Amprius Technologies - Earnings Call - Q3 2022

Transcript

Speaker 0

Good afternoon. Welcome to Amperius Technologies Presentation of its Third Quarter twenty twenty two Earnings Call. My name is Ryan, and I will be your operator this afternoon. Joining us for today's presentation are the company's CEO, Doctor. Kang Sun and CFO, Sandra Wallach.

Following management's remarks, we will open the call for questions. Please note that this presentation contains forward looking statements. These statements are based on Amperior's technology, business and expected market opportunities and are subject to uncertainty and changes in circumstance, many of which are beyond Amperior's control, which may cause actual results to differ materially for those expressed or implied in such forward looking statements. For a more complete discussion on forward looking statements and the uncertainties related to Amperior's Technologies business and expected market opportunities, please refer to its filings with the Securities and Exchange Commission, including the discussion of Imperious Risk Factors in its eight ks filed on 09/16/2022. I will now turn the call over to CEO, Doctor.

Kang Sun, for his comments. Sir, please proceed.

Speaker 1

Good afternoon, everyone, and thank you for joining us today for inaugural earnings call. Today is an important milestone for Ampere's and we are so glad that you could join us for our first quarterly earnings call as a public company. Today, we will discuss our third quarter financial results, key business drivers and the step we are taking to advance our strategic plan for high volume production of our silicon nanowire and batteries. For those new to the Ampere's story, I'd like to begin today's call by providing some background on who we are. Ampere's was founded in 2008 to commercialize the silicon nanowire anode concept that was originally developed at Stanford University.

In 2014, we finalized our silicon nanowire anode structure design and its manufacturing process. In 2016, we built our first kilowatt hour scale manufacturing line in California. Two years later, Ampere's received its first purchase order from Airbus and began its journey towards commercialization. Last year, we initiated our gigawatt hour scale manufacturing project to build a high volume facility in The United States to meet the strong customer demand for our silicon nanor battery technology. In September, we closed our business combination with Kensington Capital, a critical step on our roadmap to build a scale that can help fulfill market demand.

We could not have found a better partner than Kensington's team. This transaction provide Ampere's with access to the capital markets in addition to the proceeds reached today. That accelerate the development of timeline of our gigawatt hour scale manufacturing facility. Following the close, Kensington's Chairman and CEO, Justin Merrill joined our Board. We are fortunate to continue working with Justin and be able to leverage the entire Kensington team's deeper expertise in automotive industry.

As our long term goal is to see our silicon nanotechnology become a mainstream technology with applications across all segments of electrical mobility, including the EV industry. Amperess is in the business of developing and manufacturing ultra high energy density lithium ion batteries based on our proprietary silicon nanowire anode technology. Our business has four distinct advantages unmatched technical and the product performance, proven manufacturability, years of product commercialization experience and a team of experienced business operators with a solid track record. Today, Amperesa delivers commercial batteries with the highest known energy density and power density. Our batteries have four fifty watt per kilo specific energy density and eleven fifty watt per liter volumetric energy density with up to 10C high power capability.

Few weeks ago, we host a demonstration of our extremely fast charge capability in which we charge the one of our batteries from 0% to 80% in six minutes. In addition, Ampere's batteries offer a wide operating temperature range from minus 30 degree Celsius to 55 degrees Celsius, which is particularly important for the aviation market that we are currently targeting. Stands apart and we currently do not have any competition in the commercial market at this performance level. Ampere is currently focusing on addressing the aviation market, which we expect will grow to 50 building can by 2025. We have a group of blue chip aviation industry customers that are currently using our batteries in real world situation, among them Airbus, which is wafer head programs, AeroVironment and the Telencer.

Most recently, we announced a three year cooperation agreement with the defense industry leader, BAE Systems. This agreement further validates the significant potential of our silicon nanowire analog technology in rigorous area and the military applications. As BAE intends to investigate the business opportunities enabled by the use and supply of Ampere's batteries in their electrical aviation product portfolio. In addition to commercial customers, the U. S.

Government has also consistently shown its support for Ampere and our silicon nanotechnology. In total, we have received four grants from the U. S. Department of Energy. We have also been awarded funding for a second multiyear development program with the United States Advanced Battery Consortium to advance the development of high energy density and the low cost EV batteries.

After a decade of the development, Ampere has developed the most advanced lithium ion battery commercially available today, secured Tier one customers in the aviation industry, demonstrated the battery manufacturability and built a strong technology roadmap. Today, the company's top priority is quickly scale its production capacity to meet the customer demands and accelerate the growth. We have made progress on this goal in several ways. In October, we received the first high volume silicon nanowire anode production machine from Central Therm at our California facility. This machine provides us with approximately 10 times more production capacity to serve critical customers' assembly and qualification exiting 2023.

Furthermore, it allows us to accelerate the development of our process for building batteries at a gigawatt hour scale since we have been limited to the kilowatt hour scale until this point. This expertise is necessary as we prepare to begin construction of our high volume manufacturing facility. Next, our Vice President of Infrastructure, Andrew Hui recently came on board to spearhead our expansion efforts. Andrew brings over thirty years of facility development and management experience to Ampereus And it was most recently at Panasonic Energy of North American working at Tesla's first Gigafactory. They were lead the development of our high volume manufacturing facility as we began to scale our production capacity, focusing on factory planning, facility development and the regulatory compliance.

Last month, Amperez was awarded a 50,000,000 cost sharing grant as a part of President Biden's Bipartisan Infrastructure Law, which reflects our position as a pioneer in electrical mobility and exhibits the government's confidence in our technology. We believe this will be a catalyst to our production capacity expansion as this funding focused on growing the domestic manufacturing of next generation lithium ion battery. With all this hard work and effort, our silicon nanowire and battery technology is a business poised to scale into high volume production. We believe our technology and the products are well positioned to enable the future of electrical mobility. Our production capability is in the progress of expanding.

Our battery performance is unmatched in current market and we have several blue chip customers, including many others who are interested in working with us. Now, I will turn the call over to our CFO, Sandra Wallach, who will review our financial results for the third quarter. Sandra?

Speaker 2

Thank you, Kang. I'd also like to thank our analysts and investors for joining us on this first earnings call. Our detailed financials can be found in our shareholder letter. I will spend a few minutes covering a few key topics. As Kang mentioned, we have the proprietary technology, proven manufacturability and commercial success.

So we are focusing on scaling our production capacity to meet the growing demand in these fast moving markets. In our financials, particularly in our revenue results, you will see data points that reinforce the strength of our customer development efforts as we scale. Those results, when paired with the investments in our Fremont capacity and gigawatt scale capabilities, we believe position the company well to achieve its growth and profitability potential. We closed out the 2022 with $800,000 in revenue. Product revenue was $500,000 including nine customers sampled in total, including two leading eVTOL manufacturers.

We delivered commercial quantity shipments to AeroVironment and Teledyne FLIR, and we shipped the ninth flight set to Airbus for their high altitude pseudosatellite program with a backlog of six more sets for future deliveries. Development services revenue was $300,000 based on the delivery of sales and reports under contract with the U. S. Army for development of cells with gel electrolytes. For the 2022, our GAAP gross profit margin was negative 180%.

Variation in gross margin period over period is based on the mix of products and services. Moving now to our operating expense management. Our GAAP operating expense for the 2022 was $2,900,000 Our Q3 GAAP net loss was $4,200,000 or a loss of $06 per share. As of 09/30/2022, there were 54 full time employees based in our Fremont, California location. Share based compensation for the third quarter was $700,000 Turning to the balance sheet.

We exited Q3 twenty twenty two with $73,800,000 in cash and no debt, a net increase of $68,600,000 from Q2 'twenty two. The key drivers of our cash activity for the quarter were 2,700,000 used in operating activities, dollars 500,000.0 in capital expenditures invested in our current manufacturing facility as we are investing into opportunities to expand our footprint and accelerate our capacity to support customer qualifications and scale up. Under financing activities, we had $71,800,000 net cash provided, driven by proceeds received in connection with the business combination and the PIPE investment net of issuance cost. For projections, we expect higher capital expenditures going forward as we continue to invest in our Fremont facility and fully build out the two megawatt capacity in Fremont, California, while in parallel starting design, site selection and construction of our gigawatt scale facility. With the strength of our balance sheet and multiple vehicles to generate additional funding through both equity via warrants and committed equity facility and non dilutive sources via grants, we believe we have enough cash to execute our strategic plan.

With that, I will conclude the financial discussion and pass the call back to Kang.

Speaker 1

Thanks, Sanger. In September, Amperez entered public market, so we could better capitalize on the significant market growth for batteries in the aviation and the EV spaces. As a result of our demonstrated success with Airbus and other Tier one customers, we are becoming a market pioneer in providing high performance batteries to the aviation industry through customer validation, design wins and the recurring orders. We believe our strong market position will enable us to expand our presence in the rapidly growing aviation markets, while also serving other mobility related markets including electrical vehicles that require improvements in their electrification solutions. To take advantage of the tremendous opportunity in these markets, we must first build a high volume manufacturing facility.

Today we have more customer inquiries than our capacity can serve, which is why we are diligently working towards expanding production at our current facility in Fremont, California and finalizing the location for our gigawatt hour scale manufacturing facility, which we have narrowed down to Texas or Georgia. We are in discussion with the landlord and expect to announce a site at the 2022. In anticipation of our high production capacity, we are making significant progress in technology and the product development as well as customer acquisitions. We have enhanced our battery specific energy density from four fifty watt hour per kilo to 500 watt hour per kilo. While this optimized design is still in its final development and the testing phase in our labs, we are excited to be developing the next generation of a superior battery performance for our current and future customers.

Furthermore, we are pleased to announce that our three ninety watt per kilo polymer electrolyte cell has successfully passed the military performance specification nail penetration test, which was conducted and verified by independent third party lab. This is another significant step in the development of our technology and the product portfolio. The marked increase in energy density performance combined with lower overall weight of the battery has the potential to be used in many applications including wearable devices. We'll be providing additional details on this achievement in upcoming press release as well as a video of the nail penetration test. Finally, on the commercial side, we are rapidly building the customer pipeline as our customers' product approaching commercial launch and our batteries are validated by more commercial applications.

To summarize, Ampere continues to execute on its strategic goals plan of commercializing its proprietary silicon nanowire analog technology and capitalize on the robust market demand for next generation batteries. Backed by our innovative products, strong balance sheet and the grants, supportive base of customers and the team of technology innovators and experienced business operators. We believe Ampere is uniquely positioned to advance the future of electrical mobility today. The team at Ampereus appreciates your continued support and we look forward to what is ahead for our company and the battery industry. With that, we are ready to open the call for questions.

Operator?

Speaker 0

Thank you. We will now take your questions. Our first question comes from the line of Colin Rusch from Oppenheimer. Please go ahead.

Speaker 3

Thanks so much, guys. Gang, as you look at installing this new large scale tool and going through the evaluation of the process, can you talk about just the cadence of activity that you're expecting to go through and some of the key milestones that we should be anticipating over the next several quarters?

Speaker 1

Yes. We have this, Colin, we just received these two from Central Therm. This is a small scale of a large scale manufacturing tube. They give us approximately two megawatt capacity here. So why we need to have this first module in Fremont, California, because we need to test out the entire manufacturing process with these two.

We already we have done some tests at central firm this year. So these two not only test the silicon nanowire growth, this enable us to test the entire volume manufacturing protocols.

Speaker 3

Fantastic. I'll follow-up offline for some more detail. And then I guess that dovetails into my second question around customer qualification of both the product and the process. So obviously, you've been you're shipping revenue units to a number of companies or a number of customers. But as folks want to scale up with you guys, can you talk a little bit about the concurrent activity around qualification of the factory so that as you get the equipment installed in the new site and begin ramping, how prepared are those folks going to be to be taking product and having that product designed into their offerings out into the market?

Speaker 1

Colin, as you know, we're already in manufacturing activities since 2016. We started supplying customer commercial products since 2018, and the first customer was Airbus. So we have robust manufacturing process already, but at a small scale, at a kilowatt hour scale. This new tool will be available to start supplying customer prototypes and for the battery made on this new tool, sometimes in the third quarter next year.

Speaker 3

Fantastic. And then the final one is for Sandra. As you evaluate the sources of capital that you have out there, it seems like you may have a couple of other potential grants that you could get or other elements that may be non dilutive. Can you talk a little bit about your ability to finalize the total capital structure with non dilutive financing?

Speaker 2

So there are many programs out there. We were incredibly pleased, and thank you for the Department of Energy grant, to receive that $50,000,000 There is a DOE loan program. There are many other options that we're continuing to look at as we continually assess our capital needs in the longer term.

Speaker 3

Okay. Thanks so much, you guys.

Speaker 0

Thank you. Our next question comes from the line of Chip Moore from E. F. Hutton. Please go ahead.

Speaker 4

Kang and Sandra. I guess, first, congratulations to you and the team just for making it to your first public call. I wanted to ask in Fremont, back to the CentraTherm equipment you've got in now. So just getting to, I think you said, Kang, prototypes sort of Q3 next year. Just help us, I guess, with that ramp, what you need to do in terms of tweaks.

And I think it was automation around handling the foil. But just kind of remind us what you need to get done once you get the equipment installed.

Speaker 1

Chip, we have all the building blocks ready for this volume manufacturing process. What we need to do is test and verify each technical building blocks, I mean, the silicon growth and the back end assembly activities and integrated them together. That will require two or three quarters to finish that. So since we have been in manufacturing mode for over four years, this basically is in decoration job, okay, instead innovation. So we already have as I said, we have all the technical building blocks.

We just need to put it together. Based on current plan, we should have this line running for prototyping, not prototyping sometimes in Q3 next year and start supplying small volume. Small volume means we have nameplate capacity two megawatt some end of the 2023 or Q1 twenty twenty four.

Speaker 4

Got it. That's helpful. And just in terms of the pace of capital expenditures, obviously, you talked about higher CapEx, Sandra, moving forward. Can you help us with that pace, particularly given the cost sharing grant from the DOE, just how to think about at a high level CapEx?

Speaker 2

So for the Fremont facility build out, we think it will be a couple of million a quarter for the next couple of quarters. And then for the large scale facility, we hope to be able to announce the site and lock it in by the end of the year, as Kang mentioned. And then we would start the design and construction phase design and planning phase in Q1 and likely construction in Q2 to keep us on the aggressive time line to try to have the production line qualified and running within eighteen to twenty four months.

Speaker 4

Got it. Okay. So more significant CapEx in the back half of next year.

Speaker 2

Okay. Just as we've said, the go ahead.

Speaker 4

No, go ahead.

Speaker 2

Oh, the cost sharing arrangement with the Department of Energy is still to be negotiated as far as the final allocation of cost against which part of the demonstration facility that we've committed to. So it's hard to know what will go to CapEx versus OpEx, but we expect that to cover a chunk of that, including design and resources as we move forward.

Speaker 4

Understood. Okay, that's helpful. And maybe just the last one. Any updates on EV program, Advanced Battery Consortium, just how those efforts are coming in terms of cycle life and some of those important metrics?

Speaker 1

Yes, we are making progress here, Chip. This is two years program. We just started in March. So we are making progress here. Hopefully, at our next call, we are going to report to you the progress of the program.

Speaker 4

Got it. Okay. Well, congratulations again, thanks for the time. Appreciate it.

Speaker 0

Thank you. At this time, this concludes the company's question and answer session. If your questions were not taken, you may contact Ampreas Investor Relations team at irampreas dot com. And now, we'd like to turn the call back over to Doctor. Sun for his closing remarks.

Speaker 1

Thank you for joining us on today's call. I would like to thank our employees, partners and the shareholders for their continued support. As a reminder, you may learn more about our strategy in the investor presentation available in the Investor Relations section of our website. We look forward to updating you on Ampere's progress on our next earnings call.

Speaker 0

Thank you. Ladies and gentlemen, thank you for joining us today. You may now disconnect your lines.