SES AI Corporation

Hello, and welcome to the SES AI Corporation Fourth Quarter Earnings Call. My name is Alex, and I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can press star 1 on your telephone keypad. If you'd like to withdraw your question, you may press star 2. I'll now hand over to our host, Eric Goldstein, Vice President of Investor Relations. Please go ahead.

Thank you, Operator. Hello, everyone, and welcome to our conference call covering our fourth quarter 2022 results. and financial guidance for 2023. Joining me today are Qiqiao Hu, founder and chief executive officer, and Jing Nialis, chief financial officer. We issued our shareholder letter just after 7 a.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 that 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 detailed 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 it over to Chi-Chao.

Thanks, Eric. Good afternoon, everyone, and thanks for joining our fourth quarter conference call. As the leader in lithium metal batteries, SDS continues to evolve and innovate. Despite all the challenges that come with new battery development, we have made some exciting progress that we would like to share with you. 2022 was a difficult but productive year. We built and completed three A-sample lines, one in Shanghai, China, and two in Chungcheongbuk-do, South Korea, one for each of our three OEM JDA partners, GM, Hyundai, and Honda. The necessary level of dedicated engineering, quality, and production output required us to have dedicated lines for each OEM. Importantly, we achieved ready-to-use status for all three A-sample lines, under budget and ahead of time. This experience strongly supports our strategy of building lithium metal cells using lithium ion manufacturing process and building A and B samples in Asia so that we can come back to the U.S. for C samples and commercial production in the most efficient way possible. SDS was the first battery company in the world to introduce 100m power lithium metal cells. the first to enter an automotive A-sample JDA with a major OEM, and the first to encounter all the startup issues that come with producing 100-amp-hour lithium metal cells at pilot scale. As we detailed on our previous earnings call, we encountered countless issues ranging from ultra-thin lithium anode wrinkling and tearing during large-format rolling and lamination, novel electrolyte solvents go up electrical stacking misalignment and overhead powder formation during electrical punching formation pressure and voltage stability finding efficient ways to do image scanning on large format cells and developing proper ways to store handle tests and recycle lithium metal cells one really important thing we have learned over the past decade of development When our team can identify a specific issue, we are not that far from solving the problem. Over the past year, we have leveraged the deep lithium-ion stacked pulse cell engineering, manufacturing, and quality experience of our own team and our OEM partners and made a lot of progress. Identifying and solving these issues has provided great know-how and knowledge for our human engineers and scientists and a machine-learning-based algorithm, Avatar. By the end of 2022, Avatar could predict 100 mPower cell safety and life with more than 60% accuracy compared to 0% in the beginning of 2022. In comparison, Avatar could predict 4 mPower cell safety and life with 99% accuracy after three years of data training. Our three ASIMPLE lines provided a platform for us to work closely with each of our OEM partners and get hands-on live feedback. Our partners were stationed in our facilities for months at a time, and we attracted top engineering talent and worked with top vendors from around the world. It was accelerated learning for us in manufacturing and quality control. During the year, we also made significant investment in the province of Chungcheongbuk-do in South Korea. Our investment followed LG Energy Solution investment in the same province, making Chungcheongbuk-do the province with the highest battery production capacity in South Korea. During the fourth quarter of last year, I met with the president of South Korea, Seok-hyo Yoon, to thank him for supporting the industry and helping to build a robust supply chain around the world. I am extremely honored that we were recently awarded cash grants from the South Korean central government, represented by the Ministry of Trade, Industry, and Energy, Chungcheongbuk-do Province, and Chungju City, which will help us expand our capabilities in South Korea. The thing I am most proud of over the past year is how the entire SES team has worked as one. Our Boston team is developing new electrolytes and anode materials. Our Chongchun Bokchou team focuses on assembly equipment and cathode processes. And our Shanghai team focuses on electrolytes, annual manufacturing processes, and cell assembly processes. All of these contributions from our global team are being integrated into a system for our 100m power lithium metal cells. We recently summarized our latest large cell test data and published the results on our website. We believe this is the most complete data report on large-format lithium metal cells anywhere, and we will continue to publish similar data reports to keep the industry updated. We believe in transparency and are confident that a year from now when we publish additional reports on our large cells, the data will be even stronger as we continue to improve everything from materials to engineering to manufacturing quality. As the pioneer in lithium metal, We are also writing new protocols for the proper way to store, handle, and test lithium metal cells and interpret data. We are sharing this information with the battery community to help set new industry standards. To that end, we participated in the recent workshop on lithium metal batteries in San Diego. It was great to see so much excitement from academia, industry, national labs, and government agencies for the future of lithium metal batteries. We expect 2023 to be an exciting year for SCS. As we are upgrading our manufacturing lines, here are a few things we are working on internally and with our OEM partners. We're adding CT and X-ray imaging tools, custom-built for our large 100 MPa cells. We're adding new powder removal tools to remove all metal powders rising from the electrical counting process. We're developing entirely new anode processes from ingot to thick foils to thin foils and to the final anode to better control quality and performance. We're coating cathodes in-house to better control quality and experiment with new formulations. And we are scaling up novel solvent and salt production lines to better control quality and speed up the feedback cycle from designing new solvent molecules to getting data and making conclusions. Perhaps the most important thing for 2023 is that we are preparing for B-samples. This year, we plan to take our collective knowledge and experiences from our A-sample lines and we will design and build new B-sample lines. Our A-sample lines are semi-automated with a capacity of about 0.2 cells per minute or five minutes per cell. B-sample lines will be fully automated with about five cells per minute. Having the ability to produce more cells and generating more meaningful data on the far greater universe of experiments will further accelerate our human and machine learning, which will also allow Avatar's prediction accuracy for cell life and safety to increase quickly. Importantly, these new lives will also go a long way to proving the manufacturing feasibility and scalability of our practical approach to making liquid metal cells. As part of our preparation for B-samples, we plan to double our material R&D team, double our cell engineering team, double our manufacturing team, and nearly triple our quality team. This increase in our headcount is a natural evolution of our growth as a company and is reflected in our financial guidance for 2023. We will also hire a new chief manufacturing officer who has experience in running cell engineering, manufacturing, and quality management, and working with global OEMs to commercialize new battery technology. Compared to the major lithium-ion producers like CATL and LG Energy Solutions that have more than 3,000 quality checkpoints, we currently have about 200 quality checkpoints. Once we enter B-sample agreements with our OEM partners, We can no longer benchmark ourselves against other battery startups. We will be playing in the big leagues and will be held to the same standards that the OEMs currently use for commercial lithium-ion producers. With the dedication of our global team, the accelerated learning of Avatar, and the support of our OEM partners and vendors, we are confident that we will face the new challenges and overcome them as we continue to enter uncharted territories. SCS is profoundly American with its roots in the basement lab of MIT back in 2012. At the same time, SCS is also profoundly global with its talent and partners from around the world. As we prepare for B-samples and commercial production beyond that, we are preparing to expand back home in the U.S. This includes preparing for production capabilities for lithium metal cells, novel lithium salts and electrolytes, and lithium metal anodes. SCS plans to leverage experiences from global lithium ion players, new material innovations, new machine learning tools for safety and life prediction, and quality management, and the abundant natural resources in North America. In 2021, we were the world's first to enter automotive A samples for lithium metal. In 2022, we laid the groundwork for transitioning to B samples, In 2023, we will transition to B samples and lay the groundwork for C samples, commercial production beyond that, and building a robust next-generation EV battery supply chain here in North America. I will now turn the call over to Junie Ellis, our Chief Financial Officer, to review our fourth quarter results and outlook.