Q2 2021 Quantumscape Corp Earnings Call
Yes.
Okay.
[music].
Good day and welcome to Quantum's escapes a second quarter 2021 earnings conference call.
On Sega acquaintance gates head of Investor Relations you may begin.
Operator.
Afternoon, and thank you to everyone for joining quantity second quarter 2021.
Earnings Conference call.
To supplement today's discussion. Please go to our IR website, IR dot com dot com to view our shareholder letter.
Before we begin I want to call your attention to the safe Harbor provision for forward looking statements are posted on our website and as part of our quarterly update.
Forward looking statements generally relate to future events.
Your financial or operating performance.
Our expectations and beliefs regarding these matters may not materialize.
It will result in financial theories are subject to risks and uncertainties that could cause actual results to differ materially from those projected.
Safe Harbor provision identifies risk factors that may cause actual results to differ materially from.
The content of our forward looking statements for the reasons that we pay on our form 10-K and other SEC filings.
Including uncertainties on the.
The difficulty in predicting future outcomes.
Joining us today will be qualms caped co founder CEO, and chairman, which I vs thing and our CFO Kevin Patrik.
Sandeep will provide a strategic update on the business.
Business and then Kevin will cover the financial results on our outlook in more detail.
With that I'd like to turn the call over to J D.
Thanks, John.
Welcome to our earnings call for the second quarter of 2021.
Earlier today, we published our shareholder letter from Horizon, the major development from last quarter.
Likely.
Briefly describe a few of the highlights here.
First and most significantly we are excited to report that we have now built and are currently testing. Our first 10 day ourselves and are commercially relevant form factor.
On the shareholder letter, we published preliminary data from our cycle life tests on early catastrophe retention.
And so I can performance remained similar to what we've shown for single and poorly ourselves on.
Our goal was to have 10 their sales by the end of 2021. So we are encouraged to have our first time their cells. This early.
To be more specific the development of <unk> has been the result of a number of concrete improvements.
2 are separate or manufacturing process.
Taken together these improvements result in a step change increase in both separately the quality and consistency.
And we baseline these improvements we expect positive knock on effects to accrue to our development process as we progressed through our manufacturing.
During scale up roadmap.
As we've said since first going public separate on quality and consistency are key technical parameters and this step change improvement is an encouraging sign that our focus on this area is paying off.
To put this achievement in context.
To think about how far we've come.
In December 2020, we showed our first data on single day ourselves then in February we showed our first ordinary ourself.
To now be able to share it already and look at full size 10 day ourselves in July is very exciting to us and we believe that the rapid way to progress to this point bodes well for our development plan.
Plans going forward.
Another important development, we made and tested our anode free lithium metal sales with a low cost iron phosphate LSP cathode and confirmed that our chemistry and solid line is compatible with LLP.
We believe this demonstrates the commercial flexibility of our cathode agnostic.
Gnostic solid state lithium metal platform, which allows us to extend our product offering to a broad spectrum on the automotive market.
In addition to these exciting technical results much of our focus this past quarter has been on installing high volume manufacturing and automation tools on our engineering line as a precursor.
The build out of our pre pilot towards zero facility.
Such high volume tube will allow us to further refine our manufacturing process reduce variability and feed our learn fast and iterate development process as we continue to work towards accomplishing our year end goals.
For example, <unk>.
Tacked.
Our high volume continuous flow heat treatment equipment to improve separate our production throughput by an order of magnitude over the current process as well as the significantly improved the quality of our truck later as a result of more uniform processing.
Just as important as our tool is our team.
We've grown our company head.
Head count by 20% over the last 90 days with a particular focus on attracting experienced high tech manufacturing professionals among.
Among many others. We are pleased to welcome Selena makeup Jack from Panasonic and Tesla.
Our VP of manufacturing engineering, and Clayton patch from Micron Technology, Inc, and <unk>.
Flash technologies as VP of manufacturing.
Our focus for the rest of 2021 is to build many more 10 day ourselves to collect performance data and comprehensively characterize and optimize the salvage volume.
In addition, we will continue working closely with both volume and other customers as.
As we push towards next year's customer sampling targets.
Lastly, I'd like to take a moment to look at the bigger picture.
This last quarter has seen an incredible volume of electrification announcements from automakers all over the world with a growing number committed to phasing out combustion engines entirely this.
This comes as governments across the world are tightening restrictions on combustion engine vehicles and accelerating the pace at which automakers are required to switch the.
The EV market is seeing enormous growth in major markets and this growth looks set to continue over the short and long term.
But it's also important to keep in mind that <unk>.
<unk> sales are still less than 5% of all new car sold and in some ways. The first 5% is the easiest to address with current technology.
We believe that selling evs through the remaining 95% of car buyers will require batteries that are not just marginally better than today's standard with significantly better.
On key metrics, such as range charged on cost and safety.
We believe the automotive market is starting to appreciate that incremental progress in battery technology will ultimately be insufficient to meet the requirements of drivers necessitating step function improvements like those delivered through our analyst.
Unless lithium metal approach.
Although there are challenges ahead of US we are confident that we have the team resources and fundamental technology to overcome them and every major hurdle, we clear becomes a moat that strengthens our competitive position and new ways to capture the next generation battery market.
In short we are encouraged by the results we see in this quarter and we are excited to continue our progress towards commercial deployment of our technology and share more developments with our shareholders in the months ahead.
With that I'll hand, it over to our CFO, Kevin Hedrick to say a few words on our financial performance before we open it up.
Good day.
Kevin.
Thank you Jackie.
In the second quarter, our operating expenses were $50 million.
Excluding stock based compensation operating expenses were $38 million. This.
This level of spend was in line with our expectations entering the quarter.
The full year.
<unk> cash operating expenses to be in the range of $130 million to $160 million consistent with our guidance from last quarter's earnings call.
Capex from the second quarter was approximately $30 million for.
For the full year, we announced the capex tracking higher than previous guidance of $130 million to $160 million.
Primarily due to a pull forward of the timing of <unk> zero pre pilot manufacturing line spend from 2022 into 2021.
This.
Progress setting specifications engaging with vendors ordering equipment and advancing facility projects.
Our overall.
Spend for <unk> remains in line with our previous expectations.
Our plan to end this year with greater than $1.3 billion in liquidity also remains unchanged.
We will update Capex guidance for 2021, and the Q3 shareholder letter when timing on payments related to <unk> zero comes into clearer focus.
Zero is a vital step on our growth.
From Q zero, we plan to produce battery cells for R&D test cars in 2023 and to establish a mass manufacturing system blueprint.
Earnings from <unk> Zero, we believe will help de risk our <unk> scale up.
With respect to cash we spent 6.
<unk> million dollars on operations and Capex in the second quarter.
Update guidance for full year free cash flow burn in the Q3 shareholder letter.
Our company achieved progress on development and manufacturing, while maintaining a strong balance sheet.
We ended the second quarter with more than $1.5 billion.
In liquidity.
We continue to expect to exit 2021 with over 1.3 billion.
Sufficient capital, we believe to fully fund quantum escaped through initial <unk> production and additionally contribute to the subsequent Qs 1 expansion.
Our GAAP net income for the quarter was.
$81 million, including the impact of $131 million and noncash fair value adjustment of the assumed common stock warrants.
Excluding this non cash adjustment the net loss for the quarter was approximately $50 million in line with expectations.
We're excited about the progress.
This quarter and look forward to the opportunities ahead.
We'd like to thank our investors for supporting our mission to commercialize our solid state lithium metal batteries and to help accelerate the mass market adoption of electric vehicles.
1 final comment regarding the recently announced public warrant redemption before passing back to John.
Of the $11.5 million public warrants originally issued most have already been exercised.
As of the recent redemption press release date, only approximately $1.5 million remain outstanding.
We believe redemption of the public warrants is an important step to further simplify and streamline our capital structure.
More information. Please review our press release and 8-K filing on July 20, <unk> with that over to you John John.
Okay. Thanks, Kevin will begin today's Q&A portion with a few questions. We've received from investors over the say app and in our IR Inbox. Our first question is if you had to convert a traditional.
<unk> lithium ion manufacturing facility to a quantum skip facility, how would you do it how much of the cost savings <unk> versus building a new factory from scratch.
Yes, John the first thing I'd say is that given the demand for batteries that we're currently seeing and the supply constraints. No..1 is when you're talking about Repurposing factories current factory capacity will continue to be needed going.
Going forward and new factories will be built each year to meet the growing demand on the.
Default plan will be to build new factories from <unk>.
But if you did want to repurpose the demand factories. The main changes would be first we don't even on manufacturing line from 31 with analysts this will allow us to reuse annually.
On coders with Catholic coders, increasing the capacity of the line.
Without adding cost.
Second we can also we use existing stacker tools for prismatic cells to make ourselves.
And finally, we could simplify the coordination areas since we don't have the need to form on <unk> Sci given we don't have an anode.
So we.
It will be able to leverage most of what you find on lithium ion factory.
Net commensurate cost savings if we were to go that route.
Okay. It makes sense, what gives you confidence you'll be able to manufacture at scale, what processes are unproven or required changes versus today's lithium ion facilities.
So fundamentally the made different.
We will launch in conventional on lithium ion manufacturing is that we have this unique ceramic separate here, but enables us to use the pure metallics lithium anodes.
So it gives us confidence that we can manufacture at scale is 2 things first the fact that this is based on pre posted materials that are bundled with.
Multiple suppliers on multiple continents and.
Ill.
Tools, we use to make this debt there are already used at scale into the battery or ceramics industry. Today. So we can leverage the scale of growth industries without requiring cash.
From 2 of development.
The remainder of these questions are from the sales of stock by key team members are being perceived by some as extreme with 1 shareholder.
Secondly, claiming that our CTO, Tim home sold 50% of his holdings, noting that our chief legal officer sold shares.
And our Chief Development Officer sold 2 thirds of its shares. So the question becomes is there anything to read into those share sales and can you comment on the size of the share so.
John first.
The.
Holder fill references in question are not accurate to correct the record here.
As of the end of the quarter, Tim on our co founder and Chief Technology Officer holds 96% of its prior holdings as of June 32021.
Mohit <unk>, our Chief Development Officer.
86%.
And Mike Mccarthy, our Chief legal officer holds 83%.
Yes, if things as I mentioned on our last call outside on satisfying tax obligations I remain committed to not selling any shares until we've delivered a prototype and are commercially relevant form factor as opposed to volume.
Yes.
Okay. Our next question how soon will you be going into production and can you comment on the ongoing discussions youre, having with automakers.
So on the production side, our plans on a go into pre pilot production with our <unk> Zero line in 2023, followed by commercial production in the 2024.25 timeframe.
On the customer.
I'll say a couple of things 1 is inbound interest remains strong.
And second.
In fact, because demand appears to be higher than our near term planned capacity, we actually won't be able to work with every prospective customer thats expressed interest.
This allows us to be a little more strategic about which customers who choose to work with.
And finally I'll add that our policy is not to discuss customer deals until Theyre final.
Many Oems consider battery supplier decisions to be provisory.
Out of respect for them, we usually let them be the ones.
That announced their partnership.
Since test from 46 to 8 a lithium ion battery cell as advertised as having.
Similar performance of your battery is less likely to cause a fire versus an internal combustion engine.
What's the real advantage on the south itself.
Yes on the 10th of $40.80 incorporates a number of incremental examples including things like higher nickel content on the capital side South of pack design drive actual processing for cap and manufacturing.
And so on.
But I'll note that in all of these capital and site improvements are available to us as well since low cathode agnostic.
Couple these improvements with our lithium metal anode, you still end up getting better on the density on the team I on because of the elimination of the carbon or silicon anodes.
And we don't believe you can do better.
<unk> then on add on lithium metal cell on metrics like energy density and fast charging cost.
Because we believe the conventional carbon or carbon sales annually is in fact achievability factor for all of those parameters.
What do you see as the most significant technical challenges to market acceptance and to full scale production.
So the main challenge is scaling up on separately production, which as I mentioned earlier.
Believe is achievable since the pre close on materials, our ortho abundance commodity and the production processes and tools already use debt scale today.
The second challenge.
Was to increase on layer count, but our announcement today.
Clear.
<unk> already made strong progress on that front. So we feel good about our ability to increase their accounts.
Okay. Our last question from a SaaS.
Do you plan to test your battery from a third party to prove all the claims in your reports are true.
So as we've said before we believe the best independent testing in testing conducted by.
The customers and of course, we've had multiple customers test ourselves in their labs.
Some investors have still asked that we use a third party labs to validate our results.
Responsive to those investors.
I will say that we have submitted ourselves Linda on testing and we will share results when we have them.
I want.
To point out, though that we're we don't intend to do this for every generation of ourselves as a.
Our focus remains on providing sell to our customers.
Okay. Thanks, so much guidance, we're now ready to begin the Q&A portion of today's call. Operator, Please open the lines for questions.
<unk> asked a question.
You will need to press star 1 on your Touchtone telephone Yeah. First question is from Suraj from lack of velocity.
Please go ahead your line is open.
Yes.
Hi, everybody.
I wanted to ask you.
2 different questions..1 is just you characterize.
10, 10 layer cell.
Evidence of improvement in manufacturing can you maybe explain that a little bit for us.
And in the lab can you maybe characterize.
What you are learning on manufacture ability and specifically any any kind of specific data points on the progress you are making.
On the speed of production and yield just given that you just said that debt the.
The second challenge is scaling.
Scaling on manufacturing.
Sure Hey, Rod.
On the question, but let me answer the question about.
On the manufacturing improvement first so.
The.
At.
The core of the improvement is as we mentioned was better uniformity better quality better consistency of the films.
It turns out is 1 of the critical path.
<unk> 4.
The performance on essentially all of the metrics that we care about from.
From recycling.
Behavior too.
Our low temperature all those things are improving.
Better quality and better consistency and near films. So this new process.
Represents as I mentioned.
A combination of a number of improvements on the manufacturing side.
Allowed us to make better films better films give us.
A better yield which means some more.
With films that we started on usable so that helps us deal with the fact that a 10 day or salary wise 10 times as many films. So on having more films that are that are good it helps there.
Then secondly, as you stack up multiple films.
You have non uniformity.
And you can you can.
Compound.
The effect of those 90 day for me, so so better quality.
Helps you.
Better achieve 10 net yourself.
So that was the cash.
I think price. Upon you also asked about scalar plans is that right.
<unk> production on.
Neil just any any.
Any metrics that you could share with us on the progress Youre, making there.
Yes, So 1 thing we did say in the letter.
You noted it was the new tools that were installing for example, this new heat treatment to what we referred to integrated auto and back in the letter of the tool you can see just the physical side.
The scale of it.
Fake industrial kind of tools that.
That's literally an order of magnitude more.
Throughput on the tools that we're currently using it on a baseline process. So.
Those are the kinds of.
No step function improvements in throughput debt that are needed to be able to both PLO provide.
Providing ourselves promoting their development.
As well as well.
Provide higher volumes of compete itself.
To both test internally and from my truck customers. So that's the reason why we feel like the scale up.
Yes.
It's been strong over the last quarter.
Hey, Thanks, Thanks, and just secondly, if I if I can the comments you made on this.
Our in phosphate.
But to your technology were pretty interesting so in the market today.
I think that L T cells or like 20% less expensive like 80 Bucks a kilowatt hour versus a 100 would it be the same for yourselves. So if you were targeting 70.
Our per kilowatt hour sales in 2027 with Nicole would it could it be in the fifties for arm based and.
Is that something that you're you're sensing from your customers.
Expressing interest.
Yes.
No.
How do we give.
Dollar guidance on our on our cost structure, but here's what I can provide 2 different.
I think parts of the cost that could be helpful. For your models force.
On a all of course as you already know rod on the anode side. We believe there is no low cost and then on Nols lithium metal design, because it doesn't handle it all or you can't get lower than.
On the procedural costs there when you couple that with an <unk>.
The cap rate excuse me.
You then get additional benefits because now the cathode active material was also relatively low cost.
Rice's as you know of the actual asking materials despite prices fluctuate over time.
Recent prices for normal.
NMC cathode material may have been idled in the low $20 low.
<unk> in terms of dollars per kilogram.
The price the comparable price for LSP cathodes.
If I recall correctly.
Maybe recently from hunting in the mid single digits dollars per kilogram. So that's a.
The significant difference in cost and then given that you've already eliminated the cost of the anode moving analyst design the cash.
Half of them to be.
Larger fashion on the overall cost so having a lower cost Kathy would actually really helps you there so to net it out I think what we believe is at the.
A pretty good cost advantage, we laid out in our original model of 50% to 20%.
Lower cost than conventional demand itself because the channel we.
We think that roughly holds even for the <unk> T cells.
So the beauty of.
Coupling on lithium metal anode lift designed with LSP.
Is it a couple of things 1 agenda with literally the lowest cost possible design that we know of you take.
Zero cost annually and couple that with a very low cost capital. So you've got a very cost advantaged.
<unk>.
But secondly, you take the fundamental disadvantage of LNP.
Most of it is that it doesn't have a lot of entities entity.
Can you address that directly by coupling it with lithium metal and taking it up to a range where now it's approaching that of today's conventional NMC based batteries. So it's a really beautiful combination right you 1.
1 fell swoop end up with a.
We believe the lowest cost solution, we can have on these kinds of systems.
And B you some kind of through the rest of the biggest weakness on LLP right. So we reported this demonstration.
Really to help the market understand that.
On.
We are Kathryn agnostic, we have the ability.
Whatever cap with our Oems want and this is not.
Some kind of.
That will range between LSP in lithium and those are completely different.
<unk> of the <unk>.
Phil.
Multi dimensional space and we can we can.
On both of those axes.
<unk> worked simultaneously.
To the extent that RFP becomes important for certain.
Sub sector of the automotive market.
No.
We believe that our lithium metal analyst design paired with Adelphi becomes the best possible healthy that's what's exciting about that result.
Great. Thank.
Absolutely.
Our next question is from Jose asking them all day.
J P. Morgan please ask your question.
Thanks, very much courses on getting orders.
They're taking care of it.
Couple of questions. The first 1 with regards to <unk>.
Can you give us some rough timing in vessels by when do you expect to have installed most of the machinery for Qs hero.
On the line has spent spend most of the capex.
For this.
Perfect facility second Kenny can you give us a sense of how many people were trying to bring on board.
Of the year, I mean, low head count.
Is rising rapidly.
As of end of the year what are the plans.
The standard on a free product.
Our income interesting hires can you talk a little bit about the background zone from Salina coming from Panasonic on flattened.
By the end of help you industrialize the probe.
<unk> and accelerate that transition into Q2 on Q1.
Yeah, Yeah. Thanks for the question. This is Jay Let me go ahead and take the last 1 first because it's relatively simple and then I'll hand, it over to Kevin to take the first 2.
So.
We're delighted to have Selene on board.
I mean she.
As you know from a background. She ran at manufacturing engineering group that Panasonic Giga factory and retail.
Which we believe is 1 of the largest if not the largest operating battery facility in the world.
But she is not just on manufacturing expert who has worked with Super high volume production.
She came to satisfy she happens to be in manufacturing.
Battery expert on <unk>.
These career before this was very deeper the batteries she started out looking at.
And what's now called excellent what used to be called a failure analysis associates, which was 1 of the pioneers in battery safety analysis.
Obviously, you went over to Tesla.
<unk>.
<unk>.
During her tenure there they introduced many of the key models that we associated with Tesla now.
And then she went over to Hooper. So she's got just an amazing combination of really deep understanding of battery. She can engage with our engineers at the engineering level, but she also understands all of the.
Yes.
The complexity and sophistication that you need to run a super high volume battery line, where youre, making millions of cells.
On the line.
At that scale.
Little things that you would never think about has to be addressed exquisitely things like.
On the blades that youre using the cut your films.
On the right sharpening scheduled.
You get 1 day over use do you have.
Supply chain order, there's just a lot of things that you don't have to worry about when you're doing small scale manufacturing that become real issues that can hold up the line.
Having somebody on board who's dealt with all of those things firsthand and 1 of the worlds highest volume battery production.
It's fantastic now when you couple that the Clayton patch craving.
The 3 that run well on manufacturing engineering, which is the group that does all of the engineering for the tools and processes that we use and then Clayton patch where on the actual production line.
Back on comes from Semiconductors reason why that's relevant is semiconductors.
<unk> a very.
Aggressive using things like metrology.
Getting data on the processing of the materials to be able to keep the process.
Within the control limits.
A lot of that expertise is going to be very relevant as we scale up the separate airline.
Even with the ceramic.
Line a lot of the.
A lot of the metrology techniques, we're using are really.
We can leverage some of the techniques used in semiconductors.
To get tight controls over operating constraints and parameters. So those those 2.
A couple of the types of hires that were making debt. We think are really going to enhance our ability to execute successfully on this next phase of our journey now let me turn it over to Kevin to rest of course deficiencies.
Thank you for the questions. The first question was around some of the timeline for <unk> zero, but there's a question on timeline and operation we've.
Our guidance.
Yes, Sir we'll produce battery cells for prospective customers to <unk>.
We put into R&D cars in 'twenty 3 working backwards.
Most of the machines installed on the Capex expense in 2022.
As for the second question around head count.
We mentioned in today's letter with head count.
Just over 400.
We haven't given guidance as to head count we ended the year, but if you can.
Could get in the right ZIP code by looking at R.
Our cash Opex.
And to extrapolate with that growth.
Quarterly expense $34 million on the Opex excluding depreciation.
Nation and stock based comp and we stick to our guidance of 130 to 160 by year end, which implies that that number will be increasing.
Those 2 together you'll get in the rest of the curve.
Total head count.
Take care muscle color. Thank you.
Thank you.
Our next question is from Adam Jonas of Morgan Stanley. Please ask your question.
Alright, thanks, very much I really interesting call I think debt.
LSP testing.
Touching on again also potentially really really significant clients for clarification, you said you believe.
Net using your form factor analysis P battery could achieve.
600 to 700 watt hours per leader curious if you could give us a range of gravimetric density on that as well per kg.
Yes, I'm pretty sure.
We have those numbers, obviously, because we did the modeling I don't have them hendi on Adam, but we're happy to.
The name of available as well, it's a great question I would expect it to be roughly.
Comparable because you are.
Eliminating the.
On the <unk>.
Yeah.
They're all the traditional channel, but we can certainly get back to you on the precise metrics there.
Okay could.
Could you also.
<unk>.
The cobalt content of yourselves versus conventional I understand thats going to be.
Cash flow chemistry.
Dependent.
But could you give us just from some of them absolutely because there's so much focus on cobalt help us out again.
Mhm.
Yes, so the current the current chemistry.
We've been using to 811 chemistry.
So that would be on cobalt.
They are a new chemistries.
Debt.
Being offered by the capital providers that are even lower cobalt content on that there are some for example, net 7 or 8% cobalt. So that number continues to decline for 2 reasons is obviously you know 1 is.
It improves the cost profile that you have.
That's nice cobalt and 2 it also improves the.
I guess the easy profile, if you don't have.
Cobalt was mined in them.
Sure.
In certain places debt.
On divest working conditions.
No.
That's an independent trend that's going on.
<unk> is obviously you pointed out it's a very significant investment.
Is that you also on the minute the nickel entirely.
I think on high end day selling items.
Obviously superabundant channel Super low cost and that's what allows them to be.
Mid single digit dollars per per kilogram, but the most important takeaway Adam really is it is.
Is it it's a.
Catherine agnostic design the fundamentals basically we have consolidated.
Separately that enables on Nols lithium anodes and you can couple that with.
<unk>.
Whatever cap what happens to meet the needs of the application and given the automotive spectrum is so broad from.
Super High end premium vehicles that have.
Our requirements in terms of range of fast charge as well.
Low end vehicles, where price is the number 1 criteria.
On that level of breath can be fully addressed in.
In a catheter agnostic architecture.
Like like ours.
Okay and just 1 final 1 from me Jack you've mentioned.
Yes.
I think in 1 of the prepared questions that youre going to submit yourselves for independent testing and youre going to provide the results.
At some time in the future.
Can you tell us what testing body and when we might be able to see these those results and again.
And at the end that this isn't going to be for every iteration, but debt.
It does seem I think it would be it would carry a lot of weight and the fact that you'd even consider to do this suggests that you believe it carries from weight as well.
Yes. So this is.
A.
Sort of a certified regretted it kind of a battery test lab and.
We actually net.
You have already submitted those sales per test.
Yes, it does take time, even at <unk> right now it takes some.
Several months to get up to a few hundred cycles. So.
When we have those results, we will definitely publish them, but you're right.
It is.
It's up.
Even.
Understanding belief as I said on the call.
Yes.
The most is the testing that customers do in their labs I think from.
Investors.
Feel more comfortable if there's a third party lab testing.
And.
And that's why we're doing it so we will definitely publish those results and thank you for appreciate.
Though our points.
We don't have to do this for every generation itself, but I think having having.
Having the basic validation that could be on value and these were for lay yourselves or 1 layer.
<unk>.
So this is really just price.
Sure.
These are going to be singled ourselves to just validate that.
The core capabilities of.
What we call the Uncompromised test conditions right. So can you cycle okay.
On elevated temperatures.
On elevated.
Not super high temperature, not Super high pressure high rates of charge and discharge on the cycling once you once the and so on but we will publish all of that.
Along with the data.
Going forward, we didn't want to get ahead of ourselves and start talking about that too much given that we don't have resulted in yet so.
Thanks Jackie.
Absolutely I think from your question.
Our next question is from Gabe Daoud of Cowen. Please ask your question.
Good afternoon, guys. Thanks for all the prepared remarks, so far.
Maybe just on the <unk> test.
It's on landfill.
Maybe Doug if you can answer the last question, but.
Close to 40 cycles are so when should we expect to see debt number get closer to I just afford a 500 cycle.
A number and then ultimately get to the on the 800.
On your number that you guys are targeted for.
The automotive applications.
Yes, I mean, I think on target remains the end of the year.
And I think the main point, we I think made on the call.
Having those loans.
Actually be successfully made and go on test and have encouraging early results.
It gives us some from level.
Encouragement.
We're tracking to the to that.
In the vehicle.
George what can be done in primarily that work involves making a lot more of these cells. So we can characterize the performance.
And the behavior of the cells. So.
No.
The typical process that we use is we made a lot of cells.
Get the data we use that data to 2.
To improve.
The design in.
On the manufacturing aspects on the cell and then retest. So all of that those are the kinds of things, we expect to do between now and the year to basically turn.
That was force them to ourselves into what we call baseline selves.
Also on the matter we mentioned this.
Non past kind of a model and that's really what we're referring to there is the idea is to do statistically valid sample sizes that we test so we can actually draw conclusions.
Based on on the results of those tests that allow us to modify the design and a weighted.
Moving forward on the vector that we are instead of moving on.
Got it got it okay. Thanks, Andy that's helpful. And then just a quick follow up just going back to the LSD cathode obviously.
Number of Oems have highlighted.
The potential to use all of P for lower cost entry models, and so was the decision to test.
Yourself with Enel S P cathode.
Based on a specific request from a potential partner or was it really just to highlight again.
The cap that agnostic nature of the.
Right I'm, just trying to get a sense is it really more of a more of a pull of China.
Kind of on a request I guess.
Yes, I understand the question we don't.
And we don't talk about customer specifics that arent finalized or announce that you won't be able to answer that particular question.
I think.
The.
On the general idea that.
But there is a role for a low cost capital in the automotive.
Our market is really what we're responding to here. So we've been focused on NMC 801, primarily because.
That kind of highlights the energy density and faster I'd benefits that we've been talking about but we didn't want to make sure people weren't.
Sucking that debt.
Lithium metal panels less design is somehow tied to any particular Kathryn.
And given the.
Yes.
The resurgence of interest in RFP.
We really felt like we had a contribution to make here I cant remember as I mentioned earlier.
<unk>.
We had a number of advantages over.
The high range of calculus right. It can be it's obviously low cost.
It can be more thermally stable it can have better cycling performance on this evening.
High power density and depending on how you did on itself, but it has 1 big disadvantage, which is that it's basically low energy density.
That.
Applicability to many applications. So the reason why we wanted to use venmo has made clear that we could take that low cost chemistry derive the benefits of the low cost and the stability in the thermal.
Safety is on and just a couple of that with with this.
And on free design that.
Directly addresses the biggest limitation, that's empty densities with IBM.
A really low cost design that happens to be.
Roughly in the same ballpark as today's.
NMC type chemistries.
Many Oems I think we'll consider that could be a pretty a pretty exciting product offerings. So that's the reason why.
Hobbled why we.
We did a demonstration.
Got it thanks.
Absolutely that's the question.
Our next question is from bank of Baird. Your line is open.
Hey, guys. Thanks for taking my questions, maybe just jumping on the LLP.
1 final.
What.
It's always been a cathodic agnostic device. So you don't need to tell us that it works.
<unk>.
Pete cap aggregate.
Change or anything like that.
Is that correct.
I missed the last part of your question Ben Hasnt been 1.
Got it.
5 decided because of the resurgence or if there was some kind of change in cap and good day.
I thought there was always a cathode exhausted regard yeah, yeah, yeah, no yesterday, it always worth a catheter design.
We just didn't want.
People to think that somehow.
Adams gateways synonymous with NMC because.
Youre right.
Sure.
You need contribution as this lithium metal anode design, which is enabled by of course, the solstice operator.
We've said before as you pointed out correctly catheter.
Catheter agnostic, but having actual data on what we show.
Actual results constructed with LSP capitals, and our lithium Atlanta.
It's all of us up here.
We think just hammer that point home okay.
Okay.
Both interest and cathode materials.
And we both have a role to play over the next many years going forward.
Okay.
On the head count increase and congratulations could you just talk about recruiting in this type of environment.
Battery capacity across the board Phoenix, but expense growth.
Yeah. So we've actually had really good luck with recruiting I mean, we said we've.
We grew 20% in the quarter alone that we analyzed that rate.
Pretty rapid rate of growth.
I had a lot of people doing the.
Pandemic era.
Year last year.
And we've been fortunate to see a lot of great candidates come through so we were able to.
We keep the level of quality.
Employees will be really high.
I think that if you are in.
And scientists working on.
On next generation batteries.
My personal opinion is.
There's really no better place to be than quantum escape because.
This is not incremental stuff this is disruptive stuff.
We've shown that the core capability.
Is there based on the data we've already published.
And.
Generic.
<unk>.
Because were still low resource, we havent really extensive lab in terms of not only.
Low.
Battery manufacturing capabilities.
But that is test and characterization.
Metrology capabilities with a lot of tools at.
Scientists engineers wouldnt.
You have access to.
And many other organs.
Organizations, whether they're companies or even universities. So we feel like having the opportunity to work in such a fully equipped lap between cutting edge work.
It really helps us attract some great candidates.
The 2 that we spoke about at the senior level, obviously celina.
And tightened on the manufacturing side, just examples but they are just really the tip of the spear theirs.
There's many many.
People.
On that we've hired over that last year debt.
And they've allowed us to maintain momentum going forward here.
And then lastly, just split.
The new entrants to the public markets.
Private companies.
From April 2.
Does that change behavior from your customers or is this kind.
Kind of like a pilot.
Across all different products right now is that the stage, we're at and how do you see that evolving.
For people to pick.
Victor.
Of course, as I guess, the upper back from.
A better word to go with from a technology growth.
Sure.
Yes.
The way, we see it right I mean, I'll give you obviously on our opinion.
There's a few on.
Alternative if youre on OEM I'm looking.
For next generation type of.
Battery chemistry right. There is this other solid state based approaches other than what quantity is doing for.
For example, Theres a sulfides through the polymers the problem with those approaches is it none of them has really shown that they can prevent dendrites under the types of uncompromised commissions that.
We keep talking about like 1.1 hour charge and discharge at 25% to 30 degrees Celsius temperatures.
3 to 4 atmospheric pressure as opposed to overly elevated temperatures and pressures on 100% definite charge.
Every previous evident attempt that we've seen for solid state using other materials.
Has.
Well the cycle on this condition, so if someone's got that.
That will be exciting news, but we haven't seen that the second category is people that are just using liquids with lithium metal to try to make that work and.
And you can get.
It's easy to get results with liquid and low rates of power.
<unk>.
Dendrites or an exponential function.
Power. So at no tower, you can produce exponentially, but conversely, higher powers that propensity growth exponentially. So.
And then that's not even taking into account the impedance or resistance growth that happens from the chemical side reaction between the liquid and the.
And metal. So we think those approaches are not going to be viable for applications like automotive where high power is required and there may be an application for those and low power type scenarios that that will be the best case outcome for a liquid based lithium metal approach and the final I think categories that people working on silicon and silicon on a defined approach to incrementally improve.
Prove the energy density of.
On a lithium metal on lithium ion cells.
But in the day, even if you had 100% silicon anode with no carbon no binder Noah right on it.
Just the math on that Silicon alone would double the mass of the anodes because silicon has atomic number 28.
Lithium anatomic number 7 so even if you held.
For lithium atoms for every 1 silicon Adam you still doubling the math on the weight of that I'll, let Anna So really again the day, if you have on working lithium metal and glass design.
We honestly just don't see.
Low.
For.
Any other approach on a real challenges is not whether there is a better approach out there, but simply whether we can execute on the vision that we've laid out and get into commercial production and Thats really what were focused on it.
And we think that debt.
As reported on this call is encouraging sign.
It's obviously not done.
We're not claiming that we are shipping, but we believe that debt.
It's a signal that the team is in fact them.
Both out execute.
The team keeps doing that I think we have an opportunity to really transform the sector.
Thank you very much.
Absolutely.
Your next question is from Mark Delaney of Goldman Sachs. Your line is on.
Okay.
Yes, good afternoon, and thanks for taking the questions first just hoping you could discuss more on the manufacturing improvements that you talked about relative to separate or manufacturing and nice to hear about some improvements that you made on the.
True ability of this operator could you provide more details about how similar the current manufacturing progress on interest that is relative to what you think you may use in volume production for separate on manufacturing.
Yes, So let me address on 2 parts I think obviously, we keep them.
The details on.
Separately the process fairly close to divest because thats really some of our crown jewels.
As you obviously know.
But I think the net effect of the improvements that we're talking about.
Was to get films that are high quality of high quality, we mean uniformity. So there's lots of different non uniformities that will affect the performance of.
The other obvious operator.
The industry in the broader industry working on these types of materials.
It doesn't fully understand the.
Significant.
These are important because I can tell you this.
Everything from compositional non uniformity east morphology, non uniformities too.
Sure.
The activity on any form of these these are all things that affect the performance of your films.
I mean the separately.
Ceramic.
So the improvement that we're talking about were some concrete changes to our process that led to.
Meaningfully better outcomes in terms of the quality and consistency and that's pretty important points.
Well not only do on high quality films, what do you want to be able to get those high quality films.
They're repeatedly.
So you get better yield so.
Really the net effect of the improvements we're talking about and then relative to the tools that we're using.
If you look at the.
Photos in the shareholder letter that.
That is an image of a continuous flow key treatment tool. So every ceramic has to go through heat treatment step.
But mostly on mix today, a lot of services that are done in them.
In batch.
Sort of processes for heat treatment and those processes. We believe are not very scalable so what we have.
With continuous flow process.
It sounds like there's 1 through.
On a conveyor belt the seed treatment tool, where you have different zones that can apply different heat treatment profile as a film's run through.
That really is what we believe allows us to day.
I have a scalable process.
Here is that we do.
Don't need.
Cash Youtube <unk>. So those are the 2 key points I'd make answer your question on like 1 is.
The net effect of the improvements we're talking about was to make.
Producing better quality films with better consistency and 2 is on the scale of duty side. These continuous low heat treatment tools that we are.
Process now.
Deploying we believe.
Really allow us to increase the throughput and also frankly to further increase the quality because we think these continuous flow tools.
Better precision in terms of the.
On the heat treatment profile debt that we can apply.
That's very helpful. Thank.
From a second question I was hoping to talk about the Tam.
Testing the company had talked about last quarter about.
<unk> zero externally applied pressure, which I think could be relevant potentially for cells that can be sold on the consumer electronics industry I apologize if I missed it but I didn't hear an update on.
Dana ourselves with zero external pressure applied so is there any progress you can share on that front. Thank you.
Just moving to see operator, I apologize that there will be.
As of the speakers.
Line got disconnected, however was from which like day 1 moment.
Keith Your line will be placed.
On hold until the conference Kevin do you want to hang on.
Operator can you hear me presenters are now back into the main conference room.
Hey, folks I apologize for that looks like for some reason my line got dropped from everybody.
Are we back on.
We're back on rate.
You asked me on the back in the main conference you presenters you may continue.
So mark.
And if you saw on but can you.
Did you hear the answer to your question.
This is mark I'm not sure if you can hear me, but.
I had asked about potentially providing an update about the testing themselves with the euro external pressure.
I don't know if you got that question.
Yes.
Okay. Thank you.
Yes talking about the drop.
Thank.
So things can happen.
On these calls.
Thanks for bearing with this guidance.
I did answer the question, but it sounds like you've got dropped as low at the beginning on my answers are very quickly summarize the answer.
Answer to question is yes.
The reason why we show that you have a bunch of data was exactly to be able to make clear that weekend.
That would be the best.
Consumer application, where the pressure is not an option because there's not enough volume index consumer devices.
But having said that we.
We also said that we don't want to get distracted from our primary focus which of course is the automotive sector.
That.
Focus on served as well so far.
And we.
While we continue to execute on that automotive application.
Before we leave.
Sort of.
Go too far on the path with consumer devices.
But the fact that debt.
Because we've shown that the system can work on the zero pressure.
We can address those applications are within the scope of the ones that we can target from.
I think you had another question is low market besides that 1.
What was the second quick question, yes.
No.
Was it from me so I appreciate it.
Okay. Thank you Yeah, My my apologies for the dropped it looks like everybody got dropped.
On our idea to draw back on.
I also wanted to say that we did the team did get an answer on the.
LSP.
Chemistries and Kevin can address that.
Sure Adam you were asking about the gravimetric improvement with the cloud Inscape approach, we understand conventional lithium ion.
T cells are.
Our.
Around 170 gigawatt hours per kilogram, the best cells right now.
For the quantum scape design, combining a solid state separator in lithium metal anode with LNP.
<unk>, we believe we would be in the mid 2 hundreds what.
Arthur kill them.
Okay.
Okay, we can do more on.
Next question.
And our last question is from fee change on the car on Citigroup. Your line is open.
Yes, hi, good afternoon, Jack deep.
Good afternoon.
You say that you can't put agnostic, whether it's Alex.
LSP or NMC et cetera, now each of those cathodes of different lithium and nickel content does that change the lithium ion flow informing the lithium lithium anode in the battery and if it does how did you overcome that issue.
Yes.
The.
The beauty of the approaches.
<unk>.
The lithium that makes up our anode is the exact same lithium index normally cycling back and forth in a normal lithium ion battery on the only difference is that instead of that lithium.
In total leaning in towards diffusing into a carbon particle or silicon political as the case may be.
There is.
Silicon to integrate into so it's simply a forms of <unk>.
Actual trading of pure metallics lithium.
So.
Relative to whether there's any difference.
For lithium by definition.
On the LLP chemistry.
You can issue any debt.
On chemistry is going to be able to have.
Lithium ions come out of the capital flow through that's right and get to the anode only difference here is what happens when that within that channel and in our case.
Lithium to storms when they are appear metallic lithium and the case on lithium ion.
Lithium that goes to the anode.
Is held in place by the scaffolding.
If you will of the of the graph I'd add on so it takes fixed carbon atoms to hold 1 lithium atom and each of those.
<unk> is held in place, but that's 1 of the reason why it's Paul on lithium ion because debt annually has kind of held in place.
In this ionic state, whereas non.
Interest there.
By doing away with the cognitive and silicon.
The lithium ions connecting need each other and from a metallic bond and that's why it becomes lithium metal. So yes. It is catheter agnostic.
No.
It's the same lithium.
B B.
Moving into the annual debt balance simply forming that later.
Yes.
Okay. I guess my question on was a little different but maybe I'll come back later.
Now with this MFP cash toward a compatibility how does the size of your Tam change in terms of your total net.
Total market.
Well I think the way to think about this.
The overall market for.
On the transportation sector in terms of the number of vehicles sold on a year.
And there is a wide range of vehicles that have.
Different requirements.
By enabling LLP as the cap rate.
We.
We can address a.
A broader spectrum of that overall market. So there is there are fewer applications.
Within the vehicle market for which.
This will be an Atlanta based approach would not be effects.
I would argue that debt.
Debt without LLP.
There are some low end applications, where cost is the only thing that matters, even if the energy density of it isn't.
At World class levels, but with the <unk> solution that we have we can deliver.
We can serve those low cost applications, while improving the.
The range on the identity that day.
But they get with the Atwood LLP battery.
And lastly, you mentioned that you know that MSP, we know that has lower power density, which means range how much can your battery improve that range. Thank you.
Yes, so if you look at the show on letter.
Conventional LLP.
Sure.
Domestically is on the order of 400 or so.
What hours per year, and we believe with our quantum escape lithium metal.
<unk> design that number gets pushed up to between 6 and 700 watt hours per liter, which is significant not only because it's more than lithium iron phosphate.
Carbon.
Numbers, but because it's actually now approaching the range of conventional NMC batteries. So it's very exciting.
A combination of low cost.
Without the penalty.
Entity, if you'd have because relative to us.
So.
I was 1 of the leading.
And why we're excited about the debt.
A demonstration.
Thank you.
Really the 2 demonstrations we made today.
On a fee with lithium metal and independent ourselves together.
I think our adult day until you are in terms of our ability.
For the full market.
Thank you.
That's good.
And there are no further questions on queue centers you may continue.
So I want to thank everybody for taking the time to do.
During our call today again as I just mentioned.
So we're excited about that.
Results that we share today, the 10, they're solid result.
We believe provides strong evidence that.
We are tracking well to the.
Scalar plans that we've.
We laid out earlier this year.
On the LLP result.
Demonstrates debt.
But the system moving by Catherine.
Last week, and we can leverage this low cost capital to carry on into a little more useful.
Yeah.
Low cost cap.
We are going to stay focused on on the task ahead over the coming.
Quarters in years, and we look forward to reported for the progress from an excellent growth.
Thank you all.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
[noise].
[noise] zone.
Okay.
Okay.
Okay.
Okay.
[music].
Moving on.
Yes.
[music] accounts.