Aqua Metals Q1 2026 Earnings Call - Discard Lion Energy Deal, Advance Commercial Lithium Recycling Plant

Operator: Good afternoon. Welcome to Aqua Metals’ first quarter 2026 earnings conference call. My name is Tom, and I will be your operator this afternoon. At this time, all participants have been placed on a listen-only mode. Following management’s remarks, we will open the call for questions. It is now my pleasure to turn the call over to your host, Dan Scott, investor relations. Dan, please proceed.

Dan Scott, Investor Relations, Aqua Metals: Thank you, operator. Thank you everyone for joining us today. Earlier today, Aqua Metals issued a press release providing an operational update and discussing results for the first quarter ended March 31st, 2026. This release is available in the investor relations section of the company’s website at aquametals.com. Hosting the call today are Steve Cotton, President and Chief Executive Officer, and Eric West, Chief Financial Officer. Before we begin, I would like to remind participants that during this call, management will be making forward-looking statements. Please refer to the company’s report on Form 10-K for a summary of the forward-looking statements and the risks, uncertainties, and other factors that could cause actual results to differ materially from those forward-looking statements. Aqua Metals cautions investors not to place undue reliance on any forward-looking statements.

The company does not undertake and specifically disclaims any obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur, except as required by law. As a reminder, after the formal remarks, we will conduct a question-and-answer session. With that, I’d like to turn the call over to Steve Cotton, President and Chief Executive Officer of Aqua Metals.

Steve Cotton, President and Chief Executive Officer, Aqua Metals: Thank you, Dan. Good afternoon, everyone, thank you for joining us. The first quarter of 2026 was an important quarter for Aqua Metals as we continued advancing the commercialization pathway for our AquaRefining platform, while also broadening the strategic scope of the business across both critical minerals and energy storage markets. During the quarter, we continued advancing site selection and engineering work for what we intend to be our first commercial lithium battery recycling facility. We are now evaluating a shortlist of U.S. locations with a focus on feedstock access, logistics, strategic relationships, and long-term operating economics. At the same time, we continued refining plant configuration, operating parameters, and capital planning so that we are positioned to move quickly as we advance towards commercialization. One thing I want to emphasize is that Aqua enters this next phase from a position of resilience and operational readiness.

Over the last 2 years, the battery materials industry went through a very significant downturn. Battery-grade lithium carbonate pricing, which had generally remained above roughly $20,000 per metric ton, fell below the $10,000 per ton level during portions of 2024 and 2025. Projects across the industry were delayed or canceled. A number of companies in the sector faced restructurings or insolvencies. Throughout that period, Aqua Metals remained disciplined. We preserved capital, protected shareholder value, maintained our core technical capabilities, and continued operating and advancing our innovation center and demonstration plant here in Reno. Today, we believe those actions position us differently from many companies that either paused development entirely or significantly scaled back operations during the downturn.

At our innovation center, we have now surpassed 5,000 cumulative operating hours across extended multi-feedstock campaigns, which continues to validate both the AquaRefining platform and our pathway to broader commercialization. During the quarter, we achieved several important technical milestones. We successfully produced battery-grade lithium carbonate from multiple recycled feedstocks, including both NMC or nickel manganese cobalt and LFP or lithium iron phosphate materials, with independent validation confirming industry-grade specifications from our processes. We also achieved manganese sulfate production purity of approximately 99.8%, demonstrating the broader applicability of AquaRefining across additional critical minerals and battery precursor markets. In parallel, we continued advancing our iron phosphate recovery work from LFP materials, which we believe is increasingly important as LFP adoption continues to accelerate, particularly in stationary energy storage applications.

With LFP continuing to grow its share across both electric vehicles and stationary storage applications, we believe our demonstrated ability to recycle it economically strengthens our competitive position and expands our addressable feedstock opportunity in a meaningful way. On the strategic side, we continued pursuing opportunities designed to broaden our participation across the battery and energy storage ecosystem and create additional pathways towards future revenue generation. That includes our previously announced commercial relationships with companies including 6K Energy, Westwin Elements, Impossible Metals, Mobi Robotics, and American Battery Factory. Let me provide an update regarding Lion Energy. Following detailed diligence, we have determined not to proceed with the acquisition under the structure contemplated in the previously announced non-binding term sheet.

We continue to see long-term strategic value in the integration of energy storage solutions with domestic battery materials infrastructure, and we are evaluating alternative strategic structures and pathways that could potentially accomplish those objectives in a more capital-efficient manner. Our approach remains disciplined and focused on protecting shareholder value while maintaining strategic flexibility. Looking ahead through the balance of 2026, our priorities remain clear, advancing site selection, continuing engineering and technical validation, expanding commercial engagement, and evaluating strategic opportunities that can accelerate long-term value creation. We believe AquaRefining has the potential to become an important part of a more domestic, efficient, and resilient battery material supply chain in North America. Our process eliminates the waste streams and chemical costs that make traditional recycling uncompetitive in North America. we have demonstrated battery-grade lithium carbonate at fluorine levels we believe are the best in class for any recycled source globally.

We believe our cost profile is highly competitive with incumbent processes, both domestically and internationally, and that is the foundation we are building the commercial business on to drive that value creation. As we move forward, we do so with a validated technology platform, growing intellectual property portfolio, operating infrastructure already in place, and what we believe is an increasingly favorable backdrop for domestic critical minerals development and battery supply chain localization. With that, I’ll turn the call over to Eric for the financial review.

Eric West, Chief Financial Officer, Aqua Metals: Thanks, Steve. For the first quarter of 2026, we reported a net loss of approximately $4 million or $1.22 per basic and diluted share, compared to a net loss of approximately $8.3 million or $10.27 per basic and diluted share in the first quarter of 2025. The improvement year-over-year was primarily driven by the non-cash impairment charges that were recorded in the prior year period and did not repeat in Q1 of 2026. Total operating expenses were approximately $4.1 million for the quarter, compared to approximately $8.7 million for the first quarter of 2025. We ended the quarter with approximately $6.8 million in cash and cash equivalents and working capital of approximately $7.5 million.

Cash used in operating activities was approximately $3.8 million during the quarter. We continued to manage spend carefully while still supporting the technical, engineering, and strategic work that Steve discussed. During the quarter, we raised approximately $1.3 million in net proceeds under our ATM program. As of the quarter ended, approximately $48.6 million remained available underneath the ATM. We continue to evaluate financing alternatives and are focused on maintaining flexibility as we move through the next phase of commercialization and strategic planning. On Lion Energy, during the quarter, we contributed the previously outstanding note balance and advanced an additional $2 million to acquire a subordinated participation interest in Lion Energy’s senior secured credit facility.

As disclosed in the Form 10-Q, we recorded a provision for credit losses of approximately $437,000 during the quarter based on our assessment of the exposure and the expected recovery assumptions. Subsequent to quarter end, we elected to not proceed with the acquisition under the structure and terms outlined in the February 11, 2026 non-binding term sheet, but we continue to evaluate alternative structures that may better align with our capital discipline and shareholder value objectives. Overall, our approach remains consistent: preserve capital, stay disciplined with spending, and focus our resources on the activities we believe best support commercialization, strategic flexibility, and our long-term shareholder value. With that, I’ll turn the call back over to the moderator to begin Q&A.

Operator: Thank you. The floor is now open for questions. If you wish to join the queue to ask a question at this time, please press star one on your telephone keypad. We do ask, if listening on speakerphone today, that you pick up your handset while asking a question to provide optimal sound quality. Once again, please press star one on your telephone keypad at this time, if you wish to join queue to ask a question. Please hold a moment while we poll for questions. We have a question from Mickey Legg from The Benchmark Company. Mickey, your line is live. Please go ahead.

Mickey Legg, Analyst, The Benchmark Company: Hey, guys. Thanks for taking my questions. Just gotta ask about the Lion Energy transaction. Any additional color you can give us there on what led to the decision not to follow through and just how discussions are going, if they’re ongoing at all, about potential alternatives and that exposure on the note you have out there. Just any comments on that and how confident you are you can recover that or any alternative plans there. Thanks.

Steve Cotton, President and Chief Executive Officer, Aqua Metals: Yeah. Hey, Mickey. Hey, thanks for hopping on and asking the question. Yeah, I think we’ll do a two-part answer. I’ll answer part of your question. I’ll turn it over to Eric to answer the second part. My part, as we progress through the diligence, it became clear to us that the originally contemplated structure just no longer aligned with our capital discipline, risk profile, or shareholder value objectives. We approached the process really thoughtfully and objectively, and ultimately, we concluded that preserving flexibility and protecting the balance sheet for the company was really the right decision. That said, we do continue to believe that there’s a strategic value at this intersection of energy storage systems and domestic battery materials.

The broader thesis has not changed. What did change was our view that the structure that’s required to responsibly pursue that opportunity would need to change. We are evaluating alternatives, and that could potentially allow us to participate in selected assets, technologies, customer relationships or customer channels in a much more capital efficient and risk-balanced manner. excuse me. We are going to remain disciplined, and we’re not interested in pursuing growth really at any cost. We are interested in applying that discipline. I’ll let Eric answer the second half of the question.

Eric West, Chief Financial Officer, Aqua Metals: Thanks for the question, Mickey Legg. At the quarter end, our total exposure associated with the Lion Energy financing activities was approximately $4.1 million. You know, given the evolving situation and the prudent accounting standards, we recorded a partial reserve during the quarter, reflecting the increased uncertainty at this time. It’s really driven by, you know, GAAP principles. Importantly, our position remains as a senior secured, second to their current ABL, who has first position. We are, you know, we’re actively developing or actively monitoring developments and evaluating a range of potential recovery outcomes tied to the collateral base and, of course, any future restructuring scenarios. I’d also add that throughout this process, we remain very focused on downside protection and capital preservation.

We approach the financing strategically, and we continue to believe that our secured position provides us with multiple paths to potentially preserve value while maintaining optionality around future strategic outcomes.

Mickey Legg, Analyst, The Benchmark Company: Okay. Okay. Got it. Yeah, that’s all, that’s all super helpful. Maybe just one more on where should we be looking over the next 12 to 18 months? What milestones should we kind of be looking for? It seems like there’s a lot of focus, like you were saying, Steve, on the energy storage market. Just curious on what we should be looking for. Thanks.

Steve Cotton, President and Chief Executive Officer, Aqua Metals: Yeah, for sure. A lot of the milestones from our core Aqua Metals business, of course, is a site selection for our first commercial ARC facility, and that is something that is very far along and underway. In fact, a big portion of our team is returning today from some more visits at a short list of sites that we’re looking at selection. That is something that we expect we’ll be able to proceed with in a reasonable timeframe on a site selection. The criteria for those site selection hasn’t really changed materially and all that.

We’ve always prioritized for that site selection, things like feedstock, logistics and infrastructure availability, utility economics, permitting environment, access to workforce, and really importantly, proximity to the strategic ecosystem partners we’re looking for feedstock and offtake. In some ways, stepping back from the originally contemplated structure with Lion actually increases our flexibility on that milestone because it allows us to optimize purely around long-term operating economics and strategic positioning for our core business. That doesn’t mean that alternative structures with Lion Energy and/or other initiatives that we would take to achieve an earlier revenue production in the energy storage space is something that we’re working on and expect to update the markets accordingly as we make progress on that portion of the initiative. Hope that answers the question.

Mickey Legg, Analyst, The Benchmark Company: Yeah. Yeah, it does. That’s all I had. Thanks again, and, congrats on another quarter, guys.

Steve Cotton, President and Chief Executive Officer, Aqua Metals: Thanks. Thanks again.

Operator: Thank you. I would now like to turn the call back to Dan Scott to facilitate questions that were submitted online. Dan, the floor is yours.

Dan Scott, Investor Relations, Aqua Metals: Thanks, Tom. We have a couple that have come in. The first is for Steve. The question is: You’ve surpassed 5,000 cumulative operating hours and independently validated battery-grade lithium carbonate from both NMC and LFP feedstocks. What specific remaining technical or commercial milestones need to be cleared before you can commit to a site and begin FEL2 engineering?

Steve Cotton, President and Chief Executive Officer, Aqua Metals: We’re continuing to make very solid progress across the remaining milestones. At this stage, our focus is less about proving the core chemistry and process flows because we’ve already done that and achieved that with our innovation center and pilot and demonstration plant, and a lot more about optimization, integration, throughput, validation, commercial configuration aspects. We’ve now demonstrated that battery-grade lithium carbonate across multiple feedstocks, and that was really an important validation point for us.

We’re also continuing to refine impurity management, leveraging our assets and our operations, for things like reagent efficiency and operation stability, as well as the overall process economics, which are really important. On the commercial side, that site selection that I talked about, answering the prior question from Mickey Legg, with the team that’s in the field literally this week, as I’ve mentioned, feedstock alignment and infrastructure considerations and customer qualification discussions, things like project financing conversations all come together in parallel, as we take our disciplined phase development approach. We really want the first commercial facility positioned for long-term success and not just to get the short-term gratification of celebrating a groundbreaking.

Dan Scott, Investor Relations, Aqua Metals: Okay. Great, Steve. Thank you. Then there’s one more question, also for Steve. You’ve maintained commercial relationships with 6K Energy, Westwin Elements, American Battery Factory, Impossible Metals, and Mobi. Have any of these moved from MOU or LOI status towards binding agreements? What does the commercial conversion timeline look like?

Steve Cotton, President and Chief Executive Officer, Aqua Metals: We continue to, of course, actively engage with all of those parties named in the question and others. I would characterize several of those relationships as continuing to deepen both technically and commercially. That said, at this stage, many of these discussions really naturally evolve alongside that timing of commercialization and site selection, and then getting into qualification work and overall project structure. It’s a sequencing thing that’s really important to converting those to full force commercial agreements because you really have to have the site secured and line that out before you finalize everything else. What’s encouraging is that we continue to see really strong interest in domestic refining solutions, recycled battery materials, and low carbon supply chain positioning.

The industry really understands that North America needs a scalable domestic refining capacity. We’re also really pleased that the lithium prices have recovered from the 2024 and 2025, I’ll call it lithium lull, where lithium prices went well below $20,000 to $10,000 a ton, as I mentioned. Now we’re in an environment where we feel that we’re in a great position as one of the few companies remaining in North America to be able to fulfill this commercial plant and those commercial contracts as it relates to the commercial plant.

Dan Scott, Investor Relations, Aqua Metals: Okay, Steve, thanks. That’s it for online submissions. I’ll turn it over to Steve for closing remarks.

Steve Cotton, President and Chief Executive Officer, Aqua Metals: Yeah. Well, thank you everyone for calling in and we really appreciate the continued support of Aqua Metals. We expect that we’ll have new information to report to the market soon, stay tuned.

Operator: Thank you. This does conclude today’s conference call and webcast. You may disconnect at this time, and have a wonderful day. Thank you once again for your participation.