Advent Technologies Holdings, Inc. (NASDAQ:ADN) Q1 2023 Earnings Call Transcript

Advent Technologies Holdings, Inc. (NASDAQ:ADN) Q1 2023 Earnings Call Transcript May 15, 2023

Advent Technologies Holdings, Inc. misses on earnings expectations. Reported EPS is $-0.24 EPS, expectations were $-0.03.

Operator: Good morning, everyone. I will be your conference operator today. At this time, I would like to welcome everyone to Advent Technologies First Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session for Advent’s analysts. 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 would like to remind you that Advent issued a press release announcing its first 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 forecast targets and other forward-looking statement 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 prove more performance as of today, Advent’s actual results are subject to many risks and uncertainties that could cause actual results to differ materially from those expectations. In addition to any risks highlighted during this call, important factors that may affect Advent’s future results are described in its most recent SEC report 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 statement for any reason after the date of this call. Lastly, information discussed on this call concerning the company’s industry-competitive position and 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 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 knowledge of such industry and market which it believes to be reasonable.

These assumptions are subject to uncertainties and risks, which could cause results to differ materially from those expressed in the estimate. Please note this call is being recorded. Kicking off the call will be Dr. Vasilis Gregoriou. Dr. Gregoriou, I’ll turn it over to you.

Vasilis Gregoriou: Thank you, operator. Good morning to everyone listening in and thank you for joining us on Advent’s first 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 March 31, I highlighted that Advent has further consolidated its operations, and it was focusing on the core sectors of mobility and stationary power. This has continued in the first quarter. We remain focused on expanding and executing our commercial pipeline with a view to embed our technology and product portfolio in these key power sectors. The opening of our new facility at Hood Park in Boston represent a significant milestone achievement for Advent, because this will provide a fair market for this is growth in North America.

Hood Park encapsulates R&D and production facilities, as well as our headquarters. Its commission has expanded our global footprint for manufacturing. We also continued our capital investment program and state-of-the-art equipment that’s required to complete our scale-up production capacity. We intend for this progress to continue toward large scale manufacturing as soon as our Green HiPo project commences. The broad support for the energy transition through legislation and economic incentives is now growing globally. We believe that the future demand for Advent’s high temperature PEM technology and related products will create a significant opportunity and we believe Advent will be ideally positioned to capitalize on this. In the first quarter, we continue to execute on our strategy of innovation, commercial focus and market permeation.

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, leading to direct sales, the development of advanced fuel cell systems and joint development agreements in collaboration with OEMs which enables further long-term licensing agreements. The latter is expected to deliver revenue consisting of milestone payments and royalties, which will provide the upside to our business. I will now give you an overview of key business updates. In March, Advent and Hyundai announced the conclusion of a successful technology assessment. The assessment evaluates Advent’s proprietary MEA technology for supplying Hyundai’s high-temperature fuel cell needs, and following success, the two companies entered into a joint development agreement.

This agreement solidifies Hyundai as one of the world’s leaders in fuel cell technology to further develop the high temperature PEM technology in collaboration with Advent. The first step of the JVA focuses on MEA. Advent’s goal is to provide its MEAs and its high temperature PEM fuel cell development expertise to co-develop with automotive manufacturers the next-generation of fuel cell systems for heavy-duty mobility. Advent would pursue strategic joint development agreements to achieve its goal of supplying key MEA components and technology to the mobility market. In the maritime sector, in February, Advent announced a new collaboration with Siemens Energy offering sustainable solution across the entire energy value chain. Advent and Siemens Energy will work together to develop a 50-kilowatt to 500-kilowatt marine time fuel cell solution for a range of super yachts, which will provide a sustainable and reliable source of auxiliary power and offer improved power density.

This maritime fuel cell solution is initially expected to be used as a hybrid power source, enabling clean electricity generation instead of using conventional diesel engine and generators for procedures, such as anchoring and maneuvering. As part of the agreement, Siemens Energy has placed an initial order of 20 Advent’s methanol-powered Serene fuel-cell systems. Following the completion of the project, the two partners will explore the potential of development similar solutions for a wide range of business applications beyond maritime, such as industrial power solutions. In March Advent announced that they opened up the new R&D and manufacturing facility at Hood Park in Boston, Massachusetts. Located at the heart of one of Boston’s newest innovation and R&D communities, the Hood Park facility will enable Advent to scale up and deliver on the increasing global demand for electro-chemical components in the clean energy sector by including state-of-the-art coating machines to support the seamless transition from prototypes to production rounds for advanced membranes and electrodes, a complete analytical facility dedicated to quality control, performance analysis, and improving product lifestyle.

Fuel cell and water electrolysis test station for statistical process control and development of next generation MEA materials and a mechanical engineering lab for development automated assembly processes for MEAs. One of the products that we manufacture at Hood Park is the Ion Pair Advent MEA, which is currently being developed within the framework of the L’Innovator, the company’s joint development program with the U.S. Department of Energy. Advent intends that these proprietary fuel cell products such as Serene and Honey Badger 50 will incorporate the Ion Pair MEA beginning in 2024. The company expects the introduction of the Ion Pair MEA will significantly reduce the cost of our Serene flagship product suite and thus expand the immediate addressable market.

Furthermore, the expected system increase in power plant and lifetime with highly differentiated Advent’s fuel cells in the heavy-duty mobility industry. In May Advent and BASF Environmental Catalyst and Metal Solutions a global leader in precious metals and catalyst jointly announced an new agreement to join efforts in building a closed loop component supply chain for fuel cells and enter discussions to extend the partnerships into the field of water electrolysis. For 20 years, BASF Environmental Catalysts 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 cells and catalysts. High temperature PEM fuel cells operate at 120 to 180 degrees Celsius, offer a broad operating window and tolerate impurities in the hydrogen fuel cells.

The fuel cells also enabled simplifying cooling and need no humidification. Advent offers competitive fuel cell systems for stationary and portable applications based on methanol an on-site reforming. In the future, high temperature PEM fuel cells will also be available for heavy-duty, mobility and maritime power. The scope of the agreement includes the BASF’s role in scaling up MEA production at Advent’s plant, state-of-the-art manufacturing facility in Western Macedonia, Greece, while offering Advent its full portfolio 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 by Advent, aiming on the group performance lifetime and cost competitive.

Finally turning to Green HiPo I was elected as the Chair of the EU Important Project for Common European Interest Hy2Tech Facilitation Group. The election took place at the first general assembly for Hy2Tech and Hy2Use to the European Union’s IPCEI’s. The General Assembly was held in March in Berlin and was attended by executives from companies with projects ratified by the European Union under the IPCEI framework, as well as government and EU officials. Advent’s Green HiPo project received a notification in June 2022 for up to €782.1 million in funding from the Greek State, the highest amount of funding received for the project under IPCEI Hy2Tech. The European Union officially ratified the project in July 2022. Green HiPo will be based in the Western Macedonia region of Greece, where a state-of-the-art facility will be established for the R&D production of the innovative fuel cells, electrolyzer systems for the production of power and green hydrogen respectively.

We have already progressed identified a suitable site and have now purchased the site and commenced planning. Advent is actively working with the Greek state for the timely sign of the contract. We look forward to reporting on future progress. Advent is well-positioned to take advantage of the current focus on clean energy. We’re continuously developing our technologies and consolidating our operations to address new and key opportunities. We’ll have a product portfolio that’s focused to enable a greener economy, one that will abate the reliance on fuel cell — on fossil fuels, and will disenfranchise energy supply markets, therefore providing energy security to communities and economies. With that, I would like to hand over to our CFO, Kevin Brackman.

Kevin Brackman: Thank you, Vasilis and good morning everyone. Turning to our financials. We delivered revenue of $1 million in the first quarter, and income from grants of $0.5 million for a total of $1.5 million. R&D expenses were $3.1 million in the first 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 $8.5 million in the first quarter. Combined with R&D expenses, total operating expenses were $11.6 million, a year-over-year decrease of $1 million, primarily due to administrative cost reductions implemented throughout 2022, which were partially offset by an increase in research and development expenses.

Net loss in Q1 was $12 million or $0.23 per share. Unrestricted cash reserves were $19.5 million as of March 31, 2023, a decrease of $13.4 million from December 31, 2022, driven by R&D and administrative and selling expenses, as well as annual insurance renewals, a $2.2 million increase in inventory and $1.9 million of CapEx spending in the first quarter. 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, as Vasilis discussed earlier, we have been working actively with the Greek state for a timely implementation of the funding mechanism for the Green HiPo project. Additionally, we have been evaluating various opportunities to raise additional capital.

And in April this year, we finalized an agreement 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 use of this equity line of credit is entirely at Advent’s discretion and provides us with an effective buffer if required, that can be used alongside other sources of capital. In the meantime, we will manage our cost structure closely and capitalize on opportunities to reduce costs where possible. I will now turn to our outlook. Advent entered 2023 with the 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 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, we are not providing a revenue outlook for 2023 on this call. However, we expect to provide an outlook for revenue and income from Grants on the next earnings call. With that, I will hand back to the Vasilis, for closing remarks.

Vasilis Gregoriou: Thank you, Kevin. Advent has significant opportunity for its technology, advanced materials, and fuel cell system products. Along with Hood Park, the Green HiPo project will cement our global reach and focus in the mobility and stationary power markets. Advent is a clear energy technology company, developing innovation and products for key sectors that require clean energy. We look forward to growing the business and to keep you abreast of developments. I would like to thank you all for joining us today. And we’re ready to answer questions from the company’s analysts. Thank you very much.

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Q&A Session

Operator: Thank you. [Operator Instructions] And we’ll take our first question from Sanjay Jha at Panmure Gordon.

Operator: We’ll go next to Jeff Grampp at Alliance Global Partners.

Operator: [Operator Instructions] And we’ll go back to Sanjay Jha at Panmure Gordon

Operator: And at this time, we have no further questions. That does conclude the question-and-answer session.

Kevin Brackman : No. I think that wraps up the call today. And we appreciate everybody joining us.

Vasilis Gregoriou : Yeah, thank you very much. Bye, bye.

Operator: And again, that does conclude today’s conference. Thank you for your participation. You may now disconnect.