Solid Power, Inc.

Good day and welcome to the Solid Power, Inc. first quarter 2022 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Jennifer Alquist, Investor Relations. Please go ahead.

Thank you, and thank you, everyone, for joining us today. Joining me on the call today are Solid Power's Chief Executive Officer, Doug Campbell, and Chief Financial Officer, Kevin Papsiski. Copies of today's press release are available on the investor relations section of our website at ir.solidpowerbattery.com. Before we get started, I'd like to remind you that parts of our discussion today will include forward-looking statements as defined by U.S. security 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, we disclaim any duty to update any forward looking statements to reflect future events or circumstances. For discussion of the risks and uncertainties that could cause actual results to differ materially from those expressed in our forward looking statements, please see our most recent filings with the Securities and Exchange Commission, which can be found on our website at ir.solidpowerbattery.com. With that, let me turn it over to Doug Campbell.

Thank you, Jen. Good afternoon, everyone, and thanks for joining us. My comments today will be somewhat brief, given the short amount of time between our year-end call and today. I'll begin first with a business update. I'll then pass it over to Kevin for a brief review of the financials, and then I'll return with some concluding remarks. Looking at the first quarter, I'm happy to report that 2022 is off to a strong start thanks to the execution and focus across the entire Solid Power team. I will be providing you with an update on our operational investments and cell development progress, but in short, one, we are nearing completion of our EV cell pilot production line. Two, we have made meaningful progress constructing our electrolyte facility. Three, revenue came in ahead of expectations. And finally, four, we remain on track with all of our operational and developmental targets. In all, we believe we are well positioned to achieve our goals by the end of this year. Looking at our cell development progress during the quarter, I'm pleased to report that we remain on track with our roadmap. We recently delivered an additional iteration of our two amp hour multilayer cells to our partners. In addition, we are internally testing our 20 amp hour multilayer cells. Regarding those cells, while we still have some technological challenges to overcome, we remain on track to deliver those 20 amp hour cells to our OEM partners later this year. These smaller format cells play a very important role as we progress towards our full-scale EV cell, and we are pleased with the continued strong execution from our development team. Turning to our operational investments. As we announced last quarter, we elected to accelerate investments in our operations, production equipment, and product development efforts. We made this decision in order to take advantage of opportunities in the market and mitigate risks associated with the current supply chain environment. Let me take a moment to update you on our progress. First, our EV cell pilot line. which is designed to produce EV-scale cells in a high-throughput manner that mimics today's lithium-ion manufacturing. In particular, I am pleased to announce that the EV cell pilot line is nearing completion. As of today, nearly all of our equipment has been installed and acceptance testing complete. The EV cell pilot line has been designed to produce 60 to 100 amp hour, all solid state battery cells, which we refer to as EV scale. Once the line is fully operational, we expect to begin producing EV scale cells on the line for internal testing in the third quarter. Second, regarding our electrolyte production facility, construction is well underway and we are still targeting completion for the second half of this year. Once complete, we expect this facility to have the capacity to produce up to 2,500 kilograms of our electrolyte per month. This is a huge step up from our current production of approximately 150 kilograms per month and is a key step towards commercialization. As of today, we have made meaningful progress with building the structural framework within the facility and expect equipment will be delivered over the next several months. Construction has been going well, although we have not been immune to supply chain pressures. While these pressures introduce some complexity, they also validate our decision to execute sooner rather than later and reduce headwinds in today's supply chain environment. I'm pleased to say our operations team has done a great job mitigating these complexities, and it is a testament to their hard work that we remain on track with the timeline we put out last quarter. In short, we are energized by the progress we're making towards our 2022 goals. We believe the investments in our product and our operational capabilities are key to delivering on our OEM specifications and advancing us into formal automotive qualification. With that, I'll pass it over to Kevin to take you through our first quarter results. Kevin?

Thanks, Doug, and good afternoon, everyone. I'm going to start out with some color on the first quarter results we announced earlier and then reiterate our financial outlook for the year. Overall, our first quarter results reflected the accelerated investment timeline we announced last quarter. First quarter 22 revenues came in ahead of expectations at 2.2 million, up roughly 1.7 million from the first quarter of last year. Our team did a great job of executing on our programs and positioning us well to hit our 22 target range. First quarter 22 operating expenses were 13.5 million, up from $4.8 million during the prior year first quarter. This increase was driven by direct program costs related to revenue execution, our accelerated development efforts, and higher SG&A costs as we build out a solid public company platform. First quarter 22 net loss was $10.3 million. This compares with a net loss of $7.1 million in 21. The first quarter 21 net loss did include $2.7 million of loss on the mark-to-market valuation of our convertible debt. Looking at cash flow and liquidity, we ended the first quarter with combined cash and marketable securities of $553 million, plus $10.9 million in longer-term cash investments. Our cash used in operations was $14.4 million, and first quarter CapEx was $10.5 million, This represented investments in both the EV cell pilot line and in the build out of our electrolyte production facility. As we look at the rest of 22, we are reaffirming our overall investment guidance for the year. At a high level, we continue to expect that our total 22 combined cash investment will be in the range of $150 to $170 million. Both development and capital equipment investments should increase quarter over quarter for the remainder of the year. This level of investment would leave us with ending combined liquidity in the range of $420 to $440 million. With that, I will now hand it back to Doug.

Thanks, Kevin. In closing, we're happy with the progress the team delivered in the first quarter. As demand for EV batteries continues to build, We are driving towards operational and technological targets that we believe will position us to capture this demand and build upon our leadership position in the industry. As I said back in March, we are building our business for the long term, investing in a solid foundation with an eye towards long-term returns. With that, I look forward to updating you on our progress later in the year.

And we will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then 2. And at this time, we will pause momentarily to assemble the roster. And our first question today will come from Jim Young with Midwest Investment. Please go ahead.

Hi. Apologies. Yes. Could you please talk about any developments on the partnership front of note and of interest? I mean, in the past you mentioned that you had partnerships with Ford and BMW and then also with SK. So any discussions there would be much appreciated. Thank you.

Yeah, that's a great question. So I'd like to sort of take you back to the update that we provided in March where one of the justifications for accelerating the investments was around the expansion and optionality for, as you say, to your point, bringing in potential new partners. I don't have anything formal to report today. But, however, I can confirm that discussions are ongoing. And, of course, we would not be having those discussions if the end goal was not towards some sort of formal cooperation. As you might expect, discussions with these kind of entities can take quite some time, especially as you start to get into roll-up-your-sleeves negotiations. But again, the reason why we made the decision to accelerate the investments was to give us optionality for bringing in additional partners. And to that end, we continue to pursue those. And those discussions, by and large, are going in a very positive direction.

Great. Thank you. And my second question is, in the past, you've mentioned that you're – given the capital that you've raised, that your balance sheet is – We'll provide for a fully funded business plan. I'm just wondering if that's still the case today.

Assuming we execute on the business model with our development plan, which we remain confident that we will be able to do so, then yes, that has remained unchanged.

And our next question will come from Vikram Bagri with Needham & Company. Please go ahead.

Hey, guys. Good evening. Can you share any details on when you plan to release the comprehensive data package? I believe the target was to release it in late 2022. Are you still on track to do that?

Yep. So, Vikram, that's a fantastic question. Again, if you don't mind, I'll just sort of back up a moment and remind yourself and the audience, the listeners, what we had stated back in March. And that basically was we wanted, rather than sort of releasing data in a very piecemeal fashion, which can sometimes be confusing or even misleading, we were going to take an approach of really waiting until we had a comprehensive data package based on a variety of different things. One, first and foremost, we're only going to release data on relevant scale cells produced on our automated production equipment. Number two... that any data that we release will be based on fixed variables and industry standard test conditions. Three, that these are not onesies and twosies in terms of test samples, that we would collect data across a reasonably large sample set and ensure that we have relatively low data variability between the samples. And then finally, And this is more in parallel with the data release is, you know, reasonably disclosing sort of a bill of materials such that, you know, investors have confidence that, as I like to refer to, we don't have, quote, unquote, unobtainium in our bill of materials. That remains the case. We do remain committed to, at some point, releasing that comprehensive data package. Again, we only made that statement, I think, about six weeks ago. And so, more than likely, the way this would occur is we would release a data set first on the 2-amp-hour cells. Why? Well, because we've been building those 2-amp-hour cells much longer than any other cell format, and then expect to see a similar data package for a 20-amp-hour cell and then, again, for the full-scale EV cell. And so, again, we remain committed to doing that.

Great. Thank you. And then in terms of, in your prepared remarks, you indicated that you've run into some challenges testing the 20-hour cell. Were you referring to the enhancements you want to make to the performance of cell at lower stack pressures? Can you talk about what challenges there are and the magnitude of those challenges?

Absolutely, yeah. So as I said in our last call back in March, that there are still Still two performance metrics that for us are a work in progress. One was stack pressure, as you referenced. The other being low temperature performance. And when I say low temperature, I mean below room temperature. We are making improvements and the iterations that I referred to on two and now we're starting to see iterations on the 20 are precisely to that end. They're deploying some of the quote unquote fixes that our R&D team has done over into the production line towards making advancements specifically in those two performance areas.

Great. And one last one on revenues, and then I'll hand it over. Revenues were certainly higher than what we had expected. It sounds like they were higher than what you had expected. Was there any pull forward of revenues in the quarter? What were the drivers for higher revenues? And I see the guidance for revenue wasn't changed, so it seems like some of the revenues from later in the year were pulled forward into this quarter. Is that the right way to understand it?

Vikram, not too much was pulled forward, if any. Our team just did a great job of executing on the programs and driving revenue. And they put us in a really good position for the year. So as we step back and look at where we are, you know, we're well positioned to be in that guidance range, and I think we'll just evaluate it here quarter by quarter going forward, and if we feel we're going to exceed it, we'll come back and let you know.

Yeah, Vikram, to echo Kevin, this team is a very milestone and schedule-driven team. It's just sort of how we're wired, so it's sometimes not a surprise when we coming above revenue just because our team is so focused on execution.

Thank you very much.

Thank you.

And once again, if you would like to ask a question, please press star then 1. This will conclude our question and answer session. I'd like to turn the conference back over to Doug for any closing remarks.

Yes, thank you. So, you know, as expected, we expected this to be a relatively brief earnings call given the short period of time between today and our previous earnings call. I remain extremely excited about 2022 in particular as we bring the EV line online. as well as our second facility devoted to electrolyte production scale. It places both of our feet firmly in the stage of industrialization. So we remain very excited, and we look forward to updating you on our next earnings call. And I think with that, we will conclude today's call.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.