SES AI Corporation

Good afternoon, ladies and gentlemen. Thank you for joining today's SES AI Corporation Fourth Quarter 2023 Lender Call. My name is Tia, 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 one or your telephone keypad. It is my pleasure to pass the call over to Cal Pickleton, Chief Legal Officer. Please proceed.

Thank you. Hello, everyone. and welcome to our conference call covering our fourth quarter 2023 results and financial guidance for 2024. 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 in 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 our results for the quarter. With that, I'll pass it over to Chi Chow.

Thanks, Kyle. Good afternoon, everyone. We posted a thorough shareholder letter on our website, which provides all the details for the quarter, the year, and our 2024 outlook. Now, I want to make our time more efficient with a more focused conversation. There are three key points that I believe you should take away from SES AI's results and outlooks. First, we became the world's first to enter into automotive B sample joint development with a major automaker for lithium metal. This is a major milestone in the commercialization of lithium metal battery technology for automotive applications. In 2024, our focus will be delivering on our EV B sample joint development. Second, in addition to EV, we have also identified urban air mobility or UAM, as an exciting application for lithium metal. The high energy density and high power density of lithium metal really enables UAM. UAM is a natural stepping stone to EV for lithium metal. Third, to ensure practical safety, especially as we prepare for sea sample and commercial deployment, we are doubling down on the use of AI to monitor battery health and predict incident. Our lithium metal large-cell Avatar AI prediction accuracy increased from just 60% in 2022 to 92% in 2023. And this year, our target is 95%. Ultimately, we want to achieve near 100% safety guarantee for EV and UAM. Now I'll talk more about 2023 accomplishments. 2023 was a great year for us. we took a massive step toward commercialization of our lithium metal technology for automotive applications. We signed the world's first automotive B-sample joint development agreement for lithium metal batteries with a major automaker. No one has gotten this far with lithium metal batteries for EV application. This is a giant leap in the commercialization of lithium metal technology for automotive applications. Our three JDA partners, GM, Hyundai, and Honda, continue to be very supportive and push aggressively in EV. Hyundai recently just became the second largest EV maker in the US. It's significant to note that two of the key milestones for entering into B sample development include practical safety and manufacturability. We'll share more details around these two accomplishments. The first one, practical safety. Achieving hazard level five for large 50m power and 100m power lithium metal cells was a combination of improved safety in materials as well as improvements in cell design and engineering. In fact, we achieved greater safety-related breakthroughs in cell engineering than in material chemistry. This was intentional because by having minimal changes to material chemistry and by focusing on cell design and engineering, We didn't have to sacrifice cell performance and energy density. We recruited the world's top cell engineering talent and created designs that are still based on lithium ion, so they can be manufactured at scale, but are unique for lithium metal and can address safety-related challenges. We won't go into details about these cell design and engineering improvements since they are our newest trade secrets, but these new designs, engineering, and process improvements are being incorporated into our new B-sample cells. With regard to manufacturability, we operated three A-sample lines last year. It's important to highlight that we built more large automotive lithium metal cells per month in just one line in 2023 than during all of 2022. This was made possible thanks to significant improvements in wide-width thin lithium metal annual production and anode electrical punching and stacking. We made the right decision to move lithium metal anode production in-house. We were able to resolve issues associated with tear, wrinkle, and powders much more efficiently. By consistently producing a large quantity of large automotive lithium metal cells, we generated a large amount of data that we fed our health monitoring and incident prediction avatar, AI model. Prior to 2023, our Avatar AI prediction accuracy was 60%. By the end of 2023, we are pleased to announce that we achieved 92%. This is an important progress. The combination of greater number of cells and greater number of quality control checkpoints per cell was instrumental to the training of our Avatar AI model, making it more accurate. Our training data increased 10x from 2022 to 2023. We're confident that with more data training and advancement in AI model, we will achieve 95% incident prediction this year and eventually reach near 100% safety guarantee. In 2023, we also laid the foundation for using AI for future roadmap electrolyte development. The goal is to build a roadmap for future generations of liquid metal. Now switching to our 2024 plans, we expect to make further progress in automotive commercialization of lithium metal in 2024, and we will focus full steam on our EV B-sample JDA. We plan to further boost our cell engineering and process development efforts. We'll continue to improve cell practical safety and manufacturability. We plan to build and operate B sample lines with our JDA partners, potentially one at our own facility and another at our JDA partners facility. These B sample lines will incorporate our latest cell design and engineering, as well as manufacturing process improvements. These B sample lines will also have our latest production quality control plan. We will increase from about 600 checkpoints to about 1500 checkpoints later this year. including more imaging-based checkpoints such as x-ray, ultrasound, CT, and vision. All of these will be fully integrated with our Avatar AI model. This means the amount of training data for AI model will significantly increase in both quantity and quality. We expect our Avatar AI prediction accuracy to reach 95% for large automotive sales by end of this year. Yu-Ching Huo, Avatar AI can reach near 100% incident prediction accuracy with sufficient data training. This is very different from today's lithium ion quality data. Yu-Ching Huo, Which are still largely based on traditional statistical analysis and the manufacturing data are decoupled from real world vehicle data and very basic models are used to predict incidents. Yu-Ching Huo, That's why we still have lithium ion battery incidents that cost billions of dollars in recall. Our Avatar AI applies a far more advanced AI model that is pre-trained on both lithium metal and lithium ion data, and we have access to a comprehensive set of material chemistry data, manufacturing quality data, and real-world vehicle data. We can achieve near 100% safety guarantee. This near 100% safety guarantee is extremely important for automotive applications, and it's only possible with advanced Avatar AI. On the use of AI for roadmap electrolyte development, our amazing team of human scientists and AI scientists will work together to systematically study electrolyte chemical structures from public and internal database. We're very excited to report that we will commission our new electrolyte foundry in Massachusetts to focus exclusively on high throughput synthesis and testing of both human and AI-generated electrolyte solvent and salt chemical structures. This is a super exciting area. Some pharmaceutical companies have already demonstrated promising signals using similar approach. However, we are the very first to go this deep in the battery industry, and the signals are very inviting. We know we can accelerate the screening of novel electrolyte candidates. Now, let's see if we can use AI to develop a new electrolyte that's better than the best ever human developed one. While we focus on automotive commercialization of current generation of lithium metal, this will help us build a robust roadmap of future generations of lithium metal. In addition to the EV market, we identified urban air mobility, UAM, as a promising and exciting market that is about to take off, especially when powered by high energy density lithium metal batteries. It's significant to note that B sample for EV is equivalent to commercial production for UAM. For UAM, the energy density and power density of current lithium ion batteries are too low. And that results in short flight time and limited payload and number of passengers, making the current UAM business not economical. Lithium metal with about 60% higher energy density will change all that and make UAM a profitable business. The leading UAM companies have been waiting for a lithium metal company that can produce high-quality, large automotive-grade cells. And 2024 will be a key year for the battery design-in and qualification. And 2025 will see demo flights in major cities such as Seoul, New York City, and Abu Dhabi. This is perfect timing for us. We will convert one of our A-sample lines in South Korea to produce exclusively UAM cells. This will incorporate our latest production quality control plan and be fully integrated with Avatar AI. This line, just outside of Seoul, will have all the quality and engineering improvements of our B sample lines, but dedicated to UAM lithium metal cells, modules, and Avatar AI development and production. So our 2024 goals will include three. First is focus on EV B sample. We will work with our B-sample joint development partners to build and operate new B-sample lines. We will improve manufacturing quality control plan from 600 to 1500 checkpoints. Second is ship UAM cells. Our UAM cells will be our first commercial products. We will build a dedicated UAM lithium metal line and ship the first batch of cells to our UAM customers. Third is improved Avatar AI incident prediction accuracy. Our ultimate goal is near 100% safety guarantee for EV and UAM applications. In 2024, our goal is 95%. We will finish pre-training our Avatar AI with EVA sample data and train with new EVB sample and UAM cell data. These are challenging but exciting goals. Progress in EVB sample development and shipping the first batch of UAM cells will represent major progress in the commercialization of lithium metal batteries for EV and UAM applications. Achieving 95% incident prediction accuracy for Avatar AI will represent a major milestone towards the ultimate goal of near 100% safety guarantee, which will be critical for real-world safety. In future roadmap material development, we're building an AI super scientist. In cell design and engineering, we're building an AI super engineer. In manufacturing quality and real-world health monitoring and incident prediction, we're building avatar AI. And this information can be used in our supply chain and sustainability management, so we reduce cost and CO2 footprint and build a new supply chain for our EV and UAM customers. At SDS AI, our mission is to power a new era of electric transportation on land and in air with lithium metal batteries. As we build more automotive large capacity lithium metal cells, generate more data, expand to B sample, and prepare for C sample and commercial production, AI becomes an increasingly integral part of both material development and battery health monitoring and incident prediction. Lithium metal not only leads to longer range and more passengers, but near 100% safety guarantee and accelerated roadmap technology development. We realized that we're building more than just a battery company, but the beginning of a super intelligent AI for electric transportation. With that, I'll pass to our chief financial officer, Jim Neales for financial update.