The Sidoti Year-End Conference. My name is Ashisha, and I am an analyst here at Sidoti. With me today, I have Innventure. The ticker it trades under is INV. I'm happy to welcome Lucas Harper, Chief Investment Officer. We have about 30 minutes today, including the Q&A. If you have any questions, I request you to submit them at the Q&A section at the bottom of your screen. With that, Lucas, I will let you take over.
Great. Thank you so much. Again, my name is Lucas Harper. I'm the Chief Investment Officer here at Innventure, and I want to thank you all for making time today. I'm going to spend a few minutes just kind of talking a little bit about the Innventure model for those of you who are meeting us sort of for the first time today, and then I'll get into our companies and sort of where we are today. So essentially, Innventure is in the business of starting building and scaling highly disruptive industrial technology solutions. And essentially, what we're doing is we are a conglomerate company that's an operating company that launches wholly owned new companies in strategic collaboration with multinationals.
What we're doing is we're focusing on technologies that they've invented to solve a specific unmet market need, but the technology itself is outside of their core operating mandate in terms of what it is that they do from a day-to-day perspective as a business. They and Innventure have both underwritten the technology that they have either invented or adopted as so valuable to them from an end-use perspective in terms of what they get out of it as a client to that technology. Both they and Innventure want to partner where we will seed the company, found it, fund it, own it, operate it, and scale it towards them as one of, if not the first customers for the technology and/or a channel to the marketplace otherwise.
And again, the entirety of our model is really built around the thought process of how to build these technology solutions or companies around them in an accelerated manner that's designed to mitigate as much risk as possible to increase the likelihood of success and drive value to our shareholders. And so when we think about building technology companies and evaluating on the opportunities with multinationals, everything we do from a decisioning standpoint falls under what we refer to as our closed-loop model. And our closed-loop model has four core tenets to it. The first is the access advantage that each of these technology solutions that we're working with is unique to the multinational that we're dealing with. And so we shouldn't see it replicated on the street otherwise. It's based upon developed technology, meaning it's been funded beyond the proof of concept.
There's a well-developed patent family estate in place, and it's, again, at least to the proof of concept, and our job is to get it to full commercialization, and so it's based upon that technology solution. Our starting point is based upon the institutional data set that the multinational put together to invent and/or adopt that technology, and we can utilize that to understand and measure the efficacy of the technology solution and the overall opportunity, and then very importantly, that the multinational is there to help us catalyze early adoption for the technology solution, and catalyzation of technology solutions can come in a variety of forms, and that can be from vendor relationships. It can come from marketing support, etc.
But again, for us, the center of the bullseye is that they want to be one of, if not the first customer for the marketplace or for the technology solution, sorry, and/or a channel to the marketplace otherwise so that we know what adoption looks like for this technology solution before we really launch it as a business. And so if you think about what we're doing from a construction standpoint, we're really trying to put money to work in building these companies where we've mitigated a lot of the early-stage risks around we know who invented it, why, what the total opportunity is for in the marketplace, what's been done to get this to a high-value solution as of today, and what we think the opportunity looks like going forward, understanding who wants to be a customer once we get it to full commercial reality.
And so when you think about all these pieces, we feel like we're launching technology solutions from a founder's basis at what is much more akin to a B round from the perspective of where that technology solution is in its life cycle. And so we like to say you get early-stage economics, but a much later-stage risk profile as we build out these companies, if you will. And so we have launched four companies to date. The first two were done in partnership with a strategic partnership with Procter & Gamble. And PureCycle Technologies is a great example of kind of what our model can do. Right here you had Procter & Gamble that was looking for a new way to access fully recycled resin to include in their packages that they're putting out in the marketplace.
Upon not finding something that was suitable, they funded a young upstart scientist, Dr. John Layman, who created the world's first actual purification process for polypropylene plastic. Very exciting. You can understand why we'd be very excited about this technology, but Procter & Gamble isn't in the business of recycling. They're not even in the business of making plastic bottles. They make what goes inside plastic bottles. So the last thing that they necessarily want to do with this technology, as excited as they are about the solution, is go get into the waste collection and recycling business. So that's where we stepped in, took the technology, founded the company, built out the first pilot plant, took it to full commercial reality, took the company public, etc. And so that's a great example of kind of what we're after. Again, we've done two deals to date with Procter & Gamble.
AeroFlexx is a flexible liquid packaging solution that we're very excited about. It's five quarters into generating revenues, and we're really excited about the future of that business. The third company that we launched is a company called Accelsius. That's from a technology that was invented by Nokia Bell Labs, and it's a really exciting data center cooling solution that we'll talk more about on the call today, but it's really garnered a lot of interest in Innventure, a lot of interest in the company specifically with its novel technology solution to cool data centers, and then finally, we launched at the end of last year Refinity. Refinity is another recycling business that we're very excited about. The technology itself was invented by VTT, the Finnish lab, and we have strategically collaborated with Dow Chemical to move this company forward.
Again, given our experience in PureCycle and the understanding of the marketplace, we're very excited about this technology and what it will yield as we continue to move forward. Innventure went public in October of 2024. We're just over a year old from a public company perspective. Really, where we sit today is we're garnering, as I mentioned, a significant amount of interest in not just the overall model and the excitement around what these technology solutions look like from a value generation perspective going forward, but in particular, Accelsius has garnered a lot of interest in the marketplace today because it's a novel cooling technology solution for data centers. I think everybody's well aware of the significant infrastructure development that's going on from a data center perspective.
We've seen a lot of really exciting interest around Accelsius, and we'll talk more about that in just a moment here. I think that I'm going to stop and just see at this point if anybody has any general questions about the Innventure model and how we think about launching companies, and then we can talk more specifically about some of the underlying companies themselves.
Thank you. Thank you, Lucas. But just for starters, if we can understand how do you evaluate and prioritize new technologies for launching them and how do they fit your commercialization engine? What are the few things that you are actually looking at before you make a decision of whether you want to take the company public or not public, but to the commercial level or not?
Yeah, so the first thing that we're doing is we're understanding why the multinational has invented the technology. What specific unmet market need was it that they were trying to solve? What's the size of that unmet market? And then we really are trying to then evaluate in two different distinct thought processes around what is the technology and what is the uniqueness of the technology in and of itself. And then secondarily, we're trying to look at how does it uniquely solve an unmet market need so that we can understand what the long-term advantage is in not only the technology solution, but the multinational as a partner to really go after that part of the marketplace.
Because what we're looking for are things that are sufficiently disruptive to create new and immediate economic value to the client at the moment that they have that technology solution in their hands, such that we can compel economic behavior to change as a result of the benefits of the new dollars, be it profit, be it savings that are created by that solution itself. So that's what we're really first looking at is what is that unmet market need? What is the size of that unmet market need? How is this technology solving that? And how unique is that technology so that we can really get our arms around whether this is an opportunity that we want to spend time really focusing on?
Because again, our model is really this commercialization, rapid commercialization model, if you will, where we're taking something that's already been created beyond the proof of concept and it's ready for commercial development, and we take an operator's mindset and looking at and understanding where these technologies are and where they sit in that sort of commercialization process, if you will, because that's what we're going to do. We're going to take it on as an operator. We're going to found a new company around it. We're going to provide all the funding off of our balance sheet. Our team is going to go in and initially own and operate, well, we will continually own the company, but we'll go in and operate the company is what I meant to say because that's what our expertise is. We are zero to commercialization experts. That's what we focus on.
That's how we think about launching these companies. And so once we get our head around those pieces, and that's a nine-month to a year process for a company to really make it through that, we will then be focused on launching it and building it off of our balance sheet and then growing it into an independent operating concern.
Right, and if you can just tell us some of the lessons, good or bad, what you learned from PureCycle and AeroFlexx that were applied to the launch of Accelsius and Refinity. We've seen that the time it has taken for you to from PureCycle to get to commercialization has reduced with AeroFlexx and has gone down even more with Accelsius. Do we expect that to continue with Refinity, and what does 2026 look like for you guys?
We certainly hope that things will always continue to go faster. We certainly started from the scenario of going with a very large, long lead, high CapEx type of idea in PureCycle. You've seen that kind of come down as we went from PureCycle to AeroFlexx and certainly from an Accelsius standpoint. Refinity will have some real CapEx requirements to it, but what really makes our model work is the fact that we're focusing around this kind of closed-loop model idea. Before we launch the company, we already understand who wants to be the client, what they want to pay for the technology solution itself.
And so we can evaluate what that opportunity set looks like for us to go about building and scaling and launching that company and building it towards that multinational as one of the first customers or the channel that they're helping us to develop otherwise. And so it's from that entire process that we will sort of make the decision, if you will, around which technology solutions make the most sense for us and which opportunities are big enough for us to go focus on. Because a lot of operators in the early-stage venture space will maybe spread bet in a typical kind of venture idea or high-volume studio launches or private equity. They might be spread betting across different technology solutions and different ideas.
What we're spread betting against is across all of the IP that's being created by all these multinationals where we spend the time to winnow them down to the ones that we really actually want to focus on. So we're going to be more naturally a low-throughput, very high-conviction focus for us where each and every company that we launch, we're going to launch it with the expectation and the focus to make it successful. We know that there's no such thing as 100% success in building and launching companies, but we think that we can have a much higher likelihood of success in this partnership format where we're focused on what it is that the multinational has launched and why and how we can focus with them as a partner to build and scale companies that we know that they want to buy products from.
Right. And if we can just take a step back a little bit and see how you guys [uncertain] MNCs. There are just way too many. There's a plethora of companies that come out with technologies probably don't actually get in, which is not part of their business. So how do you vet the companies and how does your relationship evolve? With Procter & Gamble, you've done two companies already. With Nokia, you're already doing one. So how does that evolve? How do you choose the MNC as well?
Like a lot of things in life, this was really all started about under relationships and a career of our founders working in a similar model to this since sort of the early 1990s. As this has continued to evolve over time, they were able to finally earn the right for Procter & Gamble, who they originally were taking technology solutions and ideas to, to say, "Look, we know who you guys are. We like you. We like the model," etc. "But look at what it is that we've created here, and can you help us think about how to create value out of this?" That really became the inflection point that changed the model into what we're doing here today at Innventure, where we focus really almost exclusively on technologies that have been invented or adopted by these multinationals.
But to your earlier question, as we started to see success with Procter & Gamble, we then were able to take on a relationship with Nokia. As we started to see more success with both PureCycle, AeroFlexx, and Accelsius, it allowed us to go out and meet more multinationals, and it's sort of one thing has built upon the next. And Procter & Gamble actually took us out to a number of conferences. Specifically, Innovation Roundtable was one that we went to a few years back that was very meaningful for us as we just started to see a lot more interest in this type of sort of an outsourced technology solution commercialization partner, if you will, and it's really grown from there.
As we saw a really big uptick in the volume and velocity of the number of multinationals that we've been talking to, as well as then the number of technologies, that was a big part of the impetus for us wanting to go public so that we could be in a position to have access to the right types of capital to be able to fund these types of business on a go-forward basis.
Right, and if we can just take a minute and talk about the financial statements. We've been seeing a continued cash burn. What are the operational cost controls or revenue levels that are planned for 2026, and how do you ensure a sustainable cash runway?
Sure. Well, we haven't put out the specific metrics on what it is that we're going to be looking to accomplish in 2026, so I can talk about sort of characterize what it is that we're doing. We went through a scenario where, as everybody's aware, we went public via SPAC, and we had a lot of short-term operational needs that we needed to beef up to kind of go through that particular process. So those costs have been coming down over time. We've made overtures during our quarterly calls from our CFO and our CEO about things that we're doing to reduce operating costs. A lot of those go public things are going to come down naturally anyways, but we've also been focused on insourcing different things that we were kind of more outsourcing in the back office kind of in the earlier days.
You'll see some of our OpEx kind of come down over time from that. But we otherwise feel very strong about our cash position. Our volume has come up nicely. Our volume average is over a million shares. It's been significantly higher than that if you look back just over the next kind of last sort of 15 or 20 days. For us right now, from a balance sheet perspective, we're pretty comfortable with the level of cash and access to capital that we have. For us right now, it's really a matter of managing cost of capital and evaluate what are going to be the best solutions for us as we continue to raise capital, as we're growing the value of these companies and therefore the Innventure balance sheet.
So we're just trying to be mindful of that as we get from here to the point where our underlying companies are generating enough cash flow to run us from an evergreen perspective.
Right. And sorry, I'm just jumping from topic to topic, but.
No problem.
The question was for Accelsius and the strategic investment from Johnson Controls. So if you could just tell us about how that relationship is going to work and will you be seeing more relationships like that? Is that something that's just an investment or there is a way that it's going to go into revenue building as well?
Sure. And again, some of these things that you're asking, the specifics are things that we haven't put out, so I'll characterize as best I can. But we're very excited about the relationship with Johnson Controls. Obviously, they're very big in the gray space with their chillers, etc., and we're focused on the white space in terms of inside the technology solution itself. So it's a really nice fit. You saw shortly after we announced that the deal with Dark NX, where that's a 300-MW total development, if you will, the largest in the two-phase space to date that we're aware of. And that's something where both Johnson Controls and Accelsius have taken on that project. So we're very excited about that.
And I think that you can infer that the investment by Johnson Controls is a validation of the technology solution that Accelsius has created and what they feel about it as an opportunity to help continue to sort of grow their business and their footprint. And I think that what you should see from Accelsius over time is our focus has been on strategic relationships across the board from our clients and how we think about selling to them, working through the integrators in each of the different market segments as we've defined them previously. So I think whether we're looking at somebody from participating as a partner on the Accelsius balance sheet and/or relationships from a distribution perspective, really all of our focus has been on the multiplier effect of the ability to bring in more clients, the ability to take greater market share, etc.
So we're pretty excited about what's occurred recently, and we think we should continue to put out good news in the future.
Right, and if we can just keep talking about Accelsius, and if you can tell us a little bit about how the customer perception for NeuCool has evolved over the last 6 - 12 months because there's been a lot of development that's happened, so a lot of companies have got a proof of concept sales, and so how would you describe the level of enthusiasm you're seeing from the data center operators or actually all of them? Yeah.
Yeah, no. We've always said at Innventure that it's not an if, it's a when for Accelsius. It very much feels like that when is occurring now from the perspective of we've discussed without too many specifics that a lot of what our orders have looked like to date have really been more proof of concept focused, where now that's starting to transition where a significant majority of that is actually larger orders, if you will, so scale-up orders. On our last quarterly call, we talked about the pipeline has ballooned significantly to be well over $1 billion. And so we haven't necessarily talked about what we expect the capture rate to be there because, again, it's an early-stage technology that's really just kind of starting its cycle of implementation. But we're pretty excited about what that means from an opportunity set perspective for us.
I mean, we don't need to educate you or anybody else on this phone about all of what's been going on in the marketplace in terms of all the hyperscalers and otherwise that have been talking about the investments that they're making into data centers. Accelsius has done a lot of great work to take significant market share from a voice perspective in terms of the cooling space. You've seen a relatively rapid shift of, "Hey, air cooling is not going to necessarily work for very much longer. We got to start thinking about other things," to folks starting to really kind of then initially lean into single-phase water and really now a big shift towards two-phase direct-to-chip. There's been a lot of articles about that recently. You've seen a prioritization at the administration level, etc.
So there's just a tremendous amount of tailwinds to what it is that we're doing. And our big focus kind of going into the end of the year into next year is just really about executing and delivering back to the marketplace what we've been saying is coming because we feel like it's here.
Right. And I know you guys are not giving out numbers, but if we look ahead in 2026- 2027, what are the themes or priorities we should see that are most important for Accelsius as it transitions from development to broader commercialization in the market?
I mean, I think it's really just going to it's about execution. As we're starting to deliver at these higher levels and really focusing on that specifically, there's been, as you may have heard Accelsius's CEO, Josh Claman's talk in the past, it's really not always necessarily about having the best technology. And while we feel like we may have that, and we're certainly the market leader from a timing perspective, that it's about having the best company and the best people to be able to deliver on that. And that's been a huge focus for Accelsius. It's been a huge focus for Josh. A big focus on supply chain, big focus on servicing, big focus on thought leadership and additional SKUs to continue developing with the potential clients as people are really starting to buy into the idea.
I think that's what the real focus is going to be for us is executing on these deliveries with these larger integrators in the variety of different spaces that we're going to be in to really earn their trust and gain as much penetration as we can in the next two years.
Right. And going back to the cash position, Innventure, I think it's a news that I read this morning that Innventure is being added to Russell 2000, Russell 3000. Congratulations on that.
Thank you.
How do you plan to leverage on the increased index exposures? And will that get raising money more easier, or how does that work for you guys?
Sure. No, I mean, look, getting the volume up has been a very big deal for us, and any company that comes through de-SPAC and gets out into the world, one of the biggest focuses that you need to have is making sure that people really understand what's going on at the company, understand what's going on in the stock, and that's how you start to build volume, and then that volume builds security for the people that you're looking to interact with from a capital perspective because they see that increase in volume as liquidity and gives them more comfort in getting out of particular vehicles with you, and so that then leads to a situation for us where we have a lot more tools that we can take advantage of that the street is offering us from a capital perspective.
I mean, we certainly still have, as public knowledge, we have $67 million on a SEPA from Yorkville that's still available to us, but there's been no shortage of other groups that are reaching out to provide other or similar types of instruments that you get to as you graduate from being more than a year old as a public company, and the interest is being garnered in the stock and in the company otherwise because of the success of Accelsius and sort of what's going on at that level, so again, it sort of puts us in a place, as I mentioned in the beginning of the call, that we're very comfortable with our access to capital at this point.
It's really about more being mindful about what is the cost of capital and how are we going to appropriately take it in as we continue to build the value of the stock going forward.
Right. And as one of my final questions, given the volatility in the insider share sales in the recent weeks, what is your messaging strategy to reassure investors about the long-term value creation and just what they should be looking for when they're looking at the Innventure stock?
Yeah, Innventure's insiders are net positive and growing on their holdings of the stock. We're very excited, big believers about what it is that we're doing. We couldn't be more thrilled about where Accelsius is today and what we're seeing from that in the near term. We think that's going to continue to be a very big near-term driver of value for us. And then over time, that will be further backed up, if we will, by the growth of the other companies behind it, which we'll look to continue to do. So again, just sort of very excited about where we are. That volume coming up does give us a lot more options. And so again, we're excited about the opportunities that we're seeing and where each of our companies are situated and the opportunities in front of them.
It's really going to be about executing on the growth plans and making sure that we're bringing in capital at the right cost is going to be sort of our focus over the coming months.
Great. Thank you so much. With that, we're at time, but I'd like to thank you. I'd like to thank you very much for attending and sharing your story with us. And also, I'd like to thank everybody in the audience for listening and spending your time with us today. Thank you.
Thank you all. Appreciate it. Have a good day.