SES AI Corp (SES) - Q2 2024 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2024. SES AI Corp is a pre-commercialization stage company developing high-performance Lithium-Metal (Li-Metal) rechargeable battery technologies for electric vehicles (EVs) and Urban Air Mobility (UAM). The company has not yet generated revenue from its principal business activities and continues to incur net losses as it advances its technology from A-sample to B-sample production stages.
Key Financial Metrics
| Metric | Q2 2024 (3 Months) | Q2 2023 (3 Months) | YTD 2024 (6 Months) | YTD 2023 (6 Months) |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Net Loss | $(19.9) million | $(12.9) million | $(35.5) million | $(29.2) million |
| Operating Expenses | $24.6 million | $19.3 million | $45.9 million | $40.9 million |
| Cash & Cash Equivalents | $54.8 million (as of June 30, 2024) | |||
| Short-Term Investments | ||||
| Total Liquidity | $294.7 million (Cash + Investments) | |||
| Net Cash Used in Operating Activities | N/A (Quarterly) | $(31.1) million | $(30.9) million | |
| Capital Expenditures | N/A (Quarterly) | $(10.5) million | $(7.8) million |
Material Changes vs. Prior Period
- Increased R&D Expenses: R&D expenses rose 137% year-over-year for Q2 2024 ($15.1M vs $6.3M). This increase was primarily driven by a $7.7M decrease in reimbursements from Joint Development Agreement (JDA) partners due to timing in finalizing amendment terms, alongside increased personnel and facility costs.
- Decreased G&A Expenses: General and administrative expenses fell 26% year-over-year for Q2 2024 ($9.6M vs $12.9M), largely due to the conclusion of the amortization period for earn-out restricted shares and lower insurance premiums.
- Stock-Based Compensation: Total stock-based compensation decreased to $4.8M in Q2 2024 from $7.3M in Q2 2023, reflecting employee departures and the end of amortization for certain awards.
- Investment Activity: Net cash provided by investing activities turned positive ($0.5M) in the first half of 2024 compared to a net use of $23.8M in the prior year, driven by net proceeds from the maturity of short-term investments.
Guidance, Outlook, and Risks
- Commercialization Timeline: Management expects to transition to C-Sample batteries in 2026, with commercial production commencing in 2027. The company is currently building B-sample lines and converting an A-sample line for UAM production by the end of 2024.
- Liquidity Outlook: SES believes its current cash and marketable securities ($294.7M) are sufficient to fund operations for at least 12 months and through commercialization, though additional funding may be required for supply chain integration or development delays.
- Internal Control Weaknesses: The company disclosed that its disclosure controls and procedures were not effective as of June 30, 2024, due to unremediated material weaknesses in IT general controls (user access/segregation of duties) and a review control failure regarding the accounting of forfeited Earn-Out Restricted Shares. Remediation plans are underway.
- Key Risks: Significant risks include the unproven nature of Li-Metal technology in actual EVs, the unpredictability of development timelines, the need for substantial additional capital, and the potential for the UAM market not to achieve expected growth.
Investor Verification Checklist
- Verify the status of JDA amendments with OEM partners (Hyundai, GM, Honda) and the timing of expected reimbursements to offset R&D costs.
- Monitor progress on the remediation of material weaknesses in internal controls over financial reporting.
- Track the conversion of the A-sample line to UAM production and the status of B-sample line construction.
- Review the burn rate relative to the $294.7M liquidity position to assess runway to the 2027 commercial production target.
- Assess the impact of the Sponsor Earn-Out liabilities valuation changes on future earnings volatility.