Earnings Transcript for SLDPW - Q2 Fiscal Year 2024

Operator: Greetings, everyone, and welcome to the Solid Power Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Melanie Solomon, Investor Relations. Thank you. Solomon, you may begin.

Melanie Solomon: 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 Scoter; 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 the U.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. With that, let me turn it over to John Van Scoter.

John Van Scoter: Thank you for joining us today. In early 2024, Solid Power outlined four key goals

Linda Heller: Thank you, John. I'm glad to be joining for my first call at Solid Power. Please excuse my voice as I'm a bit under the weather. I'll start with Q2 results, beginning with revenue. Solid Power delivered $5.1 million in revenue during the second quarter of 2024, primarily driven by continued execution on our collaborative arrangements and government contracts. Operating expenses were $32 million driven by increased production costs and labor associated with cell and electrolyte development, scaling of operations and execution under joint development agreements and other collaborative arrangements. Operating loss was $26.9 million and net loss was $22.3 million or $0.13 per share. Capital expenditures totaled $4.4 million, primarily representing investments in electrolyte production capabilities, including the build out of a new electrolyte research and development lab. Solid Power's liquidity position remains strong with $358.8 million of total liquidity as of June 30, 2024. In addition, accounts receivable totaled $12.3 million. Deferred revenue was $10.1 million while total current liabilities were $22.9 million. Turning to the second half of the year, we continue to expect fiscal year 2024 cash used in operations to be in the range of $60 million to $70 million and capital expenditures to be in the range of $40 million to $50 million. Included in these ranges is approximately $35 million in operational and capital investments the company deferred from 2023. Total 2024 cash investment is expected to be in the range of a $100 million to $120 million. We are reducing our 2024 revenue guidance to be in the range of $16 million to $20 million. While the business is on track and we are hitting our milestones with partners, there are two factors impacting our expected revenues for the year. First, in reviewing the accounting treatment of the SK On agreements, not all of the originally projected revenue will be recognized in 2024. A portion will need to be recognized in 2025. Second, while we continue electrolyte sampling or receiving positive feedback on performance, the uptake in development have been slower than originally forecasted though not unexpected, and is also playing into our revised forecast to a lesser extent. We continue to work closely with partners and strategic players to optimize and accelerate electrolyte production volumes for ASSB technology. We have a strong balance sheet with which to execute and I'm excited about the company's plans and prospects. As John mentioned, the revenue revision does not impact our long range plan on the cash runway necessary for commercialization of our technology. We maintain our long held position as a capital-light ASSB player. And so therefore, we do not rely on near-term revenue to support our long-term commercialization pathway. I'm honored to be here at this pivotal time in the company's trajectory and I look forward to meeting many of you in the coming months. I'll now turn it back to John for closing comments before your questions.

John Van Scoter: Thank you, Linda. In closing, I'm pleased to reiterate that the company remains on track to achieve our goals for 2024. I'd like to thank our employees, partners, and stakeholders for their loyalty and dedication. We are planning to hold an analyst and investor event in December to deep-dive into our technology, strategy, long-term model, and we will share more details in the coming months. We will now take your questions. Operator?

Operator: Ladies and gentlemen, at this time, we'll begin the question-and-answer session. [Operator Instructions] And our first question today comes from Chris Pierce from Needham. Please go ahead with your question.

Chris Pierce: Hey. Good afternoon, everyone. Just on the second point you made on the revenue guidance reduction, the slower uptick in electrolyte development, is that just broadly kind of a lagging indicator in terms of how OEMs are feeling about EVs at the moment? Or is there something kind of a deeper kind of thought around that?

John Van Scoter: Good day, Chris. I think, I would credit it more to just being a very early stage on the market. When we started the year, we looked into the back half and thought some of the early players would be taking some measurable quantities in the second half. That really hasn't materialized thus far. But it's not unusual for a market that is so nascent as the ASSB market is. So we look forward to updating it and improving it as we go forward, but that's the way it looks to us right now.

Chris Pierce: Okay. And then I know that just lastly, the BMW, the JDA has been extended a couple times, is it normal for there to be a pause and I want to make sure I frame it right, but a pause in A-1 deliveries as you reset the agreement like to a longer date or is it that the A-2 cell is coming with the next thing anyway, so the A-1 cell, there's nothing to read into there? I just want to make sure I have the moving pieces right.

John Van Scoter: Yes. I think your summary in the latter case is correct, where we got a lot out of the A-1 work at the module level as I indicated. Both companies are very pleased with the progress there. But with A-2 really eminent, the mutual decision was to go ahead and pause the current cell deliveries and refocus around the performance improvement of the A-2 cell later this year.

Chris Pierce: Okay. Thank you and good luck.

Operator: And our final question today comes from D.A. Davidson. Please go ahead with your question.

Michael Shlisky: Hi. Good afternoon. It's Mike Shlisky of D.A. Davidson. Hey, in the past quarter or two, you've talked a little bit more about OEMs beyond the two plus SK you had in the pipeline – interest from other companies to your products. Has the pipeline gotten any larger or smaller over the last few months? Or anything you can comment on interest from other people in Solid Power at the current time?

John Van Scoter: Sure. Good to hear from you, Mike. Yes, I would say that two things. The pipeline is continuing to grow. So we had objected to sample as many as 15. We're over 10 now and it continues to grow. But equally as important, we've had a lot of multiple sampling to existing potential customers within this period of time. Some of them are sampling 5x or 6x as we've gone through the last 90 days. So we give them a sample, they evaluate it, they integrate it into their cell design, give us feedback. We modify it, give them a different sample and rinse and repeat. So that's as important, I think as just the sheer number is the amount of interaction we've had with the folks we have been sampling since the beginning of the year.

Michael Shlisky: Great. Thanks for that. Maybe just to follow-up on that answer, so you're saying the samplings are with the current three main customers. And I think you mentioned around 10 or 12 companies were looking at your products last quarter. Are these – the same companies, first of all, has there been any progress since last time as far as either coming to an agreement or their intensity of checking out your technology?

John Van Scoter: Yes. We have added since the last call additional new customers in that sampling program and then the ones that we have been sampling prior to that, again, we've done multiple samples to a number of them as a strong indication of their interest and of the progress.

Michael Shlisky: Okay. Thank you very much. I will leave it there.

John Van Scoter: Thank you, Mike.

Operator: And with no further questions at this time, I'd like to turn the floor back over to John for any closing comments.

John Van Scoter: Thank you for joining the call today everyone and for your interest in Solid Power. We look forward to updating you again next quarter.

Operator: This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation.