Q4 2021 Quantumscape Corp Earnings Call

Speaker 1: enables the use of a lithium metal anode, and does so in a cell that is anode-free as manufactured.

Industrial and they felt that as anode free as manufacturers.

Speaker 1: This architecture potentially unlocks a host of benefits such as improvements to energy density, charging speed, cycle life, safety, and cost.

This architecture potentially unlocks a host of benefits such as improvements energy density charging speed cycle life safety and cost.

Speaker 1: However, any lithium metal cell design must be able to deliver these benefits while also accounting for the unique challenges of lithium metal, such as increased volume expansion compared to conventional lithium ion batteries.

However, any lithium metal cell design must be able to deliver these benefits. While also accounting for the unique challenges of lithium mill, such as increased volume expansion compared to conventional lithium ion batteries.

Speaker 1: The design must also be capable of being manufactured rapidly, cost effectively, and at scale using automated processes.

The design with also be capable of being manufacturer rapidly cost effectively and at scale using automated processes.

Speaker 1: This year, we plan to demonstrate our proprietary cell format in preparation for large-scale customer sampling and eventually commercial production.

This year, we plan to demonstrate our proprietary cell format in preparation for large scale customer sampling and eventually commercial production.

Speaker 1: We look forward to sharing more details on this new format soon.

We look forward to sharing more details on this new format soon.

Speaker 1: Our second goal for the year is to deliver a sample prototype cells to at least one customer. We plan to utilize our proprietary cell products with a sample, which represents a major step towards defining our commercial product.

Our second goal for the year is to deliver a sample of prototypes.

At least one customer.

We plan to utilize our proprietary cell phone estimate example, which represents a major step towards defining our commercial products.

Speaker 1: Note that since every customer has somewhat different requirements, the precise specifications of an A sample are likely to vary between customers and across various applications.

Note that every customer has somewhat different requirements. The precise specifications of an <unk> sample are likely to vary between customers and across various applications.

Speaker 1: These examples will be produced on our phase two engineering line and delivered to customers for validation and test.

These <unk> will be produced on our phase two engineering line and delivered to customers for validation and testing.

Speaker 1: The Phase II engineering line is being located at our new QS campus and represents an expansion of our original Phase I engineering line that is located in our current San Jose R&D facility.

The phase II Engineering line is being located at our New U S campus and represents an expansion of our original phase one generic line that is located in our current.

R&D facility.

Speaker 1: Our third goal is to increase film starts to a rate of 8,000 per week.

Our third goal is to increase film starts to a rate of 8000 per week.

Speaker 1: Film starks are an important gauge of our manufacturing capacity, and thus far, one of the bottlenecks to production scale has been film supply due to considerable lead times for much of the necessary tooling.

Film Sharps are an important gauge of our manufacturing capacity and thus far one of the bottlenecks of production scale has been film supply due to considerable lead times for much of the necessary tooling.

Speaker 1: We expect this constraint to ease this year as production begins on our phase two engineering line.

We expect this constraint to ease this year as production begins at our phase two engineering line.

Speaker 1: Not only will this help serve demand for customers for ASAMPL cells, but it will also be an important demonstration of the scalability of our manufacturing process.

Not only will this help serve demand from customers for a sample cells, but it will also be an important demonstration of the scalability of our manufacturing process.

Our last goal for the year is to take delivery of equipment for our <unk> zero line.

Speaker 2: Our last goal for the year is to take delivery of equipment for our Q and zero line and remain on track with the start of pre-pilot production in 2023.

<unk> on track for the start pre pilot production in 2023.

Speaker 2: We plan to produce candidate B samples for delivery to customers next year, and our investments this year will support the build-out of QS0 and the surrounding QS camps.

We plan to produce candidate <unk> samples for delivery to customers next year and our investments this year will support the build out of Europe and the surrounding QF campus.

Speaker 1: If we complete these four goals, 2022 will represent a significant step forward on our path to bring our solid-state lithium metal battery technology into production. I'd like to close by requiring all those representing this slide to beienne seat faces can you say

If we complete these four goals 2022 will represent a significant step forward on our path to bring our solid state lithium metal battery technology into production.

I'd like to close by taking a look at the strategic picture.

Speaker 1: We believe there are four key elements to the quantum scape investment thesis. 1. Battery electric vehicle

We believe there are four key elements to the quantum escape investment thesis.

One <unk>.

Battery electric vehicles will replace combustion engine vehicles.

Speaker 1: Two, the anode-free lithium metal technology we have demonstrated can enable compelling improvements over current lithium ion batteries. Three, we can scale up our...

Two the annual tree lithium metal technology, we have demonstrated can enable compelling improvements over current lithium ion batteries.

Three we can scale up ourselves to many layers.

Speaker 1: And four, we can mass manufacture ourselves and achieve competitive economics.

And four we can mass manufacture ourselves and achieve competitive economics.

Speaker 1: So is the transition to battery electric vehicles happening? Clearly, the answer is yes. And at this point, it appears unstoppable. Major automakers have seen double or even triple digit growth in year-over-year BEV sales. And total planned investment in BEV production over the next decade amounts to hundreds of billions of dollars. The transition now seems inevitable.

So is the transition to battery electric vehicles happening clearly answered yes at this point it appears unstoppable major.

Major automakers have seen double or even triple digit growth in year over year <unk> sales.

Total planned investment in the EV production over the next decade amongst one hundreds of billions of dollars.

<unk> now seems inevitable.

Speaker 1: Second, does our next generation technology deliver compelling benefits over current lithium-ion batteries? Again, we believe that...

Second.

Our next generation technology deliver compelling benefits over current lithium ion batteries.

Again, we believe the answer is a clear yes.

Speaker 1: Using our single NERO platform, we've shown long cycle life under automotive test conditions, impressive fast charging capability, and an anode-free solid-state design that has the potential to provide improvements to energy density and safety while also offering the potential for cost reduction.

Using our single their platform, we've shown long cycle life under automotive build and test conditions impressive fast charging capability.

At an annual tree solid-state design that has the potential to provide improvements to energy density and safety, while also offering the potential for cost reductions.

Speaker 1: Above all, the level of interest we've seen from customers has persuaded us that there is widespread demand for a better battery.

Above all the level of interest we've seen from customers has persuaded us, but there is widespread demand for a better battery.

Speaker 1: That brings us to the third question. Can these single layer building blocks be stacked up into a commercially relevant...

That brings us to the third question can be single layer building blocks, we stacked up into a commercially relevant cell.

Speaker 1: When it comes to multilayering, we believe that our success over the past year, moving from one layer to four to ten to now 16, shows that we have in fact successfully been able to deliver our single layer building blocks into multilayer and power scale cells.

When it comes to market, Larry we believe that our success over the past year moving from one layer to $4 10 to now 16 shows that we have in fact successfully been able to deliver our single they're building blocks into multiyear empower scale sales.

Speaker 1: We believe delivery of our ASAP will later this year will check the box on this premise.

We believe delivery of our <unk> Apple later this year, we'll check the box on this premise.

Speaker 2: That leaves the final question. Can we mass produce these multilayer cells while also achieving competitive economics?

That leaves the final question.

And we mass produced these multilayer yourself, while also achieving competitive economics.

Speaker 2: We believe this question will be answered as we execute on our scale-up milestone.

We believe this question will be answered and we execute on our scale up milestones.

Speaker 1: In 2022, we intend to show our production intent style format and deliver ASAM.

In 2022, we intend to show our production intent cell format and deliver a samples and.

Speaker 1: In 2023, we plan to produce candidate B samples at our targeting commercialization in the 2024-2025 time clubhouse.

In 2023, we plan to produce candidate <unk> samples and are targeting commercialization and the 2020 for 2025 timeframe.

Speaker 2: As we execute on these milestones, we believe this final question will also be addressed, completing all four elements of our basic thesis.

As we execute on these milestones. We believe this final question will also be addressed completing all four elements of our basic thesis.

Yes.

Speaker 1: Our mission as a company is to build a better battery, to accelerate adoption of electric vehicles around the world, to help avert the worst effects.

Our mission as a company is to build a better battery too.

To accelerate adoption of electric vehicles around the world.

To help or hurt the worst effects of climate change at.

Speaker 2: and to create extraordinary value for customers and shareholders alike.

To create extraordinary value for customers and shareholders alike.

Speaker 2: These goals are admittedly extremely ambitious. However, if we are as successful in 2022 as we were in 2021, we believe we will have demonstrated that the goals we have set for ourselves are in fact achievable.

These goals are admittedly extremely ambitious however, if we're asked this vessel in 2022 as we were in 2021. We believe we will have demonstrated that the goals. We have set for ourselves are in fact achievable.

Speaker 1: We will continue to work to turn these ambitions into reality. Kevin? Thank you JB.

We will continue to work to turn these ambitions and to reality Kevin.

Thank you Jamie.

Speaker 3: In the fourth quarter, our operating expenses were $67 million. Excluding stock-based compensation, operating expenses were $51 million. This level of spend was in line with our expectations entering the quarter.

In the fourth quarter, our operating expenses were $67 million, excluding stock based compensation operating expenses were $51 million.

This level of spend was in line with our expectations entering the quarter.

Speaker 3: For full year 2021, operating expenses were $215 million, including stock-based compensation and depreciation.

For full year 2021, operating expenses were $215 million, including stock based compensation and depreciation.

Speaker 3: cash operating expenses for full year 2021 or 152 million.

Cash operating expenses for full year, 2021 or $152 million.

Speaker 3: For 2022, we expect cash operating expenses to be in the range of $225 million to $275 million. As we increase sell volumes, scale our manufacturing capabilities, and higher additional headcount to support this growth. APEX in the fourth quarter of 2021 was approximately $45 million.

For 2022, we expect cash operating expenses to be in the range of $225 million to $275 million as we increased sell volumes scale our manufacturing capabilities.

Additional head count to support this growth Capex in the fourth quarter of 2021 that was approximately $45 million.

Speaker 3: or full year 2021, CAPEX was approximately $127 million, below the lower range of guidance of $135 million, due to a shift in payment timing from Q4 2021 into 2022.

Our full year 2021, Capex was approximately 127 million below the lower range of guidance of $135 million due to a shift in payment timing from Q4 'twenty one into 2022.

Speaker 3: The change in payment timing does not impact scale-up timelines. US0 is currently on schedule.

The change in payment timing does not impact scale up timeline.

<unk> is currently on schedule.

Speaker 3: Our 2022 CAPEX plan makes significant investments into cell development and scalable production.

Our 2022, Capex plan make significant investments into cell development and scalable production.

Speaker 3: continuous flow processes featuring increasing levels of automation, high throughput metrology systems, and scalable digital architecture.

Continuous flow processes, featuring increasing levels of automation high throughput metrology systems and scalable digital architecture.

Speaker 3: These investments help establish the mass manufacturing blueprint for our QS1 joint venture with Volkswagen and subsequent facilities.

These investments help establish the mass manufacturing blueprint for our <unk> joint venture with Volkswagen on subsequent facilities.

Speaker 3: We expect total 2022 CapEx to be in the range of $325 to $375 million. Of this total, approximately $215 million is planned for QS0 and our expanded campus.

We expect total 2022 capex to be in the range of $325 million to $375 million.

Of this total approximately $215 million is planned for Q zero and our expanded <unk> campus.

Speaker 3: The primary QS0 building is already in an advanced stage of construction. We'll begin construction on the additional QS0 campus space in the middle of 2022.

<unk> zero building is already in advanced stage of construction will begin construction on additional queue at zero campus space in the middle of 2022.

Speaker 3: Approximately 85 million will go toward our Phase II engineering line, and approximately 52 million will flow into our Phase I engineering line, an additional project including our R&D Center in Japan.

Approximately $85 million will go toward our phase two engineering line and approximately $52 million will flow into our phase one engineering line and additional projects, including our R&D Center in Japan.

Speaker 3: In line with previous guidance, 2021 and 2022 represent the substantial majority of investment into our engineering and QSDRO line.

In line with previous guidance 2021, and 2022 represent a substantial majority of investment into our engineering and kiosks airline.

Speaker 3: In 2023, we expect capital spending related to our engineering and QS0 lines to decline significantly.

In 2023, we expect capital spending related to our engineering and <unk> zero lines to decline significantly.

Speaker 3: We target that by the end of 2022, our engineering line will have achieved its goal of producing A samples, and we will have received the majority of equipment for QS0, tracking to our 2023 goal of cell sampling from that line for use in test cars.

Targeted by the end of 2022, our engineering line will have achieved its goal of producing a samples and we will have received the majority of equipment for <unk> zero tracking to our 2023 goal of cell sampling from that line for Houston test cars.

Speaker 3: We expect CapEx investment during 2022 to be nonlinear.

We expect Capex investment during 2022 to be non linear.

Speaker 3: We anticipate Q1 2022 CapEx to be in the range of $30 million to $60 million, with higher spending coming in Q2 and Q3 as the bulk of payments for the QS0 facility and tooling occurs. We'll continue to update our CapEx guidance for Q1 2022.

We anticipate Q1 2022 capex to be in the range of 30 million to $60 million with higher spending coming in Q2, and Q3 as the bulk of payments for the <unk> facility and tooling occurs.

I'll continue to update our capex guidance throughout the year.

Speaker 3: We expect OpEx to grow steadily during 2022. In 2023, we expect OpEx to grow modestly from 2022 levels as we slow our headcount growth rate and reallocate resources from development to manufacturing.

We expect opex to grow steadily during 2022 and 2023, we expect opex to grow modestly from 2022 levels as we slow our head count growth rate and reallocate resources from development to manufacturing.

With respect to cash we spent $89 million on operations and Capex in the fourth quarter and $255 million in full year 2021.

Speaker 3: Based on these estimates, we expect to enter 2023 with over 800 million in liquidity, which we believe will be sufficient to fund cash op-ex through initial QS1 setup, final residual investment in QS0, and capex to support the initial setup of the QS1 production facilities, the joint venture for cell manufacturing, as well as the facility supply separators, which we will retain full ownership of.

Based on these estimates we expect to enter 2023 with over $800 million in liquidity, which we believe will be sufficient to fund cash opex through initial U S. One set up final residual investment in Q S Bureau, and Capex to support the initial setup of the <unk> production facilities, the joint venture for cell manufacturing as well as the facility to supply.

<unk>, which we will retain full ownership of.

Speaker 3: Our GAAP net loss for the quarter was $67 million and for the year was $46 million, including an impact of $169 million in non-cash fair value adjustment of the assumed common stock warrant.

Our GAAP net loss for the quarter was $67 million and for the year was $46 million, including impact of 169 million in noncash fair value adjustment of the assumed common stock warrants.

Speaker 3: Excluding this non-cash adjustment, the net loss for 2021 was approximately $215 million, in line with our expectations.

Excluding this noncash adjustment the net loss for 2021 was approximately $215 million in line with our expectations.

Speaker 3: In Q3-21, we completed the redemption of all outstanding warrants associated with the business combination. Consequently, there will not be any incremental fair value adjustments related to these warrants in future periods.

In Q3, 'twenty, one we completed the redemption of all outstanding warrants associated with the business combination. Consequently, there will not be any incremental fair value adjustments related to these warrants in future periods.

Speaker 3: We're excited to have accomplished all four milestones we set out to achieve in 2021, and we look forward to the ambitious tasks ahead this year. We'd like to thank our investors for supporting our mission to commercialize our solid state lithium metal batteries, and thereby accelerate the mass market adoption of electric vehicles. With that, I'll pass it over to you, John . Thanks, Dan.

We're excited to have accomplished all four milestones we set out to achieve in 2021, and we look forward to the ambitious tasks ahead. This year.

We'd like to thank our investors for supporting our mission to commercialize our solid state lithium metal batteries, and thereby accelerate the mass market adoption of electric vehicles.

With that I'll pass it over to you John .

John .

Speaker 4: Thanks, Kevin. We'll begin today's Q&A portion with a few questions we've received from investors over the SEAT and in our IR inbox.

Thanks, Kevin.

We will begin today's Q&A portion with a few questions. We received from investors over the <unk> and in our IR inbox.

Speaker 4: We had a couple of questions come in around timing of production, so I'll try to summarize them here.

I mean, a couple of questions come in around timing of production. So I'll try to summarize them here.

Speaker 4: First, can you update investors on the status of the manufacturing facilities? Specifically, where are the facilities today? Where are you going to be expanding to? And when can we expect them to be ready?

First can you update investors on the status of the manufacturing facilities, specifically, where other facilities today, where are you going to be expanding to and when can we expect them to be ready.

Speaker 1: So our plan started with our phase one engineering line at our R&D facility in San Jose. This facility has been used to make all the sales we have delivered to customers to date, including single, four, and 10-layer sales. We have a new phase two engineering line that is being built on our new QS campus. And this will be where we produce our A sample later this year. We plan to follow that up with candidate B samples from our QS0 pre-pilot line in 2023. The QS0 line is also located.

So our plan has started with our phase one engineering line at our R&D facility in San Jose. This facility has been used to make all the sales we have delivered to customers to date, including single.

And Tim there's no we.

We have a new phase II engineering line that is being built on our.

Surplus and this will be where we produce our ACR later this year.

We plan to follow that up with candidates <unk> samples from a QA zero pre pilot line in 'twenty three.

Your line is also located on our campus.

Speaker 1: And that leads to our QS1 production facility, which we are targeting to be operational in 2024-2025 country.

And that leads to a <unk> one production facility, which we are targeting to be operational in 2020 for 2025 countries.

Speaker 4: Okay, our second question also from Seya. When can investors expect to see a prototype sale and how far are you into that process?

Okay. Our second question also on tap when can investors expect to see a prototype cell and how far are you into that process.

Speaker 1: Well, we've already sampled single, four, and ten layer cells with our customers.

While we have already sampled single four and 10, they ourselves with our customers.

Speaker 1: The A-Sample prototype, which is targeted to have several dozen layers and will be familiar to investors who follow the automotive space as a sample that demonstrates the core functionality of the cell, is targeted for this year.

Sample prototype, which is targeted to have several dozen layers that will be familiar to investors, who follow the automotive space and the sample and that demonstrates the core functionality of for sale.

It is targeted for this year.

Speaker 2: We will follow that up with the candidate B sample, which is generally defined as a sample made using production processes off our QS0 pre-pilot production line, targeted for 2022. We will follow that up with the candidate B sample, which is generally defined as a

We will follow that up with the candidate B sample, which is generally defined as a sample may be the production processes of a QM pre pilot production line targeted for 2022.

Speaker 4: Okay, great. Some investors are concerned around IP protection, specifically the risk that somebody will reverse engineer our technology and reproduce our battery.

Okay, great. Some investors are concerned around IP protection, specifically the risk that somebody will reverse engineer, our technology and reproduce our batteries.

Speaker 4: Could you talk a little bit about QuantumScape's approach to IP protection and how you get comfortable with the risk of bad infringement?

Can you talk a little bit about <unk> approach to IP protection, and how you get comfortable with the risk of patent infringement.

Speaker 2: Sure, so we have a two-pronged IP strategy. The first prong is through our patent portfolio of over 200 patents and patent applications.

Sure. So we have a two pronged IP strategy. The first prong is through our patent portfolio of over 200 patents and patent applications.

Speaker 2: We generally patent those innovations that can be discovered by a competitor by examining ourselves for example, optically or chemically.

We generally patent those innovations that can be discovered by our competitor by examining ourselves for example, optically are chemically.

Speaker 1: Because these innovations can be directly observed, we're comfortable publicly disclosing them via patent filing.

Because these innovations can be directly observed we're comfortable publicly disclosing them via patent filings.

Speaker 2: However, the second prong is our portfolio of over 100 trade secrets, which are those innovations which cannot directly be observed in ourselves. For example, process conditions and recipes, intermediate materials such as solvents and gashes, of which no trade is directed to final product, and the like.

However, the second prong of our portfolio of over 100 trade secrets, we showed those innovations which cannot directly to be absorbed and ourselves.

Ample market conditions, and recipes intermediate materials, such as solvents and gases of which no traces left in the final product underlying.

Speaker 2: For someone to reverse engineer our technology, they would have to go through a lengthy and extensive process of trial and error in a multidimensional parameter space to try and arrive at the correct answers. We believe this dual track approach creates a strong moat competitors will have to work hard to overcome.

For someone to reverse engineer our technology. It would have to go through a lengthy and expensive process of trial and error and a multi dimensional parameter space trying to arrive at the correct answers.

We believe this dual track approach creates a strong moat competitors will have to work hard to overcome.

Speaker 4: Okay, two more questions for me. First, for Tevin. You said that we have enough cash to get into initial setup of QS1. Given the level of spend this year, can you walk investors through the liquidity situation until you get into initial production in the 24-25 timeframe?

Okay. Two more questions for me first for Kevin You said that we have enough cash to get the initial setup of <unk>.

Even the level of spend this year can you walk investors through the liquidity situation until you get into initial production in the 'twenty four 'twenty five.

Speaker 3: Thank you for the question, John . It's a good one and I'd be happy to walk you through it. We entered 2022 with approximately 1.46 billion in liquidity.

Thank you for the question John It's a good one and I'd be happy to walk you through it we entered 2022 with approximately $1 6 billion in liquidity.

Speaker 3: We plan to spend approximately $250 million on cash OPEX and approximately $350 million on CAPEX this year, representing a substantial investment into cell development, process development, and our mass manufacturing blueprint. This spending supports the four milestones we set out for ourselves this year and funds the majority of outstanding CAPEX for our QS0 line and QS0 campus.

We plan to spend approximately $250 million in cash opex and approximately $350 million on Capex. This year, representing a substantial investment into cell development process development and our mass manufacturing blueprint the.

Spending supports the four milestones we set out for ourselves this year and funds the majority of outstanding Capex for our <unk> zero line in <unk> campus.

Speaker 3: We subsequently plan to enter 2023 with over $800 million of liquidity. Sufficient funding, we believe, to achieve poor things.

We subsequently plan to enter 2023 with over $800 million of liquidity.

Sufficient funding, we believe to achieve four things.

Speaker 3: Fund Cash OpEx inclusive of modest growth after 2022 through initial QS1 setup.

Fund cash opex inclusive of modest growth after 2022 through initial <unk> setup.

Speaker 3: pay for residual capex for our engineering QS0 lines and QS0 campus.

Pay for residual Capex for our engineering and <unk> Airlines in <unk> campus.

Speaker 3: Fund CapEx for the initial phase of our QS1 joint venture for cell assembly. And finally, Fund CapEx for the initial phase QS1 separator facility, which we retain full ownership of.

So on Capex for the initial phase of our <unk> joint venture for cell Assembly and finally capex for the initial phase <unk>, one separator facility, which we retain full ownership hubs.

Speaker 4: Okay, great. My final question is for Jagdeep. You said in the letter that the 16-layer cells are on the amp-hour scale. Why is that significant, and can you contextualize that cell size versus other batteries?

Okay, Great and my final question on trajectory you said in the letter that the 16 lay ourselves or on the Amp hour scale why is that significant and can you contextualize that sell sides versus other batteries.

Speaker 1: Yes, amp hours are a measure of how much charge is stored by the battery. And by amp hour scale, the main total capacity is over an amp hour. To put this in context, some of today's leading EVs, battery cells, 18650 and 2170 cells, are in the range of single digit amp hours.

Yes, and powered our measure of how much charges stored by the baton and bi empower scale, we mean total capacity over in anabolic.

To put this in context some of today's meeting <unk> <unk> 18, <unk> and 'twenty 177 are in the range of single digit.

Speaker 4: Okay, thanks so much guys. We're now ready to begin the analyst portion of today's call. Operator, please open up the lines for questions.

Okay. Thanks, so much guys. We're now ready to begin the analyst portion of today's call. Operator, Please open up the lines for questions.

Thank you.

Speaker 5: If you would like to ask a question, please press star followed by one on your telephone keypad.

If you would like to ask a question. Please press star followed by one on your kind of think he pack.

Speaker 5: If you would like to remove your question, please press star 2. And as a reminder, it is star followed by 1 to ask any questions today.

If you would like to.

The meat of your question. Please press star two.

As a reminder is staffing up I want to ask any questions today.

Speaker 5: We have the first question on the phone lines from Jose Azumendi from JP Morgan. Please go ahead.

We have the first question on the phone lines from <unk>.

Monday from Jpmorgan, Sir Please go ahead.

Speaker 6: Thank you very much. Thanks for the very detailed comments and outlook revolving technology and financials. So just a couple of questions, please. Dajin, can you comment a little bit around this A sample? What do you need to solve from a technical perspective?

Thank you very much consistent with what they've been okay. Thanks for that.

Any detailed comments on our book.

<unk> technology.

On financials. So just a couple of questions. Please.

Can you comment a little bit around the sample what do you need to sell a technical perspective.

Speaker 6: uh or you know from a sort of technical milestones you need to deliver in in the short term to deliver this this example

So technical.

Technical milestones you have to deliver in the short term.

Both.

Speaker 6: Second, when you look at 2021, what do you think went better than your expectations? What do you think took a bit longer to?

Second when you look at sort of 0.1.

Do you think when better than your expectations, what do you think took a bit longer too.

Speaker 6: solve versus the initial plan can you give us that perspective?

Finishing plant can you give us that.

Speaker 6: And Kevin, can you speak a little bit around hiring and when do you think hiring will peak from an R&D?

Expected.

Kevin can you speak a little bit around hiring and when do you think I'm.

From an R&D.

Speaker 6: dedicated personal perspective. Thank you.

Dedicated personal perspective, thank you.

Speaker 2: Yeah, hi, thank you for the question. This is Jackie. I'll take the first couple and turn it over to Kevin.

Yes, Hi, alethia. Thanks for the question. This is J D. I'll take the first couple of ill turn it over to Kevin.

Speaker 1: So the A sample is in the automotive space is well understood to be a sample that demonstrates the core or essential functionality of the product. The A sample is in the automotive space

The example in the automotive space.

Well understood to be a.

Example of it.

Demonstrates the core or essential functionality of the product.

Speaker 2: That's obviously then followed up with a B sample and typically a B sample refers to

That's obviously been following up with B sample and typically be sample refers to.

Speaker 2: A product that not only has the core functionality, but also is made using production processes. And then finally there's a C-sample typically.

A product that not only has the core functionality, but also was made using our production processes.

And then finally the C sample typically in this example means it has the core functionality is made using production processes, but it is actually manufactured on the ashworth tooling on what youre going to do the production so far.

Speaker 2: It has the core functionality. It's made using production processes.

Speaker 2: but it's actually manufactured on the actual tooling on which you're going to do the production.

Speaker 2: So for our A sample then, it needs to demonstrate the core functionality. And the core functionality, as we see and our customers see it, really has to do with the electrical performance of the cell. That means things like the charge and discharge rates.

Hey, sample then they need to demonstrate the core functionality in the core functionality.

We see it in our customers see it really has to do with the electrical performance of the cell so that things like the charge and discharge rates the cycle life and so on so those are the things that we're focused on getting done and this has happened once we have that.

Speaker 2: cycle life, and so on. So those are the things that we're focused on getting done in this example. Once we have that, we think that will be a powerful demonstration that we can actually already achieve.

We think that will be a powerful demonstration that we can actually have already achieved.

Speaker 2: of the key performance metrics of the cell. We'll do so in a multi-layer cell with several dozen layers as we've said in the past.

Key performance metrics of the cell, but do so in a multinational with several dozen players as we've said in the past and as I said earlier.

Speaker 2: As I said earlier, in our view, that would check the box on the question of can we take the single-layer demonstrations that we've done and we've shown many of in the last year or so and actually deliver those in a multi-layer system.

To you that we check the box on the question of cash.

Dan.

We take the single air demonstrations that we've done and we've shown many of them in the last year or so and actually deliver those in a multi herself.

Speaker 2: I think the second question you asked was about 2021. What went better? What went worse in front?

I think the second question you asked was about 2021, and what went better what was worse than flat.

Speaker 2: That's a good question because of course, a no plan is completely linear and monotonic. You always have things that are ups and things that are downs. I think the things that we're most happy about, of course, is the fact that we hit all of the four goals that we've made out to the streets. We're happy to start building a track record of execution. We think that that bodes well for our ability to forecast accurately and then execute through those forecasts.

So.

Good question because of course, we have no plan is completely linear monotonic you always have things that are.

There are obviously things that are down I think the things that were.

Most happy part of course is the fact that.

We hit all of the four goals that we've laid out to the street and we're happy to start building a track record of execution. We think we think that that bodes well for our ability to forecast.

Accurately and then executing those forecasts.

Speaker 2: You know, I think the areas that I think were frankly challenging was, you know, one is, you know, one of our key bottlenecks.

I think the areas that I think we're frankly challenging was you know one is.

One of our key bottlenecks.

Speaker 2: to making progress really is around the volume of the separators that we could produce. That production volume was dependent on certain tools. We needed bigger tools that we had ordered from our suppliers. And the lead times associated with those tools just caused us to...

Two making progress really is around the.

The volume of the.

Operators that we could produce.

Production volume was dependent on certain tools, we need to be a bigger tools that we were we had order from our suppliers.

And the lead times associated with those tools.

Cause us too.

Speaker 2: basically not be able to ramp up production to the extent that we would have liked. It didn't end up impacting our overall results for the year. We were able to make, as you know, four layer cells and then 10 layer cells and then have those cells actually meet.

Basically not be able to ramp up production.

Traditionally we would have liked it didn't end up impacting our overall.

Overall results for the year, we weren't able to make as you know.

Foreign Aircell Nintendo ourselves and then have the south actually meet.

Speaker 2: what we consider to be the gold standard testing conditions, which of course are one hour charge and discharge, 800 cycles, room temperature of 25 degrees Celsius, 100% depth of discharge and a modest pressure. It's hard to meet all those conditions simultaneously, and we've set that up for ourselves as our key goal. So we feel good that despite some of those challenges in terms of getting tools in and so on, we were able to make enough cells to hit our goal. Let me turn it over to Kevin.

What we consider to be the gold standard testing conditions, which of course are.

One hour charge and discharge 800 cycles room temperature over 25 degrees Celsius, 100% debt to discharge and a modest pressure.

It's hard to meet all those conditions simultaneously.

Set that up for ourselves as a key key goals. So we feel good.

Some of those challenges in terms of getting tools and so on we were able to make enough cells to hit our goal.

Now, let me turn it over to Kevin for the last question.

Speaker 7: Yeah, Jose, I believe that related to headcount growth and specifically the R&D portion of it. A few comments on both those points. We ended 2021 with a team over 550 strong. While we haven't given specific headcount growth, you could take the ratio of our 2022 cash OPEX guidance as a ratio of our 2021 actuals and get pretty close.

I believe that related to head count growth and specifically the R&D portion of it.

A few comments on both those points. We ended 2021 with the team over 550 strong while we haven't given specific head count growth you could take the ratio of our 22022 cash Opex guidance is the ratio of our 2021 actuals and get get pretty close.

Speaker 3: Most of the hiring, especially this year, has been to the R&D team as we support the second phase of our engineering line towards that 8,000 film start per week target as well as continue that QS0 line start target next year, notably landing the majority of equipment this year.

Most of the hiring, especially this year has been to the R&D team as we support.

The second phase of our engineering line towards that 8000 film start per week target as well as continue that Q S zero.

<unk> Star target next year, notably landing the majority of equipment.

This year.

Speaker 3: And in terms of going forward, I would expect that trend to play out even further with even higher percentages going to the R&D team. And as we mentioned in our shareholder letter, we'll look for specific opportunities to shift development resource towards the R&D team as development is increasingly behind us and the scale up risk is the dominant.

And in terms of going forward I would expect that trend to play out even further with even higher percentages going to the R&D team and as we mentioned in our shareholder letter, we will look for specific opportunities to shift development resource towards the R&D.

Team as the development is increasingly behind us and the scale up risk is fee.

Dominant focus for the team.

Yeah.

Thank you very much.

Sure thing.

Speaker 5: Thank you. We now have our next question from Chris Schneider of UBS. So Chris, your line is open. Please go ahead when you're ready.

Thank you we now have our next question from Chris Snyder of UBS, Hey, Chris. Your line is open. Please go ahead when you're ready.

Speaker 8: Thank you. So, my first question is on scale within the manufacturing process. Can you talk about the benefits of scale? In that same vein, at what level of output do you think the benefits of scale begin to taper off?

Okay.

Thank you.

Hi, My first question is on scale within the manufacturing process can you talk about the benefits of scale and in that same vein.

What level of output do you think the benefits of scale.

Begin to taper off.

Yes.

Speaker 2: Again, a good question. So, first of all, when we say scale, we are referring to two things, obviously. One is scaling up the number of layers in our cells, and two is scaling up the production capacity. So, on the first point, you know, when you start getting to a few dozen layers, you start achieving diminishing returns relative to the energy density advantage of additional layers. So, the main reason why we want to increase...

Again, a good question. So first of all we see scale re referring to two things. Obviously, one is scaling up the number of layers and ourselves.

And two is scaling up the production capacity so.

On the first point.

When you start to get it into a few dozen mirrors.

You start achieving diminishing returns relative to the energy density advantage of additional layers.

So the main reason why we.

We want to increase their count from.

Speaker 2: you know, 1 to 4 to 10 to now 16 and then to a few dozen layers is because the more layers you have in the cell, the better the ratio of active material to inactive material and therefore the better the packing efficiency of your cell and the energy density goes up. But that's a, you know, a sort of a diminishing returns curve. As you get higher and higher, you know, you start drowning out the effects of the...

One to 410 to 16 and who.

Other matters if it goes the more layers you would have in the cell.

The ratio of active materials inactive material and therefore, the better the packing efficiency of your of yourself and the energy density goes up but that's a.

Sort of a diminishing returns curve as you get to higher and higher.

You start drawing out the effects of the of the act.

Speaker 2: of the inactive materials to the point where adding more layers doesn't help you. So once you have a few dozen layers, you kind of, you know, up.

And materials to the point, we are adding more here it doesn't help you so.

Once you are a few different manners, you kind of.

Speaker 2: you've kind of gotten most of the benefit of that aspect of scale. On the manufacturing side, clearly you need to get a certain level of scale to get the economics to be compelling. We do believe that our approach has some fundamental economic advantages, the biggest one of course being that we don't need an anode, we don't need the anode material, we don't need the anode manufacturing line, our cells are literally made anode-free, and so the anode forms in

You've probably got most of the benefit of that aspect of scale on the manufacturing side.

Clearly.

You need to get a certain level of scale to get the economics to be compelling. We do believe that our approach has some fundamental economic advantages. The biggest one of course being that we don't need we don't need the anode material, we don't need the anode manufacturing line.

So literally made anode fleet and so the anode forms in situ on the first cycle from the lithium that authority of the cabinet, we don't need to buy within foil where cardholders looking or anything.

Speaker 2: on the first cycle from the lithium that is already in the cathode. We don't need to buy lithium foil or carbon or silicon.

Speaker 2: Now, to drive those economic benefits, though, you need enough scale to where you're not

Now.

To drive those economic benefits, though would you need an upscale to where you're up you're not.

Speaker 2: operating at a too low a scale. We believe that that scale is certainly achieved in the first

Operating it at that.

Two lower scale.

We believe that scale is certainly achieved in the first.

Speaker 2: full-scale factory that we're planning, QS1, which is targeted to be on the order of 20 gigawatt hours. So we would expect our economics to be compelling at that scale. While we ramp up to that scale, obviously, we're going to have the same kind of amortization of fixed costs over low volumes that, over time, becomes lower and lower until you get to the right scale. All right.

Full scale factories that we're planning to S. One which is targeted to be on the order of 20 gigawatt hours. So we would expect our economics to be it could be compelling.

At that at that scale.

We ramp up to that scale.

Obviously, we're going to have the same kind of.

Amortization of our fixed cost or low volumes.

Yes.

Overtime becomes lower and lower until you get to the right scale, So I would say for.

Speaker 2: The 20 gigawatt hour scale or so is when we believe the economics are going to be at peak.

For 2000 gigawatt hours, a year or so is.

We believe the economics are going to be at scale.

Speaker 8: Thank you for that. And then I just kind of want to follow up on the storage market and applications beyond auto, which the company mentioned in the prepared remarks. You know, for auto, we've grown pretty accustomed to measuring performance, you know, largely in terms of density. Can you talk about, you know, what are the most important metrics for the storage market and even maybe consumer electronics, which you guys called out?

Thank you for that and then its kind of want to follow up on the storage market and applications beyond auto, which the company mentioned in the prepared remarks.

For auto we've grown pretty accustomed to measuring performance largely in terms of density can you talk about what are the most important metrics for the storage market and even maybe a consumer electronics.

You guys called out.

Speaker 2: Yeah, I mean, so for storage, we're finding that some of the same themes that resonate with the automotive space

Yes, I mean, so for storage, we're finding that some of the same themes.

With the automotive space.

Speaker 2: are resonating with storage as well. In fact, our understanding is that a lot of the storage guys are actually buying automotive class batteries today. So for example, something as simple as energy density. One might at first glance think that when you're talking about stationary storage that you have unlimited space and don't care about mass. But the reality is that when you're building 100 megawatt hour plant.

Are resonating with storage as well in fact, our understanding is a lot of the storage guys are actually buying automotive class batteries today.

So for example, something as simple as energy density.

When might at first glance think that when you're talking about stationary storage that you have unlimited.

Space and don't know kind of a mass.

But the reality is that when you're building a 100 megawatt hour plant.

Speaker 2: That's a lot of space. And so energy density, if you can have a battery that's 50% more energy dense than conventional, that does translate to real economics.

Yeah.

That's a lot of space and so energy density.

A battery, it's 50% more energy dense than conventional that does translate to real economics.

Things like power. So there is a wide range of applications and especially your storage space somewhere.

Things like frequency regulation, some of things like time shifting of man, but.

But some of those applications.

Do need high power. So the power capabilities are important obviously economics are important safety. So all of those metrics. We were finding do resonate with the stationary storage space and Thats, why we think fluids as two incidents and partnering with us.

On.

Longer term solid state Houston, and <unk> applications, you have to look at.

Speaker 2: Stationing stores applications. Yes of a consumer as well, and it's the same story there. I mean, you know different applications may wait

Tumor as well and it's the same story there.

Different applications may wait.

Speaker 2: those benefits differently, but typically they all benefit from a battery that has higher energy density, faster recharge times, safer operations, better economics.

Those benefits differently, but typically they all benefit from.

About visa has higher density faster.

Faster charge times safe operations better economics.

Speaker 2: And you know, energy density in particular is very important for consumer goods because

Well if I can.

Energy density in particular was very important for consumer goods because.

Speaker 2: You know, if you have a consumer device like a phone or a tablet or laptop where something like a half to two thirds of the volume may be battery, then the designers of that device.

If you have.

Tumor device like a phone or a tablet or laptop, where something like a half to two thirds of the volume maybe badly.

The designers of that device.

Speaker 2: place a lot of value on a battery that has the same amount of energy in a smaller space because they can use that space for additional functionality. So I think the short answer is we're finding that the same basic set of features that we offer, energy density, power density, safety, cycle-like cost, are resonating across a broader set of applications.

Place a lot of value on on a battery that.

Doesn't seem.

Amount of energy and a smaller space because they could use that space for additional functionality. So I think the short answer is we're finding that the same basic set of functionality set of features that we offer and your density power density.

The satellite costs are resonating across a broader set of applications.

Makes sense. Thank you I appreciate all that.

Absolutely.

Speaker 5: Thank you Chris. We now have Gabe Doward of Cowan. So Gabe, please go ahead when you're ready.

Thank you, Chris we now have.

<unk> <unk> of Cowen.

Please go ahead when you're ready.

Speaker 9: Thank you afternoon, guys was hoping we can maybe start with the separator and the and the film targets that you've laid out from manufacturing standpoint. Maybe 1st, just on the update on the 10 layer cells, you mentioned there's some newer cells that were put on on tests that had a commercially relevant. A separator area of 66 by 81, so I guess was curious. Is how that's evolved from prior tests and.

Thank you afternoon guys.

We can maybe start with the separator in the film targets that you've laid out from a manufacturing standpoint.

Maybe first just on the.

Update on the 10 layers. So you had mentioned there was some yourselves that we're putting on tests that had a commercially relevant.

Separator area of $66 81, So I guess I was curious just how thats evolved from prior tests.

Speaker 2: The thickness is still in the tens of microns that you've mentioned previously.

The thickness is still in the tens of microns that you've mentioned previously.

Speaker 1: The thickness, as we've said before, is in the low tens and microns, and that remains the case. The physical, the X, Y dimensions, we did point out that some of those cells are in slightly different dimensions. They're all in the same general form factor that we call commercially relevant, and the difference would have to do with the, as we are...

Yes, so the thickness.

We've said before.

Low tens of microns.

That remains the case.

The physical the XY dimension.

We did point out in some of their sales are in slightly different dimensions.

They're all in the same general pattern that we call commercially relevant.

And the difference has to do with it.

As we are evolving.

Speaker 2: Evolving our formatting the actual cell package format. We're You know slightly tweaking the dimensions to optimize that format, but but essentially You know those results were in the same format.

Evolving our format and the actual sell packaging format.

Slightly tweaking the dimensions to optimize.

That format.

But essentially.

Those results were the same this important metric.

Speaker 1: Was there another question you asked besides, and then you asked about separate assumptions. Yeah, thanks, Ajit. That's helpful.

Was there another question you asked.

And then separately, yes, thanks Rajiv.

Speaker 9: Yes, yes, yeah, I guess was just curious if you could talk a little bit about how. Go ahead Jackie. yeah so that's a really important.

Thats helpful.

Yes, yes.

Yes, I guess I was just curious if you could talk little bit about how.

Go ahead Doug.

Yeah. So that's a really important question of everybody.

So.

Speaker 1: One of the things, I mentioned earlier that scale-up involves two aspects. One is scaling up the layer count in our cells, which really is, it's primary focus is to increase energy density of the cells because it improves the ratio of active to inactive material.

One of the things I mentioned earlier the Scaleup involves two aspects one is scaling up the layer count ourselves, which really is our primary focus is to increase energy density of ourselves because it improves the ratio of active and inactive material.

Speaker 2: And the second aspect of scale-up is producing more sales. So we can provide more sales to customers and actually make progress towards our commercialization goals.

The second half of the scale up is producing more more cells. So we can provide more service to customers.

And actually make progress towards our commercialization goals both of those skill aspects are driven really by one underlying metric, which is film starts how many.

Speaker 2: scale aspects are driven really by one underlying metric, which is

Speaker 1: film starts. How many films? By film, we of course mean our solid state ceramic separator electrolyte. We call it film, the shorthand notation internally. And if you look at film starts, that gives you a sense for what volume of films we are able to produce in manufacturing internally, which will then drive both our layer counts increases as well as our delivery of sales to customers. So as we point out in the show letter.

We are of course meeting our solid state ceramic separator electrolyte.

Call It fell.

Shorthand notation internally.

And.

If you look at film starts that gives you a sense for how many.

What volume of films, we are able to produce in manufacturing internally, which will then drive our both our layer count increases as well as our there'll be a seltzer customers. So as we pointed out in the.

Speaker 2: You know, we ended the year last year with something like, you know...

Your letter.

We ended the year last year with something like.

Speaker 2: between 1,000 and 2,000 starts per week, typically, and our target for the end of the year is more like something like 8,000 starts per week, that's a substantial increase in the number of film starts per week. That increase is driven really by the arrival of new tools, as you know, we are working on, we've been working on continuous flow processing tools, so these are tools that are not.

Between 1002 thousand starts per week typically.

And our target for the end of the year is more like something like 8000 starts per week. That's a substantial increase in the number of films starts per week I think.

This is driven really by the arrival of new tools. As you know we are working on we've been working on continuous flow processing tools. So these are tools that are not.

Speaker 2: batch oven-like, but are more like just a conveyor belt running these films continuously. Those new tools are really what's behind that increase in film starts. And the increased film starts then will play a key role in allowing us to continue our progress on layer count increases as well as production volume increases of the cells to provide to our customers.

Batch of unlike.

But are more like just a conveyor belt.

Many of these films continuously.

Those new tools are really what's behind that increase in defense starts have increased film starts that will play a key role in allowing us to continue our progress on layer count increases as well as.

Volume production volume increases of the cells to provide to our customers.

Okay. That's helpful and helpful and then.

Speaker 9: So for QS0, the efficiency needs to increase another 4X or so, so you kind of have to get to about 32,000 a week or so for QS0 to supply the, I think it was 200,000 cells coming off of that line?

So for curious zero.

Efficiency needs to increase another four extra associate you kind of have to get to about 32000, a week or so for <unk> to supply. The I think it was 200000 cells coming coming off of that line.

Speaker 3: I can take that one, the shareholder letter reference talked about greater than 4X.

I gave I can I can take that one shareholder shareholder referenced this shareholder letter referenced talked about greater than Forex films.

Speaker 3: film start per unit of CapEx, with CapEx being equipment plus tooling, and that was specific to the second phase engineering line relative to the first phase engineering line. However, as you note, we do expect continued improvement going to the QS0 line, and it would be in that same zip code of improved.

Film start per unit of Capex with Capex being equipment, plus tooling and that was specific to <unk>.

Second phase engineering line relative to the first phase Engineering line. However, as you note. We do expect continued improvement going to the <unk> airline in it would be in that same zip code of <unk>.

Improved efficiency.

Speaker 9: Thanks, Kevin. And then just one final one for me, guys. You mentioned unique challenges of lithium metal, such as increased volume expansion. Is there any anything you could you could talk to in terms of maybe a percentage expansion on the cells after certain number of cycles? And has it been an issue and where do you have to get to if it if it has been?

Thanks, Kevin and then just one final one for me guys you mentioned.

Any challenges of lithium metals, such as the increased volume expansion is there any anything you could you could talk to.

In terms of maybe a percentage expansion for Michel Dexter.

Certain number of cycles and.

Has it been an issue and where do you have to get to if it if it has been an issue.

Speaker 1: Yes, to clarify, when we say expansion, this is not a cumulative expansion that happens over the life of the cell. This is just an expansion and contraction that happens in every cycle. And, of course, the reason behind it is relatively, intuitively clear. You start out with a cell that has no anode. It's anode less than manufactured, right? This is what gives us the benefits of energy density as well as, you know, the...

Yes, just to clarify when we say extension is not this is not a cumulative expansion that happens over the life of the cell. This is just an expansion and contraction that happens in every cycle and of course, the reason behind that is relatively intuitively clear.

With the cell it has no anode.

Those lessons manufacturer right. This is what gives us the benefits.

Entity as well as up.

Better economics.

Speaker 2: But when you charge up the cell, lithium has to move from the cathode to the anode, and that anode then forms in situ, it becomes a layer of pure methanolithium. That methanolithium layer has to occupy space. Lithium obviously is not, you know, interacting with it.

But when you when you charged up to sell of course lithium has to move from the capital to the anode and that informs in situ what becomes a layer of pure protect lithium.

With you later has to occupy space with obviously is not it is not.

Speaker 2: So it takes up space and so the whole cell expands by a little bit, right? So each layer probably expands a few tens of microns.

So take a space and so the wholesale expense value right. So each layer.

Probably expand a few tens of microns.

Speaker 2: and then it shrinks back down to the original size when the lithium goes back into the cathode.

And every cycle and then it shrinks back down to the original <unk>.

<unk> goes back into the catheter and you have that constant.

Speaker 2: expansion and shrinkage of the cell as you cycle. So what we're referring to in terms of the packaging is that that's sort of a unique.

Spansion and shrinkage of the cell as you.

As you cycle.

So what we're referring to in terms of packaging is it.

That's sort of a unique.

Speaker 2: of the behavior of a lithium metal cell. So if you want to drive the benefits of lithium metal anodes, which obviously are significant, you have to have a cell level design that can accommodate that expansion. The expansion is probably on the order of 15% to 20%, roughly speaking, for cycle. But you need a design at the cell package level.

Aspect of the behaviors of lithium metal itself. So if you want to drive the benefits of lithium metal anodes, which obviously are significant you have to have a cell level design that can accommodate that expansion. The expansion is probably on the order of 15% to 20% roughly speaking.

Michael.

You need to design.

Got it.

<unk>.

Cell package level.

Speaker 2: We can handle that. Now we have some really interesting news to announce in the coming weeks and months, so I don't want to be left under on that announcement, but I will say that we're planning on sharing more with our investors on the design of a new package format that can accomplish this along with accomplish some other goals that we have in terms of overall packaging efficiency.

Can handle that now we have some really good news to announce in the next in the coming up.

Two months, so I don't want to steal the Thunder on that announcement, but I will say that we're planning on sharing more.

With our investors.

On the design of a new package formats.

That can that can accomplish this along with accomplished in weather.

The goals that we have in terms of overall packaging efficiency.

Speaker 2: And the other point I'll say is that the traditional – there are basically three main types of packages that are out there today in the battery space. There's obviously cylindrical cells, like the ones

And.

The other point I'll say that the traditional theyre busy three main types of packages that are out there today in the battery space, There's obviously cylindrical cells like the ones.

Speaker 2: You know, used, you know, ones like Panasonic ships, for example, the 18650 and 2170. There's, you know,

Used.

Once that the Panasonic shifts for example, the $18 50 in 2170.

There is.

Speaker 2: Prismatic can cells, rectangular metallic cans, typically aluminum cans.

Alright, prismatic can sell through the rectangular metallic can typically aluminum cans.

Speaker 2: And the third format is pouch cells, so these are like, it's a soft material, typically some kind of a, you know, a metallized polymer material that's used to encase the cells, and that's a soft kind of packaging. So what we're talking about doing here

And the third format as pouch cells. So these are like it's a soft material typically some kind of.

Mineralized.

Polymer.

Material that's used in case of cells and Thats, a soft kind of packaging. So when we're talking about doing here is.

Speaker 2: a new type of package. It's a fourth type of package and we'll again we'll share a lot more about that in the coming weeks and months but you know our team is pretty excited about it because we think it uniquely enables lithium metal architecture.

New type of package for type of packaging.

I will share a lot more by the coming weeks and months.

Our team is pretty excited about it because we think it uniquely.

Enabled lithium metal architecture.

Speaker 1: And then the only other thing I'll say is that, you know, over time, one of the things that we think will make this even easier is, of course, the fact that we've demonstrated that our chemistry can work with very low pressure.

And then.

The only other thing I'll say is it.

Over time, one of the things that we think we will.

This decision easier.

Of course, the fact that we've demonstrated that.

And then R. R.

Chemistry can work with very low pressure.

Speaker 2: And that just makes your whole packaging and module design and the automotive pack level engineering simpler. So all that, we'll share more about it in the coming weeks and months.

And that just makes it a whole packaging and module design in.

The automotive pack level engineering simpler so all of that we'll share more about in the coming weeks and months.

Awesome very interesting thanks I did.

Thanks Kipp.

Speaker 5: Thank you. We now have a question from George Giannakaris from Baird. So, George, please go ahead.

Thank you we now have a question from.

George <unk> from Baird Hey.

George Please go ahead.

Speaker 7: Hey guys, thank you for taking my question, appreciate it. So maybe to start off with just with QS0, if that's okay, just so I can understand. And please correct me if I'm wrong because I'm just going back to old notes. I think the original...

Hey, guys. Thank you for taking my question I appreciate it.

So maybe to start off with just with <unk> zero. If that's okay. Just looking to understand and please correct me if I'm wrong, because I'm just going back to old notes.

I think the original expectation.

Speaker 7: was around $75 million in spending for QS0, but if I'm understanding it correctly here, it looks sounds like it's $215 million. Is that...

It was around $75 million and spending for Q zero, but if I, if I'm understanding it correctly here.

Look it sounds like it's $215 million is that.

Speaker 7: inaccurate in terms of my assumption. Maybe it includes the campus. I'm just trying to see if there's been inflation in some of the of the tools that you have to order or if I'm just miscalculating something.

Inaccurate in terms of my assumption, maybe and includes the campus.

I'm just trying to say if there's been inflation in some of the.

The tools that you have to order or if im just miscalculating something.

Speaker 7: Yeah, George, if you can help me with the source of the 75 million, what we did say was in the context of the follow-on, half of the capital would be going towards...

Yes, George if you can tell me if the source of the $75 million, while we did say it was in the context of the follow on after that.

We'd be going towards.

Speaker 3: Q at zero and if you look at where we've come out on that, if you look at the equipment and facility cost of the line itself, we've been roughly in line with our original expectations.

Zero and if you look at where we've come out on that and if you look at the equipment and facility costs to align itself. We've been roughly in line with our original expectations. If your question is alluding to.

Speaker 3: If your question is alluding to kind of where the spend is in 22, relative to expectations and where that amount may have gone up, the other part of your question is correct, that QF0 wasn't in the original plan. We had a unique opportunity to lease the adjacent building.

Kind of where the spend is in 'twenty, two relative to expectations and where that amount may have gone up the other part of your question is correct.

In the original plan, but a unique opportunity to lease the adjacent building.

Speaker 3: to the first building that we've occupied, and what that does is that provides close proximity for the R&D and the manufacturing teams and fosters collaboration between the departments.

To the first building that we've occupied and what that does is that provides close proximity for the R&D and manufacturing teams and fosters collaboration between the departments and the functions I guess, that's a long term Bay area campus as additional square footage that you are aligned to support its execution.

Speaker 3: And the functions gives us a long-term Bay Area campus as additional square footage the qs0 line to support its execution and future optionality extra R&D square footage to support near term and long term development so that would be one of the areas where there was additional spend not not contemplated in that type of

Future Optionality extra R&D square footage to support near term and long term development.

That will be one of the areas, where there was additional spend not not contemplated in that timeframe.

Speaker 7: Yeah, and just to that might just have been an old note of.

Yes, Andrew just to thanks Scott.

And that might just have been an old node.

Speaker 3: Yeah, I I'm trying to think internally, but what I can say is that 75 million was never the target.

Yes.

Im trying to think internally, but what I can say is that 75 million was never that target number.

Speaker 7: Yeah, it might have been just one of my old notes, but it's fair to say that these are. This is a reflection that's increased spending this year of just enhancing the opportunity, not necessarily, you know, the of any inflation that you've seen or any cost adjustments. Based on just the catalog getting more expensive.

Yes, it might've been just one of my old notes, but it's fair to say that these are this is a reflection of this increased spending this year, just enhancing the opportunity not necessarily.

Of any inflation that you've seen or any cost adjustments based on.

On just the catalog getting more expensive.

Speaker 3: Correct for the qs0 equipment and facility that that part was roughly in line with our original

Correct for the kiosk equipment and facility that part was roughly in line with our original expectations.

Okay.

Speaker 7: And then if you could just help me understand the math, you talked about film starts this year, getting those to 8,000. Is there a way to understand exactly how that translates into separators and then cells? I'm just trying to figure out what that means in terms of the eventual production ramp.

And then if you could just help me understand the math.

Talked about film starts this year are you getting those to 8000.

Is there a way to understand exactly how that translates into separators and then sells like I'm just trying to figure out like what that means in terms of the production the eventual production ramp.

Yes, I can take that one so.

Speaker 2: We use starts as a metric because that's a relatively objective, clean metric. The separators that come out of the process are going to be a function of both the number of starts and of course the yield of the process, and the yield is a constantly moving target. We're obviously constantly optimizing it and improving that fraction.

<unk> starts as a metric because that's a relatively objective clean metric.

The <unk>.

Separately or is that come out of the process are going to be a function of both the number of starts and of course the yield of the process and the yield is a constantly moving target, we're obviously constantly optimizing and improving that fashion. So the number of outlets will change over the year, but the number of starts is a little more objective and concrete to use as a metric that we track.

Speaker 2: So the number of outs will change over the year, but the number of starts is a little more objective and concrete, so we use that as a metric that we track. But basically, this target number of starts is designed to be sufficient for us to meet the goals that we've laid out for the year, which of course is.

Debating this.

This target number of starts.

Is.

Designed to be sufficient for us to meet the goals that we've laid out for the year, which of course as you know.

Speaker 2: you know, deliver A sample cells to customers and, you know, and make enough cells to keep us on track relative to the QS0, you know, and subsequent B sample engineering work as well.

Deliver a sample cell for customers.

And.

Making ourselves to keep us on track relative to the U S in Europe .

Sure.

And subsequent be sample.

And work as well.

Thank you guys.

Thank you Jos procedures.

Thank you.

Speaker 5: We now have another question on the line from David Bell of Wolf Research. So David, please go ahead, I've opened your line.

We now have another question benign from David powerful free sat say David. Please go ahead your line.

Speaker 10: Hey guys, this is David Bellon for Rod Lash. Congrats on the year. I just wanted to jump into a couple questions on the separator manufacturing. Could you walk us through the key differences between the phase one and phase two engineering line? And will phase two incorporate the continuous drying process? And how similar is that process to what will be used in QF0?

Hey, guys. This is David Bell on for Rod Lash, Congrats on the year.

Just wanted to jump into a couple of questions on the separate manufacturing.

Could you walk us through the key differentiators between the phase one and phase two.

Engineering line.

And we'll phase to incorporate the continuous dyeing process and how similar or is that process.

Will be used in Q1 zero.

Speaker 3: Yeah, there might be two areas to compare. One is the size of the continuous flow equipment. As you note that we have installed a continuous kiln into our phase one engineering line. The one that we'll be installing into the phase two is larger. And the other dimension is I was alluding to, it'll feature higher levels of automation. So these are...

Yes, there might be two areas two to.

To compare one is the size of the continuous flow equipment.

As you note that we have installed.

A continuous count into our phase one engineering line, but one that will be installing into the phase III is larger.

The other dimension as I was alluding to in our feature higher levels of automation so either.

Speaker 3: Those two metrics, thematically, we need to keep playing out, not only in this process area, but in other process areas as we make progress on process development from our initial phase to subsequent engineering phase to QS0, and then ultimately to QS1.

Those two metrics fanatically, we need to keep playing out not only in this process area than in other process areas.

We make progress on process development from our initial phase the subsequent engineering phase to Kyocera, and then ultimately to care as well.

Speaker 10: Okay, thank you. And when it comes to an earlier question, which was asked related to long lead time for equipment.

Okay. Thank you and when it comes to <unk>.

The earlier question, which was that related to long lead time for equipment.

Speaker 10: Is there still more development work that needs to be done on the QS's zero continuous drying process equipment before it's ordered?

Is there still more development work that needs to be done on the <unk> zero continuous drawing process equipment before it's ordered.

Speaker 1: I think the question is, has the QS0 long-lead time equipment for the separator been ordered? That long-lead time equipment has already been...

My question is has the curious zero.

Long lead time equipment for.

For us for the separately in order to plan.

That long lead time equipment has already been ordered.

Speaker 10: Okay, thank you. And then I just had a quick follow up on this.

Okay. Thank you and then I just had a quick follow up on that.

Go ahead Jackie.

Oh go ahead.

Yes.

Speaker 10: So, I just had a quick question. So, you today have the four collaboration agreements. Could you walk us through a little bit as to what needs to happen within those agreements in order to convert them to supply contracts?

Okay I just had a quick question. So to date had the four collaboration agreements could you walk us through a little bit as to what needs to happen within those agreements in order to convert them to supply contracts.

Speaker 1: Yeah, so it's actually pretty straightforward. We basically are planning on.

Yeah. So.

It's actually a pretty straightforward, we basically are planning on.

Speaker 2: providing those customers with a serious

Providing.

Those customers with.

Yes.

A.

Series of.

Speaker 2: successive generations of cells. So we'll start out with, you know, cells of a certain maturity. They'll test those, validate those, if all goes well, we'll then ship them the next generation of cells and so on.

Successive generations of cells, So we'll start out with.

South on a certain maturity.

They'll test those Valerie if all goes well we will then ship them. The next generation of hotels and so on.

Speaker 1: Typically speaking, it's when you get to pass the B sample that you end up with actual supply contracts being negotiated. The B sample really is when there's confidence.

Typically speaking, it's when you get to.

Past the sample that you have.

Got it.

Actual supply contracts being negotiated.

<unk> temporarily is when there is a confidence on the part of the Oems that dominate as with functionality.

Speaker 1: part of the OEMs that not only does the functionality work, but that the processes that are being used are in fact the same ones that will be used in production, and that is simply a matter of...

But the processes that are being used or in fact.

Same ones that will be used in production and that is simply a matter of acquiring the touring that will actually produce those.

Speaker 1: acquiring the tooling that will actually produce those high volume cells.

Speaker 1: And typically, we're going to want comfort from the OEM that they're actually going to, that they're committed.

High volume itself and typically we're going to want.

Okay.

From the OEM that theyre actually going to come.

Speaker 1: before we start ordering super expensive large tools for production.

Committed.

Before we start.

Wondering super expensive large towards for production.

Speaker 1: for mass production of the cells. Now, in the case of Volkswagen, obviously, we already have a partnership in place. There is a JV that's already in place that's focused on mass production.

For production mass production of the of the cells now in the case of folks volume, obviously, we already have a partnership in place.

There is a JV that is already in place.

It's focused on mass production.

Speaker 1: It's planned for a couple of phases, the first phase being a 1 gigawatt-hour phase, the second phase being a 20 gigawatt-hour phase, so these are fairly high volumes for battery production and gigapascal scale production.

That JV exiting Q1.

It's a plan for a couple of phases, the first phase being a one gigawatt hour phase the second phase.

2000 gigawatt hours. So these are fairly high volumes for our battery approximately just to go back and scale production.

Speaker 1: But to answer your question briefly, as we proceed down the path and get to more mature cells.

But to answer this question briefly.

Proceed down the path and get more mature ourselves.

Speaker 1: they get validated, that's when those agreements start changing over to becoming a supply contract.

And they have validated that when those agree.

Agreement start.

Turning over to becoming.

The supply.

My contract.

Thank you.

Absolutely.

Speaker 5: Thank you. If you would like to ask any further questions today, please press star followed by one on your telephone keypads now.

Thank you David.

Jos can you further questions today. Please press star followed by one when your telephone keypad now.

Speaker 2: Okay, I want to thank everyone for joining our 2021 earnings call, and we look forward to reporting continued progress over the coming quarters. Thank you.

Okay.

I want to thank everyone for joining our 2021 earnings call and we look forward to reporting continued progress.

Over the coming quarters. Thank you.

Yeah.

Speaker 5: Thank you, this does conclude today's call. Thank you all again for joining, you may now disconnect your line.

Thank you. This does conclude today's call. Thank you all again for joining you may now disconnect your line.

Speaker 11: Thanks for watching!

Okay.

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