between $115 million and $120 million reflecting net cash spending during the year including equipment financing of approximately $30 million to 35 million This improved outlook highlights the strength of our balance sheet and our continued focus on the careful deployment of capital as we begin deliveries. of Karno Power module systems and continue to grow revenue. Next, as Thomas discussed earlier, are gaining confidence in the ability of advancements in additive printing technology to deliver greater speed and throughput. This is the outcome we were targeting and a reason we slowed printer acquisitions this year.

Previously, we expected the next phase of the capital build out of our additive printer fleet to begin in 2028. Based on the progress we are seeing, we now see an opportunity to restart printer purchases sometime next year enabling a faster ramp up in production capacity. We expect to be able to finance these growth investments with some combination of leases, debt, and cash. As we have stated in the past, we continue to believe that capital we have on hand today is sufficient to carry us through commercialization of the KARNO power module. At the same time, additional capital will ultimately be required to support production growth.

Finally, as part of our ongoing capital planning process, we are establishing an at the market equity program to provide additional financial flexibility. The program will allow us to raise capital opportunistically when market conditions are favorable and when we believe doing so supports our priorities and long term shareholder value. We intend to be disciplined in our use of the program carefully considering both our capital requirements and the potential dilution to shareholders. Now I will turn the call back over to Thomas.

Thomas J. Healy: To wrap up, the second quarter advanced all 3 of the areas I opened with. We signed our largest military contract to date, at 41.7 million and expect to close very near $50 million worth in new military awards this year. We increased our revenue guidance for 2026 by 50% from $10 million to about $15 million and we unlocked additive manufacturing improvements that we believe support up to a threefold increase in throughput will enable us to begin scaling faster to meet the demand we are seeing.

For the remainder of 2026, our focus is on completing the early units, deploying the first systems to customer sites, closing the remaining military contracts, and building the 800 kilowatt Navy system for the USX 1 DEFIANCE autonomous Navy ship. We are excited about the opportunity ahead and about the position we are in to capture it. I will now hand the call over to the moderator to open up for Q and A.

Operator: We will now begin the question and answer session. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 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 remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Sean Milligan with Needham and Company. Sean, your line is open. Please go ahead.

Sean Milligan: Hey, Thomas and John. Good morning. Thanks for taking the questions. I guess just real quick on the current capacity of the 30 printers, want to clarify. Did you say 15 megawatts a year or 50 megawatts per year?

Thomas J. Healy: Morning, Sean. So it was 15, 15 megawatts per year. We see that the existing installed base and the printers that we already have on order and expected to come in, that will be able to produce up to 15 megawatts a year. Now with that, that is a rolling in all the advancements that we discussed throughout today's call.

Sean Milligan: Okay. Great. And then on the data center side, I think you said, like, roughly half of your LOIs are data centers today, but you are engaged with a growing number of customers. Just curious, like, how you see that progressing with the customers in your pipeline. Do you see the opportunity to sign additional LOIs or MOUs or are you going to move more to, like, test orders? Just trying to think through, potential catalysts for the rest of the pipeline there.

Thomas J. Healy: Sure. So maybe just to start, so we have the about 750, KARNO Cores worth of LOIs that are executed. That represents, around $400 million of potential revenue opportunity at current pricing. What I will say though is, that is only a fraction of the engagements and customer interests that we are seeing and engaging in. As we announced on today's call, we are working with multiple hyperscalers as well as numerous additional data center builders. And we are in discussions with them of and, you know, some of the questions we have been getting, from them are, like, how do you get to 100 megawatts a year of production capacity just for me?

Or 1 of them is even at 400 megawatts of production capacity just for me. So they wanna understand really how are we going to scale the additive manufacturing side of things. that is 1 of the big reasons why we were excited today to be able to share more about what that looks like and the capital efficient path that we have ahead of us. But the demand we are seeing from, the data center sector, the military sector, as well as the base commercial customers that we have been working with, is phenomenal, frankly. And, you know, the big focus right now is how are we gonna be able to scale to meet that demand.

Sean Milligan: Okay. that is really helpful. And kind of along those lines, you gave the numbers, the $1.5 million for printers and manufacturing equipment to support 1 megawatt of KARNO per year course per year. Just curious about the supply chain there. So on the especially on the printer side, I guess, like, how quickly, you know, can you order printers? Can you bring printers in? Is there any constraints on like, in terms of the number of printers you could bring in a year? Because to your point, like, it seems like the power And Power Space Is Accelerating.

The Demand From Data Centers Is Accelerating To Just Curious About The Ability To Accelerate Your Supply Chain, Especially On The Additive Manufacturing Side.

Thomas J. Healy: Sure. So Maybe Let's Start With The, Infrastructure That We Have In Place. So In Our Austin, Texas facility, the existing square footage that we already have under lease that has the capability of adding hundreds of additional printers to it. So we have plenty of space there. that is not gonna be our issue. The next question is, what does the supply chain look like in order to be able to source these? And get them in. As you are aware, we the systems from, Colibrium Additive, which is a GE company. The great thing is these are the same printers that they use in aerospace. They are selling into the healthcare industry.

And it even is being brought into other industries as well. And so these are not unique printers that are just for Hyliion. These are standard printers that they are scaling for other customers as well. Now in terms of their ability to deliver on those, you know, they have been in production of additive machines for over a decade. And so, you know, it is something that they have confidence, and we have had discussions with them that as our capacity is scaling up, they will be able to deliver towards them.

We do anticipate that, you know, it is in the we anticipate lead times on printers getting into the low number of quarters even potentially months of lead time as we go forward, but that is obviously something we will work closely with. GE on.

Sean Milligan: Okay. Great. I will hand it back over. Thank you so much.

Operator: As a reminder, if you would like to ask a question, please press *1 to raise your hand. Your next question comes from the line of Edward Jackson with Northland. Edward, your line is open. Please go ahead.

Edward Jackson: Very much. Morning, Thomas. Good morning, John.

Thomas J. Healy: Morning.

Edward Jackson: So I wanted to start out just to make sure I understood you talked about the 10 units that you are going to-- well, roughly 10 units that, you are still on track for. And you are going to have a chunk of that being the US Navy. So 800 kilowatts, you know, that takes care of 4 of them. And then you said that you were gonna have an initial customer site with the data center. Is that for a 200 kilowatt or is that for more systems? Given the fact that it is going in there and they are gonna be knocking it around, I assume there is no, like, product revenue associated with that.

So that I wanted to make sure that I understood that right. And then am I correct then that the remaining, you know, kind of half of the units you are gonna be sort of using to do validation work with other data center opportunities? Is that the way to think about those 10 units?

Thomas J. Healy: Yeah. So a few different parts to the question. So maybe first is the data center opportunity we are targeting for this year. So that will be with a 200 kilowatt system as you mentioned. So the base smaller enclosure, that customer ultimately has long term interest in the multi megawatt product. But the great thing is that technology on the inside of the box is the same. it is more of just a scaling equation. So that was 1 of the things we wanted to convey on today's call is, over the early adopter units as well as units that will be getting out into the field next year that are going into data center sites.

They will be taking the 200 kilowatt and it is really to build confidence in the technology and get to experience it firsthand. For a roadmap of multi megawatt systems going forward. In terms of the revenue on these early systems, so until we get to actual commercialization on the unit, we would not have recognized revenue for them. However, when we are selling these units to customers, we are charging them for them. it is more from a accounting standpoint that it does not go to revenue recognition, which John can obviously share more on. But then in terms of the additional units, so the remainder of the 10 are actually all Navy assets.

And it is the couple of customer units that we have or customer couple of customer sites, and then the remainder are going to the Navy.

Edward Jackson: Okay. Got that 1 from you. Regards to I mean, the prior question with regards to printer availability and, you know, the volume of getting them ramped in. You know, if it is going to take, you know, months or quarters where you can, you know, get printers from order When do you think you will have you finalize your kind of CapEx needs for 2027 and be able to highlight that more. I mean, it seems that you know, you are you expecting to have that done, you know, in the near term or by the year? You are just trying to get a sense of when that spend is gonna kick in for next year.

I mean, obviously, you are doing it because, you know, you are you are coming up to the point where you wanna be, which is, you know, selling product. But just to kinda get a little better sense in terms of timing because there was obviously a runway before you can, get those units in and put in new work Yeah.

Jon T. Panzer: Hi, Ed. This is John. I will take that 1. So while we have not finalized 2027 capital spending needs yet, We do think that these print speed improvements are going to enable us to start spending again on printer acquisitions. So I think if you do the math on what I projected on capital spending this year, it is gonna be $4 million compared to, like, you know, 23 million I think it was, in 2025. So next year, we would start to ramp that back up again. And what is gonna dictate that?

You know, the initial step is what you know, when you place orders, you put deposits down, You know, there are there could be an opportunity to actually get printers delivered. Some of it depends, on just when some of the technology will be available, but we certainly, you know, we will certainly wanna send the message that, we are going to restart that effort next year and whether the deliveries happen late next year or into 2028, middle of next year is yet to be determined.

But I think that, you know, the good news of the messaging is that we have an opportunity to pull ahead our ability to bring the printers in that will drive production capacity growth in the future. So I guess, stay tuned, but it is certainly going to be you know, closer than we previously had expected.

Edward Jackson: And then you have made a comment, John, that you were going to look at some equipment financing, and you thought you would get $10 to $15 million in cash proceeds. from doing this year. And then I thought you made another comment with regards to, like, another $30 or $35 million in equipment financing. What was Yeah.

Jon T. Panzer: Let me yeah. Yeah. Yeah. Sorry, Ed. Yeah. Let me clarify. So initially, our projections this year were to consume and spend net $50 million. So that would have left us with a 100 million of cash and investments at the end of the year. So that included $10 million of equipment financing. So now what we are changing is that our actual cash forecast of spending is improving by $15 million, and I am also projecting that we may upsize that equipment financing from $10 to $15 million. So that is where you get up to a $20 million improvement in our total cash forecast.

So that cash forecast was 50, and now it is somewhere of net spending and now it is somewhere between $30 and $35 million. So I did not mean to imply that the financing would be in the $30 to $35 million range. The financing will be 10 to 15. Does that make sense?

Edward Jackson: Yep. It does. Yeah. So, again, I just wanna reiterate that because of higher revenue lower spending overall, and lower capital spending, our net, cash burn is going to be about $15 million better than we previously expected. Got it. And then my last question, and I will get out of the line, is on the Navy contract, you have got, let's call it, $42 million in. You commented on it being rolling in and starting to contribute in 2027 and 2028. And so when we think about those 2 years, you know, basically, we should think about some however the cadence is we are putting at least $42 million of developmental revenue into the model. Across 2.73 thousand.

And then I wanna verify with the commentary of the ramp and the original contract. There will be no revenue from that original contract carrying forward into 2027?

Jon T. Panzer: Yeah. Yeah. Let me try and unpack that a bit. So we had a roughly $20 million of military contracts preceding the 1 that we just signed for 41.7. And we have been spending on those contracts since the end of 24. I think we had $1.5 million in 2024, 3.5 in 2025. And then and so we have we have already booked almost $10 million. So that is gonna start to wind down by the end of the next quarter, this quarter that we are in now.

At the same time, we are gonna be ramping up spending on new contracts including the 1 we just signed, and then we are anticipating additional contracts to be signed this year as well. So I think the answer to your last question is yes. The old contracts, if I can call them that, will start to wind down this quarter. Because we will have spent that money, and the new contracts will start up in Q4 of this year. And then those will accelerate in 2027 and 2028.

But I do wanna reiterate, we do expect to sign more contracts in 2027 and 2028 So what we expect to see is layering of incremental government military contracts on top of each other, which will enable steady continuous revenue growth on our R&D services line over time. And then maybe 1 other caveat some of those contracts will turn into more it will not be R&D. They will actually be commercial systems. You know, for example, base power or forward operating base power, those will be R&D initially, but then that will just turn into commercial units of special types for the military. So, again, we should see growing revenue over time.

So, yeah, the 41.7 million contract we just signed the bulk of that will be spent over 27 and 28.

Edward Jackson: Okay. Alright. Thanks for all the clarifications. Congrats on the quarter.

Jon T. Panzer: Yeah. Thanks, Ed.

Operator: As a reminder, if you would like to ask a question, please press *1 to raise your hand. We have reached the end of our Q and A session. I will now turn the call back to Thomas for closing remarks.

Thomas J. Healy: Thank you all for joining today's call. As we highlighted, a lot of exciting work happening. Customer demand both with military commercial customers, specifically the data center front. We are seeing data centers really viewing this as a viable technology to meet this power need that they have. And we are excited to get some of our early units out there into their operations to really showcase the product benefits. And then coupling to that, being able to highlight more on the road map ahead of what scaling additive manufacturing looks like. We believe with these breakthroughs, have had a very economical way to scale the business going forward.

And we are excited about the state of the art nature of what these machines are looking like. So with that, thank you for joining this quarter, and we look forward to updating further on quarter on earnings calls ahead.

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

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