ADVENT TECHNOLOGIES HOLDINGS, INC. Q2 2023 earnings call

Thank you, operator. Good morning to everyone listening in, and thank you for joining us on Advent second quarter 2023 earnings call. On today's call, I will provide an update on the business. I will then hand over to Kevin, who will give a review of our financial performance and outlook in more detail. During my last update on May 15, I highlighted that Advent has further consolidated its business operations and was focusing on the core sectors of mobility and stationary power. This has continued in the second quarter with a gradual improvement in our cash burn as various non-cost are eliminated. We remain focused on expanding and executing on commercial pipeline with a view to embedding our technology and product portfolio in these key power sectors. We also maintained our capital investment program in state-of-the-art equipment that's required to complete the scaling of production capacity.

We intend for this progress to continue towards large-scale manufacturing as soon as our Green HiPo project commences. 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 these two suitable partnerships. We look forward to growing our commercial activities and achieving long-term profitable growth. Our business focus is on the production of advanced fuel cell materials and the development of advanced fuel cell systems, leading to direct sales. In addition, joint development agreement with OEMs will enable us to enter into long-term licensing and supply agreements. I will now give an overview of our recent business updates.

BASF Environmental Catalyst and Metal Solutions, a global leader in precious metals and catalysts, Advent concluded the terms of a new agreement to join efforts in building a full loop component supply chain for fuel cells. For the past 20 years, BASF Environmental Catalyst and Metal Solutions has been a leader in membrane MEA technology for high-temperature PEM fuel cells, with a strong foundation in precious metal services and catalysts. Advent is a significant manufacturer of high-temperature PEM fuel cell systems, targeting emerging markets in the field of sustainable and decentralized energy, such as stationary power that can replace diesel generators, maritime power for methanol fuel cells, and heavy-duty mobility. High-temperature PEM fuel cells operate at 120 to 100 degrees Celsius, offer a broad operating window, and can tolerate impurities in the hydrogen fuel gas.

These fuel cells also enable simplified cooling and do not require humidification. Then offers competitive fuel cell systems for stationary and portable applications based on methanol and on-site reforming. Looking ahead, high temperature PEM fuel cells will also be available for heavy-duty mobility and maritime power. The scope of the agreement includes BASF's role in scaling up MEA production at Advent's plant, state-of-the-art manufacturing facility in Western Macedonia, Greece, while offering Advent its full portfolio of products and services to enable circularity in key materials. Both companies will cooperate on BASF's latest membrane development, Celtec-Z, and the new Ion Pair MEA membrane by Advent, aiming for improved performance, lifetime, and cost competitiveness. In the aerospace sector, Advent signed a memorandum of understanding with Safran Power Systems, a leader in auxiliary power systems and turbojet engines.

Leveraging Advent's proprietary Ion Pair MEA technology and Safran's aerospace knowledge and capabilities, the new collaboration will seek to advance the development of next-generation high temperature PEM fuel cell technology, specifically for the aerospace sector. High temperature PEM enables more efficient heat management versus low temperature PEM. High temperature PEM is more adapted for applications requiring high amounts of power, combined with strong degradation constraints, as in aviation. High temperature PEM is more robust and can withstand tougher operating conditions, such as extreme temperatures and pollution, versus low temperature PEM. The collaboration, further supported by a strong research consortium, included the Research and Technology Center of Safran Group, the French Alternative Energies and Atomic Energy Commission, Fraunhofer Institute, the French National Centre for Scientific Research, the University of Strasbourg, and the IMDEA Energy Institute.

Led by Safran Power Units, and with the support of Advent, the consortium has secured a grant for the Clean Hydrogen Partnership NYMPHEA project. Running from 2023-2026, the project is funded by Horizon Europe, and the project's main objective is to develop an aircraft-compatible, next-generation high-temperature PEM MEA. This involved optimizing and enhancing various components such as the catalyst layer, membrane, and gas diffusion layer. Advent's Ion Pair MEA technology serves as the foundation for these advancements. As part of the newly signed MoU, Advent and Safran Power Units are exploring a joint development agreement for the advancement of high-temperature PEM fuel cells in aviation and for enhancing Advent's supply capability. In May, Advent announced a contract with a prominent fuel cell manufacturer specializing in truck application in the East Asian market.

Under this contract, Advent will supply high-temperature PEM MEAs to support the development of advanced fuel cell solutions for trucks. The contract has a combined value of $1.1 million and comes after a highly successful testing phase of Advent's proprietary MEA technology conducted by our customer. Advent will deliver high-temperature PEM MEAs with a projected continuation of deliveries aligned to the customer's specific time frame. The use of Advent MEA technology in fuel cell-powered trucks is a critical and substantial enhancement to EV technology, effectively tackling the challenges associated with charging infrastructure and the limited range of pure EVs. MEAs are the critical component of fuel cell systems and have a pivotal role in determining the overall performance, durability, efficiency, weight, and cost-effectiveness of the electrochemical products they empower. Advent's electrochemistry components business include electrodes, membranes, and MEAs.

These components are critical for fuel cell electrolyzers and for long-duration energy storage, such as flow batteries. In June, Advent participated in the second European Electrolyser Summit, held in Brussels. I was part of a delegation of 30 CEOs representing the European electrolyzer manufacturing sector in a meeting with European Commissioner Thierry Breton. The primary purpose of the meeting was to discuss and address the objective outlined in the Joint Declaration of the May 2022 EU Electrolyser Summit. The meeting, jointly organized by the European Commission and Hydrogen Europe as part of the Electrolyser Partnership, brought together approximately 44 companies actively involved in the European electrolyzer supply chain. Following the second European Electrolyser Summit, the industry remains steadfast in its commitment to achieve the ambitious goals set out in the REPowerEU communication.

The objective is to accomplish 10 million tons of domestic hydrogen production and import 10 million tons of hydrogen by 2030. As part of this commitment, the industry is planning to significantly increase electrolyzer production in the EU, aiming to ramp up capacity by a factor of seven within seven years. This will involve scaling up from the current 3 GW production capacity to approximately 21 GW by 2025. In a recently published document, the partnership members and the European Commission provided an update on the progress that has been made one year after the signing of the Joint Declaration. The document highlights the industry's continuing efforts to expand its European footprint as the regulatory framework moves closer to completion. Notable developments include the Renewable Energy Directive, the Delegated Acts of Additionality, and the Hydrogen Bank.

For Advent Green HiPo project, we provided an update in May on its status. This update highlighted the recent milestone achieved so far, emphasizing the collective dedication of the entire Advent team towards decarbonization and the transformation of the clean energy landscape in Greece and Europe. Most notably, one, Advent successfully acquired the ownership right to a prime parcel of real estate located in Kozani, Greece, where its planned state-of-the-art facility for the Green HiPo IPCEI project is expected to be located. This land acquisition underscores Advent's unwavering dedication to establishing a robust infrastructure that will effectively and strategically support the objective of the Green HiPo IPCEI project. Advent has also set up a coordination and planning office in the center of Kozani, which will serve as the operational hub for the Green HiPo IPCEI project.

Second, Advent has initiated the process of identifying and hiring key professionals such as scientists, engineers, and managers, who will play integral roles in the new state-of-the-art facility in Kozani. These individuals will drive critical functions such as research and development, first industrial deployment, and supply chain management. Their expertise will be instrumental in the development, design, and manufacture of innovative fuel cell system and electrolyzer system. Advent's careful selection process will ensure that top-tier talent is recruited to support the successful execution of the Green HiPo IPCEI project, thereby ensuring the project's success and innovation. On August fourth, 2023, Advent was informed by the Ministry of National Economy and Finance that the Greek state is currently reviewing the financing of IPCEI Hy2Tech.

Accordingly, as a prerequisite for unlocking the state aid funding for Green HiPo, the Greek state is examining and planning ways to implement actions and to strengthen initiatives that will contribute to the transition of the productive and growth model of the Greek economy towards climate neutrality. Parameters for the planning of such actions include implementing projects at specific times, the availability of the completed proposed plan, as well as compliance with regulatory obligations and guidelines regarding the management of European funds.

Thank you, Vasilis, and good morning, everyone. Thank you, Vasilis, and good morning, everyone. Turning to our financials, we delivered revenue of $1.1 million in the second quarter, and income from grants of $0.7 million, for a total of $1.8 million. R&D expenses were $2.9 million in the second quarter, primarily related to internal R&D costs incurred in each of our businesses, as well as our cooperative research and development agreement with the Department of Energy. Administrative and selling expenses were $8.3 million in the second quarter. Combined with R&D, total operating expenses were $11.2 million, a year-over-year increase of $0.6 million, primarily related to an increase in research and development costs, as well as expenses related to our new Hood Park facility in Charlestown, Mass.

We recognized $9.8 million of asset impairment charges in the second quarter, mostly related to the assessment of goodwill and other intangible assets from the company's acquisitions in 2021. Net loss in Q2 was $21.8 million, or $0.41 per share. Unrestricted cash reserves were $10.1 million as of June 30, 2023, a decrease of $9.5 million from March 31, 2023, which includes $3.4 million of cash that we raised from the company's equity line of credit with Lincoln Park Capital, $1.9 million paid to complete the acquisition of the fuel cell systems business in Denmark, Germany, and the Philippines, $0.8 million paid to acquire land in Kozani, Greece, for the Green HiPo project, and $0.4 million paid for the build-out of the Hood Park facility.

Our existing cash balances and projected operating cash flows are not expected to be sufficient to support planned operations for the next 12 months. However, in addition to the potential funding from the pending Green HiPo project, we finalized an agreement in April this year for an equity line of credit with Lincoln Park Capital, which gives us the option to access up to $50 million of capital over the three-year term. The utilization of this equity line of credit is at Advent's discretion and provides us with an effective buffer that may be used alongside other funding routes. As I mentioned earlier, we raised $3.4 million in the month of June using this equity line of credit, sufficient to cover our current monthly run rate for operating and capital expenses.

We also implemented in June an at-the-market equity program with H.C. Wainwright as sales agent, under which we may sell up to $50 million of shares of the company's common stock through the agent without any commitment from Advent. We did not utilize this ATM facility during the second quarter. Aside from raising capital, we will continue to manage our cost structure closely and capitalize on opportunities to reduce costs where possible. Let me now turn to our outlook. Advent has a strong pipeline of opportunities.

As we all know, however, not every opportunity in the pipeline will transpire due to factors that are beyond Advent's control. Opportunities may not materialize or could be delayed. Due to the long-term contract nature of our business model, the timing of our revenue can also be difficult to predict. Due to the level of uncertainty caused by these factors, as well as the fact that Green HiPo is still under review by the Greek state, we are not providing an outlook for revenue and income from grants for 2023 on this call. With that, I will hand back to Vasily for closing remarks.