Q3 2023 Amprius Technologies Inc Earnings Call
Good afternoon, welcome to <unk> Technologies' third quarter 2023 earnings conference call joining us for today's presentation are the company's CEO, Dr Gang Sun and CFO Sandra Wallach.
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 future product commercialization, new customer adoption and the timing and the ability of Ambry has to build large scale manufacturing facility expanded.
Manufacturing capacity scaled business and achieve a sustainable cost structure. These statements involve known and unknown risks uncertainties and other important factors that may cause <unk> results performance or achievements to be materially different from any future results performance or achievements expressed or implied in such forward looking state.
For a more complete discussion of these risks and uncertainties. Please refer to <unk> filings with the Securities and Exchange Commission finally, I would like to remind everyone that this conference call is being webcast and a recording will be made available for replay on the company's investor Relations website at IR Dot embryos Dot Com in addition to the.
Webcast. The company has posted a shareholder letter that accompany these results, which can also be found on the Investor Relations website I will now turn the call over to embrace technology CEO Dr. Chang Sun for his comments Sir. Please proceed.
Welcome everyone and thank you for joining us this afternoon.
On today's call I will report, our progress and accomplishments at Ann piece in the third quarter.
And I was CFO, Sandra Wallach will discuss our financial results for the period.
After that I will share some closing remarks before opening the call for questions.
The third quarter was exciting quarter for us.
Before I gave the quarterly reports.
I'd like to briefly introduce entries to those who may be new to the company.
M. P S develops manufactures and markets high energy density and the high power density batteries.
With application across all segments of electrical mobility, including aviation and the EV industry.
As a pioneer of CDK and battery technologies M.
<unk> has spent the last decade, developing various a citizen annual structures and a robust manufacturing process.
As well as a strong patent portfolio of over 80 patents.
Yeah.
N P is a city can handle batteries provide industry leading performance to date.
Including.
450, Wawa keto, specifically energy density.
And the 11, 50, Wawa police or Lori magic or any density available commercially since already tons of 'twenty two.
And the father hadn't been Wawa for Kendall.
1300, Wawa put either battery platform in our labs independently verified but in early <unk>.
One needs to be.
Our battery perform up to 10 seat power capability.
Extreme many SaaS charge a week off.
Zero to a D S and stay off the charge in proximity six minutes.
Or why is the all teaching temperature range of net loss of 30 degree.
With 55 degree Celsius.
And the safety design feature.
That enable us to pass United States military benchmark Navy penetration test.
<unk> has been in commercial battery production since 2018.
So the company has many years they experienced manufacturing high energy density and the high power density lithium ion batteries.
It's our belief that there are no other commercial batteries on the marquee that it can perform at these levels.
M P. As high performance batteries have a check the market attention and customer demand.
Company's priority today.
That's the beauty of additional manufacturing capacity as quickly as we can to meet the increasing demand for our products.
Our production capacity scale up activities in both California and Colorado.
Moving along well.
This quarter, we delivered a new technologies and the new batteries.
Engaged.
And so the two additional customers.
And the move to closer to completing our battery production capacity expansion in our California factory.
I also like to take this opportunity cheat to note a few highlights of our progress.
In August we are.
Ville a breakthrough.
We sell a chemistry and the design.
That enables 400, while we're up a cable energy density with a simultaneous the tendency power capability.
The energy and the power of Cid He learned about this cell.
They key to ideal solution for electrical mobility applications, such as aviation and Elyse.
So easy toss. These batteries are designed to provide the necessary propulsion power and energy for taking off cruising and the lending club.
<unk> spending.
Fly wrench by as much as a 50 person as model that based on commercially available alternatives.
We plan to make it the specially available for customer evaluation this year.
And then to have a commercially available cells in early 'twenty 2024.
Also to enhance our customers' product performance and pay.
<unk> has developed and delivered three additional formats over 450, you IRA potato south.
This customer sells what developed in collaboration with M. P is a strategic customers.
Yes, they're unique high educated the pseudo satellite qualification requirements and enable them to operate in.
Heidi challenging environments.
Well, he's a greater energy density and the longer cycle life, the previous before high school Barbara for Caito plentiful.
We believe that the new 450, you I'll refer kiddle cells are the only known commercially available batteries for their can't let Ken provide enough power and endurance for Hertz overnight.
That's also a Saturday flight.
Yes.
Recently, we announced that we had signed purchase orders is a three premier's premier electric.
Aviation manufacturers for customer sales.
From the company's 400 since the Wawa per kilowatt Ultra high energy density platform for battery pack of development to end of quarter vacation.
Yes.
In addition to high energy tool applications.
This new customer cell form factors are positioned to improve performance of energy storage applications for the military as well.
We expect the first yourselves to be commercialized.
And.
That's what we will begin shipping this year.
Another exciting accomplishment is the performance that our batteries delivered added the Bridgestone wards solar challenge at last months.
In this race the Fourteens that it was powered at the M. P. S batteries slipped at the top four places.
32 teams.
As we reported back hospitals during the lease.
I'm peers power pack provide a wrong 30 person.
Better energy capacity for it.
Roughly the same amount of weight of the units used the other competitors.
And I expect to be the standard of course or teens by the time, the <unk> 25 event.
Wronged.
Or the the competing vehicles a lot of commercial vehicles.
Their performance requirements tests, our battery in very challenging driving conditions.
Moving to our customer contracts from the quarter.
I'm a piece of silicon.
<unk> batteries continue receiving strong attention from the customer.
As the industry.
In the third quarter were shaped at 238 customers up from 27 in the second quarter.
This group, including Leap <unk>.
On crude we pay.
These are customers, who continue to place the orders such as auto Aerovironment tethered unclear.
18, new accounts.
From 10 last quarter.
In addition, the volume purchase order from a premier.
E V tall OEM during the quarter.
We think in all of our existing technical engagement and our moving to the.
Internal qualification process for our customer itself.
I'm here to advance the cells now to serve the U S U a M and the elite all segments of the growing aviation Marquis for electrical mobility.
Our pipeline of new customer projects remains strong as well.
It is the third quarter of progress across several areas.
For example, we success.
Successfully completing the U S Army.
T O program.
Why are we demonstrate the hour.
Technology capabilities for the nano and then.
Aircraft assistance market.
This is a new market segment for our business.
And now that we have a proven our viability.
The Llano U S market, we have transitioned to the commercial products.
Secondly, another example is our partnership with the tonnage to utilize our high energy density cells, they're rechargeable battery packs.
The combination also has significant performance benefits, including both a 31% a weighted reduction and.
Six person energy boost over other comparable rechargeable battery packs.
Let me deal with this positive shape will open multiple opportunities for <unk>.
The energy and the higher power batteries.
Third.
Recently.
We also received a forecast the customer men to serve the large aviation segment.
That are tens of megawatts of the production through 'twenty Fob and the B L.
Is this new met met in March.
<unk>.
We moved to a long term supply agreement with one of the two battery pack and manufacturers to which we start to see P samples in Q4 of 2022.
Overall, we are still facing men that are greatly artist shapes our supply.
And all confidence that we are pivoting toward enough customer commitments.
So Phil our increasing Inc.
Capacity.
Yes.
As I mentioned earlier, expanding our production capacity is our main products.
We have the two expansion projects under development.
Our megawatt scale production capacity expansion in Fremont, California is nearing completion.
This facility has a lithium ion battery manufacturing capabilities with the MTA is a citizen and acknowledge we plan to deliver.
Did you ever two megawatt of capacity initially in 2024.
She is about a 10 times of our.
Current production capacity.
The additional capacity at our California.
Our factory is a critical piece to serve both as a production facility will increase the customer orders.
And as a pet facility for larger scale manufacturing process optimization.
Our 'twenty to 'twenty four capacity Fremont is already filled out.
And our list of customer commitments for 2025 continues to grow.
Well look at how we manufacture our ultra high energy density.
Silicon and or lithium ion battery.
Check out the overview.
Paul.
So the technological technology section of our website.
So we look at <unk> look forward to hosting you still 10 million investors and the analyst in Fremont, California for our open house event on December 14th.
When we were showcased and pizza hut fulfillment silicon and batteries.
Green manufacturing facility.
Our other production capacity built up is in the state of Colorado.
The manufacturing facility in California is a pallet facility, followed gigawatt hour scale factory in Colorado.
While we have at least 774000 square feet.
The production space.
The additional 525000 square feet available for expansion.
The initial production capacity is.
Is he expects to be 500 megawatt hours annually.
And then we will focus on aviation.
Batteries.
At this stage.
We plan to have the space.
Operational in 2025.
And to then increase capacity over time with five gigawatt hour module production expansions to keep up the demand.
With that I will now turn the call over to our CFO Sandra Wallach to review our financial results for.
For the quarter Thunder.
Thank you Kane I would now like to spend a few minutes covering some key financial update as a reminder, our detailed financials can be found in our shareholder letter.
We finished the third quarter with $2 8 million in revenue and $2 million increase compared to 0.8 million in the same quarter last year and up 1.2 million sequentially.
There were two main drivers of this increase first our product revenue increased by 1.7 million from the prior year period to 2.2 million largely driven by shipments to 38 customers in the quarter.
Second consecutive quarterly record for Empress, although our product revenue remains largely driven by customer purchase orders. They can arrive in uneven times throughout the year, we have shown consistent new customer growth and diversification in recent quarters and the third quarter, we even limited the number of customer service.
For greater than 10% of our revenue to only four customers in the quarter compared to five such customers last quarter.
Second our development services revenue was 0.6 million a reflection of our successful completion of the R. C. C. T O program for the U S Army as King previously mentioned.
Moving to our profitability metrics, our gross margin was negative 152% for the third quarter compared to negative 185% in Q3, 2022, and an improvement from negative 186%.
In Q2, 2023.
As we've discussed in prior quarters, we see significant gross margin variation as our product and service revenue mix fluctuates.
Also we anticipate that factory start up costs will ramp up as we start Colorado construction in earnest longer term, we are confident that our GAAP gross margin will begin to normalize as we approach our capacity expansion goals.
Now onto our operating expense management, our operating expenses for the third quarter were $4 9 million, we've maintain a lean operating structure to date.
Even when accounting for G&A fluctuations in the previous two previous two quarters.
For transaction related expenses and targeted staffing increases in R&D in Q2.
Our GAAP net loss for the third quarter was $8 5 million or a net loss of 10 cents per share.
As of September 30th 2023 our weighted average number of shares outstanding was $86 4 million.
Also as of September 32023, there were 76 full time employees up from 72 in the second quarter with those employees, primarily based in our Fremont, California location are share based compensation for the quarter was $1 1 million.
Turning now to the balance sheet, we exited the third quarter with $53 4 million in cash and no debt. The key drivers of our cash activity for the quarter were negative $8 7 million in operating cash flow, although excluding transaction cost our run rate remains at approximately.
Lee two to two and a half million dollars per quarter.
A negative $8 9 million related to the build out of the Fremont facility and ordering of long lead time equipment for Colorado.
And positive 6 million added to the usage of our committed equity facility.
Considering our business achievements and unclaimed projects, we believe we are efficiently using capital.
To drive <unk> forward.
Before I turn the call back over to King I would like to take a moment to discuss our outlook.
We expect to be capacity constrained until the end of 2023, when our new two megawatt capacity is expected to come online.
That project and our build out of Empress Fab in Colorado remain our top capital allocation priorities as we protect our capital expenditures for the rest of 2023 and the beginning of 'twenty 'twenty four we expect to spend another $5 million to $7 million over the rest of the year to complete the build out of the free.
Mountain facility.
So we estimate that we'll spend another $20 million to $30 million over the balance of 2023 and the beginning of 2024 on the start of construction for the Colorado facility and on procuring long lead time items and production equipment.
As part of our ongoing business planning, we filed a shelf registration on October seven.
It included a new at the market facility for 100 million in that filing.
We have terminated the committed equity facility concurrent with the effectiveness of the shelf.
Overall with the strength of our balance sheet and multiple vehicles to generate additional funding through both equity issuances, such as warrant exercises and sales under our ATM and non dilutive sources, such as grants loans and incentives. We believe that we will have enough cash to continue executing on our strategic.
<unk> plan.
With that I will conclude the financial discussion and pass the call back to Kim.
Thanks Sandra.
I'd like to reemphasize, a few key points before closing.
First is the city can know technology continues to demonstrate the unmatched performance in our industry.
I'm pleased batteries come and affirm our lead with their combination of safety energy power charging time, and the temperature performance and.
<unk> uniquely positioned for the electrical mobility market.
Second M. P. S battery are commercially available today.
We have been seeking commercial product in 2018.
And the our peg alone technological advancements continue to breathe, so you're getting from the customer demand.
This quarter, we not only delivered.
To repeat our customers and extend our technical engagements.
We had 18 new customers as well.
Our demand pipeline is robust.
And we look forward to further building out our customer book.
Coming quarters.
Third.
We are scanning our manufacturing capacity to serve significantly.
Mack head.
With our two megawatt hour production line nearing completion.
Expanding our footprint and the capacity at the MTS lab in California.
We also remain on track to build out <unk>.
Pet.
Our gigawatt scale facility in Colorado.
We expect to be operational entering 2025.
Finally.
We are looking forward.
So several exciting milestones as we head into 2024.
We expect to operationalize, our megawatt scale silicon anode battery manufacturing facility and the MTA for that.
To securing customer commitments to fulfill and P. S fab.
<unk> production capacity for 2025.
And that deliver fob husband, Wawa potato battery prototypes to select customers.
As we look to the rest of the year.
Our strategy and our focus and the M. P. S who gave me is unchanged.
We have a tremendous opportunity ahead.
We support other portfolio.
Now the position to us.
So both girls.
The Asian market and extend it to other industrials are seeking batteries with a leading performance.
The opportunities in front of M. P is enormous incur.
Including the 40 non beauty aviation battery market by 2025.
The 67 dealing EV battery marquee by 2025.
And of the 1.25 beauty conformal variable battery market by 2030.
Before we reach a L. M. P is gross pass in coming years.
123 has been a very productive year for the company thus far.
Our solid third quarter performance has demonstrated our team's capability the ability to deliver what we have planned and the promise.
Thank you for your continued support.
Of amperes technology.
With that.
I will turn it back to the operator.
Question and answers.
Thank you we will now conduct a question and answer session.
I would like to ask a question. Please press star one on your telephone keypad.
Confirmation tone will indicate your line is in the question queue.
You May press Star two if you would like to remove your question from the Q4.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Once again, that's star one at this time, one moment, while we poll for our first question.
Our first question comes from Colin Rusch with Oppenheimer. Please proceed.
Thanks, So much guys I'll just ask them all into a single line of questioning that Ken can you talk a little bit about your potential price leverage given the higher a higher energy density themselves any risk to capital equipment coming from international sources and other U S. As you as you start to ramp up.
And then for Saundra, if you could address you know.
Timing for any potential incremental sources of capital and then I'll hop back in the queue after that.
Okay. Thanks.
At this moment that we have a significant leverage in terms of.
Our port Arthur setting price.
Because this is the only product, which can pull format and a desire to level and there is no other commercial port Arthur chemical format of 450, you all were up a cable.
With the power capacity with delivery. So we do have.
Better pricing than our current views.
As far as I know.
Secondly in terms of sulfur production equivalents, we have your entire.
Larger scale large scale I mean, the megawatt scale 500 megawatt scale production equipment are specified.
And supplier of select.
At this moment to work working on the details of the purchasing contracts.
Great and I'll step in and answer the timing of any potential capital needs Colin Great question.
So right now we don't have any immediate plans to file the shelf.
For 400 million, we have $100 million ATM facility in place and I think his or her schedule becomes more confirmed as far as the build outs.
Well, we'll be we'll be taking a hard look at timing.
Our next question comes from Chris Souther with B Riley. Please proceed.
Hey, guys.
For taking my question.
Maybe just around the customer progress can you talk a little bit about the overall size of the orders from those three premier Electric aviation infections, you called out in no time frame those orders cover.
Maybe you could kind of frame the overall opportunity set there as part of.
A broader conversation around the backlog building activity.
I'm trying to get a better sense of where we are starting to settle out.
Capacity in Colorado.
Yeah, Chris first of all we saw as we mentioned that we sold out of our 2024.
Production capacity.
In California, because that's the place that we have as a matter of fact.
Sexy.
Oh.
So have a very strong forecast because those customer who went out of gave us the orders until they see we have a production capacity available by that.
We did receive a commit okay forecast.
Tens of megawatts at this moment.
We our capability in the pipeline.
If we it.
If we look at the entire forecast.
The entire forecast very small we have.
Customer gave us a.
The indication okay over hundred megawatts.
But in terms of sign the agreements we.
We have oh, tens or several tens of megawatts capacity.
Engages at this moment.
Got it okay, that's really helpful.
Certainly makes sense around you don't see in Colorado.
Action.
Before a lot of the formal larger orders.
So on the corn around 'twenty 'twenty four capacity being sold out.
I assume existing customers with like commercial.
Products.
Our prioritized, but how are you prioritizing new potential customers versus existing customer.
Customers, who are looking for samples.
It seems like you continue to add.
New customers tend to the whole team here just.
What does the mix look like new and existing customers kind of next year.
So we do allocate a certain.
Capacity to serve new customer as he mentioned that for somebody in prototyping.
Yeah, but our primary.
Our commitments.
We will be to the customer we already serve.
But we are what would be the we do have yeah, we do have a sufficient.
Capacity allocation for new customer engagements.
Okay.
That's what I was hopeful thank you.
Thank you just as a reminder, the company requests that each participant limit their comments to one question and one follow up. Our next question comes from Tim Moore with <unk>. Please proceed.
Thanks.
Given that the aviation market prioritize safety first in energy and power.
How how meaningful of a breakthrough could that electric vertical takeoff and landing purchase order that you recently got be for you to help serve now all the major segments of the electric mobility in aviation I mean, Q bundle and cross sell our complete offering now that you've got the vertical takeoff and landing or <unk>.
So are we.
We do have tango to grow building blocks for <unk>.
For electrical mobility applications, we truly believe that's the case because the energy the power safety charging time temperature performance.
Even the practical performance little fragile performance, we delivered to the aviation market.
Can be applied to other market.
First of all before.
A full EV.
At this moment, we do have a larger format battery manufacturing capability.
At EM piece, but.
That will change I think we have the all the technical building blocks available.
For.
For those applications.
Yes.
That's helpful, but it's nice to hear.
My other question just as my follow up question would be you know your Colorado scale factory cleared that.
Ordinance milestone six weeks ago can you just walk us through what else do you need to meet or achieve beginning the operations of the fab in the first half of next year. Besides receiving the equipment is there any other kind of hurdles or actions that you need to do besides just receiving and installing equipment.
The equipment are part of that are we.
We have let's see let's see.
I would say the most advanced lithium ion battery manufacturing.
Equipment suppliers.
In this industry we.
We select a war suppliers for the entire manufacturing line.
The delivery time or would it be three times to nine months.
We have at this moment, we are negotiating the final details of the purchasing contracts.
So that's not a problem.
Currently we still.
Walking off I'm, a regulatory issues I think it was regulatory issues is a major bottleneck for US Okay to move forward for example, air permitting okay, those kind of things.
We need to work out a way.
At this moment to look at the schedule, we have here, we probably need the.
Push our construction time shoe.
<unk> early next year instead.
This month's okay before we thought that we can get this thing done this month and now we probably push it too sometimes in January to start the construction.
[laughter].
Great. That's helpful. King Thanks for sharing that and I'll save the rest of my questions for offline later Tonight.
Thank you.
Our next question comes from I'll be seen hot with Northland Capital. Please proceed.
Hi, This is sky lush on behalf of W shape.
So with respect to the con from variable batteries.
Just wanted to know if you couldnt deliver the military's outside the U S.
Okay.
Pardon me.
We can to certain countries.
For example, finalized.
The Australia, Japan those countries, we shouldn't have a problem.
By the fourth southern countries, we do need to have an export license for <unk>.
That engagement.
Okay and as a follow up.
Can you remind us how much revenue you would need to breakeven with respect to gross margin.
And when do you expect that to happen.
<unk>.
So as of now we haven't given guidance.
Right.
As far as our financial model, So we haven't disclosed that.
Perfect. Thank you.
Thank you. Our next question comes from Amit Dayal with H C. Wainwright. Please proceed.
Thank you good afternoon, everyone can.
Can you remind us guys.
Colorado facility, what's the total capex requirement is.
To get to that 500 megawatt hour.
Phase one capacity target.
Yeah, we have given some ranges before what we've what we've updated as we get more information as we now know that the production equipment will run between.
70, and 100 million, including tariffs.
For delivery to Colorado, and the construction costs are still being updated based on the 60% drawings for the facility. So we haven't updated that that range recently.
Okay. Thank you Sandra.
I guess, a follow up to or adjacent question to that with respect to the three one capacity.
As you know how should we think about it.
Our modeling for the rent.
At three months ago.
Two megawatt hour.
Okay.
So we will have the equipment.
Online and available we're very excited to showcase it on December 14th along with the rest of the two megawatt facility.
We would expect that it will ramp up slowly throughout the year sequentially each quarter. It won't all be available Q1.
Okay, Alright, yeah, that's all I have.
Follow up with you.
Offline. Thank you.
Thank you.
The next question comes from Jeff Grant with Alliance Global Please proceed.
Afternoon, Thanks for the time.
With the impending additional capacity at Fremont I imagine there is some potential to add more new customers. While also increasing allocations to existing customers is that something you guys are considering at all or are there any constraints internally from maybe a personnel standpoint, and managing more new customers.
The other one would be the case with.
We view this.
Capacity expansion.
With a new customer in mind.
But what were the reasons would be to this new capacity because we're already at.
Capacity for current customers. So the new capacity will enable us to engage more customers.
Great. Thank you and can.
Can you talk at all about the timeline to a commerciality of the 500 Watt hour battery that you guys are working on and how what are kind of the early demand indications you see.
Of where that fits in the market relative to some of the existing offerings that you guys have already commercialized.
We already have a customer demand actually quite a strong demand.
So we expect to we start to install all the equipment.
The initial manufacturing in 2025.
At that time, we can't have a customer factory inspection, we can provide them.
We called pilot production prototypes, so customer for evaluation.
Great. Thank you for the time.
But yeah I think Jeff if your question was more around the 501 or a per kilogram five megawatt and three megawatt.
Sorry, it was more specific to the 500 watt hour.
Battery that you guys are testing yet I believe you talked about piloting that soon but was just wondering the path to be a reality.
No so that'll be that will be will.
We'll be hoping to ship.
The types to select strategic.
By the end of this year and then move into commercialization in the first part of 'twenty 'twenty four to Kings point those those.
Products have already been designed into several of our customer platforms. So we're expecting that to ramp next year as well.
Great. Thank you.
Thank you at this time. This concludes our question and answer session. If you have any additional questions you may contact <unk>.
Mr Relations team and I are at Empress Dotcom.
And I'd like to turn the call over to Dr. Sun for his closing remarks.
Yeah.
Thanks again, everyone for joining us today.
As a reminder, you may learn more about our company and additional updates and they learn about upcoming events in the presentations. So on the Investor Relations section of our website.
We hope to see you out of the advance the ultimate T or battery conference in San Diego next month.
And at our Fremont, California expansion showcase event shortly thereafter.
And we look forward to updating you on <unk> progress on our last call.
I would like to thank our employees partners and shareholders for their continued support.
Hmm.
Thank you for joining us today for Empire technologies third quarter 2022, earning conference call you may now disconnect.
Okay.
[music].