Amprius Technologies, Inc. ($AMPX)

All right. Perfect. Well, welcome to session 3 of our event today, navigating the drone supply chain. This is all about promoting the visibility to the sort of picks and shovels of the drone industry, the people who are doing the real work to build the domestic supply chain in this kind of rising area of drone componentry. Very pleased to have Ricardo Rodriguez, CFO of Amprius Technologies. Ricardo, thank you for joining us.

Yes. No, thanks for having us, Clarke. Really appreciate it.

Yes. Well, let's kick off with some background. But I think investors may not be familiar with Amprius. What's the company all about? What's the scale of the business today? And what kind of are the key segments that you serve?

Sure. So Amprius is actually going to turn 18 in the fall of this year. And last year, we did over $73 million of revenue. This year, we've told The Street that we'll do at least $125 million of revenue. In Q4, we actually did 24% gross margins, and we told The Street that we'll do at least 25% gross margins here in 2026. And our calling card is energy density and power batteries. So if you take a standard lithium-ion cell today, it will only give you so much energy density per unit of weight or size. On average, a lithium-ion cell will give you around 275 watt-hours per kilogram. And we have some cells that deliver over 500 watt-hours per kilogram. All else being equal, we can also deliver more cycle life and broaden the operating temperature range of these batteries as well. And so our team was founded at Stanford, always with kind of one foot in China and one foot at Stanford University, given that the founding team was doing their studies at Stanford, and they were all from China. And then in 2022, we basically became an all-American company by spinning off all the Chinese subsidiaries and going public. But that's the scope of our work today. As you can imagine, right, in UAV, a robot, an eVTOL, some satellite applications that we're now seeing, without a high-energy density battery, you literally don't deliver the duty cycle or the usage that, that device was designed to deliver. And so we'd like to think that we play a pretty critical role in our customers enabling these duty cycles across multiple different segments. And then obviously, as we were building up our revenue base going back to 2018, even some of our earlier investors were the early UAV manufacturers like AALTO, which is a division of Airbus and AeroVironment among many others.

Yes. Well, I think from the outside looking in, a lot of investors may be thinking that the last 5 years, drones kind of came about just by nature of us trying something new. But I suspect that, that kind of energy density was a fundamental and supporting technology in a lot of the sophistication innovation that's happened in the last 5 years. I mean, one-way attack, counter-drone interceptors, loitering munitions, all of those segments didn't exist really 5 years ago. And so it's a really supportive technology that I think has been pretty important. You got started with this -- the high-altitude pseudo-satellite business. You mentioned some of the markets, but let's talk a little bit about what you're doing today in terms of geographic focus and some of the earliest adopters, maybe some of those UAV companies were your first customers in the late 2010s. But sitting today, what does the business look like in terms of market exposure and geographic exposure?

Yes. So for last year, roughly 3/4 of our revenues were outside of the U.S., and that's just due to the markets that we fulfill. So also, about 3/4 of the revenue was in the UAV space, which was mainly defense. And as you can imagine, this market really started developing itself in Europe out of necessity, right? To do surveillance in the Nordics, in Ukraine, in the rest of Europe, folks have had to get pretty creative with not just really high-altitude drones, but also drones that fly above 20,000 feet and that carry with them a lot of devices, right? And so when the drone is carrying a couple of cameras, a gimbal, a radar, LiDAR, a bunch of communications equipment and a relatively high-powered and secure flight controller, you wonder where there's any power or energy left for the thing to actually fly. And so that's why those customers came calling earlier asking for high-energy density and then later on high-power cells and something more balanced, we've been able to tune the formula to match the requirements of each of these different applications. And then the light [ EV ] market is one that has always been there for us in China and other parts of Asia and that we actually see gathering momentum in Europe for high-powered motorcycles a little bit of power tools and things like that, that also drove roughly 25% of our revenue last year. But we do see, as we look at this year, the U.S. is obviously playing catch-up in this regard. That could drive some upside in the second half of this year. The space market is developing pretty meaningfully as well, where lithium-ion batteries didn't necessarily have a position in satellites and in backup power for receivers and antennas. We're now seeing an opportunity for that, especially when some of these antennas and receivers are portable. And then eVTOLs, that's a market that is in the very early innings. But without a high-power cell, an eVTOL literally won't take off. And without a high energy density cell, it will only go so far. And so we've been working for quite some time with some of the main names there developing a custom battery. And what we like about these markets is that there's a bit of a replacement dynamic within them as well. So unlike electric vehicles or stationary storage, which make up the bulk of the lithium-ion battery market, we could actually have some replacement cells that get sold into each of these applications.

Yes. Well, definitely would love to understand that dynamic around the U.S. and some of the earlier-stage investments that you're at in terms of building capacity domestically. And maybe we could talk about what you're doing in California and Nanotech Energy. What is the company's path to expanding the U.S. business and fulfilling some of the demand that's coming through the pipeline for the U.S. drone makers or other markets? Maybe we could talk through that and understand how -- what you see in terms of the long-term path beyond 75% outside of the U.S.

Yes. I mean, I think, the 75% outside of the U.S. has been more a nature of where the demand is rather than where the supply has been. So fortunately, we have not left any revenue on the table because of our supply structure or agreements. I mean if there was more demand in the U.S. this year, we can totally fulfill it out of South Korea and even out of China after paying the tariffs. So that's not an issue at all. But what is driving a race for setting up capacity in the U.S. and in our case, we're way more likely to establish capacity through contract manufacturing similar to the Nanotech agreement that you mentioned. And -- but what's driving the race to build cells in the U.S. is the National Defense Appropriation Act, which after 2028 makes it pretty difficult to buy cells that are not made in the U.S. Ironically, that also happens to be when the bulk of the demand will -- we expect will be there from the U.S. itself. And so it actually works out really well. And the Defense Innovation Unit within the DoW recognized this, which is why roughly a year ago, they held a bake-off amongst all battery companies, including some foreign companies to see who could deliver and develop a U.S.-made high-energy density cell that didn't rely on some of the difficult markets for sourcing some of its main components. And we actually won that bake-off by delivering everything that we promised and a little bit more constantly. And we've actually sourced and identified the 11 critical materials that we need to produce ourselves, whether it's in South Korea initially and eventually in the U.S. And so it's fair to expect us to work along the lines of more agreements like the one that we mentioned with Nanotech to produce some of our higher-running SKUs in the U.S. to also drive some convergence on the form factors and cell sizes so that we can generate a good bit of demand for all of these and continue creating value. At the same time, you've got the IRA still there subsidizing some of the manufacturing of these cells. And so we truly do believe that by the time you factor those two things, plus the fact that we use a standard lithium-ion cell production equipment and are able to relatively quickly scale up the production of our cells that the cost can actually be competitive relative to what you're seeing out of places like South Korea, Japan, et cetera, right? And so that's our plan. I mean we truly think that if we ramp up Nanotech here by the end of the summer and then ramp up other contract manufacturers early next year and throughout next year, we'll be in pretty good shape and well ahead of anybody to supply this demand.

Yes. Well, let's maybe talk about some of the technology curves that you have ahead of you. Silicon anode battery technology is sort of that Stanford sort of research product, the sort of origin of the company, but there is some differences here, whole silicon nanowire, silicon graphite blends. Maybe we could talk about some of the product mix and sort of expansion that you're pursuing in what you call SiCore. And how is that a complement to what you're doing today? And how does that fit into serving the market over the next few years? What are some advantages that, that product can have or packaging opportunities that it can have maybe versus the sort of origin product in SiMaxx?

Yes. I mean it's pretty straightforward, right? So if you look at a product like SiMaxx, SiMaxx was 100% silicon. It was the silicon nanotubes that were sort of tough to scale up. And so -- but at the same time, without SiMaxx, SiCore would not exist because while you may have a very good anode, you wouldn't know what the rest of the cell needs to be, right? So what's the cathode that balances the cell? What does the electrolyte need to be? And then what does the separator need to be in order to truly make the most out of a silicon-rich anode? And so the way we see it is right now, there are basically 4 paths to producing a "silicon-loaded cell." The first one is what you mentioned, which is just silicon doping, blending single digits of silicon with graphite on the anode side of the cell. And your iPhone or some high-end consumer devices have a little bit of silicon in them already to give you that extra little bit of performance. We're seeing some EVs like the next-generation Porsche Cayenne will have single digits of silicon within the anode to push energy density and charging times. Then the second path, which is the path that SiCore is on is silicon oxide. So silicon oxide enables you to have anywhere between 30% to up to 90% silicon if you can control the swelling by knowing what the rest of the cell needs to be. And the reason we got there sooner than anybody else on silicon oxide is because from the SiMaxx experience, we knew what the rest of the cell had to be pretty quickly. And in fact, we even see today in China and other markets, some pretty poorly balanced silicon oxide cells that are actually kind of dangerous. And then the third path is silicon carbon. And that's where companies like Sila Nano, Group14, they've all been working on how to produce the powder for silicon carbon. And the reality is that some of those cells perform comparably to what silicon oxide can deliver from our experience. And so for us, it would be a pretty easy swap to put silicon carbon in some of the cells if we see a performance benefit. But so far, we have not seen it, right? And then the last path is the one that we were sort of on up until 2.5 years ago, which is to try to do something with 100% silicon. And that we're realizing that while it delivers quite a bit of performance, it's tough to coat that electrode and to produce it at scale. It's no secret that SiMaxx was not necessarily a profitable product for us. And then as we were developing SiCore, we were able to get pretty close to SiMaxx' performance. And if you look at our tech road map, which we put out in our most recent earnings call, we believe that we can actually surpass SiMaxx' performance by continuing to develop SiCore. And so that's how we ended up where we're at today and where the battery industry finds itself today. What we do think is that lithium-ion cells are here to stay. Solid state has been 3 years away for the past 15 years, and the time line keeps getting reset on that for multiple reasons. But the main reason is that the equipment to produce those cells does not exist and it also needs to be developed, right? And so the beauty of silicon oxide in our view, is that you can actually use the standard lithium-ion cell equipment to produce cells relatively fast. And in a market that is small and dynamic like UAVs, robotics, all these applications that I listed previously, we are finding out that nothing matters more than speed so that you can deliver the right cell from the right place at the right time.

Yes. And to further understand this, you can use the same equipment and you could benefit from some of the industry's investment. One of the things, as I understand it with the EV market and the scaling of battery technology was the form factor and you had 2170s and 4680s, and a lot of this was around building economies of scale around form factor. You're talking a lot about technology decisions and chemical compositions as the sort of right horse to bet on. But on the packaging side and sort of the scaling side, are you going to find a choice where the UAV market will want a certain form factor and investors should watch the development of that form factor on a silicon oxide basis? Or is it a market that's going to be very different, and you're going to have a lot of form factors that you're going to support for something like eVTOL versus UAV, where they're going to have very different requirements and they're not going to follow this path of lithium-ion, small stitched together 2170s approach to getting power?

Yes. I mean the eVTOL guys are nowhere near that path. The eVTOL guys are actually developing relatively larger pouch cells that we're very familiar with. But to give you an idea, in Q4, we did over $25 million of revenue through around 22 SKUs, right, of either cylindrical or pouch cells. And so I think the answer to your question is it kind of depends on the OEM or the integrators' budget because you can optimize your way to having a really efficient package if you can afford it and are willing to pay for it. And it actually doesn't take that much time of development. Like some of these cells, again, going back to my point on speed, like we're able to develop them within the quarter, like develop them and ship them within the quarter. And so unlike in EVs where you had a couple of customer -- a couple of guys using cylindrical cells and then everybody else go with large pouches and large prismatic cells, and they were all deviating within a couple of percentage points of each other in terms of energy density on the markets that we are serving, switching from an optimized cell to a non-optimized cell or from a standard cell to one of our high-energy density cells, we're able to deliver, in some cases, over 100% incremental density, right? And so it is worth the additional cost. And so we are seeing some more convergence as some clear pouch sizes become kind of the leading demand drivers and same thing on the cylindrical side. But for folks who are willing to pay to truly optimize the application, we'll deliver to them the custom cell.

Yes. Well, one of the things that the company has talked about is some pretty healthy long-term targets. I mean, by 2030, getting to $600 million or more in revenue, 30% gross margins and 20% EBITDA margins. Sitting here today, what are the major hurdles to getting to those milestones? I mean is the demand side so healthy that you're not worried about demand and it's about execution on capacity? Is it about developing yield around silicon oxide? Help me understand the things that you'll be doing between now and 2030 to ensure that those targets are well in hand.

Yes. So I mean the yields are not an issue. The yields are already there. They're at standard lithium-ion cell levels above 90% already. Even for a new start-up facility, we think that they can start from a pretty healthy point of 90%. So yields are not the issue. On the demand side, that's not an issue either. In fact, as I meet more folks on the sell side and the buy side, who have looked at our TAM and SAM and right to win, they're telling me like, look, "Ricardo, you can get to $2 billion just on sizing lithium-ion cell batteries alone within the UAV space." So take aside cheap drones, lithium-polymer cells, et cetera, just look at higher-end drones that carry a lot of devices, what's the lithium-ion battery content within that, and that can be well over $2 billion globally in 2030, which makes our $600 million look pretty achievable, which we're fine with. We'd rather have that number sold to us than me out there pedaling it with not a ton of credibility. But we think it will ultimately depend on getting the right cell from the right place at the right time because it may be that half of those $2 billion are there if you are making the cells in the U.S., right? And so we want to make sure that we're there to capture this demand by producing the cells at the right place.

Perfect. As we wrap up here, last minute, what are you most excited about over the next 12 months? There's lots of movement, new product curve for you to follow, rising supply chain urgency in a certain region. What shakes out to the top for the next 12 months of where you're most excited and where the company is going?

Yes. I mean from my seat on the bus, I'm most excited, frankly, about just delivering the tech road map so that we continue separating ourselves competitively even more so than we already are, expanding our NDA compliant capacity in the U.S. for some critical pouch cells and even more cylindrical volume is critical. So as we deliver that, I think that will really put the picture together for folks. And then for me, it's actually been great here recently to see some friendly faces on the buy side get involved in the stock and make some money as we work our way through very early innings of the ramp. And so ideally, we continue doing more of the same by not screwing up this great opportunity that we have in front of us.

All right. Well, perfect. Ricardo, thank you very much for joining us. Really appreciate your voice and your opinion on what's exciting here and helping investors understand the pretty incredible growth curve ahead. So thank you very much. Looking forward to connecting soon.

Awesome. Same here. Thanks for having us. Have a good weekend, and we'll hopefully see you in Fremont. See you soon.

Yes. Perfect. Take care.

Take care. I'll see you.