TE - NYSE

Hello and welcome to FREYR Battery’s Fourth Quarter and Full Year 2023 Conference Call. With me today on the call are Tom Einar Jensen, our Executive Chairperson; Birgir Steen, our Chief Executive Officer; Oscar Brown, our Chief Financial Officer; Jeremy Bezdek, Executive Vice President of Corporate Development and President FREYR Battery US. During today’s call, management may make forward-looking statements about our business. These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expectations. Most of these factors are outside FREYR’s control and are difficult to predict. Additional information about risk factors that could materially affect our business are available on FREYR’s S-1 and Annual Report on Form 10-K filed with the Securities and Exchange Commission, which are available on the Investor Relations section of our website. With that, I'll turn the call over to Tom.

Thank you, Jeff and welcome everyone to this fourth quarter earnings call; FREYR’s 11th earnings call since we went public on the New York Stock Exchange on July 8, 2021. I want to thank all of our investors, shareholders and stakeholders for their continued support, even as we have been navigating very challenging times of strong headwinds, both in the markets and as a company. I want to take this opportunity to provide some overall strategic reflections and perspective on where we are, where we're going, and why we're confident that we're on the right track to succeed as a company. Even though it is extremely challenging to build a battery company, we have been able to turn adversity into advantage and we now see that the actions we have undertaken since the third quarter reporting are starting to yield significant operational and commercial traction. First of all, let me underline that the energy transition is happening faster than most realize, and most are able to estimate. EV sales momentum seem to be back on-track, with EV sales now showing 69% growth year-over-year from January ’23 to January ’24; and now surpassing 1 million cars in January for the first time ever. All markets are growing and year-end estimates keep trending upwards in most markets. The ESS market in 2023 was furthermore twice as high as initial estimates by reputable agencies, and closed above 100 gigawatt hours per year for the first time, and solar deployment continues to develop at record pace. Everything else that can be electrified will be electrified, and be driven by continued energy density improvements and strong cost reductions. All of this requires massive amount of automotive, domestic commercial and industrial scale storage solutions, and everything else that will be electrified for balancing out the variability of the renewable energy generation. Demand for batteries will continue to grow at the highest growth rates within the renewable energy industry and could become the largest segment in the new energy economy as early as 2030. However, while current installed capacity in China outstrips demand, there are increasing challenges for Chinese companies to export products and establish presence and invest abroad. Supply will also increasingly be regionalised overtime as batteries are becoming a critical part of energy infrastructure and the backbone of the New Energy System. Ultimately, however, it will be the ability to ride learning curves and be on the left hand side of the cost curve that will determine the winners in the long run. I am therefore very proud to say that FREYR has now finally proven that we're capable of producing electrochemically active electrodes through fully automated production of anodes and cathodes with the next generation 24M technology. We furthermore are also increasingly mastering the electromechanical challenges at the CQP [ph], which is now 94% complete, and we're on-track to start fully automated production of batteries for testing by customers in the first half of 2024. This means that we are moving from an aspiring battery company to a company producing batteries; FREYR strategy thus remains intact, and while we've had serious challenges to deal with, we are on-track to become a Western Hemisphere based global champion for clean battery solutions as our actions initiated since the Q3 reporting is starting to show significant results. As Birgir and the management team will take you through, our technology flexible strategy provides a differentiated and dual exposure to the battery industry, and we're making real headway along both tracks. We are developing next-generation battery solutions that ultimately will be cost advantaged relative to conventional solutions, and our industrialization partner of choice approach is generating strong and increasing interest which is opening significant new near-term commercial opportunities. All our strategic partners, customers and suppliers stand with us on this journey, and I would again like to thank our investors who have stood by us in these challenging times. We're deeply grateful for the patience you have shown us, and I can reassure you that all stones have been turned and we pushed all possible boundaries to ensure we can get on the offense again and regain momentum and trust in the marketplace. I will now hand it over to Birgir and the team to take a deeper dive into how we are trending towards becoming a global champion in clean battery solutions produced in the Western Hemisphere through starting to produce fully automated batteries with next-generation technology and delivering conventional solutions based on our partnership based model. Birgir, over to you.

Thanks, Tom, and hello to everyone joining today's call. Turning to Slide 4, let's look at where we stand today as our team is working on a number of exciting opportunities to generate value for you, our shareholders. As I alluded to in this morning's earnings press release, the changes we made in Q4 throughout the company are bearing fruit. We've cut cash outflow by more than half year-on-year and flattened the organizational structure to ensure information sharing, collaboration across our teams, and accelerated execution against our key objectives. As Oscar will touch upon later, battery production is capital intensive, and we're committed to deploying your capital to only the highest value opportunities while we focus on our two capital formation initiatives. The DoE Title 17 application through the loan programs office and project level equity discussions for Giga America. Our more run at CQP is the other area where we're seeing impressive performance from our people in close collaboration with our global network of vendors and strategic partners. Mike Browse [ph], our site leading [indiscernible] brings more than 30 years of experience working in and managing complex manufacturing and processing facilities, and he and his new team have driven strong progress in recent months. During the month of February, Mike and the team brought the CQP into operating mode on a dry room conditions and we're now producing automated electrodes with active electrolyte slurry. This is a meaningful step towards fully automated production at Giga scale rate. We're in the process of transitioning the CQP from installation and commissioning to production of sample battery cells for key customers, which is FREYR’s number one priority for the first half of 2024. The CQP is our means to achieve technical validation and broad customer acceptance of the 24M semi-solid product family. Following customer testing and sample cell acceptance, we will move on to off-tech conversions with key customers in turn triggering our next wave of capital formation. Moving to Slide 5, our technology strategies yielding several promising opportunities to accelerate commercialization. During our Q1 2022 earnings call, we unveiled a competitive strategy founded upon two key elements; expanding on the battery value chain into high value adjacencies to sell production, point one. And cultivating partnerships across the cell production technology spectrum from conventional to next-generation, and with the 24M semi-solid platform as our foundational fit for purpose ESS and E-mobility solution as point two. Two years later, much has changed in the industry and the macro environment; interest rates are up and still high, the ESS market is growing close to triple digit kg in US dollar terms and significantly above industry expectation, capacity buildup in China and lower material costs have triggered a steep drop in cell market prices, and finally, the IRA has materially changed capital flows. These rapid and to some extent unpredictable changes reinforce our view that our strategy of retaining flexibility in both, technology platforms and partnerships, continues to be appropriate for FREYR. It will enable us to capitalize on our core competency in manufacturing scaling while we expand our addressable markets in the U.S. and in Europe, and build a profitable position as the leading U.S. based battery maker. 24M is our next-generation platform to scale a Western technology stack that we believe will be a source of long-term competitive differentiation. We love the dynamics of the SS market, and we believe that 24M has enormous potential to be a disruptive solution for storage, as well as selected transportation applications. The flexibility of the semi-solid platform to work with different chemistries and to eventually evolve to fit new used cases is also an appealing characteristic of this technology in the longer term. While we scaled 24M on the path to mass production at Giga factories, establishing a conventional technology footprint should also enable us to accelerate our path to commercialization and new addressable end-markets. This approach has been validated by the industry leaders. Technological differentiation is essential long-term but there is tremendous value in getting to market engaging with customers and driving transferable operational technical learnings, maturing our business as we grow our topline. Turning to Slide 6, which I'll walk you through with Jeremy; receiving validation of this technology approach in real-time. Our team is focusing on five distinct project opportunities across the U.S. and Europe for semi-solid and conventional technology applications, and addressing the ESS, commercial mobility, and potentially passenger EV markets. These five project pursuits, which are in various stages of maturity, collectively encompass more than 100 gigawatt hours of potential capacity. All of these projects involve industry leading customers and partners. Beyond those five distinct project opportunities, Jeremy and his team are also discussing other avenues to accelerate FREYR’s phase path to commercialization. Jeremy, over to you.

Thanks, Birgir. In addition to the opportunities that Birgir just described on Slide 6, we have been reviewing several possible inorganic growth opportunities where FREYR’s balance sheet is valued as a key component for growth. We're not in a position to speak about any of these opportunities today but we do believe there are deals available to us that bring growth and the ability to generate revenue in the near-term through possible acquisitions where synergies could be highly valuable. We will continue to evaluate these opportunities as we move forward, and we look forward to sharing those deals as they materialize. Birgir?

Thanks, Jeremy. Moving to Slide 7, let's turn our attention to the CQP. This morning, we were pleased to announce that the asset Mo [ph] Team has realized another important milestone on the path to reaching fully automated production by successfully conducting anode casting trials with live electrolyte slurry. Our people are now operating in a dry room environment as you can see from the photos on the right of the slide, which means that our collective mindset has shifted from building tools that will produce battery cells to approaching the start of samples of production for our customers. There are more milestones directly ahead in the first half of 2024. The next item on our punch list is to integrate the casting web across the cathode, anode and merge kits using a next-generation multi-carrier system or MCS. Upon completion of that task, we can move to the anticipated start of automated production of functional sample cells for a key customers in H1. Producing customer sample cells with a full automation of the CQP will be a major achievement and is the gateway to validation of the semi-solid process technology, demonstrating product performance attributes that can convert offtake agreements to binding sales contracts, and catalyzing capital formation through the DoE Title 17 process, and a project level equity race for Giga America. Our ultimate goal at the CQP therefore, is bringing the next-generation U.S. based technology to Giga scale production in Coweta County, Georgia, and in turn, capitalizing on the benefits of the Inflation Reduction Act. Now, I'll turn it back over to Jeremy to walk you through the latest on Giga America.

Thanks, Birgir. Moving to Slide 8, the Giga America project team is excited about the progress we're making at the CQP, and we look forward to being the flagship project that allows us to industrialize that technology at scale. As a reminder, we currently owe 368 acres in Coweta County, Georgia. This location sits deep in the heart of the south-eastern United States, which is quickly becoming the clean energy and battery hub for the U.S. We continue to progress two distinct tracks that will enable us to develop hundreds of jobs in Coweta County while investing multiple billions of dollars of capital in the state of Georgia. The semi-solid technology track utilizing the 24M tech continues to advance on the back of the achievements realized at the CQP. As Birgir mentioned, we are advancing our Title 17 application in deep coordination with the DoE Loans Program Office, and we are focused on securing a conditional commitment from the DoE before the end of 2024. As we progress into the second half of the year, we will re-energize our project level equity conversations demonstrating success from the CQP and the opportunity to fund the debt side of the capital stack from The Department of Energy. It is quite likely that the conventional technology track will end up being the first opportunity for production on the Coweta County site. We have been undergoing deep due diligence with multiple technology providers, and we're nearing a decision on which technology we will select to scale on the Georgia site. We look forward to sharing our technology selection in the coming weeks. With the technology access secured, we will quickly move forward with both, project finance and project level equity to fund the project. We believe project level equity can be secured during the second half of the year, which would enable us to move the project execution forward as quickly as possible and get us to a start-up production in 2026 utilizing the conventional technology. I will now turn it over to Oscar for an update on the financial condition of FREYR, as well as an update on the re-domiciliation efforts that we completed in December. Oscar?

Thank you, Jeremy. Moving on to Slide 9; we provide an update regarding our efforts to re-domicile from Luxembourg to The United States, which were indeed successful and effective as of December 31, 2023. I want to thank our shareholders for supporting the transaction with their votes. This move dramatically expands our opportunity for equity index inclusion, as historically only an estimated 3% of our shares were held by index funds compared with a peer average of over 20%. Re-domiciling has the potential to drive incremental holdings of upto 45% of our current market capitalization, if we were held by all the index funds we would qualify for, as well as associated actively managed funds to benchmark against those indices. Moving our domicile to the U.S. has also the added benefit of aligning FREYR with a country that has offered the highest incentives for battery manufacturer in the free world, as well as the world's largest market for our products. The U.S. and Delaware have well understood corporate governance and disclosure requirements, and we will still be able to maintain our European strategies alongside our U.S. efforts. Our main office in the U.S. is Newnan, Georgia, just down the road from our 368 acre plot in Coweta County. Other important benefits of the re-domicile are noted on the slide. Moving now to Slide 10; optimizing our spending. I will review our recent financial results. For the quarter ended December 31, 2023, FREYR reported a net loss of $24 million or $0.17 per share, compared with net income of $25 million for the same period. Net income from last year's period benefited from a $60 million non-cash gain on our warrant liability fair value adjustment due to changes in our stock price. This line item reflects a gain when our stock price declines during any reporting period, and a loss when our stock price increases. For the fourth quarter of this year, we recognized a $9 million non-cash gain on this item. For the full year ended December 31, 2023, the company reported a net loss of $72 million or $0.51 per share compared with a loss of $99 million or $0.83 per share for the same period last year, including warrant liability fair value adjustments of $32 million and $14 million, respectively. The company reported higher general and administrative expenses, as well as higher research and development cost for the full year 2023 compared to 2022. Logically, this was a function of our large organization, which had been managing more projects around the world prior to our December 2023 restructuring efforts. FREYR reported a decline in G&A from the fourth quarter of 2022 compared with the fourth quarter of 2023. R&D increased quarter-on-quarter, primarily due to increased spending related to enhanced efforts to bring the CQP and test center online. Looking ahead to 2024, we have initiated a significant cost cutting and resource prioritization program focusing on the CQP and Giga America, while putting Giga Arctic on pause. This significantly reduces our annual cash burn rate as we seek to extend our liquidity runway to two years into 2026, well before we raise additional capital. As such, we have budgeted material reduction in G&A and capital commitments in 2024 compared to 2023. Most importantly, we exited 2023 with cash of $276 million, as a result of the restructuring in December, we incurred a $6 million one-time charge for severance expenses, most of which will be paid out during the first quarter. By the end of the first quarter we expect employee headcount will be reduced by 22% compared to November 2023, and the number of consultants and project support personnel will be reduced by 26%. Moving now to Slide 11; optimizing our balance sheet. We ended 2023 with total assets of $732 million, including net PP&E of $366 million, total liabilities of $97 million and no debt and total shareholders’ equity of $635 million, which implies a book value of $4.54 per share. Total cash spending of $287 million during 2023 came in well under budget due primarily to a reduction in scope of our Giga Arctic spending plans during the year. While we continue to work with the Norwegian Government on incentive programs to compete with the U.S. IRA and the EU's TCTF [ph] programs, and will do so throughout this year, we are not currently forecasting any significant capital expenditures for Giga Arctic in 2024. As such, the CQP, Giga America, and the pursuit of a conventional project are our primary areas of focus. Any significant capital expenditures in 2024 other than the capitalized costs related to the CQP and test center will only be sanctioned once new financing is secured. Given our current cash balances and our reduced cash requirements for 2024 compared with 2023, pending any new financing, we have insured FREYR has a two-year cash runway. So our 2024 spending will be focused on getting to fully automated battery cell production at the CQP using 24M technology and the production ramp necessary to deliver testable cells from the CQP to our customers, the continued development of Giga America, including the cost necessary to obtain conditional credit approval this year from the DoE Title 17 Loan Program for our 24M based Giga Factory, and pursuing a conventional relationship and project to accelerate our paths to first revenues. Indeed, we are actively evaluating significant opportunities which might merit short-term investment that lead to longer term capital formation on attractive terms in the near-term. How the CQP, Giga America, and these other opportunities develop might impact our spending for the year, and we will keep investors well informed. We have entered 2024 with the company well positioned for the current environment. We have protected our balance sheet and extended our cash runway. We continue to pursue maximizing our project development opportunities. We have a great team, a pristine balance sheet, and a long list of opportunities across the battery value chain. With that, I'll turn it back over to Birgir for additional comments.

Thanks, Oscar. I'd like to conclude on Slide 12 before we turn to Q&A. It's been an intense start to the year for our team as we evaluate and pursue a number of potentially transformational initiatives for FREYR. To give you a better sense of the road ahead in 2024, we thought you would find it useful for us to share a roadmap of key goals and potential catalysts that we are targeting this year. Many other conversations we're having are confidential, so this list is not exhaustive, but it should give you a reasonable picture of what we're aiming to achieve. Our number one priority at FREYR in H1 2024 is to demonstrate the semi-solid technology at Giga scale at the CQP. Based on a momentum that the entire asset Mo [ph] team has built in coordination with our global network of vendors and partners, we are on-track for this in the first half. On the conventional technology front, we're moving at pace to establish in an accelerated path to commercialization for FREYR, and we're focused on finalizing and announcing an agreement during the first half of 2024. We are also continue to progress our capital formation initiatives. As Oscar mentioned earlier, we're collaborating closely with our colleagues at the DoE Loan Programs Office, and we're engaging with potential project level equity investors about bold [ph] technology tracks for Giga America. Our FREYR 2.0 growth initiative to formalize commercial relationships and pursue the fire project opportunities I highlighted earlier, totaling more than 100 gigawatt hours of collective installed capacity is also gaining momentum. We look forward to sharing more detail about them when it's appropriate. For the second half of the year, we're turning our focus to commercialization and capital formation. With sample cells rolling out of the CQP, we're targeting customer validation of the semi-solid process and product performance characteristics, which we expect to trigger offtake conversions. And finally, we're targeting conditional commitment from the DoE through Title 17 LPO application before year-end 2024, which is also a key catalyst for prospective project equity. Before I turn it over to Jeff for the start of Q&A, I'd like to express my sincere gratitude to our employees around the world at FREYR. From my first day of the job in August last year, you've welcomed me to the team, and you inspired me with your dedication, professionalism and entrepreneurial spirit. On behalf of the FREYR leadership team, and our Board of Directors, thank you for all that you do. And with that, I'll hand it back over to Jeff so we can take your questions.

Thanks, Birgir. Operator, we are ready to open up the line.

[Operator Instructions] And your first question comes line of Tyler DiMatteo from BTIG. Your line is open.

Yes. Hi, good morning, everyone. Thanks for taking the time here. I wanted to start on the DoE loan process, and the conditional commitment component. I guess can you provide a little more color on that -- what shape maybe that could take the form of and a little bit of timing? Just anything else that you can add on that; I am curious to hear kind of maybe at a high level how you're thinking [ph] about that what the conversations have been?

Jeffrey, perhaps you want to pick them up?

Oscar [ph], over to you.

Yes, sorry. I'll take it. Thanks for the question. So on the DoE, it's an iterative process; we've been working with him for some time, as you know. We continue to go kind of back and forth on different drafts and information around our Part 2 application. I remember we’re in Title 17, some of our peers have been in the ATVM program which is more suitable for EV; so a little different process. The main thing to think about during -- around timing is both ourselves, of course, and the DoE are aligned with getting to conditional approval by year-end. So, there is a lot of work to do still; a lot of work to do -- the CQP to continue to provide data from that asset to the DoE. And then, later this year there'll be a former formal due diligence process where they add advisors and really dig into the details of the project. So again, we'll stick with the overall view, which is, targeting a year-end conditional approval.

Okay, great. Thank you. And then on the technology here, as we think about the semi-solid versus the conventional tech -- and we moved through 2024 and 2025. I mean, how do we think about kind of balancing the two? I know, you said, there is potential to maybe bring some revenue and the opportunities -- I think you highlighted five of them, you could maybe bring some of those forward. I mean, just -- how do you think about balancing the two platforms here? And kind of when you want to go to market?

Yes. So as we alluded to, there is a definite opportunity to start serving many of the customers that have been talking to for some time now. And to get going with our module to pack, and then onwards to systems sales to those customers. So one of the things we've been working on is how we can make that happen, even before we have ready production. But we're not going to disclose anything more on that today; we'll look forward to come back to it once we have those deals inked.

Okay, great. Thanks, everyone. Really appreciate the time. I'll turn it back to the queue [ph].

[Operator Instructions] Currently, there are no further questions. I'd like to hand it back to our presenters.