SES AI (SES) Q2 2025 earnings call transcript

She's a founder and chief executive officer and jing Neal's the financial office. We issued our shareholder letter just after four PM this afternoon, provides a business update as well as financial results. You'll find a press release for the link to our shareholder winner in today's conference call webcast to the investor relations section of our website and SES dot a I before we get started. This is a reminder that the discussion today and they contain forward looking information or forward looking statements within the meaning of applicable securities registration.

These statements are based on our predictions and expectations as of today. Such statements involve certain risks, assumptions and uncertainties, which may cause or actual or future results and performance to be materially different. And those expressed are 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 in the latest or the injuries.

And then our SEC clients. This afternoon we will review our business as well as results for the quarter.

With that, I'll pass it over to Chichen. Thanks, Kyle. And thanks everyone for joining today. We had another strong quarter with significant progress achieved on key product, revenue, development and profitability milestones. And recently in third quarter, we continued that momentum to grow our profitability and revenue through an acquisition agreement that leverages our strength in a molecular universe battery material discovery and safety monitoring capabilities with an established player in the energy storage space.

In the first quarter, since the public release of molecular universe, I'm pleased to see that we now have more than 30 companies that have begun trial testing the enterprise level and many more in the pipeline. Our mission is to accelerate the world's energy transition through material discovery and battery management. We're excited to see molecular universe helping human scientists to be more creative and develop new products much faster.

Since our launch of all in our AI a year ago, we have been progressing through four stages. The first is Tabat. We achieved this milestone with the original launch of molecular universe zero. Molecular universe is a powerful LLM specifically trained on the world's most comprehensive battery domain expertise, combined with the world's largest and most accurate battery relevant molecule property databases.

Computed through our recent advancement in GPU accelerated large scale computation chemistry algorithm. The second is AI agent. We achieved this milestone with last month's introduction of deep space in molecular universe 0.5 and a genetic capability that can conduct senior scientists level battery research. Deep space can reduce product development time from years to just tens of minutes. The ROI on this capability for battery development teams is tremendous.

The third is physical AI. This is where we are right now. Physical AI is the integration of molecular universe with physical systems, including drones, humanoid robotics, EV, UAN, and the largest of all energy storage systems or yes. We are on track with EVB sample development with our EV OEM customers and growing revenue from our AI enhanced lithium ion and look in mental cells for drones and UAN.

And our recent agreement to acquire using energy launches us into us as physical AI by providing the opportunity to integrate us.

We expect exciting revenue growth to come from five areas of focus. This will come from the first. The fourth is revenue machine. The world's energy transition ultimately needs real physical products with software and hardware integrated. We expect exciting revenue growth to come from five areas of focus. These include A software and service. This will come from our molecular universe tool platform subscriptions and development projects from cell and materials makers.

B, materials. We are producing and selling novel electrolytes and other battery materials discovered through molecular universe. C, cells. We are producing and selling AI enhanced lithium metal and high silicon lithium ion cells using electrolytes discovered through molecular universe for drones.

This is the original project that deployed the molecular universe with B sample development with leading EV OEMs for lithium metal cells. E, and last but certainly not least, yes, we will be producing and selling yes as hardware and software solutions that deploy safe and long cycle life materials and precise health monitoring from molecular universe. This is where we expect to not only grow use the energies core business, but also leverage that integration with molecular universe.

To implement this platform strategy, we already have the world's best material discovery team. We have been busy recruiting more top talent and looking for inorganic acquisition opportunities such as the one with use the energy that accelerate and extend this strategy. The reason that so many people are excited about our molecular universe platform and want to join us is that they see SES AI uniquely has all the ingredients required to build the best AI platform for energy transition.

From large battery companies don't dedicate enough resources to train AI models such as cleaning and organizing data, developing large scale competition algorithms and purchasing computing power. And other large pure AI companies simply don't have access to high quality battery data.

People that join SES AI will have unparalleled access to high quality battery data that are not available anywhere else, ranging from single molecule to formulations to cell levels, both through actual experiments and high accuracy simulation. And they will be able to sell products that are not just safer and demonstrate better performance than their competition, but improve much faster.

We will share more updates on all of this in the coming months.

Now here's Jean Nialis for financial updates. Thank you. I will discuss our financial performance for the second quarter of 2025 and provide some context on how we're deploying our capital to support SES's long term growth and the platform. Strategy to tell mentioned earlier. Revenue for the second quarter was 3.5 million with a 74% growth margin. Our Q2 revenue was primarily driven by contracts with our automotive OEM customers to develop AI enhanced little metal and lithium ion battery materials for EV applications. As noted in our pre announcement, we affirmed our four year 2025 revenue guidance of 15 million to 25 million.

We utilized 10.8 million in cash for operations in the second quarter, which was a 51% decrease from Q2 2024 and a 53% decrease from Q1 2025. We have been emphasizing our operational discipline for the past few quarters and the significant reduction in cash usage in operations is a result of executing our plan to deploy capital effectively while growing our top line.

We concluded the quarter with a strong liquidity position of 229 million with no debt. We also announced a agreement to acquire using energy. I'm very excited about the strategic move to provide us the foothold in the fast growing global ESS market and propel us forward as we expedite the implementation of intelligent energy storage solutions to address the escalating power needs of the AI era.

We have a tremendous opportunity to grow the easy energy business from approximately 10 million to 15 million and projected revenue for the full year 2025 to exponentially larger growth in the coming year together with the market share gains in the 300 billion global ESS market.

We'll continue to allocate our capital to focus on our platform enhancements and growth to support our global commercial readiness through 2025 and beyond through organic growth and acquisitions.

We have also allocated capital to share repurchases while we didn't complete any repurchases during the second quarter. In the third quarter, we have repurchased and canceled 871,754 shares for a total investment of 1.1 million or roughly 1.27 per share.

In summary, we remain financially disciplined with substantial liquidity and no debt positioning us for scalable and long term growth. We appreciate your continued support and confidence in SSAI. Thank you. Now I will turn the call back to the operator.

Yeah, Winnie, on using, they were actually one of the earliest companies in ESS. Ten years ago, they used to take LFP cells for EV applications and then supply them for ESS applications. And so the rationale for ESS, we talked about entering ESS in the last year. And then this is a really exciting market for us in addition to EV. And then they have good hardware capability and they take cells and then integrate them into these ESS containers. And then ESS actually is now the number one use for molecular universe, the LFP and sodium chemistries. So now that by integrating, we use the, now we have material development for LFP's sodium from molecular universe and then we have the hardware integration.

And then we also get data. So one thing that makes molecular universe much more powerful than any other tools out there in the industry is access to high quality real world battery data that no other AM model in this field has. So now you have the new materials chemistry and then the hardware integration from Uzi and then now the actual data. And then we can also add our avatar molecular universe on top of that to ensure safety. So that integration really makes sense to us. Thank you. And then just on the second question from other opportunities, other many opportunities.

Yes, I feel we're open to new opportunities and because more universe really empowers so many areas, not just at the material side, the material discovery side, but also material production. And then also different applications, drones, yeses. So we're looking at a few other opportunities.

Great. Thank you.

Yeah, and actually our revenue from drones and UAM has increased this year. And then a lot of the customers, especially in the US, want to move away from their current supply chain. And then we are in the process of updating and also certifying our career line so that it will be compliant to that request. But yeah, that revenue is increasing.

So in terms of capacity, we are now working. So our current career line and also country manufacturing partners, we can get to pretty high capacity. And then that capacity is much higher than the current orders we have.

So it doesn't sound like that's a huge issue there.

Yeah, this is a really interesting area. And it's so new because the use of AI is just not widely used in the battery industry as it is in other industries. So I think we are really close to a few large ones. And I think the key is really seeing that this is not just a platform, but actually it can deliver a solution that's much better than the best human scientists can. And then once we can demonstrate that, then I think that's game over. And then it will be the start of a wide adoption of a universe.

It needs to solve a problem that's harder and it cannot be solved by the best human scientists. Perfect. Really appreciate it. Thanks.

Yeah. So in terms of a tool platform is already more accurate and more powerful than any other tools out there. And then a lot of the companies, instead of asking for more features, they want more accurate results.

And then one test they're doing is actually given a really hard test that human scientists cannot solve. So if you use more universe as a scientific curiosity chapter, then it already outperforms anything else out there. But then if it's now the test is, can it solve a problem that human scientists cannot solve? Like a problem that's intrigued the human scientists for a long time. And then the team has not been solved. So that's what we're trying to do next.

Yes, we expect the next version to be sometime in September, October timeframe. And then that will include more accurate cell level data. So then the prediction will be even more accurate.