10-Q: SES AI Corporation Reports Increased R&D Spending and Net Losses in Q3 2024

SES AI Corporation's Q3 2024 results show a significant increase in research and development expenses and a corresponding rise in net losses, as the company continues to develop its Li-Metal battery technology.

Summary

• SES AI Corporation reported a net loss of $30.2 million for the three months ended September 30, 2024, compared to a net loss of $13.5 million for the same period in 2023.
• The company's research and development expenses increased significantly to $24.4 million in Q3 2024, up from $8.5 million in Q3 2023, primarily due to increased equipment purchases and stock-based compensation.
• General and administrative expenses decreased to $9.8 million in Q3 2024 from $10.9 million in Q3 2023, mainly due to lower stock-based compensation and insurance expenses.
• For the nine months ended September 30, 2024, the net loss was $65.6 million, compared to $42.6 million for the same period in 2023.
• The company's cash and cash equivalents totaled $66.7 million, with an additional $207.0 million in short-term investments as of September 30, 2024.
• SES AI is focused on developing Li-Metal battery technology for electric vehicles and urban air mobility, and is also investing in AI for safety, manufacturing, and material science.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While there is progress in technology development and AI integration, the significant increase in net losses and the risk of delisting from the NYSE are major concerns. The need for future capital raises also adds uncertainty.

Positives

• SES AI is making progress in large 50Ah and 100Ah automotive Li-Metal cell manufacturing.
• The company's AI for Safety prediction accuracy has increased to 95% in 2024.
• SES AI is actively pursuing sustainability initiatives, including dry electrode technology.
• The company has extended its JDA with Hyundai to develop B-sample Li-Metal batteries.
• SES AI has converted two EV A-sample lines to be dedicated to UAM cell production.

Negatives

• The company's net losses have increased significantly in both Q3 2024 and the nine months ended September 30, 2024.
• Research and development expenses have increased substantially, driven by equipment purchases and stock-based compensation.
• The company has not generated any revenue from sales to customers to date.
• SES AI is still in the pre-commercialization stage and expects to incur losses for the foreseeable future.
• The company's stock price has been volatile and is at risk of being delisted from the NYSE.

Risks

• SES AI faces significant challenges in developing a commercially viable Li-Metal battery for EVs and other applications.
• The company will need substantial additional capital in the future to fund its business.
• The Li-Metal technology is untested in actual EVs and may prove unworkable.
• The market for UAM and the use of Li-Metal technology in UAM applications is still emerging and may not achieve the expected growth.
• Delays in the pre-manufacturing development of battery cells could adversely affect the business.
• The company may not be able to establish or maintain supply relationships for necessary raw materials.
• The company's stock is at risk of being delisted from the NYSE due to low share price.
• The company relies heavily on its intellectual property portfolio, and if it is unable to protect its intellectual property rights, its business and competitive position would be harmed.

Future Outlook

SES AI continues to focus on EV B-sample development, improving Li-Metal cell safety, accelerating electrolyte development, manufacturing and shipping Li-Metal cells to UAM OEM partners, and improving AI prediction accuracy.

Management Comments

• SES's mission is to power a new era of electric transportation on land and in the air with Li-Metal batteries.
• The company believes Li-Metal is the end game for electric transportation energy storage.
• AI is becoming an increasingly integral part in material development, battery health monitoring and incident prediction.
• The company is seeking to accelerate its pace of innovation by utilizing AI across the spectrum of its business.

Industry Context

The report highlights SES AI's position in the competitive landscape of battery technology, particularly in the development of Li-Metal batteries for EVs and UAM. The company's focus on AI and sustainability aligns with broader industry trends.

Comparison to Industry Standards

• SES AI's focus on Li-Metal technology positions it against companies developing advanced battery chemistries, such as QuantumScape and Solid Power, which are focused on solid-state batteries.
• The company's partnerships with major OEMs like GM, Hyundai, and Honda are similar to other battery developers seeking validation and market access through strategic alliances.
• The increased R&D spending is typical for companies in the pre-commercialization stage of advanced battery technology development, where significant investment is required to achieve technological breakthroughs.
• The net losses are also typical for companies in this stage, as revenue generation is not expected until commercialization is achieved.
• The company's focus on AI for battery safety and manufacturing is a differentiating factor, as many battery developers are not as focused on AI integration.

Related Party Transactions

• General Motors Company and its affiliates (GM) are considered a related party due to their board representation and the board members employment position at GM, as well as GM holding more than 5% of the fully diluted outstanding equity securities of SES.

Stakeholder Impact

• Shareholders are impacted by the increased net losses and the risk of delisting from the NYSE.
• Employees are impacted by the company's growth and development activities.
• Customers and OEM partners are impacted by the progress in battery technology development and the potential for future commercialization.
• Suppliers are impacted by the company's ongoing research and development activities and the need for raw materials and equipment.
• Creditors are impacted by the company's financial performance and the need for future capital raises.

Next Steps

• SES AI will continue to focus on EV B-sample development, including building and operating a B-sample line.
• The company will continue to improve Li-Metal cell practical safety and accelerate future roadmap electrolyte development.
• SES AI will continue manufacturing and shipping Li-Metal cells to UAM OEM partners.
• The company will continue to improve Avatar AI prediction accuracy by deploying Avatar infrastructure and training it across a wide range of data.
• SES AI will continue to apply AI for Science to solve various Li-Metal and Li-ion electrolyte challenges.

Key Dates

Keywords

Lithium-Metal Battery, Electric Vehicles, Urban Air Mobility, Artificial Intelligence, Battery Technology, Research and Development, Net Loss, Joint Development Agreement, Manufacturing, AI for Safety