Q4 2024 SES AI Corp Earnings Call
And I'll be your moderator for today, all lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end I would now like to turn the conference over to our host Kalle Pendleton.
Kalle Pendleton: You May proceed.
Kalle Pendleton: Hello, everyone and welcome to our conference call covering our fourth quarter and full year 2024 results.
Kalle Pendleton: Joining me today are <unk>, founder and Chief Executive Officer, and Jim <unk>, Chief Financial Officer, We issued our shareholder letter just after four PM today, which provides a business update as well as our financial results Youll find a press release with a link to our shareholder letter and today's conference call webcast in the Investor Relations.
Kalle Pendleton: Section of our website at SCS Dot AI for.
Kalle Pendleton: 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.
Kalle Pendleton: These statements are based on our predictions and expectations as of today.
Kalle Pendleton: 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 our results to differ materially from our current expectations include but are not limited to those detailed in our latest earnings release.
Kalle Pendleton: And in our SEC filings. This afternoon, we will review our business as well as the results for the quarter with that I'll pass it over to Chi Chow.
Kalle Pendleton: Good.
Chi Chow: Good afternoon, and thank you for joining us on our fourth quarter and full year 2024 earnings call.
Chi Chow: Today, we are pleased to present, an update on a new era for us.
Chi Chow: As we reap the benefits are all in on AI strategy deepen existing relationships move to the next stage of our evolution to a revenue generating company.
Chi Chow: And share our plans for additional revenue streams with new market expansion and drones robotics battery energy storage systems BSS.
Chi Chow: As you may have seen we have made several announcements over the last several weeks.
Chi Chow: Including the Lcs AI as reported revenue for the first time in the fourth quarter.
Chi Chow: We are no longer a pre revenue company.
Look forward to continuing on our commercialization pattern of growing revenue in 2005 and beyond.
Unknown Speaker ...letter just after 4pm today, which provides a business update as well as our financial results.
Chi Chow: First I wanted to address the highlights <unk> space.
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 ses.ai.
Chi Chow: Since the fourth quarter, we signed contracts totaling up to $10 million to develop AI enhanced lithium metal and lithium ion batteries for evs with two automotive OEM partners.
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.
Chi Chow: These contracts solidified our relationships with our OEM partners and continue to demonstrate the value. These partners see in the use of AI for battery material development.
These statements are based on our predictions and expectations as 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.
Chi Chow: Especially with the value that enhance the electrolyte can provide for both lithium metal and lithium ion batteries.
Chi Chow: Second I want to address the important and what we have accomplished in urban air mobility.
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 filings.
Chi Chow: Drones and robotics.
Chi Chow: In January at CES.
Chi Chow: 2025 show we.
This afternoon, we will review our business as well as the results for the quarter. With that, I'll pass it over to Qichao.
Chi Chow: Unveils and AI enhanced $20 70, so integral sale with humanoid robotics.
Qichao: Thanks, Kyle. Good afternoon, and thank you for joining us on our fourth quarter and fall year 2024 earnings call.
Chi Chow: Earlier in 2024, we signed a significant purchase order with data plan for <unk>.
Chi Chow: Jones for Forest Fire management.
Today we are pleased to present an update on the new era for SDS-AI as we reap the benefits of our all-in-all AI strategy, deepen existing EV relationships.
Chi Chow: And with Softbank, perhaps communication satellites.
Speaker Change: This was a game changer as these AI, hence $20 70 cells are the first batteries to use an electrical I've discovered by Ses Ai's, Martha universe effort, which mask, the physical and chemical properties of the entire universe of small molecule suitable for battery electric rates.
Qichao: move to the next stage of our evolution to a revenue generating company and share our plans for additional revenue streams with new market expansion in drone robotics and battery energy storage systems BSS.
Chi Chow: Tend to the 11th molecules.
Qichao: As you may have seen, we have made several announcements over the last several weeks, including that SDS-AI is reporting revenue for the first time in the fourth quarter.
Chi Chow: Our human Sciences, AI agent loans that has great similarity between lithium metal and high silicon lithium ion cells in terms of intellectually anode interfaces.
Qichao: We are no longer a pre-revenue company and look forward to continuing on our commercialization path by growing revenue in 2025 and beyond.
Chi Chow: Our development in lithium metal electrolyte could also address high silicone lithium ion challenges, especially swelling and cyclists.
Qichao: First, I want to address the highlights in our EV space.
Chi Chow: We are now in both lithium metal and high silicon lithium ion.
Qichao: Since the fourth quarter, we signed contracts totaling up to $10 million to develop AI-enhanced lithium metal and lithium ion batteries, or EVs, with two automotive OEM partners.
Chi Chow: 270 is an industry standard format and is available on the large commercial scale the.
Chi Chow: <unk> discovered through our molecular universe efforts is a drop in replacement.
Chi Chow: This allows us to have a capex light model through contract manufacturing and to deliver a high energy density and high power density sell for customers and humanoid robots drones, Evs power tools and other applications.
Qichao: These contracts solidify our relationships with our OEM partners and continue to demonstrate the value these partners see in the use of AI for battery material development, especially the value that an enhanced electrolyte can provide for both lithium metal and lithium ion batteries.
Chi Chow: Third Ses AI is planning to expand into a new and growing field.
Qichao: Second, I want to address the important work we have accomplished in urban air mobility, or UAM, drones and robotics.
Chi Chow: <unk> energy storage systems BSS.
Qichao: In January, at the CES 2025 show, we unveiled an AI-enhanced 2170 cylindrical cell for humanoid robotics.
Chi Chow: Last month, we announced that <unk> signed an Mou with AI specs targeting up to $45 million to provide up to 100 megawatt hours of advanced battery energy storage systems DSS solution with AI for safety and the first deployment of the crypto mining site in <unk>.
Qichao: Earlier in 2024, we signed a significant purchase order with data blanket for drones.
and with SoftBank.
Chi Chow: Yes.
Chi Chow: This relationship is the first of its kind for Ses AI and we believe that this is something that can be replicated with additional partners in the future.
has communication solids.
Qichao: This was a game-changer as these AI-enhanced 2170 cells are the first batteries to use an electrolyte discovered by SES-AI's Molecular Universe effort.
Chi Chow: This project will involve our battery safety platform Avatar, which includes our AI for manufacturing and AI for safety solutions.
Qichao: which maps the physical and chemical properties of the entire universe of small molecules suitable for battery electrolytes, 10 to the 11th molecules.
Chi Chow: Powering our commercial success are our two focus areas.
Chi Chow: Upstream material discovery molecular universe, and downstream battery safety Avatar.
Qichao: Our human scientist and AI agent learned that there's great similarity between lithium metal and high silicon lithium ion cells in terms of electrolyte anode interfaces.
Chi Chow: In molecular universe, our collaboration with Nvidia GPU enhanced computation chemistry software help accelerated this effort to map the entire tend to the 11th universe of small molecules from more than 8000 years to just a few months.
Qichao: and our development in lithium metal electrolytes could also address high silicon lithium ion challenges, especially swelling and cyclites.
Qichao: We are now in both lithium metal and high silicon lithium ion.
Chi Chow: We have now mapped 28.
Qichao: 2170 is an industry standard format and is available on the large commercial scale. The electrode discovered through our Molecular Universe efforts is a dropping replacement.
Chi Chow: 0.1% of the molecular universe.
Chi Chow: We think this is the world's largest single molecule density function theory database.
Chi Chow: And we're also mapping solution and interface levels.
Qichao: This allows us to have a capex light model that will contract manufacturing.
Chi Chow: <unk> unique proprietary synthetic data help train our AI model that will accelerate novel irrational I discovery.
Qichao: and to deliver a high energy density and high power density cell for customers in humanoid robots.
Chi Chow: As we have seen for lithium metal and high silicon lithium ion.
drones, EVs, power tools, and other applications.
Chi Chow: On labor, even LSP cells for BSA and other chemistries.
Qichao: Third, SESAI is planning to expand into a new and growing field, Battery Energy Storage Systems, BESS.
Chi Chow: With Avatar, we have developed a new foundation model to monitor battery health and predict incidents before they happen.
Last month, we announced that SDS-AI signed an MOU with
Chi Chow: This AI based model works in conjunction with conventional fitness space battery management system CMS.
Unknown Speaker 07.01.01
Qichao: targeting up to $45 million to provide up to 100 megawatt hours of advanced battery energy storage systems ESX solution with AI for safety and the first deployment at a crypto mining site in Texas.
Chi Chow: So it is agnostic to chemistry form factor I mentioned profile.
Chi Chow: <unk> currently has been pre trained our manufacturing data and cycling data across a variety of cell chemistries, including MTN LSP Castle and high Silicon gratified in lithium metal anode and form factors, including pouch prismatic.
Speaker Change: This relationship is the first of its kind for SAS AI, and we believe that this is something that can be replicated with additional partners in the future.
Chi Chow: Cylindrical and mission profiles, ranging from BSS to EV drones and robots.
Speaker Change: This project will involve our battery safety platform avatar, which includes our AI for manufacturing and AI for safety solutions.
Chi Chow: In closing.
Chi Chow: There has been some exciting <unk> during the end of 2024 and at the start of 2025.
Powering our commercial success are our two focus areas.
Upstream Material Discovery, Molecular Universe, and Downstream Battery Safety, Avatar
Chi Chow: Especially with US recognizing revenue for the first time in our history.
Chi Chow: All in on AI.
In the molecular universe...
Chi Chow: Not only critical.
Speaker Change: collaboration with NVIDIA on GPU enhanced computation chemistry software helped accelerate this effort to map the entire 10 to the 11th universe of small molecules from more than 8,000 years to just a few months.
Chi Chow: It is the future.
Chi Chow: We see great things continuing going forward.
Chi Chow: Here are some of the things I see happening.
Chi Chow: The change in our business model.
Chi Chow: Originally we envisioned capex heavy plans to manifest itself for Evs and uhm at scale and then offsetting some of the required cost through JV.
Speaker Change: We have now mapped 10 to the 8th, 0.1% of the molecular universe. We think this is the world's largest single-molecule density function theory database.
Chi Chow: Now our business model focuses heavily on selling our AI models.
And we're also mapping solution and interface levels.
Chi Chow: In core battery materials contract manufacturing of cells, using our electrolyte and selling of contract imported cells.
Speaker Change: This unique proprietary synthetic data helps train our AI model that will accelerate novel electrolyte discovery.
Chi Chow: A focus on hiring of AI scientists and sales and marketing teams to pursue greater expansion of revenue opportunities from train 25 to 2027.
Speaker Change: As we have seen for lithium metal and high silicon lithium ion, and later even LFP cells for BSS and other chemistries.
Chi Chow: Continued evolution from a pre revenue EV focused battery technology company Levered, two one battery chemistry.
Unknown Executive, Jing Nealis, Kyle Pilkington
Speaker Change: With Avatar, we have developed a new foundation model to monitor battery health and predict incidents before they happen. This AI-based model works in conjunction with conventional physics-based battery management system, BMS.
Chi Chow: Q a company that can leverage his prior work along with its AI technology and AI enabled.
Chi Chow: <unk> should generate revenue in a capex light model much earlier than anticipated and with an ability to tap to new adjacent verticals that we believe will be much larger than EBIT.
but is agnostic to chemistry, form factor, emission profile.
Speaker Change: and currently has been pre-trained on manufacturing data and cycling data across a variety of cell chemistries including NCM, LST cathode, and high silicon graphite and lithium metal anode.
Chi Chow: Thank you for your continued interest in <unk> AI and now I'll turn it over to June for financial updates.
Speaker Change: and foreign factors including pouch, prismatic, and cylindrical emission profiles ranging from BSS to EV, drones, and robots.
June: Good afternoon, everyone I will discuss our financial performance for the fourth quarter and full year 2024.
June: I'm pleased to share our financial results and provide insights into our fiscal health strategic priorities commercialization plans and 2025 outlook.
Speaker Change: In closing, SCSAI has seen some exciting advancements during the end of 2024 and at the start of 2025, especially with us recognizing revenue for the first time in our history.
June: But the first quarter ended December 31st 2024.
Speaker Change: Falling on AI is not only critical, but is the future.
June: Revenue milestone, we reported Q4 2020 for revenue of $2 million, marking the beginning of our evolution into a commercialized high revenue generating business. This revenue was primarily driven by contracts with our automotive OEM partners to develop AI enhanced.
Speaker Change: We see great things continuing going forward. Here are some of the things I see happening.
Speaker Change: The change in our business model. Originally, we envisioned capex-heavy plans to manufacture cells for EVs and UAM at scale, and then offsetting some of the required costs through JVs.
June: Lithium metal and lithium ion batteries for EV applications.
June: <unk> initial delivery of our lithium metal sales to our customers like Softbank, perhaps and data blanket electronic applications.
Speaker Change: Now, our business model focuses heavily on selling our AI models and core battery materials, contract manufacturing of cells using our electrolytes, and selling of contract imported cells.
June: This revenue comes with a 63% gross margin demonstrating the strong value proposition of our technology and our AI strategy.
June: Operating expenses, our GAAP operating expenses were $30 4 million for the quarter.
Speaker Change: continue evolution from a pre-revenue EV focused battery technology company lever to one battery chemistry
June: Primarily driven by research and development initiatives and general administrative cost.
June: Cash flow.
Speaker Change: to a company that can leverage its prior work along with its AI technology and AI-enabled electrolytes to generate revenue in a capex light model.
June: At like $12 3 million in cash for operations and less.
June: Point 2 million in capital expenditures during the quarter.
June: Liquidity, we concluded the quarter with a strong liquidity position of $262 5 million, ensuring our ability to fund ongoing and future projects.
Speaker Change: Much earlier than anticipated, and with an ability to tap two new adjacent verticals that we believe will be much larger than EV.
June: For the full year 2024, we achieved a total cash usage in operations and capital expenditures of $78 3 million.
Speaker Change: Thank you for your continued interest in SES AI. And now I'll turn it over to Jun for financial updates.
Unknown Executive, Jing Nealis, Kyle Pilkington
Speaker Change: Good afternoon, everyone. I will discuss our financial performance for the fourth quarter and full year 2024. I am pleased to share our financial results and provide insights into our physical health, strategic priorities, commercialization plans, and 2025 outlook.
June: The low end of our previous guidance of 80 million to $95 million.
June: This includes operational cash usage of $66 1 million and capital expenditures of $12 2 million.
June: As we look ahead Ses AI is well positioned for continued growth and disciplined investment in 2025.
The fourth quarter ended December 31st, 2024.
Speaker Change: Revenue Milestone. We reported Q4 2024 revenue of $2 million, marking the beginning of our evolution into a commercialized and revenue-generating business.
June: Greater visibility we now have on revenue has allowed us to provide some guidance for 2025.
June: This will be the first time that we are providing this outlook. Therefore, we're being conservative in our expectations and focusing on our full year outlook, rather than any particular quarterly cadence of revenue or expenses.
Speaker Change: This revenue was primarily driven by contracts with our automotive OEM partners to develop AI-enhanced lithium metal and lithium-ion batteries for EV applications.
June: We intend to update this outlook during the year as needed.
Speaker Change: and initial delivery of our lithium metal cells to our customers like SoftBank for HAPs and Data Blanket for drone applications.
Revenue outlook, we anticipate 2025 revenue to be between 15 million and $25 million.
Speaker Change: Importantly, this revenue comes with a 63% growth margin, demonstrating the strong value proposition of our technology and all in AI strategy.
June: <unk> growth from our expanding partnerships and commercialization efforts, we expect to generate revenue from development of AI enhanced lithium metal in lithium ion batteries for EV applications delivery of battery cells to you Anne drones and robotics customers.
Speaker Change: Operating expenses. Our GAAP operating expenses were $30.4 million for the quarter, primarily driven by research and development initiatives and general administrative costs.
June: And delivery of integrated battery energy storage system with our AI solutions.
June: Planned spending we forecast total cash usage in operations and capex to be between 70 million and 80 million prioritizing R&D advancements commercialization and strategic market expansion with a capital light business model.
Speaker Change: Cash Flow. We utilized $12.3 million in cash flow operations and invested $0.2 million in capital expenditures during the quarter.
Speaker Change: Liquidity, we concluded the quarter with a strong liquidity position of $262.5 million, ensuring our ability to fund ongoing and future projects.
June: Cash management.
June: Our strong liquidity position extends our runway and continues to support our long term vision with a focus on financial discipline and strategic investments.
June: With our Capex light business model, we expect to maintain adequate liquidity well into 2028.
June: We see tremendous organic and inorganic growth opportunities ahead of us.
Speaker Change: This includes operational cash usage of $66.1 million and capital expenditures of $12.2 million.
June: Well capitalized to capture these opportunities and the disciplined fashion, particularly with additional funds from our projected revenue growth and or potential capital markets activity further enhancing our liquidity.
Speaker Change: As we look ahead, SES AI is well positioned for continued growth and disciplined investment in 2025.
Speaker Change: The greater visibility we now have on revenue has allowed us to provide some guidance for 2025.
June: 2024 was a transformative year for ICF AI.
June: <unk>, our first revenue milestone with a positive gross margin is a pivotal moment.
Speaker Change: As you know, this will be the first time that we are providing this outlook. Therefore, we're being conservative in our expectations and focusing on the four-year outlook rather than any particular quarterly cadence of revenue or expenses.
June: Note, our evolution from an R&D focused company to a commercial and revenue generating business.
June: With high margin revenue growing partnerships and disciplined financial management, we're excited about the opportunities ahead.
Speaker Change: We intend to update this logbook during the year as needed.
Speaker Change: Revenue Outlook. We anticipate 2025 revenue to be between $15 million and $25 million, reflecting growth from our expanding partnerships and commercialization efforts.
June: Appreciate your continued support and confidence in us USAA. Thank you now I'll turn the call back to the operator.
Speaker Change: At this time, if you would like to ask a question. It is star followed by one on your telephone keypad. If for any reason you would like to remove your question.
Speaker Change: We expect to generate revenue from development of AI-enhanced lithium metal and lithium ion batteries for EV applications, delivery of battery cells to UAM, drones, and robotics customers.
Speaker Change: Followed by two again to ask a question it is star one.
Speaker Change: Binder.
Speaker Change: Speakerphone, please pick up your handset before asking a question.
Speaker Change: and delivery of integrated battery energy storage systems with our AI solutions.
Speaker Change: Just briefly here these questions are registered.
Speaker Change: Plan spending. We forecast total cash usage in operations and CapEx to be between 70 million and 80 million, prioritizing R&D advancements, commercialization, and strategic market expansion with a capital light business model.
Our first question comes from Lenny Dunn with accompanying Deutsche Bank. Your line is now open.
Speaker Change: Hi, Thanks for taking my question Tito I was wondering maybe you can talk about.
Speaker Change: The shift in strategy here.
Speaker Change: Tax Management. Our strong liquidity position extends our runway and continues to support our long-term vision with a focus on financial discipline and strategic investments.
Speaker Change: In particular, what led to this shift.
Speaker Change: And then it was mentioned that there was plenty of contracts totally up to $10 million.
Speaker Change: With our CAPEX-like business model, we expect to maintain adequate liquidity well into 2028.
Speaker Change: <unk>, leading auto OEM partners.
Speaker Change: If you are able to the deal are they the same OEM partners that.
Speaker Change: We see tremendous organic and inorganic growth opportunities ahead of us.
Speaker Change: Yes.
Speaker Change: GDA partners worth.
Speaker Change: And how is it different.
Speaker Change: We are well capitalized to capture these opportunities in a disciplined fashion, particularly with additional funds from a projected revenue growth and or potential capital markets activity further enhancing our liquidity.
Speaker Change: <unk> previous mindset.
Speaker Change: Okay.
Speaker Change: Thanks, so much.
Speaker Change: Yes.
Speaker Change: So previously.
Speaker Change: Just focus on just lithium metal for Evs and then.
Speaker Change: 2024 was a transformative year for SES AI. Achieving our first revenue milestone with a positive growth margin is a pivotal moment that signals our evolution from a R&D focused company to a commercial and revenue generating business.
Speaker Change: And I think.
Speaker Change: Our work in lithium metal it wasn't just as the battery.
Speaker Change: Felt level it was more fundamental it was more of a material discovery level for the electrical and then also.
Speaker Change: With high margin revenue, growing partnerships, and disciplined financial management, we're excited about the opportunities ahead. We appreciate your continued support and confidence in SES AI. Thank you. Now I'll turn the call back to the operator.
Speaker Change: Lithium metal battery safety side and then.
Speaker Change: These two core we noticed and also the Oems that were working with notice there'll be could actually apply these to lithium ion.
Speaker Change: And then once you extend beyond just one technology, just one battery technology.
Kyle Pilkington: Unknown Executive, Jing Nealis, Kyle Pilkington, Kyle Pilkington, Kyle Pilkington, Kyle Pilkington,
Unknown Executive, Jing Nealis, Kyle Pilkington
Speaker Change: You can apply.
Kyle Pilkington: If for any reason you would like to remove that question, it is star followed by two. Again, to ask a question, it is star one. As a reminder, if you're using a speakerphone, please remember to pick up your headset before asking a question. I'll pause briefly here if questions are registered.
Speaker Change: <unk> platform to actually two platforms to.
Speaker Change: Multiple chemistries than than the addressable markets.
Speaker Change: Much larger so of course, we.
Speaker Change: Of course.
Speaker Change: Anyone with wood.
Speaker Change: Just make us jump from a single technology in a single market to two platform across almost every battery technology out there so that was a.
Unknown Executive, Jing Nealis, Kyle Pilkington
Unknown Executive, Jing Nealis, Kyle Pilkington
Speaker Change: Our first question comes from Winnie Dung with the company Deutsche Bank. Winnie, your line is now open.
Winnie Dung: Hi, thanks for taking my question. I was wondering maybe you can talk about
Speaker Change: August junk.
Speaker Change: And I think quite exciting jump.
Speaker Change: the shift in strategy here. In particular, what what led to this shift?
Speaker Change: And then in terms of the two.
Speaker Change: The Oems.
Speaker Change: I think I can guess <unk>. So we have been working with for a long time and.
Winnie Dung: And then it was mentioned, you know, that they would sign your contract totally up to $10 million.
Speaker Change: And to solve this.
Speaker Change: <unk>.
Speaker Change: Our ability.
Winnie Dung: for two leading auto OEM partners. If you are able to reveal, are they the same OEM partners that you know, SDS has GDA partners with? And how is it different from, you know, those previous ones with Hyundai and Hyundai?
Speaker Change: From just a single chemistry in a single market too.
Speaker Change: <unk>.
Speaker Change: Petrochemistry across multiple markets.
Speaker Change: The target not just Tvs Tvs.
Speaker Change: One of the most important ones, but also drones do drones and robotics both of them to provide us as well and then also urban air mobility. So yes.
Thank you so much.
Unknown Executive, Jing Nealis, Kyle Pilkington
Yeah, when you.
Unknown Executive, Jing Nealis, Kyle Pilkington
Winnie Dung: So previously, we just focused on just lithium metal for EVs, right? And then I think our work in lithium metal, it wasn't just at the battery.
Speaker Change: The mill.
Speaker Change: Those the motivation for why we switched from just a single tendency to multiple markets.
Winnie Dung: felt level. It was more fundamental. It was more at the material discovery level for the electrolyte and then also at the lithium metal battery safety side. And then
Speaker Change: Got it thanks, so much.
Speaker Change: I just have a follow up on the contract manufacturing and being able to 1 million students economics behind that it's interesting that the.
Speaker Change: Gross margin.
Speaker Change: With 63% in Q4, which was very impressive.
Winnie Dung: These two cores, we noticed, and also the OEMs that we're working with, noticed that we could actually apply these to lithium-ion.
Speaker Change: Is it sort of like an initial type of metrics that we should look at.
Winnie Dung: and then once you expand to beyond just one technology, just one battery technology.
Speaker Change: And how would it evolve I guess heading into 'twenty one.
Winnie Dung: and you can apply a platform to, actually two platforms, to multiple chemistries, then the addressable markets become much larger. So, of course, we, of course, I think anyone would just make this jump from a single technology in a single market to two platform across,
Speaker Change: Yes, I think it is too early to adjust.
Speaker Change: And that margin was actually a mix of the AI models, the servers as well as the actual.
Speaker Change: Selling of the cells, but going forward in terms of the contract manufacturing.
Speaker Change: I mean, our goal to do contract manufacturing is to have a high margin and I think it's well known.
Speaker Change: Next generation battery companies just cannot compete.
Winnie Dung: almost every battery technology out there. So that was a very obvious jump, and I think quite exciting jump.
Speaker Change: Scale with any of the large incumbent battery players. So that's why we do country manufacturing to achieve high margin, but the actual numbers.
Winnie Dung: And then in terms of the two OEMs, I can't even guess, it's the two OEMs that we have been working with for a long time. And they solve this transferability from just a single chemistry in a single market to
Speaker Change: Is going to evolve based on based on volume based on.
Speaker Change: Particular.
Speaker Change: Vacation and customers.
Speaker Change: Got it that's very helpful. Okay. Thank you.
Speaker Change: Thank you.
Winnie Dung: every battery chemistry across multiple markets that they target, not just EVs.
Speaker Change: Our next question comes from Brian Gordon with accompanying Watertown Research Brian Your line is now open.
be one of the most important ones, but also
Brian Gordon: Hey, everyone first of all congratulations on.
Winnie Dung: drones. They do drones and then robotics. Both of them do robotics as well and then also urban air mobility. So
Speaker Change: <unk> revenue.
Speaker Change: So a really significant event.
Speaker Change: For the company.
Yeah.
That was the
Speaker Change: I did want to follow up.
Winnie Dung: That was the motivation for why we switched from just a single chemistry to multiple markets.
Speaker Change: On the gross margins, though.
Speaker Change: It seems like there are two different ways that you guys are sort of transitioning the business model. One is kind of let's say selling software versus selling hardware could you talk a little bit about how you see.
Unknown Executive, Jing Nealis, Kyle Pilkington
Unknown Executive, Jing Nealis, Kyle Pilkington
Winnie Dung: Thanks so much. I just want to follow up on the contra manufacturing. Are you able to unveil any sort of, you know, economics behind that? It's interesting that, you know, the growth margin was, you know, 63%.
Speaker Change: Both the revenue opportunity for that and how that could potentially impact margins going forward.
Winnie Dung: in Q4, which was very impressive. You know, is this sort of like an initial type of metrics that we should look at? And how would this evolve, I guess, heading into 2025?
Speaker Change: Yes.
Speaker Change: Obviously, we want to sell just the software business.
Speaker Change: Pure high margin business.
Unknown Executive, Jing Nealis, Kyle Pilkington
Speaker Change: At the same time for both the materials and the battery safety is hard to just sell the software without the hardware for the hardware as a hook to gather customer and then you sell the software on top of that.
Winnie Dung: Yeah, I think it's too early to address that. And, and that margin was actually a mix of the AI models, the service, as well as the actual selling of the sales. But going forward in terms of the content manufacturing,
And the hardware on the material side.
Speaker Change: We contract manufacture these cells and the cells are.
Winnie Dung: I mean, our goal to do content manufacturing is to have a high margin.
Speaker Change: Carrier for our.
Speaker Change: Materials and <unk>.
Winnie Dung: And I think it's well known that these next generation battery companies just cannot compete.
Speaker Change: Demonstrated.
Speaker Change: The benefit and the power of this molecule universe.
Speaker Change: Science software.
at scale with any of the large incumbent battery players.
Speaker Change: So initially it's going to be the.
Speaker Change: The margin is going to be a mix between the.
Winnie Dung: This is why we do contract manufacturing to achieve high margin, but the actual numbers that's going to evolve based on based on volume based on the particular application and customers.
Speaker Change: The sales and software.
Speaker Change: But once we grow this.
Speaker Change: <unk>.
Speaker Change: Demand and then.
Speaker Change: Then we do plan to shift to more of a pure software business incentive for avatar.
Unknown Executive, Jing Nealis, Kyle Pilkington
Speaker Change: Got it. That's very helpful. I'll pass it on. Thank you.
Thank you.
Speaker Change: Avatar itself is of course very high margin, but then it's hard to sell just a software to BSS you want to attach it to a hardware and Thats why initially is.
Speaker Change: Our next question comes from Brian Gordon with the company Water Tower Research. Brian, your line is now open.
Unknown Executive, Jing Nealis, Kyle Pilkington
Speaker Change: Hey everyone. First of all, congratulations on achieving revenue. It's a really significant event for the company. I did want to follow up.
Speaker Change: For example, in our partnership with aspects it will be the the entire solution.
The dsos hardware with the software.
Speaker Change: Software.
Speaker Change: Okay.
On the gross margins, though.
Speaker Change: So that definitely makes sense should we expect then going forward.
Speaker Change: The company will be able to layer on something like an ongoing subscription revenue as it selling these batteries.
Speaker Change: Could you talk a little bit about how you see, you know, both the revenue opportunity for that and, you know, how that could, you know, potentially impact margins going forward?
Speaker Change: Yes that is the plan.
Speaker Change: We have a few.
Speaker Change: Discussions with a few battery companies will be actually offer subscription to the models for example that map.
Unknown Executive, Jing Nealis, Kyle Pilkington
Yeah.
Speaker Change: That we show in the shareholder letter.
Unknown Executive: Obviously, we want to sell just the software because that's a pure high-margin business.
Speaker Change: That is a treasure map I should toes and in battery company or any company.
Speaker Change: At the same time, for both the materials and the battery safety, it's hard to just sell the software without the hardware.
Speaker Change: <unk> developed a battery where to look for in terms of new electronics. So that maps. So we saw that we sell we sell.
Speaker Change: So the hardware is like a hook to get a customer and then you sell the software on top of that.
Speaker Change: <unk> discover from that map and we will also sell this payer model that was used to to create a map.
Speaker Change: and the hardware on the material side, we come to manufacture these cells and the cells are like a carrier for our
Speaker Change: The annual subscription.
Speaker Change: But you mentioned.
Speaker Change: materials and that demonstrate the benefit and the power of this Molecular Universe AF science software.
Speaker Change: Great. Thank you very much and congratulations on the quarter.
Speaker Change: So initially, it's going to be the margin is going to be a mix between the cells and the software. But once we grow this, this demand, and then
Brian Gordon: Thanks, Brian.
Speaker Change: Our next question comes from Jeff <unk> with the company William Blair Gerrick. Your line is now open.
Mark Shooter: Thanks, Felicia, yes, mark shooter on for agenda Schirmer.
Speaker Change: <unk> centre guys, congratulations again on the quarter end.
Speaker Change: And same thing for avatar. The pure avatar itself is, of course, very high margin, but then it's hard to sell just a software to BSS. You want to attach it to a hardware.
Speaker Change: The revenue outlook.
Speaker Change: The business is fundamentally different and with multiple different revenue streams. So.
Speaker Change: And that guide for the revenue can you give a rough breakdown of where do you think that's coming from.
Speaker Change: And that's why initially we, for example, in that partnership with ASX, it will be the entire solution. It's the BSS hardware with the software.
Speaker Change: Yes. So this year, just roughly high level and we mentioned.
Unknown Executive, Jing Nealis, Kyle Pilkington
Speaker Change: So that definitely makes sense. Should we expect them going forward that that the company will be able to layer on something like an ongoing subscription revenue as it's selling these batteries?
Speaker Change: In the leather.
Speaker Change: We expect bulk.
Speaker Change: Bulk of this year to come from DSS.
Then the rest to come from a combination of the EV and drones.
Speaker Change: It's just this year.
Speaker Change: Sure.
Unknown Executive, Jing Nealis, Kyle Pilkington
Speaker Change: Next year, and then going forward that could change.
Unknown Executive, Jing Nealis, Kyle Pilkington
Yes.
Speaker Change: That is the plan. And then we have a few discussions with a few battery companies where we actually offer subscription to the models. For example, that map that we show in the shareholder letter, that is a treasure map that actually tells
Speaker Change: Got it Okay and then.
Speaker Change: Application you are using youre doing youre, providing the full stack did I hear that correctly with contracted.
Speaker Change: Contract manufacturing sales plus the pack integration and BMS.
Speaker Change: any battery company or any company that needs to develop a battery, where to look for in terms of new electrolytes. So that map, so we sell that map, we sell products.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Is that a difficult market to break into.
Speaker Change: Good question.
Depends on the market.
Speaker Change: discover from that map, then we also sell this AI model that was used to create that map. That's the annual subscription that you mentioned.
Speaker Change: Very fragmented market.
Speaker Change: I think you have behind the meter and also in front of the meter and then.
Speaker Change: Some parts of the market are obviously pretty dominated by the big players.
Unknown Executive, Jing Nealis, Kyle Pilkington
Unknown Executive, Jing Nealis, Kyle Pilkington
Great, thank you very much and congratulations on the quarter.
Speaker Change: Some parts are more fragmented.
Speaker Change: Sure.
Thanks, Brian.
Speaker Change: Sure.
Speaker Change: Evercore in terms of the types of cells. They use archery required acquired common and you see about four to five different types of cells being used across all of these.
Unknown Executive, Jing Nealis, Kyle Pilkington
Unknown Executive, Jing Nealis, Kyle Pilkington
Moderator: Our next question comes from Jed Dorschmeyer with the company William Blair. Jed, your line is now open.
Moderator: Hi, Qichao. You have Mark Schueter on for Jed Dorsheimer. I'll echo those sentiments. Congratulations again on the quarter and the revenue outlook. The business is fundamentally different. It was multiple different revenue streams. So
Speaker Change: Different parts of the market and then.
Speaker Change: So we break into the.
Speaker Change: More fragment the ones and then the <unk>.
Speaker Change: Medium size.
Speaker Change: By doing that we've got.
Speaker Change: Access to all the data and then these data.
Moderator: In that guide for the revenue, can you give a rough breakdown of where do you think that's coming from?
Speaker Change: So the manufacturing data.
Omission data. These data we used to pre trained avatar and we use the lifecycle of data from these two also.
Speaker Change: Yeah, so this year, this roughly high level, and we mentioned in the letter, we expect
Speaker Change: Trained the appetite to monitor health and the nice thing is these data come from the same cells that are used by the larger players. So once we break into the medium size and gather data trend as avatar. This avatar can be used as a demo that we.
Speaker Change: both of this year to come from BSS and then the rest to come from a combination of the EV and drones and robotics just this year. Now, next year and then going forward, that could change.
Speaker Change: Used to sell the.
Unknown Executive, Jing Nealis, Kyle Pilkington
Speaker Change: Larger players.
Speaker Change: Got it. Okay. And in that BESS, the application you're using, you're doing, you're providing the full stack. Did I hear that correctly? With contracted contract manufacturing for the cells plus the PAC integration and the BMS.
Speaker Change: Got it that's very helpful last one for me regarding the drone applications.
Speaker Change: Where are your.
Speaker Change: Our contract manufacturers.
Speaker Change: And are any of your drone customers supply chain sensitive regarding the region.
Yes.
Unknown Executive, Jing Nealis, Kyle Pilkington
Speaker Change: Yes for now they are mainly in Asia and yes, the drone manufacturers are.
Hey,
Speaker Change: Good question. It depends on the market. It's a very fragmented market. And I think you have behind the meter and also in front of the meter. And then some parts of the market are obviously pretty dominated by the big players.
Speaker Change: Sensus and <unk>.
Speaker Change: They would like us to move to a more U S based manufacturing and then would you have plans.
Speaker Change: To do that.
Speaker Change: We have a phase where we go through this.
Speaker Change: Asia based pension manufacturing first and then switch to a U S based.
and some parts are more fragmented.
But, uh, but.
Keisha: Understood. Thanks Keisha.
Speaker Change: Thanks, a lot.
Speaker Change: At this time I would like to pass the conference back over to Paul Pinkerton to answer a few questions.
You May proceed.
Speaker Change: So we break into the more fragmented ones and then the medium size, but then by doing that, we get access to all the data. And then these data
Paul Pinkerton: Thanks Pat.
Speaker Change: Past quarters, we solicited questions from investors prior to the call. We received a number of submissions and we will go through a selection of both submissions now.
Speaker Change: Our first question is the performance limit today of cells with high Silicon anodes.
Speaker Change: Stability of the electrolyte with Ses's, new electrolyte and the new advanced Silicon Anodes. What is the expected specific energy density cycling durability in charge rates for 2170 cells made with these materials what is the likelihood b cells would be preferred for EV applications.
trained avatar to monitor health.
And the nice thing is.
Speaker Change: These data come from the same cells that are used by the larger players. So once we break into the medium size and then gather data, train this avatar, this avatar can be used as a demo that we use to show the larger players.
Speaker Change: Yes, hi.
Speaker Change: Hi, Silicon anodes lithium ion.
Speaker Change: It's actually quite similar to lithium metal.
Unknown Executive, Jing Nealis, Kyle Pilkington
Speaker Change: In fact, the the higher the silicon the more it behaves like a lithium metal from the perspective of this intellectually interface and.
Unknown Executive, Jing Nealis, Kyle Pilkington
Speaker Change: Got it. That's very helpful. And last one for me regarding the drone applications. Where are your contract manufacturers? And are any of your drone customers supply chain sensitive regarding the region?
Speaker Change: So high silicon.
Speaker Change: Currently suffer from swelling and also gasoline challenges that lead to short cycle is and was this new electrolyte.
Yeah.
For now, they are mainly in Asia.
Speaker Change: And yes, the drone country manufacturers are sensitive and then they would like us to move to a more U.S. based manufacturing and then we do have plans to do that. And then we have a phase where we go through this with Asia based country manufacturing first and then switch to a U.S. based.
Speaker Change: We can significantly enhance the cycle life and then how much improvement in cycle. It really depends on the amount of silicon that's us.
If we go to a 100% silicon.
Speaker Change: Actually it's actually improved the cycles.
Speaker Change: We actually expect to more than double the cycle is so the.
Unknown Executive, Jing Nealis, Kyle Pilkington
Understood. Thanks, Yichao.
Speaker Change: The <unk>.
Speaker Change: Improvement is your higher as we increase the amount of silicon.
Thanks a lot.
Unknown Executive, Jing Nealis, Kyle Pilkington
Unknown Executive, Jing Nealis, Kyle Pilkington
Speaker Change: Yeah.
Speaker Change: At this time, I'd like to pass the conference back over to Kyle Pilkington to answer a few questions. Kyle, you may proceed.
Speaker Change: Great. The next question, we have is Ken competitors copy the new solvent. Your AI discovered is it patentable or just trade secrets.
Unknown Executive, Jing Nealis, Kyle Pilkington
Speaker Change: Thanks. As with past quarters, we solicited questions from investors prior to the call. We received a number of submissions, and we'll go through a selection of those submissions now.
Speaker Change: Definitely there Ken.
Speaker Change: In this industry, especially if you have something that works really well people well copy and.
Speaker Change: The first question is the performance limit today of cells with high silicon anodes.
Speaker Change: So the only way to compete.
Speaker Change: Speed and we've tried to focus more on the speed of innovation and not just the innovation itself. For example that map that we showed in the shareholder letter that is a very good example.
Speaker Change: is the stability of the electrolyte. With SES's new electrolytes and the new advanced silicon anodes, what is the expected specific energy density, cycling durability, and charge rates for 2170 cells made with these materials? What is the likelihood these cells would be preferred for EV applications?
Speaker Change: And others. So we're not just funding.
Speaker Change: New electrical and then this new launch one new solvent, yes, if it works well you won't get copied.
Unknown Executive, Jing Nealis, Kyle Pilkington
Speaker Change: And I was just how it was in the industry anytime you have a new material if it works well because coffee.
Unknown Executive, Jing Nealis, Kyle Pilkington
Speaker Change: Yes, the high silicon anode lithium ion behaves actually quite similar to lithium metal. And then, in fact, the higher the silicon, the more it behaves like a lithium metal from the perspective of this electrolyte anode interface.
Speaker Change: <unk>.
Speaker Change: If it doesn't work well for them and.
Speaker Change: And then people won't copied but the milk is we're not just selling a new solvent.
Speaker Change: So <unk> on the map.
And so, hi, Silicon.
Speaker Change: We're selling the map and this map no one else has that and the tools to Korea. This map to find this map no. One else has so we have the ability to know where these new solvents are for different applications.
and with this new electrolyte.
Speaker Change: we can significantly enhance the cycle life and then how much improvement in cycle life really depends on the...
Speaker Change: The visibility.
Speaker Change: For now no one's in Coffeyville.
Speaker Change: Thank you.
Speaker Change: Going down to lift.
Speaker Change: Next question is AI technology evolves.
Speaker Change: Yes, improving its AI models to enhance battery performance safety and manufacturing efficiency.
Speaker Change: Improvement is actually higher as we increase the amount of silicon.
Speaker Change: So the cost of AI has come down a lot and this has allowed us to.
Unknown Executive, Jing Nealis, Kyle Pilkington
Unknown Executive, Jing Nealis, Kyle Pilkington
Speaker Change: To train.
Unknown Executive, Jing Nealis, Kyle Pilkington
Speaker Change: These models, both Los angles models and foundation models with more data and visibility and work any more data.
Speaker Change: Great. The next question we have is, can competitors copy the new solvent your AI discovered? Is it patentable or just trade secrets?
Speaker Change: <unk>.
Speaker Change: Both actual data from actual battery cycling and also a lot of synthetic data basically data that did not exist before especially.
Unknown Executive, Jing Nealis, Kyle Pilkington
Unknown Executive, Jing Nealis, Kyle Pilkington
Unknown Executive, Jing Nealis, Kyle Pilkington
Speaker Change: Definitely can, and in this industry, especially if you have something that works really well, people will copy.
Speaker Change: The molecule properties and.
Speaker Change: And so the only way to compete is the speed. And we try to focus more on the speed of innovation, and not just the innovation itself. For example, that map that we showed in the shareholder letter, that's a very good example. And others, so
Speaker Change: And the more data, we have and the more data we use to train. These models it gets more sophisticated so so.
Speaker Change: And also the costs and efficiencies have improved a lot. So it's now.
Speaker Change: Possible to actually run.
Speaker Change: We're not just finding a new electrolyte, and then this new electrolyte or this new solvent, yes, if it works well, it will get copied.
Speaker Change: Training on this massive database and the much more cost effective way than before.
and that's just how it works.
Speaker Change: in the industry. Anytime you have a new material, if it works well, it gets copied.
Speaker Change: Thank you we will be one more from the pre submitted questions.
Unknown Speaker 05.
Speaker Change: Evs are the number one market for $21 70 cells FCS is a better one what is the prognosis for selling these into automotive it seems the high silicon version might be an earlier candidate and lithium metal cells.
Speaker Change: If it doesn't work well, then people won't copy it. But in our case, we're not just selling a new solvent. So each dot on the map is a solvent. We're selling the map.
Speaker Change: And this map, no one else has that. And the tool to to create this map to find this map, no one else has that. So we have the ability to know where these new solvents are for different applications. And this ability, for now, no one can copy that.
Speaker Change: So the high silicon and lithium metal are sort of parallel tracks and the previously we focused just on lithium metal and then now we are actually improving the cycle of high silica. So we're doing both and then.
Speaker Change: Sorry.
Unknown Executive, Jing Nealis, Kyle Pilkington
Speaker Change: Has been working was three Oems quite closely.
Unknown Executive, Jing Nealis, Kyle Pilkington
Speaker Change: Thank you. Going down the list. Next question. As AI technology evolves, how is SES improving its AI models to enhance battery performance, safety, and manufacturing efficiency?
Speaker Change: And I think a few quarters earlier you mentioned.
Speaker Change: The war Oems used 270 cylindrical cells that we did not address because we only may pouch. So now our pouch lithium metal we use that to address Oems that use pulse and then our 20th 70 surgical high silicon to address Oems that we did not address.
Unknown Executive, Jing Nealis, Kyle Pilkington
Unknown Executive, Jing Nealis, Kyle Pilkington
Speaker Change: The cost of AI has come down a lot, and this has allowed us to
Speaker Change: these models, both large language models and foundation models with more data, and then visibility, and we're getting more data and, and both actual data from actual battery recycling, and also a lot of synthetic data, basically data that did not exist before, especially for the molecule properties.
Before because we didn't have that.
Speaker Change: <unk> form factor so and also same thing for robotics all of the Oems that make Evs also made robotics.
Speaker Change: This 270 really allows us to address a.
Speaker Change: Really big market that we cannot address before.
Speaker Change: and and the more data we have and the more data we use to train these models, it gets more sophisticated. So, so.
Speaker Change: Thanks, a lot.
Speaker Change: Thank you.
Speaker Change: With that I'll turn it back over to the monitor moderator for a conclusion of the call.
Speaker Change: And also the cost and efficiency have improved a lot. So it's now possible to actually run training on this massive database in a much more cost effective way than before.
Speaker Change: Okay.
Speaker Change: And then we will conclude today's conference call. Thank you for your participation and enjoy the rest of your day.
Unknown Executive, Jing Nealis, Kyle Pilkington
Unknown Executive, Jing Nealis, Kyle Pilkington
Thank you. We'll do one more from the pre-submitted questions.
Speaker Change: EVs are the number one market for 2170 cells. If SES has a better one.
Speaker Change: What is the prognosis for selling these into automotive? It seems the high silicon version might be an earlier candidate than lithium metal cells.
Hmm.
Speaker Change: So the high silicon and lithium metal are sort of parallel tracks and then previously we focused just on lithium metal and then now we are
Speaker Change: actually improving the cycle life of high silicon. So we're doing both and then a very
have been working with three OEMs quite closely, and
And I think a few quarters earlier, you mentioned that
Speaker Change: There were OEMs that used 2070 cylindrical cells that we did not address because we only made pouches.
Speaker Change: So now our pouch lithium metal, we use that to address OEMs that use pouch. And then our 2170 cylindrical high silicon, we use that to address OEMs that we did not address before because we didn't have that form factor. And also same thing for robotics. A lot of the OEMs that make EVs also make
Speaker Change: Robotics. And, and this 2070 really allows us to address a really big market that we did not address before.
Unknown Executive, Jing Nealis, Kyle Pilkington
Unknown Executive, Jing Nealis, Kyle Pilkington
Speaker Change: Thank you. With that, I'll turn it back over to the moderator for a conclusion of the call.
Unknown Executive, Jing Nealis, Kyle Pilkington
Speaker Change: That will conclude today's conference call. Thank you for your participation and enjoy the rest of your day.
Unknown Executive, Jing Nealis, Kyle Pilkington
Unknown Executive, Jing Nealis, Kyle Pilkington