• Capital Expenditures: $17.9 million in Q3, primarily for equipment purchases for low-volume QSE-5 prototype production and Cobra process preparation.
• GAAP Operating Expenses: $130.2 million in Q3.
• GAAP Net Loss: $119.7 million in Q3.
• Adjusted EBITDA Loss: $71.6 million in Q3, in line with expectations.
• Full Year Adjusted EBITDA Loss Guidance: Tightened to $280 million to $300 million, at the higher end of the original range.
• Capital Expenditures Guidance: Lowered to $60 million to $75 million for 2024.
• Liquidity: $841 million at the end of Q3.

• Warning! GuruFocus has detected 2 Warning Sign with QS.

Release Date: October 23, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• QuantumScape Corp (NYSE:QS) has begun producing low volumes of its first B-sample cells, marking a significant milestone in its development process.
• The QSE-5 cells have a measured energy density of 844 watt hours per liter and can charge from 10% to 80% in just over 12 minutes, showcasing advanced performance metrics.
• The Raptor process, a new separator production technology, has been successfully implemented, improving film quality, performance, and energy consumption.
• QuantumScape Corp (NYSE:QS) has a strategic partnership with PowerCo, a Volkswagen Group battery manufacturer, to bring the QSE-5 technology to mass production, which includes a $130 million prepayment.
• The company ended Q3 with $841 million in liquidity, projecting a cash runway extending into 2028, supported by the PowerCo deal and operational efficiencies.

Negative Points

• QuantumScape Corp (NYSE:QS) faces challenges in improving cell reliability, yield, and equipment productivity during the B-sample phase.
• The company reported a GAAP net loss of $119.7 million for Q3, with adjusted EBITDA loss at $71.6 million, indicating ongoing financial challenges.
• Higher legal fees and settlement accruals have pushed the adjusted EBITDA loss guidance to the higher end of the original range for 2024.
• The transition from Raptor to Cobra process for higher volume production is ongoing, with full implementation expected in 2025, indicating potential delays in scaling up production.
• The collaboration with PowerCo requires careful management to ensure successful industrialization and scaling, which could pose risks if not executed effectively.

Q & A Highlights

Q: Can you elaborate on the significance of QuantumScape entering the B-sample phase of the automotive qualification cycle? A: The B-sample phase is significant because it marks the first time a battery meets all major performance specifications demanded by consumers, such as range, faster charging, and better safety. This phase is crucial for transforming the electric vehicle marketplace by offering a no-compromise alternative to internal combustion vehicles. - Siva Sivaram, CEO

Q: What key challenges remain ahead after beginning low-volume QSE-5 prototype production? A: The main challenges include systematically and methodically scaling up production to millions of cells for vehicle deployment. This requires a focus on quality, processes, customer feedback, and collaboration with partners to achieve gigawatt-hour scale production. - Siva Sivaram, CEO

Q: What is required to achieve the 2028 runway extension? A: The 2028 runway extension involves more than $0.5 billion of non-dilutive capital improvements, driven by PowerCo's investment in production facilities, resource contributions, a $130 million royalty prepay, and operational efficiency improvements. - Kevin Hettrich, CFO

Q: Do you see the timeframe of 2026-2027 as reasonable for the EV space to begin implementing solid-state technology at lower volumes? A: We are on the fastest path to production, focusing on quality and collaboration with partners. Establishing a baseline that delivers on all performance metrics is crucial, and we are working methodically to achieve this with our customers. - Siva Sivaram, CEO

Q: Are there any key learnings from the continuous running of the Raptor line that have been incorporated into the higher volume line starting next year? A: Yes, the Raptor line serves as a platform for learning and improving the Cobra process. Running a stable baseline allows for systematic performance improvements, such as achieving 844 watt hours per liter and other key metrics. - Siva Sivaram, CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.