SES AI Corporation

Good afternoon. Thank you for attending today's SES AI Corporation first quarter earnings call. My name is Cole, and I'll 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 1 on your telephone keypad. I'd now like to pass the conference over to our host, Eric Goldstein. Please go ahead.

Thank you. Operator, hello, everyone, and welcome to our conference call covering our first quarter 2023 results and financial guidance. Joining me today are Chi Chau Hu, founder and chief executive officer, and Jing Nialis, 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 that 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 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 Qiqiao.

Thanks, Eric. 2023 is starting out to be a great year for SDS. A few years from now, when our lithium-ion battery technology is in mass production, I think we will look back and say 2023 was a key turning point as we laid several crucial foundations. First, I'd like to give you an update on our three OEM JDAs. As we have discussed previously, we were the world's first lithium-ion battery company to enter automotive A-sample JDAs, and we did so with GM, Hyundai, and Honda. Our biggest value to them, in addition to deep material development capability, is the ability to build and test many large 100-amp-hour lithium-ion cells. With this ability, our ideas become data, and data become intelligence. Even Elon Musk tweeted after the Starship launch that high production rate solves many ills. It's been more than a year now since our three A-sample lines have been up and running, one in Shanghai, China, and two in Chungcheongbuk-do, South Korea, producing and testing large 50M power and 100M power lithium metal cells. These are the most advanced and battle-tested large lithium metal cell production lines anywhere in the world. And what a difference they have made. They provide a safe and reliable platform for us to test new ideas and make improvements to the technology. It is safe to say, as we have discussed on previous calls, we simply didn't know what we didn't know until we started making these large cells in higher volumes. Many of the manufacturing issues that we detailed have now been solved or are close to being solved. For example, ultrathin lithium anodes wrinkling and tearing during large format rolling and lamination. After three rounds of iterations and improvements on our A-sample lines and in collaboration with our equipment and material vendors, we have significantly improved this issue. We have even started testing new processes for anode laminations. and believe we will completely eliminate this issue in future designs. Second, novel electrolyte solvent scale-up. While our material R&D team continues to develop new solvent molecules, our scale-up team has completed four different types of electrolyte solvents for production. Third, electrical stacking misalignment and overhead. Our approach of manufacturing lithium metal cells using lithium ion process really paid off here as our team of experienced lithium ion engineers quickly addressed this issue by borrowing from their lithium ion stack post-trial experience. Fourth, powder formation during electrode punching. This is unique to our lithium metal anode, and we now have two teams working on laser and metal dye approaches in parallel. Understanding the fundamental mechanism, we will be able to choose the best solution after fully understanding both approaches. Five, formation pressure and voltage stability. This is also unique to our lithium metal cell. And after three rounds of iteration and improvements and working with our vendor, we now have a solution that we will implement across our current equipment and future designs. Six. finding efficient ways to do image scanning on large format cells, and developing proper ways to store, handle, test, and recycle lithium metal cells. This is a really interesting and important area that many companies don't pay enough attention to. We are integrating imaging tools, including x-ray, CT, SEM, ultrasound, and others to our manufacturing and avatar systems. We're also developing new tools, such as large 100-amp-hour lithium metal cell teardown robots smart test boxes, and very sophisticated large-cell testing and source monitoring facilities, all to provide a safe environment for us to innovate and test cutting-edge ideas on large 100mP metal cells. And seven, our large-cell avatar prediction accuracy increased from 0% to 60% last year. And in a recent experiment, our avatar successfully predicted 18 out of 21 abnormal sales. That's getting pretty close to 90%. Furthermore, we significantly improved quality management through diligently working with our OEM partners. For example, our control plan went from about 200 control points to now more than 1,400 control points. We are targeting more than 4,000 control points. Since lithium metal is a new technology, and we want to fully characterize every little detail in the entire process. These issues could not have been addressed through simulation or discussion. They required extensive trial and error. And that's what our three A sample lines did. Building and testing hundreds to thousands of large 100m power lithium metal cells to perform a massive universe of experiments. I don't think any other lithium metal battery company is capable of doing this. And if you don't do this, you just can't push lithium metal forward. And we didn't stop there. These three A sample lines are already the most advanced in the world for large 100 m power lithium metal cell production. But we want to integrate all the learnings that we have accumulated and build a brand new line, one that is a leapfrog at least one generation ahead of our three A-sample lines. This is our line four. Line four will be for the next phase of automotive large 100m power physical metal cell development, basically A-sample. Compared to the current three A-sample lines, line four will have many of the new concepts, including avatar integration and rigorous quality control plan built in from this design phase. The exterior facility build-out is already completed. We expect the dry rooms to be completed this summer and equipment to start arriving this fall and the entire Line 4 to achieve ready-to-use status in the first half of 2024. This will be a key enabler for us to transition to B-sample, which we're still on track to achieve this year. Lastly, I want to quickly address our stock price. Frankly, it's not something I think about every day. Recently, we had our one-year anniversary since listing on the NYSE, and we completed two procedural filings. One was the S3, which allows us to fundraise in the future, although we have no plan to fundraise anytime soon. Another was the Form 4, where management, including myself, recently reported the sale of shares purely to cover taxes on vested RSUs. I, as the founder of SCS, have never sold a single share. other than to pay taxes or made a single dollar from our stock since I started the company 11 years ago. I just wanted to clarify these two issues in case there have been any misinterpretations. Anyways, I'm super excited about the progress that we're making. It was painful last year, but now it's fun again. And our new line four will be a step change in our development roadmap and a major part of transition to B-samples. We will continue to keep you posted as we take additional steps to get Line 4 up and running. With that, I'll hand the call over to Jun to review our financials.