Good afternoon, and welcome to Amprius Technologies Second Quarter 2023 Earnings Conference Call. Joining us for today’s presentation are the company’s CEO, Dr. Kang Sun, and CFO, Sandra Wallach.

[Operator Instructions] Please note that this presentation contains forward-looking statements, including, but not limited to, statements regarding future product commercialization, new customer adoption and timing and ability of Amprius to build its large-scale manufacturing facility, 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 Amprius 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 Amprius filings with the Securities and Exchange Commission. Finally, I would like to remind everyone that this conference call is being webcast and a recording will be made available for replay on the company’s Investor Relations website at ir.amprius.com.

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 will now turn the call over to Amprius Technologies CEO, Dr. Kang Sun for his comments. Sir, please proceed..

450 watt-hour per kilo specific energy density and 1,150 watt-hour per liter volumetric energy density; up to 10C power capability; the extreme fast charger rate of 0% to 80% state of charge in approximately six minutes; a wide operating temperature range of negative 30 degree Celsius up to 55 degree Celsius.

And safety design features that enable us to pass the United States military’s benchmark and nail penetration test. Amprius has over 80 patents and extensive know-how in silicon anode manufacturing technologies. And it’s our belief that there are no other commercial battery on the market that can perform at these levels.

Amprius has been in commercial battery production since 2018. So company has many years of experience, manufacturing high energy density and high-power density, lithium-ion batteries.

Our priority today is to scale our manufacturing capacity to meet the average increase in demand of our solutions with the long-term goal of becoming a mainstream battery solution with applications across all segments of electrical mobility, including aviation and the EV industries.

Building our momentum from last quarter, we are diligently working to execute the strategy we laid out earlier this year. This quarter, we continued to develop a new products, build out our book of customers and the progress on our path to large-scale commercialization. I would now like to note a few highlights in each area.

Beginning with our technological development, our second quarter includes a few key examples of our ongoing efforts to push the boundaries of what is possible in the high-performance battery space. First, earlier this month, we announced our newest product, the Amprius high-power high-energy battery cell.

This cell displays unprecedent performance in the industry, delivering 400 watt hour per kilo energy density and the maximum power density of 4,400 watts per kilo with impressive continuous charger rate.

Amprius high-power cell technology is critically important to the electrical aviation industry, enabling the capabilities of EV costs and other high-performance electrical vehicles. We believe that we are close to shipping samples to interest partners and that we will be able to commercially ship this product in early 2024.

Second, our silicon anode batteries recently powered BAE Systems first successful stratospheric flight. BAE Systems choose Amprius as its partner who is High-Altitude Pseudo Satellite Uncrewed Aerial System demonstrates that we believe it’s important to use an ultralight battery that also offers the necessary power to fly the aircraft.

The HAPS program opens extensive possibility of future communication networks, including 4G and 5G. Its versatile applications from disaster relief to border protection, present a compelling alternative to conventional airborne and satellite systems, and Amprius excited to play a part in the future. Third, we complete the U.S.

Army Safe Cell Development Program, an important technical milestone to our business with the U.S. Army. We successfully delivered our 390 watt-hour per kilo safe cells with a gel polymer electrolyte, passing the rigorous military performance specification nail penetration test.

When integrated into a battery pack, this cutting-edge technology more than doubles the energy density of existing solutions, significantly extending mission time. Also the part of the U.S. Army-funded Manufacturing Technology program, we are working closely with one of our partners to deliver conformal wearable batteries to the U.S.

Army before the end of the year. We believe that this is an important stepping stone to further developing our relationship with the U.S. military and specifically giving us entry points to the conformal wearable battery market estimates at $1.25 billion by 2030.

Finally, we have a become an integral partner to several teams participating in the Bridgestone World Solar Challenge in October. For the event, each team designs, develops and pilot a solar-powered vehicle along a 3,000-kilometer continental Australian route.

Amprius batteries superior performance attracted significant attention from teams entering the development process, and four teams chose Amprius batteries to power their solar cars. The high energy density and the high-power density capability of our batteries are critical for this application.

These are just a few of the ways Amprius is changing the battery landscape. We are constantly evolving our products to push our industrial boundaries and meet our customer performance goals. Turning to our business development efforts, we continued to see significant demand for our products in the second quarter.

We shipped to 27 total customers this quarter, up from 16 in last year’s second quarter and up from 19 in the first quarter of this year. These customer relationships extend beyond technical engagements and with customers who have a placed product orders with Amprius.

This includes repeat the customers like Airbus, AeroVironment and Teledyne FLIR will continue to show their support and demand for Amprius batteries with additional orders and commercial shipments. We shipped to 10 new customers in the quarter as well, which indicates growing industry recognition and validation of our products.

In addition, our pipeline of the potential customers remains strong. Two key ways that we bolster our pipeline are through the strategical technical engagements and prototype shipments.

In the second quarter, we not only drove significant progress in our ongoing technical engagements, we also started a new technical engagement with a leading high-performance automotive OEM. This engagement is expected to be part of the joint development contracts we are finalizing with the manufacturer.

Once finalized, we believe that this engagement will offer us another encouraging opportunity in the automotive space. As for prototype shipments, this quarter, we made site visits to two battery pack manufacturers to whom we started shipping samples in the fourth quarter of last year.

We believe that these visits serves as meaningful steps toward a significant potential demand from the aviation industry through 2025 and beyond. In addition to driving demand for our batteries, it remains a priority for our business to expand our production capacity to meet this demand.

We believe that this is a critical part of our strategy, both in short-term, as we work to expand our Amprius Lab in Fremont, California and over the medium and long-term as we strive to achieve gigawatt scale manufacturing with Amprius Fab in Brighton, Colorado.

Amprius Lab will allow us to increase our production capacity to 10x what it is today at year-end, providing enough capacity to both expand commercial shipments within our strategic accounts as well as shipped samples to our pipeline of potential customers.

Our expand Fremont production facility is designed to have a full lithium-ion battery manufacturing capabilities, including both anode and cathode production as well as automated cell assembly enabled us to further develop our capital technology and cell chemistry in-house.

In the second quarter, we ordered the necessary equipment to begin executing our Amprius Lab retrofit and expansion, a process that we are on track to complete by the end of the year in hopes of having facility up and running entering 2024.

We are also working diligently to meeting our project plan for Amprius Fab, our growth engine, which will allow us to reach high-volume manufacturing capacity.

As a reminder, our planned 774,000 square foot large-scale production facility is part of the total site with over 1.3 square feet available for expansion, expected to be the first mass production site for the next-generation battery technology in the United States.

The initial phase of our buildout will provide a potential of up to 5 gigawatt hour with expansion capability for up to a total potential manufacturing capacity of 10 gigawatt hour.

The Amprius Fab site is already equipped with electrical power and existing structure layout needed for gigawatt-scale lithium-ion battery factory, which will reduce our buildout costs and the time to market. We are now working through the Our goal is to be operational in 2025. And as of this call, we remain on track to meet this time line.

This quarter, our engineering team worked with the central team in Germany to complete necessary silicon anode mass production improvement process testing and optimization efforts. The process once optimized, will be deployed at Amprius Lab’s manufacturing line and ultimately at Amprius Fab.

Both Amprius Lab and Amprius Fab will have a high-performance Amprius silicon anode battery manufacturing capabilities. I have one final update before I turn the call over to Sandra. We recently appointed Mary Gustanski as an Independent Director to our Board of Directors and our Compensation Committee.

Mary is very versed in various challenges and opportunities in our industry and offers a unique and valued perspective to our Board. We are confident that our extensive automotive sector and the technical management experience will help us as we navigate and expand into new markets.

With that overview complete, I will now turn the call over to our CFO, Sandra Wallach to review our financial results for the quarter.

Sandra?.

Thank you, Kang. 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. We finished the second quarter with $1.6 million in revenue, a $0.9 million increase compared to $0.7 million in the same quarter last year.

There were two main drivers of this increase. First, we drove a $0.6 million increase in product revenue. As Kang mentioned, our product revenue was largely driven by shipments to 27 customers this quarter, a quarterly record for Amprius.

Also of these customers, five customers represented greater than 10% of revenue as compared to three such customers last quarter and two such customers in last year’s Q2.

Even though our product revenue remains largely driven by customer purchase orders that can arise at uneven times throughout the year, we have shown consistent new customer growth and diversification in recent quarters.

Second, our Development Services revenue totaled $0.3 million, a reflection of the Army Safe Cell delivery we completed in the quarter. As noted in previous quarters, our development services revenue is intermittent based on revenue recognition timing.

And as our capacity expands and more customers transition to commercial orders, we expect this revenue category to continue to decline as a percentage of overall revenue as we begin to process larger orders from a broader customer set and as our product revenue ramps even more. Our government grant revenue was flat year-over-year for the quarter.

Moving to our profitability metrics. Our GAAP gross margin was negative 186% in the second quarter, in line with our Q2 ‘22 gross margin of negative 197% and better than our Q1 ‘23 gross margin of negative 518% which was primarily impacted by nonrecurring start-up charges for our large-scale manufacturing facility.

As the build-out continues and construction begins in earnest, we expect the scale-up related charges to increase. Still we are confident that our GAAP gross margin will begin to normalize as we approach our capacity expansion goals in the coming years. Now on to our operating expense management.

Our GAAP operating expenses for the second quarter increased to $7.1 million, largely due to increased public company costs and additional targeted investments in R&D staffing. Our GAAP net loss for the second quarter of 2023 was $9.4 million or a net loss of $0.11 per share. As of June 30, 2023, we had 86 million shares outstanding.

Also, as of June 30, 2023, there were 72 full-time employees with those employees primarily based in our Fremont, California location. Our share-based compensation for the quarter was $0.9 million. Now turning to the balance sheet. We exited the second quarter with $65 million in cash, up $0.8 million from the last quarter and no debt.

One of the key drivers of our cash activity for the quarter was $5.6 million used in operating activities. As discussed previously, our run rate for cash used in operating activities remains projected to be around $2 million per month, excluding audit and transaction-related expenses.

Other drivers include $1.7 million in build-out related investments and the expansion of our Amprius Lab facility in Fremont and $8.1 million in financing cash inflow from accessing our committed equity facility to fund our capacity expansion and operating cash requirements.

Considering our business achievements and ongoing projects, we believe we are efficiently using capital to drive Amprius forward. Before I turn the call back over to Kang, I would like to take a moment to discuss our outlook.

As mentioned last quarter, we have several ongoing development services programs with performance obligations that we expect to complete within 2023, which means we should see increased revenue recognition weighted more heavily towards the latter part of the year.

Also, we anticipate that our G&A costs will continue at the higher rate we experienced earlier this year when accounting for additional public company and transaction-related expenses. Also, we continue to expect to be capacity constrained until we exit 2023 when our new 2-megawatt hour capacity is projected to come online.

That project, along with our build-out of Amprius Fab in Brighton, Colorado remain our top capital allocation priorities.

We believe that we are on track with our prior CapEx projections, which are – that we expect to spend approximately $10 million to $12 million, completing the build-out of the Amprius Lab facility in Fremont by the end of the year, as well as $50 million to $80 million in the second half of this year as we start construction at Amprius Fab and begin to order long lead time equipment.

We expect to confirm the facility design and scale as well as provide a projected budget during the second half of this year.

Our spending pattern is dependent upon several factors outside of our control, including the timing of rezoning approval for the Colorado site, so we expect to provide more specific projections as we have additional information to share.

Overall, with the strength of our balance sheet and multiple vehicles to generate additional funding through both equity issuances such as warrants and sales under our committed equity facility and non-dilutive sources such as grants, loans and incentives, we believe we will have enough cash to execute on our strategic plan.

With that, I will conclude the financial discussion and pass the call back to Kang..

Thanks. Thank you. I’d like to reemphasize a few key points before closing. First, Amprius silicon anode technology continues to demonstrate unmatched performance in the industry. Amprius batteries command a firm lead in 50 energy power charging time, time to performance and are uniquely positioned for the electrical mobility market.

Second, Amprius batteries are commercially available today. We have been shipping commercial products since 2018 and our technological advancement continued to bring in significant customer demand. This quarter, we not only delivered repeated customers and expand our technical engagements. We added 10 new customers as well.

Our demand pipeline is robust, and we look forward to further building out our customer book in the coming quarters. Third, we are scanning our manufacturing capacity to serve the significant demand ahead exiting 2023.

We will further prove out our largest scale manufacturing process and parameters with our 2-megawatt hour production line at Amprius Lab in Fremont. We also remain on track to build out Amprius Fab, our gigawatt-scale facility in Brighton, Colorado, which we expect to be operational entry in 2025.

Finally, we are looking forward to several exciting milestones over the rest of 2023 before end of the year.

We expect secured customer commitments to fulfill Amprius Fab’s expect production capacity for 2025, deliver 500 watt-hour per kilo battery prototypes to select the customers, complete our megawatt hour scale silicon anode battery manufacturing facility at Amprius Lab and start Amprius Lab construction and complete our product line and facility equipment purchases.

As we look to the rest of the year, our strategy and focus at Amprius remains unchanged. We have a tremendous opportunity ahead with the product portfolio that positions us to both growth in aviation market and extend it to other industries, picking battery with leading performance.

Opportunities from the Amprius are enormous, including the $1.25 billion conformal wearable battery market at 2030, the $49 billion aviation market by 2025, and the $67 billion EV battery market by 2025, all of which are Amprius growth path in coming years. 2023 has been a very productive year for company thus far.

Our solid performance in this quarter has demonstrated our team’s inability to deliver what we have planned and promised. Thank you for your continued support of Amprius Technologies. With that, I will turn it back to the operator for Q&A..

Thank you. [Operator Instructions] Our first question is from Colin Rusch with Oppenheimer. Please proceed with your question..

Thanks so much. Kang, can you talk a little bit about where you’re at from a testing perspective around the subsystems for the megawatt scale tool? And when you expect to really kind of just flip the switch and start running that full up..

Yes, Colin, we have the test, our – some you are talking about at the Fremont operation here. So at Fremont, we already finished the – almost the full test in Germany at Central term, where our suppliers for silicon anode deposition tool. So we expect to transfer that move that incur piece to frame.

So by the end of the year, we will have that part of the equipment in place. So that’s the key part of this inter manufacturing process. If we get that right, the rest of those are relatively easy..

Excellent. And then with the customers, obviously, adding incremental 10 customers is an awful lot for the company at this point.

Can you talk a little bit about what percentage of that are customers who are sampling? And how many of those are folks that are taking commercial products at this point for particular applications?.

So we – and the new customer, I think proximity, in terms of processing – they all have processing orders for given the purposes, some for sampling, prototyping, some really qualified our product. So I would say 40% of those customers are really qualified our products and start processing for their commercial applications..

That’s incredibly helpful.

And then one for Sandra, just in terms of the cadence of the cash flow for the balance of the year, how would you characterize the spend in terms of how much is going towards equipment orders? How much is going towards facilitization and how much is going in the third quarter versus fourth quarter?.

So, we are going to keep our operating activities relatively flat as far as use of cash. We have got about $10 million to $12 million more to finish out Fremont, and we are projecting somewhere between and this is all dependent on timing.

But the demand for the construction and the preordering of the long lead time items is estimated to be on the low end, $50 million, on the high end, $80 million for Colorado..

Excellent. Appreciate it. Thanks so much guys..

Thank you. Our next question is from Chris Souther with B. Riley Securities. Please proceed with your question..

Hey guys. Thanks for taking my questions.

Maybe just on the performance automotive OEM, can you give us a sense of the timelines we should expect for updates there? And can you share what you hope the goals of the joint development contracts will potentially lay out? And I am just kind of curious from a high-level standpoint, do you think this changes your potential timeline for commercialization in the automotive sector, or should we kind of temper the enthusiasm around that for the near-term and mid-term?.

We are already engaged with this customer for some time, okay. Now, we would like to formalize the relationship which the step one would be joining the development program. This is very significant for us. This is a high-performance electrical vehicle manufacturer. So, it’s going to guide us into this business.

So, we expect we will finalize this agreement in the next months or so..

Okay. And then maybe just on the battery pack manufacturing relationships that you called out in the latter and earlier on the call.

Can you talk a bit about how that fits into the overall customer strategy in larger customers you have talked about like Airbus, Teledyne FLIR, have kind of in-house pack manufacturing, or is it around kind of standardized cells for specific applications for smaller customers? Can you just kind of talk through what those relationships need?.

Yes. The Amprius Lab in Fremont, okay, we will have 10x more capacity than what we have today. That’s very, very significant. In addition to that, we will have this large tool in place. This is going to improve our battery performance as well, because we have better uniformity, we have better control of our anode manufacturing here.

So, for the – at this time, we still customize our batteries, it’s design for specific customers, or for major customers. So, the smaller customer, of course they take whatever we have here. Now ultimately, not only we wanted to standardize the battery cell, the industry is moving to better direction as well..

Okay.

And on the pack side, though you called out visiting two pack manufacturers, as you are kind of starting to standardize the sales, is it more standardized pack that you expect as well?.

Yes. We have – Chris, we have two types of customers. One type of customer is OEM, for example, Airbus. We work with them directly. Since we are cell – battery cell manufacturer, so we rely on – our customers rely on the tech company or a module company to put those together and make a module and the pack for their commercial application.

So, the pack companies are very important customer of Amprius Technologies as well. So, those two customers, we visited the leaders in this business. We already have standardized the module to supply to the industry. This – the main purpose of visited is to discuss long-term working relationship supply agreement from now to 2025 and beyond.

This is very important because we have 500 megawatt facility is under construction. By the time when we finish we need to have a full capacity operation. This was the purpose of this visit. We have very good retention with the customers at this time..

Yes. Now, it’s good to hear. I will hop in the queue. Thanks guys..

Thank you. Our next question is from Tim Moore with EF Hutton. Please proceed with your question..

Thanks. And your shareholder letter commentary today was insightful. I have got two questions here. Your commercial success is quite evident with 27 total customers shipped this quarter, up from 16 a year ago and 19 in the March quarter.

As I think out to your added capacity in that plan for year 2025, how do you prioritize the production for specific customer proposals that come across your desk? I mean clearly, the U.S. Army Safe Cell Development in the works just two summers ago, the BAE Systems stratospheric flight batteries were nice headline accolades.

But can you maybe share and rank maybe how you handle the incoming opportunities and prioritize them? Is it this year, you are trying to demonstrate a wider range of applications for your offerings, like solar and flight and Army, or is it really more based on something like sales potential 3 years out from a single customized customer?.

Yes, Tim serve our existing customers, certainly is our priority. Those customers show the loyalty to us. So, we have, for example, Airbus, we have been working with them since 2018. So, existing customer certainty is our priority. They have priority on the capacity allocation. But we have a lot of inquiries over the market.

That’s the reason we build a new capacity. The Fremont capacity could be 10x more production capacity than what we have today. This is very, very helpful for us to develop new customers..

That’s helpful. I mean you are company that clearly has a lot of great advantages beyond just power density and fast charge time and your healthy balance sheet. Obviously, you are not solely a developer, but you are actually doing the manufacturing of firm orders and production in-house.

Do you – as you kind of approach new customers and new prospects, are you seeing anything in particular that you can point to that’s maybe helping you win orders better? Is it extreme fast charge, the zero to 80% state of charge in six minutes? Is it – or is it really the power density? Is one thing over another really kind of the icing on the cake to win orders?.

Tim, Amprius today is focusing on aviation market. For aviation markets three top priorities safety, energy and the power. They cannot miss any one of those, because the safety is absolutely important for aviation and our company in the leadership position for safety will pass United States Army military spec for safety.

Secondly, the energy is very important because these dictates how far they can fly. This is very, very important for them. Otherwise, they don’t have any commercial value if they cannot fly far enough. The third one is the power. They need to have power to lift off and the landing.

This is the reason that Amprius has a large customer inquiries because if we look at the market, there is almost no battery chemistry today can deliver what we have here. In addition to safety and have ready to compromise between the power and energy.

As our news release published a few days ago, we have 400 watt-hour per kilo battery can deliver 10C power capability..

Great. Kang, that’s very helpful. And I will save my questions for offline later. Thanks..

Thanks..

Thank you. Our next question is from Abhi Sinha with Northland Financial. Please proceed with your question..

Yes. Hi. Thanks for taking my questions. So, just on the customers, I just want to press on more on that.

If you could talk about the process of acquiring a new customer, like what does it take in terms of the process and the timeline before you get an order? And more importantly, if you could talk about the feedback that you get from the customers from whom you are not able to get orders? Like what do they have to say?.

Okay. First, I will talk about what they want in terms of product specs. Our customer, basically as I have mentioned earlier, put in three things safety, energy and power. Now, with all of those three performance parameters meet their spec and there is no discussion. So, those are very, very important parameters we need to deliver.

In addition to that, the customer, we don’t get an order normally is a capacity issue. And this is why the Amprius has been focusing on the capacity expansion about 12 months, 18 months ago. That’s our primary focus.

The customer will not engage with us if they cannot – if we cannot guarantee, okay, we can support their growth, for example, in the next 24 months, at least. And the customer I have visited in Europe and in United States, recently, they basically asked us the guarantee on Q2 2026.

We want to see that there is a roadmap to the capacity expansion before they place order..

Thank you. That’s helpful.

So, just on that, how – when you go to a new customer, when you provided MO or something, how long does it take for them to approve or to place an order?.

It varies, okay. Some customer takes about seven months or eight months to be done because they take our standard products. They take tests. They see other people use it. So, it’s relatively easy. But for the new program started from the scratch, okay, they have a different technical spec to meet that you really take 1.5 years.

Definitely, in aviation is much shorter than the electrical vehicle at this time, okay. In the future, the lead time may be longer because of the time we have. At this moment, the most customers we are working with are unmanned flying devices, okay, like super satellite phones [ph], okay.

Once we get a passenger carrying vehicles, the time of development will take longer. When we see the development time, okay, this is two parts. One part is our battery development, another part is our customers’ own product development..

Alright. Thank you very much..

At this time, this concludes our question-and-answer session. If you have any additional questions, you may contact Amprius Investor Relations team at ir@amprius.com. I would now like to turn the call back over to Dr. Sun for any closing remarks..

Thanks again everyone for joining us today. I also like to thank our employees, partners and shareholders for their continued support. As a reminder, you may learn more about our company from the additional updates and learn about the upcoming events and presentations from the Investor Relations section of our website.

We look forward to updating you on Amprius progress on our next call.

Operator?.

Thank you for joining us today for Amprius Technologies’ second quarter 2023 earnings conference call. You may now disconnect..