Advent Technologies Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 15, 2023

There are 4 speakers on the call.

Operator

Good morning, everyone. I will be your conference operator today. At this time, I would like to welcome everyone to Advent Technologies' First Quarter Earnings Conference Call. Assist. On the call today, we are joined by Doctor.

Operator

Fasilis Gregorio, Advent's Chairman and CEO and Kevin Brackman, Advent's CFO. Before we begin the prepared remarks, we would like to remind you that Advent issued a press release announcing its Q1 2023 financial results shortly before market open today. You may access the materials on the Investor Relations section of the company's website, www.advent.energy. I would also like to remind everyone that during the course of this conference call, Advent's management will discuss forecasts, Target and other forward looking statements regarding the company's future customer orders and the company's business outlook that are intended to be covered by the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward looking statements. While these statements represent management's current expectations and projections about future results and performance as of today.

Operator

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

Operator

Management estimates are derived from publicly available information released by independent industry analysis and other 3rd party resources as well as data from the company's internal research and are based on assumptions made upon reviewing such data and with knowledge of such industry and markets, which it believes to be reasonable. These assumptions are subject to uncertainties and risks, which could cause results to differ materially from those expressed in the estimates. Please note this call is being recorded. Kicking off the call will be Doctor. Vasiles Gregorio.

Operator

Doctor. Gregorio, I'll turn it over to you.

Speaker 1

Thank you, operator. Good morning to everyone listening in and thank you for joining us on Advent's Q1 2023 earnings call. On today's call, I will provide an update on the business. I will then hand over to Kevin, who will give a review of our financial performance and outlook in more detail. During my last update on March 31, I highlighted that Advent has further consolidated its business operations And it was focusing on the core sectors of mobility and stationary power.

Speaker 1

This has continued in the Q1. We remain focused on expanding and executing our commercial pipeline with a view to invent our technology and product portfolio in these key power sectors. The opening of our new facility at Hood Park in Boston represent a significant milestone achievement for Advent, Because this will provide a firm offer to our business growth in North America. FoodPark encapsulates R and D and production facilities as well as our headquarters, its commission has expanded our global footprint for manufacturing. We also continued our capital investment program In state of the art equipment that's required to complete our scale node production capacity.

Speaker 1

We intend for this progress We'll continue forward large scale manufacturing as soon as our Green Hippo project commences. The broad support for the energy transition through And economic incentives is snowballing globally. We believe that the future demand for Advent's high temperature pen technology and related products will create a significant opportunity and we believe Avren would be ideally positioned to capitalize on this. In the Q1, we continued to execute on our strategy of innovation, commercial focus and market permeation. We look forward to growing our commercial activities and achieving long term profitable growth.

Speaker 1

Our business focus is on the production of advanced fuel cell material, leading to direct sales, the development of advanced fuel cell systems and joint development agreements in collaboration with OEMs, which enables to enter long term licensing agreements. The latter is expected to deliver revenue consisting of milestone payments and royalties, which will provide the upside to our business. I will now give you an overview of key business updates. In March, Adan and Hyundai announced the conclusion of a successful technology assessment. The assessment evaluates Advent's proprietary MDA technology For supplying fuel dye high temperature fuel cell needs and following its success, the 2 companies entered into a joint development agreement.

Speaker 1

This agreement solidifies the interest of 1 of the world's leaders in fuel cell technology to further develop the high temperature PEM technology in collaboration with The first step of the JDA focuses on the MEA. Advent's goal is to provide its MEAs And it's high temperature from fuel cell development expertise to co develop with automotive manufacturers the next generation for Fuel Cell Systems for Heavy Duty Mobility. Advant will pursue strategic joint development agreements to achieve its goal for supplying TMEA Components and Technology to the Mobility market. In the maritime sector, in February, Advent announced a new collaboration with Siemens Energy, offering sustainable solution across the entire energy value chain. Advent and Siemens Energy will work together to develop a 50 kilowatt to 500 kilowatt maritime fuel cell solution for a range of superyachts, which will provide a sustainable and reliable source of auxiliary power and offer improved power density.

Speaker 1

This maritime fuel cell solution is initially expected to be used as a hybrid power source, enabling Clean electricity generation instead of using conventional diesel engines and generators for procedures such as anchoring and maneuvering. As part of the agreement, Siemens Energy has placed an initial order of 20 of Advent's methanol power series fuel cell systems. Following the completion of the project, the 2 parties will explore the potential of development of Siemens solutions for a wide range of business applications beyond maritime, such as Industrial Power Solutions. In March, patent announced that the opening of the new R and D manufacturing facility at Food Park in Boston, Massachusetts. Located at the heart of 1 of Boston's newest innovation and R and D communities, The food bar facility will enable Avend to scale up and deliver on the increasing global demand for electrochemical components in the clean energy sector by including state of the art coating machines to support the seamless transition from prototypes to production runs for advanced membranes and electrodes, A complete analytical facility dedicated to quality control, performance analysis and improving product lifetime, fuel cell and water electrolysis test station for statistical process control and development of next generation MVA materials and a mechanical engineering lab for development automated assembly processes for MEH.

Speaker 1

One of the products that we manufacture at Cool Park The Ion pair of an MBA, which is currently being developed within the framework of the Innovator, the company's joint development program with the U. S. Department of Energy. Advent intends that these proprietary fuel cell products such as Serine and HoneyPad50 will incorporate the Ion pair MDA Beginning in 2024, the company expects the introduction of the ion pair MDA will significantly reduce the cost of our Serene flagship products should and thus expand the immediate addressable market. Furthermore, The expected system increase in power dense and lifetime will highly differentiate Advent's fuel cells in the heavy duty mobility industry.

Speaker 1

In May, Alpen and BHF Environmental Catalysts and Metal Solutions, a global leader in precious metals and catalysts, jointly announced a new agreement to join efforts in building a closed loop component supply chain for fuel cells and ended discussions to extend the partnerships into the field of water electrolysis. For 20 years, BHF Environmental Catalysts and Metal Solutions has been a leader In membrane and MDA technology for high temperature PEM fuel cells with a strong foundation in precious metal cells and catalysts. High temperature pan fuel cells operate at 120 to 180 degrees Celsius, offer a broad operating window Tolerate impurities in the hydrogen fuel source. The fuel cells also enable simplifying cooling and need no humidification. Advent offers competitive fuel cell systems for station and portable applications based on methanolone and on-site reform.

Speaker 1

In the future, high temperature pan fuel cells will also be available for heavy duty mobility and maritime power. The scope of the agreement includes BDC's role in scaling up NDA production and Advent's plant, state of the art manufacturing facility in Western Macedonia, Greece, while offering Advent its full portfolio of products and services to enable circularly key material. Both companies will cooperate on BHF's latest membrane development, Celltech Z and the new ion pairing DNA by Advent, Aiming from improved performance, lifetime and cost competitiveness. Finally, turning to Brincipo, I was elected as the Chair of the EU Important Products of Common European Interest, High-tech Facilitation Group. The lecture took place at the 1st General Assembly for high-tech and high-two use of the European Union's IPCIs.

Speaker 1

The General Assembly was held in March in Berlin and was attended by executives from companies with project inspired by the European Union under the IPCI framework as well as government and EU officials. Advent's Green Hippo project received a notification in June 2022 for up to €782,100,000 in funding from the Greek state, the highest amount of funding received for a project under IPCI I2Tech. The European Union officially ratified the project in July 2022. GreenChemo will be based in the Western Macedonia region of Greece, where a state of the art facility will be established for the R and D production of innovative fuel cells and electrolyzer systems for the production of power and green hydrogen respectively. We have already progressed to identify a suitable site and have now purchased the site and commenced planning.

Speaker 1

Advent is actively working with the Greek state for the timely sign of the contract. We look forward to reporting on future growth. Advent is well positioned to take advantage of the current focus on clean energy. We're continuously developing our technologies And consolidating our operations to address new and key opportunities. We have a product portfolio that's focused to enable a greener economy, 1 that will abate the reliance on fossil fuels and will disenfranchise the energy supply market, therefore providing energy security to communities and economies.

Speaker 1

With that, I would like to hand over to our CFO, Kevin Brackman.

Speaker 2

Thank you, Vasily, and good morning, everyone. Turning to our financials, we delivered revenue of $1,000,000 in the first quarter And income from grants of $500,000 for a total of $1,500,000 R and D expenses were $3,100,000 in the Q1, primarily related to internal R and D costs incurred in each of our businesses, as well as our Cooperative Research and Development Agreement with the Department of Energy. Administrative and selling expenses were $8,500,000 in the first quarter. Combined with R and D expenses, total operating expenses were $11,600,000 a year over year decrease of $1,000,000 primarily due to administrative cost reductions implemented throughout 2022, which were partially offset by an increase in research and Development Expenses. Net loss in Q1 was $12,000,000 or $0.23 per share.

Speaker 2

Unrestricted cash reserves were $19,500,000 as of March 31, 2023, A decrease of $13,400,000 from December 31, 2022, driven by R and D and administrative and selling expenses, As well as annual insurance renewals, a $2,200,000 increase in inventory and $1,900,000 of CapEx spending in the Q1. Our existing cash balances and projected operating cash flows are expected to be sufficient to support planned operations for the next 12 months. However, as Vasily discussed earlier, We have been working actively with the Green State for a timely implementation of the funding mechanism for the Green Hippo project. Additionally, we have been evaluating various opportunities to raise additional capital. And in April this year, we finalized an agreement For an equity line of credit with Lincoln Park Capital, which gives us the option to access up to $50,000,000 of capital over the 3 year term.

Speaker 2

The use of this equity line of credit is entirely at Advent's discretion and provides us with an effective buffer if required that can be used alongside other sources of capital. In the meantime, we will manage our cost structure closely and capitalize on opportunities to reduce costs where possible. I will now turn to our outlook. Advent entered 2023 with a strong pipeline of opportunities. As we all know, however, not every opportunity in the pipeline will transpire due to factors that are beyond Advent's control.

Speaker 2

Opportunities may not materialize or could be delayed. Due to the long term contract nature of our business model, the timing of our revenue Can also be difficult to predict. Due to the level of uncertainty caused by these factors, we are not providing a revenue outlook for 2023 on this call. However, we expect to provide an outlook for revenue and income from Graeme's on the next earnings call. With that, I will hand back to Vasily for closing remarks.

Speaker 1

Thank you, Kevin. Advent has significant opportunities for its technology, advanced materials and fuel cell system products. Along with Hood Park, the Green Hippo project will cement our global reach and focus in the mobility and stationary power market. Advent is a clear energy technology company developing innovation and products for key sectors that require clean energy. We look forward to growing the business and to keep you abreast of development.

Speaker 1

I would like to thank you all for joining us today, And we're ready to answer questions from the comments

Operator

And we'll take our first question from Sanjay Jha at Panmure Gordon.

Speaker 3

Yes. Good afternoon from London. I just want to check how important is this BASF agreement in winning business for Fuel Cell Systems. Can you give us some examples of whether this has opened doors for you?

Speaker 1

Yes. Thank you, Ushad Jay. Good to hear from you. The add on agreement is very significant Because first of all, it endorses the technology, our technology and also secures, if you will, the supply chain. This is very essential for this long term and the scale up of the business.

Speaker 1

As you know, BASF is a global leader. They have been for A long time on high temperature temp. We collaborate with them for a long time as well. We have our products. We've licensed from them.

Speaker 1

And now We have this tremendous opportunity with the Green People project and the new facility we're going to build to co manufacture a lot of these things, work together also On the scale up of Ion Therd. So that's very important. The second very big benefit for us is the management of the precious metals. As you know, the more we start selling all of these things become very, very important and closed loop process of these materials Araki, you need a giant like BSF along with us In our opinion to go to the next level, get the prices down and make the customer very happy about what Because now, and I'll take the opportunity, with BASF, we have big companies. We have enthusiasm and synergy and also big organizations like Los Alamos that are very excited to work with us.

Speaker 1

They have their own announcements. We'll talk along with them and these are the long term relationships we always wanted to have And we're very excited to have these people with us and BSF in particular. Thank you.

Operator

We'll go next to Jeff Grampp at Alliance Global Partners.

Speaker 2

Hello. Thanks for the time. I was A question on the Ion pair. Can you guys quantify at all to the extent you feel comfortable, kind of the cost reduction expectations you may have for this? And then regarding the rollout in 2024, I'm curious, obviously, we're only in May here of 2023, but Is there any kind of pipeline building yet at this early stage that you guys can comment on?

Speaker 1

Yes. Yes. Thank you for the question. Now regarding the Ion pair, as you know, this is very revolutionary. It's the next level of high temp PEM.

Speaker 1

You remember the low temperature PAM requires pure hydrogen. It has environmental issues. You have to take tremendous So care of the humidity and that's when it comes to trucks and things like that, It's very difficult to have a final product as we've seen. So for that matter, all these big companies, So Hyundai and the other unnamed one, which is another Diamond, but also Alpha Lab Alginus Energy, they all are very interested in our high temperature pen. Now with the existing tech, we'll go that far.

Speaker 1

The Ion pair It promises to be 2 times at least power density, 2 times the lifetime, which as you know, It immediately becomes a 4 times better product. And it is our belief that we're going to have these very exciting new MBAs in our products in 2024, which as you say, this is not far away. So for us, this is a big step and we put a lot of effort there. But so far, it looks actually very, very good. Now regarding the pipeline, let's take a look about what we're talking about.

Speaker 1

You remember before we had built The sales pipeline on the telecom and we had that unfortunate thing that happened last year, but we actually have The Saturn telecom operators that they divested their telecom towers to Tower Companies. So what we do now, we work with the Tower Companies themselves In order to have these sales, as you know, this is a long sales cycle, We have successful proof of concept, one of these things with Vantas Towers. So one part of our pipeline will be built on that. The other is from the Marine and Automotive. You've seen the progress that we make there with the San Lorenzo's and And the third thing, next year, a lot of things will depend on the defense product, the honey badger, Which are now we are in the preproduction stage, if you will.

Speaker 1

And go no go will be for production of a lot of the systems in 2024, pending the approval from the DOE. As Kevin said, because the IPCI is such a monumental Change for the company and it really has a lot of, I think I said, money associated with it. We will provide, In my opinion, a very detailed expectation for next year in our next call after the end of Q2.

Speaker 2

Great. Thanks for that detail. If I can sneak one more in. On the Green Hippo project, Thank you guys, said in your prepared remarks that you have a site purchase, which is great to see that project moving forward. Can you talk to the extent Given that there's some funding, or should I say a lot of funding, obviously, but out of your control given the timeline there, Can you still kind of dual track, some of the pre planning or pre feed kind of items To the extent you can accelerate the project given that some of the funding is obviously out of your control from a timing standpoint?

Speaker 1

No, very good question. Thank you. Yes, we run this project As it were a go. And our enthusiasm, if you will, and commitment And belief comes from the fact that the Chairman of the IPCI now, I see a lot of things that are happening at the European level. We're talking about €5,400,000,000 That they would go.

Speaker 1

There are a lot of contracts already signed. We're not that behind, to be honest. It's just not Europe does not 2 things. Unfortunately, I cannot say the same day or something like that. So we expect that things will happen for us relatively soon.

Speaker 1

Okay. We cannot say the date for obvious reasons, but we think it's going to be soon. And also in the meantime, we scheduled all our R and D development work. We have identified the site. We bought the site, the beautiful site in Kozani, and we're ready to announce it when we have the signature.

Speaker 1

And also we have entered these agreements, which for me are very important, the strategic partners like BHF that we announced and some others we cannot announce right now, But we will announce at the appropriate side that will show to the world that this thing is going to be a true Gigafactory, if you will, that will help actually doing what we all want to reduce the price because our products are Very good. But as you know, they're expensive. So in order for us to go to the next level, we have to actually scale up and manufacture is the only way to do it and with Established Manufacturers, because keep in mind, we come from the R and D side. I think the people in our manufacturing are doing Job in Denmark and Germany primarily. But at the end of the day, when you have giants of manufacturers like BASF and Delta, we're talking I think things will become 10 times more smooth.

Speaker 2

Great. I appreciate all the details. Thank you.

Operator

And we'll go back to Sanjay Jha at Panmure Gordon.

Speaker 3

Yes. Just a follow-up, the contract for trucks in Asia, Are you the sole supplier? And can you give us some more details about how the whole project It's going to work out for you?

Speaker 1

Yes. We're very happy about it because first of all, it came after The rigorous testing by the customers, so we're selected and it's a significant order if you think about it because of the M and A team. Also, the initial order, so future Orders will come and we expect to be the sole supplier because we'll build this relation. I want to take also the opportunity To say that China and India, they see methanol and biofuels It's a very important fuel because keep in mind, in this part of the world and others, Africa as well, Liquid fuels are a key. We don't expect that you will build gas pipelines, hydrogen pipelines Anytime soon.

Speaker 1

However, it's much, much easier to carry around liquid fuel and the availability of these particular fuels are there. So we feel that there is a great future. Thank you.

Operator

And at this time, we have no further questions. That does conclude the question and answer session.

Speaker 1

If you don't want to conclude, I want to take the opportunity To answer some of the questions from retail, if you don't mind. So give me a little bit of time. There are some questions that a lot of them we have already answered. I think Kevin, if you want to say something about Lincoln Park Holdings, options that we have as a NASDAQ listed company to get capital when capital is needed. So maybe you want to say a couple of things about that and I will go to the next.

Speaker 2

Yes, sure. Thank you, Vasily. So as I mentioned in my comments today, the Lincoln Park facility, the equity line of credit, It gives us the option to access up to $50,000,000 of capital over the 3 year term of the agreement, But we're not required to use the facility. So it's entirely Advent's discretion On whether or not we utilize the equity line of credit with Lincoln Park. And so the way I view it is, we advise us time and flexibility as we continue to evaluate and pursue other sources of capital.

Speaker 2

And so that's why we thought it was prudent to have a facility like that in place.

Speaker 1

Okay. Thank you. Now regarding Honda, I think we answered. When it comes to some market and videos, there are questions about it. I think we have very nice video that came out the last Today, I think it shows to everybody that we have facilities that are state of the art.

Speaker 1

And you keep in mind that there was always this Got you. And internally, how much we're going to show, people are going to come and how can I say, copy our Gas lines or whatever, I'm of that of the Position that we have to show things as much as we can to convince people and excite people also So we will have more marketing videos, if you will, first of all, of our facilities and second, about the new things that we do also Both and everything? Regardless how much we believe in the company as The largest, I can say, private shareholder. And also my team here, we have not sold one share, Once, sir, we've also once, sir, in all these years, almost 20 years for me. So that shows the great confidence that we have In our company and in our ability to have a better future that we basically have now because a lot of the things that happen Now they have to do with market conditions, we believe, not necessarily of how we grow.

Speaker 1

I think we grow at a tremendous pace. And every sale that you might see over there, just to do with the stock option taxation fees In the U. S, you sell some you get some stock options or some are used, you got to pay the tax, but none of it The real sale. So in that respect, we're fully aligned and 100% behind it, and we believe very much in the future of this company. Now regarding the U.

Speaker 1

S, we do get senior people. We've got some senior people now In Livermore, we're going to get some more senior people. Keep in mind, we have to have realistic expectations. I think we'll grow And a tremendous rate in very unfavorable market conditions. So we need to make sure that in the end, we're going to be victorious.

Speaker 1

So we have to run it at the pace that we think is, how can I say, realistic and logical? Now when it comes to renumerosin policy and all that stuff, as you know, we will not get any bonus for 2022. That's Our own decision in a way, because we feel that, that was the right decision Now about HoodPark, I think we've discussed a lot about HoodPark. It's both R and D and manufacturing. So So it's going to be our manufacturing place in the U.

Speaker 1

S. Eventually and we have great expectations from that. So now regarding the optimization of the workforce, Absolutely. We look at these things very close, and we believe that when we actually Group through a couple of acquisitions. As you know, there are always things that they can be a little bit better.

Speaker 1

I think Kevin talked about this in the last couple of calls. And we call continuing monitoring the situation, how much we spend versus what we actually get out of it. Now since we produce so many wonderful products, why we don't have actual sales? That's not true. We have sales and we did talk about it.

Speaker 1

The question is why we don't have more sales. The fact of the matter is that we have relatively expensive products, a product that they go, As we said before, the people that they do want the environmental advancement that we get from them. Plus, we have we're selling to places that in addition to environmental Advantage, the total cost of ownership, if you will, is favorable. And these are not the most advanced place, actually, they're development world places. So what we need to do, as I said Of course, we need to keep on dropping the price, keep on making more of these things.

Speaker 1

And we think in due course, our sales will come up. Now regarding the Cozano location, I think I did talk about it. We bought the site. We're ready to go. 2nd car manufacturer, we cannot talk about it because they don't allow us, but if you do your own due diligence, you'll see what it is.

Speaker 1

We don't have much update on the hydrogen to have in the U. S, just no update there so far. But In our opinion, overall, that's why I was talking a little bit more about the long term. This is happening. Hyrogen is happening.

Speaker 1

It's going to happen in Europe mostly, And the U. S. Is going to follow because of geopolitical reasons as well. So and that's why we're excited to be in electrolysis. That's why we're excited to Actually, finally have this kind of brand names working with us.

Speaker 1

I've been excited to work with us. So I think this is a matter of time. I did answer the question about the Honeybadger. For aviation, yes, we do have a lot of discussions. We're going to again announce Some good things when we can announce them.

Speaker 1

And for the The electrolysis, yes, we believe very much in the alkaline membrane electrolysis, which we believe is the Knowledge of the Future. It combines the 2, it combines pen and alkaline. We have Very, very good. Thanks. I don't want to overstate, but we have very, very good.

Speaker 1

Thanks to the efforts that they've been having in the last few years. When we saw that green hydrogen is going to grow at that rate, we're talking at an amazing rate. In my opinion, it reminds us a little bit how the Internet was in the late '90s. People say it's going to grow 10000%, and some people believe it and some people say, no, it's not going to happen. So that's what we believe now with green hydrogen also.

Speaker 1

Other people say, no, no, it's not going to happen. And We say yes, yes, it's going to happen and it's going to be massive. Okay. So we have very, very good technology there as well. And we're ready to actually make commercial products from that.

Speaker 1

In the meantime as well, we are, of course, looking at the existing technologies because there is this demand for capacity, if you will. And there's a lot of demand for today's product. So there we do have our strategic discussions in place, and we will announce them, Yes, in the appropriate time. So with that, I think we're ready to conclude. I don't know, Kevin, if you want to say something more.

Speaker 2

No, I think that wraps up the call today and we appreciate everybody joining us.

Speaker 1

Yes. Thank you very much. Bye bye.

Operator

And again, that does conclude today's conference. Thank you for your participation. You may now disconnect.

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