Amprius Technologies, Inc.

Q1 2023 Earnings Conference Call


spk05: Good afternoon. Welcome to Ambrius Technologies' first quarter 2023 earnings conference call. Joining us for today's presentation are the company's CEO, Dr. Kang Sun, and CFO, Sandra Wallach. At this time, all participants are in listen-only mode. Following management's remarks, we will open the call for questions. Please note that this presentation contains forward-looking statements, including but not limited to statements regarding future product commercialization, new customer adoption, and timing and ability of Amprius to build its large-scale manufacturing facility, expand its manufacturing capacity, scale its business, and achieve a sustainable cost structure. These statements involve known and unknown risks, uncertainties, and other important factors that may cause Amprius' results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied in such forward-looking statements. For a more complete discussion of these risks and uncertainties, please refer to Amprius' filings with the Securities and Exchange Commission, including but not limited to the discussion of Amprius' risk factors in its annual report on Form 10-K, filed on March 30, 2023. Finally, I would like to remind everyone that this conference call is being webcast and a recording will be made available for replay on the company's investor relations website at In addition to the webcast, the company has posted a shareholder letter that accompanies these results, which can also be found on the Investor Relations website. I'll now turn the call over to Amperius Technologies CEO, Dr. Kang Sun, for his comments. Sir, please proceed.
spk04: Welcome, everyone, and thank you for joining us this afternoon. After a report on our progress and accomplishments at Amperius in the first quarter, Our CFO, Sandra Wallach, will discuss our financial results for the period. After that, I will share some closing remarks before opening the call for questions. As some of you may know, Amperes is an ultra-high energy density lithium-ion battery developer and manufacturer. Our high-performance batteries are based on Amperes' proprietary high-capacity silicon anode technologies. Today, Ampes delivers commercial batteries with 450 Wh per kilo specific energy density and the 1150 Wh per liter volumetric energy density. Our batteries also have up to 10 C power capability and enable the extreme fast charging rates of zero to 80% state of charge in approximately six minutes. Some trace batteries are built for the task of operating environments with the durability to pass the United States military benchmark and new penetration test, as well as the versatility to operate in an extremely wide temperature range of minus 30 degrees Celsius to up to 55 Celsius. It's our belief that there is no one else in the commercial market that can perform at these levels. Amperes has over 80 patents and extensive know-hows in silicon anode and silicon anode manufacturing technologies. Amperes has been in commercial battery production since 2018. So the company has many years of manufacturing experience of high energy density, high power density lithium-ion batteries. Our near-term goal is to scale our manufacturing with a long-term goal of becoming a mainstream battery solution with applications across all segments of electrical mobility, including aviation and the EV industries. Building our momentum from last year, we believe that We have hit the ground running so far in 2023. With new technology breakthroughs, continued commercial successes, and additional developments for our production capacity expansion, our first quarter achievements were important steps toward accomplishing our goal for 2023. I would now like to highlight a few events. In March, we announced the Ampere's new battery platform, which is independently verified for 500 Wh per kilo specific energy density and 1350 Wh per liter volumetric energy density. Our 500 Wh per kilo battery platform was purpose-designed to serve the needs of certain strategical customer projects, such as Ato or HABS, the Airbus subsidiary developing high-attitude solar satellite, or HABS. We expect to be able to ship prototypes to these selected customers before end of 2023. The country's 500 W per kilo and 1350 W per liter battery platform not only enhances our customer applications, it also demonstrates the robust product roadmap for MPS silicon annual technologies. The company will continue to move along that roadmap to deliver the most advanced ECML batteries available on the market. This achievement follows our most recent announcement in December of 2022 that an independent third party had verified our passing of the military performance spec and nail penetration test with unprecedented 390-hour Paceto cell. MPS innovative polymer electrolyte prevents the penetrating nail from creating a new resistance short circuit as indicated by the minimal increase in cell temperature after penetration, and only small increase in cell voltage. After nail penetration, the cells still functioning and providing power, a critical capability for variable batteries used by soldiers. Also, we announced earlier this month, and after a rigorous selection process, Amperes high energy density batteries were selected by the University of Michigan's solar car team for their upcoming 3,000 kilometer race at the World Solar Challenge in Australia. The batteries for the race must provide exceptional performance in tough conditions. Our leading performance characteristics are undeniable and should provide the team with an edge for the event. We look forward to working with their team in the coming months. Moving to our business development efforts, we continue to see significant demand for our products in the first quarter, especially in the aviation and EV toll markets. As cruising distance and weight are critical property for aviation, our high energy density lightweight batteries provide ideal solutions. allowing us to develop a deep inroads in the industry. This quarter was highlighted as successes both across our existing customer as well as through new customer opportunities. We shipped to 19 customers in the first quarter, including several new accounts. Among serious ongoing new business development opportunities, we kick off a new technical engagement this quarter with the leading aerospace OEM, codifying next steps towards testing and evaluation of Ampere's batteries. Also, within our existing clients, we expand our relationship with the air environment to be the supplier of key power elements in air environment switchblade 300 block 20 missile. We expect to continue our regularly scheduled commercial shipments to air environment as well as to Teladoc floor to repeat the customers and the strong partners for entries. In addition, we have received a significant interest from other existing battery pack manufacturing partners for sizable expanded contracts to serve the larger aviation segment, including in hundreds of megawatts through 2025 and beyond. Our pipeline of interest partners continues to grow, and we believe that our efforts to build out our manufacturing capacity will lead to additional new and extended orders in the coming quarters. As we think about our goal for the next several years, our primary focus remains on expanding capacity to meet the demand and ultimately achieve a sustainable cost of structure at scale. After a transformation of 2022, With several strategic moves, including two cost-sharing grants that we were selected to receive from the United States Department of Energy, we continued to make important strides toward our goals in our first quarter. First, we recently expanded our facility at MPS Lab in Fremont, California. to accommodate our first large-scale annual production machine from Central Third. We now process the second half of our existing facility, which we expect allows us to both perfect our high-volume manufacturing processes and increase our capacity for silicon annual battery production to approximately two megawatt-hours. or 10 times our current production capacity exiting 2023. We look forward to better serving strategical aviation customers needs and supporting prototyping and the qualification projects with a new customer who are currently in our backlog. We also announced in March that We had to select a site in Brighton, Colorado as the location for our approximately 775,000 square foot large scale production facility. The first mass production site for next generation battery technology in the United States. The selection of the Colorado for our gigawatt scale factory marks the important milestone for Amperes. Initial phase of our build-out will provide a potential of up to five gigawatt for expansion capability for up to total potential manufacturing capacity of 10 gigawatt. As a reminder, this MPUS-FAB facility is already equipped with electrical power and the existing structural layout needed for gigawatt-scale lithium-ion battery factories. which will reduce build-out costs and time to the market with the goal of being operational in 2025. Also, Brighton is closer to some of our material distributors in the Northwest United States, which we expect will lower operational costs over the long time. Lastly, as part of our 18 to 24 months plan to scale, we signed our lease for Amperes Lab in April. We are aiming to begin retrofitting the facility towards the end of the summer. Overall, this new facility will transform our long-term production capabilities. In the near term, we will continue to develop and ship cutting-edge products from Amperes Lab in FEMA. while we refine our manufacturing processes to further de-risk the handle of our mass production to MPS Fab in Brighton, Colorado in the coming years. I have one final update before I turn the call over to Sandra. Enabling our entire operation here at MPS is our exceptional team. and ongoing support from our board of directors. We recently announced that we have expanded our board and appoint Kathleen Bayless as an independent director and our auditing committee chair. With her extensive management and board experience, we look forward to her unique perspectives on our board moving forward. We are excited to have her on our team as we work to execute our growth strategy. With the overview complete, I will now turn the call over to our CFO, Sandra Wallach, to review our financial results for the quarter. Sandra.
spk02: Thank you, Kang. I would now like to spend a few minutes covering some key updates. As a reminder, our detailed financials can be found in our shareholder letter. We closed out the first quarter with $0.7 million in revenue compared to $2.1 million in Q1 2022. This decrease was partially due to a decrease of $1.5 million in development services revenue and a decrease of $0.1 million for the quarter year-over-year in product revenue, both partially offset by an increase of $0.2 million in government grant revenue. Of note, due to the timing of customer shipments, we ended the quarter with both $0.5 million more in product inventory than in the same quarter last year and $2.5 million in increased deferred revenue pending final delivery of performance obligations later this year. As we've noted in previous quarters, our product revenue is driven by customer purchase orders, arriving at uneven times throughout the year, and development services revenue is intermittent based on revenue recognition timing. However, as Kang mentioned earlier, we shipped to nearly 20 customers this quarter, including four new customers, and we believe that our business development efforts continue to gain traction. Once our capacity expands and more customers transition to commercial orders, we expect to see a more even ramp of product revenue. Our GAAP gross margin was negative 504% in the first quarter, primarily due to non-recurring startup charges for our large-scale manufacturing facility. These charges included both a $1.4 million broker charge for our economic incentives negotiation and $0.3 million of pre-construction design firm startup cost. As the build-out continues, we expect that more one-time charges are likely to arise. Still, we forecast that our GAAP gross margin will begin to normalize as we reach our capacity expansion goals in the coming years. Moving now to our operating expense management, our GAAP operating expenses for the first quarter increased to $6.3 million, largely due to increased public company cost and additional investment in R&D staffing. Our GAAP net loss for the first quarter was $9.1 million, or a net loss of 11 cents per share. Our shares outstanding at March 31st, 2023 were 85 million. As of March 31st, 2023, there were 65 full-time employees, primarily based in our Fremont, California location, and our share-based compensation was 0.7 million for the first quarter. Now turning to the balance sheet, we exited the first quarter with 64.2 million in cash and no debt. The key drivers of our cash activity for the quarter were 6.5 million used in operating activities. As we previously discussed, our run rate for cash used in operating activities is projected to be around 2 million per month in addition to 2022 audit costs and transaction related expenses. Other drivers include 1.1 million of investment into the expansion of our AMPRIUS lab facility in Fremont, and $2.1 million in financing cash inflow related to usage of our committed equity facility. These activities resulted in the total net use of cash of $5.5 million for the quarter. Considering our business achievements and ongoing projects, we believe we have been efficiently using capital to drive AMPRIUS forward. Moving to our outlook, we still expect to be limited by manufacturing capacity until we exit 2023 when our new two megawatt capacity is projected to come online. Regarding revenue, we have several ongoing development services programs with performance obligations that we expect to complete within 2023, which means that we should see increased revenue recognition weighted more heavily towards the latter part of the year. We anticipate that our G&A costs will continue at the higher rate we experienced exiting 2022 when accounting for additional public company expenses. Also, we plan to continue to be lean on other operating expenses as we strategically add critical mass to our Amprius Lab and Amprius Fab operating units and allocate the majority of our capital to scaling up our manufacturing. To this end, we expect higher capital expenditures going forward as we continue to fully build out the 2-megawatt capacity at Amprius Lab and design and construct our gigawatt-hour-scale Amprius FAB facility. Our spending pattern is dependent on several factors outside of our control, including the timing of rezoning approval for the Colorado site, so we expect to provide more specific projections as we have additional information to share. As we work to fund capital requirements for our scale up in excess of our previously noted cost sharing grants from the U.S. Department of Energy, we expect that we will continue to have strong support from the U.S. Inflation Reduction Act as we access production tax credits at the anode and cell level. In addition, we have received over $10 million in state and local incentive packages related to our gigawatt scale facility. which is the result of significant partnerships built in Colorado through our selection process. We believe that these tailwinds will further enhance our economics as we accelerate our scale to meet our massive market. Overall, with the strength of the balance sheet and multiple vehicles to generate additional funding through both equity, such as warrants and our committed equity facility, and non-dilutive sources such as grants, loans, and incentives, We believe we will have enough cash to execute on our strategic plan. One last item. Based on the recommendation of a special independent board committee, we entered into a merger agreement with Amprius, Inc., our 77% stockholder. Under the merger agreement, among other things, the shares of common stock currently owned by Amprius, Inc. will be canceled and we will issue to the stockholders of Amprius, Inc., New shares of our common stock based on the negotiated and discounted exchange ratio. And we will assume all options and warrants outstanding at Amprius Inc. The newly issued shares will be subject to the same lockup that applies to Amprius Inc.' 's current shares. The merger is conditioned on, among other things, the approval of a majority of the stockholders of Amprius Technologies that are not affiliated with either Amprius Inc., or held by any of our directors or officers. We expect the special meeting to approve the merger will occur in the third quarter of this year. For more information, please reference the form 8K we filed earlier today. With that, I will conclude the financial discussion and pass the call back to Kenny.
spk04: Thanks Sandra. I would like to emphasize a few points before closing. First, we are delivering next-generation, commercially available lithium-ion batteries today. Our market-leading technology and the position in the aviation space are reflective of our unmatched performance in real-world applications and our batteries' ability to solve real-world problems. As shown By our recent increase in battery-specific energy density from 450 to 500 miles per kilo, we will continue to enhance our product performance and set new industry standards. Second, we have been shipping commercial products since 2018, so our focus today is not on commercializing. Instead, we are building out the scale to serve significant demand in the U.S. and to support U.S.-based supply chain resilience. Exiting 2023, we will further pull out our large-scale manufacturing process and parameters with our two-megawatt production line at the MPS Lab in Fremont. We are also moving swiftly to prepare the build out of Ampere's set, our gigawatt scale facility in Brighton, Colorado for the first 500 megawatt demonstration program with the United States Department of Energy. In the meantime, we are using our limited capacity to provide the necessary samples to potential customers. moving through the technical to commercial validation process. Third, we are looking forward to several exciting milestones over the rest of the 2023. In the second half of the year, we expect to finalizing the optimal deposition process for our mass production tube developed for silicon nanowire. Begin construction deliver prototypes of our 500-watt-per-kilo battery to select customers, and operationalize our two-megawatt production line at Amperes Lab by end of the year. As we look to the rest of the year, our strategy and focus at Amperes remains unchanged. We have a tremendous opportunity ahead. We support our portfolio that positioned us to both growth in the aviation market and extended to other industries, picking batteries with a stronger performance and a faster charging time. We are continuing to build our early lead with technological advancement and the strategic partnerships. Through the private and the public sector, we now have the capital and are building the capacity to become the leading commercial provider in the sustainable mobility sector. Finally, we believe we have the right team in place to execute our mission and deliver what we have planned and promised over the last decade. Thank you for your continued support of MPS technology. With that, I will turn it back to the officer for the Q&A.
spk00: Thank you. The floor is now open for questions. If you do have a question, please press star 1. If your question has been answered, you can remove yourself from the queue by pressing 1. The company requests that each participant limit their comments to one question and one follow-up. Please hold while we poll for questions. And our first question comes from Colin Rush from Oppenheimer. Go ahead, Colin.
spk06: Thanks so much, you guys, for the update. And I'll start, Sandra, just with this merger agreement. I just want to make sure that there's no fundamental change in the capital structure of the organization. You're just going to be able to distribute the shares to the individual holders of the whole you know, those folks will have, they'll be subject to the same lockup as the Holco was previously. Is that the correct way to understand this merger?
spk02: Yes, it is.
spk06: Okay, perfect. And then, Kang, in looking at the Colorado facility, can you talk a little bit about how far along you are in terms of the, you know, the design and the engineering process and how much flexibility there you have with that still as you work through the two megawatt scale up in Fremont?
spk04: Okay, Connie. For the Colorado facility at this moment, we are at the final stage of selection of our production lines to design our production line specifications. We have almost all the equipment lined up, I mean the supplier lined up, In June, we probably have the pricing negotiation. We already finished the technical specifications. This is very, very fast for us because our team has a lot of experience in dealing with equipment suppliers and lithium-ion manufacturing processes. We're still working on a few regulatory issues. We hope we can start the construction, break the ground. We don't need to break the ground. We just need to retrofit the facility sometimes in early fall.
spk06: Perfect. And then in Fremont, can you talk about any sort of surprises, either positive or negative, that you're seeing with the tool as you get it installed and start working through some of the testing processes?
spk04: Yeah, Fremont, we do a very rigorous testing in Fremont, also in Germany. So far, we are moving forward according to our own schedule. So I think the next month, June, is an important month for us. This is the time we will complete the most critical part of the evaluation of this process. Other than that, those should be relatively smooth.
spk06: Excellent. Thanks so much, guys.
spk00: Our next question comes from Chris Souther from B. Riley. Go ahead, Chris.
spk03: Hey, guys. On the CapEx plan, I didn't see any incremental details on the anticipated amount and timing for the five gigawatt hour Colorado expansion. It sounds like any material changes would become clear after June, but just wanted to get a sense of how the size and cadence are shaping out, you know, as far as the CapEx plans.
spk02: Yeah, so once we have more detail and certainty about the timing for the first 500 megawatts, which is the DOE demonstration project, then we will be putting together the CapEx plan to get us through the 5 gigawatts. But the estimates that we've shared prior remain unchanged.
spk03: Got it. Okay. That makes sense. And then in the shareholder letter, you called out that several of the customers have the potential for hundreds of megawatts through 2025 and beyond. Could you give us a sense of the size and scope of the 20-ish customers today? I assume you'd count several customers among that size, you know, ones that you've named like Teledyne Flare, Airbus, Airbus, air environments, you know, but I'm just kind of curious, of the 20, how many do you think are in that, you know, kind of size range, you know, if you had the capacity today?
spk04: We talk about the hundreds of megawatts, inquiries and discussions with our customers. Those would be the off-takers for Colorado Manufacturing. Among those customers, when we say 20 customers, those customers are included. In those 20 customers, we probably will finalize those deals sometimes in later part of July. When we build the Colorado facility, it's very important we have customers to take orders from that facility. The company is working very diligently to build a strong pipeline for our large-scale manufacturing facility.
spk03: So that's a process that probably starts in July, or you think, you know, in July, August, we'll have kind of details around, you know, I guess kind of the, you know, planned dedicated capacity by customers would be, you know, something you guys think you'd have?
spk04: In July, we probably – when we are working very – First, building this manufacturing facility here. The manufacturing facility in 2025, this is a 500 megawatt manufacturing facility. We like to have it in operation in 2025. So 2025, at least, this factory can produce a portion of the 500 megawatt. megawatt, because there is a setup, there is a customer evaluation, factory inspection, all those kind of activities. To make sure we have sufficient, we have full capacity, once we start our operation, okay, we need to run the full capacity, we need to have very strong pipeline. So pipeline needed to be hundreds megawatt hours. So the deals we are In discussion, I expect to conclude in the later part of July. So that will give us the customer base for our large-scale manufacturing facility in Colorado.
spk02: Chris, I think to further answer, many of the customers that we're serving today, not just these two-pack manufacturers, who serve more diversified aviation sector. Many of our nameplate customers, our hallmark customers, have significant demand that we can't support. So that is also part of how we're building the pipeline for 2025.
spk03: Yeah, that's really helpful on the visibility. Thanks, guys.
spk00: Thank you. And our next question comes from Chip Moore from EF Hutton. Go ahead, Chip.
spk01: Good evening. Thanks for taking the question, and congrats on all the progress year to date. I guess I wanted to follow up on the commercial pipeline, right? Great to see that growing. Curious, maybe if you can talk a bit how you're balancing, you know, new customers versus existing. Good to see, you know, new logos coming in. And then maybe talk a bit about the the qualification process, you know, what that takes, how long that takes and really how you balance that, uh, to your point of, of getting that demand in place.
spk04: Yeah, we have, uh, we have existing customers. They expanded their, um, purchase, uh, from, from MPS. That's part of the business. Uh, so far, the, uh, most of those capacities, we are, um, planning for large-scale manufacturing in Colorado are existing customers. We're also working with new customers, exploring new applications. So the qualification process depends on who will be the customer. We have the customer that qualification time is relatively short, short in half a year or so. And of course, if this is a new project for the customer, there are two types of customers. One customer uses our battery to replace their existing applications. They already have their own devices, their own application already identified. Those customers' qualification time will be short. They just test our battery, then put it in their device, then they can use it. There are another type of customer. We have to work with them on their new project For example, they design new flying devices that require our battery support. Those kind of projects usually take a little bit longer time. For battery qualification for our current customer applications, normally takes about six months to two years, depends on how how sophisticated the application will be. Now, most of the time, the delay not come from ampersand. Most of the time, the delay because the customer, their own project have been delayed.
spk01: Now, that's very helpful, Kang. And if I could ask one more, you know, with regards to Colorado and ramp up there, you know, you talked about sort of de-risking production with what you've learned. Maybe expand on that process. It sounds like you've already tested the central thermal equipment overseas. Is that something you can incorporate? And just how do you go about incorporating some of those learnings? Thanks.
spk04: That's two megawatt. That's why this is two megawatt. Actually, this is what we call two megawatt because the machine actually designed more than two megawatt. We just assume we can't deliver two megawatt capacity end of the year. So this is a very, very important exercise at Ampere. If this machine can meet our specification, scale-up will not be the issue. So far, we tested in Germany and in Fremont, gave us very encouraging results. This is a much higher throughput and a much robust process than what is the process we have today. If these two megawatts work, serve two purposes. One is the validation. This is probably the most important thing to us. The second part is give us 10 times more capacity to serve our customers.
spk01: Great. I appreciate it. Thanks very much.
spk00: At this time, this concludes our question and answer session. If your question was not taken, you may contact the Amprius Investor Relations team at I would now like to turn the call back over to Dr. Sun for his closing remarks.
spk04: Thanks again, everyone, for joining us today. I would also like to thank our employees, partners, and the shareholders for their continued support. As a reminder, You may learn more about our company from the additional updates and learn about upcoming events and presentations from the investor relations section of our website. We look forward to updating you on Amprius' progress on our next call. Thanks.
spk00: Thank you for joining us today for Amprius Technology first quarter 2023 earnings conference call. You may now disconnect your lines and have a wonderful day.

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