Q3 2024 SES AI Corp Earnings Call

and the other two are the same.

The End

Good afternoon. Thank you for attending today's this year's A.S. 3rd, quarter, 2024, Arne's Release and Call. Running me, Jayla, and I'll be a moderator for today. All lives will be immediately during the presentation portion of the call, with an opportunity for questions and answers at the end. I'm now like to turn a conference over to our host, Fowl Pinkleton, E.F. Legal Officer Fowl, you may proceed.

Hello everyone and welcome to our conference call covering our third quarter 2024 results.

Joining me today are Qichao Hu founder, Chairman and Chief Executive Officer and Jing Nealis, Qichao Financial Officer. We issued our shareholder letter after market closed today, which provides a business update as well as our financial results.

You'll find a press release with a link to our shareholder letter in today's conference call webcast

in the Industrial Relations section of our website at seth.ai. Before we get started, this is a reminder of the discussion today. May contain forward-looking information, forward-looking statements, within the meaning of applicable security to legislation.

We've statements are based on our predictions and expectations of today. Such statements 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 a result to different materialy from our current expectations include, but are not limited to those detailed and our latest earnings release and in our SEC filings.

This afternoon we'll review our business as well as results for the quarter. With that, I'll pass it over to Qichao.

Qichao: Thank Kyle, good afternoon and thank you for joining us on our third quarter earnings call. Here we present an update on our progress toward commercialization of our next generation with the metal batteries and our three AI solutions.

The first early commercial revenue in urban air mobility and drones. Our UAM lines have completed site acceptance test as AT and we want self-supply agreements including with soft bank.

Second, Beast Emples has EV Secrets.

Our 100-empoor lithium-metal decimple cells successfully passed the GB3A03120, a major milestone towards decimples and start of production as it will be.

Third, review pipeline from AI accelerated battery material discovery for lithium metal and lithium ion. We expect earlier review pipeline from the electrolyte projects including both lithium metal and lithium ion.

So first early commercial revenue in UAM in drones.

Recently, we signed several commercial agreements to supply listing metal cells with several customers including soft bank. Earlier this year, we converged our EVA sample lines to UAM lines.

and we're excited to report that both Oshaha and Trimzu EVAsMBull to UAM line conversions have completed side acceptance test SAT and achieved ready to use part to use status.

The new UAM cells, manufacturer on these lines have 30 MP in capacity and are custom designed to meet UAM customer requirements.

Second, B-Zampos Path Evisated Path

At the World's First to enter automotive be sample during development for lithium metal, a 100-amp old lithium metal cell developed for our be sample JDAs successfully passed the rigorous industry safety test of GB38031 2020.

This is the first time in the industry that a large capacity looks in metal cells, successfully past safety tests required by the global GB303120 EV traction batteries safety standards.

This certification is required by all of SSAI's EBOEM partners. As well as many of the other leading manufacturers as the global standard.

GB-3A-031-2020 is a manager of safety standards encompassing the series of rigorous tests which include overcharge, over discharge, external short circuit, heating, temperature cycling, and crushing.

The Chief Minister of the Standards, demonstrates the SSAI's 100-impolled metal cells can effectively manage safety risk under the Strungeon Test Conditions.

This is the major milestone towards sea sample and start of production, SOP.

Third, all you know AI.

Speaker Change: Our AI solutions have already borne fruits in advancing the lithium metal plant on the last year. We're working closely with our OEM partners to broaden the scope of our AI efforts to incorporate other battery chemistry and cell designs.

We anticipate that this won't enable us to deliver greater value to a broader customer base Better serving our customers using lithium ion and lithium metal batteries and generating multiple revenue opportunities

Speaker Change: The End

AI Excellency, the Battery Materials Discovery.

Earlier this year, we established our July 5th, Formed a Partnership with a Media to leverage the latest computing hardware in software and attract a team of world-class battery-elatial scientists including promoting Dr. Kong Xu to our Chief Technology Office at CTO.

Speaker Change: We achieved remarkable acceleration.

which allowed us to compute the largest molecular property database in the world.

We have the most complete N-T-N capabilities, including molecular property mapping, a model development human domain expertise, the Lashri-Foundry for molecules synthesis and the Lashri formulation, and cell production and validation from lab to A samples and B samples and beyond.

We'd like to enter a pipeline of revenue contracts the first time later this year, including five projects from two companies.

One, Yelashva and Manufacturer in one automaker. To apply our AI accelerated battery material discovery, N-TN capability to solve various lithium metal and lithium ion Yelashva challenges. This is just in the first quarter since we introduced our all-emal AI strategy.

AI Commandifaction in Safety, both Oshaha and Trimzy U.M. lines now have AI for manufacturing installed and we are currently installing AI for manufacturing for the B-Cemble lines as our OEM partner site.

Qichao: This tool has helped detect defects that would have escaped using conventional manufacturing quality control.

All UIM in drone customers that receive all the metal cells, the modules will also have our AFSAV to embed it in addition to conventional battery management system, to precisely monitor battery health and predict incidents.

Qichao: With AFA Safety alone, we have achieved 95% prediction after a seat.

The Chief in the Target that we set out earlier this year and with AF from any factory integrated with AF safety, we can achieve a hundred percent prediction accuracy. These are based on training from 15,000 with the metal cells.

Qichao: Oval, I'm very proud about achievement in the past quarter. In EV, a 100-impot with the metal cells successfully passed the rigorous GB3A-031 global industry safety test.

and Industry 1st for lithium metal and a major milestone to a commercialization of lithium metal for EV. In U.M. and drones, we now have two lines producing cells from multiple customers, including Southbank.

Powering the success of Elvis and Metal is our Pauline on AI Strategy.

We built what we believe to be the world's largest molecular property database using still the art competing hardware and software Expect to enter a pipeline of revenue contracts for the first time from our AI solutions in the fourth quarter of the year

and achieved a target of 95% production accuracy with AF-50. 100% accuracy will integrate AF-50 manufacturing with AF-50.

So thank you for your continued interest in SES AI and now I will turn over to Jing for a financial update.

Jing: Thank you, Qichao.

Today, I will cover our 424 financial results and discuss our awkwarding and capital budget for full year 2024.

Jing: In the third quarter, our gaps offered in expenses were 34.2 million, cash used in operation were 22.7 million and capital expenditures were 1.5 million.

We ended the third quarter with 274 million in liquidity.

Qichao: As we continue to be very prudent with our cash and management of our expenditures, we updated our full year 2024 guidance.

We now expect total tax usage to be in the range of 80 million to 95 million. That I'm from 100 million to 120 million previously.

This range is comprised of cash usage from operation of 70 million to 80 million compared with 85 million to 95 million previously.

and Captoley's expenditures in the range of 10 million to 15 million, compared with 15 million to 25 million previously.

Qichao: With our reduced and more happily efficient cash usage and expectation that our oil and on AI strategy will start generating revenue in the near future. We expect our strong balance sheet to provide liquidity for the company well into 2021.

Qichao: Now I would like to hand it over to the operator to start a Q&A section.

Speaker Change: Well, now begin our question and answer session. That's it. Some of you would like to ask a question. Please press star follow by one on your telephone. Keep head. If you're any reason, you will like to remove that question. Please press star follow by two.

Again, to ask a question, it is star one. As a reminder, if you're using a speaker phone, please remember to pick up your hint before asking a question. A first question comes from Sean Severson, with the company Water Tower Research. Sean, the mind is not open.

Thank you, good afternoon. Qichao, very exciting on the revenue opportunity in the 4Q from AI, but can you expand a little bit on what the revenue mechanism is going to be as a subscription service or what is the what form is the revenue going to take?

Yeah, thanks, Sean. So the AI accelerated to material discovery, it's really just the beginning. I think we'll change the whole battery industry. We've already demonstrated, so we found a molecule that improved lithium metal cycle after about 20%. That's very exciting. And now we're going to apply this to silicon lithium ion.

Qichao: and we found Philokon and all batteries.

In terms of Yelashwai, I should quite similar to looking at it. In terms of business model, our goal is a combination of...

Subscription, so this...

Colliant in the Electoral Company or that company can pay as a fee.

Qichao: Per year as a subscription to use the model and then when we come up with a new model to you and new Elisha product, we will also be manufacturing that Elisha and then supply that. So, it's a combination of subscription to the model as well as a product revenue.

Qichao: and so when you look at, I guess it's...

Growing the number of customers here, can you walk me through how this is going to go to marketing? Obviously, you have a great sound like a pilot, and he called a pilot program, but she's going to have something that's actually in use.

What is this growth? You do then add other products to the same OEM or you have multiple OEMs you're talking to. How does it develop? I'm just trying to understand the growth process of the AI Reventer.

Speaker Change: Yeah, yeah, so...

Speaker Change: So the three OEMs that we have been working with obviously those will be the first three customers for this And then in addition to them also they are Eulachphalite companies that make Eulachphalite for other OEMs that we don't have

JGSworth, but also for the diagnosis for car applications, but also cell phones, robotics, grid stories, and then other applications. So we have already approached by...

Qichao: The Top 5, I will say, you'll actually have companies and then...

Qichao: Top.

Qichao: Data makers and the car companies. So, took.

So we have a few projects on going and then it's not like we have to develop that's totally new for each one. There is a lot of commonalities among these and then in the beginning, they'll take about 9 months to a year per new discovery. But once we have this arsenal, I mean now we're at about 10 to the 7th.

Qichao: which is the largest in the world and as soon as we get it, entry to eighth. Once we have this arsenal, then we expect to come up with a new model to forth. So we expect to come up with a new,

Speaker Change: and then my last question is on the span of Cap X-10 to 15, or even from the operation usage. How is the all in AI fitting into this? I'm just trying to understand where the money is.

Qichao: Going to now versus, you know, if we look back more towards the manufacturing development, the knob and see if they have opportunities in front of you.

Qichao: Yoke.

and I can also that and in Jing Nealis you can also tell me the beat and for line we...

Speaker Change: Part of the Catholics were this year, will be for the decimple line, but also the decimple line, the decimple lines, what they are, they are part of this complete N-TN capability for this AI accelerators material discovery. A lot of companies that will do just the AI in the recommended policies, but they don't synthesize and don't test.

Speaker Change: in batteries, so...

Qichao: You can't really validate.

But what we're trying to do, and then this really important is...

We have to map the property space, which we are doing that's basically a computation chemistry. We have the best team in the world and then we filter down and recommend monotutes. But then you have to synthesize the monotutes. That's what our goshuophoundry is about. We built that earlier this year and then once we have the monotutes synthesized, we formulate the goshuoline. And then we...

Custom in A-SAMBOSEL, in B-SAMBOSEL. So all the effort, all the...

All the Joshua Phones, the teams that we build on the path, and not to come together. And really...

I think we're the only one that has this complete NGN capability for AI, Excel, materials discovered in the battery space. But in pharmaceuticals, they are other companies that do this, but in the battery space, this is the only one. So in terms of cab packs,

I love the manga we're spending on this Italian talent is always number one, GPU, we're getting good deals from our partners, but these are the main things to you if you want to ask something.

Yeah, I just want to add a little bit of color on the cash spammed as Qichao mentioned

We are spending money on hiring the best talent and GPU, but those were in our functional plan and we're we would do our catpacks to focus on building one-by-simple line and converting to UAM lines.

and we have also significantly decreased G&A spending throughout the year.

and then also what's mentioning we are expecting to receive around 7 million in the fourth quarter. It's a combination of milestone payments from our OEM partners at Part of the JDA's, plus down payment from revenue contracts that we mentioned earlier.

Speaker Change: Thank you very helpful.

Qichao: [inaudible]

Qichao: The End

Qichao: The End

Qichao: The End

What I've question comes from Winni Dong with a company door to bank Winni, you'll notice that open

Winni Dong: Thank you so much. Please talk about maybe the revenue potentials that are associated with the U.A.M. customer pipeline.

and then, are there any more details you can potentially share?

with our zombie agreement with South Bank and when it might be seen, you know, the conversion test.

Qichao: and I want to address that.

Speaker Change: Sure, yeah, so well, because of confidentiality with our customers, we currently really can't go to much detail about the contract.

But the project will kick off in November and then it will continue until the first half of the next year.

Qichao: That's all I can say right now

But for the AI solution revenue, we're expecting to enter into contract in the next few weeks and that's potentially revenue throughout 2025.

Speaker Change: Got it. I mean, is anyway these those help us.

Speaker Change: Five, the potential of that kind of opportunity. It sounds like there are several ways that you guys can monetize this. Anyway, two sort of help us with potentially, I don't know, More than that kind of, you know, Chapter 8 into 2025.

Yeah, at this moment we are not really providing guidance for 2025, but I think...

What we could say right now is one we will put out an announcement when the contract is signed.

2. We are seeing tremendous interest from our existing partners and then new customers and new partners on all these solutions that we're providing. So stay tuned for more information when we announce the deal.

Okay, got it. And then I'm going to briefly, you guys have talked about sharing and pulling on.

and so data from some of you here that are accompanying in order to succeed into the AI model. Maybe talk about where you might be with this and how that can potentially boost your database.

Speaker Change: Yeah, we need uh...

Speaker Change: on the mouth, you'll realize that.

Speaker Change: That one we are actually synthesizing the data. So all the data we are competing and then...

and this is not just hardware but also very advanced news staff for computing these properties and then computer fast and also accurate. So this, we are computing in-house and the number not relying on any data from other companies because also they don't have that.

and then on the manufacturing, as part of the bee samples, we actually...

We actually got data from our OEM partners and then the data are for looking at all as was looking at IOM data, manufacturing on the same line, so we can actually get these data and then turn them out off.

Speaker Change: Thank you very much.

Speaker Change: An Exquestion, ComSTroom, Sean Severson with a Company Water Tower Research. Done, Your Line of Set will be.

Thanks, since you try to follow up on the UAM market, I know before you said that it was developing fast, but

It may not be a huge commercial market immediately in front of you, but I'm just wanting to get an update on

What you're seeing now, that's changed at all. Obviously going to market very quickly there. But what do you think today of the commercialization opportunity in UAM?

Speaker Change: Yeah, um...

So I think it's a good UAM, and then that includes both one-to-care passengers, as well as large cargo drones. The market is actually quite fast, especially in China and in other parts.

This module is growing quickly and then we actually made a cell that's tailored for UAM including passenger and large cargo, this 30-amp power. It's smaller than the 100-amp power EV and then this size is known to replace the 2170 lithium-ion cells.

that these UAM companies currently use and then they ask, okay, they want this format. This market is actually growing quite fast and then is why we opened up this new cell product just for this.

Speaker Change: And can you remind me, I know Lithium metal has some particularly attractive attributes for UAM. So, if you just compare and contrast the competitiveness of Lithium metal versus Lithium high-on, because it seems like you're displacing Lithium, Lithium high-on batteries and many of these applications as well towards commercialization.

Speaker Change: Yeah, sure, so for UAM because they need high-pouldance, the alabdolism ions are...

Palo cells, so they are around 250 watts per kg at a cell level and then for lithium metal the cells that we're...

Speaker Change: The flying there are 400.

Speaker Change: wants to engage you. So that means you can fly almost 3% longer or you can carry 3% more payload, more passengers or more cargo. It's a big change and this means a lot for the economic and the profitability of the UAM in large cargo business.

Thank you.

Speaker Change: As a farmer, I'd like to pass the call for into back over to Kyle for more questions. Bout, do a proceed.

Thank you, we do have one question which was submitted in advance by investors.

So the question is for Qichao, FCS has produced high energy density cells.

One of the remaining concerns is related to cycle life requirements by the EVO EM's as the data is indicating that FES is still working on decreasing the cycle life. What are the things that FES is working on to increase cycle life?

Yeah, so we have a few things that are quite promising. One is this new molecule that we discovered using the AI accelerated.

and that includes cycle by about 20%. And then that's only after we've mapped 10 to the fifth.

Speaker Change: Space, but we're going to map 10 to the 8th, so there's about 1,000 times bigger that we can map. So that improves cycle by 20% and then also on AF for safety, we're also using the new AI tools to...

to be trained on these cycling data and then we can develop optimized charging protocols. That can also improve the cycle life. And then also on the website we publish our cycle life under...

Real World UAM Conditions and EV Conditions, especially under the UAM Conditions, we can actually get them on a thousand cycles. So both at the material level and the charge protocols both can be improved by our human team as well as the AI accelerated discovery.

Great, thanks with that, I'll pass it back to the operator.

At his time, there are no more questions, what should he give for his best effect? Travel Stinty for close or marks.

Speaker Change: The End

Oh yeah, I mean we're quite excited about this new AI accelerated material discovery that we have and then with a new...

Competition Chemistry, Algorithms that we develop, we are able to really map all the properties of these molecules very fast and very accurately. And this has helped us identify new molecules for looking metal. And then we're also going to...

Bring this tool to looking my own and this was at a request so far where OEM

Partners, and then, you know, this into this, the complete capabilities that we built, including the molecules, the Elatra Foundry and the A-Cemple B-Cemples.

Speaker Change: That will conclude today's conference call. Thank you for your participation and enjoy the rest of your day.

The End

Speaker Change: [inaudible]