Earnings Call Transcript - AMPX Q4 2022

Operator, Operator

Good afternoon and welcome to the Amprius Technologies Conference Call and Webcast. It’s now my pleasure to turn the call over to Greg Bradbury.

Greg Bradbury, Presenter

Good afternoon. Welcome to Amprius Technologies’ fourth quarter and full year 2022 conference call. Joining us for today’s presentation are the company’s CEO, Dr. Kang Sun and CFO, Sandra Wallach. At 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 timing and ability of Amprius to build its large-scale manufacturing facility, expand its manufacturing capacity and scale its business. These statements involve known and unknown risks, uncertainties and other important factors that may cause Amprius’ 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, including but not limited to a discussion of Amprius’ risk factors in its quarterly report on Form 10-Q filed on November 14, 2022. 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. I will now turn the call over to Amprius Technologies’ CEO, Dr. Kang Sun, for his comments. Sir, please proceed.

Kang Sun, CEO

Welcome, everyone and thank you for joining us this afternoon. To begin today’s discussion I will give some complete background followed by a review of our recent accomplishments before turning the call over to our CFO, Sandra Wallach to discuss our financial results for the year in more depth. After that, I will share some closing remarks before opening the call for questions. Amprius develops and manufactures ultra high-energy density lithium-ion batteries based on our proprietary silicon anode technology. Our business has four distinct advantages: unmatched technical and product performance, proven manufacturability, years of product commercialization with industrial leaders, and a team of seasoned business operators with a solid track record. Our near-term goal is to scale our manufacturing with the long-term goal of becoming a mainstream battery solution. With applications across all segments of electrical mobility, including the aviation and EV industries, over the past few years, Amprius has delivered commercial batteries with the highest known energy density and power density. Our current available batteries have as much as 450 watt-hours per kilo in specific energy density and 1,150 watt-hours per liter in volumetric energy density with up to 10C high-power capability. Our batteries are also built for cost-effective operating environments with the ability to pass the United States military benchmark nail penetration test, as well as the versatility to operate in an extremely wide temperature range of effort as low as minus 30 degrees Celsius and up to 55 degrees Celsius. These features, along with extreme fast charge rates of 0% to 80% state of charging in approximately 6 minutes, set Amprius apart. It is our belief that there is no one else in the commercial market that can perform at this level. In addition, we have amassed over 80 patents and over a decade of know-how in silicon anode technology and manufacturing. Moving to our review, 2022 was arguably the most transformational year for Amprius since our founding in 2008. It was also the year of many firsts for our business as we executed on our strategy to transform electrical mobility with a focus on aviation applications. I will now take a minute to highlight some of our key milestones from the past year. As I mentioned a few minutes ago, Amprius has a leading position in the emerging energy transmission sector with disruptive technology. We entered 2022 with our first commercial segment on 450 watt-hours per kilo and the 1150 watt-hours per liter product for high-performance aviation. We manufacture the only batteries on the market that can produce these specifications, and we are constantly working to improve the performance and capabilities of our technology. As an example, earlier today, we realized that our upgraded 500 watt-hours per kilo capable batteries, which are not yet available to the market, had their capabilities verified by an independent third party, which is a crucial step in the product development timeline. Demand for this next-generation battery is growing, and we are making great progress. Based on trend estimates, we expect to be able to save prototypes to selected customers before the end of 2023. We also completed several important demonstrations of our technology's capability in 2022. In October, we successfully exhibited our battery’s extreme fast charging ability through a video demonstration where we were able to achieve a return of 0% to 80% state of charge in approximately 6 minutes. Our performance is ahead of the United States advanced battery consortium 2025 goal of 0% to 80% charge in 15 minutes. In practice, this will allow vehicles and other applications to operate much more efficiently with less downtime. Additionally, in November, we allowed an independent third-party testing lab to validate our 390 watt-hours per kilo polymer electrolyte cells successful passing of the United States military performance specification for the nail penetration test. This test is used to determine the feasibility of a specific product in combat scenarios and is an important benchmark to be considered for military applications. We have a unique opportunity to provide a significant energy density performance increase of nearly 100%, doubling the runtime for mobile-powered devices without increasing the overall weight of the wearable batteries for our soldiers. Moving to our business development efforts, 2022 was a successful sales year for our aviation and defense segments. Amprius has made deep inroads with the aviation and the eVTOL market because we produce high-energy density, lightweight batteries. The single most important issue in eVTOL performance is battery weight, which is why our batteries are in such high demand. Lighter and denser batteries mean greater standard range, while faster charge turnaround times mean increased flight time. To that end, we signed new multiyear agreements with federal aviation industry leaders like AeroVironment, Teledyne, FLIR, and BAE Systems, and expanded our existing commitments with Airbus, the U.S. Army, and the USABC among others. I will highlight some of those agreements now. In July, we launched a 3-year deal with Teledyne FLIR to supply our batteries as they develop their unmanned aircraft system products. Also in October, we entered into a 3-year cooperation agreement with BAE Systems to develop lightweight high-energy batteries specifically for electrically powered flight applications. In May, we were awarded funding for the second multiyear development program in the United States advanced battery consortium for the development of a low-cost EV battery. This consortium is between Ford, GM, and Stellantis and enabled a cooperative agreement with the United States Department of Energy. Their mission is to develop electrochemical energy storage technologies that advance the commercialization of next-generation electrified vehicle applications. I am pleased to announce that we officially delivered the first set of reference cells in the fourth quarter of 2022. Altogether, these new wins and expansions amount to a 65% year-over-year boost in shipments. We believe our successful early efforts are now driving a positive flywheel effect, leading to orders from new customers and expansion orders from existing customers. As we think about our goals for the next several years, our primary focus is on expanding capacity to meet demand and ultimately achieve a sustainable cost structure at scale. We made several strategic moves in 2022 that put us on our career path to achieve these goals. In September, we closed our business combination with the Kensington Capital Acquisition Corp. IV to provide us with greater access to capital via the public markets. Through that process, we also raised approximately $70 million in cash net of expenses and added a strategic customer to our investor base in AeroVironment. We could not have asked for better partners than the Kensington team and have continued to work closely alongside them as we execute our strategy. More recently, we put in place a committed equity facility, which allows us to assess up to $200 million of additional funding. After a competitive process, we were selected to receive two cost-sharing grants from the U.S. Department of Energy in October of 2022. The first is a $1 million cost-sharing grant from the DOE’s Advanced Manufacturing Office specifically for the evaluation of development of mass production processes we use for our silicon anodes. This process based in our Fremont facility includes a deposition shift currently used in solar cell manufacturing. The second is a $50 million cost-sharing demonstration grant selected for negotiation of the award from the DOE’s Office of Manufacturing and Energy Supply Chain. We are among the first set of companies to be selected for negotiation of the awards to receive funding from the President Biden’s Bipartisan Infrastructure Law to expand the domestic manufacturing of batteries. To that end, in October, we received the first large-scale anode production machine from Centrotherm, which is now installed in our Fremont facility and is expected to increase our capacity for silicon anode production to approximately 2 megawatts exiting 2023. To meet this greater production output, we recently expanded our lease facility in Fremont, California, effectively doubling our footprint in that location. Our expansion in Fremont is planned to improve our high-volume manufacturing processes and increase our capacity by 10x, which will serve strategic aviation customers’ increasing needs and support sampling and qualification projects with new customers who are currently in backlog. This takes me to our more exciting news. Earlier this month, we announced the selection of a site in Brighton, Colorado as the location for our 775,000 square-foot production facility. The selection of Colorado for our gigawatt-scale factory marks an important milestone for Amprius. We have worked closely with the state of Colorado, the Colorado Economic Development Commission, Adams County, and the City of Brighton to align on terms that are mutually beneficial, which include a comprehensive incentive proposal. The initial phase of our build-out of the existing facility will provide a potential of up to 5 gigawatt-hours, and is also expanded to create over 330 new jobs. For subsequent phases, the site has expansion capabilities for up to a total potential manufacturing capacity of 10 gigawatt-hours. This site also hosts several advantages over our other potential locations. The body is already equipped with the electrical power and the existing structural layout needed for a gigawatt-scale lithium-ion battery factory, which will reduce build-out costs and time-to-market with a goal of being operational in 2025. Additionally, our Brighton site is closer to some of our material distributors in the Northwestern U.S., which we expect will lower operational costs over the long term. Lastly, our commitment to Colorado allows us to establish our largest scale operations here in the United States. Amprius batteries will be designed and made in the U.S. This new facility will transform our long-term production capabilities. In the near term, we will continue to develop and shape cutting-edge products from our Fremont facility while we refine our manufacturing processes to further de-risk the handling of our mass production products to Brighton in the coming years. To help with the transition, we made a strategic decision to form two new business units: Amprius Lab and Amprius Fab. Amprius Lab, located in Fremont, will focus on advanced battery technology product and manufacturing process development. While Amprius Fab, located in Brighton, will focus on large-scale fabrication of silicon anode batteries. To support this transition, Jon Bornstein, currently the company’s COO, will take a new role to lead Amprius Lab as the Division Business Unit President. In the interim, I will serve as the Acting President of Amprius Fab. I have one final update before I turn the call over to Sandra. One of the areas which I am most proud is the team we have built. Over the last several months, we have added critical roles to lead up our efforts still. In my Acting President role for Amprius Fab, I am working with our new Vice President of Infrastructure, Andrew Huie, who joined us last September. Andrew brings over 30 years of facility development and management experience and most recently served as the Director of Facilities at Panasonic Energy of North America. Huie will be spearheading our efforts to scale production capacity, focusing on factory planning, facility development, and regulatory compliance. With our leadership team in place, we believe that we are well positioned to execute on our growth strategy. With that overview complete, I will now turn the call over to our CFO, Sandra Wallach, to review our financial results for the full year. Sandra?

Sandra Wallach, CFO

Thank you, Kang. I would now like to spend a few minutes covering some key updates. As a reminder, our detailed financials can be found in our shareholder letter. As Kang mentioned, we believe that we have the proprietary technology in place and we have shown consistent manufacturability and commercial success. We have been shipping commercial products since 2018. So, our focus today is not on commercializing but is instead on scaling our production capacity to meet the growing demand in these fast-moving markets. In our financials, particularly in our revenue results, you will see data points that reinforce the strength of our customer development efforts as we scale. We believe that those results, especially when paired with our investments in both our Fremont capacity and gigawatt-hour scale capabilities position the company well to achieve its growth and profitability potential. We closed out 2022 with $4.4 million in revenue. Product revenue was $2.4 million including over 25 new customers, to which we shipped batteries within calendar 2022. Within that set of new customers, 4 are leading eVTOL manufacturers and 2 are global battery pack suppliers for the aviation sector. Also, we delivered commercial quantity shipments to AeroVironment and Teledyne FLIR and completed two flight tests for Airbus’ HAPS program with a backlog of 6 more sets for future deliveries still pending. Development services revenue totaled $1.8 million driven by both the delivery of cells and the timing of other deliverables under multiple contracts. We also recognized the first portion of the $1 million DOE cost-sharing grant revenue, which was $0.2 million. For 2022, our GAAP gross profit margin was negative 123%. Our gross margin displays variations period over period based on the mix of products and services. Now moving to our operating expense management, our GAAP operating expenses for 2022 were $12.6 million with higher G&A expenses in Q3 and Q4 due to increased public company costs. Our 2022 GAAP net loss was $17.3 million or a loss of $0.24 per share. Our shares outstanding at December 31, 2022 were 84.6 million with 71.3 million weighted average shares of common stock outstanding for the year. As of December 31, 2022, there were 59 full-time employees primarily based in our Fremont, California location. Share-based compensation for 2022 was $2.7 million. Turning to the balance sheet, we exited 2022 with $69.7 million in cash and no debt, a net increase of $58.2 million from December 31, 2021. The key drivers of our cash activity for the year were $13.9 million used in operating activities, $1.5 million in capital expenditures, which represents our investment in our current manufacturing facility as well as in opportunities to expand our footprint and accelerate our capacity to support customer qualifications and scale up, $73.6 million net cash provided by financing activities driven by proceeds received in connection with the business combination and PIPE investment, net of issuance costs plus proceeds from the exercise of stock warrants and options. Moving to our outlook, we expect to continue to be limited by manufacturing capacity until we exit 2023 with the new 2-megawatt capacity coming online. Regarding revenue, we have several ongoing development services programs with performance obligations that we expect to complete within 2023, which means that we expect increased revenue recognition weighed more heavily toward the latter part of the year. We expect that our G&A costs will continue at the higher rate exiting 2022 noting additional public company expenses. We will continue to be lean on other operating expenses strategically adding critical mass to the new business units that we announced and allocating the majority of our capital to scaling up our manufacturing. We expect higher capital expenditures going forward as we continue to build out the 2-megawatt capacity in Fremont, California, while we, in parallel, design and construct our newly announced Brighton, Colorado gigawatt-hour scale facility. Our spending pattern is dependent on several factors outside of our control, including the timing of approval for rezoning for the Colorado site. So we will provide more specific projections as we have additional information to share. Also, we expect that we will continue to have strong support from the U.S. Inflation Reduction Act as we access production tax credits at the anode and cell levels. In addition, we have received over $10 million in state and local incentive packages relating to our gigawatt scale facility, which is the result of significant partnerships built in Colorado through our selection process. We believe that these tailwinds will further enhance our economics as we accelerate our scale to meet our massive market. With the strength of our balance sheet and multiple vehicles to generate additional funding through both equity such as warrants in 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.

Kang Sun, CEO

Thanks, Sandra. I would like to re-emphasize a few key points before closing. First, today, we have market-leading technology and a position in aviation that reflects our unmatched performance in real world applications. Over the past year, we have demonstrated extreme fast charging capability, enhanced our battery specific energy density from 450 to 500 watt-hours per kilo, and we successfully passed the key performance test important to future work with the U.S. government. Second, we are building out the scale to serve tremendous demand in the U.S. and to support U.S.-based supply chain resiliency. Exiting 2023 we will further throughout our large-scale manufacturing process and parameters with a 2-megawatt pilot line coming up in our Fremont, California facility. We are also now moving swiftly to prepare and build out our gigawatt scale facility in Brighton, Colorado for the first 500-megawatt demonstration program with the United States Department of Energy. Third, we are continuing to build a pipeline of blue-chip customers to meet our planned expansion efforts, which has operating at a scale of hundreds of megawatts exiting 2024. As we look to the rest of 2023, our strategy and focus at Amprius remains unchanged. We have tremendous opportunity ahead with the product portfolio that positions us for growth in the aviation market and expand into other industries, taking batteries with stronger performance and faster charge time. We are continuing to build on our early lead through technological advancement and strategic partnerships. Through the private and public sectors, we now have the capital and are building the capacity to become a leading commercial provider in the sustainable mobility sector. Finally, we have the team in place to execute our mission. Thank you for your continued support of Amprius Technologies. With that, I will turn it back to the operator for Q&A.

Operator, Operator

Thank you. Our first question today is from Colin Rusch at Oppenheimer. Your line is now live.

Colin Rusch, Analyst

Thanks so much guys and congratulations on all the progress. Really glad to see you guys get that award this week with the Battery Show. Kang, as you started installing the megawatt tools and evaluating them, can you talk about any surprises either positive or negative that you are seeing from the tools that are in installation at this point?

Kang Sun, CEO

At this point, we already powered the two in Fremont, this Centrotherm tool. We don’t – we also try to tune the source, because this tool we need to work with the supplier to get the deposition source adjusted. We expect sometime in later summer, early fall, this tool will be fully operational.

Colin Rusch, Analyst

Okay, that’s tremendous. And then in terms of the selection of Colorado obviously, the building site has some advantages. But can you talk a little bit more about supply chain advantages in terms of location as well as hiring opportunities, because there seems to be potentially some efficiencies that you guys are gaining by choosing this location?

Kang Sun, CEO

Yes, the most obvious one of course is close to our selling source. Selling today is manufactured in the state of Montana, Colorado compared to the other state, where we looked Georgia, Texas, now we see that in Colorado. Now, this is probably the most visible supply chain advantage. In addition to that Colorado’s weather is mostly drier, that is very important for us, I think the most important thing is the Colorado, they have the sufficient power for us, as a battery manufacturer, we cannot afford to have power disruptions. So they almost guarantee that the power supply, the current power supply already adequate for our Phase 1.

Colin Rusch, Analyst

Okay, that’s super helpful. And then just a final one with the introduction on the new product. And the validation with a third party, I guess, can you talk about what your customers are looking for? And in terms of incremental validation on that before you start to see some orders or is it really just a capacity issue for you guys right now on that product, given the performance, so you’ve been able to demonstrate?

Kang Sun, CEO

We have capacity issues with a lot of customers and a lot of inquiries. We have inquiries from industrial players, even from the government, but we don’t have enough capacity to satisfy their demand. That’s one challenge for us. That’s why the capacity extension is our priority. The second demand from the customer, of course, we are currently focusing on the aviation segment. So the aviation segment, so far we are the only ones able to provide high energy, high power batteries. And already today, we announced the 500 watt-hours per kilo. That’s the battery the Airbus has for when they really needed to make a second-generation product. So we have capacity challenges. At the same time, we have customer demand for energy and power.

Colin Rusch, Analyst

Okay, thanks so much, guys.

Operator, Operator

Thank you. Our next question is coming from Chris from B. Riley. Your line is now live.

Unidentified Analyst, Analyst

Hey, guys. Thanks for taking my questions here. Maybe just touch on the Colorado facility, you called out in the letter rezoning process that you’re going through there anything you care about that process? And how we should think about the timing, assuming you get clarity on that over the next couple of weeks, months whenever, and then the overall capital needs expected through the end of next year. Any update there given the plans appear to be pretty solidified in Colorado?

Kang Sun, CEO

Yes, okay. And so the timing issue, and then timing question, then Sandra can you elaborate more on the financing? So, we are currently working with the regulatory authorities. I think this is the most time-consuming part of this project. And currently the source of the production line, we have never lined up. I believe our production line can be delivered on time. Construction discussions went well. We are planning to have this construction start late summer and early fall. It will take us about 18 months to get building retrofit done then have our production line thought.

Unidentified Analyst, Analyst

Got it. And then any update on the capital expectations through the end of next year. Given – I think we’ve probably got a pretty good idea of your expected costs at this point given the site selection and all that?

Sandra Wallach, CFO

Yes, so that’s a great question. So our production and equipment capital needs are still in the $120 million to $150 million per gigawatt. That’s the total cost without government grant offsets. And we’re estimating possibly another $100 million on construction NTIs, so, somewhere in total between $220 million and $250 million.

Unidentified Analyst, Analyst

Got it. Okay, that’s really helpful. And then on the customer side, it seems like you guys are continuing to add new customers testing, maybe you could just talk a little bit more about some of the demand and segments aside from USABC, are there any other non-aerospace defense type customers in there, and then maybe within aerospace, curious if you could talk about either dies or use cases within that kind of broader sector to give us some kind of breakdown around the types of demand you’re seeing out there?

Kang Sun, CEO

So we are working with – of course, most of our customer aviation battery customers. At the same time, we have been for the last few years engaging with non-aviation battery customers primarily in the electrical vehicle battery space, because we don’t have a larger format production line at this time. So we can only see the evaluation stage at this phase I would call it a technical exchange phase. As the USABC or the grant, this has twice asked us to proceed with the low-cost high-energy density electrical vehicle, we also have interaction with other OEM EV OEMs but at this time still at a technical exchange stage until we have a larger format EV format, I mean, 100 amp-hour, 120 amp-hour cells, we will stay at a technically extended stage.

Unidentified Analyst, Analyst

Yes, that makes sense. So maybe just within aerospace any other – any ways you can kind of segment out the types of customers or the use cases would be helpful there?

Kang Sun, CEO

Right. For us today, you see we have industrial customers, we have customers in the Defense segment. Those batteries are adequate for other applications. We just need to have the capacity and the lighter format of the battery in the right size. For those applications, I think this is our effort over the next 18 to 24 months, we will get there. Our – as we mentioned repeatedly, our challenge is the ease of capacity. Once we get the capacity issue resolved, we will have much better fluctuations in revenue generation and serve the customers.

Unidentified Analyst, Analyst

Makes sense. I will hop into queue. Thanks, guys.

Operator, Operator

Thank you. We have reached the end of the question-and-answer session, and now I’d like to turn the floor back over to Dr. Sun for any final comments.

Kang Sun, CEO

Thanks again everyone for joining us today. I’d like to thank our employees, partners and shareholders for their continued support. As a reminder, you may learn more about our company updates and the call we will be presenting in the Investor Relations section of our website. We look forward to updating you on Amprius progress on our next call.

Operator, Operator

Thank you. That does conclude today’s teleconference and webcast. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.