References to the “Company,” “Hyliion,” “we,” “our,” or “us” in this report refer to Hyliion Holdings Corp. and its wholly owned subsidiary Hyliion Inc., unless expressly indicated or the context otherwise requires. The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this report and our audited consolidated financial statements and related notes thereto in our 2025 Annual Report. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q (“Form 10-Q”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical fact, contained in this Form 10-Q are forward-looking statements, including, but not limited to, statements regarding our strategy, prospects, plans, objectives, future operations, future revenue and earnings, projected margins and expenses, markets for our services, potential acquisitions or strategic alliances, financial position, and liquidity and anticipated cash needs and availability. The words “anticipates,” “believes,” “targets,” “should,” “contemplates,” “estimates,” “expects,” “intends,” “may,” “could,” “plans,” “projects,” “will,” “would,” “potential,” “remains,” “continues,” “likely,” or variations of such words and similar expressions or the negatives thereof are intended to identify forward-looking statements. However, not all forward-looking statements contain these identifying words. These forward-looking statements represent our management’s expectations as of the date of this filing and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance and achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. We cannot guarantee the accuracy of the forward-looking statements, and you should be aware that results and events could differ materially and adversely from those contained in the forward-looking statements due to a number of risks and uncertainties including, but not limited to, those described in the section entitled “Risk Factors” included in our 2025 Annual Report on Form 10-K, this Form 10-Q, and in other documents we file from time to time with the U.S. Securities and Exchange Commission (the “Commission” or the “SEC”) that disclose risks and uncertainties that may affect our business. Readers are urged to carefully review and consider the various disclosures made in this Form 10-Q and in other documents we file from time to time with the Commission. Furthermore, such forward-looking statements speak only as of the date of this Form 10-Q. Except as required by law, we do not undertake, and expressly disclaim any duty, to publicly update or revise these statements, whether as a result of new information, new developments, or otherwise and even if experience or future changes make it clear that any projected results expressed in this Form 10-Q or future quarterly reports, 13 Table of Contents press releases or company statements will not be realized. Unless specifically indicated otherwise, the forward-looking statements in this Form 10-Q do not reflect the potential impact of any investments, divestitures, mergers, acquisitions or other business combinations that have not been completed as of the date of this filing. In addition, the inclusion of any statement in this Form 10-Q does not constitute an admission by us that the events or circumstances described in such statement are material. We qualify all of our forward-looking statements by these cautionary statements. In addition, the industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors including those described in the section entitled “Risk Factors” included in our 2025 Annual Report on Form 10-K and in this Form 10-Q. These and other factors could cause our results to differ materially from those expressed in this Form 10-Q. Overview Hyliion is committed to creating innovative solutions that enable clean, efficient, and flexible electricity production while contributing positively to the environment in the energy economy. Hyliion’s primary product offering, the KARNO Power Module, is a modular, fully enclosed, fuel-agnostic and fully integrated power generating solution. The KARNO Power Module is powered by the KARNO Core, a heat powered linear generator, to produce electricity with significant improvements in efficiency, emissions and lifecycle cost compared to conventional generation technologies. Hyliion’s KARNO Power Modules enable effective power generation using a wide range of fuel sources, including conventional fuels such as natural gas, propane or diesel, waste fuels such as landfill gas, wellhead gas, and zero carbon fuels such as renewable hydrogen and ammonia. Hyliion is initially targeting the data center, defense, commercial, and industrial sectors with a locally-deployable generator designed to meet a wide range of power generation needs. The Company intends to scale up its KARNO Power Module solution to address larger utility-scale power needs and plans to develop future variants for industrial waste heat, nuclear, household use and e-mobility applications such as vehicles and marine vessels. Additionally, the KARNO Power Module technology is well-suited to provide combined heat and power in various stationary applications. KARNO Power Modules The KARNO technology emerged out of General Electric’s long-running R&D investments in aerospace and metal additive manufacturing across multiple industries and in areas such as generator thermal and performance design. Originally envisioned as a range-extending power source for our Hypertruck powertrain system, we now intend to commercialize the KARNO Power Module as a standalone product targeting power generation, defense, and e-mobility markets, as well as related R&D services that we have undertaken pursuant to contracts with the United States government. 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. The KARNO Power Module and KARNO Core technology, including the technology that we acquired from General Electric, and the technology developed by Hyliion subsequent to the acquisition, is protected by numerous patents and trademarks which we believe provide us with extensive and lasting protection for our intellectual property. The Science of the KARNO Power Module The KARNO Power Module is distinguished from conventional generating systems that rely on reciprocating internal combustion engines or gas turbines to drive a rotating shaft. Instead, the KARNO Core that powers the KARNO Power Module uses an innovative thermal converter to power a linear electricity generating system. The KARNO Core produces linear motion from temperature differences within the system. Heat is generated through flameless oxidation of fuels, such as natural gas, hydrogen, or propane. The thermal energy heats helium gas enclosed within a sealed cylinder, causing it to expand and drive linear motion in a connected piston-shaft system. The shaft includes a sequence of permanent magnets that pass through electrical coils as the system oscillates, generating electricity. Subsequently, the countermotion generated by a piston at the opposite end of the shaft flows the helium gas to the cold side of a piston in an adjacent shaft, where excess heat is efficiently dissipated. This cyclical process continues, resulting in a continuous source of electrical power as long as heat is supplied to the KARNO Core. Linear generators present several advantages over conventional generators, including higher thermal efficiency, lower emissions and reduced maintenance, benefits that are partly attributable to the generator’s simplified design with few moving parts. Additionally, they exhibit high power density and higher efficiency by circumventing the mechanical losses linked to rotating components such as bearings and gears while producing less noise and vibration. In the case of the KARNO Core, each shaft relies on a single moving part and utilizes a pressurized helium bearing system in place of oil-based lubricants. Thermal converters offer the advantages of fuel flexibility and high operating efficiency. The KARNO Core stands out for its ability to maximize heat transfer between components and working fluids. Enabled by advances in additive manufacturing systems, parts are designed with many intricate flow channels for the movement of heat, coolant, helium and exhaust gases such 14 Table of Contents that contact surface areas for heat transfer are maximized. This enables the KARNO Power Module to achieve high levels of efficiency. The KARNO Power Module is expected to surpass the efficiency of many conventional generating systems when employing various fuel sources and its high efficiency is expected to remain consistent across a broad range of output power levels. In comparison, fuel cells reach peak efficiency at low power levels but experience diminishing efficiency as output increases towards full power. Internal combustion engines typically achieve peak efficiency within a limited operational output range and may suffer increased wear at low power levels. The KARNO Power Module offers a distinct advantage in power adjustment by modulating the rate of heat introduction, enabling seamless power adjustments without compromising efficiency. 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. High efficiency is expected to remain relatively consistent across a wide range of output power levels, spanning from tens of kilowatts to multiple megawatts. In contrast, internal combustion diesel or natural gas generators typically operate within an efficiency range of 25% to 40% over a similar power spectrum, while the U.S. electrical power grid is estimated to operate at an efficiency between 33% and 40%. Notably, best-in-class grid-level combined cycle gas turbine powerplants can obtain efficiencies above 50% but often incur transmission and distribution losses between 5% and 10% which the KARNO Power Module is expected to circumvent by being located near the point of power consumption. Conventional generators emit pollutants because of incomplete combustion of fuel-air mixtures and sub-optimal operating conditions, with the formation of nitrous-oxide (“NOx”) and carbon monoxide (“CO”) compounds being particularly prominent. Unlike conventional generators, the KARNO Power Module is designed for continuous flameless oxidation of the fuel at lower temperatures and extended reaction times. This is achieved partly through the recirculation of exhaust gases, which serves to prolong oxidation, and by pre-heating incoming air. As a result, the KARNO Power Module is anticipated to 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. One of the notable advantages of the KARNO Power Module in comparison to traditional generating units is the expected reduction in maintenance requirements and cost. Conventional generators typically incur periodic and usage-based maintenance expense that can range between 5% to 20% of their total operating cost throughout their lifespan, influenced by factors such as utilization and operating parameters. The KARNO Power Module’s primary advantage arises from having only a single moving part per shaft (4 shafts per 200 kW KARNO Core), which glides on low friction helium bearings. This innovative design mitigates efficiency losses attributed to friction, enhancing the system’s operational longevity and eliminating the need for oil-based lubricants. The KARNO Power Module derives advantages from its expected capability to operate across a diverse spectrum of over 20 available fuel sources and fuel blends. These include natural gas, propane, gasoline, jet fuel, and alternative fuels like biodiesel, hydrogen and ammonia. Moreover, the KARNO Power Module can seamlessly transition between these fuels or fuel blends. This versatility enables a single KARNO Power Module to adapt to different use cases. For example, the KARNO Power Module may operate on natural gas for prime power generation when a pipeline connection is available, on waste gas near a landfill or dairy farm, and switch to locally stored diesel fuel for continuous generation if its primary fuel supply is interrupted. Furthermore, we expect that as hydrogen becomes more widely available, the KARNO Power Module will be able to adapt to 15 Table of Contents this cleaner fuel. As the energy landscape evolves, we believe that the KARNO Power Module’s fuel-agnostic nature positions it as a flexible solution to electricity generation needs, enhancing energy security. Benefits of the KARNO Power Module Versus Conventional Competitors We believe the versatility and operating characteristics of the KARNO Power Module make it an effective system for a variety of conventional and emerging electricity generating applications. Key attributes of the KARNO Power Module distinguish it from its conventional generator counterparts: •Efficiency: The anticipated operating efficiency of the KARNO Power Module could result in lower marginal cost of electricity generation versus conventional generating systems and, in some markets, grid power. •Low Maintenance: With only a single moving part per shaft, the simplicity of the KARNO Power Module is expected to reduce both periodic maintenance expenses and overhaul costs and deliver longer uptime. •Fuel Agnostic: While many traditional generators operate on a single fuel source or require system modification to achieve fuel flexibility, the KARNO Power Module is designed to be fuel-agnostic and can switch between fuel choices during operation with few or no modifications. •Low Noise and Vibration: Unlike conventional generators, the KARNO Power Module operates without internal combustion, resulting in a significantly lower noise level under normal operating conditions of approximately 67 decibels at six feet. •High Power Density: The unique architecture and features of the KARNO Power Module that are enabled by advances in additive manufacturing are expected to enable the KARNO Power Module to achieve a high power density relative to competing power generation technologies. •Modularity: The DC output of the KARNO Power Module allows multiple KARNO Power Modules to be connected on a single bus to achieve higher power outputs without impacting other performance characteristics. Market Opportunity As economies and industries evolve, the demand for electricity is accelerating, driven by the electrification of society, urbanization, increasing industrial output and technological growth. Electricity powers factories, drives the digital revolution, supports healthcare, education, and financial services, and serves as the foundation of economic productivity. Additional drivers include the projected widespread growth of artificial intelligence, automation, expanding data centers and the electrification of transportation. However, as global energy demand rises, traditional centralized power generation and distribution models face mounting challenges. The aging of grid transmission infrastructure is creating new challenges as operators work to balance the availability of affordable, reliable power with maintaining grid stability and integrating new sources of clean power generation. The addition of intermittent renewable power generation further complicates grid management, emphasizing the need for resilient and adaptive electricity systems. Distributed power generation offers a solution by decentralizing electricity production, reducing transmission needs and delivering power closer to points of consumption. 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. Designed for both stationary and mobile applications, the KARNO Power Module addresses many of the challenges that have traditionally limited the widespread adoption of onsite power solutions. These include high operating costs, reliability issues, complex maintenance, noise pollution, space constraints, and dependency on limited fuel sources. Hyliion’s initial KARNO Power Module product is a 200 kW system that is power-dense and easy to deploy. It features a compact, space-efficient rectangular design with a footprint of approximately 25 square feet, housing a single four-shaft linear generating unit and integrated balance-of-plant components. The KARNO Power Module supports fuel switching during operation without power loss, while flexible deployment options allow it to operate in grid-following, grid-forming, or islanded configurations (when paired with an external inverter), making it suitable for a wide range of applications. Additionally, the KARNO Power Module features real-time monitoring of over 1,000 operational parameters through its KARNO Cloud® platform, enabling proactive diagnostics, predictive maintenance, and performance optimization, ensuring maximum uptime. With cloud connectivity, users gain instant access to remote monitoring and control features, providing insights into system performance, fuel efficiency, and system health. Beyond the 200 kW variant, Hyliion is advancing the development of a larger Multi-MW (2 MW+) KARNO system, which integrates multiple 200 kW KARNO Core units operating in tandem in a compact containerized footprint. The Multi-MW KARNO system will target key market segments such as data centers and industrial prime power applications. We are also developing a modular 800 kW system consisting of four KARNO Core units that is planned to be delivered to the U.S. Navy in 2026 as part of our project with ONR. We believe that this modular and scalable approach enables seamless power expansion 16 Table of Contents while maintaining high efficiency and reliability. By utilizing multiple 200 kW generating blocks, the system offers built-in redundancy and the flexibility for customers to customize capacity to match their power needs. Hyliion also plans to expand the KARNO product line over time with both larger and smaller capacity versions, adjusting power levels by varying the number of generator shafts and component sizes. Initially, the KARNO Power Module will target power applications ranging from 200 kW to the low megawatt range, addressing a broad spectrum of distributed generation needs. With its ability to deliver reliable, fuel-flexible, and highly efficient power, the KARNO Power Module is uniquely positioned to serve a variety of key market segments, including: •Data Centers: As cloud computing, artificial intelligence, machine learning, and edge computing continue to expand, data centers are projected to consume an increasing share of global energy demand. Onsite power generation is an emerging solution for new data center developments, although conventional generating technologies often face local resistance due to noise or emissions concerns. Hyliion’s Multi-MW KARNO system is being designed to meet the needs of data center developers by providing a scalable, fuel-flexible onsite power solution with significantly reduced levels of noise and emissions than conventional diesel or natural gas generators. Capable of operating on more than 20 different fuels, the KARNO Power Module enables data center developers to minimize onsite generation infrastructure. Its ability to easily transition between pipeline-supplied fuels, such as hydrogen or natural gas, and onsite stored fuels, like methanol or diesel, eliminates the need for separate backup generation systems, reducing capital and operational costs. Additionally, as data center rack power densities rise to support increased AI workloads, Hyliion’s KARNO Power Module’s native 800V DC architecture simplifies power system design and enhances site resiliency. •Commercial & Industrial: As electricity demand increases and grid infrastructure struggles, microgrids and onsite prime power solutions are becoming essential for industries facing high consumption charges, peak demand pricing, and grid reliability concerns. Businesses, industrial sites, and remote facilities increasingly seek localized power generation to mitigate rising energy costs, monetize assets, and improve operational resilience. With relatively high efficiency, fuel adaptability and low maintenance needs, KARNO Power Modules provide a cost-effective alternative to grid electricity, allowing businesses to optimize energy costs while ensuring uninterrupted operations. Its ability to integrate with energy storage and renewable sources is expected to enable installation of effective hybrid energy solutions. Additionally, the KARNO Power Module’s cogeneration capabilities may allow industries to utilize both electricity and thermal energy, improving overall system efficiency and recovering usable waste heat. •Defense: Defense organizations around the world are pursuing advanced energy solutions to support modern, rapidly evolving, distributed operations across land, sea, air, and autonomous platforms. Hyliion’s fuel-agnostic KARNO platform is engineered to meet these changing mission profiles with a combination of versatility, efficiency, and durability. Designed to operate on over 20 fuels, including JP-8 and its variants, diesel, ammonia, and hydrogen, the KARNO system enhances logistical adaptability across diverse applications. Its low acoustic and thermal signatures support stealth and operational security, while its high fuel efficiency enables longer runtimes and reduced refueling needs. Built with minimal moving parts and robust architecture, the KARNO technology delivers extended maintenance intervals and high system uptime under challenging conditions. Whether deployed in forward operating bases, shipboard power systems, microgrids, or unmanned autonomous platforms, we expect that the scalable KARNO Power Module can deliver reliable, next-generation power for the strategic and tactical demands of global defense operations. •Vehicle Charging: The adoption of electric vehicles (“EVs”) is placing increasing strain on grid capacity, a challenge expected to grow with the introduction of commercial EVs, including buses, delivery vans, and heavy-duty trucks. These vehicles require substantial power for charging, intensifying grid demands. While Direct Current (“DC”) fast charging technology and infrastructure are evolving to meet this need, many commercial operators cite limited grid capacity and high electricity costs as barriers to scaling their EV fleets. We believe the KARNO Power Module offers an advantaged solution for commercial EV charging. Its native DC output integrates with DC fast charging infrastructure, eliminating power losses associated with conversion. Additionally, the KARNO Power Module’s compact footprint and quiet operation will make it suitable for deployment in space-constrained locations, such as urban charging hubs, fleet depots, and remote charging stations where grid access is limited or expensive. When paired with onsite energy storage systems and renewable energy sources like solar or wind, KARNO Power Modules can enable resilient and sustainable microgrids for EV charging. •Biogas (Landfill, Wastewater & Digester Gas): Biogas sourced from landfills, wastewater treatment plants, and dairy digesters represents a growing market as industries and municipalities seek to convert methane-rich waste gases into electricity and prevent methane, a potent greenhouse gas, from escaping into the environment or being flared. Current power generation technologies often struggle to process biogas due to contaminants such as hydrogen sulfide and siloxanes, as well as moisture and fluctuating gas compositions, necessitating preconditioning and purification before the fuel can be utilized. We believe the KARNO Power Module’s advanced architecture and corrosion-resistant 17 Table of Contents materials enable it to operate with minimal gas preconditioning, making it a cost-effective, high-performance solution for converting waste gas into reliable power. •Oil & Gas and Syngas: The oil and gas industry is electrifying due to growing power needs across drilling, production, refining, and transportation operations. However, wellhead and flare gas, byproducts of oil and gas extraction, are often wasted due to insufficient pipeline capacity or poor gas quality, leading to lost energy and increased emissions. The KARNO Power Module enables conversion of waste gas into usable electricity with minimal pre-treatment, enabling onsite power generation and grid integration. We believe the KARNO Power Module’s fuel flexibility, use of corrosion-resistant materials, and ability to handle variable fuel quality make it a suitable technology of choice for oilfield electrification while significantly reducing emissions. Additionally, the KARNO Power Module’s fuel-agnostic capability allows it to generate clean electricity from hydrogen-rich syngas, a valuable byproduct of gasification or industrial processes. •Mobility: The KARNO Power Module is designed to be particularly suitable for applications that require a source of electric power in mobile applications such as electric vehicles, railroad locomotives, remote power generation and marine vessels. Compared to conventional power sources, the KARNO Power Module is expected to offer higher efficiency, lower emissions, quieter operation, reduced maintenance needs and the flexibility to operate on a wider range of fuel sources. Additionally, the KARNO Power Module’s high power density, modularity and native DC power output offer an added advantage where space constraints and integration are considerations. •Backup Power: The market for local backup power generators is well established and positioned to grow due to decreasing grid reliability, the increasing share of intermittent renewable energy sources, rising extreme weather events, and the need for uninterrupted power. Also, the grid balancing and servicing market is expanding as utilities and independent power producers seek fast-ramping, distributed generation assets to balance supply and demand fluctuations. Innovative business models such as Resiliency-as-a-Service and Virtual Power Plants have emerged to leverage distributed generation assets for grid resilience. With growing concerns over emissions from internal combustion engine-powered generators in the backup power market, we believe the KARNO Power Module presents an opportunity to provide solutions for end users that desire a lower emissions profile and in the event emissions regulations are further tightened. •Waste Heat: In hard-to-decarbonize industrial sectors such as cement, glass, and primary metals production, vast amounts of high-grade waste heat (1000°C+) are released during manufacturing processes. Traditionally, much of this thermal energy is lost due to limited efficient recovery solutions. Since the KARNO Power Module uses heat as its primary energy source to generate electricity, high-temperature industrial waste heat is expected to be able to be directly utilized to produce clean electricity, enabling industries to recover wasted energy, improve efficiency, and reduce emissions. KARNO Power Module Development Research and Development Most of our current activities are focused on the R&D of our KARNO Power Module. We undertake significant testing and validation of our products and components to ensure that they will meet the demands of our customers. Our R&D activities primarily take place at our facility in Cincinnati, Ohio and at our headquarters in Cedar Park, Texas. Our R&D is primarily focused on: •development of the KARNO Core and KARNO Power Module including testing and validation; •integration of the KARNO Core and KARNO Power Module technology into various applications; •accelerated lifetime testing to improve reliability, maintainability and system-level robustness; •development of battery systems that can be used as a starter power source for the KARNO Power Module or as a load buffer solution; •data analytics; and •alternative products for existing and in-development components and technology. Since acquiring the KARNO technology from GE in September 2022, Hyliion has made significant investments in research and development to commercialize the 200 kW KARNO Power Module while simultaneously developing an 800 kW system for the U.S. Navy. This 800 kW platform is also intended to serve as the foundational building block for future multi-megawatt KARNO systems targeting data centers and other large scale applications. Early efforts focused on the development of a 125 kW KARNO Core, which was successfully operated in our Ohio facility and utilized for extensive testing and further advancements. Through this system, we validated the ability of the KARNO Core’s fuel oxidation system to operate on a wide range of fuel sources, including natural gas, hydrogen, gas mixtures, and untreated landfill and Permian Basin well gas. 18 Table of Contents Additionally, testing of the oxidation system demonstrated very low levels of pollutant emissions in the exhaust stream. The 125 kW KARNO Core also served as a platform for developing and validating key components that are now incorporated into the higher-power 200 kW KARNO Power Module slated for market launch. These advancements include improved helium gas bearings for greater durability, a magnetic encoder for precise shaft position detection and optimized printed components to increase KARNO Core power, efficiency and manufacturing speed. The 200 kW KARNO Core also incorporates a larger Hyliion-designed linear electric motor. We have completed the design and sourcing of initial components for the balance-of-plant systems that support KARNO Core operation for the 200 kW system, including the system enclosure. The balance-of-plant includes cooling, pressure control, fuel, battery, high and low voltage, inlet air and exhaust systems. Development work also includes control software, safety systems, the human-to-machine interface and the physical integration of systems. Validation of essential operating parameters, including efficiency, emissions and reliability, are also part of R&D activities. In 2025, we delivered two early adopter KARNO Power Modules to the U.S. Navy, along with two additional units for internal testing and Underwriters Laboratories (“UL”) certification. The Navy units are currently undergoing testing under our R&D contract with ONR and are performing in line with expectations. We have also completed development work enabling the Navy Power Modules to operate on liquid diesel fuel, a key requirement for shipboard applications, and to seamlessly switch between liquid and gaseous fuels under operation. 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. In 2025, key R&D activities included design enhancements to the regenerator, a critical printed component that functions as a thermal capacitor by storing heat as helium cycles between hot and cold temperature regions within the system. The regenerator is a critical component needed to achieve the KARNO Power Module’s target power and overall system efficiency. Early testing identified opportunities to improve the regenerator’s heat storage and transfer capability, leading to a redesigned architecture that has demonstrated improved performance during subsequent testing. Additional design enhancements were also made to improve the thermal insulation of other system components, further reducing heat loss. Development efforts continue to focus on optimizing the regenerator and related components, with the objective of converting more thermal energy into electrical output, thereby increasing both power output and overall system efficiency. Also in 2025, we insourced linear electric motor production following an unsuccessful effort to outsource this work to a contract manufacturer. This transition is accelerating the ramp-up in motor production capacity and enabling greater control over manufacturing quality. In 2026, R&D activities have focused on testing and validating KARNO Power Module operation and software controls while building additional units for early adopter customers for field testing, including the U.S. Navy. We project that we remain on track to complete approximately 10 early adopter units during 2026. To date, testing of both engineering development units and customer units has been conducted at our Ohio facility, allowing engineers to closely monitor system operation and rapidly incorporate design enhancements intended to improve performance and reliability. Later in 2026, these initial units are expected to be deployed to customer sites, where they will undergo continued testing and validation while simultaneously operating in their intended commercial environments. In the second quarter, we successfully completed the non-recurring portion of Underwriters Laboratories ("UL") certification testing for the KARNO Power Module, a key milestone required before delivering units to customer sites. Testing included the linear electric motor, battery system, and complete Power Module. Individual production units will continue to undergo final operational testing before receiving final UL certification until completion of facility level certification, which is expected in the coming months. Recent accomplishments include the successful demonstration of uninterrupted operation while switching among hydrogen, natural gas, and diesel fuels, validating the system's fuel agnostic architecture in which both gaseous and liquid fuels are supported within a single integrated system rather than through separate hardware configurations. Following this milestone, we began extended durability testing of the complete KARNO Power Module using diesel as the primary fuel source. We also successfully demonstrated the operation of multiple Power Modules as a single coordinated generating system. During testing, two 200 kW units automatically shared changing electrical loads while maintaining stable power delivery. This capability is important for applications with variable electrical demand and supports development of a standardized 800 kW building block for future multi megawatt power plant configurations. Development also continues on design enhancements intended to increase the generator's power output and efficiency toward design specifications. These efforts include further optimization of the regenerator to increase its thermal storage capacity 19 Table of Contents during operating cycles, as well as improvements to the thermal insulation of other system components to further reduce heat losses. Another major R&D objective in 2026 has been optimizing the throughput of our additive manufacturing fleet. Following the acquisition of approximately two dozen additive printers over the past two years, we have focused on increasing printer speed and throughput while simultaneously optimizing the design of printed Power Module components for manufacturability and performance. We are encouraged by the progress to date and have identified machine enhancements that we believe can increase print speeds by a factor of two to three, depending on the specific part and printer model. Based on these expected improvements, together with anticipated technological advances in next generation additive manufacturing systems expected to become available in the coming quarters, we currently expect to accelerate planned purchases of additional printers from 2028 into 2027. Additional testing and validation remain necessary before these improvements can be confirmed, but initial results have been encouraging. Research and Development Services We provide R&D services to third parties, including the ONR. In September 2024, Hyliion was awarded a cost-plus-fixed-fee contract of up to $16.0 million by the ONR to assess the suitability of the KARNO Power Module for Navy vessels and stationary power applications. The contract aligns with ONR’s objective of leveraging advanced technology to reduce its carbon footprint while enhancing operating capabilities. Upon successful validation and demonstration, the KARNO Power Module could be used as an electric power system in future platforms and for stationary power needs. In 2025, we delivered two KARNO Cores under this contract which we have been testing at our R&D facility in Cincinnati. In 2026, we expect to deliver additional KARNO Cores, including a four-core 800 kW KARNO Power Module system. The U.S. Navy has identified its USX-1 Defiant vessel as the platform for KARNO Core sea trials, supporting both ship propulsion and auxiliary power. The 800 kW KARNO Power Module being built for the vessel under this contract is in assembly, with completion expected during 2026. We will also expand testing to include long duration operation, diesel fuel integration, simulation of ship motion and the ability of the system to operate in extreme temperature environments. In July 2026, the Company was awarded a cost-plus-fixed-fee contract of up to $41.7 million by the ONR in support of the High Efficiency/Low Maintenance Ultra Reliable (“HELMUR”) Megawatt Scale Power Generation Units program. Under the 36-month contract, the Company will design, develop, construct, test and deliver 2-megawatt and 3-megawatt KARNO power generation systems to locations identified by ONR. The contract also includes work to advance the Company’s core technology, develop alternative core components to enhance system capabilities and reduce supply-chain risk associated with magnet availability, and further develop additive manufacturing processes. Work under the contract will be performed primarily in Cedar Park, Texas and is expected to be completed by July 2029. Funding for the contract was obligated at the time of award using fiscal year 2025 and 2026 Navy research, development, test and evaluation appropriations. We will continue to provide R&D services to third parties under existing contracts and anticipate entering into additional R&D agreements in 2026 and 2027 with ONR and other government customers. Customers engage Hyliion to explore and validate the KARNO Power Module’s capabilities tailored to their specific requirements. Key areas of interest include testing its low-emissions flameless oxidation system and evaluating applications that leverage the KARNO Power Module’s high power output, compact configuration and versatility, including the ability to easily transition between fuels. R&D services may also involve testing the KARNO Power Module under various operating conditions, including harsh environments, and in mobile applications to assess its performance. Certain customers seek to measure and validate the KARNO Power Module’s low emissions profile and test different power configurations to ensure the technology aligns with their operational and environmental needs. Key Factors Affecting Operating Results We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including but not limited to economic uncertainties, supply chain disruptions, inflation, high interest rates, and other risks discussed below and referenced in Part II, Item 1A “Risk Factors.” Commercialization of KARNO Power Module Our focus remains on the continued development and testing of our fuel-agnostic KARNO Power Module, together with the deployment of initial units with early adopter customers. We are targeting commercialization of the 200 kW KARNO Power Module following completion of these initial deployments and once sufficient testing and operating experience has been obtained to validate reliable operation and achievement of our design criteria. We anticipate that a substantial portion of our capital resources and efforts in the near future will be focused on these activities. The amount and timing of our future funding requirements will depend on many factors, including but not limited to the pace of completing initial KARNO Power Module testing and validation, the timing of KARNO Power Module commercialization, the pace at which we invest in KARNO Core additive printing capacity, our plans for manufacturing KARNO Power Module components (whether in-house or through 20 Table of Contents outsourcing to third parties), the range of product offerings we plan to bring to market and external market factors beyond our control. Key Components of Statements of Operations Revenue We generate revenue by providing R&D services under contracts with third parties, including the U.S. government. Additionally, we expect to begin generating product revenue following the commercialization of our KARNO Power Module. Cost of Revenue Cost of revenue includes costs associated with R&D services revenue, such as direct costs, including labor and materials, and applicable overhead costs. Research and Development Expense R&D expenses consist primarily of costs incurred for the discovery and development of our KARNO Power Module, which include: •personnel-related expenses including salaries, benefits, travel and share-based compensation, for personnel performing R&D activities; •fees paid to third parties such as contractors for outsourced engineering services and to consultants; •expenses related to components for development and testing, materials, supplies and other third-party services; •depreciation for equipment used in R&D activities; and •allocation of general overhead costs. We expect to continue to invest in R&D activities to achieve operational and commercial goals. Selling, General and Administrative Expense Selling, general and administrative expenses consist of personnel-related expenses for our corporate, executive, finance, information technology, sales, marketing and other administrative functions, expenses for outside professional services, including legal, audit and accounting services, as well as expenses for facilities, software licenses, depreciation, amortization, travel, sales and marketing costs. Personnel-related expenses consist of salaries, benefits and share-based compensation. Factors that also affect selling, general and administrative expense include the total number of employees, costs incurred as a result of operating as a public company, including compliance with the rules and regulations of the U.S. Securities and Exchange Commission, legal, audit, insurance, investor relations activities and other administrative and professional services. Exit and Termination Costs Exit and termination costs consist primarily of recoveries from resale of assets. Other Income Other income currently consists primarily of interest income earned on our investments. 21 Table of Contents Results of Operations Comparison of Three Months Ended June 30, 2026 to Three Months Ended June 30, 2025 Our results of operations for the three months ended June 30, 2026 (the “current quarter”) and 2025 on a consolidated basis are summarized as follows (in thousands, except share and per share data): Three Months Ended June 30, 2026 2025 $ Change % Change Revenues Research and development services $ 4,944 $ 1,515 $ 3,429 226.3 % Total revenues 4,944 1,515 3,429 226.3 % Cost of revenues Research and development services 4,578 1,384 3,194 230.8 % Total cost of revenues 4,578 1,384 3,194 230.8 % Gross profit 366 131 235 179.4 % Operating expenses Research and development 9,495 10,137 (642) (6.3) % Selling, general and administrative expenses 6,427 5,963 464 7.8 % Exit and termination (benefits) costs (258) (346) 88 (25.4) % Total operating expenses 15,664 15,754 (90) (0.6) % Loss from operations (15,298) (15,623) 325 (2.1) % Interest income 1,370 2,209 (839) (38.0) % Net loss $ (13,928) $ (13,414) $ (514) 3.8 % Net loss per share, basic and diluted $ (0.08) $ (0.08) $ — — % Weighted-average shares outstanding, basic and diluted 178,441,616 175,308,965 3,132,651 1.8 % Revenue and Cost of Revenues Revenue for R&D services increased $3.4 million and associated cost of revenues increased $3.2 million due to the timing of performance of the R&D services. The remaining amount of revenue that we may recognize under these contracts was up to $5.7 million as of June 30, 2026. We may incur losses in the performance of these contracts. In July 2026, we were awarded an additional contract of up to $41.7 million by the ONR on a best effort basis. We expect to begin performance on this contract in the fourth quarter of 2026, increasing performance in the second and third quarters of 2027, and continuing through mid-2029. These contracts can be cancelled by the United States government at any time for, among other reasons, convenience. We do not expect to generate significant R&D services revenue following substantial completion of the September 2024 ONR contract discussed in Note 3, “Summary of Significant Accounting Policies” of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q, until performance under the July 2026 contract increases substantially, which we expect to occur around mid-2027. Research and Development R&D expenses decreased $0.6 million due to significant efforts toward performance of our contracts with the ONR. Selling, General and Administrative Expenses Selling, general, and administrative expenses increased $0.5 million attributable primarily to personnel expense, offset by other smaller changes. Exit and Termination (Benefits) Costs Exit and termination benefits decreased by $0.1 million as a result of the adoption of the Plan and items discussed in Note 2, “Disposals” of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q, including recoveries from assets sold. 22 Table of Contents Interest Income Interest income decreased $0.8 million primarily due to the decline in our investment balance. Comparison of Six Months Ended June 30, 2026 to Six Months Ended June 30, 2025 The following table summarizes our results of operations on a consolidated basis for the six months ended June 30, 2026 (the “current six months”) and 2025 (in thousands, except share and per share data): Six Months Ended June 30, 2026 2025 $ Change % Change Revenues Research and development services $ 7,776 $ 2,004 $ 5,772 288.0 % Total revenues 7,776 2,004 5,772 288.0 % Cost of revenues Research and development services 7,200 1,861 5,339 286.9 % Total cost of revenues 7,200 1,861 5,339 286.9 % Gross profit 576 143 433 302.8 % Operating expenses Research and development 17,165 22,367 (5,202) (23.3) % Selling, general and administrative expenses 12,608 12,044 564 4.7 % Exit and termination (benefits) costs (672) 1,077 (1,749) N/A Total operating expenses 29,101 35,488 (6,387) (18.0) % Loss from operations (28,525) (35,345) 6,820 (19.3) % Interest income 2,860 4,677 (1,817) (38.8) % Net loss $ (25,665) $ (30,668) $ 5,003 (16.3) % Net loss per share, basic and diluted $ (0.14) $ (0.18) $ 0.04 (22.2) % Weighted-average shares outstanding, basic and diluted 178,057,282 174,829,257 3,228,025 1.8 % Revenue and Cost of Revenues Revenue for R&D services increased $5.8 million and associated cost of revenues increased $5.3 million due to the timing of performance of the R&D services. The remaining amount of revenue that we may recognize under these contracts was up to $5.7 million as of June 30, 2026. We may incur losses in the performance of these contracts. In July 2026, we were awarded an additional contract of up to $41.7 million by the ONR on a best effort basis. We expect to begin performance on this contract in the fourth quarter of 2026, increasing performance in the second and third quarters of 2027, and continuing through mid-2029. These contracts can be cancelled by the United States government at any time for, among other reasons, convenience. We do not expect to generate significant R&D services revenue following substantial completion of the September 2024 ONR contract discussed in Note 3, “Summary of Significant Accounting Policies” of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q, until performance under the July 2026 contract increases substantially, which we expect to occur around mid-2027. Research and Development R&D expenses decreased $5.2 million due to significant efforts toward performance of our contracts with the ONR, including the production of capitalized inventory that may either be utilized for future revenue generation under these contracts or for R&D activities. Selling, General and Administrative Expenses Selling, general, and administrative expenses increased $0.6 million attributable primarily to personnel expense, offset by other smaller changes. Exit and Termination (Benefits) Costs 23 Table of Contents Exit and termination costs decreased by $1.7 million as a result of the adoption of the Plan and items discussed in Note 2, “Disposals” of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q, including recoveries from assets sold. Interest Income Interest income decreased $1.8 million primarily due to the decline in our investment balance. Liquidity and Capital Resources At June 30, 2026, our total current assets were $71.6 million, consisting primarily of cash and cash equivalents of $13.2 million, short-term investments of $51.0 million, accounts receivable of $2.7 million and prepaid expenses of $3.6 million. Our total current liabilities were $9.4 million and were primarily comprised of accounts payable, accrued expenses and operating lease liabilities. We also had $68.2 million of investments in longer-term liquid securities which we maintain to generate higher income on capital that we do not expect to spend in the next 12 months. We believe the credit quality and liquidity of our investment portfolio at June 30, 2026 is strong and will provide sufficient liquidity to satisfy operating requirements, working capital purposes and strategic initiatives. The unrealized gains and losses of the portfolio may remain volatile as changes in the general interest rate environment and supply and demand fluctuations of the securities within our portfolio impact daily market valuations. To mitigate the risk associated with this market volatility, we deploy a relatively conservative investment strategy focused on capital preservation and liquidity whereby no investment security may have a final maturity of more than 36 months from the date of acquisition or a weighted average maturity exceeding 18 months. Eligible investments under the Company’s investment policy bearing a minimum credit rating of A1, A-1, F1 or higher for short-term investments and A2, A, or higher for longer-term investments include money market funds, commercial paper, certificates of deposit and municipal securities. Additionally, all of our debt securities are classified as held-to-maturity as we have the intent and ability to hold these investment securities to maturity, which minimizes any realized losses that we would recognize prior to maturity. However, even with this approach we may incur investment losses as a result of unusual or unpredictable market developments, and we may experience reduced investment earnings if the yields on investments deemed to be low risk remain low or decline further due to unpredictable market developments. In addition, these unusual and unpredictable market developments may also create liquidity challenges for certain of the assets in our investment portfolio. Based on our past performance, we believe our current and long-term assets will be sufficient to continue to execute on our business strategy and meet our capital requirements for the next twelve months. Our primary short-term cash needs are costs associated with KARNO Power Module development, building our initial deployment units and capital investments for additive printer acquisitions and other assets. Longer term, our capital needs will be determined by our go-to-market strategy as well as governmental R&D, which may include development of our own KARNO Power Module manufacturing capacity or outsourcing this work to third parties or business partners. We have up to $6.1 million remaining authorized for repurchases under our $20 million share repurchase program but have currently paused any additional repurchases. Based on current projections of operating expenses, capital spending, working capital growth and historical share repurchases, we expect to have approximately $115 million to $120 million in cash, short-term and long-term investments remaining on our balance sheet at the end of 2026. This projection assumes the completion of approximately $10 million to $15 million of equipment financing during 2026 under the proposed arrangement described below, and does not assume any sales of common stock under our at-the-market offering program. The equipment financing remains subject to credit approval and agreement execution, and the amount and timing of any fundings will depend on equipment delivery and acceptance. The financing may be delayed, completed for a lesser amount, or not completed at all. We have accepted a proposal from an equipment financing provider for up to $15 million of financing that would be secured by certain of our additive manufacturing, CNC machining and other production equipment, and paid a good faith deposit in July 2026. The proposal is non-binding, and the financing remains subject to the provider's credit approval, equipment inspection and execution of definitive documentation, and may not be completed on the proposed terms or at all. If completed, we expect to make monthly payments over a five-year term and to account for the arrangement as a secured borrowing. We expect to use any proceeds to fund capital investments supporting KARNO Power Module commercialization and for general corporate purposes. In August 2026, we entered into an at-the-market sales agreement with Needham & Company, LLC and Northland Securities, Inc., under which we may sell, from time to time at our discretion, shares of our common stock having an aggregate offering price of up to $100 million. We are not obligated to sell any shares under the program, and any sales will depend on market conditions, our capital needs and other factors. Sales under the program, if any, would provide an additional source of liquidity to accelerate investments in assets needed for growth following commercialization, primarily additive printing machines and related assets, and would be dilutive to existing stockholders. We expect to use the ATM program opportunistically based on our capital requirements, and market conditions. Sales of shares under the program, if any, may cause dilution to stockholders. For additional information, see “Part II—Item 5. Other Information—At-the-Market Offering Program.” 24 Table of Contents 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. However, actual results could vary materially and adversely as a result of a number of factors including, but not limited to, those discussed in Part II, Item 1A. “Risk Factors.” The amount and timing of our future funding requirements will depend on many factors, including the scope and results of our R&D efforts, the breadth of product offerings we plan to commercialize, the growth of sales, working capital needs, and our long-term manufacturing plan for the KARNO Power Module, including the pace of investments in additive manufacturing assets and the methods of financing those investments, as well as factors that are outside of our control. We regularly evaluate our funding needs and sources of capital and may seek external funding in the appropriate circumstances. While we believe that we have sufficient capital to support the anticipated commercialization of the KARNO Power Module, we do anticipate that, at some time, we will seek further capital to accelerate these growth investments, whether through sales under our at-the-market program or other financing sources. Any such financing may include equity or debt securities and may not be available on acceptable terms, or at all. With our current cash and investments, we believe we are well positioned to be deliberate and opportunistic in determining the timing and structure of any additional capital raise. During the periods presented, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, which were established for the purpose of facilitating off-balance sheet arrangements. Cash Flows Net cash, cash equivalents and restricted cash provided by or used in operating activities, investing activities and financing activities for the six months ended June 30, 2026 and 2025 is summarized as follows (in thousands): Six Months Ended June 30, 2026 2025 Cash from operating activities $ (19,816) $ (23,999) Cash from investing activities 10,043 30,895 Cash from financing activities 1 (532) $ (9,772) $ 6,364 Cash from Operating Activities For the six months ended June 30, 2026, cash flows used in operating activities were $19.8 million. Cash used primarily related to a net loss of $25.7 million, adjusted for a $1.7 million change in working capital accounts and $7.6 million in non-cash expenses (including $3.2 million related to share-based compensation, $4.2 million related to depreciation and amortization, $1.3 million related to prepaid expenses and other current assets, and $1.6 million related to accounts payable, accrued expenses and other current liabilities, partially offset by $2.2 million related to accounts receivable and $1.2 million related to inventory). For the six months ended June 30, 2025, cash flows used in operating activities were $24.0 million. Cash used primarily related to a net loss of $30.7 million, adjusted for a $0.6 million change in working capital accounts and $6.1 million in non-cash expenses (including $2.7 million related to share-based compensation, $2.4 million related to depreciation and amortization, $1.9 million related to prepaid expenses and other current assets, and $1.6 million in assets held for sale carrying value adjustments, partially offset by $0.9 million related to accounts payable, accrued expenses and other liabilities and $0.6 million related to gain on asset sales). Cash from Investing Activities For the six months ended June 30, 2026, cash flows provided by investing activities were $10.0 million. Cash provided related to the sale or maturity of investments of $45.0 million and the proceeds from sale of assets of $1.9 million, offset by the purchase of investments of $34.7 million and acquired property and equipment of $2.1 million. For the six months ended June 30, 2025, cash flows provided by investing activities were $30.9 million. Cash provided related to the sale or maturity of investments of $60.0 million and the proceeds from sale of assets of $0.8 million, offset by the purchase of investments of $18.4 million and acquired property and equipment of $11.6 million. Cash from Financing Activities For the six months ended June 30, 2026, cash flows provided by financing activities were nominal. For the six months ended June 30, 2025, cash flows used in financing activities were $0.5 million, primarily due to taxes paid related to the net share settlement of equity awards. 25 Table of Contents Critical Accounting Policies and Estimates In preparing our condensed consolidated financial statements, we applied the same critical accounting policies as described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, supplemented by those described below, that affect judgments and estimates of amounts recorded for certain assets, liabilities, revenues and expenses. Inventory As of June 30, 2026, we have not yet commercialized the KARNO Power Module. Unless such components are capitalizable, costs incurred for components acquired prior to our determination of reaching a commercial stage are expensed as R&D costs, resulting in zero cost basis for those components. As a result, certain components on hand have a zero cost basis, and inventory capitalized in future periods that incorporates these components will reflect carrying amounts, and related cost of revenue upon sale, that are lower than would result had those components been initially capitalized. When inventory may be utilized in performance of our contracts with the ONR, we capitalize that inventory including certain allocations of overhead, labor, and other direct costs and classify it as work-in-process inventory. When this inventory is designated to and utilized in an activity, we record either an R&D or a cost of sale charge in the period in which the utilization occurs. All inventory at June 30, 2026 is classified as work-in-process. Inventory is valued using the specific identification cost method and is stated at the lower of cost or net realizable value. We review our inventory to determine whether its carrying value exceeds the net amount we expect to realize upon the ultimate sale of the inventory. Share-Based Compensation We account for share-based payments that involve the issuance of shares of our common stock to employees and non-employees and meet the criteria for share-based awards as share-based compensation expense based on the grant-date fair value of the award. The Company has elected to recognize the adjustment to share-based compensation expense in the period in which forfeitures occur. We recognize compensation expense for awards with only service conditions on a straight-line basis over the requisite service period for the entire award. If we were to utilize different assumptions, including the estimate of underlying share volatility of our market-conditioned awards, share-based compensation cost could be under or overstated. If there are any modifications or cancellations of the underlying unvested securities, we may be required to accelerate any remaining unearned share-based compensation cost or incur incremental cost. Share-based compensation cost affects our research and development and selling, general and administrative expenses. The Company granted 2.3 million restricted stock units in the six months ended June 30, 2026 that are subject to vest between February 11, 2026 and December 31, 2028 contingent upon achieving underlying closing stock price thresholds. Through June 30, 2026, there was no achievement of underlying closing stock price thresholds on these awards. These awards were valued at $1.57 per unit using a Monte Carlo simulation including a blend of historical and implied share volatility of 105% and a risk-free rate of 3.48%.