10-K: Hyliion Reports Wider Losses Amid KARNO Module Delays

Hyliion Holdings Corp. reported increased net losses for fiscal year 2025, driven by significant R&D investments and production delays for its KARNO Power Module, despite growing government contract revenue.

Summary

• Hyliion Holdings Corp. is focused on designing and developing its KARNO Power Module, a modular, fuel-agnostic power generator, and providing related R&D services.
• The company reported a net loss of $57.188 million for the year ended December 31, 2025, an increase from $52.048 million in 2024.
• Revenue from research and development services increased by 130.3% to $3.475 million in 2025 from $1.509 million in 2024, primarily from U.S. government contracts.
• Research and development expenses rose by 14.8% to $42.467 million in 2025, reflecting increased spending on KARNO Power Module design, testing, and component production.
• Selling, general, and administrative expenses decreased by 6.7% to $22.757 million in 2025, mainly due to lower facilities costs and insurance expenses.
• Cash used in operating activities improved to $46.549 million in 2025 from $56.738 million in 2024.
• The KARNO Power Module is designed for high efficiency (initially ~45%, targeting 50%+) and ultra-low emissions (over 95% reduction in NOx and CO compared to best-in-class engines).
• Initial KARNO Power Module deployments to early adopter customers, including the U.S. Navy, occurred in 2025, with further deliveries and UL certification expected in 2026.
• The company experienced delays in early 2025 for customer unit deliveries and design parameter validation due to issues with a key printed component (regenerator) and linear electric motor production ramp-up.
• Hyliion insourced linear electric motor production in mid-2025 to accelerate ramp-up and improve quality control.
• The company expects to achieve commercialization of the KARNO generator by the end of 2026, anticipating sales growth in 2027 and beyond.
• Hyliion projects approximately $100 million in cash, short-term, and long-term investments remaining on its balance sheet at the end of 2026, assuming $10 million in equipment-backed financing or debt.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a challenging period for Hyliion, marked by increasing losses and product development delays, despite promising technology and growing government R&D revenue. The path to commercialization and profitability remains uncertain and capital-intensive.

Positives

• Revenue from R&D services significantly increased by 130.3% to $3.475 million in 2025, demonstrating growing engagement with government contracts.
• Cash used in operating activities decreased by $10.189 million, indicating improved operational cash management compared to the previous year.
• The KARNO Power Module boasts high anticipated electrical generating efficiency (initially ~45%, targeting 50% or higher), surpassing many conventional generators.
• KARNO Power Module is designed for ultra-low emissions, expecting over 95% reduction in NOx and CO compared to best-in-class diesel/natural gas engines, meeting stringent SCAQMD Rule 1110.3 standards without aftertreatment.
• The KARNO Power Module is fuel-agnostic, capable of operating on over 20 diverse fuel sources, including natural gas, hydrogen, propane, diesel, and waste fuels, enhancing energy security and versatility.
• The company secured a Phase II SBIR contract up to $1.5 million from the U.S. Navy's ONR in July 2025, building on previous contracts totaling up to $18.4 million.
• Successful operation of the 125 kW KARNO Core validated its fuel oxidation system and low emissions, serving as a platform for the larger 200 kW module.
• In-sourcing linear electric motor production in mid-2025 is expected to accelerate production capacity and improve manufacturing quality.
• The KARNO Power Module's design features a single moving part per shaft and helium bearings, expected to reduce maintenance requirements and costs significantly.
• The company believes its current and long-term assets, including $22.9 million in cash and $129.4 million in investments, will provide sufficient liquidity for the next twelve months.

Negatives

• Net loss increased by 9.9% to $57.188 million in 2025 from $52.048 million in 2024, indicating continued unprofitability.
• Interest income decreased by 31.6% to $8.351 million in 2025, primarily due to a decline in investment balance and lower interest rates.
• The company is an early-stage entity with a history of losses and expects to incur significant operating and net losses for the foreseeable future.
• Delivery of early deployment customer units and validation of KARNO Power Module design parameters were delayed in early 2025 due to design and production problems with a key printed component (regenerator) and issues ramping up linear electric motor production.
• The company has no experience manufacturing the KARNO Power Module on a large-scale basis, posing a risk to achieving growth and profitability objectives.
• Significant markets for KARNO Power Modules may develop more slowly than anticipated or may never materialize, impacting future revenues.
• Hyliion is substantially dependent on government funding, particularly ONR contracts, which if lost or reduced, could materially adversely affect R&D activities and revenue recognition.
• The company is experiencing limitations on the importation of high-strength rare earth magnets from China and faces challenges in securing sufficient domestic supply.
• Total stockholders' equity decreased from $244.389 million in 2024 to $192.009 million in 2025.

Risks

• Significant delays in the design, production, and launch of the KARNO generator could harm the business, prospects, financial condition, and operating results.
• Substantial dependence on government funding, particularly ONR contracts, which if lost or reduced, could materially adversely affect R&D activities and ability to recognize revenue.
• As an early-stage company with a history of losses, Hyliion expects to incur significant expenses and continuing losses for the foreseeable future.
• Lack of experience manufacturing the KARNO Power Module on a large-scale basis, and potential failure to develop adequate manufacturing processes or identify qualified outsourced partners in a timely manner.
• Significant markets for KARNO Power Modules may develop more slowly than anticipated or may never develop at all, harming revenues and potentially preventing recovery of development losses.
• Inability to successfully engage target customers or convert early-stage products into meaningful orders in the future.
• Products may not be suitable for defense applications, impacting future revenue from ONR and other government contracts.
• Demand for products depends on end-user customers, some of whom operate in highly cyclical industries, leading to uncertainty and potential impact on demand.
• Failure to manage growth effectively, including attracting qualified personnel, could materially and adversely affect business, prospects, operating results, and financial condition.
• Dependence on suppliers, many of which are single or limited-source, and their inability to deliver necessary components at acceptable prices, volumes, and performance specifications.
• Risk of manufacturer concentration in the additive printer market, with current reliance on Colibrium Additive (formerly GE Additive).
• Increases in costs, disruption of supply, or shortage of components could harm the business.
• KARNO Power Modules may contain defects in design and production, fail to perform as expected, or require extensive repair, harming reputation and financial results.
• Limited experience servicing KARNO Power Modules and integrated software, potentially affecting customer support and business operations.
• Exposure to product liability claims, which could harm financial condition and liquidity if not successfully defended or insured against.
• Financial results may vary significantly from period to period due to fluctuations in operating costs and other factors.
• Significant competition in the distributed generation and R&D markets from companies with greater resources and established market shares.
• Developments in alternative technology or improvements in distributed generation products may adversely affect demand for Hyliion's products.
• Cybersecurity risks to operational systems, security systems, infrastructure, and customer data, potentially leading to operational disruptions, reputational harm, or legal liabilities.
• Potential for patent, copyright, or trademark infringement claims or trade secret misappropriation claims, leading to substantial costs and diversion of resources.
• Inability to protect intellectual property rights from unauthorized use by third parties, potentially resulting in loss of competitive advantage and decreased revenue.
• Dependence on compliance with governmental regulations related to defense spending and procurement, with non-compliance leading to fines, penalties, or debarment.
• Exposure to risks related to tariffs, duties, and taxes, which can significantly impact global supply chains and operations, increasing costs.
• Changes in U.S. tariff and global trade policies may materially and adversely affect the business, particularly regarding imported components.
• Subject to changes in federal government policies in the energy sector, which could impose substantial costs and uncertainty.
• Evolving laws, regulations, standards, and contractual obligations related to data privacy and security, with non-compliance potentially harming reputation and incurring fines.
• Various environmental laws and regulations could impose substantial costs and cause delays in building production facilities.
• Unexpected delays in obtaining required permits and approvals for production facilities.
• Need to raise additional funds, which may not be available on favorable terms, negatively affecting business, prospects, financial condition, and operating results.
• Ability to use net operating loss carryforwards and other tax attributes may be limited as a result of ownership changes (e.g., Section 382 of the Internal Revenue Code).
• Inability to obtain or agree on acceptable terms and conditions for government grants, loans, and other incentives.
• Concentration of ownership among existing executive officers, directors, and their affiliates (approximately 21.8% as of December 31, 2025) may prevent new investors from influencing significant corporate decisions.
• Issuance of additional shares of common stock or preferred stock, including under equity incentive plans, could dilute the interest of stockholders.
• Failure to maintain compliance with NYSE American's continued listing requirements could result in the delisting of common stock.
• Future product recalls could materially adversely affect business, prospects, financial condition, and operating results.
• Risks associated with acquisitions, including integration challenges, diversion of management resources, and potential financial underperformance.

Future Outlook

Hyliion expects to continue delivering KARNO Power Modules to early deployment customers throughout 2026, with full 200 kW UL certification anticipated before planned commercialization late in 2026. The company projects sales growth in 2027 and beyond, supported by new additive printers and optimization of existing print capacity. Hyliion anticipates completing engineering solutions to enhance power level, efficiency, and operational durability throughout 2026. The company expects to have approximately $100 million in cash and investments by the end of 2026, assuming $10 million in equipment-backed financing, and plans to seek additional capital post-commercialization to accelerate investments in additive printing machines and related assets for growth.

Management Comments

• We believe that together, these efforts advance the technical feasibility of full-scale system development (referring to ONR contracts).
• We believe that the unique capabilities of the KARNO Power Module will make it competitive in the market for distributed power systems, competing favorably against conventional generating systems and new alternative power systems such as fuel cells and other linear generators.
• We anticipate that the KARNO Power Module will initially achieve an electrical generating efficiency of approximately 45%, calculated by considering the usable power output in relation to the energy from the fuel source.
• We believe that ongoing engineering improvements are expected to increase the KARNO Power Module's efficiency to 50% or higher in future design iterations.
• We anticipate that the KARNO Power Module will achieve ultra-low levels of emissions, with NOx and CO emissions expected to be reduced by over 95% compared to best-in-class diesel or natural gas engines and meeting South Coast Air Quality Management District (SCAQMD) Rule 1110.3 emission standards without the need for aftertreatment.
• We believe that Hyliion's KARNO Power Module is an innovative solution in the emerging distributed generation space, offering a reliable power generator that combines high efficiency, fuel flexibility, and low emissions.
• We believe that initial KARNO Power Module deployments, along with our ongoing testing and development efforts, will validate critical design specifications, including projected operating life, maintenance requirements and durability.
• We expect to achieve UL certification at the full design power of 200 kW prior to the planned commercialization of the KARNO Power Module later in 2026.
• We expect to continue to incur net losses in the short term as we execute on our strategic initiatives by completing the development and commercialization of the KARNO Power Module with customer deployments anticipated to continue throughout 2026.
• With our current cash and investments, we believe we are well positioned to be deliberate and opportunistic in determining the timing and structure of a capital raise.

Industry Context

StockSavvy.ai notes that Hyliion's focus on distributed power generation with its KARNO Power Module aligns with broader industry trends towards decentralized energy solutions, driven by increasing electricity demand, aging grid infrastructure, and the integration of intermittent renewable sources. The emphasis on fuel flexibility and ultra-low emissions positions Hyliion to capitalize on growing environmental regulations and the demand for cleaner energy, particularly in high-growth sectors like data centers and EV charging infrastructure. However, the market is highly competitive, with established players like Cummins and Generac, and emerging alternative power systems like fuel cells, posing significant challenges for Hyliion's commercialization efforts.

Comparison to Industry Standards

• KARNO Power Module's anticipated electrical generating efficiency of approximately 45% (expected to increase to 50% or higher) compares favorably to internal combustion diesel or natural gas generators, which typically operate within a 25% to 40% efficiency range.
• The U.S. electrical power grid is estimated to operate at an efficiency between 33% and 40%, suggesting KARNO could offer a more efficient local power solution.
• Best-in-class grid-level combined cycle gas turbine powerplants can obtain efficiencies above 50%, but incur 5% to 10% transmission and distribution losses, which KARNO Power Module aims to circumvent by being located near consumption.
• KARNO Power Module's expected NOx and CO emissions reduction of over 95% compared to best-in-class diesel or natural gas engines, and meeting SCAQMD Rule 1110.3, positions it as a leader in low-emission generation without aftertreatment, a significant advantage over many conventional competitors like Cummins or Caterpillar.
• The KARNO Power Module's low noise level of approximately 67 decibels at six feet is a competitive advantage over conventional generators that typically produce higher noise levels due to internal combustion.

Management Changes

Corporate Governance

Legal Proceedings

• The company is periodically involved in legal proceedings, legal actions, and claims arising in the ordinary course of business, including payroll-related and various employment-related matters.
• Management believes that the outcome of such current legal proceedings will not have a significant adverse effect on the company's consolidated financial position, results of operations, or cash flows.

Stakeholder Impact

• Shareholders: Face increased net losses and potential dilution from future capital raises, but also potential long-term value from KARNO commercialization. Existing executive officers, directors, and affiliates hold a significant ownership stake (21.8%), which could influence corporate decisions.
• Employees: Benefit from continued R&D investments and future growth opportunities with KARNO. Management changes indicate strategic strengthening of the executive team. Equity incentive plans are in place to attract and retain talent.
• Customers (especially U.S. Navy): Benefit from ongoing R&D services and the development of the KARNO Power Module for various applications, including defense. Early adopters are receiving units for testing.
• Suppliers: The company's dependence on single or limited-source suppliers, particularly for rare earth magnets, poses risks to supply chain stability and costs. Opportunities exist for domestic suppliers as the company seeks alternatives.
• Creditors: The company's liquidity position, with $129.4 million in investments and expected $10 million in equipment-backed financing, suggests a managed approach to capital needs, but continued losses and future capital raises are noted.

Next Steps

• Continue delivering KARNO Power Modules to early deployment customers throughout 2026.
• Expand testing to include long duration operation, diesel fuel integration, simulation of ship motion, and extreme temperature environments for ONR contracts.
• Implement engineering solutions to enhance KARNO Power Module's power level, efficiency, and operational durability throughout 2026.
• Achieve UL certification for KARNO Power Module up to 150 kW initially, and full 200 kW prior to commercialization.
• Complete commercialization of the KARNO generator before the end of 2026.
• Ramp up delivery of KARNO generators to commercial customers following commercialization.
• Expand sales, distribution, and service networks to support growing market presence, potentially exploring outsourcing or partnerships.
• Procure and receive additional additive printing machines from GE in 2026 to build out print capacity.
• Optimize key print parameters to increase output from existing installed printer base.
• Begin testing new laser technology anticipated to become available with future printer models and for retrofitting existing fleet.
• Evaluate funding needs and sources of capital, potentially seeking external funding to accelerate investments in additive printing machines and related assets post-commercialization.

Key Dates

Recommendation

Hyliion is in a critical transition phase, shifting from powertrain to the KARNO Power Module. While the KARNO technology shows significant promise with its fuel flexibility, high efficiency, and low emissions, and has secured notable government R&D contracts, the company continues to incur substantial net losses and has experienced product development delays. The path to commercialization and profitability is still uncertain and capital-intensive, with a need for future capital raises. The stock is speculative, balancing innovative technology and market potential against execution risks, financial losses, and competitive pressures. A 'hold' recommendation reflects the high risk/reward profile, suggesting investors monitor progress on commercialization, production scaling, and financial performance before making further investment decisions.

Keywords

KARNO Power Module, Linear Generator, Fuel-Agnostic, Distributed Power Generation, Energy Efficiency, Low Emissions, Additive Manufacturing, SEC Filing, 10-K, Hyliion Holdings Corp., ONR Contracts, R&D Services, Electric Vehicles, Data Centers, Microgrids, Biogas, Oil & Gas, Defense Applications, Renewable Energy, Thermal Converter, NYSE American