Amprius Technologies, Inc.

Good afternoon. Welcome to the Amperius Technologies' fourth quarter and full year 2024 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 our financial and business performance, our business strategy, future product development or commercialization, new customer adoption, and new applications, our growth and the growth of the markets in which we operate, and the timing and ability of Ambrius 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 Ambrius' results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied in such forward-looking statements. For more complete discussion of these risks and uncertainties, please refer to AMPRIUS's filings with the Securities and Exchange Commission. Finally, I'd like to remind everyone that this conference call is being webcasted 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 Amperius Technology 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 give you an overview of our record performance and some of our 2024 accomplishments while also highlighting the upcoming milestones we look forward to achieving soon. After that, our CFO, Sandra Wallach, will discuss our financial results for the period. Then I 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 Ampere to those who may be new to our company. Ampere is a pioneer and a leader in silicon anode battery space. At Ampere, we develop, manufacture, and market high energy density and high power density silicon anode battery with applications across all segments of electrical mobility, including the aviation, electrical vehicle, and light electrical vehicle industries. Today, Amperes commands performance leadership with this combination of battery energy density power density, charging time, operating temperature range, and safety. Across our battery portfolio, we offer unmatched performance among commercially available batteries. Tempest has been delivering commercial batteries to the market with up to 450 Wh per kilo and 1150 Wh per liter. 10C power capability. Extreme fast charging rate of 0% to 80% stay of 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 nail penetration test Each of these performance parameters is critically important to the real world electrical mobility applications. Not only do our batteries enable certain aircrafts and the vehicles to maximize performance, but they enable our customers to achieve their economic targets as well. In addition to our commercially available batteries today, We have also achieved a third-party validation of our latest 500-watt per kilo, 1,300-watt per liter battery platform. It's our belief that there are no other commercial batteries on the market that can perform at these levels today. Amperes is a silicon anode battery technology pioneer with over a decade of development experience and the long track record of commercial shipments and customer achievements. 2024 was an important and productive year for Ampere. Company introduced a new silicon anode battery platform, PsiCo. Commercialized a group of new batteries with breakthrough performance. due to over 1.8 gigawatt-hour contract manufacturing capacity, achieved record sales revenue, engaged with 235 customers, and developed a strong growth path. Innovative technologies and the breakthrough product performance are the foundation of Ampere's business. Large-scale manufacturability and commercialization of these technologies and the products have enabled Amperes to achieve incredible milestones and business results this year. In January 2025, Amperes introduced the first battery cell in the industry with a combined high energy and high power. 370 watt per kilo energy density and offering up to 3,500 watt per kilo power. Furthermore, the cell supports high discharge rates of up to 10 C without cooling and up to 15 C with active cooling, ensuring quick power delivery without compromising runtime. This cell provides ideal situation for aviation electrical vehicles and any electrical mobility applications that require both endurance and the rapid energy delivery. In Q4, the pre-production 10-ampere-hour samples were delivered to six of our customers, enabling real-world testing in challenging environments. We are seeing strong customer interest for this battery with industrial leaders like Teladon, FLIR, already actively evaluating its capabilities. Amperes also developed and shipped high-performance EV battery cell samples to the United States Advanced Battery Consortium, or USABC, in 2024. The USABC awarded Amperes a $3 million grant to develop a low-cost and the fast-charging battery cell back in 2022. Since then, Amperes not only met the US ABC's development targets, but exceeded them by delivering a cell with a specific energy of 360 Wh per kilo at the beginning of life and a power density of 1,200 Wh per kilo. The A-sample UV cells can also charge it to 90% of their rate energy in just 15 minutes, exceeding the U.S. ABC target of 80% with the same timeframe. In 2024, Amperes also received the X-Time Prime Award from the U.S. Army to develop a large-format 500-watt-per-kilo battery cell. We believe that this product which is in development with our partner, AeroVironment, will allow supreme battery performance that is not available anywhere else. This project is expected to be complete this year. Today, Amperes has a high-performance commercial battery portfolio that provides critical solutions to the customer with various applications across the electrical mobility market. The 14 different SKUs provide a range of performance options for different applications that are all commercially available today. Technical achievements at Amperes have enabled our commercial success. In fact, in the first quarter alone, we shifted to 98 total customers, with 53 of those being new to the Ampere's platform. Our renting customer growth complemented by volume of shipments to strategical customers, resulting in first quarter revenue of 10.6 million, a 35% increase from the third quarter of 2024, and 170% increase from the fourth quarter of 2023. Additionally, 77% of the revenue from Q4 came from outside of the United States compared to just the 22% in the same period of last year are shipped to bases and demonstrates the expansion of our customer base worldwide. Over the course of 2024, we shipped to a total of 235 customers. This includes new customers, as well as repeat volume orders from our long-term partners, like Auto Airbus, Aero Environment, Teladon FLIR, Klaus Hamdani, and BAE Systems. The rapid customer expansion we are driving is a testament to our product competitiveness, manufacturing capability, and the sales strategy. We generated 24.2 million in revenue for the full year, 167% increase from 2023. In 2024, we developed some sizable business opportunities to support our growth for years to come. In Q3 and Q4, we shared that we signed two separate agreements with Fortune 500 companies. First agreement announced in September 2024 was a non-binding letter of intent with the Fortune Global 500 Technology OEM to develop a high energy cycle symmetrical cell for the light electrical vehicle market. The battery solution that Amperes will provide will be a technology breakthrough in cell chemistry, cell design, and cell manufacturing. We believe it will be a very attractive product for the light electrical vehicle market, which in Q4 contributes about 25% of our Q4 revenue. The light electrical vehicle market is expected to grow significantly. Based on a January 2025 report from the business research company, the light electrical vehicle market size is expected to reach approximately 136 buildings by 2029. In addition, the light electrical vehicle market has a shorter design cycle because it's already operating at a scale. The other agreement announced in October 2024 was a development contract for a small format custom high energy density Dymax pouch cell. Ampere's high energy batteries provide a critical solution to the customer's application. We expect to produce a battery with approximately 50% less weight and size compared to their current battery without compromising performance. At the end of Q3, we also announced two contracts totaling over 20 million to supply 40 amp hour high performance cells for light electrical vehicle applications. As an update, these cells are already shipping, and we expect to recognize 100% revenue in 2025. In total, we add over 16 million in new customer purchase orders to our backlog in the fourth quarter, giving us additional visibility into our growth for 2025. In addition to the performance of Amperes batteries, our manufacturing capability and capacity have attracted customer attention as well. Today, Amperes has over 1.8 gigawatt-hour cell manufacturing capacity and is well-equipped to deliver all types of battery cells to customers, pouch cells, cylindrical cells, and prismatic cells. The company is also actively working on developing a global contract manufacturing network. And in 2025, we are increasingly optimistic about our future and have begun the year with a running start. Last month, we announced that we secured a 15 million purchase order from a leading unmanned aircraft system or UAS manufacturer for our cycle cells. This volume purchase order follows the success for field trials and the qualification over the course of nine months, leading to Ampere's battery being designed into the manufacturer's fixed-wing UAS platform. This order secured a critical supply for the customer's production ramp, and we expect to ship the cells in the second half of 2025. As more commercial and defense aviation customers complete their battery qualification process, we are seeing a strong pipeline of follow-on commitments. We believe that orders like this indicate that the drone market is continuing to grow and that Amperes is going to play a large part in powering future applications. Fortune Business Insights projects the global drone market will surge from 18 buildings in 2023 to 213 buildings by 2032. So we believe we are just at the beginning of a significant expansion of one of our addressable markets. This quarter, we have also designed and shaped new high performance 6.3 ampere hour cylindrical cells for use in the light electrical vehicle sector. This cell delivers over 25% more capacity than current 21700 cells, setting a new standard for energy density in the industry for this widely used cell format. Because of its seamless integration to existing battery systems, the manufacturers can implement a high capacity, longer lasting power without a costly redesign. As a final note, we have obviously monitoring the policy changes and the potential industry headwinds resulting from the recent changes in federal administration. With much of the global battery supply in Asia, we are not immune to economic policy impacting the region. But we are taking swift action to mitigate any risks to the extent that we are able, including diversifying our manufacturing partnerships and the supply chains to avoid geopolitics, geopolitical concerns, and the tariff related issues. We plan to share additional updates with you as they become available. We remain confident in our expectation for growth throughout 2025. With that, I will now turn the call over to Sandra to review our financial results.

Thank you, King. I would now like to spend a few minutes covering some of our key financial updates. As a reminder, our detailed financials can be found in our shareholder letter. We ended the fourth quarter with 10.6 million in total revenue. As we have previously discussed, our total revenue is the combination of our main revenue streams, product revenue and development services and grant revenue. This quarter, 10.3 million came from our product revenue, representing a 4.3 million or 71% increase sequentially. Product revenue in Q4 2023 was just $0.9 million, marking a nearly 1,000% increase year over year. Our development services and grant revenue totaled $0.3 million this quarter, which was down from $1.8 million in Q3 and $3 million year over year. As we've discussed in the past, development services and grant revenue from large development programs are non-recurring in nature. leading to greater fluctuations depending on the comparison period. The overall increase in revenue this quarter was primarily driven by the addition of new customers. As Kang mentioned, we shipped to 98 customers in the fourth quarter. Of these customers, only three accounted for greater than 10% of revenue, a decrease from four in the third quarter, and an increase from two customers counted in the fourth quarter of 2023. Going forward, we plan to continue adding to our customer mix to diversify our revenue streams and provide more reliable product shipments as we get to a position of scale. Pivoting to our full year results, we closed 2024 with $24.2 million in revenue. This represents 167% increase from the $9.1 million in revenue we generated in 2023. This achievement was fueled by the increase in product sales as a percentage of total sales, supported by the impressive growth of our customer base. As a reminder, we shipped to 235 individual accounts in 2024. Moving to our profitability metrics, gross margin was negative 21% for the quarter compared to negative 65% in Q3 of 2024 and negative 98% for the prior year period. For the full year, gross margin was negative 76% compared to negative 162% in the prior year period. The improvement is directly related to the launch of our SICOR product line, which has a positive gross margin contribution. As a reminder, we see significant gross margin variation as our product and services revenue mix fluctuates. Gross margins in 2024 were also impacted by pre-construction planning costs. related to the Colorado facility, which were completed in October of 2024. Now moving on to our operating expense management. Our operating expenses for the fourth quarter were $9.5 million, an increase of $3.4 million or 55% compared with Q3 2024, and an increase of $3.6 million or 62% from the prior year period. OPEX increased from Q3 to Q4 as a result of higher R&D costs associated with operating expenses compared to cost of sales. This change coincides with the runoff of large development contracts as we pivoted to a mix of revenue that is more heavily weighted to product sales. The sequential increase in OPEX also included non-recurring G&A stock-based compensation of $0.7 million in Q4, which was associated with a fully vested grant that was made by our former holding company, Amprius Inc., for key employees and service providers prior to the assumption of stock options by Amprius Technologies, and a non-recurring loss on a write-down of property, plant, and equipment of $1.9 million in Q4. Year over year, the increase in OPEX was driven by increased investment in sales, The aforementioned reallocation of R&D from cost of goods sold as development services agreements run off, and the same non-recurring stock-based compensation charge and loss on a write-down of property, plant, and equipment. For the full year, our operating expenses were $27.9 million compared to $24 million in 2023. Our gap net loss for the fourth quarter was 11.4 million, or a net loss of 10 cents per share, with 109.8 million weighted average number of shares outstanding. In Q3 2024, our net loss was 10.9 million, or negative 10 cents per share, with 110.4 million weighted average number of shares outstanding. Q4 2023 net loss was 9.7 million, or negative 11 cents per share, with 88.5 million weighted average number of shares outstanding. Our gap net loss included two non-recurring charges that totaled two cents per share. The first one-time event was a loss on a write-down of property, plant, and equipment of 1.9 million as shown in our financial statements. The second is the stock-based compensation charge from Ampreus Inc. of 0.7 million. For the full year, net loss was 44.7 million or negative 45 cents basic and diluted EPS with 101.9 million weighted average number of shares outstanding compared to a net loss of 36.8 million or negative 43 cents per share with 86.2 million weighted average number of shares outstanding in 2023. As of December 31st, 2024, there were 99 full-time employees up from 92 at the end of the third quarter with those employees primarily based in our Fremont, California location. Our share-based compensation for the fourth quarter was 2.4 million compared to 1.7 million in Q3 and 1.1 million in the prior year period. The sequential increase is primarily based on the non-recurring grant of fully vested shares by Amprius Inc. for key employees and service providers. For the full year, share-based compensation was $7.3 million compared to $3.9 million in 2023. This change is primarily due to changes in the Board of Directors and the previously mentioned non-recurring grant of fully vested shares by Amprius Inc. As of December 31st, 2024, we had 116.9 million shares outstanding. which was up 5.6 million from the prior quarter. The change includes 5.5 million shares forfeited and canceled as part of the option assumption agreement with Ampreis Inc. prior to its dissolution. This decrease was more than offset by 0.3 million shares related to option exercises and RSU vestings and 10.8 million shares issued from our ATM reserve. Now turning to the balance sheet, we exited the year with 55.2 million in net cash and no debt. The 20.1 million net increase in cash is related primarily to the 22.6 million we generated through the issuance of common stock under our at market sales agreement. As of December 31st, 2024, we had over 66 million left on the facility. Other key drivers for cash for the quarter included 6.1 million used in operating cash flow. We continue to remain lean with a 2.5 to 3 million monthly run rate, excluding transaction-related cost. Our fourth quarter operating cash results included minimal non-recurring expenses for the design and pre-construction work on the Colorado facility, which was completed in October of 2024. At this time, we do not expect future expenses related to the facility build-out. We also had $4.2 million of cash inflow associated with the return of our deposits for long lead time items related to the Colorado facility. This was partially offset by $0.6 million in property, plant, and equipment purchases for the Fremont facility. 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 2025. We expect to spend another million dollars on supporting equipment to complete the two megawatt line in Fremont in addition to 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. The scope and schedule of the construction will be determined based on, among other factors, timing and availability of funding, along with monitoring the overall sector for changes in demand, supply, battery cost structure, government incentives, trade tariffs, and other considerations may also influence our decision, including whether to proceed with the construction at all. As Kang mentioned, we have secured adequate capacity for the foreseeable future through our contract manufacturing network and plan to expand that in 2025 without deploying our capital. That concludes my financial discussion and I will now pass the call back to Kang.

Thanks, Sandra. As we look ahead, our strategy at Ampere remains unchanged. Our top priorities are leading technology innovation and product performance, ensuring world-class manufacturing capability and sufficient production capacity, growing our customer pipeline and driving revenue growth and having a healthy balance sheet. We are excited about the year ahead and looking forward to growing our business on the momentum we build in 2024. In 2025, Amperes expects to deliver new high-performance batteries, participate in new market segments, engage with more customers, build additional manufacturing partnerships, and bring our business to another level. We believe that the opportunity ahead of Amperes is tremendous. Our team is confident in delivering what we have planned and promised. We have began the year strong, and we are looking to building increasing momentum throughout 2025. Over the next few months, we'll be attending several industrial and financial conferences, and we hope to see you there. Thank you for your continued support of Ampere's technologies. With that, I will turn it back to the operator for Q&A.

Thank you. We will now be conducting a question and answer session. If you would like 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 2 if you would like to remove your question from the queue. For participants using Seeker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question comes to the line of Colin Bush with OfferTimer.

Please proceed. Thanks so much, guys. You know, Kang, you've got such a big list of customers at this point. You've been able to close a handful of them into larger contracts. Can you talk a little bit about the diversity of applications that you're seeing getting tested for, how much customization is required for those customers, and how many are in late stages of evaluation where you might see something come in the next quarter or so where they would pull the trigger on a bigger purchase order?

Okay, thanks, Colin. We have 230 customers in 2024. This is at the top of our pipeline funnel. There are three types of customers. There are customers already have the devices and using other batteries, just use our battery to replace it. Those can be very quick replacement that demonstrate in 2024 for light electrical vehicle business and a small fraction of the aviation business. That takes a couple months to start using our battery. We'll anticipate some business like this in 2025. The second type of customer is that they have devices, but they need to qualify that. They need to redesign not the devices, the battery pack and evaluate our battery to fit into their application. This could be nine months to a year type of qualification process. The third type of customer, for example, EVTOL, not only they need to qualify our products, they need to certify their own product. So those who would take longer. But we look at, based on our 2024 experience, we are quite confident we can convert a large portion of those customers to the purchase order in 2025.

Thanks so much. And then in terms of your manufacturing base and your geographic exposure, can you talk about your strategy for incremental expansion contract manufacturing potentially or other strategies around managing some of the dynamics around the changing geopolitical environment?

Well, the contract manufacturing strategy has been very successful for us. We have not spent a dollar on the ground for the manufacturing capacity. We also have a lot of flexibility. in terms of cell design. And they are quite a successful strategy so far. Of course, many of those relationships require a certain skill, you know. Currently, all our manufacturing facilities are located in China. We have three partners, so we offer all battery formats. We have cylindrical, prosthetic, and pouch. So at the same time, this year, just early this year, we also developed a manufacturing partnership in Korea. We are evaluating the sample produced on their production line. Next week, next month, I will go to Europe to have a conversation with another European, potential European contractor manufacturers. We're doing those for mainly for geopolitics reasons. Now, in terms of cost, we have very competitive manufacturing cost structure today. I would say we are not only can compete in US, we can compete globally in terms of the manufacturing, contract manufacturing cost structure we have here. So moving forward, we definitely need to have a global supply chain to support our contractor manufacturing practice. We need to have a global contractor manufacturing partnership. So I think this would happen in first half of the 2025.

Excellent. Thank you so much. The last one is for Sandra. Obviously, you supplemented the balance sheet here in the fourth quarter. Can you give us an update on the year-to-date activity against that ATM? You know, you've had a certain amount of volume and, you know, some volatility in the stock, which has given you some opportunities. I just want to get a sense of where, you know, how much you've been active in the market with that and roughly where you think the cash balance may be exiting the quarter during that early, you know, with the half of the quarter here.

So as of December 31st, we went into a traditional blackout period because of our financial results. So, we've not been in the market.

Okay. So, zero. Okay. Perfect. Thank you so much.

Thank you. Our next question comes from the line of Jeff Lewismeyer with William Blair. Please proceed.

You have Mark Shooter on for Jed Dorsheimer. Congrats on the year and the new 53 customers this quarter. That's great to hear. I guess I'll dig in a little bit deeper on Colin's point, which is I was a bit surprised to hear you're looking to continue to expand and diversify and add more customers to the list. Can you walk us through the strategic decision to target many customers with smaller volumes versus fewer customers with larger volumes? Or does it just take this many engagements to land a large PO?

Mark, we Most of those customers we are dealing with, they have a high volume of potential. Otherwise, we wouldn't do it. If a customer tells us the maximum is 30,000 cells per year, we're not going to deal with them. Because every customer we are dealing with, they all claim they have a large volume potential. Of course, we do our diligence. We'll see their growth path. We will see their devices, how much battery they need per device. This is a very competitive market. The more customer we can engage, the more opportunity for success. So that's why we have a large pile of customers at this time. And during the next six months, I think we will filter through. We have to focus on. Another reason is this market. We have a huge manufacturing capacity support us. So the capacity is not an issue for us. That's why enable us to engage with very high volume customers. But focus on high volume customer is our priority. There's no doubt about it. That would make manufacturing much easier. Even we engage so many customers, so we don't customize our battery for each customer. So we have 14 SKUs in our catalog. We probably even want to shrink to about 10 SKUs in the future. So because of the performance of our product, Most of the customer would like to accommodate our cell format, our standard, I would call unpaired standard Beji cell format.

Oh, thank you, Khanh. That's very helpful. Talking about the aerospace and defense customers, I know you have a strategy to include a more geographically diverse production contract manufacturing career you mentioned in Europe. I'm interested. Have any of those customers reluctantly walked away or have not purchased yet because of the China supply?

Surprisingly, none of the customers walked away because of the source of the supply. But we do have a customer ask us to change the manufacturing phase in nine months or six months to nine months or say in 2026, you have to manufacture in so-called NATO-friendly countries.

Very interesting. Okay. Thank you very much.

Thank you. Our next question comes from the line of Chip Moore with Roth MKM. Please proceed.

Hey, everybody. Thanks for taking the question. I wanted to ask on maybe just an update on commercial side, obviously you're having good engagement with new customers. Maybe talk about investments you're making there on the SG&A. What's up is that, you know, somewhere you're investing in, and I guess what can you do there to maybe help accelerate some of this commercial adoption?

Yeah, Tiff, this is Sandra. So we definitely have increased our investment in sales. We've effectively, over 2024, tripled the size of our sales team. It's still a small but mighty, mighty team. Based on the fact that, as Kang mentioned, this is really a design-in-win process, so it just takes time to manage these accounts. G&A separately was up because of some of the non-recurring items that you saw, you'll see in the financials.

Yeah, yeah. Got it. Appreciate it. And maybe, you know, a follow-up on the customer side, I think it was 77% outside U.S. Any more color there on, you know, how spread data, you know, is there concentration within that? Or how do you think about that ship to outside U.S.?

Yeah, we expect we have more customer outside of the U.S., Not because the U.S. business doesn't grow, just that we have more international customers. Once we set up additional manufacturing partnerships, we expect we will have strong customer inquiries outside of the United States.

Yeah, Chip, to clarify, the U.S. grew, no question. It just grew at a smaller rate, and that's just because of the global interest in the batteries.

Perfect. Okay. And maybe just the last one. I think you said what you added over $16 million to backlog Q4. You've won some more orders this year. Maybe just any way to help us frame, I guess, where backlog stands you know, year end and how to think about visibility in 2025. Thanks.

Yeah, I will field that one. Let's see. We just filed the 10K and we report out on our RPO. And RPO I believe was, just find it. My apologies. 16 million, 17 million in that range, there's backlog. RPO was 15 million nine at the end of December. For under excluding government grant revenue and then 17.2 including government grant revenue and it's all expected to convert within the next 12 months. But as you know, customers are placing POs quarter by quarter, so that's more indicative of what we have fueling the first half of the year.

Gotcha. That's what I was getting at. Okay. Great. I'll stop there. Thanks.

Thank you. Our next question comes from the mind of Derek Soberg with Cantor Fitzgerald. Please proceed.

Yeah, hi, King. It's Andrew. Congrats on the results here. I wanted to start with some of your Fortune 500 customers. Sounds like there's significant upside with them. What's it going to take to get maybe a sizable project expansion with those customers? What's kind of the criteria that they're looking for initially? Is it how the batteries perform in the markets? Can you just talk about, you know, the potential of getting to the next level with those customers? And then I've got to follow up.

OK, there are two engagements we announced. One has about 2 gigawatt hour purchase possibility. This is related to 6.3 amp hour cell we just delivered. Another one has about 1 million cells per year potential. It's actually the high-end consumer electronics product is not our major focus, but this customer's product at this moment, only our technology can support. So those are two, we call Fortune 500 technology company engagement we announced. In addition to that, we have been engaging with some larger corporation for different projects.

And Kang, earlier in the call, you laid out three types of customers. You know, for those Fortune 500 companies and opportunities, where would you kind of, which bucket would you put those in?

Okay, the first one, electrical vehicle. This has a two gigawatt hour opportunity. They have the vehicle. They have a vehicle already set up. That's not a problem. But this is... This is the battery has much higher energy, much higher energy and much higher power. So I think that the battery evaluation is a major part of this venture. They don't need to certify their vehicle. They need to get our battery qualified. And this group of people will come to our contract manufacturing partnership factory in April. So for the second contract, That one, even easier. That's just a simple replacement. And our battery is way qualified. It exceeds their current performance level by a very large margin.

Guys, that's helpful. And then, Kang, just on that point, the second customer, are they looking to use a battery platform that you're already commercializing today, or is this kind of a next-generation battery platform that they're hoping to use? Can you discuss that at all?

Yeah, the cell chemistry are the same. We already have this battery manufactured, I think, for 28G, the cell chemistry. But the cell format is different. This is the problem. It's the smallest battery ampere that's ever made.

Got it. That's super helpful. And then, Sandra, just based on, you know, some of the visibility that you guys have into demand this year, some large programs expected to hit, how should we think about gross margin, you know, sort of going from negative to positive? Can you talk about the gross margin progression for the years as we sort of reach scale here?

Yeah. So, you know, we've talked about the fact that SICOR sales are gross margin positive day one. So that's what has helped drive the gross margin to negative 21% in Q4, which is, again, balancing the historical negative margin that we've had here in Fremont because we've been so capacity constrained and we've got such a tiny manual shop here. So I think we'll continue to see, since most of the growth is going to come from PSYCOR, positive movement. in the gross margin. Again, SICOR is growing, and we also had cost of goods sold in 2024 for the pre-construction and design work for Colorado that's not recurring. That wrapped up in October. So we should see positive progression on gross margin.

Got it. Super helpful. Really appreciate it.

Thank you. Our next question comes from . Please proceed.

Afternoon. I was curious to go back on the topic of pipeline and future business opportunities. I'm curious, King, like on the spectrum of sizes of these various customers you're talking to, How would you contextualize these ones that you've won of size, these kind of $15, $20 million orders that you guys have been successful with? Where would you say those rank? Is there a way to kind of bookend or think about what an average could be in any sense? I know it's probably wide-ranging, but just trying to get a sense of how material those wins are in the context of future opportunities you're looking at. Thanks.

Yeah. All those customers have the potential to reach that level. I mean, the $10 million, $15 million, even $50 million sales. But in 2025, we don't think they will reach their optimized purchase volume. But we will see the orders at the current level. That means $10 million to $20 million, maybe even $30 million order is quite possible. Our sales team, now the major function of our sales team today is to accelerate the customer battery qualification process to close the deals. We do everything beyond the sales function to help our customer to get our battery qualified, to have their product certified, a large fraction of our customers have a very decent volume potential. We just need to get those deals closed. Get a deal closed is to help them to qualify our battery as quickly as we can.

Got it. Okay. That's really helpful. Thanks. And for my follow-up, with respect to looking at diversifying the contract manufacturing base that you have, would you say that's explicitly for i guess shall we say trade related contingencies or are there other benefits to being in other jurisdictions or continents from a you know customer preference perspective or or otherwise are there other factors at play there yeah uh always good to have a diversified manufacturing base here we have a different type of customers

in locating different region. So even without geopolitics, it's good to have a different manufacturing base. So currently, because the supply chain is almost 100% Asia, so that's why the Asia is going to be our major focus in terms of manufacturing facility development. So currently, we have China. We have the best quality. faster turnaround time, and the lowest cost. We certainly have a customer, very appreciative. We have the facility there. And at the same time, we let the customer have a geopolitics concern. So that's why we are working with several Korean battery manufacturers. So of course, we don't use all of them at the end of the day. but we received very positive results. European customer, we have European customer. Actually, we are dealing with one of the major European drone companies these days. So they would like us to have some participants in Europe in terms of manufacturing.

Great. Those are really helpful details. Thank you for the time.

Thank you. Our next question comes to the line with Ted Jackson with Northland Securities. Please proceed.

Thank you very much. Congratulations on the quarter. My first question for you is looking at your customers. So you have about 235 customers. You had 182 new customers just in the year. So, you know, I mean, three-quarters of your customer base is new to you relative to the year. You commented that you had 25% of your revenue in the fourth quarter come from the LED segment. And so I'm going with this. I'm curious, when you look at the end markets that you've been selling into, what was the mix of those end markets with the 48, or whatever is the total amount of customers that you had in 23? What was the mix with it in 24? How did it shift? And then when you look at the opportunities in front of you for 25, how would you see that mix change further in 25? Does that question make sense? That's my first question.

Make sense. Yeah. So 23 to 24, we certainly had electrical vehicle business. 2023, we didn't have any participation. So the customer come to us, they look at our battery specs, they think it's ideal for their application. So we look at the market size is very large, the qualification time much shorter, and the check size is bigger. So we decided to get into electrical vehicle. 2024 confirmed it was a successful engagement. So 2025, we anticipate that we have more LED electrical vehicle business. And of course, the aviation is still growing, but the LED electrical vehicle business will be getting bigger.

What was, so if I was to think of 2024, in the first quarter was the LED segment basically non-existent, in the fourth quarter it was, you know, 25% of revenue, and Would I expect that as we go through 25 that the LED segment would potentially be more than 25% of revenue given what we saw in 24?

That would happen. Yeah, for two reasons. Reason number one, we have some customer has a larger volume and is early adopters. They don't need to spend a month, a year to qualify. They think our battery is perfect. If they can design into the pack, then they can use it. So there are a lot of those programs already reached advanced stage. For that reason, I would think, I would forecast we will have probably over 25% electrical vehicle revenue.

Okay, my second question. I know it's not really a great metric, but it's just kind of a thing to look at to kind of see how you're progressing in terms of kind of larger orders and shipments, how you're progressing in terms of your customers' products really going commercial. And so I'd look at the revenue per customer, and I look at the last four quarters. It was $28,000, then it was $60,000, then it was $64,000, then it's $105,000. And so what that tells me is that you are seeing some of these new design wins come to fruition, become production-level shipments. When I look at that and I think forward, and I think about the new customer wins you've had, will I see your revenue become more driven by existing customers and perhaps not see so many new customers in 25, or will I see both? I mean, how would I think about that mix? I mean, because in your new customers, you had 48 new customers in 23, you had 182 in 24. I mean, is it going to be another 182 new customers, or will we see that new customer growth kind of slow down? see greater revenue generation from existing customers whose products are becoming commercial? That's my next question.

Yes. Existing customer will contribute more revenue than the new customer for sure. Because normally if we engage with the customer, unless the customer already know our battery and they see the spec already feeding into their pack or their application, Most customers come in with a couple hundred sales, a couple thousand sales, and it becomes, let's say, 25,000, 50,000 sales. Then they go for 100,000 sales. This is the qualification process in this business. If we look into this, the existing customers certainly begin to contribute a lot more revenue than the new customers.

But now, would we still see, I mean, if we think about your new customer pipeline, I mean, is it so robust that we could still see you add 100 or 200 new customers in 25? Or are you getting to the point now where it's less about that, you know, like that's going to slow down and it's really about harvesting the customers that you've, you know, brought in?

Yeah, we covered a very... We have very solid coverage of aviation market today. That means fixed-wing electrical aircraft, drones, AirTags, EVTOL type, and hydrogel super-satellite. We have very solid coverage here. But there are many emerging companies come out. You talk about a drone company, just in Ukraine, There are over 200 drone companies. The Taiwan almost have every new drone companies every other week. So, but we don't, we will be more selective, yeah, in 2025, you know, 2024, 2023, anybody come to us, we take it because it is the early stage of market development. Now our coverage is quite solid. Now we know who is going to win, who is not going to win in the near term. So we will selectively acquire new customer. But the most important task for MPI is to push the current customer to commercialization stage.

Um, sort of following on to the thing with new customers, the 182 customers, new customers that you had in 24, I mean, it was just such a substantial ramp. You know, the side core came out in that period of time. Can you give some sort of sense in terms of, of those new customers? What's the mix between a Cymax and Cycore?

Uh, primarily I would have seen 90% for that core, uh, because, uh, uh, cycle is readily available. We have, uh, capacity to support. When customers come to us, they are not only looking for the performance, particularly those sizable customers. They want to see you have manufacturing capacity to support. Otherwise, they wouldn't engage. For Sitecore, we developed a huge manufacturing capacity available. It's 1.8 gigawatt hour capacity. So the customers feel very comfortable to engage with us.

My last question, and I'm sorry to ask so many, and it's really just a nitpicky one. Just kind of looking at my model, I had a gap, and I'm curious, like, at the end of, you know, you ended 2024 with 235 customers. What was the customer count at the end of fiscal 23?

You know what, Ted, let me pull that from our filings, and I'll send that over to you.

Okay. Okay, that's it for me. Sorry to be such a pain. And again, congratulations on the quarter. I look forward to 2025 and beyond.

Thank you. Thanks.

Thank you. Our next question comes from the line of Amit Dowell with HC Rainwright. Please proceed.

Thank you. Good afternoon, guys. you know, with respect to the revenue cadence for 2025, can you provide any color on whether we should expect, you know, sequential improvements through 2025, you know, relative to what the fourth quarter results?

Yeah, so I think we would expect to see We're not a seasonal business per se, but I think the first quarter has just had some headwinds. There's been a lot of changes as far as the funding landscape, so we're confident in what the year growth has the potential to be. But we're expecting Q1 is going to be a little tougher just because of the change in the administration here.

Understood. And I'll follow up on that with you offline. Gross margins, Sandra, is there a level that you have a sense, revenue-wise, where you think you can start turning gross margin positive? Is it like 15 to 20 million or higher than that per quarter where you can start seeing gross margins turn positive?

You know, we haven't given guidance on that yet. I think we're still, we're working on a, you know, target model. And, but we don't have anything concrete today.

Okay. And maybe for Ken, you know, with respect to sort of larger applications like EV tools, et cetera, how different is the sort of the battery chemistry or technology relative to what you are already shipping to customers currently? and how much improvements need to be made to sort of win some of those types of orders?

Yeah, for eVTOL, we already qualified for one customer application. So our chemistry is very robust. I would say we don't need to change a whole lot of chemistry to support this market. You know, the Huawei aviation, we basically use the same cell chemistry, with slightly adjustments. For example, customers want to have more energy. They want to have more power. We can make some changes to satisfy them. There is no major invention involved because the platform is quite robust. You look at the battery we delivered, 371 watt per kilo with 10C, 15C. uh capability so with that as the baseline we almost can deliver the sales for all applications in this market segment understood okay um yeah that's all i have other questions have been asked um i'll follow up with you guys offline thank you thank you

At this time, this concludes our question and answer session. If you have any additional questions, you may contact us at the operations team at ir.ampreus.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 then learn about upcoming events and the presentations from the investor relations session of our newly revamped website. I hope you can check it out, and we look forward to updating you on the exciting progress we are making in transforming the electrical mobility market. Finally, I'd like to thank our employees, partners, and the shareholders for their continued support. Operator.

Thank you for joining us today for N3S Technology's fourth quarter and full year 2020 earnings conference call. You may now disconnect.