Solid Power, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Financial statement amounts below are in millions of U.S. dollars unless otherwise noted; the filing presents most amounts in thousands.
Business context
Solid Power is a research-and-development-stage company developing sulfide-based solid-state battery technology. Its planned model is to sell solid electrolyte and license cell designs and manufacturing processes, rather than commercially manufacture battery cells. It works with Ford, BMW, and SK On; products remain in development and require further validation before commercialization.
Financial performance and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $4.906 | $2.582 | $8.698 | $4.778 |
| Operating expenses | $27.078 | $17.278 | $52.189 | $30.788 |
| Operating loss | $(22.172) | $(14.696) | $(43.491) | $(26.010) |
| Net income (loss) | $(12.205) | $13.667 | $(31.365) | $3.321 |
| Operating cash flow | Not separately provided | Not separately provided | $(36.304) | $(22.958) |
| Capital expenditures | Not separately provided | Not separately provided | $21.184 | $30.957 |
- Q2 revenue increased 90% year over year; first-half revenue increased 82%. The filing attributes the overall increase primarily to joint development agreement (JDA) work. BMW JDA revenue was $3.470 million in Q2 and $6.470 million for the first half.
- Direct costs were $6.897 million in Q2 and $13.171 million for the first half, exceeding revenue in both periods. The filing does not report a gross margin.
- Research and development expense rose 72% in Q2 and 73% for the first half, reflecting higher labor and material costs and expanded development work. First-half SG&A increased 21%, while Q2 SG&A declined 3%.
- Net results were affected by non-operating items, particularly gains from changes in the fair value of warrant liabilities: $4.987 million in Q2 2023 versus $27.473 million in Q2 2022; $2.325 million for the first half versus $28.183 million. Interest income also increased, to $4.993 million in Q2 and $9.827 million for the first half.
- At June 30, cash and cash equivalents were $28.439 million, marketable securities $192.694 million, and long-term investments $222.255 million: total liquidity of $443.388 million, down from $496.054 million at year-end 2022. Current assets were $229.851 million and current liabilities $13.057 million.
- The balance sheet reports no current long-term debt at June 30; total liabilities were $28.700 million, including $6.791 million of warrant liabilities and lease liabilities. Cash declined $21.684 million during the first half.
Changes, outlook, and risks
- SP2 began electrolyte powder production in April 2023 and was scaling production while meeting internal performance and quality targets. The company reported increased EV-cell production and improved 20 Ah cell yields.
- Management said it remained on track to deliver A-sample EV cells to partners in 2023 and EV cells to BMW for a demonstration-car program. It identified second-half priorities as scaling and sampling electrolyte, optimizing cell production, improving performance, and delivering cells to partners.
- Management expects spending to continue rising across operating areas, with higher R&D and SG&A costs and increased operating cash use. Near-term capital spending was expected to focus on completing the electrolyte production and development facility.
- Management stated that available cash and other liquid assets should fund operating needs and capital requirements for at least 12 months, and longer until licensing or electrolyte sales generate adequate cash flow. It noted that additional financing could be needed if business conditions or plans change.
- The filing cites commercialization and technical-validation uncertainty, production scale-up and facility delays, partner negotiations, EV-market adoption, competition, supply-chain issues, and regulatory or economic changes as risks. It reported no material changes to risk factors since the Q1 2023 Form 10-Q and no litigation expected to have a material adverse effect.
- The company extended its Ford JDA and appointed John Van Scoter President and CEO. Management reported disclosure controls were effective as of June 30, 2023.
Important facts for investors to verify
- Progress against 2023 cell-delivery targets and the BMW demonstration-car program, including customer validation and acceptance.
- Whether SP2 can scale electrolyte production to target levels and meet customer quality requirements.
- Revenue mix and concentration: BMW JDA revenue represented a substantial portion of reported revenue; assess the timing and terms of future partner work.
- Cash burn, capital spending, and the composition and liquidity of marketable securities and long-term investments relative to management’s runway estimate.
- Operating performance excluding non-cash warrant fair-value changes and investment interest income, which materially affected reported net results.
- Potential dilution from equity awards and warrants; 178,390,443 common shares were outstanding as of August 7, 2023, and the warrants have an $11.50 exercise price.