Q2 2021 Advent Technologies Holdings Inc Earnings Call
Good morning, everyone I will be your conference operator today at this time I would like to welcome everyone to the advent technologies second quarter earnings Conference call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there'll be a question and answer session.
On the call today, we are joined by Doctor The Sealy Gregori, you advance chairman and CEO and Kevin.
Brachman advent CFO.
Before we begin the prepared remarks, we would like to remind you that advent issued a press release announcing its second quarter 'twenty 'twenty, one financial results shortly before market open today.
You may access the materials on the Investor Relations section of our IR Dot advent Dong energy.
I'd also like to remind everyone that during the course of this conference call advanced management well discussed.
Forecast targets and other forward looking statements regarding the company's future.
Customers customer orders and the company's business outlook that are intended to be covered by the safe Harbor provisions of the private Securities Litigation Reform Act of 1995 for forward looking statements.
While these statements represent the management's current expectations and projections about future results.
And performances of today advent actual results are subject to many risks and uncertainties that could cause actual results to differ materially from those expectations. In addition to any risk.
During this call important factors that may affect advent future results are described in its most recent S. E. C reports filed with the Securities and Exchange Commission, including todays earnings.
Press release.
Except as required by applicable law. The company undertakes no obligation to update any of these forward looking statements for any reason after the date of this call lastly.
Lastly, information discussed on this call concerning the company's industry competitive position in the market in which it operates is based on information from independent industry and research organizations. Other third party sources and management estimates management estimate.
Are derived from publicly at the publicly available information released by independent industry analysis, and other third party resources as well as data from the company's internal research and are based on assumptions.
Upon reviewing such data and this experience and and and and knowledge of such industry end markets.
Which believes to be reasonable these assumptions are subject to uncertainties and risks, which could cause results to differ materially from those expressed in the estimates.
Please note that this call is being recorded.
Kicking off the call will be Doctor lists.
The Sealy.
Or are you Doctor Gregoire, you all I'll turn the call over to you.
Thank you operator, good morning, everyone and thank you for joining us for <unk> second.
Second quarter 2021 earnings call.
Joined today by our newly appointed CFO, Kevin Brackman, We're pleased to have Kevin joined has not been this quarter and we'd like to offer a warm welcome to him as a member of the leadership team.
Kevin replaces been founder who has served as a CFO, but then following its merger in February 'twenty to 'twenty, one with a M. C. I acquisition Corporation, where she was chief Executive Officer.
In today's call I will provide some brief comments about our results followed by an update on the business I will then turn things over to Kevin to review, our financial performance and outlook in more detail.
Turning to our results Kevin completed our second quarter as a public company, we're continuing to build our high temperature products to new and existing markets and we're working to expand our offerings throughout the various partnerships. Our business is rapidly growing and we are strategically expanding our team.
In the second quarter, we delivered 1 million in revenue up 400% from the prior year driven by strong customer demand for admins product offerings and the acquisition of ultrasound.
We continue to have strong cash reserves totaling 116.1 million at quarter end, our sales of Mbas and redox flow battery components remains strong and we expect to see both revenues and bookings increase as we move through the remainder of 2021, we're optimistic about the long term revenue part of the company.
We have kept a very busy quarter highlighted by notable new business activity.
More recently, we entered into an agreement to acquire the fourth fuel cell system businesses.
And she said Agco solutions from <unk> group.
Energy based in Denmark in the Philippines is a leading manufacturer of high temperature proton exchange membrane fuel cell system globally with thousands of systems shipped around the globe during his 15 year operation.
Yes, I'd Echo solutions based in Germany provides fuel cell stack assembly and testing as well as the production of critical fuel cell components, including membrane electrode assemblies bipolar plates and reformers.
P. S operates a facility on Chris's group combos, and nausea in Germany, and that facility would be least leviathan upon closing of the deal.
Jackson is expected to accelerate the implementation of our business plan to expand oddbins growing the revenue base in fuel cell stacks and systems together, we will provide a platform to meet the rapidly increasing demand for alternative power across the globe.
With the addition of <unk> Energen preset Eco solutions admin will expand its geographic footprint by three countries in Europe, and South East Asia and will add 92 employees in these growing team. We look forward to successfully integrate our new colleagues and the extensive experience they have to offer.
The deal will bring together some of the leading minds into high temperature fuel cell space and will further build our platform to meet the rapidly increasing demand for clean energy worldwide.
This transaction fully aligns with admin any fuel anywhere option and this together with a previously completed acquisition.
<unk> been through a global leader in the remote enough power market for fuel cell production with mobility and aviation products on the horizon as well.
We look forward to being able to share more information in the coming weeks as the transaction is expected to close in the third quarter of 2021.
In early March we announced that we entered into a joint development agreement with the United States Department of Energy's, Los Alamos National Laboratory reshape of National Laboratory, and the National Renewable Energy Laboratory under this agreement.
Along with support from the deal is hydrogen and fuel cell technologies office.
And then stable scientists are working closely with its counterparts to develop breakthrough materials to help strengthen U S manufacturing the fuel cell sector and bring high temperature proton exchange membrane fuel cell to the market.
Very important programs has continued to progress over recent months included delivery insertion of samples for key components of next generation high temperature <unk> systems.
In May we announced our participation in the major European hydrogen project White Dragon proposal.
As part of a group of our largest energy companies in Greece, and Italy. The proposal sets forth the future vision for the entire hydrogen value chain and a path to expand its role in the Greek energy system reduced carbon gods.
The objective is to gradually replace the lignite power plant in Western Macedonia in Greece, and transition to clean energy production and transmission with the ultimate goal or fully decarbonize in Greece entered the system. The White Dragon project plans to use large scale renewable electricity to produce green hydrogen by electrolysis and western muscle.
Don't you.
Odd when is a key player in the projects. The project as this hydrogen will then be stored using oddbins high standards of fuel cells supplying all of Greece with clean electricity clean energy in sheet.
Further in July 2021, we announced that we have been nominated by the Greek Minister of development investment to be part of the first wave of IPC iron a hydrogen and have also been selected to be the coordinator of technology field, two dedicated to fuel cell and associated technologies the companies.
Very pleased to be the designated fuel cell partner for a potential 8 billion Europe project, we look forward to offer an additional color as the project becomes together in the coming few months.
Early in Q2, you also sign a new contract through our subsidiary holds ourselves with a U S Department of defense for the wearable fuel cell.
This contract will be focusing of computing the M. I L. S. D D certification or Walter ourselves 50 watt the reformatting of Wearables fuel cell power system known as shiny Bonzer. Connie Badger is designed is designed to integrate with materials already utilized by the U S Army and will operate as a wearable.
Battery that can be function on the move as we noted on last quarter's call Honey Badger was selected by the deal with National Defense Center for energy and environment to take part in <unk> 'twenty 'twenty, one demonstration validation program.
We are excited about the continued progress of Carney Badger partnered with a U S. Army is a landmark for Ireland as our products become a key choice for defense applications.
On the policy front, we're optimistic about I'd been will continue to increase market share as the world focuses more on clean energy as of June The World Resources Institute reported a 59 countries represented over half of Grubhub G. H G emissions have conveyed net zero emission targets, we believe our.
Fuel cell technology will play a key role in driving decarbonization.
As we move forward worldwide towards clean renewable energy advent is prepared to increasingly contribute to the goal of 100% clean energy.
With that I would like to turn it over to our CFO Kevin Brackman.
Thank you Sally and good morning, everyone.
Hey jump into a review of the results I wanted to say, how thrilled I am to join the advent team.
This is a dynamic company with an exceptional leadership team and unique operational opportunities ahead.
With growing integration of hydrogen fuel cells into the global energy transition over the next eight.
Advent is well positioned to play an important role in the adoption of hydrogen fuel cells through its innovative EMEA technology.
As a result, I couldnt be more excited to be part of the company and look forward to playing a role in advance that dilution.
Turning to our financials as facility noted earlier, we delivered net revenue of $1 million in the second quarter, a 400% increase from the prior year.
The increase was driven by growing customer demand for advanced N. A as in other products as a result of advanced customers, increasing their own testing and usage of our products.
The acquisition of Altra sell also contributed to the growth in revenue this quarter.
Cost of revenues increased zero point $5 million or 207% year over year does hero point $7 million in the quarter as compared to 0.2 million in the prior year period. The increase was directly related to revenue growth over the last year and the requirement for <unk>.
Increased production of EMEA and other products to satisfy customer demand as well as ultra sells operations.
Gross margins were also higher in the quarter, reflecting the revenue growth in our more mature mix of revenue.
Advent reported gross profit of zero point $3 million in the quarter compared to breakeven in the prior year quarter due to the strong revenue growth.
<unk> expenses were zero point $6 million in the second quarter, primarily related to our cooperative research and development agreement with the Department of Energy, We announced in March of this year.
Administrative and selling expenses were $6.6 million a year over year increase of $6.2 million due to increased staffing cost to operate as a public company and stock based compensation expense.
The net loss totaled $3.1 million in the quarter and the adjusted net loss was $6.8 million I should note that our adjusted net loss excludes the impact from the change in the fair value of the outstanding warrants.
This compares to a net loss and adjusted net loss of zero point $3 million in the prior year period, our net loss per share was seven cents in the second quarter of 2021.
And then also remains well capitalized with $116 million in cash reserves on the balance sheet, which provides us with the flexibility to be agile and executing on our strict T. J can operational priorities. This is a decrease of $8.9 million from March 31, 2021, driven primarily by the <unk>.
Cash for operating and capital expenses in the second quarter, and a $2 million payment to complete the acquisition of ultrasound.
Existing cash reserves and projected cash flows are anticipated to be sufficient to support our planned operations for the next 12 months.
Company expects to invest substantially in fixed assets plant and equipment in the near future as it executes its product development programs.
Turning to our outlook.
Based on our performance to date in the current macro factors. We are reaffirming our previously issued full year 2021 guidance of investing between $25 million and $40 million in combined Capex and operating expenses to develop our next generation fuel cell products.
<unk> and expand our business.
We continue to plan on utilizing between $15 million and $30 million on a net cash basis, which includes our current revenue projections for existing products.
We continue to anticipate entering 2022, and a very strong position with a significant portion of our current cash balance and our liquidity position that will allow us to fund operations for the foreseeable future.
In closing we had advent are well positioned for the future. The company has built a solid foundation for the business and we will continue to execute against our strategic growth priorities I look forward to meeting and speaking with many of you. Many of you in the coming weeks as I settle into the CFO role pleased.
Not hesitate to reach out to set up a time to speak as I look forward to getting to know all of you.
With that I will turn it back over to the silly for closing remarks.
Thank you Kevin we believe there is enormous opportunity for high temperature fuel cell technology.
Theres, an economist here in our businesses today, they enable to provide the necessary scale and innovation to fill that gap.
Since we have begun which have always been committed to be a leader in this space and continue to prove our dedication through our partnership and continued product development as.
As the world increasingly recognize the importance of renewable fuels oven will be a major player in the fuel cell and hydrogen economy I want to thank you all for joining us today and now we're ready to answer questions. Thank you very much.
If you would like to ask a question no need to press star one on your telephone to withdraw your question press the pound or Husky's. Please standby, while we compile the Q&A roster.
Okay.
Yes.
Your first question comes the line of Laurence Alexander with Jefferies.
Good morning, I have two questions. One can you give a feel for the SG&A cadence for the balance of the year.
And secondly can you.
Give some context around the white Dragon project.
What the potential revenue opportunity for advent could be if that project goes forward.
Yeah. So.
<unk>.
This is Kevin.
I'll take the SG&A question, and then Vasili will address the White Dragon project.
So on SG&A in the second quarter, we had roughly six and a half.
Uh huh.
S G.
Yes.
I would say that that included approximately approximately 1 million of what I would call nonrecurring costs.
Which we don't expect to repeat in.
In the third and fourth quarters.
But having said that we will we will have additional stock based compensation expenses in the third and fourth quarters from the grants.
What he awards that we completed in June.
And so I think our run rate SG&A, we will probably be a little bit higher.
Then what we were looking at in the second quarter.
Yes.
Now regarding the White Dragon project the way that are going on is that an umbrella project, meaning that it shows a sub projects are under it and not when is the.
A key participant there because we will provide if the project goes to the.
Final state and we will we should know in the next few months.
We will provide not only the high temperature <unk> cel collaboration with nor are they turned the company.
We will actually would be key providers of the electrical Liza as well.
It is a mega project the potential earnings capability for admin is enormous.
Don't want to say more and not to mislead because we need to make sure that we show for the.
The okay from the European Commission and the Greek government that they will actually fund the majority of the project, but so far.
Three states.
Project. If you will we have passed the first one meaning that we are the selected wanted to go to the first wave from the Greek government of BMD.
Good.
Minister of development and now we wait from the Prequalification from the European Commission.
And that should happen relatively soon there we should be able to give.
A better idea, but we're talking about a very very very significant opportunity for for us and thanks for bringing it up we will know more in the next few months.
The Mt.
And then also for both of those both the deal when you project and the initial phase of the White Dragon, where you're acting as the coordinator.
Are your total cost related to those projects being covered.
Being reimbursed.
Reimbursed in any way.
Or is there kind of a net GAAP that we should be thinking about that's incremental and then you would get it back if the project proceeds.
And if I understand correctly, we're not going to pre pay something right now at least for the wide that are gone we will find out there is what's called the funding gap and that's the major discussion there because as you know we have great products.
I think people know that they are just expensive. So there is a what's called a funding gap that the the cost of Mexico. In this particular case that European Commission Comed and agreed through negotiation to pay the majority of it and that's the the the number that we wait to find out.
But it will be massive if it goes through and as I said, there will be one of them are to keep projects in Europe and I'm glad again, you bring it up because I think the market is so far it has not come to appreciate the magnitude of it and we've been also conservative because we're a relatively smaller called by now and this is a mega.
But we will actually be able to finish it with the support of the partners and the.
Funding.
Organizations.
We have the technology now regarding to deal with that.
We have the D O E, which is a program that we pay and we get the technology right to it because we co develop with the Dewey.
The innovator program and then there is the deal we you know the honey Badger and there the potential earnings are in the tens of millions and we will know next year now under qualification state we have.
I received a few million dollars and we announced it in Q1 and now where are the army's qualifying the product and we should know early 'twenty to 'twenty two but the potential revenue there is probably an authentic effective movement.
U S dollars.
Yeah.
Your next question comes the line of Elliot Jones with Fern Lee.
Hi, guys.
Thanks for the update.
Good speech you Kevin for the first time and congrats again on the new position.
Just two quick questions from me.
Yeah.
Obviously the revenue.
Being driven by customer demand.
The acquisition could you give them.
Potentials.
The revenues between operating revenue on the ultra ultra so revenue is that possible.
We don't.
We're not going to provide that level of detail between them.
Our organic and inorganic.
We havent guided to that and so we will stay away from providing that level of detail.
Got it.
And then the second quick question for me is just on the M&A.
Hey, you guys are hitting your cash balance to good use with.
With the acquisitions do you expect kind of any any further.
In the short term teach here or do you think the kind of found.
Foundations are kind of set.
You guys now.
Your next 12 months.
Yeah, well, we don't expect something immediately we're going to have something in the pipeline if youre asking that however, as we as you see with <unk> energy, which kind of immediately accelerates our business plan by a years.
I went to opportunities there would move fast and the point I want to make here I think you know it but I think the market has to also.
Be more familiar with it is that we're talking about a very accelerated sectors here. Okay. It's not the slippery sector. You know seven years ago that you know there are only five players and we've kind of figured out how to do and wood fire away things will happen now that will happen because governments are there.
And it and the opportunity that I'd been provides with its unique technology has to be understood because towards Asia, where a bridge technology. You know, we breeds oil and gas, which is going to be with us for the long time, I mean, let's be practical about the entity list, but on the other can you have too much faster now.
Go to zero emission.
World or a lower emission world through a zero emission strategy.
So in a way.
Coming back to them mayonnaise.
Some think my might happen just because they have to happen, but right now we don't you have something in mind.
Again, if you'd like to ask a question Press Star One. Your next question comes from Adam Foresight with Longbow Research.
Good morning, three questions. If I may firstly, it looks like quite a healthy gross margin at 33% I'm. Just wondering if can we see that level as a run rate going forward or is there anything sort of unusual in the mix I think Kevin you referred to sort of mature revenue mix at the moment.
I'm guessing there must be detail in there and second question just a quick one obviously, we saw we don't slow demand being quite strong in the first quarter and I Wonder if that's still there in the second quarter or was that more of a one off.
And then finally, just another question on point Dragon when it comes to the actual fuel cell applications do you have any just fisher have any.
Products, which could be pretty much off the shelf to use at the moment or are you going to have to develop specific products for for white Dragon applications. Thanks.
So yeah.
Your first question on gross margin, yes, I think.
It's going to vary depending on the customers you're selling to and the contracts that you have at any given point in time, but I do think 33% as it is you know pretty reflective of our.
Of our existing customers and existing product base.
And then I'll let out.
Yeah regarding the flow battery, yes.
Yes, not only where are continuing but we think there'll be an acceleration and I agree with you on this this is a very.
Very good technology also battery, but the technology and we have Oh you know.
Very good visibility.
Visibility for 'twenty, one and 'twenty two for sure which means that it will be continuing in the future. So that's number one now regarding the way that Argonne as you know the white Dragon.
We can use technology Douglas has developed but with the acquisition of <unk> energy, we've got than other systems, you don't methanol systems. This time, but with some modifications that can actually be.
Retrofitted to go there so yes, the acquisition gives us another strength if you will to attack a big project like this because in addition to the Knowhow. We have also manufacturing capacity now.
Yes.
Great that's that's.
Very helpful. Thank you.
Think of them.
There are no further questions at this time.
This concludes today's conference call. Thank you for participating you may now disconnect.
Yeah.
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