Amprius Technologies, Inc. (AMPX) Q3 2026 Earnings Call Transcript

Operator: Good morning, and welcome to the Amprius Technologies Third Quarter 26 Earnings Conference Call. Joining us for today's presentation are the company's CEO, Tim Stepien and CFO, Ricardo C. Rodriguez. At this time, all participants are in a listen-only mode. Following management's remarks, we will open the call for questions. Please note that this presentation contains forward looking statements including, but not limited to, statements regarding the company's financial and business performance, business strategy, future product development, or commercialization, new customer adoption and new applications, company's growth and the growth of markets in which the company operates and the timing and ability of Amprius to expand its manufacturing capacity scale its business, and achieve a sustainable cost structure. These statements involve known and unknown risks uncertainties and other important factors that may cause Amprius' results performance or achievements to be materially different from any future results, performance or achievements expressed or implied in such forward looking statements. For a more complete discussion of these risks and uncertainties, please refer to Amprius' filings with the Securities and Exchange Commission. This presentation includes non GAAP financial measures, including adjusted EBITDA and adjusted EBITDA margin, Our non GAAP financial measures do not replace the presentation of Amprius' GAAP financial results and should only be used as a supplement to, not a substitute for, Amprius' financial results presented in accordance with GAAP. And may not be comparable to calculations of similarly titled measures by other companies. A reconciliation of adjusted EBITDA to GAAP net loss the most directly comparable GAAP financial measure is included in our press release. A copy of which is furnished to the SEC and posted on our website. Finally, I would like to remind everyone that this conference call is being webcast. A recording will be made available for replay on the company's Investor Relations website at ir.amprius.com. In addition to the webcast, the company has also posted a press release accompanies these results, which can also be found on the Amprius Investor Relations website. Before turning the call over to management, I want to highlight a few near term IR events. Amprius will be attending the Craig Hallum Conference on November 17 in New York. And the B. Riley Conference in New York on December 2. We hope to connect with many of you at these upcoming events. I will now turn the call over to Amprius' Technology CEO, Tim Stepien, for his comments. Sir? Please go ahead.

Thomas Michael Stepien: Welcome everyone and thank you for joining us this morning. Amprius continues to see strong demand for our energy dense silicon anode lithium ion batteries from a growing set of aviation, defense and advanced mobility customers. In the third quarter, that robust demand resulted in record revenue of $39.1 million up 83% year-over-year and 15% sequentially. As shown on slide 3, our Q3 revenue represents an annualized run rate of over $156 million Given our double digit revenue percentage increase in Q3, a rapidly growing order book along with an expanding group of contract manufacturers that support our capital light business model, we are raising our full year 2026 revenue target to $145 million up from at least $140 million This is a third consecutive quarter that we have increased our outlook. We saw particular strength in North America this quarter. With revenue in the region up 2.3x compared to last year. North America represented 31% of our business in Q3, up from 19% in Q2. Europe remains our largest market at nearly 60% of overall revenue. The third quarter was an eventful period for Amprius which included product introductions, new manufacturing relationships and a growing customer base. Let me touch on a few highlights. In September, we introduced SiCore 500, a new 500-watt-hour per kilogram cell. Designed for long endurance aviation applications. Previously producing these extremely high energy density cells required custom manufacturing tools, specialized material handling equipment and procedures and non standard cell designs. SiCore 500 is markedly different. Designed for commercial lithium ion processing equipment and standard cell formats. Making it compatible with Amprius' global contract manufacturing network. We believe these new cells are ideal for the sustained low rate discharge profiles required for high altitude platform systems, or HAPS as well as for fixed wing drones and other long endurance applications. In HAPS, stored energy and battery weight decide whether persistent stratospheric flight is possible. Solar powered platforms charge through batteries during the day so that they can stay aloft through the night. Higher specific energy cells increased flight time, range and payload without adding weight. We plan to ship SiCore 500 cells to HAPS companies in the fourth quarter. They support extended duration missions where platforms stay airborne in the stratosphere between 60,065 thousand feet for weeks and months at a time. These systems provide broadband communications bringing Internet access to remote areas. HAPS also enables earth observation environmental monitoring for tracking methane or other greenhouse gas emissions for example. I want to highlight 1 of our European customers, Quantum Systems. A leading German developer of autonomous unmanned systems. Quantum is growing rapidly attracting world class investors and expanding its portfolio across air, land and sea. Amprius has supplied silicon anode cells for Quantum's vector and Vector ISR platform for several years and we are proud that our technology helps deliver the endurance these missions demand. Relationships like this 1 reflect the durability of our customer base and the growing role of high energy density cells in allied defense programs. In Q3, Amprius entered new market segments defense and maritime vehicles. We began shipping SiCore cells to a leading European manufacturer of autonomous deep sea underwater vehicles that operate at depths of more than 3000 meters for commercial, scientific and defense applications. These vehicles execute lengthy missions and are far away from any opportunity to recharge. So every watt hour on board really matters. That makes them a natural fit for our high energy density silicon anode cells. This is the first time SiCore technology has gone beneath the sea and we see it as a promising new avenue for growth. Let's now turn to the supply side. In September, Amprius was selected for a competitive contract from the U. S. Department of War's Industrial Based Analysis and Sustainment Program to retrofit an existing domestic lithium ion battery production line. The retrofit changes 1 portion of an existing factory converting production from standard electric vehicle batteries to our advanced battery systems that power Group 1, 2, and 3 drones. The contract totaled $75 million, $22.3 million of which has been obligated. Our partner in this contract is a major South Korean battery manufacturer that operates the existing U. S. Line today. At completion expected in early 2028, we expect that the line will have the capacity to produce 12 million Amprius pouch cells annually. Importantly, these cells are aligned with the domestic sourcing requirements of the National Defense Authorization Act. The conversion project is expected to cost approximately $100 million including in kind investments from Amprius. This project will significantly increase our ability to provide standardized NDAA compliant high performance pouch cells for key customers at scale. As you are aware, Amprius has chosen a capital efficient production strategy. We have long worked with contract manufacturers in Chip and South Korea and we have been expanding our work with partners in The United States. For instance, we recently entered into a contract manufacturing agreement with Kaminus a U. S.-based manufacturer of lithium ion battery cells and electrodes to build our pouch cells at its facility in Indianapolis. The agreement spans the cell production process from partial assembly of Amprius supplied components to full cell production and advances our development of a resilient NDAA compliant supply chain. I want to reiterate that Amprius is shipping NDAA compliant cells today and we remain on track to reach full NDA compliance with domestically produced cells in 2027. Please now turn to Slide 4. As the unmanned aerial vehicle market matures, we see segmentation of the vehicles and applications. We have mapped various drone applications with Amprius cells that enable the performance these applications demand. Our catalog covers UAV missions from minutes to months, for both 1-way munitions and reusable platforms. Reusable drones are shown at the top of our diagram. Intelligence, surveillance and reconnaissance ISR drones, drones as first responder DFR, and delivery drones tend to need a combination of power for takeoff and landing and energy for flight time. Amprius meets these requirements with our balanced line of SiCore cells. HAPS, like those described earlier, where carrier maximum energy which we deliver with our new SiCore 500 cells and other batteries predicted depicted in red. The bottom of our diagram covers low cost attributable or 1-way drones. Our balanced cells are often used by deep-strike drones. Interceptor drones need power to quickly reach maximum speed and intercept a hostile drone and are high power cells deliver. Cell content per aircraft ranges from hundreds of dollars to tens of thousands, so mix matters here as much as volume. Please note that Amprius' silicon anode cells deliver premium performance. That is not required by all drones. The power needs of low cost first person view, FPV drones are often met by off the shelf low cost graphite anode cells. We do not chase these opportunities. Please now turn to Slide 5. While the results of the recent U. S. Midterm elections could have an impact on the fiscal 2027 U.S. Defense budget, we believe that the widespread adoption of military drones by armed forces across the world is here to stay. As we have noted before, the Trump administration's proposed 2027 budget calls for more than $50 billion in outlays for the Defense Autonomous Warfare Group, DAWG, an arm of the Department of War focused on drones and related hardware. While the U. S. Congress has yet to pass the 2027 spending authorization and the actual budget might be smaller than the original request, it is nonetheless clear that the Pentagon will be making a major growing outlay for autonomous capabilities for years to come and Amprius expects to be a beneficiary of that trend. Independent of the size of the 2027 defense budget, we believe The U. S. Will meaningfully increase spending on drones. Heidi Shyu, the Department of War's Undersecretary for Research and Engineering said at The Wall Street Journal, Tech Conference last week, that the U.S. was caught flat footed by drone warfare and were not prepared because we just did not imagine it. I just want to make sure we are imagining the next fight. Unquote. Many countries recognize the asymmetric advantage drones provide on the modern battlefield. U. S. Allies, including Ukraine, Taiwan and The UK have rolled out drone programs with combined spending of more than $20 billion over the next 3 years. Other programs are underway in Germany, Poland, The Nordics, Japan and South Korea. Note that several countries either prefer or require allied-source cells which favors suppliers like Amprius. We are keenly aware of these trends and we are positioning Amprius to win. In Q3, we hired 2 Europe based sales account managers. On Monday, November 9, we hosted a high energy battery day in Tel Aviv. Attended by about 100 people from dozens of Israeli companies. On slide 6, we wanted to highlight our view of market share and growth rates. Amprius estimates the total defense related cell demand in 2026 from The U. S. And allied nations is $445 million, up 28% from 2025. With our updated 2026 revenue forecast of $145 million nearly twice our 2025 total, we believe we are growing approximately 3.5x faster than the market. Our industry leading technical performance has allowed us to outperform the overall market. Looking forward, by 2030, we expect loitering munitions and interceptors to be the fastest growing segments with a projected 58% compound annual growth rate. These applications align well with the core strengths of our cell portfolio. Let me now turn the call over to Ricardo to review our Q3 results in detail.

Ricardo C. Rodriguez: Thank you, Tim. Good morning, everyone. I will start my remarks with Slide 7 as the backdrop. Before we dive into the results, I will summarize the main things to take away this morning. First, we had a record quarter. Revenue of $39.1 million up 83% year over year, gross margin holding at about 27% through a tougher mix with more cylindrical cells than originally expected. Second, gross margin has the potential to improve from here. I will walk through each driver of margin this quarter and why I see 1 as an opportunity rather than a headwind. Next, behind our third revenue guidance raise, we have made deliberate investments to keep outpacing the markets that we serve. We are raising 2026 revenue guidance to $145 million We are also updating adjusted EBITDA guidance to at least $2.5 million as we invest ahead of projected demand. And fourth, our balance sheet is actively funding the ramp, We have $60.7 million of cash and no debt. The cash we used this quarter went into securing supply for Q4 and early 2027. And we believe it will quickly be turned into more cash as we fulfill near term demand. The third quarter was our seventh consecutive quarter of sequential double digit top line growth. North America drove the quarter. More than doubling to $12.2 million, while Europe held steady at $23.3 million Through 9 months, revenue was $101.7 million, up 113%. Gross profit was $10.5 million, up 13% sequentially more than 3x year over year. Gross margin was 26.9%, close to level with Q2's 27.3%, and up from 15% a year ago. For the first 9 months of the year, gross margin was 25.1% versus 5% last year. Excluding Colorado costs in both years, gross margin was 26.3% year-to-date, and 15% for the same period last year. A year ago, I said there would be a quarter or 2 where margins take a step back as we manage mix And as North America grows ahead of us, getting paid for NDAA compliance. Both factors declined in Q3, but we still held gross margin at 27% by managing a couple of ins and outs. 2 headwinds cost us about 8 points of gross margin. Mix took about 4 more cylindrical cells, much of it shipping against the large European order more shipments to North America. Freight took the other half of these 8 points as we shipped by air quickly to meet demand. We nearly made all of it back though, About 4 points came from lower expenses in Fremont, and an $800,000 portion of that moved to R&D, since that team focused on development and the engineering prototyping the DIU line. And the rest we were able to recover in pricing. Each of these drivers is a lever that our team is getting better at managing proactively. On the next slide, I will outline in more detail how these factors drive our margin outlook. Q3 operating expenses $15.2 million, up $1.7 million sequentially. Excluding the $800,000 of Fremont expenses that were reallocated from cost of goods sold, operating expenses grew by about $900,000 That is in line with the $1 million quarterly rate I outlined in August. They went mostly to development including SiCore 500. Our net loss was $3.5 million or negative $0.02 per share, 10% narrower than a year ago. Adjusted EBITDA was negative $1 million and a negative 3% margin. Over the last 12 months, adjusted EBITDA was negative $1.4 million on $127 million of revenue. And very close to breakeven. Now let me turn to our outlook on Slide 8. In March, we set an initial 2026 revenue outlook of more than $125 million, raised our forecast to $130 million in May and then to at least $140 million in August. With what we know today, we are raising it a third time to $145 million that is $20 million above where we started the year. The chart at the top of the slide shows why. Our annualized run rate went from $114 million in Q1 to $136 million in Q2 to $156 million in Q3. Our guide implies Q4 revenue of about $43.3 million up about 11% from Q3. Our goal remains the same as it has been all year, to deliver what we promise and when we can, some more. Our implied Q4 annual run rate would be $173 million On gross margin, we continue to expect at least 28% for the full year. We are at 25% through 9 months, so the fourth quarter carries a real step up. We believe that we can get there by managing the following drivers. The first is mix and volume. The orders that we have in hand for Q4 will likely carry a richer mix in Q3 with more pouch cell demand in the current and expected purchase orders. The second is unit cost. We continue spreading fixed cost over more cells. So this works to our advantage. The third 1 is freight. Freight was a painful 11% of revenue in Q3. Moving most sales shipments from air to ocean starting around year end can half that cost. Or provide us about 5 points at today's revenue run rate. That is mostly a 2027 benefit but with more inventory on hand, we are going after this for the first time before the end of this year. The last 1 is pricing. In this high demand environment, we will continue optimizing for this as the markets that we sell into confirm that we have a uniquely differentiated high performance product. Mix will keep moving from quarter to quarter as we adjust the shifting supply and demand trends but each of these levers is in our hands nothing about our path to gross margins above 30% has changed. As I have said before, it will not be straight line up into the right, but our visibility is improving over time. Moving to the rest of our outlook, we now expect adjusted EBITDA of at least $2.5 million and I will walk you through that bridge on the next slide. We are reiterating a net loss of $10 million or less, That includes the $1.9 million non-cash warrant charge from Q2 Excluding it, the net loss is expected to be about $8 million We are updating our EPS outlook to a loss of $0.07 or less per diluted share and $0.06 excluding the warrant exchange. These all assume a share count of 143.4 million shares. Finally, we continue to expect capital expenditures below $10 million for the year funding the AIU backed investments in Fremont while keeping our capital efficient low fixed cost model. On Slide 9, I will walk you through our target adjusted EBITDA for the year. As I mentioned earlier, we are updating our 2026 outlook to at least $2.5 million from more than $4 million in August. Bridge is simple. The $5 million revenue raise at a gross margin of at least 28% that is about $1.4 million of gross profit, have chosen to invest about $2.9 million more in operating expenses this year. These investments are already paying dividends in various aspects, such as R&D, taking SiCore 500 at 500 watt-hours per kilogram on conventional lithium ion lines from launch to customer qualification we also continue certifying our entire cell portfolio to more stringent standards that will keep extending our competitive lead Second is enabling U. S. Production. Good examples of this are starting production on the DIU pilot line in Fremont in December, enabling Kaminus in Indianapolis for pouch volume production in the first quarter of 2027. Finally, driving our recent go to market wins including the design wins that Tim described earlier, in his remarks, including the subsea UUV win and the expected quantum Systems work into orders. 1 last item to keep in mind for Q4 We expect to complete about $6 million of work under our $18.1 million Defense Innovation Unit Agreement before the end of the year. We record that as other income, not revenue. Consistent with how we have always defined adjusted EBITDA, it is included in our outlook. We ended the third quarter with $60.7 million of cash Note that we have no at-the-market equity offering facility that would increase the share count. Cash was down $13.8 million in the quarter. Our operations used $7.8 million, and capital expenditures were $5.2 million, all at our Fremont facility and supporting the DIU-backed investments. The operating cash used was the working capital built to drive near term growth and it was deliberate. Prepaid expenses rose $14 million to $18.9 million and included advances to our partners to secure supply for the Q4 and 2027 ramp. Receivables grew $5.2 million to $45.9 million with higher shipments and inventory grew $4.4 million to $15.9 million also in order to drive near term growth. Higher payables and the crude liabilities offset a good part of that. This build is also what is now letting us ship by ocean instead of by air, which drives our long term gross margin floor. Working capital ended at $107.8 million, compared to $90.7 million a year ago. And total stockholders' equity was $124.7 million Our contract manufacturing model keeps capacity growth capital light, and our balance sheet funds the ramp ahead. As we get to the close of the year, like to thank our team for delivering a record quarter margin drivers that we can pursue and act on, a third revenue forecast raise, and for protecting a balance sheet that funds the ramp with no debt. We expect to head into 2027 with more customers very clear demand visibility NDA compliant U. S. Capacity coming online the cost structure built to capture more than our fair share of opportunity. With that, I am happy to turn the call back to Tim for his closing remarks.

Thomas Michael Stepien: Thank you very much for your attention and continued support. Ricardo, thank you. Amprius continues to see wide and varied growth opportunities across multiple markets and geographies. We remain bullish about the opportunity in drones, for the defense sector, but that is far from our only market. We expect growing commercial demand for drones in delivery, inspection, agriculture, search and rescue and other areas in the months and years ahead. We are equally encouraged by the outlook for our batteries in e-mobility applications including e motorcycles and scooters, for personal and commercial robots and for electric vertical takeoff and landing aircraft. For point to point regional transport of both passengers and cargo. In short, the future looks bright for Amprius and we appreciate your continued support on this journey. Operator, we can open the floor for questions.

Operator: Thank you. Before pressing the star key. To allow for as many questions as possible, Thank you. Our first question comes from the line of Colin Rusch Oppenheimer and Company. Please proceed with your question.

Colin Rusch: Thanks much guys. You raised the target for 2030 in the deck from $600 million to $800 million in revenue. And you have talked in a lot of detail here around the drone Can you talk a little bit about what is happening with both U. S. And Allied military procurement and those sales processes. That you are seeing that is gonna support that increase in, in revenue, over the next 4 to 5 years?

Thomas Michael Stepien: Yes. 1 of the slides, Colin, thank you. This is Tim. Shows the worldwide opportunity and the total $20 billion that you get over 3 years, and there we expect that will come through. And more will be added to it. And as we-- some of that is a function of the actual 2027 defense budget. But what we are seeing is flow through. The numbers that you see that we show on our slides are translating to orders that we are receiving here. The increase in North America is 1 indication of that. right, 2.2x quarter over quarter. So it is flowing down to the drone manufacturers. And to the battery suppliers like Amprius that are supplying to the craft. So it is happening. Yes.

Ricardo C. Rodriguez: The other thing to add, Colin, is that you are referring to Slide 17. That number has always been anchored by what we believe that we can realistically supply given our existing agreements and capacity And so the $200 million add in 2030 capacity is basically what we expect to have up and running with our South Korean partner by then, and then also the capacity at Kaminus. So between both facilities, should be adding depending on the mix anywhere between 270 and 300 megawatt hours per year.

Colin Rusch: that is very helpful guys. And then on the technology roadmap, you have laid out some of those targets and the progress that you can make over the next couple of years with performance. Can you talk a little bit about where you are at on executing against that roadmap? What that is doing for your customer relationships? And any update on various materials or chemistries that we should be thinking about that could start impacting some of those performance metrics?

Thomas Michael Stepien: We have a robust technology team. They are on the treadmill. Sitecore 500 is the latest example of an industry leading cell that is now available What we are trying to do is get earlier into the design cycle of our customers. So rather than wait and understand publicly what might be available, we are reaching out and sharing roadmaps under appropriate NDAs, of course, with customers like the 1 we mentioned in the call here with Quantum Systems. We are close with them. We are close with others. In that way, we can share with them not just what was recently released, but what we are working on for 2027. And you asked about the supply chain. We have a NDA compliant supply chain. There are 18 different components to our batteries, anode, cathode, electrolyte separator, etcetera. We are-- we have reviewed those individual components for NDA with the Department of War. They are happy with it. We are in execution mode on that. We are supplying those cells today with some of the partners we mentioned, have more to do, of course. But we are happy with the road map on the technology side.

Ricardo C. Rodriguez: And then timing wise, Colin, yeah. I mean, basically, 500 announcement came out 3 months before we promised it when we first put out that chart on the evolution of the performance of the cell. So we are on track.

Colin Rusch: Perfect, guys. Thank you so much. Thanks. Thanks, Colin.

Operator: Thank you. Next question comes from the line of George Gianarikas with Canaccord Genuity. Please proceed with your question.

Analyst: Hi, everyone. Good morning and thank you for taking my questions. Hey Ricardo. So maybe to focus a little bit on your long term margin guidance for 2030. As you are having these conversations with your contract manufacturing partners, how have those sort of either increased your conviction or maybe decrease them in those margin targets over the next 5 years? Thank you.

Ricardo C. Rodriguez: Yes. So 1 thing that gives us even more conviction about the longer term gross margin target is that as our volumes increase, we have a better idea of what the fixed cost structure of the CMs looks like. And so 1 of the points that we have been making to them here as the volumes have grown is okay, given that those are fixed, why do not you just charge them to me as a fixed expense and let's keep the variable piece of it variable? And that way, we can share in some of that operating leverage. We are also developing capabilities in house to manage the Centimeters. So some of them, the setup and engineering work that the Centimeters normally be doing themselves and amortizing within each piece, will ideally no longer be there. Some of these new relationships that we are setting up. I mean, we are getting pretty hands on at owning the process and driving this within the CMs. And as we do that, our do that ourselves, we think we can find scalability that otherwise would not be there. If it is kinda bucketed within HCM. Thank you. And as your market opportunity grows, there are competitors trying to break in as well. And what would you say the factors are that most frequently tip competitive evaluations in your favor? Well, the first 1 is really just the ability to fulfill the order there, right? We have seen a lot of competitors put out press releases where they are in essence taking the specs of our previous generation product thinking that will be enough to get volume But they really have a chicken or the egg problem, right, where they do not have the cost. The technology is, frankly, a generation behind what our team is currently developing. And you know, we have seen several of our customers actually place relatively larger volume orders with these potential competitors? Only for them to not be fulfilled because the product only exists in a slide.

Thomas Michael Stepien: We also have the capability here George, in Fremont with our pilot line. It will be fully up and running at the beginning of the year. there is 30 new tools, 28 of which are installed. We still need a couple more to come in. That allows us to stay on that innovation edge and we can make 700,000 cells a day once we are at steady state. And we do that not for volume orders, but for new orders and different chemistry platforms. And customers that want us to turn the knobs and provide new cell sample cells. So that ability to do quick turn designs directly with our customers rapidly helps us We stay where we want to stay at the Yes.

Ricardo C. Rodriguez: I think if you look at, for example, Slide 6 and demand that Tim framed out, we are talking about roughly $450 million cell market here in 2026. And okay, we are, you know, selling our $145 million of revenue roughly into that assuming that all of our sales are into this the cell market, which only 75% of them really are. But when I look at the competitive landscape, you know, the second and third biggest competitors at most can do, you know, $80 million of revenue per year. The second 1 can do, you know, $40 million a year of revenue if they execute. And also their capacity limited. So I do think that we have plenty of room here to grow while the rest is kind of capacity constrained. And that is why we are finding out that this contract manufacturing model if we can stand this capacity up quickly enough is actually pretty good.

Analyst: Thank you so much. Thanks, George.

Operator: Thank you. Our next question comes from the line of Mark Shooter with William Blair. Please proceed with your question.

Mark Shooter: Hey, Tim and Ricardo. Congrats again on the quarter. Thanks, Hopping on to your new slides, of course. Touching on the new slides that you had of breaking out the allied defense drone spending. Related to the midterms, as you mentioned, Tim, I think the common through line is that maybe the Blue Wave will tamper defense spending. But Again, I Do not Think We Agree That Would, Impact The Current U. S. Drone demand. But to look at it at a slightly different angle, if Democrats want to increase the support for the Ukrainian defense efforts, Could the blue wave actually be more of a tailwind not even net neutral or net negative, but could the blue wave be a tailwind in 2027?

Thomas Michael Stepien: Look, certainly could be. We all want that conflict to end of course. So there are that possibility. And it is also the slide before the 1 you mentioned that showed the different types of drones. Super interesting to us because if you look at that, all right, maybe some of the 1-way drones would decrease if peace does come sooner than and of course, we all want that. But the surveillance and other ones probably increase in a peace type situation. So we believe that there are a lot of legs to this drone story. it is the decade of the drone, the tides coming in, all the euphemisms that you want. Again, because of the asymmetric advantage. So almost independent and we tried to make this point of the actual budget drone spending will be higher, right? Fewer tanks, more drones in defense. And then also we see some of that same asymmetry with delivery We have seen recent announcements from companies with agriculture, etcetera. So it is a very good spot for us as a battery supplier to drone companies across the different segments across the different geographies.

Mark Shooter: Thanks, Tim. And on that next slide where you break out the sell demand and the market size. I did notice that pricing was at $350 a kilowatt-hour. You know, our understanding of pricing is almost double that. I am just wondering if those numbers that you have for the TAM could be conservative Or are you assuming that there is some pricing decline?

Ricardo C. Rodriguez: They are. This includes a lot of cylindrical cells. As well. So I think it is worth keeping that in mind. The 600 plus and in some cases $1300 per kilowatt-hour is at the pack level. So there is some add on to this. Derek, we wanted to just strip it down to the cells and we were you know, pretty conservative on what the mix of this would be and also on what the pricing could be. But that is a good catch, Mark.

Mark Shooter: Great. Thanks, Sean. Thank you, Mark.

Operator: Thank you. Our next question comes from the line of Eric Stine with Craig Hallum Capital Group. Please proceed with your question.

Eric Stine: Hi, Tim. Hi, Ricardo. Good morning. Hey, Eric. Good morning. Good morning. Hey. So I do wanna go back to slide 6, and you know, you just talked about the limitations of your competitors, and, you have got the competitive advantage and the, you know, broad product offering, etcetera. When you. Right now, you know, estimated share of around 30%, I mean, how do you think about share, you know, as the market continues to expand pretty rapidly, I mean, is this growth with the market? Because you can actually deliver on this, are there market share gains? How do you think about that, I guess, 2028, 2030 and beyond?

Ricardo C. Rodriguez: Yes, that is a good question. For 2028, the recent capacity increase announcements definitely help us go and maintain our share. But I would say stay tuned, right. Obviously, we have to assess where the demand is coming from. All signs point to it continuing to come from Europe. And so, you know, we have not announced anything around Europe. I think that roughly 300-megawatt hours that we will add here in The U. S. Over the next year and a half, 2 years for NDA compliance. Help us satisfy this near term need we see. And if you look at the U.S. portion of the bar as a floor, it, you know, it can more than use up that demand that we are setting up. And so, yeah, I think this will evolve. I mean, we will look at these market figures quarterly. We are pretty in tune with the main demand drivers. And I think that is the beauty of our model where we are, in essence, building up capacity much faster than what it would take to set up our own captive plant. I mean, even the 1 plant that would produce the number of SKUs that we have and a mix of pouches and cylindricals at these relatively low volumes, And I say relative to other markets like EVs and stationary storage, the plant just does not exist. Like, I do not think anybody and as we talk to our experts around the process design and how to get this done, I do not think anybody can set up 1 plant that is, you know, sub a couple of gigawatt hours and produce so many different types of cells with these margins. It does need to be done through multiple leverage facilities at contract manufacturers. And the speed is also critical too I think the speed is what is enabled us to get more than our fair share of this market here. And if we keep going, it is what will enable us to keep outpacing the growth the market as we laid it out here on Slide 6.

Eric Stine: Got it. Thank you for that. And maybe just for my follow-up, at the end of the prepared remarks, obviously bullish on drones. But then talked about commercial and talked about robotics and light EVs etcetera, other applications. I mean, maybe would assume 2027 is still vast majority is gonna be about drones, UAVs, But maybe as you think about the mix evolving as you get out to 2030 and beyond, how do you think about that in terms of your overall business?

Thomas Michael Stepien: Yes. 2027 will still be drone dominant in terms of our revenue percentage. As we get to 2030, to your question, we think it is going to be more balanced in a couple of ways. Number 1 is some of the other segments that we talk in the deck. Including eVTOLs, including robotics, That is where we are spending some time today. We have added to our sales force as we mentioned with European folks and others, And we have also stood up a separate business development arm. So that we are attracting some of those further out So that is something that we think about I think the balance also from a supply side will be better balanced in 3, 4 years. Customers are starting to ask for batteries from specific location and we are responding. that is part of why you see Caminus. that is part of why you see what we are doing with our South Korean partners in The US. So that will come into the actual supply of that demand in that timeframe, and will be better balanced between Chip generally mostly South Korea, and The U. S. At the end of the decade.

Eric Stine: Okay. Thank you. Thanks, Erin. Thanks, Erin.

Operator: Thank you. Our next question comes from the line of Austin Bohlig with Needham and Company. Please proceed with your question.

Austin Bohlig: Hey guys, thanks for taking my question and congrats on the solid results here. Maybe just wanted to first-- yes. Maybe just wanted to first start on of the new updated guidance. Third time you raised it, Would just love to maybe talk through kind of different scenarios and, like, maybe potential further upside to kind of this new target.

Ricardo C. Rodriguez: And sorry, just to be clear, you are referring to the year's, the longer-term 1, Austin? The year, the 145. Yeah. So the 145, you know, we made it just the 145 simply because we run out of time here with the end of the year coming. And I do think that, you know, when it is time to put out the 2027 number, we have got pretty good visibility in that. But obviously, the longer we can spend building that book, the more solid that will be as we as we communicate it. I do think that what is implied by the guide, is around $43.3 million of revenue for Q4, makes a lot of sense from where we stand, especially if we are trying to get to, you know, really strong gross margins. Right? The guide in essence implies margins getting to almost 35% And in order to do that, we really do need to be heavy on the pouch side. And so that is the main goal. I do think that if we were not so focused on managing the margins in Q4, To your point, there could be additional upside on the top line. But I do think that in this phase that we are in, demonstrating our path to profitability and the margin potential of the business given that we have you know, a pretty healthy backlog, is more important than just continuing to build up the revenue base.

Austin Bohlig: Okay. Yeah. How. Very helpful. And I think too, like, really, it seems like an exciting opportunity in the subsea market. Just curious on how, like, the content per vehicle in that may differ from drones.

Thomas Michael Stepien: Yes. Good question. So we are also very excited about that. there is a lot of opportunity underneath the surface. We generally, these craft are larger compared to drones. So the battery content tends to scale with the overall size of the craft. Some of that depends a bit on the mission that the craft is actually doing. There are some 1-way underwater drones. there is some surveillance drones also, just like we show in 1 of our diagrams. So it is a new space for us. We are talking to many customers. And some of the same value that we provide in particular, the ability to handle 9000 feet, 3000 meters, is somewhat unique to our design. So we want to exploit that and then to get some more wins on the board All right.

Austin Bohlig: Perfect. Well, thank you, Tim, and keep up the good work, Awesome. Thank you.

Operator: Thank you. Thank you. Our next question comes from the line of Ryan Pfingst with B. Riley Securities. Please proceed with your question.

Ryan Pfingst: Hey, good morning, guys. Thanks for taking the questions. Morning, Ryan. How are you? Hey, Ricardo. Maybe just a follow-up on the revenue mix And thinking about 2027, understanding you are not giving guidance yet, but how should we be thinking about the potential breakdown next year between U. S. Versus international opportunities as we try to size the potential for, you know, US growth going into 2027?

Ricardo C. Rodriguez: Yes. The way we are thinking about it right now is that if The U. S. Can double year over year, that would be a decent that would kind of its contribution to the mix for next year. A lot of it is supply dependent as well, right. So the onus is on us to get the capacity at Caminus in particular and then South Korea to be higher than what it is today? But, yeah, I think if we can do a doubling of our US business going into next year, that would be sort of my best estimate for what the mix of it would be that is helpful.

Ryan Pfingst: And then I wanted to touch on the progress of your South Korean contract manufacturing partners and the progress they have made growing their capacity and maybe you could frame what that capacity looks like today or where you expect it to be by the end of next year?

Thomas Michael Stepien: Yes. So at the August call, we gave the names of 3 of our contract manufacturing partners. There were 3 in South Korea. There is a fourth that we have added and officially signed up and there is more that we are working with. Our team was over in South Korea 2 weeks ago. I will be there in about 10 days myself. Probably once again before the end of the calendar year. So it is a market we are spending an awful lot of time on. To help stand them up. They are working well What we are doing, and I think we need folks to understand this, is in order to protect our intellectual property, which is mostly centered around the anode, there is 1 CM in South Korea that is making our anodes for us and we are providing coils to companies like Kaminus that are putting together the batteries. So we have tried to be thoughtful about how we industrialize the various CMs in South Korea particularly, not just to get the scale and the cost that we want, but at the same time, sure that we have protecting our IP and also making it faster for newer CMs like Kamenis to come up to speed. If we take a little bit off of their shoulders and they are focused just on assembly and test, For example, the back 2 thirds, middle and the last part of a typical lithium ion cell factory, focusing the first third at 1 trusted partner that helps speed, it helps cost, it helps IP protection. that is helpful detail.

Ryan Pfingst: Congrats on the progress, guys. Ryan, thank you.

Operator: Thank you. Our next question comes from the line of Derek Soderberg with Cantor Fitzgerald. Please proceed with your question.

Derek Soderberg: Hey, Tim. Hey, Ricardo. Hey, there. Good morning. Good morning. So my first question is related to the earlier question on pricing, the $350 per kilowatt-hour. SiCore pricing is higher than that, but curious how that has sort of trended that figure as volumes have ramped up in Korea. And I think, Riccardo, you had that the $350 figure was conservative. But should we view that as more or less kind of a longer term blended average price as you sort of get into the gigawatt scale?

Ricardo C. Rodriguez: Yeah. I think that is a. You know, the 350 is a very long-term floor that is very cylindrical heavy. Right? So if you look at what is on Slide 6, I think it is probably fair to assume that 70% of that is cylindrical, which we obviously are trying to disprove as we create the market. And to your question on recent pricing, recent pricing has actually trended higher relative to what our expectations were you know, going back just a little over a year ago. Especially on some of the pouches. The cylindrical pricing is challenging. it is also more challenging to demonstrate better performance on a cylindrical cell. So that makes total sense. And that is why we were pretty incentivized to drive our pouch cell portfolio in every way we can.

Derek Soderberg: Got it. Ricardo, can you touch on that a bit more? Just can you pull out the mix portion of the pricing increase you are talking about? What else has been contributing to that negotiations? Better technology, what is there anything else that is sort of driving pricing beyond mix? Right now?

Ricardo C. Rodriguez: Yeah. I think the main thing driving pricing right now is that there is no capacity out there from you know, in the market. Either you are stuck buying a standard lithium ion cell or you try to get a high performance cell from a very short list of participants like us, the cylindrical side, there is more competition, right? You know, the Moly cell has a high performance cell in the cylindrical market that, you know, we think they are not pricing as high as they should, frankly. And there are several other players selling standard cylindrical cells at pretty low prices that sometimes make us even question, okay, you know, if we cannot source a cylindrical cell at a certain cost, why do we bother with this, especially when we have so much demand on the pouch side. So that is something that we will continue managing here as we build out the portfolio.

Thomas Michael Stepien: And our team is not standing still. Right? We are figuring out a way to get even more performance out of a cylindrical cell potentially.

Derek Soderberg: Got it. Super helpful. that is all for me. Thanks guys. Thanks. Thanks, Derek.

Operator: Thank you. Our next question comes from the line of Chip Moore with ROTH Capital Partners. Please proceed with your question.

Chip Moore: Hey, good morning. Thanks for taking the question. Maybe 1 on the retrofit of the EV battery line. Just talk about progress on key milestones there and how those tie into future grant disbursements?

Thomas Michael Stepien: Yes, Chip, thanks for your question. I will take that. So the competitive contract, to use the appropriate language, from that we have been coached from the Department of War because it is exactly that. it is added to the end of contract. It has started this time last week, actually, Wednesday last week, we had our kickoff meeting. With the team in DC. I attended, of course, with our friends and partners in South Korea. There are 15 milestones. it is a 24 month program. The first part is about making sure we provide the correct tools that will go into the factory. And then there is some retrofitting of the factory itself that comprise most spending. We spend first and then we are reimbursed for that spending. Some of that flows through Amprius, right? So we will work with our South Korean partners to spec up tools. They will buy the tools. We will invoice the government. They will send us funds and we will send most of those funds for tools in this example South Korean So that is how it is working. it is up and running. there is a lot of work to do. We will start to it will start to look real once we start to deliver equipment to the factory and the retrofit. So that is probably summer, fall of 27. But we are up and running. We are off to the races.

Chip Moore: Excellent. Thanks, Tim. And maybe for my follow-up, the slides around defense spending, slide 5, with a particularly a lot of you know, European allied nations in there, and I. You also talked about some hiring over there. Just do you see a need for additional contract manufacturing over in Europe here sooner than later, or how are you thinking about that? Thanks.

Thomas Michael Stepien: We do. Some of the requests I mentioned earlier that customers have specific request. there is a law of course here in The U. S, the National Defense Authorization Act that is very clear on what is required and when. The when is about 14 months from now. Depending on the program. But generally, the beginning of 2028. There is not a law in Europe generally, but there are some preference that we are starting to hear from our customers. We have discussions underway. We were first on a specific mission to look at some European CMs Oh gosh. A year or so Actually, 1 of our engineers is in Europe visiting his folks, but he is stopping by and spending tomorrow with 1 of the CMs that we have seen in the past. As you can imagine, there is a lot of work that happens before we actually announce customers, right? We started working with Kaminus, oh my gosh, probably in the spring. We announced it a month or so ago. So that will come. That will be give us some of that same balance that I tried to answer. on 1 of the other questions. Thank you. Thank you, Chip.

Operator: Thank you. Our next question comes from the line of Amit Dayal with H. C. Wainwright. Proceed with your question.

Amit Dayal: Thank you. Good morning, guys. Just 1 question for me. Hey, guys. So you know, China recently implemented some tax policy changes that have been disruptive to the lithium ion industry over there a little bit, at least in the near term, you know. A lot of margin pressure, a lot of sort of orders being pushed out, etcetera. Does this development potentially help Amprius Potentially, right.

Thomas Michael Stepien: As different countries are implementing either protective measures or other types of restrictions, we have to be nimble And that is part of why we have more than 1 leg to stand on South Korea. US cylindrical pouch, So, we keep our finger on the pulse of what is happening. Around that front. We have a team, we have a 12-person team in China that is presence there. So we are on top of it. We have outsiders, government affairs firm, various lawyers who also keep us up to date on some of these geopolitical considerations. And that is part of that is part of how we run the show internally here.

Ricardo C. Rodriguez: So Amit, the other thing to keep in mind is that a lot of this shakeout happens in, you know, way larger markets than what we are addressing. So mainly EVs and stationary storage. And so, you know, in some ways, I do think that we are sort of flying our plane either above or below that turbulence.

Amit Dayal: Understood. Thank you, guys. that is all I have. Thanks.

Operator: Thank you. Thank you. Our next question comes from the line of Josh Sullivan with JonesTrading. Please proceed with your question.

Analyst: Hey, good morning. Hey, Josh. Good morning. Just wanted to kind of get your thoughts on how Part 108 evolves And, you know, when whenever that happens, you know, how quickly is that gonna translate to, you know, activity for you guys how do you think the market kind of evolves? Just wanted to kind of get your thoughts around that as we get closer.

Ricardo C. Rodriguez: Well, that is the line of sight regulation, right? Yeah. On the commercial side, BBLOS. Yeah. Yeah. I mean, I think that will unlock a good bit of non defense demand and there is a big ecosystem of companies. That are going after that market. Right? So you know, drones as first responders seem to be the opportunity that is there most right now to take advantage of this. We actually had an internal meeting here to you know, cover our targeting of a lot of these names. Some of them we know well. And, yeah, I do think that in a, you know, kind of unclogged D.C., if this actually goes into effect, that will be a big tailwind for all of these participants.

Thomas Michael Stepien: Yeah. And again, the types of drones. Right? So, DFR, worried about the LOS beyond visual line of sight, delivery, etcetera. We have some public names that we have talked about for those. And it is a land and expand strategy. With a couple delivery companies under our belt, and we wanna talk to more. So as that evolves and frankly makes it easier for our customers, we believe that we should be a beneficiary Okay, great.

Analyst: I will leave it there. Thank you. Thanks.

Operator: Thank you. Thank you. Our next question comes from the line of Ted Jackson with Northland Securities. Proceed with your question.

Ted Jackson: Thanks very much. I wanted to talk a little hey guys, you guys saved the best for last, I am sure. Totally, I wanted to talk a little bit about the North American market. And where I am going with it is it is just kind of a more of a discussion. But, you know, you had a big jump in it this last quarter in terms of its contribution. I am assuming that was driven by kind of drone dominance. And I just wanted to verify that. And then when I think about kinda the business as we get into 2027-2028, there is a couple of things that have crossed my mind is 1 is you are gonna ramp your North American production really in 2027. it is gonna be pouch cell based. And so, the first thing is, like, how does that change your You had a high cylinder count, you know, this time, but will we see the bulk of your revenue going forward be pouch cells because you just have this much more capacity that is really dedicated to pouch. Will we see the mix of business shift and be a little more North American because you have this capacity in place. And then and then, because of it is a pouch cell and you are gonna be making a lot of this stuff more in the North American market, How does that all play out with regards to the margin structure for Amprius? Because you are not gonna have the freight cost, and you are going to be having, you know, basically, a higher-margin, you know, product line being, you know, produced here in The US. I guess that is more or less my only question to have.

Ricardo C. Rodriguez: Yes. No, that is helpful. So 2 points. I think first, we should not forget about the announcement that we made earlier this year around Nanotech and our intent to have cylindrical cell production here in The U. S. Through that. And so we will have hopefully some, you know, good and competitive cylindrical cells here in the not too distant future. To go after the U.S. market. We continue looking for frankly additional supply of low cost, high performance cylindrical cell. That would enable us to not completely tilt the mix towards pouches in that late 27, 28 time frame. To your point, Ted. And so but, yeah, I if the mix completely tilts towards pouches, with you know, pricing being the main driver, obviously. I do think we could potentially have an even more attractive gross margin profile.

Thomas Michael Stepien: Especially with the scale that we are bringing. Right? I mean, if you look at the demand that we showed here on slide 6 it was, and you put, you know, 300 or more megawatt hours of capacity, that is actually pretty good. And that in many ways explains the rationale behind the $75 million contract that we got with the DIU. Right? So that is a gap in demand that we have to fulfill here in The U. S. And where we are pretty uniquely positioned to go in and do that if we can execute. Yes, maybe just a couple things to add on there. So as Heidi Shyu said, The U. S. Is starting to get serious, right? he is imagining different scenarios and we are starting to see that flow through albeit there is uncertainty about the actual size of some of these budgets. And that is also evidenced by these gauntlets, right? There have been 4 gauntlets on Drone Dominance. Number 2 was-- number 3 is in February, I believe. So The U. S. Is starting to play catch up. And then and just by the way, just to be clear, we do have an $18 million defense innovation unit and then the 75 million is with different group, the industrial base folks. So both of those are underway.

Ted Jackson: Okay. Thanks very much and congratulations on superb quarter.

Operator: Thank you. Ladies and gentlemen, that concludes our question and answer session. I will turn the floor back to Mr. Stepien for any final comments. Thank you.

Thomas Michael Stepien: To our customers, shareholders, employees and partners, thank you for your continued support. Several markets need advanced batteries, and Amprius cells lead the industry on multiple dimensions, which puts us in a really strong position to keep innovating execute with discipline and deliver meaningful results. Thank you for your time and attention.

Operator: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.