Greetings. Welcome to the Solid Power Inc. Full Year 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.

Thank you, operator, and thank you, everyone, for joining us today. I'm joined on the call today by Solid Power's President and Chief Executive Officer, John Van Scoter, and Chief Financial Officer, Kevin Paprzycki. A copy of today's earnings 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 U.S. 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 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 John Van Scoter.

Thank you, Jen, and good afternoon, everyone. Thank you for joining the call today. I'll begin today with a brief overview of 2023 and our overall progress. Then I'll walk through our 2024 goals and priorities. After that, I'll hand off the call to Kevin for the financial review, and we'll open up the call for Q&A. 2023 was a milestone year for Solid Power. We successfully commissioned SP2, our second Solid Power facility to lead electrolyte production. We accelerated our cell development with a key partner and overcame significant yield challenges as we scale production, and we delivered our first EV cells to officially enter the automotive qualification process. Before I go further in detail on our progress, I want to give kudos to the Solid Power team and express my sincere appreciation for their hard work in hitting these milestones. This was a challenging year, and the team did remarkable work to contribute to the business growth. I'll start with our progress on the electrolyte side. Since commissioning our SP2 plant in April, we've successfully phased out electrolyte production at SP1 and begun using SP2 electrolyte in our EV cells. We successfully ramped up our SP2 production, achieving an electrolyte production capability of 1.1 metric tons per month in multiple campaigns. This represents a tremendous increase in scale and a new best for the company. While this does fall just short of our original 2023 production goal, we were able to overcome a couple of unexpected challenges with equipment and incoming material quality that we saw late in the year. As we continue to work through these issues, we remain confident in scaling production of electrolyte in 2024. During 2023, we also sampled our electrolyte to new potential customers with positive reception. To be clear, these are not…

Thanks, John. Good afternoon, everyone. I'll start off today with an overview of our financial results and then discuss our '24 outlook. Our '23 financial results reflect strong execution by the team from our start-up of SP2 all the way through our entry into a sample. '23 revenue of $17.4 million fell right in the middle of our guidance range. This reflects solid performance on key milestones, partner commitments and government contracts. '23 operating expenses were $108 million, reflecting increased operational costs as we ramped both EV cell and electrolyte production over the year and increased R&D costs as we work to deliver our A1 sample cells. Our '23 operating loss was $90.6 million and net loss was $65.5 million or $0.37 per share. Turning to our balance sheet and liquidity. During '23, we invested $58.3 million into operations and $34.5 million in the CapEx, bringing our total cash investment to $92.8 million. This was well below our guidance range. When we were able during the year, we prudently pushed expenditures into '24. All in, we deferred roughly $35 million, consisting of about $20 million in operational investments, mostly development materials and around $15 million in capital investments related to our R&D lab and other SP2 enhancements. As a result of our lower spend, we ended the year with total liquidity just under $416 million. Our ending liquidity includes $34.5 million in cash and equivalents that we keep on hand, but the bulk of this amount, around $381 million is invested and shows up in the marketable securities and long-term investment line items on our balance sheet. All of those investments are in A rated securities. We plan to provide longer-term cash guidance later this year. However, at the moment, we continue to believe this strong liquidity position, combined with…

Thanks, Kevin. 2023 was a milestone year for Solid Power, enabled by hard work and execution of the Solid Power team and the excellent collaboration we've had with our partners. As we enter 2024, we're acting with competitive urgency, the successes of 2023 have us well positioned to execute. I look forward to keeping you updated. With that, I will hand it over for Q&A.

We will now begin the question-and-answer session. [Operator Instructions]. Our first question comes from Mike Shlisky with D.A. Davidson. Please go ahead.

Yes, hello. Good afternoon, and thank you. John, some of your questions -- some of your comments about buying some brand new customers were interesting. Can you maybe share with us how different would the powder be from one customer to the next to find someone brand-new here? And are there major expenses that have to take place to onboard a potential new customer and a long-term customer [ph]?

Yes. Good to hear from you, Mike. Good question. We're finding that the variance across the various customers require a degree of customization but not substantial difference from customer-to-customer. We also have designed the SP2 electrolyte facility to already comprehend those changes from customer-to-customer. So the facility is responding well to the changes that we're asking it to make. Without getting into too much of the weeds, things like particle size, morphology, those sort of things are varying customer-to-customer, all well within the variability of our process within SP2. We don't expect that there will be any significant cost difference to manufacture those from customer-to-customer. But we are very excited about being able to tune our electrolytes specifically to our customer cell design needs.

Great. Thanks. Just a follow-up there. How about the cost to actually get that potential customer? When you try and find the right powder for them, do they come to you with what they want? We just spend a lot of time experimenting and there's a lot of cost to that? I'm just kind of curious as to you do have new customers are going to start seeing elevated costs maybe in '25 or in 2026?

I think we have actually -- we're seeing what we had predicted where we would go in with an initial sample. There will be initial testing done by the customer at the powder level. And then they would give us feedback around changes that they would like to see. We would then resample them maybe once, maybe twice. And then that would progress into where they would start to incorporate into cell designs. We have a number of customers that are in that process right now. We have previously, I think, signaled that we thought the whole process from that initial sample through integration to their cell designs and then into actual supply agreement could take between 12 months and 24 months. And I think we're seeing now that consistently around 18 months to 24 months, it's taking to do that process and very much in line with what we had expected. We don't see a significant cost increase in order to do that this year or next, we've comprehended that in our overhead structures that we've signaled to the market.

Got it. And then I also wanted to follow-up about your comments about thermal runaway incidents that you had mentioned in some of the testing in some of the cells. Obviously, just having one is a problem. One issue is a problem. But can you maybe tell us what percent of the cells that you did produce were affected by this? Was it a flaw in just the cell that you've found, or was the overall, where all the cells produce the exact same way? And again, are there going to be some unusual or high cost to resolve that issue. Obviously, we want to be a very safe cells. I was curious if you can just give us some kind of numbers behind that?

Yes. So as you know, well, Mike, this is not a unique phenomenon to Solid Power. This is part of the normal battery scaling and technology maturation of the new technology. So in terms of percentage, we have manufactured over 1,000 cells, EV cells in the second half of last year. And this is a very, very small percentage of those, a handful that have exhibited this phenomena. It is very early on, on the most current occurrences. We are not at the root cause yet. But I'm pleased to say that the team is embracing standard, well-proven engineering principles to get to root cause, 8D, issue call diagrams, SMAs, etcetera. And when we've had these type occurrences in the past, we've resolved them rapidly. So we wanted to be transparent in share of this recent occurrence. But when we've had these kind of events in the past, applying those type disciplines with the quality of the team that we have here, we expect that we'll resolve this quickly. And again, no significant incremental cost to do this. I think we've comprehended the OpEx that we need to on an ongoing basis, continue to iterate, evolve and recover from these situations like we've just signaled have occurred.

Great, outstanding. I'll pass it along. Thank you.

The next question comes from Jeffrey Campbell with Seaport Research. Please go ahead.

Good afternoon, and congratulations on a strong quarter. The SK On agreement noted that SK's license Solid Power solid-state cell designs and manufacturing processes that is limited to R&D activities and may not be used for commercial cell production. I just wondered, does this limitation specifically refer to the SK On site?

Yes, it does. Specific to the SK On agreement. If successful in this phase, we would expect that, that would give way to a subsequent license agreement for commercial production.

Okay. Great. In your earlier discussion, you mentioned that one of the goals in expanding your presence in Korea was exposure to new technology. I was just wondering what kind of effect [ph] you're thinking about? If there's something specific at this point?

There really isn't, Jeff. There is so much going on in the Peninsula that we're trying to keep our aperture open. My initial thought is towards higher nickel content NMCs. We're already having those discussions with various vendors. Then I thought goes to the tool set, staying up with the current state of lithium-ion equipment and manufacturing techniques because the bulk of that is, I think you know, will be applicable into our manufacturing flow for the cells. And then just anything that's coming out of universities or national labs, given the amount of focus that Korea has in the battery space kind of is where my head goes, but it's really across the board right now. It's too early to say any specifics underneath those categories.

Okay. That's a good laundry list of things keeping an eye on. My last question is you mentioned that the A2 cell design is a focus for BMW in 2024. Since A1 sales have been delivered since October, and I assume that references to BMW correct me if I'm wrong. Do you have a time line for accomplishing your 2024 A2 goals?

Our first confirmation, yes, those A1s did go to BMW last year. And we actually worked on A2 design last year. And when BMW came in with their requirements for the demo car this year, we quickly realized we need to pivot, take the learnings from A1, which have been substantial, both at BMW as well as within Solid Power, apply them to the design that we have for A2 and then drive to execution on that design by late this year is the current scheduling for that design and initial production.

Okay, great. Thank you. I appreciate that.

[Operator Instructions]. Our next question comes from Brian Dobson with Chardan Capital Markets. Please go ahead.

Hi, good evening. Thanks for taking my question. So just an additional question on the expanded relationship with SK On. Do you view that as a long-term strategic partnership? And do you see that as rather important to expanding on the Korean Peninsula?

The simple answer, Brian, is yes. We think that to be able to do concurrent development with our technologies on all three continents is going to be a strategic advantage of ours. The discussion and the relationship with SK since putting that agreement in place has only gotten better. We're even discussing follow-on agreements potentially about how we could continue to expand the collaboration. So it is very strategic to us at the cell level and then feeding back to our electrolyte, the performance, given their high-volume expertise to make sure that our electrolyte is the best it can be moving forward is very, very important to us. And yes, they are very strong on the Peninsula. So the relationships that they bring across the board, whether it's equipment or whether it's relationships with the government or universities is all very, very important to us going forward. Also, their relationships with material suppliers, raw material suppliers that is also very important to us. So it's very, very important to us moving forward strategically in Korea.

Yes, I certainly agree with that viewpoint. I guess circling back to one of your key goals for 2024 as far as expanding electrolyte production. In that segment, you touched upon expanding your sampling program and said that you're already in talks with several companies. Could some of those be automotive OEMs? Are you focusing on the automotive area? Or are there other areas that you wish to expand into with your sampling program?

Yes. Simply put, they are in the automotive space with both EV OEMs as well as battery manufacturers that target the EV space. And I would say they're roughly evenly split right now between those two categories. We have had some discussions with our battery OEMs about them taking the technology into other spaces beyond automotive. But I would say that, that's very early on at this stage. Right now, we are going to rely on them to do that right now and leverage their capabilities in those other spaces. So it's really primarily automotive and then evenly split between EV OEMs and battery OEMs.

Yes, very good. Is it fair to say that those battery suppliers would be Tier 1 battery suppliers or Tier 1 automotive suppliers?

Yes.

Yes, very good. Thanks very much.

Thank you, Brian.

This concludes our question-and-answer session. I would like to turn the conference back over to John Van Scoter for any closing remarks.

Yes. Well, thank you for the questions, and thank you for your interest in Solid Power. We look forward to updating you as we continue to execute along our vision and our progress along our strategic objectives. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.