FREYR Battery, Inc. (FREY) Q2 2024 Earnings Call Transcript

FREYR Battery, Inc. (NYSE:FREY) Q2 2024 Earnings Convention Name August 9, 2024 8:30 AM ET

Firm Members

Jeffrey Spittel – VP, IRDaniel Barcelo – ChairmanTom Einar Jensen – Co-founder, CEOEvan Calio – CFO

Convention Name Members

Tyler DiMatteo – BTIG

Jeffrey Spittel

Hi there and welcome to Freyr Battery’s Second Quarter 2024 Earnings Convention Name. With me as we speak on the decision are Daniel Barcelo, Chairman of Freyr’s Board of Administrators, our Co-founder, Chief Government Officer, and Board Director, Tom Einar Jensen, and Evan Calio, our Chief Monetary Officer. Throughout as we speak’s name, administration might make forward-looking statements about our enterprise.

These forward-looking statements contain important dangers and uncertainties that might trigger precise outcomes to vary materially from expectations. Most of those elements are outdoors Freyr’s management and are tough to foretell. Further details about danger elements that might materially have an effect on our enterprise can be found in Freyr’s S1, an Annual Report on Kind 10-Okay filed with the Securities and Trade Fee, which can be found on the investor relations part of our web site.

With that, I am going to flip the decision over to Daniel.

Daniel Barcelo

Thanks, Jeff, and welcome everybody to our Q2 ‘24 earnings name. Since that is my first alternative to handle you as Freyr’s chairman of the board, I might prefer to spend a couple of moments highlighting the strengths of our excellent administration workforce and emphasizing our dedication to generate worth for our shareholders, clients, companions, and staff all over the world. Our collective purpose as Freyr’s board of administrators is to determine a worthwhile enterprise as quickly as potential.

As Tom and Evan will element shortly, the business and capital markets are evolving quickly, and we should evolve with them. Our technique has tailored to this altering panorama, and the current appointments to our board and management workforce finest place Freyr to construct on the progress we now have made and to execute our technique.

Freyr’s Board of Administrators now contains our Co-founder, Tore Ivar Slettemoen, Todd Kantor, the managing associate of Embody Capital, David Manners, who has in depth expertise within the U.S. authorities, Peter Matrai, a Co-founder and vitality business knowledgeable, Jessica Strine, a seasoned institutional investor, CEO, and business advisor, and Dan Steingart, professor of Chemical Metallurgy at Columbia College and the Chair of Freyr’s Technical Advisory board.

We’re absolutely aligned in help of Tom Jensen, our CEO, Evan Calio, our CFO, and the remainder of our management workforce, and we now have the utmost confidence of their skills to steer this group on an accelerated path to profitability. Our focus for the rest of 2024 is to advance our enticing enterprise growth alternatives. Throughout his time as our govt chair, Tom continued to spearhead our world enterprise growth endeavors, so his return to the CEO function dovetails with Freyr’s prime priorities.

We’re additionally delighted to have Evan Calio on our workforce as CFO. Evan brings deep world vitality sector, capital formation, and deal-making experience to Freyr having beforehand run companies at BTIG and Morgan Stanley, in addition to having served as an lawyer for the U.S. Securities and Trade Fee. Evan can be instrumental in our journey to create lasting shareholder worth.

Earlier than I flip the decision over to Tom, I might prefer to thanks, our shareholders, for the continued help, which is mirrored by the passing of resolutions at our AGM in June. We’re excited in regards to the alternatives forward for Freyr, significantly within the battery expertise and vitality cupboard space. And with that, I am going to flip the decision over to you, Tom.

Tom Einar Jensen

Thanks, Daniel, and welcome everybody to our Q2 2024 earnings name, Freyr’s thirteenth earnings name since we went public, and my first earnings name since I got here again into the CEO function. I might like to begin as we speak’s name on a private observe. As most of you already know, I’ve been with Freyr from the beginning, and I care deeply about our folks, our traders, our clients, our companions, and our success. And though the capital markets have been chaotic recently, it’s nothing we have not seen earlier than.

It’s possible you’ll recall that we raised the preliminary fairness to go public on the New York Inventory Trade in early 2021 through digital roadshows within the throes of the pandemic. I’m delighted to be 65 days into my second tenure as CEO of Freyr. Whereas I do know we now have nonetheless numerous work to do and that confidence in us has been challenged, I need to firmly state that I might not have stepped again in if I didn’t see that we are able to ship stellar outcomes and groundbreaking developments related in relative influence for us as an organization as once we went public again in 2021.

Again then, we had a conceptual ambition to change into a battery firm with a small workforce and a restricted stability sheet. Now, we’re one of many few firms globally to have confirmed that we are able to produce purposeful batteries utilizing next-generation gear on the 24M SemiSolid platform. Now we have a world partnership and buyer community. Now we have a money place of greater than $200 million with no debt on our stability sheet. Now we have strategic belongings with which we are able to execute tasks and unlock worth, and we now have an rising variety of extremely promising alternatives to determine a deeply worthwhile enterprise.

Now we have globally main companions throughout the whole battery worth chain, together with our Vitality Transition Acceleration Coalition companions with added curiosity and participation from vitality majors, hyperscalers, and ultra-large tech caps who see the vital function and huge potential that the battery business represents, each by way of decarbonization, but in addition by way of unlocking next-generation computational energy in a sustainable method.

We all know, nonetheless, that our traders are looking forward to concrete information, and we acknowledge that your belief and help should be earned by delivering. So, in the event you take one message from as we speak’s name, it is that our revamped board and administration workforce, 65 days into working collectively, are acutely centered on execution, and that is what I am doing along with our glorious workforce in a continually altering and dynamic atmosphere.

Since my return to the CEO function, I’ve begun to sense a well-known feeling from our formative days. I am listening to most of the identical messages from present and rising companions, and I see actual momentum behind the scenes. The important thing distinction is that Freyr is now not merely an organization with a imaginative and prescient to supply batteries. Now we have now confirmed to business leaders that we possess the technical and operational acumen to justify a seat on the desk, and we’re capitalizing on that privilege.

I’m energized in regards to the alternative to function Freyr’s CEO as soon as once more, and I am excited in regards to the street forward. Turning now to slip quantity 4. We’re main with our conclusion by summarizing our worth proposition to traders. As we noticed on this morning’s press launch, our singular focus is to construct a worthwhile enterprise that generates first income and EBITDA as quickly as subsequent yr. We intend to realize this by unlocking worth from our actual belongings, which embrace Giga Arctic, Giga America, the CQP, our land place in Finland, and our expertise licensees.

With publicly traded battery startups deeply out of favor, our fairness at the moment trades beneath money, so there’s significant hidden worth to generate from our belongings. Within the present financing and battery cell pricing environments, adaptability is essential to success. As such, we now have refocused our enterprise growth efforts on tasks which are the quickest to market. The downstream mannequin influence alternatives we’re advancing are financeable due to their comparatively modest capital depth, and so they supply extremely enticing financial returns.

We’re finalizing business agreements and technical options with top-tier companions, and we can be saying specifics on economics and timelines as quickly as we’re prepared with worth accretive offers. We’re conscious of the challenges the battery business is going through, and we prioritize stable worth accretive offers over pace, however we at the moment are very near the preliminary ending line, so we’ll ask for a bit extra endurance till we are able to announce specifics, however our plans embrace commissioning and startup manufacturing, income and EBITDA era throughout 2025.

Our robust stability sheet is one other supply of power for Freyr. Though exterior project-level fairness and debt can be found for bankable tasks as we speak, our important money stability and debt-free stability sheet give us the pliability to be affected person whereas we prioritize capital formation that’s tied to particular tasks. And to offer extra flexibility, we’re implementing extra measures that can prolong Freyr’s runway to roughly 36 months with out assuming the addition of any new sources of funding.

We’re clearly additionally pursuing varied sources of non-dilutive funding linked to our rising product portfolio, however we take nothing without any consideration and search to regulate what we are able to whereas pursuing extra alternatives to enhance our potential to develop additional. Turning to our third level, for all of the capital gear depth of the battery business, it is human capital within the type of technical and operational expertise that’s the major supply of worth creation and aggressive differentiation.

With our current successes on the CQP, on the 24M platform, we now have demonstrated to our present and potential companions that Freyr has world-class individuals who know the right way to discover options to extremely advanced technical points. Underneath the management of our newly appointed Chief Working Officer, Mike Brose, our chief expertise officer, Andreas Benson, and our EVP of venture execution, Einar Kilde, we now have developed deep material experience for a wide range of battery worth chain options which continues to drive new alternatives.

And at last, if we carry ourselves out of the tyranny of the second in these risky capital markets environments, Freyr’s story remains to be tied to secular progress developments that ought to in the end resonate with traders. Battery options will more and more be acknowledged as the important thing enabler of the vitality transition, highlighted by the necessity to present dependable, reasonably priced, clear, dispatchable vitality as the worldwide energy grids develop extra reliant upon intermittent renewables amidst sure world electrical energy demand.

Freyr is more and more on the forefront of this vitality revolution. Turning now to slip 5, let me replace you on the pillars of our Freyr 2.0 technique that we now have alluded to in earlier calls. We’re accelerating our typical expertise technique and we count on to steer with downstream tasks centered on module influence manufacturing. This strategy is grounded in market fundamentals as follows.

The economics of module influence tasks profit from the excess of battery cell capability whereas finalizing end-user functions with native content material necessities and battery administration methods. Financing is obtainable for these tasks as a result of they’re far much less capital intensive than battery cell Giga factories.

Freyr has already been engaged on downstream expertise configurations to help cell manufacturing so we are able to channel that momentum to fabricate purpose-built storage options for our clients and the development lead instances for module influence amenities are a lot shorter, enabling us to speed up our path to market additionally provided that we now have constructing an infrastructure belongings inside the corporate. The second pillar of our Freyr 2.0 technique is our emphasis on monetary self-discipline and our robust stability sheet.

In as we speak’s difficult financing atmosphere, money is king. Accordingly, we now have inbuilt flexibility in our working mannequin to regulate our money burn charge to increase our runway to no less than 36 months with out elevating any extra capital. Along with this precedence, we’re additionally pursuing a number of choices to generate worth from our present belongings together with Giga Arctic. Our business efforts are additionally in excessive gear.

We’re concurrently evaluating potential inorganic alternatives whereas we mature the Freyr 2.0 business pipeline of typical expertise tasks. Our workforce is keen to share what we have been engaged on within the public area and as we transfer from confidential negotiations to formal commitments, we’ll talk our progress accordingly to the market. Whereas we deal with accelerating Freyr’s path to commercialization within the close to time period, we stay dedicated to establishing a long-term aggressive moat round our distinctive place with 24M SemiSolid expertise.

The technical milestones we now have introduced this yr on the CQP have confirmed that we as a workforce can produce batteries on a novel expertise platform and people achievements are attracting consideration from potential companions throughout the battery and adjoining industries. The battery business’s future rests on enhancing battery security, rising vitality density, driving down uncooked materials and conversion prices, and enhancing each electrochemical and electromechanical elements of battery manufacturing.

There are a number of extra alternatives across the 24M platform which incorporates novel supplies, LFP recycling choices, improved cell designs, and far safer separator options which we consider in the end might be a cloth a part of a differentiated subsequent era tech stack at ultra-low prices with all security elements below management. We’ll, in a useful resource smart method, proceed the work with present and new companions to develop aggressive battery options primarily based on the 24M platform, progressively take a look at and embrace extra elements of the 24M portfolio, and discover complementary avenues to leverage the digital belongings we now have developed in-house in Freyr and on the CQP.

Turning to slip 6. Let’s spend a couple of minutes panning out to evaluate the massive image alternative for Freyr. The information from quite a few sources proceed to help our view that we’re within the early phases of a structural and exponential progress development for batteries that are the important thing facilitator of the vitality transition. In Freyr’s core and markets, batteries are the answer for a structural dilemma throughout each the provision and demand spectrums for energy.

Moreover, I need to underline that these secular progress developments are underpinned by studying curves which can proceed to drive down prices and speed up deployment additional. Conventional estimators and standard vitality analysts nonetheless battle to tackle board the momentum within the transition as has been the case constantly for the final many years. Ultimately, nonetheless, these developments are pushed by economics and exponential progress will proceed as we’re within the early phases of the S-curves as depicted in these charts.

Whereas economics drive world progress, coverage has a job to play for momentary localized deployment. Allocation of capital will gravitate to the markets which profit from momentary incentives just like the Inflation Discount Act, which is among the the explanation why Freyr re-domiciled to the U.S. earlier this yr and why we’re accelerating our presence within the U.S. vitality transition.

Energy grids worldwide have gotten extra reliant on intermittent renewable electrical energy sources via accelerating wind and particularly solar energy era deployment. These require battery backup within the type of battery vitality storage system options to make sure dispatchable reasonably priced provide. No matter the supply of energy era, nonetheless, and the notion that rising intermittent energy provide drives demand for batteries, low-cost battery options are very helpful in supporting grid reliability no matter the supply of the facility provide.

Demand for electrical energy already fluctuates each day and seasonally with climate and through every day with peaks and troughs in utilization patterns. Batteries utilized in storage functions improve reliability, cut back prices, and help the continuing deployment of latest functions akin to microgrids, electrified residence heating, and the uptake of electrical automobiles. As studying curves proceed to enhance efficiency, security, and prices of batteries, every little thing that may be electrified can be electrified.

Decentralized and decarbonized renewable energy-based microgrids coupled with renewable energy-based utility-scale options will more and more be deployed, incentivized, and supported. Freyr is considered one of few firms with elementary publicity to this secular development on each side of the Atlantic, and we now have pedigree partnerships in present and next-generation battery expertise options, offering a singular publicity for traders to trip this persevering with and accelerating vitality transition wave.

And now it’s my nice privilege to welcome Evan Calio to our workforce as Freyr’s Chief Monetary Officer. Evan was instrumental in Freyr’s formation as a public firm throughout his time at BTIG, so he is aware of our story. He understands our business, and he has hit the bottom operating on a number of essential initiatives throughout his first 65 days in his new function. Evan, you’re heartily welcome to the workforce. Over to you.

Evan Calio

Thanks. Thanks, Tom. Look, earlier than I converse to slip 7, I might additionally prefer to share just a few private observations on why I joined Freyr in and be on this facet of the mic for the primary time. As a few of it’s possible you’ll know, I spent most of my profession protecting world vitality markets as an funding banker, as an fairness analysis analyst, and over that point, I’ve witnessed a number of cycles, labored with many firms throughout the worth chain in each conventional and renewable vitality. I joined Freyr with eyes vast open, proper?

As Tom referenced, we labored collectively. We had been a lead advisor within the D-SPAC IPO and retained shut contact as an advisor actually all through the Freyr group for the reason that IPO. And whereas I respect the challenges of building a enterprise, a publicly traded firm in risky markets, I consider Freyr has the appropriate senior folks, management, the appropriate folks, I consider in the appropriate sector, battery and its adjacencies.

I believe it is the appropriate place, relative stability sheet power and compelling and superior tasks and the appropriate time now. Now could be the appropriate time. On folks, I am excited to rejoin Tom and Peter Matrai, co-founders of Freyr. Alternative to work once more with Dan Barcelo, Todd Kantor, Jessica Strein, all whom I’ve identified for over 20 years. And in my first 60 days, it solely confirms my conviction on the organizational depth and focus.

So we now have an distinctive group of leaders and so they’re devoted to constructing one thing significant and lengthy lasting and that is interesting to me. On the sector, Tom lined it extra eloquently than I’d. But electrification is going on. Stationary storage market has long-term tailwinds. The market’s younger and dynamic and it’ll contain consolidation. That excites me.

On time, there is a saying within the vitality enterprise that is confirmed to be true all through my profession that fortunes are made in a downturn. I am betting the cyclical downturn for a secular progress business will solely add to that adage. And whereas the sector is out of favor, we’re working diligently behind the scenes to search out value-creating transactions, alternatives tied to our 3G capital, world community, expertise footprint to construct a invaluable enterprise for our shareholders.

Tom and I’ve a standing name each weekday. It is 5 AM, 6 AM. We’re in several time zones and I get up day by day excited for that. So I respect your belief in us and I can guarantee you that I am all in. So let me now simply handle, I am going to stroll you thru the monetary overview, which is slide 7. And whereas I highlighted the worth of money in a cyclical trough, my job is to protect and prolong it, okay. And when capital is scarce and costly as it’s as we speak, money is king.

Our debt-free stability sheet, our money place, our relative aggressive strengths, and we’re decided to safeguard and fortify it. Accordingly, as was referenced, we’re implementing a price management initiative to increase our money liquidity runway to 36 months. And I count on to see these results within the fourth quarter of this yr. With our deal with typical expertise technique, we need not spend significant capital to advance our alternatives. So capital spending will decline till we now have definitive agreements that catalyze each growth and hopefully EBITDA money stream visibility.

Within the interim, we’ll proceed to scale back working expense. Relating to capital formation, which is my earlier profession on Wall Avenue, you should not count on to see exercise earlier than we now have concrete agreements in place tied to particular value-creating alternatives for our fairness. We now have two of our 5 largest fairness traders on the board. 10 days, kind of related, very related begin date to me. So our workforce will proceed to be very considerate about value-enhancing capital formations.

On the slide, whole money use within the quarter was $31 million, ending 2Q’24 at $222 million. That is increased, quarter-over-quarter by $8 million over the primary quarter. But, adjusting for non-recurring property deposits and FX, it was down $2 million. So largely in line, quarter-to-quarter, year-to-date, $54 million money use. This displays 2Q exercise on the CQP associated to our profitable cell-production trials, and we count on these prices will proceed into the third quarter.

Nevertheless, into the fourth quarter and 2025, we count on to see the results of price and exercise discount that help our 36-month money liquidity runway outlook. And that is it. With that, I am going to flip it again, Tom, to you and shut us out.

Tom Einar Jensen

Thanks, Evan. I additionally stay up for our early afternoon calls, your morning calls. That digital espresso is a spotlight of my day. Transferring now to slip 8, we’ll conclude with our key messages. Our workforce is shifting ahead decisively with our typical technique, which presents a number of paths to face up a worthwhile enterprise. Our collective purpose is, once more, to realize first income and EBITDA as quickly as 2025.

As we have mentioned earlier, we’re persevering with to progress cell-production alternatives, however within the present state of the worldwide capital markets and forward of the U.S. election, our downstream product alternatives clearly supply a quicker path to market. And as importantly, the financial returns related to cell influence manufacturing on both facet of the Atlantic are extremely enticing. These tasks require a lot smaller quantum of capital relative to cell-production, and the development cycle instances are significantly shorter.

So we’re enthusiastic about these alternatives. As we finalize the expertise agreements we’re engaged on, we stay up for sharing extra particulars with the funding group within the close to time period. Evan and I mentioned how invaluable our money place and stability sheet is, however I’ll underscore that time another time. Tonight is in an early stage secular progress business that’s at the moment out of favor, so sustaining ample dry powder to benefit from strategic alternatives is a vital aspect of our plan.

Now we have a number of alternatives to generate worth from every of our actual belongings, however Giga Arctic offers some significantly attention-grabbing use circumstances given the size and suppleness of what we have already got on web site. As we mature and finalize selections, we’ll be sure you replace you accordingly. Consolidation is starting to occur within the renewable vitality house, and given the important function that batteries play throughout the worth chain, our deal groups are very lively.

We perceive that our traders need to hear extra about what these alternatives are, and we’re desirous to share extra about these probably transformative offers as we get via confidential discussions. And at last, the achievements that Mike, Andreas, Einar, and the whole workforce made on the CQP throughout the first half of 2024 by producing batteries on the 24M SemiSolid platform on the industrial scale have attracted important consideration from new and present strategic companions.

We can not management or predict when danger urge for food within the capital markets will return, however by demonstrating our potential to supply purposeful battery cells with the SemiSolid expertise, we now have established a singular place, and we absolutely intend to construct a long-term aggressive moat round it. Within the interim, Freyr’s rising digital platform, the CQP and Giga Arctic, is unveiling new potential business pathways and triggering discussions with forward-thinking companions.

To the purpose Evan made earlier, the challenges going through the battery business are yielding alternative for the businesses that handle capital prudently, adapt shortly and decisively to market circumstances, and execute in opposition to the definitive however versatile plan with embedded optionality. Our workforce’s resolve is steadfast. We’re centered on delivering our technique, and we’re enormously grateful on your continued help. And with that, I am going to hand it again over to Jeff so we are able to take your questions. Thanks on your consideration.

Jeffrey Spittel

Tom. Krista, we’re able to open up the road for Q&A, please.

Query-and-Reply Session

Operator

Actually. [Operator Instructions] Your first query comes from the road of Tyler DiMatteo with BTIG. Please go forward.

Tyler DiMatteo

Hello, guys. Good morning. Thanks for taking the query.

Jeffrey Spittel

Hey, Tyler.

Tyler DiMatteo

Tom, I wished to sort of begin with you being again into the seat now. What are a number of the key takeaways that you’ve got? And I assume actually what I am questioning is, how do you prioritize the varied enterprise alternatives that you simply’re alluding to and sort of pursuing right here? I am simply curious how you consider that.

Tom Einar Jensen

Yeah. Hello, Tyler, and thanks for that query. In order we articulated throughout the name, our major focus is to get into income and EBITDA era as shortly as potential. And as you already know, elevating capital for cell manufacturing within the West is a difficult endeavor. We’re, after all, pursuing a number of alternatives on this regard. However the surplus of battery manufacturing in Asia permits us to pursue much less capital-intensive however nonetheless cash-accretive and value-accretive alternatives within the modular influence house.

So, that’s what we’re concentrating on initially. After which we’re pursuing different alternatives additionally upstream, midstream, and downstream. However the one method that we’ll kind of pursue that in a value-accretive method is once we can hyperlink it to related financing exercise. So, you must count on us to focus lots on producing income within the not-so-distant future, coupled with EBITDA era. After which we’ll construct up on that extra publicity into the worth chain of batteries.

The ultimate factor I am going to say is, given the difficult financing markets and difficult capital markets, I ought to say, during the last kind of 12 to 18 months, coupled with these tectonic shifts within the battery house that the IRA represents, but in addition the dramatic discount in cell manufacturing prices and costs from China, I do assume you will note numerous alternative for consolidation within the house. So we’re being approached by a broad number of firms which are occupied with discussing how the mixture of alternatives create extra worth.

We’re fairly selective in who we’re discussing alternatives with on this regard, however we’re, after all, open for dialogue. However principally, the main target is generate income in EBITDA as shortly as potential.

Tyler DiMatteo

Okay, nice. No, no, very, very useful. After which I wished to only sort of come again to the CQP right here. One of many slides, it was alluded to, we’ll proceed to progress some cell manufacturing there as nicely. I assume, Tom, as we speak, what are a number of the key learnings from having that facility up and operating? And I assume the opposite factor I wished to sort of get some colour on was the brand new enterprise circumstances for the CQP. Any colour there?

Tom Einar Jensen

Yeah, thanks, Tyler. So placing into operation a next-generation battery expertise isn’t a trivial endeavor. I can say that. It has been fairly a tall order. And the workforce at Freyr, an distinctive quantity of succesful folks, together with numerous stakeholders and other people from our companions, have been working day and evening during the last, nicely, basically, since we made that funding determination again in August 2021, to actually rise up the next-generation battery manufacturing expertise.

The truth that we now have been capable of each construct it, direct it, fee it, and begin operations of it speaks heaps and bounds, in my view, of the workforce that is been capable of take that to the size that it’s. Nevertheless, the tectonic shifts within the markets and the requirement to each produce safer, increased vitality density, longer cycle life, and likewise lower-cost batteries does require us to assume via what extra parts we have to show up in that system.

Now we have glorious working relationships with not solely the 24M consultants, but in addition the whole 24M ecosystem, in addition to various extra firms round it. So, we can be testing out a broad number of options to make sure that we are able to generate a pathway and a roadmap to even higher and even lower-cost options for next-generation expertise. So, the truth that we now have an working asset the place we now have confirmed that we are able to run and produce batteries will give us a chance to begin implementing extra measures to change into much more aggressive because the market evolves shifting ahead.

Tyler DiMatteo

Okay, nice. Thanks, Tom. Actually respect the caller there. I am going to flip it again to the queue.

Jeffrey Spittel

Thanks, Tyler.

Operator

[Operator Instructions]. Now we have no questions at the moment. I’ll now flip the convention again over to the audio system for closing remarks.

Jeffrey Spittel

Thanks, Krista. Nicely, thanks, everybody, on your consideration and your curiosity in Freyr. We stay up for seeing you out on the street. Now we have various occasions deliberate for the approaching quarter, so we’ll discuss to you all quickly. Please do not hesitate to comply with up with questions. We’ll be round to area them as we speak and the rest of subsequent week. Thanks very a lot. This can conclude the decision.