Q3 2022 Advent Technologies Holdings Inc Earnings Call

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Good morning, everyone I will be your conference operator today at this time I would like to welcome everyone. If you added that technologies third 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 Doctor Vasili Gregoire.

Adventure, Chairman and CEO and Kevin Brackman adamant CFO before we begin the prepared remarks, we would like to remind you that I've been issued a press release announcing its third quarter 2022 financial results shortly before market opened today.

You may access the materials on the Investor Relations section of the company's website Www Dot advent Dong energy I would also like to remind everyone that during the course of this conference call <unk> management will discuss forecasts targets and other forward looking statements regarding the company's future customer orders and the.

The Companys business outlook that are intended to be covered by the safe Harbor provisions of the private Securities Litigation Reform Act of 1995 or forward looking statements.

While these statements represent management's current expectations and projections about future results and performance as 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 risks highlighted during this call important fact.

That may affect I'd been future results are described in its reports filed with the United States 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 are derived from 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 made upon reviewing such data and with knowledge of such industry markets in which it 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.

Note. This call is being recorded kicking off the call will be Dr. Vasili Gregorio Doctor Gregorio I'll now turn it over to you.

Thank you operator.

Turning to everyone listening in and thank you for joining us.

<unk> third quarter 2022.

<unk> earnings call.

Joined today by our CFO , Kevin Brooklyn.

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

No.

Based on the business.

I will then hand over to Kevin who will give you a good.

Financial performance and outlook in more detail.

<unk> had a very productive third quarter, which began in July with a formula that thank you Joseph.

Thanks Roger.

This now clears the way for the process will begin funding from the Greek state under the ITC.

Great.

<unk> represents a $5 4 billion euros and support 15 member state the hydrogen technology.

Yeah.

Brian James just 40 areas consistent.

Hydrogen generation.

Tell technology story.

Sort of transportation and distribution.

Using technology.

Are those green shippable encapsulates all of these areas, namely hydrogen generation and fuel cell technology.

Example of other companies in these areas include comments macphee.

Through both in Denver.

The scope of games people over the initial years.

<unk> is doing.

And when facts of a fuel cell systems and electric laser systems.

<unk> for cumulative capacity of 180 megawatts of fuel cell and one five gigawatts of elixir lasers over this time.

That's one of the systems will take place in Greece in the region of Western Macedonia, which will become our focal point for technology development and mass production.

The streamline of the business is continuing.

And she has resulted in a clear focus of resources towards our core technologies.

And market segments.

This has proven to be effective and we have entered into several new and we will use during the third quarter with major partners.

The sale of fuel cell systems in EMEA will provide near term revenue.

Stationary power sector has been targeting telecommunications and affordable power sector has been targeted in the defense sector.

We have secured new agreements in the sectors during the third quarter our.

Our focus on the mobility sector.

Heavy duty vehicles and aviation.

While opportunities from the mobility sector are likely to be significant owing to the nature, they will lend themselves to longer term license agreements.

We have cash reserves totaling $42 4 million U S dollar.

As of September 30.

Overall, our performance this quarter leaves us confident about the long term growth and that has potential to become one.

In addition to the Greenfield project I will now give an overview of our seamless during this quarter.

In July I had been hoisted 'twenty to 'twenty, two investor day, where ocwen executives and senior leaders to discuss the Companys. Most recent advancements towards fuel cell products and systems housing development project in business activity and markets across the U S Europe and Asia.

<unk> addressed where the company experienced people project with planned funding of $782 1 billion euros over six years from the Greek state aimed at producing high temperature fuel cells and electrolytes.

So the telco nice global car production via hydrogen.

R&D partnerships and collaborations with Oems.

The U S Department of energy and the U S Department of defense.

High temperature in the NBA, and whether electrolysis integrations and advanced commercial activities and global markets aimed at replacing existing power systems with Harrison alternatives.

In August .

I've been announced the launch of <unk>.

Our comp affordable fuel cell system, and quiet power supply for using off grid applications.

Is military and risk operations.

The launch of Wideband portable power system coincided with the company's fulfillment of especially from an order from the U S Department of defense.

They found about 50 powered systems can be fueled.

By biodegradable methanol, allowing me a silent generation robots.

50 watts of continuous power clean emissions.

Designed for covered operations Honeywell, they're 50 can easily port Arabian satellite communications gear.

<unk> fixed and mobile surveillance systems lots of computers, along with more denim.

And about the 50 is a unique technology that can provide up to 65% of weight savings versus batteries over at typical 72 hour mission.

The weight savings benefit increases further for longer missions.

And about the 50 unique design allows it to be used in soldier award configurations, or operator decides affordable backer.

Our vehicle, while charging batteries and battery systems, while its thermal features allows you to operate within an ambient temperature range of minus 20 degrees Celsius blast 55 degrees.

Aside from its optimize compatibility with integrated visual augmentation system turning back. The 50 can also power devices, such as high frequency radios like the model 117, G as well as began and Starlink seven loans funded.

But the 50 durability allows it to be easily deployed in challenging conditions climate, we're supporting emission mobility for 2% to seven days without the need to re supply.

She is countered by the fuel cell technology can run a hydrogen.

Liquid fuels the system can operate the fraction of the weight of traditional military grade batteries to meet the U S Department of defense continuous evolving needs for on the go electronics.

As military power needs continue to evolve.

Daily portable lightweight part to it.

This is like how do you factor will become a mission critical necessity.

Also in August I've been announced the signing of an Mou with <unk>, the leading important pipeline gas liquefied natural gas increase.

<unk> basically a way for us to a digital operation on hydrogen projects and set out the framework for our forthcoming mutually by the agreement.

The fact that this year.

Preliminary agreed to.

Collaborate on the production of environmentally friendly as hydrogen as a fuel with the participation of other major investment partners.

Co develop a proprietary highly differentiated CHP system ready for mass production with efficiency approaching 90% and with multi fuel operating capabilities, such as hydrogen and natural gas and a few routes that can address the key current and future on Greece, and Knox Creek operation model.

Business cases, and create an innovation hub for the hydrogen fuel cell industry and develop synergies for promote in hydro and related technology.

Also in August we announced the successful delivery of our portable fuel cell products. The <unk> Army special operations Ewen.

<unk> fuel cell technology powers, a highly sophisticated and great reportable battery charger designed to meet their eye off grid power needs and performance demand in segments, such as those regularly faced by the Atlantic governments special operations units another military divisions.

Portable fuel cell can be quickly and efficiently utilized by remote military units the power off grid radio surveillance radio.

And other mobile electronic military equipment by operating under even the most challenging conditions.

Portable fuel cell uses the colon is proprietary methods of information technology to deliver premium performance alongside and significant reduction in size and weight.

Delight with in combo with affordable fuel cell kits and soldiers blade care to systems and Roger Sachs maximize increasingly portability across the full range of military operations.

The portable fuel cell delivers up to 50 watts of continuous power and up to 85 watts of peak power, ensuring a reliable <unk> experienced to date.

They are ideal for high power electronic devices regular used by the Atlantic Army's special operations units.

Portable fuel cell operates silently and Karen uninterrupted off grid for up to two weeks with a single Hot Swappable fuel tank portable fuel cell business deployed successfully within the framework of apartment beyond national large scale joint exercise.

In August <unk> announced that it has co signed an Mou with a New York State Energy Research and development authority and more than 60 clean hydrogen ecosystem partners.

Under the Mou the practice will collaborate to develop a proposal that will enable the north eastern United States to become one of the least for regional clean hydrogen hub basically made it through the federal regional clean hydrogen hub program included in the bipartisan infrastructure investment and job site.

The coalition of six States, Connecticut, Massachusetts, Maine, New Jersey, New York, and Rhode Island, along with more than 60 clean hydrogen ecosystem partners are laying the groundwork for the per quarter for the U S Department of energy funded opportunity with up to 8 billion in total content available.

After the initial announcement in March 2022, New York will continue to add strategic partners. Now include 14 private sector industry leaders.

Utilities 20, Hudson technology original equipment manufacturers and universities seven nonprofit organizations five other states to transportation companies and three state agencies.

The consortium partners have committed to collaborate with the New York State Authority, New York Power Authority <unk> development for the proposal to advanced clean hydrogen projects.

At the same time, but at this stage, we will also coordinate with our respective states entities to shell, allowing the consortium efforts with each state's climate and clean energy goals charges, Massachusetts goal of reaching net zero carbon emissions by 2015.

With the execution of these agreements the partner will work together to define the shared vision and plans for the region on a clean hydrogen hub again advanced safe clean hydrogen energy innovation and investment.

Climate change, while improving the hill resiliency and economic development for the reasons residents.

Advancer hydrogen hub proposal that makes glamour and environmental standards.

Which deliver opportunities and improve the quality of life or other resource areas in the region.

Our former research and analysis necessary to support the hydrogen hub proposal to quantify the reduction of greenhouse gas submissions resulted from the project.

Develop a framework to ensure the ecosystem for novation production infrastructure and related workforce development and sales across all parts of the state.

And support environmentally responsible opportunities to develop clean hydrogen in accordance with the participates in state policy.

The coalition will continue to focus on the integration of renewables, such as onshore and offshore wind hydro power in solar PV and nuclear power into clean hydrogen production and devaluation of clearing houses for us interest protection, including for medium and heavy duty vehicles heavy industry.

Our generation applications, another appropriate uses consistent with decarbonize enough.

In September we announced the signing of an Mou with hydrogen system.

Other than energy solutions company based in Saudi Arabia to provide integrated hybrid solutions and value added support to industrial and renewable energy markets and the middle East.

Under the Mou hydrogen systems and to utilize a vast number of existing relationships and the telecom and hydrogen energy marketplace and the kingdom of Saudi Arabia and elsewhere throughout the middle East.

To market sell and distribute install and service admins full line of high temperature fuel cell and hydrogen production products to.

Simultaneously oven and hybrid systems intend to collaborate and explore potential large scale development opportunities for hydrogen fuel cell power applications across the region.

August permanent projects include in this area and then zero fuel cell system, but realized a significant carbon advantages over conventional diesel remote parts interested Dakota type dependable.

Fuel cells can operate in a range of low or zero carbohydrate insurers and enable more efficient ship management, such as fuel cells can produce power and extending that beyond <unk> from minus 40 degrees Celsius drop to last 55 degree Celsius and condition Scott this higher position in luxury amenity.

Resulted excuse me and a longer lifetime and lower total cost of ownership.

Also in September we announced the signing of the CD three get agreement with the German state of <unk>.

For the supply of methanol powered fuel cell systems, which will be installed in select critical communication sites in the region.

Other metal powder fuel cell system will be used as a backup power source for broader groups.

<unk> Radio network.

In relation to digital driven a medicine power systems et cetera sites over the next three years.

Chairman's, all public safety and security infrastructure does rely on the nowadays is analog radio system for communication.

This is some increases and secured means of communication.

Net loss for first responders and other public safety officials to communicate easily and securely.

POS network now covers 99, 2% of German territory.

Other solutions were selected as part of attentive launched by the thermostat.

Which requested that fuel cells and hydrogen technology companies submit proposal for sustainable and reliable emergency power supply solution. Prior thoughts on selection the performance of the company's Mahalo power fuel cell was tested at the site of the Brs itself.

Radio network, providing further proof of concept for the use of high numbers of Benfield, Seth as inefficient backup power source for critical infrastructure applications.

Methanol power fuel cell delivery LIBOR power in an environmentally friendly way, reducing C O two emissions and operate and finally, while having a lower impact on the surroundings methanol as a carrier of hydrogen allows simpler store as the pure hydrogen and insurances the safety of operations.

Im going to hit the strong pipeline and has made progress and competitive black lines are tangible.

<unk>. The pros are we're attracting are significant and we remain fully focused on commercializing <unk>.

And nowhere is this technology portfolio.

With that I would like to handover to our CFO Kevin Brackman.

Thank you Victoria and good morning, everyone.

Turning to our financials, we delivered revenue of $2 4 million in the third quarter compared to $1 7 million in the prior year third quarter.

The 43% increase resulted from an increase in the delivery of MAA electrochemistry components as well as engineering fees.

Gross profit was flat year over year in the third quarter R&D expenses were $2 5 million in the third quarter, primarily related to the internal R&D costs incurred in each of our businesses as well as our cooperative research and development agreement with the department of energy.

Administrative and selling expenses were $8 2 million in the third quarter combined with R&D expenses total operating expenses were $10 8 million, which is a year over year decrease of three 2 million, primarily due to $2 $4 million of executive severance recognized.

In the prior year third quarter as well as a year over year reduction in stock based compensation expenses zero point $6 million.

Net loss totaled $11 5 million in the quarter and adjusted net loss was $10 6 million or adjusted net loss excludes a <unk> 9 million loss from the change in the fair value of outstanding warrants, our net loss per share was 22 cents in the third quarter.

Advent remains well capitalized with $42 4 million in cash reserves on the balance sheet as of September 30th which provides us with the flexibility to be agile in executing on our strategic and operational priorities. This is a decrease of $4 1 million from June 30.

Of 2022.

In the third quarter of 2022, we received $3 8 million in tenant improvement allowances for the Hood Park, R&D and manufacturing facility, which is net of additional spending for the build out of the facility alright.

Alright 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.

<unk> entered 2022 with a more advanced product range and a dedicated technical sales team focused on key sectors and geographies.

We therefore have a strong pipeline.

So in mid June the company announced the successful notification from the Greek state for funding of $782 million.

Euro for advanced screen Hippo project, which was subsequently subsequently ratified by the EU.

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.

Due to the long term contract nature of our business model the timing of our revenue can also be difficult to predict.

Throughout 2022, we have experienced delays from our customers in the Philippines for a fuel cell systems and their installation.

As a result, our revenue for 2022 will be less than we had originally planned.

With respect to Green Hippo discussions with the Greek state are progressing and we look forward to providing updates over the coming weeks.

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

<unk> has built a solid foundation for the business and continues to execute on our strategic initiatives.

With that I will hand back to <unk> for closing remarks.

Thank you Kevin I think you had a significant portfolio of technology and commercial strength allows us to compete and be successful at the global level.

I've been at Green cable will be transformational for Iceland, and green capabilities for the long term. The Greek state has now started the process that will allow for content and we'll keep you informed on development.

Development.

<unk> been pursuing a visible.

Defined path.

<unk> and significant sectors other than as a clean energy technology company and we will leverage from this track to generate commercial products and provides attractive technological solutions through our partnership with AUM I would like to thank you all for joining us today and we're now ready to answer your questions. Thank you very much.

Yes.

At this time, if you'd like to ask a question simply press star followed by the number one on your telephone keypad again that is star one for any questions to withdraw your question Press Star One again, we'll pause for just a moment to compile the Q&A roster.

Our first question will come from the line of Laurence Alexander with Jefferies. Please go ahead.

Good morning, This is Dan Rizzo on for Laurence.

Could you just provide a little bit more color on the hunting Titan 50.

<unk> with the department of Defense.

What's the revenue from that once I guess, its fully ramped and what is the addressable market and what is the timing in terms of ramping that up.

Okay.

Yes, I'm not going to provide a specific revenue number for that project.

We are as we described we're excited about that product it's a compact.

<unk> fuel cell.

For off grid.

And such as military and rescue operation.

We expect scale up production and sales to occur over the next let's say 18 to 24 months.

And we believe the potential is significant because.

<unk> power is needed.

In the field of operations.

Especially at programs like DNA graded.

Visual augmentation system.

Progress has plans. So so we're excited about the potential.

And just a follow up is this an exclusive agreement with the department of defense, whereas you can't cannot sell to anybody else or is it not like that am I thinking about it wrong.

Okay.

No it's not.

We do need an export license as you can imagine.

State of the art.

U S military product, so that will not be unusual for NATO countries. So.

No it's not.

There is no restrictions there.

The question is.

Thank you very much.

Thank you.

Your next question will come from the line of Sanjay <unk> with Panmure Gordon. Please go ahead.

Yes, Hello, Thank you for taking my questions.

I've got two or three if I may 1st of all on the German state.

Agreement you have.

Could you sort of give us some idea.

How many.

Backup.

Systems two.

<unk> digital network have so what's potentially non motor fuel systems that you could supply them.

You're kind of contract is it kind of like testing or is it kind of.

They're ready to be deployed.

And my second question is.

You said earlier that you're expecting revenue to be less.

Listen you had originally expected how much of the expectation was how much what are you expecting to sell to Philippines and is that should we expect that to now come in in the following year.

Yes, So let me let me take your second question first so we started the year our guidance.

Was $23 million that included both revenue and grants.

The large majority of it was revenue so, let's say $20 million of revenue and $3 million of grants.

I mean, we're at $6 million of revenue through nine months.

Due to the delays that we've seen in the Philippines and so weak.

We expect to hook obvious say fall short of that $20 million revenue number for the full year.

Having said that I mean, we're working everyday to secure orders.

We hope to.

Hopefully close on some some orders before the end of the year.

So that we can hit the ground running in 2023, so to your point.

We still kind of view it really is a timing issue.

We still believe in the growth potential of that business. It's just it's taken more time to secure orders than we had originally planned for.

Your first question on the Brandenburg Con.

Contract the contract in and of itself is not for a significant number of systems.

Hopefully that's the start of <unk>.

More contracts similar.

And so that we can do with Brandenburg or with other states and municipalities and so.

So hopefully it that's just the start of.

Good things to come.

Yes.

If I may say couple of things as well.

To augment what Kevin said.

As you know.

The opportunity is really in Asia Pacific Okay. So there, even though we have a delay in the Philippines, we're not saying that we're not going to do it is delayed so we have to act.

I cannot say differentiate between sales and revenue.

So the sales are on track with this the revenue projections were for the quarter. We will have a delay that's why we're we're announcing.

However, in the meantime, and as Kevin said a lot of other opportunities. This is showing up in Asia Pacific and also in Europe , as you'll see now Germany.

And so on so overall, we're very optimistic about that.

I think it does.

The timing of the revenue.

As the secure plus as Kevin said, when we started the year, we really predicted the grounds to come from.

What I would call normal ground grants that we have delta the beginning and it was on the lower end.

So it made them now with the advent of Green people and as we said we would have at least five weeks till the end of the year to see how the funding will come from these <unk> projects, which are Pan European Nishu, everybody is pushing for this thing to happen this year.

<unk>.

The potential to have a significant.

Grant revenue.

Is there and Thats, where we also announced we will begin so overall revenue wise, we should be lower however.

Listen I PCI wise.

Not only were not down I think we're going to do very very good is just the timing of it.

Is it fair to there and Thats, where we are announcing now alright.

Thank you.

Thank you.

At this time I will turn the conference back over for any closing remarks.

Nowhere okay. Thank you very much for your.

Participation.

Attention. Thank you.

Ladies and gentlemen that does conclude today's call. Thank you all for joining you may now disconnect.

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Okay.