Q1 2025 Aqua Metals Inc Earnings Call
Good afternoon, and welcome to the Aqua metals first quarter financial results call. At this time all participants are in a listen only mode. A 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 or.
By pressing star one on your telephone keypad.
Speaker Change: Note that this conference is being recorded I will now turn the conference call over to our host Bob Myers of F. N. K I R. You may begin. 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 first.
Warner ended March 31, 2025.
Speaker Change: This release is available in the Investor Relations section on the company's website at Aqua metals Dot com.
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 today may eight 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.
Speaker Change: Aqua metals cautions investors not to place undue reliance on any forward looking statements.
Speaker Change: <unk> 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.
Speaker Change: Questions will be accepted on the call from analysts and all other investors can submit a question using the webcast portal provided in todays in 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 all for joining US today I'm pleased to report on what has been an important first quarter for Aqua metals as we continued to execute on our mission to build a low cost resilient domestic battery materials supply chain.
Steve Cotton: It's been just over a month since our last call, but there are some important updates that we'll discuss today. Joining me today are Judd Merrill, our Chief Financial Officer, and Eric West our incoming CFO.
Steve Cotton: We will be making remarks on our Q1 results and answering questions. Today and then we'll begin transitioning from his role to Eric's later this month and will continue as a consultant through August will speak more on that shortly.
Steve Cotton: So let's begin with our operational updates starting with what we have accomplished to build an adaptive platform for critical minerals recovery in Q1, we achieved three key technical and operational milestones that position us at the forefront of battery recycling innovation first our product line expansion, we produced any.
Steve Cotton: Samples of nickel carbonate and mixed hydroxide precipitate or M H P, which align with our developing downstream partners needs.
Steve Cotton: These are not just technical words, they unlock new revenue opportunities and enhanced our developing customer and partner value proposition.
Steve Cotton: Our L. S. P recycling breakthrough we completed a successful engineering analysis, and then lab and bench scale demonstration for lithium recovery from L. S. P batteries as many of you know L. S. P.
Steve Cotton: For lithium iron phosphate is poised to dominate both EV and stationary storage markets importantly, our process can handle a blend of 50% NMC or nickel manganese cobalt and 50% L. S. P input effectively doubling our lithium carbonate output.
Steve Cotton: And improving project economics.
Steve Cotton: Third our purity and performance advancements we have continued to improve our battery grade lithium carbonate assays to meet specific and stringent potential customer specifications, which further strengthens our position as a trusted domestic supplier. So in short as market needs evolve so does aqua metals.
Steve Cotton: We are continuously advancing our technology and adjusting our overall business and commercialization strategy to meet the challenges and seize the opportunities that we see ahead.
Steve Cotton: So now turning to our site strategy, we have entered into an agreement to sell the Sierra arc property. This strategic move allows us to retire all of our debt generate meaningful cash reserves and reduce our holding costs by approximately $100000 per month.
Steve Cotton: This decision is about resilience and flexibility we are aligning our capital deployment with today's market environment characterized by lower lithium prices uncertainty in our industry and the tighter capital markets.
Steve Cotton: By Lightning our footprint now we gain the freedom to evaluate more cost efficient locations ideally near the feedstock and off take sources for which we are developing which could both lower capex and introduce meaningful opex efficiencies as we advance towards commercial deployment, we remain fully committed to.
Steve Cotton: Building, our first commercial arc and we're actively engaged with our potential supply off take and funding partners to determine the best path forward.
Speaker Change: Switching now to the leadership front as I mentioned earlier Judd Merrill will transition from CFO on May 16th after several years of dedicated service Jud, we've really sincerely. Thank you for all of your commitment and leadership through the transformative times and we all wish you the best on your next venture.
Speaker Change: Indirectly related to judge departure, we are pleased to welcome Eric West as our incoming CFO effective may 19th as many of you listening already know Eric has six years of experience with Aqua metals to his prior role, including VP of finance and we are also grateful that he has agreed to return to the company in the <unk>.
Speaker Change: Oh role and have every confidence in his ability to help lead us into this next phase Judd will also ask Eric to introduce himself in a moment.
Speaker Change: So to summarize my comments as we look ahead Aqua metals is first expanding and adapting its product portfolio and commercial plant economic model to match market conditions, and where the critical minerals market is headed.
Speaker Change: Second managing capital prudently and adapting our strategy to strengthen our already well proven resilience as a company.
Speaker Change: And third aligning the right leadership to deliver on our goals, including the previously announced recent additions to our board of directors, adding key commercial and financial market expertise.
Speaker Change: We are operating with a clear eye on long term value creation, making the right moves at the right times to build a flexible high performance business and maintain that resilience as we have to date.
Speaker Change: So with that I'll turn it over to Judd to walk through the financials. After that we'll open the call for Q&A.
Judd Merrill: Steve first this being my last call as the CFO of the company I want to take a moment to thank the shareholders stakeholders my colleagues the board.
Speaker Change: And Steve for the trust and support in my role here over the last say.
Speaker Change: Six and a half years, sometimes though opportunity knocks and I have taken a new role and a competitive company to be announced soon.
Speaker Change: I leave the role of CFO here, and very capable guardianship very blessed Eric and I have known each other and worked together for many years, including here at Aqua metals, and I am providing consultancy to the company into Eric through August for a seamless transition.
Speaker Change: I thought I'd ask Eric to introduce himself briefly on this call Eric go ahead.
Eric West: Thanks, Judd and Steve and to the board for giving me the opportunity to really take the helm from Jud and helped drive forward our future I'm returning to Aqua metals to take this role because I believe in the company's value proposition the strength of the team and in my abilities to make a positive impact on the company's future.
Speaker Change: I will leave it at that for now and look forward to engaging with shareholders and stakeholders directly in the near future I will turn it back over to Jed now to cover the Q1 financials and Q&A.
Jed: Thanks, Eric.
Speaker Change: Let me start my comments with our balance sheet, we ended the quarter with total cash of approximately $1 6 million.
Speaker Change: As we have reported we have listed the Sierra arc asset for cell to cell would result in the retirement of all that and produce cash proceeds while also reducing holding costs by approximately 100000 per month.
Speaker Change: This decision as cash runway, allowing the company to evaluate more cost effective.
Speaker Change: Cost efficient locations for future <unk>.
Speaker Change: Development.
Speaker Change: Sierra Arc facility includes the building structure under a line Lan and various permanent improvements that were previously classified as construction and progress within the plant property and equipment on the company's consolidated balance sheet.
Speaker Change: The carrying value of the asset group was approximately nine 3 million net of depreciation.
Speaker Change: An impairment charge of approximately $5 2 million was recorded during the three months ended March 31 2025.
Speaker Change: The company anticipates, a sell will be completed during the second quarter 2025.
Speaker Change: And we'll move now to the income statement.
Speaker Change: Plant operations decreased approximately $1 5 million or 67, 2% for the three months ended March 31, 2025 as compared to the three months ended March 31 2020 for.
Speaker Change: The decrease was primarily driven by a reduction in payroll and related costs of approximately 786000, resulting from workforce reductions implemented in August 2024, and continued reductions during the first quarter of 2020 by.
Speaker Change: Additionally, professional fees decreased by approximately 390000 and supplies materials inventory adjustments and other overhead related expenses decreased by 309000.
Speaker Change: General and administrative expense decreased 619000, or approximately 27 20, 27% for the three months ended March 31 2025.
Speaker Change: Impaired to the three months ended March 31st 2024.
Speaker Change: The decrease was primarily due to a reduction in payroll and related costs of approximately 737000.
Speaker Change: And a 49000 decrease in director's fees.
Speaker Change: These decreases were partially offset by an increase of 41000 professional fees and 126000 suppliers materials and other overhead expenses.
Speaker Change: For the three months ended March 31, 2025 accompanying recognized a noncash impairment of approximately $5 2 million related to construction in progress for the facility in.
The impairment was the result of a strategic shift in our revised capital allocation priorities, which led management to discontinue development of the facility for its originally intended use as a result, the carrying amount of the facility was reduced to reflect its estimated recoverable.
Speaker Change: Value.
Speaker Change: Our net loss for the three months ended March.
Speaker Change: March 31, 2025, and was approximately $8 3 million or a negative.
Speaker Change: Dollar three cents per basic and diluted share compared to a net loss of $5 5 million or a negative dollar and five cents per basic and diluted share for three months ended March 31 2024.
Speaker Change: Now moving to the cash flow statement net cash used in operating activities. During this period consisted.
Speaker Change: Primarily of our net loss adjusted for noncash items, such as depreciation amortization and stock based compensation charges.
Speaker Change: As well as net changes in working capital.
Speaker Change: Net changes in investing.
Speaker Change: Oh activities.
Speaker Change: Uh huh.
Speaker Change: Primarily included my minor previously committed fixed asset acquisition.
Speaker Change: Net cash provided by financing activities was 638000 for the three months ended March 31, 2025, consisting of $1 2 million net proceeds from the sale of Aqua metals shares.
Speaker Change: Pursuant to the at the market offering or ATM offset by 66000 related to tax withholdings to cover rsum vesting.
Speaker Change: And 500000 principal payment made on notes payable.
Speaker Change: We are actively engaging with potential and strategic financial partners aligned with our long term strategy.
Speaker Change: That concludes my remarks on the company financials, I will now turn it back over to the moderator for Q&A.
Speaker Change: Thank you ladies and gentlemen, the floor is now open for questions. If you do have a question. Please press star one on your telephone keypad at this time again that star one if you do have a question or comment please hold as we poll for questions.
Speaker Change: And we'll take our first question from Mickey lag from benchmark. Please go ahead Magee.
Mickey Lag: Hey, guys. Thanks for taking my questions and congrats on making it through another quarter John Congrats on your new role too no.
Speaker Change: I wish you the best and Eric It's nice to meet you over the phone and congrats on the new role as well.
Mickey Lag: So I guess just to start you know.
Speaker Change: That's on the Sierra Art sale you know.
Mickey Lag: Kudos to you know.
Mickey Lag: Find yourselves some breathing room there could you just walk me through you know that process. You know your thought process went back and exactly you know how much runway does this give you and it seems like if I can read into this a little bit there more of a focus.
Mickey Lag: Odd co locating now could you just you know correct me there if that's right and walk me through that.
Mickey Lag: Okay.
Mickey Lag: Hey, Mickey Yeah. This is Steve Thanks for the question and.
I'll start with the C or arc and.
Mickey Lag: Kind of my view in.
Mickey Lag: The industry is.
Mickey Lag: As a whole.
Mickey Lag: And as everyone's looking at the the critical minerals industry has seen I would say there are companies that have had to effectively cease operations due to large initial outlays in building, what we would characterize as really large plants and we've always been market aware and willing to pivot and willing to adapt the current conditions early enough.
Mickey Lag: And that gives us kind of that pragmatic and survivor instinct that we've demonstrated that in the past for those of you that noticed for a long time.
Mickey Lag: Along with our own belief most analysts the players in this industry do believe that it's going to thrive for those that survive.
Mickey Lag: Selling to see are now gives us that 100000 dollar a month savings in carrying costs. It gets us that meaningful cash runway to continue to develop our commercial relationships with that pragmatic and but I would say is resilient shift in focus to build when they come.
Mickey Lag: Compared to what the industry has been doing which has been build it and then they will come.
Mickey Lag: And we're fully committed to building the first arc once we finalize the off take and supply financing for the entire project and our commercial discussions have led us to alternate locations and that could improve the capex and opex and other efficiencies, especially needed in the current market conditions to produce EBITA that is bank.
Mickey Lag: <unk>.
Mickey Lag: And that's really what we believe is the best approach given the current difficult market conditions and public policy.
Mickey Lag: <unk> et cetera is to is to do what we've done and to partner and go where the materials are versus bring the materials to us and not carry the load in the meantime, I'll turn it over to Jud just to give you. Another quick summary in terms of what it means for us economically.
Mickey Lag:
Jud Merrill: How it saves us money. So we can be very clear on that.
Jud Merrill: Hey, Mickey and thanks for your comments and your questions.
Speaker Change: So the sheer argued.
Speaker Change: We owe about $3 million on that that's the only debt the company has left.
And so anything that we sell above and beyond that price.
Speaker Change: <unk> will add to our cash balance.
Speaker Change: And so you know in the past and we're still kind of in the same area.
Speaker Change: 500000, a month burn.
Speaker Change: And that's just kind of a base kind of like holding cost and being a publicly traded and employees and all of that and even some of the costs related to the work that's still ongoing at our innovation Center, which we still are operating in and running.
Speaker Change: You know on ongoing basis so.
Speaker Change: So we anticipate that you know will be over that.
Speaker Change: That price quite a bit and and that will just add to our cash balance and help with the runway.
Speaker Change: Got it okay. Okay, that's clear.
Speaker Change: Alright, and yeah that kind of segway.
Speaker Change: And then my next question, which is related to the macro and how things have.
Speaker Change: Been so dynamic I guess you could call. It has there been an uptick in customer inbounds, given all the tariff announcement and discussion there you know it seems like Oh.
Speaker Change: Don't really have a choice, but to go domestic now four P. M y.
Speaker Change: There is clearly.
Speaker Change: Not a lot of the domestic product. So I'm. Just curious are you know what what sort of conversations youre having there.
Speaker Change: Yeah, It's an interesting time in the industry for sure everybody is trying to figure out what the public policy moving forward is going to be and how that translates to government support from a policy perspective from a loan guarantee perspective and from grant perspective, even grants that were previously issued or.
Speaker Change: In question and so that coupled with the drop in lithium prices did a really frankly below.
Speaker Change: Any project Financeable number for a mine to consider opening up a new lithium mine that is got most analysts and we agree with those analysts believing that this is a temporary bump in the road so to speak and that we will see those lithium prices come up because it has to do in order for the industry to really.
Speaker Change: Think of it like what the minimum price of a barrel of oil has to be at the same type of scenario.
Speaker Change: So we see the industry in the meantime, looking not only at their own capabilities, but looking at each other and this is very common.
Speaker Change: When an industry is new and maturing and hit the bump in the road that you see a phase of consolidation.
Speaker Change: And the phase of more open armed partnerships and that's what we've been experiencing is the activity level of engaging with not only the large players, but the medium and the small players has really gone through the roof, which is a really positive thing because now everybody is talking and trying to collectively figure out how to build this industry from.
Speaker Change: The ground up in the U S. So we're really encouraged by that and like I said in my earlier comments it's.
Speaker Change: It is the game of survivor and in order to thrive you've got to survive and so we're very situationally aware and making sure that we continue to survive and be there for when this industry really starts to thrive.
Speaker Change: Got it got it okay understood.
Speaker Change: <unk>.
Speaker Change: I thought the product line expansion and the LSP recycling was an interesting development and it's another example of <unk>.
Speaker Change: How you guys are able to be nimble.
Speaker Change: A rapidly evolving industry and it seems like that.
Speaker Change: Being driven by some of these customer discussions youre, having and some of the product that they're looking for to meet some of their specification could you just talk about the opportunity there and you know.
Speaker Change: What's the thought process is with that.
Speaker Change: Yeah, great. Thank you that's a great question and I'd love to talk about that.
Speaker Change: So I would say our advancements that we've announced this quarter are really two pronged and that is that firstly, we are oriented to market and partner responsiveness by our nature. So think of that as like have it your way and that means making materials that fit as best as possible as the input for.
Speaker Change: Our downstream partners processes and that greatly enhances improves our offtake opportunities engagements with those customers because we're going to give it to them their way.
Speaker Change: Secondly, we're really driving hard for optimization and that is really to improve the plant economics iteratively. So our process does continue to be the one if not the only one that could actually produce positive EBITDA, particularly with a suppressed metals prices and current.
Speaker Change: Marketplace conditions that we're seeing.
Speaker Change: So with that focus on that optimization, we believe strongly that our operating costs at commercial scale could be much lower than the other processes and that's because they eliminate the need for massive amounts of onetime use chemical cost transport costs processing costs, and costly and harmful waste streams that.
Speaker Change: Come about when you're doing it with that methodology and that we believe does two things that optimization improves our margin profile at scale and that provides what we believe is still a bankable plant build future that can be debt or project financed.
Speaker Change: And then the second thing that does is that this key work allows us to further advance discussions we've been having with other adjacent players in the critical minerals space for Aqua metals to also be an enabler in the form of licensing or joint venture or other win win arrangements because we have the IP, we have the two plus years of derma.
Speaker Change: Australia lithium arc refining that it produced battery grade materials, and we have the proof of the economic and environmental and worker safety advantages.
Speaker Change: And that's what we believe is at the largest scale of battery grade materials production from recycling by us thus far in the U S.
Speaker Change: Great Great and then.
Speaker Change: Actually I just have to throw in one about a government discussions and the White House I know last call.
Speaker Change: You said it might take a couple of months here, though to progress into that.
Speaker Change: Bad Bad your line of sight into how those May go and is there anything more you could tell US you know are those active.
Speaker Change: See you know your mission, creating.
Speaker Change: Creating a domestically produced product, they're very aligned with the administration.
Speaker Change: To create that.
Speaker Change: Supply chain locally here in the U S right.
Speaker Change: Yes so.
Speaker Change: The government side is kind of we discussed on the last conference call. We've we've been engaging the various stakeholder agencies and that includes things like the D. O D. The Doa et cetera, et cetera, and we're taking full advantage of the opportunity, but we don't have specific feedback yet and we've been advised.
Speaker Change: Is by our well respected D. C based government relations partner are that it will likely take a few more months to gain a little bit more clarity on what the go forward policy and then following with that policy the funding support will or won't be for the industry.
Speaker Change: That said, we are aligned with the administration's interest in securing the domestic supply chain and keeping all these critical with valuable materials in the U S where they can then be reintroduced into the U S manufacturing operations, creating manufacturing jobs, rather than really the current conditions. We're effectively the U S is a net exporter of critical materials.
Speaker Change: The form of Black mass that goes to Asia, and an employer of the battery cells and systems that come back as a net importer and everyone agrees on that being a major problem and a major priority to address and so we're really hopeful and active in trying to affect the outcome to see government support really kick in in this space again.
Speaker Change: Later this year.
Speaker Change: Got it okay. That's all for me thanks, guys.
Mickey Lag: Thanks Mickey.
Speaker Change: Once again Thats Star one if you do have a question or comment.
Speaker Change: And I'll turn the floor over to Bob Myers for additional questions.
Speaker Change: Yes. Thank you we have received a few questions first questions.
Speaker Change: Or potential partners testing the quality of your more recent material that you are producing.
Speaker Change: Yeah. That's a good question. So yes, the primary focus of our pilot demonstration plant operations to continue to today and beyond in our innovation Center here in Tahoe Reno Industrial center continues to be producing and assaying ourselves product samples and sending those samples and testing.
Speaker Change: Varying our feedstock sources to create those samples and getting those materials in the hands of all of these potential off takers that we've been talking to like I was mentioning earlier.
Speaker Change: We continue doing this in Q1.
Speaker Change: Through now and those commercial relationships of course really underpin the financing of moving forward with that commercial scale facility.
Speaker Change: Great. Thank you the next question.
Speaker Change: Similar.
Speaker Change: With the appropriate financing for an arc.
Speaker Change: How quickly can these new initiatives translate into revenues.
Speaker Change: Yeah, so even with the Sierra arc.
Speaker Change: Would need to build an additional building. So we believe that we could potentially improve time to market by taking a suitable building or buildings that already exist such as a brownfield sitting somewhere else in the country closer to supply and offtake partners that we're talking to and.
Speaker Change: And that could be better suited to our new plant layout process flows with these improvements that we've made by adding the LLP mixing it in with the NMC and producing these other products to be able to produce EBITDA at the maximum level and as I already pointed out we're in several discussions with these adjacent players in the industry that already have.
Speaker Change: <unk> and we can be an enabler for them and that means making their EBITDA producing value proposition and time to market greater and faster and that might allow for <unk>.
Speaker Change: Improvements for them and those types of scenarios.
Speaker Change: One company in this industry cannot do it all so we believe that in addition to helping ourselves we're positioned uniquely to be able to help all the other companies do it better.
Speaker Change: Got it thank you pivoting a little to the financials and Judd in particular.
Speaker Change: Ken Jud tell us a little bit more about his departure.
Speaker Change: Yes sure Bob.
Speaker Change: So this decision was based kind of on a long term opportunity that matches my career in it in a noncompetitive opportunity.
Speaker Change: And it's not related to Aqua metals, you know, it's really been a pleasure.
Eric West: Seriously being here at Aqua metals immune CFO and I wish the best for the team and that's why I'm I'm available during the transition period, we worked out a 90 day plus consulting period, where I can help smooth transition my role to Eric the incoming CFO.
Eric West: I worked with Eric for quite a bad time, not only here at Aqua metals, but in a prior role and I have full confidence in.
Eric West: And him and go forward plan with that.
Speaker Change: Great. Thank you and we have I think one more question for you.
Speaker Change: Can you expand a little bit on your early remarks around near term and long term financing opportunities.
Speaker Change: Yeah. So start we'll start with the near term.
Speaker Change: Driven by our desire to retire some existing debt by.
Speaker Change: By the end of this quarter that we're in now and that is going to revert a reduced burn.
Speaker Change: So we will be making interest payments and other holding costs and that helps our cash run rate.
Speaker Change: Also near term financing is included.
Speaker Change: Judicious use of the ATM.
Speaker Change: And potential asset disposition of like fungible equipment.
Speaker Change: And as we announced today, a real estate that won't be we don't need to be bearing the cost.
Speaker Change: You know for at this time.
Speaker Change: And then on the long term.
Speaker Change: A lot of this has remained the same just trying to find the right partner.
Speaker Change: For project financing and they're still in debt based finance capital and we're still having discussions and.
Speaker Change: Advancing that and there's some opportunities there.
Speaker Change: That we're continuing to have we're also having.
Speaker Change: Directly related discussions about feedstock and offtake partnerships.
Speaker Change: That makes the financing the first arc bankable and then also how we can work together with these partners to find the go forward strategy.
Speaker Change: Yeah.
Speaker Change: Excellent. Thank you and that's all the time, we have for questions I'll now turn the floor back to Steve Cotton for closing remarks.
Patient Time for Players and Critical Minerals for Sure, and Consolidation also means Partnerships
Speaker Change: We've seen, for example, in one example, light and acquired many of north full assets and many other instances of consolidation and partnering.
Speaker Change: And this is really common with the development of any industry. They hit the proverbial bump in the road and we're definitely paying intention engaging with all the opportunities with all the parties that are out there and where it makes sense. We'll explore a better way forward on that front.
But in the meantime, we've really added to the resilience and the runway of the company with the
Speaker Change: The courageous decisions that we've made as a management team to date.
Speaker Change: and I feel very confident in our ability to continue to survive.
to make the day that we shall thrive.
Speaker Change: and I thank everybody for your support and continue to confidence knock on metals and we will see you soon.