SES AI Corporation

Good afternoon. Thank you for attending today's SES AI Corp third quarter 22 earnings conference call. My name is Daniel and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I would like to pass the conference over to our host, Eric Goldstein, Vice President of Investor Relations. Eric, please proceed.

Thank you, Operator. Hello, everyone, and welcome to our conference call covering our third quarter 2022 results and outlook for the year. Joining me today are Chi-Chao Hu, Founder and Chief Executive Officer, and Jing Nielis, Chief Financial Officer. 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 and today's conference call webcast in the investor relations section of our website at ses.ai. Before we get started, this is a reminder, the discussion today may contain forward-looking information or forward-looking statements within the meaning of applicable securities legislation. 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. The risks and uncertainties that could cause our results to differ materially from our current expectations include but are not limited to those details in our latest earnings release and in our SEC filings. This afternoon, we will review our business as well as results for the quarter. With that, I'll pass the call over to Qiqiao.

Thanks, Eric. Good afternoon, everyone, and thanks for joining our third quarter conference call. As the leader in lithium metal battery cell development, our organization continues to evolve and innovate in order to meet all the challenges that come with manufacturing large format cells. During the third quarter, we achieved several important milestones, First, our SCS Korea pilot facility was completed, and its cell assembly line was ready to use in September, only eight months after breaking ground on this greenfield facility in January. Since opening, SCS Korea has already been able to produce about 100 of our large Apollo Base 50 and 100M power cells. Second, our Shanghai Giga facility was fully operational in Q3 And since January, has produced about 1,000 Apollo Base 50 and 100 empowered cells. Both SCS Korea and Shanghai Giga have much higher capacity, approximately several thousand cells per month. However, we intentionally slowed down their lines in order to focus on quality and to identify and address manufacturing issues. We plan to increase volume when our manufacturing process becomes more robust. We have shared 50m power cell data with all of our OEM JDA partners and have shipped 50m power cells to some partners. Going forward, we plan to ship cells to all of our partners, including GM, Hyundai, and Honda. We also expect to share data on our 100m power cells and will begin shipping them to our JDA partners early in 2023. Importantly, the 50 amp hour cells produced at Shanghai Giga have received UN38.3 certification, which means they have been deemed safe for transport by an approved independent testing lab. Additionally, our Shanghai line received IATF 16949 quality certification, which means it is on track to meeting the process quality requirements for the automotive market. We expect to receive the same certifications for our 100 mPower cells produced in Shanghai and SES Korea. Customer interest in these large format cells remains strong. In addition to the three OEM JDAs that we have formally announced, we have also shared cell data with several other EV and eVTOL OEMs around the world. We believe that we are the leader in lithium metal battery development and have built more small and large-format lithium metal cells than anyone else. However, developing and building large 50- and 100-amp-hour cells has been incredibly difficult and, candidly, much harder than we expected. We have encountered complex problems, including poor press density of wide-format lithium metal foils, powder arising from using lasers to cut our anodes that can lead to cell shortage, optimizing pressure distribution over a larger area, and developing accurate health monitoring algorithms for large cells without any data initially, just to name a few. Importantly, as a result of these problems, which have led to numerous large-capacity cell failures, we have gained a lot of incredibly valuable data that we are now using to train our health monitoring algorithm, Avatar. For example, our ability to predict failures in large 50 and 100-amp-hour cells has increased from 0% to approximately 60% in the past few months. By comparison, our ability to predict failures in smaller 4-amp-hour cells is now more than 99% after four years of data training. In addition, these issues have forced us to make several key changes in our vendor partnership and manufacturing process. that are now yielding significant improvements in cell performance, quality, and yield. Our shareholder letter contains a table that summarizes the performances of our four MPAL cells, first published last year and recently updated, 50 MPAL cells, entirely new data, and 100 MPAL cells, still ongoing. On cell engineering and manufacturing, while there's still a gap between the performance of our smaller 4M power cells and the larger 50M power cells, we are making great progress in bridging this gap. We remain confident that the larger cells, both 50 and later 100M power cells, will match the performance of the smaller 4M power cells. On new material chemistry, We're making excellent progress in developing new electrolytes, coatings, and animal materials that will improve the performance of all cells. Stay tuned as we plan to publish more detailed 50m-power cell data this month and expect to show performance improvements leading up to our expected transition from A-samples to B-samples. As a result of our real-world experiences with large lithium metal cells, we have started to take a fresh look at our supply chain and have elected to take certain operations in-house to improve performance and quality. Our lithium metal supply chain has a lot of overlap with the lithium ion supply chain. Having a comprehensive supply chain is critical for us to develop a cell system that meets OEM requirements and to scale our volumes and reduce costs. This is not only important for getting to B samples, but also for pilot scale development. Improving our internal capability for R&D in every component and having control over every step in the process now allows us to quickly troubleshoot, identify, and optimize. Initially, we only focused on our electrolyte anode in the cell. We simply purchased the cathode within foil and separated and had little ability to investigate and optimized besides a simple quality analysis summary from our vendors. Now, for all cell materials, we either make it in-house or we partner with our vendors and have them develop new materials to our specifications, which has improved the performance and quality of our cells. A cell is really a living and breathing system, especially a large 100mL metal cell. If you don't have full access and control of the entire supply chain, Every little detailed step, you just will not succeed at meeting the full-blown specs from OEMs for A-samples or get to the D-sample stage. In late September, I had the privilege of meeting the South Korean president at the South Korea North America Investors Roundtable in New York. I committed to advancing research and development for lithium-ion batteries in South Korea. SES was the only North American battery company to participate in the event where South Korea announced a total of $1.15 billion of planned investments for batteries, semiconductors, and other industries. South Korea is the world leader in EV batteries and plays a key role in the global upstream supply chain. This is why we are investing in the development of SES Korea. We are proud to have been recognized by the government of South Korea for our innovation in lithium metal battery technology and our commitment to supporting the future of the electric vehicle and urban air mobility ecosystem. The recent Inflation Reduction Act, IRA, offers very attractive tax credits and incentives for battery manufacturing and supply chain build-out in North America. We are actively discussing with our partners to see how we can leverage our learning from the global supply chain to establish a robust North American EV battery supply chain. We are very excited about the potential here. Earlier this year, we set three milestones we hope to attain by mid-2023. These are incredibly challenging, but we are making good progress on all three. One, deliver and optimize A-sample batteries for our three JDA partners. Two, begin to transition from A-sample batteries to B-sample batteries. And third, continue to establish supply chains for key materials. Finally, we expect to hold our second annual Better World in December, and hope everyone will be able to join us. Topics at Better World will include data and performance of our large-format cells, AI-based battery health monitoring developments, and further thoughts on our supply chain initiatives. I'll now turn over to June Nialis, our Chief Financial Officer, to review our third quarter results and outlook.