Earnings Call Transcript - AMPX Q4 2023

Operator, Operator

Good afternoon. Welcome to Amprius Technologies' Fourth Quarter and Full Year 2023 Earnings 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, the timing and ability of Amprius to build its large scale manufacturing facility, expand its manufacturing capacity, scale of business and achieve a sustainable cost structure and Amprius' financial and business performance. 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. 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. On today's call, I will report our progress and accomplishments for the fourth quarter, while also highlighting some of the milestones we achieved in 2023. Our CFO, Sandra Wallach, will then discuss our financial results for the period. After that, I will share some closing remarks before opening the call for questions. The fourth quarter was a strong end to a great year for Amprius. Before I give a recap of the year, I would like to briefly introduce Amprius to those who may be new to the company. Amprius develops, manufactures and markets high energy density and high-power density batteries with applications across all segments of electrical mobility, including the aviation and EV industries. As a pioneer of silicon anode technologies, Amprius has spent the last decade developing various silicon anode structures, cell chemistries and manufacturing processes. The company has a strong patent portfolio of over 80 issued patents and pending applications. When it comes to battery performance, Amprius silicon anode batteries command a leading position in the industry. Amprius batteries deliver 450 watt-hours per kilo specific energy density and 1,150 watt-hours per liter volumetric density and have been available commercially since early 2022. In 2023, we developed a 500 watt-hours per kilo, 1,300 watt-hours per liter battery platform, which will be ready for commercial shipments soon. Additionally, Amprius' silicon anode structures and cell chemistries enable us to achieve 10C power capability and balance high energy and high power battery designs. Our silicon anode batteries have extreme fast charge rates of 0% to 80% state of charge in approximately 6 minutes and operate in a wide temperature range of minus 30 degrees Celsius up to 55 degrees Celsius, and have safety design features that enable us to pass the United States military benchmark nail penetration tests. Each of these performance parameters is critically important to electric mobility applications. Not only do our batteries enable certain aircraft and vehicles to function, but in doing so, they also enable our customers to achieve their economic targets as well. Amprius has been in commercial battery production since 2018. So the company has many years of experience manufacturing high energy density and high-power density lithium-ion batteries. It's our belief that there are no other commercial batteries on the market that can perform at these levels today. Between our two battery families, SiMaxx and SiCore, Amprius' high-performance batteries have attracted significant market attention and customer demand. The company's priority today is to build additional manufacturing capacity as quickly as we can to meet the significant customer demand for our products. 2023 was a transformational year for Amprius. We came into the year with three major goals. First, we set out to further advance our silicon anode battery technology to deliver breakthrough performance. Second, we sought new customer wins as we continue to grow our product shipment volume. And third, we strove to expand our production capacity to meet the increasing demand for our batteries. We made significant progress across each of these areas and are confident that our efforts have positioned Amprius to continue executing on its growth strategy in 2024 and beyond. Specifically, we had several noteworthy accomplishments in 2023. Last year turned out to be a banner year for our technology development. Back in March, we unveiled our 500 watt-hours per kilo battery platform, a first for our industry. To the best of our knowledge, once our cells begin shipping to customers this year, Amprius will be the first company to achieve 500 watt-hours per kilo energy density in a commercially available battery. In August, we also unveiled our breakthrough battery cell chemistry and design that enables 400 watt-hours per kilo energy density with simultaneous 10C power capability. The energy and power delivered by this cell make it an ideal solution for electric mobility applications, such as aviation and EVs. For eVTOL, this battery is designed to provide the necessary proportion of power and energy for takeoff, cruising, and landing, while also extending flight range by as much as 50% as modeled based on commercially available alternatives. We completed customer evaluations at the beginning of the year, shipping batteries to select customers in 2023 with expanded commercialization expected in 2024. We hit the ground running in 2024 as well. In January, we launched our all-new cycle product family to go along with our existing Silicon nanowire platform called SiMaxx. While SiMaxx includes our highest performance batteries, the cycle platform serves applications that demand high energy density and longer cycle life, offering up to 400 watt-hours per kilo and as many as 1,200 cycles and full end of discharge. Developed in close collaboration with Brazilian partners, we are able to achieve greater manufacturing capacity in the short term by working with toll manufacturing partners, which we expect will allow us to serve more customers and bring in additional revenue while we extend our U.S. manufacturing capacity. We believe that toll manufacturing capacities can create a bridge until our facility in Colorado comes online. The SiCore product also has additional form factor flexibility, capable of both pouch and cylindrical cell form factors. This allows them to be used in more applications and to be available at scale today. These two product platforms are the accumulation of years of work in the silicon anode space and are just the beginning of our vision here at Amprius to transform electrical mobility. Overall, when it comes to battery performance, we continue to set new bars for ourselves in 2023. We are confident that Amprius batteries can reach unmatched levels of performance, and we look forward to trying to expand our performance lead in 2024. We believe that the highest endorsement of our technology comes from customer orders. Our industry continues to notice the battery performance success that we are having, and as a result, our demand far outstrips our supply. Throughout the year, we had several customer wins; we furthered our partnership with AeroVironment in Q1, started a new technical engagement with a leading high-performance automotive OEM in Q2, and reached a long-term battery supply agreement with Tenergy in Q3. In the fourth quarter, we made significant progress on building out our book of customers, shipping to 41 total customers in the quarter, up from 38 in Q3. While many of them were repeat customers like AeroVironment, Teledyne Clear, Alto Airbus, as well as the U.S. Army and BAE Systems, 16 of them were new customers who came to us from across the electrical mobility sector. For example, we announced a volume purchase order from an eVTOL manufacturer in October and completed high-volume shipments of SiMaxx cells to the Korean Aerospace Research Institute in December. We also successfully secured the SiMaxx purchase order from three premier electric aviation manufacturers for customer 450 watt-hours per kilo cell for battery pack development and qualification. These customer cells were developed in collaboration with Amprius' strategic partners to address their unique HAPS qualification requirements and enable these customers to operate in highly challenging environments with greater energy density and longer cycle life than the previous 400 watt-hours per kilo platform. The new cells are the only known commercially available batteries of their kind that can provide enough power and endurance for HAPS overnight stratospheric flight applications. These orders help strengthen Amprius' position as a premier global battery solution for eVTOL and HAPS applications. Additionally, in the wearables market, we completed our first volume shipments of the Safe Cell for the U.S. Army in December. This shipment is an important milestone for us because it completes our scale-up manufacturing initiative under the U.S. Army Fund Manufacturing Technology program, allowing us to deploy our cells for mission-critical products. To meet market and customer demand, we have made significant progress in building out our manufacturing capacity. First, we completed our new production line in Fremont, California, in December. With this investment, we have increased our manufacturing capacity by approximately 10 times and expect to achieve 2 megawatt-hours of capacity exiting 2024. At our large-scale manufacturing site in Brighton, Colorado, we received the final rezoning permit that allows us to move forward with the site. We have made progress in recent months, ordering long lead time items such as electrical, mechanical, and plumbing systems to ensure that we remain on track with our timeline. We are also continuing the design and pre-construction work that will allow us to be operational in 2025. In addition to our manufacturing capacity development, we have developed two manufacturing partnerships to provide us with large-scale manufacturing capacity for SiCore battery production. Overall, we believe that 2023 was a highly successful year across our major initiatives. As we turn our attention to 2024, it remains critical to our growth strategy that we continue advancing our technology and expanding our production capacity. We are off to a good start. In addition to launching SiCore and making progress on pre-construction activities at the Amprius fab, we announced that we received the AS9100:2016 certification for our Fremont production facility. This crucial certification received from Smithers Quality Assessments, Inc. will help us continue to supply batteries to the burgeoning electrical aviation industry, helping to advance technologies like eVTOL, HAPS and drones. As shown in our recent customer wins and technology advancements, we believe that no other company can commercially offer capabilities that match those of Amprius batteries. Earlier this week, we were named one of Fast Company's 2024 most innovative companies, largely due to our batteries' advanced capabilities. We were also recognized at the recent International Battery Seminar, winning the best-of-show new product award for our SiMaxx 400 watt-hours per kilo cell. This is our second consecutive award in this category at IBS, as we won last year for our 450 watt-hours per kilo, 1,150 watt-hours per liter lithium-ion cell. Overall, these awards further underscore the demand for our innovative solutions. We are working hard to expand our production capacity to meet that demand, and we are confident in the path forward for Amprius. 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, CFO

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 fourth quarter with $3.9 million in revenue, a $3.1 million increase compared to $0.8 million in the same quarter last year, and up $1.1 million sequentially. There were three drivers of this net increase in Q4 versus Q4 of 2022. First, our product revenue increased by $0.3 million from the prior year period to $0.9 million, largely driven by shipments to 41 customers in the quarter, a second consecutive quarterly record for Amprius. Although 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. Of these customers, only two represented greater than 10% of revenue, a testament to our diverse customer set. Second, our development services revenue increased by $3 million, a reflection of the successful completion of the U.S. Army Manufacturing Technology Program delivery that Kang mentioned earlier. Development services are non-recurring in nature due to disparate programs. Third, these two increases were partially offset by a $0.2 million reduction in government grant revenue period-over-period due to the completion of the DOE program in Q3 2023. Pivoting to our full-year results, we closed 2023 with $9.1 million in revenue. This represents a growth rate of over 100% from 2022. Moving to our profitability metrics, our gross margin was negative 162% for the full year compared to negative 128% in the prior year period. As we've discussed in prior quarters, we see significant gross margin variation as our product and services revenue mix fluctuates. We anticipate that factory start-up costs will ramp up as we start Colorado design and construction. Long term, we are 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 full year 2023 were $24 million, a 94% increase from the prior year. While we continue to maintain a lean cost structure, the increase is primarily attributed to increased G&A related to public company expenses and transaction-related costs as well as targeted staffing increases in R&D and sales and marketing. Our GAAP net loss for the full year 2023 was $36.8 million, or a net loss of $0.43 per share, with 86.2 million weighted average number of shares outstanding compared to a net loss of $0.24 per share with 71.3 million weighted average number of shares outstanding. As of December 31, 2023, there were 80 full-time employees, up from 76 in the third quarter and 59 at the end of 2022, with those employees primarily based in our Fremont, California location. Our share-based compensation for the year was $3.9 million compared to $2.7 million in 2022. Turning to the balance sheet, we exited the year with $45.8 million in cash and no debt. Key drivers of our cash activity for the year were $25.6 million used in operating cash flow, $17.6 million used for costs related to the build-out of the Fremont and Brighton facilities and $19.2 million inflow added primarily through the usage of our equity financing. 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 outlook for 2024. We expect to spend another $2 million to $3 million completing the new cathode line and other support equipment for the megawatt hour line in Fremont this year. As detailed design work on our facility in Brighton is finalized and construction gets underway, we expect to finalize our construction cost forecast, and we'll provide updates as the year goes on. As part of our strategic planning efforts, we filed a shelf registration on Form S-3 in October 2023 and once effective, established a new ATM facility for $100 million. We have terminated the committed equity facility concurrent with the effectiveness of the shelf registration statement. Subsequent to December 31, 2023, we have raised gross proceeds of about $6.5 million through the sale of approximately 2 million shares under the ATM facility as of March 18, 2024. To support our strategic plan, we are pursuing additional funding through multiple vehicles, including both equity issuances such as warrant exercises and sales under our ATM and non-dilutive sources such as grants, loans, and incentives.

Kang Sun, CEO

Thanks, Sandra. I'd like to reemphasize a few key points before closing. First, Amprius' silicon anode technology continues to demonstrate unmatched performance in our industry. Amprius' batteries command a firm lead with their combination of energy, power, charging time, and temperature performance and are uniquely positioned for the electrical mobility market. Second, Amprius batteries are commercially available today. We have been shipping commercial products since 2018, and our technological advancements continue to bring in significant customer demand. This quarter, we not only delivered to repeat customers and expanded our technical engagements, but we also added 160 new customers as well. Our demand pipeline is robust, and we look forward to further building out our customer book in the coming quarters. Third, we are scaling our manufacturing capacity to serve significant demand ahead and support a U.S.-based supply chain. We believe that the introduction of SiCore helps us meet some of the near-term demand. Finally, we are looking forward to several exciting milestones in the year ahead. In 2024, we are looking to begin construction of our gigawatt-scale facility in Brighton, Colorado, fully optimize our SiMaxx mass production process in Fremont, add new customers, and deliver additional cells to current customers as we increase our SiMaxx cell production. We aim to ramp up our toll manufacturing efforts to secure hundreds of megawatts of capacity in 2024 so that we can maximize our opportunity to deliver SiCore batteries to customers, commercialize our 500 watt-hours per kilo cells, and continue to innovate and push the boundary of what is possible for our industry. As we look to the rest of the year, our strategy and focus at Amprius remain unchanged. We have a tremendous opportunity ahead with a product portfolio that positions us for growth in aviation and expansion into other industries seeking batteries with leading performance. The opportunities in front of Amprius are enormous, including the $1.25 billion conformal wearable battery market by 2030, a $33 billion aviation battery market by 2030, and the $591 billion EV battery market by 2033. 2023 was a very productive year for the company, and we believe that 2024 is off to a strong start. We look forward to continuing to deliver on our plans and promises in the year ahead. Thank you for your continued support of Amprius Technologies. With that, I will turn it back to the operator for Q&A. Thank you.

Operator, Operator

At this time, we’ll open the line for questions. We ask that each participant limit their comments to one question and one follow-up. Thank you. Our first question comes from Colin Rusch with Oppenheimer & Company. Please state your question.