10-Q: SES AI Corporation Reports Second Quarter 2024 Financial Results, Progresses on Li-Metal Battery Development

SES AI Corporation reported a net loss for the second quarter of 2024, while continuing to advance its Lithium-Metal battery technology and expand its manufacturing capabilities.

Summary

• SES AI Corporation, a pre-commercialization stage company, reported a net loss of $19.9 million for the three months ended June 30, 2024, and a net loss of $35.5 million for the six months ended June 30, 2024.
• The company's research and development expenses increased significantly, driven by a decrease in reimbursements from JDA partners and increased personnel and facility costs.
• General and administrative expenses decreased due to lower stock-based compensation and insurance costs.
• SES AI is focused on developing Lithium-Metal battery technology for electric vehicles and urban air mobility, with plans to transition to C-Sample production in 2026 and commercial production in 2027.
• The company is also developing AI models for material development and battery health monitoring.
• As of June 30, 2024, SES AI had $54.8 million in cash and cash equivalents and $239.9 million in short-term investments.
• The company has a remaining commitment to spend up to $27.5 million under a joint development agreement as of June 30, 2024.

Sentiment

Score: 5

Explanation: The document presents a mixed picture. While there is progress in technology development and partnerships, the company is still pre-revenue, incurring significant losses, and has identified material weaknesses in internal controls. 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 has addressed key manufacturing challenges in ultra-thin wide format lithium anode and high concentration electrolyte scale-up.
• SES AI's Avatar AI prediction accuracy increased from less than 60% in 2022 to 92% in 2023, with an expected 95% accuracy by the end of 2024.
• The company is executing initiatives to improve the environmental sustainability of its business.
• SES AI has extended its JDA agreement with Hyundai to conduct further research and development activities.
• The company has remediated a previously reported material weakness related to the valuation of Sponsor Earn-Out liabilities.

Negatives

• SES AI has a history of net losses and expects to continue to incur losses for the foreseeable future.
• The company's research and development expenses have increased significantly.
• The company has not generated any revenue from sales to customers to date.
• The company identified a material weakness in a review control related to the accounting for forfeitures of Earn-Out Restricted Shares.
• The company's disclosure controls and procedures were not effective due to certain unremediated material weaknesses in internal control over financial reporting.

Risks

• SES AI faces significant challenges in developing a Lithium-Metal battery that can be commercialized for use in electric vehicles and other applications.
• The company will need substantial additional capital in the future to fund its business.
• The company's Li-Metal technology is untested in actual EVs and may ultimately prove unworkable.
• Delays in the pre-manufacturing development of the company's battery cells could adversely affect its business.
• The company may not be able to establish new, or maintain existing, supply relationships for necessary raw materials.
• The company's ability to manufacture its Li-Metal batteries at scale depends on its ability to build, operate and staff its facilities successfully.
• Certain components of the company's batteries pose safety risks that may cause accidents.
• The company's use of artificial intelligence and machine learning may result in legal and regulatory risk.
• The price of the company's common stock has been and may continue to be volatile.

Future Outlook

SES AI believes that 2024 will be a key year in the commercialization of Li-Metal batteries for automotive applications, with a focus on EV B-sample JDAs, UAM cell production, and improving Avatar AI prediction accuracy. The company plans to transition to C-Sample in 2026 and commence commercial production in 2027.

Management Comments

• SES AI'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.
• The company is leveraging its automotive 50Ah and 100Ah cell production volume and quality data to train its Avatar AI.
• The company is executing several initiatives to improve the environmental sustainability of its business.

Industry Context

The report highlights SES AI's efforts to develop advanced battery technology, which is a key area of focus in the electric vehicle and urban air mobility industries. The company's partnerships with major automakers and its focus on AI-driven development position it as a potential player in the future of battery technology.

Comparison to Industry Standards

• SES AI's focus on Lithium-Metal technology is a departure from the current industry standard of Lithium-ion batteries, aiming for higher energy density.
• The company's joint development agreements with major automakers like GM, Hyundai, and Honda are similar to other battery technology companies seeking validation and market access.
• The development of AI-driven battery management systems is a growing trend in the industry, with companies like Tesla also investing in similar technologies.
• SES AI's transition from A-sample to B-sample and then C-sample is a common development pathway for battery technology companies, similar to companies like QuantumScape and Solid Power.
• The company's focus on both EV and UAM applications is unique, as most battery companies focus on one or the other.

Corporate Governance

Legal Proceedings

• The company is not currently a party to any litigation or legal proceedings that, in the opinion of management, are likely to have a material adverse effect on its business.

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 may be concerned about the company's continued net losses and the need for future capital raises.
• Employees may be impacted by the company's growth and changes in operations.
• Customers and partners may be interested in the company's progress in developing its battery technology.
• Suppliers may be affected by the company's need for raw materials and equipment.
• Creditors may be interested in the company's financial stability and ability to repay debts.

Next Steps

• SES AI will continue to focus on EV B-sample JDAs, including building and operating B-sample lines.
• The company will continue to improve cell practical safety and accelerate future roadmap electrolyte development.
• SES AI will build and ship 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.
• The company plans to transition to C-Sample in 2026 and commence commercial production in 2027.

Key Dates

Keywords

Lithium-Metal batteries, electric vehicles, urban air mobility, battery technology, artificial intelligence, joint development agreements, manufacturing, research and development, financial results, net loss