Q4 2024 Innventure Inc Earnings Call

Operator: Please enter your dial-in PIN and press pound when finished.

[Analyst]: Sí. ¿Te puedo pedir un favor? ¿Me pasas mi celular?

Lucas Harper: Sí.

[Analyst]: Está ahí para tomar fotos de los enlaces que pongan. Por favor, dice aquí arriba.

Lucas Harper: Okay. Gracias.

Speaker Change: Good day and thank you for standing by. Welcome to the Inventure Fourth Quarter and full year 2024 earnings conference call. At this time all participants are listened only mode. After the speaker's presentation there will be a question and answer session.

Speaker Change: To ask a question during the session, you will need to press star 111 on your telephone. You will then hear automated message advising your hand is raised. To withdraw your question, please press star 111 again. Please be advised that today's conference is being recorded. Arnaud behind the conference, over to your first speaker today. Lucas Harper, Chief Investment Officer, please go ahead.

Speaker Change: Thank you operator and thank you all for joining us for our Inventure's fourth quarter and full year 2024 earnings call. My name is Lucas Harper Inventure's Chief Investment Officer and joining me on the call today our Bill Haskell Chief Executive Officer and Dave Yablonowski Chief Financial Officer.

Speaker Change: Earlier today we issued a press release announcing our financial results which is available on our investor relations website along with a supplemental slide presentation.

Speaker Change: As referenced on slide 5, we will be discussing non-GAAP financial measures during the call.

Speaker Change: The most directly comparable GAAP financial measures and a reconciliation of the differences between the GAAP and non-GAAP financial measures are available in our earnings relief and supplemental slide presentation on our website.

Speaker Change: These forward looking statements involve a number of uncertainties and risks, including but not limited to those described in our earnings release Form 10-K for the period ended December 31, 2024, and other filings with the SEC.

Speaker Change: The actual results of operations and financial conditions of the company could differ materially from those expressed or implied in our forward looking statements.

Bill Haskell: And now I'd like to hand, the call over to our CEO Bill <unk>.

Bill Haskell: Thanks, Lucas and thanks to everyone listening today.

Bill Haskell: And then he was happy to report on our fourth quarter and full year 2024.

Bill Haskell: Which proved to be a several year in the company's history and our evolution is the growing differentiated technology commercialization platforms.

Bill Haskell: We accomplished several key milestones throughout the year, which I'd like to recap first.

Bill Haskell: Both are reflects annick Celsius started delivering commercial product in the marketplace, marking a significant milestone in our commercialization journeys.

Bill Haskell: Both have continued the momentum into this year and I'll touch on 2025 strategic priorities for each later in my commentary.

Bill Haskell: Second in October and venture closed this business combination will darn CW started trading on the NASDAQ as a public company.

Bill Haskell: As we've said in the past we believe in venture represents a differentiated opportunity for investors to participate in the expected growth trajectory of our current and future operating companies.

Bill Haskell: We remain committed to our goal of driving long term value for our shareholders and believe we are only in the very early stages of capturing that value.

Bill Haskell: Third and finally in December we announced our collaboration with the Dow Chemical company and the launch of our fourth operating company where affinity.

Bill Haskell: In addition to Procter and Gamble and Nokia Dallas third active multinational corporation, we have collaborated with in connection with the launch of a new operating company.

Bill Haskell: There are various collaborative opportunities we plan to explore with Dow within the waste to value ecosystem and we are very much look forward to the future.

Bill Haskell: As you can see 2024 was a watershed year at indenture, we executed well against our 2024 strategic priorities and believe we have positioned the company well for success in 2025.

Now, let's dive into updates for each of our operating companies starting with <unk>.

Bill Haskell: As a reminder, in venture owns a majority of the company and we consolidate <unk> financials.

Bill Haskell: Compared to single Phase water <unk> Nucor systems offer a differentiated cooling solution that can handle higher heat fluxes lower overall operating expense and have superior redundancy and servicing flexibility all while using a dielectric fluid that our testing indicates will not damage the gpus in the.

Bill Haskell: The agenda of the league.

Bill Haskell: All of this can lead to a lower total cost of ownership for the data center operators compared to single phase cooling systems.

Bill Haskell: As I mentioned <unk> has started delivering product to the marketplace. During Q3 2024 and gained momentum during the fourth quarter.

Bill Haskell: While revenues have yet to scale attraction Celsius is generating within the data center ecosystem is impressive.

Bill Haskell: I'd like to start by reviewing the strategic goals that <unk> set out to accomplish.

Bill Haskell: Our strategy has always been to lever the reach of global partners to both validate our model and to reach scale.

Bill Haskell: To that end, we have targeted establishing relationships with one or more entities in each of the following four separate groups.

Bill Haskell: Number one large global Oems number two hyperscale is number three co location operators and number four AI as a service providers.

Bill Haskell: To date, we have made meaningful progress with companies in all four groups as.

[Analyst]: Y cómo se había visto.

Lucas Harper: Faltaba el cigarro.

[Analyst]: Faltaba, sí está.

Lucas Harper: Ya hace rato que se fue, ¿no?

[Analyst]: Sí.

Lucas Harper: ¿A dónde se fue?

[Analyst]: Pues

Bill Haskell: As communicated in our recent press release <unk> signed a three year master purchasing agreement to White label, it's product for a leading global thermal management OEM for sale to its end user customers and resale towards channel partners.

Lucas Harper: Se fue porque te buscaron o?

[Analyst]: Perdón.

Bill Haskell: We have also been engaging in discussions with multiple hyperscale is.

Bill Haskell: To get a sense for the potential for these large global companies. The top Hyperscale is collectively have estimated spending over $250 billion for data center development for 2025, and each typically orders equipment at a rate of about 1000 racks per week.

Bill Haskell: <unk> has also announced deals with large colocation players telehealth and data centers, both of which have established innovation centers that will display <unk> <unk> solution.

Bill Haskell: We have announced the collaboration with AI as a service provider Nordic as well.

Bill Haskell: Importantly, we believe each of these agreements is the potential for expansion as we expect additional orders will follow as the customers validate the technology.

Bill Haskell: We believe that the economics of the <unk> solution a compelling the expected benefits for Datacenters are clear and market adoption of the technology is starting to gain momentum.

Bill Haskell: We are also excited about <unk> recent announced product line expansion, which could help serve the needs of large players in the data center market.

Bill Haskell: This includes the launch of a 250 kilowatt multi rack cooling system, helping excelsior serve the ever increasing need for higher rack power densities across a broadening set of end market use cases.

Bill Haskell: We believe the design of this product in scale, even higher and we are excited about the company's sophisticated product roadmap.

Bill Haskell: We expect these innovations will help the company maintain our leading position in the two phase direct to chip liquid cooling market.

Bill Haskell: We look forward to sharing more as we progress through 2025, but needless to say we are proud of what <unk> has accomplished to date and expect many additional achievements from <unk> in the quarters and years ahead.

Now shifting to Arrow flex, which as a reminder is carried on our balance sheet as an equity method company.

Bill Haskell: Similar to <unk> Celsius. It reflects started delivering product to the marketplace. During 2024 and is gaining momentum that we believe sets the company up for a pivotal 2025.

Bill Haskell: Earlier, this month <unk> announced a partnership with spectrum brands. So they are permanent or D shedding ultra premium pet shampoo product.

Bill Haskell: The airport's design should help improve the overall customer experience with a sustainable solution that uses up to 66% less plastic than Richard bottle alternatives.

Bill Haskell: This is a significant development for our flex and one that is indicative of the broader conversations Andy and his team are having with potential customers.

Bill Haskell: Packaging companies are not solely focused on volume and price sustainability performance and total cost of ownership all play a large role in the decision, making process and potential customers need to audit the packaging facilities to ensure the products meet all of their criteria.

Bill Haskell: This makes two other recent announcements critically important.

Bill Haskell: First as I mentioned on our last call Arrow Flex received the highest standard rating under the brand reputation through compliance global standard or BRC GFS and is certified as double a grade.

Bill Haskell: This represents the fourth consecutive year the Westchester manufacturing site has achieved the highest rating which is an important credential you've looked for in our packaging supplier.

Bill Haskell: Second.

Bill Haskell: Air Flex recently achieved two important international organization for standardization or ISO certifications.

Bill Haskell: These ISO certifications hold significant value for organizations and brand owners with clear policy surrounding product quality and performance.

Bill Haskell: These credentials provide verification that arrow flex as production process meet ISO standards and.

Bill Haskell: And coupled with the <unk> certification exemplify <unk> with exceptional quality and consistent approach to manufacturing.

Bill Haskell: These certifications open up the aperture of potential customers that Eric looks can target to further establish itself within the $400 billion of packaging market.

Bill Haskell: In addition, <unk> launched its partnership with Kenny Pack in Europe, which was originally announced back in June of 2024.

Bill Haskell: Eric Flex deployed its proprietary filling machine directly at coming back production site.

Bill Haskell: Facilitate adoption of the technology across Europe.

Bill Haskell: This strategic partnership positions <unk> to help address growing demand for sustainable liquid packaging solutions in the broader European region.

Bill Haskell: While product deliveries have yet to start this milestone establishes a global footprint localizing the ability for European customers to do business levels.

Bill Haskell: We are proud of this momentum and look forward to seeing what Andy and his team do next.

Bill Haskell: Now, let's move to our latest operating company for affinity, which is focusing on opportunities in the waste to value space.

Bill Haskell: In mid December we launched a affinity and announced its collaboration with Dow.

Bill Haskell: In January we hosted a call where bill Grieco Refinish CEO did a deep dive into the Dow collaboration and the technology that <unk>.

Bill Haskell: <unk> intends to commercialize.

Bill Haskell: But encourage everyone could give that to listen as it provides valuable detail around the plastic waste to value market opportunity.

Operator: Good day, and thank you for standing by. Welcome to the Innventure Q4 and Full Year 2024 Earnings Conference Call. At this time, all participants are in listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would like to hand the conference over to your first speaker today, Lucas Harper, Chief Investment Officer. Please go ahead.

Bill Haskell: From a technologies and refinish differentiators.

Bill Haskell: To quickly frame why are we so excited about the opportunity less than 9% of global plastic waste generated each year is recycled.

Bill Haskell: For affinity is focused on the 240 million tons of plastic waste that typically landfilled or incinerated annually.

Bill Haskell: The scope of this unmet market need is a key reason that we're focused on commercializing what we believe will be an economically viable recycling solution.

Bill Haskell: Our solution to that problem uses a proprietary advanced recycling process licensed from BTT Technical Research center of Finland to convert minimally saw sorted low cost mixed plastic waste to dropping chemicals.

Lucas Harper: Thank you, operator, and thank you all for joining us for Innventure's Q4 and full year 2024 earnings call. My name is Lucas Harper, Innventure's Chief Investment Officer, and joining me on the call today are Bill Haskell, Chief Executive Officer, and David Yablunosky, Chief Financial Officer. Earlier today, we issued a press release announcing our financial results, which is available on our investor relations website, along with a supplemental slide presentation. As referenced on the slide side, we will be discussing non-GAAP financial measures during the call. The most directly comparable GAAP financial measures and a reconciliation of the differences between the GAAP and non-GAAP financial measures are available in our earnings release and supplemental slide presentation on our website. In addition, certain statements being made today are forward-looking statements that are based on management's current assumptions, beliefs, and expectations concerning future events impacting the company.

Affinity plans to takeaways from food trays plastic wrap storage bands detergent containers, and other household plastics and convert them to sustainable chemicals that today come from barrels of oil in turn reducing the overall net need for oil production.

Bill Haskell: The process targets conversion of abundant low cost plastic waste to valuable chemicals that unexpected high yield.

Bill Haskell: The company is only a few months old.

Bill Haskell: Energy has hit the ground running.

Bill Haskell: First they are building an impressive team.

Speaker Change: In addition to build Ricoh and Adam Javan Refinish higher Doctor Agnostic Paulo Rivera as Chief Technology Officer, who brings over 25 years of experience in the chemicals and fuels industries.

Lucas Harper: These forward-looking statements involve a number of uncertainties and risks, including but not limited to those described in our earnings release, Form 10-K for the period ended December 31, 2024, and other filings with the SEC. The actual results of operations and financial conditions of the company could differ materially from those expressed or implied in our forward-looking statements. Now I'd like to hand the call over to our CEO, Bill Haskell.

Speaker Change: Second the team established plans with BTT for bench and pilot scale experiments for optimization of olefin gas production from plastic waste.

Speaker Change: These experiments are currently being conducted using plastic waste in our potential feedstocks because the initial production plant that were affinity plans to build.

Speaker Change: PTT also started experiments on <unk> behalf for liquid production that have been promising.

Bill Haskell: Thanks, Lucas, and thanks to everyone listening today. Innventure was happy to report on our Q4 and full year 2024, which proved to be a seminal year in the company's history and our evolution as a growing differentiated technology commercialization platform. We accomplished several key milestones throughout the year, which I'd like to recap. First, both AeroFlexx and Accelsius started delivering commercial product to the marketplace, marking a significant milestone in their commercialization journeys. Both have continued the momentum into this year, and I'll touch on 2025 strategic priorities for each later in my commentary. Second, in October, Innventure closed its business combination with Learn CW and started trading on the Nasdaq as a public company. As we've said in the past, we believe Innventure represents a differentiated opportunity for investors to participate in the expected growth trajectory of our current and future operating companies.

Speaker Change: Additionally, the affinity and Dow teams are beginning to develop project plans for defining product quality site selection and integrating the conversion process with steam cracker operations.

Speaker Change: Looking ahead, while we don't expect the company to generate revenue for a few years, we thought it would be helpful to discuss three key strategic priorities for affinity over the next several quarters.

Speaker Change: Number one engaged an engineering procurement and construction partner for the first plant design and delivery to demonstrate viability of fluid bed conversion of mixed plastic waste a liquid product at BTT pilot scale and three finalize the initial site selection and feedstock sourcing for the first plant.

Speaker Change: Executing on these priorities will set the company up for future success, and we are excited to watch the company developed.

Speaker Change: Now I'll provide an update on the pipeline of multinational corporation relationships in our funnel.

Speaker Change: We started 2024 with two ongoing MDC partners, Procter and Gamble and Nokia.

Bill Haskell: We remain committed to our goal of driving long-term value for our shareholders and believe we are only in the very early stages of capturing that value. Third, finally, in December, we announced our collaboration with The Dow Chemical Company and the launch of our fourth operating company, Refinity. In addition to Procter & Gamble and Nokia, Dow is the third active multinational corporation we've collaborated with in connection with the launch of a new operating company. There are various collaborative opportunities we plan to explore with Dow within the waste to value ecosystem. We very much look forward to the future. As you can see, 2024 was a watershed year at Innventure. We executed well against our 2024 strategic priorities and believe we have positioned the company well for success in 2025. Now let's dive into updates for each of our operating companies, starting with Accelsius.

Speaker Change: We ended the year with three adding Dow in collaboration with our launch of affinity.

Speaker Change: Beyond that there is a diverse and evolving set of MMC, they continually share opportunities within venture for us to evaluate.

Speaker Change: Given this we don't plan to disclose MMC numbers on a quarterly basis moving forward instead, we will communicate relevant developments to the market as they happen.

Speaker Change: Rather than focusing on quantity the quality of the opportunities. There has always been paramount and we continue to see quality increase as our relationships evolve.

Speaker Change: Based on relationships with just three Mmc's and venture has launched four companies since inception.

Speaker Change: Pure cycle technologies was the first indenture operating company and it is now a public company with an enterprise value of approximately $1 5 billion.

Speaker Change: As previously communicated in venture took the company public in 2021, and we no longer have an economic interest in pure cycle.

Bill Haskell: As a reminder, Innventure owns a majority of the company, and we consolidate Accelsius's financials. Compared to single-phase water, Accelsius's NeuCool systems offer a differentiated cooling solution that can handle higher heat fluxes, lower overall operating expense, and have superior redundancy and servicing flexibility, all while using a dielectric fluid that our testing indicates will not damage GPUs in the event of a leak. All of this can lead to a lower total cost of ownership for the data center operators compared to single-phase cooling systems. As I mentioned, Accelsius started delivering product to the marketplace during Q3 2024 and gained momentum during Q4. While revenues have yet to scale, the traction Accelsius is generating within the data center ecosystem is impressive. I'd like to start by reviewing the strategic goals that Accelsius set out to accomplish.

Speaker Change: As we evaluate opportunities we look to create companies that we believe have the potential to reach similar target enterprise values above $1 billion.

Speaker Change: To close 2024 was a milestone year for adventure and marked the beginning of our journey as a public company I am incredibly proud of all the hard work exhibited by the entire <unk> team and the teams across our family of operating companies.

Speaker Change: The momentum we've seen early in 2025 is invigorating and we expect this year to be an inflection point for revenue growth.

Speaker Change: With that I'd like to turn the call over to our Chief Financial Officer, David <unk> to review our financials.

Speaker Change: Dave.

Dave Jablonski: Thanks, Bill and thanks to all joining today.

Speaker Change: Investor ended 2024, with total revenue of $1 $2 million primarily.

Bill Haskell: Our strategy has always been to lever the reach of global partners to both validate our model and to reach scale. To that end, we have targeted establishing relationships with 1 or more entities in each of the following 4 separate groups. Number 1, large global OEMs. Number 2, hyperscalers. Number 3, colocation operators. Number 4, AI-as-a-service providers. To date, we have made meaningful progress with companies in all 4 groups. As communicated in our recent press release, Accelsius signed a 3-year master purchasing agreement to white label its product for a leading global thermal management OEM for sale to its end user customers and resale to its channel partners. We have also been engaging in discussions with multiple hyperscalers.

Dave Jablonski: Primarily representing the first commercial sales at a Celsius.

Bill Haskell: As Bill mentioned.

Bill Haskell: The Celsius in Aero Flex began generating revenue in 2024, and we expect revenues to continue to grow in 2025 with most of the growth occurring in the second half of the year.

Bill Haskell: Adjusted EBITDA was a loss of $27 $9 million in 2024, driven.

Bill Haskell: Driven by cost of sales and R&D expense at a Celsius.

Bill Haskell: Marketing expense as a Celsius grows.

Bill Haskell: Non recurring professional services legal fees and consulting fees related to the business combination.

Bill Haskell: Higher G&A at both the Celsius some adventure.

Bill Haskell: <unk> from our transition from a private company to a public company.

Bill Haskell: To get a sense for the potential for these large global companies, the top hyperscalers collectively have estimated spending over $250 billion for data center development for 2025, and each typically orders equipment at a rate of about 1,000 racks per week. Accelsius has also announced deals with large colocation players, Telehouse and iM Data Centers, both of which have established innovation centers that will display Accelsius's NeuCool solution. We have announced a collaboration with AI as a service provider, Nordik Data Centers, as well. Importantly, we believe each of these agreements has the potential for expansion as we expect additional orders will follow as the customers validate the technology. We believe that the economics of the Accelsius solution are compelling, the expected benefits for data centers are clear, and market adoption of the technology is starting to gain momentum.

Bill Haskell: A reconciliation of adjusted EBITDA to net loss as shown in the appendix of the earnings presentation.

Bill Haskell: Now a brief discussion on tariffs.

Bill Haskell: Like most companies across many different industries.

Bill Haskell: Still evaluating the impact tariffs may have on our business.

Bill Haskell: This point, we don't expect tariffs to have a material impact on our ability to grow revenue and scale our operating companies.

Bill Haskell: While our Celsius as a buyer of materials like aluminum and copper and other electrical components.

Bill Haskell: The company's tier one supply chain is largely north American based so where Celsius is relatively protected from any direct impact tariffs may have.

Bill Haskell: For Aero Flex the company continues to pursue U S based raw material suppliers and all production is currently done in the U S.

Bill Haskell: We are also excited about Accelsius's recent announced product line expansion, which can help serve the needs of large players in the data center market. This includes the launch of a 250 kW multi-rack cooling system, helping Accelsius serve the ever-increasing need for higher rack power densities across a broadening set of end market use cases. We believe the design of this product can scale even higher, and we are excited about the company's sophisticated product roadmap. We expect these innovations will help the company maintain a leading position in the two-phase direct-to-chip liquid cooling market. We look forward to sharing more as we progress through 2025, but needless to say, we are proud of what Accelsius has accomplished to date, and expect many additional achievements from Accelsius in the quarters and years ahead.

Bill Haskell: The impact of tariffs on the <unk> partnership is also not expected to be material as Kemet pack distribution will be focused within the broader European region.

Bill Haskell: And for <unk>.

Bill Haskell: We also don't expect tariffs to have a significant impact on the business.

Bill Haskell: The company's plan is to build plants in the U S.

Bill Haskell: Source plastic waste feedstock domestically and sell both the liquid and gas products to domestic off takers.

Bill Haskell: It is important to say, we remain committed to our goal of creating long term shareholder value and are confident in how the company is positioned as we move through 2025.

Bill Haskell: Moving now to our recently announced transactions.

Bill Haskell: Shifting to AeroFlexx, which as a reminder, is carried on our balance sheet as an equity method company. Similar to Accelsius, AeroFlexx started delivering product to the marketplace during 2024 and is gaining momentum that we believe sets the company up for a pivotal 2025. Earlier this month, AeroFlexx announced a partnership with Spectrum Brands for their FURminator deShedding ultra-premium pet shampoo product. The AeroFlexx design should help improve the overall customer experience with a sustainable solution that uses up to 66% less plastic than rigid bottle alternatives. This is a significant development for AeroFlexx, and one that is indicative of the broader conversations Andy and his team are having with potential customers. Packaging companies are not solely focused on volume and price.

Bill Haskell: All of which strengthened our capital position.

Bill Haskell: First on March 24, 2025, and venture completed a private placement of series C preferred stock and the aggregate amount of approximately $28 $9 million.

Bill Haskell: The series C offering was designed to accommodate certain persons interested in investing in the company on terms similar to those of the series B preferred round that closed on October 2024.

Bill Haskell: As well as strengthen the adventure balance sheet by converting founder and other related party debt into series C preferred shares.

Bill Haskell: Specifically, we issued 275000 preferred shares for cash proceeds of $2 $75 million and issued 300000 series C preferred shares pursuant to an agreement with one of our advisers.

Bill Haskell: Sustainability, performance, and total cost of ownership all play a large role in the decision-making process, and potential customers need to audit the packaging facilities to ensure the products meet all of their criteria. This makes two other recent announcements critically important. First, as we mentioned on our last call, AeroFlexx received the highest standard in rating under the Brand Reputation through Compliance Global Standard, or BRCGS, and is certified as double A grade. This represents the fourth consecutive year the Westchester manufacturing site has achieved the highest rating, which is an important credential MNCs look for in a packaging supplier. Second, AeroFlexx recently achieved two important International Organization for Standardization, or ISO, certifications. These ISO certifications hold significant value for organizations and brand owners with clear policies surrounding product quality and performance.

Bill Haskell: In addition, <unk>.

Mike: Decorative chairman Mike got worse.

Mike: <unk> strategy Officer, John Scott and other related parties terminated approximately $18 million worth of adventure and Aero flex that in exchange for approximately $2 3 million series C preferred shares.

Mike: Resulting in an annual interest expense savings of approximately $3 million.

Mike: We believe this demonstrates a strong commitment from our founders and reiterate their belief and then venture score to drive long term value creation for our shareholders.

Mike: Second on March 25, 2025, and venture entered into a securities purchase agreement with Yorkville for convertible debenture issuances in an aggregate principal amount of up to $30 million.

Bill Haskell: These credentials provide verification that AeroFlexx's production process meet ISO standards, and coupled with the BRCGS certification, exemplify AeroFlexx's exceptional quality and consistent approach to manufacturing. These certifications open up the aperture of potential customers that AeroFlexx can target to further establish itself within the $400 billion packaging market. In addition, AeroFlexx launched its partnership with Chem-Pak in Europe, which was originally announced back in June 2024. AeroFlexx deployed its proprietary filling machine directly at Chem-Pak's production site to facilitate adoption of the technology across Europe. This strategic partnership positions AeroFlexx to help address growing demand for sustainable liquid packaging solutions in the broader European region. While product deliveries have yet to start, this milestone establishes a global footprint, localizing the ability for European customers to do business with us. We are proud of this momentum and look forward to seeing what Andy and his team do next.

Mike: We expect to issue $20 million of debentures, and a closing scheduled to occur within the next few days.

Mike: And to issue an additional $10 million of debentures later in the second quarter subject to satisfaction of certain closing conditions.

Mike: I'd like to close by reiterating our previously stated capital allocation priorities.

Mike: We've set up before discipline and risk mitigation is part of our DNA.

Mike: We'll take that approach as we look to scale our operating companies.

Mike: We will aim to pace capital investments with revenue visibility.

Mike: Can be highly focused on cost management to minimize early stage operating expense.

Mike: Again this is a key benefit of our closed loop model as our collaborations with multinational corporations are designed to help reduce operating risk.

Mike: We will also focus on supporting our operating companies with the ultimate goal of funding growth off of our own balance sheet.

Bill Haskell: Now let's move to our latest operating company, Refinity, which is focusing on opportunities in the waste-to-value space. In mid-December, we launched Refinity and announced its collaboration with Dow. In January, we hosted a call where Bill Grieco, Refinity's CEO, did a deep dive into the Dow collaboration and the technology that Refinity intends to commercialize. We'd encourage everyone to give that a listen, as it provides valuable detail around the plastic waste-to-value market opportunity, incumbent technologies, and Refinity differentiators. To quickly frame why we're so excited about the opportunity, less than 9% of global plastic waste generated each year is recycled. Refinity is focused on the 240 million tons of plastic waste that are typically landfilled or incinerated annually. The scope of this unmet market need is a key reason that we're focused on commercializing what we believe will be an economically viable recycling solution.

Mike: We believe that our operating companies have strong growth potential.

Mike: And by maintaining long term control will have the opportunity to unlock significant shareholder value over the long term.

Mike: Finally, as we continue to scale and launched new companies.

Mike: And to consolidate their cash flows at the venture level because of this we may ultimately look to return a portion of the excess capital to our shareholders.

Mike: That concludes our prepared remarks.

Mike: We believe there are many exciting things on the horizon for adventure.

Mike: And we look forward to executing our strategy and delivering value to our shareholders.

Mike: Now we will open up the call for Q&A.

Mike: Thank you at this time, we will conduct a question answer session. As a reminder to ask a question you will need to press star one I'm wondering your telephone and wait for your name to be handouts to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.

Bill Haskell: Our solution to that problem uses a proprietary advanced recycling process licensed from VTT Technical Research Centre of Finland to convert minimally sorted, low-cost mixed plastic waste to drop-in chemicals. Refinity plans to take waste from food trays, plastic wrap, storage bins, detergent containers, and other household plastics, and convert them to sustainable chemicals that today come from barrels of oil, in turn reducing the overall net need for oil production. The process targets conversion of abundant, low-cost plastic waste to valuable chemicals at an expected high yield. The company is only a few months old. Refinity has hit the ground running. First, they are building an impressive team. In addition to Bill Grieco and Adam Javan, Refinity hired Dr. Ignasi Castillo-Rivara as Chief Technology Officer, who brings over 25 years of experience in the chemicals and fuels industries.

Mike: Okay.

Speaker Change: And our first question comes from the line of Chip Moore of Roth Capital Partners. Your line is now open.

Chip Moore: Good morning, Hey, everybody. Thanks for taking the question.

Speaker Change: I wanted to maybe ask on.

Speaker Change: On <unk>, if you could expand a bit on those poor groups, you mentioned and I guess, particularly the global Oems in Hyperscale or just maybe give us a sense of.

How those discussions have been evolving here.

Speaker Change: In recent months.

Speaker Change: Okay.

Bill: Hey, Jeff This is bill and thanks for the question.

Speaker Change: So first I would say that on the OEM agreement.

Bill: That is the contracts that we have and it does have.

Speaker Change: Some conditions in it that include effectively.

Speaker Change: Hard contracts for take or pay and then some some benchmarks.

Bill Haskell: Second, the team established plans with VTT for bench and pilot scale experiments for optimization of olefin gas production from plastic waste. These experiments are currently being conducted using plastic wastes that are potential feedstocks for the initial production plant that Refinity plans to build. VTT also started experiments on Refinity's behalf for liquid production that have been promising. Additionally, the Refinity and Dow teams are beginning to develop project plans for defining product quality, site selection, and integrating the conversion process with steam cracker operations. Looking ahead, while we don't expect the company to generate revenue for a few years, we thought it would be helpful to discuss 3 key strategic priorities for Refinity over the next several quarters. Number 1, engage an engineering procurement and construction partner for the first plant design and delivery.

Certain exclusivity provisions in the agreement.

Speaker Change: So that's that's a deal that we are under contract for.

Speaker Change: Yes.

Speaker Change: Label.

Speaker Change: As we've described in our nation.

Speaker Change: So we're quite excited about it it's the scale of this sort of scale of both the OEM home.

Speaker Change: Has asked us not to name them at this stage.

Speaker Change: The scale of the of the OEM and their demands in the marketplace are quite substantial.

Speaker Change: The agreements that we have drafted I cant imagine that they would have entered into something that they didn't believe was going to result in at least sort of thousands of racks.

Speaker Change: Equipment or larger.

Speaker Change: Which is very significant to us tomorrow type a revenue standpoint.

Speaker Change: Hyperscale orders, we've had literally dozens of meetings with various cypress Taylor's.

Bill Haskell: Two, demonstrate viability of fluid bed conversion of mixed plastic waste to liquid product at VTT pilot scale. Three, finalize initial site selection and feedstock sourcing for the first plant. Executing on these priorities will set the company up for future success, and we are excited to watch the company develop. Now I'll provide an update on the pipeline of multinational corporation relationships in our funnel. We started 2024 with two ongoing MNC partners, Procter & Gamble, and Nokia. We ended the year with three, adding Dow in collaboration with our launch of Refinity. Beyond that, there is a diverse and evolving set of MNCs that continually share opportunities with Innventure for us to evaluate. Given this, we don't plan to disclose MNC numbers on a quarterly basis moving forward. Instead, we will communicate relevant developments to the market as they happen.

Speaker Change: So we're quite optimistic that going forward, we will end up with some some firm commitments from some those groups.

Chip Moore: As you May know chip.

Speaker Change: <unk>.

Speaker Change: Competition in the spaces.

Speaker Change: Principally I would say the old way of doing things that are most.

Speaker Change: People are using.

Speaker Change: They are today.

Speaker Change: We've got some that are using single phase water and there are dozens and dozens of contractors in that space, but there are only two to our knowledge ourselves and one other.

Speaker Change: In the two phase directed chip.

Speaker Change: And most of the large players have already indicated that it's inevitable that we will get there and have a requirement for that some now some later.

Speaker Change: So I think we're well positioned with both the hyperscale or as the Oems.

Speaker Change: And then the AI as a service providers as I mentioned.

Speaker Change: We've had a contract that we announced Denver and discussions with others.

Bill Haskell: Rather than focusing on quantity, the quality of the opportunities has always been paramount, and we continue to see quality increase as our relationships evolve. Based on relationships with just three MNCs, Innventure has launched four companies since inception. PureCycle Technologies was the first Innventure operating company, and it is now a public company with an enterprise value of approximately $1.5 billion. As previously communicated, Innventure took the company public in 2021, and we no longer have an economic interest in PureCycle. As we evaluate opportunities, we look to create companies that we believe have the potential to reach similar target enterprise values above $1 billion. To close, 2024 was a milestone year for Innventure and marks the beginning of our journey as a public company. I am incredibly proud of all the hard work exhibited by the entire Innventure team and the teams across our family of operating companies.

Speaker Change: Has fairly substantial.

Speaker Change: Kind of chipsets need cooling for.

Speaker Change: So overall quite bullish on it.

Speaker Change: Feel like this businesses is really at an inflection point and I'm more optimistic than I've been been ever with respecting that works all CSS.

Speaker Change: Great. Thanks for.

Speaker Change: And I guess, sorry go ahead.

Speaker Change: Yes. Thank you.

Speaker Change: I can answer.

Speaker Change: Yeah, Yeah, I was going to ask about that inflection point and then put.

Speaker Change: Particularly as it relates to.

Speaker Change: Sort of back half of this year you gave some commentary there maybe just.

Speaker Change: Dovetail that with some of some of those conversations youre having.

Speaker Change: Well in the case of the OEM, we expect that ramp to begin in the second half when the white label product would be available in the marketplace I, obviously cant sell it until it.

Speaker Change: It's finalized and Thats really more on their side and ours, I think where we.

Bill Haskell: The momentum that we've seen early in 2025 is invigorating, and we expect this year to be an inflection point for revenue growth. With that, I'd like to turn the call over to our Chief Financial Officer, David Yablunosky, to review our financials. Dave?

Speaker Change: Okay.

Speaker Change: Hey.

Speaker Change: I mean, excuse me a product that we've already developed.

For them, we need to go through UL certifications, but by and large we have a product that we could put in the marketplace pretty readily.

David Yablunosky: Thanks, Bill. Thanks to you all joining today. Innventure ended 2024 with total revenue of $1.2 million, primarily representing the first commercial sales at Accelsius. As Bill mentioned, both Accelsius and AeroFlexx began generating revenue in 2024, and we expect revenues to continue to grow in 2025, with most of the growth occurring in H2 of the year. Adjusted EBITDA was a loss of $27.9 million in 2024, driven by cost of sales and R&D expense at Accelsius, marketing expense as Accelsius grows, non-recurring professional services, legal fees, and consulting fees related to the business combination, and higher G&A at both Accelsius and Innventure, resulting from our transition from a private company to a public company. A reconciliation of Adjusted EBITDA to net loss is shown in the appendix of the earnings presentation. Now a brief discussion on tariffs.

Speaker Change: Sometime in the second half of the year.

Speaker Change: That will be available for sale and that would begin to ramp in there, which again I would expect to be relatively steep.

Speaker Change: Timing is always challenging to predict particularly.

Right now as the market has been.

Speaker Change: Volatile and there's a lot of uncertainty and nervousness kind of across the board, but overall quite bullish on what the second half of the year. It looks like not only for <unk>, but also for Aero flex.

Speaker Change: Okay.

Speaker Change: Got it that's helpful. Yes.

Speaker Change: I haven't noticed any volatility.

Speaker Change: I guess.

Speaker Change: As a follow up here I did notice.

Speaker Change: <unk>.

Speaker Change: On <unk> on their website.

Speaker Change: There is I think.

Speaker Change: The major contract manufacturer and.

Speaker Change: Pretty.

Speaker Change: Large global thermal management OEM listed on there just wondering if that is new or something that just had noticed in the past.

Speaker Change: Yes.

Speaker Change: OEM is what we've discussed.

Speaker Change: That is the global OEM.

Speaker Change: I'm not aware that there is named the contract manufacturer.

Speaker Change: Was there a name of one on the website.

David Yablunosky: Like most companies across many different industries, we're still evaluating the impact tariffs may have on our business. At this point, we don't expect tariffs to have a material impact on our ability to grow revenue and scale our operating companies. While Accelsius is a buyer of materials like aluminum and copper and other electrical components, the company's tier 1 supply chain is largely North American-based, so Accelsius is relatively protected from any direct impact tariffs may have. For AeroFlexx, the company continues to pursue US-based raw material suppliers, and all production is currently done in the US. The impact of tariffs on the Chemapac partnership is also not expected to be material, as Chemapac distribution will be focused within the broader European region. For Refinity, we also don't expect tariffs to have a significant impact on the business.

Speaker Change: Hi, Thanks, maybe still left to go on there.

Speaker Change: Okay, that's certainly a possibility.

Speaker Change: I'll defer to them to answer your question, but we can take it.

Speaker Change: Yes, we certainly are engaged with with various Scott at manufacturers to be able to accommodate the scale, particularly in the hyperscale is that they sell through to.

Speaker Change: The kind of orders that we would anticipate there are very substantial and so we need a contract manufacturer buyer side to be able to accommodate the kind of the volumes we would expect.

Speaker Change: Understood.

Speaker Change: If I could sneak one more in maybe on <unk>.

Speaker Change: <unk> flex.

Speaker Change: You announced that pet shampoo product just how to think about that is that sort of an early stage.

Speaker Change: Testing on the shelf limited markets or what's the and what's the potential opportunity with that.

David Yablunosky: The company's plan is to build plants in the US, source plastic waste feedstock domestically, and sell both the liquid and gas products to domestic off-takers. It is important to say we remain committed to our goal of creating long-term shareholder value and are confident in how the company is positioned as we move through 2025. Moving now to our recently announced transactions, all of which strengthen our capital position. First, on 24 March 2025, Innventure completed a private placement of Series C preferred stock in the aggregate amount of approximately $28.9 million. The Series C offering was designed to accommodate certain persons interested in investing in the company on terms similar to those of the Series B preferred round that closed on October 2024.

Speaker Change: Yes look I think it's smaller so far to your point you can go buy Amazon today, if you wanted to.

Speaker Change: It's out there and available so it has both a.

Speaker Change: And online.

Speaker Change: Element to it as well as kind of.

A meaningful commercial scale.

Speaker Change: Still contract for Us which is.

Speaker Change: Not the.

Speaker Change: First but it's the largest to date and we would expect large amounts not just from them follow on orders, but yes.

Speaker Change: Quite a few of those.

Speaker Change: Folks that are interested in it and all of these various certifications have been announcing and continue to announce.

Speaker Change: Sure.

Speaker Change: Really critical particularly to the to the law.

Speaker Change: Large CPG companies.

Speaker Change: Or all.

Speaker Change: Require normally ISO certifications, but an area of certifications along the way.

Speaker Change: And in order to.

Speaker Change: For them to be able to place an order. It's just kind of what are the hurdles you have to go through so there's one yet to be achieved I think its fairly close in time.

David Yablunosky: Strengthen the Innventure balance sheet by converting founder and other related party debt into Series C preferred shares. Specifically, we issued 275,000 preferred shares for cash proceeds of $2.75 million and issued 300,000 Series C preferred shares pursuant to an agreement with one of our advisors. Executive Chairman Mike Otworth, Chief Strategy Officer John Scott, and other related parties terminated approximately $18 million worth of Innventure and AeroFlexx debt in exchange for approximately 2.3 million Series C preferred shares, resulting in an annual interest expense savings of approximately $3 million. We believe this demonstrates a strong commitment from our founders and reiterates their belief in Innventure's goal to drive long-term value creation for our shareholders. On 25 March 2025, Innventure entered into a securities purchase agreement with Yorkville for convertible debenture issuances in an aggregate principal amount of up to $30 million.

Speaker Change: A month or two away.

Speaker Change: Expect that to kind of unlock some various orders that are pending that certification.

Speaker Change: Gotcha perfect. Thanks, Bill maybe just one last housekeeping question.

Speaker Change: It looked like Arrow flex.

Speaker Change: Stake went up to 38%.

Speaker Change: That increase.

Speaker Change: Would you be looking to take that majority at some point and then.

Speaker Change: Celsius is that's.

Speaker Change: Still the same ownership cushman. Thanks.

Speaker Change: Yes, <unk> is where it was before we did increase our ownership stake in <unk> reflects the converted some debt into equity.

Speaker Change: To increase our stake and we do have a mechanism potentially to be able to get to a majority ownership in.

Speaker Change: And it reflects down the road so that remains to be seen but.

Speaker Change: But there is a pathway I would say to achieving that at some point in the future. So we decided to do it.

Speaker Change: Very good okay. Thanks very much.

Speaker Change: Thank you.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Our next question comes from the line of Josh <unk> of Northland.

Speaker Change: Capital markets. Your line is now open.

David Yablunosky: We expect to issue $20 million of debentures in a closing scheduled to occur within the next few days and to issue an additional $10 million of debentures later in the Q2, subject to satisfaction of certain closing conditions. I'd like to close by reiterating our previously stated capital allocation priorities. We've said it before, discipline and risk mitigation is part of our DNA, and we'll take that approach as we look to scale our operating companies. We will aim to pace capital investments with revenue visibility and be highly focused on cost management to minimize early-stage operating expense. Again, this is a key benefit of our closed-loop model as our collaborations with multinational corporations are designed to help reduce operating risk. We will also focus on supporting our operating companies with the ultimate goal of funding growth off of our own balance sheet.

Speaker Change: Yes. Thank you.

Speaker Change:

Speaker Change: Got a few questions myself.

Speaker Change: First of all.

Speaker Change: I don't believe I see a 10-K filed yet.

Speaker Change: When do you guys actually expect that to be filed or if I missed this just let me know I missed it.

Speaker Change: Yes, yes, no go.

Bill Haskell: Go ahead, Bill you want me to take it sure.

Speaker Change: We expect to take K to be filed in the next few days.

Speaker Change: No significant issue there.

Speaker Change: Okay great.

Speaker Change: And then product revenue for the quarter I don't see an actual <unk>.

Speaker Change: The disclosure on the product revenue, but I think he did have it on the September quarter can you give us a sense as far as what was actually product revenue for the second quarter.

Speaker Change: Thank you again, Dave.

Speaker Change: Well I mean.

Speaker Change: If you'd repeat the question please to make sure I got it.

Speaker Change: Yes, I'm looking for product revenue for the December quarter, and Im thinking Thats something you can disclose because I believe it was the slowest part of September quarter.

David Yablunosky: We believe that our operating companies have strong growth potential, and by maintaining long-term control, we'll have the opportunity to unlock significant shareholder value over the long term. Finally, as we continue to scale and launch new companies, we plan to consolidate their cash flows at the Innventure level. Because of this, we may ultimately look to return a portion of the excess capital to our shareholders. That concludes our prepared remarks. We believe there are many exciting things on the horizon for Innventure, and we look forward to executing our strategy and delivering value to our shareholders. Now we'll open up the call for Q&A.

Speaker Change: Right.

Speaker Change: I think we'll disclose that in our 10-K filing with the details.

Speaker Change: But primarily.

Speaker Change: We have the Celsius consolidated in the revenue representing.

Speaker Change: Our Celsius, a little bit of management fees for managing the ESG bonds.

Speaker Change: But in general primarily the revenue number youll see in our financial statements at this point in time will represent a Celsius.

Speaker Change: Okay got it.

Speaker Change: <unk>.

Speaker Change: Cogs was up about three eight ex <unk> so would.

Speaker Change: Would it be fair to believe that that's a pretty good proxy for how much product revenue was up <unk> as well.

Speaker Change: Well I think if you looked at already some knowhow, yes, yes, I mean, I would just say.

Operator: Thank you. At this time, we'll conduct a question and answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Chip Moore of ROTH Capital Partners. Your line is now open.

Speaker Change: We build a building some inventory.

Speaker Change: In anticipation of sales.

Speaker Change: So we want to have we have the ability internally to manufacturer.

Speaker Change: A decent.

Speaker Change: The number of racks of equipment per month.

Speaker Change: But we wanted to build some inventory so we can be responsive to customer contracts as they represent.

Speaker Change: Represent themselves.

Speaker Change: I wouldn't draw too much correlation between the.

Speaker Change: The cost of materials.

Speaker Change: <unk> at this stage and the revenue.

Chip Moore: Morning. Hey, everybody. Thanks for taking the question. I wanted to maybe ask on Accelsius if you could expand a bit on those four groups you mentioned, and I guess particularly the global OEMs and hyperscalers. Just maybe give us a sense of how those discussions have been evolving here in recent months.

Speaker Change: They'll obviously reconcile et cetera at some point.

Speaker Change: That's right and just to add to bills comments I mean, there is some period costs in there.

Speaker Change: Amortized over certain numbers of units and also the amortization of the intangible asset that we had to book as a result of the business combination agreement to.

Speaker Change: <unk> purchase price allocation some of that hits cost of goods sold as well.

Speaker Change: Okay, that's super helpful.

Bill Haskell: Hey, Chip. This is Bill, thanks for the question. First, I would say that on the OEM agreement, that is a contract that we have, it does have some conditions in it that include effectively hard contracts for take or pay and then some benchmarks to obtain certain exclusivity provisions in the agreement. That's a deal that we are under contract for a white label product as we've described in our information. We're quite excited about it. The scale of this, the scale of both the OEM, who has asked us not to name them at this stage, but the scale of the OEM and their demands in the marketplace are quite substantial.

Speaker Change: So in the September quarter, you basically had one sort of like Google cloud delivery.

Speaker Change: Could you help quantify how many proof of concepts as you deliver that.

Speaker Change: Quarter.

Speaker Change: Yes.

Speaker Change: Not wanting to provide that information knowhow principally for competitive reasons, but we don't want people to do is be able to sort of kind of back into.

Speaker Change: The cost per system in margins and those sorts of things again, principally for competitive reasons and we have certain customers that don't want us to.

Speaker Change: Disclose many contract details, but I think what what you want to look at overall will be a trend.

Speaker Change: For the next few quarters, and just look at the kind of trajectory of the revenue growth.

Speaker Change: But.

Speaker Change: Again.

Speaker Change: Brian.

David Yablunosky: The agreement that we've drafted, I can't imagine that they would have entered into something that they didn't believe was going to result in at least thousands of racks of equipments or larger, which is very significant to us from a revenue standpoint. On the hyperscalers, we've had literally dozens of meetings with various hyperscalers. We're quite optimistic that going forward, we will end up with some firm commitments from those groups. As you may know, Chip, the competition in this space is principally, I would say, the old way of doing things. Of course, most people are using air today. We've got some that are using single-phase water, and there are dozens and dozens of contractors in that space, but there are only two, to our knowledge, ourselves and one other, in the two-phase direct-to-chip.

Speaker Change: Obscure but.

Speaker Change: Try not to.

Speaker Change: So too much information that would impact us in a negative way competitively.

Speaker Change: Okay great.

Speaker Change: Rather understood that makes sense.

Speaker Change: And then.

Speaker Change: Your slide deck can you talk about on the Celsius.

Speaker Change: <unk> Celsius accomplishments.

Speaker Change: Doubling.

Speaker Change: The.

Speaker Change: Heat capacity removal.

Speaker Change: With this most recent test now.

Speaker Change: Well enable that doubling of that capacity was it some implementation of a new technology or wasn't just simply getting access to.

Speaker Change: Higher wattage thermal simulators.

Speaker Change: Yes. It is.

Speaker Change: A combination of things, but principally it's I would just say engineering improvements design improvements that allow us to get a higher heat flux, because it's not just the total heat per socket, it's the heat flux.

David Yablunosky: Most of the large players have already indicated that it's inevitable that we'll get there and have a requirement for that, some now, some later. I think we're well-positioned with both the hyperscalers, the OEMs

Speaker Change: <unk> per square centimeter that you can remove.

Speaker Change: Because <unk> got shifted a bunch of different formats and so.

Speaker Change: Really trying to measure the effectiveness of the technology, then heat flux is a good measure of that kind of makes everything apples to apples.

Bill Haskell: The AIs, the service providers, as I mentioned, we've had a contract that we announced, and we're in discussions with others that have fairly substantial kind of chipsets that they need cooling for. Overall, quite bullish. I feel like this business is really at an inflection point, and I'm more optimistic than I've been ever with respect to where Accelsius is.

Speaker Change: But yes, we are.

Speaker Change: We are getting access to kind of the latest round of chips to test, but we can also stimulate higher <unk>, we have a capability to stimulate much much higher than what is available in the marketplace and so we continue to test the limits of what we think the technology. It can go.

Speaker Change: So.

Speaker Change: Well I think well ahead of the next couple of generations of chips that we would anticipate coming out into the marketplace based upon looking at the product roadmaps of the various ship.

Chip Moore: Great. Thanks, Bill, for that.

Bill Haskell: Did that answer everything you asked?

Chip Moore: Sorry, go ahead. Yeah. Oh, I was going to say to your point-

Speaker Change: Suppliers.

Speaker Change: We feel very confident that we can.

Bill Haskell: That was a complete answer.

Chip Moore: Yeah. I was going to ask about that inflection point, and then particularly as it relates to sort of back half of this year. You gave some commentary there. Maybe just dovetail that with some of those conversations you're having.

Speaker Change: Manage.

Speaker Change: Heat loads they can produce chips, Florida.

Speaker Change: And that's really important because single phase water.

Speaker Change: That kind of drops out in the not too distant future in terms of its ability to remove that kind of heat.

Bill Haskell: Well, in the case of the OEM, we expect that ramp to begin in the H2 when the white label product would be available in the marketplace. They obviously can't sell it until it's finalized, and that's really more on their side than ours. I think we have a product that we've already developed for them. We need to go through UL and a few other certifications, but by and large, we have a product that we could put in the marketplace pretty readily. Sometime in the H2 of the year, that'll be available for sale, and that would begin the ramp there, which again, I would expect to be relatively steep. Timing's always challenging to predict, particularly right now as the market is very volatile and there's a lot of uncertainty and nervousness kind of across the board.

Speaker Change: So there is a I mean.

Speaker Change: If you look at some of the.

Speaker Change: The.

Speaker Change: Information that's been put out by some of the larger players they've all indicated that two phase directed chip is going to be required at some point for certain chipsets.

Speaker Change: Water will just reach its limitation, because it's kind of linear with the amount of water you can pump through the.

Speaker Change: <unk> coal plate.

Speaker Change: Yes, no doubt about that debt.

Speaker Change: Water called one phase G.

Speaker Change: Correct liquid called as its limitations.

Speaker Change: Bill you did mention something about watts per square meter I wasn't sure if you were saying.

Speaker Change: Centimeter square centimeter.

Speaker Change: Sorry, what was the first quarter.

Speaker Change: Yes.

Speaker Change: But.

Bill Haskell: Overall, quite bullish on what the H2 of the year looks like, not only for Accelsius, but also for AeroFlexx.

Speaker Change: Or was that a statement, saying that you had increased the.

Speaker Change: Keith Block's Eplex withdrawal in terms of watts per square centimeter or was it more of a statement that you're able to expand the amount of square centimeters that you can call and Thats, what gotcha, what's what removal.

Chip Moore: Got it. That's helpful. Yeah, I haven't noticed any volatility. As a follow-up here, I did notice on Accelsius, on their website, there is, I think, a major contract manufacturer and a pretty large global thermal management OEM listed on there. Just wondering if that is new or something I just hadn't noticed in the past.

Speaker Change: Yes, it's a bit of both I mean, we can build these these various.

Speaker Change: Place to sit on top of the chips, that's kind of whatever configuration as required and as you know now there are four way in a way Gpus and you have to build kind of some fancy.

Speaker Change: So on top of all of those combined but it really is the obviously the engineering improvements that we have others that we're pursuing to continue to crank up the industrial heat flux, which is again.

Bill Haskell: Yeah. Well, the OEM is what we've discussed. That is the global OEM. I'm not aware that they've named a contract manufacturer. Was there a name of one on the website, or?

Speaker Change: Loss per square centimeter.

Speaker Change: Great Okay.

Chip Moore: I thought I saw maybe Celestica on there.

Speaker Change: And then moving onto era of flex.

Speaker Change: Announced terminator as a customer as part of spectrum group.

Bill Haskell: Okay. Yeah. That's certainly a possibility. I'll defer to them to answer the question.

Speaker Change: And I think in the early days you also had a dog shampoo Mighty Mutt and I believe that the different brand owned by a different private equity group.

Chip Moore: Okay. We can take it up the line. Yeah.

Bill Haskell: We certainly are engaged with various contract manufacturers to be able to accommodate the scale, particularly of the hyperscalers that they sell through to. The kind of orders that we would anticipate there are very substantial. We need a contract manufacturer by our side to be able to accommodate the kind of volumes that we would expect.

Speaker Change: Do you see basically like the pet care vertical.

Speaker Change: <unk> basically your first vertical dollar reached critical mass.

Speaker Change: Okay, that's necessarily.

Speaker Change: Certainly.

Speaker Change: One of the one of the marketplaces that we're pursuing I think oil is likely to be a pretty significant player gear oil and and motor oil for.

Chip Moore: Understood. If I could sneak one more in, maybe on AeroFlexx. You announced that pet shampoo product. Just how to think about that. Is that sort of an early-stage testing on the shelf, limited markets, and then what's the potential opportunity with that customer?

Speaker Change: Recreational vehicles and so forth.

Speaker Change: That seems to be a pretty aggressive area right now for us up or that we're pursuing and then there are others.

Speaker Change:

Speaker Change: Babies shampoos kind of home care.

Bill Haskell: Yeah, look, I think it's smallish so far, to your point. You can go buy them on Amazon today if you want to, and it's out there and available. It has both a kind of an online element to it, as well as kind of a meaningful commercial scale contract for us, which is not the first, but it's the largest to date, and we would expect larger ones, not just from them, follow-on orders. We've got quite a queue of folks that are interested in it, and all of these various certifications that we've been announcing and continue to announce are really critical, particularly to the large CPG companies. They all require not only ISO certifications, but various certifications along the way in order for them to be able to place an order. It's just one of the hurdles you have to go through.

Speaker Change: That kind of line, there's a lot of interest in that as well.

Speaker Change: But real.

Speaker Change: Yes.

Speaker Change: Covering a lot of different verticals in terms of having client interactions with <unk>.

Speaker Change: Customers are a lot of different verticals across the board.

Speaker Change: But I think if I had had to bet on one I would say.

Speaker Change: In terms of 2000, 2025 kind of penetration oil would be a good guess.

Speaker Change: Great. That's helpful color and then finally could you just.

Speaker Change: Tell us what was the actual opex rate the non-GAAP opex rate for the December quarter, and where do you expect that to head for the March quarter here.

Dave Jablonski: Hey, this is Dave again.

Speaker Change: If you look at the.

Speaker Change: The opex in the press release as I said in my remarks that contains a lot of costs from the business combination agreement and other other elements going forward, but I don't think we want to really get into too. Many details of the specific cost lines in opex, but rest assured it'll be it'll be lower our run rate would be lower going forward.

Bill Haskell: There's one yet to be achieved. I think it's fairly close in time, a month or two away. We expect that to kind of unlock some various orders that are pending that certification.

Chip Moore: Gotcha. Perfect. Thanks, Bill. Maybe just one last housekeeping question. It looked like AeroFlexx stake went up to 38%. Did that increase? Would you be looking to take that majority at some point? Then, is Accelsius, is that still the same ownership position? Thanks.

Speaker Change: I guess, what I'm trying to get at is that is it.

Speaker Change: Obviously, it's going to go up.

Speaker Change: As we progressed in scale right, but.

Speaker Change: Yes, I have it at the start of <unk> million dollars in the September quarter I'm.

Speaker Change: I'm sorry.

Speaker Change: Rather I have a baseline rate of around $6 million a quarter.

Bill Haskell: Yeah. Accelsius is where it was before. We did increase our ownership stake in AeroFlexx. We converted some debt into equity to increase our stake. We do have a mechanism, potentially, to be able to get to a majority ownership in AeroFlexx down the road. That remains to be seen, but there is a pathway, I would say, to achieving that at some point in the future should we decide to do it.

Speaker Change: I'm not sure if thats really a good.

Speaker Change: Good baseline rate, if you could give any sort of.

Speaker Change: <unk> that'd be appreciated.

Speaker Change: Well again, I think when we put our 10-K out there'll be more detail in there for sure about operating expense and there'll be more breakouts on on the business combination expense et cetera, and I just think at this point in time.

Chip Moore: Very good. Okay. Thanks very much.

Bill Haskell: Thank you.

Speaker Change: I'm not ready to get into that kind of detail but.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Nehal Chokshi of Northland Capital Markets. Your line is now open.

Speaker Change: You can look at last year as a proxy.

Speaker Change: We we expect to keep Opex.

Speaker Change: As low as we possibly can now excluding cost of goods sold right Im talking G&A.

Nehal Chokshi: Yeah. Thank you. Got a few questions myself. First of all, I don't believe I see a 10-K filed yet. When do you guys actually expect that to be filed? If I missed it, just let me know I missed it.

Speaker Change: Yes.

Speaker Change: Sales and marketing and R&D right Thats, what were talking about it its baseline fixed costs, we intend to vantage it frankly, we.

Speaker Change: Would even like to defer.

Speaker Change: To find ways to optimize that cost and perhaps even reduce.

Speaker Change: But.

David Yablunosky: Yeah. No.

David Yablunosky: Hi, this is Yeah, go ahead, Bill. Or you want me to take it? Sure. We expect the 10-K to be filed in the next few days. It's routine. No significant issue there.

Speaker Change: Think we ought to wait for the 10-K to come out.

Speaker Change: Okay.

Speaker Change: Ill yield the floor. Thank you for taking my questions.

Speaker Change: Thanks to health.

Speaker Change: Thank you. This concludes our question and answer session.

Nehal Chokshi: Okay, great. Product revenue for the quarter. I don't see an actual explicit disclosure on the product revenue, but I think you did have it on the Q3. Can you give us a sense as far as what was actually product revenue for the Q4?

Bill <unk>: I'd like to turn it back to Bill <unk>, Chief Executive Officer for closing remarks.

Speaker Change: Alright, well. Thank you Alberto I appreciate you listening and the questions and we look forward to.

Bill <unk>: The next update going forward here.

Bill <unk>: Which will be sometime in the middle of May I believe so thanks again.

Bill Haskell: That's you again, Dave.

David Yablunosky: Well, if you'd repeat the question, please, to make sure I got it.

Bill <unk>: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

Nehal Chokshi: Yeah. I'm looking for product revenue for Q4, and I'm thinking that's something you can disclose because I believe it was disclosed for Q4.

Bill <unk>: Okay.

David Yablunosky: Right. I think we'll disclose that in our 10-K filing with the details. Primarily, we have Accelsius consolidated, and the revenue represents Accelsius. A little bit of management fees for managing the ESG fund. In general, primarily, the revenue number you'll see in our financial statements at this point in time will represent Accelsius.

Bill <unk>: [music].

Nehal Chokshi: Okay. Got it. COGS was up about 3.8% Q over Q. Would it be fair to believe that that's a pretty good proxy for how much product revenue was up Q over Q as well?

Bill Haskell: We're building inventory somehow. Yeah.

David Yablunosky: Exactly

Bill Haskell: We're building some inventory in anticipation of sales. We have the ability internally to manufacture a decent number of racks of equipment per month. We wanted to build some inventory so we can be responsive to customer contracts as they represent themselves. I wouldn't draw too much correlation between the cost of materials at this stage and the revenue. They'll obviously reconcile each other at some point.

David Yablunosky: That's right. Just to add to Bill's comments, there's some period costs in there that get amortized over certain numbers of units, and also the amortization of the intangible asset that we had to book as a result of the business combination agreement. That, through purchase price allocation, some of that hits cost of goods sold as well.

Nehal Chokshi: Got it. Okay, that's super helpful. In Q3, you basically had one sort of proof of concept delivery. Could you help quantify how many proof of concepts did you deliver during Q4?

Bill Haskell: Yeah. We're not wanting to provide that information, principally for competitive reasons. What we don't want people to do is be able to sort of back into the cost per system and margins and those sorts of things. Again, principally for competitive reasons. We have certain customers that don't want us to disclose many contract details. I think what you'll want to look at overall will be the trend over the next few quarters and just look at the kind of trajectory of the revenue growth. Again, trying to, not obscure, but trying not to show too much information that would impact us in a negative way competitively.

Nehal Chokshi: Okay, great. Rather, understood. That makes sense. In your slide deck, you talk about on the Accelsius, some of Accelsius' accomplishments, doubling the heat capacity removal, with this most recent test. What enabled that doubling of that heat capacity? Was it some implementation of a new technology, or was it just simply getting access to higher wattage thermal simulators?

Bill Haskell: It's a combination of things, but principally, it's, I would just say, engineering improvements, design improvements that allow us to get a higher heat flux. Because it's not just the total heat per socket, it's the heat flux, the watts per square centimeter that you can remove, because you've got chips with a bunch of different formats. If you're really trying to measure the effectiveness of the technology, then heat flux is a good measure that kind of makes everything apples to apples. Yeah, we are getting access to the latest round of chips to test, but we can also simulate higher heats. We have a capability to simulate much, much higher heat than what is available on the marketplace. We continue to test the limits of where we think the technology can go.

Bill Haskell: We're, I think, well ahead of the next couple of generations of chips that we even anticipate coming out into the marketplace based upon looking at the product roadmaps of the various chip suppliers. We feel very confident that we can manage whatever heat loads they can produce chips for. That's really important because single-phase water, that kind of drops out in the not-too-distant future in terms of its capability to remove that kind of heat. If you look at some of the information that's been put out by some of the larger players, they've all indicated that two-phase direct-to-chip is going to be required at some point for certain chipsets. Water will just reach its limitation because it's kind of linear with the amount of water you can pump through the cold plate.

Nehal Chokshi: Yep. No doubt about that water-cooled one-phase direct liquid cooled has its limitations. Bill, you did mention something about watts per square meter. I wasn't sure if you were saying that you had.

Bill Haskell: Square centimeter. Yeah.

Nehal Chokshi: Yeah. I'm sorry. Sorry.

Bill Haskell: Square centimeter.

Nehal Chokshi: Watts per square centimeter. Yeah. Was that a statement of saying that you had increased the heat flux withdrawal in terms of watts per square centimeter, or was it more a statement that you were able to expand the amount of square centimeters that you can cool, and that's what got your watt removal up?

Bill Haskell: Yeah, it's a bit of both. We can build these various plates that sit on top of the chips. It's kind of whatever configuration is required. As you know now, there are four-way and eight-way GPUs, so you have to build some fancy plates to sit on top of all of those combined. It really is, I would say, the engineering improvements, and we have others that we're pursuing to continue to crank up the actual heat flux, which is, again, watts per square centimeter.

Nehal Chokshi: Great. Okay. Moving on to AeroFlexx. You announced FURminator as a customer as part of Spectrum Brands. I think in the early days, you also had a dog shampoo, Mighty Mutt, and I believe that's a different brand owned by a different private equity group. Do you see basically the pet care vertical being basically your first vertical that will reach critical mass?

Bill Haskell: Not necessarily. It's certainly one of the marketplaces that we're pursuing. I think oil is likely to be a pretty significant player, gear oil and motor oil for recreational vehicles and so forth. That seems to be a pretty aggressive area right now for us that we're pursuing. There are others, just baby shampoos, home care, that kind of line. There's a lot of interest in that as well. Really, we're covering a lot of different verticals in terms of having client interactions with customers in a lot of different verticals across the board. I think if I had to bet on one, I would say in terms of 2025 kind of penetration, oil would be a good guess.

Nehal Chokshi: Great. That's a helpful color. Then finally, could you just tell us what was the actual OpEx rate, the non-GAAP OpEx rate for Q4, and where do you expect that to head for Q1 here?

Bill Haskell: That's a great question.

David Yablunosky: Hey, this is Dave again. Yep. Hey, if you look at the OpEx in the press release, as I said in my remarks, that contains a lot of costs from the business combination agreement and other elements going forward. I don't think we want to really get into too many details of specific cost lines in OpEx. Rest assured, it'll be lower. Our run rate will be lower going forward.

Nehal Chokshi: I guess what I'm trying to get at is that, obviously it's going to go up as we progress and scale, right? I have it at $13 million in Q3. I'm sorry. Rather, I have a baseline rate of around $6 million a quarter. I'm not sure if that's really a good baseline rate. If you could give any sort of guidance there, that'd be appreciated.

David Yablunosky: Well, again, I think when we put our 10-K out, there will be more detail in there for sure about operating expense, and there will be more breakouts on the business combination expense, et cetera. I just think at this point in time, I am not ready to get into that kind of detail. You can look at last year as a proxy. We expect to keep OpEx as low as we possibly can. Now, excluding cost of goods sold, right? I am talking G&A.

Nehal Chokshi: Yep

David Yablunosky: sales and marketing, and R&D, right? That's what we're talking about. It's baseline fixed cost. We intend to manage it. Frankly, we would even like to find ways to optimize that cost and perhaps even reduce. I think we ought to wait for the 10-K to come out.

Nehal Chokshi: Okay. I'll yield the floor. Thank you for taking my questions.

Bill Haskell: Thanks, Nehal.

Operator: Thank you. This concludes the question and answer session. I would now like to turn it back to Bill Haskell, Chief Executive Officer, for closing remarks.

Bill Haskell: Great. Well, thank you all. We really appreciate you listening in and the questions. We look forward to the next update going forward here, which will be sometime in the middle of May, I believe. Thanks again.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.