Advent Technologies Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 14, 2023

There are 5 speakers on the call.

Operator

Good morning, everyone. I will be your conference operator today. At this time, I would like to welcome everyone to Advent Technologies Third Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session open to Advent's analysts.

Operator

On the call today, we are joined by Doctor. Vasily Gregorio, Advent's Chairman and CEO and Kevin Brackman, Advent's CFO. Before we begin the prepared remarks, we would like to remind you that Advent issued a press release announcing its Q3 2023 financial results shortly before market opened today. You may access the materials in the Investor Relations section of the company's website, www.advent.energy. I would also like to remind everyone that during this conference call, Advent's management will discuss forecasts, targets and other forward looking statements regarding the company's future customer orders and the company's business outlook that are intended to be covered by the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward looking statements.

Operator

While these statements represent management's current expectations and projections about future results and performance as of today. Advent's actual results are subject to many risks and uncertainties that could cause actual results to differ materially from those expectations. In addition to any risks highlighted during this Call important factors that may affect Advint's future results are described in its most recent SEC reports filed with the Securities and Exchange Commission, including today's earnings press release. Except as required by applicable law, the company undertakes no obligation to update any of these forward looking statements for any reason after the date of this call. Lastly, information discussed on this call concerning the company's industry competitive position in the market in which it operates is based on information from independent industry and research organizations, other third party sources and management estimates.

Operator

Management estimates are derived from publicly available information released by independent industry analysis and other third party resources as well as data from the company's internal research and are based on assumptions made upon reviewing such data and with knowledge of such industry end markets with which it believes to be reasonable. These assumptions are subject to uncertainties and risks, which could cause results to differ materially from those expressed in the estimates. Please note that this call is being recorded. And kicking off the call will be Doctor. Vasily Gregorio.

Operator

Doctor. Gregorio, I'll now turn the call over to you.

Speaker 1

Thank you, operator. Good morning to everyone listening in and thank you for joining us on Advent's Q3 2023 earnings call. On today's call, I will provide an update on the business. I will then hand over to Kevin, who will review our financial performance and outlook in more detail. In my last update, I highlighted that Advent was consolidated its business operations and was focusing on its core sector where our high temperature Technology is particularly well suited.

Speaker 1

Through implementing this strategy, we achieved a number of milestone and contract wins since the start of the Q3 and I will discuss shortly. We remain focused on expanding and executing our commercial pipeline With a view to embedding our technology and portfolio in these key power sectors, we believe that the future demand for Advent's high temperature PEM technology and related products will create significant opportunity and we believe Adan will be ideally positioned to capitalize on this through suitable partnership. We look forward to growing our commercial activities and achieving long term profitable growth. I will now give an overview of our recent business update. Last week, we were excited to announce the signing of the term sheet with Airbus, a global leader in aeronautics, space and related services, for a joint benchmark project regarding an optimized ion pair membrane electrode assembly for hydrogen fuel cells.

Speaker 1

Airbus will provide financial support to the project in its extended knowledge of the aviation industry. ADVENT will invest in people, materials, hardware and third party research centers to contribute to the goal of the project. The multimillion dollar collaboration will take place over 2 years. A contract based on the signed term sheet is expected to be signed by the end of 2023 The project will commence immediately thereafter in 2024. The goal of the project is to accelerate the development of Advent's And benchmarked the Ion Pair MVA against aviation requirements and current and expected technological limits.

Speaker 1

High temperature PEM MBAs operated at temperature higher than 180 degrees aimed to solve one of the largest challenges in aviation fuel use, which is Thermal Management. High temperature fuel cells allow increased performance, increased passenger carrying capability An increased range compared to low temperature fuel cell technologies. Adam believes that high temperature PEM is a superior option not only for aviation, But also for heavy duty trucks, the automotive industry and maritime use. In September, our wholly owned subsidiary in In Livermore, California, we secured a new $2,200,000 contract with the U. S.

Speaker 1

Department of Defense for Portable Power Systems. This milestone achievement comes under the General Technical Services Prime contract and will play a crucial role in supporting the demanding mission requirements of the U. S. Army. This contract is a continuation of a series of past contracts with the U.

Speaker 1

S. Department of Defense And its primary objective is to further optimize Advent's proprietary HB15 portable fuel cell system by integrating our innovative ion pairing MA technology. On the completion of this new 12 month contract, Advent and the U. S. Department of Defense Aim to reinforce their long term collaboration by focusing on the manufacturing process of the enhanced HP50 fuel cell system that will enable high volume production manufacturing capacity.

Speaker 1

MEA from the heart of the forms the heart of the fuel cell and their performance determine The lifetime efficiency, weight and to a large extent the cost of the end electrochemical printer product. ADVENT Ion pair MVA technology is anticipated to significantly enhance HP50's performance The result is in higher power density and improved cobalt packaging, making it ideal for off grid field applications, including military and rescue operations. Since 2020, we've been actively refining the HP50 fuel cell system To create a highly portable and efficient power supply suitable for on the move battery charging and direct power supply for various Through rigorous development efforts, the size and weight of the original 50 watt fuel cell system has been significantly reduced, Culminating in successful field test in 2022 and 2023 with the final technical report reinforcing its operational suitability. The HP 50 power system can be fueled by biodegradable methanol, providing near silent power generation with clean emissions. Its compact design allows you to simulate power radio and satellite communication of Arati, remote surveillance systems, laptops The system's unique thermal feature enables it to operate within a wider At a wide ambient temperature range from considerably below freezing to at least 40 degrees Celsius, therefore ensuring Reliability in challenging conditions and climates.

Speaker 1

HB50's adaptability to run on methanolol as a hydrogen allows it to operate at a fraction of the weight of traditional military grade batteries. This factor is aligned with the U. S. Department of Defense pursuit of lightweight and highly portable power solutions for their electronic needs. Also in September, Advent secured A significant expansion order contract with a prominent fuel cell integrator operating in the Asian market.

Speaker 1

Under the terms of this agreement, Adil will provide its innovative e fuel powered syringe fuel cell stacks on corporation and power application within the leisure sector in the region. The contract has a total initial value of $1,300,000 The supply chain is projected To remain active throughout 2024 in accord with the customer specific timeline, the primary application of Advent's fuel cell stacks is to serve As a sustainable prime and backup power source in small cabins working in conjunction with batteries. The utilization of Advent's marine fuel cell stacks using liquid methanol as a hydrogen carrier fuel offers advantages in terms of transportation, Logistics and storage efficiency compared to gaseous hydrogen, therefore, enhancing operational safety. Advent Sering Fuel Cell stands out with a small footprint occupying only about a third of the space required by typical comparable diesel generator. Beyond the environmental advantages in terms of reduced emissions, the refuel cells provide an uninterrupted power supply across diverse environmental conditions and geographical locations.

Speaker 1

Also in September, at the Monaco Yacht Show, Avan and built its The range of Cerrit Power Systems resulted from the synergy of the company's high temperature proton exchange membrane fuel cells With a compact battery unit designed to fulfill both primary and auxiliary power requirements for maritime vessels, Cerium Power Systems integrate a compact battery, significantly smaller than traditional battery owned solutions With a small fuel cell configuration operating on methanol, biomethanol or e methanol. This combination not only serves as a primary power source Smaller vessels, including leisure boats, sailboats, ferries and inland vessels, but also replaces Conventional diesel generators provide a clean and efficient power alternative for a wide range of maritime application. Additionally, Sherim Power Systems offer robust power capacity for supporting auxiliary loads on larger vessels and Supply, Convenience, Short Power Solutions for Vessels and Ports. Leveraging Advent's patent, high temperature pen technology, Serene Power Systems Our purpose built for optimal performance with various fuels. Operating at high temperatures, they efficiently generate electricity while producing heat, Technically boosting overall efficiency, which can reach up to 85%.

Speaker 1

Methanol is a standout energy delivery and storage medium and excels as a superior hydrogen carrier, releasing hydrogen catalytically through a fuel reformer. Moreover, Methanol offers the advantage of efficient storage and wide enough availability for existing infrastructure with a distribution network comparable to conventional fuels, Establishing it as a safe and cost effective maritime fuel option. Let me now provide an update on the Green Hippo project. I chaired the coordination group for the important projects of common European interest in hydrogen technology. And in October, at the European Commission's Clean Transition Dialogue, I had the opportunity to bring President of the European Commission, Ursula, over the line on the progress of projects endorsed by VIEU under the I also addressed the length of time that is taking for the Greek state to finalize funding for Advent's EU ratified Green Kipu Project reiterated Advent's Resolute's commitment to execute on the project efficiently.

Speaker 1

The Green Kibo project is among the 41 initiatives under IPCI High-tech, collectively prepared and reported by 15 member states. In July 2022, the European Commission officially ratified Afton's Green Hippo project following notification by the Greek state in June 2022, Securing total estate funding of up to €782,100,000 over the length of the project, The Greasibo project focuses on the development, design and production of high temperature temp fuel cells, the electrolyzer systems for the production of power Located in Kozani, Greece, the project is expected to play a crucial role In transition in the Western Macedonia region from a coal based economy to a more sustainable economic model, a state of the art facility Gozani It's intended to serve as a production hub for fuel cells and electrolyzers contributing significantly to the region's economic development. Advent has already installed over 1200 high temperature pan fuel cell systems worldwide replacing environmentally harmful diesel generators And providing clean energy to sectors such as telecommunications and critical communications infrastructure. Moreover, Advent is expected Advent is working closely with the Greek state to help finalize its internal process and procedures so that the funding for Green Hippo can commence. We will provide further updates on Green Hippo at an appropriate time.

Speaker 1

Advent is well positioned to take advantage of the ever increasing focus on clean energy. We're continuing to advance in our technologies and consolidate our operations to address new and key opportunities. Finally, we have a highly advanced product A portfolio that's focused on enabling green economy, one that can help reduce the reliance on fossil fuels and provide far greater energy security to Communities and Economy. With that, I would like to hand over to our CFO, Kevin Bracken. Kevin?

Speaker 2

Thank you, Vasily, and good morning, everyone. Turning to our financials, we delivered revenue of $1,300,000 in the 3rd quarter And income from grants of $500,000 for a total of $1,800,000 R and D expenses were $2,100,000 in the 3rd quarter, primarily related to R and D costs incurred in each of our businesses as well as our cooperative research and development agreement with the Department of Energy. Administrative and selling expenses were 8,900,000 the Q3, combined with R and D expenses, total operating expenses were $11,000,000 A year over year increase of $300,000 primarily related to an increase in expenses for our new Hood Park facility in Charlestown, Mass. Net loss in Q3 was $11,800,000 or $0.20 per share. Unrestricted cash reserves were $3,700,000 as of September 30, 2023, A decrease of $6,400,000 from June 30, which includes 2,100,000 of cash raised from the company's equity line of credit with Lincoln Park Capital and a final payment of $700,000 for the build out of the Hood Park facility.

Speaker 2

Our existing cash balances and projected operating cash flows Are not expected to be sufficient to support planned operations for the next 12 months. In addition to the potential funding from the pending Green Hippo project, we continue to seek other sources of capital. We finalized an agreement in April this year for an equity line of Credit with Lincoln Park, which gives us access up to $50,000,000 of capital over the 3 year term. However, the utilization of this equity line of credit is prohibited if our stock price closes below $0.50 per share. As I mentioned earlier, we raised $2,100,000 in the 3rd quarter using this equity line of credit.

Speaker 2

We also set up an at the market equity program with H. C. Wainwright as sales agent, under which we may sell up to $50,000,000 of the company's common stock Through the agent, we began utilizing this ATM facility during the month of October and intend to continue utilizing This facility moving forward. In October, we collected a $1,000,000 prepayment under the new defense contract and finished the month of October with $3,100,000 of available cash compared to the 3 point $7,000,000 of available cash as of September 30. We will continue to manage our cost structure closely And capitalize on any opportunities to reduce costs where possible.

Speaker 2

Let me now turn to our outlook. Advent has a strong pipeline of opportunities. As we all know, however, not every opportunity in the pipeline will transpire due to factors that may be beyond Opportunities may not materialize or could be delayed. Due to the long term contract nature of our business model, the Due to these factors and because state aid funding for Green Hippo has not yet commenced, We are not providing an outlook for revenue and income from grants for 2023 on this call. With that, I will hand back to Vasily for closing remarks.

Speaker 1

Thank you, Kevin. ADVENT has significant opportunities for its high temperature pump technology, advanced materials and fuel cell system products. ADVENT is a clean energy technology company developing innovative products for key sectors that require clean energy. We look forward to growing the business and to keeping you informed of development. I would like to thank you all for joining us today.

Speaker 1

I will now turn back to Operator, to open the line for questions from the company's analysts. Thank you very much.

Operator

Thank you. And we'll take our first question from Sean Urquhart with Hannon and Partners.

Speaker 3

Hi. Thanks for the presentation, Doctor. Agree. And just from our side, I think what would be interesting to understand Given the capital constraint and going into next year, does this impact the Strategic allocation in terms of how you look at your sort of projects in different regions, EU versus U. S.

Speaker 3

And does it also impact looking at the product mix that you're currently looking at across different segments of the market? Are you Honing down into specific areas or is it impacted by that?

Speaker 1

Yes. So thanks for the question. As you know, as you already said that we've been Working very diligently and we have a Bluetooth organizations that they're close to us now in very Key sectors and these sectors are also very consolidated, if you will, all right. So we're going to grow these relationships. You saw the very Recent relation with Airbus that for us is very, very important because with our technology we have a chance to really fly The hydrogen plane now pretty much the same technologies used in automotive and maritime.

Speaker 1

And I say the same For the general audience, obviously, there are many differences when you go down to the Technological level, the most the thing will make the difference and we have talked about in our presentation here It's the contribution from the IPCI project, which it's been Going slower than we thought. However, we've done everything we have to do. And keep in mind, we're dealing with the state. We don't deal with the customer. So we purchased the site.

Speaker 1

We have scheduled the R and D work. We have the strategic Agreements with BASF that we have announced and with some others that we will announce at the appropriate time. And we're waiting for the Greek state to We have to show the patience and resolute that's needed in a situation like this. For sure, we're not going to walk away from a big grant like that. So that will in a way determine very much Where we're going to go cash flow positive.

Speaker 1

But overall, we're moving in the right direction. I think we've done It meant this job. And we need to bring the cash in now to continue the operations at the level that we're here And basically, finish these partnerships in a very good way.

Speaker 3

Thank you very much. Just to follow-up on that, I think Looking at the purchase orders and going through into next year, just given the difficult environment around supply chains that Hence, focusing on the sort of hydrogen sector specifically, how do you sort of see the key mitigants For Advent to make sure that you can deliver against those orders and make sure that you can execute.

Speaker 1

Yes, it is true that there is cost increases in the stuff that we made, I think primarily I think it's Dale from COVID and all the uncertainties with the geopolitical situation and also The cost of capital, but we've got to do what we have to do in order to, as you say, Deliver the products to our customers. So I think there is an effect, but it's not going to be, In my opinion, the rate determined step. We have to do the stuff that I mentioned in our Your first part of the question first and then we'll take care of problems as they arise.

Speaker 3

Thank you very much.

Speaker 1

You're welcome.

Operator

We do have a question from Roger Bell with Hanuman Partners. Roger, your line is open. Please go ahead. Roger, your line is open. Please pick up your handset or release your mute option.

Speaker 4

Apologies, I was on mute. Yes. Thank you very much for the call and congratulations again on the project with Airbus. I just wanted to ask about the Green Hippo project and the drawdown of the funding from IPCC So when you do commence that project and start drawing that on, what's the time frame To bring that into production and start generating revenue from that project?

Speaker 1

Yes. You're right. I mean, it has to go from, let's say, time 0, right, when we sign, How fast we're going to get up fuel? Very fast because we're waiting for it now. We're waiting for it Almost a year.

Speaker 1

So we're ready. So with this, the cash flow also will follow. So as I said, we're dealing with the state. We have to show the necessary respect to the process, if you will. But the whole mood is positive, I must say that, over the long term.

Speaker 1

So we will move fast after we have the signature.

Speaker 4

Thanks. And then just a follow-up in general on The sort of structure of your partnerships with potential downstream customers, Are you sort of equity holder in those partnerships? And would you be sort of obliged to find funding if they sort of move forward? Or Are the sort of partners providing the cash and you're providing sort of expertise and potentially taking Some kind of technology royalty further down the track, is that how you would sort of see those relationships working in general?

Speaker 1

Yes, all of the above. I'll tell you where we are right now and obviously where we'd like to be and I think you kind of said it What the right track is, right now we bring the technology, okay? And since we bring the technology with big partners that they have Tremendous knowledge of their particular markets. We both want to accelerate What do we do? Okay.

Speaker 1

So instead of taking a fixed amount of time, it should take us much less because keep in mind that they have a lot of people and a lot of capital tied to these big projects We're talking about automotive, we're talking aerospace, we're talking about marine. These are big consolidated markets, okay, Huge market. Now a company like us right now as you've seen in addition to this, we sell the complete systems And basically we tried to do it through major distributors and resellers, things like that. Eventually, and I think you alluded to it, for us, We need to license to top manufacturers, okay? And that's our model.

Speaker 1

And I think we are True to our model so far, we said we're going to do JTAs, we did them. Now we said we're going to have license tomorrow. I hope we'll do it sooner than later. We know where the path is. And I think starting from telecom, starting from construction, starting from marine where we have Final products, you've seen we partnered with Siemens Energy for the large scale systems.

Speaker 1

We have the San Lorenzo board that everybody Is waiting to see in the next Monaco show and we're very proud of it. So we'll keep our fingers crossed that we get everything right. The same thing with the telecom. We have a lot of installations not only in Asia, but also with the German Police. And then of course, Smart and Globe in the Philippines.

Speaker 1

So we're moving along this Ruth, if you will, knowing very well that in the end, we definitely would like to license the technology in automotive or to aerospace Giants and we will get a lot of revenue from that. Because if you look at the margins, The license margin is very, very big and the gross margins for the fuel cell systems are much smaller, which Understandable. So that's our plan.

Operator

Thank you. And that does conclude Advent Technologies' 3rd quarter conference call. Thank you for your participation today everyone and you may now disconnect.

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Advent Technologies Q3 2023
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