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spk00: Good morning, everyone. I will be your conference operator today. At this time, I would like to welcome everyone to Advent Technologies' first quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. On the call today, we are joined by Dr. Vasilis Gregorius, Advent's chairman and CEO, and Kevin Brackman, Advent's CFO. Before we begin the prepared remarks, we would like to remind you that Advent issued a press release announcing its first quarter 2022 financial results shortly before market open today. You may access the materials on the investor relations section of the company's website, www.advent.energy. I would also like to remind everyone that during the course of this conference call, Advent's management will discuss forecasts, targets, and other forward-looking statements regarding the company's future, customer orders, and a company's business outlook that are intended to be covered by the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward-looking statements. While these statements represent management's current expectations and projections about future results and performance as of today, Advent's actual results are subject to many risks and uncertainties that could cause actual results to differ materially from those expectations. In addition to any risks highlighted during this call, important factors that may affect Advent's future results are described in its most recent SEC reports filed with the Securities and Exchange Commission, including today's earnings press release. Except as required by applicable law, the company undertakes no obligation to update any of these forward-looking statements for any reason after the date of this call. Lastly, information discussed on this call concerning the company's industry competitive position in the market in which it operates is based on information from independent industry and research organizations. other third-party sources, and management estimates. Management estimates are derived from publicly available information released by independent industry analysis and other third-party resources, as well as data from the company's internal research and are based on assumptions made upon reviewing such data in this experience and in knowledge of such industries and markets, which is believed to be reasonable. These assumptions are subject to uncertainties and risks, which could cause results to differ materially from those expressed in the estimates. Please note this call is being recorded. Kicking off the call will be Dr. Vassilis Gregoriu. Dr. Gregoriu, I'll turn it over to you.
spk02: Thank you, operator. Good morning to everyone listening in, and thank you for joining us on Advent's first quarter 2022 earnings call. I'm joined today by Advent's CFO, Kevin Brackton. On today's call, I will provide comments regarding our first quarter results, followed by an update on the business. I will then hand over to Kevin, who will give a review of our financial performance and outlook in more detail. During my last update on March 28, I concluded by remarking that 2021 was a very significant and progressive year for Aden, and that we had built the foundation for growth. This foundation is already bearing fruit, and is provided to be a catalyst exemplified by the agreements that we had put in place in the first quarter of 2022. As a clean energy technology company, We will continually improve and leverage on our technology and expertise and focus on market needs. We hold around 190 issued, licensed, and pending patents worldwide for our fuel cell technology and have 38 R&D programs allowing Advent to offer a spectrum of products to the energy market from advanced materials to fuel cell. Our global reach includes Boston, Massachusetts as our headquarters. were built in state-of-the-art membrane electro-manufacturing facilities in Charlestown, Mass. In Livermore, California, we designed and manufactured lightweight systems. Denmark and Germany .
spk00: And it appears we've lost Dr. Gargar-Hugh. Mr. Brackman, if you would go ahead, I'll dial back out.
spk03: Sure. Thank you. In Denmark and Germany, it is shared development and assembly responsibilities for ADVENT's 5-kilowatt to 15-kilowatt serine-use systems. In the Philippines, we service the telecom market through sales, service, and site preparation. And in Greece, we have expanded our MEA production and polymer synthesis capacity, including polymer for the next-generation ADVENT MEA. During 2022, we will continue to consolidate our business to make operations more efficient and effective and to concentrate activities on our key markets. Our business focuses on the production of advanced fuel cell materials leading to direct sales and the development of advanced fuel cell systems in collaboration with OEMs, which will enable us to enter into long-term licensing arrangements. The latter is expected to deliver revenue consisting of milestone payments and royalties, which will provide the upside to our business. We continue to have strong cash reserves, totaling $59.3 million in March 31. Overall, our performance this quarter leaves us confident about the long-term growth and earnings potential of the company. I will now give an overview of our key achievements during the quarter. In March, ADVAN announced the availability of its next-generation MEA. These MEAs are already undergoing testing and validation by select strategic partners. The ADVAN MEA technology is ... I'm on the paragraph talking about the next-generation MEA technology.
spk02: Yeah, yeah, I see. Apologies. Somehow, you know, my connection is no good where it was good before. So I'll take over and then we'll go back to you, Kevin. So basically, the milestones already achieved because you were there on the U.S. Department of Energy collaboration. The milestones already achieved include accelerated stress testing that has confirmed the potential for a greater than five times improvement in lifetime versus current high-temperature PMMEA, a strong potential for two to three times the power density versus current high-temperature PMMEA. Alvin is now in various discussions for joint development agreements in the genset, heavy-duty automotive, marine, and aviation markets. ADVEN intends to scale up the production capacity of the ADVEN-MEA in the order of hundreds of kilowatts per month in mid-2023 and megawatts per month in the end of 2023. ADVEN also intends that its own products at Serenity, Honey Badger and M0, as well as third-party products, will be able to use the new ADVEN-MEA in mass production as soon as 2024. Due to the high-temperature operation, adreninase can work within pure hydrogen that can be reformed on board from methanol.
spk00: And again, we've lost Dr. Gregorio's connection. I'll dial back out to him.
spk03: Okay, I'll pick it up. ADVAN's MEAs can work with impure hydrogen that can be reformed onboard from methanol, natural gas, and other renewable fuels. The new ADVAN MEA is expected to redefine the MEA market globally and further validate ADVAN's leading position in the electrochemistry components business. In February, we announced new contracts with manufacturers of clean power generation and energy storage solutions. for the delivery of advanced electrochemistry components. These contracts have a combined value of $2.2 million. ADVENT began delivering electrochemistry components in the fourth quarter of 2021, and deliveries are expected to continue to September 2022. The vast majority of the new business is from customers based in North America. Advanced electrochemistry components business includes electrodes, membranes, and MEAs. These components are critical for fuel cells, electrolyzers, and long-duration energy storage, such as flow batteries. The performance of these components defines the lifetime, efficiency, weight, and ultimately a substantial portion of the cost of the end electrochemistry products. Advent is continuously innovating in the area of electrochemical components. Advent's electrochemistry materials R&D team is primarily based in Boston, Mass., with synthesis and manufacturing capabilities in Europe.
spk02: I'll take over. I apologize again, and this time I don't think we'll drop off because we changed the line completely. So apologies to everybody for this. In January, we announced that we have entered into a distribution and service agreement with Calscan Solutions, a Canadian-based industrial service company focused in the oil field industry. The agreement allows Calscan to market, resell, install, and service the Avon M0, the Serenity fuel cell products, to meet the demand for electric systems in the oil and gas sector. Current regulatory pressure is focused on targets will be aggressively reduce oil and gas industry methane emissions throughout Canada. Other diverse family of products, including the M0 and Serenity fuel cell products, aim to significantly reduce wellhead methane emissions where they replace methane polluting pneumatic injection technology, increase well productivity and safety, and decrease maintenance costs in well sites based in North America. ADVEN's products emit significantly less carbon compared to conventional diesel remote power generation technologies and can be deployed in more extreme environments than solar panels and electric battery systems. The ADVEN M0 products can also integrate with current systems to enhance the reliability and ensure that these systems continue to operate, creating additional value opportunities for customers. The ADVEN M0 products are designed specifically to generate power in remote environments. The overall methane emissions related to wellhead currently approach 40 million tons of carbon dioxide emissions per year, which is equivalent to a carbon footprint of more than 8 million passenger cars. M0 will initially be featured mainly in Canada and the United States, with the aim of providing remote power to up to 185,000 oil and gas wellheads. Also in January, we announced that Arben will be upgrading various sites of Globe Telecom in the Philippines 10 kW SerenEU fuel cell systems, enabling GLOBE to reach its ambitious targets for reducing CO2 emissions. By deploying Arden SerenEU fuel cells, GLOBE aims to reduce carbon emissions across its network, consume cleaner fuel in smaller quantities, achieve lower emissions, and maintain energy-efficient heat removal. Arden SerenEU fuel cells produce fewer emissions than traditional generator sets, and also generate less noise, thereby providing a system with a low footprint to surrounding areas and communities. Depending on the fuel use, the system can be close to CO2 neutral, as well being easier to store and transport. Other surrounding use systems also have higher temperature and environmental conditions tolerance, ensuring uninterrupted backpack power and strong resilience against extreme environments such as typhoons, monsoon rain, and even long dry seasons. By using fuel cells for its green transition, GROP complies not only with regulation and its own ambitions for best environmental practices, but also secures several competitive advantages. GROP's commitment to establishing science-based targets and net zero emissions by 2050 are in line with the Paris Agreement and raised to zero. The Paris Agreement aims to limit global warming to 1.5 degrees Celsius compared to pre-industrial levels. Race to Zero is the UN-backed global campaign rallying non-state stakeholders to take rigorous and immediate action to halve global emissions by 2030 and deliver a healthier, fairer zero-carbon world by 2050. All of GLOBE's initiatives in the green transition reflect its commitment to the UN Sustainable Development Goals and also to decouple economic growth from environmental degradation, increasing resource efficiency, and promoting sustainable lifestyles by changing the way people produce and consume goods and resources. In February, ADVEN announced the signing of an MOU with Electric Seat Facilities, or ESF, a Dutch-based business with over 15 years of experience in electric and hybrid propulsion systems and energy systems. Under the agreement, ESF commits to becoming a future distributor of ADVEN's Serene EU fuel cell products, further strengthening its portfolio of innovative CO2-reducing technologies. ESF offered demonstrations and state-of-the-art components, helping its customers significantly reduce emissions and achieve energy efficiency. This new collaboration will enable Aden to facilitate rye processes and fuel cell configurations for both land-based and marine time applications, with the initial geographic focus being Benelux, Germany, Switzerland, and Austria. Aden's RNEU fuel cells are currently being used for demonstrations within the framework of the green shipping WADEN-C program. This program aims to accelerate innovation in the field of CO2-neutral and fossil-free shipping for the Wadden Sea Fleet, as well as to develop the associated port facilities and infrastructure, and to secure governmental pathways promoting the transition towards innovative CO2-reducing technologies. In March, ADREN announced that it entered into a preliminary strategic agreement with DIDEN, a leading power generation industrial equipment provider in Malaysia. DiDEN has declared its intention to become a distributor of ADDEN's Serenau fuel cell products. This will enhance the promotion of DiDEN's clear power generation sources and actively support the ongoing clean energy transition effort in Malaysia. ADDEN has already shipped units of its Serenau fuel cell products to DiDEN for testing and evaluation. Once these tests are complete, DiDEN and ADDEN will determine the best strategic approach to the introduction of ADDEN's methanol-based fuel cell to the Malaysian market. During the first quarter, we have continued to progress with the White Dragon and Green Hippo projects in southeastern Europe, which are subject to EU approval. While the approval timing is not within our control, we anticipate formal notification from the EU during Q2 or Q2 of this year, with the final ratification by the EU or current shortly thereafter. In parallel, Aden has started to put in place an operational structure that will deliver on these very significant projects, with Aden being ideally poised to commence immediately upon final ratification. We look forward to providing more information around EU approval and the final scope of the projects over the coming months. Aden is well positioned to take advantage of the growing focus on clean energy. We are continuously developing our technologies and consolidating our operations to address new IKEA opportunities. We have a product portfolio that's focused to enable green economy, one that will abate the resilience on fossil fuels, and will disenfranchise the entire supply market, therefore providing energy security to communities and economies. Our deal flow pipeline is getting stronger, and we're looking forward to reporting on future progress. With that, I would like to hand over to our CFO, Kevin Brackman.
spk03: Thank you, Mr. Owing. According to our financials, we delivered revenue of $1.3 million in the first quarter compared to $1.5 million in the prior year quarter. The decline resulted from the timing of revenue recognition under certain of our long-term customer contracts. However, there was a significant increase in income from grants of $0.5 million compared to the prior year quarter. Gross profit decreased $1.4 million year-over-year in the first quarter due to the mix of products and customers included in revenue, a higher fixed cost base resulting from the acquired businesses, and supply chain cost pressure in the first quarter of 2022. R&D expenses were $2.1 million in the first quarter, primarily related to our Cooperative Research and Development Agreement with the Department of Energy as well as the R&D costs at SurEnergy and Fisher EcoSolutions. Administrative and selling expenses were $10.5 million in the first quarter, a year-over-year increase of $2.6 million, primarily due to increased staffing and costs resulting from the acquisitions of SurEnergy and Fisher EcoSolutions and operating as a public company, and from stock-based compensation expenses. Net loss totaled $4.1 million in the quarter, and adjusted net loss was $12.5 million. I should note that our adjusted net loss excludes an $8.4 million gain from the change in the fair value of outstanding warrants. Our net loss per share was $0.08 in the first quarter. Advent remains well capitalized with $59.3 million in cash reserves on the balance sheet at March 31st, which provides us with the flexibility to be agile in executing on our strategic and operational priorities. This is a decrease of $20.5 million from December 31, 2021, driven by the increased level of R&D and administrative and selling expenses, as well as annual insurance renewals and incentive compensation payouts during the quarter. Our existing cash reserves and projected cash flows are anticipated to be sufficient to support our planned operation for the next 12 months. I will now turn to our outlook. Advent developed significantly during 2021, and we entered 2022 with a more advanced product range, a dedicated technical sales team focused on key sectors and geographies, and potentially large infrastructure projects. We therefore have a strong pipeline. As we all know, however, not every opportunity in the pipeline will transpire due to factors that may be beyond Advent's control. Opportunities may not materialize or could be delayed. Advent will use its expertise and resources to bring opportunities to fruition, which will translate into revenue. Due to the long-term contract nature of our business model, the timing of our revenue can also be difficult to predict. Having said that, we anticipate revenue and income from grants for 2022 to be approximately $23 million, which will be heavily weighted towards the second half of the year. This estimate does not include contribution from the White Dragon and Green Hippo projects in southeastern Europe because these projects are still pending EU approval. In closing, we believe that Advent is well-positioned to be the provider of clean energy solutions across a variety of end markets. The company has built a solid foundation for the business and continues to execute on its strategic initiatives. With that, I will hand back to Vasili for closing remarks.
spk02: Thank you, Kevin. Advent has significant opportunities for its technology, advanced materials, and fuel cell system products. During the first quarter of 2022, we've seen a material increase in the number and frequency of inquiries for our technology and products. In addition, the geographical spread and potential scale of these opportunities have also increased. But most importantly, the size and strategic importance of OEMs that they are in discussions with are significant. We see these trends as continuing, others in the clean energy technology company, development technology, and products for key sectors that require clean energy. We look forward to growing the business and to keep you abreast of development. I would like to thank you all for joining us today, and we're now ready to answer questions. Thank you very much.
spk00: Thank you. At this time, we will begin the question and answer session. To ask a question, press star 1 on your telephone keypad. If you would like to be removed from the queue, please press star 1 again. We ask that you please limit yourself to one question and one follow-up to allow everyone a chance to ask a question. We'll pause for just a moment to compile the Q&A roster. And we do have a question from Adam Forsyth with Longsborough Capital.
spk01: Morning, everybody. Just a question on the new electrochemical contract for $2.2 million. Are those from existing customers? Is this follow-on business, or is this with new customers? Thanks.
spk02: Kevin, do you want to take that?
spk03: Yeah, those are with existing customers.
spk01: Okay, so it's follow-on business. Just a quick follow-up. Were those customers the sources of most of the revenue in this quarter, or are you seeing any revenue from any of the new sources, the new CarScan, Global Telecom, ESF, et cetera? And if not, when do you expect to see initial revenue from those sources? Might we see anything in Q2?
spk03: Yeah, I would say I would not say it was the majority that the electrochemistry contracts. I would not say that that was the majority of our revenue in Q1. I would say it was spread across all of our products and businesses. We have experienced delays. in the Philippines with the installation of some of the fuel cell systems there. So we're, as I said in my comments, we're really expecting revenue to ramp up in the second half of the year. Yeah, yeah. Great. Thanks.
spk00: And again, if you would like to ask a question, please press star one. We'll pause just a moment. And at this time, we have no further questions. That does conclude the question and answer session and today's conference call. Thank you for your participation. You may now disconnect.
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