Gelion plc (GELN) Earnings Call Transcript & Summary

Good morning, and welcome to the Gelion plc investor presentation. [Operator Instructions] Before we begin, I would like to submit the following poll. I would now like to hand you over to Non-Executive Chairman, Dr. Steve Mahon. Good morning to you.

Good morning. Gelion made two important announcements on Tuesday this week and the purpose of this update to investors is to explain those behind it. The first of those announcements was we announced a partnership with one of the U.S. government's labs. This is part of our entry strategy into the U.S. In advanced batteries, lithium sulfur, we believe, could be a competitive and strategically important chemistry for -- western countries are all looking for over their supply chains. In all the Western governments, the U.S. is by far the most aggressive and leading in terms of their spend on procurement of advanced technologies in this space and in the defense space. The U.S. defense budget is 10x that of the U.K. So our goal is to be the category leader, the #1 in the world on lithium sulfur batteries and on the sulfur chemistry for batteries. You can't be the global leader if you don't have a strategy, and this marks the start of our U.S. market entry. The second announcement is that we're transitioning to a new CEO today. We have both John and Matt on the call today. John is retiring and we've invited John to the call to share his thoughts and reasons with you all. And then it will be my pleasure to introduce Matt to you today. John came to me about 9 months ago to talk about how we could start the process of stepping back to the business and how do we manage this in the most professional and efficient way that we can. And so we plotted a path to what is the stage of the company need to be at where we can go to the next phase where a new CEO can come in and look at how we scale up to more advanced commercial partnerships. And John months since the turn of the year, as you've seen a steady series of announcements that put that platform in place. We engaged one of the leading global executive search firms. They screened hundreds of candidates, and we were delighted that our lead candidate, Matt, was able to come and join us -- someone who had experience lived and operated in Europe and Asia, had experience of making battery materials and carbon-based structures, which is the core competence we need in our team. And so it will be really, I hope, an exciting few years with Matt at the helm. But firstly, I'd like to hand to John and ask him to give his reflections on the business and his rationale for why he feels [indiscernible]. John, maybe I'll hand the floor to you now.

Thanks very much, Steve. First of all, a huge thank you to all the shareholders who have backed Gelion in our mission during my tenure. It's been a real honor being the CEO of Gelion. I'm an innovation CEO. I came to the company with a very, very clear focus. What the Board asked me to do was to accelerate the path from innovation to commercialization and to position the business for meaningful global impact and long-term success. Well, I was blessed by the team that I found when I came into Gelion. They're a wonderful team. They've done a magnificent job, and Gelion is strongly set on those goals today. The art of innovation. It's something I've done all my life is this 35-year career as an innovation CEO. At the end of the day to me, is establishing product market fit for the technology that you represent and to integrate it into the global supply chain so that it's adopted everywhere. World is very competitive today. You want to be #1 in your market sector. And NES, our Nano-Encapsulated Sulfur has a huge scope of product market fit. So Gelion today has a very clear focus towards high growth around development, scaling and commercialization of NES. It has an awesome and highly effective team, devastated to be leaving them personally. They've been so supportive in my tenure. But I've made this decision for personal reasons in the stage of my life that when I'm doing this, I'm in boots and all working 12 to 16 hours a day. We've got a few things I'm going to be doing before I get too old to do them. And I am completely convinced that we've found the right person to take the business forward here now in Matt. There's a lot of innovation ahead. But also the company now will be drilling its focus around execution and scaling, and we needed the CEO that had the experience to deliver this next stage. I've had the pleasure of interacting with Matt for a bit over a month now in preparing for this transition. He's a very strong honest leader. I'm 100% sure he will do a great job. And Steve and our Board did an excellent job in their transition planning. So very pleased to hand over to you, Matt, if you would take the address to our shareholders from here.

Thanks, John. I appreciate it. Well, look, thank everybody for giving me this platform to talk to you today. I'm going to go through just a few simple things. I'll give a little bit of background about myself and then really talk importantly about why I'm excited to be joining Gelion. And then the fantastic news about this CRADA and the collaboration with the National Lab of the Rockies and why that's really, really important for Gelion, particularly as we go into this next phase. So I'm Matt. I spent the last more than 20 years in the Energy and Performance Materials space, the last 15 years of which have been at Cabot Corporation, a global specialty chemicals and Performance Materials company and really a leader in that. And through my various roles there, they've really been about developing, scaling and growing Performance Materials businesses, including Cabot's Battery Materials business. And so I have had experience scaling a Materials business into the battery space. I've run P&Ls of different sizes from $10 million of revenue to more than $2 billion of revenue and businesses with teams of anywhere from 20 people to more than 2,000 people. And I am extremely honored and excited to be joining Gelion. The reasons that I'm excited are manifold, but really it boils down to 3 principal things. I think, firstly, it's the technology. It is a proven technology and not just by Gelion, not just internally validated, but actually validated by our partners, the people who want to use this material. And that's not only important, but it also -- it differentiates Gelion from some other battery materials companies who have validated the technology, but haven't had it validated by customers. So proven technology, proven by our partners. The second reason is that this is eminently scalable. I've had experience of scaling manufacturing for Performance Materials businesses. And one of my first questions to Steve and the Board was around great, that's a great material, but how do you make it? And whilst our Nano-Encapsulated Sulfur material is really special. Actually, the processes that you need to make this at scale do not require invention. There are processes that exist in the world today at scale, and we will need engineering partners to build that into a functioning system. But there's no invention required. And so that was a really, really important thing because in my experience, that's a large part of the battle. And then lastly, the partnerships that John and the team have built. And I think what's really neat is that we've got partners in different regions with TDK in Asia, with Nissan in Europe, with QinetiQ in Europe. And now with the National Lab of the Rockies in the U.S. but also in different applications across different cell chemistries for lithium metal anode, which is a great fit for defense applications with graphite and silicon or graphite silicon anodes, which is a great fit across quite a wide range of applications and now even in solid-state chemistries. And so this is hugely, hugely exciting. It's really unique in my experience to have such a great spread of top-tier partners. And so yes, proven technology, eminently scalable process and great partners. And so I am really, really grateful to John what he's handing over to me and what I look forward to stewarding for our shareholders. It's a business that has clarity. We are a sulfur battery materials company. It has a very, very strong IP foundation. It has fantastic partnerships. And now we have added to that the CRADA with the National Lab of the Rockies. And what that gives us is an entry point into the U.S. And so that gives us a partnership in another part of the geographic spread, but also a scale-up path, and I'll talk a little bit about that. But first, maybe a little bit of background on the CRADA and the National Lab of the Rockies. So National Lab of the Rockies, NLR, formerly NREL, some folks know it by its former name, is a federally funded lab in the United States underneath the Department of Energy and it's in Colorado. And it's one of a network of federal labs and people may have heard of Los Alamos, Argonne National Lab, Idaho National Lab. So there are others out there. But the important thing about NLR, it is the national lab that's dedicated to energy technologies. It's a 300-acre campus. It's got more than 3,500 staff and its mission is to facilitate the application of research into practical settings. And so this just matches perfectly with what Gelion is bringing to the United States and more broadly to the battery industry. CRADA stands for a Cooperative Research and Development Agreement between National Labs and public or private enterprises. And I think what's important here is it's research and development, not necessarily just R&D. And so what we're doing is very much in the development bucket with the program with NLR. So hopefully, that's a little bit to put some color to this. You can see on the slide we've got what we'll go through in this program, providing our materials, designing and building with NLRs, help on the technology, some fantastic cells to prototype, validating them, validating the materials, validating the cells and validating the manufacturing processes. And then it ends in a domestic pilot plant in the United States the first production plant at scale of this material, the first in the U.S. And that then paves the way for commercial qualification across a wide range of applications. So why is this important to Gelion? Well, I've been involved in CRADA before. John has been involved in CRADA before at other companies, and there are lots of good things you can say about it, but there are 5 parts of the why, why is this important that really stand out to me. The first and foremost is the major external validation of this technology in the United States. We've had validation in other regions with other partners. Now this will give us this validation in the United States and specifically by a federal agency, which comes with a huge amount of credibility. Secondly, we can leverage that credibility to secure 2 parts of funding that were previously harder for us to go and get. So one is nondilutive grant funding, which there are big pools in the United States, particularly for this type of technology at the moment. And the second is access to a group of strategic investors. And so there are investors out there. We've met with some of them that look for companies that have signed CRADA because it comes with that credibility. And so both of these are big pools. And the timing of this is important because of the U.S. focus on energy independence and on national security and defense. And so we're bringing this material to a market that really values the value proposition that we have. The third part is acceleration. And so this accelerates our path to commercialization. And so not only does it get us our pilot plant, but it's a structured program of materials, cells and manufacturing qualification. So that will give us credibility with defense, energy storage, electric vehicle customers in the United States, but that includes U.S. government procurement. So this is access into those markets. So when we put those things together, the fourth thing to say about this is it derisks our scale up. We've got the major technical validation, which reduce our technical risk. We've got then commercial qualification. It accelerates our path to commercialization. It brings down our market risk. And so really, this is a very important thing for derisking Gelion's path forward. And then lastly, and by no means least, it unlocks U.S. market access for Gelion. So I've worked with U.S. companies for U.S. companies and living and working in the U.S., all of those for some time. And my experience has been U.S. companies like doing business with companies that have a footprint in the United States. They want to delink from Chinese supply chains under the current environment. And that's one of the key features of Gelion's technology. It's based on sulfur chemistry. Sulfur is abundant in the world, but the U.S. has somewhere in the range of 15% of the world's sulfur production. It's a byproduct of the oil and gas, refining and chemicals industries. And they want things to be fast and they want things to be real. And the CRADA now will deliver all of those things for us. It will give us a local footprint with credibility. It enables then the U.S. to delink part of its supply chain with an alternative cathode material for its cells. And it will accelerate. It will make it fast, and it will very much make it real. And so for me, the CRADA will deliver all of those things. So just to reiterate, the CRADA is important to us because it's a major external validation with the highest level of credibility in that market. It will then enable us to take that and leverage it to access pools of funding that were maybe not available to us before. Those are not a given, but we now have a very, very credible way of pursuing those and engaging on those. Thirdly, it will accelerate our path to commercialization. Fourthly, it will help us derisk our commercialization and scale up. And then it will be this sort of absolutely important key in the door to unlock access into the U.S. market, particularly the U.S. defense market in a very, very credible way. And then when we put all of that together with the fantastic work that John and the team have delivered, and you've seen recent announcements on Max Planck on the solid-state battery program with Nissan, then actually, Gelion really becomes a global cathode company. And you can see our partnerships here across the world in different regions and with the different partners with whom we are extremely proud to be working. So yes, hopefully, that's brought a bit of color to where we are. It's the same mission that John has been stewarding the company through. It's just the next phase of that mission. I'm extremely proud to be the person who's been entrusted to lead that. And I think the platform that you see on the screen is a fantastic one that we now need to go and both execute on and supplement. And so Alex, I think now probably best if I hand back to you for some questions.

That's great. Thank you very much indeed for your presentation, Matt. [Operator Instructions] I would like to remind you the recording of this presentation, along with a copy of the slides and the published Q&A can be accessed via investor dashboard. Simon, at this point, if I may hand over to you, sir, to take us through the Q&A session, and I'll pick up from you at the end. Thank you.

Thanks, Alex. Let's start with some pre-submitted ones. Question for you, Matt. What lessons and experience from your time at Cabot are you bringing to Gelion? And where do you see the greatest opportunity to apply those lessons?

Well, thank you. Great question. And I'm sure as the new person on the screen, people are interested to know. So I was lucky enough at Cabot to have a really wide range of experiences. I would say the most relevant ones to this fantastic opportunity at Gelion would be the following. Firstly, an understanding of the battery industry, including the needs of different applications, customer qualification processes at companies like Panasonic, Samsung SDI, Tesla, PowerCo, which is Volkswagen, and the industry structure. It's an industry that's built on partnerships and understanding that, I think, is something I bring with me. Secondly is experience of scaling production and particularly the strategic options that are out there for any company in terms of deploying capacity through different models. And then lastly, experience of building and maintaining partnerships across different regions of the world. That's been across different industries, including in the battery industry and the battery materials industry. And it's something that John has obviously done a fantastic job of, and I'm glad that I can bring some experience to that as well.

Thanks, Matt. Fairly obvious question, this one. You've now got -- you're operating across the U.K., Australia, Japan and now the U.S. as well. How are you going to lead an organization as geographically dispersed as that?

Yes, it's fantastic. It's -- I'm really looking forward to it. I think, honestly, I'm used to it. Most of my experience has involved leading global teams and cross-regional collaborations within organizations and between organizations. And so I'm used to it. My preference is often to be in person. But the key things in managing it are, firstly, ensuring everyone in our team understands our mission and our priorities so that they can make good choices. Secondly, I think being thoughtful about what to delegate. So when you don't need to travel, when the team can go and just do it themselves versus when to be in person and when being in person will make the difference. And then I would also say knowing what the important things are for being at home because that has to be balanced in all of this. So yes, I'm not only used to it, but I relish it, quite frankly. And so it was one of the attractive things about coming to Gelion is it is genuinely a global company, and it's an environment that I thrive in.

Are there any -- have you identified any gaps both in terms of capability and skills in the management team? And are you going to be -- do you need to go and hire?

Well, look, I mean, I'm day 3 on the job. As John said, thankfully, I've been lucky enough to have a month in the background seeing how John and the team work and what they're working on and trying to get up to speed to have a flying start, but it's still kind of very early. What I would say is my first observation is, and John alluded to it, that I have inherited a really capable team. And so the short answer is no. My experience is that as we scale up, we will need to complement the skills of the team. To give some examples, working with EPC firms, manufacturing operations, global key account management. These are things that have to come as we climb the maturity curve. But we're not there yet. There's not the need to do that yet. We have a very, very capable team for where we are.

Follow-on from that, I guess. You're going to be based in the U.K. Does that mean changes to the management team in Australia?

No. I mean we -- I am based in the U.K. We already have a very capable team in place, as I've said, across the U.K., Australia, -- and in the U.S., actually, where we have Tracy Sizemore, our Senior Vice President of Global Partnerships, a deeply experienced gentleman and a great part of our team. So no, no need for immediate changes. Three of the leadership roles are in Australia, our CFO, our CTO and our HR lead. And so the short answer is my role being in the U.K. doesn't change anything. We're a global company. I've just described how we're going to work -- continue to work globally. And so no need for immediate changes in Australia.

You mentioned in a proactive interview that you were expecting additional partnerships for Gelion later this year. Can you say anything about these? Will they be commercial or government or -- is it going to be in the EV space?

Yes. So this is a great question. I'm sure it's the hot one on everybody's lips. But I'm sure you'll understand that I can't give specifics. We are pursuing partnerships across a number of applications, including drones, including EVs and across short, medium and longer-term horizons, that's very important and across the value chain, whether that's with end applications with cell makers or people that make complementary materials in our space with which our materials interact inside a cell. And so we're pursuing partnerships across all 3 of those different things, different end markets, different time horizons and different parts of the value chain. But unfortunately, at this stage, I can't give any specifics.

A couple of questions around QinetiQ. One, drones have been in the news recently here in the U.K. What can you tell us about drones in the U.K.? And secondly, where are you with the QinetiQ collaboration? Can you give us an update?

So Steve, maybe I can pass this one to you, and you might be best placed to answer this one.

Thanks, Matt. Well, we're on track with QinetiQ. We said we would publish in the year, and we're on track to do that, and we have made pouch cells. I mean I can't speak to QinetiQ's plans with the new DIP recently announced, but drones and autonomous vehicles are a core area for advanced batteries, and it shouldn't be surprise that the U.K. alongside U.S. and most of the NATO countries are actively pursuing solutions in this space.

You mentioned in the September '25 collaboration agreement announcement with TDK that the principal objective over the next 12 months is to progress to prototype lines. Are you still on track for that?

So John, I mean, you've been the architect of this. If it's okay, I'll pass this one to you.

[indiscernible] strong. Our CTO, Louis Adriaenssens and his team, they work very closely with the TDK battery team. We're progressing testing. We exchange progress systematically with them. We have 2 goals on the way to getting a prototype production. The first is to get to what we call our MSK, what we call our MVP baseline. This is a combination of performance characteristics that we've set as to qualify for commercialization. And we do anticipate sharing this generation of material with TDK shortly. So great progress by Team Gelion on that one. Second one is to scale up our fabrication capabilities to be able to make the NES in sufficient scale to support a prototype production line. And we're working to that goal in parallel. Again, Team Gelion doing a great job on the process technology evolution as well. There's still risk in both of those schedules. However, the team is progressing systematically, working diligently towards them. And every day that I was walking into the office, they were inspiring with their progress every day. So I would say, generally, on track.

Thank you very much. We keep hearing you've said a couple of times that sulfur is abundant, but how do you actually collect it at scale required for -- if the world adopts your battery technology? And who would process it?

So I'll take this one. So sulfur is a byproduct of some very, very well established industries. It's a byproduct of desulfurization process in refineries, in gas -- natural gas processing and in some chemicals complexes around the world and supplies very well established downstream industries like sulfuric acid production, fertilizers and others. So there is already a very, very strong global market for producing sulfur, particularly the type of sulfur that would be used in batteries is used in batteries amongst other industries with some really very well-established producers. I mean, BASF, Shell, Chevron, Exxon, Saudi Aramco, Mosaic, CF Industries. And so I don't worry about sulfur supply. It's -- no one's got to go out and invent anything to come and start collecting it. And then just to put it in perspective, there are in the range of 100 million tonnes a year of sulfur produced globally. And if you just pick a single market to sort of make the point, if every electric vehicle in the United States, every electric vehicle that's produced in the United States used cells that had Nano-Encapsulated Sulfur as its cathode, you'd need about 40,000 to 50,000 of that 100 million tonnes. And if we're in that position, we're in an absolutely fabulous position. And so yes, I'm not worried about the sulfur supply globally. The great thing -- one of the many great things about our material is that a little bit goes a very, very long way. And that really is the sweet spot for Performance Materials.

Quite a technical question yet. Do you have any plans to release specific measured energy density numbers for the drop in graphitic cell? And separately, do you plan to release real cycle life data for the lithium metal cells? Just curious whether those are statistics or measurements that you're going to be providing?