Advent Technologies Holdings Inc (ADN) 2023 Q2 法說會逐字稿

Good 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. (Operator Instructions)

On the call today, we are joined by Dr. Vasilis Gregoriou, 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 announced second-quarter 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, 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. 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 risk 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. 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 estimates. Please note that this call is being recorded.

Kicking off the call will be Dr. Vasilis Gregoriou. Dr. Gregoriou, I now turn it over to you.

Thank you, operator. Good morning to everyone listening in, and thank you for joining us on Advent's second-quarter 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 16, I highlighted that Advent has further consolidated its business operations and was focusing on the core sectors of mobility and stationary power. This has continued in the second quarter 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 scaling of production capacity. We intend for this progress to continue towards large-scale manufacture as soon as our Green HiPo project commences.

We believe that the future demand for Advent's high-tech -- high-temperature PEM technology and related products will create a significant opportunity. And we believe Advent would be ideally positioned to capitalize on these two suitable partnerships.

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. 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. BASF Environmental Catalyst 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 cells.

For the past 20 years BASF Environmental Catalyst and Metal Solutions has been a leader in membrane and MEA technology for high-temperature PEM fuel cells with a strong foundation in precious metal services and catalysts. Advent is a significant manufacturer of high-temperature PEM 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 from e-methanol fuel cells, and heavy-duty mobility.

High-temperature PEM fuel cells operate at 120 to (technical difficulty) degrees Celsius, offer a broad operating window, and can tolerate impurities in the hydrogen fuel gas. These fuel cells also enable simplified cooling and do not require humidification. Advent offers competitive fuel cell systems for stationary and portable applications based on methanol and on-site reforming. Looking ahead, high-temperature PEM fuel cells will also be available for heavy-duty mobility and maritime power.

The scope of the agreement includes BASF's role in scaling up MEA production at Advent's planned state- of-the-art manufacturing facility in Western Macedonia, Greece, while offering Advent its full portfolio of products and services to enable circularity in key material. Both companies will cooperate on BASF's latest membrane development, Celtec-Z, and the new Ion Pair MEA membrane by Advent, aiming for improved performance, lifetime, and cost competitiveness.

In the aerospace sector, Advent signed a memorandum of understanding with Safran Power Systems (sic - Safran Power Units), a leader in auxiliary power systems and turbojet engines. Leveraging Advent's proprietary Ion Pair MEA 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 is more adapted for applications requiring high amounts powered combined with strong integration constraints as in aviation. High-temperature PEM is more robust and can withstand tougher operating conditions, such as extreme temperatures and pollution versus low-temperature PEM.

The collaboration is further supported by a strong research consortium including the Research & Technology Center of Safran Group, the French Alternative Energies and Atomic Energy Commission, Fraunhofer Institute, the French National Centre for Scientific Research, the University of Strasbourg, and the IMDEA Energy Institute. Led by Safran Power Units and with the support of Advent, the consortium has secured a grant for the Clean Hydrogen partnership, NIMPHEA Project.

Running from 2023 to 2026, the project is funded by Horizon Europe. And the project's main objective is to develop an aircraft-compatible, next-generation High-temperature PEM MEA. This involves optimizing and enhancing various components, such as the catalyst layer, membrane, and gas diffusion layer. Advent's Ion Pair MEA technology serves as the foundation for these advancements.

As part of the newly signed MoU, Advent and Safran Power Units are exploring a joint development agreement for the advancement of high-temperature PEM fuel cells in aviation and for enhancing Advent's supply capability.

In May, Advent announced a contract with a prominent fuel cell manufacturer specializing in truck applications in the East Asian market. Under this contract, Advent will supply high-temperature PEM MEAs to support the development of advanced fuel cell solutions for trucks. The contract, with a combined value of $1.1 million, comes after a highly successful testing phase of Advent's proprietary MEA technology conducted by our customer.

Advent will deliver high-temperature PEM MEAs with a projected continuation of deliveries aligned to the customer's specified timeframe. The use of Advent's MEA technology in fuel cell-powered 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 determining the overall performance, durability, efficiency, weight, and cost-effectiveness of the electrochemical products they empower.

Advent's electrochemistry components business includes electrodes, membranes, and MEAs. These components are critical for fuel cells, electrolyzers, and for long-duration energy storage, such as flow batteries.

In June, Advent participated in the Second European Electrolyzer Summit held in Brussels. I was part of a delegation of 30 CEOs who represent 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 objectives outlined in the joint declaration of the May 2022 EU Electrolyzer Summit. The meeting, jointly organized by the European Commission and Hydrogen Europe as part of the Electrolyzer Partnership, brought together approximately 44 companies actively involved in the European electrolyzer supply chain.

Following the Second European Electrolyzer Summit, the industry remains steadfast in its commitment of achieving the ambitious goals set out in the REPowerEU communication. The objective is to accomplish 10 million tons of domestic hydrogen production and import 10 million tons of hydrogen by 2030. 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 seven years. This will involve scaling-up from the current 3-gigawatt production capacity, so approximately 21 gigawatt by 2025.

In a recently published document, the partnership members and the European Commission provided an update on the progress that has been made one year after the signing of the joint declaration. 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 bank.

For Advent, Green HiPo project, we provided an update in May on its status. This update highlighted the recent milestones achieved in the project as described below, emphasizing the collective dedication of the entire Advent team towards decarbonization and the transformation of the clean energy landscape in Greece and Europe.

Most notably, one, Advent successfully acquired the ownership rights to a prime parcel of real estate located in Kozani, Greece, where its planned state-of-the-art facility for the Green HiPo IPCEI project is expected to be located. This land acquisition underscores Advent's unwavering dedication to establishing a robust infrastructure that will effectively and strategically support the objectives of the Green HiPo IPCEI project. Advent has also set-up a coordination and planning office in the center of Kozani, which will serve as the operational hub for the Green HiPo IPCEI project.

Second, Advent has initiated the process of identifying and hiring key professionals, such as scientists, engineers, and managers, who will play integral roles at the new state-of-the-art facility in Kozani. These individuals will drive critical functions, such as research and development, first industrial deployment, and supply chain management. Their expertise will be instrumental in the development, design, and manufacture of innovative fuel cell systems and electrolyzer systems. Advent's careful selection process will ensure that top-tier talent is recruited to support the successful execution of the Green HiPo IPCEI project, thereby ensuring the project's success in 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 for IPCEI Hy2Tech. Accordingly, and as a pre-requisite for unlocking the State Aid funding for Green HiPo, the Greek State is examining and 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 neutrality. Parameters for the planning of such actions include implementing projects at specific times, the viability of the completed proposed plans, as well as compliance with regulatory obligations and guidelines regarding the management of European funds.

We will provide further updates on Green HiPo at an appropriate time. Advent is suitably positioned to take advantage of the growth focus on clean air. We will continuously advance our technology and consolidate on operations to address new and key opportunity. We have a product portfolio that's focused to enable a green economy, one that will reduce the reliance on fossil fuels and will decentralize the energy supply market, therefore providing energy security to communities and economy.

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

Thank you, Vasilis, and good morning, everyone.

Turning to our financials, we delivered revenue of $1.1 million in the second quarter and income from grants of $0.7 million for a total of $1.8 million.

R&D expenses were $2.9 million in the second quarter, primarily related to internal R&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 $8.3 million in the second quarter. Combined with R&D, total operating expenses were $11.2 million, a year-over-year increase of $0.6 million, primarily related to an increase in research and development costs as well as expenses related to our new Hood Park facility in Charlestown, Mass.

We recognized $9.8 million of asset impairment charges in the second quarter, mostly related to the assessment of goodwill and other intangible assets from the company's acquisitions in 2021.

Net loss in Q2 was $21.8 million or $0.41 per share.

Unrestricted cash reserves were $10.1 million as of June 30, 2023, a decrease of $9.5 million from March 31, 2023, which includes $3.4 million of cash that we raised from the company's equity line of credit with Lincoln Park Capital, $1.9 million paid to complete the acquisition of the fuel cell systems business in Denmark, Germany, and the Philippines, $0.8 million paid to acquire land in Kozani, Greece, for the Greek HiPo project, and $0.4 million 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 HiPo project, 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 million of capital over the three-year term. The utilization of this equity line of credit is at Advent's discretion and provides us with an effective buffer that may be used alongside the other funding routes.

As I mentioned earlier, we raised $3.4 million 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 million 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 second quarter. Aside from raising capital, we will continue to manage our cost structure closely and capitalize on opportunities to reduce costs where possible.

Let me now turn to our outlook. 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 Advent's control. Opportunities may not materialize or it 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 HiPo 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 Vasilis for closing remarks.

Thank you, Kevin. Advent has significant opportunities for its high-temperature PEM technology, advanced materials, and fuel cell system projects. Advent is a (technical difficulty) energy technology company, developing innovative products for key sectors that require clean energy. We look forward to growing the business, and we'll keep you abreast of developments.

I would like to thank you all for joining us today. Before we open the line to any questions from the company channel, I would like to address questions submitted by Lacie Midgley with Panmure Gordon, who is unable to join the call today.

The first question is, can you provide an update on the Green HiPo 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 HiPo. And we have demonstrated particular actions that says that we'll move in this direction.

First of all, we scheduled all the R&D and development work. Second, we have identified a suitable site. We purchased the land. And we have commenced with planning. So it's very important, we have entered this very strategic agreement with BASF and other funds that we cannot mention right now -- and we will announce obviously the details at the appropriate time -- that ensures that the minute we start, that we have these giant with us to be able to manufacture the products with quality and at the right time.

In the meantime, as we said, we are -- complained to the European Union because we feel that this is a big delay here from the state and it's really not acceptable by us. So I sent a letter to Commissioner Breton, who initiated an internal discussion within the European Commission, with DG growth and DG internal market in the same SME. These are policy departments, the Directional General (sic - Directorate-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 authorities to be able to inform us and us to inform you, the shareholders, that the project will receive the foreseen public funds. So I think we're in the last stages.

And there, as you know, we had very big delays within that action with other European partners. Of course, we have suffered, we believe, a big loss in our valuation because of all of that. So this thing needs to be resolved as soon as possible. The Europeans understand that this is a project of common European interest, this is not Greece only, not Italy -- for [Denora], let's say, and it's not planned for [Mcfe]. 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 (sic - Alternate Minister for Private Investment Issues) from Greece, Mr. Nikos Papathanasis, in response to my letter to him on July 25. And basically, the idea is -- and I will go over the letter in a bit. The idea is that the Greek State is examining and planning ways to implement actions and to strengthen the initiatives that will contribute to the transition of the productive and growth model of the Greek economy towards climate neutrality.

The parameters for the plan and such actions include implementing project 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 IPCEI program, and will 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'll do everything in our capacity to finish this. And we'll keep you posted on the developments, which, as I said, I think there will be very soon.

Several questions is again from Lacie. Can you provide an update on the Hyundai JDA and next key milestones, including expected first sale? As you know, the -- as with other automotive manufacturers, Hyundai is an OEM. And basically, we're developing the fuel cell system in collaboration with the OEM.

We have a joint development agreement now, where we -- our PEM MEA and, actually, our fuel cell expertise as well will be incorporated in an automotive engine with Hyundai. And Hyundai has shown great interest in the technology -- in basically the Ion Pair technology.

And we also -- there, we corporate Hyundai technology as well. We use a Hyundai catalyst for that particular program. So the whole idea is to achieve the power targets that they're conducive for automotive in order for this to become an actual -- a product.

Now as you know, we have three core hardware modules on the market already. So we have good experience from using them. And as I said in other calls as well, it's not going to be Hyundai that we'll work with. We have other large companies that we cannot name, but we're working very actively with all of them.

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 vision -- because we have this for quite some time now, as you know, the ones that follow us. The methanol, and eventually e-methanol, that arrived from green hydrogen, we believe, will be a key fuel in the path to net zero for maritime.

So not only Siemens Energy, but also Alfa Laval, Merck, they all work there. And we're trying to collaborate as many of them as we can. But we have -- there is success with Siemens and San Lorenzo. And we feel very proud about that.

So again, the idea is that when you use high-temperature PEM and e-methanol, we're talking about a similar system, an inexpensive one-space [deformation], whereas low-temperature PEM requires 99.99% pure hydrogen. The cell system now that we'll is made in Denmark, and we're talking about 100 kilowatt. But we actually also can go to 250, easy.

So that's the status over there. I think there is the right technology and the right market. And it's -- reduction, if you will, to grow this as fast as we can.

Another question is, how has conversation as part of the early stages of the BASF agreement progress with regards to establishing the end-to-end supply chain in Europe? I think we've discussed that also in the script. Basically, the idea is that -- the BASF agreement is very significant for us because, one, it endorses our technology. And second, it fortifies our supply chain.

We're working on high-temperature PEM with BASF for about 15 years now, as you know. BASF is a global leader in manufacturing membranes, electrodes, a lot of expertise with PPI. And as I said, we're very close and for me would be a key parameter, this association, in accelerating the Green HiPo. 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 of BASF to manage precious metals in a closed-loop processing of this material. That's very important when we go from more pilot programs through large-scale manufacturing.

The next question is, does your current cash position and currently burn rate give you sufficient headroom until funding is received for and to execute on the Green HiPo project and other commitments? I'm going to turn this to Kevin. So Kevin, will you please answer this?

Yeah, sure. Thank you, Vasilis.

So let me share some information on our liquidity situation and cash burn rate. So we finished the second quarter with right around $10 million of available cash on our balance sheet. As you know, over the past three 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, the other is an ATM facility with H.C. Wainwright.

Each of those facilities gives us the opportunity to access up to $50 million of capital over the next three years. And that's at our discretion on whether and when we utilize those facilities. So we have those two facilities in place.

As I mentioned in my comments this morning, we raised $3.4 million in the month of June, utilizing one of those two 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 will probably range between $2.5 million and $3 million per month. And so that the $3.4 million 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.

And 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 HiPo or from other sources of cash.

And with that, I will turn it back to Vasilis.

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

Yeah. We'll turn it back to the operator to open the line for any other questions.

Yes.

Thank you. The floor is now open for your questions. (Operator Instructions) There are no more questions. Thank you, ladies and gentlemen. This does conclude today's call. Thank you for your participation. You may now disconnect.