Amaero Ltd

Good morning and welcome to the Amero investor webinar. I'm Jane Morgan, investor and media relations manager. And today I have the pleasure of speaking with Hank Holland, our chairman and CEO, who's going to be providing a company update. As usual, we will be taking questions throughout the presentation. So please use the Q&A function, which can be found at the bottom of your screen. Hank, I'll hand to you.

Thank you, Jane. Good morning, everyone. As you're aware, Amero lodged its quarterly financial results yesterday. I'd like to highlight some of the information from the results. And then, as always, we'll be happy to take questions as follows. It was quite a transition for Amero. We reported revenue of Australian $4.7 million, an increase of 445% over the same period a year ago. This included $4.1 million of powder revenue and about $600,000 of revenue from PMHIP manufacturing of large, nearnet-shaped parts. During the quarter, we increased atomization by 240% over the prior quarter. Again, that is in the September quarter, we increased atomization by 240% over the June quarter. Notwithstanding the significant step function in increased manufacturing, we could not manufacture enough product to fill all of our orders. and thus we carried into the current quarter approximately half million dollars of order backlog. All of those powder orders have now been shipped that carried over into this current quarter. We ended the quarter with Australian 9.9, I'm sorry, excuse me, we used cash in operations of Australia $9.9 million during the course of the order. This included $4.7 million of bar stock inventory purchases, we've been very mindful the last 12 months to carry buffer stock thus mitigating the risk of any trade disruptions or tariff risk somewhat timely given the tip that arose about a week ago with the threatened heightened tariffs with china we are in very good position as far as inventory in stock we have 20 tons of titanium bar that arrive This week, we have another 20 tons, another 40 tons, actually, that will ship before the end of the month. The threatened tariff was to take place in November. So, again, we are in very good shape as far as buffer stock of inventory. We ended the quarter with $50.9 million of cash. Moreover, three days into the quarter on October the 3rd, we received $5.7 million U.S., or about 8.8 million Australian from an Ex-Im bank draw. This was from CapEx spent the prior quarter. So as of October the 3rd, we had a cash balance of roughly $59.7 million after drawing on Ex-Im bank. We've got about another US $7 million or about 10.8 million Australian left to draw on the Ex-Im bank loan. And we will draw that over the course of this fiscal year. Moving on, one of the real focuses this year, really there will be two primary focuses, one to continue scaling manufacturing production, our throughput, and the other will be continue to scale our commercial contracts. Anyone that has been involved in manufacturing, scaling manufacturing is not easy. When you go from development to production, it's a very different process. In anticipation of this, in May of this year, We brought in a gentleman that I've known for many years, Eric Olson. Eric headed up manufacturing consulting at Accenture for three decades. I met him at a former portfolio company. We had a SWAT team in for about six weeks. They reviewed all of our processes, met with our entire staff, all of our quality controls, all of our safety controls, and they put forth a plan in anticipation of not only scaling from fiscal year 25 to fiscal year 26. But scaling from one atomizer, which we had before, all the way up to four atomizers, which is our plan, they had no shortage of input and recommended changes over time. In fact, there's about 42 items that they identified in our processes and our people and our staffing and various protocols, much of which has already been implemented. and some more of which will be implemented in the coming months and or years as we make a further scale and automate, for example, the way that we handle and move powder within the facility to do so in a way that is more expedient, but also less risk of contamination and safer. As part of the changes they recommended, our operations over the prior two years had really been focused on building our facility and commissioning the equipment. obviously now we've transitioned a very different type of operations which are centered around manufacturing as part of this we brought on a new vp of manufacturing operations who is essentially now running our operations mark struss i'll talk a bit more about mark later mark comes with 25 years of manufacturing experience including in the auto industry a much more complex manufacturing process or series of processes than we have here. But again, it's been very instrumental in helping us think about how we begin to scale, how we begin to change these processes. I'll come back to this in the last point here in a minute, but we've gone through a real step function in operations. To that point, we have ordered additional equipment, much of which was ordered earlier this calendar year, some of which arrived in the first quarter of the fiscal year, more of which will arrive in the current quarter and next quarter, that will again continue to scale the processes beyond atomization. We have a five-step process, the first step of which is atomization, but a series of processes that follow, and this capital equipment will help us further scale those processes. Over the prior quarter, and again, I repeat, over the prior quarter, we had a subsequent or sequential increase in powder shipments of 153% in a single quarter. We shipped about five tons of product in the fourth quarter of fiscal year 25. We shipped over 12 tons of product in the first quarter of fiscal year 26. We had a 240% increase in atomization. From about eight tons in the fourth quarter, the June quarter, to 27 tons in the September quarter, we were operating in June one eight-hour shift five days a week on a single liga. We finished September operating two 10-hour shifts a day, six days a week on two atomizers. So again, significant scaling over the course of the quarter. In anticipation and recognizing the transition period of which Amero is in, my wife and my family and myself relocated to Chattanooga during the course of last quarter. We're thrilled to be here for three years. I've been traveling back and forth and with a new baby at home, did not want to continue to be away from the family. And moreover, have very long days here. I get to the office about 6.30 in the morning. We have a 7 a.m. production meeting. It's a little bit after 8 p.m. now, which would be a typical day So again, it gives me a chance to be here all day, every day, and be less away from family as I travel. So thrilled to do so, work alongside a great group of colleagues. And one of the things I've always said is people around here can attest, I won't ask anyone to work harder than I work. And that being said, there's plenty of people here working just as hard as I am, and it's a heck of a team. Some significant improvements during the course of the quarter from a qualification standpoint, as well as ongoing material improvements. As you might recall with Casteon and Admin, we signed a five-year preferred supplier agreement in April of 2024. We then qualified C-103 in September of 24. This was a very big deal. The founder of Casteon, Dr. Yuping Gao, is the foremost expert in printing C103 and refractory alloys. Adman owned by one of the leading private equity firms in the industrial space in the US has been very active in additive manufacturing as well. And so qualifying with Castian and Dr. Yuping Gao was a very big deal. We then immediately did some additional work on refining chemistries And we announced in December of 24 that we had made some slight tweaks to C103 chemistry that had shown some improvements. And then we've been continuing since then to make some other refinements. We have completed that. Thrilled to say that we have qualified with Adman on top of the qualifications that we've done before. We've achieved performance specifications that are rot-like. Much of additive manufacturing material is subpar to rot material properties. The prior supplier that Casteon had had achieved rot-like material properties, and it was important that we achieve consistent properties with other supplier, and we've now done so. So another significant advancement, both in our qualification standards as well as our relationship with Casteon and admin. We will continue to advance, particularly as it relates to propulsion systems and thermal protection systems, these important systems on hypersonics and space applications, and we'll work closely with Cascade and Admin going forward. Also, during the course of the quarter, as you know, we achieved qualification, which was a predicate condition with Velo3D. We achieved that with Auburn University's National Center of Additive Manufacturing Excellence. I'll announce later one of the interesting things, Dr. Jonathan Peck, who had been a senior technician at Castillon. Very few people, again, understand and know how to print C-103. He had left Casteon and gone to Auburn. That is who he worked with at Auburn. I'm pleased to say that Dr. Jonathan Peck will be joining Amero at the end of this month. And again, one of the important technical hires that we have made. During the course of the quarter, as everyone is aware, we completed a $50 million placement that was very well supported. strong institutional support and participation. We also had an SPP. The SPP was $3 million, and I would say modestly supported, $470,000, same terms and same issue price as the placement. The board considered this very seriously in that we were fully funded before, but the board felt it was important, given that we were two years into commercial engagement, go ahead and pull forward some growth initiatives that had been planned for fiscal year 27 and beyond, as well as to make investment in argon recycling that will further improve our unit cost advantage that we have over competitors and further uniquely position us not only as the largest capacity U.S. domestic producer of spherical refractory and titanium alloy powders, but also at the lowest cost. Some important hires that we made during the course of the quarter. Brett Panuk, our Chief Financial Officer, has been fantastic, brings a great audit background in accounting, as well as FP&A experience. Mark Struss, I mentioned before, essentially assuming leadership in the manufacturing operations. Dr. Jonathan Peck, I mentioned, has joined us as VP of Technology Development, was at Casteon and then Auburn. And then Dr. Arun has been an amazing force at Amero. He's been promoted yet again. This is actually his second promotion. And he is leading all of our applied research as well as process development and working hand in hand with Mark Struss as we continue to refine and develop our operating systems. Also, during the course of the quarter, we gave updated financial guidance. Pleased to report for fiscal year 26, we anticipate revenue of Australian $30 to $35 million. And we expect roughly 40% of that would be achieved during the first half of the fiscal year, roughly 60% of that to be achieved in the second half of the fiscal year. On the commercial side, we made progress on a number of fronts. As everyone is aware, we announced a five-year exclusive supplier and development agreement with Tythomic, ASX listed company, for refractory and titanium alloy spherical powders. One of the things that perhaps isn't as well appreciated in the ASX market is spherical powders are very different than angular powders. Also very different gas atomized powder than say HDH powders. Also reactive or titanium alloys very different than non-reactive such as nickels and so forth. And so AMERA plays a unique role in the supply chain and particularly when you're qualifying in parts. What TITOMIC was finding is that the defense primes came to them for development and production parts, mission critical aerospace and defense applications. the defense primes required it be spherical powder. So they give very specific material specifications. And in some cases, they'll also define how the powder is manufactured. This is more true, for example, in medical applications where it is most often plasma atomization or gas atomized powder. We've already begun working with Tytomic on a project, and I would expect you'll hear more about that in the coming months. But again, important opportunity for us, I believe for Tytomic as well, in the refractory space in particular, and really scaling their expertise in cold spray applications. Knuts Godwin, we did not announce this as a standalone announcement in the course of the quarter, As people will know that have followed this company closely, we tend to be somewhat guarded with not announcing things unless we feel it has a very material, immediate financial impact. That being said, Knut's Godwin is an important relationship for us. Knut's Godwin is located near Houston. They're a very pivotal, integrated additive manufacturing and advanced manufacturing firm, primarily focused on the oil and gas industry, but increasingly focused on other areas, including aerospace. We work with them on the PMHIP side of our business, and now we'll be working more closely with them on the titanium side of their printing business. They also use largely Velo3D machines, and obviously with our partnership with Velo3D, it ties in here nicely with Kunitz Godwin as well. During the quarter we announced about a year ago, we received a contract, a little bit over a million dollars with the U.S. Defense Prime Contractor, and that we expected to complete first article parts. Those parts have now been completed. We said we expected to do that in September or October. We'll continue to do some testing with our customer over the balance of this calendar year. Expect to hopefully finish that by the end of December. And then that will be the acceptance of those first article parts will be a very important milestone as we move forward to advance other development opportunities, but even more importantly, production part contracts with this customer. And also further validates PMHIP manufacturing as a mature, what in the U.S. we call a technical readiness level or TRL level, a mature and scalable alternative to to large castings and large forgings, which is very important, particularly in the maritime industrial base, the submarine industrial base, but also in the oil and gas industry. And then finally, we announced in the quarter a development collaboration with a Boeing company. This also, I think, is a very important example of the benefits as well as the immediate insertion of PMHIP. We've not disclosed the nature of the part that we're working on with Boeing, but it is a structural part in a next-generation aerospace application, and I would expect you'll hear more from us as well as Boeing as this collaboration advances. I thought it might be helpful to give investors just a representative list of some opportunities that we're advancing. We won't come out and essentially announce these or announce the counterparties until we have binding contracts. That's just our practice. But we are continuing to advance development and production opportunities that support the US Navy and the Maritime Industrial Base. We're continuing to advance C-103 powder opportunities, specifically within missile systems. Tungsten powder opportunities for the munitions complex. Munitions, as those you might know, is a very significant opportunity given our depleted stocks. And tungsten, very, very important. Tungsten, as you might know, It's got a characteristic as a heavy alloy, it penetrates, but also it sharpens as it penetrates. And so it's a very important material that is used in munitions. Very few people and very few technologies, tungsten has a very, very high melting temperature and thus very few technologies can atomize tungsten. Zirconium opportunities, which are important for nuclear power as well as nuclear propulsion systems. Refractory powder opportunities for cold spray applications, as I mentioned with Tythomic. Had been advancing a strategic supplier agreement with a large integrated additive manufacturer. It continued to advance a strategic supplier agreement with a large multinational medical device company. Investment tooling for a semiconductor, a large company in the US. Production contracts for oil and gas, actually companies plural. We're working on upcycling, recycling opportunity that takes titanium coarse powder and the stubs from our bar to upcycle and recycle that. Atomization and testing of development refractory alloy powders as a more cost effective alternative to C103. for applications that aren't so mission critical that they would insist on C-103. And then finally, integration and or co-location of adjacency manufacturing and processing capabilities. This is particularly important to the U.S. Navy. Part of the challenge that we have right now is parts on average are taking about 28 months to manufacture, and yet much of that time has been queued up as these parts travel all over the country for various processing. And so to the extent we could co-locate some of those adjacency processing, it would enable us to shorten the time of production as well as mitigate the risk and improve the resiliency of our production supply chains in the U.S. Jay and I hope that is helpful and would be more than happy to take any questions.

Wonderful. Thank you so much for that, Hank. And if you could please send through your questions using the Q&A function, which can be found at the bottom of your screen, that'd be great. We've had a few come through already. So let me jump into it. This one came through on email, actually, in fact. So One of Amero's competitive advantages has been stated that the company can produce a far greater percentage of the high value aerospace grade powder versus the low value sort of off spec powder than competitors. So from Amero's production results so far, is the company achieving the advertised figures across the range of metals? And did this affect Amero's ability to produce enough finished powder to fill orders this quarter?