Solid Power Q1 2024 Earnings Call Transcript

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Provided by Quartr
May 7, 2024

There are 8 speakers on the call.

Operator

Greetings, and welcome to the Solid Power Inc. First Quarter 2024 Financial Results and Business Update Call. Please note that this conference is being recorded. I will now turn the conference over to your host, Jennifer Almquist, Investor Relations for Solid Power. Thank you.

Operator

You may begin.

Speaker 1

Thank you, operator. Welcome, everyone, and thank you for joining us today. I'm joined on today's call by Solid Power's President and Chief Executive Officer, John Van Schkoetter and Chief Financial Officer, Kevin Papczynski. A copy of today's earnings release is available on the Investor Relations section of Solid Power's website, www.solidpowerbattery.com. I'd like to remind you that parts of our discussion today will include forward looking statements as defined by the U.

Speaker 1

S. Securities laws. These forward looking statements are based on management's current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. Except as otherwise required by applicable law, Stella Howard disclaims any duty to update any forward looking statements to reflect future events or circumstances. For a discussion of the risks and uncertainties that could cause actual results to differ materially from those expressed in today's forward looking statements, please see Stella Power's most recent filings with the Securities and Exchange Commission, which can be found on the company's website at www.solipowerbatteries.com.

Speaker 1

With that, let me turn it over to John Van Schoter.

Speaker 2

Thank you, Jen. Good afternoon, everyone, and thank you for joining today's call. I'll begin today with a brief update on our progress. After that, I'll hand the call off to Kevin for the financial review. Then we'll open up the call for Q and A.

Speaker 2

When we last spoke, we outlined our 2024 goals. They are to expand our electrolyte capabilities and available market, advance to A2 sample cell designs, execute

Speaker 3

for our partners

Speaker 2

and strengthen our presence in Korea. 2024 is off to a good start with continued strong execution on all four of these priorities during the Q1. With respect to electrolyte, we expanded our sampling program with ongoing shipments to new potential customers. We made progress on our A2 cell design and are executing on a path that we believe will enable us to deliver higher performing cells by target dates. We continue to execute for our partners, most notably through strong early execution on our SK ON R and D technology transfer and line installation agreements, and we further established our team and offices in Korea, providing the basis for ongoing engagement in the region.

Speaker 2

Looking

Speaker 3

a little more closely

Speaker 2

at each of these goals, starting with electrolyte. We continue to see growing interest in our electrolyte powder. During the quarter, we made shipments to our existing partners. We also made repeat shipments to a potential customer after receiving positive feedback and shipped our electrolyte to a new potential OEM customer we are excited to work with. Our Electrolyte has now been shipped to 10 potential customers outside of our existing joint development relationships.

Speaker 2

We've also continued to invest in our new electrolyte R and D lab, which we are targeting to complete sometime mid year. The goal of this lab will be to optimize continuous electrolyte production, reduce the cost of our powder and develop future generations of even higher performing electrolyte. We continue to believe our proprietary electrolyte represents a great long term opportunity for our industry and for our shareholders, and we remain committed to continuing to expand our capabilities in available market in this area. Turning to cell development, our team continues to refine our A2 cell design with a goal of delivering A2 cells to our partners by the end of this year. Our A2 cells are designed to improve our cell performance including energy and power.

Speaker 2

We believe these improvements also represent an incremental step towards commercial solid state technology. With respect to cell performance, our team has also been working hard to better address the handful of A1 cells that went into thermal runaway earlier this year. The team is improving our internal testing capabilities, performing detailed analysis of our cell reactions and thoroughly evaluating the materials and processes used in production. We've been able to identify minor changes in our cells' and design as well as improvements in our manufacturing process that we have factored into our plans for the A2 builds. Battery technology development is challenging and our team is energized by the opportunity to overcome hurdles and demonstrate the potential of solid state batteries.

Speaker 2

I'm proud of our team's work and want to express my appreciation for their commitment to driving realistic thoughtful solutions. Turning to our partners, Since signing the expanded agreement with SK ON in January, we've begun collaboration in earnest. In April, we hosted SK ON for 3 weeks here in Colorado to kick off the tech transfer process under our R and D license. During those 3 weeks, we conducted workshops, training and other hands on learning with respect to our cell production processes. This was valuable time spent and beneficial for both sides as we set a solid foundation for future collaboration.

Speaker 2

We also sent a team to Korea to begin work on the SK ON line installation. I'm pleased to say that we're nearing design freeze on SK ON's new EV cell line. All the lines major equipment is now on order, keeping us well on track to complete the line in the first half of twenty twenty five. Both the tech transfer and line installation efforts will ultimately increase collaboration and leverage the development efforts on our solid state technology across the U. S, Europe and Asia in the years to come.

Speaker 2

We also continue our close collaboration with both BMW and Ford under our joint development agreements. We continue to value these relationships and look forward to continuing to work closely with our OEM partners throughout the year. And lastly, Korea. We've made good progress in solidifying our Korean presence. We now have an entire team on the ground in Korea with a combination of expat Solid Power employees and local expertise who onboarded in our SP2 facility a couple of weeks ago.

Speaker 2

This team is located in Seoul where we are establishing a home base for driving further engagement across the peninsula with potential customers, vendors, government agencies and others in the forefront of battery technology development. Before I wrap up, I also want to say we're making good progress on our planned investor event for later this year. We look forward to sharing more details with you in the coming months. With that, I'll turn the call over to Kevin.

Speaker 3

Thanks, John. Good afternoon, everyone. I'll start off today with an overview of our financial results for Q1. Then I'll discuss our 2024 outlook. Our Q1 financial results reflect continued technology development and initial execution on our new SK agreements.

Speaker 3

1st quarter revenue was just under $6,000,000 This primarily reflects solid performance on our BMW agreement. Operating expenses for Q1 were 31,700,000 dollars reflecting our planned investments in cell and electrolyte development, the scaling of our operations and execution under our development agreements. First quarter operating loss was $25,800,000 and net loss was $21,200,000 or $0.12 per share. Turning to our balance sheet. We ended the quarter with total liquidity of $379,000,000 in cash, marketable securities and long term investments.

Speaker 3

We invested $29,100,000 in operations during the quarter and $4,100,000 in CapEx, mostly going towards our new electrolyte R and D lab. Our overall CapEx investments were lower than last year when we were investing heavily in our SP2 electrolyte plant. We did have an increase in working capital invested this quarter. We had a couple of large partner receivables at the end of Q1 that will be collected in Q2 in line with contract milestones. We also placed down payments during the quarter on equipment for the SK line install.

Speaker 3

We expect our working capital to normalize over the remainder of the year, lowering our cash burn over coming quarters. Lastly, during the quarter, we repurchased 5,000,000 shares of our common stock for a total of just over $8,000,000 You will see $4,900,000 on our statement of cash flows with the remaining amount sitting on the balance sheet as the cash settled in early April. Overall, our liquidity position remains strong, especially in light of our capital light business model with its lower CapEx requirements. Turning to our outlook for the year, we are reiterating our guidance for 2024, with revenue still expected to be in the $20,000,000 to $25,000,000 range. This includes the remaining revenue from our BMW agreement and expected revenue from our new SK agreements.

Speaker 3

We did have a small amount of SK revenue in Q1 and expect more over the rest of the year as we execute on tech transfer and line installation. With respect to the overall cash flow guidance, we are reiterating our expectation that total cash investment for 24 will be in the range of $100,000,000 to $120,000,000 with operating cash investment expected to be $60,000,000 to $70,000,000 and CapEx investments expected to be $40,000,000 to $50,000,000 In addition to the $100,000,000 to $120,000,000 we will have $8,000,000 of share repurchase investments show up in our financing cash flows from the repurchases we've done so far this year. We'll continue to evaluate the timing and amounts of future repurchases under our plan.

Speaker 2

With that, I'll now turn the call back to John. Thanks, Kevin. In closing, 2024 is off to a solid start. The team here at Solid Power continues to execute well on our 2024 goals, whether the targets are technical, strategic or financial in nature. I'm confident that this continued strong execution will drive shareholder value for the long term.

Speaker 2

With that, I'll turn it over to Q and A.

Operator

We will now begin the question and answer session. The first question comes from Mike Schliske with D. A. Davidson. Please go ahead.

Speaker 4

Yes. Hello. Good afternoon and thanks for taking my questions. You had mentioned you have shipped Electrolyte to 10 potential partners beyond the 3 that you've already mentioned you're working with. Those 10 partners, could you give me kind of bracket for us, are they auto OEMs or battery folks?

Speaker 4

And maybe some sense as to the size, maybe combined of what kind of market share those autos or batteries may have or just some sense as to how big if they all signed up to work with Cella Power, the long term opportunity may be there.

Speaker 2

Good afternoon, Mike. Thanks for joining. Yeah, it's a combination of battery OEMs and EV OEMs. I would say it's skewed more towards battery OEMs in this period of time. But again, it's both.

Speaker 2

I honestly don't have a good assessment of what the total available market that they address would be. But it is a combination of the very large known players in the market as well as some of the medium sized players in the market.

Speaker 4

Got it. Thanks. I also appreciated your details on the team's efforts to fix those issues with thermal runaway. Can you share with us is the resulting cell going to look cost or perform differently than what was originally put in or are the changes very small to your knowledge at this point?

Speaker 2

Yes. Great question again, Mike. I want to emphasize clearly that just a handful of cells that we have out of 1,000 that we've built. So just to keep the situation in scope. But there are small tweaks that we're making.

Speaker 2

But I would like to once again reiterate that the battery system is really a complex interplay between the chemistries, the mechanics and the overall system environment that it operates in. And so those all have to be tweaked as you make a change in one area that it may affect the design, it may affect the manufacturing flow. And so just bear that in mind when we talk about changes, it's small tweaks to all those because of the interplay between them for the battery system.

Speaker 4

Got it. Thanks. And perhaps one last one for me, and this is for Kevin. Is it too early to ask about 2025 at this point? Do you think that your cash burn or expense run rate as it tapers down a little bit around the year, could it maybe run similar to what you're seeing this year?

Speaker 4

Or are there is there a major step up or down for 2025?

Speaker 3

Thanks, Mike. We're going to give longer term guidance later this year at our investor event. But we've I don't think our messaging has changed much from what we said originally, which is once we got through our SP1 minutee install and our SP2 electrolyte facility that our CapEx needs would tweak down and overall spend would go down. So we're not expecting any changes, but we'll give more detailed guidance here later this year.

Speaker 4

Okay. I appreciate those answers. Thanks so much.

Operator

Our next question comes from Brian Dobson with Chardan Capital Markets. Please go ahead.

Speaker 5

Yes. Thanks very much for taking my question. I guess just one follow-up on those, call it, 10 clients and the 2 new clients that you had mentioned. You mentioned supplying powdered electrolyte both on ongoing basis to one potential client and one new potential client. What kind of feedback have you received from those companies?

Speaker 5

And can you give us an idea as to what industry they're in, either automotive or battery?

Speaker 2

There's one customer that's in the battery space providing to the EV market, a major player in Asia. And then a second EV OEM also in Asia. So those are the description of the 2 that we referred to in the call. The feedback has been very encouraging, Brian. And the reason I say that is that we've been through multiple iterations of sampling with both of them.

Speaker 2

Then looking at the initial material saying, I like this characteristic about the electrolyte, but could you change this characteristic? And we go ahead and we do our modification or screening or what have you to get to that desired specification. We resample it. They reevaluate it, taking through their cell lines. And then it's a rinse and repeat from there.

Speaker 2

We've had as many as 5 cycles with 1 of those 2 OEMs at this point. So it clearly shows engagement. It shows that there's interest, strong interest I would say as a result of the engagement. We're not through that process with either of them. I would expect that would continue through the balance of this year.

Speaker 2

As I said, the battery system is a very complex interplay. They both have their own cell designs. And so we're really tuning the electrolyte to make it perform the best in their cell design. And I believe that will continue to balance this year.

Speaker 5

Yes, excellent. And is there any update on work that you had been doing with BMW toward the development of 1 of their prototype

Speaker 2

cars? Yes. So our collaboration with BMW continues to be very strong. If anything, it's gotten stronger in 2024. You may recall, we actually have ex pat engineers from BMW here on-site in Colorado for extended periods of time.

Speaker 2

And they're working shoulder to shoulder with our engineers to come up to speed on our cell design, so that they can duplicate that and then in Parsdorf, Germany. I understand that equipment for that facility is coming in this year and they have an objective to get that facility up and running in 2025. There is we're still in discussions with them about the demo car. We really don't have any further updates for you at this point. But we will share that with you as soon as we do have clarity about their plans.

Speaker 2

As you I'm sure know they are going through a major platform change with the NOI class coming out next year. And so they're doing a lot of internal planning. So there really is no further update at this point other than that close collaboration and our support of their line in Parsgrove Germany as

Speaker 3

we go through this year.

Speaker 5

Excellent. And during the quarter, you retired nearly $5,000,000 worth of stock. I think we're in agreement that shares are undervalued at this level. But as you're thinking about utilizing additional share repurchases, are you thinking about being programmatic? Are you thinking about being opportunistic in nature?

Speaker 5

I guess, how are you and the Board going about that?

Speaker 3

Hey, Brian. We're thankful that we have such a strong balance sheet at this point and we'll remain flexible here and consider all opportunities to buy our stock back going forward. At this point, we don't want to give too much detail because that could impact our ability to buy back, but we'll consider the opportunities here as they come up going forward.

Speaker 5

Okay. And just one final one, if I could sneak it in. It's very exciting that you're building out Korea. Have you received any kind of early feedback from team members on the ground there regarding the reception of solid power by the local companies?

Speaker 2

Yes, the reception has been just what we hoped it would be. I think once you plant your flag and start to invest in a country like that, it's really our first global expansion. People take notice. And so yes, we are getting differential treatment from the various partners and providers, suppliers over there. And also very close collaboration with the National Labs.

Speaker 2

They have clearly acknowledged that being there makes a difference. And we have hired now 3 nationals already throughout program management, technical lead as well as HR over there to build out that core team. So the reception is exactly what we had hoped, maybe a little bit better than I had expected on the government side, but it's really coming in nicely.

Speaker 5

Thanks very much.

Operator

Our next question comes from Jeffrey Campbell with Seaport Research Partners. Please go ahead.

Speaker 6

Good afternoon and congratulations on all the success that you've laid out. I really only have one question at this point and that is all these various samplings of the electrolyte where the electrolyte is going. Is this electrolyte being tested for any other kind of battery architecture besides the silicon EV cell? Or conversely, if not, can we see this as some sort of validation of the silicon E B cell architecture?

Speaker 2

Yes. Good question, Jeffrey. We believe that it's being used in a variety of different anode, cathode combinations at this point. For obvious reasons, these OEMs generally keep those designs pretty close to their chest. So we don't have a lot of visibility, but we get some clues, if you will, based on what they're asking for in terms of the changes to electrolyte.

Speaker 2

And I think it's fair to say that there's a number of different combinations of anode and cathode that are being utilized with our electrolyte at this point. Again, it underscores the, we're really indifferent to, the anode technology and the cathode technology. It speaks to the versatility, I think of our electrolyte and of our business model. We do again work closely with the customers, but don't have ultimate visibility right now on those designs.

Speaker 6

Yes. Well, that flexibility is kind of where I was going. So thanks for that answer. I appreciate

Operator

Our next question comes from Vincent Anderson with Stifel. Please go ahead.

Speaker 7

Yes, thanks. So just two quick ones on the SK partnership. Could you remind me, are you able to immediately start iterating off of your most recent A2 battery with SK or does the nature of the JDA mean that you kind of have to start a few steps back and develop forward from there?

Speaker 2

We will start with the A1 design as a baseline because it's the most learned and then build from there. But our intention would be to have ongoing collaboration for the various designs as we go forward. They've expressed the desire to do that same thing, but it will start off of our base, which we built largely last year.

Speaker 4

Okay.

Speaker 7

All right. That makes sense. And are they going to be explicitly sourcing raw materials for you or having a direct say in raw material sourcing?

Speaker 2

You mean for our precursors or do you mean for the other components in the battery?

Speaker 7

Yes, sorry. Apologies, yes, for your precursors.

Speaker 2

No. We solely control our precursor vendors and selection.

Speaker 7

All right. And just shifting gears, I'm curious, are you planning on requiring or dedicating additional prototyping equipment or electrolyte manufacturing equipment to support the new electrolyte chemistry? I'm only asking because I assume you've already started working on some of this R and D around the new chemistry and you feel the need to afford it its own lab space. So I'm just wondering if that's going to eventually come with maybe entirely segregated lines and things like that?

Speaker 2

We have the DBPR line that will be coming on mid year here, well, lab excuse me, not line that will advance the state of the art there, advance our production capability in terms of continuous flow versus batch, as well as driving on our cost vectors. But once that's done, it's designed so that whatever results can be seamlessly integrated into our SP2 existing powder line. And one of the, I think, real highlights of this year has been the flexibility that that line has demonstrated already. I mean it was designed for flexibility, but as we've gone through these customer sampling exercises I described previously, our ability to actually tune it very quickly to the customer requirements is really proven to be beyond even my expectations. So we don't envision a different line other than the DBPR lab that then will material and designs will migrate into the standard SP2 facility.

Speaker 7

Perfect. All right. That's all from me. Thank you.

Operator

This concludes our question and answer session. I would like to turn the conference back over to John Van Schoeder for any closing remarks.

Speaker 2

Thank you for joining the call today, everyone, and for your interest in Solid Power. We look forward to updating you again next quarter.

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