QuantumScape Corporation (NYSE:QS) Q4 2022 Earnings Call Transcript

Gabe Daoud: Thanks, Jagdeep. Super helpful. And then I guess on that note, just hitting on cathode loading going to 5-milliamp hour. I think in one of your previous slides, you showed the QS-0 power cell and the QS energy call, both of which had pretty good or attractive fast charge capabilities. So, I guess the question is going to the energy cell and the 5-milliamp hour to bump up energy density. Would you still expect to have that, call it, 50 minutes or so charge time for 10% to 80% — for the 10% to 80% charge window? Would that still be fair? And is that the 950 or so watt hour per liter energy density target on the energy cell, is that still fair?

Jagdeep Singh: Yes. So I think the long-term numbers that we’ve shared in the slide that you’re referring to are still our targets. So we expect the energy cell to be somewhere in the vicinity of 900 to 1,000 watt hours per liter, as we’ve mentioned before. And we do think that cell should still be able to charge more quickly than conventional lithium-ion batteries. So yes, we think getting something in the 15-ish-minute range is not unrealistic for that cell. For the reason that we mentioned before, which is that cell does not — even though it’s an energy cell, with the thick cathode. It doesn’t have an anode. So there’s no extra distance for the lithium-ions to have to traverse in the anode. So we can basically use the ion transport length of a conventional lithium-ion battery, which includes both anode and cathode distance, and apply that purely to the cathode, so that we can get thicker cathodes, more to cathode than conventional cells or have those cathodes be able to charge faster the conventional cells.

And then the power cell, we believe, will be — could potentially get even faster than that. But of course, at the extent of somewhat lower energy density, because as you point out to get the power cathode you have, somewhat thinner cathode with somewhat higher amount of electrolytes. So, basically lower cathode mass loading, which gives you both higher power and lower energy density. So effectively, the short answer to your question is, yes, we do believe that our energy cell should still be compelling on the power front, and our power cell will also have an interesting level of energy density.

Gabe Daoud: Great. Thanks, Jagdeep.

Jagdeep Singh: Absolutely.

Operator: Our next question is from Winnie Dong with Deutsche Bank. Your line is now open.

Winnie Dong: Hi. Thank you so much for taking my question. I wanted to elaborate a little bit more on the cathode capacity loading improvement. How does that change your in-process A-sample testing right now with customers, or do you then anticipate that as an improvement that will be beyond? I just want to clarify that. That’s my first question. Thanks.

Jagdeep Singh : Yes. Yes. So as we’ve said before, we see the A-sample as really being a phase. There’s a series of deliveries we’ll make under the A-sample umbrella. And subsequent versions of that sample will have this new higher mass loading, higher capacity loading cathode as well as the more efficient packaging. And then that will lead to B and C-samples subsequently.

Winnie Dong: Got it. And then in terms of the series of A-sample prototypes that you’ll be continue to deliver this year. How long do you anticipate this sort to last? And I think previous quarters, you’ve alluded to B-sample and C-sample, each being around 18 months or so, which puts us into perhaps the timeframe of 2026 or so. So with A-sample sort of rolling out this year as well, keeping a picture for us in terms of the time line for ultimate commercialization?

Jagdeep Singh : Yes. So we haven’t said anything — we haven’t provided any new communications relative to time line other than what we said on the last earnings call. I think the main thing that we, I think, are pointing out on this call is that when you look at the B and C-samples and even the commercial product, some of the key requirements for those subsequent samples and products, are the key things we’re focused on in 2023. So whether it’s the B or the C sample or more advanced versions of A or the product, they all need more efficient packaging. They all need the ability to have these more energy dense cathodes or higher capacity loading cathodes. And frankly, they all would need this — we think this new fast film production process that we’ve also alluded to on this call.

We think those are all really key things. And they all need obviously increasing liabilities you go from prototype to products. So those are all things that are a key part of our goals for this year. And regardless of which sample we want to focus on in the future, we have to get these things done this year. And that’s kind of why this is an important year for us. And we just want to make sure that we execute on these key goals because they will form the foundation for all those subsequent milestones.

Winnie Dong: Got it. Thank you so much. If I may just squeeze in one more on the topic of improving quality and consistency. Could you maybe elaborate for us sort of like the steps that you’re taking to achieve that goal for this year? Is it more — perhaps more material vertical integration? Is it more automation of the equipment? Any details on that? Thank you.

Jagdeep Singh: Absolutely. So there’s a lot of things that can lead to quality that we want to improve. So things like particles, for example, if you have any kind of a large particle sitting between the layers of your cells that could eventually lead to issues. If you have, for example, tabs that are not welded properly as you bring together all the different layers in the cell that could lead to issues. There’s just a lot of things that all around, incoming materials quality. If the material is getting in had defects or process control. If things are not — if the partners itself is not operating within your statistical buses control limits, for example, automation, which allows you to have more precision in how you assemble and align the various layers.

So those are all areas that are potentially contributors to quality consistency. And those are the kinds of things that we are trying to tighten up this year to ensure better and better quality. I think the key point I would emphasize is that other industries, including some of the 1P efforts in the letter, like the multiples on the capacitor industry as well as the lithium-ion battery industry have already shown the ability to control those parameters quite well. And so we don’t need to reinvent the wheel there. We just plan on having a disciplined execution process, a disciplined manufacturing team that puts in place those controls, those processes, that level of automated precision that ensures that we don’t have extraneous particles floating around or that we don’t have emphasized placement or we don’t have bad tab wells and those kind of things.

So those are all things that a doable. We just need to implement an organization that has the discipline to repeatably execute on that front.

Winnie Dong: Great. Thank you. Appreciate all the response.

Jagdeep Singh: Absolutely.

Operator: Our next question comes from Chris Snyder with UBS. Your line is now open.

Chris Snyder: Thank you. I understand you cannot share specific customer testing protocols and results. But could you provide some general feedback from — that you got from customers post delivery of the A0 sample?

Jagdeep Singh: I can reiterate what we said earlier, which is that we feel that most of the samples we provided have performed well. We’ve mentioned some of the specific tests that were done, including fast charge, some of the early capacity retention curves and so on. And I can also point out that one of the areas that we want to keep improving is, in fact, the reliability of these cells. And so that’s why we spend a lot of time talking about things we plan to do this year to improve quality and consistency, all the process automation and particle reduction and so on. Other than that, there’s not a lot we can say about the specifics. These are customer-specific protocols and results. But I think from our standpoint, we can say, we’re actually pleased with where we are. And we think we’re well positioned to go from here to the next phase, which involves adding this additional functionality that we talked about earlier today.

Chris Snyder: Thank you. I appreciate that. And then, I guess, maybe just following up on some of the prior questioning on the pathway from the A0 sample to the B sample. I guess how many generations of the A sample should we expect? And will we get updates on these as the samples progress? And then kind of another one on that same line, are the subsequent generations of A samples customer specific in that like A sample to customer X would be different than the A sample of the customer Y or is it uniform across all customers?