Amprius Technologies, Inc.

Good afternoon. Welcome to Imperious Technologies presentation of its third quarter 2022 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, Dr. 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 imperious technology, business, and expected market opportunities and are subject to uncertainty and changes in circumstance, many of which are beyond imperious 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 imperious technologies, business, and expected market opportunities, please refer to its filing with the Securities and Exchange Commission, including the discussion of imperious risk factors in its 8K file on September 16, 2022. I will now turn the call over to CEO, Dr. Kang Sun, for his comments. Sir? Please proceed.

Good afternoon, everyone, and thank you for joining us today for NPS inaugural earnings call. Today is an important milestone for NPS, 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, As I said, we are taking to advance our strategic plan for high volume production of our silicon nanowire anode batteries. For those new to the AMPIS story, I'd like to begin today's call by providing some background on who we are. AMPIS 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 annual structure design and its manufacturing process. In 2016, we built our first kilowatt-hour scale manufacturing line in California. Two years later, Amperes 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 nanowire and battery technology. In September of this year, 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 provided Amperes with access to the capital market in addition to the proceeds raised to today. That accelerated the development 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 nanowire technology become a mainstream technology with applications across all segments of electrical mobility, including the EV industry. Amperes 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 product performance, proven manufacturability, years of product and commercialization experience, and a team of experienced business operators with a solid track record. Today, MPS delivers commercial batteries with the highest known energy density and power density. Our batteries have 450 Wh per kilo specific energy density and 1150 Wh per liter volumetric energy density with up to 10C high power capability. A few weeks ago, we hosted a demonstration of our extremely fast charge capability in which we charged one of our batteries from 0% to 80% in six minutes. In addition, Amperes batteries offer a wide operating temperature range from minus 30 degrees Celsius to 55 degrees Celsius, which is particularly important for the aviation market that we are currently targeting. UMPRIS stands apart, and we currently do not have any competition in the commercial market at this performance level. UMPRIS is currently focusing on addressing the aviation market, which we expect will go to 50 building camp 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 Zephyr HEP programs, AeroVironment, and Teletransfer. 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 anode technology in rigorous area and the military applications. As BAE intends to investigate the business opportunities enabled by the use and the supply of MPS batteries in their electrical aviation product portfolio. In addition to commercial customers, The US government has also consistently shown its support for Amperes and our silicon nanotechnology. In total, we have received four grants from the US Department of Energy. We have also been awarded funding for a second multi-year 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, Amperes has developed the most advanced lithium-ion battery commercially available today. Secure T01 customers in the aviation industry demonstrated the battery manufacturability and built a strong technology roadmap. Today, the company's top priority is to 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 sampling 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 30 years of facility development and management experience to Amperes, and was most recently at the Panasonic Energy of North America, working at the Tesla First Gigafactory. They will lead the development of our high-volume manufacturing facility as we begin to scale our production capacity, focusing on factory planning, facility development, and the regulatory compliance. Last month, Amtris was awarded a $50 million cost of sharing grant as a part of President Biden's bipartisan infrastructure law, which reflects our position as a pioneer in electrical mobility and exhibit the government's confidence in our technology. We believe this will be a catalyst to our production capacity expansion as this funding is focused on growing the domestic manufacturing of next generation lithium-ion batteries. With all this hard work and effort, our silicon nanowire and battery technology is a business point 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 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 Warlick, who will review our financial results for the third quarter. Sandra.

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 third quarter of 2022 with 0.8 million in revenue. Product revenue was 0.5 million, 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 $0.3 million based on the delivery of cells, and reports under contract with the U.S. Army for development of cells with gel electrolytes. For the third quarter of 2022, our GAAP gross profit margin was negative 180%. Variation in gross margin, period over period, is based on the mix of product and services. Moving now to our operating expense management, our GAAP operating expense for the third quarter of 2022 was 2.9 million. Our Q3 gap net loss was $4.2 million, or a loss of $0.06 per share. As of September 30, 2022, there were 54 full-time employees based in our Fremont, California location. Share-based compensation for the third quarter was $0.7 million. Turning to the balance sheet, we exited Q3 2022 with $73.8 million in cash and no debt, a net increase of 68.6 million from Q2 22. The key drivers of our cash activity for the quarter were 2.7 million used in operating activities, 0.5 million 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 71.8 million 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 Cain.

Thanks, Andrew. In September, Amperes entered public market so we could better capitalize on the significant market growth for batteries in the aviation and the EV species. 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, our 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 by the end of 2022. In anticipation of our higher production capacity, we are making significant progress in technology and product development as well as customer acquisitions. We have enhanced our battery specific energy density from 450 Wh per kilo to 500 Wh per kilo. While this optimized design is still in its final development and testing phase in our labs, we are excited to be developing the next generation of superior battery performance for our current and future customers. Furthermore, we are pleased to announce that Our 390-wire-per-kilo polymer electrolyte cell has successfully passed the military performance specification nail penetration test, which was conducted and verified by an 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 a 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 an 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' products approach in commercial launch, and our batteries are validated by more commercial applications. To summarize, MPS continues to execute on its strategic goals plan of commercializing its proprietary silicon nanowire technology and to capitalize on the robust market demand for next-generation batteries. Backed by our innovative products, strong balance sheet and grants, supportive base of customers, and a team of technology innovators and experienced business operators, we believe Amperes is uniquely positioned to advance the future of electrical mobility today. The team at Amperes Appreciate 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?

Thank you. We will now take your questions. Ladies and gentlemen, if you wish to ask a question, please press star 1 on your telephone keypad A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment please while we poll for questions. Our first question comes from the line of Colin Rush from Oppenheimer. Please go ahead.

Thanks so much, guys. Kang, 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?

Yeah, we have this column. We just received this tool from Central Therm. This is a small scale of a large scale manufacturing tube that gave 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 this tube. We already, we have done some tests Central Therm this year. These two not only test the silicon nanowire growth, this enable us to test the entire volume manufacturing protocol.

Fantastic. I'll follow up offline for some more detail. And then, you know, I guess that dovetails into my second question around customer qualification of both the product in the process. So obviously you've been, you know, you're shipping revenue units to a number of companies or a number of customers, you know, but as folks want to scale up with you guys, you know, 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, you know, how prepared are those folks going to be to be taking product and having that product designed into their offerings out into the market.

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 a 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 for the battery made on this new tool, sometimes in the third quarter next year.

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?

So there are many programs out there. We were incredibly pleased And thank you for the Department of Energy grant to receive that $50 million. There's 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.

Okay. Thanks so much, you guys.

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

Hey, 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 central thermal equipment that you've got in now. So just getting to, I think you said, Kang, prototypes sort of Q3 next year. Kind of remind us what you need to get done, you know, once you get the equipment installed.

Yeah. 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, that means the silicon growth and the back-end assembly activities. and they integrated them together, that will require two or three quarters to finish that. Since we have been in manufacturing mode for over four years, this basically is in the creation job instead of innovation. 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, you know, we have nameplate capacity to Megawatt end of the 2023 or Q1 2024.

Got it. That's helpful. And just in terms of the pace of capital expenditures, obviously, you know, you talked about higher CapEx, Sandra, moving forward. You know, 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?

So for the Fremont facility build-out, We think it'll be a couple of million a quarter from 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. keep us on the aggressive timeline to try to have the production line qualified and running within 18 to 24 months.

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

Okay.

Right.

As we've said... Go ahead.

No, go ahead.

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.

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?

Yeah, we are making progress here, Chip. This is a two-year program. We just started in March. So we are making progress here. At our last call, we are going to report to you the progress of the program.

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

Thank you. At this time, this concludes the company's question and answer session. If your question was not taken, you may contact AMP REIS Investor Relations Team at ir.ampreis.com. And now, we'd like to turn call back over to Dr. Sun for his closing remarks.

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 MPS progress on our next earnings call.

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