Q1 2024 SES AI Corp Earnings Call
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Thank you all for standing by for todays conference call with Ses.
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Operator: We will be beginning today's conference call shortly. Thank you again for standing by and we will be beginning in a few moments. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Good morning all.
Speaker Change: Thank you again for standing by and we will be beginning in a few minutes time.
Speaker Change: [music].
Speaker Change: Good morning, all.
Prika: I would like to welcome you all to the SES First Quarter 2024 Business and Financial Results Call. My name is Prika, and I will be your moderator for today's call. All lines are on mute for the presentation portion of the call, with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by 1 on your telephone key. If you change your mind, please press the star, then two.
Speaker Change: I would like to welcome you all to the F E S basketball attached twenty-twenty for business and financial results call.
breaker: My name is breaker and I will be your moderator for today's call.
breaker: All lines all Amit the presentation portion of the cool.
breaker: What are the opportunity for questions and answers at the end.
breaker: Okay.
Speaker Change: If you would like to ask a question. Please press star followed by one on your telephone keypad. If you change your mind. Please press Star then two.
Prika: And for operator assistance at any point during the call, please press star, then zero. Thank you. I would now like to pass the conference over to your host, Carl Pilkington, Chief Executive Officer, to begin. So, Carl, please go ahead.
Speaker Change: And for operator assistance at any point during the call. Please press star and Gateway.
Speaker Change: Keith.
Speaker Change: I would now like to pass the conference over to your host call Pilkington Chief Executive Officer to begin so call. Please go ahead.
Carl Pilkington: Hello, everyone, and welcome to our conference call covering our first quarter 2024 results. Joining me today are Qichao Hu, Founder and Chief Executive Officer, and Jing Nealis, Chief Financial Officer. We issued our shareholder letter just after 4 pm yesterday, which provides a business update as well as our financial results. You'll find a press release with a link to our shareholder letter and today's conference call webcast in the investor relations section of our website at scs.ai.
Call Pilkington: Hello, everyone and welcome to our conference call covering our first quarter 2024 results. Joining me today are Chi Chow, who founder and Chief Executive Officer, and Jim Dallas, Chief Financial Officer, We issued our shareholder letter just after four P M yesterday, which provides a bit.
This update as well as our financial results, you'll find our press release, well linked to our shareholder letter and today's conference call webcast in the Investor Relations section of our website.
Call Pilkington: Yes.
Carl Pilkington: Before we get started, this is a reminder that the discussion today may contain forward-looking information or forward-looking statements within the meaning of applicable securities legislation. These statements are based on our predictions and expectations as of today. Such statements can involve certain risks, assumptions, and uncertainties, which may cause our actual or future results and performance to be materially different from those expressed or implied in these statements. The risks and uncertainties that could cause our results to differ materially from our current expectations include, but are not limited to, those detailed in our latest earnings release and in our SEC filing. This morning, we will review our business, as well as the results for the quarter. After that, I'll pass it over to Qichao.
Call Pilkington: Hi.
Call Pilkington: Before we get started this as a reminder, the discussion today may contain forward looking information or forward looking statements within the meaning of applicable securities legislation.
These statements are based on our predictions and expectations as of today.
Call Pilkington: Such statements can involve certain risks assumptions and uncertainties, which may cause our actual or future results and performance to be materially different from those expressed or implied in these statements the risks and uncertainties that could cause our results to differ materially from our current expectations include but are not limited to.
Call Pilkington: Those detailed in our latest earnings release and in our SEC filings. This morning, We will review our business as well as the results for the quarter with that I'll pass it over to Chi Chow.
Qichao Hu: Good morning, and thank you for joining us on our call. Our mission is to power a new era of electric transportation on land and in the air with liquid metal batteries. That new era became a lot more visible in the past few weeks as we reached two significant milestones that we believe no other lithium metal battery manufacturer has ever reached before. We're excited to talk about these achievements in more detail today, as we believe the milestones reinforce our lead in the race to commercialize our lithium metal technology for both EV and UAM applications. I want our time this morning to center on how we got to this point and what it means for SESAI going forward.
Qichao Hu: Good morning, and thank you for joining us on our call.
Qichao Hu: Our mission is to power, a new era of electric transportation on land and in the air with lithium metal batteries.
Qichao Hu: That new era.
Qichao Hu: Can a lot more visible in the past few weeks as we reached two significant milestones that we believe no other lithium metal battery manufacturers has ever reached before.
We're excited to talk about these achievements in more detail today as we believe the milestones reinforced our lead in the race to commercialize our lithium metal technology for both EV and U N applications.
Qichao Hu: I want all the time this morning to center on how we got to this point and what it means for Ses AI going forward.
Qichao Hu: We have to talk about four pillars in the business to support our vision and we have made significant advancements in each one of this year lets talk about our core focus first.
Qichao Hu: We have talked about four pillars in the business that support our vision, and we have made significant advancements in each one this year. Let's talk about our core focus, the first EV. We have an extremely differentiated high-density battery technology platform that has been validated by JDA partners such as Hyundai, Honda, and GM. Our announcement last week that the JDA partnership with Hyundai is entering the next phase further validates our technology and capability to scale manufacturing to rapidly meet increased demand.
Qichao Hu: Yeah.
Qichao Hu: We have an extremely differentiated high density better technology platform that has been validated by J D. H partners, such as a 10 day Honda and G N.
Qichao Hu: Our announcement last week that the J&J partnership with Hyundai is entering the next phase further validates our technology and capability to scale manufacturing to rapidly meet increased demand.
Qichao Hu: This agreement represents two global firsts for SES AI and our industry. It is the first time a lithium metal battery manufacturer is building a line within an automotive OEM facility, and it makes us the only lithium metal battery company to have two B-sample development JDAs on the way. In the past few months, we have all seen coverage about how OEMs in the US are scaling back their EV ambitions.
Qichao Hu: This agreement represents two global first for Ses AI and our industry.
It is the first time it lithium metal battery manufacturer is building a line within automotive Oems facility.
Qichao Hu: And it makes us the only lithium metal battery company to have to be simple development JD is underway.
Qichao Hu: In the past few months, we have all seen coverage about how Oems in the U S are scaling back their EV ambitions. However.
Qichao Hu: However, Hyundai, already the second largest EV manufacturer in the United States, is focusing on becoming a top three global EV maker by 2030. They recently announced a $50-plus billion investment to increase their EV lineup to 31 models and additional personnel for research and development of new EVs and batteries. Honda announced last week that they are making a $15 billion investment in EV plants in Canada, reinforcing their commitment to very ambitious goals over the next decade.
Qichao Hu: However, Hyundai already the second largest EV manufacturer in the United States is focusing on becoming a top three global EV maker by 2030.
Qichao Hu: They've recently announced a 50 plus billion dollar investment to increase the EV lineup to 31 models and additional personnel for research and development of new Evs and batteries.
Qichao Hu: Honda announced last week that they were making a $15 billion investment in EV plants in Canada, reinforcing their commitment to very ambitious goals over the next decade.
Qichao Hu: I can't emphasize enough the significance of moving into the next phase of our joint development contract with Hyundai and the confidence Hyundai has placed in SES AI's technology and capability. While Hyundai will fund the development of the dedicated B-Sample facility in their electrification research center in Ulleung, South Korea, SCSAI will be investing in building and operating one of the largest capacity lithium metal lines in the world within this new facility. We expect this line to be ready early in the fourth quarter of this year, with our avatar AI infrastructure ready several months thereafter.
Qichao Hu: I can't emphasize enough the significance of moving into the next phase of our joint development contract with Hyundai and the confidence <unk> has placed in CSA ice technology and capabilities.
Well Hell date will fund the development of the dedicated Dissemble facility in the electrification Research center in <unk> South Korea.
Qichao Hu: She is AI it will be investing in building and operating one of the largest capacity lithium metal lines in the world within this new facility.
We expect this line to be ready early in the fourth quarter of this year with our avatar AI infrastructure ready several months thereafter.
Qichao Hu: The increased production allows for more training of our avatar AI in addition to more tests. The testing we will be conducting will be on the performance lifecycle. We will test the cells to the extreme to understand where they fail.
Qichao Hu: The increase production allows for more training of all advertising AI. In addition to more testing.
Qichao Hu: The testing we will be conducting will be on the performance lifecycle, we will test the cells to the extreme to understand where they fail. This process is similar to what we're doing on the all other b simple agreement.
Qichao Hu: This process is similar to what we're doing under our other B-sample agreement. Operating this P-sample line in Hyundai's U1 facility will be good practice for what we plan to do with C-sample and beyond, especially with the joint ventures we've mentioned in the past that we believe can help us support the large scale needed for startup production. Second, UAM.
Qichao Hu: Operating in this fee simple line in how this facility will be good practice for what we plan to do with C sample and beyond.
Qichao Hu: Especially with the joint ventures, we've mentioned in the past that we believe can help us support the large scale needed forced out of production.
Qichao Hu: Second.
Qichao Hu: Yeah.
Qichao Hu: While EV is the core focus, we are very committed to Urban Air Mobility, or UAM, as an exciting application for our lithium metal batteries. It's the second pillar of our mission. UAM is an adjacent growth opportunity that requires little additional development beyond what we are already doing for EV, and we believe it is a perfect fit for lithium metal. When I say a little additional development, I mean that the B-sample cells we have delivered for EV are nearly equivalent to commercial production for UAM. With two B-sample agreements going, we can apply those learnings to UAS. UAM operates on a fleet model where revenue per passenger per mile is the primary metric, and weight is a primary concern.
Qichao Hu: Well EV is the core focus we are very committed to urban air mobility or UN as an exciting application for our lithium metal batteries is the second pillar to our mission.
Qichao Hu: I am isn't adjacent growth opportunity that requires little additional development beyond what we're already doing for Evs.
Qichao Hu: And we believe it is a perfect fit for lithium metal.
Qichao Hu: When I say, a little additional development I mean that would be sample cells. We have deliver for EV are nearly equivalent to commercial production for UAS.
With to be simple agreements volume, we can apply those learnings to uhm.
Qichao Hu: Uhm operates on a fleet model where revenue per passenger per mile is the primary metric and wait as their primary concern.
Qichao Hu: Lithium metals' energy density means that aircraft can carry twice the number of passengers or double the amount of cargo or double the number of miles. This step change greatly improves UAM operators' profitability. As the first mover in this space, it also means we have an opportunity to make this market. We're already seeing strong demand from OEMs and have a growing number of sale, sampling, and supply agreements with the top five OEMs. I would also note that our partner Hyundai has been very aggressive and has demonstrated commitment to UAF. We have already started work on converting our EVA sample line in Korea to a UAM dedicated line, which we expect to complete in September. Third, AI.
Qichao Hu: Metals energy density means that aircraft can carry twice the number of passengers will double the amount of cargo will double the number of miles.
Qichao Hu: This step change greatly improves uhm operator's profitability.
Qichao Hu: The first mover in this space. It also means we have an opportunity to make this market.
Qichao Hu: We're already seeing strong demand from Oems and have a growing number of cell standpoint, and supply agreements with top five Oems.
Qichao Hu: I would also note that our partner <unk> has been very aggressive and has demonstrated a commitment to you and we have already started work on converting our EV a simple eye in Korea to a dedicated line, which we expect to complete in September.
Qichao Hu: Third AI.
Qichao Hu: To ensure practical safety across all our product lines, especially as we prepare for sea trials and commercial deployment, we have significantly expanded the use of avatar AI to monitor battery health and predict. Our lithium metal large-scale avatar AI prediction accuracy increased from just 60% in 2022 to 92% last year. Our target is 95% accuracy by year-end. Ultimately, we aim to achieve a near 100% safety guarantee for EV and UAM and pioneer the foundation for using AI for future electrolyte development.
Qichao Hu: To ensure a practical safety across all our product lines, especially as we prepare for see sample in commercial deployment, we have significantly expanded the use of avatar AI to monitor battery health and predict incidents.
Qichao Hu: Lithium at a large scale avatar AI prediction accuracy increased from just 60% in 2020% to 292% last year.
Qichao Hu: Our target is 95% accuracy by year end.
Qichao Hu: Ultimately, we aim to achieve a near 100% safety guarantee for EV and UAS.
And pioneer the foundation for using AI for future roadmap electrical that development.
Qichao Hu: With Avatar AI, we're building more than just a battery. We are laying out a super intelligent AI for electric transportation. Our new electric foundry is now fully operational, and we can test new ideas generated by both humans and AI much faster. We are curating several large molecular databases and systematically screening them using both classical physics simulation and machine learning. The goal is to map the relevant small molecular universe.
Qichao Hu: With Avatar AI, we're building more than just a battery company, we're laying out a super intelligent electric transportation.
Qichao Hu: Our new electric foundry is now fully operational and we can test new ideas generated by both humans and AI at much faster. We are curating, several large molecular databases and systematically screening them using both classical physics simulation and machine learning.
The goal is to map the relevant small molecular universe, we're very excited to collaborate with several leading research groups on board computing power and machine learning tools.
Qichao Hu: We're very excited to collaborate with several leading research groups on both computing power and machine learning tools. AI for Science is a feature of material discovery. And SES AI integrates the world's leading machine learning scientists, battery domain experts, and an advanced chemical synthesis and cell testing facility. This gives us an ability to innovate and improve our products for EV and UAM at a pace that we believe is unprecedented in the industry. Fourth, sustainability.
Qichao Hu: The science is the future of material discovery and integrates the world leader in machine learning scientists battery domain experts and advanced chemical synthesis and cell testing facility.
Qichao Hu: This gives us an ability to innovate and improve our products for E V. A UAS at the pace that we believe is unprecedented in the industry.
Qichao Hu: Fourth.
Qichao Hu: And the ability.
Qichao Hu: Lastly, we're integrating sustainability into our operations and innovation to enable supply chain efficiencies to accelerate production timelines and reduce costs. We recently announced that we will fund a new research initiative at Worcester Polytechnic Institute, WPI, to develop state-of-the-art recycling technology for lithium metal. Recycling for lithium ion batteries exists at an early stage, but recycling technology for lithium metal batteries has not yet been developed. Recycling lithium metal batteries can be critical in the reduction of the shortage of raw materials and environmental problems.
Qichao Hu: Lastly, we're integrating sustainability into our operations and innovation to enable supply chain efficiencies to accelerate production timelines and reduce costs.
Qichao Hu: We recently announced that we will fund a new research initiative that will serve Polytechnic Institute of API to develop state of the art recycling technology for lithium metal.
Qichao Hu: To date.
Recycling for lithium ion batteries exists at an early stage, but recycling technology for lithium metal batteries has not yet been developed.
Qichao Hu: Recycling lithium metal batteries that can be critical in the reduction of the shortage of raw materials and environmental problems.
Qichao Hu: Another initiative we're pursuing is working on dry electrodes that can reduce chemical solvent evaporation. We expect to announce a collaboration partner on this effort in the not-too-distant future. As a real-time example of integrating environmental efforts into our business, we recently announced SCS CARES.
Qichao Hu: Another initiative, we are pursuing is working on dry electrodes that can reduce chemical solvent evaporation.
Speaker Change: We're excited to announce a collaboration partner on this effort in the not too distant future.
Speaker Change: In a real time example of integrating environmental efforts into our business, we recently announced SCS cares.
Qichao Hu: This initiative partners with organizations that monitor forest fires and protect marine animals to power advanced drones with our lithium metal A and B sample cells and collect field data to train avatar AI. We will have more details on this initiative and our much broader sustainability strategy when we post our first sustainability report at the end of May. 2024 goals
This initiative partners with organizations that monitor forest fires and protect marine animals to power advanced drones, with our lithium metal a and b sample cells and collect field data to train Avatar AI.
Speaker Change: We will have more details on this initiative and our much broader sustainability strategy will be post our first sustainability report at the end of May.
Qichao Hu: We noted last quarter that 2024 will be a key year in the commercialization of lithium metal batteries, and we're very pleased with the execution so far on our annual goals. We have become the world's first liquid metal battery manufacturer to have two B-samples underway, and we expect to become the first to build a line within an OEM facility. With Avatar AI, we expect to produce the highest number of sales this year with a higher number of associated quality checks than ever before.
Speaker Change: 2024 goals, we noted last quarter that 2024 will be a key year in the commercialization of lithium metal batteries and we're very pleased with the execution so far on our annual goals.
Speaker Change: We have become the world's first look at metal battery manufacturer to have to be sample underway and we expect to become the first to build a mine within an oem's facility.
Speaker Change: With Avatar AI, we expect to produce the highest number of cells. This year with a higher number of associated quality checks than ever before.
Qichao Hu: This increase in data will help to improve Avatar AI's accuracy. As we look to accelerate future electrolyte discoveries, we're also training and developing new AI models and testing new ideas generated by these models in our electrolyte foundry. I'll now turn it over to Jim for a brief discussion of our financial. Thank you, Qichao.
Speaker Change: This increase in data will help to improve avatar ai's accuracy.
Speaker Change: As we look to accelerate future electrified discoveries, we're also training and developing new AI models and testing new ideas generated by these models, you'll actually I foundry.
I'll now turn it over to Jim for a brief discussion of our financials.
Jing Liu Nealis: Thank you, Qichao. Good afternoon, everyone.
Jim Dallas: Thank you Michelle good afternoon, everyone today I'll cover our first quarter 2024 financial results and discuss our operating and capital budget for full year 2024.
Jing Liu Nealis: Today I will cover our first quarter 2024 financial results and discuss our operating and capital budgets for full year 2024. In the first quarter, our GAAP operating expenses were $21.3 million, which included $4.8 million of stock-based compensation expense. Cash used in operations was $9 million as we received a $11 million payment from our OEM partner. Expenditures were $6.8 million.
Jim Dallas: In the first quarter, our GAAP operating expenses were $21 3 million, which included $4 8 million of stock based compensation expense.
Jim Dallas: Cash used in operations was $9 million as we received 11.
Jim Dallas: And payments from our OEM partners.
Jim Dallas: Capital expenditures were $6 8 million.
Jing Liu Nealis: We ended the first quarter with $319 million in liquidity. Our strong balance sheet will support the company as we stay on track to achieve our commercialization milestones. For the full year 2024, our financial guidance is unchanged. We continue to expect cash usage from operations to be in the range of 90 to 100 million and Capital Expenditures in the range of $20 to $30 million. We expect total cash usage for the year in the range of $110 to $130 million.
We ended the first quarter were 319, maryanne and liquidity a strong balance sheet, what's the point of the company at least stay on track to achieve our commercialization milestones.
Jim Dallas: For the full year of 2024, our financial guidance is unchanged.
Jim Dallas: We expect cash usage from operations to be in the range of 90 to 100 million and capital expenditures in the range of 20 to 30 million.
Jim Dallas: We expect total cash usage for the year in the range of 110 to 139 a M.
Jing Liu Nealis: As we continue to achieve the milestones we laid out, deepen our long-standing partnership with our OEM partners, and accelerate the Speed of Future Electrolyte Discovery, we're very focused on capital efficiency. Our priorities for 2024 are to attract top talent to support the strategic goals Qichao laid out earlier, build production capacities to deliver lead metal cells to our EV and UAN partners, and advance the use of AI for battery performance prediction as well as electrolyte material discovery as we stay at the forefront of battery material science innovation. With that, I will hand over to the operator to open up for questions.
Jim Dallas: As we continue to achieve the milestones we laid out deepen our long standing partnership with our OEM partner.
Jim Dallas: And accelerate the speed of future electrolyte discovery, we're very focused on capital efficiency.
Jim Dallas: Our priorities for 2024 are to attract top talent to support the strategic God keto laid out earlier.
Jim Dallas: Build production capacity to deliberately metals out.
Jim Dallas: R E D.
Jim Dallas: Ram partners.
Jim Dallas: And advanced the use of AI for battery performance prediction as well as electrical that material discovery, absolutely stay at the forefront of battery material science innovation.
Speaker Change: With that I'll hand, the call back to the operator to open up for questions.
Speaker Change: Thank you.
Operator: If you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind at any time, please press star then 2. We have the first question from Jed Dorsham Hill on behalf of William Blair. The line is open.
If you would like to ask a question. Please press star followed by one on your telephone keypad now.
Speaker Change: If you change your mind any time please Mr Linton.
Speaker Change: We have the first question from Jeff <unk> from William Blair.
Jeff: Line is open.
Mark Shooter: Hi, everyone. You have Mark Shooter on for Jed.
Alright, everyone you have mark shooter on project.
Mark Shooter: Congratulations again on the B-Sample JDA with Hyundai. I wanted to see if there were any differences between the partnership that you see because you know with Hyundai you're going to be in their facility. That's different with the other OEM you're working with. So could you give us a little color on the compare and contrast those two relationships and any differences you might see between them?
Jeff: Congrats again on the <unk> sample J D with R&D.
I wanted to see if there is any differences between the partnership that you see.
Speaker Change: I know youre going to be in their facility.
Speaker Change: With the other Oems Youre working with so could you give us a little color on the compare and contrast, those two relationships.
Speaker Change: Any differences you might see between them.
Qichao Hu: Yeah, Mark. So the two are similar in terms of production capacity and then also the final specifications, and they're different in the following ways. One is the Hyundai one is in their facility.
Speaker Change: Yes.
Speaker Change: Sure.
Speaker Change: So the.
Speaker Change: The two are similar in this in terms of.
Speaker Change: Production capacity and then also the final specs.
Speaker Change: They are different.
Speaker Change: In the falling of ways. One is the foundry ones is in their facility, so, especially when it comes to installing avatar AI.
Qichao Hu: So especially when it comes to installing Avatar AI, you have to install that on their IT infrastructure. That does create some complexity compared to the other one, where we do everything on our own infrastructure. So this is one issue we're still trying to sort out, and this Avatar AI basically has to deal with quality, with equipment, with all the data in every process, every step of the entire assembly. So this is probably the biggest difference that we have, this Avatar AI just on someone else's IT infrastructure.
Speaker Change: So when you have to install on their infrastructure that does create some complexity compared to the other one will be do everything on our own infrastructure. So this is a.
Speaker Change: Is the one issue with so trying to sort out.
Speaker Change: Avatar AI basically.
Speaker Change: How should you with quality was equipment with with all the data in every process every step of the entire <unk>.
Speaker Change: Assembly.
Speaker Change: That's probably the biggest.
Speaker Change: Difference that we have.
Speaker Change: On someone else's infrastructure.
Qichao Hu: And also, for this one, we do plan to build cells primarily for EVs. But also, Helmde is interested in UAM, so we're also testing some higher power density versions of these lithium metal cells for UAM applications, whereas the other one is all focused on EV applications.
Speaker Change: And then.
Speaker Change: And also for this one.
Speaker Change: We do plan to build sales primarily for EV, but also the founder is interested in doing so we're also testing some higher power density versions of these lithium metal cells for uhm applications, whereas the other one is.
This is all focus on EV applications.
Mark Shooter: Got it. Okay, thanks for the call. And everyone for Jing, now that we're in someone else's facility, right?
Speaker Change: Got it okay. Thanks for that color and maybe one for Jim now that we're in.
Jim Dallas: Someone else's facility do you believe that that helps any with the capex spending I know behind days, maybe pitching in for a decent amount of that so how does that affect the financials and business give you any more runway than you were previously expecting.
Jing Liu Nealis: Do you believe that that helps any with the CapEx spending? I know Hyundai is going to be pitching in for a decent amount of that. So how does that affect the financials? And does this give you any more runway than you were previously expecting?
Jing Liu Nealis: Thanks, Mark. The, the capex and opex that we, the guidance we have given out already taken that into consideration. So, operating in a Hyundai facility definitely helps as the facility cost and everything will be on their side. So, it will not increase our total spending this year, and it's fully built into our model.
Speaker Change: Thanks Mark.
Speaker Change: The Capex and Opex.
Speaker Change: The guidance, we have given out already taken that into consideration.
Speaker Change: Sure.
Speaker Change: Operating in Hyundai facility definitely helps us.
Speaker Change: So any cost and everything will be.
Speaker Change: Well the ammo side, so it will not increase our total spending this year.
Speaker Change: And it's fully built into our model.
Mark Shooter: Great. Thanks. I'll hop back in queue.
Speaker Change: Great. Thanks, I'll hop back in queue.
Operator: Thank you. As a reminder, to ask any further questions, please press star followed by one on your telephone keypad. Your next question comes from Sean Severson of Watertower Research.
Speaker Change: Thank you.
Speaker Change: A reminder to ask any further question. Please press star followed by one on your telephone keypad.
Speaker Change: Your next question comes from Shawn Severson.
<unk> research.
Shawn Michael Severson: Thank you. Good morning.
Shawn Michael Severson: Great. Thank you good morning.
Shawn Michael Severson: Qichao, I was wondering if I could step back and take a bigger picture question here, and it's regarding the adoption curve of lithium metal. So if we look at kind of what's going on in the industry, you know, talking about overall EV slowing, but, you know, hybrids are doing well, for example, what I'm trying to understand... As you start to commercialize this, the adoption curve of lithium metal versus lithium ion and the relevancy or how important actual, you know, large growth and unit sales, let's say are in the EV market.
Shawn Michael Severson: John I was wondering if you could step back and take a bigger picture question here.
Shawn Michael Severson: It's regarding the adoption curve of lithium metal. So if we look at kind of what's going on in the industry.
Talking about overall EV slowing but hybrids are doing well for example, and what I'm trying to understand.
Shawn Michael Severson: As you start to commercialize.
Shawn Michael Severson: The adoption curve of lithium metal versus lithium ion and the relevancy of how important actual.
Shawn Michael Severson: Large growth in unit sales, let's say are in the EV market, So I guess to summarize.
Shawn Michael Severson: So I guess to summarize, you know, are you really looking at an adoption curve that provides a great growth curve for you regardless of, let's say, a flattening out of the growth curve for EVs? Am I thinking about it the right way?
Shawn Michael Severson: Are you really looking at an adoption curve that provides a great growth curve for you regardless of let's say a flattening out of the curve growth curve for Evs and I'm thinking about it the right way.
Qichao Hu: Yeah, I think if you look at EV today, it's probably flattened out a little bit for lithium ion because lithium ion has saturated a lot in some markets. For example, in China, it's almost 30%. And then in some countries in Europe, it's also more than 20%.
Speaker Change: Yes, I think if you look at <unk> today.
Speaker Change: It's probably flattening out a little bit where lithium ion because lithium ion has saturate a lot in.
Speaker Change: Some markets for example, in China is almost 30% and.
Speaker Change: Some countries in Europe, it's also more than 20%. So lithium ion has essentially a lot, but then for lithium metal.
Speaker Change: There's still a huge market.
Qichao Hu: So lithium ion has saturated a lot. But then for lithium metal, it's still a huge market, and it's growing really fast. And then UAM, we actually think UAM will see adoption much sooner for lithium metal technologies because of the lightweight and also the enhanced safety with avatar AI. So no, we don't see any flattening or anything in terms of demand and adoption for new technology.
Speaker Change: Growing really fast and then youre in with interesting UN will see adoption much sooner.
Speaker Change: And the technologies because of the right way and also the enhanced safety with advertising. So so no we.
Speaker Change: We don't see any flattening or anything in terms of.
Speaker Change:
Speaker Change: And the adoption for new technologies.
Shawn Michael Severson: Right, so even in that flattening unit EV market, you would still see a pretty good pathway, let's say through, of course, 24, but more importantly, 2526, as I assume you would get out more, more platforms, and more commercialization, you'd still be seeing a lot of unit growth because of lithium metal adoption, not necessarily the overall EV market.
Speaker Change: Alright, so even in that flattening unit EV market, you would still see a pretty good pathway, let's say through a course 'twenty four but more importantly, $25 26 as I assume you would get out more.
Speaker Change: More platforms in more commercialization you'd still be seeing a lot of unit growth because with the metal adoption not necessarily the overall EV market.
Speaker Change: Yes, yes.
Qichao Hu: Yes, yes. I mean, the overall EV market in some countries is at 20-30%. So it's, it might be slowing down a little bit, but then for lithium metal, when you are less than 1%, like zero point something, it's still incredibly fast.
Speaker Change: The global EV market in some countries are 20, 30% so.
Speaker Change: It might be slowing down a little bit, but then for lithium metal when youre less than 1% zero point, something it's still incredibly fast.
Shawn Michael Severson: Understood. And my next question is about your your cash management. As you look as you look into the year in 2024 and beyond, I'm trying to get an understanding of what you would see as, you know, optimal capital management in the sense that What do you have to spend versus what are optional spends? Do you think if we look at cash conservation for 2024 and into 2025? I mean, is it possible you could reduce that more if need be? Or how flexible are you on that on that cash budget and spend? Yeah.
Speaker Change: Understood and my next question is about your cash management as you look as you look into the year in 2024 and beyond Im trying to get an understanding of what you would see as.
Speaker Change: Optimal capital management in a sense that.
Speaker Change: What do you have to spend versus water optional spend do you think if we looked at cash conservation for 2024 and into 2025.
Is it possible you could reduce that more if need be or how flexible are you on that on that cash budget spend.
Qichao Hu: Yeah. I'll answer that first.
Speaker Change: Yeah.
Speaker Change: I'll answer that first so I think the to be simple J D. H right. Those we've made commitments so definitely we want to.
Qichao Hu: So I think the two B-sample JDAs, right, we've made commitments. So definitely, we want to install the lines, the B-sample lines. And then these are very helpful for us to make more sales. And for us, more sales mean more data.
Speaker Change: Installed the lines that these simple lines and then these are very helpful for us to make more sales and as well as more sales being more data. So the to be simple lines, we definitely plan to invest.
Qichao Hu: So the two B-sample lines, we definitely plan to invest in them. And then for UAM, UAM, we plan to convert one of the older lines. So instead of buying and building an entirely new line for UAM, we're not doing that. We are actually converting an old A-sample line to build UAM to save costs. And also, a third area is actually in AI.
Speaker Change: And this is where you are in.
Speaker Change: We plan to.
Convert one of the older mines, so instead of buying and building an entirely new line for you and we're not doing that we're actually converting old a sample of line two.
Speaker Change: Two to Bill Yulia to save cost and also a third area is that shaking AI I think AI, we definitely want to spend.
Qichao Hu: I think AI is definitely something we want to spend money on. And then training these AI models to build models costs a lot of compute power. And this is a game that the only way to win is basically by having sufficient compute power.
Speaker Change: Training.
Speaker Change: Models.
Speaker Change: Cost a lot of compute power and <unk>.
Speaker Change: And this is again the.
Qichao Hu: And so far, just in the preliminary training that we have done, we actually found some very, very interesting new molecules that can be used as electrolytes. And then once we have these new electrolytes, then the new materials can extend the cycle life and then reduce the overall cost of the cell. So I think we are committed to the B-sample spending and also probably accelerating AI spending because it's just such an exciting area.
Speaker Change: The only way to win is basically by having sufficient compute power and.
Speaker Change: And so far just in the preliminary.
Speaker Change: The training that we have done we actually found some very very interesting new molecules that can be used as youll actualize and then once we have these new electrolytes.
Speaker Change: <unk>.
Speaker Change: The materials kind of extend the cycle life and reduce the overall.
Speaker Change: The cost of the sale. So I think we are committed to the decent both spending and also probably accelerating.
Qichao Hu: And then, if we don't do it, I think other companies will do it. But also, in areas like building cells for UAM, we do plan to save some costs by just converting the old n-sample line in South Spain.
Speaker Change: Are you spending because it's just such an exciting area and if we don't do it I think other companies will do it but then also in areas like building a sales for you in.
Speaker Change: Then we do plan to save some costs by just converting the old a simple lines.
Speaker Change: So finding a new life.
Shawn Michael Severson: Thank you; that was very helpful.
Speaker Change: Great. Thank you that's very helpful.
Speaker Change: Yes.
Carl Pilkington: Thank you. I would like to now turn it back to Carl Wilkinson for any, or any additional questions. Thanks.
Speaker Change: Thank you I would like to now turn it back to you.
Speaker Change: For some additional questions.
Speaker Change: Yes.
Carl Pilkington: Thank you. Yes, we did have a number of questions which were submitted in advance of the call, and we'll go through a selection from those pre-submitted questions now. The first question is, has SES produced any bee samples using the existing lines? Please elaborate.
Speaker Change: Thank you, yes, we did have a number of questions, which were submitted in advance of the call and will go through a selection from those pre submitted questions now.
Speaker Change: The first question is has SCS produced any b sample using the existing lines. Please elaborate.
Qichao Hu: So we're still building cells using the A-sample lines, and then we are building the B-sample line, but the B-sample line is not ready yet. And we expect the B-sample lines to be ready towards the end of this year, and then we will improve the A-sample lines towards meeting the specifications of the B-sample. So the goal is that by the end of this B-sample JDA, the two B-sample JDAs, then we will actually have the B-sample cells. But for now, we are improving the A-sample cells to meet the specifications of the B-sample.
Speaker Change: So we're still building cells using a simple lines and then we have built in the B sample line and to be simple line is not ready yet and we expect that these simple lines to be ready.
Towards the end of this year and then we are.
Speaker Change: Proving the central lines.
Speaker Change: Tours meeting the specs also be central to the goal is by the end of this be simple T. D. A to be simple JD, we will actually have to be simple self but for now we are improving the a simple cells two to meet the specs of the sample size.
Carl Pilkington: Okay, the next question is, can you share any progress on the newbie sample?
Speaker Change: Okay.
Question is can you share any progress on the new <unk> sample lines.
Qichao Hu: Now the details, because we do have confidentiality with the OEMs, but we're making a very good process in terms of designing the lines, issuing the PLOs, and also the vendors have already started building the lines. So we do expect both lines to be operational by end of the year.
Speaker Change: Now the details because we are we do have.
Speaker Change: Confidentiality with the Oems, but we're making very good.
Process in terms of design deadlines issuing appeals and also the vendors have already started doing their lines so would.
Speaker Change: Would you expect both lines to be operational by end of this year.
Carl Pilkington: Super. The next question is, do you have any update on the B-sample JDAs in addition to the first recently signed?
Speaker Change: Super.
Speaker Change: The next question is do you have any update on the sample J D. As in addition to the first recently signed.
Speaker Change: We're not.
Qichao Hu: So we're focused on the two B-sample JDAs because we've made commitments. And in terms of getting a third or fourth additional B-sample JDA, that's not really a focus for us because a lot of the work is similar. So we do want to make sure that we deliver on the two B-samples that we've already committed to. And that's our top focus.
Speaker Change: So we're focused on the to be simple J D. H, because we've made commitments in terms of getting a third or fourth additional b simple JD is that's not really a focus for us because a lot of the work are similar so we do want to make sure that we deliver to the 2% growth that we've already committed and and.
Speaker Change: That's our focus.
Speaker Change: Okay.
Carl Pilkington: Okay. And then the last question we'll take from the pre-submitted questions is, currently how safe is SES's lithium metal cell? There is a lot of energy packed into a small volume, and lithium metal is very reactive.
Speaker Change: Okay.
Speaker Change: And then the <unk>.
Last question, we'll take from the pre submitted question is currently how safe is SCS is lithium metal cells, there as much energy packed into a small volume in lithium metal is very reactive further you talk about AI being used to improve reliability and FCS invested an explosion of bunkers to evaluate.
Qichao Hu: Further, you talk about AI being used to improve reliability, and SES has invested in explosion bunkers to evaluate issues. A skeptic might conclude that these unique and extended efforts are needed to make your cells safer. But how safe are your cells today?
Speaker Change: Issues, a skeptic might conclude that these unique and extended efforts are needed to make yourselves safer how safe are yourselves today.
Qichao Hu: Yeah, because lithium metal does have higher energy density than lithium ion, it does have a greater safety concern than lithium ion because it has higher energy density. That's just the fundamentals of a battery. When you have a battery with a higher energy density, you will have higher safety concerns. And historically, in the past, lithium metal did have some safety issues.
Speaker Change: Yeah, because lithium metal does have higher and as you can see it in lithium ion.
Speaker Change: It does have a.
Speaker Change: Greater safety concerned about him I am because has higher energy density that is just the.
Speaker Change: Fundamentals of the battery when you have a battery with a higher intensity you will have higher safety concerns and historically in the past looking at those that have some safety issues. This is why we are.
Qichao Hu: This is why we are spending a lot of effort on Avatar AI. So all the cells that we build, all the good cells, and bad cells, actually, sometimes we intentionally make the cells fail so that we have both positive signals and negative signals, and then we use them to train Avatar AI. So the goal of this Avatar AI is to try to ensure as close to 100% safety in the field as possible, on top of making the electrolyte safer through this AI for science effort and also making the cell design as safe as possible.
Speaker Change: A lot of effort on avatar AI. So all the cells that we build all the <unk> actually sometimes we intentionally make the cells sales. So that we have both positive signals and negative signals and we use them to train.
Speaker Change: So.
Speaker Change: All of this is too cheap.
To ensure that.
Speaker Change: Close to a 100% safety in the field as possible on top of it.
The last one is safer through this as a science effort and also making the cell design as safe as possible, but we know from a pure hardware perspective, no high energy density cells can be 100% safe. That's why we need this software this I'm sorry.
Qichao Hu: But we know from a pure hardware perspective, no high energy density cell can be 100% safe. That's why we need this software, this Avatar AI, on top of this hardware to make sure the actual operation in the field can be as close to 100% safe as possible. I think not just for lithium metal, but any high-intensity batteries in any vehicle operations in the field must have Avatar AI.
Speaker Change: On top of this hardware to make sure the actual operation in the field can be as close to 100% safe as possible.
Speaker Change: I think not just for lithium metal Indian high incidence.
Batteries and any vehicle operations in the field Martha Avatar.
Carl Pilkington: Great. Thanks, Qichao. I'll pass it back to the operator to see if there are any additional questions on the line. Thank you.
Speaker Change: Great. Thanks. Thanks.
Martha: Thanks Chi Chow.
Back to the operator to see if there's any additional questions on the line.
Operator: Thank you. As a reminder, please press star followed by 1 to ask any additional questions. And we now have a follow-up question from Dred, Jed, Dorshan Himma, and William Black.
Martha: As a reminder, please press star followed by one to ask any additional questions.
Martha: And we now have a follow up question from Jed Dolson humor with William Blair.
Mark Shooter: Hey guys, it's Mark again. Thanks for the additional question. I just wanted to dial in a bit more on the AI. I was wondering what you're using for the training data. Is this, and you're saying since being installed on the lines, and especially the lithium metal line with the partner Hyundai, that has me thinking, is this, are you looking at metrology of the lithium metal surface to try to predict yields or future current density hotspot issues?
Jed Dolson: Hey, guys. It's Mark again, thanks for the additional question I just wanted to dial in a bit more on the AI I was wondering what youre using for the training data is this and you're saying you're at since being installed in the lines and especially the lithium metal aligned with the partner handbag.
Jed Dolson: My thinking is this are.
Jed Dolson: Are you looking at metrology lithium metal surface to try to predict yields or future current density hotspot issues. So it doesn't help with yields or is this more of a we're building sells are doing stripping photometry and stressing the cells that certain product voltages and monitoring in that way.
Qichao Hu: So does it help with yields? Or is this more of a we're building cells, we're doing circuit voltometry and stressing the cells at certain voltages and monitoring in that way. So is it cell testing? Or is this kind of a yield thing?
Jed Dolson: So is it so testing or is this kind of a yield.
Jed Dolson: Yield thing as well.
Jed Dolson: Okay.
Qichao Hu: So there are actually three types of data: first is the cell design, so like the cathode loading, the anode thickness, and then the electrolyte, basically the design information of the cell. And the second is manufacturing data. So that includes, like you said, the lithium surface, morphology, roughness, electrolyte stacking, overhand misalignment, electrolyte filling, pressure during heat sealing, so all the parameters, all the data during the manufacturing process. And then third is testing. So that includes things like cyclic photometry at high temperature, low temperature, high pressure, low pressure during cycling, the first cycle, the second cycle, all the way till 500, 600 cycles until the cells die. And then all three types of data are used to train this model.
Jed Dolson: So it's actually has three types of data.
Jed Dolson: First is the cell design, so like the catheter loading the annual thickness and then.
Jed Dolson: You'll actually basically the.
Jed Dolson: Design information of the sale and the second is manufacturing data. So that includes like you said lithium surface mythology roughness.
Jed Dolson: Electrolyte stacking overhand misalignment electric filling.
Jed Dolson: Sure.
Jed Dolson: And pressure during heat sealing so all the all the parameters all the data during the manufacturing process and then third is testing. So that includes like the cyclic voltammetry at high temperature or low temperature high pressure low pressure during the cycling the first cycle the second cycle all the way.
500, 600 cycles until the cells and then and there.
Jed Dolson: All three types of data are used to train this model.
Qichao Hu: Okay, that's the whole way through. Very interesting. And do you plan on this having the, as a part of the BMS for any potential electric vehicles that are going to be in here? So is this a will this be live monitoring on a go forward as well inside the cars? Or is this more of just you getting the data to build the safe cell, and then you get a stamp, and you don't need the constant monitoring? Yeah.
Speaker Change: Got it okay. That's the whole way through very interesting and do you plan on just having the.
Speaker Change: Part of the BMS for any any potential electric vehicles that youre going to be in here.
Speaker Change: It will just be live monitoring on a go forward as well inside the cars or is this more of yes, you get the data to build the base salary and then you're going to stand when you don't need it you don't need a constant monitoring anymore.
Qichao Hu: Yes, so this will be inside the BMS. And then we are talking about constant live monitoring. And actually, we have been doing this for some drones, and now we are starting to put this in some UAM applications. And also later in the B sample; we definitely plan to put this in the BMS for the demo cars. So yes, the three types of data actually train three different kinds of models for the avatar AI.
Speaker Change: Yes. So this will be inside the BMS and then so we are talking about constant live monitoring and actually we have been doing this for some drones and then we're starting to put us in some uhm applications and also later in the B sample, we definitely plan to put us in the BMS for the demo cars. So yes the.
Speaker Change: The three types of data actually train.
Speaker Change: Three different kinds of models for the Avatar AI and then the last part the testing.
Qichao Hu: And then the last part, the testing, definitely, will be part of the BMS, so that we can actually gather data and then use the data to train the model live. So we can only do monitoring, and then the model will send a recommendation to the driver in terms of what to do, but then it won't be able to actually control the bat.
Speaker Change: Definitely will.
Speaker Change: It will be part of the BMS, so that we can actually gather data.
Speaker Change: And then use the data to turn the model at life, we won't be able to do.
Speaker Change: So we can only do.
Speaker Change: And then the mono Wilson a recommended.
Speaker Change: The recommendation to the driver in terms of what to do but it won't be able to actually control the debt.
Operator: I understand. Okay. I appreciate the call. Thanks.
Mark Shooter: Understood. Okay. I appreciate it.
Speaker Change: Understood. Okay I appreciate the color. Thanks.
Speaker Change: Okay.
Speaker Change: Thank you.
Operator: Thank you. I can confirm we have no Thank you all for joining and please enjoy the rest of your day. You may now disconnect your lines.
Speaker Change: Thank you I can confirm we have made.
Speaker Change: So I had a question so I'd like to conclude the call. Thank.
Speaker Change: Thank you all for joining and please enjoy the rest of your day you may now disconnect your lines.
Speaker Change: [music].
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