Solid Power, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; balance-sheet comparisons are to December 31, 2022. Solid Power is a development-stage solid-state battery technology company. It plans to sell sulfide-based electrolyte and license cell designs and manufacturing processes, rather than commercially manufacture battery cells. Its development partners include Ford, BMW and SK On.
Financial results and liquidity
- Revenue: $3.8 million, up 73% from $2.2 million a year earlier. Revenue primarily reflects research and development contracts and licensing activity; $3.0 million was recognized under the BMW joint development agreement.
- Costs and losses: Direct costs were $6.3 million, exceeding revenue; research and development was $11.6 million, up 75%, and general and administrative expense was $6.8 million, up 68%. Total operating expenses rose 86% to $25.1 million. Operating loss was $21.3 million versus $11.3 million.
- Net loss: $19.2 million, compared with $10.3 million; loss per share was $0.11 versus $0.06. Interest income of $4.8 million partly offset operating losses. A $2.7 million non-cash loss from revaluing warrant liabilities reduced nonoperating income.
- Cash flow: Operating cash use was $19.6 million, versus $14.4 million. Investing cash use was $20.7 million, including $11.6 million of property and equipment purchases; financing provided $0.1 million. Cash and cash equivalents declined to $9.9 million.
- Liquidity and obligations: Cash, marketable securities and long-term investments totaled $468.2 million, down from $496.1 million at year-end. Total liabilities were $33.4 million, including $11.8 million of warrant liabilities and $9.0 million of lease liabilities. The balance sheet showed no current portion of long-term debt.
- Other metrics: Property, plant and equipment, net, was $87.9 million. Stock-based compensation was $2.2 million for the quarter, with $59.9 million of unrecognized future compensation cost.
Changes versus Q1 2022
- Revenue increased $1.6 million, primarily from joint development agreement activity; management said government-contract revenue and related costs decreased slightly.
- Operating expenses increased $11.6 million, reflecting expanded development activity, higher labor and material costs, facility and production expansion, and public-company and administrative costs. Direct costs increased $4.2 million alongside the revenue increase.
- Operating cash use increased $5.3 million. Investing cash use decreased from $48.9 million, which the company attributed largely to the net effect of purchases and sales of marketable securities.
- Interest income rose to $4.8 million from $0.2 million, while the warrant fair-value adjustment shifted from a $0.7 million gain to a $2.7 million loss.
Outlook, risks and notable items
- Management expects spending across operating areas to increase through the rest of 2023 and anticipates further operating cash use and investment as development and production scale-up continue. Key planned capital spending includes completing and enhancing the Thornton electrolyte facility and improving cell pilot lines.
- Management said available cash and other liquid assets should fund operating needs, working capital and capital expenditures for at least the next 12 months and longer term until licensing or electrolyte sales generate adequate cash flow. It noted that additional financing could be needed if conditions or plans change; financing may not be available on acceptable terms.
- Solid Power was developing 0.2 Ah, 2 Ah, 20 Ah and larger-format EV cells on two pilot lines. The 60–100 Ah EV line is intended for automotive qualification and vehicle-integration demonstrations. Products remain in development and require customer validation, successful scaling, and acceptable supply or licensing agreements before commercialization.
- Key risks include technical and commercialization uncertainty, partner and customer negotiations, production delays, supply-chain constraints, competition, EV adoption and the company’s continuing losses. The company reported no loss on its SVB operating accounts and no SVB investments, but added a risk disclosure concerning deposits above FDIC-insured limits and possible bank failures.
- The filing reports no current litigation likely to have a material adverse effect. A historical fee demand related to the predecessor’s business combination was settled in March 2022 for an amount materially consistent with the prior accrual.
- Disclosure controls and procedures were assessed as effective at March 31, 2023; no material change in internal control over financial reporting was reported during the quarter.
Investor facts to verify
- Progress and timing for Thornton electrolyte production, EV-cell qualification, and customer validation; the filing gives no quantified commercialization revenue guidance.
- Whether the $468.2 million of total liquidity remains sufficient as operating cash use and planned facility investment increase, and how much is available in each investment category.
- Composition, timing and commercial terms of revenue, particularly BMW and other partner agreements, and the extent to which direct costs rise with development activity.
- Potential dilution from outstanding warrants, options and restricted stock units; the filing reports 19.3 million warrants outstanding and 177.7 million common shares outstanding at March 31, 2023.
- Exposure to uninsured bank deposits and changes in marketable-security values, as well as the effect of warrant remeasurement on reported earnings.