Solid Power, Inc. (ticker: SLDP) reported its third-quarter 2024 financial results and discussed significant developments regarding a potential $50 million grant from the U.S. Department of Energy (DOE). CEO John Van Scoter highlighted the company's selection to negotiate the grant, aimed at enhancing the production of solid electrolyte materials for advanced all-solid-state batteries (ASSBs). Despite reporting a net loss, the company maintains a strong liquidity position and is on track to achieve its 2024 goals, including the installation of a pilot line for electrolyte production.
Key Takeaways
- Solid Power has been selected to negotiate a $50 million grant from the DOE for sulfide-based solid electrolyte material production.
- The company reported $4.7 million in revenue in Q3 2024, primarily from SK On agreements and government contracts.
- Operating expenses were $32.2 million, resulting in a net loss of $22.4 million.
- Solid Power's liquidity position remains robust with $348.1 million in cash as of September 30, 2024.
- The company is progressing in its electrolyte Innovation Center, A-2 cell design, and partnerships with BMW (ETR:BMWG) and SK On.
- A non-binding memorandum of understanding with a major battery manufacturer for electrolyte collaboration is in the finalization stages.
- Solid Power is preparing to showcase its technology strategy in early 2025.
Company Outlook
- Installation of a pilot line for electrolyte production is planned within the next 12 to 18 months.
- The company aims to produce 75 metric tons of electrolyte annually by 2026 and 140 metric tons by 2028.
- Solid Power plans to update stakeholders on its progress in the next quarter and will hold an analyst and investor event in the first half of 2025.
Bearish Highlights
- The company incurred a significant net loss of $22.4 million during the quarter.
Bullish Highlights
- Selection for DOE grant negotiation underscores the validation of Solid Power's technology and business model.
- Strong liquidity position with substantial cash reserves.
- Ongoing advancements in technology and strategic partnerships.
Misses
- Revenue fell short of covering operating expenses, leading to the reported net loss.
Q&A Highlights
- Van Scoter addressed the highly competitive nature of the DOE grant process, with only 5% of proposals in their category being awarded.
- The company remains committed to its strategy for developing advanced electric vehicle batteries, regardless of potential policy changes from the new U.S. administration.
- The grant, if awarded, will serve as a cash offset for a total project cost of $110 million, which includes a $60 million company contribution.
Solid Power, Inc. continues to focus on its long-term strategy of producing advanced materials for the electric vehicle industry, with an emphasis on innovation and collaboration. The company's efforts to secure additional funding from the DOE and its ongoing projects reflect a commitment to advancing the future of electric vehicle technology.
InvestingPro Insights
Solid Power's recent financial results and strategic developments can be further contextualized with insights from InvestingPro. Despite the company's progress in securing potential government funding and advancing its technology, several financial metrics highlight the challenges SLDP faces.
According to InvestingPro data, Solid Power's market capitalization stands at $199.54 million, reflecting its current position in the competitive electric vehicle battery sector. The company's price-to-book ratio of 0.45 suggests that the stock may be undervalued relative to its book value, which could be of interest to value investors considering the company's potential in the ASSB market.
However, InvestingPro Tips reveal some concerning trends. One tip indicates that Solid Power is "quickly burning through cash," which aligns with the reported net loss and ongoing investments in research and development. This rapid cash burn is a critical factor for investors to monitor, especially given the capital-intensive nature of battery technology development.
Another relevant InvestingPro Tip notes that the company "suffers from weak gross profit margins." This is evident in the reported gross profit margin of -33.57% for the last twelve months as of Q3 2024. The negative margin underscores the challenges Solid Power faces in achieving profitability, a common issue for companies in the early stages of commercializing advanced technologies.
On a positive note, an InvestingPro Tip highlights that Solid Power "holds more cash than debt on its balance sheet," which is consistent with the company's reported strong liquidity position of $348.1 million in cash. This financial cushion provides Solid Power with runway to continue its research and development efforts, a crucial factor given the company's focus on long-term technological advancements.
For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for Solid Power, providing a deeper understanding of the company's financial health and market position.
Full transcript - Solid Power Inc (NASDAQ:SLDP) Q3 2024:
Operator: Good day, everyone, and welcome to today's Solid Power, Inc. Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please note this call may be recorded. I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Melanie Solomon, Investor Relations.
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 US 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, Melanie, and thank you all for joining us. We accomplished a lot in the third quarter and I'm excited to share our progress with you today. A major highlight of the quarter was the US Department of Energy's announcement that we were selected to negotiate a $50 million grant for a project focused on continuous production of sulfide-based solid electrolyte materials for advanced all solid-state batteries or ASSBs. The process was highly competitive and we view our selection as a validation of our technology and business model. We thank the DOE for its faith in Solid Power. Wide adoption of EVs in the United States will require continued advancement of battery technologies, including the materials that support that advancement. We believe our sulfide cell and electrolyte can offer a step function increase in battery performance compared to conventional lithium-ion. While performance is critical so is the ability to efficiently manufacture and process our product. As we continue to innovate on electrolyte performance, based on feedback from partners and potential customers, we also need to demonstrate that our electrolyte can be manufactured on a high-volume and high-quality basis. To do so, we will need to shift from our current batch production to a continuous manufacturing process. Over the next 12 to 18 months, the team is planning to install the first globally known pilot line that can continuously manufacture sulfide-based cell and electrolyte materials for ASSBs. The first pilot line we are planning to install has been part of our overall electrolyte technology development road map. We expect that by using a continuous manufacturing process, we will have better control of the final electrolyte product and a greater ability to tailor our electrolyte to a customer's requirements. As an added benefit, following Phase 1 of the project we expect to be able to produce 75 metric tons of electrolyte per year to support our customer development programs. Our projection is that Phase 1 will be completed in 2026. After finishing the full project projected to be in 2028, we expect to have the capability to produce 140 metric tons per year at SP2, which is more than four times our current capability. Last month, shortly following the DOE's announcement, we hosted Colorado Governor, Jared Polis; and Deputy Secretary of the Department of Energy, David Turk. We gave them a tour of our electrolyte facility and showed them how we plan to deploy the DOE funds in a continuous manufacturing process. Deputy Secretary David Turk spoke about the DOE's rigorous selection process and the criteria used to select companies for grants. Solid Power satisfied their three main criteria: first having a strong technology and business model; second addressing challenges in the US supply chain for clean energy by producing battery cells domestically; and third improving our surrounding communities by hiring locally to staff this project. We're thrilled to have the validation and support of the federal government and our local community here in Thornton and look forward to undergoing negotiations for the grant. The next step in the DOE process will be to negotiate a contract for the grant funding. We expect that will take several months and we will provide updates when we are able to. Another highlight of the quarter was beginning development activities in our state-of-the-art electrolyte Innovation Center or EIC. The EIC was designed to significantly enhance our research and development capabilities, and improve pre-pilot electrolyte manufacturing processes. The EIC will allow us to focus on smaller scale electrolyte development and pre-pilot manufacturing processes, before transferring our processes to pilot scale manufacturing. The EIC will enable speed and flexibility, emulating a full process on a smaller scale. The work we do in the EIC will help us customize electrolyte for customers' needs and enhance our feedback loop between our electrolyte and cell development programs. This pre-pilot continuous flow process and equipment development will also be a precursor to the work we expect to do under the BIL grant and increase our confidence in executing that program. I'm very excited about the potential EIC gives us, as we continue to position Solid Power as a leader in the sulfide electrolyte space. Moving on to electrolyte sampling. We continue to sample multiple customers on a repeat basis. with multiple variants and we have received constructive feedback. As we iterate our products, we believe we are well positioned to react quickly to our customers' requirements. While the total addressable market is large, the number of customers within is finite. As we have said before, we believe many EV OEMs and Tier 1 battery producers have sulfide-based solid-state products in their future road map. Of this group, we are now actively sampling a substantial portion. The feedback from sampling is providing important learnings as we continue to evolve our technology. And as I mentioned with our new EIC, we can rapidly adapt and adjust to meet their needs. On the cell side, we've made significant progress on our A-2 cell design this year. In order to address gaps, we identified with the A-1 design the team has been hard at work to improve the design of our cathode anode and separator for the A-2. These are not major chemistry changes. Rather, we are tweaking and enhancing the current design in our pursuit of higher performance. In addition, the team has made some mechanical improvements to the lines with the goal of higher quality cell builds. The work is continuing on these efforts and I believe they will provide notable improvements from our A-1 design especially around safety and energy density. We have begun small production runs of our A-2 material set for internal testing and expect to begin testing A-2 cells in early 2025. As I segue to our progress with partners, I want to note two things I am excited about. First, the feedback loop we have created is fueling our technology development with sampling and customer response as key components. Second, our cell technology will soon be in development on three continents through our work with BMW in Europe and SK On in Asia, broadening our reach and depth of experience globally. With BMW in the third quarter, we finalized the JDA extension as we continue to collaborate with them on cell development and manufacturing. The overall goal of the JDA remains what it has always been to develop a competitive solid-state battery technology that can be used in an automotive application. We continue to drive performance around A-2 and our overall road map to achieve a product that meets BMW's exacting standards prior to vehicle integration. We are laser-focused on continuing to develop our cell technologies prior to BMW bringing online its pilot line in Parsdorf Germany next year. We value our partnership with BMW and continue to enjoy the collaborative nature and beneficial feedback loop. With SK On we remain on track with our agreements and have already met all of the required milestones for the year. The line drop and tech transfer are going well and we expect to send electrolyte to Korea this quarter to support factory acceptance activities ahead of planned line installation in mid-2025. Additionally, during the third quarter we signed a non-binding MoU with a major battery manufacturer to explore the possibility of an electrolyte JDA. While it is very early in this engagement if we successfully advance to an agreement it would be our first electrolyte-specific JDA. We expect such a collaboration would give us as valuable feedback and insights into the electrolyte design and development. We are continuing to deepen relationships across Korean battery landscape by collaborating with Korean research institutes such as Korea Electronics Technology Institute and Korea Evaluation Institute of Industrial Technology. We have entered into several agreements to leverage the Korean ecosphere on materials and battery performance and are excited by what we can learn from these new relationships. We expect these collaborations to advance our understanding of market needs while expanding our network in Korea as we benefit from the talent and experience of these leading institutions. Overall I'm pleased with the progress in the third quarter and excited about our momentum as we exit the year and move into 2025. I will now turn the call over to Linda to review our financials. Linda?
Linda Heller: Thank you, John. I'll start with Q3 results beginning with revenue. Solid Power delivered $4.7 million in revenue during the third quarter of 2024 primarily driven by continued execution on the SK On agreements and government contracts. Operating expenses were $32.2 million driven by increased production costs, cell and electrolyte development costs, scaling of operations and execution under our joint development agreements. Operating loss was $27.6 million and net loss was $22.4 million or $0.13 per share. Capital expenditures totaled $2.7 million during the quarter primarily representing investments in the electrolyte production capabilities including the build-out of the EIC. Solid Power's liquidity position remains strong with $348.1 million of total liquidity as of September 30 2024. In addition, accounts receivable totaled $2.6 million. Deferred revenue was $6.7 million, while total current liabilities were $20.3 million. As John mentioned, we have already achieved our SK On milestones for the year. We expected $14.9 million in progress payments in 2024 which have already been collected. For 2024, we are reiterating the guidance we provided on the last call which may also be found in the press release we issued today. As a reminder and point of clarification, the Department of Energy award is a grant not alone for funding of up to $50 million. The total estimated project cost is $110 million and we are dedicating $60 million over a multiyear period. The $50 million grant represents a potential offset of our plans not an incremental investment expense. We are well positioned to execute our strategy, and I'm excited about the company's plans. I'll now turn it back to John for closing comments before we take 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 would like to thank our employees our partners and stakeholders for their loyalty and dedication. We have been planning an analyst and investor event to showcase our technology strategy and long-term model. As the team will be focused on negotiating the BIL grant over the next few months, we believe that negotiation and further progress on our strategy will better position us for an exciting event in the first half of 2025. Overall, I am encouraged by our progress as we continue to focus on improvement of electrolyte and cell performance. We will now take your questions. Operator?
Operator: [Operator Instructions] Our first question will be from Mike with D.A. Davidson.
Mike Shlisky: Hey everybody, it's Mike Shlisky D.A. Davidson.
John Van Scoter: Good, Mike. Good to hear your voice.
Mike Shlisky: A couple of quick ones from me. One the ASSB grants award that you just mentioned can you just give us a little insight as to how that's going to work? Is it a competitive process? Are you up against other companies for this grant? And if they kind of give the DOE the best deal? Are you already selected? And it just comes down to some minor details. I guess I'll make sure I understand the likelihood of the grant coming through for close to the amount that you've been talking about at least.
John Van Scoter: Sure. The process started late last year to make a proposal to the DOE under the bipartisan infrastructure legislation. We actually submitted the formal proposal in March of this year. We then were invited back to defend that proposal in Washington D.C. in front of a skilled panel in the DOE facility. It was 1.5 hours kind of like a thesis defense if you will. We were allowed five people to attend that. They peppered us with questions on all of the major areas the technology the business model the viability of the supply chain domestically and then the community benefits program. The best knowledge that we have and this is actually through a lobbyist that we use in Washington D.C. was again it was very highly competitive and there were 25 total awards that were given and about 10% was were actually awarded of the proposals that were put in to the best of our knowledge. In our specific category it was even more selective and about 5% of proposals were actually granted. So that's an overview of how the proposal process went and then the selective nature of the grants. Did that address the question Mike?
Mike Shlisky: Yes. I just wanted to follow-up. So assuming the grant money does come through in the reasonable near future, does the does it represent funding of the plan that you've already had in place all along? Or is this a bit of a branching out, a different initiative that would require some brand new funding? I'm trying out, if the cash you have on hand will just be bolstered by this additional grant funding? And would you have been fine without it?
John Van Scoter: It's the former, Mike. In fact, we had this in our plan. So this is essentially, a cash offset for what we had planned to spend. As with any DOE program, it is a cost share program. So we will have to put $60 million in for the project. So the total project spend will be $110 million, to get to the continuous flow operation, over the course of the next three-plus years.
Q – Mike Shlisky: Okay. I do have other questions, but maybe I'll just throw out one more question for you, as somewhat related. We just had an election in the United States, a couple of days ago as you know and the President-elect coming in seems to be a bit less enthusiastic about the electric vehicle world, than maybe prior administrations was. So I want to make sure, I'm clear that this particular grant and even your customers' ability and desire to even pursue further EV platforms, is still relatively intact after the changeover in January.
John Van Scoter: Yes. We really can't speculate on how things are going to play out, relative to the new administration, Mike. I think, time will tell on that. We just remain focused on our strategy, solving for longer range, lower cost and safer EVs. We believe that's what the market is looking for. Some of the softness that is out there right now with the current EVs, I believe are caused by inadequacies in those areas. And so we're focused on our strategy and executing our strategy and believe that it will be a winner in the long run.
Q – Mike Shlisky: All right. Okay. I’ll leave it there. Thanks so much for the discussion.
John Van Scoter: Thank you, Mike.
Operator: [Operator Instructions] I'm showing no additional questions at this time. I'd like to now turn the conference over to our presenters for any closing remarks.
John Van Scoter: Thank you for joining the call today and for your interest in Solid Power. Linda and I look forward to updating you next quarter. Thank you.
Operator: Thank you ladies and gentlemen. This does conclude today's presentation. You may now disconnect.
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