Loop Energy Inc.

Good day, everyone, and welcome to the Loop Energy Q4 and full year 2022 results conference call. Just a reminder that today's call is being recorded. If you have a question today, please press star 1 on your telephone keypad. At this time, I would like to hand things over to Ms. Natalie Arsenault. Please go ahead, Natalie.

Hello, and welcome, everyone. Thank you for joining us this afternoon for the fourth quarter and full year 2022 earnings conference call for Loop Energy. Joining me is our President and Chief Executive Officer, Ben Nyland, and our Chief Financial Officer and Corporate Secretary, Paul Catterford. We will be available for questions at the end of the presentation. Before we begin, I would like to clarify that our comments today will include statements and answers to questions that could imply future events, such as our 2023 prospects and financial performance, and could include the use of non-GAAP and non-IFRS measures. Though it is obvious these statements are subject to risks, uncertainties, and assumptions, accordingly, actual performance could differ materially from the statements made today, so do not place undue reliance upon them. We also disclaim any obligation to update forward-looking statements, except as required by law. I ask that you read our legal disclaimer and refer to our risks and assumptions outlined in our public disclosures In particular, the section entitled Forward-Looking Statements and Risk Factors in our annual information form for the year ended December 31, 2022, and our filings, which are available on CDAR. Fourth quarter and four-year results were released day after market. The press release, financial statements, as well as MD&A and annual information form are available on CDAR and on our website at loopenergy.com. I would now like to turn the call over to Ben Ryland.

Thank you, Natalie. In my prepared remarks today, I'll begin by providing some commentary regarding the fourth quarter of 2022 and what we are seeing emerge in the marketplace here in 2023. I will then briefly review a five-point operating plan that we've put into place and the important strategic engagement that we've entered into with Credit Suites, which we announced after market today. I will then pass the Call over to Paul Catafert, our interim CFO, to provide a summary of Q4 and year-end 2022 results. And then we'll open up the lines after that for the Q&A session. In the fourth quarter of 2022, we continue to receive positive feedback on our recently announced S1200 Next Generation 120kW module. Using our larger e-flow plate design, the S-1200 fuel cell solution is targeted at mid- to high-end bus and truck manufacturers for electrification of their transport vehicles and to significantly extend their driving ranges. On the operating side, we undertook a cost reduction initiative in the fourth quarter and decreased our operating expenses significantly. Paul will provide some additional commentary on this initiative in his prepared remarks. As we headed into fourth quarter last year, we continued to see strength in our customers' expectations for the end of the year and for 2023. However, as we approached the end of Q4, it became apparent that headwinds in the capital markets, rising electricity costs, and overall inflationary pressure were resulting in extended timelines for both new and existing projects, thus impacting demand formation across the value chain in our industry. Our close connection to the OEM customer ecosystem enabled Loop to act collaboratively with our customer base and implement adjustments to both production and delivery schedules. In this changing macro environment, I've been working closely with Kent Sexton, the Chair of our Board of Directors, and Paul Catterford on a five-point plan which includes the following. The first point of the plan is focusing the company's efforts on projects that provide clear near-term value creation and market opportunities. The second point of the plan is working closely with existing and new customers to shift fuel cells as well as to better understand and plan for the deferred growth. In 2022, we expected the economic slowdown to be short-lived and for growth to return in 2023. We are now seeing that the slowdown is likely to be longer. In response to this, we are working closely with our customers to understand their near-term needs and to be prepared when the growth returns. The third point of the plan is adjusting our business development efforts, including sales, marketing, and support, to the new economic and geographic realities of the sector. The fourth point of the plan is managing operating expenses to the current market conditions. And the fifth point of the plan is engaging Credit Suisse to advise us on strategic options regarding partnerships, joint ventures, investments and other opportunities. Let me speak to the first and the last two points in the plan in a little more detail. I indicated that the first point of the plan is focusing the company's efforts on projects that provide near-term value creation and market opportunities. Within this part of the plan, there are three key initiatives. Specifically, the first key initiative is completing the vertical integration of the bipolar plate manufacturing process for our next generation products. This is one of the key pillars in our cost of goods reduction strategy. The second key initiative is completing the development of our low-profile 60 kilowatt unit, which is targeted at the vehicle market, one of the few markets that is continuing to grow in spite of the current economic climate. And the third key initiative is sourcing a strategic partner for the next stage of electrolyzer development using eFlow technology. This allows us to focus our product development and business development teams on our core market, fuel cells for transportation, while continuing to move into the electrolyzer space. Our work with Fraunhofer IFD has demonstrated the potential of incorporating our technology into electrolyzers, something that we feel can deliver compelling value to strategic partners seeking to improve the performance of existing products or provide a market entry point for new players. These are the three key initiatives of the first point of our plan. Regarding the fourth point of our plan, managing operating expenses, At the end of 2022, Loop's global headcount was 134 employees. With the most recent changes we have made in Q1, we have reduced that number by roughly a third. The changes were designed to maintain the functionality of the business and enable the focus on vertical integration, new product launch for buses, and support the strategic options process with credit suites. Our headcount today remains higher than at the beginning of 2022 with an extremely high-caliber group of employees, and we believe this adjustment aligns the company's capabilities and capacity with the new reality of the market. And finally, let me provide a little more context for the Credit Suisse engagement and the initiative that we are undertaking. As I mentioned earlier, the market for commercial fuel cell vehicles has shifted over the last several months. What we have learned from the last couple of years is that Loop's products are compelling and customers are taking them on. However, the volumes that are needed to reach positive gross margin and ultimately profitability as a standalone fuel cell company are market growth dependent and as a result may be further away than previously expected. In this situation, it is prudent to step back and assess all of the options available to the company. This can range from equity investments engagements, such as joint ventures, partnerships, mergers, or even acquisitions. We have engaged credit suites because of their global reach and strong existing relationships with many of the companies who would be great strategic partners or investors in move. Engagement is underway, and we plan to provide further updates as appropriate. I can say that we are excited about the opportunity to engage in this process and to enter into discussions with world-class potential partners to map out a path forward for Loop Energy and our leading hydrogen fuel cell technology. Credit Suisse is advancing the process quickly and Loop's management team has consistently proven that it is agile and capable of moving quickly as well. Given the current economic climate, we are looking to fully understand all strategic options available so our Board of Directors can then decide on the one that best serves the interests of the shareholders, customers, partners, employees, and company going forward. I will now turn the call over to Paul for his review of the fourth quarter and year-end 2022 financials.