Q2 2024 Solid Power Inc Earnings Call

Operator: Greetings everyone, and welcome to the Solid Power second quarter 2024 earnings conference. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Melanie Solomon, from Nestor Relations. Thank you. Ms. Solomon, you may begin.

Greetings, everyone and welcome to the solid Power's second quarter 2024 earnings Conference call.

At this time all participants are in a listen only mode.

A brief question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

It's now my pleasure to introduce your host Melanie Solomon Investor Relations Solomon.

Speaker Change: Sullivan you may begin.

Melanie Solomon: Thank you, Operator. Welcome, everyone, and thank you for joining us today.

Melanie Solomon: Thank you operator, welcome everyone and thank you for joining US today I'm joined on today's call by solid powers, President and Chief Executive Officer, Jon <unk>, and Chief Financial Officer, Linda Heller.

Melanie Solomon: I'm joined on today's call by Solid Power's President and Chief Executive Officer, John Van Scoter, and Chief Financial Officer, Linda Heller. A copy of today's earnings release is available on the Investor Relations section of Solid Power's website, www.solidpowerbattery.com. I'd like to remind you that parts of our discussion today will include forward-looking statements as defined by U.S. securities laws. These forward-looking statements are based on management's current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events.

Melanie Solomon: A copy of today's earnings release is available on the Investor Relations section solid Power's website, www dot sounds like power battery dotcom.

Melanie Solomon: I'd like to remind you that parts of our discussion today will include forward looking statements as defined by U S Securities laws. These.

Melanie Solomon: These forward looking statements are based on management's current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events.

Melanie Solomon: Except as otherwise required by applicable law, Solid Power disclaims any duty to update any forward-looking statements to reflect future events or circumstances. For a discussion of the risks and uncertainties that could cause actual results to differ materially from those expressed in today's forward-looking statement, please see Solid Power's most recent filings with the Securities and Exchange Commission, which can be found on the company's website at www.solidpowerbattery.com. With that said, let me turn it over to John Van Scoter.

Melanie Solomon: Except as otherwise required by applicable law sell empower disclaims any duty to update any forward looking statements to reflect future events or circumstances.

Melanie Solomon: For a discussion of the risks and uncertainties that could cause actual results to differ materially from those expressed in today's forward looking statements. Please see solid power's most recent filings with the Securities and Exchange Commission can be found on the company's website at www Dot solid power battery Dot com.

Melanie Solomon: With that let me turn it over to John <unk>.

John Van Scoter: Thank you for joining us today. In early 2024, Solid Power outlined four key goals to expand our electrolyte capabilities and market reach. Advance our A2 sample cell design, execute our partnerships effectively, and strengthen our presence in Korea. Overall, I view our progress through the first half of the year positively, as we continue to be laser focused on the challenges and opportunities ahead of us in order to commercialize what could be a step function improvement in battery technology. During the past three months, we have increased our electrolyte sample shipments to potential customers.

John: Thank you for joining us today in early 'twenty 'twenty four solid power outlined four key goals.

Speaker Change: Expand our electrolyte capabilities and market reach.

Speaker Change: Advance our eight to sample cell designs.

Speaker Change: Execute our partnerships effectively and strengthen our presence in Korea.

Overall, I view, our progress through the first half of the year positively as we continue to be laser focused on the challenges and opportunities ahead of us in order to commercialize what could be a step function improvement in battery technologies.

Speaker Change: During the past three months, we increased our electrolyte sample shipments to potential customers.

John Van Scoter: I am pleased with the pace of electrolyte sampling with many repeat shipments to OEM, and we continue to receive encouraging feedback. On the cell side, we are primarily focused on our continued advancements in A2 cell design, which has been designed to meet our very high standards with improvements aimed at higher performance and our relentless pursuit of safety. Next, I'd like to highlight some successes with our key partners. First, SKUns, with which we greatly deepened our relationship in January of this year, is going according to plan.

Speaker Change: I am pleased with the pace of electrolyte sampling with many repeat shipments to Oems.

Speaker Change: And we continue to receive encouraging feedback.

Speaker Change: On the sell side, we are primarily focused on our continued advancements in <unk> cell design.

Speaker Change: Which has been designed to meet our very high standards with the improvements aimed at higher performance and our relentless pursuit of safety.

Speaker Change: Next I'd like to highlight some successes with our key partners.

Speaker Change: First SK.

With which we greatly deepened our relationship in January of this year.

Speaker Change: It's going according to plan.

John Van Scoter: We completed the first milestone under our R&D license agreement and made strong progress on deliverables under the line installation agreement. Following the training we completed with SK-ON in April, our focus has been on continuing to share information on our cell development program and preparing for installation of SK An's line in Korea. It is no small undertaking to design and install an EV line, and we're thankful for SK-ON's strong partnership.

Speaker Change: We completed the first milestone under our R&D license agreement and made strong progress on deliverables under the line installation agreement.

Speaker Change: Following the training we completed with SK on in April our focus has been on continuing to share information on our cell development program and preparing for installation of SK <unk> wine in Korea.

Speaker Change: It is no small undertaking to design and install an EZ line and we're thankful for Essakane strong partnership.

John Van Scoter: The next step is to begin factor acceptance testing of certain equipment. Overall, we remain on track to have SKON's new EV cell line up and running by mid-2025. Next, Ford continues to be a key partner for us as we collaborate with them on various projects on both the cell and electrolyte side of the house. We look forward to sharing relevant updates in the future. Lastly, we continue to collaborate with BMW employees embedded at our Louisville facility and visit with them in Germany. Last month, we extended our JDA with BMW until the third quarter as we negotiate a longer-term JDA extension with BMW.

Speaker Change: The next step is to begin factory acceptance testing of certain equipment.

Speaker Change: Overall, we remain on track to have <unk>, New E B cell line up and running by mid 2025.

Speaker Change: Next Ford continues to be a key partner for us as we collaborate with them on various projects on both the sell and electrolyte side of the house.

Speaker Change: We look forward to sharing relevant updates in the future.

Speaker Change: Lastly, we continue to collaborate with BMW employees embedded at our Lewisville facility.

Speaker Change: And visit with them in Germany.

Speaker Change: Last month, we extended our J D with BMW until the third quarter as we negotiate a longer term JD a extension with BMW.

John Van Scoter: After demonstrating our ability to scale from a 2 amp hour cell to a 20 amp hour cell and finally to the 60 amp hour A1 EV cell under our original JDA, we expect the extension will be heavily focused on improving the cell design and advancing cell performance, with a shared ultimate goal to see an all solid state sell commercialized. As with all our partnerships, our relationship with BMW is a truly collaborative process, and we expect we will have a JDA extension that is mutually beneficial to both companies, especially with our desire to see BMW be successful with its forthcoming solid-state line.

Speaker Change: After demonstrating our ability to scale from a to empower sell two or 'twenty empower cell and finally to the 60 empower E. One E D cell under our original J D. E. We expect the extension will be heavily focused on improving our cell design and advancing cell performance with a share.

Speaker Change: Our ultimate goal to see in all solid state sell commercialized as with all of our partnerships our relationship with BMW is a truly collaborative process and we expect we will have a JD extension that is mutually beneficial to both companies.

Speaker Change: Especially with our desire to see BMW be successful with its forthcoming solid state line.

John Van Scoter: As we discussed in the last call, we have been in discussions with BMW regarding their demo car program and how we can support it. And we promise to provide more information as we have better clarity. I'm pleased to report that BMW successfully built modules using the A1 cells we shipped previously to BMW. Each module contained 72 cells with a 60 amp hour capacity.

Speaker Change: As we discussed in the last call we have been in discussions with BMW regarding their demo car program and how we can support it and we promised ride more information as we have better clarity.

Speaker Change: I'm pleased to report the BMW successfully built modules using the a one sells we shipped previously to BMW.

Speaker Change: Each module contained 72 cells with 60 Amp hour capacity.

John Van Scoter: BMW was able to use those modules to conduct testing, including initial drive cycle testing. Overall, we view this as a remarkable achievement by both companies and from which we each learned a lot. However, with the expected focus on the forthcoming extended GADA to be on cell performance improvement, BMW has paused future deliveries of cells for the demo car program.

Speaker Change: BMW was able to use those modules to conduct testing, including initial drive cycle testing.

Speaker Change: Overall, we view this as a remarkable achievement by both companies.

Speaker Change: And from which we each learned a lot.

Speaker Change: However, with the expected focus on the forthcoming extended J D. A to B Unseld performance improvements BMW has paused future deliveries of cells for the demo car program.

John Van Scoter: As we progress with our development program, we plan to discuss with BMW future opportunities for a demo car using Solid Power technology. Moving on to our efforts in Korea. In addition to the significant work we are undertaking with SK-ON, we continue to strengthen relationships across the Korean and Japanese battery landscape. The establishment of a dedicated team in Korea, who have much easier access to Japan than they would from Colorado, underscores our efforts to engage stakeholders and drive further growth in those technology-rich locations.

Speaker Change: As we progress with our development program, we plan to discuss with BMW future opportunities for a demo car using solid power technology.

Speaker Change: Moving on to our efforts in Korea.

Speaker Change: In addition to the significant work we are undertaking with Essakane, we continued to strengthen relationships across the Korean and Japanese battery landscape.

Speaker Change: The establishment of a dedicated team in Korea, we have much easier access to Japan than they would from Colorado.

Speaker Change: Underscores our efforts to engage stakeholders and drive further growth and those technology rich locations.

John Van Scoter: We have recently expanded our team in Korea to add business development capability. This enables us to further support our collaboration with SK-ON and increase activity in the Korean and Japanese battery ecosphere. We are talking with most of the major players in Korea and Japan, ramping up electrolyte sampling activities with the end goal of developing another global customer. We are repeat sampling with some and providing new sampling with others.

Speaker Change: We have recently expanded our team in Korea to add business development capabilities.

Speaker Change: This enables us to further support our collaboration with SK <unk> and.

Speaker Change: And increased activity in the Korean and Japanese battery Ecosphere.

Speaker Change: We are talking with most of the major players in Korea and Japan.

Speaker Change: Wrapping electrolyte sampling activities with the end goal of developing another global customer.

Speaker Change: We are repeat sampling with some and providing new sampling with others and all in all we are encouraged by these engagements.

John Van Scoter: And, all in all, we are encouraged by these engagements. Overall, I remain encouraged by the progress we are making with our objectives for 2024. Now, I'm pleased to introduce our new CFO, Linda Heller, on her first earnings call today with Solid Power. Linda and I worked together for more than four years at eSolar, and she has deep expertise in the renewable energy industry, paired with successful experience as a CFO. With Linda as our new CFO, we are updating our financial plan, which has resulted in our adjusted annual revenue guidance.

Speaker Change: Overall I remain encouraged by the progress we are making with our objectives for 2024.

John Van Scoter: Linda will go through further detail as it primarily relates to technical accounting matters, but I will say that this revision does not impact our long-range plan for the cash runway necessary for commercialization of our technology. I'm thrilled to be working alongside Linda again as we continue to execute toward our key strategic milestones, strengthen our leadership position in solid-state battery technologies, and deliver long-term shareholder value.

Speaker Change: Now I'm pleased to introduce our new CFO Linda Heller on her first earnings call today with solid power.

Linda Heller: Linda and I worked together for more than four years in E solar and she has deep expertise in the renewable energy industry paired with successful experience as a CFO.

Linda Heller: With Linda as our new CFO, we are updating our financial plan, which has resulted in our adjusted annual revenue guidance.

Speaker Change: Andrew will go through further detail is it primarily relates to technical accounting matters, but I will say that this provision does not impact our long range plan on the cash runway necessary for commercialization of our technology.

Andrew: I'm thrilled to be working alongside Linda It's again as we continue to execute toward our key strategic milestones strengthen our leadership position in solid state battery technologies and deliver long term shareholder value.

Andrew: Yeah.

Linda Heller: Thank you, John. I'm glad to be joining for my first call at Solid Power. Please excuse my voice as I'm a bit under the weather.

Linda: Thank you John I'm glad to be joining for my first call. It all it power.

Speaker Change: Please excuse my voice.

Speaker Change: Under the weather.

Speaker Change: Starting with Q2 results beginning with Rodney solid power delivered $5 $1 million in revenue during the second quarter of 'twenty 'twenty four primarily driven by continued execution on our collaborative arrangements and government contracts.

Linda Heller: I'll start with Q2 results, beginning with revenue. Solid Power delivered $5.1 million in revenue during the second quarter of 2024, primarily driven by continued execution on our collaborative arrangements and government contracts. Operating expenses were $32 million, driven by increased production costs and labor associated with cell and electrolyte development, scaling of operations, and execution under joint development agreements and other collaborative arrangements. Operating losses were $26.9 million, and net losses were $22.3 million, or $0.13 per share.

Speaker Change: Operating expenses were $32 million driven by increased production costs and labor associated with cell and electrolyte development scaling of operations and execution under joint development agreements and other collaborative arrangements.

Speaker Change: Operating loss was $26 $9 million and net loss was 22 three.

Andrew: $3 million or 13 cents per share.

Linda Heller: Capital expenditures totaled $4.4 million, primarily representing investments in electrolyte production capabilities, including the build-out of a new electrolyte research and development lab. Solid Power's liquidity position remained strong with $358.8 million of total liquidity as of June 30, 2024.

Andrew: Capital expenditures totaled $4.4 million, primarily representing investments in electrolyte production capability, including the build out of a new electric like research and development lab.

Andrew: Solid powers will could you do position remains strong with 358 $8 million a ton of liquidity as of June 30 of 'twenty 'twenty four and it just and accounts receivable totaled $12 $3 million deferred revenue with $10 $1 million, while total current liabilities were too.

Linda Heller: In addition, accounts receivable totaled $12.3 million, deferred revenue was $10.1 million, while total current liabilities were $22.9 million. Turning to the second half of the year, we continue to expect fiscal year 2024 cash used in operations to be in the range of $60 million to $70 million and capital expenditures to be in the range of $40 million to $50 million. Included in these ranges is approximately $35 million in operational and capital investments the company deferred from 2023. Total 2024 cash investment is expected to be in the range of $100 million to $120 million.

Andrew: Two $9 million.

Speaker Change: Turning to the second half of the year, we continue to expect fiscal year 'twenty 'twenty four and cash used in operations to be in the range of 60 million to $70 million on capital expenditures to be in the range of 40 million to $50 million.

Speaker Change: Including in these ranges is approximately $35 million in the operational and capital investment the company deferred from 'twenty to 'twenty three.

Andrew: Total 2024 cash investment is expected to be in the range of 100 million to $120 million.

Linda Heller: We are reducing our 2024 revenue guidance to be in the range of $16 million to $20 million. While the business is on track and we are hitting our milestones with partners, there are two factors impacting our expected revenue for the year. First, in reviewing the accounting treatment of the SK-ON agreement, not all of the originally projected revenue will be recognized in 2024. A portion will need to be recognized in 2025. Second, while we continue electrolyte sampling or receiving positive feedback on performance, the uptake and development have been slower than originally forecasted, though not unexpected. And it's also playing into our revised forecast to a lesser extent.

Speaker Change: We are reducing our 2020 for revenue guidance to be in the range of 16 million to $20 million.

Speaker Change: Well the business is on track we are hitting our milestones with partners. There are two factors impacting our expected revenue for the year.

Andrew: First it was really in the accounting treatment of the S. K on agreement.

Andrew: Not all of the originally projected revenue will be recognized in 2020 for a portion will need to be recognized in 2025.

Andrew: Second while we continue to elect to like gambling are receiving positive feedback on performing yeah.

Andrew: The uptake into bell and they'll have been slower than we originally forecasted.

Andrew: Not any expected and its also playing into our revised forecast to a lesser extent.

Linda Heller: We continue to work closely with partners and strategic players to optimize and accelerate electrolyte production volumes for ASSB technology. We have a strong balance sheet with which to execute, and I am excited about the company's plans and processes. As John mentioned, the revenue revision does not impact our long-range plan for the cash runway necessary for commercialization of our technology. We maintain our long-held position as a capital-light ASSB player, and therefore, we do not rely on near-term revenue to support our long-term commercialization path.

Andrew: We continue to work closely with partners and strategic players to Akamai accelerate electronic adoption.

Andrew: For a S. S. The technology, we have a strong balance sheet with which to execute and I'm excited about the company's plans and prospects.

Andrew: As John mentioned, the revenue revision does not impact our long range plan on the cash runway necessary for commercialization of our technology, we maintain our long held position as a capital light E. S. S. B player and therefore, we do not rely on near term revenue to support our long term commercialization pathway.

Linda Heller: I'm honored to be here at this pivotal time in the company's trajectory, and I look forward to meeting many of you in the coming months. I'll now turn it back to John for closing comments before your questions. Thank you, Linda.

Speaker Change: I'm honored to be here at this pivotal time in the company's trajectory and I look forward to meeting many of you in the coming months.

Andrew: Now I'll turn it back to John for closing comments before your question.

John Van Scoter: Thank you, Linda. In closing, I'm pleased to reiterate that the company remains on track to achieve our goals for 2024. I'd like to thank our employees, partners, and stakeholders for their loyalty and dedication. We are planning to hold an analyst and investor event in December to deep dive into our technology, strategy, and long-term model, and we'll share more details in the coming months. We will now take your questions. Operator.

John: Thank you Linda in closing I am pleased to reiterate that the company remains on track to achieve our goals for 2024.

John: I'd like to thank our employees partners and stakeholders for their loyalty and dedication.

Speaker Change: We are planning to hold an analyst and investor event in December to deep dive into our technology strategy.

Andrew: Long term model and we'll share more details in the coming months.

Speaker Change: We will now take your questions.

Andrew: Operator.

Operator: Ladies and gentlemen, at this time, we'll begin the question and answer session. If you would like to ask a question, please press star and one on your telephone keypad. The confirmation tone will indicate that your line is in the questions. You may press star and 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset prior to pressing the start key.

Speaker Change: Ladies and gentlemen at this time, we'll begin the question and answer session.

Operator: One moment while we pull for questions. And our first question today comes from Chris Pierce from Needham. Please go ahead with your question.

Speaker Change: You'd like to ask a question. Please press star and one on your telephone keypad.

Speaker Change: Confirmation tone will indicate that your line is in the question too.

Sue: You May press star and Sue if you'd like to remove your question from the queue.

Andrew: For participants using speaker equipment may be necessary to pick up your handset prior to pressing the star two.

Speaker Change: One moment, while we poll for questions.

Andrew:

Andrew: Hum.

Chris appears: And our first question today comes from Chris appears from Needham. Please go ahead with your question.

Chris Pierce: Hey, good afternoon everyone. Just on the second point you made on the revenue guidance reduction, the slower uptake in electrolyte development, is that just broadly a kind of a lagging indicator in terms of how OEMs are feeling about EVs at the moment, or is there something kind of a deeper kind of thought around that?

Chris appears: Hey, good afternoon, everyone I'm just on the second point you made on the revenue guidance reduction the slower uptake in electrolyte development is that just broadly a.

Chris appears: Kind of a lagging indicator in terms of how Oems are feeling about evs at the moment or is there something kind of a deeper kind of thought around that.

John Van Scoter: Good day, Chris. I think I would credit it more to just being in the very early stage of the market. When we started the year, we looked into the back half and thought that some of the early players would be taking some measurable quantities in the second half. That really hasn't materialized thus far. But it's not unusual for a market that is so nascent as the ASSB market is. So we look forward to updating it and improving it as we go forward, but that's the way it looks to us right now.

Chris appears: Good day, Chris.

Speaker Change: I think I would credit it more to just being a very early stage of the market.

Speaker Change: When we started the year, we looked into the back half and talked to some of the early players would be taking some measurable quantities in the second half that really hasnt materialized, thus far but.

Speaker Change: But it's not unusual for a market that is so nascent as the SSD market is so we look forward to updating and improving as we go forward, but that's the way it looks to us right now.

Chris Pierce: Okay, and then I know that just recently the BMW JDA has been extended a couple times. Is it normal for there to be a pause in A1 deliveries as you reset the agreement to a longer date, or is it that the A2 cell is coming with the next thing anyway, so the A1 cell, there's nothing to read into there? I just want to make sure I have all the moving pieces right.

Speaker Change: Okay, and then I know that just lastly, the BMW. The J D has been extended a couple of times is it normal for there to be a pause in I want to make sure I frame it right, but a pause in a.

Chris appears: A one deliveries as you.

Speaker Change: Reset the agreement and like to a longer date or is it that the a T cell was coming was the next thing anyway. So the E. One so there's nothing to read into there I just want make sure I have the moving pieces right.

John Van Scoter: Yeah, I think your summary in the latter case is correct, where we got a lot out of the A1 work at the module level, as I indicated. Both companies are very pleased with the progress there, but with A2 really eminent, the mutual decision was to go ahead and pause the current cell deliveries and refocus around the performance improvement of the A2 cell later this year.

Speaker Change: Yeah, I think your summary in the latter case is correct, where Oh, we got a lot out of the a one work at the module level as I indicated are very both companies are very pleased with the progress there, but with a two are really eminence. The mutual decision was to go ahead and pause the current cell deliveries and refocused.

Chris appears: The performance improvement to sell later this year.

Chris Pierce: Okay, thank you, and good luck.

Speaker Change: Okay. Thank you and good luck.

Operator: And our final question today comes from D.A. Davidson. Please go ahead with your question.

Michael Shlisky: Hi, good afternoon. It's Michael Shlisky of BA Data. Hey. In the past quarter or two, you've talked a little bit more about OEMs beyond the two plus SK you had in the pipeline for interest from other companies for your products. Has the pipeline gotten any larger or smaller over the last few months or anything in common with interest from other people in Solid Power at the current time?

John Van Scoter: Sure, good to hear from you, Mike. Yes, I would say two things.

John Van Scoter: The pipeline is continuing to grow, so we had an objective to sample as many as 15. We're over 10 now, and it continues to grow. But equally as important, we've had a lot of multiple sampling to existing potential customers within this period of time. Some of them have been sampling five or six times as we've gone through the last 90 days. So we give them a sample, they evaluate it, they integrate it into their cell design, give us feedback, we modify it, give them a different sample, and rinse and repeat. So that's as important, I think, as just the sheer number of interactions we've had with the folks we have been sampling since the beginning of the year.

Michael Shlisky: Great, thanks for that. Maybe just a follow-up on that answer.

Speaker Change: Some of them are sampling five or six times as we've gone through the last 90 days.

Speaker Change: So we give them a sample they evaluated the.

Speaker Change: Integrated into their cell design give us feedback we modify it gives them a different sample and rinse and repeat so that's just as important I think is just the sheer number is the amount of interaction we've had with the folks we have been sampling since the beginning of the year.

John Van Scoter: So you're saying the samplings are with the current three main customers. I think you mentioned around 10 or 12 companies were looking at your product last quarter. Are these the same companies, first of all, and has there been any progress since last time as far as either coming to an agreement or their intensity of checking out your technology?

Speaker Change: Great. Thanks, Matt maybe just a follow up on that answer so youre, saying samplings out with the current.

Speaker Change: <unk>.

Speaker Change: I think you mentioned around 10 or 12 companies. We're looking at your comments last quarter.

Speaker Change: Are these the same companies first of all in.

Speaker Change: Has there been any progress since since last time as far as other.

Speaker Change: How much when agreements or there.

Speaker Change: There potentially.

Speaker Change: Checking out your technology.

John Van Scoter: Yes, since the last call, we have added additional new customers to that sampling program. And then the ones that we have been sampling prior to that, again, we've done multiple samples to a number of them, as a strong indication of their interest and of their progress.

Speaker Change: Yes, we have added since the last call additional new customers in that sampling program and then the ones that we had been sampling prior to that again, we've done multiple samples to a number of them as a strong indication of their interest and of the progress.

Michael Shlisky: Okay, thank you very much. I will leave it there.

Speaker Change: Okay. Thank you very much I'll leave it there.

Operator: And, with no further questions at this time, I'd like to turn the floor back over to John for any closing comments.

John Van Scoter: Thank you for joining the call today, everyone, and for your interest in Solid Power. We look forward to updating you again next quarter.

Operator: This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation.