Q3 2023 Solid Power Inc Earnings Call
Greetings and welcome to the Solar Power, Inc. Third quarter 'twenty to 'twenty, three financial results and business update call.
Please note. This event is being recorded and now I'll turn the conference over to your host Jennifer Almquist Investor Relations for Solar Power Inc. Thank you you may begin.
Thank you operator, and thank you everyone for joining us today I'm joined on the call today by Solitaires, President and Chief Executive Officer, John Van Scooter, and Chief Financial Officer, Kevin <unk>.
A copy of today's earnings release is available on the Investor Relations section of solid colors website at I R got salad powered battery dotcom.
I'd like to remind you that parts of our discussion today will include forward looking statements as defined by U S. Securities laws. These forward looking statements are based on management's current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events.
Sept as otherwise required by applicable law solitary disclaims any duty to update any forward looking statements to reflect future events or circumstances.
For a discussion of the risks and uncertainties that could cause actual results to differ materially from those expressed in today's forward looking statements. Please see solid powers them.
Recent filings with the Securities and Exchange Commission, which can be found on the company's website at IR that solar powered battery dot com.
With that let me turn it over to John Vince Carter.
Thank you Jen and good afternoon, everyone. Thank you for joining the call today.
I'll begin today with an important milestone our <unk> sample EV sales shipments and entrance into automotive qualification.
I'll then provide an update on our saw solid overall progress and give early thoughts on 2024 priorities and goals.
After that I'll hand, the call off to Kevin for the financial review and we'll open up to Q&A.
Over the last week or so we shipped more than 80 of our EV cells to BMW to officially begin the automotive qualification process. This.
This is no small achievement.
A year ago, we were struggling with yield issues on our 20 amp ourselves as we initially scaled up our roll to roll line production.
Since then the team has overcome those obstacles and more including a few significant supply chain and vendor quality issues.
Both the cell and powder production sites.
We've done this while completing S V. Two construction initiating powder production and incorporating our new SB two powder into cells.
I want to extend my gratitude to the team and reiterate my appreciation for the strong team I've inherited.
Looking more closely at the EV sales, we just shipped.
These EBV cells meet Bmw's initial performance expectations and represent our first 481 cell for the automotive qualification process.
These <unk> cells are 60 Amp hour have 40 layers and are about 10 by 30 centimeters in size.
Importantly, they were also produced on our <unk> cell line using electrolyte from SB too.
We expect a one cells are to be followed by <unk> and <unk> cells.
Each with increased performance targets that we will collaborate with BMW to meet their expectations.
We still have a way to go to hit the increased performance targets for <unk>, two and <unk> three but this is a great start.
And we are now on a path to work with our partners to hit those targets.
We can't provide details at this point, but if we continue to improve towards those eight 2% and <unk> III targets. We believe we will drive greater range.
Battery life and safety for the consumer while driving down costs for the Oems.
T cells are not only a key step towards the commercialization of solid Power's technology. They are a key step for BMW demo car program as well.
The cells are slated for module and pack builds this year and together we are targeting them to power a full sized BMW EV in 2024.
Our ability to enter a sample was bolstered by the investments we've made in quality assurance equipment and processes.
These include the X Ray and Cte scan equipment that we acquired and fully implemented into our processes earlier this year.
It also includes some new innovative screening techniques with the team developed which enable us to identify and address problems more efficiently.
<unk>. These process processes helped us get into automotive qualification and also give us confidence the cells. We have delivered will meet the targets laid out for us.
A uniformly across all shipments, which is critical for overall EV Pac performance.
It's also worth mentioning that these cells came off our EV line at SD Wan with solid power and BMW employees working side by side on their development.
The <unk> efforts to accelerate the development of our solid state technology was a huge driver and we are grateful for their collaboration.
Now there were successfully producing a one cells. We've also separated our two lines with each running concurrently.
Our <unk> cell line is focused on 100% at our a sample cell production for our partners and our pilot or development line now fully dedicated to advancing our self performance, including R&D, our nextgen cells.
During my travels this quarter I got to visit Bmw's battery development facility and powers Dorf, Germany.
Facility is impressive and the facilities and infrastructure are progressing with their line to be built over the coming year.
Substantial square footage will be dedicated to continued development of solid Power's technologies and staff by the NWS experienced battery engineers.
Once complete this line will expand development activities of our solid state technologies in two regions of the world.
In addition, we continue to progress the Ford and FCA on cell requirements, which in some respects are different than bmws.
On the electric side since we began production of our electrolyte powder and SPT in April we have been diligently working to increase production volumes inefficiencies.
The team has done a great job, we have the final configuration of our production line in place and are now producing powder at sufficient volumes and quality to use SPD <unk> powder and the manufacturer of our EV cells.
Importantly, we stopped producing powder at SB, one and begun to redeploy RSP, one team and resources towards the development of our Nexgen powders.
We feel good about our capability to produce 125 metric tons per month and <unk> by the end of this year.
As we've said previously demonstrating production at this scale is important as potential customers prefer to take product from large production runs.
So far this year, we have provided <unk> electrolyte samples to potential customers and are working towards providing samples to four more in the near future.
We believe many EV Oems and tier one battery producers have a sulfide based solid state product in their future roadmap the.
The scale and high quality of the powder, we are now putting out puts us in an incredible position to be the leader in supplying them the electrolyte they will need.
Lastly, I would like to take a moment to briefly update you on the strategic priorities I outlined last quarter as well.
A couple more we've added to our list.
We're still refining our 2024 goals, but I feel these priorities will likely form the basis for what we want to achieve next year.
On last quarter's earnings call I outlined three initiatives that I saw as immediate strategic priorities, specifically, establishing a presence in Korea, increasing our strategic supply chain capabilities and elevating our external and Investor Communications.
First establishing a presence in Korea.
During the quarter, we established a new legal subsidiary to do business there.
Secured and opened office space in Korea and.
And laid the groundwork for collaboration with the Korean National Labs and universities.
Most importantly, we visited Vanessa over an approximately 10 day period with some of my senior team.
During the trip, we've added options with our partners suppliers and potential customers and got very positive feedback on our plans, we evaluated our options and narrowed down to a few potential paths to further expand our Korean presence.
We feel good about our plan and our ability to make progress over the next few months.
Our plan should allow us to accelerate building our team in Korea, and tapping into the World class battery talent pool that exists there we look forward to sharing more when we can sell.
Second elevating our strategic supply chain activity.
During the quarter, we battled through the similar grade material issues, we have been facing.
I think the team did a fantastic job, ensuring we kept development and production moving forward are working with our suppliers to address root causes.
We also began the recruiting process for the key supply chain leadership, we need and met with potential new suppliers in Korea for critical materials.
Lastly on supply chain, we successfully implemented.
On October one.
Going live with supply chain and accounting functions. We are excited about the tools. This will provide our team did a great job here of keeping this project on time and under budget.
And I'd like to thank the many involved for the tireless and successful efforts.
Third elevating our external and Investor Communications efforts.
During Q3, we continued to meet with shareholders, but increase the amount of interactions significantly.
We completed a positive series of meetings in a non deal road show and are planning another in Q4.
A few weeks ago, we posted a new investor deck, which does a good job summarizing solid powers investment thesis.
Also from a media perspective, we increased our PR efforts with social and print media. We've done three to four interviews with a great Denver Post article published and the rest on the way.
IR planning is well underway for 2024 with a focused on increasing higher quality interactions and greater visibility.
We are planning an investor analyst event sometime in 2024, where we expect to provide a comprehensive technical update on our cell and electrolyte progress.
<unk> insight into our commercialization timeline and update our high level financial projections.
Lastly, and I are one of the things we hear consistently from investors is that they'd like to have more frequent updates.
To be clear, we will only release news when we have meaningful news to share.
Our progress has been strong we will not always have major news to share on a frequent or consistent schedule. When we hit significant milestones were accomplished one of our goals, we will proudly release it.
But world changing development progress isn't always linear.
Shifting gears towards new priorities in October the senior team at solid power spent a couple of highly productive days working off site on longer term strategic plans and initiatives.
Following those meetings, we've added two additional priorities, which will focus on in 2020 for.
The first is seeking at least one additional OEM partner.
OEM partner must be additive in terms of collaborative expertise and also fully aligned with our current partners objectives. The second is accelerating our revenue timeline to drive cash generation opportunities, we expect any new revenues to be driven by electrolyte sales.
Feedback from our current sampling process continues to be positive.
Each of these new objectives demonstrates our competitive urgency.
And the shift towards growth and technology commercialization.
Collectively all five of these priorities will likely form our goals for the year.
As we fully plan out these new priorities and set our goals and guidance for 2024 will go into them in more detail.
With that I'll hand, it over to Kevin to take you through our financial results.
Kevin.
Thanks, John Good afternoon, everyone.
I'll start off with an overview of our financial results and then update our 'twenty three outlook.
Overall solid operational performance has us tracking favorable to our ops and capex targets for the year.
Strengthening our solid liquidity position.
Our third quarter 'twenty, three revenue of $6 4 million.
In line with our expectations.
And again, driven by strong execution on our development and government contracts.
Third quarter 'twenty, three operating expenses were $27 9 million up $9 $5 million from last year.
This increase represents expanded efforts to build our EBV cells and increase our electrolyte production.
We expect these development related investments to be slightly higher in the fourth quarter than they were in the first three quarters of 'twenty three.
Our third quarter 'twenty, three operating loss was $21 $5 million and net loss was $15 $1 million.
Touching on our balance sheet and liquidity during the third quarter, we invested $15 $3 million in operations and $8 $3 million in Capex.
We ended the quarter with total liquidity of $422 $3 million consisting.
Consisting of cash marketable securities and long term investments.
Looking ahead to the rest of 'twenty three.
Right now we believe both our operational and capital spend will be slightly favorable to the low end of our guidance range for the year.
We continue to expect revenue in the range of $15 million to $20 million.
But we believe our 'twenty three cash investments will come in slightly below the $70 million low end for operating.
And the $50 million low end for Capex.
I want to praise the ops teams here as these favorable reductions are driven by positive factors.
On the operating side, our <unk> cell development and yields have been solid, meaning we have needed to build fewer cells.
This translates into less material and labor spend.
On the Capex side, the team has done a great job optimizing processes and finding more cost effective ways to structure, our SPT powdered line.
As a result, we've been able to eliminate some of our planned equipment.
There are also some investments where we can prudently wait until 'twenty four to make.
Those will get picked up when we give guidance for next year.
So taking into account those favorable investment Spence.
We now expect ending liquidity for 'twenty three slightly above the high end of our guidance range, which was $375 million.
Finishing up at this point, we have no real change or update to our longer term projections.
Although this great spend performance by our ops team helped strengthen our overall liquidity.
With our capital light business model, we are still sitting in a very solid position for the long term.
With the ability to run all the way to the late Twenty's with our current cash and.
And longer as we secure the financing or grant funding that we're pursuing.
We plan to give financial guidance for 2004 at year end with longer term high level projections provided during our planned 24 IR event.
With that I'll now turn the call back to Jon Thanks, Kevin before we head to Q&A I'd like to reiterate that since I stepped into this role almost five months ago I have been incredibly pleased with the solid power team I've inherited.
One O solid powers core values is to earn credibility through execution.
I believe the team here does that on a daily basis at all levels.
And just a few months I've seen excellent execution and driving a sample cell deliveries and ramping high quality <unk> electrolyte production, despite battling through technical and supply chain challenges.
Solid power continues to execute its technical customer and financial targets.
We are confident continuing to execute this way will drive long term shareholder value.
With that I'll hand, it over for Q&A.
Yes. Thank you we will now begin the Q&A session to ask a question you May Press Star then one on your Touchtone phone.
If you are using a speaker phone please pickup your handset before pressing the gays.
Sorry. Your question. Please press Star then two.
At this time, we will pause momentarily to assemble the roster.
And the first question comes from Michael <unk> from D. A Davidson.
Good afternoon, and thanks for taking my questions.
So John.
I think being in Korea. It sounds great that you are making some headway there pumping in office and getting things started.
And you already have a presence kind of in Europe, given where you're working with them with BMW I was wondering if or.
Why don't you have other plans for perhaps Japan, or China or elsewhere for additional opportunities or is it just going to kind of one step at a time here.
Yes, I would think it is one step at a time, but.
My vision for the Korean office is actually to operate throughout Asia that is one of the beauties of planning the flag. There initially I think we can do.
Our work in Japan, and the rest of Asia from that location, but I do think we're in a stepwise.
And just be mindful of the costs associated with creating satellite offices, but balance that against the opportunity to.
To support our partners and develop our supply chain relationships and procure world class talent.
Great Thanks for that color.
I wanted to turn to.
The strike Thats underway or just wrapping up here in the U S at the big three automakers.
There are some headlines as to what's in the new contracts that come out of it now is the name of the individual companies. They all kind of seem somewhat similar.
I guess, if you are you.
Have you gotten any feedback from any of your partners that there will be changes to the.
The timeline or amount of investments in their EV.
On the EV vehicles or in the battery facilities at this point.
Yes, we've been monitoring this very regularly.
All the headlines have come out from the various strikes and so forth and plant pausing and the like but honestly, we have not seen any change in terms of the poll from our partners.
From around the globe.
All of the <unk>.
Push that that they've had for specific timelines and requests really haven't changed. So we're very pleased with that may just be the time horizon.
They're looking at for the commercialization, that's driving that but we're still under a lot of pressure to perform to be in a position to have commercial those are commercialized technology by 2028.
Great I appreciate those comments I'll pass it along thank you.
Thank you and the next question comes from Vincent Anderson with Stifel.
Yes. Thanks.
So Toyota Hasnt necessarily been quiet about it sulphite technology, but I am curious if you've noticed.
Any shift recently in the conversations throughout the industry. After their announcement of working on raw material integration with <unk> I would imagine it's a net positive to have the chemistry further validated by these big market participants, but I'm wondering if it's translated yet into an uptick in interest or urgency from any of your potential elect.
Customers that see that as a.
A competitor.
Yes, we do see it as a net positive.
With major players now backing sulphide base, all solid state batteries in their roadmap.
We think that there's room for multiple winners.
And we think that given our position from ability to produce volume electrolyte now in our plans to grow that in the future that we're very well positioned to participate.
With the players that are.
Intending to be there with sulfide based asp's.
Perfect. Thanks.
And then could you just refresh my memory on if theres any tie between SP wanted to speak to with regards to some of the optimization youre doing around your electronic chemistry.
And so far as <unk> accelerates that or.
Optimizing the chemistry further was part of the step of moving to SP to its scale are those completely independent.
No they are interrelated.
As we've shifted.
All of the electrolyte production to SP to shut down.
The SP one production, it's allowed us to reconfigure the physical area in SD Wan and also.
Have resources move around to support our next generation of powders, they're in SP one.
And then we.
We also are underway and construction for the next generation powder laboratory here at <unk>.
That is scheduled to be completed next summer and so we'll go through another redistribution of square footage lab capability and personnel when that facility is available and SP to again to focus on the next generation electric lights.
Great and then last one specifically for you John you've had a few months solid power now.
I'm just wondering what impression fresh pair of eyes is found with regard to how you see the balance of of call. It risk reward mainly on capital requirements of driving development and adoption of of solid state sells all the way down to the OEM level versus maybe focusing on optimizing.
<unk> chemistry further broadening the commercial opportunities of the electrolyte.
On more OEM agnostic basis, and letting the market come to you and tell you exactly when and where to commit more capital.
So we're very customer driven.
We're finding that our partners that we have right now are having different requirements in different approaches to.
ASB development and were really following our partners requirements and collaborating with them to meet those requirements.
That is kind of the landscape that we see right now I think it's appropriate given the nascent nature of the market based on my experience with early stage technologies.
And as it matures I think theres, an opportunity to do more call it independent and more reusable development across multiple customers, but right now given a lot still has to be sorted in terms of performance.
That is the nature that we're following right now with each OEM.
Okay. That's very helpful. I appreciate it.
Thank you and the next question comes from Jeffrey Campbell of Seaport Research partners.
Hi, good afternoon.
Hey sample sales typically are tested for self performance and cycle lives.
Allow a manufacturer to make design and production decisions.
Yourselves already meet Bmw's initial performance expectations, what are the primary endpoints.
<unk> sales will be tested for.
Okay.
Yes.
We just shipped to cells.
We of course have characterization data on them going out, but we need.
Confirmation of Bmw's testing, we need them to be integrated into packs.
Our into modules and then in the packs and so we're still a ways away from being able to comment really further on the performance.
And I would emphasize yes that we've met BMW requirements for a one but those are primarily driven by the demo car.
So there will be a 2% and three we expect that we will be working with BMW on for subsequent improvements as we go through the entire a sample.
Part of the process for a sample qualification.
Okay. Thank you.
Sure.
The.
You mentioned in your prepared remarks that another OEM relationship as the 2024 goal is it possible that that partner might not be one of your current JV relationships.
Yes.
Okay, great. Thank you appreciate it.
Thank you and once again. Please press Star then one if you would like to ask a question.
And the next question comes from Brian Dobson with Chardan capital.
Hi, Thanks, very much for taking my question.
<unk>.
So wholesaling the electrolyte likelihood a key area of opportunity would you speak to the competitive landscape in that segment and also what you see as your advantages moving forward.
I'm sorry could you repeat the question you broke up I didn't get the first part of it.
Yes, sorry about that.
So.
Wholesaling the electrolyte.
As a key area of potential opportunity in the future could you speak a little bit to the competitive landscape that you're seeing in that segment.
And what your advantages might be.
Sure Good question.
We have taken an approach to.
Invest ahead of the aggregate demand that's in the marketplace and I believe it's been a key part of the uptake that we would have from not only our current partners, but our potential future partners in that.
These are all very high volume minded companies and very high volume spaces, and I think that really differentiates us from the other current providers that are providing electrolyte in into the market.
Obviously.
<unk> market Windows close and we need to continue to make investments to stay ahead of the demand.
Right now I think we look forward into 2024, we have a good balance to what we see demand wise and what we can produce here at SB too.
But we're constantly looking at that and actually have on.
The drawing board SP three plans right now underway to again stay ahead of that.
In terms of competitors I think that we're near the front of the pack with regard to ability to produce high quality.
Consistent.
Production.
To the level that is required by the marketplace. There may be one or two others that could do that today, but we're in a small set I believe relative to wholesaling electrolyte.
Yeah, very good and then just turning to BMW I could ask a follow up question on that side. You mentioned that you that you've met the initial requirements and that you are currently making adjustments for bmw's eight two requirements. How long do you have to do that.
And how far along are you in making those adjustments.
Yes for clarification <unk> is going to be a new cell design. So it's more than just an adjustment.
And it could require some other chemistries all the way back to the electrolyte, depending on where we land. We literally are in the collaboration phase with them to define spin.
Specifically, what those requirements are going to be and based on those requirements. It will drive overall timeline.
As we commented earlier in our remarks, we do plan to do an investor event in 2024, and one of the things that will cover and that we expect will be more detailed around our <unk>.
Timing and specifications.
Really not in a position to comment any further on that right now, but it is underway, it's a cell design as well as potentially back into electrolyte chemistries.
Yeah very good thanks very much.
Thank you.
As a reminder, please press star then one if you'd like to ask a question.
Alright that does concludes our question and answer session as well as the call itself. Thank you. So much for attending today's presentation. You may now disconnect your lines.