Amprius Technologies Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 7, 2025

Key Takeaways

  • Positive Sentiment: Ampreus reported Q2 revenue of $15.1M, up 34% sequentially and 350% year-over-year, driven by a 450% increase in Sycor shipments and delivering a positive 9% gross margin for the first time.
  • Positive Sentiment: The company shipped to 93 customers in Q2 (43 new) and was selected for Amazon’s inaugural Climate Tech Accelerator, with 86% of revenue generated internationally.
  • Positive Sentiment: Ampreus introduced the SA-one 102 cell achieving an industry-leading 450 Wh/kg (73% above conventional batteries), which powered Alto’s Zephyr drone for a record 67-day continuous flight.
  • Positive Sentiment: To support scaling, Ampreus formed a contract manufacturing partnership in South Korea and secured a $10.5M grant from the U.S. Defense Innovation Unit to expand its Fremont pilot line.
  • Negative Sentiment: Despite stronger underlying metrics, the company recorded a Q2 net loss of $6.4M and maintained a quarterly cash burn of $7.5M–$9M, though it exited the period with $54.2M in cash and no debt.
AI Generated. May Contain Errors.
Earnings Conference Call
Amprius Technologies Q2 2025
00:00 / 00:00

There are 11 speakers on the call.

Operator

Good afternoon. Welcome to the Amperus Technologies Second Quarter twenty twenty five Earnings Conference Call. Joining us for today's presentation are the company's CEO, Doctor. Kang Sun President, Tom Stepien and CFO, Sandra Wallach. At this time, all participants are in listen only mode.

Operator

Following management's remarks, we will open the call for questions. Please note that this presentation contains forward looking statements, including, but not limited statements regarding our financial and business performance, our business strategy, future product development or commercialization, new customer adoption and new applications, our growth and the growth of the markets in which we operate, the timing and ability of Ampreas to expand its manufacturing capacity, scale its business and achieve a sustainable cost structure. These statements involve known and unknown risks, uncertainties and other important factors that may cause Ampreas' 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 Ampreys' filings with the Securities and Exchange Commission. Finally, I would like to remind everyone that this conference call is being webcasted and a recording will be made available for replay on the company's Investor Relations website at ir.ampreus.com.

Operator

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'll now turn the call over to Amprea's Technologies CEO, Doctor. Kang Sun for his comments. Sir, please proceed.

Speaker 1

Welcome everyone and thank you for joining us this afternoon. On today's call, I will give you an overview of our business and then our President, Tom Stetting will recap our Q2 performance and our recent accomplishments. After that, our CFO, Sander Wallach will discuss our financial results for the period. Then I will share some closing remarks before opening the call for questions. Let's begin.

Speaker 1

For those who may be new to our company, I would like to briefly introduce Ampereus. Ampereus is a pioneer and the leader in the silicon anode battery space with over decades of development experience and the long track record of commercial shipments and the customer achievement. At Ampereus, we develop, manufacture and market high density and high power density silicon anode battery with applications across all segments of electrical mobility, including aviation and the light electrical vehicle industry. Today Ampere has the most complete commercially available portfolio of silicon anode material systems in the industry. And the commence performance leadership with the combination of the battery energy density, power density, charging time, operating temperature range and safety.

Speaker 1

Across our battery portfolio, we believe that we offer unmatched performance among the commercially available batteries. Ampere has been delivering commercial battery to the market with up to four fifty watt per kilo and eleven fifty watt per liter, 10C power capability, an extreme fast charge rate of 0% to 80% state of charge in approximately six minutes. The ability to operate in a wide temperature range of minus 30 degrees Celsius up to 55 degrees Celsius and the safety design features that enable us to pass the United States military's benchmark and nail penetration test. Each of these performance parameters is critically important to real world electrical mobility applications. Not only do our battery empower certain drone, satellite and the vehicles to maximize performance, but they also enable our customer to achieve their economic targets as well.

Speaker 1

In addition, Ampere has developed a 500 watt hour per kilo and a 1,300 watt hour per liter battery platform that has been validated by independent third party. It's our belief that there are no other commercial batteries on the market that can perform at these levels today. In the second quarter, Ampere continued to demonstrate technological innovation and drive business growth. We believe we are successfully executing our strategy to transform electrical mobility with our game changing performance. With that overview complete, I will now turn the call over to our President, Tom Stapton to recap the highlights from our record quarter.

Speaker 1

Tom?

Speaker 2

Thank you, Kang. In the second quarter, we built on our momentum from the start of the year and we believe we have improved in all key business areas. Specifically, we released compelling new products, engaged with additional customers and continued to expand our operations. Let's start with product updates. Innovative technologies and breakthrough product performance are the foundations of Ampreus' business.

Speaker 2

Since debuting our Sycor product platform in January 2024, we have relentlessly pushed the limits of lithium ion performance. This April, we introduced SA-one 102, the first SiCor cell to reach four fifty watt hours per kilogram, a record setting energy density 73% higher than the typical two sixty watt hours per kilogram of conventional batteries used in electric vehicles and power tools. Built around a high capacity silicon anode, this is where the SA prefix comes from and about the size of a standard tea bag SA-one 102 is produced on our California pilot line and is already winning strong customer praise for the significant endurance boost it gives mission critical unmanned autonomous vehicles commonly referred to as drones. With global drone demand accelerating SA-one 102 cements Ampreus' position at the forefront of this market. In order to deliver SiCor samples to our customers quickly and expedite their qualification process, we've expanded production at our pilot line in Fremont, California.

Speaker 2

As prospective customers move through the qualification process and request high volume orders, we then deliver through our existing contract manufacturing partners. So far in 2025, we have shipped the sales to several industry leading global drone companies. In May, we announced that Alto, a subsidiary of Airbus set a new record for their loitering drone, which flew for sixty seven days without interruption. Alto's Zephyr is a solar powered loitering vehicle that operates around 70,000 feet, approximately twice the altitude of commercial airplanes. During daylight, solar powers the motors and channels surplus energy to charge Amperea cells.

Speaker 2

At night Zephyr draws stored energy to remain aloft. Our high capacity silicon anode batteries delivered dependable overnight power, enabling continuous flight for more than two months and stand as a critical pillar of the mission success. During Q2, we've added dozens of new customers. We recently announced that Ampreus was selected by Amazon to participate in their inaugural cohort as a part of the Amazon Devices Climate Tech Accelerator. This program supports companies developing technologies that could help reduce the carbon footprint of Amazon's devices and operations.

Speaker 2

This is a recent development and this selection provides us with a valuable opportunity to engage with Amazon's technical and sustainability teams that worked on millions of devices worldwide. We are excited about the opportunity to explore how our cells could provide more efficient energy solutions in their industrial, consumer electronics and mobility focused platforms. In Q2, we shipped batteries to 93 customers, 43 of whom are new to the Amperius platform. The remaining 50 are repeat customers, including several of our longtime strategic partners, such as Alto Airbus, BAE Systems and the U. S.

Speaker 2

Army. Thanks to our breakthrough energy performance and the ample production capability, we attracted new customers and generated $26,400,000 in revenue during the first half of this year, already surpassing our full year 2024 total of 24,200,000.0 Q2 revenue totaled $15,100,000 a 34% increase from the first quarter and up 350% from Q2 twenty twenty four. This strong growth was primarily driven by a greater than 450% increase in Sycor shipments over Q2 twenty twenty four. Sycor is a proprietary silicon anode that uses standard lithium ion processing equipment and is gross margin positive, enabling us to report positive gross margin for the first time. Sandra will provide more context here when she reviews our financial highlights next.

Speaker 2

In Q2, we diversified our customer base. 86% of our revenue came from outside The United States on a ship to basis, an increase from 60% in Q2 twenty twenty four. Customer diversification helped enable steady growth in a generally uncertain domestic and international macroeconomic environment. In Q2, over 90% of our revenue came from the aviation sector, driven by an increase and ongoing strength in the drone market. We are enjoying increased market adoption and a more favorable policy stance from the U.

Speaker 2

S. Government that creates new opportunities for innovation and deployment. The remainder of our Q2 revenue was primarily derived from the light electric vehicle sector, which remains healthy, but has a lumpier profile due to our customers' varying product introduction cycles. The LED market tends to have short design in cycles and we believe our drop in replacement batteries can help us succeed in gaining market share in this growing market. To support customer demand, we are seeing in our core markets.

Speaker 2

We have continued to work closely with our current contract manufacturers. We are also opportunistically sourcing additional partners to provide us with greater geographic diversification and operating flexibility. In May, we announced a contract manufacturing agreement with a leading battery manufacturer in South Korea. This new partnership expands our physical manufacturing footprint and allows us to serve additional customers with specific geographic supply chain requirements. The facility is currently ramping up and is expected to produce Ampreus cells shortly.

Speaker 1

We are off to a rapid start in Q3. As we announced in July, we initiated shipping cells to customers from our Fremont, California pilot line for testing. So far, five customers have received the new SiCore cells. Our pilot line allows us to rapidly develop and prototype new batteries quickly and to deliver them to key strategic customers who have specific design requirements.

Speaker 2

We are seeing an increase in demand for drone technologies following the June 2025 U. S. Executive order promoting domestic drone manufacturing and the July Department of Defense directive prioritizing U. S. Made drones for procurement.

Speaker 2

U. S. Secretary of Defense, Hagsef wrote that small drones quote, resemble munitions more than high end airplanes.

Speaker 3

They should be

Speaker 2

cheap, rapidly replaceable and categorized as consumables, unquote. We expect these policy actions will accelerate adoption timelines and open new opportunities across both the defense and commercial sectors. Ampreus has operated in this sector for seven years and we believe we enjoy a first mover advantage. Here is one specific example. AV formerly known as Aero Environment is a designer and manufacturer of small drones used by the U.

Speaker 2

S. Military. This quarter, we delivered sample sales as part of the X TAC Prime U. S. Army grant program.

Speaker 2

These sales extended state of the art performance clocking in with an average energy density of five seventeen watt hours per kilogram. Higher energy density delivers tremendous customer value, notably longer flight time and or additional payloads. In summary, the 2025 has been strong and now our focus is on maintaining that momentum through consistent execution in the second half. I'll now turn over the call to our CFO, Sandra Wallach to review our financial results.

Speaker 4

Thank you, Tom. 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. As previously noted, we ended the second quarter with $15,100,000 in total revenue. Our total revenue is a combination of our main revenue streams, product revenue as well as development services and grant revenue.

Speaker 4

This quarter product revenue contributed $14,500,000 to total revenue, representing a $3,600,000 or a 32% increase sequentially. Product revenue in Q2 twenty twenty four was $3,300,000 So Q2 twenty twenty five marks a 335% or $11,200,000 year over year increase. Our development services and grant revenue totaled $500,000 this quarter, representing a $200,000 increase sequentially and up from zero year over year. As we've discussed in the past, development services and grant revenue from large development programs are non recurring in nature, leading to greater fluctuations depending on the comparison period. The overall increase in revenue this quarter was primarily driven by the addition of new customers.

Speaker 4

As Tom mentioned, we shipped to 93 customers in the second quarter. Of these, only two individually accounted for greater than 10% of the revenue in Q2, a decrease from three customers that individually accounted for greater than 10% of revenue in both the 2025 and the 2024. Going forward, we plan to continue adding to our customer mix to diversify our revenue streams and provide more reliable product shipments as we get to a position of scale. Our total for remaining performance obligations was $29,100,000 at the end of Q2 twenty twenty five, up 57% from the same quarter last year and down sequentially as Q1 twenty twenty five included a $15,000,000 purchase order from a drone OEM. Now moving to our profitability metrics, gross margin was positive 9% for the quarter compared to negative 21% in 2025 and negative 195% in the prior year quarter.

Speaker 4

As a reminder, we will continue to experience a degree of gross margin variation as our product and services revenue mix fluctuates going forward. Now on to our operating expense management. Our operating expenses for the second quarter continued to be lean at $8,200,000 an increase of $800,000 or 12% compared with Q1 twenty twenty five and an increase of $1,800,000 or 27 percent from the prior year period. The sequential and year over year increase in OpEx was driven by increased investment in sales and the reallocation of R and D from cost of revenue as development services agreements run off. Our GAAP net loss for the second quarter was 6,400,000 or negative $05 per share with $121,800,000 weighted average number of shares outstanding.

Speaker 4

In Q1 twenty twenty five, our net loss was $9,400,000 or negative $08 per share with 118,000,000 weighted average number of shares outstanding. Our Q2 twenty twenty four net loss was $12,500,000 or negative $0.13 per share with $97,000,000 weighted average number of shares outstanding. As of 06/30/2025, there were 97 full time employees, up from 95 at the end of the first quarter, primarily based in our Fremont, California location. Our share based compensation for the second quarter was $1,900,000 relatively flat with Q1 twenty twenty five and the prior year period. As of June 30, we had 125,100,000.0 shares outstanding, which was up 4,500,000.0 from the prior quarter.

Speaker 4

The change includes approximately 1,300,000.0 shares issued from option exercises and RSU vesting as well as 3,200,000.0 shares issued under our ATM program. Now turning to the balance sheet, we exited the second quarter with $54,200,000 in cash and no debt. Key drivers for cash in the quarter included $4,300,000 used in operating cash flow, which was lower than our average projected run rate of approximately 2,500,000.0 to $3,000,000 monthly, excluding transaction related cost. The main cause of variation this quarter is related to the improvement in our net loss. Dollars 700,000.0 used in investing activities related to our Fremont, California facility.

Speaker 4

We also had $10,800,000 in cash inflow from financing activities consisting of $9,800,000 from the issuance of common stock under our at market sales agreement and $1,000,000 of proceeds from option exercises. We still have approximately $46,700,000 left on the facility as of 06/30/2025. Considering our business achievements and ongoing projects, we believe we are efficiently using capital to drive Ampreus forward. Before I turn the call back over to Kang, I would like to take a moment to discuss our CapEx outlook for the remainder of 2025. We have made the decision to strategically invest in diversifying our supply chain and expanding manufacturing capability within our Fremont facility to include electrode manufacturing.

Speaker 4

We're doing this in collaboration with the U. S. Government Defense Innovation Unit and have secured a contract for 10,500,000.0 awarded in July 2025. As we previously stated regarding the Colorado facility, the designs for this project are effectively complete and we are continuing to monitor the larger industry dynamics associated with building a factory in The United States. Changes in demand, supply, battery cost structure, government incentives, trade tariffs and other considerations, including the timing and availability of funding will influence our decision on the next steps and timing.

Speaker 4

We have secured adequate capacity for the foreseeable future through our contract manufacturing network and plan to further expand that without deploying additional capital. That concludes my financial discussion and I will now pass the call back to Kang.

Speaker 1

Thanks Sandra. As we look ahead, our strategy and the focus remain unchanged. Amperez is committed to delivering the next generation of lithium ion batteries today. We believe our technology is already raising the bar in real world application by providing unmatched performance and solving meaningful problems for our customers. We are continuing to execute against our product roadmap with new innovations that extend our lead in the battery space, while building global manufacturing scale to meet the significant and growing demand.

Speaker 1

Through our capitalized contract manufacturing model, we have access to over 1.8 gigawatt hour of capacity positioning us to fulfill more customer demand that we expect to generate this year. We continue to see strong momentum in customer engagement. Our priority remains moving more of those engagements from evaluation to full platform integration for mass production. With hundreds of customer shifts to over the past six quarters, both new and the repeat business, we believe we are building a powerful base of long term relationships. Tom Stappin, who joined as our President in May, has proven to be exceptional at supercharging our customer engagement.

Speaker 1

His leadership will accelerate our go to market efforts and drive deeper penetration into fast moving markets we serve. Look ahead, we believe Amperez is well positioned for sustainable growth and the long term success supported by our core peers. First, our industry leading technology and the product. Our silicon and batteries outperform our traditional lithium ion battery solutions in real world applications. Second, our gigawatt scale manufacturing capability through capital efficient contract manufacturing model allow us to scale quickly.

Speaker 1

Third, we benefited from extensive customer engagement, including both new and repeat business from our partners. And fourth, we maintain strong financial health. We have an increased cash reserves, low burn rate, low debt and added flexibility through our aftermarket sales agreement. We are excited about the future ahead and invite you to meet with us as we attend several upcoming investor conferences. We'll be participating in the event hosted by Oppenheimer, Needham, Gateway and HC Wainwright over the next few weeks.

Speaker 1

Thank you for your continued interest and support of Ampere's technology. With that, I will turn it back to the operator for questions.

Speaker 5

Thank you. At this time, we'll open the line for questions from the company's publishing research analysts. The company requests that each participant limit their comments to one question and one follow-up. Now for our first question, which will come from the line of Colin Rusch with Oppenheimer. Please proceed with your question.

Speaker 6

Thanks so much guys. Obviously, you've

Speaker 7

been

Speaker 6

qualifying with a large number of customers here over the last six quarters, as you mentioned, Kang. And certainly, talking about kind of a twelve to twenty four month process for qualification suggests that you're reaching near closure with a number of customers to start moving into production. Can you just talk about that process? And how we should think about revenue inflection in your ability to support those customers as they move into new production volumes?

Speaker 1

Yes. Let me give you high level report again, I'm probably getting some details. We have you see, we have built a huge customer pipelines. We have various customers at a different development stages. Q2 is a demonstration of transformation from the qualification stage to the revenue stage.

Speaker 1

Q3, we anticipate that we have more customer will move from the qualification stage to the revenue processing order stage. Tom, do want to give us some even more detail to call it?

Speaker 2

Yes, Colin, thanks for the questions. We have, as we say, three twenty somewhat customers. What we're really focused on is going deeper. We describe these as different layers. There's some companies we've been working with where we are seeing tens of thousands of batteries any given order.

Speaker 2

There's others that are earlier, that's part of why we invested and are building out the pilot line here to continue that. As Kang mentioned, there's an ongoing and growing process here, but that's how we think about winning the designs and then helping our customers achieve success, which can only help us.

Speaker 6

Thanks so much guys. And then, Sandra, on the financial side, you have a pretty impressive shift into positive gross margins here in the quarter. I'm curious how you guys are thinking about your cash needs and the potential for gross margin expansion from here as scale revenue?

Speaker 4

Colin, so as we've mentioned, Sycor has been gross margin positive since day one. And since that is the driver of the revenue growth, we expect that we're going to continue to see over time favorable movement in our gross margins to continue to get more positive. It may be a little bit lumpy. There are some we're still too small to say we're at a steady state for sure. But the growth is primarily coming from SciCore and that's all greater than the average gross margin.

Speaker 4

So we should continue to see that grow. Regarding the cash, again, with the $54,000,000 of cash, no debt and $47,000,000 left on the at market sales agreement. We're still in the 7,500,000.0 to $9,000,000 of operating cash burn a quarter. And so I think we've got a nice long runway.

Speaker 6

Great. Thanks so much, you guys.

Speaker 5

Our next question comes from the line of Mark Schuder with William Blair. Please proceed with your question.

Speaker 8

Hi, team. Congrats on another strong quarter. You mentioned in the shareholder letter pickup in the drone customer engagement. Could you give us some more color on the nature of those conversations, how they're accelerating? And could you also frame the opportunity for us maybe in a dollar content of batteries per drone or maybe market size?

Speaker 2

Yes. Maybe I can start that out. This is Tom. So Mark, thanks for the question. So we

Speaker 1

serve

Speaker 2

loitering drones, Group one, Group two and a little bit of Group three drones. There's a taxonomy. Those smaller drones tend to be battery operated. Group four and Group five tend to be the larger engines as opposed to motors. And we did talk in the call as you heard about enabling a tremendous value with Alto by being able to stay aloft for sixty seven days.

Speaker 2

So our batteries are incredible force multipliers. Every extra minute in the sky increases target engagement chances. It reduces logistical churn. It helps on military side commanders hold more terrain view, longer terrain view and reduces cost. It's not just the military, right?

Speaker 2

We have industrial inspection. Think about saving up alignments, climb up to look at power lines or bridges or utility work. We heard about those horrible floods in Texas, drones were helping identify folks who needed help and damage. In agriculture, you can trim pesticide use, have more efficient spraying, you can map, you can seed more efficiently. Walmart and others are using drones to deliver parcels and groceries.

Speaker 2

So it's pretty amazing what's happening here. We don't tend to talk about individual customers or orders. We did talk to our friends at McKinsey. The Battery Insight team believes that drones worldwide is something like a $50,000,000,000 market opportunity today. If you take the battery part of that, it's around 10% plus or minus, which gives us a total TAM for batteries of our type round numbers $4,500,000,000.05000000000 dollars

Speaker 8

That's great. I really appreciate the color there, Tom. Considering like that to go on that right the batteries section of that TAM and considering that the battery is a relatively small COGS line item. Can you speak to the pricing power that you guys may have because of the increased energy density and your pricing power over competitors? And given the geographical location, what are you willing to what are customers willing to pay up for maybe non China supply, like the South Korea capacity or even in the Fremont pilot line?

Speaker 2

Yes. So we provide tremendous value and for us and our customers it's about that value. It's not so much about the price. So we have a performance product and we're able to command a price. That strategy of having a disruptive technology, that can command a premium in the short term, this probably won't last forever, building scale and then moving down the cost curve is a tried and true path and that's a path that we're on.

Speaker 2

The pilot line here that is expanding is all about quick turn. So we can do quick turns. Some of our customers are ordering 100, 200 cells because they just need to test, want to validate that what we tell them is real. And then as orders come in, we go through our contract manufacturing partners. That's some of the dynamics on the customer side.

Speaker 8

Thank you, John.

Speaker 5

Thank you. The next question is from the line of Chip Moore with ROTHMKM. Please proceed with your question.

Speaker 7

Thanks for taking the question and congrats on the positive gross margins. I want to ask on the light electric vehicle opportunity. I think you talked about that being somewhat lumpy and shorter cycle. Any way to help us think about potential contribution there and visibility over the next few quarters?

Speaker 1

Chip, the light electrical vehicle, our market primarily in Europe and Asia. So, this industry experienced a revolution because everything from the vehicle design to the battery specification all changed. So we anticipate these are quite a large change and give us very exciting opportunity because this new standard, performance standard require high energy and high power. Now our battery just fitting to it. We have customer present us a very sizable opportunity, those customers from Europe.

Speaker 1

In Asia, the product qualification time is quite short. So give us additional maturity in the near term.

Speaker 7

Good to hear, Kang. And I think I heard you say earlier, on Q3, some of those customers that have been going through the qualification stage maybe for a little bit longer are going to move into revenue phase. Should we think about revenues increasing sequentially? Is that a fair assumption? Thanks.

Speaker 1

I think that should be the case based on the status of our qualification process.

Speaker 7

Very good. Thanks for the clarification.

Speaker 5

Thank you. Our next questions come from the line of Derek Soderbergh with Cantor Fitzgerald. Please proceed with your question.

Speaker 9

Yes. Hey, everyone. Thanks for taking the questions. Can you provide some more detail on that $10,500,000 contract with the U. S.

Speaker 9

Government? It looks like the innovation unit. Is this for drones? Or was this the wearable battery program? Just wondering if you could provide more detail what sort of led to that program, other details like where do you need to build this?

Speaker 9

Do these batteries need to come from your facility in Fremont? Or can they come from Korea? Just some more detail on that contract would be great.

Speaker 2

Yes. Maybe I can start that out. This is Tom. So the DIU is about ten years old. They are an arm of the DoD.

Speaker 2

They have offices here in Silicon Valley, Boston, other tech centers. They have three principal responsibilities to identify high potential technology like our batteries, to accelerate adoption across the DoD and to strengthen the national security innovation ecosystems. They received about $2,000,000,000 in the recent OB3A bill. So what we're doing is building out our pilot line, both in terms of capability. Sandra mentioned that we're adding the electrode manufacturing capability, the front end of a three part lithium ion factory, as well as increasing the capacity here in Fremont.

Speaker 2

And the idea is to have batteries that are NDAA compliant, right? Basically think of countries that are NATO countries or friendly with us. The $10,500,000 is going to cover more than 50% of that overall build out. We're dedicating resources and CapEx to deliver to that. The pilot line won't be huge, right?

Speaker 2

It's around 10 megawatt hours a year, but that's all about getting supplying and qualifying U. S. Material and getting mostly drones to the first part of your question, all integrated and designed into our type of technology and then making it available in NDAA compliant countries.

Speaker 9

Got it. That's helpful. And then just sticking to the DoD stuff. I've seen quite a few comments coming out from the administration, surrounding drones. Just from the investors' perspective, what's the best way to approach this opportunity for you guys?

Speaker 9

I know you've got potentially some production capabilities in Colorado if you wanted to make those investments. Do you think this pilot line and then whatever space you have left in Fremont can sort of handle this drone opportunity potentially

Speaker 3

in The U.

Speaker 9

S? Like what's the best way to approach this commentary that we're hearing out of the DoD that they want a domestic supply of drones? And how are you guys going to respond to that?

Speaker 2

Yes, Derek, question. A one word answer is velocity. We talked about in the recorded call, the two executive orders and HEXF from about a month ago about removing some of the friction. We heard just a couple of days ago that Transportation Secretary Sean Duffy and the FAA have tried to normalize the beyond visual line of sight for drone operations. So think delivery and other things, agriculture inspection.

Speaker 2

So that's all velocity, right? As these devices become mainstream and we have more and more of this occurring, We believe that our batteries are differentiators, huge value if you can deliver twice as many packages or you can do twice the acreage that you could do with a different battery. And that's where we want to play. That's where we can win.

Speaker 9

Got it. Super helpful. Appreciate it.

Speaker 5

Our next question comes from the line of Ryan Pfingst with B. Riley. Please proceed with your questions.

Speaker 3

Hey, all. Thanks for taking my questions. First, for the contract manufacturing agreement in South Korea, could you potentially size the production capacity you now have there or maybe what it looks like relative to the agreements you have in China?

Speaker 1

Yes. Currently, the capacity we just have one contract manufacturing partnership in South Korea at this time. The capacity is adequate for what we ask them to do today. This facility not only getting excited by our contract manufacturing partner, also the local government, okay, they really see Ampere's technology the enabler to expand their advanced new generation lithium ion battery manufacturing base in Korea. So we are working with them.

Speaker 1

As a matter of fact, these couple of days, I'm working on the plan for the facility expansion.

Speaker 3

Great. Appreciate that. And then sticking with the manufacturing side, you noted that you're still sourcing additional partners. Just curious what the main geographies are that you're targeting there for additional contract manufacturing capacity?

Speaker 1

At this time, the best manufacturing skills resigned Korea and China. They are the leaders in battery manufacturing. Those two areas we already have a partnership. We are strengthening the partnership, we extend our capability and capacity. In addition to that, we're also looking for domestic partnership as well.

Speaker 1

There are many U. S. Small sized battery companies. They have been experiencing very difficult time. So Ampere's technology and Ampere's market penetration could help this company.

Speaker 1

Potentially we can form partnerships in United States as well.

Speaker 3

Great. Thank you, Kai. I'll turn it back.

Speaker 5

Thank you. The next questions are from the line of Amit Dayal with P. C. Wainwright. Please proceed with your question.

Speaker 10

Thank you. Good afternoon, everyone. Congrats on the strong margin performance this quarter. So Sandra, just on that front, should we expect margins to remain in the positive territory, but vary a little bit depending on sales volume, etcetera, but stay in the positive territory for the rest of the year as revenue scale from here?

Speaker 4

Yeah. So that's a good question. So I think we have crossed over officially at the $15,000,000 of revenue per quarter line to be nicely positive. I think we'll see some variation, normal variation based on which deals are going through each quarter, but we should stay positive and continue to grow that positive gross margin over time.

Speaker 10

Understood. And then your comments around operating costs, as your revenues are scaling, it just seems like there may be some operating leverage coming into play as well. Operating costs, should we expect them to remain steady at around these levels, at least for the next few quarters before you see any further ramp in revenues?

Speaker 4

Yeah, given that we are leveraging the contract manufacturing model, we are going to mean, we're 97 employees full time as of the June. So we're still really lean. We're making strategic investments in R and D and in sales and go to market. But I wouldn't see a wholesale change in our operating expense profile in the foreseeable future.

Speaker 10

Thank you for that. Just last one, if I can squeeze this in for Tom maybe. Tom, can you talk about what the pipeline looks like, the opportunities that you're working on? Are there contracts potentially you may be pursuing that could be in the $20,000,000 $30,000,000 $40,000,000 level type of deals? Just trying to get a sense of how big some of these customer interactions could potentially be for the company?

Speaker 2

Yes. We don't tend to talk about them until the end of the quarters or if they're really large, we'll talk about a mid quarter. Look, as we said, these are different layers and there's a different gestation period at each of our customers. There's three twenty some odd that we've served over the last six, eight quarters. We'll work at them all.

Speaker 2

We're pretty wide. We want to go deeper. We want to get those design wins. And we're doing that. There's some tools that we've improved to do that.

Speaker 2

There's some partnerships that we're working on. Can't tell you much more than that at this point in time.

Speaker 10

Understood. All right. I'll step back in

Speaker 2

queue, guys. Thank you so much. Thank you.

Speaker 5

Our next question is from the line of Ted Jackson with Northland Securities. Please proceed with your questions.

Speaker 3

Thanks very much. Want to keep googling around on the production side of things. So the South Korean facility is on the cusp of coming online. You've been making Cyclo product in the pilot line at Fremont. I mean, there a potential for a step up in revenue when the South Korean partner brings that line into play and you begin to transfer some of that production out of Fremont to it?

Speaker 3

And when exactly does that South Korean line turn off? Is that a third quarter phenomenon? Is that a fourth quarter? Is that a first quarter? That's my first question.

Speaker 3

And your questions? Thanks.

Speaker 1

Now we engaged with them about a couple of quarters ago. We just finished because of the we just finished the new tooling of the equipment. Another equipment, another all the production line already for Ampere's product. So we just finished that. We had a prototype presented to us.

Speaker 1

I believe we are going to start the manufacturing for our customers next month. So this we have a fraction of the customer like to buy the batteries from a specific region. That's one of the reasons we developed a partnership. In addition to that, South Korea and those automated battery, they are one of the best in the industry. So Fremont will have a very intimate relationship interaction with our contract manufacturing partnership.

Speaker 1

Tom mentioned earlier, we are going to expand and upgrade our pipeline here. So our manufacturing process here can be delivered to our contract manufacturing facility, vice versa. When they develop something unique, we will share with our team here.

Speaker 3

Is there a chance that as that comes online that is there do you have any kind of pent up demand that's waiting for that South Korean facility to turn on because they don't want to have their product come from China?

Speaker 1

No. Korean partnership the partner we have in Korea, they certainly can manufacture anything the Chinese is making, okay, for pouch cells. Today, we have not have cylindrical cell partnership in Korea, but we are in the discussion. But whatever we made in Fremont, made in China, made in Korea, this should be all capable to manufacture our batteries.

Speaker 3

Okay. The next question is, the margin is improving. Sycor has been a tremendous success for the company. It's driving revenue growth. It's driving margin.

Speaker 3

Can you give us some kind of ballpark mix of the revenue between Sycor and Cimax this period? And maybe what was it second quarter?

Speaker 4

Yes, Ted, we don't break it down. We just break it down by product. But it's fair to say that the majority of our growth is coming from Sycor.

Speaker 3

Okay. And then with the expansion of Fremont line, you commented that you're going to spend some more money relative to maybe what was in the plan at a quarter or so ago. The government is going to provide you, call it $10,000,000 and then you're going to put the other half. How do we think about how this plays out within the financials? Like when we think about the actual CapEx numbers that we're going to be putting in our models for cash flow, what are those numbers and how does it play out?

Speaker 4

So what we're contributing is really dedicating resources that we have that are working on this important initiative to diversify our supply chain and expand manufacturing within Fremont and some funds for equipment and build out. So the DIU contract is over the next six quarters is funding the majority of the effort of this project. So our portion is a fraction of the $10,000,000

Speaker 3

Okay. But so you would get the money in and then you would spend it. So I mean, I assume we would still see a pickup with regards to just in your cash flow statement for CapEx. But at the end of the day, it's really just flowing through your financial statements from the DIU. Is that do understand what I'm saying?

Speaker 3

Just to understand how it goes through the model.

Speaker 4

Yes. So I think revenue recognition for a contract like this is a little bit tricky. We're still working through the details. But the overall, it's fair to assume that it's going to come through as revenue and we're going to show the cash going out in the statement and cash flows.

Speaker 3

Okay. And then my last question. They're offering this to you and helping you out. There's clearly a desire by this administration, honestly, even the previous administration to bring, well, battery manufacturing into The U. S.

Speaker 3

And also just strategic industrial activity into The U. S. I would say that the fact that you've got this funding shows that you are strategic. Is there any discussion or any opportunity for you to go into partnership with the government to bring to fruition the work you've done in Colorado?

Speaker 4

So we're in regular communications with a number of key stakeholders. And one of the things that we've been clear about is that our ability to move forward with the design and the capacity in Brighton is really dependent on a number of macro things going on, not the least of which is tariffs, government incentives, supply and demand. At this point, we have more than enough capacity. We would be over $1,000,000,000 in revenue with the 1.8 gigawatt hours that Kang has already secured for us. And so we've got more than enough capacity to serve the foreseeable future.

Speaker 4

And we but we are keeping those lines of communication open if something does change that would make it more economically viable to move forward with Brighton at this time.

Speaker 3

Okay. That's it for me. Hey, congrats on the quarter. It was great.

Speaker 2

Thank you.

Speaker 5

At this time, this concludes our question and answer session. If you have any additional questions, you may contact Ampreus' Investor Relations team at irampreus dot com. I'd now like to turn the call back over to Doctor. Sun for his closing remarks.

Speaker 1

Thanks again, everyone, for joining us today. As a reminder, you can find out more about our company, receive additional updates and learn about upcoming events from the Investor Relations section of our website. We look forward to updating you on exciting progress we are making in transforming the electrical mobility market. Finally, I'd like to thank our employees, partners and shareholders for their continued support.

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