Live: QuantumScape (QS) Q2 Earnings Coverage

So the second deal which is announced after the expanded PowerCo agreement is that we have signed a JDA with a global auto major OEM. Here, our job is to make sure we take our technology platform and adapt it to this customer’s needs. So the JDM does exactly that. make sure that their specifications, the product that they need, we adapt our technology to that. Once we get that going, the same playbook that we have used with PowerCo. That same model applies that we, as a joint team will make sure that we are transferring the technology to them to then ramp in volume. So the playbook has been defined with the PowerCo agreement, and we are doing the same thing into our next customer as we had originally planned. And we have had this JDA now signed and ready to go.

-Siva Sivaram, CEO

building upon what we just announced, our vision for the business model provides 2 sources of cash inflows. On the front end, we will monetize development activities for our customers to tailor our core technology to meet their specific needs. Subsequently, as the customer ramps production, we realize royalties over the lifetime of the project.

Some of these payments could take the form of licensingfees or royalty prepayments as in the PowerCo deal. As we continue to develop further generations of our technology, we will maintain both lines of business to generate consistent and compelling cash flows. Payment for development activities has the benefit of being near term. The royalty payments represent the majority of the value capture through a consistent long-term stream of high gross margin revenue.

This business model is unlocked by a highly differentiated technology platform. This expanded PowerCo deal is a validation of this vision with about $0.25 billion to bring this technology to market. This program will serve as a proof of concept of the QSE-5 technology and support other programs targeting VW vehicle applications such as vehicle demo fleet and other programs under the scope of the overall project covered by the collaboration agreement. The intention of the program is to leverage the combined expertise and resources of QS and PowerCo to advance the QSE-5 technology, ensuring its readiness for commercial application in the automotive industry. As part of this deal, PowerCo will be contributing up to $131 million to QS in order for a joint team in San Jose to accelerate the scale-up of QS technology.

The agreement enables earlier PowerCo engagement in the QSE-5 production and automation efforts, advancing the ramp-up of the QS San Jose pilot line. You’ll see that this expanded agreement is a clear signal of the growing strategic technical and financial alignment between our 2 companies and reflects our shared confidence in QSE-5 as a game-changing platform for the battery industry.

-Siva Sivaram, CEO

Last, I want to address our strategic outlook. This quarter is a major inflection point in our journey, and we are now firmly in the commercialization phase of our company. We believe this expanded deal with PowerCo is an unambiguous demonstration of both the economic value of our solid-state platform and the power of our capital-light business model. Under this model, we have the ability to monetize development activities early on and then collect licensing royalties as our customers ramp production volumes. We are just getting started.

We have a long and deep relationships with additional auto OEMs, and we continue to see these engagements intensify as demonstrated by our new JDA with an existing automotive customer. We believe our technology platform has the potential to revolutionize the automotive industry as well as other rapidly emerging markets, amounting to a total addressable market in the hundreds of billions of dollars annually. The challenges of scaling production remains significant, and there is still much work left to do. But working together with our world-class partners, we believe we are closer than ever to achieving our long-term goals.

-Siva Sivaram, CEO

Now an update on our annual goals. On June 24, we announced the completion of our first of our annual goals. Our next-generation Cobra process has replaced Raptor as our baseline separated production process. We expect this step change in efficiency and productivity will enable B1 sample shipments this year, and we will continuously improve all aspects of the Cobra process as we ramp production. To keep pace with this higher rate of separator production, we are installing higher-volume cell production equipment, and we remain on schedule to meet this second 2025 goal. Production ramps are always challenging. And as we scale our cell production, we are focused on improving metrics such as cell reliability, process stability and equipmen.

-Siva Sivaram, CEO

QS now up 2.26% as the conference call is about to kick off. Access the webcast here. 

With QuantumScape nailing milestones and locking in up to $131 M from VW PowerCo, how is everyone feeling?
1) All-in—can’t miss this train 2) Buying more—late but not too late 3) Holding—got my spot, thanks 4) Sitting out—no FOMO for me

QS dropped 7% before the bell today, which comes on the heals of a 140% 6 month shoot up. While a pre-revenue company, Wall Street gives the stock a price point which is half the current valuation.

Hold on to your hats as management works on hitting its milestones.

Given QuantumScape is a pre-revenue company, much of the reaction will be based upon what the company has to say on their conference call. You can register to attend here.

Here’s what QuantumScape had to say about thier PowerCo agreement:

“We have announced an expansion of our existing collaboration and licensing arrangement with Volkswagen Group’s battery maker PowerCo. This upgraded deal sees PowerCo contributing additional payments of up to $131M to QS over the next two years to support our joint commercialization activities. These payments are connected with certain milestones to be achieved by the joint scaleup team; the first milestones linked to expected payments of more than $10M have already been achieved. These new payments are additional to the previously announced $130M that will be due to QS upon satisfactory technical progress and execution of the full licensing agreement. As part of this upgraded collaboration agreement, QS will prioritize the output of QSE-5 cells from our San Jose pilot line to support our joint activities with PowerCo, though we maintain our non-exclusive arrangement and retain the right to provide cells to our other prospective customers.”

EPS of -.18 (slightly misses Wall Street estimates of $.20).

QunatumScape earnings are out and the highlight is the company says:

“We are happy to report that we have now entered into a joint development agreement with another major global automotive OEM.”

More analysis to come…

Alphabet just reported very solid earnings but we’re still waiting on QuantumScape. Once the company reports we’ll begin analyzing their earnings.

The closing bell has rung and we’ll be monitoring for QuantumScape’s earnings and posting updates in this live blog.