Participants

Tom Jensen; Executive Chairman of the Board; FREYR Battery Inc

Birger Steen; Chief Executive Officer, Director; FREYR Battery Inc

Jeremy Bezdek; Executive Vice President - Global Corporate Development, President of FREYR Battery U.S; FREYR Battery Inc

Oscar Brown; Group Chief Financial Officer; FREYR Battery Inc

Tyler DiMatteo; Analyst; BTIG, LLC

Presentation

Operator

Hello, and welcome to for our batteries First Quarter 2024 earnings conference call. With me today on the call are time-honored Jensen, our Executive Chairperson, further Steen, our Chief Executive Officer, Oscar Brown, our Chief Financial Officer, Jeremy Betdaq, Executive Vice President of Corporate Development and President for battery US.
During today's call, management may make forward-looking statements about our business. These forward looking statements involve significant risks and uncertainties that could cause actual results differ materially from expectations. Most of these factors are outside FARES control and are difficult to predict Additional information about risk factors that could materially affect our business are available in fairs, F-1 and annual report on Form 10 K filed with the Securities and Exchange Commission, which are available on the Investor Relations section of our website.
With that, I'll turn the call over to Tom.

Tom Jensen

Thank you, Jeff, and welcome, everyone, to this first quarter 2024 earnings call Friday, August 12th earnings call since we've been public on the New York Stock Exchange back in July 2021, when we launched our mission to become a global champion in clean battery solutions. We advocated that deep electrification would happen across the board, and we particularly emphasized the massive growth expected in the segment with LFP batteries.
It is interesting to look back on our market predictions from back then, which were notably higher than most other estimates at the time and see that the development in battery deployment is well in line with our prediction as per the recent International Energy Agency report, the storage market continues to grow exponentially and is exhibiting the benefits and added momentum from established and emerging structural growth drivers such as renewables proliferation, electrification of everything, but also now the AI and crypto on the horizon. We believe this market will continue to surprise on the upside, and we are very well positioned to play a significant role in it. Against this backdrop, we have made significant progress behind the scenes this quarter on augmenting our technology strategy, evaluating maturing, rejecting and pursuing value accretive deals refining further, our end market focus on ESS and commercial mobility and preparing to fund a build-out of our presence in the U.S. battery value chain through our Giga America efforts as a listed company with no debt, a strong balance sheet and valuable assets. We are increasingly being recognized as an industrialization partner of choice, and our optionality is strong and increasing our dual strategic approach on technology has been to develop next-generation technology development through the 24 m. platform and complement base through securing rights to build, own and operate conventional top-tier technology currently penetrating the accelerating market Berger and the team will take you through the details of where we are on this journey. But I'm very excited about the significant progress we have made through our highly professional and dedicated people on both sides of the Atlantic. During the quarter, we are in we expect to move from an aspiring battery company to a battery producing company with strong optionality and top-tier technology partnerships in the making. Despite the enormous complexity of bringing novel cell production technology to scale, I am very proud that our teams and partners have sold a majority of the remaining challenges and this world's first production platform at gigawatt-hour scale. We are now in the homestretch of fine tuning and aligning the highly complicated machinery to enable production with the full automation of the next-generation casting and unit cell assembly later this quarter. When this happens, we will be in a unique position with one of the very few U.S. IP-based battery technologies at a scale not yet seen in operation. As with every battery producer, we will face multiple new challenges as we ramp towards test production, but we will deal with them and communicate accordingly.
Turning now to Slide 4. We have furthermore strengthened our Board of Directors to maximize shareholder alignment and value creation through the appointments of top Cantor to Ivan, let them all and David manners. We are deeply grateful and honored to have our largest shareholder, our original founder and a distinguished US intelligence officer with unique geopolitical and Public Affairs expertise join today board. These gentlemen each bring decades of experience across the global capital markets and energy sectors, and they are aligned with you as fellow shareholders in our business. Furthermore, their dedication to our journey is already supporting accelerated development for the company while we safeguard our financial position and strengthen our optionality for a highly dynamic and exciting future.
On behalf of Ryder's Board of Directors, I would like to extend our appreciation and gratitude to our investors who, despite the challenges have continued to believe we relentlessly continue our pursuit of becoming a clean battery manufacturing company in the Western Hemisphere. This is a tremendous challenge and not without heartache, but we are very close to material breakthroughs and I promise you that we will not rest until we have become a force to be reckoned with in this industry, but that did get handed over you.

Birger Steen

Thanks, Tom.
And welcome to everyone joining today's call.
Turning to Slide 5. Let's begin with our key messages from today's release. Although we had a cloud first quarter of 2024 in terms of formal news releases, our teams have been diligently working several exciting opportunities behind the scenes. While we continue to approach our most significant milestone to date at the CQP, let's start with our progress on the CQP, thanks to the efforts of MICROS team and our valued partners at the asset level, we continue to expect that the first units of production trial with the full automation of the CPPs next-generation semi-solid casting and unit cell assembly will take place in Q2 2024.
Turning to our Board of Directors, as Tom just mentioned, we were delighted to welcome three seasoned professionals to our board in recent weeks, helped counter to the U.S. let them own and David matters.
Third, as I mentioned earlier, our business development and commercial teams have been busy evaluating and pursuing opportunities across the globe. As Jeremy will detail shortly with an update of our freight 2.0 growth initiative, we've streamlined our project and new pipelines to focus on the initiatives that aligned with our objective to accelerate our path to market and with a view to generating positive operating cash flow as quickly as possible.
Finally, in the prevailing interest rate, capital markets and industry environment, cash is king, and we remain focused on preserving and deploying your precious capital to generate shareholder value. We'll hear from Oscar shortly about our commitment to maintaining strict capital and cost discipline while we build our business and advance our capital formation process.
Moving to slide 6, let's dive into our continued progress at the CEQP. There's no change to our prior expectation to commence automated units of production with the full functionality of the casting unit cell assembly and the second quarter preparation for this key milestone. The teams have been focused on the complex and delicate process of integrating the cathode anode and merge units for the casting immune cell assembly machine on what we believe is the world's largest multi-carrier system or MCS, for sure. Let me provide some additional context about the unique characteristics of the sensitive process and our next steps at the CEQP, unlike conventional lithium-ion battery manufacturing, which involves producing electrodes on separate equipment before assembling them into cells, the semi-solid technology employs a continuous and integrated process semi-solid process starts with electric coding and proceeds to electrode stacking. The next generation central casting and unit cell assembly unit, which is the heart of the production system, then creates independent unit sales each containing a cancelled anode and separated the subsequent steps required to produce a complete cell in a pouch, which is a stock of multiple unit sales have already been developed and validated on the semi-solid platform. As such, when we begin producing these unit sales continuously under the full automation of next-generation casting Unitel assembly, it will be a meaningful achievement for frac. And as you can see from the photos in this slide, we've continued to make and test cells at the CKP. While we approach the final stages of automating the casting and unit sellers. However, this next milestone is a step change on our journey to becoming a battery production company, demonstrating our ability to produce cells on an old technology platform slowly accrete the key precursor to validating the semi-solid manufacturing process. It's also an important step to prove our technical and operational credentials as an emerging partner of choice for our customers, Alliance members and global network of vendors. They appreciate the Acumen required to hit this next milestone, and we're grateful for their continued support on our scaling.
During I'll turn the call over to Jeremy to discuss our ongoing business development opportunities.

Jeremy Bezdek

Further, I'll begin on Slide 7. During our fourth quarter update. In February, Fraser announced its 2.0 growth initiatives the strength of our balance sheet and the strong capability we have across the Company, our strengths that others across the value chain, see as attractive attributes for a conversation. We continue to pursue opportunities related to this strategy and have focused a significant amount of time in the last couple of months narrowing in on projects and priorities that both provide near-term revenue and cash flow as well as avoiding a negative impact on our current liquidity position. We are now focusing on four distinct commercial and project related opportunities. We have added one e-mobility development and commercial opportunity this past quarter, while eliminating two of the previously contemplated projects related to the EV market in Europe, the current project list represents opportunities at multiple spots in the value chain, multiple end-use markets and project types, ranging from a variety of greenfield projects to one potential inorganic growth opportunity as these projects mature and become something that we can discuss publicly, we will look forward to sharing more information. All told, these growth opportunities create a real opportunity for France to accelerate our journey towards fortifying ourselves as a Western leader in the lithium ion battery sector.
Now turning to Slide 8. I also wanted to include a brief update about the Giga Americas site in Costa County, Georgia. We continue to advance the conventional technology track. And we believe, as I mentioned last quarter, that this project will be the earliest path to market for scaled production. Simply put the technological maturity and established supply chains with conventional technology create an acceleration that allows us to realize a start of production date faster than we would otherwise have been able to achieve with the IRA production tax credits, providing such a significant opportunity and benefit to the project. It behooves us to move as quickly as possible to realize those benefits over the next couple of months.
Our plan is to finalize terms with the technology provider deliver previously discussed, conditional and binding offtake agreements and refreshing and relaunching the project level equity process, along with the debt side of the fundraising, we will provide full transparency into the project plan and the value opportunity over the succeeding weeks as those details get finalized related to Project Patriot, the 2014 production track at Giga America. We continue to engage with the DOE and keep them updated on our progress. While we await results from the CTP., we are actively managing the appropriate level of project spend.
I will now send it over to Oscar to chat about the finance financial performance from the last quarter. Thank you, Oscar.

Oscar Brown

Thank you, Jeremy. Moving now to slide 9, optimizing our spending, I will review our recent financial results. In addition to the usual year-over-year comparison, we've added the previous quarter to the slide for ease of sequential quarterly comparison as well for the first quarter of 2024 Freight reported a net loss of $29 million or $0.2 per share compared with a net loss of $25 million in the fourth quarter of 2023, which is the sequential period net loss of $13 million in the first quarter of 2023, which was the year over year period. The net loss in the fourth quarter of 2023 was impacted by a number of unusual items, including a $9 million benefit from the warrant liability fair value adjustment due to a decline in our stock price during the quarter, the reversal of annual bonus accruals as a company chose not to pay cash estimate for 2023 in light of our restructuring, which lowered operating expenses, partially offset by the restructuring accrual, reflecting the downsizing of our workforce to better reflect the prioritization of our projects and the development versus operating stage of our company in Q1 2024, we recognized higher depreciation expense and in 2023 and resume quarterly accruals for the potential S-chip awards that would be based on 2024 performance. These items can make sequential comparisons of our total operating expenses and G&A less intuitive. In any case, our cash G&A run rate run rate has indeed come down with the reduction in force and refocus of our activities in 2024 .
As of the end of Q1 2024, we have reduced full-time employees by 20% and contractors and projects support by 50% compared with November 2023. Also, as a reminder, the warrant liability fair value adjustment reflects a non-cash gain when our stock price declines during and any during any reporting period and a loss in our stock price increases. This item was nominal in the first quarter of 2024. It can vary widely depending on periodic movements in our stock price company reported increasing research and development costs in each of the periods highlighted as commissioning activities for the CQP intensified and we work towards this upcoming production milestone. We expect R&D spending will be lower in the second half of 2024 as we achieved the aforementioned goals in the first half. While we have significantly reduced our annual cash burn rate compared with last year, when all spending, including capital expenditures are considered, we continue to seek opportunities to reduce unnecessary costs and activities to extend our liquidity runway beyond the two year target we have discussed in previous calls before we raise additional financing to support our project activity. We exited the first quarter of 2024 with cash and equivalents of $253 million and no debt, reflecting total cash uses in the first quarter of $23 million compared with cash uses of $52 million in the fourth quarter of 2023 and $88 million in the first quarter of 2023 year over year.
Net cash used for investing activities, which is primarily capital expenditures and any related reimbursements, was $2 million in the first quarter of 2024 $19 million in the fourth quarter last year and $67 million in the first quarter of last year.
Moving now to slide 10, optimizing our balance sheet and focusing in on the cash waterfall for the first quarter, you can see that gross capital expenditures in the first quarter of 2024, which were $21 million, were mostly offset by other items, which included a $19 million reimbursement of deposits from our general contractor at Giga Arctic, reflecting the completion of the Eastern North buildings and therefore, the contract no further significant net capital expenditures for GIG Arctic are budgeted for the remainder of the year. And costs for utilities and maintenance to preserve the buildings are expected to be around $2 million per year prior to any project related funding this year. Capital expenditures for the remainder of the year will be primarily related to the CQP and test center and will be much lower than last year. As previously discussed, we continue to evaluate use cases for the GIG Arctic buildings and site, which could include it's an original its original intent of the giga factory battery component manufacturing for other industrial activities. In addition, we have received unsolicited inquiries regarding a potential sale of the buildings to third parties. Book value of the 75,000 square meter asset is approximately $225 million. We will continue to actively evaluate the future of this asset with maximizing rich risk-adjusted shareholder value. As our guidepost.
So our 2024 spending has been focused on getting to battery cell production at CQP using 24M. technology in the production activity necessary to deliver testable cells from the CQP to NASDAQ, continued development of Giga America and pursuing a conventional license and project to accelerate our path to first revenues. Indeed, we are actively evaluating significant opportunities which might merit short term investment, but lead to longer term capital formation on attractive terms in the near term, how the CTP. Giga America and these other important opportunities develop might impact our spending for the year, and we will keep investors updated. We have exited the first quarter with the company well positioned for the current environment. We protected our balance sheet and extended our runway. We continue to pursue pursue non-dilutive growth capital and are maximizing our project development opportunities while remaining vigilant on overall spending. We have a great team a pristine balance sheet and a long list of opportunities across the battery value chain.
With that, I'll turn it back over to Berger for additional comments.

Birger Steen

Thanks, Oscar. I'll conclude our prepared remarks on Slide 11. Before we go to Q&A, we started 2024 with clear priorities to deliver on automated trials, cell production, evolving a conventional technology track for the company several promising opportunities to pursue and evolve on an imperative to conserve cash and generate capital formation alternatives. The result of these efforts is the updated 2024 road map you see on slide 11, at the CK. team refocused on commencing production of unit sales with a full automation of the casting and in cell assembly. As I noted earlier, Mike, his teams and our partners have been working tirelessly prepared for this next milestone, and we're looking forward to sharing more news with you from the CQP during the second quarter.
In parallel with the important progress as the asset more Jeremy and his team have been working several promising deals behind the scenes, highlighted by the conventional technology opportunity during the coming months, we intend to formalize the agreement, secured offtake agreements and relaunched a project equity and debt funding processes as allocators of your capital. We believe that the conventional track for big America offers the greatest potential to accelerate the capture of the Section 45 X production tax credits. This project is a top priority in addition to coordinating with Jeremy's folks on the conventional opportunity elsewhere. And his team have been working on several other capital formation initiatives tied to projects in the frame 2.0 growth pipeline as we execute our strategy to accelerate our path to commercialization. And first, revenues, capital raises associated with the highest value creation projects will take priority.
Turning to the second half of 2024, we expect to be in execution mode on live projects. For the conventional agreement, our focus will be on commercial development and capital formation to facilitate the potential Giga America FID.
Finally, with the progress we expect to demonstrate later this year on our highest priority projects, capital formation and commercial momentum should accelerate and Tanda. We're locking in on some transformational opportunities, and we're excited to share news of our progress 24 2024 continues.
Before I turn it over to Jeff for started Q&A, I'll once again thank our employees for their commitment to our cause of responding to do is far from easy. And you've navigated those scaling journey, the dynamic policy environment and a higher for longer interest rate backdrop with unwavering professionalism on behalf of the Board of Directors and management team. Thank you for all that you do.
And with that, I'll hand it back over to Jeff.
So we can take your questions.

Question and Answer Session

Operator

(Operator Instructions)
Tyler D Mateo with BTIG.
Please go ahead.

Tyler DiMatteo

Hi, everyone, and good morning. Thanks for the time today. Really appreciate it. So we all know the CQP. I'm just curious here.
As we get to the final stages and we move towards automated cell production, you know what are those key stages that are less that we kind of need to work through is just simply testing kind of making sure that the multicarrier system and the process is working. I'm just curious if you can kind of help us understand what those final steps are before we can really start producing batteries here.

Tom Jensen

Yes. Thanks. As we discussed them and Cascade Utell assembly machine is a highly complex and Version one piece of machinery. The thing we've accomplished so far this quarter is we've made it through the first and potentially most novel process and embedded in this machine. That's the casting of anodes and cathodes. And we've been able to hands merge batteries made from those automated that automated production batches of cathodes and anodes and come out with her initial test results that are quite encouraging relative to our original spec. That's remaining now, as you indicate, is the tuning of the multicarrier system that ensures that the the anodes from the top there cancelled from the bottom and the separator meet and exactly the right place and with the right pressure and with the right vertical sorry, horizontal movement so that we end up with the appropriate tolerances for the final unit, sell assembled and then some and then divided and turned into something that can be stocked into a full battery cell with 23 of these major hotels and that that sort of piece of Precision Machinery. Again, what we understand from from personal and Siemens to be the largest multi-carrier system installed anywhere and tuning that machine is what we're working on now. And so we're rethinking and we were expecting a W could be it could be a few hours, a few days away from from first successful fully automated casted and merch cells. And so I think it's not too much to say that we have to notify people who are afraid who are holding their breath a little and every morning us, we get our updates from Mike and his team.

Tyler DiMatteo

Okay, great. Thank you really helpful on that front? And then on the battery component comments, you're realizing it's early days here, I guess, just at the highest level, I mean, what would an ideal opportunity look like in that side of the value chain? Or just how are you thinking about that and kind of what would you look for and just any color there?

Birger Steen

As you know, um, we started up based on the unique advantages and characteristics of the 24 ounce and a solid process as applied to LFP. with a focus on the ESS. space. That's also where we developed a long-term capability and partnerships such as our partnership with NASDAQ rules, which is called Munich energy.
I guess I'm just there to make modules and packs. And we also have advanced plans for further downstream product development. So I'd say somebody who's developing, say, grid storage or something that sits adjacent to a PV project, probably in the U.S. who likes the fact that our current cells are produced or cells to be produced are produced on the U.S. soil. And we'd like to see that supply chain resilience and certainty for the next 10 years that you can get from our from a stateside producer. And that would be our deal, our deal downstream extension and customer for that extension Okay.

Tyler DiMatteo

And if I could just squeeze one more in here on the the 2.0 that the growth initiatives you kind of spoke to the four distinct projects, I guess without getting into details of those, you know, how did they come about? I mean, how do you define them and what was kind of the sourcing process there?
Have you got any comments on that front?

Birger Steen

on premise and I will have our conversation about the performance this quarter later on, but they'll definitely still discuss discuss only the slide that's the Jeremy perhaps you could you could talk a little bit about how we how we went about the level of developing and triaging and pruning this portfolio.

Jeremy Bezdek

Happy to do that Berger.
Thanks.
Tyler, thanks for the question. It's actually a very process. We are always listening. We're always taking calls. We have a funnel approach as most due to evaluating alternatives doing initial screening and then advancing those projects into real actionable opportunities.
I would say the current portfolio that we have and maybe the portfolio that we've actually screened out all came in a slightly of different ways. Some relationships that some of us have throughout the battery value chain, of course, are are always important opportunities because you feel like you understand the opportunities to a greater degree by having access to both people and companies through a variety means. So I think that's it's using our relationships, but it's also been in bounce from off the shelf right from people that we don't know that see what we're doing, see our public position and see our balance sheet and the fact that we have no debt and are interested in talking to us about how we might work together. So so I'd say some of it was kind of proactively outreach from us, but most of it was in bounce and on. And that's exciting because I think what it means is our messaging is getting out there that we want to be a partner of choice for folks and that they see us as a credible player that they want to work with.

Tyler DiMatteo

Okay.
Great.
Yes, no, very good. Thank you, guys. I really appreciate the time and I'll turn it back to the queue.

Birger Steen

Thanks, Tyler.

Operator

Once again, if you would like to ask a question, simply press star then the number one on your telephone keypad. And at this time there are no further questions, I'll turn the call back to management status will.

Birger Steen

Thank you, everyone, for the time today and your attention and your interest in prayer. Look forward to seeing everybody out on the road as we get into the quarter and we will talk to you all very soon.
This will conclude the call.