QuantumScape Q3 2024 Earnings Report

QuantumScape EPS Results

• Actual EPS: -$0.23
• Consensus EPS: -$0.21
• Beat/Miss: Missed by -$0.02
• One Year Ago EPS: -$0.23

QuantumScape Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

QuantumScape Announcement Details

• Quarter: Q3 2024
• Date: 10/23/2024
• Time: After Market Closes
• Conference Call Date: Wednesday, October 23, 2024
• Conference Call Time: 5:00PM ET

QuantumScape (NYSE:QS) is a development-stage company specializing in the research and commercialization of next-generation solid-state lithium-metal batteries for electric vehicles. The company’s core technology replaces the traditional liquid electrolyte with a solid ceramic separator, aiming to deliver higher energy density, faster charging times and enhanced safety compared to conventional lithium-ion cells. QuantumScape’s product roadmap focuses on enabling electric vehicle manufacturers to extend driving range and reduce charging downtime, addressing key barriers to widespread EV adoption.

Founded in 2010 and headquartered in San Jose, California, QuantumScape has attracted significant strategic investment and formed partnerships with leading automotive OEMs. The company operates research and development facilities in California and has established pilot production lines in both the United States and Germany to refine its cell manufacturing processes. Over the past decade, QuantumScape has secured a portfolio of patents covering cell architecture, materials and manufacturing techniques essential to solid-state battery performance.

Under the leadership of co-founder and Chief Executive Officer Jagdeep Singh, QuantumScape is advancing toward commercial production. The management team combines expertise in materials science, electrochemistry and large-scale manufacturing. As the company progresses through development milestones, it aims to supply solid-state cells to global automakers and battery integrators, with an initial focus on North America and Europe. QuantumScape’s long-term objective is to accelerate the transition to clean transportation by delivering battery technology that meets the performance and cost requirements of the automotive industry.

QuantumScape Q3 2024 Earnings Call Transcript

Key Takeaways

• QuantumScape began low-volume production and shipping of its first QSC5 B-sample solid-state cells, achieving 844 Wh/L energy density and fast-charging from 10 % to 80 % in just over 12 minutes.
• The Raptor separator production process is now baseline, delivering better film quality, reduced heat-treatment time and lower energy use, while preparations are underway to implement the COBRA process by end of 2024 for gigawatt-hour scale production.
• QuantumScape entered a non-exclusive licensing deal with Volkswagen Group’s Powerco to mass produce QSC5 cells, securing a $130 million royalty prepayment and future royalties while shifting GWh-scale factory CapEx responsibility to Powerco.
• In Q3, CapEx totaled $17.9 million, GAAP net loss was $119.7 million and adjusted EBITDA loss was $71.6 million, and the company ended with $841 million liquidity while tightening full-year EBITDA loss guidance to $280-300 million and lowering CapEx guidance to $60-75 million.
• The Powerco licensing structure and operational efficiencies are projected to extend QuantumScape’s cash runway to 2028 by delivering over $500 million of non-dilutive capital efficiency improvements.

Presentation

[Operator]

Good day, and welcome to QuantumScape's third quarter twenty twenty-four earnings conference call. John Saager, QuantumScape's Vice President of Capital Markets and FP&A, you may begin your conference.

[John Saager, VP of Capital Markets at Truist Securities]

Thank you, operator. Good afternoon, and thank you to everyone for joining QuantumScape's third quarter twenty twenty-four earnings call. To supplement today's discussion, please go to our IR website at ir.quantumscape.com to view our shareholder letter. Before we begin, I want to call your attention to the safe harbor provision for forward-looking statements that is posted on our website as part of our quarterly update. Forward-looking statements generally relate to future events, future technology progress, or future financial or operating performance. Our expectations and beliefs regarding these matters may not materialize. Actual results and financial periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

[John Saager, VP of Capital Markets at Truist Securities]

There are risk factors that may cause actual results to differ materially from the content of our forward-looking statement for the reasons that we cite in our shareholder letter, Form 10-K, and other SEC filings, including uncertainties posed by the difficulty in predicting future outcomes. Joining us today will be QuantumScape's CEO, Dr. Siva Sivaram, and our CFO, Kevin Hetrick. With that, I'd like to turn the call over to Siva.

[Siva Sivaram, CEO at QuantumScape]

Thank you, John. I'd like to begin by discussing the most significant achievement in our company's history. We are excited to report that we have begun producing low volumes of our first B-sample cells, accomplishing our most important goal for twenty twenty-four, and we have begun shipping these cells for automotive customer testing. These are B samples of QuantumScape's first product, QSE-5, with measured energy density of 844 Wh/L, capable of fast charging from 10% to 80% in just over 12 minutes. QSE-5 represents an important milestone for our company and the battery industry as a whole. These cells are, to the best of our knowledge, the first anode-free, solid-state lithium metal cell design ever produced for next-generation automotive applications.

[Siva Sivaram, CEO at QuantumScape]

This cell is capable of simultaneously delivering exceptional performance with respect to energy density, discharge power, charging speed, low temperature performance, and safety. This milestone marks a new stage of rigorous development and production efforts. Now that the product design and performance profile is set and we have established a baseline process, we will continue to ship samples, get customer feedback, and refine our processes. During this B sample phase, iterations of these samples will be subject to extensive product testing, which will take many months to complete. We have to substantially improve on metrics such as cell reliability, yield, and equipment productivity, among others. Next, I'd like to share an update on our progress on separator production. The first implementation of our disruptively fast separator production process is named Raptor, and as of Q3, Raptor is now our baseline.

[Siva Sivaram, CEO at QuantumScape]

We set this as a key annual goal because Raptor is a major improvement from our last generation technology in film quality and performance, heat treatment time, and energy consumption. We expect that Raptor will continue to support our QSE-5 sample output into 2025. Beyond enabling these samples, Raptor serves as a learning platform and transitional step to our Cobra process, which we continue to see as our best pathway to gigawatt-hour scale separator production. We are preparing for Cobra production to enter our baseline in 2025. We expect Cobra heat treatment equipment will be in place by the end of twenty twenty-four, and with the addition of higher volume downstream automated equipment, this line will enable a significant increase in separator production. Next, I'd like to briefly update on our joint work with PowerCo, the battery manufacturer of the Volkswagen Group.

[Siva Sivaram, CEO at QuantumScape]

As a reminder, we have signed a landmark agreement with PowerCo to bring our QSE-5 technology platform into mass production at the gigawatt-hour scale. The first phase of this agreement includes intensive collaboration, with PowerCo contributing skilled personnel to aid the industrialization of the QSE-5 platform. Upon satisfactory technical progress in this phase, QuantumScape will grant PowerCo a license to mass-produce battery cells in exchange for royalty payments, including a $130 million prepayment. The collaboration phase kicked off in Q3 with joint development activities at our San Jose facilities. During this phase of the project, we combined our QSE-5 platform and deep knowledge of solid-state battery technology with PowerCo's expertise in scaling up high-volume manufacturing processes. PowerCo is well positioned to contribute in areas such as supply chain, production equipment, and automation. Last, I want to put this quarter's achievements in context.

[Siva Sivaram, CEO at QuantumScape]

This is a proud moment for the entire QuantumScape team. We have accomplished our most important goal. We have started producing these samples of our QSE-5 product and began shipping them for customer testing. We believe these cells represent a new high watermark for the battery industry. This is the moment we've been waiting for, the start of the climb towards industrialization. To make the kind of impact on electric transportation we believe this technology is capable of, we will need enhanced manufacturing processes, which can make millions of cells per year, with defectivity rates on the order of a few cells per million or lower. It will require a sustained effort and deep collaboration with partners, including the Volkswagen Group and PowerCo, to achieve such a massive scale. With those long-term goals in mind, shareholders should take a balanced view of the achievement we have announced today.

[Siva Sivaram, CEO at QuantumScape]

It is no more than the first shipment of early low-volume QSE-5 B samples, but at the same time, we believe it is no less than a true world first, an anode-free, solid-state lithium metal battery, capable of revolutionizing electric vehicle performance. A cell with the potential to offer what drivers are demanding: much longer range, faster charging, powerful acceleration, and better safety, all at the same time. Thank you for your continued support, and we look forward to updating you on further progress in the months to come. With that, I'll hand things over to Kevin.

[Kevin Hettrich, CFO at QuantumScape]

Thank you, Siva. Capital expenditures in the third quarter were $17.9 million, in line with expectations. Q3 CapEx primarily supported equipment purchases for low volume QSE-5 prototype production, as well as the Cobra process and other equipment as we prepare for higher volume QSE-5 prototype production in 2025. GAAP operating expenses and GAAP net loss were $130.2 million and $119.7 million, respectively. Adjusted EBITDA loss was $71.6 million in Q3 and in line with expectations. We continue to track to full year guidance for adjusted EBITDA loss.

[Kevin Hettrich, CFO at QuantumScape]

This quarter, we tighten our full year guidance for Adjusted EBITDA loss to be between $280 million and $300 million, within original guidance, but at the higher end of the original range, primarily due to higher legal fees and settlement accruals in 2024 that we do not expect to reoccur in 2025. We are lowering our guidance for capital expenditures to be between $60 million and $75 million. This lower guidance in 2024 is driven by realized PowerCo deal-related efficiencies, non-deal related savings, and a shift in certain payments originally planned for late 2024 into 2025. We ended Q3 with $841 million in liquidity. As we've mentioned previously, our long-term capital requirements are a function of our commercialization pathway.

[Kevin Hettrich, CFO at QuantumScape]

We believe our deal with VW PowerCo offers a capital efficient path to market and continues to project our additional funds raised, including under our ATM prospectus supplement, would further extend this cash runway.

[John Saager, VP of Capital Markets at Truist Securities]

Thanks, Kevin. We'll begin today's Q&A portion with a few questions we've received from investors, or that I believe-

[Siva Sivaram, CEO at QuantumScape]

Investors touting isolated improvements are specific performance features. Today, we are discussing extensive measurements of our first planned product that we have worked so hard to develop. We believe that the QSE-5 cell is concurrently better than the major performance specifications that the consumers demand. Range, faster charging, ability to operate at lower temperatures, ability to provide high power, and a better safety profile than today's lithium-ion cells. For the first time, you're seeing a battery that can meet all of the above requirements, and we are providing actual measurement data for all of these features. When OEM customers deploy our batteries into their vehicles at scale, we believe this combination of characteristics will transform the electric vehicles marketplace by offering a no-compromise alternative to internal combustion vehicles.

[John Saager, VP of Capital Markets at Truist Securities]

So beginning low-volume QSE-5 prototype production is a major milestone on QuantumScape's journey toward industrialization. But what key challenges remain ahead?

[Siva Sivaram, CEO at QuantumScape]

John, first, I'm just so pleased that we have reached this stage. We got here through a set of thoughtful, deliberate milestones, starting with our single-layer results in 2020, and progressing towards our first A-samples in 2022, and six-layer Alpha-2 prototypes earlier this year. We have communicated to you every step of the way. Now that we have a design that's frozen and a baseline that's running for our first product, this industrialization process follows a well-developed playbook that many industries have used before. In fact, I'm excited to be in a familiar place that I have been in several times during my career. We know what we need to do.

[Siva Sivaram, CEO at QuantumScape]

We need to do systematically, methodically, iteratively, take a product that we have developed at our headquarters in San Jose, and bring that into production of millions of cells that are ultimately deployed in vehicles. This long-term goal will require constant focus on quality, processes, customer feedback, and very close collaboration with our broader ecosystem to achieve gigawatt-hour scale production.

[John Saager, VP of Capital Markets at Truist Securities]

Thanks, Siva. Kevin, turning to you, what is required to achieve the 2028 runway extension? Can you elaborate further on the details behind that?

[Kevin Hettrich, CFO at QuantumScape]

The 2028 runway extension is the equivalent of more than $500 million of non-dilutive improvement to capital availability in our forecast. There are four primary drivers. First, under the licensing agreement, PowerCo will invest CapEx required for gigawatt-hour scale production facilities. The deal replaces our prior JV structure, which frees up $134 million we had previously earmarked for required capital investments. Second, PowerCo will contribute resources and skilled personnel as part of the collaboration, which helps reduce costs to industrialize our technology platform. Third, the licensing agreement features an inflow to QuantumScape of a $130 million royalty prepay, contingent upon satisfactory technical progress. Fourth, and separate from the PowerCo deal, we continue to make improvements to the efficiency of our operations, which, as mentioned in our shareholder letter, we've already begun to realize.

[Kevin Hettrich, CFO at QuantumScape]

Longer term, the shift to a license with VW PowerCo for up to 80 GWh, four times the size of the JV agreement the PowerCo deal replaced, reduces forecast capital requirements to QuantumScape by billions of dollars.

[John Saager, VP of Capital Markets at Truist Securities]

Okay, thanks so much. We're now ready to begin the live portion of today's call. Operator, please open up the line for questions.

[Operator]

At this time, in order to ask a question, press star, then the number one on your telephone keypad. Our first question comes from the line of Joseph Spake with UBS. Your line is open.

[Operator]

Hi, this is Gabriel on for Joe. Thanks for taking my questions. First, congratulations on beginning B-sample shipments and fully implementing Raptor. I know you previously mentioned that you were targeting something like 800 Wh/L and that 10-80% charge time under 15 minutes, so good to see those metrics there. Siva, we've seen some announcements from some of your competitors intending to launch with their solid-state tech and lower volume fleets around that 2026-2027 timeframe, but we've also heard expectations for full introduction of solid state as a later decade event. I know earlier you spoke about how QSC five stacks up within the competitive landscape. Without setting specific expectations, do you see that timeframe as reasonable for the EV space in general to begin implementing this kind of technology, even if lower volume?

[Siva Sivaram, CEO at QuantumScape]

Gabe, thanks for asking the question. We—I will talk for ourselves first. As you said, there are a lot of announcements all the time from everywhere. We believe in systematic, methodical, iterative development of a product from an A-sample into high volume production. This requires that we take no shortcuts. We make sure we focus on quality. We make sure we focus on the supply chain, our ecosystem, and do this right, and with a partner who knows how to build in volume. All of this does require time, effort, and focus. I can only tell you that we are on the fastest path to production as possible. Our partner and us are both highly motivated to get this path-breaking technology into production in the fastest possible manner, and that's where we are headed.

[Siva Sivaram, CEO at QuantumScape]

And the first part of getting that started is establishing a baseline that actually delivers all of these, which is what we have established today. We have established that concurrently, we can give you the safety, we can give you better than expected energy density, very, very good power, very good safety, and ability to operate at very low temperatures. Put them all together, you have the baseline, and we work methodically, systematically, and iteratively with our customers. That's about all I can tell you. Our customer is working very closely with us on this.

[Siva Sivaram, CEO at QuantumScape]

Great. That's good to hear. And Kevin, you lowered the CapEx guide about $25 million at the midpoint, so the full year guide implies about $16.5 million of CapEx in Q4. Is this sort of the quarterly run rate we should be expecting going forward, or are there some costs you expect to incur, such as Cobra spend, that won't repeat going forward?

[Kevin Hettrich, CFO at QuantumScape]

Thank you, Gabe. That's a good, that's a great question. Specifically here, to the question on CapEx, we lowered guidance to $60 million-$75 million for three reasons. The first was deal-related efficiencies regarding the VW PowerCo deal. The second was non-deal related savings, and the third was a shift in certain payment timing targeted at the end of 2024 into 2025. That range of CapEx, we would expect going forward, when you compare 2025 levels to 2024, to be flat to slightly down. Actually, for the same set of reasons, you should expect the same thing of 2025 OpEx as well, flat to slightly down when compared to 2024 levels.

[Kevin Hettrich, CFO at QuantumScape]

Thanks, everyone. Congrats on the quarter.

[Operator]

... Your next question comes from the line of Jordan Levy with Truist Securities. Your line is open.

[John Saager, VP of Capital Markets at Truist Securities]

Hi, guys, it's Henry in for Jordan here. Congrats on the B-sample milestones. Just to start with those samples now being produced and Raptor continuously running, I'm just curious, are there any key learnings you guys have found from the continuous running that have been incorporated into the higher volume line, you know, starting next year? Thanks.

[Siva Sivaram, CEO at QuantumScape]

Henry, absolutely. What you're asking is exactly what we are doing. The Raptor line not only produces enough samples to run the baseline, but is also the platform on which we learn how to structure, improve, and continuously make the Cobra process better. Even on the rest of the line, it is what you would expect. Running a stable baseline allows you to systematically improve on the performance, and you can see the effect.

[Siva Sivaram, CEO at QuantumScape]

I mean, to come and tell you that we can do 844 Wh/L and , just over 12 minute of charge time, operating up to minus thirty degrees with NC capability and with safety that is, even at a three hundred degree thermal stability that is good, this kind of an improvement comes from running a stable baseline.

[John Saager, VP of Capital Markets at Truist Securities]

Thanks for that. And then maybe just one quick follow-up. Kevin, to you. On the readjusted CapEx forecast, are you guys able to talk to what kind of drove the shift in certain payments that you mentioned from this year to next? What was behind that?

[Kevin Hettrich, CFO at QuantumScape]

Yeah, just to put a magnitude to that shift was in the single digit millions. It doesn't change any of the publicly stated kind of milestones for progress. And we're very much aligned with both our prospective launch customer and VW PowerCo on the industrialization and tech transfer work. So I would put it in just the normal course of operations.

[Operator]

And your next question comes from the line of Winnie Dong with Deutsche Bank. Your line is open.

[Winnie Dong, Director and Equity Research at Deutsche Bank]

Thank you so much, and congrats on the quarter and the news of starting B-sample delivery. Now that you have a few months of collaboration with PowerCo, I was wondering if you can talk about maybe some of the specific issues that, you know, they're solving for, versus what QuantumScape might be solving for internally for, you know, B-sample deliveries and testings with customers. And then secondly, could you guys maybe share any details around the economics beyond the royalty payment? I understand that there is some sort of share economics, you know, beyond the $130 prepayment that you guys discussed. Is there any details I can potentially, you know, offer at this point? Thank you.

[Siva Sivaram, CEO at QuantumScape]

Winnie, why don't we take the second question first? Kevin, you wanna talk about the economics?

[Kevin Hettrich, CFO at QuantumScape]

No, I, unfortunately not anything beyond the redacted contracts we've put in place. As you correctly noted, there is a royalty prepay which kind of gets unlocked with sufficient technical progress of $130 million inflow to QuantumScape. And then, once up and going, there are two parts. There's both a royalty rate and then there is a outperformance share. And as is common in the industry, those details between two companies aren't shared so as not to disadvantage either one in future negotiations.

[Siva Sivaram, CEO at QuantumScape]

So, Winnie, on to your first question. Clearly, on the second question, look, as much as we can disclose, we have, for many reasons, both for confidentiality between the parties and because we want to retain the ability to negotiate with other customers when we start, so we don't want to put these numbers out. On your first question as to what Volkswagen's or PowerCo's role in this development is, we come in with a very deep knowledge of the solid-state battery technology itself, the electrochemistries involved, the materials involved, the processing, sequences, and parameters.

[Siva Sivaram, CEO at QuantumScape]

What PowerCo is very, very good at is in scaling up in industrialization of the manufacturing capabilities, making sure that the ecosystem, the supply chain, is properly negotiated, put in place, factory ramp up, making sure that the tools and their uptimes and large scale volume production capability is in place. Those things, they are very good at, and we are both working together as one team, one goal, to take these B samples into the gigawatt hour scale factories that we both want to get out as soon as possible.

[Operator]

Your next question comes from the line of Ben Kalo with Baird. Your line is open.

[Ben Kalo, Analyst at Baird]

Hi, good evening, and congrats, guys. I echo everyone's congrats to you. Just could you talk a little bit more about, you know, moving to Cobra or adding Cobra and, you know, how, you know, that gets started, just some timing of it, and then how we should expect, you know, the ramp up there, you know, to meet the more high volume of production? Thank you.

[Siva Sivaram, CEO at QuantumScape]

Thanks, Ben. As you rightly point out, that is a very important step for us to ramp the volume of production from Raptor into Cobra. The Cobra equipment, the main pieces of tools have already started arriving. By end of this year, all the individual pieces that we need just for the Cobra process will be in place. Early part of next year, certain high volume production capable downstream tools will get added, and this will be a continuous process as we are developing and slowly cutting over from Raptor to Cobra. Raptor, we expect, will be the main part of the sample production earlier in the year, and as Cobra comes in, it will cut over into majority into Cobra in 2025.

[Ben Kalo, Analyst at Baird]

I think you might have touched on this a little bit, but just if I ask again, just I know it's early in sending B-samples out, but too early to tell so far. And just how that could, you know, how you expect the, you know, customer deal pattern to change with actually having samples in their hand, if it does change at all? Thank you.

[Siva Sivaram, CEO at QuantumScape]

Clearly, having samples in our hand is a great thing for all of us, us and our customers, and as you'd expect, the customer data is going to be very proprietary to the customer, and they are not going to allow us to share any of that outside unless they choose to. However, we do measure sister cells, and that's where the data that we presented today are all from the sister cells, and you can see how thoroughly we have characterized it and given you the data so that we are not just showing bits and pieces of data, just one parameter at a time. We are actually showing you comprehensive data, exactly how it is measured, what the dimensions are, how do we measure energy, power, all of those, so this is the reason we are able to share the data in that much detail.

[Siva Sivaram, CEO at QuantumScape]

Customers will, of course, measure it their own way, with their own specifications and will give us specific feedback. That will help us in refining and making the process better.

[Ben Kalo, Analyst at Baird]

Thank you very much.

[Siva Sivaram, CEO at QuantumScape]

Thanks, Ben.

[Operator]

Again, if you would like to ask a question, please press star and the number one on your telephone keypad. And our next question comes from the line of Jed Dorsheimer with William Blair. Your line is open.

[Mark Shooter, Senior Associate at William Blair]

You have Mark Shooter on for Jed. You know, echoing everybody else, congrats on the B sample stage gate. That's a big accomplishment. Not to undermine that achievement, but obviously we're gonna look forward a bit. So talking about C samples, that's where the rubber meets the road, as a lot of CapEx is needed to build the new manufacturing equipment for the Cobra process. Am I thinking about this correctly, that the new licensing structure will help create a shared responsibility for developing and also scaling that Cobra process? And does this de-risk the, you know, the type of maybe wait and see type of approach that PowerCo could have taken, right? Because now they have this shared responsibility. Do you see any advantage in that?

[Siva Sivaram, CEO at QuantumScape]

Mark, this is a very important consideration on why and how we went with this model. In the relationship that we have developed with PowerCo and in the general capital light model that we are going after. The designation of B sample is actually done by the customer, and whether it is B sample or when the B samples are fully qualified from them with the same functionality, they will call the same B samples, C samples, depending on where they are in their qualification. But the most important thing with respect to your question is this: PowerCo Volkswagen commits to spending all the capital to build, ramp, and run the factories. We participate in enabling them to be able to use that equipment very well and produce the cells.

[Siva Sivaram, CEO at QuantumScape]

We make our money when they're on the volumes, and we get a royalty prepay when certain progress has been made. On a continuing basis, we get royalties and an outperformance, as we were talking about it earlier. We are not committing to spend a lot of capital in building and running factories. That's what our partner will be doing, and so going from B samples to C samples, et cetera, will be their designation based on their ability to ramp in high volumes.

[Kevin Hettrich, CFO at QuantumScape]

And if you take a step back from the shareholder perspective, we're amplifying each partner's core competency for QuantumScape, as Siva mentioned, that all the knowledge and the chemistry and the process and the cell design and development. But from the VW PowerCo, just the expertise in industrialization, automation, automotive scale. We mentioned before over the summer, this is a non-exclusive deal and we think serves as a template for others in the future. The IP is co-owned around industrialization, for the separator is always owned by QuantumScape, regardless of who creates it. And then as I discussed in the comments in the letter, it's a major driver to extend our runway. And Mark, to your question, once you get to giga scale factory, it has tremendous-...

[Kevin Hettrich, CFO at QuantumScape]

Benefits to the QuantumScape shareholder in terms of the capital to penetrate our technology into the marketplace.

[Siva Sivaram, CEO at QuantumScape]

We are watching for the shareholder returns, and this is the optimum model for us to maximize shareholder returns.

[Mark Shooter, Senior Associate at William Blair]

That's great. Thank you both for the color. Just a quick follow-up on that. If the PowerCo is responsible for the scale-up past your C-sample, am I thinking about this correctly, that even if they create trade secrets or processes around the Cobra process, QuantumScape is still, has 100% ownership of that and then can I know you're working with other OEMs, so can you immediately transfer that to, of that learning to potential competitors to PowerCo? Like, how does that relationship work?

[Kevin Hettrich, CFO at QuantumScape]

On the ownership question is, yes, QuantumScape retains ownership of the separator technology, regardless of who creates it in this collaboration phase. Regarding the exact details of how it works for use with others, I don't want to get into the weeds of the contract itself. There are limitations, but we think on balance, they're quite favorable to QuantumScape, and use with other partners.

[Siva Sivaram, CEO at QuantumScape]

But clearly, Mark, our expectation is that we will have multiple customers with whom we'll be ramping as rapidly as possible. And so the contract allows certain features for us to be able to do that. Clearly, there will be some restrictions, but this is a much faster way to do it.

[Mark Shooter, Senior Associate at William Blair]

Understood. Thank you again.

[Operator]

There are no further questions at this time. QuantumScape management, I'll turn the call back over to you.

[Siva Sivaram, CEO at QuantumScape]

Thank you, operator. As a final note today, I would like to acknowledge our co-founder and chairman, Jagdeep Singh, who will be retiring from the board at the end of 2024 after almost 15 years of service. Jagdeep is the visionary behind the growth of QuantumScape, leading up to the critical achievement of shipping these samples of our first commercial product. We are deeply grateful for his inspired guidance and will continue striving towards the ambitious goals he has set for the company. On a personal level, I'd like to express my gratitude to Jagdeep for continuing to be a great friend and confidant and for his invaluable help as I take on the task of leading this extraordinary company into its next stage. With that, thank you for listening, and we look forward to updating you on further progress in the months to come.

[Operator]

This concludes today's conference call. You may now disconnect.

Participants

Executives

• Kevin Hettrich, CFO
• Siva Sivaram, CEO

Analysts

• Winnie Dong, Director and Equity Research at Deutsche Bank
• Mark Shooter, Senior Associate at William Blair
• John Saager, VP of Capital Markets at Truist Securities
• Ben Kalo, Analyst at Baird
• Analyst at UBS