雅虎香港財經 QuantumScape Corporation (NYSE:QS) Q1 2024 Earnings Call Transcript
QuantumScape Corporation (NYSE:QS) Q1 2024 Earnings Call Transcript April 24, 2024
QuantumScape Corporation misses on earnings expectations. Reported EPS is $-0.24 EPS, expectations were $-0.22. QuantumScape Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day and welcome to QuantumScape's First Quarter 2024 Earnings Conference Call. John Saager, QuantumScape's Vice President of Capital Markets and FP&A, you may begin your conference.
John Saager: Thank you, operator. Good afternoon and thank you to everyone for joining QuantumScapes's first quarter 2024 earnings call. To supplement today's discussion, please go to our IR website at ir.quantumscape.com to view our shareholder letter. Before we begin, I want to call your attention to the Safe Harbor provision for forward-looking statements that is posted on our website as part of our quarterly update. Forward-looking statements generally relate to future events, future technology progress, or future financial or operating performance. Our expectations and beliefs regarding these matters may not materialize. Actual results and financial periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected.
There are risk factors that may cause actual results to differ materially from the content of our forward-looking statements for the reasons that we cite in our shareholder letter, Form 10-K and other SEC filings, including uncertainties posed by the difficulty in predicting future outcomes. Joining us today will be QuantumScape's CEO, Dr. Siva Sivaram and our CFO, Kevin Hettrich. With that, I'd like to turn the call over to Siva.
Siva Sivaram: Thank you, John. At the beginning of this year, we laid out four key goals for 2024 to help investors follow our progress as we move from prototype to product. Begin shipment of Alpha-2 prototype battery cells, ramp our Raptor fast separator production process, begin low-volume B0 prototype production of our first commercial product, QSE-5, and prepare our Cobra process to support higher volumes of QSE-5 in 2025. We announced on March 27 that we started shipments of six-layer Alpha-2 prototype battery cells to automotive customers, which is the first of our four key goals for 2024. This is a key deliverable in our engagement with our prospective launch customer. The Alpha-2 prototype combined higher-loading cathodes with our FlexFrame cell format and improvements to packaging efficiency: tighter internal margins, thinner current collectors and a slimmer design.
Alpha-2 is important because, when combined with Raptor films and other refinements and incorporated into a approximately 5 amp hour design, it represents the core of QSE-5. The Alpha-2 design is intended to serve as an effective demonstration platform for customers to preview important electrical performance capabilities of the planned QSE-5. Customer feedback is the most critical input in the product development cycle, as it provides insight into areas that need improvement and strengthens collaboration. In our shareholder letter, we published data on four key performance features of Alpha-2 cells. The first of these is discharge power, which relates directly to vehicle acceleration in high-performance applications. Alpha-2 prototypes are capable of up to 10C discharge rates, which in a 100 kilowatt hour pack would be nominally equivalent to over 1,000 horsepower.
We believe this translates to a compelling combination of energy and power compared to conventional lithium-ion cell designs. Second, fast charging is an important feature for EV applications. Improving on previous results, Alpha-2 prototypes have demonstrated the capability to fast charge from 10% to 80% state of charge in less than 15 minutes. Third, is low temperature performance. Conventional EV battery performance can be significantly impaired when ambient temperature drops below freezing. Our cells have the potential to offer good energy density and hence range across a spectrum of operating temperatures down to minus 25 degrees Celsius. Last is the advances in applied pressure. As a remainder, some solid-state battery technologies can appear to deliver acceptable performance when put under high externally applied pressure.
We are aware of various solid-state battery groups reporting cycling results using test pressures from 20 atmospheres to as high as 750 atmospheres. Such high pressures are impractical for real-world EV applications. In the Alpha-2 prototype, we have now reduced externally applied pressure to 0.7 atmospheres within the range currently present in conventional EV battery pack designs, and we believe this allows us to integrate our cells into existing pack concepts. We continue to target zero-pressure designs for consumer electronics applications. We believe the combination of these capabilities, planned for QSE-5, represents an unmatched value proposition, and Alpha-2 represents an important step forward as we work towards ramping up our manufacturing capabilities and improving the reliability performance of our cells.
Now a word on our production outlook. Our current generation separator production process will continue to serve ongoing Alpha-2 sample production for customer shipment and internal testing in Q2. In parallel, increased production from the new Raptor process will allow us to gather larger volumes of cell testing data to validate safety and reliability improvements, accelerate process improvement of downstream cell assembly steps, and begin production of QSE-5 B0 samples. Most of the upstream and downstream automation equipment that serves the Raptor heat treatment equipment has completed or is undergoing site acceptance testing. The Raptor process has shown encouraging improvements with respect to certain critical to quality metrics. In addition to the planned Raptor ramp, we are also streamlining cell assembly processes by simplifying the bill of materials, consolidating process steps, and increasing automation to enable a smooth ramp of cell production.
While supporting initial production of QSE-5 prototype cells, Raptor also serves as a learning platform for our next generation of separator production, the Cobra process. Cobra is intended to combine the fundamental process innovations pioneered by Raptor with specialized equipment capable of realizing the full potential of fast separator production. The Cobra process is necessary to enable higher volumes of QSE-5 prototype production in 2025. Last, a word on our strategic outlook. We remain tightly focused on a singular goal, bringing our first commercial solid-state lithium metal battery cell to market for electric vehicle applications. Achieving this ambitious goal requires three major elements, differentiated technology, close customer engagement, and methodical execution of our milestones.
On the first point, we believe the performance differentiation of our solid-state lithium metal technology continues to be clear as successive iterations of samples have demonstrated. On the customer front, we are increasing our focus on intensive collaboration with our automotive partners, including our prospective launch customer. And finally, we continue to pursue a disciplined approach to product development and process deployment. While there is still significant work ahead of us, we are as enthusiastic as ever about our technology and its potential impact, and we look forward to sharing more details over the months to come. With that, I'll hand over to Kevin for a word on our financial outlook.
Kevin Hettrich: Thank you, Siva. Capital expenditures in the first quarter were $14.1 million. Q1-CapEx primarily supported low-volume QSE-5 prototype production targeted for later this year, as well as the Cobra process and other equipment as we prepare for higher-volume QSE-5 prototype production in 2025. We maintain our full-year 2024 guidance for capital expenditures to be between $70 million and $120 million. GAAP operating expenses and GAAP net loss were $131.9 million and $120.6 million, respectively. Adjusted EBITDA loss was $76.2 million in Q1. The table reconciling GAAP net loss and adjusted EBITDA can be found in the financial statements at the end of the shareholder letter. We maintain our full-year 2024 guidance for adjusted EBITDA loss to be between $250 million and $300 million.
This guidance reflects our efforts to maintain our commercialization timeline while conserving cash and extending our runway, primarily by focusing on process improvements. We ended the quarter with $1.01 billion in liquidity, strongly positioning the company as we transition from prototype to product and prepare for subsequent industrialization. We continue to be prudent with our balance sheet and reiterate our forecast that our cash runway will extend into the second half of 2026. Any additional funds raised from capital markets activity, including under our ATM Prospectus supplement, would further extend this cash runway. Longer term, our capital requirements will be a function of our industrialization business model, which we believe could reflect a mix of wholly-owned production, joint venture, and licensing relationships.
A - John Saager: Thanks, Kevin. We'll begin today's Q&A portion with a few questions we've received from investors or that I believe investors would be interested in. Siva, could you give investors any initial impressions after your first few months as CEO?
Siva Sivaram: John, it's been an exciting eight months since I joined QuantumScape. The first thing I want to mention is that the team at QuantumScape is extraordinary. In the depth of knowledge they have in battery technology and science, equally impressive is their commitment to the QuantumScape mission of revolutionizing energy storage. I've also been very pleased with the level of interest and involvement from the customers. The level of partnership and the customer intimacy is genuinely exciting. In terms of scaling the technology, I can see a lot of similarities from my prior experience in semiconductors with the progress that we need to achieve. I can see the path from where we are to where we need to go on defect density reduction, process variability control, equipment productivity, ecosystem development, etcetera.
Finally, seeing the current headwinds in the EV market, I can also see how the fundamental thesis of the company is getting validated. Today's lithium ion-based battery packs will not meet the customer needs on range, charging time, safety, or cycle life of the battery, even given the downward price pressure and marginal improvements being made by the industry. It's unclear that there is a path with the current technology to make the leap from the early enthusiasts to more mainstream car buyers. QuantumScape represents the next generation of battery technologies that we think are necessary to make the EVs a compelling choice for car buyers.
John Saager: Thanks, Siva. On the last point, you mentioned the macro environment and sentiment around EVs. Has any of that impacted QuantumScape's growth plans or customer conversations?
Siva Sivaram: Yes, what we are seeing is that there is clearly some cyclicality in the marketplace. There are macroeconomic reasons and some geographic variabilities in demand. In addition, there are some manufacturer-specific trends as well. However, over the long-term, the secular demand from the marketplace for EVs is undeniable. I see the interest from our OEM customers and the excitement about the progress of our technology. Having said that, we see that the automotive customers are still uncomfortable with the EV value proposition versus traditional combustion vehicles, especially in regards to the range and charging capability given the current crop of offerings. A holistic battery solution that is strong on safety, great on the long-term life of the battery, along with a better range and faster charging times is required.
The variance in the marketplace of conventional lithium-ion batteries do not solve for all these trends. Nor do we think the rate of progress in this 30-year-old technology capable of getting there. What we at QuantumScape have demonstrated so far is a step change from the current solution. Solid-state, anode-free, lithium-metal battery that simultaneously offers high energy density and high power density, along with improved safety and cycle life. We believe our technology platform will enable EVs to be a compromise-free choice for the majority of the mobility marketplace.
John Saager: Okay, great. Now our focus to this quarter, can you explain how Alpha-2 fits into your big picture development roadmap and how does this move us towards our ultimate goal of getting into serious production?
Siva Sivaram: John, from a big picture perspective, the QSE-5, which is an approximately 5 amp hour cell, is a product we are striving to deliver to our automotive customers. The automotive industry uses a series of major stages to structure product development, typically called A-sample, B-sample, and C-sample, followed by start of production. We delivered A-samples in 2022, and Alpha-1 and Alpha-2 are stepping stones to achieving B-sample production by the end of this year. Alpha-1 was completed last year. Alpha-2, which we began shipping in the first quarter, has almost all the same characteristics as QSE-5, other than the Raptor films and the final cell capacity. This gives our prospective launch customer the ability to evaluate and give rapid feedback on the performance capabilities of the cell so we can methodically iterate and improve.
John Saager: Kevin, turning to you now, how does our current capital runway align with our product development roadmap?
Kevin Hettrich: We ended Q1 with over $1 billion of liquidity on the balance sheet and reiterated our guidance of cash into the second half of 2026. Our balance sheet, we believe, is a competitive advantage and source of strength for the company. The capital in our forecast is being invested into things we believe create value. Finish the QSE-5 product, targeting approximately 800 watt-hours per liter and 15-minute charge times from 10% to 80% capacity. Develop and deploy our Raptor and Cobra fast processes that make our proprietary solid-state electrolyte separator and install equipment to serve the small-volume, high-visibility program of our prospective launch customer, with whom we continue to closely work for the QSE-5 launch.
We expect the capital efficiency to improve with subsequent facilities due to the operational benefits of larger-scale equipment and process maturity, as well as due to business model and capital structure. Some of those options available to us are the use of traditional, non-dilutive sources of funding, including debt, customer prepayments, and government incentives. In addition, we have the full opportunity set of business models available, including joint ventures and licensing. JVs benefit from the strength of the partner and reduced CapEx funded by QuantumScape. Licensing enables market penetration beyond the constraints of QuantumScape's balance sheet and operational bandwidth.
John Saager: Okay, thanks so much. We're now ready to begin the live portion of today's call. Operator, please open up the line for questions.
Operator: [Operator Instructions] Your first question comes from the line of Joseph Spak with UBS. Please go ahead.
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