Aqua Metals - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 was a balance-sheet and technology execution quarter: AQMS eliminated all long-term debt, raised liquidity via the $4.3M Sierra ARC asset sale, and ended the quarter with $1.93M cash (≈$3.2M as of the call), while advancing best-in-class lithium carbonate purity (<30 ppm fluorine) and producing >1 tonne of high-purity NMC mixed hydroxide cake for partner sampling.
• Reported net loss of $6.77M (–$7.44 per share) included a ~$3.77M non-cash impairment/loss on asset sale; YoY operating costs declined materially on workforce reductions (plant ops $0.78M vs $2.37M YoY; G&A $2.20M vs $3.43M YoY).
• Management highlighted internal cost analysis indicating AquaRefining is cost competitive with Chinese hydromet recycling and ~50% of traditional U.S. hydromet costs—an important strategic proof-point for commercialization and potential partnerships.
• Potential stock reaction catalysts: reverse stock split to address Nasdaq compliance, industry-facing technology showcase with ~100 attendees (OEMs and battery ecosystem), foundational U.S. patent allowance enabling licensing/JV models, and debt-free status supporting strategic optionality.

What Went Well and What Went Wrong

What Went Well

• “Best-in-class” lithium carbonate purity advanced: <30 ppm fluorine; ~100 kg produced and sampling with strategic counterparties; >1 tonne NMC mixed hydroxide cake produced for qualification.
• Strengthened balance sheet and liquidity: $4.3M Sierra ARC sale; Summit loan ($3.0M) retired; no long-term debt; cash $1.93M at quarter-end and ~$3.2M as of call.
• Cost competitiveness and scalability: internal analysis shows cost parity with China and ~50% of U.S. hydromet; started design of modular ARC facility (10–60k tpa) and showcased technology to >100 industry stakeholders.

What Went Wrong

• Operating loss driven by non-cash impairment: ~$3.77M impairment/loss on disposal tied to Sierra ARC transaction in Q2; YTD impairment ~$9.0M.
• Continued pre-revenue profile and net loss: Q2 net loss of $6.77M; with no formal revenue recognized, profitability remains dependent on commercialization, offtake, and financing.
• Nasdaq compliance risk addressed via 1:10 reverse split; still contingent on successful appeal and maintaining bid price; capital access and project financing remain key external dependencies.

Transcript

Speaker 4

Afternoon and welcome to the Aqua Metals second quarter financial results call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. You can submit a question via the web at any time by typing them in the Ask a Question field on your screen. If connected by phone, to queue up for a telephone question, press *1. To queue up for a question, press *2 to remove yourself from the queue. Please note that this conference call is being recorded. I will now turn the conference over to our host, Bob Meyers of FNKIR. You may begin.

Speaker 1

Thank you, operator, and thank you everybody for joining. Earlier today, Aqua Metals issued a press release providing an operational update and discussing financial results for the second quarter ended June 30, 2025. This release is available in the Investor Relations section on the company's website at aquametals.com. Hosting the call today are Steve Cotton, President and Chief Executive Officer, and Eric West, Chief Financial Officer. Before we begin, I would like to remind participants that during the call, management will be making forward-looking statements. Please refer to the company's report on Form 10-Q filed today, August 13, for a summary of the forward-looking statements and the risks, uncertainties, and other factors that could cause actual results to differ materially from those forward-looking statements. Aqua Metals cautions investors not to place undue reliance on any forward-looking statements.

The company does not undertake and specifically disclaims any obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur, except as required by law. As a reminder, after the formal remarks, we will be taking questions. Questions will be accepted on the call from analysts, and all other investors can submit a question using the webcast portal provided in today's and earlier press releases. We will take as many questions as we can in our available time slot. With that, I'd like to turn the call over to Steve Cotton, CEO of Aqua Metals. Steve, please go ahead.

Speaker 2

Thank you and good afternoon, everyone. This past quarter has been a defining period for Aqua Metals. We advanced our commercialization roadmap, achieved new technical milestones, and strengthened our financial position, all of which position us for successful market entry. First, on the technology front, we produced lithium carbonate with fluorine content below 30 parts per million, which is likely a best-in-class result globally for recycled lithium. This meets and exceeds the strict specifications of cathode-active material producers, and we've already produced approximately 100 kilograms for strategic counterparties to evaluate. We produced over one metric ton of high-purity NMC, or Nickel Manganese Cobalt mixed hydroxide cake, for qualification sampling with potential partners. We believe this material could integrate directly into the value chain at the PCAM step, or Precursor Cathode Active Material step, creating efficiencies over producing independent sulfate streams.

We continued exploring alternative feedstocks, successfully testing nickel refinery residue and preparing to test undersea nodules rich in nickel and cobalt later this year. We also began trials for sodium sulfate regeneration technology, an innovative process that could help PCAM producers convert sodium sulfate waste into sulfuric acid and sodium hydroxide, which can be recirculated back into their process. This not only reduces chemical costs but also minimizes waste streams. Second, on scalability, we began designing a modular, scalable commercial ARC facility capable of processing between 10,000 and 60,000 metric tons of black mass annually. This design will serve as a clear blueprint for scaling AquaRefining to meet growing demand. We are already in discussions with potential strategic partners who could support a phased build-out. Third, on cost competitiveness, our internal analysis shows that AquaRefining in the U.S.

is cost-competitive with Chinese hydrometallurgical recycling and operates at roughly half the cost of traditional U.S. hydrometallurgical methods. This is a critical milestone, proving that sustainability and competitiveness can go hand in hand. Finally, we continue to engage with potential strategic partners. We believe collaboration among recyclers, CAM producers, and technology innovators will be essential to building a fully domestic closed-loop battery material supply chain, something still largely absent at commercial scale in the United States. Our progress this quarter shows that Aqua Metals is not just preparing to participate in that market; we are positioning ourselves to help define that. With that, I will turn the call over to our CFO, Eric West, to review the financials. Go ahead, Eric.

Speaker 0

Thanks, Steve. Let me start my comments with our balance sheet. We ended the quarter with cash and cash equivalents of approximately $1.9 million, and as of this call, we have approximately $3.2 million. During June, we completed the sale of the CRR facility and related equipment, generating roughly $4.3 million of cash proceeds. These proceeds were used to retire the $3 million sum of building loan, which also eliminated the associated interest expense going forward. With the payoff of this note, the company now has no debt. As a reminder, on August 4, 2025, we effected a one-for-ten reverse stock split. All per-share figures we referenced today reflect that split. I will now move to the income statement. Operating expenses reflect prudent cost control and workforce reductions implemented to conserve cash while we pursue necessary capital funding.

For the quarter, plant operations expenses were $0.8 million, down from $2.4 million a year ago, and G&A was $2.2 million, down from $3.4 million in Q2 of 2024. The decline in both categories was driven primarily by lower payroll and related costs following workforce reductions. We do not expect these actions to materially impact current pilot operations or ongoing R&D. Q2 2025 net loss also includes non-cash items associated with the CRR transaction, specifically an impairment and loss on the disposal of property and equipment of approximately $3.8 million in the quarter and $9 million recognized year to date as we exited the site. Other income benefited from $0.5 million of interest and other income and $0.8 million of non-cash gain from the warrant liability remeasurement. Net loss for the quarter was approximately $6.8 million.

On a per-share basis, basic and diluted net loss per share was -$7.44 for Q2 of 2025 versus -$9.94 in Q2 of 2024. Now moving to the cash flow statement. Year-to-date cash used in operating activities was $5.3 million, an improvement versus the prior year, reflecting prudent cash management and cost reduction actions, including workforce reductions taken to conserve cash while we work toward the capital funding path. Investing activities provided $4.9 million, driven primarily by the building and equipment sales proceeds received in Q2. Financing activities used $1.8 million year to date. This comprised a $2.7 million raise through our ATM and $0.1 million via the Lincoln Park ELOC, and we applied $4.5 million to principal repayments, including the payoff of the Summit Loan and Bridge Note.

We are continuing to focus on capital solutions and partnering structures that support our long-term strategy while strengthening our cash position to ensure an adequate runway. That concludes my comments on the company's financials. I will now turn the call back to Steve.

Speaker 2

Thanks, Eric. To summarize, in Q2, we delivered best-in-class lithium quality, validated our cost competitiveness, expanded our feedstock potential, and initiated the design of this scalable ARC facility. We also strengthened our balance sheet and extended our cash runway, giving us a solid financial platform as we move towards commercialization. We are proud of the progress we've made, and we believe Aqua Metals is well-positioned to play a defining role in building a resilient, fully domestic battery material supply chain in the United States. With that, let's open the call for questions.

Speaker 4

Thank you. We'll now conduct our question and answer session. To ask a question via the phone, press *1 on your telephone keypad. A confirmation tone will indicate that your line is in a question queue. You can press *2 to remove yourself from the queue. To ask a question on the webcast, simply type it in the Ask a Question field on your screen. One moment, please, while we pull for questions. Your first question comes from Mickey Legg with The Benchmark Company. Please state your question.

Speaker 3

Hey, guys. Congrats on the quarter. Thanks for taking my questions. Welcome to the team, Eric. Could you maybe talk a little bit more about the progress on the technology side of things? Maybe just break that down a little bit more for someone who's not an engineer. I think the China comp was pretty compelling, saying that it's 50% of the cost of the current U.S. How could you break that down a little bit? What are the implications of that? How are your potential customers viewing the progress on that side? What sort of things are they looking for? Thanks.

Speaker 2

Yeah, great. Thanks, Mickey. Great question. It's a tough one because it's definitely been a productive quarter for innovation. If I had to just pick one thing that really stands out, it's the progress that we announced that we made on the quality of our lithium carbonate, mainly being that we've reduced the fluorine content to under 30 parts per million, which is incredibly low. Based on the feedback that we're getting from the strategic partners that we're working on, it may be the highest spec lithium carbonate, not just from recycled sources, but period, even compared to many mine sources. I think that's huge. It shows that sustainable recycling can meet or even exceed the standards of traditional supply chains. That's gotten real traction with our prospective partners reviewing our samples.

I'll tell you, though, Mickey, the other piece that I'm really excited about is the flexibility that we're building into our flow sheet and the ARC facility designs. With our developing partner network, we're taking this sort of have-it-your-way approach, where some partners may want nickel metal, others may prefer something like a nickel carbonate, and others may want their nickel in the form of high-purity NMC mixed hydroxide cake. We're designing our flow sheets and the ARC plans to deliver what each developing partner needs. That level of flexibility, paired with our strategic pillars about licensing and/or building plants, allows us to do the build, own, and operate model as well as an enabler and partner model, and gives us the optionality to really meet the market where it is and where it ultimately will be in the U.S. and beyond to enable others to succeed alongside of us.

I think that's a real powerful position for us to be in.

Speaker 3

Great, great. Yeah, that's exciting to hear. I definitely like the optionality aspect of that. Maybe, if you could give us a little more color on the tech showcase you just hosted with Nat Battery, just dig into that a little bit. How are discussions going there? Is there any traction that you were able to generate from that?

Speaker 2

Yeah, we've seen a really encouraging wave of engagement coming out of that event. First off, I'd say it was a real honor to host so many of the leading players in the battery and the automotive OEM space, and to have that level of turnout, which was around 100 attendees in total for the event, and also some private tours that took place around the event, and to receive such strong feedback was incredibly validating. What stood out in my mind was the feedback and how many visitors called out the cleanliness and safety and organization of our innovation center and our demonstration plant operations, as well as the quality of materials that we're producing and the thoughtful design of our overall flow sheet. Those comments really meant a lot to us because they came from some of the top minds in the industry.

If you haven't seen it yet, anyone listening or reading the transcript, our August 6th press release includes a direct link to the event recap, and that's complete with photos, testimonial videos from industry leaders who were there. I really encourage folks to check that out. You can also find it under the media tab on our website in our blog, which we call The Current. You just click on media, blog, The Current, and you'll get there. The videos there are brief, but I think they're powerful, and they make it clear that we really do have something special here. In terms of outcomes, we believe the event did a few things, per your question. It helped push forward some of the ongoing conversations we were already having with some of these strategic prospective partners.

It also opened the door to some brand new discussions we've been having with players that we hadn't yet engaged. Maybe most importantly, though, for the duration and the durability of the event is that it left a lasting impression on the industry. After the visit, the industry now does have irrefutable firsthand evidence that Aqua Metals has developed a truly sustainable and economically competitive recycling process. We can help stand up the closed-loop battery mineral supply chains in the U.S. and other China markets. That's a major differentiator to me. This event really helped cement that message.

Speaker 3

Great, great. Love to hear that. It really looked like a pretty impressive event. I think more of these tangible touchpoints with industry leaders is very valuable. If I could squeeze in a couple more here. One on the mass side, there's just a lot going on with regulations and incentives and trade policies out there. Can you give us your view on how you think potential incentives or trade policies in the future could impact your competitiveness?

Speaker 2

Yeah, that's a great question, kind of the area that we can't directly control, but we could certainly influence and help benefit from. One of the things that we took a lot of time being proactive about during the National Battery Conference get-together is that we feel like we got a lot of support for the industry, telling the government administration, the various groups within the government, that what we really need to stand up the U.S. market here is a policy that encourages producers of black mass, so those that collect the lithium batteries and then pre-process them, which is the input to recyclers, that rather than be a net exporter of that material to sell through Korea or other locations at very high payables, that you can't make as much money in the U.S. on.

If there was a tax incentive, for example, in place to encourage and reward those pre-processors to sell those materials domestically so we can begin to produce and stand up an actual recycling set of infrastructure in the U.S., that would be something that everybody in the industry seems to be able to get behind. We spoke with the National Battery Organization themselves and got support and some vehicle OEMs as well as the pre-processors themselves. We're greatly encouraged as that being one of the areas that industry is going to try to influence our senators and congresspeople and various groups within the administration on encouraging that type of incentive. That is an ongoing effort, and we hope to see things there.

We're still in an uncertain period in terms of other policies, and we're awaiting what we see from the DOE, as well as we are encouraged on what the DOD has done. For example, I'll call out that there was an announcement recently of stockpiling, I believe it's $2.5 billion worth of cobalt. Our technology is the only recycling technology that can produce cobalt in the form of cobalt rounds, and that's an industry standard material. We believe that a policy setting like that can really help to stand up recycling in the U.S. by showing government support for the outbound materials that could come out of the recycling infrastructure if it were to be developed. Because let's remind everybody, right now there is about zero tons per year of commercial quantities of recycling collectively in the industry, and we need to get to a number far beyond that.

These kinds of policies and other things that we're working on with the industry and the trade organizations we believe could really make a difference and an impact in the coming years.

Speaker 3

Great. All right. The last one here. You made some good progress being prudent with your cash and on the balance sheet side of things. With no more long-term debt, can you just talk about what flexibility you have to structure partnerships, whether that be through equity or royalties or maybe licensing? Which do you see as likely? Maybe some of the breathing room you've bought yourself, could you just get into that?

Speaker 2

Yeah, fortunately, because of the great work that Eric has done to develop a stronger cash position through some asset divestiture that was non-essential assets and other tools to increase our cash, we do have that runway to be able to work towards some of these strategic partnerships and developing the right relationships with the right players. We're really fortunate that we feel like we've got a significant amount of runway and time to see through those discussions. That's a really important aspect of keeping this business moving along and, frankly, keeping the whole industry moving along, is that all the companies in this space need to be collaborating and working together versus trying to go with a lone strategy. Making sure that our balance sheets allow us the time to be able to establish those relationships is just absolutely critical.

I think we took a really good step in this past quarter in that direction.

Speaker 3

Yeah, agreed. All right, thanks. That's all for me.

Speaker 2

Thanks, Mickey.

Speaker 4

Thank you. I'm now handing the floor over to Bob Meyers for any web questions.

Speaker 1

Yes, thank you. First question. Can you elaborate on the patent allowance you received and how it is supporting discussions with potential partners?

Speaker 2

Yeah, happy to. Just a few weeks ago, we announced that we secured a U.S. patent allowance that covers foundational aspects of our AquaRefining technology for the lithium-ion battery recycling space. That's really a big deal. Beyond just protecting our IP, it really activates a key part of our business model that we've been talking about. We've always had two strategic pillars. One is the build, own, and operate model, where we develop and run our own recycling campuses, which, as everybody knows, is capital intensive. The other part of what we call our business model is the enabler and partnering pillar. This patent is really the unlock for that. With this allowance in hand, we can now pursue further high-margin licensing, joint ventures, and other tech enablement types of deals with partners who want to build cost-competitive, clean, domestic battery recycling capabilities without reinventing the wheel.

This isn't just a win for IP; it's a revenue enabler for us. We're already seeing that in our conversations with these potential partners. The patent does give us a tangible, defensible foundation to point in those discussions. It's clear, it's validated, and it shows the value, I think, that we bring to the table, not just technically, but also commercially.

Speaker 1

Great, thank you. Next question. This week has been interesting with a surge in lithium prices as a major producer in China closes a plant. Can you offer your take on market activity?

Speaker 2

Yeah, absolutely. It's definitely been a noteworthy week for the lithium markets and for lithium-related stocks. I think what sparked that primarily was a surge thing there was CATL, or Contemporary Amperex, one of the world's largest battery makers, shutting down operations at a key lithium mine in China's Yichun region. That facility accounts solely for around 6% of global lithium output. That move really reverberated through the market immediately. Lithium carbonate prices in China popped around 3%, and lithium stocks around the world rallied. That really underscores how thinly stretched supply chains have become and why prices need to rebound enough to make production viable outside of China. Oversupply and lackluster demand in recent years has driven prices down to levels that made it nearly impossible for non-China producers to even compete. At Aqua Metals, our goal has always been to help enable a U.S.

and global solution through an economically viable but also sustainable supply chain. That means making lithium carbonate and indeed really all the battery-critical materials from recycled sources and even mined ones competitive on price and on quality. We view this market movement not just as a short-term bump, but I view it as a signal that more rational prices could be returning. That's essential for building a resilient, localized set of capabilities. This week's surge is a reminder that it's not just about recycling tech. It's really just about the economics. We're building towards both sides, the superior specs here at Aqua Metals and strong margins so that ex-China markets actually do have a chance to become and then remain more independent.

Speaker 1

Great, thank you. The next question. In addition to the commentary in your opening remarks, what are the next steps and milestones we can watch out for?

Speaker 2

Great. Our focus right now is on securing the right supply and offtake partnerships that will enable financing for our first commercial ARC facility. The market has shifted for sure, and we're in a mode of we'll build it when they come versus build on spec. We believe that we now have the financial runway to pursue the right deals with the right economics in the months ahead. I'm going to point out again that the recent IP allowance and our flexible offtake model, being able to deliver nickel as metal or carbonate or nickel manganese cobalt cake, has opened up meaningful new discussions and revenue opportunities. That furthers our chances at the right deal or even deals. While still early, it's also notable that we're testing new feedstocks like refinery residues and undersea nodules, which could greatly expand our reach beyond battery recycling.

We look forward to sharing more on those developments as we continue to progress them through lab bench and pilot scale.

Speaker 1

Thank you. Next question. Eric, as the new CFO, can you offer a few more insights about your key objectives in the coming weeks and months ahead?

Speaker 0

Yes, I can. My top priority is to continue the strong momentum that we built on the fiscal side. We already made real progress improving the balance sheet, eliminating the long-term debt, and raising liquidity. I'll be focused on keeping that trend going. The financial discipline is what gives us the ability to pursue the exciting opportunities Steve's been talking about, whether it's building our first commercial ARC facility or enabling others through partnerships. The other big area of focus for me is on the financial modeling and partner interface side. We've got active conversations happening around feedstock, offtake, licensing, and JV opportunities. I'll be spending a good amount of time on the modeling and the economic structuring supporting those decisions. It's all about making sure we optimize every opportunity while keeping the company on solid financial footing.

Speaker 1

Thank you. Next question. Why did Aqua Metals execute the reverse stock split?

Speaker 0

That's a good question. The primary reason for the reverse stock split was to support our efforts to regain full compliance with the NASDAQ listing requirements. We've had an ongoing conversation with NASDAQ, and this is the move to part of working through those final steps. We view the NASDAQ listing as a strategic asset. It brings real benefits to our shareholders from both liquidity and visibility. Staying listed also gives us access to the larger pool of institutional and retail investors, especially those that prioritize transparency, good governance, and emerging growth stories like Aqua Metals. While these moves are never taken lightly, we see this as an important step in positioning the company for long-term opportunities.

Speaker 1

Thank you. The next question. You discussed a cost comparison study of AquaRefining. Can you explain that a bit more?

Speaker 0

Yes, I can. This is something that we're pretty excited about because, as we've said from the beginning, if the U.S. and other markets want to truly compete with China in battery recycling, we need to change the game. We can't just match it. The study we completed internally compared the cost structure of AquaRefining to both traditional U.S. and Chinese hydrometallurgical plants, and we have found what we found was really compelling. Our process is cost-competitive with China and actually runs at about half the cost of traditional U.S. hydrometallurgical recycling. One of the key drivers is that Aqua Metals eliminates the need to manage and dispose of huge volumes of single-use chemicals, and we use electricity instead to regenerate those needs of chemicals. That's both a CapEx and an OpEx savings, and especially in ex-Chinese markets, the disposal of a byproduct like sodium sulfate is extremely expensive.

Our process avoids producing and then crystallizing that sodium sulfate waste stream on the back end, which exceeds the valuable lithium, nickel, and cobalt minerals combined, which is a big deal from both a cost and a sustainability standpoint. When you put all that together, we believe that AquaRefining gives us and our partners a much better shot at building a viable critical minerals recycling industry here in the U.S. and other markets. At the end of the day, price matters with commodities, and AquaRefining is designed to compete where it counts.

Speaker 4

Thank you. Ladies and gentlemen, that is all the time we have for questions. I'll now hand the floor back to Steve Cotton for closing remarks.

Speaker 2

Thank you everybody for attending, and we are very proud of the accomplishments in the past quarter from a financial perspective, operational and commercial, and kind of some new strategies in addition to battery recycling. We've done what we can do to continue to keep the stock listed through the NASDAQ and expect those conversations on compliance to be productive. Our cost comparison has really made an impact in our conversations with potential partners in the U.S. They're seeing that it is, as Eric said, that price matters with commodities, and we think that we've got the right set of tools not only for ourselves, but to help enable others. We appreciate all the support from our shareholders, and we look forward to reporting updates ad hoc. Between now and the next quarterly call, I wish everybody a great day, a great week, and a great quarter. Thanks.

Speaker 4

Thank you. With that, we conclude today's conference call. All parties may now disconnect. Have a good day.