Advent Technologies Holdings, Inc. (NASDAQ:ADN) Q2 2022 Earnings Conference Call August 9, 2022 9:00 AM ET
Company Participants
Vasilis Gregoriou – Chief Executive Officer and Executive Chairman of the Board
Kevin Brackman – Chief Financial Officer
Conference Call Participants
Operator
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 would like to remind you that Advent issued a press release announcing a second quarter 2022 financial results, shortly before market opened today. You may access the materials on the Investor Relations section of www.advent.energy. I’d 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 represents management’s current expectations and projections about future results and performance as of today, Advent’s actual results are subject to many risk and certainties that could cause actual results to differ materially from those expectations. In addition to any risk highlighted during this quarter, 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 analysis and other third party resources as well as data from a 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 estimates. Please note this call is being recorded.
Kicking off the call will be Dr. Vasilis Gregoriou. Dr. Gregoriou. Please go ahead.
Vasilis Gregoriou
Thank you, operator. Good morning to everyone listening in. And thank you for joining us on advent’s second quarter ‘22 earnings call. I’m joined today by Advent CFO, Kevin Brackman. On today’s call, I will provide comments regarding our second quarter results, followed by 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 details. Subsequent to my last date on May 12, Advent presented its inaugural Investor Day on July 7, which provided a comprehensive review of our technology and commercial progress. This event was very well attended. And for those of you who couldn’t join in, our full recording is available to watch through our website. Advent had a very exciting second quarter, capital identification from the Greek state for funding of EUR 782.1 under IPCEI Hydrogen technology for Advent’s Green HiPo project. Certification from the Greek state was sent to the EU under the IPCEI framework that was subsequently ratified by the EU. That certification has approved up to EUR 5.4 billion support by 15 member states in the hydrogen technology value chain, is also expected that this funding will unlock additional EUR 8.8 billion in private investments.
This value chain has four key areas consisting of hydrogen generation, fuel-cell technology, storage, transportation and distribution and end user technology. Advent’s Green HiPo encapsulate the idea of hydrogen generation fuel-cell technology and examples of other companies in these areas includes, [Kipia], the joint venture between [Inaudible], MarkFeet, [Inaudible] Arkema, Boss and Dailmer Truck. Advent’s Green HiPo project was originally among five projects out of 20 candidates from Greece for IPCEI funding. These five projects were then subjected to detailed review and due diligence by the EU, resulting in two projects notified by the Greek state. The notification the first was IPCEI Hydrogen technology projects is a testament to the world class innovation that Advent possesses and the commitment that Greece and the EU have in Advent’s ability to deliver such an important project. The scope of Green HiPo over the initial period of six years, is to innovatively develop and manufacture fuel cell systems, and electrolyzer systems. We’re aiming for cumulative capacity of 180 megawatts of fuel cells, and 1.5 gigawatts of electrolyzers over that time. The production of these systems will take place in Greece in the region of Western Macedonia, which will become our focal point for technology development and mass production.
In my last update, I mentioned that during this year, we will continue to consolidate our business to make operations more efficient and effective and to concentrate our global activities on our key sectors. We have therefore found our expertise in stationary power, portable and mobility. This has resulted in Advent’s development specific [Inaudible] of technical or commercial expertise within these key sectors. This clear vision has given rise to serious traction from global OEMs. Therefore augmenting our pipeline.
System sales will provide near term revenue. Our stationary power sector therefore been targeting telecommunications, and our portable sector has been targeting the defense sector. Product development in the defense sector is geared toward factors such as reliability, compactness, versatility of fuel source and [Inaudible]. As a result, the same factors have also made our portable products attractive to a multitude of non-defense applications. Our mobility efforts are geared towards heavy duty vehicles, marine and aviation. While opportunities from the mobility sector are significant, they will likely emanate from longer term license agreements. What is apparent is that our overlap and mixture of revenue streams would eventually intertwine and will contribute to both the magnitude and the strength of Advent’s commercial strength. We will continue to have strong cash reserves totaling $46.5 million at June 30.
Overall, our performance this quarter leaves us confident about the long-term growth and Advent’s potential for commerce. In addition to the Green HiPo project I mentioned earlier, I will now give an overview of our key achievements during the quarter. In April, Advent announced the signing of a technology assessment, sales, and development agreement with Hyundai, a leading multinational automotive manufacturer offering a range of world-class vehicles and mobility services in over 200 countries. Advent and Hyundai aim to deliver green energy solutions to current high carbon applications, using fuel cell technology. Under this agreement, Hyundai will provide catalysts to Advent for evaluation with Advent’s proprietary MEA. Advent intends to support Hyundai in fulfilling its fuel cell project needs, through developing inks and structures using Hyundai catalysts, following which they will determine whether their own catalysts, or external standard catalysts, will be used for this project. In addition, Advent will support Hyundai by supplying Advent MEAs throughout the development and commercialization cycle for testing, evaluation, and optimization under conditions set by Hyundai and by assisting Hyundai with the use and specifications of MEAs as well as their implementation into Hyundai’s designs.
Following the completion of the first phase of the project, Hyundai and Advent will collaborate closely to set out specific product requirements, collaborative product goals and milestones for achieving define targets and plans for the second phase, which shall also include Advent’s stack cooling technology. The Advent MEAs to be tested by Hyundai are currently being developed within the framework of L’Innovator, Advent’s joint development program with the U.S. Department of Energy’s Los Alamos National Laboratory, Brookhaven National Laboratory, and National Renewable Energy Laboratory. The new Advent MEAs is expected to redefine the MEA market globally and fair their value based Advent’s leading position in the electrochemical component business. MEAs are the most important components of a fuel cell as they greatly define the performance, lifetime, weight, and cost of the end system. Advent MEAs operate at a high temperature between 80 degree Celsius to 240 degree Celsius compared to the incumbent low temperature PEM technology, which is restricted to an operating temperature of below 100 degree Celsius. The ability to operate at over 100 degree Celsius confers significant advantages such as the efficient heat removal in heavy-duty mobility applications, making Advent’s high temperature PEM an ideal technology for trucks, aviation and marine applications. Advent’s MEAs can operate effectively with fuels such as low Advent fuel such as low grade hydrogen which can be reformed on-board from methanol, natural gas, and other renewable fuels. Advent MEAs are also resilient to extreme temperature variations, humidity, and air quality conditions.
As a further milestones to our mobility focus, In May, Advent announced the signing of a second technology assessment agreement with another large global automotive manufacturer. With a common goal of sustainability and the faster decarbonization of the U.S. automotive industry, Advent is supporting efforts to advance innovative fuel cell technology as a sustainable and efficient option for achieving carbon neutrality. More specifically, Advent will provide assistance, through supplying MEAs for testing, evaluation, and optimization. Providing support on MEA operational parameters and sharing technical know-how for fuel cell stacks, proprietary HT-PEM technology, and leveraging HT-PEM for advanced cooling systems. One of the primary objectives will be to conduct a detailed assessment of Advent’s proprietary HT-PEM technology and MEAs for consideration of future opportunities. Contingent upon the successful execution of the first phase of the project, the companies will work to establish a Joint Development Agreement governing specific product requirements, goals, milestones, and plans. The new Advent MEAs to be tested as part of this project, are currently being developed within the framework of L’Innovator.
In April, Advent announced that it received new orders for its proprietary MEAs from Safran Power Units, a leader in auxiliary power systems and turbojet engines. The MEAs are based on Advent’s proprietary high temperature- PEM technology. The supply of Advent MEAs started in the first quarter of 2022, and deliveries continued through the second quarter. The MEAs will support Safran Power Units’ R&D efforts. HT-PEM technology has applications across multiple industries such as heavy duty to motor renovation because it can operate with almost any low-carbon or zero-carbon fuel.
Safran Power Units constantly innovates and develops new power unit solutions, featuring higher performances with lower environmental footprint and operating costs, relying on its expertise in hybridization and fuel cells. Safran Power Units has been a long-term customer of Advent, having tested and deployed Advent’s state-of-the-art MEAs in a variety of applications in the past.
MEA’s form the heart of the fuel cell, and their performance determines the lifetime efficiency, weight and to a large extent the final cost of the complete power delivery system.
In May, Advent participated in the European Electrolyzer Summit in Brussels. This event was organized by the European Commission in cooperation with Hydrogen Europe and took place under the auspices of the European Clean Hydrogen Alliance. Commissioner for the Internal Market, Thierry Breton, CEO of Hydrogen Europe, Jorgo Chatzimarkakis, and 20 other CEOs and executives from the Electrolyzer Community met and signed a Joint Declaration, establishing a clear goal of paving the way towards achieving the objectives of the REPowerEU’s proposed Hydrogen Accelerator, which sets out a strategy to double the previous EU renewable hydrogen target to 10 million tons of annual domestic production and an additional 10 million tons of annual hydrogen imports. Under the Joint Declaration, Europe’s leading electrolyzer manufacturers agreed to increase their manufacturing capacity in an effort to have, by 2025, a combined annual electrolyzer manufacturing capacity of 17.5GW, as well as to further increase that capacity by 2030 in line with projected demand for renewable and low-carbon hydrogen. The Joint Declaration features the following three objectives, regulatory framework, and access to financing and to supply chain integration.
In June, Advent announced the signing of a MoU with Neptune Lines, a leading vehicle logistics provider via global marine branch. Neptune Lines and Advent agreed to jointly conduct a pilot program to explore the application of a fuel cell-based auxiliary power system. This application will be tested by Neptune Lines’ highly experienced team, who will evaluate its performance as a sustainable source of power generation. After the evaluation stage, the parties will consider a broader collaboration. Advent fuel cells are a reliable source of on-demand power generation across various applications and industries, including shipping, power generation, and heavy-duty mobility. The fuel cells can deliver direct power without power loss from additional converters, offering a sustainable and highly efficient solution.
Also in June, Advent announced the signing of a MoU with Laskaridis Shipping, a renowned ship management company based in Athens. Under the terms of the MoU, Laskaridis Shipping and Advent have agreed to jointly conduct a pilot program, under which Advent will supply Laskaridis Shipping with its SereneU methanol-powered fuel cells. Laskaridis Shipping will install these systems on selected dry bulk vessels to assess their overall performance as auxiliary, back-up, or emergency power sources.
Following the successful completion of the pilot program, Laskaridis Shipping and Advent will collaborate on manufacturing and testing the next generation of Advent’s fuel cells. These collaboratively tested fuel cells are expected to be based on Advent’s next-generation MEA.
Advent is a vertically integrated manufacturer. Its portfolio includes advanced HT-PEM fuel cell systems, covering the range from 25W to 90kW. Serene methanol-powered fuel cells deliver critical and reliable power in an environmentally friendly way, reducing CO2 emissions and operating silently, while having a low impact on surroundings. Methanol as a carrier of hydrogen allows simpler storage such as handling and logistics compared to pure hydrogen, and enhances the safety of operations.
Advent has made very good progress over the last quarter, as well as having a strong pipeline of opportunities. Our projects are very techni efficient and [Inaudible] its potentially transformation. We remain fully focused on commercializing our innovative technology.
With that, I would like to turn it over to our CFO, Kevin Brackman. Kevin?
Kevin Brackman
Thank you, Vasilis. And good morning, everyone. Turning to our financials, we delivered revenue at $2.2 million in the second quarter, compared to $1 million in the prior year quarter. The increase primarily resulted from the businesses in Denmark, Germany and the Philippines, acquired by Advent on August 31st of 2021. Gross profit decreased $0.4 million year-over-year in the second quarter, due to the mix of products and customers included in revenue, a higher fixed cost space resulting from the acquired businesses and supply chain cost pressure in the second quarter of 2022.
R&D expenses were $2.6 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 million in the second quarter, a year-over-year increase of $1.4 million, primarily due to increased staffing and costs resulting from the acquisitions and from stock-based compensation expenses. Net loss totaled $11.1 million in the quarter and adjusted net loss was $10.9 million. I should note that our adjusted net loss excludes a $0.2 million loss from the change in the fair value of outstanding warrants. Our net loss per share was $0.22 in the second quarter. Advent remains well capitalized with $46.5 million in cash reserves on the balance sheet as of June [Tech Difficulty] provides us with the flexibility to be agile in a [Tech Difficulty] operational priorities. This is a decrease of $12.8 million from March 31st of 2020, driven by the increased level of R&D and administrative and selling expenses, as well as $2.8 million of spending during the second quarter for the build out of our Hood Park R&D and manufacturing facility.
In the second half of 2022, we expect to receive approximately $5 million in tenant improvement allowances for the Hood Park facility. Net of additional spending for the buildup. Our existing cash reserves and projected cash flows are anticipated to be sufficient to support our planned operations for the next 12-months.
I will now turn to our outlook. Advent develop significantly during 2021 and we entered 2022 with a more advanced product range and a dedicated technical sales team focused on key sectors and geographies. We, therefore have a strong pipeline. Also in mid-June, the company announced the successful notification from the Greek state for funding of EUR 782.1 million for Advents Green HiPo which was subsequently ratified by the EU. As we all know not every opportunity in the pipeline will transpire due to factors that may be 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 global inflationary pressures and economic conditions, we have recently been experiencing some delays from our customers in the Philippines for fuel cell systems and their installation. Notwithstanding this, our pipeline is robust and together with year one of the Green HiPo funding expected later in 2022. We expect to exceed our previous estimate of $23 million for the year from the total of revenue and grant income.
In closing, we believe that Advent is well positioned to be the provider of clean energy solutions across a variety of end markets. Company has built a solid foundation for the business and continues to execute on its strategic initiatives. With that, I will hand back Vasilis for closing remarks.
Vasilis Gregoriou
Thank you, Kevin. Advent’s significant portfolio of technology and commercial strength allowing to compete and be successful at the global level. Green HiPo will be transformational for us and Green HiPo is for the long term. During and beyond the initial six year development and production timeframe, we’re aiming for significant revenue growth through Green HiPo will cement our foothold in the global electrolyzer market and fuel cell market. In parallel, Advent is pursuing a visible and defined path towards key and significant sectors. Advent is a clean energy technology company. By innovative in development state-of-the-art technology, we will leverage from the strength to generate commercial products and provide attractive technology solution through partnership with OEMs. I would like to thank you all for joining us today. And we’re now ready to answer questions. Thank you very much.
Question-and-Answer Session
Operator
Q –
A –
Operator
And at this time, we have no questions. That does conclude today’s conference call. Thank you for your participation. You may now disconnect.
Be the first to comment