Solid Power : Transcript

Solid Power, Inc.

Second Quarter 2023 Earnings Conference Call

August 8, 2023 - 3pm MT

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Corporate Participants

Jennifer Almquist, Investor Relations for Solid Power Inc.

David Jansen, Solid Power's Chairperson

John Van Scoter, President and Chief Executive Officer

Kevin Paprzycki, Chief Financial Officer and Treasurer

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Conference Call Participants

Brian Dobson, Chardan Capital Markets

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Operator

Greetings. Welcome to the Solid Power, Inc. Second Quarter 2023 Financial Results and Business Update Call. Please note that this conference is being recorded. I will now turn the conference over to your host Jennifer Almquist, Investor Relations for Solid Power, Inc. Thank you. You may begin.

Jennifer Almquist

Thank you, Operator, and thank you, everyone, for joining us today. I'm joined on the call today by Solid Power's Chairperson, Dave Jansen, President and Chief Executive Officer, John Van Scoter and Chief Financial Officer, Kevin Paprzycki.

A copy of today's press release is available on the Investor Relations section of Solid Power's website at ir.solidpowerbattery.com.

I'd like to remind you that parts of our discussion today will include forward-looking statements as defined by US securities laws. These forward-looking statements are based on management's current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. Except as otherwise required by applicable law, Solid Power disclaims any duty to update any forward-looking statements to reflect future events or circumstances. For a discussion of the risks and uncertainties that could cause actual results to differ materially from those expressed in today's forward-looking statements, please see Solid Power's most recent filings with

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the Securities and Exchange Commission, which can be found on the company's website at ir.solidpowerbattery.com.

With that, let me turn it over to Dave Jansen.

Dave Jansen, Chairperson, Solid Power, Inc.

Thank you, Jen, and good afternoon, everyone.

I'm very excited today to introduce John Van Scoter, who took over the reins as CEO in June. John brings to Solid Power a skillset that we believe is ideally suited at this stage of the company's development. This includes deep experience working in cleantech and renewable energy, as well as a history of leading tech companies through the development stage and into commercialization.

It has been a pleasure working with John and helping him get up to speed. I've been extremely pleased with his leadership and engagement thus far. I think I speak on behalf of the entire board in saying we feel he is off to a great start.

With all of the changes over the past several months, I also want to acknowledge the Solid Power leadership team for continuing to drive progress towards our strategic goals. I believe having John aboard will enhance their ability to continue to execute our strategic plan.

With that, I'd like to hand the call over to John. John, welcome.

John Van Scoter, President and Chief Executive Officer, Solid Power, Inc.

Thank you, Dave, and good afternoon, everyone. I'm glad to be here and appreciate everyone joining the call today.

First, I'd like to thank Dave for his service as our interim CEO these last several months and for his guidance during the transition process. He has left me with a great hand here at Solid Power.

I'll begin today with some of my initial thoughts on the business, then I'll give a business update and hand off the call to Kevin for the financial review. I'll then wrap up our prepared remarks and we will go to Q&A.

As many of you know, I come to Solid Power having spent many years working with leading edge and renewable technology companies. What attracted me was not only the huge opportunity to put the next generation of battery technology into EV's, but also the Company's unique strategy and business model.

To give a little more color, I was attracted to the transformative potential of Solid Power's technology. I believe there is a very real need for advancement in EV batteries, and I believe the technology we are developing offers attainable and compelling advantages.

I also thought our capital light business model was a great fit for the industry and for our investors. By not having to construct expensive gigafactories, we can partner with, rather than compete with large industry incumbents, and expand our addressable market, all while minimizing our capital outlays.

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And lastly, I was attracted to the depth and breadth of talent on the Solid Power team.

Having been in the CEO seat now for 7 weeks, I've had some time to get to know the business and the people here at Solid Power. I'm happy to report that what I've found is a business that is transformative and forward thinking, products that are being very well received, and a team with depth and talent worthy of the task at hand.

Specifically, I've found a business that has done the hard work of creating a multi-generational technology roadmap. In my experience, this level of forward-thinking is unique for a company at this stage. What's more, we have also made progress with the second generation electrolyte as well as the development of nickel-and-cobalt-free technologies.

I've also found a team of over 250 people executing well on the strategic plan the company has laid out, with working production lines that are producing electrolyte and prototype EV cells that are being positively received by our partners. Seeing these working production lines today and understanding that neither existed 15 months ago, is incredibly impressive. This is a testament to the team's strong execution and sense of urgency. It also demonstrates how well Solid Power has done in growing the team over the last few years.

And I've found deep bench strength across the organization. I'm happy to say that after interacting with our employees at all levels of the organization, my opinion of the team has only improved. Our shareholders should take comfort that Solid Power has built a very passionate and talented team.

Since joining, I have spoken at length with Solid Power's employees, partners, suppliers and other stakeholders. Through those discussions, I've identified some incredible near-term opportunities that we are going to focus on.

Specifically, my first near-term priority is to develop our international capability. Our team has done exceptionally well with our US and European partners. We have, and will continue to, drive operational and development progress in these regions. That said, we have been executing well with our Korean partners. And, as we work towards commercialization, we will need to strengthen our capabilities in Korea, and elsewhere in Asia. By building strong partnerships in this area of the world, Solid Power stands to benefit immensely. First, these partnerships can enable us greater access to our potential EV customers. Second, we will have a greater opportunity to develop relationships with material and equipment suppliers. Third, our operations and development capabilities stand to benefit from the incredible battery talent and infrastructure in this part of the world. For these reasons, we are developing a comprehensive strategy to position Solid Power to grow in Korea. I look forward to updating you as we have more to share.

The second near-term priority relates to our supply chain maturity. As I'll touch on in a moment, we are significantly increasing our production of both cells and electrolyte. As such, our need for timely, consistent supply of materials will only increase from here. This growth in operational production presents an opportunity - and indeed a growing need - to advance our strategic supply chain capabilities. We are investing in the tools and talent we need to elevate the supply chain competency, including an ERP and hiring additional talent.

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Our third near-term priority relates to increasing and enhancing our investor communications. For the last several quarters, the team has been focused on execution as we have built SP2, began powder production, improved cell assembly yields, and scaled from the 20Ah cells to EV cells. During this time, the team lessened their public outreach as we focused on execution in these areas. As we have made solid progress towards our 2023 goals of entering A Sample and advancing towards powder commercialization, we have an opportunity to increase our investor and public relations efforts. We are developing an outreach plan that includes greater investor interaction, educating the market on the advantages of solid state and our strategic value proposition, greater articulation of our timeline and strategy, and increasing our public relations and social media presence.

The Solid Power team has done excellent work in bringing the company to the strong position it has today. We have incredible opportunities that I believe will benefit the company, its partners, employees and shareholders. I look forward to keeping you updated on our progress.

Turning to our business update.

Overall, the company has made solid progress towards its 2023 operational goals over the first half of the year. We continue to execute well on our joint development relationships with Ford, BMW and SK On and across our government R&D contracts. This is evidenced by the recent extension of our Ford JDA.

With respect to electrolyte, we began producing electrolyte powder at SP2 in April. Since that time, we have continued to produce powder while beginning to increase our batch sizes. Along the way, we have also been troubleshooting the production line, quickly addressing and resolving normal startup production issues.

I'm very pleased to say our initial batches of powder have been performing well. As a reminder, we are measuring our powder against 12 internal performance and quality metrics including particle size, viscosity, conductivity and dryness. I'm pleased to say we have now qualified our powder on all 12 of these metrics. This gives us confidence in our timeline, and should allow us to increase our production volumes, phase out our SP1 powder production and redeploy our operations team towards developing our next generation powders.

As we look to ramp up our powder production, we still have some equipment on order that will help increase production volumes longer term. We referenced this on last quarter's call. We currently expect to receive this equipment in the second half of this year. The team has done a nice job of optimizing the performance of our current equipment, preventing this from impacting our near-term production.

In addition, during the quarter, we made great progress constructing a dedicated powder development lab at SP2. This lab is intended to help us optimize our continuous production, reduce the cost of our powder, and develop future generations of even higher performing electrolytes.

With powder production now up and running, we have continued discussions with multiple potential electrolyte customers and received very positive initial feedback on the samples that we have provided. Last quarter, we communicated it would take 1-2 years before we had supply agreements in place, but with this great feedback, it may be possible to accelerate this timeline.

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Turning to cell development.

The team continues to make strong progress elevating our cell builds. Back last fall, we experienced yield challenges scaling our 20 Ah production. Since then, we have worked closely with BMW's on-site team, invested in quality assurance equipment, and made key design changes to improve manufacturability. These changes allowed the team to greatly improve our yields.

I'm pleased to report that so far, the team has translated this strong performance to the EV line. Further, we and our partners are encouraged by the initial cell performance. In particular, our performance has allowed us to start production of EV cells that we expect to deliver this year for use in BMW's demo car.

That said, we have a way to go before we'll have cells ready for commercial use. Execution is critical. We need to continue to improve cell performance over the next few years before true commercialization. However, we are very excited about the possibility of our cells powering a full-sized BMW demo car between now and 2025.

Of course, as we have continued to build EV cells, we have been met with some challenges.

First, on the supply chain side, the team has encountered issues with our material supply. In particular, we have seen inconsistencies in the supply of like-grade materials. I'm pleased to say thus far, the team has adapted well and we are successfully navigating through these issues. At this time, we believe these challenges will not impact our long-term timeline. However, it underscores our near-term priority to elevate our supply chain capabilities, now that we are poised to produce at higher rates.

Second, as we've discussed previously, we are continuing our efforts to improve safety performance in our EV cells to match what was observed in our smaller cells. One of the goals of our technology is to deliver both superior performance and safety over today's batteries. This could allow OEMs to greatly reduce the size & complexity of their battery packs, expensive safety incidents, and, in turn, the overall cost of their batteries. We are working closely with our partners and are encouraged that our collective efforts can be integrated into our cells by the end of this year.

The Solid Power team has done great work to get us to the point where we are today. As a new leader in this organization, I'm energized to work with a team that is so focused on long-term execution and doing things the right way. Our strategy has not changed, nor have the short-term milestones we are focused on. For 2023 these remain:

• Scaling production of our electrolyte
• Continuing to deliver electrolyte to potential customers for sampling and feedback
• Delivering EV cells to our partners and
• Officially entering the automotive qualification process.

With that, I will hand it over to Kevin to take you through our financial results. Kevin?

Kevin Paprzycki, CFO Solid Power Inc.

Thanks John. Good afternoon, everyone.

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