SES AI Corp. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. SES develops lithium-metal batteries for EV, urban air mobility and other applications. It remains pre-commercialization, has not begun principal operations and reported no revenue from its principal business activities.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 / prior balance date |
|---|---|---|
| Revenue | None | None |
| Operating expenses | $21.3 million | $21.6 million |
| Operating loss | $21.3 million | $21.6 million |
| Net loss | $15.6 million | $16.2 million |
| Net loss per share, basic and diluted | $0.05 | $0.05 |
| Operating cash use | $9.0 million | $15.4 million |
| Capital expenditures | $6.8 million | $6.0 million |
| Cash and cash equivalents | $129.6 million | $85.7 million at Dec. 31, 2023 |
| Short-term investments | $189.1 million | $246.8 million at Dec. 31, 2023 |
| Total liabilities | $38.5 million | $47.9 million at Dec. 31, 2023 |
Gross R&D activity was $15.3 million, offset by $3.5 million of JDA reimbursements, resulting in reported R&D expense of $11.8 million. R&D expense rose 39% year over year, chiefly from personnel and facility costs; general and administrative expense fell 28% to $9.5 million, principally reflecting lower stock compensation and professional, audit and insurance costs. Interest income was $4.2 million. There is no meaningful revenue-based margin to assess.
Cash, cash equivalents and short-term investments totaled approximately $318.8 million at quarter-end. The $53.2 million of cash provided by investing activities largely reflected $60.0 million of investment maturities, partly offset by capital spending; it should not be read as operating cash generation. The company reported no material financing inflow. No conventional borrowings are shown; lease liabilities were $12.1 million in total, including current and non-current portions. Current assets were $327.1 million versus current liabilities of $13.9 million.
Changes versus the prior comparable period
- Net loss narrowed by about $0.7 million; operating expenses declined by $0.3 million overall, as lower G&A more than offset higher R&D.
- Operating cash use decreased by $6.4 million, helped by working-capital inflows and JDA receivable collections.
- Cash and cash equivalents increased from year-end, while short-term investments declined as securities matured. Combined cash and short-term investments were lower than at year-end.
- Q1 2024 included a $0.9 million gain from the change in fair value of Sponsor Earn-Out liabilities, versus a $0.6 million gain in Q1 2023. This non-operating, non-cash item is sensitive to the company’s stock price.
Outlook, risks and notable items
- Management expects cash on hand and marketable securities to fund working capital and capital expenditure needs for at least 12 months from filing and states these resources are expected to fund the company to commercialization. It also cautions that additional funding may be needed, including for a potential U.S. integrated supply chain or development delays.
- Management’s plan is to continue EV B-sample development, build and operate B-sample lines, ship cells to UAM partners, and advance battery safety and Avatar AI. It targets transition to C-sample in 2026 and says commercial production could begin in 2027; these are forward-looking goals, not assured outcomes.
- SES extended a Hyundai JDA in March 2024 through December 2025 for B-sample development. It operated three A-sample lines and was building two B-sample lines. Management describes progress on 50Ah and 100Ah cells but notes the technology remains under development and commercialization is uncertain.
- Purchase obligations were $50.7 million, including a commitment to spend up to $35 million under a JDA; operating lease obligations were $15.1 million. A government grant of $8.9 million remained unearned and conditional. Failure to meet grant requirements could require repayment with interest.
- Management identifies continuing losses, substantial future capital needs, development and scale-up challenges, customer adoption, safety, supply-chain, and execution risks. The filing says there were no material changes to previously disclosed risk factors and no current legal proceedings expected by management to have a material adverse effect.
- Disclosure controls were not effective at quarter-end because of material weaknesses in IT access/segregation controls, review of Sponsor Earn-Out valuation assumptions, and review of Earn-Out Restricted Share forfeiture accounting. Management says the weaknesses did not cause material misstatements in the periods presented and describes remediation efforts.
Most important facts for investors to verify
- Whether B-sample development, partner testing and the stated 2026 C-sample/2027 production timetable remain on track.
- Actual cash burn and capital expenditure trends, including whether available liquidity continues to support the stated runway and commercialization plan.
- JDA reimbursements, collection of partner receivables, and the scale and timing of committed spending and purchase obligations.
- Progress in remediating the disclosed material weaknesses and whether controls are subsequently judged effective.
- Compliance with government-grant conditions and any changes in potential repayment exposure.