QuantumScape Corporation

Good day and welcome to QuantumScape's second quarter 2021 earnings conference call. John Sager, QuantumScape's head of investor relations. You may begin your conference.

Thank you, operator. Good afternoon and thank you to everyone for joining QuantumScape's first quarter 2022 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 and 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. There are risk factors that may cause actual results that differ materially from the content of our forward-looking statement for the reasons that we cite in our Form 10-K and other SEC filings, including uncertainties posed by the difficulty in predicting future outcomes. Joining us today will be QuantumScape's co-founder, CEO, and chairman, Jagdeep Singh, and our CFO, Kevin Hetrick. Jagdeep will provide a strategic update on the business, and then Kevin will cover the financial results and our outlook in more detail. With that, I'd like to turn the call over to Jagdeep.

Thank you, John. At the end of 2020, we unveiled single layer cell data showing a solid state lithium metal chemistry we believe is capable of delivering compelling performance benefits over conventional battery chemistries on key metrics such as energy density or range and charging time. Since then, we have not only shown further advancement of this platform, including repeated 15 minute fast charge and operation with zero applied pressure, but have also demonstrated that we can scale up to multi-layer cells using single-layer organ blocks. We continued the steady progress into 2022 by showing our very first 16-layer cell on our February earnings call and are pleased to note that we have now demonstrated results over 500 cycles with 16 layers under our gold standard test conditions with energy retention and cycling behavior similar to our single, four, and 10-layer cells. In addition, one of our key goals for 2022 is to demonstrate our proprietary cell format, which is designed to be flexible enough to unlock the benefits of our anode-free cell architecture while accommodating the uniaxial volume expansion characteristic of lithium metal anodes. This 16-layer result is in this proprietary cell format. We believe these results represent an encouraging proof of concept, and we look forward to sharing additional details on our proprietary cell format in the future. While we are pleased to share these results, we note that more work remains to be done on the quality and consistency of our materials and processes before we can achieve our goals of commercializing our technology. This requires a continued focus on improving our production tools and processes, as well as incorporating improvements in product design. We have encountered and expect to continue to encounter and work through a range of technical, engineering, and production challenges as we execute on our plan. However, we believe successfully addressing these challenges further strengthens the moat we have built around our technology with our IP portfolio, which now consists of over 300 patents and patent applications. In parallel with building up the layer counts of ourselves, we have also been working to increase the scale of our operations, One key constraint on this front has been separator production, and a key goal for 2022 is to ramp up the production of separator films with peak weekly starts of over 8,000. We're therefore happy to report that we recorded average weekly starts of over 3,700 exiting Q1 2022 compared to less than 2,000 exiting Q4 2021. This increase was made possible by new higher-throughput continuous-flow separator production tooling on our Phase I engineering line. The new tooling has also increased our confidence in a core component of our scale-up thesis, that larger-scale continuous-flow equipment can not only improve the throughput of our manufacturing process, but also deliver improvements in quality and consistency due to better process control. Increased throughput and better quality not only allows us to build more cells to test but also allows us to allocate a significant fraction of our separator films to perform other critical tasks, such as testing to automation and iterating on our manufacturing process. Over the coming quarters, we expect to take delivery and complete the qualification of many more large-scale and continuous-flow tools across our Phase I and II engineering lines and our QX0 pre-pilot lines. We continue to target delivery of A-sample cells to at least one customer in 2022. The A-sample is planned to have dozens of layers and is intended to demonstrate the core functionality of the battery cells. Automotive customers today are generally forced to make a choice between cells that offer higher energy but lower power or higher power but lower energy. We believe that in order to substantially improve both power and energy simultaneously, new battery chemistries are required. The core value proposition of our solid state lithium metal technology is the potential to shift the performance frontier on both energy and charging speed simultaneously. In that vein, in Q1, we announced a new deal with a third top 10 automotive OEM by Global Revenue. Upon achieving certain milestones, the deal reserves five megawatt hours of capacity for this OEM from QS0. our pre-pilot production line. The agreement also provides a pathway to establishing a US-based joint venture facility with up to 50 gigawatt hours in annual cell production capacity, subject to technical milestones and mutual agreement. This latest announcement is the fifth customer sampling agreement we have announced and affirms the strong interest leading automotive players have in adopting next generation battery technology. Lastly, a word on our strategic vision. Battery development and manufacturing is a complex undertaking that requires grit, determination, and disciplined execution. Since entering the public markets in 2020, our team has been focused on laying the foundation for what we expect will be substantial growth in our manufacturing and operational capabilities. 2022 represents an inflection point in this process and we believe we have shown that our long-term execution strategy is beginning to yield results. While substantial work remains to accomplish our 2022 goals, we believe this quarter's increases in film starts, progress on our proprietary materials and cell format, and manufacturing quality improvements represent a strong start towards achieving these milestones. We look forward to reporting continued advances on these fronts in the coming quarters.