SES AI (SES) Q1 2025 earnings call transcript

Hello everyone and welcome to our conference call covering our first quarter 2025 results. Joining me today are Chichahoo, Founder and Chief Executive Officer, and Jing Nielitz, Chief Financial Officer. We issued our shareholder letter yesterday afternoon after market close, which provides a business update as well as our financial results. You'll find a press release with a link to our shareholder letter in today's conference call webcast in the investor relations section of our website at SES AI.

Before we get started, this is a reminder that the discussion today may contain forward-looking information or forward-looking statements within the meaning of applicable securities legislation. These statements are based on our predictions and expectations as of today. Such statements involve certain risks, assumptions, and uncertainties, which may cause our actual or future results and performance to be materially different from those expressed or implied in these statements. The risks and uncertainties that could cause our results to differ materially from our current expectations include that are not limited to those detailed and latest earnings release and in our SEC filings.

This morning, we will review our business as well as results from the quarter. With that, I'll pass it over to Chichao.

Thanks, Kyle. Good morning, and thank you for joining us on our first quarter 2025 earnings call. In the first quarter, SES AI achieved a new record for revenue with $5.8 million. This was a great start to what we expect will be a transformational year for SES AI. In addition, we have announced a battery materials discovery software and service platform, and on April 29th, we will be launching our Molecular Universe demonstration at 11 a. m. You can find more details on our website. First EV, during the first quarter, we booked revenue from contracts with two OEM partners to develop AI-enhanced lithium metal and lithium ion batteries for EVs.

And some highlights include we are on track to complete the sample and in discussion about commercial next steps with two OEMs. We have deployed our AI for science material discovery and to end capability to develop new electrolytes to improve critical battery performance measures such as cycle-wise and safety of lithium metal and silicon lithium ion batteries for two OEMs.

And based on the successful track record for these two OEMs, we are packaging our AI for science material discovery and to end capability into a software and service platform called Molecular Universe. This allows us to mass produce material discovery and development service. Our largest and most profitable revenue component, enabling us to rapidly expand our service from just one chemistry and only two OEMs in one market to potentially all OEMs, all battery makers, all electric companies, consumer electronics companies, and many more across all battery chemistries, and with pure global EV competition and new safety regulations through our material discovery and development services, we can deliver commercially practical weaning solutions that help OEMs differentiate.

And even before the global release of Molecular Universe, there are already one dozen companies, including OEMs, battery, and electric companies, doing early access testing. And now to UAM, drones, and robotics, I'm very excited about the tremendous response we have received following our introduction of the AI-enhanced 2170 symmetrical cell for humanoid robotics and drones applications.

We also produced power cells for customers in drones and UAM from our own lines that were previously converted from EVA sample lines. In particular, the strategic value of our facility in Kyungju, South Korea has proven to be particularly valuable to many of our customers, given the current geopolitical uncertainty and tariff tension. Also, these cells use electric materials discovered through Molecular Universe.

I would like to turn to the upcoming launch of our Molecular Universe software and service platform, as I mentioned, will be released on April 29th. The motivation for Molecular Universe is to mass-produce material discovery and development service, our largest and most profitable revenue component. This platform delivers commercially practical weaning solutions that help users compete. Molecular Universe is not contract R&D, rather is an end-to-end service ranging from material discovery to cell manufacturing.

It is Assemble, Assemble, C-Sample, SOP, at scale. Its benefits are not just applicable to one chemistry with a metal and one market EV, but can be applied to all battery chemistries and all battery markets. We will have the global release of the first version of Molecular Universe, MU0, on April 29th. The live demo will explain MU0's features and pricing structures.

We look forward to reporting more progress and details on the Molecular Universe during the second quarter. To close, I would like to highlight some of our plans for 2025 and beyond.

First, we are in a strong cash position to execute on our vision. We have evolved from manufacturing CapEx heavy plans for EV and UAM at scale to a scalable software and service business model. We have focused our operating costs on enhancing our commercial team to pursue greater opportunities to expand revenue in 2025 to 2027. Our new Molecular Universe software and service platform has proven to be successful with two OEMs already and can more efficiently deliver commercially practical winning solutions to all OEMs across all battery chemistries, both lithium metal and silicon lithium ion.

We expect the Molecular Universe platform to allow us to rapidly grow our largest and most profitable revenue component. So, thank you for continuing interest in SES AI and now I'll turn it over to King for financial updates.

Good morning, everyone. I will discuss a financial performance for the first quarter of 2025 and provide some context on how we are managing capital to support SES's long-term growth strategy. Revenue for the first quarter was 5.8 million. With this strong start to the year, we remain on track to achieve our full-year 2021 2025 revenue guidance of 15 million to 25 million.

Our Q1 revenue was primarily driven by contracts with our automotive OEM customers to develop AI-enhanced lithium metal and lithium ion batteries for EV applications.

Importantly, we delivered a strong growth margin of 79% in Q1, which is consistent with our expectations. The high-margin profile is largely a result of our asset-life systems model, driven by our OEM and AI strategy. Our gap operating expenses were 27.8 million for the quarter. We utilized 22.8 million in cash for operations and invested 0.9 million in capital expenditures during the quarter.

We concluded the quarter with a strong liquidity position of 240 million with no debt. As we look ahead to the remainder of 2025, our focus remains on disciplined execution and building the foundation for long-term and scalable growth, where seeing top-line growth maintaining a strong growth margin, executing our plan efficiently, and position the business for the next phase of commercial readiness.

In summary, we are operating from a position of strength, growing top-line revenue, controlling costs, and deploying capital with discipline. We expect to exit 2025 with more than 200 million in liquidity. We appreciate your continued support and confidence in the SAA. Now I will turn the call back to the operator.

The CJ facility, challenging facility right in South Korea, so it has two lines. It has the A sample line that we built with the GMJDA and then that got converted to large pout cells and they are also a smaller UOM cells. We have two pout cell lines, but then also because of the new trend, we can also add additional equipment into a common day cylindrical as well as prismatic cells.

Another one here is some of your competitors are pursuing a similar strategy using excess Chinese capacity for 2070 cells with silicon. Can you remind us of the performance benefits from SES's 2070s with your improved electrolyte and keep reminding us of the performance and how you compare it to others?

Yeah, so most 2170s cells today have 5.5 or less empowers and that's typically less than 30% silicon and then if you go to more silicon, if you get to 6.5 empowers and even more than 7 empowers, then you do need more silicon and then the current electrolyte is not stable and the cycle life is short and also a lot of times the electrolyte has FDC and that tends to gas and then pop the lid.

So all we watch for life actually works really well with high-content silicon, so we're talking about enabling the stable performance and no gas for 2170s that can achieve more than 6.5 empowers and even 7 empowers.

That's great, thank you. I do one more if I could see. Yes, sure. Customer type who would be interested in the molecular universe, AI, what types of customers are you engaged with outside of your two main partners?

Yeah, that's actually really exciting and then for now I mean just the first version is just electrolyte. We're talking about all the major battery companies like T01s and T02s. We have more than a dozen early access users already before Tuesday launch, next Tuesday, but also car companies. So a lot of these battery companies and car companies and also some chemical and electric companies are really excited about this.

Great, teach your job. Yeah, thanks Mark.

Sure, so I'm going to go over the pricing structure first. I'll go over the pricing structure first and then you do the buyback. So the pricing structure for molecular universe, it has basically we have five tiers and then they are divided into pure software and also software plus servers. So pure software, so it's basically for a subscription per user per month and then you can get access to partial molecular universe, the whole molecular universe, different properties and also you can interact with it and then ask questions. And then these are specific commercial challenges that you face in the market. And then the servers is, for example, some of the large enterprise want us to do on-prem deployment or we actually train this model with the customer's proprietary database.

And also in some cases, once we find molecules and then they ask us to synthesize molecules, actually formulate your electrolyte test the molecules in the batteries like a sample, a sample, basically the full JDA. And then once we discover new molecules and then we can file IP, we can also hide the molecules in what's called hidden galaxies from other users for a fee. So it's a mix of one-time fee that includes the on-prem install setup and then recurring in the form of subscription to this tool as well as once we find this model to you, this almost like a royalty payment for us to hide the molecules. So if you want to go over the buyback.

Hi, I want to answer your first question. So first I wanted to just reaffirming our 2025 revenue guidance and our strong balance sheet as we expect to exit the year with more than 200 million in liquidity. And also we're on a strong revenue growth path while maintaining the high margin and controlling cost. We believe just that the shared repurchase program would be an efficient capital allocation tool for us. The potential use of the capital would not impact the liquidity runway going forward.

Yes, Ian? Chita, I want me to take it.

I can answer that. So we, at the beginning of the year, when we gave the guidance, we mentioned that we don't give them this is the first year for us to have a full year revenue. We don't want to put a quarterly cadence there. But having said that, I think is more stable. And we are on track to achieve our guidance that we provided, which is 2025 revenue between 15 to 25 million based on our existing pipeline of revenue. We are very confident that we will achieve that goal. It's not beyond. I think for 2026, not to provide guidance or anything, but this year is very foundational year, transformational year for us. We're laying all the groundwork, the foundation to significantly grow our revenue in 2026.

Excellent. And one follow-up question on Molecular Universe. I guess one of the things that we're all kind of interested in is how we measure the success of that going forward. Are you going to be giving us backlog users? I mean, obviously you've got 12 people looking at it. Now that's great. I just wanted to think about how we should measure success of that.

Well, I think it will come down to revenue, right? Revenue will be generated from Molecular Universe. That's the ultimate metric for success. And also, I think just from a battery industry perspective, we're talking about replacing and accelerating R&D. So if this becomes really successful, I think this will be a tremendous tool to help battery companies and car companies, itself hiring thousands of people in the spend five years on the new technology.

I think you can do that with just 10 people in a few months. So really accelerates development of new technology. And maybe one final question then, and thank you for that answer.

Growth margins medium in the long term. Obviously, if you're selling more and more software, that might trend up. But 79% is pretty good already. Is that kind of what you're thinking in your longer models? Is something in the 70 to 80% range?

I think I'll take that line. The mix of services and products, I think, given we're rolling out the software and services, those have a very, very good margin above 80%. And we also sell products and those are more like 20 to 30%. So going forward is a mix of both. But regardless, we're looking at a mix of about 60% margin. Great.

Thank you. Thank you.