Innventure, Inc.

Thank you for standing by. Welcome to InVenture's third quarter 2024 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Lucas Harper, Chief Investment Officer. Please go ahead.

Good morning, and thank you all for joining us for InVenture's third quarter 2024 earnings call, our first as a public company. My name is Lucas Harper, InVenture's Chief Investment Officer. And joining me on the call today are Bill Haskell, our Chief Executive Officer, and Dave Yablonowski, our Chief Financial Officer. Earlier this morning, we issued a press release announcing our financial results, which is available on our investor relations website along with a supplemental slide presentation. A reminder that certain statements made today may be forward-looking statements. These statements are made based upon management's current expectations and beliefs concerning future events impacting the company and therefore involve a number of uncertainties and risks, including but not limited to those described in our earnings release, Form 10-Q for the period ended September 30, 2024, and other filings with the SEC. Therefore, the actual results of operations or financial condition of the company could differ materially from those expressed or implied in our forward-looking statements. And now, I'd like to hand the call over to Bill.

Thanks, Lucas, and thanks to everyone listening today. I'm Bill Haskell, CEO of InVenture, and we're excited to speak to you on our first earnings call as a public company. InVenture began trading on the NASDAQ in early October after closing our business combination with LearnCW, and I'd like to thank the entire InVenture team and our partners for their tireless work over the last year to get us to this point. We are incredibly proud of what we've accomplished to date and are very excited about the future. Today, I'd like to start with an introduction to InVenture, tell you about who we are and why we built our model the way we have, and then provide an update on our family of businesses before passing it to Dave to cover our financials. So let's start with what InVenture is all about and how we plan to create value for our shareholders. Our core strategy is to enable multinational corporations, or MNCs, to commercialize their proprietary technologies for their own strategic advantage. For perspective, the top 100 global MNCs spend over $720 billion a year on R&D but only a single digit percentage of that spend results in commercial products. The reason for such a stark statistic is that most large companies are not in the business of creating new companies. Instead, they're focused on the mission of growing and supporting their core business. That is where InVenture comes in. We, as engineers, scientists, and entrepreneurs, founded InVenture to help commercialize breakthrough technologies whose ultimate potential often goes unrealized. We provide value to the multinational by acquiring or licensing their technology and developing a product or solution that is designed to benefit their core business and economics. We'll speak to the specific companies we've created around these technologies in a minute, but the most important takeaway is that InVenture represents a unique way for our shareholders to indirectly invest in our operating companies and capture value as we scale them. We seek early stage economics, much like startups, but seek late stage risk. As a public company, not only do we have an enhanced ability to pursue these opportunities, but we believe our company represents a unique and liquid investment option as compared to other common stock or vehicles like venture capital or private equity. So let's discuss what we've accomplished so far. To date, we've started three companies, PureCycle in 2015, Aeroflex in 2018, and Excelsius in 2022. I'll touch on each briefly, but I'd encourage everyone to review our Analyst Day presentation from earlier this year for a deeper dive into the origin story for each. You'll also be able to hear directly from Aeroflex CEO Andy Meyer and Excelsia CEO Josh Kleiman. Let's start with PureCycle, which has commercialized a technology licensed from Procter & Gamble that converts used polypropylene into recycled resin, which is the equivalent of virgin resin used to make new plastic products. This technology provides strategic value to P&G, meeting a sustainability need, as well as providing economic value. While we took the company public in 2021 and did not have an economic interest today, it was the first proof point validating our mission to build companies that represent billion-dollar-plus enterprise value opportunities. Our second company, Aeroflex, was also founded based on a technology source from Procter & Gamble. The company was started around a novel liquid packaging solution that functions like a rigid bottle made possible with an inflatable airframe. The technology leverages the best attributes of both rigid and flexible packaging to deliver a product with significant economic and sustainability benefits. The Aeroplex pack requires up to 70% less virgin plastic than standard liquid packaging and weighs significantly less, which greatly reduces shipping costs. Lastly, it is curbside recyclable, where all plastic bottles are accepted, which satisfies sustainability requirements for a broad number of products and end markets. Our third company is Excelsius, based in Austin, Texas, which was originally founded on a thermal management technology we acquired from Nokia Bell Labs. Excelsius's technology, known as direct-to-chip two-phase liquid cooling, can essentially replace air conditioning as the primary cooling method for the newest generation of servers created to support the generative AI industry. These latest high-performance chipsets produced by NVIDIA, AMD, and others can no longer be cooled efficiently using traditional air conditioning. Excelsior's technology represents a stair-step improvement in data center cooling efficiency and can reduce average energy consumption at data centers by approximately 40%. Even prior to the generative AI boom occurring in the marketplace today, the industry has long grappled with what we call the thermal wall. which is effectively the physical limit for data center server cooling capacity imposed by these very hot processors. We see a tremendous growth opportunity for Excelsius, which went from a standing start in June of 2022 to producing commercial systems that are being delivered to the market today. We're very excited and proud of what we've done at Excelsius, which is also the first company developed under what we call the conglomerate model. That means we own a majority of it today, and we intend to own a majority for the long term. We believe that maintaining majority ownership in the companies we create in the future will maximize long-term value for our shareholders. Dave will speak to this more in his remarks, but the ultimate goal is to consolidate financials and access the underlying cash flows from our businesses to fund not only InVenture, but future NUCOs as we go forward, which we believe will compound shareholder value. Now let's discuss how our closed-loop model has helped position InVenture for success. We have purposely designed InVenture's business model to mitigate five key risk factors historically inherent in high-growth venture creation. Market, technology, adoption, funding, and operational execution. Our closed-loop model is designed to help mitigate these risk factors and act as a value creation flywheel to found and grow disruptive companies. We call this the science of company building. Our partnerships with multinational corporations are key to mitigating the first three risks, market, technology, and adoption. Let's start with market risk. MNCs, by their scale and nature, constantly listen to the needs of the market and have a wealth of data that provides visibility into end market demand that a typical startup would likely not be able to access. The MNC uses this knowledge to identify significant unmet market needs, which as a valued collaboration partner, InVenture is typically granted unique access to. The second key risk factor is technology. Unlike traditional startups that start from scratch, many of the technologies we evaluate are many years and tens of millions of dollars into development. We look to acquire technologies that have been proven to work which helps mitigate the risks attributable to commercializing disruptive technologies. Further, InVenture should not have to assume the majority of the initial financial risk related to the invention of new technologies. Third, our MNC partners often help catalyze broader adoption of the end product by becoming an early customer or assisting with offtake. They have considerable brand recognition and scale, which drives immediate consumer awareness. InVenture also benefits from their significant sales and marketing channels, which is substantial as compared to a typical startup. Next, let me address funding as a differentiation point. As I mentioned, Our plan is to fund InVenture NUCOs from inception through to commercialization off our own balance sheet, which helps us maintain majority ownership along the way. This is important to our end shareholders in two important ways. First is that InVenture can maintain operating control of our NUCOs, which is critical for early stage company success. The second is for the economic value opportunity. We seek to capture the outsized value for our shareholders that can come with founding a successful company. Lastly, there's operational execution risk mitigation. Our team is comprised of professionals with a deep pool of talent and experience in taking companies from inception to commercial scale. Rather than backing first-time entrepreneurs, we rely on our executives that have founded and successfully commercialized several companies during their careers. This level of expertise, paired with the vast marketing resources and market data of our MNC partnerships, is key to InVenture's past success positions as well for future growth. Overall, we believe this model is highly differentiated in the marketplace and one of the key tenants that we expect will deliver value for our shareholders. Now let's touch on how we've designed our model to synthesize the vast amounts of data available to us and determine which opportunities fall into our strike zone. As I noted earlier, risk mitigation is woven into our DNA. We only pursue opportunities that we believe have billion-dollar enterprise value potentials. We are looking for a compelling unmet customer need that is backed by a proven industrial technology. We believe the technology solutions we pursue have significant and quantifiable value generation opportunities and are backed by established market data from our MSC partners. The years of R&D resources and millions of dollars of capital invested into these technologies helps to significantly mitigate risk before we even begin our evaluation. Most importantly, there needs to be a clear path to material profitability. I'll say it again. We're aiming to bring billion-dollar-plus enterprise value opportunities to the market, and the opportunities we analyze must meet that criteria, in our opinion, before we deploy capital towards company formation. This steadfast discipline has been the key to our success and will remain in place moving forward. With that background on New Venture, let me now provide updates on our individual businesses for Q3, starting with Excelsius. As a reminder, Excelsius is the first in-venture company operated under the conglomerate model, where we own a majority of the business, approximately 55% as of today. This ownership stake takes into account the Series A funding that Excelsius announced yesterday. As I mentioned, we see a huge growth opportunity in the liquid cooling space, and that vision is being validated by the market. We are happy to announce that Excelsius started delivering systems to customers in Q3 of this year. I'd remind everyone that we started Excelsius in 2022. To be generating revenue in under 30 months since founding is something we are incredibly proud of, and it is a testament to InVenture's closed loop model. What's even more exciting than the rapid commercialization of the company is the pipeline of opportunities we have ahead of us. While it is still too early to get into specifics, Excelsius is in discussions with many of the top players within the data center ecosystem. The company's booth at industry events such as OCP Global Summit, Digital Infrastructure Network in London, and the upcoming data center world in Atlanta has been a popular destination, which furthers our conviction that the technology is truly disruptive and presents a compelling growth opportunity. Josh and his entire team are doing highly impressive things at Excelsius, and we look forward to updating the market on their progress in the future. Now shifting to Aeroflex. In venture owns approximately 31% of the company today, and it is carried on our balance sheet as an equity method company. While we don't plan to disclose the same level of financial details as we plan to do for the businesses we consolidate, the Aeroflux business is a story we love telling. The product is designed to meet a significant market need, and the commercialization of the technology is another great example of InVenture's closed-loop approach with MNCs. The company's manufacturing operations are fully developed, with the capacity to manufacture tens of millions of packages on an annual basis. We are proud to announce that Aeroflex is currently delivering product and building a pipeline of demand. We expect to see Aeroflex products available in the marketplace in 2025. We are proud of this milestone achievement, but I'd like to put Aeroflex's growth potential into perspective. For illustrative purposes, a single household brand from a company such as P&G might sell well over 500 million units a year globally, which is more than 10 times the volume we believe is required to make Aeroflex profitable. Needless to say, there is a vast addressable market opportunity for the company, and we are only in the very early stages of capturing that opportunity. 2024 has also been a pivotal year for Aeroflex's global growth plans. First, in February, the company announced a partnership with Dynapak Asia, and in June announced a partnership with Chemipak to deliver its liquid packaging solution to the European market. Finally, as announced yesterday, Aeroflex received the highest standard and rating under the Brand Reputation through Compliance Global Standard, or BRCGS, and is certified as AA grade. This represents the fourth consecutive year the Westchester manufacturing site has achieved the highest rating, which is an important credential MNCs look for in our packaging supplier. Great progress is being made at Aeroflex, and we expect many exciting things in the future. Congratulations to Andy Meyer and his team on the success and execution to date. Now let's shift to one of the most exciting differentiators of our business model, our robust pipeline of multinational corporation relationships and how those relationships could translate into opportunities. Today, we have two ongoing MNC partners, Procter & Gamble and Nokia. Beyond that, there are seven MNCs that have shown us at least one opportunity over the last 12 months. This network includes widely recognizable corporations across large industries, such as energy, industrials, telecom, and aerospace and defense. While expanding this network continues to be one of our top priorities, the beauty of our model is that we don't need dozens of active partners to be successful. We only need a handful of high quality, high conviction partners that believe in the InVenture model and understand the strategic value InVenture can deliver for their organizations. These MNC relationships translate into a highly active flow of technology opportunities delivered to the top of our evaluation funnel. Each opportunity then moves through our down select analysis, a rigorous discipline employed to identify what we believe are the best technologies that overlap with the largest and most achievable value opportunities. It is important to remember that we don't focus on the exact number of technologies spread across the different phases of down select at any given time, which can vary significantly from quarter to quarter. The most important factor for us is the quality of the opportunities, which has continued to increase as our MNC partnerships evolve. As we discussed in depth at our analyst day, the overwhelming majority of the opportunities that come into the funnel do not meet the stringent criteria we've established to initiate new company formation. InVenture maintains a strict discipline to abandon opportunities even at the 11th hour if they don't meet our standards, which positions us to succeed. Best of all, even opportunities that reach the final stage but ultimately fail down select do not tie up capital or drive significant expense. On the other hand, the rare gems that do meet our standards become NUCOs that we believe have proven technology and a billion-dollar-plus enterprise value potential. It's the model we've spent our careers optimizing, and we cannot be more excited as we aim to create value for new and future shareholders. With that, I'd like to turn the call over to our Chief Financial Officer, Dave Yablonowski, to review our financials. Dave?