Hyliion Holdings is scaling back its powertrain business to focus on electric generator technology. (Photo: Alan Adler/FreightWaves)
Hyliion Holdings is exiting hybrid electric propulsion and will lay off 175 employees – two-thirds of its workforce – as it focuses on developing a business around the fuel generation technology it bought from GE Aviation.
“Our focus on Karno is aligned with the growing demand for electricity,” Hyliion founder and CEO Thomas Healy said in a news release. “With commercial deliveries planned for next year, the Karno generator offers a more capital efficient route to market.”
The expected turnaround came after markets closed Wednesday as part of the Austin, Texas-based startup’s third-quarter earnings report. Hyliion’s board of directors approved the moves on Tuesday.
After delays and cost overruns, the board launched a strategic review in October of the Healy engine business, founded in 2015. Hyliion stopped taking orders for the engines on October 11. The termination is expected to close by the end of the first quarter of 2024 and is worth $18.4 million.
The announcement of a strategic review sent Hyliion (NYSE: HYLN ) stock dumping by shareholders. It lost about half of its value on October 11. Shares closed at 59 cents on Thursday. The New York Stock Exchange told Hyliion last Thursday that it did not meet its listing requirements because its shares had traded below $1 for 30 consecutive days. The exchange may initiate delisting procedures.
A rare startup with cash on the balance sheet
Hyliion is a rare transportation startup in that it retained much of the cash it raised in a reverse merger with special-purpose acquisition company Tortoise Acquisition Corp. in 2020. Development of the Hypertruck ERX platform is spending money with no certainty of market acceptance and no line drive to raise more money.
As fleets begin to replace diesel models with zero-emission battery electric trucks, the Hypertuck ERX solution falls short due to complexity, cost and falls short of being a true zero-emission drive.
Hyliion has received certification from the California Air Resources Board for the 12-liter Cummins natural gas engine for the Hypertruck. But CARB won’t recertify it next year. This would require Hyliion to accept the 15 liter Cummins replacement and go through the process again.
“The decision around our propulsion business was very difficult,” Healy said. “But we believe this is a necessary step to protect our financial stability, especially given the current economic climate.”
Hyliion said it would try to sell its propulsion assets, but could not predict whether that would happen. The job cuts were included in Hyliion’s 10-Q filing with the Securities and Exchange Commission.
Karno originally planned for the Hypertruck ERX
The company bought the Karno generator from GE in August 2022 for $37 million in cash and Hyliion stock.
Originally conceived as a second-generation drive for the ERX, Karno is now Hyliion’s core business. It expects to begin supplying customers with stationary generators running on natural gas, hydrogen, propane or up to 20 additional fuels.
For electric vehicle charging, moving Karno’s generators to a location where installed power is lagging could help meet the regulated demand for electric trucks.
“I really see a lot of shippers and carriers testing temporary solutions until they roll out their permanent solutions,” Salim Yousefzadeh, founder and CEO of startup WattEV Truck-as-a-Service, told FreightWaves.
“There are cases where some people can’t get power to their site fast enough. Instead of putting a diesel generator, they might look at putting a linear generator there that uses natural gas to generate power. That’s something we appreciate in some of our locations that have been around for years in terms of getting energy.”
Hyliion has moved into a new Karno R&D and low-volume manufacturing facility near Cincinnati. Technological progress reported so far includes:
- Successfully delivering power to the grid as part of ongoing development and validation.
- Conducting client showcases to increase future sales.
- Perform simulations and laboratory tests showing achievable power, efficiency and emissions targets.
Hyliion has enough money to commercialize Karno, Healy said.
By the numbers
The company plans to end 2023 with approximately $285 million in available capital. A cash burn of approximately $40 million is expected in 2024.
Operating expenses for the third quarter were $33.3 million, compared to $62.9 million in the year-ago quarter, which included $28.8 million for the Karno purchase.
Year-to-date expenses were $103.7 million, compared to $120.8 million in the year-ago period. Hyliion ended Q3 with $324 million in cash, short-term and long-term investments.
Hyliion expects full-year operating expenses of approximately $140 million, including the cost of shutting down propulsion operations. The company does not expect additional revenue from engine sales in 2023.
Editor’s note: Updates with abbreviations, NYSE noncompliance letter, and edits throughout.
Will the stationary power generator save Hyliion?
Hyliion may drop the Hypertruck ERX when the strategic review begins
Hyliion buys 3D-printed hybrid fuel generation technology from GE
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