Solid Power Q3 2024 Earnings Call Transcript

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November 7, 2024

There are 5 speakers on the call.

Operator

Good day, everyone, and welcome to today's Solid Power Inc. 3rd Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen only mode. Later, you will have the opportunity to ask questions during the question and answer session.

Operator

Please note this call may be recorded. I'll be standing by should you need any assistance. It is now my pleasure to turn the conference over to Melanie Solomon, Investor Relations.

Speaker 1

Thank you, operator. Welcome everyone and thank you for joining us today. I'm joined on today's call by Solid Power's President and Chief Executive Officer, John Van Schkoetter and Chief Financial Officer, Linda Heller. A copy of today's earnings release is available on the Investor Relations section of Solid Power's website, www.solidpowerbattery.com. I'd like to remind you that parts of our discussion today will include forward looking statements as defined by U.

Speaker 1

S. Securities laws. These forward looking statements are based on management's current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. Except as otherwise required by applicable law, Solid Power disclaims any duty to update any forward looking statements to reflect future events or circumstances. For a discussion of the risks and uncertainties that could cause actual results to differ materially from those expressed in today's forward looking statements, please see Solid Power's most recent filings with the Securities and Exchange Commission, which can be found on the company's website at www.solidpowerbattery.com.

Speaker 1

With that, let me turn it over to John Van Schkoetter.

Speaker 2

Thank you, Melanie, and thank you all for joining us. We accomplished a lot in the Q3, and I'm excited to share our progress with you today. A major highlight of the quarter was the U. S. Department of Energy's announcement that we were selected to negotiate a $50,000,000 grant for a project focus on continuous production of sulfide based solid electrolyte materials for advanced all solid state batteries or ASSBs.

Speaker 2

The process was highly competitive and we view our selection as a validation of our technology and business model. We thank the DOE for its faith in solid power. Wide adoption of EVs in the United States will require continued advancement of battery technologies, including the materials that support that advancement. We believe our sulfide solid electrolyte can offer a step function increase in battery performance compared to conventional lithium ion. While performance is critical, so is the ability to efficiently manufacture and process our product.

Speaker 2

As we continue to innovate on electrolyte performance based on feedback from partners and potential customers, we also need to demonstrate that our electrolyte can be manufactured on a high volume and high quality basis. To do so, we will need to shift from our current batch production to a continuous manufacturing process. Over the next 12 months to 18 months, the team is planning to install the 1st globally known pilot line that can continuously manufacture sulfide based solid electrolyte materials for ASSBs. The first pilot line we are planning to install has been part of our overall electrolyte technology development roadmap. We expect that by using a continuous manufacturing process, we will have better control of the final electrolyte product and a greater ability to tailor our electrolyte to a customer's requirements.

Speaker 2

As an added benefit, following Phase 1 of the project, we expect to be able to produce 75 metric tons of electrolyte per year to support our customer development programs. Our projection is that Phase 1 will be completed in 2026. After finishing the full project projected to be in 2028, we expect to have a capability to produce 140 metric tons per year at SP2, which is more than 4 times our current capability. Last month, shortly following the DOE's announcement, we hosted Colorado Governor, Jared Polis and Deputy Secretary of the Department of Energy, David Turk. We gave them a tour of our electrolyte facility and showed them how we plan to deploy the DOE funds in a continuous manufacturing process.

Speaker 2

Deputy Secretary, David Turk spoke about the DOE's rigorous selection process and the criteria used to select companies for grants. Solid Power satisfied their 3 main criteria. 1st, having a strong technology and business model. 2nd, addressing challenges in the U. S.

Speaker 2

Supply chain for clean energy by producing battery cells domestically. And third, improving our surrounding communities by hiring locally to staff this project. We're thrilled to have the validation and support of the federal government and our local community here in Thornton and look forward to undergoing negotiations for the grant. The next step in the DOE process will be to negotiate a contract for the grant funding. We expect that will take several months and we will provide updates when we are able to.

Speaker 2

Another highlight of the quarter was beginning development activities in our state of the art Electrolyte Innovation Center or EIC. The EIC was designed to significantly enhance our research and development capabilities and improve pre pilot electrolyte manufacturing processes. The EIC will allow us to focus on smaller scale electrolyte development and pre pilot manufacturing processes before transferring our processes to pilot scale manufacturing. The EIC will enable speed and flexibility, emulating a full process on a smaller scale. The work we do in the AIC will help us customize electrolyte for customers' needs and enhance our feedback loop between our electrolyte and cell development programs.

Speaker 2

This pre pilot continuous flow process and equipment development will also be a precursor to the work we expect to do under the BIL grant and increase our confidence in executing that program. I'm very excited about the potential BIC gives us as we continue to position Solid Power as a leader in the sulfide electrolyte space. Moving on to electrolyte sampling, we continue to sample multiple customers on a repeat basis with multiple variants and we have received constructive feedback. As we iterate our products, we believe we are well positioned to react quickly to our customers' requirements. While the total addressable market is large, the number of customers within is finite.

Speaker 2

As we have said before, we believe many EV OEMs and Tier 1 battery producers have sulfide based solid state products in their future roadmap. Of this group, we are now actively sampling a substantial portion. The feedback from sampling is providing important learnings as we continue to evolve our technology. And as I mentioned, with our new EIC, we can rapidly adapt and adjust to meet their needs. On the cell side, we've made significant progress on our A2 cell design this year.

Speaker 2

In order to address gaps we identified with the A1 design, the team has been hard at work to improve the design of our cathode, anode and separator for the A2. These are not major chemistry changes. Rather, we are tweaking and enhancing the current design in our pursuit of higher performance. In addition, the team has made some mechanical improvements to the lines with the goal of higher quality cell builds. The work is continuing on these efforts, and I believe they will provide notable improvements from our A1 design, especially around safety and energy density.

Speaker 2

We have begun small production runs of our A2 material set for internal testing and expect to begin testing A2 cells in early 2025. As I segue to our progress with partners, I want to note 2 things I'm excited about. First, the feedback loop we have created is fueling our technology development with sampling and customer response as key components. 2nd, our cell technology will soon be in development on 3 continents. Through our work with BMW in Europe and SK Hahn in Asia, broadening our reach and depth of experience globally.

Speaker 2

With BMW in the Q3, we finalized the JDA extension as we continue to collaborate with them on cell development and manufacturing. The overall goal of the JDA remains what it has always been, to develop a competitive solid state battery technology that can be used in an automotive application. We continue to drive performance around A2 and our overall roadmap to achieve a product that meets BMW's exacting standards prior to vehicle integration. We are laser focused on continuing to develop our cell technologies prior to BMW bringing online its pilot line in Parzdorf, Germany next year. We value our partnership with BMW and continue to enjoy the collaborative nature and beneficial feedback loop.

Speaker 2

With SK on, we remain on track with our agreements and have already met all of the required milestones for the year. The line drop and tech transfer are going well and we expect to send electrolyte to Korea this quarter to support factory acceptance activities ahead of planned line installation in mid-twenty 25. Additionally, during the Q3, we signed a non binding MOU with a major battery manufacturer to explore the possibility of an electrolyte JDA. While it is very early in this engagement, if we successfully advance to an agreement, it would be our 1st electrolyte specific JDA. We expect such a collaboration would give us as valuable feedback and insights into the electrolyte design and development.

Speaker 2

We are continuing to deepen relationships across Korean battery landscape by collaborating with Korean Research Institutes such as Korea Electronics Technology Institute and Korea Evaluation Institute of Industrial Technology. We have entered into several agreements to leverage the Korean ecosphere on materials and battery performance and are excited by what we can learn from these new relationships. We expect these collaborations to advance our understanding of market needs while expanding our network in Korea as we benefit from the talent and experience of these leading institutions. Overall, I'm pleased with the progress in the Q3 and excited about our momentum as we exit the year and move into 2025. I will now turn the call over to Linda to review our financials.

Speaker 2

Linda?

Speaker 3

Thank you, John. I'll start with Q3 results, beginning with revenue. Solid Power delivered $4,700,000 in revenue during the Q3 of 2024, primarily driven by continued execution on the SKON agreements and government contracts. Operating expenses were $32,200,000 driven by increased production costs, cell and electrolyte development costs, scaling of operations and execution under our joint development agreements. Operating loss was $27,600,000 and net loss was $22,400,000 or $0.13 per share.

Speaker 3

Capital expenditures totaled $2,700,000 during the quarter, primarily representing investments in the electric light production capabilities, including the build out of the EIC. Solid Power's liquidity position remains strong with $348,100,000 of total liquidity as of September 30, 2024. In addition, accounts receivable totaled $2,600,000 deferred revenue was 6 point $7,000,000 while total current liabilities were $20,300,000 As John mentioned, we have already achieved our SKON milestones for the year. We expected $14,900,000 in progress payments in 2024, which have already been collected. For 2024, we are reiterating the guidance we provided on the last call, which may also be found in the press release we issued today.

Speaker 3

As a reminder and point of clarification, the Department of Energy award is a grant, not a loan, for funding of up to $50,000,000 The total estimated project cost is $110,000,000 and we are dedicating $60,000,000 over a multi year period. The $50,000,000 grant represents a potential offset of our plans, not an incremental investment expense. We are well positioned to execute our strategy and I'm excited about the company's plans. I'll now turn it back to John for closing comments before we take your questions.

Speaker 2

Thank you, Linda. In closing, I'm pleased to reiterate the company remains on track to achieve our goals for 2024. I would like to thank our employees, our partners and stakeholders for their loyalty and dedication. We have been planning an analyst and investor event to showcase our technology, strategy and long term model. As the team will be focused on negotiating the BIL grant over the next few months, we believe that negotiation and further progress on our strategy will better position us for an exciting event in the first half of twenty twenty five.

Speaker 2

Overall, I am encouraged by our progress as we continue to focus on improvement of electrolyte and cell performance. We will now take your questions. Operator?

Operator

Thank And our first question will be from Mike with D. A. Davidson.

Speaker 4

Hi, everybody. It's Mike Schlepky of Davidson. How are you?

Speaker 2

Good, Mike. Good to hear your voice.

Speaker 4

Yes, same here. A couple of quick ones for me. One, the ASSB grant award that you just mentioned, can you give us a little insight as to how that's going to work? Is it a competitive process? Are you up against other companies for this grant and just to kind of give the DOE the best deal?

Speaker 4

Are you already selected and just going to come to some minor details? I guess I want to make sure I understand the likelihood of the grant coming through for close to the amount that you've been talking about at least.

Speaker 2

Sure. The process started late last year to make a proposal to the DOE under the bipartisan infrastructure legislation. We actually submitted the formal proposal in March of this year. We then were invited back to defend that proposal in Washington DC in front of a skilled panel in the DOE facility. It was an hour and a half kind of like a thesis defense, if you will.

Speaker 2

We have we're allowed 5 people to attend that. They peppered us with questions on all of the major areas, the technology, the business model, the viability of the supply chain domestically and then the community benefits program. The best knowledge that we have and this is actually through a lobbyist that we use in Washington DC was again, it was very highly competitive and there were 25 total awards that were given and about 10% was what were actually awarded of the proposals that were put in to the best of our knowledge. In our specific category, it was even more selective and about 5% of proposals were actually granted. So that's an overview of how the proposal process went and then the selective nature of the grants.

Speaker 4

Okay.

Speaker 2

Does that address the question, Mike?

Speaker 4

Yes. I just wanted to follow-up. So assuming the grant money does come through in the reasonable near future, does the does it represent funding of the plan that you already had in place all along or is this a bit of a branching out a different initiative that would require some brand new funding? So I'm trying to figure out if the cash amount on hand will just be bolstered by this additional grant funding and would you have been fine without it?

Speaker 2

It's the former, Mike. In fact, we had this in our plan. So this is essentially a cash offset for what we had planned to spend. As with any DOE program, it is a cost share program. So we will have to put $60,000,000 in for the project.

Speaker 2

So the total project spend will be $110,000,000 to get to the continuous flow operation over the course of the next 3 plus years.

Speaker 4

Okay. I do have other questions, but I'll just maybe I'll just throw out one more question for you that's somewhat related. We just had an election in the United States a couple of days ago, as you know, and the President-elect coming in seems to be a bit less enthusiastic about the electric vehicle world than maybe prior administrations was. So I want to make sure I'm clear that this particular grant and even your customers' ability and desire to even pursue further EV platforms is still relatively intact after the changeover in January?

Speaker 2

Yes. We really can't speculate on how things are going to play out relative to the new administration, Mike. I think time will tell on that. We remain focused on our strategy, solving for longer range, lower cost and safer EVs. We believe that's what the market is looking for.

Speaker 2

Some of the softness that is out there right now with the current EVs, I believe are caused by inadequacies in those areas. And so we're focused on our strategy and executing our strategy and believe that it will be a winner in the long run.

Speaker 4

All right. Okay. I'll leave it there. Thanks so much for the discussion.

Speaker 2

Thank you, Mike.

Operator

Thank you. I'm showing no additional questions at this time. I'd like to now turn the conference over to our presenters for any closing remarks.

Speaker 2

Thank you for joining the call today and for your interest in Solid Power. Linda and I look forward to updating you next quarter. Thank you.

Operator

Thank you, ladies and gentlemen. This does conclude today's presentation. You may now disconnect.

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