Q4 2023 QuantumScape Corp Earnings Call

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Speaker Change: Good day and welcome to quantum escapes fourth quarter 2023 earnings conference call John.

Speaker Change: John Zager quantification, Vice President of capital markets and F. P. N. A you may begin your conference.

John Zager: Thank you operator.

John Sager: Good afternoon, and thank you to everyone for joining Quantumscape's fourth quarter 2023 earnings call. To supplement today's discussion, please go to our IR website at ir.quantumscape.com to view our shareholder letter. Before we begin, I want to call your attention to the Safe Harbor provision for forward-looking statements that is posted on our website as part of our quarterly update. Forward-looking statements generally relate to future events, future technological progress, or future financial or operating performance. Our expectations and beliefs regarding these matters may not materialize.

Speaker Change: Afternoon, and thank you to everyone for joining columns group's fourth quarter 2023 earnings call to.

Speaker Change: To supplement today's discussion. Please go to our IR website at IR dot quantum scape dot com to view our shareholder letter.

Speaker Change: Before we begin I want to call your attention to the safe Harbor provision for forward looking statements that is posted on our website as part of our quarterly update.

Speaker Change: Forward looking statements generally relate to future events future technology progress or future financial or operating performance.

Speaker Change: Our expectations and beliefs regarding these matters may not materialize.

John Sager: Actual results and financial periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. There are risk factors that may cause actual results to differ materially from the content of our forward-looking statements for the reasons that we cite in our shareholder letter, Form 10-K, and other SEC filings, including uncertainties posed by the difficulty in predicting future outcomes. Joining us today will be Quantumscape's co-founder, CEO, and Chairman Jagdeep Singh, our CFO Kevin Hetrick, and Dr. Siva Sivaram, president. With that, I'd like to turn the call over to John. Since our founding, our mission has been simple: revolutionize energy storage and enable a more sustainable future. Reflecting on this journey, we've made remarkable progress towards commercializing solid-state lithium metal batteries from the single-layer pouch cells we showed in December 2020 all the way to our 24-layer A0 cells shipped in December 2022. The best performing of these have now yielded impressive cycle life performance over 1,000 cycles with 95% capacity retention, as reported by Volkswagen's battery arm Powerco, based on testing in their own labs in Germany.

Speaker Change: Actual results in financial periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

Speaker Change: There are risk factors that may cause actual results to differ materially from the content of our forward looking statements for the reasons that we cite in our shareholder letter Form 10-K, and other SEC filings, including uncertainties posed by the difficulty in predicting future outcomes.

Speaker Change: Joining us today will be quantum Scapes co founder CEO and chairman Jack <unk>, Zhang our CFO, Kevin Patrik and Dr. Silver Silver M President.

Speaker Change: With that I'd like to turn the call over to J D.

J D: Thanks, John.

J D: Since our founding our mission has been simple revolutionize energy storage and enable a more sustainable future.

J D: I think on this journey, we've made remarkable progress towards commercializing solid state lithium metal batteries from a single their pouch cells. We showed in December 2020, all the way to our 24 layer a zero cells shipped in December 2022, the best performing of these have now yielded impressive cycle like performance over one.

J D: Cycles with 95% capacity retention as reported by folks volumes battery arm powerful based on testing in their own labs in Germany and.

Jagdeep Singh: In 2023, we set out to turn these A0 prototypes into a commercial product, and with advances in cathode loading, packaging efficiency, and process quality, we now have our first commercial product, QSE5, at our site. When it comes to the combination of product development, customer engagement, and financial strength, I believe our leadership in next-generation batteries is stronger than it's ever been. When we begin shipping QSE5, it will mark a world first for automotive solid-state lithium metal battery technology, representing the culmination of years of development on the part of the Quantumscape team and further solidifying our leadership in next-generation battery technology. But starting low volume production of our first product is not the end of the journey; it's just the beginning.

J D: In 2023, we set out to turn these easier of prototypes into a commercial product and with advances in cathode loading packaging efficiency and process quality. We now have our first commercial product <unk> in our sites.

J D: When it comes to the combination of product development customer engagement and financial strength I believe our leadership in next generation batteries is stronger than it's ever been.

J D: When we begin shipping <unk> five.

J D: Mark a world first for automotive solid state lithium metal battery technology, representing the culmination of years of development on the part of the quantum to keep team and further solidifying our leadership in next generation battery technology.

J D: But starting low volume production.

J D: Of our first product is not the end of the journey, it's just the beginning.

Jagdeep Singh: To truly fulfill the promise of our breakthrough technology, we will need to increase production by orders of magnitude from where we are today. For that reason, early last year, I set out to recruit a leader with extensive experience in high-volume manufacturing of sophisticated technology products. Such a candidate would need to have extensive experience bringing complex emerging technology into high volume production, a proven track record of operational discipline, and an appreciation for the significance of Quantumscape's mission and the scale of our ambition. I believe our company is closer than ever to having a profound impact on the automotive industry and the wider world, while delivering exceptional returns for shareholders. I was looking for a leader who both shared that vision and had the tools to make it a reality.

J D: To truly fulfill the promise of our breakthrough technology, we will need to increase production by orders of magnitude from where we are today.

For that reason.

J D: Last year I set out to recruit a leader with extensive experience in high volume manufacturing of sophisticated technology products.

J D: Such a candidate would need to have extensive experience remain complex emerging technology into high volume production, a proven track record of operational discipline.

J D: And an appreciation for the significance of quantum escapes mission and the scale of our ambition.

J D: I believe our company is closer than ever having a profound impact on the automotive industry and the wider world, while delivering exceptional returns for shareholders.

J D: I was looking for a leader who both shared that vision and had the tools to make it a reality.

Jagdeep Singh: I'm pleased to say we found the ideal candidate in Dr. Siva Sivaram. He has decades of experience taking groundbreaking technology products into high volume production, building factories, establishing partnerships, and scaling production across the world. Since coming on as president, Siva has impressed the team with his operational skills, strategic vision, and ability to drive results, as well as his connections within the broader high-tech manufacturing industry. Most importantly, he fits in perfectly with the culture we've worked hard to build and the values we all hold.

J D: I am pleased to say, we found the ideal candidate and Dr. Save us ever him. He has decades of experience taking groundbreaking technology products into high volume production building factories, establishing partnerships and scaling production across the world.

J D: Since coming on as President Shiva has impressive team with his operational skills.

J D: Strategic vision and ability to drive results.

J D: As well as his connections within the broader high tech manufacturing industry.

Most importantly, he fits in perfectly with the culture, we have worked hard to build and the values. We all hold respect curiosity integrity and passion to solve the problem of building a better battery.

Jagdeep Singh: Respect, curiosity, integrity, and passion to solve the problem of building a better battery. That's why, as chairman, I'm thrilled to announce that, on my recommendation, the board has agreed to appoint Dr. Siva Sivaram as chief executive officer. I have total confidence that he's the right person to take on the challenge of bringing our transformational solid-state battery technology to market, driving this next phase of growth, fulfilling our mission of revolutionizing energy storage, and delivering exceptional returns for shareholders. There's no doubt in our minds that Siva is the right person at the right time to lead us on to the next phase of our journey. With that, let me turn it over to you, Seva. Congratulations.

Chairman: That's why as chairman I'm thrilled to announce that with my recommendation. The board has agreed to appoint Dr. Silver silver him as Chief Executive Officer, I have total confidence that he's the right person to take on the challenge of bringing our transformational solid state battery technology to market driving this next phase of growth fulfill.

Dr. Silver: Our mission of revolutionizing LPG storage and delivering exceptional returns for shareholders.

Dr. Silver: There's no doubt in our minds.

Dr. Silver: That is the right person at the right time to leave.

Dr. Silver: Onto the next phase of our journey.

Speaker Change: With that let me turn it over to use it to.

Speaker Change: Congratulations.

Dr. Siva Sivaram: Thank you, Jagdeep. I'm proud and excited about this opportunity and very grateful to you for entrusting me with this mission. I'll begin with a look back at our achievements in 2023, give some insight into our manufacturing process, and close with a look at our key goals for the next. 2023 marked the beginning of a transformational period for Quantumscape, starting with the shipment of our first A0 prototype cells in late 2022 and continuing in 2023 with the development and demonstration of key component level improvements needed to go from prototype to product, higher cathode loading, an The A0 prototypes were intended to demonstrate the core capability of the technology ahead of achieving the reliability and other characteristics expected of a commercial product.

Speaker Change: Thank you dig deep.

Speaker Change: I'm proud and excited for this opportunity and very grateful to you, but interestingly with this mission.

Speaker Change: I'll begin with a look back at our achievements in 2023.

Speaker Change: Give us some insight into our manufacturing process roadmap.

Speaker Change: And close with a look at our key goals for the next year.

Speaker Change: 2023 marked the beginning of a transformation in the PDL for quantum escape.

Speaker Change: Starting with the shipment of our first is zero prototypes Hill in late 2022, and continuing into 2023 with the development and demonstration of key component level improvements needed to go from prototype to product.

Speaker Change: Hi, Ed cats or loading.

Speaker Change: And efficient commercial packaging design.

Speaker Change: And then improved and far more scalable separate to the process.

Speaker Change: The azido prototypes were intended to demonstrate the core capability of the technology ahead of achieving the reliability and other characteristics expected of a commercial product.

Dr. Siva Sivaram: One of the customers that received the A0 prototype cells was our long-standing partner, Volkswagen, whose battery manufacturing on power confirmed the results we reported in our Q3-23 shareholder live, are the best-performing cells, achieved over 1,000 cycles, with over 95% capacity. With respect to cash load loading, we reported performance results from higher loading cells in our Q1 2023 shareholder. This increase in cathode loading means our new cathodes offer 60% more capacity per unit of charge. This improvement has been integrated into our baseline cell bills, representing a key step forward towards achieving our target energy density for QSE5. Improved packaging efficiency is another enabler for high energy density.

Speaker Change: One of the customers that received the ERO prototype sales, but does have a long standing partner the Volkswagen group.

Speaker Change: Whose battery manufacturing powerful confirmed the results we reported in our Q3 23 shareholder letter.

Speaker Change: Their best performing set of achieved over 1000 cycles with over 95% capacity.

Speaker Change: Does it affect the castle of loading the reported performance results from higher loading in our Q1 2023 shareholder letter.

This increase in catheter loading means our new cat towards offered 60% more capacity per unit it yet.

Speaker Change: This improvement has been integrated into our baseline sell bills, representing a key step forward towards achieving our target energy density for <unk> five.

Speaker Change: Improved packaging efficiency is another enabler for heightened caught high energy density.

Dr. Siva Sivaram: And the flex frame packaging of QSC-5 is more efficient, compared to our A0 prototype. In Q4, we completed the integration of several packaging improvements, including tighter internal margins, thinner current collectors, and a slimmer frame design. Another focus in 2023 was to improve production quality and consumption.

Speaker Change: Flex frame packaging of USD five is more efficient compared to our <unk> broker type cells.

Speaker Change: In Q4, we completed the integration of several packaging improvements, including tighter in turn on the margin.

Isn't that a current collectors and slimmer frame design.

Speaker Change: Another focus in 2023 was to improve production quality inconsistent.

Dr. Siva Sivaram: With respect to reliability, we have improved the interface between the cathode and the separator, which we have determined is one of the major drivers of reliability; we have reduced ambient and process-related particle contamination, improved the components and processes that go into cell assembly, and made advances across our entire production. These improvements have allowed us to integrate higher-loading cathodes and more efficient packaging into the Alpha 2 prototype cells we plan to ship. Our final goal was to introduce our new fast separator heat treatment. This goal is important because heat treatment is one of the most cost-intensive parts of ceramic processing and is often the main bottleneck in terms of throughput.

Speaker Change: With respect to reliability, we have improved the interface between the cathode and the separator, which we have determined is one of the major drivers of reliability.

Speaker Change: We have reduced ambient and process related particle contamination.

Speaker Change: The components and processes that go into cell assembly and made advances across our entire production flow.

Speaker Change: These improvements have allowed us to integrate into higher loading cathodes and more efficient packaging into the alpha two prototypes and we plan to ship this year.

Speaker Change: Our final goal was to introduce our new fast separated heat treatment process.

Speaker Change: This girl is important because heat treatment is one of the most.

Speaker Change: Cost intensive box of ceramic pricing and is often the main bottleneck in terms of throughput.

Speaker Change: This fastest process also result in an improved separator and we're rolling it out in two stages.

Dr. Siva Sivaram: This faster process also results in an improved separator, and we are rolling it out in two stages: Raptor, which we successfully deployed in Q4, and its successor, Cobra. On that front, I'd like to take a moment to offer some more detail on Raptor and Cobra and our process. When it comes to Raptor, the heat processing step is approximately eight times faster than our current generation process, cutting the amount of energy needed per separator and increasing throughput. Raptor also removes several other process steps entirely, allowing us to eliminate material inputs that would otherwise introduce particle contaminants.

Speaker Change: Raptor, which we successfully deployed in Q4 and its success at Cobra.

Speaker Change: On that front I'd like to take a moment to offer some more detail under raptor and Cobra and are in process of roadmap.

Speaker Change: When it comes to Raptor the heat processing step is approximately eight times faster than our current generation process.

Speaker Change: Cutting the amount of energy needed per separate there and increasing throughput.

Speaker Change: But after also removes several other process steps entirely.

Speaker Change: As to eliminate material inputs.

Speaker Change: That would otherwise introduced party the contamination.

Dr. Siva Sivaram: When it reaches its full planned run rate, Raptor will be capable of more separated starts per week than the combined capacity of every previous generation of heat treatment equipment put together. Thanks to this step change increase in productivity, Raptor is capable of providing enough separator films to enable low volume QSC-5 production. Cobra takes the innovations of the Raptor process and adds three more improvements. First and foremost, the COBRA heat treatment step is designed to be faster than Raptor by more than an order of magnitude, which dramatically improves throughput and energy efficiency.

Speaker Change: When it reaches its full planned run rate that will be capable of more separated talks per week than the combined capacity of every previous generation of heat treatment equipment put together.

Speaker Change: Thanks to this step change increase in productivity.

Speaker Change: And is capable of providing <unk> separated firms to enable low volume USD five production this year.

Cobra takes the innovation stuff that happened in process and add three more improvement.

Speaker Change: First and foremost the.

Speaker Change: Cobra heat treatment is designed to be faster than dropped by more than an order of magnitude.

Speaker Change: Which dramatically improves throughput and energy efficient.

Speaker Change: Second the Cobra heat treatment equipment has a footprint in order of magnitude smaller than raptor, while also increasing production capacity, which saves space on the production floor and further improves the process economics.

Dr. Siva Sivaram: Second, the COBRA heat treatment equipment has a footprint an order of magnitude smaller than Raptor, while also increasing production capacity, saving space on the production floor and further improving the process. Third, the COBRA process consolidates or eliminates additional individual process steps compared to Raptor, reducing potential sources of variability from the process, as well as easing production bottlenecks and lowering costs. We believe these advantages make COBRA the most attractive pathway to gigawatt-hour-scale production, though such volumes will require larger configurations of COBRA. Bringing online a disruptive improvement like COBRA presents a technical challenge, and significant work remains to develop a fully mature COBRA production process. We have prioritized bringing COBRA into production as soon as possible. Finally, I'd like to lay out our four key goals for the coming year.

Speaker Change: Third the Cobra process consolidates it eliminates additional individual process steps compared to raptor than using potential sources of variability from the process as well as easing production bottlenecks and lowering cost.

We believe these advantages may Cobra process, the most attractive pathway two gigawatt hour scale production.

Speaker Change: No such volumes will require larger configurations of Cobra equipment.

Speaker Change: Bringing online a disruptive improvement like Cobra.

Speaker Change: Since the technical challenge.

Significant work remains to develop.

Speaker Change: Fully mature Cobra production process.

Speaker Change: We have prioritized, bringing cobre into production as soon as possible.

Speaker Change: Finally, I'd like to lay out our four key goals for the coming year.

Dr. Siva Sivaram: In 2024, our focus is to take the improvements we have demonstrated at the component level in 2023 and integrate them into one design, QSC5, the approximately 5 amp hour cell that we are targeting as our first commercial product. Our first major goal for the year is to ship a round of samples designated as Alpha 2, which integrates the improved cathode and packaging that we have developed in 2023 into a multi-layer cell design. Alpha 2 is an important milestone in de-risking many of the key elements of integration and, when combined with Raptor films and other refinements, represents the core of QSE5. Our second goal for this year is to transition to wrapped production, going from initial deployment at the end of last year to its full planned run rate. To enable this transition, we must install and qualify upstream and downstream automation for RAPT.

Speaker Change: In 2024, our focus is to take the improvements we have demonstrated at the component level in 2023 and integrate them into one design.

Speaker Change: Fight.

Speaker Change: The approximately five empower itself that we're targeting as our first commercial product.

Speaker Change: I would first weighted goal for the year is to ship around the samples the six.

Speaker Change: Dated as alpha too.

Speaker Change: Which integrates the improved capsule and packaging that we have developed in 2023 into a multi layered cell design.

Speaker Change: Also tool is an important milestone in derisking many of the key elements of integration.

Speaker Change: And when combined with Raptor films and other refinements that business the core of Q S E site.

Speaker Change: Our second goal for this year is to transition to Raptor production.

Speaker Change: Going from initial deployment at the end of last year.

Speaker Change: Full planned run rate too.

Speaker Change: To enable this transition, we must install and qualify upstream and downstream automation for raptor.

Dr. Siva Sivaram: We expect it to provide up to three times the separator production capacity compared to our current generation process, enabling low-volume QSE5 prototypes. Our third goal for this year is to begin low-volume B0 prototype production for our first commercial cell, QSC. We define B0 prototypes as the near-final QSC-5 product design, a 24-layer cell integrating improving package efficiency and higher loading cathode using films produced by our Raptor. It is important to note that the final designation of a B sample by an automotive OEM occurs only after evaluation of these candidates.

Speaker Change: We expect it to provide up to three times that separated.

Speaker Change: <unk> capacity compared to our current generation process, enabling low volume <unk> prototype production this year.

Speaker Change: Our third goal for this year is to begin low volume B zero broker type production kind of our first commercial sale of UFC fight.

We define b zero prototypes as the near final QC Fibrotic design at.

Speaker Change: At 24 layer cell integrating improving package efficiency and higher loading cathode using films produced by a rapid process.

Speaker Change: It is important to note that the final designation of a b sample by an automotive OEM occurs only after extensive testing of these candidates.

Dr. Siva Sivaram: We believe QSC-5 builds a unique, high-value segment of the EV battery market by combining high energy density with high power. The final goal for the year is to prepare for Cobra production in 2021. We are already operating prototype versions of COBRA heat treating equipment, and in light of the promising data from our prototype equipment and the significant advantages of COBRA as a pathway to gigawatt-hour scale production, we have prioritized bringing COBRA into production as soon as possible to support higher volumes of QSC-5 in 2020. Our goal for 2024 is to set the stage for COBRA by taking delivery of key pieces of COBRA equipment and preparing to bring them into production. These goals are challenging and ambitious, and you will require focused effort on behalf of the entire Cobra team. We believe that achieving them will represent major progress along our industrialization road. With that,

Speaker Change: We believe QC five fills a unique high value segment of the EV battery market by combining high energy density with high power.

Speaker Change: The final goal for the year is to prepare for our Cobra that production in 2025.

Speaker Change: We are already operating prototype versions of Cobra heat treating equipment.

Speaker Change: And in light of the promising data from a prototype equipment and a significant advantages of Cobra is a battery two gigawatt hour scale production, we have prioritized, bringing cobra into production as soon as possible to support higher volumes of USD five in 2025.

Speaker Change: Our goal for 'twenty 'twenty four is to set the stage for Cobra by taking delivery of key pieces of Cobra equipment and preparing to bring them into production.

Speaker Change: These goals are challenging and ambitious.

Speaker Change: And it will require the focused effort on behalf of the entire team.

Speaker Change: We believe that achieving them will represent major progress along our industrialization roadmap.

Speaker Change: With that.

Kevin Hetrick: I will hand over to Kevin for a word on our financial outcomes. Thank you, Siva. Capital expenditures for the fourth quarter and full year 2023 were $13.8 million and $84.5 million, respectively.

Speaker Change: I will hand over to Kevin for a word on our financial outlook.

Kevin Patrik: Thank you Sylvia.

Kevin Patrik: Capital expenditures for the fourth quarter and full year, 2023 were $13 8 million and $84 5 million respectively.

Kevin Hetrick: Notable items of Q4 CAPEX included QS0 Facilities Investment, as well as prototype equipment for our COBRA process. GAAP operating expenses were $124.6 million in the fourth quarter and $479 million for the full year 2023. Cash operating expenses were $73.9 million in the fourth quarter and $264.1 million for the full year 2023, consistent with our previously communicated guidance. In lieu of a cash operating expense metric, moving forward, we will provide guidance on adjusted EBITDA. Adjusted EBITDA, as a similar measure, we believe offers improved comparability with other companies. Included in our shareholder letter is a reconciliation of adjusted EBITDA to gap net loss. Adjusted EBITDA loss was $60.7 million in the fourth quarter and $249.2 million for the full year 2023.

Kevin Patrik: Notable items of Q4, Capex included <unk> zero facilities investments as well as prototype equipment for our Cobra process.

Kevin Patrik: GAAP operating expenses were $124 6 million in the fourth quarter and $479 million for the full year 2023.

Kevin Patrik: Cash operating expenses were $73 9 million in the fourth quarter and $264 1 million for the full year 2023, consistent with our previously communicated guidance.

Kevin Patrik: In lieu of a cash operating expense metric moving forward, we will provide guidance on adjusted EBITDA.

Kevin Patrik: Adjusted EBITDA is a similar measure we believe offers improved comparability with other companies.

Kevin Patrik: Included in our shareholder letter as a reconciliation of adjusted EBITDA to GAAP net loss adjusted EBITDA loss was $60 7 million in the fourth quarter and $249 2 million for the full year 2023.

Kevin Hetrick: For the full year 2024, we expect capital expenditures to be between $70 million and $120 million. Priorities for CAPEX in 2024 include investments in certain process areas, notably cell assembly, to better match the throughput of the Raptor tool, as well as CAPEX for COBRA, metrology to support improvements in film quality and reliability, and facilities to support further scale up of QS0. For the full year 2024, we forecast adjusted EBITDA losses to be between $250 million and $300 million.

For the full year 'twenty 'twenty, four we expect capital expenditures to be between $70 million and $120 million.

Kevin Patrik: <unk> for Capex in 2024 include investments in certain process areas, notably cell assembly to better match, the throughput of the Raptor tool as well as Capex for Cobra metrology to support improvements in film quality and reliability and four facilities to support further scale up of <unk> zero.

Kevin Patrik: For the full year 2024, we forecast adjusted EBITDA loss to be between $250 million and $300 million.

Kevin Hetrick: Our 2024 guidance reflects efforts to maintain our commercialization timeline, while conserving cash and extending our runway, primarily by focusing on process. Raptor is a notable step change process improvement. Also important are steady, continuous improvement efforts targeted throughout the process. The net result is an operating plan that increases QS0 output while holding CapEx to a similar range as 2023. We ended the year with $1.07 billion in liquidity, strongly positioning the company as we transition from prototype to product and prepare for subsequent industrialization. We continue to be prudent with our balance sheet and optimize spending as a result of cost-saving initiatives and judicious spending. We now forecast that our cash runway will extend into the second half of 2026, two quarters beyond our prior estimate.

Kevin Patrik: Our 2024 guidance reflects efforts to maintain our commercialization timeline, while conserving cash and extending our runway primarily by focusing on process improvements.

Kevin Patrik: Raptor is a notable step change process improvement also important our steady continuous improvement efforts targeted throughout the process flow.

Kevin Patrik: The net result is an operating plan that increases your output, while holding capex to a similar range as 2023.

Kevin Patrik: We ended the year with 1.07 billion in liquidity strongly positioning the company as we transitioned from prototypes of product and prepare for subsequent industrialization.

Kevin Patrik: We continue to be prudent with our balance sheet and optimize spending.

As a result of cost saving initiatives and judicious planning, we now forecast our cash runway will extend into the second half of 2026, two quarters beyond our prior estimates.

Kevin Hetrick: Any additional funds raised from capital markets activity, including under our ATM perspective supplement, would further extend this cash. In the longer term, our capital requirements will be a function of our industrialization business model, which we believe could reflect a mix of wholly owned production, joint venture, and licensing relations. Thanks, Kevin. We'll begin today's Q&A portion with a few questions we've received from investors, or that I believe investors would be interested in. Jagdeep, I'll start with you.

Kevin Patrik: Any additional funds raised from capital markets activity, including under our ATM prospectus supplement with further extended this cash runway.

Longer term, our capital requirements will be a function of our industrialization business model, which we believe could reflect a mix of wholly owned production joint venture and licensing relationships.

Speaker Change: Thanks, Kevin will begin today's Q&A portion with a few questions. We've received from investors or that I believe investors would be interested in.

Jack I'll start with you you've overseen quantum's capes developments since its founding what makes you feel it was the right move to a point to the CEO and also what drove the timing.

John Sager: You've overseen Quantumscape's development since its founding. What makes you feel it was the right move to appoint Siva as CEO? And also, what drove the So, John, the first point is that I believe we're in the strongest position that we've ever been in relative to the combination of technical progress, cash balance, and customer engagement. We've shipped our A0 samples to customers, and seen the best performing of these deliver category-leading performance in the customer lab over a thousand cycles with 95% capacity retention. We have a billion dollars in the balance sheet, and our customer engagement is stronger than ever.

Kevin Patrik: So John the first point is that I believe we're in the strongest position that we've ever been in relative to the combination of technical progress cash balance and customer engagement.

Kevin Patrik: We've shipped are a zero samples to customers seeking the best performing of these deliver category leading performance from the customer lab over 1000 cycles with 95% capacity retention, we have $1 billion on the balance sheet and our customer engagement is stronger than ever secondly, we're now in a period of transformation going from prototype to product, which we plan to.

Jagdeep Singh: Secondly, we're now in a period of transformation, going from prototype to product, which we plan to achieve by combining the component-level results we announced last year, higher capital loading, improved packaging, and a more scalable film process with Raptor into an integrated cell, the QSC-5. But the other critical part of this transformation is to put in place a leader that brings the high volume manufacturing experience we'll need to drive the next stage of our. On that note, we were very fortunate to attract someone of civil caliber, someone who checks all the boxes in terms of having brought emerging technologies into high volume production multiple times in his career, as well as having the cultural fit that's so necessary for a successful transition. We think his taking the helm as CEO will be a huge value creation move for investors over the coming decade. And finally, I continue to serve as chairman to provide continuity and to provide any help CIVA needs. Thanks, Jackie. Siva, I am turning to you now.

Kevin Patrik: Achieved by combining the component level results, we announced last year, our catheter loading improved packaging and more scalable film process with raptor into an integrated cell the <unk> five.

Kevin Patrik: The other critical part of this transformation is to put in place and the leader that brings to the high volume manufacturing experience will need to drive the next phase of our growth.

On that note we were <unk>.

Kevin Patrik: Very fortunate to attract someone of <unk> caliber someone who checks all the boxes in terms of having bought emerging technologies into high volume production multiple times in his career as well as having the cultural fit that's necessary for a successful transition.

Kevin Patrik: We think he is taking the helm as CEO will be a huge value creation move for investors over the coming decade.

Kevin Patrik: And finally I continue to serve as chairman to provide continuity and to provide any help 70 for me.

Speaker Change: Thanks Jackie.

Speaker Change: Turning to you know you've had a remarkable career to date what attracted you to quantum escape at this stage of our development.

Dr. Siva Sivaram: You've had a remarkable career. What attracted you to Quantumscape at this stage of our business? Well, my career over the last four decades in the semiconductor and data storage business has been one of taking revolutionary new technologies into high volumes. Whether it is advanced microprocessors at Intel, 3D flash at SanDisk, or high volume data storage at Western Digital.

Jackie: Well John.

Jackie: My career over the last four decades in the semiconductor and data storage industries.

Jackie: Has it been undertaking revolutionary new technologies into high volume production.

Jackie: But there does advanced microprocessors that didn't tell our treaty flash at Sandisk on high volume data storage at Western digital.

Dr. Siva Sivaram: I've been fortunate to be closely involved in solving complex technology problems while simultaneously bringing manufacturing to the forefront. I've been part of building fabs and factories around the world. And in every case, it's a process of developing a stable baseline, delivering a product to the customer, getting feedback, scaling the production, and systematically improving productivity and reliability. Now, I wanted to do something more impactful and leave a mark, whether it is a team, technology, market, or impact. QuantumScape fits the profile perfectly.

Jackie: I've been fortunate to.

Jackie: To be closely involved in solving complex technology issues.

Jackie: While simultaneously, bringing up manufacturing capabilities.

Jackie: I've been part of building Fabs in factories around the world and in every case, it's the process of developing a stable baseline delivering our product to the customer get feedback scaled up production and systematically improve productivity and reliability.

Speaker Change: Now I wanted to do something more impactful.

Speaker Change: And leave a mark.

Speaker Change: Whether it is team technology market impact.

Speaker Change: Skip fits that profile perfectly pardon me.

Dr. Siva Sivaram: The impact touches every person on the planet, the technology is world-changing, the team is world-class, and the market spans the globe. My connection with Quantumscape is now almost a decade old. I was talking with Jagdeep and Tim about adhesion layer deposition in 2013. I was talking with them both again around 2017.

Speaker Change: The impact that just every person on the planet that technology is world changing the team is world class and the market spans the globe.

Speaker Change: My connection with Quantum's Gabe is now almost a decade old.

Speaker Change: I was talking with dig deepen them about adhesion layer deposition in 2013.

He was talking with them both again around 2017.

Dr. Siva Sivaram: Jagdeep and I started talking about this current opportunity almost a year ago, last February. I was immediately intrigued by the past, of leading the company through this next stage. Since I joined the company last... I've been very impressed with the purposefulness and the depth of the knowledge in all aspects of battery technology. The focus on solving materials and chemistry problems at the fundamental level before attempting to ramp volume aligns with my experiences in successful manufacturing. Thanks, Siva.

Speaker Change: And the Zebra and I started talking about this current opportunity almost a year ago last February.

Speaker Change: It was immediately intrigued with the possibilities of leading the company through this next phase.

Speaker Change: Yeah.

Since I joined the company last year I've been very impressed with the purpose for the rest of the team.

Speaker Change: And the depth of knowledge in all aspects of battery technology in production.

Speaker Change: Focus on solving materials and chemistry problems at the fundamental level.

Speaker Change: Before attempting to ramp volume.

Speaker Change: Our lanes with my experiences in Texas food manufacturing transitions.

Speaker Change: Thanks, Peter a question for silver that we received from an investor in our IR Inbox, how can investors best track quantification progress against our commercialization timeline for low volume be samples this year.

John Sager: A question for Siva that we received from an investor in our IR inbox: How can investors best track Quantumscape's progress against our commercialization timeline for low-volume beef samples this year? John, this is a transformational moment.

Speaker Change: John This is a transformational moment for us.

Operator: We have shipped out A0, defined the commercial packaging design, and we are targeting alpha. This has all been necessary to get a well-defined product, the QSE5. The next step is getting the QSC-5 B0 samples in customers' hands as soon as possible, so we can get feedback from them and improve it. The goals that we have set up for ourselves this year directly track industrialization; delivering the Alpha 2 samples to customers, getting wrapped and ramped to high volume, and starting the low-volume production of QSC5B03, which are 24 layers with wrap, are critical to us. The fourth goal of preparing for COBRA production is essential for ramping up cell volume. Tracking our progress to these goals is the best way for investors to follow along on our industrialization. Okay, thanks so much. We're now ready to begin the live portion. Operator, please open up the line for questions. I have food.

Speaker Change: <unk> zero differ.

Speaker Change: Define the commercial packaging design and we are targeting alpha tool shipments.

Speaker Change: This has all been necessary to get a well defined product that <unk> E file.

The next step is getting the <unk> five zero samples in customers hands as soon as possible. So they can get the feedback from them and iterate.

Speaker Change: The goals that we've set up for ourselves this year directly track the industrialization of the technology.

Speaker Change: Delivering the alpha two samples to their customers.

Speaker Change: Getting the raptor ramp to high volumes.

Speaker Change: And starting the low volume production of <unk> at Samsung, which at 24 layers with Raptor homes.

Speaker Change: Tyler Texas.

Speaker Change: The fourth goal of preparing for the corporate up production is essential for ramping the sales volume next year.

Hacking our progress toward these goals is the best way for investors to follow along and our industrialization roadmap.

Speaker Change: Okay. Thanks, so much we're now ready to begin the life portion of today's call. Operator, Please open up the line for questions.

Speaker Change: Absolutely.

Operator: We will now begin the Q&A session. If you'd like to ask a question, please press star followed by 1 on your telephone keypad. If you would like to remove your question, press star, followed by.

Speaker Change: We'll now begin the Q&A session.

Speaker Change: Do you like to ask a question. Please press star followed by one on your telephone keypad.

Speaker Change: We'd like to remove your question press star followed by chance.

Operator: And as a reminder, if you're using a speaker... Please remember to pick up your handset before asking your question. Our first question of the day comes from Jordan Levy with Truist. Please proceed. Congratulations, Siva, on your role here, and Jaideep, thanks for everything and looking forward to continuing to have you on the board here as the Chair.

Speaker Change: And as a reminder, if youre using a speakerphone. Please remember to pick up your handset before asking your question.

Speaker Change: Our first question today comes from Jordan Levy was curious please proceed.

Jordan Levy: Congratulations on the role here and Josh Thanks for everything and looking forward to continuing to have you on the board here.

Jordan Levy: Siva, maybe, you know, given you're taking over as CEO here, I just wanted to step back and get your thoughts. You obviously have a lot of experience with scaling up new technologies, and I just wanted to get your thoughts on the go-forward path and what the biggest challenges to getting to that gigawatt-hour scale are, in your opinion, and your confidence around the ability to get there over the coming years. Thank you.

So maybe.

Jordan Levy: Given you're taking over as CEO here I just wanted to step back and get your thoughts do you have a lot of obviously experience on scaling up new technologies and I just wanted to get your thoughts on the go forward path look the biggest challenges to getting to that gigawatt hour scale are in your opinion and your confidence around the ability to get there.

Jordan Levy: Over the coming years.

Jordan Levy: Yeah.

Speaker Change: Thank you thanks for the question.

Dr. Siva Sivaram: Thanks for the question. The way we have always done volume manufacturing ramps is to be systematic. So the goals that we have set up for ourselves neatly align with that way of thinking in terms of making sure we do the near-term things correctly, build it up, deliver samples to customers, learn back from them, iterate, and improve. So, this year is all about marching towards low-volume B0 production, making sure all the infrastructure is put in place to make that happen. And once we have that, then we can take the steps towards higher volume B-sample production next year. So I think we are very well set up with our goals of making sure that the Alpha-2 goes out this year, followed by the B0 initial volume production, making sure Raptor is well integrated, and then getting ready for Cobra. So as long as we march through this systematically, we'll be reaching there the fastest. Thanks so much for that. Maybe a quick follow up. Scott, sorry. No, no, no; please go ahead.

Speaker Change: No.

Speaker Change: The way, we have always done volume manufacturing ramp is to be systematic.

Speaker Change: So the goals that we have set up for ourselves.

Neatly aligned into that.

Speaker Change: Way of thinking in terms of making sure we do the near term things correctly bill it up delivered samples to customers.

Speaker Change: And then back from them iterate and improve.

Speaker Change: So this is all about marching towards low volume production.

Speaker Change: Making sure all the infrastructure that goes in place to make that happen.

Speaker Change: And once we have that then take the steps towards hydro volume.

B sample production next year. So I think these are very well set up with our goals of making sure that the the alpha to go solve this year followed by the the BZ, though initial volume production, making sure Raptor is really integrated and then getting ready for Cobra. So as long as we March through this systematically.

Speaker Change: We'll be reaching there the fastest.

Speaker Change: Thanks, so much for that and for every table on that quick follow.

Speaker Change: Yes.

Speaker Change: No no. Please go ahead.

Dr. Siva Sivaram: Thanks. I was just going to say, reading through the shareholder letter and the commentary on COBRA, it seems like, you know, you all said that the priority now is to get that online as soon as possible. And I'm just curious, is there something that's come to light either with the prototype of COBRA heat treatment that you've been looking at or something that's kind of gotten you more excited about getting to COBRA? Or has anything changed how you're thinking about that?

Speaker Change: Okay.

Speaker Change: Reading through the shareholder letter on the commentary.

Speaker Change: On Cobra. It seems like you all said that the priority now is to get that online as soon as possible and I'm. Just curious is there something that's come to light.

The prototype of Cobra treatment.

Speaker Change: Looking at our something that's kind of gotten you more excited about getting to Cobra or has anything changed kind of how you're thinking about that.

Dr. Siva Sivaram: Clearly, we deployed Raptor at the end of last year, and we have now integrated it into cells and are ramping it up. And we need to make sure we get our learnings from Raptor. COBRA, the potential, when you see the heat treatment time being reduced by an order of magnitude and the equipment footprint dropping by an order of magnitude, it is a very big deal for us to get into volume production next. So this idea of learning from Raptor and getting ready for Cobra is the system we are following, and I think that's the right way to ramp production. Thanks so much.

Speaker Change: Clearly we deployed after the end of last year.

Speaker Change: And we have now integrated into settle Sendai ramping it and we need to make sure we get learnings from from Raptor.

Speaker Change: Corporate at the potential when you see the the heat treatment time being reduced by an order of magnitude and the equipment footprint dropping by an order of magnitude. It is a very big deal for us to get into volume production next year.

Speaker Change: So this idea of learning from Raptor and getting ready for the call, but that's the the the system. We are following and I think that's the right way to ramp production.

Speaker Change: Thanks, so much.

Speaker Change: Yeah.

Gabriel J. Daoud: And the next question of the day comes from Gabe Daoud with TD Cowan. Please proceed. Great, thank you. And Jagdeep, we'll miss you on these calls, and a simple congratulations on the new role. Kaj, I was hoping we could start with Alpha 2, seeing as that's the next iteration of your cell design. Could you just maybe talk a little bit about, well, first, I guess, have you paired the higher loading cathode with anything other than just the two-layer cell?

Speaker Change: Our next question today comes from Gabe Daoud with TD Cowen. Please proceed.

Gabriel J. Daoud: Okay. Thank you and.

Gabriel J. Daoud: We'll Miss you on these calls and I said the congrats on the on the new role.

Gabriel J. Daoud: I was just hoping we could start with alpha to.

Gabriel J. Daoud: That's the next iteration of your service.

Gabriel J. Daoud: Cell design could you just maybe talk a little bit about.

Well first I guess have you pared to higher loading tattooed with anything other than just the two layers. So would be interested in an update on that and then also if you could just talk about those efforts to incorporate the higher cathode loading with.

Gabriel J. Daoud: I would be interested in an update on that. And then also, if you could just talk about those efforts to incorporate the higher cathode loading with a greater level of layers, and maybe what some of the challenges are there, interface between the cathode and separator issues, as you noted, and are they issues with lack of uniformity with lithium plating and stripping? Just any kind of update on that undertaking would be helpful. Hey Gabe, it's Jack Deep.

Gabriel J. Daoud: A greater level of layers and maybe with some of the challenges are there or is it the.

Gabriel J. Daoud:

Gabriel J. Daoud: Interface between cathode and separator issues as you noted and is it issues with lack of uniformity with lithium cleaning and stripping just any kind of update on on that undertaking would be helpful.

Gabriel J. Daoud: Hey, Jade, it's J D. Let me go ahead and start and then I'll turn it over to Sarah to provide more color. So yeah, you're correct that we did develop the higher loading cathode last year, we reported on that I think on the Q1 call last year.

Jagdeep Singh: Let me go ahead and start, and then I'll turn it over to Siva to provide more color. So yeah, you're correct that we did develop the higher-loading cathode last year. We reported on that, I think, on the Q1 call last year, and we did ship that higher-loading cathode to customers. And then what Alpha 2 represents is exactly what you're saying. It's a multilayer version of that higher-loading cathode integrated with the advances in packaging that we refer to.

J D: And we did ship that higher loading capo to two customers.

Sarah: Then what alpha to represent us exactly what youre, saying, it's a it's a multilayer version of that higher loading cathode integrated with the advances in packaging that we referred to so remember.

Jagdeep Singh: So remember, going from the A0 prototype to the QSC product involves four major components, if you will. The first is a 24-layer design that we already showed in the A0 prototypes that we shipped back in 2022. The second is a higher-loading cathode that we developed and shared results of on the Q1 call a year ago. The third is the better packaging, which includes a number of different improvements from tighter margins, less overall volume in terms of the package that's more efficient and other things like that. Better current collectors.

Sarah: Going from the easier a prototype to QC product involves four major.

Sarah: Components. If you will the first is a 24 layer design that we already showed in the ACO.

Sarah: Types of we shipped back in and then 'twenty two the second is a higher loading cathode that we developed and shared with also.

Sarah: Q1 call a year ago.

Sarah: The third is the is the better packaging, which includes a number of different improvements from.

Sarah: Tighter margins.

Sarah: Less.

Sarah: Overall.

Volume in terms of the packages more efficient.

Sarah: Other things like that.

Sarah: Other current letters and the final thing is the retro films, which are obviously the building block for our long term.

Jagdeep Singh: And the final thing is the Raptor films, which are obviously the building block for our long-term, more scalable film production process. So those four things all have to come together to make a QSC5 prototype. And what we are doing with the Alpha 2 is integrating the higher-loading cathodes and the better packaging along with the multilayer design, which gives us confidence that we're tracking towards the QSC5 low-volume B0 prototypes that Siva referred to earlier. Siva, do you want to add to that at all?

Sarah: More scalable film production process. So those four things I'll have to come together to make a <unk> prototype and what we're doing with the alpha to integrating.

Sarah: The higher loading cathodes and the better packaging, along with the multi their design, which which.

Sarah: Which gives us confidence that we're tracking towards the <unk> five.

Sarah: Low volume B zero.

Speaker Change: Uh huh.

Speaker Change: Boro types that I referred to earlier the civil you want add to that at all.

Dr. Siva Sivaram: Thanks, Edwin. So you see this systematic approach over and over again. We had shipped the 24-layer A0 samples very end of 22, and we are going to be shipping low-volume B0 samples this year. We needed to have multiple steps in between as we integrate these important subcomponents, whether it is the hard-loading cathode or packaging, efficient packaging, or the Raptor. As we go along, we want to make sure we do deliver these samples to customers, make sure they get to test, and they give us You'll see this very, very often from us as we go forward.

Speaker Change: Thanks Eddie.

Speaker Change: So you see this systematic approach over and over again, we had shipped the 20 foot layout, Israel samples, where we ended up 22, and we're going to be shipping this year low volume B zero samples we.

We needed to have multiple steps in between as we integrate this important sub components, where they just had loading castles outer packaging efficient packaging or thereafter, as we come along we want to make sure. We do deliver these samples to customers make sure they get to test they give give us feedback you'll see this very often from us.

As we go going forward. So also two represents one of those big steps to make sure that we have the HUD loading canceled and in the packaging put together and then when we add the Raptor and then Oh, we get.

Gabriel J. Daoud: So Alpha 2 represents one of those big steps to make sure that we have the hard-loading cathode and the packaging put together, and then when we add the Raptor, then we get more towards the low-volume V0 production that happens later in the year. Thanks guys, that's helpful. So the low volume B0 prototype would that cell then more or less be pretty close to the targeted commercial energy density of about 800 watt hours per liter?

Speaker Change: More towards the low volume production that happens later in the year.

Speaker Change: Thanks, guys that's helpful.

Speaker Change: The low volume B zero prototypes.

Speaker Change: And then more or less be pretty close to the targeted.

Speaker Change: Commercial energy density of about 800 watt hours per liter.

Speaker Change: Yeah, so that that the we are defining the b's zero as essentially a cell that integrates before.

Jagdeep Singh: Yeah, so we're defining the B0 as essentially a cell that integrates the four component level improvements that I just mentioned, right? The 24-layer design, the higher loading cathode, more efficient packaging, and the new improved Raptor films. And if we do that, then you're absolutely right; we start to get into the zip code of the commercial target energy density for QSE5. There might be small variations, obviously, because it'll still be a prototype, a B sample, a B0 sample, not the commercial product. But the most important point there, Gabe, is that we will have those four building blocks integrated. And with that, we'll be essentially in the right zip code of energy density.

Speaker Change: Component level improvements that I, just mentioned right. The 24 are designed to higher loading cathode more efficient packaging and the new improved Raptor films and if we do that then you're absolutely right. We start to get into the ZIP code of the commercial targeted at your density <unk> five.

Speaker Change: There might be small variations, obviously, because it'll still be a prototype of b sample b zero sample not not a commercial product, but the most important point there. It gave us that we will have.

Speaker Change: Those four building blocks integrated and with that will be.

Speaker Change: Essentially in the right ZIP code of energy density.

Gabriel J. Daoud: Awesome. That's great to hear. Just one last quick one for me.

Speaker Change: Awesome, that's great to hear just one last quick one for me.

Gabriel J. Daoud: Just on the separator manufacturing Cobra. Oh, sorry, Raptor, Target getting to 15,000 starts a week, Cobra, just under 100,000. Any thoughts on, I guess, yields and what yields look like off those starts? I know initially, they would probably be pretty low, but just curious if you could help us think about that a bit more.

Speaker Change: Just on the separate and manufacturing Cobra, Oh, sorry, rather target getting to 50000 starts a week Cobra just under 100000.

Speaker Change: Any thoughts on I guess yields and what the yields look like after it starts I know initially would probably be pretty low, but but just curious if you could help us think about that a bit more thanks guys.

Dr. Siva Sivaram: Thanks, guys. Yeah, just to be clear, we have said Raptor produces 3x our current existing process stats, and Cobra can be an order of magnitude higher. We are not exclusively giving stats and yield numbers specifically in this, but you can see when you increase productivity by orders of magnitude, that's a very, very important step for us. So we will be receiving Cobra equipment towards the end of the year. We want to make sure all the upstream and downstream steps are integrated.

Speaker Change: Yeah, just to be clear, we have said that it produces three X our.

Speaker Change: The existing process starts and and co brand can be an order of magnitude higher.

Speaker Change: We are not explicitly giving start some yield numbers specifically in this but you can see when you increase productivity in like orders of magnitude. That's a very very important step for us.

Speaker Change: So we will be receiving cobra equipment towards the end of the year, we want to make sure all of the upstream downstream steps are integrated. So we are so that we can be ready for production with it next year.

Jagdeep Singh: So we are so that we can be ready for production with it next year. And Gabe, if I can just add, if you look at the chart in our shorter letter that talks about the key indicators of process scalability, you see, as Silva mentioned, that the processing time for COBRA, compared to what we do today, is an order of magnitude lower, which means orders of magnitude better. And independently of that, the equipment footprint is also an order of magnitude smaller, right?

Speaker Change: And Dave if I can just add if you look at the chart in our shareholder letter that talks about the key indicators of process scalability.

Speaker Change: So as I mentioned that the processing time for Cobra compared to what we do today is an order of magnitude lower which means earned back to better.

And independently of that the equipment footprint is also an order of magnitude better right. So when you look at when you look at the total capability of the process in a given amount of space. It really is.

Benjamin Joseph Kallo: So when you look at the total capability of the process in a given amount of space, it really is a compellingly better process that we're super excited about, relative to getting to the gigawatt hour scale. Thanks, guys. Our next question today comes from Ben Kallo with Bayard. Please proceed. Hey, good evening.

Speaker Change: A compellingly better process that we're super excited about relative to getting to a gigawatt hour scale.

Speaker Change: Thanks Scott.

Speaker Change: Our next question today comes from Ben <unk> with Baird.

Ben: Please proceed.

Ben: Okay.

Ben: Good evening. Thank you.

Dr. Siva Sivaram: Thank you, Jagdeep, for everything. Dr. Siva, welcome. I wanted to ask just about the background.

Ben: Through deeper on for Greg.

Ben:

Ben: Roku.

Speaker Change: I wanted to ask just about the backdrop, we read all these things grow.

Dr. Siva Sivaram: We read all these things about, you know, going white, EBs, you know, demand being down, but I know a lot of it is just headlines, but how that impacts your discussions and business development. Yes. Obviously, we've been talking very closely with our customers, and indeed it's true that there is short-term turbulence in the marketplace, but the secular long-term trend in EVs continues to be very robust, and our customers and their confidence reflect that, as we work with them for the long term, they are as pumped up about what we are able to deliver as they have always been. So we continue to work with them closely. We do watch the markets in the short term, but I think our focus is on this secular long-term trend of increasing EV adoption across all markets. And just on that front, you said all markets. Do you focus on one market in particular? I know China is probably stronger than Europe, or is that up to your customers?

Speaker Change: UBS.

Speaker Change: Yeah.

Speaker Change: No.

Speaker Change: Hey, Lloyd.

Speaker Change: But how that impacts.

Speaker Change: Oh your discussions.

Speaker Change: Business to grow.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: Obviously, we've been talking very closely with our customers and indeed, it's true that this short term turbulence in the marketplace.

Speaker Change: But the secular long term trend in <unk> continues to be very robust and our customers and they had confidence reflects that.

Speaker Change: As we work with them for the long term they are as pumped up about what we are able to deliver as they have always been so we continue to work with them closely we do watch the markets in the short term, but I think our focus is on this secular long term trend of increasing <unk> adoption across all markets.

Speaker Change: Just on that front to use it in all markets.

Do you focus on.

Speaker Change: On one particular trend is probably stronger.

Speaker Change: Europe.

Speaker Change: Sure.

Speaker Change: Customers.

Dr. Siva Sivaram: Yeah, I should not be talking for our customers. You should ask the question of our customers, but our main customers are global players who have businesses across all marketplaces, and their demand to us aggregates all these as they talk. And you guys have a very good cash balance, but how do we think about it being deployed over 24 CapEx and Acapital needs going forward? Thank you. Ben, thank you for the question. We ended the year with approximately a billion and seventy million dollars, which we think is a strong cash balance for this transition phase going from prototype to product. We provided guidance for the year for CapEx of between $70 and $120 million and adjusted EBITDA guidance of between $250 million and $300 million, which combined together provides a cash runway into the second half of 2026.

Speaker Change: Yeah.

Speaker Change: I should not be talking for our customer. So you should ask the question of our customers, but our main customers are global players who have businesses across all marketplaces and their demand with aggregates all of these as they talk to us.

Speaker Change: You guys have.

Speaker Change: Very good cash balance, but how do we think could be deployed.

Or.

Speaker Change: Capex.

Speaker Change: The company will be going forward. Thank you.

Speaker Change: Ben Thank you for the question Yeah, we are.

Speaker Change: We ended the year with approximately a billion dollars $70 million, which we think is a strong cash balance for this transition phase going from prototype to product.

Speaker Change: We provided guidance for the year for Capex of between 70, and $120 million and adjusted EBITDA guidance of between 250.

<unk> million dollars and $300 million loss.

That combines together.

Speaker Change: Two a cash runway into the second half of 2026, and we did note in the letter that that is an extension of a further two quarters relative to the prior guidance. So while we haven't given.

Kevin Hetrick: And we did note in the letter that that is an extension of a further two quarters relative to the prior guidance. So while we haven't given interim detail in the periods outside of 2024, we have updated the aggregate cash runway guidance. Please be kind.

Speaker Change: Interim.

Speaker Change: Detail in the periods outside of 2024, we have updated the aggregate.

Cash runway guidance.

Okay.

Speaker Change: Okay.

Jed Dorshimer: Our next question today comes from Jed Dorsheimer, and William Blair is here to present it. Thank you. Thank you. You have Mark Shooter on for Jed Dorsheimer here.

Speaker Change: Our next question today comes from Jed <unk> with William Blair.

Jed: Please proceed.

Jed: Alright here of Mark shooter on for George Farmer.

Mark Trevor Delaney: I just want to reiterate what other analysts' sentiments here, congratulating you both, Jed and Steve. Thinking about the amp-hour size of your cells, there's obviously some energy density efficiencies that can be gained from larger cell sizes, and my understanding is that the limiting factor here is the area of the separator.

Jed: Just want to reiterate what other analysts sentiments here congratulating to both Jack and CEVA.

Speaker Change: Thinking about the.

Mark: Empower size of yourselves, there's obviously some energy density efficiency that can be gained from larger cell sizes and.

Mark: My understanding is that the limiting factor here is the area of the of the separate or not that you can't make larger but there is a optimization function. There. So can you walk us through some of the offsets between.

Jagdeep Singh: Not that you can't make larger, but there's an optimization function there. So can you walk us through some of the offsets between Cost and Yields versus the Energy Density Benefits you may go, or you may get from going to a larger cell size with a larger area separation? Yeah, it's a great question.

Mark: Cost and yields versus the energy density benefits. You May go are you may get from going to a larger ourselves with a larger areas separately.

Speaker Change: Yes, it's a great question, thanks for asking so.

Jagdeep Singh: Thanks for asking. So you're absolutely right that for any given architecture, if you go into a larger package, the ratio of package inactive materials to electrodes and active materials gets more favorable, and so you will get an energy density advantage by going to a bigger cell, just because there's less spinach and unnecessary, you know, sort of componentry in the cell. Having said that, our mission was to get our first product to market as quickly as possible, and we wanted to minimize how many changes we made to the design and the form factor we were already working on. So, the reason why the QSE5 is in the form factor that it's in is largely because that was the form factor we had identified as our initial A sample early on, and all of our manufacturing capability was designed around that particular form factor.

Speaker Change: You're absolutely right that for any given.

Speaker Change: Architecture.

Speaker Change: If you go into a larger package the ratio of.

Speaker Change: Package inactive materials to electrodes and active materials gets more favorable and so you will get an energy density advantage.

Speaker Change: By going to a bigger sell just because there's less spinach and unnecessary.

Speaker Change: Sort of.

Speaker Change: Componentry and the cell.

Speaker Change: Having said that our mission was to get.

Speaker Change: Our first product to market as quickly as possible and we wanted to minimize how many changes we made to the design and the form factor. We are already working on so the reason why the <unk> five is in the form factor that it's in.

Speaker Change: Is largely because that was the fourth factor we had identified as our initial sample early on and all of our manufacturing capability was designed around that particular form factor. So.

Jagdeep Singh: So, rather than change the form factor and incur a number of unnecessary delays as we read it through the tooling and so on, we wanted to just focus on time to market and deliver a cell in that same form factor. The good news is that even within that smaller form factor, we see very compelling numbers. In one of our previous, in the Q223 short letter, you'll see a chart on page three, I think, that shows you that we believe we can get to a pretty unique combination of energy and power in that form factor. So, even the 5 amp power form factor, which is about as much energy as you get in a 2170 cell, the one that's used in the Model 3, for example, the Tesla Model 3, you basically can get to, you know, on the order of 800 or more watt hours per liter while still targeting 15-minute charge times.

Speaker Change: Rather than change the form factor and incur a number of.

Speaker Change: Sorry delays as we read it tooling and so on we wanted to just focus on time to market and deliver a cell.

Speaker Change: And that's the important factor the good news is we even within that smaller form factor, we see very compelling numbers and one of our previous in the Q2 'twenty three short letter you'll see a chart on page three I think.

Speaker Change: That shows you that we believe we can get to a pretty unique combination of energy of power in that form factor, even the five amp power form factor.

Speaker Change: This is about as much energy as you get into 'twenty 170 sell to one that's using the model III for example, the Tesla model three.

Speaker Change: You basically can get to.

Speaker Change: The order of 800 or more watt hours per liter, while still targeting 15 minute charge times.

Dr. Siva Sivaram: To our knowledge, that's a unique part of the curve. All of the other major EV cells that are out there can either get energy or power, but not both simultaneously. And then having said that, the roadmap absolutely allows for us to get to higher energy densities simply by increasing the form factor. So, even with no fundamental changes to the chemistry, simply by going to larger separator films and larger cell packaging, you end up improving the ratio of active to inactive materials in the cell and thereby improving the overall energy density. So, that's something that's very much on the roadmap, and it's just a matter of sequencing what we do so we can focus on getting to market without unnecessary delays. Oh, that's great. Thanks to the caller.

To our knowledge, that's the unique part of the curve.

Speaker Change: All of the other major Evs EV cells that are out there.

Can either get energy or power, but but not both simultaneously and then having said that the roadmap absolutely allows for us to get to higher energy density simply by increasing the form factor so even with even with no fundamental changes to the chemistry simply by by going to larger separate our films and larger sell packaging.

Speaker Change: You end up improving the.

Speaker Change: Ratio of active to inactive materials in the cell and thereby improving the overall energy density. So that's something that's very much on the roadmap and it's just a matter of.

Speaker Change: <unk>.

Speaker Change: Sequencing, what we do so we can focus on getting to market without unnecessary delays.

Speaker Change: Oh, that's great. Thanks for the color.

Dr. Siva Sivaram: There's a follow-up here talking about Raptor and Cobra. There's obviously a large development that's occurred in the sintering process. Unfortunately, with all things batteries, there's often a performance downside to every improvement you make in one area. Did you touch on any of the challenges you've had, and what do you want to see from the material set in Raptor that gives you the green light? for COBRA? Is it things like, does the void space change? Does the lithium conductivity change because you're the faster sintering? Any color on that would be great.

Speaker Change: As a follow up here talking about wrapped around Cobra, there's obviously a large development that's occurred in our sintering processes of the heat treatment.

Speaker Change: Unfortunately, with all kinds of batteries.

Often our performance negative side to every improvement you're making one area.

Speaker Change: You touch on any of the challenges you've had and what do you want to see from the material set and our Raptor that gives you the green light.

Speaker Change: For Cobra or is it things like Theres, a void space changed the lithium connectivity gains because of the faster.

Speaker Change: Centering anything any color on that would be great. Thanks, guys.

Dr. Siva Sivaram: Thanks guys. Even though the heat treatment time has dramatically been reduced. We have not changed the composition of the films, which continue to be refined as our needs evolve. Both the Raptor films, which we have already integrated and ourselves satisfied that it meets our needs, we continue to follow this very, very closely with Cobra. Like any step change, production change thing, you know there are going to be difficulties as you ramp them up. And we, as careful development engineers, do go back and systematically analyze them to make sure that we are doing the right things to scale up. As of now, we don't see anything that is a blocker for that.

Speaker Change: Even though the.

Speaker Change: Heat heat treatment time has dramatically reduced we have not changed the composition of the films, which continued to be refined as I said as their needs evolve.

Speaker Change: The Raptor films, which are already integrated and put ourselves satisfied that it meets their needs.

Speaker Change: We continue to follow this very very closely with Cobra like Amy step change production change things you know that are going to be difficulties as you ramped them up.

Speaker Change: And we as a scaffold development engineers, we do go back and systematically analyze them to make sure that we are doing the right things to scale up as of now we don't see anything that is a blocker for that we are doing very well in this that's the reason we are putting a priority on getting cobra into production as soon as possible.

Dr. Siva Sivaram: We are doing very well with this. That's the reason we are putting a priority on getting COBRA into production as soon as possible. But it is an order of magnitude improvement in productivity.

Speaker Change: And but it is there.

Speaker Change: Order of magnitude improvement in productivity so it makes it.

Wesley Brooks: So it makes it very attractive for us to implement it into production as soon as possible. Our next question of the day comes from Wesley Brooks with HSBC. Please proceed. Hi guys, thanks for the question and congrats on the new roles. So firstly from me, are there any key timelines that you can provide us for these goals during the year? I mean, particularly on shipping the A2 cells and kind of when we should expect feedback on that and then kind of when we should expect that low volume production to get off the ground, or we just kind of, Yeah, we just kind of wait to see as you go through it. As we have said in our shareholder letter, we expect low volume B0 production for this calendar year, and that's the guidance we have given, and all in between steps, such as the shipping We'll keep you updated as we achieve each of these milestones through the year. But for now, our guidance is to say that we will be in low volume production in calendar 2024.

Speaker Change: Very attractive for us to implement into production as soon as possible.

Our next question today comes from Wesley Brooks of HSBC.

Wesley Brooks: These proceed.

Wesley Brooks: Hi, guys. Thanks for the question and congrats on the new.

Wesley Brooks: The new rules.

Wesley Brooks: So lastly for me could.

Wesley Brooks: Could you.

Wesley Brooks: Are there any key timelines.

Wesley Brooks: Can provide us for these go through the year, I mean, particularly on shipping the <unk> and and kind of when we should expect feedback on that and then trying to when we should expect low volume production once we get or we just kind of yes.

Wesley Brooks: Yes.

Wesley Brooks: We just kind of wait to see as you as you go through it.

Wesley Brooks: As we have said in our shareholder letter, we expect low volume visitor production for this calendar year and that's the guidance we have given.

Wesley Brooks: And all in between steps suggests the shipping of Alpha two and ramping raptor into production.

Wesley Brooks: And getting Cobra into into onsite, we will keep you keep you updated as we achieve each of these milestones through the year, but for now our guidance is to say that we will be in low volume production in calendar 2024.

Dr. Siva Sivaram: Okay, understood. And then, you know, kind of a follow-up, you talked about the four key building blocks, obviously, the packaging, the high load cells. Yeah, the Raptor.

Speaker Change: Okay understood.

Speaker Change: Yes kind of a follow up you talked about the full key building blocks, obviously in the packaging the high load cells.

Yes.

Speaker Change: Russert.

Dr. Siva Sivaram: I mean, are there any other key technological challenges that still need to be resolved? Or is it really just kind of putting these all together and figuring out how to do that, you know, kind of efficiently and, and well? So we are making that big transition from having developed individual components to making a product, the QSC-5. I do not want to minimize, for instance, the reliability improvements that we need to make.

Speaker Change: Are there any other key technological challenges that still need to be resolved.

Speaker Change: Or is it really just kind of putting these all together and figuring out how to.

Speaker Change: How do you do that.

Speaker Change: Kind of fishing.

And well.

Speaker Change: So we are making that big transition from having developed individual components into making our product the <unk> five.

Speaker Change: Hi.

Speaker Change: I do not want to minimize for instance, the reliability improvements that we need to make as.

Dr. Siva Sivaram: As we increase the volumes, we will make sure we continue to monitor productivity increases, particle reduction, variability reduction, and process control. These things do take time, so I don't want to minimize the amount of work that goes into making that happen. The individual components, as we said, the higher loading cathode, the better packaging efficiency, and the Raptor films.

Speaker Change: As we increase the volumes, we will make sure we continue to monitor productivity increases particle detection variability introduction process control. These things do take time, so I don't want to minimize the amount of work that goes into making that happen. The individual components as we said the higher loading castle.

Speaker Change: The better packaging efficiency. The Raptor films, we have the 24 layer on we've shown all of these independently like USC five puts these together the devil is going to be in the details of getting all of this together and ramped in volume.

Dr. Siva Sivaram: We have the 24th layer on. We have shown all of these independently. The QSC5 puts these together. The devil is going to be in the details of getting all of this together and ramped up in volume. And so I don't want to come back and say that to minimize the number of challenges. Go to Beadaholique.com for all of your beading supplies needs!

Speaker Change: And so I don't want to come back and say that.

Speaker Change: To minimize the amount of challenges ahead of us.

Wesley Brooks: Great, that's understood. Thank you. Our next question today is a follow-up from Gabriel Daoud with TD Cal. Pleased to see you. Guys, just wanted to hop back on and ask a quick one. Could you maybe confirm or curb any kind of confusion around the prospective automotive launch customer for QS E5? Is that still the same?

Speaker Change: Okay.

Speaker Change: Great. That's understood. Thank you very clear.

Speaker Change: Our next question today is a follow up from gaped out with TD Cowen. Please proceed.

Speaker Change: Yeah.

TD Cowen: Thanks, guys just wanted to hop back on and ask a quick one could you maybe confirm or or curb any kind of confusion around.

TD Cowen: The perspective automotive launch customer for <unk> five.

Gabriel J. Daoud: And is that prospective launch customer VW or Powerco? Thanks. Yeah, we have not explicitly called out who our launch partner is. All I can say is, in the last four months that I have been here working with JetDeep, I have spent a lot of time with the customer. The customer continues to be as excited as always to get this launched. As we get close to it, we will disclose, with their permission, who the launch partner is. Got it, got it.

TD Cowen: Is that still the same and as that prospective launch customer VW or power curve. Thanks.

Speaker Change: Yeah, we have not explicitly called out who are <unk>.

Speaker Change: Launch partner is all I can say is in the in the last four months that I haven't had working with Debbie.

Speaker Change: I have spent a lot of time with the customer the customer continues to be asics aided us all the way is to get this launch as we get close to it we will we will disclose with their permission on who the launch partner.

Dr. Siva Sivaram: Thanks for the, Thank you for your questions. There are currently no questions registered, so as a reminder, it is Star 1 to ask a question. Thank you. With that, I'd like to thank all of you for joining us. I'd also like to thank our team for their excellent work this quarter, and we thank our shareholders for their continuing support of our mission. We look forward to sharing more as we continue to move forward. Thank you all. That will conclude today's conference call. Thank you all for your participation. You may now disconnect your line.

Speaker Change: Got it got it thanks for that.

Speaker Change: Thank you for your question.

Speaker Change: There are currently no questions registered so as a reminder, it is star one to ask a question.

Speaker Change: Yeah.

Speaker Change: Thank you with that I'd like to thank all of you for joining US I would also like to thank our team for their excellent work this quarter and we thank our shareholders for their continuing support of our mission. We look forward to sharing more as we continue ahead. Thank you all.

Speaker Change: That will conclude today's conference call.

Speaker Change: Thank you all for your participation you may now disconnect your line.