Company Overview
SES AI Corporation (SES) is a pioneering force in the world of advanced battery technology, spearheading the development and commercialization of high-performance lithium-metal (Li-Metal) batteries. With a relentless focus on innovation and a deep commitment to sustainability, SES has emerged as a trailblazer in the electric vehicle (EV), urban air mobility (UAM), and drone industries.
Founded in 2012, SES has dedicated over a decade to perfecting its proprietary Li-Metal battery technology. The company's mission is to power a new era of electric transportation on land and in the air, addressing the global need for clean and efficient energy solutions. SES' differentiated battery technology aims to combine the high energy density of Li-Metal with the large-scale manufacturability of conventional lithium-ion (Li-ion) batteries, positioning the company as a key player in the transition from fossil fuel-based vehicles to eco-friendly EVs.
Early Challenges and Strategic Pivot
In its early years, SES faced significant challenges in developing a commercially viable Li-Metal battery for EVs. A crucial turning point came when the company made the strategic decision to transition away from solid-state Li-Metal technology in 2012. This pivotal move allowed SES to focus on creating batteries that could operate at room temperature and be manufactured at scale, essential factors for mass-market adoption.
Strategic Partnerships and Milestones
The company's technological prowess and potential caught the attention of major industry players. In 2015, SES received its first strategic investment from General Motors, marking a significant milestone and validating the company's approach. This investment not only provided crucial capital but also signaled growing interest from major automakers in SES's innovative Li-Metal technology.
Building on this momentum, SES continued to make substantial progress in its battery development. In 2021, the company achieved another significant milestone by signing what it believes to be the world's first automotive A-sample Li-Metal joint development agreements (JDAs) with GM, Hyundai, and Honda. These partnerships have been instrumental in allowing SES to collaborate with leading OEMs and further refine its technology to meet the stringent requirements of the automotive industry.
Advancements in EV Technology
The company's progress in the EV segment is particularly noteworthy. In 2023, SES achieved a significant milestone by becoming the world's first to enter automotive B-sample joint development for Li-Metal batteries. Its 100mPOWER Li-Metal cells successfully passed the rigorous GB38031-2020 industry safety test, a mandatory global standard for EV traction batteries. This certification paves the way for SES to move closer to commercial production and further integration with its OEM partners.
Expansion into Urban Air Mobility
Recognizing the immense potential of Li-Metal batteries in the emerging urban air mobility (UAM) market, SES has also made strategic moves to capitalize on this opportunity. In 2024, the company converted its existing EV A-sample production lines to dedicated UAM cell lines, with both the Shanghai and Chengdu facilities completing site acceptance tests and achieving ready-to-use status. These customized 30mPOWER Li-Metal cells are designed to replace the current 2170 Li-ion cells used in UAM applications, offering a significant advantage in terms of power density and flight time.
AI-Driven Innovation
Underpinning SES' technological advancements is its groundbreaking "All-in on AI" initiative. The company has made substantial investments in developing state-of-the-art artificial intelligence (AI) solutions to accelerate its battery material discovery, manufacturing processes, and safety monitoring capabilities. SES' AI for Science, AI for Manufacturing, and AI for Safety programs have already yielded impressive results, including the identification of new electrolyte molecules that improve lithium-metal cycle life by 20% and the achievement of 95% prediction accuracy for battery incident forecasting.
Financials
The financial performance of SES has been marked by consistent investments in research and development, as the company prioritizes technological leadership over near-term profitability. In the fiscal year 2023, the company reported a net loss of $53.4 million, with operating expenses of $78.2 million. However, the company's strong balance sheet, which included $332.5 million in cash, cash equivalents, and short-term investments as of December 31, 2023, provides a solid foundation to sustain its growth initiatives.
For the most recent quarter (Q3 2024), SES reported a net loss of $30.186 million, which was 124% higher compared to the net loss of $13.5 million in Q3 2023. This increase was primarily driven by a $16.0 million rise in research and development expenses, partially offset by a $1.1 million decrease in general and administrative expenses. The company's operating cash flow (OCF) for Q3 2024 was -$22,868,499, while free cash flow (FCF) stood at -$24,436,453.
It's important to note that SES has not generated any revenue from sales to customers as of September 30, 2024. The company has spent $59.9 million on gross research and development activities during the nine months ended September 30, 2024, prior to reimbursements of $8.6 million from its OEM partners under joint development agreements (JDAs).
Liquidity
As of September 30, 2024, SES had a strong liquidity position with $66.74 million in cash and cash equivalents. The company's debt-to-equity ratio stood at 0.036 as of December 31, 2023, indicating a low level of debt relative to equity. SES also maintains a healthy current ratio of 15.24 and a quick ratio of 15.22 as of September 30, 2024, suggesting a robust ability to meet short-term obligations.
Looking ahead, SES' management has outlined a more capital-efficient plan for 2024, with expected total cash usage in the range of $80 million to $95 million, down from the previous guidance of $100 million to $120 million. This revised guidance reflects the company's prudent approach to managing its expenditures while capitalizing on the revenue opportunities presented by its AI-powered solutions and the growing demand for its Li-Metal batteries in the EV, UAM, and drone markets.
Specifically, SES now expects cash usage from operations to be $70 million to $80 million, compared to the previous guidance of $85 million to $95 million. Capital expenditures are projected to be in the range of $10 million to $15 million, down from the previous guidance of $15 million to $25 million. The company believes its strong balance sheet will provide liquidity well into 2028, given the reduced and more capital-efficient cash usage, as well as the expectation that their "all-in on AI strategy" will start generating revenue in the near future.
Future Outlook
Despite the challenges inherent in developing and commercializing transformative battery technologies, SES has demonstrated its resilience and innovative spirit. The company's strong partnerships with industry leaders, its focus on sustainability, and its pioneering work in AI-driven battery innovation position it as a compelling investment opportunity in the rapidly evolving clean energy landscape.
SES continues to make significant strides in both the EV and UAM segments. In the EV sector, the company's 100 mPOWER lithium metal cells successfully passed the rigorous GB38031 global industry safety test in Q3 2024, marking an industry first for lithium metal and a major milestone toward commercialization. In the UAM and drone segment, SES has two production lines supplying cells to multiple customers, including SoftBank. The company's UAM-specific 30 mPOWER lithium metal cells offer 50% higher power density compared to the lithium-ion cells currently used by UAM operators.
As SES continues to push the boundaries of battery technology, investors and industry observers will closely follow the company's progress in navigating the complex and dynamic landscape of electric transportation. With its unwavering commitment to innovation and its strategic execution, SES AI Corporation is poised to play a pivotal role in shaping the future of sustainable mobility.