SES

SES AI Corp. Q1 2025 Filing Summary

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended March 31, 2025. SES AI Corp. is an early-stage growth company developing AI-enhanced Lithium-Metal (Li-Metal) and Lithium-ion battery technologies for electric vehicles (EVs), urban air mobility (UAM), and other applications. The company operates in one segment and has facilities in Woburn, MA; Shanghai, China; and Chungju, South Korea. Principal operations and revenue generation began in October 2024.

Key Financial Metrics

Revenue Composition: $5.8 million in service revenue and $0.008 million in product revenue. All revenue was generated from customers in the Asia Pacific region.

Cash Flow: Net cash used in operating activities was $22.8 million. Net cash used in investing activities was $49.8 million, primarily due to net purchases of short-term investments ($48.9 million).

Material Changes vs. Prior Period

• Revenue Recognition: The company generated $5.8 million in revenue in Q1 2025, compared to zero in Q1 2024, marking the start of commercial revenue from service contracts with OEMs.
• Operating Expenses: Total operating expenses increased 30.8% to $27.8 million. Research and Development (R&D) expenses rose 74.3% to $20.5 million, driven by increased lab equipment purchases ($5.5 million) and AI infrastructure software costs ($4.7 million), partially offset by a decrease in JDA reimbursements.
• General & Administrative (G&A): G&A expenses decreased 23.0% to $7.3 million, primarily due to lower headcount and reduced stock-based compensation.
• Non-Operating Gains: A significant gain of $7.9 million was recorded from the change in fair value of Sponsor Earn-Out liabilities, compared to $0.9 million in the prior year, reducing the net loss.
• Liquidity: Cash and cash equivalents decreased by approximately $72.7 million during the quarter, largely due to operating cash burn and net investment purchases.

Outlook, Risks, and Contingencies

• Liquidity Outlook: Management believes current cash and marketable securities ($239.8 million total) are sufficient to fund operations for at least 12 months. However, the company expects to incur losses for the foreseeable future and may require additional capital for commercialization.
• NYSE Listing Risk: The company received a notice of deficiency from the NYSE on March 7, 2025, for failing to maintain a minimum average closing share price of $1.00. SES has a six-month cure period to regain compliance; failure to do so could result in delisting.
• Internal Controls: The company identified a material weakness in internal controls related to the valuation of Sponsor Earn-Out liabilities. Remediation efforts are underway.
• Trade Policy Risks: New U.S. tariffs and trade restrictions, particularly regarding imports from China, pose risks to supply chains and cost structures.
• Technology Risks: Commercialization of Li-Metal batteries remains untested in actual EVs, with risks regarding performance, safety, and scaling manufacturing.

Investor Verification Checklist

• Verify the sustainability of the $5.8 million revenue run rate and the mix of service vs. product revenue.
• Monitor the company's progress in regaining NYSE compliance within the six-month cure period.
• Assess the impact of the material weakness in internal controls on future financial reporting reliability.
• Review the status of Joint Development Agreements (JDAs) with Hyundai and Honda, and the transition from A-Sample to B-Sample batteries.
• Track cash burn rates against the $239.8 million liquidity position to determine the runway for commercialization.