SES AI Corporation

Good afternoon all, I would like to welcome you all to the SES AI Corporation second quarter earnings call. My name is Prika and I will be the moderator operating today's conference call. All lines are on mute for the presentation portion of the call today and the opportunity for questions and answers at the end. If you would like to ask a question, please press star then one on your telephone keypad. If you change your mind, please press star 2. And I would now like to hand you over to your host, Eric Goldstein, VP of Investor Relations with SEF. So, please go ahead when you're ready.

Thank you, operator. Hello, everyone, and welcome to our conference call covering our second quarter 2023 results and financial guidance for 2023. Joining me today are Chi Chau Hu, Founder and Chief Executive Officer and Jing Mielis, 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 that are 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 it over to Qiqiao.

Thanks, Eric. As everyone I'm sure is aware by now, in 2021, we became the world's first company to enter automotive A-sample with lithium metal batteries. and we did so with three OEMs, GM, Honda, and Hyundai. Earlier this year, we laid out the goal to transition to B-sample, and I'm happy to report we are making really exciting progress. We continue to push forward with high energy densities at a wide range of temperature and power requirements enabled by our unique lithium metal battery technology and avatar system. Although we have a way to go before full commercialization, we're getting closer to making the leap from automotive A sample to being the first supplier of lithium-ion batteries in the automotive B sample stage. Furthermore, while we are doubling down on our progress with our automotive customers, we see another unique opportunity in urban air mobility, UAM. That I will discuss later in this call. In the EV market, we need to solve two major hurdles to position us to transition to automotive B-sample. The first is manufacturability. We're not talking about small-cell lab-scale manufacturing. We're talking about 100 m-power cells in pilot-scale manufacturing facilities for real automotive A- and B-sample qualifications. This year, we expect to transition from producing about 1,000 total 100mP lithium metal cells in 2022 to about 1,100mP lithium metal cells per month per line. Importantly, our cells are high quality and will continue to be tested both in-house and by our OEM customers. Now that we're more than halfway into 2023, we have lines in both Shanghai and South Korea making about 500 large 100mP lithium metal cells per month with one shift. By adding a second shift, we are confident that we will achieve over 1,000 cells per month per line. In addition to building the cells, we're also adding testing bunkers. We built one test bunker earlier this year. We expect to finish our second testing bunker before September and plan to add a few more bunkers in our facility so we can test as many cells as we can build. Providing a safe place to test a large quantity of our lithium metal cells is critical. This will allow us to accelerate our development process and test our cells under a massive universe of conditions so they are better prepared for real-world usage. These large 100 amp power lithium metal cells have been either tested directly by our customers or tested in-house and the data shared with our customers. Our second hurdle was B sample line preparation. We announced line four earlier this year, which will be dedicated to B sample EV sales for one of our customers. We have completed the equipment process design and evaluation with our customer and have commenced a bidding process with a few vendors. We expect this line to be ready in Q1 of 2024. Line four will have more than 1,400 quality checkpoints compared to only 300 quality checkpoints in the first three A-sample lines, and it will be fully compatible with our avatar system. We don't need to wait for line 4 to be complete to start the actual B-sample phase, since we expect that our current A-sample lines will soon be capable of producing nearly 1,000 lithium metal cells per month per line. We will use the A sample lines in the early phase of B sample and will move to line four for the later part of B sample after it's fully operational. Our world leading energy density and power enabled by our lithium metal battery technology makes SDS batteries a great fit, not just for automotive applications, but also for urban air mobility and drones. As such, in addition to line four, we're also preparing to build a new line five which will be dedicated to B-sample for urban air mobility, or UAM, cells for another one of our OEM customers. We will leverage the equipment and process design from Line 4 and customize for UAM cells. Both Line 4 and Line 5 will have our latest quality control system with more than 1,400 quality checkpoints and be fully compatible with Avatar, allowing full traceability of our cells. We're super excited about both line four and line five. Line four will be our first B sample line for EV. Line five will supply cells for UAM and other drone applications that need lightweight and high capacity lithium metal cells. In terms of performance, lithium metal is a perfect fit for UAM and drone applications because of its lightweight and high discharge power density. To review, We now have three A sample lines operational. We expect to increase throughput from 1,100 M-powered lithium metal cells per year last year to nearly 1,000 large 100 M-powered lithium metal cells per month per line by end of this year. And we're preparing two B sample lines, one dedicated for EVs with one OEM customer, that's line four, and another dedicated for UAMs. with another OEM customer, that's line five. Both lines four and five are expected to start producing at least 1,000 high-quality, large, 100-amp-powered lithium metal cells per month per line once operational, both fully compatible with Avatar and with full-quality traceability. We expect to have all five lines each producing at least 1,000 high-quality, 100-amp-powered lithium metal cells per month per line We believe that this will accelerate our B-sample development and qualification with our existing three OEM customers and open up additional sampling capacity for a new pipeline of OEMs in both EVs and UAMs at the B-sample stage. In addition to preparation for B-samples, we're also investing heavily in fundamental R&D to accelerate our material discovery. For a novel battery technology like lithium metal, it fundamentally comes down to materials, especially our core competence, which is the electrolyte. I am proud to announce that we will be building a new electrolyte foundry near our headquarters in Boston. It will focus on novel electrolyte molecule discovery and synthetic pathway development. This novel material discovery platform will allow us to continue to improve our key performance and safety metrics by accelerating design-to-data timeframe for new electrolyte solvent and salt molecules and formulations. We are aggressively hiring top electrolyte scientists and chemists and AI machine learning scientists to develop totally new molecules and synthesis techniques. Not only are we discovering new materials and new techniques, but we're also discovering new techniques to discover new techniques. With all these exciting developments, we need more talent. We recently added an SVP of quality, Mr. Kojima Atsushi, who has more than 30 years in quality management from Sanyo Panasonic and GS Yuasa in nickel-cadmium and lithium-ion batteries. He is managing our group-level engineering and manufacturing quality to ensure our five large cell lines, three A sample and two B sample, incorporate the most rigorous quality system and are compatible with Avatar. Since lithium metal is new, and this is the first time anyone has taken lithium metal to A and B samples, we intentionally use more rigorous quality management than even the most rigorous lithium ion lines. Under our new SDPO quality, our yield actually decreased initially because the standards we're employing are much more stringent, and thus we're discovering issues at a much deeper level. And that's a good thing. We want to systematically build a solid quality foundation, especially in B-sample. It's extremely important for our future. In summary, earlier this year, we established a milestone to transition to B-sample. Not only are we confident that we will achieve that, but we also expect to go beyond. We are expanding into UAM and drone applications. which in addition to EVs are ideal markets for our unique high energy density and power density lithium metal batteries. Not only do UAM and drones represent early commercialization opportunities for us, but we also believe that lithium metal will enable UAM the same way that lithium-ion enabled portable electronics back in the 1990s. We're also expanding into novel techniques for material and process discovery using AI machine learning. We are at an exciting intersection between sustainability, electric transportation, and AI machine learning. We seek the world's best material scientists, chemists, cell engineers, and AI machine learning scientists to join us. What started out as simply developing a novel battery has become much more, including enabling urban air mobility and building a super-intelligent system in both battery manufacturing and material discovery. With that, I will hand the call over to Chih-Chau.