Solid Power, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Amounts below are in U.S. dollars; financial statement amounts are converted from thousands to millions unless otherwise noted.
Business context
Solid Power is a research-and-development-stage battery technology company developing sulfide-based solid electrolyte and solid-state cell designs. Its intended model is to sell electrolyte and license cell designs and manufacturing processes, rather than manufacture commercial battery cells. Revenue to date has primarily come from joint development agreements (JDAs), government contracts, and R&D licensing.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $6.4m | $2.8m | $15.1m | $7.6m |
| Direct costs | $7.2m | $3.5m | $20.4m | $8.6m |
| R&D expense | $14.2m | $9.7m | $40.4m | $24.8m |
| SG&A expense | $6.4m | $5.2m | $19.3m | $15.8m |
| Operating loss | $(21.5)m | $(15.6)m | $(65.0)m | $(41.6)m |
| Net loss | $(15.1)m | $(12.4)m | $(46.5)m | $(9.1)m |
| Loss per share | $(0.08) | $(0.07) | $(0.26) | $(0.05) |
Revenue less direct costs was negative $0.8m in Q3 2023 (approximately -13% of revenue), versus negative $0.7m (approximately -26%) in Q3 2022. For the nine-month periods, this measure was negative $5.3m (approximately -35%) versus negative $1.0m (approximately -13%). This is a simple revenue-less-direct-cost calculation, not a separately reported GAAP gross margin.
- Cash flow, nine months: Operating activities used $51.7m, versus $30.5m in 2022. Investing activities provided $29.0m, primarily reflecting purchases and sales of securities; capital expenditures were $29.5m. Financing activities provided $0.03m.
- Liquidity: At September 30, 2023, cash and cash equivalents were $27.5m, marketable securities $166.0m, and long-term investments $228.8m; total liquidity was $422.3m, down from $496.1m at year-end 2022.
- Debt and leases: No current portion of long-term debt was reported at quarter-end. Lease liabilities totaled $9.7m ($0.9m finance and $8.8m operating). Warrant liabilities were $5.6m.
- Balance sheet: Total assets were $543.9m, total liabilities $26.3m, and stockholders’ equity $517.6m. Property, plant and equipment, net, was $99.2m.
Material changes versus prior comparable periods
- Q3 revenue rose 126% year over year; nine-month revenue rose 98%, driven principally by JDA activity. BMW JDA revenue was $3.7m in Q3 and $10.1m year to date.
- Operating expenses increased 51% in Q3 and 63% year to date, reflecting higher direct costs, R&D investment, and SG&A. Management cited increased labor and materials, hiring and workforce development, outside professional services, and enterprise resource planning costs.
- Nine-month net loss widened to $46.5m from $9.1m. The comparison is affected by a $28.2m warrant fair-value gain in the prior-year period, compared with a $3.5m gain in 2023. Interest income increased to $15.0m from $4.3m.
- Operating cash use increased by $21.2m year over year. Cash and cash equivalents fell by $22.7m from December 31, 2022, while total liquidity declined by $73.8m.
Outlook, commentary, and risks
- Solid Power reported first A-1 EV cell deliveries to BMW in October 2023, after quarter-end, entering BMW’s automotive qualification process; further deliveries were projected in coming months. It also increased SP2 electrolyte volume for EV cells and phased out SP1 production.
- Management expected operating spending to remain elevated through the rest of 2023 and expected revenue and related direct costs to increase as JDA deliverables were performed. It also anticipated further capital spending to complete and scale electrolyte production capabilities. The filing gives no specific revenue, earnings, or cash-burn guidance.
- Management stated that available cash and other liquid assets should fund operating, working-capital, and capital requirements for at least the next 12 months and longer until adequate cash flows arise from licensing or electrolyte sales. Additional financing could be needed if business conditions or plans change.
- Commercialization depends on successful R&D, customer testing and validation, acceptable supply and licensing agreements, production scale-up, and EV market adoption. Other cited risks include facility delays, competition, supply-chain disruptions, regulatory changes, and the company’s continuing losses. The filing reported no material change in risk factors since the Q1 2023 Form 10-Q.
- The company reported no material litigation and no off-balance-sheet arrangements. Management concluded disclosure controls were effective as of September 30, 2023.
Important facts for investors to verify
- Progress and customer acceptance in BMW’s EV-cell qualification process, and whether projected follow-on deliveries occurred.
- Whether JDA revenue growth converts into commercially sustainable revenue and improved direct-cost economics.
- Actual cash burn and capital spending against the $422.3m reported total liquidity, including the liquidity and maturity characteristics of investments.
- Progress, cost, and timing of electrolyte facility scale-up and EV-cell development milestones.
- Potential dilution from equity compensation and warrants; 49.0 million potentially dilutive securities were excluded from diluted loss per share as anti-dilutive.