Q3 2025 SES AI Corp Earnings Call
Speaker #1: There to ask questions by pressing star , followed by one on your telephone keypad . If you change your mind , please press star , followed by two .
Speaker #1: I will now hand you over to the Chief Legal Officer , Kyle Pilkington . To begin , please go ahead when you're ready .
Speaker #2: Hello everyone , and welcome to our conference call covering our third quarter 2025 results . Joining me today are Qichao Hu founder and Chief Executive Officer and Jing Nealis Chief Financial Officer .
Speaker #2: We issued our shareholder letter just after 4 p.m. 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 .
Speaker #2: And today's conference call webcast in the Investor Relations section of our website at . Xxii . 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 .
Speaker #2: 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 .
Speaker #2: The risks and uncertainties that could cause our results to differ materially from our current include , but are not limited to , those detailed in our latest earnings release and in our SEC filings .
Speaker #2: This afternoon , we will review our business as well as results for the quarter . With that , I'll pass it over to Qichao Hu .
Speaker #2: Thanks , Kyle . Thanks .
Speaker #3: joining today . We had a record third quarter with more than $7 million in revenue . That's more than 100% growth over the second quarter .
Speaker #3: Our all in on AI strategy is working remarkably . Today I want to highlight some of the successes we've seen with this strategy and what it means for the future .
Speaker #3: We reached a major milestone this quarter that we expect to have far reaching consequences across the revenue machine . We described in detail during our last call .
Speaker #3: That milestone was the release of our latest version of molecular Universe Mu 1.0 . Mu 1.0 is a powerful and complete end to end AI for science workflow that includes five features ask and a genetic for .
Speaker #3: property prediction and design , and predict chemistry specific and chemistry agnostic machine learning models , respectively , that can accurately predict battery , state of health , and end of life .
In terms of potential revenues from Evie, we completed the B-Sample line site acceptance tests this summer with one other OEM. As a result, in 2026, we expect to start commercial supply of Electra materials and partner with them for self-production.
Overall, it's hard for us to comprehend a more consequential period than what we have experienced over the past 2 quarters, particularly, as it relates to delivering on the goals. We outlined coming into the year for instance, we know that we wanted to break into the ESS Market in a big way. Now, we've done so with the acquisition of using energy and the acquisition has already delivered significant Revenue in 2025,
We launched 3 versions of molecular Universe this year. The discoveries made by us and our customers so far have accelerated our push into materials to supply them through the heisen JB.
we'll have more to share on our fourth quarter, call about how we expect 2026 to shape up for us, but we expect successful us will look like a hardware software integrated platform with multi-pronged and
As molecular Universe a complete AI for science workflow SAS platform accelerates Innovation across all battery chemistries. We are working with our JV Partners to provide a Dependable hardware supply chain for the cells developed from molecular universe.
Just as AI for science is completely changing, other Industries would like your universe. Is now transforming, All Battery, chemistry across all applications. We are excited about the revenue growth potential brought by molecular universe and will continue to assemble, the best talent data and compute resource needed to build AI for science for energy transition.
Lastly I want to express my gratitude for our teams who are working super hard to make all of this happen and thanks to all of you for being on this journey with us. And now here's Gene for financial updates.
Thank you.
I will discuss our financial performance for the third quarter of 2025 and provide some context on how we are deploying our Capital to support, ICS AI long-term growth and then the all in on AI strategy to mentioned earlier.
Revenue for the third quarter, was 7.1 million representing a 3.6 million or 102% increase from the previous quarter.
Our Q3 Revenue was approximately a 55.45 split between our service revenue from our Automotive, OEM customers to develop AI enhanced latest metal and lithium ion battery materials, for Ev applications and product Revenue, primarily from using energy energy storage system sales.
for the full year 2025 where updating our Revenue guidance to 20 million to 25 million due to use these contribution going forward,
Growth margin was 51% for the third quarter, which is a combination of 78% growth margin from the service revenue, and 15% growth margin from the product Revenue as a reminder with easy energy. Now, part of sees we expect growth margin variation from quarter to quarter as our service and product Revenue, mix will fluctuate
7 cents per share.
Price of September 30th, we had 365 million Class A and Class B shares outstanding, which were down 1.3 million from the previous quarter. Mainly due to the share repurchase, we executed during the third quarter.
In the third quarter. We repurchased and cancelled 1.3 million Class A shares. For a total investment of 1.6 million or roughly $1.20 per share.
We utilized 14.3 million in cash for operations. In the third quarter.
We exited a third quarter, with a strong liquidity position of 214 million.
As mentioned, we closed the uz acquisition in September and recognized some uz Revenue during the third quarter.
We see a tremendous opportunity to grow that use the energy business from approximately 10 million to 15 million in projected, 4 year, 2025 Revenue to a much larger growth in the coming years. As we execute our go to market strategy, that Chow outlined to make market share gains in the 300 billion Global ESS markets.
When we report Q4 earnings, we expect to provide more definitive outlook on how we see the full year 2026 Revenue growth shaping up from these growth in ESS that subscriptions use contributions from hyphen JV and potential for the start of commercial production of electrolytes and or battery cells. From Automotive, oems drones and Robotics
The potential growth of these revenue streams which all have different margin profiles, will be much larger than what we have experienced in 2025, but the growth isn't linear from quarter to quarter and the margin may vary quarter to quarter as well.
Looking ahead. We remain focused on executing our strategy, we're continuing to grow our Top Line while remaining financial aid disciplines with substantial liquidity. We are well, positioned for sustainable growth and long-term success.
We appreciate your continued support and confidence in s csai. Thank you now, I'll turn the call back to the operator.
In the question and answer session, if you'd like to ask a question, please press star, followed by 1 on your telephone keypad. Now, if you change your mind, please press star, followed by 2. When preparing to ask your question, please, ensure your devices are muted. Locally, we will make a quick pause here for the questions to be registered.
And our first question comes from the line of Derek's other work with Contour, fetch sit down.
Yeah. Hey thanks for taking the questions. Um on The Hyphen JV, can you talk about how that opportunity came about um was the company paying for molecular Universe access or was this sort of an internal project at SCS. Um and then what what type of battery will this electrolyte enable?
Hey, Derek. Um, yeah, so really good question. And actually, the heisen JV can as a request by some of the molecular Universe Enterprise users. So um my universe since we launched this uh, earlier this year has been growing really fast. And then we had almost every major battery company and Battery materials company in the world. Uh, uh, traveling this and then. So in addition to the SAS platform both on the cloud and also on premise, several of the battery companies uh that are um uh, using the molecular Universe Enterprise
To also ask us, okay? We found these materials, these formulations these molecules through molecules, why don't you just just make these and then sell these to us? Um, because they currently buy electrical lights uh, from companies. So it it's a quite mature business model. So we say, okay, yeah, um,
We're happy to sell these materials to you. These are new formulations that they cannot buy anywhere else. Um, and then, so we, uh, we form this joint venture. It's a cat-backs, uh, JV we control it. Um, we control 90% of the JV and we contract manufacturer, this company called high Zone, uh, to produce this formulation. And then we sell that formulation to the, the cell makers and then some of the applications. Um,
Low temperature performance of lfp for USS batteries. A lot of these these LP batteries, uh, for USS when they're deployed in like northern Europe, these cold places, they don't work so well, when uh it's it's a a volt temperature, another 1 is for cell phone applications so it's a high voltage electrolyte for LCL uh cells. And then another is a um all person Solus and lithium ion cells for Ev applications. Also to improve the cycle. So these 3 we are um, requested by the the user. The the cellmate that you actually Supply these materials, uh, commercial scale to them.
And this was discovered through the large Universe platform.
Got it that, that's helpful. And I guess just to, to that point, I guess I wasn't um, imagining, you know, a JB coming out of this first, the molecular Universe. Can you just talk about how you expect demonetization of that business to, to sort of play out over the next year? Um, you know, beyond sort of JVS? Do you expect
More likely with Universe to grow. Sort of, as a, a traditional software as a service business, where every quarter you sort of add additional seats or, you know, do you expect there to be sort of like a stair stepper, um, you know, on stair step up on on Revenue as you sign kind of larger agreements. Um how do you sort of see the monetization of mu playing out sort of over the next year? How should we think about it?
Yeah, um, it's not so mu is a mix of SAS platform and materials and then so the SAS platform and then we laid out the, the different tier pricing on the, uh, website molecular dash.com. And so, we have the individual tiers. And then the number of individual tiers is growing. Um, and then also, we have the Enterprise tiers. These are the, the major battery companies and then the, the material companies, and the chemical companies. And then, and a lot of these, uh, companies prefer on premise. So, um, we also sell them, um, this this molecular Universe, uh, in the Box, uh, on premise solution. So we charge them monthly subscription. Uh, and also we we sell this this, uh, this computer that we actually Deploy on site. And also, uh, the the servers on top of that, I think.
I think the uh, SAS uh platform. We do try to see uh growing number of themes, uh, per month and also per quarter and then the the material supply uh, because a lot of these companies eventually uh, want us to supply the materials, but the revenue coming from the molecular Universe. Discovered materials is actually um going to be much higher than the than the SAS Revenue.
Got it, that's helpful. And then just 1 final 1 for me, just a broad update on molecular Universe. Um, I think in the past you said, you've got like, 2, dozen or so companies in trial testing, um, can you just give us an update on maybe where that is and, um, you know, I think in the past you
Have mentioned, you know, there are other potential large or medium-sized battery oems um you know, as part of that group. Uh where where are you at with, you know, some of those players in negotiations. Um, when do you expect and maybe a medium or large size OEM to uh to sign on to Mu uh, through a a joint development. Thanks.
Yeah, yeah. So the number now is getting close to 40, uh, Enterprise. Uh, and then and they've gone through, um, mu2 trial and U 1.0 trial, which is the latest version and
Um, and it's gone through the initial cloud-based trial. And then now we are, um, planning for, uh, on premise deployment. Because a lot of these, these medium sized, especially the larger sized Enterprises, they can do the cloud trial. But then eventually, they will need this on premise actual to actually deploy. This this is why we're moving towards this. Uh, this molecular Universe In The Box on premise solution.
Got it, appreciate it.
Thank you.
So just as a reminder, if you'd like to ask a question, is there 1 on your telephone keypad? The next question comes from, Winnie dog, with Deutsche Bank,
Hi, thanks so much for taking my question. Um, I just wanted to follow up on that last last question that was asked. Um, you talked about, you know, launching 3 sub tiers within the Enterprise
looking for, um, and then if you can just
Maybe just uh remind us of the other um subscription options. Um that's also bringing you this recurring Revenue opportunity. Thank you.
Yeah, we need. So the um, Enterprise 1, 2 3, basically, they differ, in terms of size of multi database, the depth of the models used and also the um the knowledge. Um, and the knowhow the models are are trained on for example Enterprise 1. Um we see that as like a a PhD student level. Uh and the Enterprise 2 is like the uh Pulse app level. And the Enterprise 3 is a senior scientist level and then, um, for example, Enterprise 1, when they answer a question, they'll answer a question, typically Less Than 3 minutes and the Enterprise 2, post level answer. Question in about 5 minutes and press. 3 will answer the question in more than 30 minutes, but the depth and the quality, and the new discoveries are much deeper, um,
So, along the Enterprise 1 are a medium, uh, size companies, and also some startups, and then the larger companies. Um,
And then so for Enterprise 1 and 2, we offer only cloud and then for Enterprise 3 and even higher tiers. Join development. We offer a combination of cloud and also uh, uh, on premise which most of the larger companies uh, want
And then in addition to these tears, we can also do the joint development but here with the larger customers that's where so um, so for now, the cloud version 1 universe is trained only on SS internal data. But then for the joint development, we will actually put our Multi Universe In The Box encrypted. And then also uh, uh, organized, the user's data, the the cell Maker's data, and then after that, train our universe in the box, and then we're helping them do something that they've always wanted to do. But they've never had the resource. And then never had the capability to do that.
Got it. That's that's very detailed. Thank you so much. Um,
And then sew this quarter is for some very um, you know, meaningful Revenue contribution from, from using energy. So I was just curious. If you can just maybe take a step back and um, help us sort of get re-engage or with the background of this company, where the markets are, what you think, you know, the growth could be from this business and then maybe more broadly, speaking as you look out to the different revenue streams, so you know, usually energy molecular Universe, you have the, the relationships with OEM partners.
For electrolyte Productions. Um,
Just maybe give us a sense of, you know, which channel you're most optimistic about as you head out to growth in the next, you know, three years. Thank you.
Yeah. So use the energy is the energy storage company and the serve, uh, mainly the behind the meter commercial and Industrial applications. And before we acquire easy, we actually use your supply. Um this database machine learning model to use it to help improve the the, the accuracy of their BMS battery management system in terms of predicting battery health and then end of life. And then, uh, since we acquired them, now, we are, um, adding more of these, uh, machine learning based models, which is uh, is the predictive feature.
And like Universe mu 1.0. We are adding that into their BMS so when we sell these, when easy deploys, these packs to customers around the world, um a lot of the
Customers for example, in Norway or northern Europe, they complained that the packs especially in Winter are just not so accurate and the bmss just start working. So by adding this predict, we can actually to each us, the pack is a box, is a molecular Universe In The Box and then and then we can gather data train the predict feature of Mike inverse locally in the box and then make predictions about these issues before. The customers can actually uh find out about the issues. And then so since we've um added this predict the amount of customer calls their complaints actually dropped and then,
We uh, plan to continue to do that. Um,
uh, so think of each
yes. As packed as a Multi Universe in a box and then we collect the data, we do local training and we make prediction on the safety. And then I think that's a a really exciting, uh, connection. So we get data and we get, uh, Revenue
in terms of the overall, uh, growth of Revenue of the different businesses. Um, the opportunities that we mentioned using this year, um, Revenue, we expect to pull about 15 to 20 million. And I think next year, esss, we can at least double that.
Um, so this is 1 area. Another is is drones drones this year. We are getting our initial, uh, contracts. And also a lot of the drones customers in the US really want, uh, sales, uh, made alfab China. So we are making these sales in our chungju, South Korea facility. Actually, the amount of capacity for pouch cells, for drones outside of China is like super rare. It's hard to find path sells capacity outside of China. We have them. So we expect drones to also grow, uh, uh, in a big way for us next year. And then easy,
And, um, so for example, the joint development we had with Hyundai Motors, uh, and also Honda, um, we are using, like, Universe to discover these new electrolytes. And then once we identify these electrolytes, then our plan is to use the Hyphen JB to contra manufacture this and then supply. So I think next year, revenue-wise, uh, total we should be able to at least double, um, if not triple, um, what we did this year because of all these opportunities that are, uh, enabled by this Universe platform.
That's very helpful. Thank you.
Just as another reminder, it's part 1 on your telephone keypad to ask you a question.
and as we have no further audio questions, I will hand back over to Kyle for
the other questions.
Thank you. Um as in past quarters, we have received some written questions from investors and uh time permitting. We'll go through a selection of those questions which have not yet been addressed on the call.
Um, so the first question, uh, we have um, relates to liquidity and whether management has a view on, um, where liquidity is expected to be at the end of 2025 and we'll kind of scaling up of molecular universe, or the use the energy integration, impact the cap. Catch burn, or capex plans.
uh, I can cover that so our
Yeah. Yeah I will take that. So our our liquidity balance uh is very strong and given that we uh close that UV acquisition. Also we did some stock repurchase. Uh based on that program, we still expect to exit the year with somewhere uh between 195, million to 200 million of liquidity. And then uh the other thing I wanted to probably emphasize is we're laser focused on funding growth. So our liquidity balance is uh sufficient to um to kind of
Uh, grow our revenue from different streams that your child just mentioned, whether is, uh, EFS strong through materials, or sets from, uh, Nu. So, the, um, uh, cash balance is no longer, uh, to fund Runway but we have a capex, right? Um, business model. So the easy acquisition
Is helping us to grow Revenue with Positive Growth margin. All of our Revenue sources come come in on day 1 with uh Positive Growth margin. So um it's not a capex heavy uh business. So um there are liquidity balance uh will be sufficient uh, to find the growth going forward.
Great. Um the next question relates to the molecular Universe um and it goes uh mu 1.0 is impressive can you share the roadmap for Mu for 2026 and what other features have been requested?
To cover Electrical uh uh, process optimization, and also sell design, and Manufacturing optimization. And then another big request, uh, from some of the major battery companies, they want their own molecular Universe, which is quite exciting. Because a lot of these battery companies they want to expand. They want to build factories overseas in different continents and they need a, a, a battery Bible. Uh, so to speak basically put all their knowledge training this model into a, a portable molecular universe. So that is going to be a really exciting uh uh project that we will be working on with these uh battery companies.
Excellent. And I think we have time for one more. Um, so, uh, the last question is, uh, if you could provide an update on the status of the 2170 and its capability to make pouch cells for robotics, drones, and UAM.
Are you seeing good prospects for sales or um do you see a need for scale up before uh, promoting these more heavily?
Yeah. So the path cells especially for drones. Um,
We're seeing a very interesting convergence and the standardization of the format in the drones industry um around this 10, amp power power cells and then so that's quite exciting. And then, uh, we are converting our chungu line which we build both the EV line, as well as the UAM line. We're converting that capacity to make, uh, this, this power cell and then, so so far the capacity that we have missed the needs, but we're also seeing the fast growing demands especially since it's a a produced, uh, in Korea. So we do see, a quite exciting growth, uh, uh, in this market.
Great. Uh, with that, I'll pass it back to the operator for closing remarks.
Thank you, everyone. This concludes today's call. Thank you for joining human now. Disconnect have a great rest of your day.