Advent Technologies Q2 2023 Earnings Call Transcript

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Provided by Quartr
August 11, 2023

There are 3 speakers on the call.

Operator

Morning, everyone. I will be your conference operator today. At this time, I would like to welcome everyone to the Advent Technologies Second Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session open to Advent's analysts.

Operator

On the call today, we are joined by Doctor. Vasily Gregorio, Advent's Chairman and CEO and Kevin Brackman, Advent's CFO. Before we begin the prepared remarks, we'd like to remind you that Advent issued a press release announcing its Q2 2023 financial results shortly before market opened 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, targets 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.

Operator

While these statements represent management's current expectations and projections about future results and performance as of today. Advent's actual results are subject to many risks 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 analysts, Analysis and other third party resources as well as data from the company's internal research and are based on assumptions made upon reviewing such data and with the 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 that this call is being recorded. Kicking off the call will be Doctor. Vasily Gregorio.

Operator

Doctor. Gregorio, I now 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 Q2 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 May 15, I highlighted that Advent has further consolidated its business operations and was focusing on the core sectors of mobility and stationary power.

Speaker 1

This has continued in the Q2 with a gradual improvement in our Cash burn as various non costs are eliminated. We remain focused on expanding and executing on commercial pipeline with a view to embedding our technology and product portfolio in this key power sector. We also maintained our capital investment program in State of the art equipment that's required to complete the scale of production capacity. We intend for this progress to continue towards large scale manufacture As soon as our Green Hippo project commences, we believe that the future demand for Advent's High temperature PAM technology and related products will create a significant opportunity and we believe Admiral will be ideally positioned To capitalize on these 2 suitable partners, we look forward to growing our commercial activities and achieving long term profitable growth. Our business focus is on the production of advanced fuel cell materials and the development of advanced fuel cell systems, leading to direct sales.

Speaker 1

In addition, joint development agreement with OEMs will enable us to enter into long term licensing and supply agreements. I will now give an overview of our recent business updates. VHF Environmental Catalysts and Metal Solutions, a global leader in precious metals And Catalyst and Advent concluded the terms of a new agreement to join efforts in building a full loop component supply chain for fuel cell. For the past 20 years, VHF Environmental Catalysts and Metal Solutions has been a leader in membrane MEA Technology for high temperature prem fuel cells with a strong foundation in precious metal cells as a catalyst. Advent It's a significant manufacturer of high temperature pan fuel cell systems, targeting emerging markets in the field of sustainable And decentralized energy such as stationary power that can replace diesel generators, maritime power for in metal fuel cells and heavy duty mobility.

Speaker 1

High temperature pan fuel cells operate at 120 to 100 degrees Celsius, offer a broad operating window and can tolerate impurities in the hydrogen fuel gas. These fuel cells also enable Simplified cooling has no required humidification. Advent offers competitive fuel cell systems for stationary portable applications based on Methanol and on-site reform. Looking ahead, high temperature pump fuel cells will also be available for heavy duty mobility and maritime power. The scope of the agreement includes BHF's role in scaling up MEA production at 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 Superlarity and key materials.

Speaker 1

Both companies will cooperate on BHF's latest membrane development, Teltec Z and the new Ion pair MVA membrane by Advent aiming for improved performance, lifetime and cost competitiveness. In the aerospace sector, Advent signed a memorandum of Understate with Safran Power Systems, a leader in auxiliary power systems and turbojet engines. Leveraging Advent's proprietary AmpereMEA Technology and Safran's Aerospace knowledge and capabilities, The new collaboration will seek to advance the development of next generation high temperature PEM fuel cell technology, specifically for the aerospace sector. High temperature PEM enables more efficient heat management versus low temperature PEM. High temperature PEM is more adapted for applications requiring high amounts of power combined with strong integration constraints as in aviation.

Speaker 1

High temperature PAM is more robust and can withstand tougher weather conditions such as extreme temperatures and pollution versus low temperature PAM. The collaboration further supported by a strong research consortium included the Research and Technology Center of Safran Group, The French Alternative Energy's and Antrimia Energy Commission, Fraunhofer Institute, the French National Centre For Scientific Research, The University of Sartre Strasbourg and the IMDA Energy Institute led by Safran Power Units and with the support of Advent, The consortiums have secured the ground for the clean, hydropower and partnership in the entire project. Running from 2023 to 2026, The project is funded by Hydrogen Horizon Europe and the project's main objective is to develop an aircraft Compatible next generation high temperature per MEA. This involves optimizing and enhancing various components such as the catalyst layer, membrane and gas diffusion layer. ADVENT's ion pair M8 technology serves as the foundation for this advancement.

Speaker 1

As part of the newly signed MoU, Advent and Safran Power units are exploring a joint development agreement for the advancement of high temperature FACTORIN specializing in truck application in the East Asian market. Under this contract, Advent will supply high temperature 10 MEAs to support the Development of Advanced Fuel Cell Solutions for truck. The contract has a combined value of $1,100,000 and comes after a highly successful Testing phase of Advent's proprietary MVA technology contacted by our customer. Advent will deliver high temperature PMEAs With a projected continuation of deliveries online to the customer's specific time frame, the use of Advent MVA technology in fuel cell Power Trucks is a critical and substantial enhancement to EV technology, effectively tackling the challenges associated with charging infrastructure and the limited range of pure EVs. MEAs are the critical component of fuel cell systems and have a pivotal role In the terminal, the overall performance, durability, efficiency, weight and cost effectiveness of the electrochemical products being powered.

Speaker 1

Advanced Electrochemistry Components business include electrodes, membranes and MEAs. These components are critical for fuel cell electrolyzers And for long duration energy storage such as low batteries. In June, Advent participated in the 2nd European Electrolyzer Summit held in Brussels. I was part of the delegation of 30 CEOs representing the European Electrolyzer Manufacturing Sector in a meeting with European Commissioner, Thierry Breton. The primary purpose of the meeting was to discuss and address the objective outlined in the joint declaration of the May 2020 To EU Electrolyzer Summit, the meeting joined overnight by the European Commission in Hydrogen Europe as part of the Electrolyzer Partnership Brought together approximately 44 companies actively involved in the European electrolyzer supply chain.

Speaker 1

Following the 2nd European Electrolyzer Summit, the industry remains steadfast in its commitment to achieve the ambitious goals set out and the repowering your communication. The objective is to accomplish 10,000,000 tons of domestic hydrogen production and import 10,000,000 tons of hydrogen by 2,030. As part of this commitment, the industry is planning to significantly increase electrolyzer production in the EU, Aiming to ramp up capacity by a factor of 7 within 7 years. This will involve scaling up from the current 3 gigawatt Production capacity to approximately 21 gigawatts by 2025. In a recently published document, The partnership members and the European Commission provided an update on the progress that has been made 1 year after the sign of the joint declaration.

Speaker 1

The document highlights the industry's continued efforts to expand its European footprint as the regulatory framework moves closer to completion. Notable developments include the Renewable Energy Directive, delegated acts of additionality and the hydrogen pump. For Advent Green Hippo Project, we provided an update in May on its status. This update highlighted the recent milestone achieved so far, emphasizing the collective dedication of the entire Advent team towards decarbonization and the transformation of the clean energy landscape in Greece in Europe. Most notably, 1, Advent successfully acquired the ownership price to a prime parcel of real estate located in Forzani, Greece, where its planned state of the art facility for the Green Hippo IPCI project is expected to be located.

Speaker 1

This land acquisition underscores Advent's Unwavering the indication to establishing a robust infrastructure that will effectively and strategically support the objective of the Green Hippo IPCI project. Avianz has also set up a coordination and planning office in the center of Bozani, which will serve as the operational hub for the green kebo IPCI product. 2nd, Advent has initiated the process of identifying and hiring key professionals such as scientists, engineers and managers who will play integral roles in the new state of the art facility in Cozari. These individuals will drive critical functions such as research and development, First Industrial Deployment and Supply Chain Management. The expertise will be instrumental in the development, design and manufacture of the innovative fuel cell system Electrolyte Systems.

Speaker 1

Advent's careful selection process will ensure that top tier talent is recruited to support the successful execution of the Green Hippo IPCI project, thereby ensuring the project's success and innovation. On August 4, 2023, Advent was informed by the Ministry of National Economy and Finance that the Greek state is currently reviewing the financing of IPCI Accordingly, as a prerequisite for unlocking the state aid funded for Green Hippo, the Greek state is examining the planning ways to implement actions and to Strengthen initiatives that will contribute to the transition of the productive and growth model of the Greek economy towards climate and traffic. As well as compliance with regulatory obligation and guidelines regarding the management of European funds, We will provide further updates on Green Hippo at an appropriate time. Advent is suitably positioned to take advantage of the growth focus on clean energy. We'll continuously advance our technology and consolidate our operations to address new and key opportunities.

Speaker 1

We have a product portfolio that's focused to enable a green economy, With that, I would like to hand over to our CFO, Kevin Brackman.

Speaker 2

Thank you, Vasily, and good morning, everyone. Thank you, Vasily, and good morning, everyone. Turning to our financials, we delivered revenue of $1,100,000 in the 2nd quarter Expenses were $2,900,000 in the 2nd quarter, 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 point $3,000,000 in the 2nd quarter. Combined with R and D, total operating expenses were 11,200,000 A year over year increase of $600,000 primarily related to an increase in research and development costs as well as expenses related to our new Hood Park facility in Charlestown, Mass.

Speaker 2

We recognized $9,800,000 of asset impairment charges in the Q2, mostly related to the assessment of goodwill and other intangible assets from the company's acquisitions in 2021. Net loss in Q2 was $21,800,000 or $0.41 per share. Unrestricted cash reserves were $10,100,000 as of June 30, 2023, A decrease of $9,500,000 from March 31, 2023, which includes $3,400,000 of cash that we raised From the company's equity line of credit with Lincoln Park Capital, dollars 1,900,000 paid to complete the acquisition of the FuelCell Systems business in Denmark, Germany and the Philippines, dollars 800,000 paid to acquire Land in Kazanee, Greece for the Green Hippo project and $400,000 paid for the build out of the Hood Park facility. Our existing cash balances and projected operating cash flows are not expected to be sufficient to support planned operations for the next 12 months. However, in addition to the potential funding from the pending Green Hippo project, Jack, we finalized an agreement in April this year 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 utilization of this equity line of credit As I mentioned earlier, we raised $3,400,000 in the month of June using this equity line of credit, sufficient to cover our current monthly run rate for operating and capital expenses. We also implemented in June an at the market equity program with H. C. Wainwright as sales agent, under which we may sell up to 50,000,000 of shares of the company's common stock through the agent without any commitment from Advent. We did not utilize this ATM facility during the Q2.

Speaker 2

Aside from raising capital, we will continue to manage our cost structure Advent has a strong pipeline of opportunities. As we all know, however, not every opportunity in the pipeline will transpire due to factors that are beyond 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, As well as the fact that Green Hippo is still under review by the Greek state, we are not providing an outlook for revenue and income from grants for 2023 on this call. With that, I will hand back to Vasily for closing remarks.

Speaker 1

Thank you, Kevin. Advent has significant opportunities for its high temperature PEM technology, advanced materials and fuel cell system products. Advent is a clear energy technology company developing innovative products for key sectors that require clean energy. We look forward to growing the business as we keep you abreast of development. I would like to thank you all for joining us today.

Speaker 1

Before we open the line to any questions from the company's analysts, I would like to address questions submitted by Lesley Midland with Pamela Gordon, who was unable to join the call today. The first question is, can you provide an update on the Green Hebo project and expected timing on evaluation, confirmation of final funding documents and subsequent releases of funding. As I said a little bit in the script, We are very keen to officially launch the Green Hippo and we have demonstrated particular actions that says that We're moving in this direction. 1st of all, we scheduled all the R and D and development work. 2nd, we have identified the suitable site.

Speaker 1

We purchased the land and we have commenced with Planet. 3rd, very important, we have entered these very strategic Agreements with BASF and other partners that we cannot mention right now and we will announce obviously the details at the appropriate time That ensures that the minute we start, we have these giants with us to be able to manufacture The products with quality and at the right time. In the meantime, as we said, we are Complain to the European Union because we feel that this is a big delay here from the state and it's simply not acceptable by us. So I sent a letter to Commissioner Breton, who initiated an internal discussion within the European Commission With Digi Growth and Digi Internal Market Industry and SME, these are policy departments, the Directional General. And there what we got back is that despite that we're in the holiday month, The European Union will work very closely with the Greek authorities to be able to inform us and for us to inform you the shareholders that the project will receive The foreseen public funds.

Speaker 1

So I think we're in the last stages and there as you know We had very big delays with interaction with other European partners. Of course, we have suffered, We believe a big loss in our valuation because of all of that. So these things need to be resolved as soon as possible. The Europeans understand that this is a project of common European interest. It's not Greece only, Not Italy for the Nora, let's say, it's not France for McPhee.

Speaker 1

So I think The Europeans will push very hard on this. Now we received on August 4, A letter by the Deputy Minister of Economy and Finance from Greece, Mr. Nicolas Pavafanasis, in response to my I had a letter to him on July 25. And basically the idea is And I will go over it later in a bit. The idea that the Greek state is examining and planning ways to implement actions and to strengthen initiatives that will contribute to the transition of the product And growth model of the grid economy towards climate neutrality.

Speaker 1

But on parameters for the plan and such actions include implementing projects at specific times, The viability of the completed proposal plans as well as compliance with regulatory obligations and guidelines regarding the management of European funds. The Greek state is currently reviewing funding for the IPCI program and we'll provide further updates at an appropriate time. So the delay is solely with the Greek state and we expect this to be resolved very, very soon. You can imagine we do everything in our capacity to finish this And we will keep you posted on the developments, which as I said, I think that will be very soon. Second question is again from Lacy.

Speaker 1

Can you provide an update on the Hyundai JPA And next key milestone included expected first sales. As you know, the As with other automotive manufacturers, Fidel is an OEM and basically there we're developing the fuel cell system in collaboration with the OEM. We have a joint development agreement now where the Agron MEA and actually our fuel cell expertise as well will be incorporated in Automotive region with Hyundai. And Hyundai has shown great interest in the technology and basically the ion pair technology. And we also there, we incorporate Hyundai Technology as well.

Speaker 1

We use Hyundai Catalyst for that particular program. So the whole idea is to achieve the power targets that are conducive for automotive in order for this to become and actual product. Now, as you know, we have 3 core hardware models on the market already. So we have good experience from using them. And as I said in other calls as well, it's not only a few data we work with, we We have other large companies that we cannot name, but we're working very hard actively with all of them.

Speaker 1

The other question is how has the collaboration with Siemens Energy for maritime fuel cell solution progressed? Is the relationship progressing to JDA or similar depending on successful technology testing? And there, the collaboration with Siemens, as you know, is on this very exciting sector of maritime. We're very happy that our methanol division because we have this for quite some time now as you know the ones that you follow us. The methanol and eventually in methanol that arise from green hydrogen, we believe will be a key Fuel in the path to net 0 for a maritime.

Speaker 1

So not only Siemens Energy but also Alfa Laval, Maersk, they all work there and we try to collaborate as many of them as we can. But we have very recent success with Siemens and Sao Lorenzo And we feel very proud about that. So again, the idea is that when you use high temperature And in methanol, we're talking about a similar system in an expensive one stage deformation, whereas low temperature PEM Requires 99.99 percent pure hydrogen. The syringe system now that we use, it's made in Denmark, And we're talking about 100 kilo or watt, but we actually also And go to 250 easy. So that's the status over there.

Speaker 1

And I think There is the right technology in the right market and it's our obligation, if you will, to grow this as fast as we can. Another question is how has conversations part of the early stages of The BHF agreement progressed with regard to establishing the end to end supply chain in Europe. I think we discussed that also in the Basically, the idea is that the BHF agreement is very significant for us because one, it endorses our technology And secondly, it fortifies our supply chain. We work in our high temperature spend with BASF for about 15 years now, as you know. BSF is a global leader in manufacturing and brands, electrodes, a lot of expertise with PBI.

Speaker 1

And as I said, we're very close and for me would be a key parameter, This association in accelerate the Green Keepo project, win win situation for both parties And very secure deal, if you will, for the customer as well. Another thing I don't want to be Left out of the conversation is the ability to PSF to manage precious metals in closed loop processing of these materials. That's very important. We will go from more pilot programs to true large scale manufacturing. The next question is, does your current cash position and currently burn rate give you sufficient headroom I've been funding to receive for and to execute on the Green Hippo project and other commitments.

Speaker 1

I'm going to turn this to Kevin. So Kevin, would you please answer this?

Speaker 2

Yes, sure. Thank you, Vasily. So let me share some information on our liquidity situation and cash burn rate. So we finished the 2nd quarter with right around $10,000,000 of available cash on our balance sheet. As you know, over the past 3 months or so, we've put in place A couple of different equity facilities, one is an equity line of credit with Lincoln Park Capital.

Speaker 2

The other is an ATM facility with H. C. Wainwright. Each of those facilities gives us the opportunity to access up to $50,000,000 of capital over the next 3 years. And that's our at our discretion on whether and when we utilize those facilities.

Speaker 2

So we have those 2 facilities in place. As I mentioned in my comments this morning, we raised $3,400,000 in the month of June Utilizing 1 of those 2 facilities. At the same time, we have also taken actions recently to reduce our Costs and to reduce our spend rate. So as I look forward to the second half of the year, I'm anticipating that our monthly spend For operating and capital expenses, we'll probably range between $2,500,000 $3,000,000 per month. And so the $3,400,000 that we raised back in June is sufficient or even more than sufficient to cover what we expect to be our monthly spend rate in the second half of the year.

Speaker 2

So that would continue to be our plan in the short term. It's to continue to use these facilities to raise the cash that we need to cover our Operating expenses, until such time that we receive funding from either Green Hippo or from other sources of capital. And with that, I will turn it back to Vasily.

Speaker 1

I think Kevin, we're ready now to go to Q and A. I don't know if there are any questions, extra questions from

Speaker 2

Yes, we'll turn it back to the operator to open the line for any other questions.

Operator

Thank you. The floor is now open for your questions. We'll now take a moment to compile our roster. There are no more questions. Thank you, ladies and gentlemen.

Operator

This does conclude today's call. Thank you for your participation. You may now disconnect.

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Advent Technologies Q2 2023
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