Amprius Technologies Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
November 7, 2024

Key Takeaways

  • Q3 revenue surged to $7.9 million, up 81% sequentially in product sales.
  • Secured $20 million in contracts for 40 Ah high-performance light electric vehicle cells and signed two LOIs with Fortune 500 firms that could exceed 2 GWh over five years.
  • Achieved third-party validation of a 500 Wh/kg, 1 300 Wh/L battery platform slated for year-end shipment.
  • Expanded manufacturing capacity through contract partners to support up to 800 MWh pouch and > 1 GWh cylindrical cells, including two newly operational dedicated lines.
  • Gross margin remained negative at –65% (improved from –195% in Q2) and the net loss was $10.9 million, reflecting ongoing development and facility costs.
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Earnings Conference Call
Amprius Technologies Q3 2024
00:00 / 00:00

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Operator

Good afternoon. Welcome to the Amprius Technologies Third Quarter 2024 Earnings Conference Call. Joining us for today's presentation are the company CEO, Dr. Kang Sun, and CFO, Sandra Wallach. This time, all participants are in listen-only mode. Following management's remarks, we will open the call for questions. Please note that this presentation contains forward-looking statements, including but not limited to statements regarding future product commercialization, new customer adoption and new applications, and the timing and ability of Amprius to expand its manufacturing capacity, build its large-scale manufacturing facility, scale its business, and achieve a sustainable cost structure. These statements involve known and unknown risks, uncertainties, and other important factors that may cause Amprius's results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied in such forward-looking statements.

Operator

For a more complete discussion of these risks and uncertainties, please refer to Amprius's filings with the Securities and Exchange Commission. Finally, I would like to remind everyone that this conference call is being webcasted, 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. I will now turn the call over to Amprius Technologies CEO, Dr. Kang Sun, for his comments. Sir, please proceed.

Kang Sun
Kang Sun
CEO at Amprius Technologies

Welcome, everyone, and thank you for joining us this afternoon. On today's call, I will give you an overview of our third quarter accomplishments. We are also highlighting some of the upcoming milestones we are looking forward to achieving in the near future. After that, our CFO, Sandra Wallach, will discuss our financial results for the period. Then, I will share some closing remarks before opening the call for questions. Before I give a recap of the quarter, I would like to briefly introduce Amprius to those who may be new to our company. Amprius is a pioneer and a leader in the silicon anode battery space. At Amprius, we develop, manufacture, and market high-energy density and high-power density silicon anode batteries with applications across all segments of electrical mobility, including the aviation and the EV industries.

Kang Sun
Kang Sun
CEO at Amprius Technologies

Today, Amprius commands performance leadership with its combination of battery energy density, power density, charging time, operating temperature range, and safety. Across our battery portfolio, we offer unmatched performance among the commercially available batteries. Amprius has been delivering commercial batteries to the market with up to 450 Wh per kilo and 1,150 Wh per liter, 10C power capability, the extremely fast charge rate of 0%-80%, rate of charge in approximately six minutes, the ability to operate in a wide temperature range of minus 30 degrees Celsius up to 55 degrees Celsius, and the safety design features that enable us to pass the United States military's benchmark nail penetration test. Each of these performance parameters is critically important to real-world electrical mobility applications. Not only do our battery enable certain aircraft and vehicles to maximize performance, but they enable our customers to achieve their economical targets as well.

Kang Sun
Kang Sun
CEO at Amprius Technologies

In addition to what is commercially available today, we have also achieved third-party validation of our latest 500 Wh per kilo, 1,300 Wh per liter battery platform. This battery will be ready for shipment by the end of this year. It is our belief that there are no other commercial batteries on the market that can perform at these levels today. Amprius is a silicon anode battery technology pioneer with over a decade of development experience and a long track record of commercial shipments and customer achievements. While Amprius high-energy high-power batteries are for all electrical mobility applications, the company is presently serving two large and high-growth segments: aviation and light electrical vehicles. Both benefit from Amprius battery performance and present Amprius with enormous business opportunities. Our aviation customers include manufacturing OEMs in high-altitude pseudo satellites, eVTOLs, electrical aircraft, and various drones from commercial to industrial to military.

Kang Sun
Kang Sun
CEO at Amprius Technologies

Fortune Business Insights projects that the global drone market will surge from $18 billion in 2023 to $213 billion by 2032, so we believe we are just at the beginning of a significant expansion of one of our addressable markets. Aerospace Testing International forecasts the electrical aircraft and the eVTOL battery market could be $50 billion by 2030. The light electric vehicle market is quite impressive as well. Precedence Research estimates the market will have a compound annual growth rate of 9.74% from 2023 to reach $206 billion by 2032. If there is one constraint in all of this, it is the critical role of the battery innovation. At Amprius, we offer solutions to this constraint, and our third quarter results reflect our traction in both the aviation and the light electric vehicle industries as customers see the value of our technology.

Kang Sun
Kang Sun
CEO at Amprius Technologies

In the third quarter, we more than doubled revenue from the second quarter and engaged with 53 new customers. We have expanded our market participation to the light electric vehicle segment, signed $20 million of customer contracts and two LOIs with Fortune 500 industrial leaders, delivered a high-energy density 360 Wh per kilo EV battery cells to industrial consortium USABC, and developed gigawatt-hour scale contract manufacturing capacities. All these accomplishments and the progress position Amprius for accelerated growth in coming quarters and years. The introduction of Amprius SiCore Battery in January has given us a large advantage in battery space by expanding our offerings. Amprius offers a very versatile platform that enables the designs of the best-performing silicon anode batteries for a variety of customer applications. Today, we offer customers 14 different SKUs that are available in a variety of battery formats and form factors.

Kang Sun
Kang Sun
CEO at Amprius Technologies

These cells, which range from 350 Wh per kilo-450 Wh per kilo, ensure that we are covering a significant portion of our customers' commercial applications. Amprius batteries are recognized as the best in class for energy power, cycle life, charging time, temperature performance, and safety for electrical mobility. Our technology leadership and battery performance are validated by increasing customer purchasing volume. Now, I would like to briefly provide an update on our partnership with the United States Advanced Battery Consortium, or USABC, since it is a remarkable technical breakthrough in an important market segment for Amprius. After being awarded a $3 million cost-sharing contract from the USABC in collaboration with the United States Department of Energy approximately a year and a half ago, this quarter, we successfully delivered the EV cells to them.

Kang Sun
Kang Sun
CEO at Amprius Technologies

USABC selected Amprius to address some of the most challenging issues experienced by EV users, such as range uncertainty and the need for faster charging time. Amprius not only addressed this issue but surpassed many of the initial goals set by USABC. Amprius EV cell achieved 360 Wh per kilo energy density, 1,200 Wh per kilo power density, a charge to 90% of their rate energy in 15 minutes, and expected cycle life of 1,000. We believe our continued success paved the way for future engagements with electrical vehicle manufacturers. Amprius batteries have become a great attraction in the electrical mobility market. In many cases, Amprius batteries are the only known commercial available battery that meet certain of our customers' requirements in technical performance and application economics. In Q3, we shipped to 94 customers. Of these, 53 were new customers covering several parts of the electrical mobility sector.

Kang Sun
Kang Sun
CEO at Amprius Technologies

Our year-to-date customer count now stands at over 175. Many of these customers are also long-time partners with repeat volume purchase orders, including Aalto HAPS, Airbus, AeroVironment, Teledyne FLIR, Kraus Hamdani Aerospace, and BAE Systems. The combination of new customers and volume shipments to returning customers allowed us to generate $7.9 million in revenue for the third quarter. Our performance in the third quarter represents more than double the amount of the revenue we generated just last quarter, almost triple what we generated in Q3 last year and compares to the $9.1 million we generated in all of 2023. The primary driver behind our growth this quarter has been our SiCore product. Since its launch in January, we have expanded our contract manufacturing capabilities, enabling us to quickly scale production and deliver large volume shipments where we have strong demand.

Kang Sun
Kang Sun
CEO at Amprius Technologies

The three customer engagements we announced in Q3 are the results of the SiCore platform introduction and the contract manufacturing strategy. The high performance of our battery and the immediate availability of manufacturing capacities enable us to quickly move customers through the commercial validation process, secure volume purchase commitments, and deliver large quantities of cells to customers. Look at some of these new agreements in more detail. In September, we announced that we received two contracts totaling over $20 million to supply 40 Ah high-performance cells for light electrical vehicle applications, which we are already shipping. For context, our 40 Ah high-performance SiCore battery is produced at a contract manufacturing facility as soon as the battery and the production lines are qualified by the customer, enabling us to rapidly scale and meet customer demand. We expect to recognize this revenue by mid-2025.

Kang Sun
Kang Sun
CEO at Amprius Technologies

In the last few months, we have also signed two separate agreements with Fortune 500 leaders. While we are in the early stage of this project, both engagements have the potential to greatly expand and become high-volume orders from tier-one customers where we now have the capacity to meet the demand. First of these contracts is a non-binding letter of intent with Fortune Global 500 Technology OEM to develop a high-energy SiCore cylindrical cell for the light electrical vehicle market. This LOI is expected to translate into a commercial supply agreement that will cover the next five years and could provide Amprius with battery production orders exceeding two gigawatt-hours over the proposed contract duration. We will begin shipping the first group of SiCore cylindrical cells designed for this application later this year. The second Fortune 500 agreement is a development contract for a small-format, high-energy SiMaxx power cell.

Kang Sun
Kang Sun
CEO at Amprius Technologies

Amprius high-energy battery provided a critical solution to the customer's application. The project is expected to reduce the battery weight and size by approximately 50% compared to their current battery without compromising performance. A smaller and lighter battery enables better product design, enhancing the overall customer experience and offering a significant competitive advantage in the market. The application is projected to require over 1 million cells per year if the project objectives are met. On that note, in order to support current as well as future customer commitments, we took additional steps forward this quarter to increase our manufacturing capabilities. In June, we announced the initial rollout of our contract manufacturing strategy that secured over 500 MWh of additional capacity through several partners. To further diversify and expand our manufacturing capacities, we recently launched two lines designed for the requirements of Amprius batteries with one of our existing partners.

Kang Sun
Kang Sun
CEO at Amprius Technologies

These production lines will be supporting the 20 million light electrical vehicle battery orders that I just mentioned. They are already operational and shipping cells. Beyond creating additional capacity, having lines engineered specifically for our product enables us to provide more stringent designs for our cell chemistry, which is a key consideration for many of our highly technical customer applications. As of today, we now have access to up to 800 MWh of pouch cell and over one gigawatt-hour of cylindrical cell production annually. As for our manufacturing facility, we are planning in Brighton, Colorado. We have now completed production line specifications and selection, finished the construction design drawings and specifications for the facility. We remain on track from the regulatory standpoint, having recently submitted our site plan and advanced all other regulatory plans applications for the facility.

Kang Sun
Kang Sun
CEO at Amprius Technologies

Since we have gigawatt-hour scale contract manufacturing capacity available today, we may not need Colorado production capacity to support market demand for some time. We also are continuing to make progress ramping up our facility in Fremont, California. We remain on pace to scale our Fremont production rates entering 2025 with up to two megawatt-hour scale. Looking ahead, we are increasingly optimistic about the road ahead of us as well as our ability to meet the challenges. With technical leadership, great battery performance, a growing book of customers, and the capacity to now support large volume shipments, we believe that we are set up for sustainable growth for the foreseeable future. We are working hard to execute our goals, and we expect to carry our momentum through the end of 2024 and into 2025.

Kang Sun
Kang Sun
CEO at Amprius Technologies

With that, I will now turn the call over to our CFO, Sandra Wallach, to review our financial results for the quarter. Sandra.

Sandra Wallach
Sandra Wallach
CFO at Amprius Technologies

Thank 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 third quarter with $7.9 million in total revenue. As we have previously discussed, our total revenue is a combination of our main revenue streams: product revenue and development services and grant revenue. This quarter, $6.1 million came from our product revenue, representing a $2.7 million or 81% increase sequentially and a $3.9 million or 176% increase year-over-year. Our development services and grant revenue totaled $1.8 million this quarter, which was up from none in Q2 and up $1.2 million year over year.

Sandra Wallach
Sandra Wallach
CFO at Amprius Technologies

As we've discussed in the past, development services and grant revenue is non-recurring in nature, leading to greater fluctuations depending on the comparison period. The combined increases in revenue this quarter were driven by the addition of new customers and grant programs. As Kang mentioned, we shipped 94 customers in the third quarter. Of these customers, only four accounted for greater than 10% of revenue, an increase from three in the second quarter and consistent with the four customers counted in the third quarter of last year. Going forward, we will continue adding to our customer mix to diversify our revenue streams and provide more reliable product output as we get to a position of scale. Moving to our profitability metrics, gross margin was -65% for the quarter compared to -195% in Q2 of 2024 and -152% in the prior year period.

Sandra Wallach
Sandra Wallach
CFO at Amprius Technologies

As a reminder, we see significant gross margin variation as our product and services revenue mix fluctuates. Gross margin this quarter was also impacted by design pre-construction costs related to the Colorado facility, which will not recur. Longer term, we're confident that our GAAP gross margin will begin to normalize as we approach our capacity expansion goals. Now on to our operating expense management. Our operating expenses for the third quarter were $6.2 million, a decrease of $0.2 million or 4% compared with Q2 2024, and an increase of $1.3 million or 26% from the prior year period. The sequential decrease was driven by lower share-based compensation and outside services. The year-over-year increase is primarily attributable to increased investment in sales, allocation of R&D from COGS as development services agreements run off, and largely flat G&A.

Sandra Wallach
Sandra Wallach
CFO at Amprius Technologies

Our GAAP net loss for the third quarter was $10.9 million or a net loss of $0.10 per share, with 110.4 million weighted average number of shares outstanding. In Q2 2024, net loss was -$0.13 per share with 97 million weighted average number of shares outstanding. Q3 2023, net loss was a -$0.10 per share with 86.4 million weighted average number of shares outstanding. As of September 30, 2024, there were 92 full-time employees, up from 88 at the end of the second quarter, with those employees primarily based in our Fremont, California location. Our share-based compensation for the third quarter was $1.7 million compared to $1.9 million in Q2 and $1.1 million in the prior year period. The sequential decline was due to changes to the board of directors.

Sandra Wallach
Sandra Wallach
CFO at Amprius Technologies

As of September 30, 2024, we had 111.3 million shares outstanding, which was up 3.4 million from the prior quarter. That increase includes 3.1 million shares issued as part of the warrant exchange that reduced the total number of outstanding private warrants from 15.9 million to 0.3 million. Now turning to the balance sheet, we exited the third quarter with $35 million in net cash and no debt. Key drivers for the $11.4 million of cash we used in the quarter were $9.5 million used in operating cash flow. We continue to remain lean with a $2.5 million-$3 million run rate per month, excluding transaction-related cost. Note that our Q3 2024 operating cash included $2.4 million of non-recurring expenses used for the design of the Colorado facility. These expenses are projected to tail off with the completion of the construction drawings, which are substantially complete.

Sandra Wallach
Sandra Wallach
CFO at Amprius Technologies

$1.3 million used to continue the build-out of our expanded two megawatt production line in Fremont and $0.5 million related to the payment to stock issuance costs associated with the warrant repricing offer. 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 discuss our CapEx outlook for the remainder of the year. We expect to spend another $1 million on supporting equipment to complete the two megawatt line in Fremont, in addition to our normal operating capital requirements. Now that the designs are effectively complete for Colorado, we will continue to monitor the larger industry dynamics driving our ability to proceed further.

Sandra Wallach
Sandra Wallach
CFO at Amprius Technologies

Timing and availability of funding, along with the monitoring of the overall sector for changes in demand, supply, battery cost structure, government incentives, trade tariffs, and other considerations, will influence our decision on next steps and timing. One last housekeeping item I'd like to discuss is a change to our cap table after the end of the quarter. On October 23rd, we announced that Amprius Inc., our former controlling shareholder, had voluntarily liquidated and dissolved. As a result, the shares that Amprius Inc. held were distributed pro rata per a dissolution plan approved by their board of directors. This distribution removes a controlling shareholder consideration and dispenses the shares more broadly into the hands of the original investors in Amprius Inc.

Sandra Wallach
Sandra Wallach
CFO at Amprius Technologies

also contributed to us 5.5 million common shares of Amprius Technologies and will reimburse related expenses in exchange for our assumption of the outstanding stock options of Amprius Inc., an aggregate of 7 million options with a weighted average exercise price of $2.10 per share. There was no operating impact to Amprius Technologies as a result of this distribution or option assumption, and we extinguished the contributed shares. The option assumption was approved by a committee of the Amprius Technologies board of directors comprised of solely independent and disinterested directors. That concludes my financial discussion, and I will now pass the call back to Kang.

Kang Sun
Kang Sun
CEO at Amprius Technologies

Thanks, Sandra. As we look ahead, our strategy at Amprius remains unchanged. Our top priorities are innovating next-generation batteries, growing our customer base, and scaling our manufacturing capabilities.

Kang Sun
Kang Sun
CEO at Amprius Technologies

Today, Amprius has the best-performing battery for the electrical mobility market, strong revenue growth, an impressive customer pipeline, and a Gigawatt-hour scale manufacturing capacity available to us. Our technical leadership and unmatched battery performance in the industry have been validated by industrial leaders and repeated customer orders. Our contract and manufacturing strategy has also shown great results. We are already able to support our customers with over 10 million pouch battery cells and 125 million cylindrical cells annually. We also recently celebrated the launch of a dedicated Amprius line at one of our manufacturing partners, with the capacity for 800 MWh of pouch cells. At the same time, we are exploring additional manufacturing partners in Asia and Europe, expanding our Fremont production capacity for SiMaxx battery production and have finalized our design for the factory in Colorado. We believe that the opportunity in front of Amprius is tremendous.

Kang Sun
Kang Sun
CEO at Amprius Technologies

Our team is more confident than ever in delivering what we have planned and promised. We look forward to closing out the year strong and heading into 2025 with increasing momentum. Over the next few months, we will also be attending several industrial and financial conferences, and we hope to see you there. Thank you for your continued support of Amprius Technologies. We look forward to continuing to deliver on what we have planned and promised in the upcoming quarters. With that, I will turn back to the operator for Q&A.

Operator

Thank you. At this time, we'll open the line for questions from the participating research analysts. Excuse me. The company requests that each participant limit their comments to one question and one follow-up. To ask a question, please press star one on your telephone keypad at this time.

Operator

Again, that's star one if you do have a question or comment. Please hold as we pull for questions, and we'll take our first question from Colin Rusch from Oppenheimer. Please go ahead, Colin.

Colin Rusch
Colin Rusch
Managing Director at Oppenheimer

Thanks so much, guys, and appreciate all the detail on the contract manufacturing capacity that you have. We'd love to dig into the customer list a little bit more. Can you talk about how many customers are in late-stage negotiations that have the potential to be 10 MWh or more? And how should we think about the cadence of incremental customer announcements like the one you just made?

Kang Sun
Kang Sun
CEO at Amprius Technologies

Yep. Colin, for the customer, I have a significant volume. We already concluded two customers. Combined revenue, $20 million. We can deliver that within the year. Actually, we expect next May we can recognize the revenue. In addition to that, we have a conversation with another three customers.

Kang Sun
Kang Sun
CEO at Amprius Technologies

Those are high-volume potential customers.

Colin Rusch
Colin Rusch
Managing Director at Oppenheimer

Great. That's super helpful. And then just given the change in strategy away towards a CapEx-like model, can you talk a little bit about the path to operational cash flow break-even? It seems like you guys, given the differentiated product and the capacity availability, potentially have a pretty straight line towards reaching that operational break-even.

Sandra Wallach
Sandra Wallach
CFO at Amprius Technologies

Absolutely. So, as we've mentioned before, the product that we sell under the trademark of SiCore is profitable day one without having to put any of our investor money to work in the capital and infrastructure. We have still limitations in how much of the SiMaxx we can deliver. Given the up to two megawatt-hours that we're completing in Fremont, we expect the near-term revenue growth to all come from SiCore.

Sandra Wallach
Sandra Wallach
CFO at Amprius Technologies

So that gives us a clearer view now that Kang has removed the capacity constraint to really grow into that operational profitability profile as we move forward.

Colin Rusch
Colin Rusch
Managing Director at Oppenheimer

And then just from an organizational capacity perspective on the OpEx side, can you talk a little bit about what investments you need to make to really support a drive towards break-even revenue levels?

Sandra Wallach
Sandra Wallach
CFO at Amprius Technologies

So, this last quarter, we made an investment of two additional salespeople. That's really been our big focus, along with business development and adding some key R&D resources into the Fremont team so we can drive the cycles of learning faster. So that's really where we're looking at it. 92 employees. We're talking about a handful of really critical hires that we're focused on right now.

Colin Rusch
Colin Rusch
Managing Director at Oppenheimer

Super helpful. Thanks so much, you guys. We'll put that as done.

Operator

Thank you.

Operator

We'll take our next question from Jed Dorsheimer from William Blair. Please go ahead, Jed.

Mark Shooter
Mark Shooter
Senior Associate at William Blair

You have Mark Shooter on for Jed. Just to put a finer point on Colin's question, are you saying that you'll be recognizing all of the $20 million by May, or that you'll start to recognize some revenue by May?

Kang Sun
Kang Sun
CEO at Amprius Technologies

Mark, at this time, our plan is to recognize the revenue by May.

Mark Shooter
Mark Shooter
Senior Associate at William Blair

Okay. So, by May of next year, you'll have $20 million in revenue from those customers?

Kang Sun
Kang Sun
CEO at Amprius Technologies

Yeah. The $20 million, yes, from these customers. We already started shipping the product this quarter.

Mark Shooter
Mark Shooter
Senior Associate at William Blair

Got it. Thank you for the clarification, Kang. To dive into that a bit more with the customer strategy, congrats on 175 customers. I mean, that is quite a lot.

Mark Shooter
Mark Shooter
Senior Associate at William Blair

I'm wondering if your strategy is to continue to service many customers with more smaller volumes and bespoke cell designs, maybe to capture higher margin, or are you looking to secure more chunkier, large customers with higher volume? How are you thinking about that?

Kang Sun
Kang Sun
CEO at Amprius Technologies

Yeah. We like to focus on large customers with substantial volume. So, that way, it's easier for us, not just product development, also the manufacturing and the service. So, those are our top of the funnel. We have 175 of them. But eventually, we hope there are sizable, large volume customers who will place the order.

Mark Shooter
Mark Shooter
Senior Associate at William Blair

Okay. And lastly, I mean, at a steady state in a couple of years out, when the facilities are ramped and you have large orders, do you have a gross margin target in mind, considering the cost for the toll?

Sandra Wallach
Sandra Wallach
CFO at Amprius Technologies

We haven't given any guidance about our target model.

Sandra Wallach
Sandra Wallach
CFO at Amprius Technologies

But again, because the majority of the volume will be coming from SiCore, which is made on traditional graphite manufacturing lines, we've seen a reason why we can't get to parity with graphite.

Mark Shooter
Mark Shooter
Senior Associate at William Blair

Thank you very much.

Operator

Thank you. And we'll take our next question from Chip Moore from Roth. Please go ahead, Chip.

Chip Moore
Managing Director and Senior Research Analyst at Roth

Thanks for taking the question. Congrats on all of the progress this quarter. I wanted to follow up on the two $20 million contracts that it sounds like you're going to recognize by the middle of next year. Is there potential for those to grow, or should we think about a new set of purchase orders, or what's the opportunity with those customers?

Kang Sun
Kang Sun
CEO at Amprius Technologies

Chip, at this time, the orders they place are satisfying their needs until middle of next year.

Kang Sun
Kang Sun
CEO at Amprius Technologies

That's why by middle of next year, those batteries will be made and sold, and the revenue will be recognized. But those are very important customers. They are the leaders in this particular segment. So, we anticipate that they will have additional orders come in sometime next year because this only satisfies half of the year of their demand. So, we are working with those customers very closely. First task is to get those products made and have revenue recognized by May.

Chip Moore
Managing Director and Senior Research Analyst at Roth

Understood. That's helpful, Kang. And maybe for my follow-up on the LOI in the light electric vehicle space, large potential, right, two gigawatt-hours. I think you talked about a potential supply agreement over five years. What are the milestones to reach that in terms of samples and evaluation? I imagine that takes some time, but how should we think about that?

Kang Sun
Kang Sun
CEO at Amprius Technologies

Yeah.

Kang Sun
Kang Sun
CEO at Amprius Technologies

I think the key this is a pretty good technology. This is a required substantial change of the cell chemistry and the cell design. Now, we have done most of those. This is not from scratch. Okay. Amprius already has the foundation for both. So, we need to perfect the cell design. We are planning to give them the first batch of the sample. Okay. Whatever they ask for, there's no one in the industry has made it. Also, no one in the industry today believes this can be done.

Chip Moore
Managing Director and Senior Research Analyst at Roth

Okay.

Kang Sun
Kang Sun
CEO at Amprius Technologies

But Amprius already demonstrated in the lab. So, they were planning to come to the factory to check the factory out December 5th, okay, because I will not be available. So, we delayed this factory inspection probably to early next year. We convinced them they should test the sample first before they come to the factory.

Kang Sun
Kang Sun
CEO at Amprius Technologies

This is a very reputable customer. He's an industrial leader. Definitely, he's an industrial leader. If not a number one, he's a number two in this particular market segment. So, we are very proud of having this opportunity to serve them.

Chip Moore
Managing Director and Senior Research Analyst at Roth

Excellent. Appreciate it. I'll take the rest of mine offline. Thanks.

Operator

Thank you. And we'll take our next question from Jeff Grampp from Alliance Global. Please go ahead, Jeff.

Jeff Grampp
Jeff Grampp
Senior Analyst at Alliance Global

Good afternoon. I had a question on the customer account metrics you guys provided. I think this was a new record, both for new customers as well as total, which I guess also kind of means it looks like existing customer account was also at a record. So, I'm curious to dive into the main drivers of that.

Jeff Grampp
Jeff Grampp
Senior Analyst at Alliance Global

And in particular, wondering, is this SiCore expansion and the capacity that you guys have secured, would you say that's the main catalyst to the increased receptivity, if you will, from customers, that they feel more conviction in your ability to deliver in volume, or what other factors might you see at play to drive this acceleration?

Kang Sun
Kang Sun
CEO at Amprius Technologies

Jeff, the first driver is our battery performance. There's no doubt about it. Okay. They couldn't get a battery with the same performance anywhere in the industry today. I think that's the key driver. That's the key attraction for us in the marketplace. So, before, we have a capacity limitation. So, our qualification process has been long and lengthy. For some customers, we had to give up because we don't have enough capacity to serve them. So, the SiCore introduction plus our contract manufacturing strategy worked very well for us.

Kang Sun
Kang Sun
CEO at Amprius Technologies

And not only do we have sufficient capacity to serve the customer. Also, the customer is quite familiar with our manufacturing process. We have a customer on November 18th. We have another large customer come to China to look at our factory. That's why we'll make a trip to Asia next week. So, the driver is technology leadership and available manufacturing capacity, also manufacturing capability. Capacity and capability are two different things. Capability means our manufacturing line can deliver quality, can deliver the format and the form factor we want, also can deliver on time.

Jeff Grampp
Jeff Grampp
Senior Analyst at Alliance Global

Great. That's really helpful details. For my follow-up, I was curious about that $20 million-plus level order that you guys had a couple of months ago now.

Jeff Grampp
Jeff Grampp
Senior Analyst at Alliance Global

Given that that was for SiCore, which really hasn't even been in the market, I think, for a full year yet, it would seem to suggest, I guess, a pretty quick qualifying period for the customer. I'm curious if, in your sense, that's unique for that particular need or how you're generally seeing customer qualification timelines changing, if at all, with SiCore and with some of your recent proof points, if you will, and derisking this for customers. Thanks.

Kang Sun
Kang Sun
CEO at Amprius Technologies

Yeah. We accumulate sufficient data points for customers to review. Now, this is the Amprius battery. We have a long history. Now, we have a lot of data available for various batteries for customers to take a look. So, what drags the qualification? Most times, not our battery.

Jeff Grampp
Jeff Grampp
Senior Analyst at Alliance Global

Okay.

Kang Sun
Kang Sun
CEO at Amprius Technologies

What would be the certification process? Now, for what? Depends on the application.

Kang Sun
Kang Sun
CEO at Amprius Technologies

This particular application, the certification process is much simpler than other applications. For example, eVTOL battery qualification is much longer than the drones. The drones are much longer than light electric vehicles. So, depending on the application, the qualification cycle could be quite short, quite quick. The customer can fairly quickly choose to qualify our battery. In this case, there's $20 million contracts. We present our database. Customer did a very quick test, validated our data. At the same time, their qualification process is much shorter than other qualification processes.

Jeff Grampp
Jeff Grampp
Senior Analyst at Alliance Global

Got it. That's really helpful. I appreciate it. Thank you, guys.

Operator

As a reminder, that's star one if you do have a question or comment. And we'll take our next question from Ted Jackson from Northland Securities. Please go ahead, Ted.

Ted Jackson
Ted Jackson
Managing Director and Senior Equity Research Analyst at Northland Securities

Thank you very much. Good evening or good afternoon to you.

Ted Jackson
Ted Jackson
Managing Director and Senior Equity Research Analyst at Northland Securities

I've got a couple of questions that are still left on my list. One is with regards to the spending on the Colorado facility and its impact on your third-quarter gross margins. You said, if I listen to the call correctly, that it was $2.4 million. First of all, I want to verify that's what you said. And then secondly, can I assume from your commentary that the spend for kind of the legwork for that facility has kind of ramped down and now we could expect it to essentially be nonexistent with the fourth quarter and going forward? That's my first question.

Sandra Wallach
Sandra Wallach
CFO at Amprius Technologies

Yeah, Ted. So, the $2.4 million was based on cash flow for operating cash. That's what we spent in the third quarter. There's always a difference between the P&L and cash. But the $2.4 million is related to the P&L. I'm sorry, to cash.

Sandra Wallach
Sandra Wallach
CFO at Amprius Technologies

Yes, we substantially completed all of the design and construction specifications in October. We're expecting that to ramp down and drop to a very low rate until we're ready to spin back up and get started.

Ted Jackson
Ted Jackson
Managing Director and Senior Equity Research Analyst at Northland Securities

What was the net that was in your COGS for Colorado in the third quarter? Just so I can kind of have an apples-to-apples comparison when I think about your fourth quarter, since I won't be in there anymore.

Sandra Wallach
Sandra Wallach
CFO at Amprius Technologies

Let's see. It was a little bit higher than the cash basis. It was closer to $2.9 million.

Ted Jackson
Ted Jackson
Managing Director and Senior Equity Research Analyst at Northland Securities

Okay. Then just to make sure I understand right, all else being equal, if we had the exact same shipment levels in the fourth quarter that you had in the third quarter, we would see your margin improve by just under $3 million simply because of that?

Sandra Wallach
Sandra Wallach
CFO at Amprius Technologies

Yes.

Ted Jackson
Ted Jackson
Managing Director and Senior Equity Research Analyst at Northland Securities

Okay.

Sandra Wallach
Sandra Wallach
CFO at Amprius Technologies

Again, our margin fluctuates based on the mix of.

Ted Jackson
Ted Jackson
Managing Director and Senior Equity Research Analyst at Northland Securities

Yep. That's why I think the factors are so.

Sandra Wallach
Sandra Wallach
CFO at Amprius Technologies

Yeah.

Ted Jackson
Ted Jackson
Managing Director and Senior Equity Research Analyst at Northland Securities

My next thing is just a bit of clarification. When you talked about the Fremont facility and having to put another $1 million in it in the fourth quarter, is that on top of? Is that additional CapEx? Are you saying that your fourth quarter CapEx will basically be about $3 million? I mean, $1 million. Excuse me.

Sandra Wallach
Sandra Wallach
CFO at Amprius Technologies

So, it's $1 million to finish off the build-out for the balance of the up to two megawatts capacity. Every factory I've ever been with has some normal run rate of CapEx for replacement and upgrade. So, but it's not a material number.

Ted Jackson
Ted Jackson
Managing Director and Senior Equity Research Analyst at Northland Securities

Okay. I mean, that's helpful.

Ted Jackson
Ted Jackson
Managing Director and Senior Equity Research Analyst at Northland Securities

And then, I guess I'm speaking this in, but it's still on the Fremont, and then I'll get out of line and come back in. But when I listened to the commentary and read, you're expecting to exit 2024 with two megawatts of capacity available at Fremont. That will be that you're there. Is that correct?

Sandra Wallach
Sandra Wallach
CFO at Amprius Technologies

We believe that we will be entering 2025 with up to two megawatts of capacity. So, 2 megawatts is the nameplate, and we've been ramping through that. But we've always said that we'll be up to two megawatts.

Ted Jackson
Ted Jackson
Managing Director and Senior Equity Research Analyst at Northland Securities

Okay. That's fair. That's fair. I'll step out of line and let someone else jump in. Thanks.

Operator

At this time, this concludes our question-and-answer session. If you have any additional questions, you may contact Amprius's investor relations team at ir@amprius.com.

Operator

I'd now like to turn the call back over to Dr. Sun for his closing remarks.

Kang Sun
Kang Sun
CEO at Amprius Technologies

Thank you again, everyone, for joining us today. As a reminder, you can find out more about our company, receive additional updates, and learn about upcoming events and presentations from the investor relations section of our website. We hope to see you at one of our upcoming events, and we'll continue to update you on the exciting progress we are making in transforming the electrical mobility market. Finally, I'd like to thank our employees, partners, and shareholders for their continued support. I'll be there.

Operator

Thank you for joining us today for Amprius Technologies' third quarter 2024 earnings conference call. You may now disconnect and have a great day.

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