GuruFocus - Release Date: November 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hyliion Holdings Corp (HYLN) has achieved the second-to-last milestone in the commercialization timeline for the 200 kilowatt Carno generator, moving it to the testing and validation stage.
- The company secured a significant contract with the US Office of Naval Research worth up to $16 million, which includes the sale of up to seven Carno generator systems.
- Hyliion Holdings Corp (HYLN) has received letters of intent exceeding the number of units planned for shipment in 2025, indicating strong market demand.
- The Carno generator has demonstrated the ability to operate on multiple fuel sources, showcasing its adaptability and flexibility.
- The Carno generator now qualifies under California's renewable portfolio standard, opening new opportunities in a key renewable energy market.
- Revenue recognition for the Carno generator units will only occur once design specifications and key performance criteria are confirmed, potentially delaying revenue realization.
- Initial gross margins for the Carno generator are expected to be negative, with improvements anticipated only by late 2025 or early 2026.
- The company is still in the testing and validation phase for the Carno generator, indicating that further development and adjustments may be needed.
- Hyliion Holdings Corp (HYLN) has suspended share repurchases due to recent share price strengthening, which may impact shareholder returns.
- The production capacity for 2025 is limited to several dozen units, which may not meet the full market demand or potential sales opportunities.
A: Thomas Healy, CEO: We've learned a lot from the alpha version, particularly around the linear electric motor and bearings, which we've incorporated into the beta version. The beta phase is in testing and validation, and things are looking promising. We're on track to start customer deliveries by the end of this year. The early adopter units are a partnership with customers, allowing us to gather feedback and make improvements as needed.
Q: Can you elaborate on the data center product? Is it just 10 Carno generators inside a housing? Is there any risk in upsizing the Carno size?
A: Thomas Healy, CEO: The plan is to have 10 four-shaft systems inside an enclosure with integrated accessories like cooling and air handling systems. The development risk is more about packaging rather than redesigning the generator. We expect to make initial deliveries of the two-megawatt systems in 2026. The data center space is a significant driver of market demand, and we're seeing a need for on-site power generation solutions like ours.
Q: How does Carno compete with fuel cells or traditional gensets in terms of cost and efficiency?
A: Thomas Healy, CEO: Carno generators are expected to be less expensive than fuel cells and about a third the size, which is crucial for data centers with land constraints. Additionally, Carno generators have advantages in maintenance and reliability, as fuel cell membranes deteriorate over time and need replacement.
Q: What is your production capacity for 2025, and do you expect to recognize revenue on all units produced?
A: John Panzer, CFO: We expect to ship several dozen units next year, generating low double-digit millions in revenue. Revenue recognition will occur once the product is commercialized, expected around mid-2025. We anticipate recognizing revenue on all units sold both this year and next year.
Q: Regarding the Navy contract, can you provide more details on the revenue generation and associated costs?
A: John Panzer, CFO: The Navy contract includes seven Carno units and involves engineering work, material purchases, and testing. There are costs associated with it, but it supports our R&D and sets us up for future sales. We expect it to be a core part of our service offerings going forward.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.