Release Date: February 25, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SES AI Corp (SES, Financial) reported revenue for the first time in Q4 2024, marking its transition from a pre-revenue company to a revenue-generating business.
- The company signed contracts totaling up to $10 million with two automotive OEM partners for AI-enhanced battery development, solidifying its relationships in the EV sector.
- SES AI Corp (SES) unveiled an AI-enhanced 2170 cylindrical cell for humanoid robotics, expanding its market reach into drones and robotics.
- The company announced a significant MOU targeting up to $45 million for advanced battery energy storage systems (BESS), indicating potential for future revenue growth.
- SES AI Corp (SES) achieved a 63% gross margin on its Q4 2024 revenue, demonstrating the strong value proposition of its technology and strategy.
Negative Points
- Operating expenses were high at $30.4 million for Q4 2024, driven by research and development and general administrative costs.
- The company utilized $12.3 million in cash from operations during the quarter, indicating significant cash outflow.
- SES AI Corp (SES) is still in the early stages of its commercialization strategy, with revenue guidance for 2025 being conservative at $15 million to $25 million.
- The transition to a CapEx-light business model may present challenges in maintaining high margins as the company scales.
- The company faces competitive risks, as its new solvent discoveries could potentially be copied by competitors, emphasizing the need for rapid innovation.
Q & A Highlights
Q: Qichao, can you discuss the shift in strategy and the recent contracts with automotive OEM partners? Are these the same partners as before, like Honda and Hyundai?
A: Previously, we focused solely on lithium metal for EVs. Our work was more fundamental, involving material discovery for electrolytes and battery safety. We realized we could apply this to lithium-ion as well, expanding our addressable market. The two OEMs are long-time partners who see the potential in applying our technology across multiple chemistries and markets, including EVs, drones, and robotics.
Q: Can you provide insights into the contract manufacturing economics and how it might affect gross margins moving forward?
A: It's too early to provide specific numbers. The Q4 margin was a mix of AI models and cell sales. Our goal with contract manufacturing is to maintain high margins, as next-gen battery companies can't compete at scale with large incumbents. The actual margins will depend on volume, application, and customer specifics.
Q: How do you see the transition between selling software versus hardware impacting revenue and margins?
A: We aim to sell software for high margins, but hardware acts as a hook to demonstrate the software's value. Initially, margins will be a mix of cells and software, but we plan to shift towards a more software-centric business model over time.
Q: Can you provide a breakdown of the expected revenue streams for 2025?
A: For 2025, we expect the bulk of revenue to come from battery energy storage systems (BESS), with the remainder from EVs, drones, and robotics. This distribution may change in subsequent years.
Q: How is SES improving its AI models to enhance battery performance, safety, and manufacturing efficiency?
A: The cost of AI has decreased, allowing us to train models with more data, both actual and synthetic. This enhances model sophistication and efficiency. We are now able to run training on massive databases more cost-effectively, improving battery performance and safety.
Q: What is the prognosis for selling SES's 2170 cells into the automotive market, especially the high silicon version?
A: High silicon and lithium metal are parallel tracks. We are improving the cycle life of high silicon cells and working closely with three OEMs. Our 2170 cylindrical silicon cells allow us to address OEMs we couldn't before due to form factor limitations, expanding our market reach.
Q: Can competitors copy the new solvent discovered by SES's AI? Is it patentable or a trade secret?
A: Competitors can copy successful materials, so we focus on innovation speed. We sell a map of potential solvents and the AI tool used to create it, which competitors cannot replicate. This gives us a competitive edge in discovering new materials.
Q: Are there plans to move drone manufacturing to the U.S. due to supply chain sensitivities?
A: Currently, manufacturing is mainly in Asia, but drone customers prefer U.S.-based production. We plan to transition to U.S. manufacturing after an initial phase in Asia.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
