Q3 2024 Solid Power Inc Earnings Call
Speaker Change: Good day, everyone, and welcome to today's Solid Power, Inc. third quarter 2024 earnings conference call.
At this time, all participants are in a listen-only mode.
Speaker Change: Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing star 1 on your touchtone phone. You may withdraw yourself from the queue by pressing star 2.
Speaker Change: Please note this call may be recorded. I'll be standing by should you need any assistance It is now my pleasure to turn the conference over to Melanie Solomon investor relations
Melanie Solomon: Thank you, Operator. Welcome, everyone, and thank you for joining us today. 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.
Melanie Solomon: A copy of today's earnings release is available on the Investor Relations section of Solid Power's website, www.solidpowerbattery.com.
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 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.
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 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.
Speaker Change: With that, let me turn it over to Jon Van Scoter.
Thank you, Melanie, and thank you all for joining us.
Speaker Change: We accomplished a lot in the third quarter, and I'm excited to share our progress with you today.
Speaker Change: A major highlight of the quarter was the U.S. Department of Energy's announcement that we were selected to negotiate a $50 million grant for a project focused on continuous production of sulfide-based solid electrolyte materials.
Speaker Change: The process was highly competitive, and we view our selection as a validation of our technology and business model. We thank the DOE for its faith in solid power.
Speaker Change: Wide adoption of EVs in the United States will require continued advancement of battery technologies, including the materials that support that advancement.
Speaker Change: We believe our sulfide solid electrolyte can offer a step function increase in battery performance compared to conventional lithium-ion.
Speaker Change: While performance is critical, so is the ability to efficiently manufacture and process our product.
Speaker Change: As we continue to innovate on electrolyte performance, based on feedback from partners and potential customers, we also need to demonstrate that our electrolyte can be manufactured on a high-volume and high-quality basis.
Speaker Change: To do so, we will need to shift from our current batch production to a continuous manufacturing process.
Speaker Change: Over the next 12 to 18 months, the team is planning to install the first globally known pilot line that can continuously manufacture sulfide-based solid electrolyte materials for ASSBs.
Speaker Change: We expect that by using a continuous manufacturing process, we will have better control of the final electrolyte product and a greater ability to tailor our electrolyte to a customer's requirements.
Speaker Change: As an added benefit, following phase one of the project, we expect to be able to produce 75 metric tons of electrolyte per year to support our customer development programs.
Speaker Change: After finishing the full project projected to be in 2028, we expect to have the capability to produce 140 metric tons per year at SP2, which is more than four times our current capability.
Speaker Change: Last month, shortly following the DOE's announcement, we hosted Colorado Governor Jared Polis and Deputy Secretary of the Department of Energy, David Turk.
Speaker Change: We gave them a tour of our electrolyte facility and showed them how we plan to deploy the DOE funds in a continuous manufacturing process.
Speaker Change: Deputy Secretary David Turk spoke about the DOE's rigorous selection process and the criteria used to select companies for grants.
Speaker Change: Solid power satisfied their three main criteria. First, having a strong technology and business model. Second, addressing challenges in the US supply chain for clean energy by producing battery cells domestically.
Speaker Change: and third, improving our surrounding communities by hiring locally to staff this project.
Speaker Change: We're thrilled to have the validation and support of the federal government and our local community here in Thornton, and look forward to undergoing negotiations for the grant.
Speaker Change: The next step in the DOE process will be to negotiate a contract for the grant funding. We expect that will take several months, and we will provide updates when we are able to.
Speaker Change: Another highlight of the quarter was beginning development activities in our state-of-the-art Electrolyte Innovation Center or EIC. The EIC was designed to significantly enhance our research and development capabilities.
and Improved Pre-Pilot Electrolyte Manufacturing Processes.
Speaker Change: The EIC will allow us to focus on smaller scale electrolyte development and pre-pilot manufacturing processes before transferring our processes to pilot scale manufacturing.
Speaker Change: The EIC will enable speed and flexibility, emulating a full process on a smaller scale.
Speaker Change: The work we do in the AIC will help us customize electrolyte for customers' needs and enhance our feedback loop between our electrolyte and cell development programs.
Speaker Change: I'm very excited about the potential the EIC gives us as we continue to position solid power as a leader in the sulfide electrolyte space.
Speaker Change: Moving on to electrolyte sampling, we continue to sample multiple customers on a repeat basis with multiple variants. And we have received constructive feedback. As we iterate our products,
Speaker Change: We believe we are well positioned to react quickly to our customers' requirements.
Speaker Change: While the total addressable market is large, the number of customers within is finite. As we have said before, we believe many EV-OEMs and Tier 1 battery producers have sulfide-based, solid-state products in their future roadmap.
Speaker Change: Of this group, we are now actively sampling a substantial portion.
Speaker Change: The feedback from sampling is providing important learnings as we continue to evolve our technology. And as I mentioned, with our new EIC, we can rapidly adapt and adjust to meet their needs.
Speaker Change: On the cell side, we've made significant progress on our A2 cell design this year. In order to address gaps identified with the A1 design, the team has been hard at work to improve the design of our cathode, anode, and separator for the A2.
Speaker Change: These are not major chemistry changes. Rather, we are tweaking and enhancing the current design in our pursuit of higher performance.
Speaker Change: In addition, the team has made some mechanical improvements to the lines with the goal of higher quality cell builds.
Speaker Change: The work is continuing on these efforts, and I believe they will provide notable improvements from our A1 design, especially around safety and energy density.
Speaker Change: We have begun small production runs of our A2 material set for internal testing and expect to begin testing A2 cells in early 2025.
[inaudible]
Speaker Change: As I segue to our progress with partners, I want to note two things I am excited about. First, the feedback loop we have created is fueling our technology development, with sampling and customer response as key components.
Speaker Change: Second, our cell technology will soon be in development on three continents.
Speaker Change: through our work with BMW in Europe and SK-ON in Asia, broadening our reach and depth of experience globally.
Speaker Change: With BMW in the third quarter, we finalized the JDA extension as we continue to collaborate with them on cell development and manufacturing.
Speaker Change: The overall goal of the JDA remains what it has always been, to develop a competitive solid-state battery technology that can be used in an automotive application.
Speaker Change: We continue to drive performance around A2 and our overall roadmap to achieve a product that meets BMW's exacting standards prior to vehicle integration.
Speaker Change: We are laser focused on continuing to develop our cell technologies prior to BMW bringing online its pilot line in Parsdorf, Germany next year. We value our partnership with BMW and continue to enjoy the collaborative nature and beneficial feedback loop.
Speaker Change: With SK on, we remain on track with our agreements and have already met all of the required milestones for the year.
Speaker Change: The line drop and tech transfer are going well, and we expect to send electrolyte to Korea this quarter to support factory acceptance activities ahead of planned line installation in mid-2025.
Speaker Change: Additionally, during the third quarter, we signed a non-binding MOU with a major battery manufacturer to explore the possibility of an electrolyte JDA.
Speaker Change: While it is very early in this engagement, if we successfully advance to an agreement, it would be our first electrolyte-specific JDA. We expect such a collaboration would give us as valuable feedback and insights into the electrolyte design and development.
Speaker Change: We are continuing to deepen relationships across Korean battery landscape by collaborating with Korean research institutes, such as Korea Electronics Technology Institute and Korea Evaluation Institute of Industrial Technology.
Speaker Change: We have entered into several agreements to leverage the Korean ecosphere on materials and battery performance and are excited by what we can learn from these new relationships.
Speaker Change: We expect these collaborations to advance our understanding of market needs, while expanding our network in Korea, as we benefit from the talent and experience of these leading institutions.
Speaker Change: Overall, I'm pleased with the progress in the third quarter and excited about our momentum as we exit the year and move into 2025. I will now turn the call over to Linda to review our financials.
Linda.
Linda Heller: Thank you, John. I'll start with Q3 results, beginning with revenue. Solid Power delivered $4.7 million in revenue during the third quarter of 2024, primarily driven by continued execution on the SK-ON agreements and government contracts.
Linda Heller: Operating expenses were $32.2 million, driven by increased production costs, cell and electrolyte development costs, scaling of operations, and execution under our joint development agreements.
Linda Heller: Operating loss was $27.6 million, and net loss was $22.4 million, or $0.13 per share.
Linda Heller: Capital expenditures totaled $2.7 million during the quarter, primarily representing investments in electric light production capabilities, including the build-out of the EIC.
Linda Heller: Solid Power's liquidity position remains strong with $348.1 million of total liquidity as of September 30th, 2024.
Linda Heller: In addition, accounts receivable totaled $2.6 million, deferred revenue was $6.7 million, while total current liabilities were $20.3 million.
Speaker Change: As John mentioned, we have already achieved our FKON milestones for the year. We expected $14.9 million in progress payments in 2024, which have already been collected.
Speaker Change: For 2024, we are reiterating the guidance we provided on the last call, which may also be found in the press release we issued today.
Speaker Change: As a reminder and point of clarification, the Department of Energy Award is a grant, not a loan, for funding of up to $50 million. The total estimated project cost is $110 million, and we are dedicating $60 million over a multi-year period.
Speaker Change: We are well positioned to execute our strategy and I'm excited about the company's plans. I'll now turn it back to John for closing comments before we take your questions.
John: Thank you, Linda. In closing, I'm pleased to reiterate that the company remains on track to achieve our goals for 2024. I would like to thank our employees, partners, and stakeholders for their loyalty and dedication.
John: We have been planning an analyst and investor event to showcase our technology, strategy, and long-term model.
John: As the team will be focused on negotiating the BIL grant over the next few months, we believe that negotiation and further progress on our strategy will better position us for an exciting event in the first half of 2025.
John: Overall, I am encouraged by our progress as we continue to focus on improvement of electrolyte and cell performance.
We will now take your questions. Operator?
Speaker Change: Thank you. At this time we would like if you'd like to ask a question please press star 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2. Again that is star 1 to ask a question. We'll pause for just a moment to allow questions to queue.
Speaker Change: And our first question will be from Mike with D.A. Davison.
Speaker Change: Hi. Hey, everybody. It's Mike Schliske of Davidson. How are you?
Good, Mike. Good to hear your voice.
Speaker Change: Yes, same here. A couple of quick ones from me. One, the ASSB grant award that you just mentioned.
Speaker Change: Can you give us some insight into how that's going to work? Is it a competitive process? Are you up against other companies for this grant?
Speaker Change: Give the DOE the best deal. Are you already selected? And it just comes down to some minor details. I just want to make sure I understand the likelihood of the grant coming through for
Speaker Change: Close to the amount that you've been talking about, at least.
Speaker Change: Sure, the process started late last year to make a proposal to the DOE under the bipartisan infrastructure legislation.
Speaker Change: We actually submitted the formal proposal in March of this year.
Speaker Change: We then were invited back to defend that proposal in Washington, D.C. in front of a skilled panel in the DOE facility.
Speaker Change: It was an hour and a half, kind of like a thesis defense, if you will.
Speaker Change: We were allowed five people to attend that. They peppered us with questions on all of the major areas, the technology, the business model, the viability of the supply chain domestically, and then the community benefits program.
Speaker Change: The best knowledge that we have, and this is actually through a lobbyist that we use in Washington, DC, was again, it was very highly competitive.
Speaker Change: and there were 25 total awards that were given and about 10% was were actually awarded of the proposals that were put in to the best of our knowledge. In our specific category was even more selective.
and about 5% of proposals were actually granted.
Speaker Change: So that's an overview of how the proposal process went and then the selective nature of the grants.
Okay. Did that address the question, Wayne?
Speaker Change: funding of the plan that you have already had in place all along or is this a bit of a branching out?
a different initiative that would require some brand new funding.
Speaker Change: I'm trying to figure out if the cash flow on hand will just be bolstered by this additional grant funding and would you have been fine without it?
Speaker Change: It's the former, Mike. In fact, we had this in our plan, so this is essentially a cash offset for what we had planned to spend.
Speaker Change: As with any DOE program, it is a cost share program. So we will have to put $60 million in for the project. So the total project spend will be $110 million to get to the continuous flow operation.
over the course of the next three plus years.
Okay.
Speaker Change: I do have other questions about this. Maybe I'll just throw out one more question for you that's somewhat related. You know, we just had an election in the United States a couple of days ago, as you know, and the president-elect coming in.
Speaker Change: Seems to be a bit less enthusiastic about the electric vehicle world than maybe prior administrations was, so I want to make sure I'm clear that this particular grant
Speaker Change: and even your customer's ability and desire to even pursue further EV platforms is still relatively intact after the changeover in January.
Speaker Change: Yeah, we really can't speculate on how things are going to play out relative to the new administration Mike I think
Speaker Change: Time will tell on that. We just remain focused on our strategy, solving for longer range, lower cost, and safer EVs. We believe that's what the market's looking for. Some of the softness that is out there right now with the current EVs, I believe, are caused by inadequacies in those areas.
Speaker Change: and so we're focused on our strategy and executing our strategy and believe that it will be a winner in the long run.
Speaker Change: All right. Okay. I'll leave it there. Thanks so much for the discussion.
Thank you, Mike.
Speaker Change: I'm showing no additional questions at this time. I'd like to now turn the conference over to our presenters for any closing remarks.
Speaker Change: Thank you for joining the call today and for your interest in solid power. Linda and I look forward to updating you next quarter. Thank you
Speaker Change: Thank you, ladies and gentlemen, this does conclude today's presentation. You may now disconnect.
Alright, see you next time.
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