Amprius Technologies, Inc.

Good afternoon and welcome to Amperius Technology's second quarter 2023 earnings conference call. Joining us for today's presentation are the company's CEO, Dr. Kang Sun, and CFO, Sandra Wallace. 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 Amperius 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 Amperius' 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 Amperius' filings, with the Securities and Exchange Commission. 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 ir.ampreus.com. In addition to the webcast, the company has posted the shareholder letter that accompanies these results, which can also be found on the investor relations website. I will now turn the call over to Ampreus Technologies CEO, Dr. Kang Sun for his comments. Sir, please proceed.

Welcome everyone. And thank you for joining us this afternoon. On today's call, I will report on our process and accomplishments at MPS in the second quarter. And 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. Our second quarter demonstrated our business momentum and growth potential. Amperes introduced new products and technologies brought in more customers and delivered increased revenue. Our battery performance continues to command a firm leading position in the industry. Highlight the Amperes ability to provide 450 Wh per kilo specific energy density and 1150 Wh per liter volumetric energy density up to 10 C power capability. The extreme fat charge rate of 0% to 80% stay of the charge in approximately six minutes. The wider operating temperature range of minus 30 degrees Celsius up to 55 degrees Celsius. And the safety design feature that enable us to pass the United States military's benchmark and nail penetration test. EMPIS has over 80 patents and extensive know-how in silicon anode and silicon anode manufacturing technologies. And I would believe that there are no other commercial batteries on the market that can perform at these levels. EMPIS has been in commercial battery production since 2018. So company has many years of experience manufacturing high energy density and high power density lithium-ion batteries. Our priority today is to scale our manufacturing capacity to meet every increasing demand of our solutions with the long-term goal of becoming a mainstream battery solution with applications across all segments of electrical mobility, including the aviation and the EV industries. Building our momentum from last quarter, we are diligently working to execute the strategy we lay out earlier this year. This quarter, we continue to develop new products, build out our bulk of customers, and progress our path to larger scale commercialization. I would now like to note a few highlights in each area. Beginning with our technological development, our second quarter includes a few key examples of our ongoing efforts to push the boundaries of what is possible in the high-performance battery space. First, early this month, we announced our newest product, the Amperes high-power, high-energy battery cell. This cell displays unprecedented performance in the industry, delivering 400-watt-per-kilo energy density and the maximum power density of 4,400-watt-per-kilo, with an impressive 10C continuous charge rate. EMPI's high-power cell technology is critically important to the electrical aviation industry, enabling the capabilities of EVTOS and other high-performance electrical vehicles. We believe that we are close to shipping samples to interest partners and that we will be able to commercially ship this product in early 2024. Second, our silicon annual batteries recently powered BAE Systems' first successful its partner for its high-attitude super-satellite uncrewed aerial system demonstrate that they believe it is important to use the ultralight battery that also offers the necessary power to fly the aircraft. The HIAPS program opens extensive possibilities of future communication networks including 4G and 5G. It is a versatile application from disaster relief to border protection, present a compelling alternative to conventional airborne and satellite systems. And the MPA is excited to play a part in the future. Third, we complete the US Army Safe Cell Development Program, an important technical milestone to our business with the US Army we successfully delivered our 391-hour-per-kilo safe cells with a gel polymer electrolyte, passing the vigorous military performance specification nail penetration test. When integrated into a battery pack, this cutting-edge technology more than doubles the energy density of existing solutions, significantly extending mission time Also, as a part of the U.S. Army-funded manufacturing technology program, we are working closely with one of our partners to deliver conformal variable batteries to U.S. Army before the end of the year. We believe that this is the important stepping stone to further developing our relationship with the U.S. military and the specifically giving us entry points to the conformal variable as we market estimate at 1.25 building by 2030. Finally, we have become an integral partner to several teams participating in the Breeze Stone World Solar Challenge in October. For the event, each team designs, develops, and pilots a solar-powered vehicle along a 3,000-kilometer Transatlantic Australia route. Ampere's battery's superior performance attracts significant attention for teams entering the development process, and four teams chose Ampere's battery to power their solar race cars. The high energy density and the high power density capability of our battery are critical for this application. These are just a few of the ways Amperes is changing the battery landscape. We are constantly evolving our products to push up our industry boundaries and meet our customer performance goals. Turning to our business development efforts, we continued to see significant demand for our products in the second quarter. We shifted to 27 total customers this quarter, up from 16 in last year's second quarter and up from 19 in the first quarter of this year. These customer relationships extended beyond technical engagements and are with customers we have placed product orders with Amperes. This includes repeat customers like Airbus, AeroEnvironment, and the Teledansler, who continue to show their support and demand for Amperes batteries with additional orders and the commercial shipments. We shipped to 10 new customers in the quarter as well, which indicates growing industrial recognition and the validation of our products. In addition, our pipeline of the potential customers remains strong. Two key ways that we bolster our pipeline are through the strategic technical engagements and the prototype achievements. In the second quarter, we not only Through significant progress in our ongoing technical engagements, we also start new technical engagements with the leading high-performance automotive OEM. This engagement is expected to be part of the joint development contract we are finalizing with the manufacturer. Once finalized, we believe that this engagement will offer us another encouraging opportunity in the automotive space. As for prototype shipments, this quarter we made a site visit to two battery pet manufacturers to whom we started shipping samples in the fourth quarter of last year. We believe that this visit serves as meaningful steps toward a significant potential demand from the aviation industry through 2025 and beyond. In addition to driving demand for our batteries, it remains a priority for our business to expand our production capacity to meet this demand. We believe that this is a critical part of our strategy, both in short term as we work to expand our MPs Lab in Fremont, California and over the medium and the long term as we strive to achieve gigawatt scale manufacturing with MPs Lab in Brighton, Colorado. MPs Lab will allow us to increase our production capacity to 10 times what it is today by year end. providing enough capacity to both expand commercial shipments within our strategic accounts, as well as ship samples to our pipeline of potential customers. Our expanded Fremont production facility is designed to have a full lithium-ion battery manufacturing capabilities, including both anode and cathode production, as well as the ultimate cell assembly enabling us to further develop a capital technology and the cell chemistry in-house. In the second quarter, we ordered the necessary equipment to begin executing our MTS lab retrofit and expansion. a process that we are on track to complete at the end of the year in hopes of having facility up and running entering 2024. We are also working diligently to meeting our project plan for MPFED, our growth engine, which will allow us to reach high volume manufacturing capacity As a reminder, our planned 774,000 square foot largest scale production facility is a part of the total site with over 1.3 square feet available for expansion. Expect to be the first mass production site for the next generation battery technology in the United States. The initial phase of our build-out will provide the potential of up to 5 gigawatt hour with expansion capability for up to total potential manufacturing capacity of 10 gigawatt hour. The MPFET site is already equipped with the electrical power and the existing structural layout needed for gigawatt scale lithium-ion battery factory. which will reduce our build-out cost and the time to market. We are now working through the rezoning and the site permitting processes, and I believe we are on schedule to begin construction on Amherst Fab later in the third quarter as part of our 18 to 24-month plan. Our goal is to be operational in 2025, and as of this call, we remain on track to meet this timeline. This quarter, our engineering team worked with the Central CERN team in Germany to complete the necessary silicon nanowire annual mass production equipment process testing and optimization efforts. The process, once optimized, will be deployed at Ampes Labs manufacturing line and ultimately at Ampes FED. Both Amperes Lab and Amperes Set will have high-performance Amperes silicon and battery manufacturing capabilities. I have one final update before I turn the call over to Sandra. We recently appointed Mary Kostanski as the independent director to our board of directors and our compensation committee. Mary is the very first in various challenges and opportunities in our industry and offers a unique and valued perspective to our board. We are confident that our extensive automotive sector and the technical management experience will help us as we navigate and expand into new markets. With that overview complete, I will now turn the call over to our CFO, Sandra Wodick, to review our financial results for the quarter. Thank you.

Thank you, Kang. I would now like to spend a few minutes covering some key financial updates. As a reminder, our detailed financials can be found in our shareholder letter. We finished the second quarter with $1.6 million in revenue. a 0.9 million increase compared to 0.7 million in the same quarter last year. There were two main drivers of this increase. First, we drove a 0.6 million increase in product revenue. As Kang mentioned, our product revenue was largely driven by shipments to 27 customers this quarter, a quarterly record for Amprius. Also, of these customers, five customers represented greater than 10% of revenue as compared to three such customers last quarter, and two such customers in last year's Q2. Even though our product revenue remains largely driven by customer purchase orders that can arrive at uneven times throughout the year, we have shown consistent new customer growth and diversification in recent quarters. Second, our development services revenue totaled $0.3 million, a reflection of the Army safe-sell delivery we completed in the quarter. As noted in previous quarters, our development services revenue is intermittent based on revenue recognition timing. And as our capacity expands and more customers transition to commercial orders, we expect this revenue category to continue to decline as a percentage of overall revenue as we begin to process larger orders from a broader customer set and as our product revenue ramps even more. Our government grant revenue was flat year over year for the quarter. Moving to our profitability metrics, our GAAP gross margin was negative 186% in the second quarter, in line with our Q2-22 gross margin of negative 197%, and better than our Q1-23 gross margin of negative 518%, which was primarily impacted by non-recurring startup charges for our large-scale manufacturing facility. As the build-out continues and construction begins in earnest, we expect these scale-up related charges to increase. Still, we are confident that our GAAP gross margin will begin to normalize as we approach our capacity expansion goals in the coming years. Now onto our operating expense management. Our GAAP operating expenses for the second quarter increased to $7.1 million, largely due to increased public company costs and additional targeted investments in R&D staffing. Our gap net loss for the second quarter of 2023 was 9.4 million, or a net loss of 11 cents per share. As of June 30, 2023, we had 86 million shares outstanding. Also, as of June 30, 2023, there were 72 full-time employees with those employees primarily based in our Fremont, California location. Our share-based compensation for the quarter was $0.9 million. Now turning to the balance sheet, we exited the second quarter with $65 million in cash, up $0.8 million from the last quarter, and no debt. One of the key drivers of our cash activity for the quarter was $5.6 million used in operating activities. As discussed previously, Our run rate for cash used in operating activities remains projected to be around $2 million per month, excluding audit and transaction-related expenses. Other drivers include $1.7 million in build-out-related investments in the expansion of our Amperius Lab facility in Fremont, and $8.1 million in financing cash inflow from accessing our committed equity facility to fund our capacity expansion and operating cash requirements. Considering our business achievements and ongoing projects, we believe we are efficiently using capital to drive AMPRIUS forward. Before I turn the call back over to King, I would like to take a moment to discuss our outlook. As mentioned last quarter, we have several ongoing development services programs with performance obligations that we expect to complete within 2023, which means we should see increased revenue recognition, weighted more heavily towards the latter part of the year. Also, we anticipate that our G and A costs will continue at the higher rate we experienced earlier this year when accounting for additional public company and transaction related expenses. Also, we continue to expect to be capacity constrained until we exit 2023 when our new two megawatt hour capacity is projected to come online. That project, along with our build-out of Amprius Fab in Brighton, Colorado, remain our top capital allocation priorities. We believe that we are on track with our prior CapEx projections, which are that we expect to spend approximately 10 to 12 million completing the build-out of the Amprius Lab facility in Fremont by the end of the year, as well as 50 to 80 million in the second half of this year as we start construction at Amprius Fab and begin to order long lead time equipment. We expect to confirm the facility design and scale, as well as provide a projected budget during the second half of this year. Our spending pattern is dependent upon 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. Overall, with the strength of our balance sheet and multiple vehicles to generate additional funding through both equity issuances, such as warrants and sales under our committed equity facility, and non-diluted sources, such as grants, loans, and incentives, we believe we will have enough cash to execute on our strategic plan. With that, I will conclude the financial discussion and pass the call back to Cain.