Amprius Technologies Q2 2023 Earnings Call Transcript

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August 10, 2023

There are 8 speakers on the call.

Operator

Good afternoon, and welcome to Amprius Technologies Second Quarter 2023 Earnings Conference Call. Joining us for today's presentation are the company's CEO, Doctor. Kang Sun and CFO, Sandra Wallace. At this time, all participants are in listen only mode. Following management's remarks, we will open the call for questions.

Operator

Please note that this presentation contains forward looking statements, including but not limited to statements regarding future product commercialization, new customer adoption and timing and ability of Aperis to build its large scale manufacturing facility, expand its manufacturing capacity, scale its business and achieve a sustainable cost structure. These statements involve known and unknown risks, uncertainties and other important factors that may cause Amparis' results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied in such forward looking statements. For a more complete discussion of these risks and uncertainties, please refer to Amprius' filings with the Securities and Exchange Commission. Finally, I would like to remind everyone that this conference call is being webcast and a recording will be made available for replay on the company's Investor Relations website at ir.amprius.com. In addition to the webcast, the company has posted a shareholder letter that accompanies these results, which can also be found on the Investor Relations website.

Operator

I will now turn the call over to Amprius Technologies' CEO, Doctor. Kang Sun, for his comments. Sir, please proceed.

Speaker 1

Welcome everyone and thank you for joining us this afternoon. On today's call, I will report on our process and accomplishments at Ampeus in the Q2 and our CFO, Sandro Wallach, will discuss our financial results for the period. After that, I will share some closing remarks before opening the call for questions. Our Q2 demonstrated our business momentum and the growth potential. Ampere has introduced new products and technologies, brought in more customers and delivered increased revenue.

Speaker 1

Our battery performance continues to comment a firm leading position in the industry, highlight the Ampere's ability to provide 4.50 hour per kilo specific energy density and 11 50 hour per liter volumetric energy density, up to 10 C power capability, the extreme fast charge rates of 0% to 80% stay of charge in approximately 6 minutes the wider operating temperature range of minus 30 degrees Celsius up to 55 degrees CELSIUS and safety design feature that enable us to pass the United States military's benchmark and nail penetration test. Ampere has over ED patents and extensive know how in silicon anode and silicon anode manufacturing technologies. And it's our belief that there are no other commercial battery on the market that can perform at these levels. Amprius has been in commercial battery production since 2018. So company has many years of experience manufacturing high energy density and high power density lithium ion batteries.

Speaker 1

Our priority today is to scale our manufacturing capacity to meet every increasing demand of our solutions with the long term goal of becoming a mainstream battery solution with applications across all segments of Electrical Mobility, including the Aviation and the EV Industries. Building our momentum from last quarter, We are diligently working to execute the strategy we lay out earlier this year. This quarter, we continued to develop new products, build out our book of customers and the progress on our path to larger scale commercialization. I would now like to note a few highlights in each area. Beginning with our technological development, Our Q2 include a few key examples of our ongoing efforts to push the boundaries of what is possible in the high performance battery space.

Speaker 1

1st, early this month, we announced our newest product, the Ampere's high power, high energy battery cell. This cell displays unprecedented performance in the industry, delivering 400 watt of potato energy density and the maximum power density of 4,400 watt per kilo with impressive Tennessee continues charge rate. Ampere's high power cell technology is critically important to the electrical aviation industry, enabling the capabilities of EV parts and other high performance electrical vehicles. We believe that we are close to shipping samples to interest partners and that we will be able to commercially ship this product in early 2024. Secondly, our silicon anode battery is a system that powered BAE Systems' 1st successful Start with spheric slides.

Speaker 1

DAE 16 chose Ampeus as its partner So it's a high altitude super satellite and crude area system demonstrates that we believe it's important to use the ultralight battery that also offers the necessary power to fly the aircraft. The HEP's program opens extensive possibility of future communication networks, including 4 gs and 5 gs. It is versatile applications from disaster relief to border protection present a compelling alternative To conventional airborne and satellite systems and MPS is excited to play a part in the future. 3rd, we complete the U. S.

Speaker 1

Army Safe Cell Development Program, An important technical milestone to our business with the US Army, we successfully delivered Our 3 90 hour per kilo safe cells with gel polymer electrolytes, passing the vigorous military performance specification nail penetration test. When integrated into a battery pack, this cutting edge technology more than doubles the energy density of existing solutions, significantly extending mission time. Also as a part of the US Army funded manufacturing technology program, We are working closely with one of our partners to deliver conformal variable batteries to US Army before the end of the year. We believe that this is the important setting strong to further developing our relationship with the U. S.

Speaker 1

Military and specifically giving us entry points So the conformal variable as we market estimate at 1.25 billion by 2,030. Finally, we have become an integral partner to several teams participating in the Bridgestone for the Solar Challenge in October. For the event, each team designs, develops and pilots a Solar powered vehicle along a 3000 kilometer Transcendental Australia route. Ampere's battery's superior performance attracts significant attention for teams entering the development process and the 4 teams chose Ampere's battery to power their solar waste costs. The high energy density and the high power density capability of our battery are critical for this application.

Speaker 1

These are just a few of the ways Ampere is changing the battery landscape. We are constantly evolving our products to push our industry boundaries and meet our customer performance goals. Turning to our business development efforts, We continue to see significant demand for our products in the Q2. We shifted to 27 total customers this quarter, up from 16 in last year's Q2 and up from 19 in the Q1 of this year. These customer relationships extend beyond technical engagements and are with customers who have placed product orders with Amprius.

Speaker 1

This includes Repeat, customers like Airbus, Aero Environments and the Teladamseler, who continue to show their support and demand for Amtra's batteries with additional orders and the commercial shipments. We shipped to 10 new customers In the quarter as well, which indicates growing industrial recognition and the validation of our products. In addition, our pipeline of the potential customers remains strong. Two key reasons that we bolster our pipeline are through the strategic technical engagements and prototype Statements, in the Q2, we not only saw significant progress in our ongoing technical engagements, We also start new technical engagements with the leading high performance automotive OEM. This engagement She is expected to be part of the joint development contract we are finalizing with the manufacturer.

Speaker 1

Once finalized, we believe that this engagement will offer us another encouraging opportunity in the automotive As for prototype shipments, this quarter we made a site visit to 2 battery test manufacturers To whom we started shipping samples in the Q4 of last year. We believe that this visit serves as meaningful steps toward a significant potential demand from the aviation industry through 2025 and beyond. In addition to driving demand for our batteries, It remains a priority for our business to expand our production capacity to meet this demand. We believe that TCE is a critical part of our strategy, both in short term As we work to expand our Amphis lab in Fremont, California and over the medium and the long term as we strive to achieve gigawatt scale manufacturing with Ampere Fab in Brighton, Colorado. Ampere's lab will allow us to increase our production capacity to 10 times what it is today at year end, Providing enough capacity to both expand commercial shipments within our strategic accounts as well as to ship samples to our pipeline of potential customers.

Speaker 1

Our expanded Fremont production facility It is designed to have a full lithium ion battery manufacturing capabilities, including both anode and the cathode production as well as the ultimate cell assembly enabling to further develop our cathode technology and the cell chemistry in house. In the Q2, we ordered the necessary equipment to begin executing our And Chris led pressure fee and expansion, a process that we are on track to complete at the end of the year in hopes of having facility up and running entering 2024. We are also working diligently to meeting our project plan for Ampere's FET, our growth engine, which will allow us to reach high volume manufacturing capacity. As a reminder, our planned 774,000 Square Foot Largest Scale Production Facility is a part of the total site With over 1.3 square feet available for expansion, expect to be the 1st mass production site for the next generation battery technology in the United States. The initial phase of our build outs We'll provide the potential of up to 5 gigawatt hour with expansion capability for up to total potential manufacturing capacity of 10 gigawatt hour.

Speaker 1

The Ampere Fab site is already equipped with electrical power and existing structure layouts needed for gigawatt scale lithium ion battery factory, which will reduce our build out cost and the time to market. We are now working Through the rezoning and the site permitting processes and believe we are on schedule to begin construction on our entry Later in Q3 as part of our 18 to 24 months plan. Our goal is to be operational in 2025. And as of this call, we remain on track to meet this timeline. This quarter, our engineering team worked with the central firm team in Germany to complete the lesser service silicon nanowire anode mass production equipment, the process testing and optimization efforts.

Speaker 1

The process, once optimized, will be deployed at Amphis Labs manufacturing line and ultimately at Amphis Labs. Both Amperes led and Amperes led will have a high performance Amperes silicon anode battery manufacturing capabilities. I have one final update before I turn the call over to Sanjay. We recently appointed Mary Kastensky as an independent Director to our Board of Directors and our compensation committee. Mary is the very worst in various challenging set of opportunities in our industry and offers a unique and valued perspective to our Board.

Speaker 1

We are confident that Her extensive automotive sector and the technical management experience will help us as we navigate and expand into new markets. With that overview complete, I will now turn the call over to our CFO, Sandra Vodick, to review our financial results for the quarter. Thank

Speaker 2

you, Kang. I would now like to spend a few minutes covering some key financial updates. As a reminder, our detailed financials can be found in our shareholder letter. We finished the Q2 with $1,600,000 in revenue, a $900,000 increase compared to $700,000 in the same quarter last year. There were 2 main drivers of this increase.

Speaker 2

First, we drove a $600,000 increase in product revenue. As Kang mentioned, our product revenue was largely driven by shipments to 27 customers this quarter, a quarterly record for Amprius. Also of these customers, 5 customers represented greater than 10% of revenue as compared to 3 such customers last quarter and 2 such customers in last year's Q2. Even though our product revenue remains largely driven by customer purchase orders that can arrive at uneven times throughout the year, we have shown consistent new customer growth and diversification in recent quarters. 2nd, our development services revenue totaled $300,000 a reflection of the Army safe cell delivery we completed in the quarter.

Speaker 2

As noted in previous quarters, our development services revenue is intermittent based on revenue Sun. And as our capacity expands and more customers transition to commercial orders, we expect this revenue Category to continue to decline as a percentage of overall revenue as we begin to process larger orders from a broader customer set and as our product revenue ramps even more. Our government grant revenue was flat year over year for the quarter. Moving to our profitability metrics, our GAAP gross margin was negative 186% in the 2nd quarter, in line with our Q222 gross margin of negative 197% and better than our Q1 'twenty three gross margin of negative 5 18%, which was primarily impacted by non recurring start up charges for our large scale manufacturing facility. As the build out continues and construction begins in earnest, We expect these scale up related charges to increase.

Speaker 2

Still, we are confident that our GAAP gross margin will begin to normalize as we approach our capacity expansion goals in the coming years. Now on to our operating expense management. Our GAAP operating expenses for the 2nd quarter increased to $7,100,000 largely due to increased public company costs and additional targeted investments in R and D staffing. Our GAAP net loss for the Q2 of 2023 was $9,400,000 or a net loss of $0.11 per share. As of June 30, 2023, we had 86,000,000 shares outstanding.

Speaker 2

Also as of June 30, 2023, there were 72 full time employees with those employees primarily based in our Freeland, California location. Our share based compensation for the quarter was $900,000 Now turning to the balance sheet, we exited the 2nd quarter with $65,000,000 in cash, up $800,000 from the last quarter and no debt. One of the key drivers of our cash activity for the quarter was $5,600,000 used in operating activities. As discussed previously, Our run rate for cash used in operating activities remains projected to be around $2,000,000 per month, excluding audit and transaction related expenses. Other drivers include $1,700,000 in build out related investments in the expansion of our Amprius Lab facility in Fremont and $8,100,000 in financing cash inflow from accessing our committed equity facility to fund our the expansion and operating cash requirements.

Speaker 2

Considering our business achievements and ongoing projects, We believe we are efficiently using capital to drive Amprius forward. Before I turn the call back over to Kang, I would like to take a moment to That's our outlook. As mentioned last quarter, we have several ongoing development services programs with performance obligations that we expect complete within 2023, which means we should see increased revenue recognition weighted more heavily towards the latter part of the year. Also, we anticipate that our G and A costs will continue at the higher rate we experienced earlier this year when accounting for additional public company and transaction related expenses. Also, we continue to expect to be capacity constrained until we exit 2023, when our new 2 megawatt hour capacity is projected to come online.

Speaker 2

That project, along with our build out of Amprius Fab in Brighton, Colorado remain our top capital allocation priorities. We believe that we are on track with our prior CapEx projections, which are that we expect to spend approximately $10,000,000 to $12,000,000 completing the build out of the Amprius lab facility in Fremont by the end of the year, as well as $50,000,000 to $80,000,000 in the second half of this year as we start construction at Amprius Fab and begin to order long lead time equipment. We expect to confirm the facility design and scale, as well as provide a projected budget during the second half of this year. Our spending pattern is dependent upon several factors outside of our control, including the timing of rezoning approval for the Colorado site. So we expect to provide more specific projections as we have additional information to share.

Speaker 2

Overall, Sun. With the strength of our balance sheet and multiple vehicles to generate additional funding through both equity issuances such as warrants and sales under our committed equity facility and non dilutive sources such as grants, loans and incentives. We believe we will have enough cash to execute on our strategic plan. With that, I will conclude the financial discussion and pass the call back to Kang.

Speaker 1

Thanks, Andrew. I'd like to reemphasize a few key points before closing. 1st, Ampere's silicon anode technology continues to demonstrate unmatched performance in the industry. Ampere's batteries command a firm lead in 50 energy, power, charging time, temperature performance and are uniquely positioned for the electrical mobility market. 2nd, Amprius batteries are commercially available today.

Speaker 1

We have been shipping commercial products since 2018 and our technological advancement that continue to bring in significant customer demand. This quarter, we not only delivered to repeat customers and expand our technical engagements, we added 10 new customers as well. Our demand pipeline is robust and we look forward to further building out our customer in the coming quarters. 3rd, we are scaling our manufacturing capacity to serve the significant demand ahead Exiting 2023, we will further pull out our largest scale manufacturing process and the parameters With our 2 megawatt hour production line at Amperes Labs in Fremont. We also remain on track to build out MPSF, our gigawatt scale facility in Brighton, Colorado, which we expect to be operational entry in 2025.

Speaker 1

Finally, we are looking forward to several exciting milestones over the rest of the 2023 before end of the year. We expect secure customer commitments to fulfill Ampere's fabs' expected production capacity for 2025, deliver 500 watt per kilo battery prototypes to select the customers complete our megawatt hour scale Silicon Anor battery manufacturing facility at Amphis Labs and start Amphis fab construction and complete our product line and the facility equipment purchases. As we look to the rest of the year, our strategy and the focus at Amprius remains unchanged. We have a tremendous opportunity ahead With the product portfolio that positions us to both growth in aviation market and expand it to other industries picking battery with the leading performance. Opportunities in front of Amperes are enormous, including the 1.25 building conformal variable Battery market by 2,030, the 49 fueling aviation market by 2025 and the 67 EV battery market by 2025, all of which are ampeous growth path in coming years.

Speaker 1

2023 has been a very productive year for the company thus far. Our solid performance in this quarter has demonstrated our team's ability to deliver what we have planned and promised. Thank you for your continued support of Ampere's Technologies. With that, I will turn it back to the operator for Q and A.

Speaker 3

Thank you. At this time, we'll open the line for questions. The company requests that each participant limit themselves to one question and one Our first question is from Colin Rusch with Oppenheimer. Please proceed with your question.

Speaker 4

Thanks so much. Can you talk a little bit about where you're at from a test Sun. Perspective around the subsystems for the megawatt scale tool and when you expect to really kind of just flip the switch and start running that full app?

Speaker 1

Yes, Connie. We have test our I assume you are talking about the Fremont operation here. So at Premont, we already finished almost the full test in Germany at Central Serum Well, our supplier for silicon anodeeposition too. So we expect To transfer that to move that entire piece to freedom. So By the end of the year, we will have that part of the equipment in place.

Speaker 1

So that's the key part of this entire manufacturing process. If we get that right, the rest of those are relatively easy.

Speaker 4

Excellent. And then with the customers, obviously adding incremental ten customers is an awful lot for the company at this point. Can you talk a little bit about And what percentage of that are customers who are sampling and how many of those are folks that are taking commercial products at this point for particular applications?

Speaker 1

So we as a new customer, I think Approximately, in terms of processing orders, they all have processing orders, but for given the purposes, some for sampling, prototyping, Some really qualified our product. So I would say 40% of those customers really qualified our product A lot of processing for their commercial applications.

Speaker 4

That's incredibly helpful. And then one for Sandra, just in terms of The cadence of the cash flow for the balance of the year, how would you characterize the spend in terms of How much is going towards equipment orders? How much is going towards facilitation? And how much is going in the Q3 versus Q4?

Speaker 2

So, we're going to keep our operating activities relatively flat as far as use of cash. We've got about $10,000,000 to $12,000,000 more to finish out Fremont and we're projecting somewhere between and this is all dependent on timing, but the Demand for the construction and the pre ordering of the long lead time items is estimated to be on the low end dollars 50,000,000 on the high end, dollars 80,000,000 for Colorado.

Speaker 3

Thank you. Our next question is from Chris Southern with B. Riley Securities. Please proceed with your question.

Speaker 5

Hey, guys. Thanks for taking my questions. Maybe just on the performance automotive OEM, can you give us a sense of The timelines we should expect for updates there and can you share what you hope the goals of the joint development contract We'll potentially lay out and I'm just kind of curious from a high level standpoint, do you think this changes your potential timeline for Commercialization in the automotive sector or should we kind of temper the enthusiasm around that for the near term and midterm?

Speaker 1

So we already engaged with this customer for some time. Now we would like to formalize the relationship Sun. Chris, the step 1 would be joining the development program. This is a very significant for us. This is a high performance The electrical vehicle manufacturer is going to guide us into this business.

Speaker 1

So we expect we'll finalize this agreement in next month or so.

Speaker 5

Okay. And then maybe just on the battery pack manufacturing Relationships that you called out in the letter and earlier on the call. Can you talk a bit about how that Just into the overall customer strategy, did the larger customers you've talked about like Airbus, Teledyne, FLIR, have kind of In house pack manufacturing or is it around kind of standardized cells for specific applications for smaller customers? Can you just kind of talk through what those relationships mean?

Speaker 1

Yes. The Ambi's lab in Fremont, Okay. We will have 10 times more capacity than what we have today. That's very, very significant. In addition to that, We will have this large tool in place.

Speaker 1

This is going to improve our Battery performance as well, because we have better uniformity, we have better control over our annual manufacturing here. So at this time we still customize our batteries each design for specific customers, Now for major customers, for the smaller customer of course they take what we have here. Now ultimately, not only we wanted To standardize the battery cell, the industry is moving to better direction as well.

Speaker 5

Okay. And on the PAC side, though, you called out visiting 2 PAC manufacturers. As you're kind of starting to standardize the valves, is it more standardized back you'd expect as well?

Speaker 1

Yeah, Chris we have 2 types of customers. One type of customer is OEM, for example Airbus. We work with them directly. Since we are cell battery cell manufacturer, so we rely on the our customer rely on the pad Company, it was a module company to put those cells together and make a module and a pack for their commercial application. So the tech companies are very important customer of Ampere's Technologies as well.

Speaker 1

So those two Customers who visited are the leaders in this business. They already have a standardized module to supply to the industry. The main purpose of Visitor is to discuss long term working relationship, supply agreements From now to 2025 and beyond. This is very important because we have 500 megawatt facilities Design the construction, by the time we finish, we need to have full capacity operation. This was the purpose of this visit.

Speaker 1

We have very good relationship with the customers at this time.

Speaker 5

Sun.

Speaker 3

Our next question is from Tim Moore with D. F. Hunt. Please proceed with your question.

Speaker 6

Thanks. And your shareholder letter commentary today was insightful.

Speaker 1

I've got

Speaker 6

Two questions here. Your commercial success is quite evident with 27 total customers shipped this quarter, up from 16 a year ago and 19 in the March quarter. As I think out to your added capacity in that plan for the year 2025, How do you prioritize the production for specific customer proposals that come across your desk? I mean, clearly the U. S.

Speaker 6

Army Safe Cell Development has been in the works since 2 summers ago. The BAC systems stratospheric flight batteries for nice headline accolades. But can you maybe share and rank maybe how you handle the incoming opportunities and prioritize them? Is it this year you're trying to demonstrate a wider range of applications for your offerings like solar and flight and army? Or is it really more based on something like Sales potential 3 years out from a single customized customer.

Speaker 1

Yes, Tim, serve our existing customers, certainly Those customers show the loyalty to us. So we have for example Airbus, we have been working with them since 2018. So existing customers certainly is our priority. They have priority on the capacity allocation. But we have a lot of inquiries over the market.

Speaker 1

That's the reason we build a new capacity. The Fremont capacity could be 10 times more Production capacity than what we have today, this is very, very helpful for us to develop new customers.

Speaker 3

That's helpful. I mean, the

Speaker 6

company clearly has a lot of great advantages beyond just Power density and fast charge time and your healthy balance sheet. Obviously, you're not solely a developer, but you're actually doing the manufacturing with firm orders and production And how do you as you kind of approach new customers and new prospects, are you seeing anything in particular You can point to this maybe helping you win orders better. Is it extreme fast charge, the 0% to 80% Data charge in 6 minutes, is it or is it really the power density? Is one thing over another really kind of the icing on the cake to win orders?

Speaker 1

Tim, for Amperes today is focusing on aviation market. For aviation market, three Top priority, safety, energy and the power. They cannot miss any one of those Because the safety is absolutely important for aviation and our company in the leadership position for safety. We passed the United States Army military stack for safety. Secondly, the energy is very important Because this dictates how far they can fly.

Speaker 1

This is very, very important for them. Otherwise, they don't have any commercial value If they cannot clarify enough. The third one is the power. We need to have power to lift off and then mandate. This is the reason The Ampere has a lot of customer inquiries, because if we look at the market, there is almost no battery chemistry Today, can you deliver what we have here?

Speaker 1

In addition to safety and have very little compromise between the power and energy as our A news release published a few days ago, we have a 400 watt hour per kilo battery Can deliver 10C power capability.

Speaker 6

Great, Kang. That's very helpful. I'll save my questions

Speaker 3

Sun. Our next question is from Abhi Sinha with Northland Financial. Please proceed with your question.

Speaker 7

Yes, hi. Thanks for taking my question. So just on the customers, I just want to press on more on that. If you could talk about the process of acquiring a new customer, like what does it take in terms of the process and the timeline before you get an order. And more importantly, if you could talk about the feedback that you get from the customers from whom you are not able to get the orders, like what do they have to say?

Speaker 1

Okay. First, let's talk about What do they want in terms of product specs? Our customer, basically as I mentioned Earlier to tell him 3 things, okay, safety, energy and the power. Now without those 3 performance parameters need their spec And there is no discussion. So those are very, very important parameters we need to deliver.

Speaker 1

In addition to that, And the customer we don't get an order, normally it's a capacity issue. This is why the Ampeus Has been focusing on the capacity expansion about 12, 18 months ago. That's our primary focus. The customer will not engage with us if they cannot if we cannot guarantee, okay, we can support their growth, For example, in next 24 months at least and the customer have visited Europe and in United States recently, They basically ask us to guarantee until 2026. They want to see that there is a roadmap So the capacity expansion before they pre sold it.

Speaker 7

Thank you. That's helpful. So just on that, How when you go to a new customer, when you provide a demo or something, how long does it take for them to approve or to place an order?

Speaker 1

Various, okay. Some customers takes about 7 to 8 months, They're done because they take our standard of products, they take a test, they see other people use it. So it's relatively easy. But for the new program, start up from the scratch, okay, they have a different technical spec to meet That usually take a year and a half. Definitely in aviation is much shorter than the electrical vehicle.

Speaker 1

At this time, okay, in the future, the lead time may be longer because when we have At this moment, the most customers we are working with are unmanned flying devices, Okay, like a super satellite zones. Once we get a passenger carrying vehicle, The time of development will take longer. While we see the development Time, okay, this is 2 parts. One part is our battery development, another part is our customers' own product development.

Speaker 3

At this time, this concludes our question and answer session. If you have any additional questions, and may contact Amprius' Investor Relations team at irampreus.com. I'd now like to turn the call back over to Doctor. Sun any closing remarks.

Speaker 1

Thanks again everyone for joining us today. I'd also like to thank our employees, partners and shareholders for their continued support. As a reminder, you may learn more about our company, fund additional updates and learn about upcoming events and presentations from the Investor Relations section of our website. We look forward to updating you on Amprius progress on our next call. Operator?

Speaker 3

Thank you for joining us today for Amprius Technologies' Q2 2023 earnings conference call. You may now disconnect.

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