Q1 2025 SES AI Corp Earnings Call and Business Update
Hello everyone at the SES A.I. First Quarter, 2025, Anning Space and Call will begin shortly. If you'd like to ask a question, please press star, fill it by 1 on your 11th e-pad. Thank you for your patience.
Joining me today are Chi Chow, who founder and Chief Executive Officer, and Jim <unk>, Chief Financial Officer, We issued our shareholder letter yesterday afternoon. After market close which provides a business update as well as our financial results, you'll find our press release with a link to our shareholder letter in today's conference call webcast to be.
Investor Relations section of our website.
Yes.
Hi.
Speaker Change: Before we get started this is a reminder, about the discussion today may contain forward looking information or forward looking statements within the meaning of the applicable securities legislation.
Speaker Change: 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 the risks and uncertainties that could cause our results to differ materially.
Speaker Change: From our current expectations include but are not limited to those detailed in our latest earnings release and in our SEC filings.
Speaker Change: This morning, we will review our business as well as results for the quarter with that I'll pass it over to Chi Chow.
Chi Chow: Thanks Kyle.
Chi Chow: Morning, and thank you for joining us on our first quarter 2025 earnings call.
Chi Chow: In the first quarter SCS AI achieved a new record for revenue was $5 $8 million.
Chi Chow: This was a great start to what we expect will be a transformational year for <unk>.
Chi Chow: In addition, we have announced a battery materials discovery software and service platform and on April 29, we will be launching our molecular universe demonstration at 11 a M.
Chi Chow: More details on our website.
Chi Chow: EV during the first quarter, we booked revenue from contracts with two OEM partners to develop a L E N lithium metal and lithium ion batteries for Evs.
Chi Chow: Some highlights include.
Chi Chow: We are on track to complete the simple and in discussion about commercial next steps with two Oems.
Chi Chow: We have deployed our Alco science material discovery end to end capability to develop new electrolyze to improve critical battery performance measures, such as <unk> and safety of lithium metal and silicon lithium ion batteries put your Oems.
Chi Chow: And based on the successful track record with these two Oems we are packaging, our AI for science material discovery end to end capability into a software and service platform called molecular universe.
Chi Chow: Allows us to mass produce materials discovery and development services, our largest and most profitable revenue component.
Chi Chow: Labeling us to rapidly expand our service from just one chemistry and only two Oems.
Chi Chow: Market.
Chi Chow: All Oems all battery makers, all electronic companies consumer electronics companies and many more across all battery chemistries.
Chi Chow: And with fierce global competition, and new safety regulations through our material discovery and development services, we can deliver commercially practical winning solutions that help Oems differentiate.
Chi Chow: And even before the global release of molecular universe. They are already one dozen companies, including Oems battery electric companies doing early access testing.
Chi Chow: And LG uhm drones and robotics.
Chi Chow: We're excited about the tremendous response, we have received following our introduction of the AIE 21, 70 symmetrical cell put humanoid robotics and drones applications.
Chi Chow: We also produce pulp sales for customers and drilling you in from our own lines.
Chi Chow: Previously converted from EV, a simple lines.
Chi Chow: In particular, the strategic value of our facility in Changzhou, South Korea, that's proven to be particularly valuable to many of our customers given the current geopolitical uncertainty and tariff tension.
Chi Chow: Also these cells used luxury materials discovered through molecular universe.
Chi Chow: I want to turn to the upcoming launch of our molecular universe software and service platform as I mentioned will be released on April 29.
Chi Chow: The motivation for molecular universe as to mass produce material discovery and development services, our largest and most profitable revenue component.
Chi Chow: This platform delivers commercially practical winning solution to help users compete.
Chi Chow: We will launch a universe is not contract R&D, rather it's an end to end service ranging from material discovery to cell manufacturing it.
Chi Chow: It is a simple simple simple sop at scale.
Chi Chow: This benefits not just applicable to one chemistry, lithium metal and what market EV, but can be applied to all battery chemistries and all battery market.
Chi Chow: We will have the global release of the first version of molecular universe and Euro on April 29.
Chi Chow: The live demo will explain and used <unk> features and pricing structures. We look forward to reporting more progress in detail on the length of universe during the second quarter.
Chi Chow: To close I want to highlight some of our plans for 2025 and beyond.
Chi Chow: First we are in a strong cash position to execute on our vision.
Chi Chow: We have evolved from manufacturing Capex heavy plans for Evs at scale to a scalable software and service business model.
Chi Chow: We have focused our operating costs on enhancing our commercial team to pursue greater opportunities to expand revenue in $2025 2027.
Chi Chow: Our new molecular universe software and service platform has proven to be successful with two Oems already.
Chi Chow: Can more efficiently deliver a commercially practical winning solutions to all Oems across all battery chemistries, both lithium metal in silicon with the Maya.
Chi Chow: We expect the molecular universe platform to allow us to rapidly grow our largest and most profitable revenue component.
Chi Chow: So thank you for your continued interest in <unk> and now I'll turn it over to gene for financial updates.
Gene: Good morning, everyone I will discuss our financial performance for the first quarter of 2025 and provide some context.
Chi Chow: And how we are managing capital to support our.
Chi Chow: Long term growth strategy.
Chi Chow: Revenue for the first quarter, five 8 million tons.
Chi Chow: Strong start to the year, we remain on track to achieve our full year 2025 revenue guidance of 15 million to 25 million.
Chi Chow: Q1 revenue was primarily driven by contracts, thank our automotive OEM customers.
Speaker Change: AI enhanced silicon metal and lithium ion batteries for EV.
Chi Chow: Application.
Speaker Change: Importantly, we delivered strong gross margin of 79% in Q1, which is consistent with our expectation.
Speaker Change: High margin profile is largely a result of our asset light business model driven by our <unk>.
Speaker Change: Got it.
Speaker Change: Our GAAP operating expenses by $27 8 million in second quarter, we utilized $22 8 million in cash for operations.
Speaker Change: <unk> 9 million and peptide cemetery giant Claire.
Speaker Change: We concluded the quarter with a strong liquidity position of 240 million with no debt.
Speaker Change: As we look ahead to the remainder of 2025, our focus remains on disciplined execution and building the foundation for long term scalable growth.
Speaker Change: We're seeing top line growth maintaining a strong gross margin.
Speaker Change: <unk>, our plan efficiently and kudos.
Speaker Change: And the business for the next phase of commercial revenue.
Speaker Change: Summary, we are operating from a position of strength growing topline revenue controlling costs and deploying capital with discipline.
Speaker Change: We expect to exit 2025 with more than 200 million in liquidity.
Speaker Change: We appreciate your continued support and confidence in SCS AI now I will turn the call back to the operator.
Thank you Sue we'd like to ask a question. Please press star followed by one on your telephone keypad. If you would like to remove your question. Please press star followed by <unk>.
Speaker Change: Ask your question Peter Shilton doesn't meet your lately.
Speaker Change: Our first question Gucci Jed <unk> of William Blair. Please go ahead.
Mark Shooter: Yes, Mark shooter on for jet.
Mark Shooter: Can you remind us of what cell type the chemistry and the capacity of your <unk> facility.
Mark Shooter: It seems as though there will be a strategic location now given the tariffs. So what is your strategy there to maximize the value of that facility.
Mark Shooter: The DJ facility it sounds your facility in South Korea.
Mark Shooter: So he has two lines it has a simple line.
Mark Shooter: There'll be bill.
Mark Shooter: The <unk> in that.
Mark Shooter: The converted too.
Mark Shooter: The large pouch cells in there also.
Mark Shooter: Smaller UA himself. So we have two pulp sale.
Mark Shooter: But then also.
Mark Shooter: Because of.
Mark Shooter: The new trend, we can also add additional equipment to accommodate cylindrical principles prismatic cells.
Mark Shooter: Okay. Thank you.
Mark Shooter: Another one here is some of your competitors are pursuing a similar strategy using excess Chinese capacity for 2070 cells.
Mark Shooter: And with Silicon can you remind us of.
Mark Shooter: <unk> benefits from Ses is $10 seven days with the with your improved electrically.
Mark Shooter: And can you remind us of the performance.
Mark Shooter: <unk>.
Mark Shooter: To others.
Mark Shooter: Yes. So most 21 70 yourself today have five five or less $10 and that's typically less than 30 person silicon and then if you could give more silicon if you get to six five <unk> and the seven.
Mark Shooter: And given more than seven hours than you do need more silicon and the current intellectually.
Mark Shooter: Is stable and the cycle is insured and also a lot of times. They launched one has said that tends to gas and then pumped the lid. So <unk> actually works really well with high content silicon.
Mark Shooter: So we're talking about enabling the stable performance in Nogales for 'twenty 170 events and achieved more than $6, five empowers and even 7% Bob.
Mark Shooter: That's great. Thank you.
Mark Shooter: And one more if I could.
Mark Shooter: Yes sure.
Speaker Change: The customer tightened who would be interested in the molecular universe AI what types of customers are you engaged with outside of your two main partners.
Mark Shooter: Yes.
Mark Shooter: It was really exciting and then.
Mark Shooter: I mean, just the.
Speaker Change: The first version is just electrified we're talking about all of the major battery companies and tier ones and tier twos, we have more than a dozen early access.
Mark Shooter: Users already before Tuesday launch next Tuesday.
Mark Shooter: But also car companies. So a lot of these battery companies.
Mark Shooter: Companies and also some chemical and electrical companies are really excited to others.
Chuck: Great. Thank you Chuck.
Mike: Yes, Thanks, Mike.
Mike: The next question guys see Winnie Dong of Deutsche Bank. Please go ahead.
Winnie Dong: Hey, good morning. Thanks, so much for taking my question I guess the first one is on maybe just.
Winnie Dong: The rationale for the graduation.
Winnie Dong: The share buyback and then the second one is I know you're going to do a <unk> session.
Winnie Dong: Question for the <unk>.
Winnie Dong: <unk> related can you tell us.
Winnie Dong: The platform I was wondering if you can maybe just give us maybe like the pricing structure that you guys have in mind for that.
Winnie Dong: And how you plan to roll that out to customers to access and potentially.
Winnie Dong: Thank you.
Winnie Dong: Sure so.
Winnie Dong: Thanks Ryan.
Winnie Dong: First in June.
Winnie Dong: So Jim.
Winnie Dong: But the pricing structure first and you do the buyback so yes, so the pricing structure from a legacy universe.
Speaker Change: Basically we have five tiers and then they are divided into pure software and also software servers, so pure software.
Speaker Change: So it's basically for a subscription.
Speaker Change: Per user per month, and then you can get access to partial molecular universe to home will actually universe different properties and also you can.
Speaker Change: <unk>.
Speaker Change: Asked questions.
Speaker Change: And then these are specific.
Speaker Change: Commercial challenges that you face in the market and then the.
Speaker Change: Servers for example, some of the large enterprise walnuts to do on Prem deployment.
Speaker Change: <unk> actually.
Speaker Change: Train this model with the customer.
Speaker Change: Customers proprietary database.
Speaker Change: And also in some cases.
Speaker Change: Once we find molecules and then they asked us to synthesize molecule actually formulary electrolyte test the molecules in the batteries and a simple simple basically the full J D E. And then once we discover new molecules and then we can file IP. We can also hide the molecules in what's called hidden galaxies from other users.
Speaker Change: For fees so so.
Speaker Change: The mix of onetime fee.
Speaker Change: That includes the on Prem.
Speaker Change: Install setup and then recurring.
Speaker Change: In the form of subscription to this tool as well as once we fund this molecule does.
Speaker Change: This almost like the royalty payment for us too too high the molecules.
Speaker Change: Yeah.
Speaker Change: The assumed interference over the buyback.
Hi, Wendy.
Speaker Change: I'll answer your first question. So first I wanted to just reaffirming.
Speaker Change: Our 2025 revenue guidance.
Speaker Change: And our strong balance sheet as we expect to exit the year with more than 200 million in liquidity and.
Speaker Change: Also we're on a strong revenue growth path, while maintaining the high margin and controlling cost.
Speaker Change: Believe.
Speaker Change: The share repurchase program would be efficient capital allocation tool for us.
Speaker Change: Actual.
Speaker Change: Use of the capital would not impact our liquidity runway going forward.
Speaker Change: Yeah.
Winnie Dong: Thank you Winnie the next question goes to John really a water tower research John Please go ahead.
John: Thank you very much I'm interested in the cadence of the revenue through the year is it going to be mostly back end loaded obviously, it's growing just wanted to get an idea of how you think it might ramp through the year and then also.
It might play into 2026, I'm not asking for guidance, but just kind of a view.
Speaker Change: Yes, Jim.
John: Okay.
John: I can answer that so yes.
John: At the beginning of the year.
John: Gave the guidance we mentioned we don't given this is the first year.
John: To have a full year revenue, we don't want to kill.
John: Credit quarterly cadence, there, but having said that I think.
John: Is more stable and we are on track to achieve our guidance that we provided which is.
John: 2025 revenue between 15 to 25 million based on our existing pipeline of revenue. We are very confident that we will achieve that goal if not beyond.
John: I think for 2026.
John: Not to provide guidance or anything but this year is very foundational year transformation, all aircrafts were laying the groundwork.
John: Foundation too.
John: Significantly grow our revenue in 2020.
John: Yeah.
John: Excellent and one follow up question on molecular universe.
Speaker Change: Hey, guys.
Speaker Change: The things that we're all kind of interesting is how we measure the success of that going forward are you going to be giving us backlog users I mean, obviously, you've got 12 people looking at it now thats great.
Speaker Change: Just wanted to think about how we should measure success in that.
Speaker Change: Well I think it will come down to revenue right revenue, we generate from electric universe.
Speaker Change: The ultimate metric for <unk>.
Speaker Change: Success.
Speaker Change: So I think just from the battery industry perspective, we're talking about.
Speaker Change: Lacing and accelerating R&D.
Speaker Change: If this becomes really successful.
Speaker Change: This will be a tremendous tool to help battery companies in the car companies and so hiring thousands of people in less than five years on the new technology. I think you can do that with just 10 people.
Speaker Change: In a few months, so really accelerates development of new technology.
Speaker Change: And maybe one final question, then and thank you for that answer.
Speaker Change: Gross margins medium and long term, obviously, if you are selling more and more software.
Might trend.
Speaker Change: 79% is pretty good already is that kind of what youre thinking in your longer models is something in the 70% to 80% range.
Speaker Change: And I think.
Speaker Change: Great.
Speaker Change: The margin yes.
Speaker Change: Go ahead John.
Speaker Change: So the margin.
Depending on the mix of services and products.
Speaker Change: I think.
Speaker Change: Given we're rolling out our software and services.
Speaker Change: <unk> has a very very good margin above 80%.
Speaker Change: And we are we also sell a product and those are more like 20% 30%.
Speaker Change: Going forward, it's a mix of both.
Speaker Change: We're looking at a mix of about 60% margin.
Speaker Change: Great. Thank you so much.
Speaker Change: Thank you.
Speaker Change: Thank you there appear to be no additional questions. This now concludes today's call. Thank you for joining you may now disconnect your lines.
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