All right. Good morning, everyone. For those that don't know me, Andrew Percoco, I cover autos here at Morgan Stanley. Very pleased to be joined by Kevin Hettrich, CFO of QuantumScape. Thank you for joining us this morning. Thank you. Before we get started, this important disclosure here, please see the Morgan Stanley Research Disclosures website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley representative. All right. Maybe Kevin, just over to you in terms of anything you want to share before we get into the questions in terms of the story, where you are in the commercialization process, and obviously the business model's evolving, I'm sure we'll talk about that. But just want to turn the floor over to you in terms of any initial remarks you want to make. Yeah. For folks following the story, we're working to commercialize solid-state lithium-metal batteries, which have compelling advantages in all the things you'd care about: smaller, lighter, faster-charging, safer. For those following the story more closely, some of the recent announcements, we started a highly automated pilot line in San Jose called the Eagle Line. On the last earnings call, we announced two new customer verticals alongside automotive, where we've historically focused. We've now added data center and a vertical called Advanced Solutions, which includes things like aerospace, defense, robotics, consumer electronics, and medical devices. Back to automotive, we announced in June a multi-year research agreement with Honda, who together with Volkswagen, those are two of the four top 10 global OEMs with whom we work. There's some nice momentum there. Maybe that's a nice kind of initial framing, and I'm confident we'll get into all those things with conversation. Yeah, that's great. Maybe just to set the stage in terms of where you are in the commercialization— Yeah. —process on just the automotive side of the business in terms of ramping up cell production. Perfect. We can kind of go from there. We have announced our first product, the QSE-5. That is just over a 5 Ah cell. Some of the advertised specs are 844 Wh per liter, 301 Wh per kilogram. That cell charged between 10% and 80% of state of charge in 12.2 minutes. As we talked about in our recent shareholder letter, when we do side-by-side testing with lithium-ion of different kind of chemistries and form factors, we see equivalent, if not superior, safety performance for the cell. We are very excited by that cell performance. So are our partners. We have worked for a long time with the Volkswagen Group. They have invested over $300 million in the company over private rounds, and then as a public company making contribution under our current collaboration and licensing agreement. In automotive, we have a very capital-light approach. The business model is kind of twofold. One is to work with top-tier customers who then pay us to do specific development demos and sampling. The goal there is to do confidence building and to help train them and do technology transfer to shift to the licensing part, where the cash inflows are, the potential is quite a bit higher, and those would accrue to us on successful transfer of our technology to their factories. As I mentioned in the opening remarks, we are with four of the top 10 global OEMs. We have nice geography coverage between North America, Europe, and Asia amongst those top four. Together about a year ago at the Munich Auto Show, together with our partners, VW's PowerCo, provided the cells into an Audi design pack that went into a modified Ducati V21L race bike, which went across the stage at the Munich Auto Show. That was our first vehicle demonstration globally of our solid-state battery technology in a very emotional moment for us to see vehicles powered by ourselves in the public eye. Since then, we started our pilot line in February, which together with the QSE-5 product, of course, the ability to make it scalable at quality is important. The focus of the team, since that February point, has been on bringing up that line, and tracking to both internal and external metrics for it. We mentioned on the earnings call that we are achieving 90% uptime on the equipment, which is a nice kind of marker. We are seeing more process stability, and we set out a goal relative to Q2 2026 production, a kind of pilot line type output levels. We want to double that before the year-end. If we are able to double that, we see it kind of tracking and having satisfactory output for all the breadth of customer demand we are endeavoring to undertake. What would you say in terms of your ability to achieve a doubling of capacity— Yeah. —or production? What are the gating factors? I am sure there are many, but if you can just maybe list off— Yeah. —what the top ones are in terms of your ability to get there. They are internally focused is a good way of saying it. Further increases to uptime, yield, and process maturity and effectiveness are the ways to get there. I mentioned, I think on one of the recent earnings calls that the CapEx you see us incurring is generally not for the Eagle Line. We are already moving beyond our QSE-5 roadmap and to invest into subsequent kind of product generations. Here it is continuing to get more and more out of the existing equipment that we have put in place. That is true of the broader Eagle Line. That is also true of our Cobra separator process that is a sub-component of that Eagle Line. On the PowerCo, you recently amended the agreement. Correct. You made some changes to it. Maybe just walk through the rationality behind— Yep. —why you made those changes, and ultimately what the goal is behind the new structure— Yeah. —with Volkswagen. Great question. In 2024, we announced the collaboration licensing agreement with VW PowerCo. The goal of that remains unchanged, is to commercialize QuantumScape technology into the VW Group, to make compelling vehicles under their brands. That remains the same. They have two members on our board. We have a team from PowerCo on site working shoulder-to-shoulder on that line. There is a $130 million prepay on triggering of the licensing part of the contract. All that remains the same. In 2025, we added collaboration cash flows to it. That agreement in 2025 was up to $131 million, and that had a number of things that we jointly said, "Hey, if you accomplish this, you get paid that" type of a structure. If you fast-forward to 2026 and the recent amendment, a few changes. One is that we reworked what those milestones were. What we found is that for the consumption of materials and labor and equipment to date, it has been less than what was originally contemplated. That was one source of savings. The second is one of the deliverables was to support the MotoE race program, which is something that was canceled, not due to us. The race organizers canceled that for their own reasons. We had deliverables tied to that also went away. For two of those reasons, we brought down the total billings to then fit the new scope of work. We refocused it on more automotive and less bike at that point because we took away the MotoE, and we also added deliverables from our next-gen roadmap on there. The total billings went from about $131 million closer to $75 million. We commensurately brought down expense, so it is cash flow -neutral from both of our sides. As a secondary implication, by freeing up some deliverables that would have been more bike-focused, all that capacity we can then reuse for other things, be it for VW, be it for Honda, be it for those other OEMs, be it for those other verticals. Some of the overview and how the numbers work. Makes sense. When it comes to manufacturing, you briefly touched upon doubling— Yep. —production the second half of the year. As you've moved from pre-production lab testing to the production process,— Yeah. —what have been the biggest learnings? Because ultimately I feel like that's where the biggest— Yeah. —problems arise, is really taking it from a lab to scaled up production. So what is top three learnings that you would say you guys have come across as you have started that process? That's a good question. The one learning that I would share that the head of our board, Dennis Segers, and our CEO, and COO Luca mentioned, is that you really don't know what you have until you have built a million of it. The benefit of just producing very high volume of a part quantity is you get really nice statistics in terms of different kind of failure modes, sources of yield loss, et cetera. I think just having a highly automated pilot line gives you both more stats and also much more repeated learning. And we have seen it really accelerate the speed with which we can characterize and root cause and eliminate things, which is the very iterative cycle with which you refine things. I think that was a pleasant surprise to the team, just how powerful that capability has been. Two is just that in hard tech, it is not a trivial task to take a tool that is designed to do a higher volume of something that is more innovative. Just for the room, I have kind of binned the equipment that we use into something that is fairly conventional- looking, something that is maybe a little more customized to us. In the first category, I put the cathode, I put testing. In the second category, where it is like, okay, we do stacking, but it is specific to our form factor. That is maybe a little more conventional lithium-ion, but the specs are tied to us. Then the third bin are things that it is a pretty innovative piece of tooling, that I would put Cobra. So equipment development is hard. You take specs, it shows up, you de-risk it with proof of concept. So there is no way around that systematic, methodical, iterative work. You get the tool in, you learn from it, you quickly respond in. That is the way with which you come down the learning curve. So maybe the second lesson is just there is real work there, and it is all about having a good team with cycles of learning, a supportive set of ecosystem. You do not have to do three. If you have two, that is good, too. Two is fine. Okay. The third thing I would say is just that we have gotten really positive feedback from our customer partners, from other verticals, and from our ecosystem that is named and unnamed. So I think the team is pretty proud of what we have created. And as a reminder, the technology platform is the cell, and it is all of the means of making, which is the equipment, the processes, the materials, and the supply chain under it. That makes sense. Speaking of other OEMs, other partners,— Yeah. You recently announced Honda. That's right. Just bring us into that conversation. Why were they interested in the technology, and was there a common denominator between the conversation?— Yeah. —with Honda and Volkswagen, and can we expect that to be true with the other OEMs? Or are the OEMs all approaching this in a fairly unique way and timeline? The thing that is the same is that solid-state lithium-metal chemistry can make very compelling products. For an automotive company to say, "I can simultaneously improve range, power, safety, and life simultaneously" is a very exciting thing. Automotive companies think in generational-type timelines of maybe directionally $500 million- $1 billion to do a new product platform. It is very hard to get significant differentiation on your powertrain versus a peer. We continue to get wonderful traction within automotive partners. The way that that played out is before Honda announced the relationship publicly, we had been working with them for some time. As they saw us making progress, like announce the B-sample, the Raptor, and then the Cobra innovation to the separator process, the V21L race bike at last year's Munich Auto Show, the start of the pilot line, all of the in-the-background engineering conversations. We did mention in that press release that they did a quite thorough around-the-world comparison and technical evaluation. Honda, of course, is a leading automotive company, and they themselves have had pretty significant internal investment into solid- state themselves, so I think they are quite qualified and knowledgeable. We are very pleased that the result was the announcement of that multi-year agreement with us. Each of the pieces of progress we make makes the time to convert a little more quick, I would say. We are building up the foundation, and for someone to come in and quickly get credibility is just easier and easier. It is like, "Here is the cells, there is the line. Yeah. Here is the roadmap, here is the next steps. You mentioned Honda has invested in this technology, and they have looked at it. Is there any synergies there in terms of what they have done and bringing it to the table in terms of what you guys, or are they just essentially saying, "Okay, you have a better technology. We are going to start from scratch and go with your approach"? I do not have anything to add to that conversation today. It is an excellent question. Maybe more to come on that. The other piece I would highlight is that Honda, in their communication, of course, they are a leading automotive company. They also do have a breadth of other portfolio offerings, which do line up with some of our other business units. There is an opportunity both within and outside of automotive. That makes sense. When you think about adding additional partnerships, additional OEMs,— Yeah. —What is the balance in terms of adding a bunch of partners?— Yeah. —but also being able to be nimble— Yeah. —and make changes and course-correct as you inevitably figure things out as you start to scale production? Yeah. How do you think about balancing that, and what's the sweet spot? It's a great question. For QuantumScape, we've achieved a number of things within the existing four top 10 OEMs. We have geographic diversity. It's a pretty good share of the world market just between the four of them. Not that you couldn't increase close partnerships from there, but we're at a point of each one is such a massive economic opportunity. We're probably at a pretty good number. Maybe you could strategically make some small additions, but this is a wonderful core set of partners to work with. That is great. When you think about the competitive landscape around solid-state,— Yep. —just batteries in general,— Yep. —let us zone, hone in on solid-state. There are others out there. There are. Like the CATL— Yep. —Samsung, that are trying to commercialize this technology, and I think whenever someone hears, "Oh, CATL is doing it," that's an obvious— Yep. —risk in some people's minds. That's right. How would you answer that? What's your position in terms of the competitive moat— Yeah. —that you guys are building around your technology versus— Yeah. —the larger players in the space? First, lots of compliments to CATL, dominant player in the lithium-ion industry. The speed with which they've hit scale and quality, and also done engineering at the systems level to mitigate some of the volumetric energy density weakness, hats off to all of those things. They are the name to track within lithium-ion, especially in that iron phosphate kind of chemistry. With solid-state lithium-metal, it is a different chemistry. The act of removing the anode entirely gives you a structural advantage in terms of weight and volume. You've taken out material. You literally have nothing there as manufacturers, so that's weight and volume. Power, there's again, it's a structural advantage. Your lithium-ion doesn't have to travel as far to plate. For those a little more in the weeds, you don't have to slow down the rate of charge at higher states of charge to wait for it to diffuse into an increasingly populated anode. For any of those who drive electric cars, you notice around 50% or 60% the rate of charge starts to slow down. What's going on is if you're lithium-ion charging from the cathode and anode side of the battery, you need a little more time to diffuse into a spot in their anode that's not yet occupied. We don't have that. We just plate lithium metal. If you look at our charge rate, we go a flat line up to 80%, at which time we slow down because we don't want to damage the cathode behind us. So weight, volume, power, safety. Today's anodes are full of flammable material, and the separator material, that porous plastic itself, is flammable. We're removing the former and replacing the latter. Then life. One of the major sources of life loss is in that set of materials that we remove. It is a structural advantage where we're not competing on cost. It's a new category that we think there will always be an appetite for higher performance in all of these application areas. As you get to scale, because these advantages come from the elimination, we see cost- competitive, if not cost advantage, when we get to higher scale. It is a different thing. That said, the proof is in the pudding. We, in our investor deck, plot the world's prototype results onto a single chart. I highly recommend that slide. It's one of the favorite s among investors. What we say is, just put on one chart how many times you can cycle at a relatively fast rate of one-hour charge, one-hour discharge, before you lose 20% of capacity. That's basically the definition of automotive life. Then to do so with no excess lithium, because that cuts against the very reason you'd do it, and then reasonable temperatures and pressures, or at least we have different colors on there. If you've got very high temperatures and pressures that probably are not consistent with the product, we put you in red. If it's something you could do a system, put you in blue. Then if there's room temperature and no applied pressure, put you in green. Long story short, we're ahead of everybody by multiple dimensions. CATL got onto the map for the first time, I think, last year, but is in the two-plus hour type charge times, I think it was at 500 cycles. Then many of those folks are using materials that you can never say never, but in our experience and belief, may not ever hit the types of performance levels we've achieved because we have experience working in those. There is room for multiple winners. As of today, we're ahead of everyone on multiple dimensions at the same time, and that's before they've invested in, okay, let me make larger and multilayered cells and invest in the method of making. We don't have a monopoly on all the world's smart and hardworking kind of people, certainly not from it. Our goal is to commercialize as quickly as possible and then to replenish the roadmap and to move on to the next thing. That is the path to success as an innovation company. Yeah, that's great. Maybe just switching gears to some of the new verticals— Yep. —that you recently started to talk about. Maybe just talk through what you see as the most attractive opportunity for the technology, but also why now? Yeah. You've been focused on automotive for a long time. That's been the North Star for you guys. Why is now the right time to be looking at other verticals within this technology? Choosing between children is a difficult thing. I will do my best. The why now part is the easier one. It is no coincidence we started talking about adjacencies to automotive exactly at the same moment we started up the pilot line. To date, we have not had samples that we could get out of. Our samples are oversubscribed within our existing automotive partners, and it is only now with the pilot line and its ramp up that we have got the bandwidth with samples to engage more broadly. The two verticals that we announced, one was QS DC. QS is QuantumScape, DC stands for Data Center, and then QS AS, which is QS Advanced Solutions. George, I think, just put out a video last week, talked about aerospace and defense, robotics, medical devices, consumer electronics. When you have cells that are compelling on everything you care about, smaller, lighter, faster- charging, safer, longer- lived, it is unsurprising that anything that wants a battery is a candidate to work with that. We chose things that are adjacent to the QSE-5, utilize the same platform where we believe that there is very strong customer demand. Maybe I will touch on brief of them in a bit more detail. Let us start with data centers. Very importantly, we are targeting inside the building, in fact, inside the rack. There are existing architectures as of today, or technically as of yesterday, Amazon announced one too, where there are architectures where they want to put Battery Backup Units, BBUs, either into the rack with the GPUs or adjacent to it. The reason they want to do that is because they are asking that battery system to do two things, to provide two to five minutes of backup and to improve the power quality to the GPUs. If you can give the GPUs exactly the kind of volatile power ask that they want, you can get the most out of them, and you can effectively get more revenue out of your GPUs if you keep them with exactly the power demands that they ask for. Why would you do it there as opposed to supplying it centrally? Two reasons. One is performance. If the power asks were changing that quickly, to do so from a distance is difficult, if not potentially outright impossible. Two is if you just think of the I²R losses supplying copper cables at huge distances, it gets uneconomic for CapEx and also just for efficiency reasons. As soon as you go down the path of, and Amazon yesterday announced what I believe is called the Trainium3, where they are putting Battery Backup Units on the top and the bottom. As soon as you put batteries into the cabinets or adjacent to the cabinets, it is intuitive. You want them to be small, because that is opportunity cost you can use for other GPUs or power electronics. You want them to be powerful, because they need to do their job, and you want them to be safe for all the intuitive reasons. As I mentioned, we think that combination is a really compelling fit with our chemistry. On the last earnings call, we said that it's early days, very exciting. We're having conversations both with the people setting the architecture as well as the ODMs who'd be supplying those cabinets. Our focus is on having the discussions in terms of, here's the spec sheet of ourselves. What do you want? What are your use cases? Doing those use cases, collecting feedback. I think forward signals of progress you should look for is what's the sampling? Are we making progress in terms of the integration of our cells into the end use of either racks or cabinets? Then can we show that we're maintaining the really wonderful aspects of the QSE-5 in that system kind of configuration where we're performing data center-type use cases? So very, very exciting. We believe the qualification can be faster than in automotive. We would estimate internally in 2030 that this could be a low single-digit billion-dollar-type opportunity, and growing rapidly after. So very exciting. Switching gears to the QuantumScape Advanced Solutions, we mentioned on the earnings call, we shipped cell samples to a U.S. defense prime. There, we see, again, depending on the defense application, we see a combination of different interests, but it includes things like volumetric and gravimetric energy and safety, as well as the fact that we eliminate graphite. We have no anode. China supplies 95% of the world's graphite. Last year, in a moment of tension, it was something that was threatened, the cessation of graphite export to the United States as just a point of leverage between the two countries. It is highly desirable to take that reliance to nothing. So that, within defense in particular, is noted. For reasons of intellectual property protection, we've been very thoughtful about partner selection. With the exception of off-the-shelf-type products we could get from lithium-ion, we don't engage in substantive types of purchasing out of China for IP reasons. The result of the separator, of course, is proprietary to us. So eliminating graphite, the separator is proprietary to us. Then for IP reasons, we have the opportunity to be like the poster child of a non-FIOC kind of cell, and push how you define that deeper and deeper and deeper into the supply chain. So the combination of performance plus that elimination of anode is getting some real kind of resonance on the defense side. There, I think you have some of the fastest qualification times possible. Because that's a bucket that captures so many different things, you have a real diversity of applications and a real diversity of timelines. Some of those can be quite fast moving. On the qualification piece and the time-to-market— Yeah. —commercialization timeline, obviously, I think we can all agree that a data center developer probably wants to move a lot more quickly than an automotive OEM who's thinking on a five- or 10-year— Yep. —product refresh cycle. Yep. When you talk about data centers and even Advanced Solutions being potentially quicker speed to market— That's right. Is that a function of the technology's actually easier to solve in those applications? Yeah. Or is it mostly a function of those customers are just moving at full speed, and they're just going to drive that commercialization process as quick as possible? Moving at full speed, and then may have reduced specifications because in automotive, it's 10+ year life. If you're driving an electric car, you want many hundred thousand miles. So the product qualification to confirm your product meets those standards, by its nature, kind of takes longer. So I would say it's a combination of all of those things. We have strong belief that the QSE-5, as developed for automotive, is very compelling across that core of attributes. Now it's precisely when we get into the detail with the specs back and forth and the sampling. We've tested all sorts of varieties of automotive use cases. New to us will be the data center ones. So this is exactly the type of engineering conversation that's going on as we speak. That makes sense. I guess when you think about the nature of the business, you've emphasized you want it to be capital-light. That's right. Licensing. Does that change at all with data centers and Advanced Solutions? Is there like a PowerCo equivalent that we can think of in the data center market? Just as we think about the financial profile of the business and the capital needs and the capital intensity, how does that change, if at all, with these new opportunities? Yeah. On the supply of cells to these new areas, our existing PowerCo contract allows them to be a producer. More to come on how we supply that. There's a number of conversations going on in the background, so more to come on that for the source of supply, especially as we want to move quickly into these new markets. On how does the economics kind of change? We talked about, under automotive, two different streams of cash flow. One is during that collaboration phase, we're getting paid to do development and demos and samples, and then the longer-term licensing one. I would maybe make two comments. One is that it is exciting early days. In terms of contrasting which one could be more or less attractive or how they differ, I would punt that to a little later when we have had some more of the conversations. The thing I would emphasize is that we are utilizing the same technology platform that has taken us capital and time to develop. Included in the guidance we have provided this year are go-to-market sales and some amount of vertical- specific engineering resource. In the scheme of things, that is all incremental to the technology development. We think these incremental opportunities are very much good for the company and good for investors. That is great. Maybe got three minutes left here. Any quick questions from the audience? All right, if not, we are sitting in here in a year from now. Yeah. What would you like to be saying to the audience as it relates to auto, data centers, defense? What is the dream scenario in terms of what you have delivered over the next year? Well, I am going to give you a non-sexy answer. I would say that I would be tickled if we have knocked it out of the park on the Eagle Line pilot line. The reason is because all paths through commercialization and through any of the customers and any of the verticals have us executing that pilot line well, in terms of our internal, external metrics. Figuring out the blueprint and the supply chain kind of beside it, that is the core thing on all of the successful journeys. The speed with which we do that and the quality with which we do that, those cell samples are exactly the currency we use to kind of drive these forward. That is the thing I think is the core thing to get right, and I think sets up for all those exciting opportunities in all three verticals after. All right. Well, looking forward to the conversation next year then. Perfect. Appreciate it. Thank you, Andrew. Thank you, everyone. Thank you.