creating innovative solutions that enable clean, flexible, and affordable electricity production. Here to tell you more about the company is Hyliion's Chief Executive Officer, Thomas Healy. Thomas?
Thank you. Hi, everyone. My name is Thomas. I'm the founder and CEO of Hyliion, and we're gonna be talking a little bit about power generation. That's the focus of our company. We make these generators that you see in this animation here, sitting between two EV charging pedestals. Our thoughts are, as we go forward here, we're gonna really move to a distributed power generation grid. You know, as you think about the grid today, you've got areas that are already going through rolling brownouts, similar to the area we're in right now in California, as well as you've got a lot more demand coming onto the grid. You've got things like AI needing more data centers. You've got EV charging.
You've got industrial applications that are saying, "We're gonna move to electric power," for their equipment, as opposed to running off of conventional fuels. And so our belief is where our grid is heading is a model where as opposed to having one big power plant and pushing power out to all these different areas, you're actually gonna make power locally that will feed electricity back into the grid. If for any of you who are familiar with Hyliion, we went public back in 2020. At that time, we were a company focused on electric semi-trucks. We were making powertrains for vehicles. And about nine months ago, we did the shift to actually moving out of the powertrain business and focusing solely on this KARNO generator technology.
I'll share a little bit of background on that in a second, but from a company standpoint, we, as mentioned, are traded on the New York Stock Exchange. We closed out last quarter with just under $250 million of cash on our balance sheet, so well-funded for years ahead here. Headquarters is in Austin, as well as R&D facility up in Cincinnati. Our mission now is to deliver these fuel-flexible, innovative power generation solutions. A little bit of background on the technology. This technology that we have, the KARNO generator, was actually created within GE.
It was technology that they started working on back in 2017, and then in 2021, they approached Hyliion and said, would we be interested in actually using this genset as a way to charge the batteries in the vehicle? We started a joint development program together and working on that. Fast-forward a couple of years, we actually acquired the full division out of GE and brought that into Hyliion. Then, as mentioned, about nine months ago, we actually decided to pivot and not bring this technology into the vehicle space, but actually bring it into the stationary power space. Really, the thought process behind that was for any of you who have been following the EV space. It's been a challenging few years.
Many of the companies in the space are trying to raise capital or are nearing bankruptcy, and while we had a strong balance sheet, we decided, let's get out of that space and focus on an area where there's a ton of growth, right? There's a tremendous amount of growing demand for needing more power generation so a little bit of background on the actual genset itself so it's a linear heat generator. Now, it probably doesn't mean anything to most people in the audience. This is not a technology we invented from a physics standpoint, right? Heat engines have been around for a couple of centuries.
But what we've done is we've taken kind of the latest and greatest in fuel handling, in additive manufacturing or 3D printing, brought those together in order to kind of reinvent this type of generator, and we're seeing pretty unprecedented levels of benefits out of it. Most notably is probably the efficiency, as noted on this slide, so we produce about 50% electrical efficiency out of this generator. That's on par or better than many of the power plants that are out there today, so as we think about this distributed grid model, having, you know, localized power generation, if you can make that electricity just as efficiently or more efficiently in most instances than the local power plant, that's a huge win.
So the architecture of it is this linear setup as shown on the bottom of the slide here, but we're gonna go ahead and go through some slides here that kind of show you how the technology actually works. So you've got this four-shaft setup. All four shafts are identical, and they actually interact with each other. When we go ahead and look at the end of the genset, this is where we produce heat. As I said on the last slide, this is a heat engine, so our actual fuel source is heat. The way we produce that heat is we take fuel, and we burn it, and that's what makes the heat to power the genset. So that's what gives us the capability of being fuel agnostic.
The same exact generator can run on natural gas, can run on hydrogen. Even fuels like diesel, conventional fuels, can be run through the same genset as well. We're taking the fuel in, mixing it with air, and producing heat, and what that heat is doing is it's going to heat up a trapped gas, and that's what you see in that red and blue area on the slide, next to the pistons there. That's trapped helium, and what happens to a gas is when it gets heated up, that gas wants to expand, and that's what actually pushes the piston one way, and then you actually have the exact opposite reaction happening on the other side that pushes it back.
So, most people, when they see, you know, the architecture, they think of, like, a car engine, where you're exploding fuel, and that's what moves the piston. This is actually very different. It's all powered off of, gases being heated and then those expanding and moving that piston back and forth. And then in the middle of the genset is a linear electric motor, sitting there producing electricity. So also very different than, like, a Cummins or Caterpillar engine, where, their output is actually rotation of a shaft. Our output is electricity. So if anyone has questions on that at the end, we can dive into it, but, that's just a little high level on how the tech actually works. But we'll go ahead and dive into the product that we're actually delivering.
So on the slide here, you see a box that's a 200-kilowatt box. So to put that into perspective, 200 kilowatts would be the amount needed for an EV charging pedestal for two cars, or our headquarters down in Austin, Texas, 150,000 sq ft, that would be between one, maybe two of these 200-kilowatt boxes. We also, as I'll share in a couple of slides here, we've got a 2-megawatt solution that we're working on as well, which that would be more geared towards data centers or towards oil and gas applications.
But the thought process with this box is, you deploy this outside your facility, you treat it much more like an air conditioning system than a genset in a lot of ways, where you deploy it, you let it run, you want it to be running 24/7. Because what we've found is you can actually make electricity cheaper through this generator than what you can buy, you know, electricity for, from most of the utilities out there. So this is that product landscape that I mentioned of 200-kilowatt box that could. We'll start delivering that solution later this year to customers, the 2-megawatt solution, and then we also have the ability to do customized solutions.
So, one example of this would be, we're working on some marine applications, where we could actually customize exactly to the power levels needed, by that end customer. And, the other very key thing to note on this is, if you think about, like, a Cummins engine, a Caterpillar engine, when they want to go to different power levels, they actually reinvent the entire genset, right? It's a totally new block, new pistons. For us, what we're doing is we're actually just stacking these 200-kilowatt modules together. So, that 2-megawatt solution, that's just 10 of these 200-kilowatt solutions stacked together. And, we see a lot of benefit there because, now your manufacturing is all kind of the same, as you're going to scale power.
One of the questions we do get asked a lot is, well, would there be benefits to making bigger systems? And we found that there's really not, actually, at least not at this time. That two hundred kilowatt solution is really optimized for both manufacturing and for the power output. So benefits of this solution. You know, as I mentioned in the lead in, the whole thought process is, if you own one of these generators, you want to be running it twenty-four seven. This effectively becomes your personalized power plant, and you use your grid as backup electricity. So it's fuel agnostic. The same genset solution can run on. We've identified over twenty different fuels. Most customers are starting with natural gas. That's kind of the easy go-to. It's a low-cost fuel.
We also have applications that are going to be running on hydrogen, and then we're seeing a lot of interest from kind of unique fuels as well, like ammonia or, you know, fuel that is coming out of, like, a landfill or oil and gas site, where it's got a lot of abnormalities in the fuel, right? It's got, you know, different mixtures. And what we found with the KARNO generator is, since it's fuel agnostic, it can run on those fuels without being pre-scrubbed. So we've actually taken fuel from the Permian Basin, came right out of a wellhead, ran it through the reactor of the KARNO generator, and it was able to make the heat needed in order to run the KARNO.
So, we see that as a huge advantage, not only from, you know, being able to take whatever you have available, but also for customers, it gives them a future-proof solution, right? A lot of companies are looking at, well, hydrogen is the future. You know, when is that going to happen? They don't know, and they don't wanna buy infrastructure today that isn't going to be usable in five to ten years. So with the KARNO generator, you have a product that can work on fuels that are available today and also the expected fuels of the future. On the ultra-low emissions standpoint, so our NOx levels and CO levels are in the order of magnitude of, like, 98%-99% lower than what a normal internal combustion engine would be.
So ultra-low emissions from it, and then also has the ability to be zero carbon emissions if you're running on fuels like hydrogen or ammonia. High efficiency, so I touched on that earlier, of it's basically power plant level efficiencies. Minimal maintenance, so there's only one moving part per shaft, and that part even rides on air bearings. So, we're looking at in between, like, part changes, a few years of operation before you would actually need to change out some of the components on the genset. Long lifespans, so we're expecting 10-plus years of life out of the solution, and then low noise. So, from a noise level standpoint, we're at 67 decibels from 6 feet away.
So to put that into comparison, this is much more like the noise level of an air conditioning unit versus what you would think of as a conventional, you know, engine running out back of a facility. So one of the unlocks is, we're making a lot of the components of the generator through additive manufacturing. So since this is a heat-powered engine, one of the kinda core parts of the genset is really good heat exchange between where you're reacting the fuel and where you're trying to expand that gas. And so we've designed those components, and we manufacture them through additive printing or 3 D printing, and that's what's allowed us to see that huge increase in efficiency, compared to other heat engines that have been attempted in the past.
So on the right-hand side of the slide, you can see an example of what some 3D printing machines look like, and then on the left-hand side, you can see what one of our actual components in the genset looks like as well. And you can see you could never have manufactured that component through conventional practices, and that's what's allowing us to really enable this KARNO generator. So in terms of markets we're going after, there's kind of five key verticals. The first is EV charging. The problem set there is when EV charger companies go out to their utilities, they're usually getting quoted anywhere from two to three years before they're going to be able to get a grid interconnect. So with the KARNO generator, it's a solution that you can bring in, deploy immediately, and start producing power.
Data centers, a pretty similar story, where data center providers are going to the utility. I was at dinner with one last night, where they were saying they're getting quoted, in some instances, out to 2030 before they would be able to get power for the data centers that they're trying to build. And, you know, their order of magnitude is, you know, they're at, like, 50 megawatts per site that they're trying to produce power. So waste gas, this is a pretty unique one, where I mentioned before, gas coming off of landfills, oil and gas sites. Normally this would have been pollution, wasted gas that would go into the atmosphere. We're actually able to take that and use it as the fuel source behind the KARNO generator. Excuse me. Prime power, so this is like the hotel we're in right now.
You could put a generator out back of this facility and make power locally, and then the last one is the mobility space. As mentioned before, we're working on a marine application where we can take that same KARNO generator and be the power plant inside of ships, and we've got a program going with the U.S. Navy for that, so just some milestones here. This was a slide we initially came out with over a year ago or so, and we laid out what the progression of kind of the development was going to be of the generator, and where we stand today is, you know, later this year is when we'll actually be putting initial units out in customers' hands.
We've had units that have been under development in our operations at various kind of iterations for the last couple of years. We're pleased to say that we've remained primarily on track with this development plan. The only thing that has shifted a little is the completion of the beta generator, which is that production intent generator will be completed now in the second half of this year. Just to cover some financial updates. High level, I'll cover. Jon, our CFO, is also here with us today and can answer some more detailed questions as well. We're expecting to burn about $55 million of capital this year. That's both CapEx and OpEx.
The capital expenses that we have are primarily going into the purchasing of additive manufacturing equipment in order to scale up producing these gen sets. We wanted to just cover at a high level the cash position of the company as well. We started this year with just under $300 million of cash. We're projecting to end at about $220-$230 million of cash. One of the added things of this year is we actually initiated a stock buyback program earlier this year. We were trading at around a $100 million dollar market cap with...
or I'm sorry, yeah, a $100 million market cap with close to $300 million of cash on our balance sheet, and so we decided it was a good time for us to actually take some of that cash we had and initiated a $20 million stock buyback program. So we, we've executed $14 million of that buyback, and then paused the program since we've seen a correction in the stock price since then. So I think that's the high-level slides that we had kind of prepared leading into this. We'd now like to open to any Q&A anyone might have. Yeah.
Oh, sorry. Can you just talk a little bit about, more flesh out the use cases? A couple of them were sort of time to market-
Yeah
-driven. I'm just trying to understand if your efficiency is comparable to a power plant. Like, does it need to be significantly better than a power plant longer term to kind of justify the cost of capital to the, to the customer?
Yeah, great, great question. So, so we are, from an efficiency standpoint, that's just like kind of going from the actual fuel you're bringing in to electricity. The more important metric is, what's the utility charging you for that kilowatt hour of electricity you're buying? So what we found is we took the average, cost per kilowatt hour across the entire U.S., as well as the average cost of natural gas in every state across the U.S., and in every single one of them, if you take those averages, we would be able to produce electricity for cheaper through the KARNO than you could buy electricity from the utility provider. So, we actually see cost as one of the big advantages of the KARNO. And in most instances, we find that we could actually make electricity for less than the grid.
So, what's the—like, can you talk a little bit about pricing and payback period that you?
Yeah. So, it varies by every single state, right? So a state like California is going to have the highest cost natural gas, but then the electricity cost from the grid is exceptionally high, right? So actually, a state like this offers one of the best paybacks. You can be in the couple of years in a state like this versus other states like Florida, for instance, while natural gas is at pretty low or inexpensive. Electricity is also very low there as well. So that's gonna be a longer payback, but it is still gonna be a positive payback for customers. So in our discussions, what we're often finding with customers, excuse me, is about a three to three-ish year payback on the system.
What's two hundred kilowatts cost?
So we have not publicly disclosed an exact MSRP on it, but what we have shared is that we are more than what your conventional diesel and natural gas engines cost, but we are significantly less than where, like, fuel cells are at. So we're kinda in between those two solutions.
Yes. Any idea what those are in the market? What's the two sides look like?
Yeah. Just kinda high-level numbers, conventional engines will be, you know, around $1,000 per kilowatt. Fuel cells will be around $3,000 per kilowatt.
Okay.
How do you guys market this? Do you have a direct sales force? And if so, like, what's the plans to kinda grow that sales force? And I'm just very curious about how you're getting the name out, so to speak.
Yeah. So, we do have our own internal sales team. It's a pretty small team right now. Thankfully, we've got some great people on the team, though. So our Chief Commercial Officer is the former head of the data center business for Cummins. Excuse me. So, so he joined us. That's allowed us to really get into that data center space, as well as then these other vertical markets like EV charging. We're going to, you know, the trade shows like ACT Expo, where, you know, everyone who's looking at buying EV vehicles is at those sorts of trade shows. We're also going to, like, biogas conferences, those sorts of things, so to get the name out there and meet with these customers.
But we really haven't expanded the sales force, in, you know, right now, from the standpoint of we don't have the product out there yet, right? So, we've already got over half of our capacity that we have planned for next year. We already have LOIs from customers in place for those units. So, the goal right now is really get the units out there, you know, the units later this year out there in customers' hands, and then take those customer proof points to then go more broad with the technology. Yeah.
So you mentioned a challenge, and one of the reasons customers are talking to you is they can't get the electricity-
Yeah
supply. And I guess there's two issues: one is generation, and two, they don't have enough distribution.
Yep
To get that voltage. And natural gas is an alternative. How does that look? Is there enough production, but is there enough distribution into customer locations, like data centers, you're talking to?
Yeah. So we have not seen any issues with kinda the supply of natural gas and availability of natural gas. That hasn't, has not come up. The supply of electricity, though, has been... Jon, would you mind just grabbing me a water? Sorry. I've got a tickle in my throat that isn't going away. So, the supply of natural gas hasn't been a problem, but, supply of electricity has been a big problem. So sorry. I'll just grab this here. And, one of the other things we've found is if you look at, like, the data center market, what they normally do is they have natural gas coming in, plus they have diesel fuel stored locally for emergency situations. And so the KARNO generator can actually run on those two fuel sources. As opposed to today, data centers will sometimes actually deploy natural gas engines and diesel engines in parallel.
A couple questions. Can you talk a little bit about the sort of timeframe once you get these into customer hands? Like, are the proof of concepts likely to last months, quarters, years? And then, can you talk a little bit about the capacity you expect to have in place at year-end? And then lastly, long-term kind of gross margin model and what the ramp looks like in initial years. Thanks.
Sure. So, the timelines we've laid out with these early adopters is really having the validation of the product done in a couple of quarters, right? So, this isn't something that they need to run multiple years in order to see is it working as expected. You know, it's something you see pretty quickly. Is it doing what we thought or not? And then in terms of, you know, these initial units, we will be selling them at a loss. But what we've shared is, we expect to get to that break-even to gross margin positive standpoint by late 2025, early 2026. So, you know, that's gonna be one of the big focuses for the organization over the next 18 months here, is just working on bringing the cost down, and getting to positive margin.
Is GE still involved at all?
They're involved from the standpoint of those additive manufacturing machines that I showed earlier. GE actually makes those. We're a customer of GE's, so we're buying those machines from them. And then the other aspect is, when we did the acquisition, it was both a cash and stock deal, and so, GE is around a little less than a 2% shareholder in the organization. Any other questions?
So they decided to sell you the technology, but then get the CapEx?
So, yeah. So they sold us the KARNO generator technology, right? But then they still own the business of additive manufacturing and making that equipment. And so we go to GE, we purchase the additive machines, and as part of that acquisition or us acquiring the KARNO generator, was a preferred supply agreement on the machine. So, we're kind of like a recurring customer to GE to get the manufacturing equipment.
... you talked about, but thoughts on burn rate next year as you're kind of working towards break even gross margin?
Yep.
and scaling and buying more 3D printers. Does your burn rate go up a little bit next year?
So we project it will go up some. It's not a drastic growth or change in the burn. But we do expect moderate growth as we go into next year of the burn rate. And then obviously, you know, get to break even, then to gross margin positive, and work on changing that trajectory. So with that, I mean, we've got $250 million in cash on the balance sheet at the end of last quarter, $55 million in burn this year, so we're in a position where we have, you know, plenty of run rate ahead of us. Yeah.
Just curious, once delivered to a customer, do you have like, maintenance and repair teams that need to go out to customer sites?
So we do have a service team that we actually initially established for the powertrain side of the business. It's a small team, but they'll do the initial service along with our engineers in the very beginning of these units being out there. And then our long-term plan is we'll work with existing service parties that are out there to have maintenance contracts on these. It's you know, our goal is not to have a bunch of brick-and-mortar facilities across the country. And the maintenance is pretty light. You know, there's no oils, no lubricants in it, so it's not like a conventional engine, where you're doing oil changes every few hundred hours. This is more of a, you know, let it run, and every few years, there's some parts that need to be replaced.
So when GE sold it, did you guys get, like, all the GE engineers that worked on this and everything?
We did, and it was a mix of aerospace engineers and additive manufacturing engineers. So, you know, I think some of the most brilliant people in additive manufacturing now actually work for us. So even though we're buying these machines from GE, we're able to even kind of further push the boundaries of what these printers can do. And so, and then, the aerospace engineers, the benefit there is we've really followed the exact same process that GE normally takes when they're developing a jet engine. We've been able to follow that same process in the development of this KARNO. So, what that means is it's simulation first, right? That's one of the things GE really pushed in the engine world, was you can model all this stuff before you actually go build engines.
And so, we've taken that same approach versus some other companies who will kind of like build a prototype, see how that one runs, and then try to iterate from there. So, that's where GE started that modeling back in 2017. And then, you know, it was. It turned into an initial prototype, and then the most recent iteration of the design we've already been running for the last year. Okay, I think we're running out on time, right? So apologies that I got to cough through that, but hopefully, you're able to understand me, and if anyone has any further questions, Jon and I are here all day and tomorrow as well. So please come find us.