Amprius Technologies, Inc.

Looking ahead, we are increasingly optimistic about the road ahead of us, as well as our ability to meet the challenges. With technical leadership, greater battery performance, a growing book of customers, and the capacity to now support large volume shipments, we believe that we are set up for sustainable growth for the foreseeable future. We are working hard to execute our goals and we expect to carry our momentum through the end of the 2024 and into 2025. With that, I will now turn the call over to our CFO, Sandro Wallach, to review our financial results for the quarter. Sandro.

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 third quarter with $7.9 million in total revenue. As we have previously discussed, our total revenue is a combination of our main revenue streams, product revenue and development services and grant revenue. This quarter, $6.1 million came from our product revenue. representing a $2.7 million or 81% increase sequentially and a $3.9 million or 176% increase year-over-year. Our development services and grant revenue totaled $1.8 million this quarter, which was up from none in Q2 and up $1.2 million year-over-year. As we've discussed in the past, development services and grant revenue is non-recurring in nature leading to greater fluctuations depending on the comparison period. The combined increases in revenue this quarter were driven by the addition of new customers and grant programs. As Kang mentioned, we shipped 94 customers in the third quarter. Of these customers, only four accounted for greater than 10% of revenue, an increase from three in the second quarter, and consistent with the four customers counted in the third quarter of 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, gross margin was negative 65% for the quarter compared to negative 195% in Q2 of 2024 and negative 152% in the prior year period. As a reminder, we see significant gross margin variation as our product and services revenue mix fluctuates. Gross margin this quarter was also impacted by design pre-construction costs related to the Colorado facility, which will not recur. Longer term, we're 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 third quarter were $6.2 million, a decrease of $0.2 million, or 4%, compared with Q2 2024, and an increase of $1.3 million, or 26%, from the prior year period. The sequential decrease was driven by lower share-based compensation and outside services. The year-over-year increase is primarily attributable to increased investment in sales, allocation of R&D from COGS, as development services agreements run off, and largely flat G&A. Our gap net loss for the third quarter was 10.9 million, or a net loss of 10 cents per share, with 110.4 million weighted average number of shares outstanding. In Q2 2024, net loss was negative 13 cents per share, with 97 million weighted average number of shares outstanding. Q3 2023, Net loss was a negative 10 cents per share, with 86.4 million weighted average number of shares outstanding. As of September 30, 2024, there were 92 full-time employees, up from 88 at the end of the second quarter, with those employees primarily based in our Fremont, California location. Our share-based compensation for the third quarter was 1.7 million compared to 1.9 million in Q2, and 1.1 million in the prior year period. The sequential decline was due to changes to the board of directors. As of September 30, 2024, we had 111.3 million shares outstanding, which was up 3.4 million from the prior quarter. That increase includes 3.1 million shares issued as part of the warrant exchange that reduced the total number of outstanding private warrants from 15.9 million to $0.3 million. Now turning to the balance sheet, we exited the third quarter with $35 million in net cash and no debt. Key drivers for the $11.4 million of cash we used in the quarter were $9.5 million used in operating cash flow. We continue to remain lean with a $2.5 to $3 million run rate per month, excluding transaction-related costs. Note that our Q3-24 operating cash included $2.4 million of non-recurring expenses used for the design of the Colorado facility. These expenses are projected to tail off with the completion of the construction drawings, which are substantially complete. $1.3 million used to continue the build-out of our expanded two-megawatt production line in Fremont, and $0.5 related to the payment of stock issuance costs associated with the warrant repricing offer. 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 Kang, I would like to take a moment to discuss our CapEx outlook for the remainder of the year. We expect to spend another $1 million on supporting equipment to complete the two-megawatt line in Fremont, in addition to our normal operating capital requirements. Now that the designs are effectively complete for Colorado, we will continue to monitor the larger industry dynamics driving our ability to proceed further. Timing and availability of funding, along with the monitoring of the overall sector for changes in demand, supply, battery cost structure, government incentives, trade tariffs, and other considerations will influence our decision on next steps and timing. One last housekeeping item I'd like to discuss is a change to our cap table after the end of the quarter. On October 23rd, we announced that Amprius Inc., our former controlling shareholder, had voluntarily liquidated and dissolved. As a result, The shares that Amprius Inc. held were distributed pro rata per a dissolution plan approved by their board of directors. This distribution removes a controlling shareholder consideration and dispenses the shares more broadly into the hands of the original investors in Amprius Inc. Amprius Inc. also contributed to us 5.5 million common shares of Amprius Technologies. and will reimburse related expenses in exchange for our assumption of the outstanding stock options of Amprius, Inc., an aggregate of 7 million options with a weighted average exercise price of $2.10 per share. There was no operating impact to Amprius Technologies as a result of this distribution or option assumption, and we extinguished the contributed shares. The option assumption was approved by a committee of the Amperius Technologies Board of Directors comprised of solely independent and disinterested directors. That concludes my financial discussion, and I will now pass the call back to King.

Thanks, Sandra. As we look ahead, our strategy at Amperius remains unchanged. Our top priority are innovating next-generation batteries, growing our customer base, and scaling our manufacturing capability. Today, Amperes has the best performing battery for the electrical mobility market, strong revenue growth, and an impressive customer pipeline, and a gigawatt-hour scale manufacturing capacity available to us. Our technical leadership and unmatched battery performance in the industry has been validated by industrial leaders and repeated customer orders. Our concrete manufacturing strategy has also shown great results. We are already able to support our customer with over 10 million pouch battery cells and 125 million cylindrical cells annually. We also recently celebrated the launch of a dedicated ampoule lines at one of our manufacturing partners with the capacity for 800 megawatt hour of pouch sales. At the same time, we are exploring additional manufacturing partner in Asia and Europe, expanding our Fremont production capacity for CEMEX factory production, and have finalized our design for the factory in Colorado. We believe that the opportunity in front of Ampere is tremendous. Our team are more confident than ever in delivering what we have planned and promised. We look forward to closing out the year strong and heading to 2025 with increasing momentum. Over the next few months, we will also be attending several industrial and financial conferences, and we hope to see you there. Thank you for your continued support of MPS technology. We look forward to continuing to deliver on what we have planned and promised in the upcoming quarters. With that, I will turn it back to the operator for Q&A.

Thank you. At this time, we'll open the line for questions from the company's publishing research analysts. The company requests that each participant limit their comments to one question and one follow-up. To ask a question, please press star 1 on your telephone keypad at this time. Again, that's star 1 if you do have a question or comment. Please hold as we poll for questions. And we'll take our first question from Colin Rush from Oppenheimer. Please go ahead, Colin.

Thanks so much, guys. Appreciate all the detail on the contract manufacturing capacity that you have. Would love to dig into the customer list a little bit more. Can you talk about how many customers are in late stage negotiations that have the potential to be 10 megawatt hours or more? And how should we think about the cadence of incremental customer announcements like the one you just made?

Yep, according for the customer, significant volume, we already conclude two customer combined revenue $20 million. We can deliver that within the year. Actually, we expect next May we can recognize the revenue. In addition to that, we have a conversation with another three customers. Those are high volume potential customers.

Great. That's super helpful. And then, you know, just given the, you know, the change in strategy, you know, way towards a CapEx Lite model, can you talk a little bit about the path to operational cash flow breakeven? It seems like you guys, you know, given the differentiated product and the capacity availability, you know, potentially have a pretty straight line towards reaching that operational breakeven.

Absolutely. So, as we've mentioned before, the product that we sell under the trademark of SCICOR is profitable day one without having to put any of our investor money to work in the capital and infrastructure. We have still limitations. in how much of the SINAX we can deliver given the up to two megawatts that we're completing in Fremont. We expect the near-term revenue growth to all come from SICOR. So that gives us a clearer view now that Kang has removed the capacity constraint to really grow into that operational profitability profile as we move forward.

And then, you know, just from an organizational capacity perspective on the OpEx side, can you talk a little bit about what investments you need to make to really support a drive towards, you know, brachium retina levels?

So this last quarter we made an investment of two additional salespeople. That's really been our big focus along with business development and adding some key R&D resources into the Fremont team so we can drive the cycles of learning faster. So that's really where we're looking at 92 employees. We're talking about, you know, a handful of really critical hires that we're focused on right now.

Super helpful. Thanks so much, you guys. That's fun.

Thank you. And we'll take our next question from Jed Dorsheimer from William Blair. Please go ahead, Jed.

You have Mark Shooter on for Jed. Just to put a finer point on Colin's question, are you saying that you'll be recognizing all of the 20 million by May or that you'll start to recognize some revenue by May?

Mark, at this time, our plan is to recognize the revenue May.

Okay, so by May of next year, you'll have $20 million in revenue.

Yeah, that $20 million from these customers. We already started shipping the product this quarter.

Got it. Thank you for the clarification, Tom. And to dive into that a bit more with the customer strategy, congrats on 175 customers. That is quite a lot. I'm wondering if your strategy is to continue to service many customers with more smaller volumes and bespoke cell designs, maybe to capture higher margin? Or are you looking to secure more chunkier, large customers with higher volume? How are you thinking about that?

Yeah, we like to focus on large customers with substantial volumes. So that way is easier for us, not just product development, also the manufacturing and the service. So those are our top of the funnel. We have 175 of them. But eventually, we hope there are sizable, large-volume customers who will place an order.

Okay. And lastly, at a steady state, say in a couple years out, when the facilities are ramped and you have large orders, do you have a gross margin target in mind considering the cost for the toller?

We haven't given any guidance about our target model. But again, because the majority of the volume will be coming from which is made on traditional graphite manufacturing lines, we've seen a reason why we can't get to parity with graphite.

Thank you very much.

Thank you. And we'll take our next question from Chip Moore from Roth. Please go ahead, Chip.

Thanks for taking the question. Congrats on all of the progress this quarter. I wanted to follow up on the two $20 million contracts that sounds like you're going to recognize by the middle of next year. Is there potential for those to grow? Or should we think about, you know, a new set of purchase orders? Or what's the opportunity with those customers?

Given this time, the orders they place, they satisfy their needs until middle of next year. That's why by middle of next year, those batteries will be made and sold and the revenue will be recognized. But those are very important customers. They are the leaders in this particular segment. So we anticipate that they will grow to they will have additional order coming sometimes next year because this only satisfies half of the year of their demand. So we are working with those customers very closely. First task is to get those products made and have revenue regulated by May.

Understood. That's helpful, Kang. And maybe for my follow-up on the LOI in the electric vehicle space, you know, large potential, right, two gigawatt hours. I think you talked about a potential supply agreement over five years. What are the milestones to reach that in terms of, you know, samples and evaluation? I imagine that takes some time, but how should we think about that?

Yeah, I think the key, this is breakthrough technology. This requires substantial change of the cell chemistry and the cell design. Now, we have done most of those. This is not from scratch. The armpits already have the foundation for both. So we need to perfect the cell design. We are planning to give them the first batch of the sample. Whatever they ask for, no one in the industry has made it. Also, no one in the industry today believes this can be done. But Ampere has already demonstrated in the lab. they were planning to come to factory to check the factory out December 5th, okay, because I will not be available. So we delayed the factory inspection probably to early next year. We convinced them they should test the sample first before they come to the factory. So this is a very reputable, uh customer is the industrial leader definitely is the industrial leader it's a number it's not a number one is number two of these particular market segments so we are very proud of having this opportunity to serve them excellent uh appreciate it i'll take the rest of mine offline thanks thank you and we'll take our next question from jeff gramp from alliance global please go ahead jeff

Afternoon. I had a question on the customer count metrics you guys provided. I think this was a new record, both for new customers as well as total, which I guess also kind of means it looks like existing customer count was also at a record. So I'm curious to drive into the main drivers of that, in particular wondering, you know, is this SICOR expansion and the capacity that you guys have secured significant? Would you say that's the main catalyst to the increased receptivity, if you will, from customers, that they feel more conviction in your ability to deliver in volume? Or what other factors might you see at play to drive this acceleration?

Jeff, the first driver is our battery performance. There's no doubt about it. They couldn't get a battery with the same performance anywhere in the industry today. I think that's the key driver. That's the key attraction for us in the marketplace. So before, we have capacity limitation. So our qualification process has been long and lengthy. For some customers, we had to give up because we don't have enough capacity to serve them. So the Sitecore introduction plus our contract manufacturing and strategies work very well for us. And not only we have a sufficient capacity to serve the customer, also customer quite familiar with our manufacturing process. We have a customer, November 18th, we have another large customer come to China to look at our factory. That's why I will make a trip to Asia next week. So the driver is technology leadership and available manufacturing capacity, also manufacturing capability. Capacity and capability are two different things. Capability means our manufacturing line can deliver quality, can deliver the format and the form factor you want, also can deliver on time.

Great, that's really helpful details. For my follow-up, I was curious that 20 million plus level order that you guys had a couple months ago now. Given that that was for SICOR, which really hasn't even been in the market, I think, for a full year yet, it would seem to suggest, I guess, a pretty quick qualifying period for the customer. I'm curious if, in your sense, that's unique for that particular need or how you're generally seeing customer qualification timelines changing, if at all, with SICOR and with some of your recent points, if you will, and de-risking this for customers. Thanks.

Yeah, we accumulate sufficient data points for customers to review. Now, this is Ampere's battery. We have a long history. Now, we have a lot of data available for various batteries for customers to take a look. So what drags the qualification? Most times are not our batteries. will be the certification process. It depends on the application. This particular application, the certification process is much simpler than other applications. For example, EV talk, battery qualification is much longer than the drones. The drones are much longer than light and electrical vehicles. Depending on the application, the qualification cycle could be quite short, quite quick. The customer can very quickly to qualify our battery. In this case, it is 20 million contracts. You know, we present our database. Customer did a very quick test to validate our data. At the same time, you know, their qualification process is much shorter. and other quantification processes.

Got it. That's really helpful. I appreciate it. Thank you, guys.

As a reminder, that's star one if you do have a question or comment. And we'll take our next question from Ted Jackson from Northland Securities. Please go ahead, Ted.

Thank you very much. Good evening or good afternoon to you. I've got a couple of questions that are still left on my list. One is with regards to the spending on the Colorado facility and its impact on your third quarter gross margins. You said, if I listened to the call correctly, that it was $2.4 million. First of all, I want to verify that's what you said. Can I assume from your commentary that the spend for kind of the legwork for that facility is kind of ramped down and we could expect it to essentially be non-existent with the fourth quarter and going forward? That's my first question.

Yeah, Ted, so the $2.4 million was based on cash flow for operating cash. That's what we spent in the third quarter. There's always a difference between the P&L and cash, but the $2.4 million is related to the P&L. I'm sorry, to cash. And yes, we substantially completed all of the design and construction specifications. in October, so we're expecting that to ramp down and drop, you know, to a very low rate until we're ready to spin back up and get started.

So what was the, you know, the nut that was in your cogs for Colorado in the third quarter? Just so I can kind of, you know, an apples to apples comparison when I think about your fourth quarter, you know, since I won't be in there anymore.

It was a little bit higher than the cash basis, so it was closer to 2.9 million.

Okay. So then just to make sure I understand right, so all else being equal, if we had the exact same shipment levels in the fourth quarter that you had in the third quarter, that we would see your margin improved by just under $3 million simply because of that.

Yes.

Okay.

Again, our margin fluctuates based on the mix of contracting factors.

Yeah. My next thing is just a bit of clarification. And when you talked about the – Fremont facility and having to put another million in it in the fourth quarter, is that on top of, is that additional CapEx? Are you saying that your fourth quarter CapEx will basically be about $3 million? I mean $1 million, excuse me.

So it's $1 million to finish off the build-out for the balance of up to 2 megawatt capacity. Every factory I've ever been with has some normal run rate of capex for replacement and upgrade, but it's not a material number.

Okay. I mean, that's helpful. And then I'm sneaking this in, but it's still on the Fremont, and then I'll get out of line and come back in. But when I listened to the commentary and read, you're expecting to exit 2024 with two megawatts of capacity available at Fremont, that you're there. Is that correct? No.

We believe that we will be entering 2025 with the up to two megawatts of capacity, so two megawatts is the nameplate, and we've been ramping through that, but we've always said that we'll be up to two megawatts.

Okay, that's fair, that's fair. I'll step out of line and let someone else jump in, thanks.

And at this time, this concludes our question and answer session. If you have any additional questions, you may contact Amprius' investor relations team at ir.amprius.com. I'd now like to turn the call back over to Dr. Sun for his closing remarks.

Thanks again, everyone, for joining us today. As a reminder, you can find out more about our company receive additional updates, and learn about upcoming events and presentations from the investor relations section of our website. We hope to see you at one of our upcoming events, and we'll continue to update you on the exciting progress we are making in transforming the electrical mobility market. Finally, I'd like to thank our employees, partners, and shareholders for their continued support. I'll present.

Thank you for joining us today for Amprius Technologies' third quarter 2024 earnings conference call. You may now disconnect and have a great day.