Q1 2022 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 <unk> Technologies' first quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

On the call today, we are joined by Dr. <unk>, Greg how are you.

Chairman and CEO and Kevin Brackman advert CFO before we begin the prepared remarks, you would like to remind you that <unk> issued a press release announcing its first quarter 2022 financial results shortly before market opened today.

You may access the materials on the Investor Relations section of the company's web site Www Dot advent dot energy.

I would also like to remind everyone that during the course of this conference call advance management will discuss forecasts targets and other forward looking statements regarding the company's future customer orders and the Companys business outlook that are intended to be covered by the safe Harbor provisions of the private Securities Litigation Reform Act of $19 95 for forward.

Statements.

While these statements represent management's current expectations and projections about future results and performance as of today and actual.

Actual results are subject to many risks and uncertainties that could cause actual results to differ materially from those expectations.

In addition to any risks highlighted during this call important factors that may affect future results are described in its most recent.

SEC 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, 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 estimates estimates are derived from publicly available information released by independent industry analysis, and other third party resources as well as data from the Companys internal research and are based on assumptions made upon reviewing such data in this experience and knowledge of such industries and markets, which is believed to be reasonable. These are.

Assumptions are subject to uncertainties and risks, which could cause results to differ materially from those expressed in the estimates.

Please note this call is being recorded.

Kicking off the call will be Dr. Phaseolus, Greg how are you Dr. Gregory I'll turn it over to you.

Thank you operator.

Thank you for joining us.

Quarter two.

Earnings call.

Dave.

Yes.

On today's call I will provide commentary regarding our first quarter results.

Hello, and good bye.

Davidson.

I will then hand over to Kevin.

Actual performance and outlook.

Thank you Melissa.

It's mark here.

W are working very effectively address their broadband.

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Based on the data.

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The first quarter.

Is it clean energy technology company.

Food and beverage.

The expertise and focus.

How does R&D.

License spending problem worldwide.

Technology and R&D programs.

Programs allow Bentley Walker spectrum abroad next to the energy market.

So.

Our global reach to include both the Martha Stewart headquarters.

In spite of the augmented in the Metro market participants and sounds 12 months.

Favorable going forward.

I'm sure lightweight.

Bandwagon.

Sure.

And then it appears we've lost Dr. Gregory.

<unk> if you would go ahead I'll dial back out.

Sure. Thank you.

In Denmark, and Germany, a shared development and assembly responsibilities for and then five kilowatts to 15 kilowatts arrange use systems.

In the Philippines, We service the telecom market through sales service and site preparation and in Greece, we have extended our MAA production and Palomar synthesis capacity.

Cleaning polymer for the next generation of had been EMEA.

During 2022, we will continue to consolidate our business to make operations more efficient and effective and to concentrate our activities on our key market.

Our business focus is on the production of advanced fuel cell materials, leading to direct sales and the development of advanced fuel cell systems, and collaboration with Oems, which will enable us to enter into long term licensing arrangements.

The latter is expected to deliver revenue consisting of milestone payments and royalties, which will provide the upside to our business.

We continue to have strong cash reserves totaling $59 3 million at March 31 overall, our performance this quarter leaves us confident about the long term growth and earnings potential of the company.

I will now give an overview of our key achievements during the quarter.

In March <unk> announced the availability of its next generation NDA. These.

<unk> are already undergoing testing and validation by select strategic partners.

Then EMEA technology back anymore.

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Yeah.

Yes.

On the paragraph talking about the next generation MBA technology.

Yes, yes.

This is somehow my connection is not good.

Before so I will take over and then.

We'll go back to your bedroom so basically.

<unk>.

The milestones already achieved because you were there in the U S. The Carnival brand is the collaboration with Biogen have already achieved include accelerated.

But just confirm that.

<unk> put a greater than five times improvement in lifetime versus current high temperatures been EMEA is a strong potential for two to three times the power density versus current high temperature <unk>.

<unk> is now in various discussions with joint development agreements and the denser heavy duty automotive.

And the excellent market.

And parents to scale up the production capacity will be up in EMEA and build the confidence of kilowatts per month in mid 2023 megawatts.

Per month.

For 2023.

The notion that the.

John products et cetera, any view counted badger and then zero as well as third party products, we'll be able to use that.

New oven NDA if possible.

As soon as 2024.

Due to the high temperature operation either in EMEA has been working with the pure hydrogen that can be reform onboard for methanol.

And again, we've lost talked to pick areas connection I'll fall back out to them.

I'll pick it up and then Mdas can work with the interior hydrogen that can be reformed onboard from methanol natural gas and other renewable fuels. The new AD been EMEA is expected to redefine the EMEA market globally, and further validated advance leading position in the electrochemistry.

<unk> business and.

In February we announced new contracts with manufacturers of clean power generation and energy storage solutions for the delivery of advanced Electrochemistry chemistry components. These contracts have a combined value of $2 $2 million, and then began delivering electrochemistry components in there.

<unk> fourth quarter of 2021 and deliveries are expected to continue to September 2022.

The vast majority of the new businesses from customers based in North America.

And then for Electrochemistry components business includes the electrodes membranes and Mbas. These components are critical for fuel cells, Electrolyzed serves and long duration energy storage such as flow batteries.

The performance of these components defines the lifetime efficiency weight and ultimately a sub.

<unk> portion of the cost of the and electrochemistry products at <unk>.

<unk> is continuously innovating in the area of electrochemical components advent electrochemistry materials R&D team is primarily based in Boston mass.

Since the ISS and manufacturing capabilities in Europe .

In January .

I'll take carbon policies again this time I don't think it will drop off because we tend to lag so I apologize to everybody for this.

In January we announced there were several handling the distribution and service agreement with Gulf kind of solutions.

Imagine based industrial service company focused in the oilfield industry.

The agreement allows calls come to market and sell install and service the other net zero.

Is your fuel cell products.

And the demand for electric systems in the oil and gas sector.

Kind of regulatory pressure focus on targets, we will be aggressively reduced oil and gas industry methane emissions through kind of the other diverse proppant of products, including the <unk> zero and so I don't know your fuel cell products aim to significantly reduce workload.

<unk> emissions, where they are.

Place methane pollutants pneumatic injection technology.

Increased well productivity and safety and decreased maintenance cost and well site based in North America.

Products amid significantly less government compared to conventional these are remote power generation technologies and can be deployed in more extreme environments that solar panels and electric battery system.

The other net zero products can also integrate with guidance system to enhance reliability and sort of the systems continued to operate create an additional value opportunities for customers via.

<unk> zero products are designed specifically to generate power.

Ireland.

The other methane emissions related to Wellheads, Canada approach 14 million tons of carbon dioxide emissions per year, which is equivalent to a carbon footprint of more than 8 million passenger cars.

Zero will initially be featured mainly in Canada, and the United States with the aim of providing remote private drop to highlight 5000 oil and gas wellheads.

Also in January we announced that augment will be upgrades and provided the size of globe telecom in the Philippines with 10 kilowatts of energy fuel.

Fuel cell systems, enabling globe to reach this ambitious targets for reducing C O two emissions.

By deploying now to answer any of your fuel cells global aims to reduce carbon emissions our growth as network consumed cleaner fuel in smaller quantities.

Lower emissions and maintain added efficiency the removal.

As I said I mean, your fuel cells produce pure ambition that the additional generator sets and also generate less noise, thereby providing a system, where the low footprint surrounded madison comment.

Depending on the fuel use the system can be close to neutral as well in Asia.

Storage and transport.

And as Youll systems, Ultrashape higher temperature and environmental conditions tolerance.

Children, I'm, interrupting backbone power and strong resilience against external environment, such as pay phones monsoon rains enable long dry seasons.

By using fuel cells for its green transition group comprised not only with regulation and it sounds the basis for the best environmental practices, but also secure several competitive advantages.

Maintenance to establish a science based targets and net zero emissions by 2050 are in line with the Paris agreement and race to zero.

The Paris agreement aims to limit global warming to one five degrees Celsius compared to pre industrial level.

The race to zero is the UN backed global campaign rallies nonstate stakeholders to take a rigorous and immediate action to have a global emissions by 2030 and deliver a healthier fare the zero carbon world by 2015.

All of our global initiatives and the green transition reflect its commitment to the UN sustainable development goals and also to decouple economic growth for environmental degradation increases resource efficiency and promoting sustainable lifestyle.

Changing the way people producing consumer goods and resource.

In February <unk> announced the signing of an Mou with electric as you pursue this or ESF.

Thats based business with over 15 years of experience in electric and hybrid propulsion systems and then there's the system.

Agreement is physical midst will be comment if future distributor of Rodman <unk> fuel cell products further strengthen its portfolio of innovative steel through reducing technology.

DSS offered demonstration and state of the art component, helping its customers significantly reduce emissions and energy efficiency.

This new collaboration will enable them to facilitate dry processes and fuel cell configurations for both land based and marine type applications, where the initial geographic focus will be in Benelux, Germany, Switzerland and Austria.

And the <unk> sales are currently being used for demonstrations within the framework of the Green season wasn't C program.

This program is to accelerate innovation definitive to neutral Unfortunately free shipping for the weapon systems as well as to develop the associated port facilities and infrastructure and to secure governmental pathways promoting the transition forwards.

<unk> zero through reducing technologies.

And one other and announce the vendor and the preliminary strategic agreement with Diovan and lead in power generation industrial equipment provider in Malaysia.

Dennis has declared his intention to become a distributor of <unk> fuel cell products.

This will enhance the promotion of guidance cleared product generation sources and not be really support the ongoing energy transition effort in Malaysia.

He has already shipped units.

So I don't know your fuel cell products with guidance for test and evaluation. What is the status of our complete guidance <unk> will determine the best therapeutic approach, putting production, Nevada methanol based fuel cell to the Malaysian market.

During the first quarter, we have continued to progress with a wide drought and Greek <unk> project in southeastern Europe , which are subject to your approval, while the approval time and is not.

Within our control.

We anticipate formal notification from EU during Q2 or Q2 for this year with the final ratification by the EU opinion shortly thereafter.

Harlan I think you started to put in place and operational structure.

Labor on this very significant projects without them being ideally poised to commence immediately upon final electrification, we look forward to providing multiple EU.

<unk> approval and the final scope of the projects over the coming months.

<unk> is well positioned to take advantage of the growing focus on clean energy.

We are continuously development of technologies and consolidated our operations to address.

Opportunities whichever product portfolio that's focused.

Economy, Wanda would abate the resilience through sort of pure <unk> pure and simple.

Some franchise the entire supply market, therefore, providing and as the security community and economy.

Deal flow pipeline is getting stronger and we're looking forward to reporting on future progress.

With that I would like to hand over to our CFO Kevin Brackman.

Thank you Ms Elliott.

Turning to our financials, we delivered revenue of $1 3 million in the first quarter compared to $1 5 million in the prior year quarter. The decline resulted from the timing of revenue recognition under certain of our long term customer contracts.

However, there was a significant increase in income from brands of zero to $5 million compared to the prior year quarter.

Gross profit decreased $1 4 million year over year in the first quarter due to the mix of products and customers included in revenue a higher fixed cost base, resulting from the acquired businesses and supply chain cost pressure in the first quarter of 2022.

R&D expenses were $2 1 million in the first quarter, primarily related to our cooperative research and development agreement with the department of energy as well as the RMB asset sort of energy and Fisher Eco solutions and.

Administrative and selling expenses were $10 5 million in the first quarter a year over year increase of $2 6 million, primarily due to increased staffing and costs, resulting from the acquisitions of <unk> energy and fishery Eco solutions and operating as a public company and from stock based compensation expense.

Yes.

Net loss totaled $4 1 million in the quarter and adjusted net loss was $12 5 million.

Note that our adjusted net loss excludes $8 4 million gain from the change in the fair value of outstanding warrants, our net loss per share was <unk> <unk> in the first quarter.

And that remains well capitalized with $59 3 million in cash reserves on the balance sheet at March 31.

Which provides us with the flexibility to be agile and executing on our strategic and operational priorities.

This is a decrease of $20 5 million from December 31, 2021, driven by the increased level of R&D and administrative and selling expenses as well as annual insurance renewals and incentive compensation payouts during the quarter.

Our existing cash reserves and projected cash flows are anticipated to be sufficient to support our planned operations for the next 12 months.

I will now turn to our outlook.

And then develop significantly during 2021, and we entered 2022 with a more advanced product range of dedicated technical sales team focused on key sectors and geographies and potentially large infrastructure projects. We therefore have a strong pipeline as we all know however.

Not every opportunity in the pipeline will transpire due to factors that may be beyond advanced control opportunities may not materialize or it could be delayed.

Then we will use his expertise and resources to bring opportunities to fruition, which will translate into revenue due to the long term contract nature of our business model. The timing of our revenue can also be difficult to predict having said that we anticipate revenue and income from brands for 2000.

'twenty two to be approximately $23 million, which will be heavily weighted towards the second half of the year.

This estimate does not include <unk>.

Contribution from the White Dragon and Green Hippo projects in South Eastern Europe , because these projects are still pending.

Approval.

In closing, we believe that add Ben is well positioned to be the provider of clean energy solutions across a variety of end markets. The.

The company has built a solid foundation for the business and continues to execute on our strategic initiatives.

With that I will hand back that that's only for closing remarks.

Thank you Kevin I think you had significant opportunities for this technology advanced materials and fuel cell system product driven.

During the first quarter of 2022, we've seen a material increase in the number and frequency of inquiries for technologies and products.

In addition, the geographical spread and potential scale of these opportunities have also increased.

But most importantly, the size and strategic importance of Oems. So they are in discussions with are significant we see these trends continue that others in the clean energy technology company development technology and products for key sectors that require clean energy, we look forward to growing the business and to keep you abreast of develop.

I would like to thank you all for joining us today and were now ready to answer your questions. Thank you very much.

Thank you at this time, we will begin the question and answer session to ask a question press star one on your telephone keypad.

If you would like to be removed from the queue. Please press star one again, we ask that you. Please limit yourself to one question and one follow up to allow everyone. A chance to ask a question, we'll pause for just a moment to compile the Q&A roster.

And we do have a question from Adam four sites with one of our capital.

Good morning, everybody.

Just a question on the new electrochemical contracts of $2 2 million are those from existing customers does this follow on business or is this with new customers right.

Kevin do you want to take that yeah those are.

Those are with.

The existing customers.

Okay.

Follow on business, if I could just a quick follow up.

With those customers the sources of most of the revenue in this quarter or are you seeing any revenue from any new sources of <unk> global telecom USS et cetera.

And if not when do you expect to see initial revenue from there.

Martin CRP in Q2.

Yes, I would say.

<unk>.

I would not say it was the majority of the.

Electric chemistry contracts.

I would not say that that was the majority of our revenue in Q1 I would say.

Spread across all of our products and businesses.

We have experienced delays.

In the Philippines with the installation.

Some of the fuel cell systems the air.

So we're as I said in my comments were really expecting revenue to ramp up in the second half of the year.

Yes, yes, great. Thanks, Kevin Thanks.

And again, if you would like to ask a question. Please press star one we'll pause just a moment.

And at this time, we have no further questions that does conclude the question and answer session and today's conference call. Thank you for your participation you may now disconnect.

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