Amprius Technologies, Inc.

Good afternoon. Welcome to the Ambrius Technologies second quarter 2024 earnings conference call. Joining us for today's presentation are the company's CEO, Dr. Kang's son, 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 new applications, and the timing and ability of AMPRIUS to expand its manufacturing capacity, build its large-scale manufacturing facility, 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. 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.amprius.com. 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 will now turn the call over to Amprius Technologies CEO, Dr. Kang Sung, for his comments. Sir, please proceed.

Welcome, everyone, and thank you for joining us this afternoon. On today's call, I will give you an overview of our second quarter accomplishments while also highlighting some of the upcoming milestones we are expecting later this year. Our CFO, Sandra Wallach, will then discuss our financial results of the period. After that, we will share some closing remarks before opening the call for questions. Before I give a recap of the quarter, I would like to briefly introduce Amperes to those who may be new to our company. At Amperes, we develop, manufacture, and market high energy density and high power density batteries with applications across all segments of electrical mobility, including the aviation and EV industries. Today, Ampere commends performance leadership in its combination of battery, energy density, power density, charging time, operating temperature range, and safety. Across our battery portfolio, we offer unmatched performance amongst commercially available batteries. Ampere has been delivering commercial battery to the market with up to 450 W per kilo and the 1150 W per liter. Can see power capability. The extreme fast charge rate of zero to 80% stay of the charge in approximately six minutes. The ability to operate in a wide temperature range of minus 30 degrees Celsius up to 55 degrees Celsius. and the safety design features that enable us to pass the United States military's benchmark and new penetration test. Each of these performance parameters is critically important to reward electrical mobility applications. Not only do our battery enable certain aircraft and vehicles to maximize performance, but we enable our customers to achieve their economic targets as well. In addition to what is commercially available today, we have also achieved a third-party validation of our latest 500-watt per kilo, 1,300-watt per liter battery platform. This battery will be ready for commercial shipment later this year. It's our belief that There are no other commercial batteries on the market that can perform at these levels today. Amplius is a silicon annual battery technology pioneer. He has over a decade of development experience, producing a strong patent portfolio of over 80 issued patents and patent applications, and a long track record of commercial shipments and customer accomplishments. Turning to the second quarter results, Amperes had a very productive quarter. We delivered a new high performance batteries to the market, developed the larger manufacturing capacities, and engaged with new customers and the new market segments. The launch of Amperes side core battery early this year has the effect our customer base and attract new customers. It also enables Ampere to explore new market segments. Since the launch, we have seen continued demand for cycle battery in aviation, electrical transportation, and other industrial applications. Ampere has recently further optimized our cell chemistries and cell designs. allowing us to deliver the battery with enhanced performance to the market. One of these high-performance batteries is Ampere's SA11 battery. This is an energy and power-balanced battery based on Ampere's cycle cell chemistry. This 30-ampere-hour cell offers 350 watts per kilo with 700 cycles. The performance and the cell format are specifically designed for certain electrical mobility applications, such as the eVTOL and the drone market. Another battery we delivered in the second quarter is the Amperes SA17. This is the highest known energy density cylindrical battery with this format in the industry. Following the success of our 18650 battery, that was released in January, we create a larger version of the cylindrical battery, the 21700. The larger SA17 offers a six amp hour energy, providing customer dropping replacement for those that currently use the five amp hour batteries. The SA17 enable us to further target the micro mobility segment. including two-wheeler applications like scooters and e-bikes, as well as other applications in aviation and industrial equipment. With these new additions, MPS has 14 SKUs in our product portfolio. Our battery offerings cover the entire performance map of our customer commercial applications, energy, power, cycle life, charging time, and more. The combination of Amperes CEMEX and cycle platforms enable us to tailor our cell chemistry for various customer requirements. Both Amperes CEMEX and cycle batteries can be high energy and high power solution for EVs. This quarter, we made material progress toward delivering the 100 amp hour EV form factor battery cells to the United States Advanced Battery Consortium, or USABC. The cell we have developed will meet or exceed all 2023 USABC low-cost fast-charging EV cell characteristics, including exceptional fast charging performance, and usable energy in your low-cost battery solution. This development was under a 3 million cost-sharing contract from the USABC in collaboration with the United States Department of Energy. Ampere's high-performance batteries have continuously received attention from customers in various market segments. In many cases, MPS batteries are the only known commercially available batteries that meet the customer requirements in technical performance and application economics. In Q2, we shifted to 56 customers. Of those, 24 were new customers across the electrical mobility sector, complementing strong repeat volume orders from our long-time partners, such as Air Environment, Teledon FLIR, Klaus Hamdanli, and BAE Systems. This combination of two dozen new customers and the volume shipment to returning customers allowed us to double our quarterly revenue output compared to Q2 last year. we record a 41% year-over-year increase in shipments within the United States and a robust 271% increase in shipments to the rest of the world. With these improvements, we record 50% of the total revenue in the second quarter from outside of the United States. Look at the forward demand. We locked 7.6 million in new sales orders during the quarter, which translated to a 32% increase in our next backlog at the end of the Q2 versus Q1. During the quarter, we also secured additional order from non-time customer auto Airbus. Based on all the size and timing, Amperes will now be delivering CEMEX 450-watt per kilo high-energy battery cells to Ato Airbus through 2025. These battery cells will continue to supply the necessary power and endurance for Ato Airbus project Zephyr stratospheric flight operations. In Q2, we also entered into three different partnerships with leading pack designers and manufacturers. These partnerships are critical as they allowed us to broaden our sales reach and offer our next generation batteries to each manufacturer's respective customer base. has developed a significant manufacturing capacity in the second quarter. The company took several steps forward to expand both our CEMEX and SAICO product capacity. For SAICO, we currently have three well-equipped and very experienced large-scale manufacturing partners in Asia, providing over 500 megawatt hours of production capacity across both pouch and cylindrical battery cells. MPs today has access to approximately 10 million pouch cells and 125 million cylindrical cells annually. These arrangements provide us with mass global production capacity and ensure that we deliver our products in a timely manner while maintaining the quality our customers expect. More importantly, the contract manufacturing partnership model allows us to eliminate the upfront capital expenditure while ensuring immediate capacity to accelerate our sales. We are also planning a manufacturing facility in Brighton, Colorado. We have now completed roughly 60% of the construction design drawings and specifications for the facility. We remain on track from a regulatory standpoint. Having recently submitted our Fed plan and advanced or other regulatory to replants and applications for the facility. As we previously discussed, the initial production line in Colorado will be focused on cycle manufacturing. Given the more immediate opportunities we have identified for the cycle platform and specifically for customer requesting a US-based supply chain. We continue to make important progress to ramp up our facilities in Fremont, California. In the second quarter, we completed the qualification process for our central thermal machine, which is used in silicon anode fabrication process. Looking further ahead, we remain on pace to scale our Fremont production reach at the end of the year to up to 2 megawatt hour scale. This includes implementing CEMEX cattle production in-house to streamline our manufacturing process. We plan to have this capacity up and running in Fremont later this year as well. Breakthrough performance of MP's battery has continued to gain recognition from the battery industry. The company 500-watt per kilo battery was selected by Fast Company Magazine for its 2024 Innovation by Design Awards. MPS also recognized that the Cleantech Breakthrough Awards as the Battery Technology Company of the Year in its inaugural event. Invited by the Taiwan Battery Association. Amperes hosted its first Amperes Battery Forum in Taiwan in April, where over 100 attendees from the industry-leading companies and institutions learned about Amperes' breakthrough silicon-anode battery technology and the partnership opportunities. The forum received significant interest from potential customers, industrial partners, and the Taiwanese investment community. The momentum built in Q2 has given us a strong tailwind in Q3 as well. Recently, we were awarded a $1.9 million contract from the U.S. Army's Ex-Tile Prime Program to develop a large form factor 500-watt-per-kilo CEMEX energy density cell for electrical mobility applications in the defense sector. The recognition of this breakthrough technology by the U.S. military opens much broader applications of our 500-watt-per-kilo batteries that is available only from Ampere today. In summary, we believe we paused for a strong second half of the year thanks to our increase increasing sales outlook, growing customer engagement, expand the production portfolio, and high volume manufacturing capacity build up. We are working hard to execute our goals and expecting to continue our momentum through 2024 leading to a great 2025. With that, I will now turn the call over to our CFO, Sandro Wallach, review our financial results for the quarter. Thank you.

Thank you, King. 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 $3.3 million in total revenue. As we have previously discussed, our total revenue is a combination of our main revenue streams, product revenue, development services, and grant revenue. This quarter, all 3.3 million came from our product revenue. As we've discussed in prior quarters, our development services revenue comes from development programs that are non-recurring in nature. On a sequential quarter-over-quarter basis, our product revenue increased 1 million, or 43%, and compared to prior year, revenue increased 1.7 million, or 105%. These increases were driven by shipments to 56 customers in the quarter. Although 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. As Cain mentioned, 24 of the 56 customers this quarter were new customers. Also, three customers this quarter represented greater than 10% of revenue, compared with three in Q1 2024 and five in the same period last year. Going forward, we will continue adding to our customer mix to diversify our revenue streams and provide more reliable product output as we get to a position of scale. Moving to our profitability metrics, our gross margin was negative 195% for the quarter. compared with negative 109% in Q1 2024 and negative 186% in the prior year period. As a reminder, we see significant gross margin variation as our product and service revenue mix fluctuates. Also, our gross margin continues to be impacted by pre-construction costs related to the Colorado facility. Longer term, we are confident that our GAAP gross margin will begin to normalize as we approach our capacity expansion goals. Now on to our operating expense management. Our operating expenses for the second quarter were 6.4 million, an increase of 0.5 million or 9% compared with Q1 2024, and a decrease of 0.7 million or 9% from the prior year period. The quarter-over-quarter increase was driven by G&A stock-based compensation. The year-over-year decrease is primarily attributable to reductions in G&A costs that were offset by investment in R&D and sales. Our gap net loss for the second quarter was 12.5 million, or a net loss of 13 cents per share, with 97 million weighted average number of shares outstanding. In Q1 2024, net loss was a negative 11 cents per share with 90 million weighted average number of shares outstanding. And in Q2 2023, net loss was also negative 11 cents per share with 85.2 million weighted average number of shares outstanding. As of June 30th, 2024, there were 88 full-time employees, up from 81 in the first quarter and 72 in the prior year same period. with those employees primarily based in our Fremont, California location. Our share based compensation for the second quarter was 1.9 million compared to 1.2 million in Q1 and 0.9 million in the prior year period. As of June 30th, 2024, we had 108 million shares outstanding, which was up 15.7 million from the prior quarter. related to the recent work we've done to clean up our cap table, which I'll now discuss. During the second quarter, we completed a cash tender offer, which provided a temporary exercise period with a reduced cash exercise price for our private and public warrants. In the cash tender offer, we were able to reduce the number of warrants outstanding from approximately $47.7 million to approximately $34.6 million. and raised net proceeds of $14.2 million. We have also closed a second tender offer that allowed cashless exercise of the private warrants, which resulted in the extinguishment of $15.6 million of the $15.9 million total outstanding in exchange for the issuance of 3.1 million shares of common stock. In total, more than 60% of the original warrants are no longer outstanding. Turning now to the balance sheet, we exited the second quarter with $46.4 million in net cash and no debt. Compared to Q1, we recorded a net increase of $7.4 million in cash. Key drivers of our cash activity for the quarter were $17 million of cash inflow added with $14.2 million netted from the cash tender offer and $2.8 million of cash inflow added primarily through the usage of our ATM, $8 million used in operating cash flow, We continue to remain lean with a two to two and a half million run rate per month, excluding transaction related costs. And 1.6 million used to continue build out of our expanded two megawatt production line in Fremont and move our Brighton, Colorado facility forward. 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 Cain, I would like to take a moment to discuss our outlook for the remainder of the year. We expect to spend another one to two million on equipment to support the two megawatt line in Fremont. This includes the necessary tools to have our cathode line up and running by the end of the fourth quarter of this year. As Kang mentioned, we're also finalizing the pre-construction work for our Colorado facility. The first line will be for Sycor manufacturing. This allows us to use conventional off-the-shelf processes, which will help us provide a high confidence schedule and cost. The total facility will have room to accommodate three to five gigawatts of capacity to support both CIMAX and SICOR production. The construction scope and schedule for the facility will be determined based on the final design and the availability and timing of funding. In addition, we're paying close attention to the larger industry dynamics. Changes in demand, supply, battery cost structure, government incentives, trade tariffs, and other considerations would also influence our decision. To support our strategic plan, we are regularly evaluating our capital resources, including sources of funding that provide the optimal cost of capital for our current production needs. These sources include both equity issuances such as sales under our ATM or warrant exercises, and non-dilutive sources, such as grants, loans, and incentives. That concludes my financial discussion, and I will now pass the call back to King.