Q3 2024 Aqua Metals Inc Earnings and Business Update Call
Speaker Change: Good afternoon and welcome to the AquaMetals third quarter financial results call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. You can submit a question via the web at any time by typing them in the ask a question field. If you have joined us by phone, you may press star one to join the queue.
Speaker Change: Please note that this conference is being recorded. I will now turn the conference over to our host, Bob Meyers of FNK-IR. Bob, you may begin.
Bob Meyers: Thank you, Operator, and thank you, everybody, for joining. Earlier today, Aqua Metals issued a press release providing an operational update and discussing financial results for the third quarter ended September 30, 2024.
Bob Meyers: Hosting the call today are Steve Cotton, President and Chief Executive Officer, and Judd Merrill, Chief Financial Officer.
Speaker Change: Before we begin, I would like to remind participants that during the call, management will be making forward-looking statements.
Speaker Change: Please refer to the company's report on Form 10-Q, filed November 14th, for a summary of the forward-looking statements and the risks, uncertainties, and other factors that could cause actual results to differ materially from those forward-looking statements.
Aquametals Cautions Investors
Not to place undue reliance on any forward-looking statements.
Speaker Change: The company does not undertake, and specifically disclaims, any obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur, except as required by law.
Speaker Change: As a reminder, after the formal remarks, we will be taking questions. Questions will be accepted over the phone from analysts and all other investors can submit a question using the online webcast portal provided in today's and earlier press releases.
Speaker Change: We will take as many questions as we can in our available time slot.
Speaker Change: And with that, I'd like to turn the call over to Steve Cotton, CEO of Aqua Metals. Steve, the call is yours.
Steve Cotton: Thank you, Bob, and thank you to everyone who joined us today.
Steve Cotton: We're pleased to share AquaMetal's progress over the last quarter, during which we've made significant advancements in lithium recycling and bolstered initiatives for commercial growth and operational expansion.
Steve Cotton: We'll discuss the operational achievements at our pilot facility, our efforts on strategic financing, key commercial engagements that continue to solidify AquaMetal's position as a leader in sustainable lithium battery recycling, and Judd will discuss the Q3 financials.
Steve Cotton: Since our second quarter conference call, and the previously announced loan decision, we have focused on three main objectives. First, demonstrating the repeatability of our unique lithium arc refining processes.
Steve Cotton: Second, securing long-term financing, and third, further establishing commercial partnerships to support our growth.
Steve Cotton: First, I'll talk about our pilot facility operations and production quality.
Steve Cotton: We're excited to announce that our pilot facility has consistently achieved 24-hour operational capacity, producing high-purity, battery-grade lithium carbonate with over 99.5% purity. This is a critical validation of the quality and consistency of our lithium arc refining process.
Steve Cotton: To date, we have delivered multiple lithium carbonate samples to potential offtakers and battery manufacturers, all of whom have acknowledged the quality of our recycled materials. We're confident that our ongoing pilot operations are paving the way for full-scale commercial recycling at meaningful revenue scale.
Steve Cotton: Moving on now to our strategic financing and commercial initiatives. In terms of financing, we've made strides in securing both short-term capital through non-essential asset dispositions, as well as long-term capital to support the expansion of our Sierra Aqua Refining Campus, or Sierra Arc.
Steve Cotton: We have multiple term sheets in place, one of which is a substantial capital commitment for our growth plans, which includes the completion of the CR arc as well as future capacity expansions.
Steve Cotton: Another term sheet outlines a commercial supply agreement with a leading battery materials manufacturer. Negotiating and finalizing these agreements is our highest priority and this initiative is demanding most of our time.
Steve Cotton: Holistically, we believe that these agreements will secure a steady supply of black mass for our recycling processes, offtake of our products, which positions us well for long-term operational success and fits hand-in-glove with our long-term financing efforts.
Steve Cotton: Turning to advancements at our commercial scale at the Sierra Arc facility.
Steve Cotton: We've made substantial progress in preparing the site for commissioning, pending final financing. We're now materially completed of all the long lead time critical infrastructure upgrades, including structural, utility, electrical service, and switchgear and other building improvements.
Steve Cotton: to enable us to accelerate operations and reach commercial activity once financing is secured.
Steve Cotton: Our initial operations will focus on processing 3,000 tons of black mass per year in our Phase 1 building with plans to scale up to 10,000 tons in Phase 2.
on to cost efficiency and environmental leadership.
Steve Cotton: Unlike traditional recycling methods that generate massive quantities of sodium sulfate
which is a costly byproduct that even exceeds product output.
Steve Cotton: Our process is much more capital and operating cost efficient, eliminating waste streams and reducing environmental impacts through decarbonization.
Steve Cotton: This not only strengthens our commitment to sustainability, but also translates into what we believe is a low-cost producer opportunity for us to achieve significant cost savings in chemical purchases, waste handling, and compliance.
Steve Cotton: As I said, our primary focus is on finalizing financing to complete Phase I and Phase II of the Sierra Arc build-out. Once funded, we anticipate commissioning the facility within two to three quarters.
Steve Cotton: Positioning AquaMetals to quickly scale commercial operations with the goal of becoming the first truly commercial scale lithium battery recycler in the U.S.
Steve Cotton: supply and established agreements with battery manufacturers. In parallel, our pilot facility will continue to validate our technology and supply representative battery grade samples to existing and potential partners.
Steve Cotton: In closing, I want to extend our gratitude to the AquaMetals team for their dedication and hard work. This quarter's accomplishments reflect the scalability of our technology and our commitment to building a financially resilient, environmentally responsible recycling company right here in the U.S.
Steve Cotton: We're energized by the response to our progress from industry leaders and other stakeholders and we're focused on bringing Sierra Arc online and driving foundational and sustainable growth in the U.S. critical battery mineral supply chain.
Speaker Change: I'll now turn it over to our CFO, Judd Merrill, to discuss financials for the quarter.
Unknown Speaker, Unknown Speaker,
Judd Merrill: Thanks, Steve. Let me start my comments with our balance sheet. We ended the quarter with total cash of approximately $3 million.
Judd Merrill: One of the more noticeable changes to the balance sheet and the statement of stockholders' equity is the effect of the reverse stock split. During the quarter, we implemented a reverse stock split of our common stock at a ratio of one post-split share for every 20 pre-split shares.
The reverse stock split became effective on November 5th, 2024.
Judd Merrill: Included in the 10-Q are presented as if the stock split had been effective from the beginning of the earliest period presented. This reverse stock split was done to enable us to meet NASDAQ listing requirements.
Judd Merrill: For this quarter, there were only minor changes to our balance sheet compared to the previous quarter ended June 30, 2024, so I will move on to the income statement.
Judd Merrill: This represents an approximate 9% decrease for the quarter which was due to a decrease in payroll and payroll related fees as we completed a reduction in force during August 2024.
Judd Merrill: We expect further decrease in plant operation costs in the fourth quarter.
Judd Merrill: General and administrative expense were little changed compared to the prior year, both quarter and year to date. We expect G&A cost to decrease for Q4 and as we head into 2025.
Judd Merrill: Reflecting the effects of the reverse stock split, our net loss for the three months ended September 30th, 2024.
was approximately 5.2 million or a negative 76 cents.
for Basic and Diluted Share.
Judd Merrill: compared to a net loss of 4.5 million or a negative 89 cents per basic and diluted share for the same quarter in 2023.
Judd Merrill: Our net loss for the nine months ended September 30th, 2024 was approximately $17 million.
Judd Merrill: or a negative $2.77 per basic and diluted share compared to a net loss of $13.9 million or a negative $3.12 per basic and diluted share for the same period in 2023.
Judd Merrill: Cash provided by financing activities and cash used in investing activities did not change significantly compared to the prior quarter.
Judd Merrill: Cast used in operations decreased slightly from the prior quarter and is expected to decrease further in the coming quarter.
Speaker Change: That concludes my remarks on the company financials and will now turn it back over to the moderator for Q&A.
Speaker Change: Thank you. We will now be conducting a question and answer session.
Speaker Change: If you would like to ask a question, please press star 1 on your telephone keypad.
Speaker Change: A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: Our first questions come from the line of Sameer Joshi with HC Wainwright. Please proceed with your questions.
Come be called, stay still it's all Right on
Speaker Change: So sorry Samir, it's really hard to hear you, unfortunately your phone is breaking up.
Thank you. Thank you.
It's it's crackling in and out.
Can you hear me now?
Yes, you sound perfect. Thank you.
Speaker Change: Okay great. So I was going to ask you about the DOE visits. I think there was a grant that was expected towards the phase two of the project. I don't know what the status of that grant is right now.
Unknown Speaker 0 . . . . . .
You got it.
Speaker Change: And for the long term financing, you did mention a couple of types of investors that are looking at it, including a strategic investor.
Speaker Change: But can you just describe the status and stage of progress, are there multiple parties at the table for each of these categories and what kind of structures are being discussed?
Speaker Change: and folks in the financial side for quite a while, and as I mentioned earlier since August .
Speaker Change: And we can't really comment on the structure at this point in time, but
Speaker Change: It is of great interest in our part to not only fund phase one of the CRR, but to have a path and flight path to get to
Speaker Change: The Phase Two, which is the build out to 10,000 tons.
and work with patient and strategic capital.
Speaker Change: That is looking at the space strategically and from a long term perspective. So that's what we really prioritize and we're having
Great, great discussions.
Speaker Change: On the commercial side, as I mentioned, we have been providing this battery grade lithium carbonate to multiple OEMs and players in the industry.
Speaker Change: and the consistent feedback we get is A, the samples that we provide are consistently battery grade and that just as importantly, we seem to be the only North American recycler that is able to provide battery grade recycles lithium carbonate.
and all those economics put together. Fortunately, because our process.
Speaker Change: So that means getting the scale more quickly is more important, and finding the funding to get from the $3,000 to the $10,000 is a critical part of our funding strategy. So we expect to be able to report more on the commercial and financing activities as we get towards the end and into the early part of next year.
Speaker Change: And then one last one, probably for Judd. I think you mentioned $500,000 to $600,000 a month.
Judd Merrill: Now this is GNA and operations. This is total kind of cash needs right now and we've done a good job getting our burn way down and and trying to manage that cost and so that includes everything.
Judd Merrill: and for the plant operations you did mention you expected them to be lower what what levels can you reach without like
So that you can restart the operations when needed.
yeah yeah I mean we'll see similar once we
Judd Merrill: Cash needs that that we had before Kind of I mean if we look back at q2 It's kind of a good example. We were ramping up at that point and had hired most of our people So I think that's kind of similar to what we'd expect once we turn things back on
Okay, thanks for taking my questions.
Speaker Change: Thank you. As a reminder, if you would like to ask a question by phone, please press star 1 on your telephone keypad.
Dr. Michael Legg, Judd Merrill, Sameer Joshi,
Speaker Change: Thank you. I'm not showing any further questions on the phone. Bob, I'd like to pass the call back to you for any questions submitted via the webcast.
Bob Meyers: Sure, thank you. First question, can you talk a little bit more about why you executed the reverse stock split?
Speaker Change: Yeah, Bob, I'll take that question. The primary reason was to regain compliance with the NASDAQ listing requirements.
Speaker Change: This is something that many companies, particularly those in the microcap or even the lithium related industry that have had to deal with, and will probably have to do in order to maintain that NASDAQ listing rule. And so that's what we did.
Got it. Thank you.
Speaker Change: And this was touched upon, but the financing term sheet is great news.
Speaker Change: Is there something in particular that gives you confidence that this will advance to a signed agreement?
Speaker Change: I'll just take that. We've talked about our desire and our goal to make sure that we fund this not only in the short term, but in the long term.
Speaker Change: And so we spent a lot of time and effort in this area. We've done things internally in terms of like, you know, purchasing certain modeling software and organizing and doing extended runs of our pilot operation, all with that goal. And so, you know, there's a tremendous amount of work.
Unknown Executive, Judd Merrill, Stephen Cotton
Speaker Change: Got it. Thank you. The next question. Assuming everything goes well and you do secure long-term funding, can you talk a little bit more about the commissioning schedule for the Sierra Arc?
Steve Cotton: Yeah Bob, this is Steve, I'll take that one. So I would start with saying our confidence in our ability to ramp quickly is really a reflection of the consistent pilot operations that we strategically chose to do compared to a lot of others in the industry and have been successfully doing for now nearly two years.
and as mentioned in our earlier remarks,
Steve Cotton: Ready to be installed and commissioned and that gives us a unique and really interesting rapid time to market up on funding.
Steve Cotton: So we've already gotten that real head start with that building acquisition and outfit and equipment and finalized designs.
etc.
Steve Cotton: This, I believe, would really put us into an industry leadership position.
of being the first.
Steve Cotton: Even with the frustrating delays that we've seen not only for Aqua Metals, but for the industry as a whole Even with that that puts us in what we believe will be a leadership position in the entire industry
Speaker Change: Great, thank you. The next question, following on on the funding, can you tell us more about your commercial development?
Speaker Change: Yeah, so being able to repeatedly produce battery grade materials versus what's called technical grade or even lower grade than technical lithium carbonate and other materials to OEMs has really bolstered our supply and offtake discussions.
Speaker Change: That is really a qualifying event in order to even have those detailed discussions. We've been told that we're the ones that are able to consistently provide those. So those engagements are very serious.
Speaker Change: And as I mentioned earlier, the commercial and funding fit together hand in glove, and all parties are in talks. We're not just in talks with commercial and in talks with the financial side. We're all in talks because it is hand in glove, and it all fits together.
Speaker Change: to see this thing through. We expect that we'll be able to update on the commercial development further even later this year or early next.
Thank you. Next question.
Speaker Change: regarding other partnerships in particular 6k and the timeline to support them with recycled materials.
Speaker Change: Yeah, so we continue to work with our partner 6K and we've made a lot of great progress in this past quarter.
Speaker Change: And so in addition to directly providing that battery grade lithium carbonate to OEMs, we've also provided the same to 6K, along with that NRE project or non-recurring engineering project that we developed for them of nitrated metals.
Speaker Change: Inclusive of Recycled Metals from our process and they've been producing battery grade CAM or cathode active material samples for their OEM relationships.
Speaker Change: We've evidenced together, we believe the lowest cost, decarbonized, recycled content supply chain right here in the U.S.
Speaker Change: that can truly compete with the China factor. And just this past quarter and together, we're really engaging quite a few of those various OEM counterparties through that partnership in addition to some direct discussions and samples that we provided as I mentioned earlier.
Speaker Change: So we're really excited about that future with 6K together, achieving a lot of goals for securing critical battery minerals right here in the U.S. with a cost and environmental advantage.
Great, thank you.
Speaker Change: Can you discuss in a little bit more detail you outlined industry leaders as well as several government agencies that have visited the plant and where you think some of those discussions might lead?
Speaker Change: Yeah, well, it was it was great to have representatives visit just this past quarter from the DOE, from the DOD, from the EPA, workforce development, visiting our Innovation Center and our pilot facility operating within that Innovation Center, as well as the CRR facility.
Speaker Change: and Environmental Benefits and Worker Safety and Comfort Advantages for the Community right in an operating plant producing battery-grade critical materials before their eyes as they visit it.
Speaker Change: We think that's quite impactful and that that will really help build our relationship with the various government agencies on a go-forward basis.
Speaker Change: And we've, subsequent to those visits, had further interaction with those agencies, and we expect that continued conversations ought to do a great deal to help us support our ongoing grant efforts.
And let's remember also that grants require cost share.
Speaker Change: So, any company that's awarded a grant is going to have to provide a significant cost share. So, you have to have the right financial strategic partner in order to support that cost share.
Speaker Change: So, as I was mentioning earlier, the commercial and the overall financing go together hand in glove. Well, so does this.
Speaker Change: because we've seen some companies that have been awarded provisionally large grant dollars and everybody's wondering where they're going to get their cost share and how that's going to impact the company to be able to support that cost share.
and Stephen Cotton. Thank you. Thank you.
Speaker Change: Yeah, so we are producing these materials and those materials are being sent.
Speaker Change: to the samples that we've been talking about today, to the various OEMs, etc. The overall capacity of the pilot facility, design capacity, is between 50 and 100 tons per year. So they're not a giant amount.
Speaker Change: So that's much more valuable than a small tiny trickle of revenue that we could have. And we could be reporting, but we've chosen not to go that path because it's much more important to take that finite amount of materials and seed the market to develop those commercial relationships.
Speaker Change: So that's really what's been happening with the materials at the facility.
Hi!
Speaker Change: Thank you. That is all the time we have for questions today. I'd like to hand the call back over to Steve Cotton for any closing remarks.
Steve Cotton: Great, well thanks everybody for continuing your support and having interest in aqua metals and I think we'll have a lot more news to report in the near future as we are very busily working away and what we've been talking about today and we look forward to reporting soon in our next quarterly update or sooner.
Thanks everyone.
Speaker Change: Thank you. That does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.