SES AI - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 revenue was $3.527 million with 74% gross margin; net loss was $22.651 million (-$0.07 EPS). Revenue declined sequentially from Q1 ($5.793 million) but improved materially year over year from $0 in Q2 2024.
• Full-year 2025 revenue guidance of $15–$25 million was reaffirmed; quarter-end liquidity was $229 million with no debt, and cash used in operations fell to $10.8 million (-51% YoY, -53% QoQ).
• Strategic catalysts: launch of MU-0.5 (agentic “Deep Space”) to accelerate battery R&D; agreement to acquire UZ Energy to enter the $300B ESS market, with CFO highlighting UZ’s projected $10–$15 million 2025 revenue and an intent to scale substantially thereafter.
• Post-quarter, the company repurchased and canceled 871,754 shares for ~$1.1 million (~$1.27/share), signaling confidence and capital discipline; management reiterated focus on disciplined M&A and share repurchases.

What Went Well and What Went Wrong

What Went Well

• Gross margin of 74% on Q2 revenue, driven by high-margin services with automotive OEMs; MU enterprise traction surpassing 30 trial users, including new Japanese OEMs.
• Operational discipline: cash used in operations reduced to $10.8 million; strong liquidity of $229 million with no debt.
• Strategic expansion: MU-0.5 released with agentic capabilities (“Deep Space”) to compress R&D timelines from years to minutes; agreement to acquire UZ Energy to integrate ESS hardware with MU for data-driven improvements.
  • “We are excited to leverage UZ’s strong marketing team and hardware platform… to expand our market share in not only the global $300 billion ESS market but specifically in the United States” — Qichao Hu.

What Went Wrong

• Sequential revenue decline: Q2 revenue of $3.527 million vs. $5.793 million in Q1; sustained operating losses with Q2 net loss of $22.651 million despite improved cash burn.
• Continued elevated R&D and G&A spending, though both trended down QoQ (R&D $19.087 million; G&A $6.520 million).
• Consensus estimates (S&P Global) were unavailable, limiting beat/miss context for EPS/revenue; investor focus likely shifts to execution milestones (MU conversions to paid/JDAs, UZ integration and ESS pipeline) [GetEstimates – no data].

Transcript

Speaker 6

Good afternoon. Thank you for attending today's SES AI second quarter 2025 earnings release and call. My name is Jayla, and I'll be your moderator for today. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. I would now like to turn the conference over to our host, Kyle Pilkington. Please proceed.

Speaker 5

Hello, everyone. Welcome to our conference call covering our second quarter 2025 results. Joining me today are Qichao Hu, Founder and Chief Executive Officer, and Jing Nealis, Chief Financial Officer. We issued our shareholder letter just after 4:00 P.M. this afternoon and provided a business update as well as our financial results. You'll find a press release with a link to our shareholder letter and today's conference call webcast in the investor relations section of our website at ses.ai. Before we get started, this is a reminder that the discussion today may contain forward-looking information or forward-looking statements within the meaning of applicable securities legislation. These statements are based on our predictions and expectations as of today. Such statements involve certain risks, assumptions, and uncertainties which may cause our actual or future results and performance to be materially different from those expressed or implied in these statements.

The risks and uncertainties that could cause our results to differ materially from our current expectations include but are not limited to those detailed in the latest earnings release and in our SEC filings. This afternoon, we will review our business as well as your results for the quarter. With that, I'll pass it over to Qichao.

Speaker 1

Thanks, Kyle, and thanks to everyone for joining today. We had another strong quarter with significant progress achieved on key product revenue development and profitability milestones. Recently, in the third quarter, we continued that momentum to grow our profitability and revenue through an acquisition agreement that leverages our strength in Molecular Universe battery materials discovery and safety monitoring capabilities with an established player in the energy storage space. In the first quarter since the public release of Molecular Universe, I'm pleased to see that we now have more than 30 companies that have begun trial testing at the enterprise level and many more in the pipeline. Our mission is to accelerate the world's energy transition through material discovery and battery management. We are excited to see Molecular Universe helping human scientists to be more creative and develop new products much faster.

Since our launch of All In Our AI a year ago, we have been progressing through four stages. The first is chatbot. We achieved this milestone with the original launch of Molecular Universe Zero. Molecular Universe is a powerful LLM specifically trained on the world's most comprehensive battery domain expertise, combined with the world's largest and most accurate battery-relevant molecule property databases, computed through our recent advancement in GPU-accelerated large-scale computation chemistry algorithm. The second is AI Agent. We achieved this milestone with last month's introduction of DeepSpace in Molecular Universe 0.5, an agentic capability that can conduct senior scientist-level battery research. DeepSpace can reduce product development time from years to just tens of minutes. The ROI on this capability for battery development teams is tremendous. The third is physical AI. This is where we are right now.

Physical AI is the integration of Molecular Universe with physical systems, including drones, humanoid robotics, EV, UAM, and the largest of all, energy storage systems, or ESS. We are on track with EV B-sample development with our EV OEM customers and growing revenue from our AI-enhanced lithium-ion and lithium metal cells for drones and UAM. Our recent agreement to acquire UZ Energy launches us into ESS physical AI by providing the opportunity to integrate UZ's ESS hardware with Molecular Universe material discovery platform, LFP and sodium-ion for ESS, and precise battery health monitoring system. The fourth is revenue machine. The world's energy transition ultimately needs real physical products with software and hardware integrated. We expect exciting revenue growth to come from five areas of focus. These include: A, software and service. This will come from our Molecular Universe platform, subscriptions, and development projects from cell and materials makers. B, materials.

We are producing and selling novel electrolytes and other battery materials discovered through Molecular Universe. C, cells. We are producing and selling AI-enhanced lithium metal and high silicon lithium-ion cells using electrolytes discovered through Molecular Universe for drones, UAM, and humanoid robotics. D, EV development service. This is the original project that deployed the Molecular Universe with B-sample development with leading EV OEMs for lithium metal cells. E, and last but certainly not least, ESS. We will be producing and selling ESS hardware and software solutions that deploy safe and long-cycle life materials and precise health monitoring from Molecular Universe. This is where we expect to not only grow UZ Energy's core business, but also leverage that integration with Molecular Universe. To implement this platform strategy, we already have the world's best material discovery team.

We have been busy recruiting more top talent and looking for inorganic acquisition opportunities, such as the one with UZ Energy, that accelerate and extend this strategy. The reason that so many people are excited about our Molecular Universe platform and want to join us is that they see SES AI uniquely has all the ingredients required to build the best AI platform for energy transition. Some large battery companies don't dedicate enough resources to train AI models, such as cleaning and organizing data, developing large-scale computation algorithms, and purchasing computing power. Other large pure AI companies simply don't have access to high-quality battery data. People that join SES AI will have unparalleled access to high-quality battery data that are not available anywhere else, ranging from single molecule to formulations to cell levels, both through actual experiments and high-accuracy simulation.

They will be able to sell products that are not just safer and demonstrate better performance than their competition, but improve much faster. We will share more updates on all of this in the coming months. Now here's Jing Nealis for financial updates.

Speaker 4

Thank you. I will discuss our financial performance for the second quarter of 2025 and provide some context on how we are deploying our capital to support SES AI's long-term growth and the platform strategy Qichao mentioned earlier. Revenue for the second quarter was $3.5 million, with a 74% gross margin. Our Q2 revenue was primarily driven by contracts with our automotive OEM customers to develop AI-enhanced lithium metal and lithium-ion battery materials for EV applications. As noted in our pre-announcement, we affirmed our full-year 2025 revenue guidance of $15 million to $25 million. We utilized $10.8 million in cash for operations in the second quarter, which was a 51% decrease from Q2 2024 and a 53% decrease from Q1 2025.

We have been emphasizing our operational discipline for the past few quarters, and the significant reduction in cash usage in operations is a result of executing our plan to deploy capital effectively while growing our top line. We concluded the quarter with a strong liquidity position of $229 million with no debt. We also announced an agreement to acquire UZ Energy. I'm very excited about this strategic move to provide us the foothold in the fast-growing global ESS market and propel us forward as we expedite the implementation of intelligent energy storage solutions to address the escalating power needs of the AI era. We have a tremendous opportunity to grow the UZ Energy business from approximately $10 million to $15 million in projected revenue for the full year 2025 to exponentially larger growth in the coming years, together with the market share gain in the $300 billion global ESS market.

We'll continue to allocate our capital to focus on our AI platform enhancements and growth to support our global commercial readiness through 2025 and beyond, through organic growth and acquisitions. We have also allocated capital to share repurchases. While we didn't complete any repurchases during the second quarter, in the third quarter, we have repurchased and canceled 871,754 shares for a total investment of $1.1 million, or roughly $1.27 per share. In summary, we remain financially disciplined with substantial liquidity and no debt, positioning us for scalable and long-term growth. We appreciate your continued support and confidence in SES AI. Thank you. Now I will turn the call back to the operator.

Speaker 6

We will now begin our question-and-answer session. At this time, if you would like to ask a question, it is star followed by one on your telephone keypad. If for any reason you would like to remove that question, it is star followed by two. Again, to ask a question, it is star one. As a reminder, if you're using a speakerphone, please remember to pick up your headset before asking a question. Our first question comes from Winnie Dong with Deutsche Bank. Winnie, your line is now open.

I was wondering if you can tell us a bit more about UZ Energy, the genesis of that purchase, and how you plan to leverage that business on a go-forward basis. Secondly, I think you mentioned that you are on the lookout for more M&A opportunities. I was wondering if you can elaborate a bit more on that. You know, what kind of other companies you're looking for, what does the pipeline look like right now? Thank you.

Speaker 1

Yeah, Winnie, on UZ, they were actually one of the earliest companies in ESS. Ten years ago, they used to take LFP cells for EV applications and then supply them for ESS applications. The rationale for UZ is really, for ESS, we talked about entering ESS end of last year, and this is a really exciting market for us in addition to EV. They have good hardware capability, and they take cells and integrate them into these ESS containers. ESS actually is now the number one use for Molecular Universe, the LFP and the sodium chemistries. Now that by integrating with UZ, we have material development for LFP sodium from Molecular Universe, and we have the hardware integration, and we also get data.

One thing that makes Molecular Universe much more powerful than any other tools out there in the industry is access to high-quality real-world battery data that no other AI model in this field has. Now you have the new materials chemistry and the hardware integration from UZ, and now the actual data. We can also add our avatar, Molecular Universe, on top of that to really ensure safety. That integration really makes sense to us.

Thank you. On the second question, for other opportunities, other M&A opportunities?

Yes, I think we're open to new opportunities because Molecular Universe really empowers so many areas, not just at the material side, the material discovery side, but also material production, and then also different applications, drones, ESS. We're looking at a few other opportunities.

Great. Thank you.

Speaker 6

Our next question comes from Derek Soderbergh with the company Cantor Fitzgerald. Derek, your line is now open.

Jing, good to see you guys and hear from you. I wanted to get an update on the UAM and drone opportunity. It feels like that opportunity is sort of the nearest for you guys to potentially get your lithium metal technology out there. What needs to happen on the supply chain to ensure that ramp happens smoothly? Is the plan still to ramp the UAM or drone opportunities next year? Is that still the timeline? I've got a follow up.

Speaker 1

Actually, our revenue from drones and UAM has increased this year. A lot of the customers, especially in the U.S., want to move away from their current supply chain. We are in the process of updating and also certifying our carrier line so that it will be compliant to that request. That revenue is increasing.

What kind of capacity, you know, revenue capacity do you think you guys have, you know, sort of for the drones and UAMs at this point?

In terms of capacity, we are now working, our current career line and also contract manufacturing partners, we can get to pretty high capacity. That capacity is much higher than the current orders we have.

Got it. It doesn't sound like that's a huge issue there. Got it. Just as my follow-up on the software piece, 30 companies trial testing. I know it's only been a few months now, but what do you think it's going to take to get one of those companies to sort of move to a joint development tier? Is it just a matter of time testing the platform? Is it sort of identifying a certain amount of cost savings with the R&D process? What do you think it's going to take to get one of those companies to a joint development tier? Thanks.

Yeah, this is a really interesting area. It's so new because the use of AI is just not that widely used in the battery industry as it is in other industries. I think we are really close to a few large ones. I think the key is really seeing that this is not just a platform, but actually it can deliver a solution that's much better than the best human scientists can. Right now, some of the largest battery companies are giving challenge to Molecular Universe and seeing if it can solve problems that the smartest human scientists cannot. Once we can demonstrate that, I think that's game over. It will be the start of a wide adoption of Molecular Universe. It needs to solve a problem that's harder and it cannot be solved by the best human scientists.

Perfect. Really appreciate it. Thanks.

Speaker 6

Our next question comes from John Roy with Water Tower Research. John, your line is now open.

Great. I wanted to continue on the Molecular Universe. What is the overall general feedback from the enterprises that are currently using it? Are they wanting a lot more features? What are they doing with it mostly?

Speaker 1

Yeah, in terms of a full platform, it's already more accurate and more powerful than any other tools out there. A lot of the companies, instead of asking for more features, want more accurate results. One test they're doing is actually giving a really hard task that human scientists cannot solve. If you use Molecular Universe as a scientific curiosity chatbot, it already outperforms anything else out there. The task now is can it solve a problem that human scientists cannot solve, like a problem that's intrigued the human scientists for a long time and the team has not been able to solve. That's what we're trying to do next.

Great. Do you have any expectations when the next release might be coming and what some of those features might be? Are you putting in costs? Sorry, I haven't gotten into the tool that much and manufacturability issues into the system yet.

We expect the next version to be sometime in the September, October timeframe, and that will include more accurate cell level data. The prediction will be even more accurate.

Great. Thanks so much.

Thank you.

Speaker 6

There are no more questions registering in the queue. I'd like to pass the conference back over to our hosting team for closing remarks.