Morning, everyone. Thanks again for joining us at TD Cowen Sustainability Week. This is the last day, and we hope you enjoyed the event. This morning, and next up, we're delighted to host QuantumScape's CFO, Kevin Hettrich, for a fireside chat. I'm sure as folks online are aware, QuantumScape is a next generation lithium-ion battery company, hoping to commercialize solid-state lithium-metal batteries to improve performance in EVs and also consumer electronics. Excited to get an update. Kevin, thanks so much for joining us. Gabe, thank you for having me. Yeah. Kevin, did you wanna set the table with a couple slides before getting into some Q&A? Sure. You, I can just verbally hit a few points that you discussed. Why solid-state lithium-metal batteries? Actually, Dan, if you do advance towards what is a solid-state battery and why is it better, our three-column slide. Batteries are ubiquitous in things, in cars, in CE devices, grid, et cetera. All of the commercial cells use that structure on the left. You have an anode, you have a cathode, you have a separator between. The way a battery works is you take the lithium-ion, comes from the bottom, the cathode. When you want to store energy, it pushes up to the anode. It's just like rolling a ball up a hill. When you want energy back out, the ball comes back down the hill from the anode to the cathode, and just repeat that over and over. What QuantumScape is working on is that structure on the right. Visually, you'll notice two things. One is that the anode, that kind of graphite carbon structure, is gone, as manufactured, and that we've replaced the separator in the middle, with a solid ceramic. The reason why we do that is, as you can see, we're removing volume and mass from the cell. Cells, we're targeting them to be lighter and smaller. We can get into more detail later. This innovation also helps with charge time, and the things that we're removing from the cell are organic materials. By reducing the level of organic materials in the cell, we believe that's going to improve safety as well. Energy density, you can think of like range, charge time. That's literally how long you have to wait while you're recharging the car, and of course, safety is critical. We have six agreements with automotive partners. By far, VW is the deepest and strongest of those partnerships, with whom we have a JV for commercialization. There are three levels of maturity, of sampling stages. Just last December, we shipped our first A- sample prototypes, or what we refer to as A0. That is where we are in terms of product maturity. fantastic team, strong balance sheet, and a very, very, exciting and fun moment for the company. Great. That's perfect. Maybe before diving into some of the questions or discussion on the tech side, since you did note you shipped A0 samples at the end of last year to some of your OEM partners, can you maybe just share any initial feedback that you've received so far? As we mentioned on the last shareholder letter, that those results, generally went quite well. We do need to improve reliability as we go from A- sample to B stage and B to C stage, but we were, I think, pleased with the performance of those cells. Okay, good. Good. From a commercialization standpoint, it seems like, at least based on the last shareholder letter and your earnings call, you guys have maybe settled on a 5 Ah cell, which I think is maybe the 24-layer. Maybe just talk a little bit about the decision or the comfort level and going forward with what you think is, you know, a good size cell for EV applications and that 5 Ah level. Yeah, you can think of the automotive sector today as being somewhat bifurcated between quite large cells and then cells in that zip code of 5 Ah, which we settled on for the first product. In the fullness of time, we plan to make both. The rationale to choose the small end of the spectrum is really threefold. One is we've shipped 24-layer cells in that type of XY dimension in those A0s. In terms of time to market and cost of development, there is a shorter path than kind of locking in on the thing that you know. The second reason is that in that form factor, we're intending this to be better in terms of power or energy than anything you could otherwise buy. The start of our S-curve for this technology, for those who are familiar with that concept, we're targeting to put above what we think lithium-ion can ever achieve, and we only continue to go from there. Finally, what's kind of unique about the application requirements in automotive and consumer is that there's an overlap in this size. With this same prototype, we can engage the leading automotive players, as well as the leading consumer ones, without needing to spin up a separate development path at this point. Yeah. Okay, great. Great. Could you, Kevin, maybe also just remind us where you are on, or what the, you know, the latest on separator starts and improving throughput and, or yield, I should say, and consistency with respect to the separator? Because that's obviously part of the secret sauce. That's the secret sauce. We ended last year with kind of a baseline of about 5,000 starts. We flexed that up for the A0 sample campaign to 8,000. These are things we talked about in the Q4 2022 letter. One of the goals this year is a very exciting one. We had what you could refer to as a breakthrough or an upside surprise in terms of a means of making our solid-state separator, which we refer to in our Q1 letter as the fast separator process. Our, one of our four goals for the year is to demonstrate that process. In fact, is to start making films off of that process this year. We have, just to quantify what that means, is that using similar equipment to what we use today, this new process is capable, once it's fully running, of effectively tripling what we make. That's the kind of first step of that process. There's a second step, which would require different tools for which we have prototypes already running, that we'll see yet more gains. That's something that we're internally very excited about, and look forward to sharing more about on future shareholder letters as we make progress. Okay, great. Great. Kevin, the 5 Ah cell, was that in the proprietary form factor that you guys have alluded to maybe a couple of calls ago? Maybe it's like a mix of a pouch and prismatic, but can you just give us an update on that and where you are on that? No, you're correct. It was in that kind of FlexFrame form factor, where it's the an oversimplification, our cell engineers will hate me. Is think of a pouch cell, but with a rigid frame supporting the edges. This way, it's built to support that volume expansion between charge and discharge, while still using a lot of the mass manufacturable type of elements of a pouch cell. Okay, great. Great. We hear a lot, and we've heard from, you know, OEM battery engineers, at least some, that think, you know, a 5 Ah cell is not practical for EV applications. Maybe just talk a little bit about why you think that may be the case, and also, I think the 21700s are 5 Ah cells, right? Maybe just give us a little bit of color on that. Well, the second point that you brought up is the one I would point out, the leading, the globally leading car this year uses about that size of cells. To the point, there is a bifurcation. Some OEMs do prefer larger cells, and we would plan to make those, but we don't. We see so much demand, even in that small cell part of the market, it just fills factories after factories after factories. We don't need to satisfy 100% of OEMs day zero. We just need to satisfy enough, and within our partner group, we see that enough. We'll plan to make that in the fullness of time, but small, for the reasons I laid out, I think, is a clear winner in terms of strategy. Okay. Okay, that's helpful. Maybe just taking a step back, can you also maybe just describe a little bit more the architecture and maybe of the cell and the differences between, you know, maybe you and some other folks who are attempting to commercialize lithium-metal batteries or actually making lithium metal foil? That's a great question. As you see in this slide that's up, that middle column, as made, there's nothing there. It's very similar to conventional cells. When you buy cathode material from a leading cathode supplier, 100% of the lithium you use to cycle back and forth is in the cathode material you buy. When you charge up the structure on the left, that kind of carbon silicon hotel is effectively empty, and the lithium ions leave your cathode material, and they go into your hotel for the first time. Similar to us, but we have no hotel. There's just no, you know, bare metal is sitting there, so that lithium metal plate's there for the first time. For obvious reasons, adding a material takes up weight and volume. Adding a very expensive material, like pure sheets of lithium foil, it's both expensive and because it's so reactive, it's very hard to work with in a manufacturing environment. You can imagine that that is bad for cost, it's bad for scalability, it's bad for energy density. It's for all those reasons you wouldn't want to if you didn't need to. We kind of assert that those are really hard challenges that might prohibit it from ever being commercializing. We think this. we have conviction that lithium metal by itself is certainly a negative, and we've shown that you can make the system without it, and we wouldn't see why you'd ever do it any other way. In fact, doing it that other way may prohibit it from ever being commercialized at least within automotive, that's so cost conscious. Okay. Got it. Got it. Okay, that's helpful. The 5 Ah cell, I think just on, you know, future iterations of the cell, you guys this year have also laid out a target to just improve cathode loading. Yep. Could you maybe talk about that, the significance of that, and how that helps you achieve your energy density target? What you want in a cell is, as much of the cell as possible, you want to be active materials and as little of the cell to be inactive materials. I can kind of hit two things at the same time. I can talk about the cathode loading, I can also talk about the packaging efficiency. Step one is, well, basically, step zero is come to the party with a ceramic separator and a pure lithium-metal anode. There is no better anode. There's no higher energy density, higher performing anode in terms of volumetric energy density than lithium metal. Step two is pair it with a nice, big, fat, thick cathode. You then have the opportunity for a very, very high percentage of your cell components to be active. You're always going to need a separator between anode and cathode. You're always going to need current collectors, and there's some other cell engineering parts in there. If you want to maximize for energy density, which we and everyone else do, you want as much of it to be anode and cathode as possible. We had traditionally been in the zip code of a little over 3 mAh per centimeter squared, and an amp hour or a milliamp hour is a measure of capacity. A square centimeter is a measure of area. If you imagine in a square centimeter of cathode, we're actually just telling you how much capacity is there. We've gone from kind of mid-threes up to about five. That was to do that required thicker cathodes. It required making sure the interfaces were good. We had to calender to the right size. We had to do all that without changing the performance of our cells. We shared on our Q1 2023 letter, two-layer cells that showed 800 cycles under our kind of gold standard conditions. We were pretty pleased with that performance right out of the gate. Later in the year once you have a thick cathode, the theoretically best anode you can, the attention starts to shift to reducing all of those inactive components. For example, making the current collectors a little bit thinner, making sure the tolerances between the parts are tighter and tighter, reducing some of the kind of dead space within the pouch cell. If you have those two things together, then you get kind of very exciting, measurable volumetric energy density, measurable at the cell level. Okay, got it. What's the target on a volumetric basis, and where was that 5 Ah A0 cell coming in at? We haven't given a watt hour per liter there. What we have talked about is kind of longer term targets in that 900 to 1,000, and we did say that this NSE would be like, we're targeting it to be better than anything that you can buy. We haven't given precision there, but just that qualitative guidance. Okay, got it. By going to a thicker cathode, could you maybe just talk about how that may impact some of the fast charge data that you guys have showed? What you're referring to is as you make the cathode thicker, 'cause battery charge times are expressed in terms of, like, it's 15 minutes to charge the battery from 10%-80%, has been and continues to be the goal. What Dan is showing here is on data on a smaller cell. These are just single-layer cells. This was shared some time back. We continue to target that 15-minute type charge time between 10% and 80%. Now that you have thicker cathodes, you're actually moving from crudely, I mean, around from three to five, it's basically 50%+ more lithium ions go through the separator in the same amount of time, so your separators have to be higher performing. In addition to all the cathode work that I mentioned, to your more nuanced point, actually, the separator is bearing more work. That continues to be our target, and we look forward to sharing data on that in the future. Yeah. Got it. Okay. Okay. Kevin, could we also, maybe just talk about what, you know, some of the pack considerations may be for a lithium-metal battery? You know? Yep. You talked about the cell level, the form factor to accommodate the lithium-metal breathing. Yep. Just talk to us about maybe some of the pressure requirements that are needed at the pack level. That's a good question. We think if you're 5 ATM or less in pressure, that is workable in an automotive system. Much of our data has been in the threes. We think it's desirable, but not required to go even lower. If you'd recall, at the end of 2021, we showed no applied pressure on single-layer cells, and that was at the end of 2021. In the middle of last year, we actually sampled those into the consumer electronic space. Those were well-received, as we've discussed it in shareholder letters. That's a desirable quality, but really anything over five, you can do. The reason why is that an automotive system is a fair amount of volume, and when you apply pressure, you just kind of do it to the ends, and it cascades through the entire row of cells. Above five, it just becomes practically a lot tougher to either make the cells themselves under that pressure or to get them in and out of the system, or the amount of space and area to apply that level of pressure just gets hard. We've, we've set the requirement at five or less, and we're in it, and we'll try to get it as low as we can. Ideally, not required, I mean, a nice to have feature would be to also ship the automotive cells at zero applied pressure. We do see zero applied pressure as effectively being a requirement, something at or near that for consumer applications, because that pressure application, whatever volume you use for it, while you have space for that in a large automotive system, in something small, like a phone, it's just gonna hurt your volumetric energy density too much, where we think the product is no longer compelling. Sure. Back to your broader point on other system implications. If you're charging in 15 minutes, which that same car that we alluded to, that was kind of top-selling in the world, I think, on the fastest supercharger, might do 35 minutes from 10% to 80%. If you double that, crudely, to 15, you're actually doubling the rate of heat that is leaving the cell. The batteries are effectively the same efficiency. As you charge them with twice the rate, you end up needing to get rid of twice the amount of heat. It's convenient that plated lithium metal, which is what happens when you charge the cell, is actually a good, it's a metal, and it's good at removing heat. Our cells are also being designed to remove heat consistent with those charge times. You would see an ability of the system corresponding with the cell to get rid of the heat. If you're dumping more power in at a higher rate, you'd actually see a little thicker electrical cabling in the system, but not quite as much as you think. Maybe, Dan, if you go back to the fast charge data. Today's lithium-ion cells charge pretty quickly between. On the bottom is time, on the Y-axis is state of charge. They charge pretty quickly between, say, like zero and maybe 40% state of charge. That gray line at the bottom is that kind of world's best-selling car. As you see, the rate of charge starts to slow down. To go back to my metaphor of the graphite silicon hotel, once the hotel is kind of at 40%, 50% occupancy, it takes those lithium ions a little more time to find a room. That's, that's the reason why you have to slow down as you hit higher and higher states of charge. We don't have that. It just directly plays. We start slowing down around, say, like 80%, because those final cathode, those final lithium ions that you pull out of the cathode, you have to be careful 'cause you don't wanna damage that side of the device so you can maintain life. We can go very, very fast for the first 80% and then slow down for the reasons that everyone else does, as well to preserve the cathode. Okay, that's really helpful. I wanna shift back to the separator just for a minute before we kind of get into end markets and commercialization. Could you just talk a little bit about the manufacturing process and, like, how critical is it that every single piece of film and thin, you know, ceramic is flawless? Yeah. Is that necessary, you know, for a long cycle life? That's a fantastic, that's a fantastic question and really at the root of what we do. If you were to open up a cell for anything, for a phone, a car, and you look at any of the electrode components, like, they're not perfect. Anything, anything done at any type of scale is gonna have some amount of kind of delta from what like. Like, open up a cathode, it won't be perfectly mixed, it won't be perfectly smooth. You'd have little bits of stuff, may have gotten in there. It's similar in our system, as well. There are some aspects that we require tighter tolerances than the conventional industry. There are other things where we're robust, too. As we've done development over the years, we've learned what are the things that are very, very important to get right and keep the tolerances quite tight around. Those are the ones that we invest in to kind of understand what the spec is, and then just make sure everything fits it, from the incoming, material quality to how it's processed, inspection points within it, using, statistical process control to help, deliver that quality throughout. There's some where it's actually like, that's fine, that's not perfect, but it actually doesn't harm, cell performance. To have, like, a detailed question, which would be impossible to do for, like, trade secret reasons, it would really depend on what you're, talking to. The one thing that also helps put it into perspective is that we're the defectivity that we care about is usually at the, like, microns or tens of microns level. That's very different than some other industries, like the spinning disk drive. There's something like 5 nm, which that's another order of magnitude. But that's actually. It's several orders of magnitude. That's three orders of magnitude. 1,000 times more precise, so, like, that spinning disk. We're not in that kind of semiconductor, disk drive type ZIP code. We're more in the particle size, which is actually similar to what. We're in a similar ZIP code from what you see in ceramics and other lithium-ion products. Cool, that's great. That's really helpful. Okay, let's maybe talk a little bit more about the potential with consumer electronics. You, you noted that earlier and also on the last couple of calls, how you shipped some cells to some big players in the space. Maybe just talk a little bit about to the extent you could share, like, what products or some of these customers potentially interested in your, in your battery for? Is it mobile phones, laptops, wearables? Yeah, anything you could say on that I think would be helpful. Yeah, the features which are the automotive kind of is especially excited about power, charge time, energy density, and safety. In consumer, it's really energy density, energy density, energy density, and that is largely true across all of the different application areas that you referenced. We're. We are a enabler. Our goal is to come with a better widget and then hand it to these leading companies, and then we largely take their direction around. Well, of course, we have some back and forth, but we largely take their direction around where to put it. Effectively, all those products you mentioned would very much value better energy density. There's also a practical nature of it, too, just in terms of like: Okay, you've hit, given gate and product development here, we just so happen to have an opening in this product here. Therefore, let's... There's a little more kind of stickiness to go for that. There's also just the reality of different product lines coming up for new components. Okay. Okay, got it. Could you maybe just talk a little bit about what some of the differences in specs may be, too? I mean. Yeah. You noted that's super important, but, like, I'd imagine cycle life on all these devices, the requirements there are probably less than what you would need for a new-. Yeah, they're effectively, the general statement is they're easier everywhere. Mm-hmm. The one area where they are more difficult is in the pressure requirement. Right. That is the one exception. Okay. Okay, cool. Got it. Okay, can you maybe just talk to us a little bit about the relationship with VW and how that has helped you, and what's the collaboration like these days? Is there any update on the location of QS-1? Yeah, I think the last time we got an update, there was some language in there that kind of alluded to that maybe it could be placed here in the U.S. because... Yeah -of the IRA. Yeah, if you could share some thoughts there, that'd be great. We've been working with VW a long time. I've been with the company coming up 12 years this summer, VW has been there almost the entire time. From very early, when the company was a twinkle in the eyes of our Co-founders, Jagdeep, Tim, and Fritz. Not too far after their kind of tech scouting group had found us, the VW, to their credit, identified just how strategic and important batteries are, were pretty early. For them, it's a large fraction of the cost of the car, the battery system determines all of the performance attributes. VW, one of the largest automotive manufacturers in the world, many of the iconic brands, everything from the mass market VWs to your performance Audis, Porsches, and Lamborghinis. You have some like within Audi, you have for those bike racers out there, you have Ducati as well, so some really cool, iconic brands. They've been an investor many times with us over and over. They've in 2018, they announced to the world that on the prototype sampling we did with them, it was the first time they'd ever seen lithium-metal cells working with this type of power in the application, which they did a nice kind of press release and event around. At that time, we formed a joint venture for first commercialization, which you can summarize it. There's more materials we filed with the SEC that go into more detail, but it's basically a 50/50 joint venture where we split it down the middle. If we hit our milestones to enable it, they put in half the capital, help run it with us alongside us, and then buy out 100% of the output of the factory. We've since. When we became a public company, our sole automotive relationship was with VW, at least something that was signed on paper, and the plan was to go directly to that facility. Once we became a public company, we put a facility in between, which we called QS-0, and we also added five other automotive partnerships. The goal of that QS-0 facility is to hit A, B, C sample maturity and to do first automotive production on what would be a fairly small lines. We'll use the facilities that we have here in San Jose already. Because we're commercializing out of QS-0 first, as opposed to going directly to QS-1, the timelines in that original agreement didn't really hold because it would follow after. We moved them, I think, once or twice, and then we just said, "Let's just take it out because we're commercializing through QS-1." Also in parallel, the U.S. came out with the Inflation Reduction Act, which has very significant subsidies to develop a closed loop domestic supply chain here in the United States. That, being able to see that, as well as how or if the Europeans respond to that, will, of course, be an important determinant of where that QS-1 facility goes. The most likely outcome is what we referred to in our 8-K in September. It would be either in Germany or somewhere in North America. Okay, great. Great. Okay, Kevin, looks like, just about a minute left here or so. Just could you leave us with some final thoughts on the commercialization timeline and what could we expect from there? This is a, this is a big year for us between the cathodes and the packaging efficiency and the reliability. That takes you from an A- sample, and sets up the B- sample stage, which is what we continue to target to start next year. We're very excited to make progress on that fast separator process. If you pair the product maturity combined with how we would make it at scale, this is a really critical year for us, and we've got our heads down working hard. Awesome. Great. We'll leave it there. Well, thanks so much, Kevin, for the time today. It's good to see you, as always. Good to get an update and best of luck the rest of the year. We'll chat soon. Thank you, Gabe. Thank you, everybody. Thanks, everyone.