I will be hosting Kevin Hettrich from QuantumScape. He is the CFO. We do not have any slides today. If you have any questions, we do have microphones. This is being webcasted. Kevin, thanks for joining the auto conference. I appreciate this. Maybe just as an introduction for those less familiar, can you provide a brief overview of QuantumScape, the core technology, and what you view as maybe some of the key misunderstood points about this role today? Terrific. Good morning to those in the room. Thank you, Bill, for hosting us here at the conference. QuantumScape is the leader in solid-state lithium-metal battery development. Solid-state lithium-metal is a type of chemistry beyond lithium-ion that carries advantages in everything that customers would care about. It is called solid-state lithium-metal because the solid-state part, a thin ceramic separator, sits between the two active materials in the battery. Lithium-metal because when you charge the device, lithium is stored in a pure metal form, as opposed to lithium-ion, which is a conventional batteries today. The ion part of lithium-ion speaks to a host material that is all around it. Because it is stored in a pure metal format, it is the elimination of that host material that leads to all the advantages of our battery chemistry. Smaller and lighter, faster charging, better safety performance, lower cost at maturity, and scale. Where we are as a company, we have been in a development and commercialization of this new chemistry. We announced our first product in 2024 at the automotive A-sample type product range, the QSE-5. That is an 800 Wh/L cell with more than 300 Wh/kg, charges in about 12 minutes from 10%-80% with improved safety performance, which is better than anything on multiple dimensions you would find in the market today. We have historically focused and continue to focus on the electric vehicles. We have had a long-standing partnership with Volkswagen, where we have a collaboration and licensing agreement up to 85 GWh of scale in the licensing agreement. We are in the collaboration phase. We are getting paid to do development and sampling and demos on their behalf. We have a team from VW PowerCo working alongside us on the pilot line that we just started up. We work with four of the top 10 OEMs in the world. VW is named. Honda, they named themself in June. We can talk about that a little bit more. With the start of our highly automated pilot line, the Eagle Line in February. We have additional sampling capacity, and we announced two new customer verticals, one in data centers and one in advanced solutions. And it was from that vertical that we sampled to a U.S. defense prime that we talked about in the last earnings call. The other thing I might highlight, a capital light business model. We get cash two ways. One is we get paid in the current moment from partners and ecosystem players who are paying for sampling demos, custom development. And we are setting up the foundation for much larger economic opportunity, which would be licensing upon successful transfer of the technology to their factories. So, cash in two forms, and we avoid gigawatt- hour scale type CapEx. You asked about some things that are maybe underappreciated and non-intuitive. We have done $40 million in cumulative customer billings to date. That is worth highlighting. We did $19.5 million last year. We are already above that, I think around $21.8 million this year. The advantage we have in the chemistry is pretty fundamental. Very proud of that technology platform, the patents and trade secrets on it. And that is strongly counterpositioned. To try to replicate that, you would have to start a new company, even if you navigate all the patents and trade secrets, and then the growing customer and partner ecosystem. That is a nice teaser from there. No, I appreciate that introduction. And for those who came in the room earlier, we can take questions using the microphone. But you have been at the firm for more than a decade, but maybe just looking at the last year, what have been some of the more important changes, whether it be organizationally, commercially, or technically? And what does that enable as we look ahead to next year and the years beyond? Yeah. Great question. Just a little less than a year ago, we, together with our partners, VW, PowerCo, and Audi, were one of the highlights of the Munich Auto Show, where we powered a Ducati V21L race bike across the stage. That was our first vehicle demo for the company. And then just a quarter or two later, started up a very highly automated pilot line in our Eagle Line. That is important. Arguably one of our most important focus areas as a company because all commercial roads go through that. Industrializing that for the next level of scale in terms of process and equipment design and supply chain development is critical for all paths of commercialization. It provides higher sampling volumes for Volkswagen, for Honda, for these two other top 10 global OEMs, and for these new verticals. And then finally, for the tech transfer itself, when we have partners and customers on site, that is the line from which we can teach from and design the future. Yeah. Going to move to, I guess, manufacturing, and maybe let's start off with the Eagle pilot line. Maybe you can explain the significance of having the Eagle pilot line in the Bay Area. Yep. And whilst demonstrating scalable production remains a critical goal this year, I have some follow-ups as well. Yeah. There is a saying that goes around Silicon Valley, and our Chairman of our Board, Dennis Segers, and the CEO, Siva Sivaram, talk about a lot. You do not really know what you have until you build a million of it. As you get higher volumes, you get statistical confidence intervals around failure modes, and it really hones in the SMVA also we will repeat, systematic, methodical, iterative. We are in that mode of once you have established a baseline with volume, the way you come down a cost curve, the way you drive quality, the way you improve operational metrics is just to produce a lot of parts, identify common causes you want to eliminate, and you eliminate them, you root cause them, control them, and you move on. That is the wheel of improvement. That really requires and is best supported by automation because you are able to do that. Things are done in a very repeatable way, and you get nice part counts, and you get nice signal. That was a big deal for all the reasons that I mentioned its importance. It is a really important stepping stone for the company. One of the things I would highlight in the capital-light model is we're working with arguably the world's number one and number two suppliers of ceramics in that of Corning and Murata, to have them produce a gigawatt-hour scale, our separator, to supply two different cell manufacturers like a VW PowerCo. We think that's the best of both worlds. We know our material system, we know the processes, we know the equipment design to this level of scale. Of course, your Corning and Murata know how to have a lot of experience taking the technologies down that kind of cost curve as you reach new orders of magnitude. That's capital efficient, kind of a bullseye on our capital-light model. In addition to the, I guess, the partners you have on the supply side, when we think about production, what are the key metrics that matter? Yeah. Uptime, yield, throughput, and I think you've talked about uptime of greater than 90%. Yep. What are the next, I guess, things under control that- Yeah You're looking to improve? If I point investors to three separate things, one is there are internal metrics. All the ones you named are things that we track. We did talk about on the last earnings call as a measure of the Eagle Line, the process becoming more stable. We are achieving uptimes of more than 90%. We do plan on continuously improving everything in that systematic, methodical, iterative style that I mentioned. The second is output. As we make improvements in those metrics, output will rise. We said a goal on the last quarter was to double the Eagle Line output from where it was in Q2 over the rest of the year. That's a sign of maturity, of us making progress on the process, as well as that sampling volume can then go to your Volkswagens, Hondas, these other OEMs, and these two other verticals. That's important. The third thing, we were just talking about some of the broader ecosystem. Continue to make progress with Corning and Murata. In a success case, you'll hear us making announcements in other parts of the supply chain for materials and equipment. We did mention on the last earnings call we're working with leading suppliers of equipment to design the future higher scale version, so we have a blueprint to give to partners. Maybe sticking on that blueprint, I guess, what are you proving internally that makes you confident that a partner can replicate at a higher scale? I guess maybe with that, how much of the process is similar to an existing process? Yeah. Great question. Let me start with that first. In a conventional lithium-ion plant, it really does four things. It makes a cathode, it makes an anode, it assembles a cell, and it tests the cell. If you look at our process, it imports the separator. It buys it. If you look at our process, we have no anode. All that equipment, all that bill of materials goes away. You can think of the cathode as being effectively conventional. The cell assembly, we stack. There's a combination of practice. Cylindrical cells are generally wound, and then others stack or kind of do a process called Z-folding, so we'd stack. We would share the testing step, except we simplify it quite a bit. Those lithium-ion cells, upon being assembled, and the liquid electrolyte put in, will often sit for weeks as they're put through a charge and discharge cycle that helps form a passivating layer on that anode host material. It's called a solid electrolyte interphase. It chews up a bunch of active material. It ties up inventory, and it is in pretty expensive equipment. I recall Tesla, during their Battery Day, some number of years ago, pointed to that as actually the most expensive step in the factory. We don't have an anode host material. We don't have a liquid electrolyte in the anode. That basically becomes a quality control step for us. For us, the separator you can't buy, we innovated on it. So that's why we're training up Murata and Corning. So that was the second part of your question. Remind me the first part. Well, it was just- The blueprint. What gives you confidence that you can- Yeah. Well, the blueprint thing. Replicate. Is it Georgia which is the show-me-state? Wait, which one? That's Missouri. It's Missouri. Yeah. Missouri is the show-me-state. There's an element of that show-me-state theme of buy the equipment, develop the process, and let me see it. That's certainly part of it, is partners and customers, when they come visit the facility, they can see with their eyes every step, every tool, how it's made, the performance of the cell. You can see where the bleeding edge is today, and then it's based off of running that equipment, identifying things we like to do different and better that leads to the next level of design. It's actually working off of that line where we're working with the rest of the supply chain for materials and equipment. It's kind of two parts. You can see that show me feel. Then in working with the vendors, and you would recognize many of the names that we're working with because there's pretty good overlap from leaders in the lithium-ion equipment space and then leaders in the ceramic equipment space. Those are who you'd expect we'd be working with. Yeah. So you described the capital light commercialization approach. But I guess in practice, does this mean, I think you alluded to this a little bit. Yeah. Licensing, JV manufacturing, tolling, supply agreements, some kind of mix? I am just trying to get a sense of what would be more internal versus- Yeah. Partnered out. Great question. Our internal focus, what is core to us is development and taking things to a pilot line level of scale. At that point, development in this space is so intertwined between chemistry, between cell architecture, materials, process, and equipment, very interdependent. As a result, it makes a lot of sense to do all that work under the same roof. Beyond a pilot line level of scale where you have shown on a highly automated set of equipment, it is repeatable, you then can argue that there is a real benefit to working with some of the highest quality manufacturers in the world to take over the rest of the journey. That fits well, we think, for a few reasons. One is it hits their core competency. From a shareholder perspective, you avoid pretty heavy investments into large-scale factories. And those large-scale factories tend to, you invest in them a year or two before they start production. The first year is not usually a banner year in terms of the economics either. So just being able to focus on very high gross margin licensing in the longer term. And then, as I mentioned before, we've been collecting customer billings as they're paying us cash to do development and sampling and demos custom to them, which is near-term validation for investors and a meaningful source of cash flow for us. I have familiarity with the semiconductor industry, and we think of companies that used to have their own fabs, and then they outsource. Yeah. They lose a lot of core IP. Yep. How do you think about protecting your returns and IP while staying capital light? The semiconductor example is a good one where done well, you can have people focus on their spots in the value chain, like NVIDIA in terms of design, TSMC in terms of manufacturing, ASML in terms of equipment. They benefit from the volume that each does. They've learned to protect the IP there. That is a business model that we look to in terms of a success case where we're trying to occupy that design and licensing spot at the upfront. How do you protect it? There's a few layers. One is in terms of the development. We have over 300 patents and patent applications. Many of the innovations are not reverse engineerable. Those we protect as trade secrets. That's step one. Then step two is to choose the right partners and to have the right incentives in place where everyone makes a great return in the success case, and they have incentive to protect the IP and to not more broadly diffuse it. The third layer of protection is just speed. Success is bringing out the QSE-5 and achieving market penetration with it. As we alluded to in our 2026 goals, we're going to talk about what's beyond it. What's very exciting is while the performance gains have been flattening out with time, we see that the QSE-5, our first product, is just the start of our S-curve. There's an anode and a cathode and a separator and a battery. The anode we've eliminated is manufactured as gone. Our separator is less than the thickness of a human hair. Of course, we can increase the size of that. We can make it even thinner and keep chipping away at the overhead of the cell. A lot of the action in the future will go back to the cathode. There's unique innovation which only makes sense on that solid-state lithium-metal platform, and that we see as the start of a new S-curve. Great. We mentioned partners earlier, so let's move to partnerships. Yeah. How should investors interpret the updated PowerCo agreement? What is changed, what is consistent, and what are the next observable milestones we should look out for? We have been working with Volkswagen since 2011, 2012, so more than a decade. The objective is the same, is to take QuantumScape's solid-state lithium-metal technology and to commercialize it in automotive, specifically within the VW Group, where they have many of the most iconic brands and diversity from motorcycles to trucks to more volume cars, more premium cars, et cetera. That is constant. The structure of the license, as I mentioned, is up to 85 GWh. 5 GWh, interestingly and strategically, the VW Group has the ability to sell outside of the automotive market. That is actually a fulfillment path outside of automotive for us. There is a $130 million prepay that we would earn with certain technical milestones being met, which is a prepay on royalties. There remains cash to be earned for this custom development. What is changed is we have updated the roadmap. I think the original agreement was two years ago, the original licensing deal. Last year, we updated it. This year, we updated again with the scope of work. You can think of this a bit as a living document. We took out some things that were motorcycle related, given the cancellation of the MotoE race series, which had nothing to do with us. There was a fair amount of work that was tied to it. Some billings went, some cash use went. It is net neutral cash to us in this new roadmap, better aligns to our development, so it is a little more automotive focused, and it features development, including the larger form factor cells that VW has asked for. Yeah. How should we interpret the 2029 target and what? Yeah. Are the sort of milestones that we should be looking out for? Yeah. So, key there are these technical milestones, bringing up the Eagle Line, producing higher volumes, maturing it, certainly in that direction. And then that larger form factor cell development is also critical there. In the last earnings call, we had a photo showing our very high volume Cobra process, producing larger area ceramic parts in significantly larger sizes than our QSE-5, which is showing that the core technology and the important process by which we make the separator is consistent with those form factors. Because I didn't mention that before, as important as the cell innovation is that process innovation on the ceramic side also something perhaps underappreciated. When we focused on automotive makes you think about highly scalable things that have entitlement to very high quality, very high volumes, and very low cost points. That pushed us to think outside the box in terms of our ceramic process. The most expensive and most critical quality step in the ceramics process is the heat treatment. Kind of makes intuitive sense. So we worked with a vendor to take one of their continuous tools and to speed it up by an order of magnitude, called that Raptor. And the development team said, "Okay, I understand the knob that I'm turning to get there on speed. What if we cranked it even more?" So that led to the Cobra process. We worked with a vendor to do a pretty innovative tool design, and we think that led to yet another order of magnitude of improvement. Relative to continuous equipment that you can get in the ceramics industry, we think we're in order, if not two orders of magnitude faster than other ceramic improvement, and that is just as important of a body of IP as our cell development work. Yeah, probably get to technology in a bit here in more detail. I guess now you have the Honda partnership as well. Yeah. What is the importance of that? How does it differ in maturity from the PowerCo, and what are the next steps in that partnership? Honda, one of the top 10 global OEMs, has a fantastic product portfolio. Any of these automotive customers, just the potential volumes within them is ginormous. Many tens of GWh is possible within them. That was the result of hands-on testing, comparison of us against other competitive approaches around the world. We went with a public announcement with Honda that we are doing a multi-year research and development agreement with them. I mentioned their development expertise. They also have non-automotive offerings, which gives us some other avenues for these other kind of verticals. We see it as a step forward with one of these four OEMs, that there is enough confidence and excitement that now we are a named partner. Each of these top 10 global OEMs is a massive opportunity themselves, so having kind of a second named one is important. Just for kind of fresh validation from another name that we are kind of making forward progress on what we are working on is very interesting. Yeah. How important is it to add any more auto customers, or you feel pretty good about the two sort of It's a good question. We have two named, and there's two other top 10 who are not yet named. We have talked about we like geographic diversity, so our goal would be amongst the. We've said amongst the top four, there's a North American, there's a European, and there's an Asian manufacturer. And between the four of them, it's such a large fraction of the market that that's probably not that we wouldn't add another kind of suite. We could, but that's a very nice addressable market. We will continue to engage people, but that's a pretty healthy share of the entire automotive market, and it's multi-hundred- billion- dollar TAM. Yeah. I'm going to come back to technology and sort of market segmentation, but just want to see if there's any questions from the audience before moving forward. Can you use the microphone, please? Yeah. Can you hear me? Okay. Thanks for the question. Obviously, you said right now, largely your business is developing sampling and demos. Yeah. But do you have any idea down the line what the cost difference would be for OEMs between solid-state lithium and lithium-ion? Is that something that you see completely replacing lithium-ion, and then does that result in higher cost for customers in the long run? Good question. With maturity and scale, we see this as cost-advantaged. What's key to make that math work is we have an intrinsic win on the elimination of the end material. That's not only the graphite silicon host material, it's the liquid ion conductor that's in it. That's from a materials point of view, and then all of the steps to make it. Then it's that formation simplification. The chemistry gives you that. What's critical for us is as we substitute the separator, can you do that within the margin of the savings that you just created? The things we can point to that say we're on the path, still work to do, is the bill of materials we think is inherently low cost, and the method of making with that Cobra process, that it's a coding step and it's this very high speed that we see that being capable of very low cost points. Our intent is to be higher performance in all the dimensions that you care about, which our partners would be able to show up in better products. The ecosystem could charge a premium for that performance. But then at the same time, actually get the cost point at parity and then lower. You get nice big margins for investors. That encourages ecosystem partners to play. We would of course start with the areas where we're adding the most value, so think like luxury and performance type segments. As you hit greater grain volumes and can come down the learning curve, it opens up broader and broader parts of the. A good quick follow-up. You talked a minute ago about turning that knob, I am not sure I completely understand the science. For speed on the separator, yeah. Right. Is there a point where continuing to turn that knob becomes, there is not as cost of advantageous down the line? Yeah. There are other vectors, though, that can result in speed that we have not turned. So, you are right, you get diminishing returns on, as you kind of, every time you double, it gets harder and harder. There is a lot of runway on a few different knobs. That is actually one of the focuses of the Corning and Murata partnerships. One of the reasons that they were excited to partner with us, it is a brand-new market for them. Then they saw the innovation on the Raptor and Cobra side, and we got feedback that we did not think this was possible and kind of. They got very excited, and it has already been a very fruitful partnership where like, "Well, geez, when you do the next design, could we try this, and this?" There are dozens of engineers between our team and their teams very actively working on that. I think there's a lot of runway there. Thank you. Thanks. I guess in addition to potential cost benefits that you described and- Yeah. I guess less complexity, but maybe coming back technology. So where's the differentiation of your ceramic separator and- Yeah. Anode free, whether it be in terms of energy density, safety, you kind of mentioned manufacturability, cycle life, or other factors? I love this question. The separator is a means. It gives a safety benefit, but the separator, the objective of it is purely to enable that lithium metal anode. In a conventional battery, you have a cathode and you have an anode, and we charge the cell, lithium goes into the cathode, and then we charge, it goes back. Sorry, when you charge it goes into the anode. When you discharge, it goes back down to the cathode. It just back and forth is how that works. As manufactured, we have nothing in the anode. We do not have the graphite, do not have the silicon, do not have the liquid. When you eliminate that as manufactured, that is weight and that is volume. That is one of the key benefits. Second thing, power. Why do we charge faster? Two reasons. If you are a lithium-ion going from one side of the device to the other, we just cut the distance in half. All devices in lithium-ion in the world are designed to avoid. They are limited in their charge rate by the speed with which lithium can go to the other side of the battery, and then you throttle it back for the diffusion into the anode. We do not have an anode to diffuse into, so we have this wonderful charge profile all the way up to like 80% state of charge in which we slow it down, so you do not damage the cathode. There is a fundamental charge advantage. Safety. The anode we eliminate is full of organic material, the graphite, the liquid electrolyte is flammable. The separator we replace. Another, it is a porous organic material. Just the elimination of organic material from the separator and from the anode, I think is a big safety improvement. You see that in our last shareholder is that our shareholder letter and the safety improvement you see in terms of nail penetration and over-discharge and things like the very high levels of heat. You can take our cells to a few hundred degrees Celsius, and you damage them, but you do not see a safety event. Life. One of the two major sources of life loss occurs in the anode, which I mentioned we eliminate. And then cost. That was kind of the answer that we had before. It is very elegant that you get these advantages by eliminating one of the materials as manufactured. The other thing I would just highlight is that the material that we eliminate, graphite, found in all lithium-ion cells, even if it's a silicon cell, it still has a blend of graphite, usually more than 50%. That material is 90%-95% dominated by China. Just in terms of a simplification of supply chain or from a national security point of view, that elimination is, I think, very important. Yeah. It's kind of part of an earlier part in terms of scaling, but customers are obviously interested in larger form factors. That's right. What's left to be proven to scale the large format cells? Good question. We showed on the last earnings call that the separator itself can do it. What you should look to us in the future is to start, would be to show cell data, where we are actually seeing the build-outs of the larger cells on that. There is some continued work on the separator. That was a nice step. Then you will see us increasingly start to show component and then ultimately cell level data there. I want to come back to market segmentation. You have talked about now being organized into three verticals, QSEV, data center, D.C., and then- Yep I think A.S., advanced solutions or something like that. Exactly. That is right. How do you allocate engineering and commercialization resources between EV and these other higher performance markets? Great question. When we started the year and we hadn't yet named the verticals, the goal was to advance into adjacent high-value markets. Adjacent because it's something for which the QSE-5, which we developed for automotive, was a very interesting product to sample to get traction. That's true in both the data center and the advanced solutions vertical. We're literally sampling QSE-5 cells made from our pilot line into these new spaces. Because we're utilizing the same tech platform and as of today, literally no modification to the cell, the incremental investment that's in our annual plan, that's implicit in the guidance we've given the street, is really in sales, product development, and engineering. It's more of an incremental investment that utilizes the technology platform we've spent so much time and capital to develop. The timing of us stepping up some of the traction outside of the VW Group and announcing the other verticals is not a coincidence that that was with the start of our highly automated Eagle Line. That gives us the sampling volume to go after these other partners within automotive and beyond automotive. Within data center, what type of companies are you partnering with in the value chain? What does the product look like? How does the 800-volt transition sort of impact, I guess, even- Yeah. The interest in your product? Great question. The 800-volt is a system architecture that automotive has been focused on for some time. With the data center move there is a nice kind of market opportunity for us to target entry. The application we are targeting is specifically battery backup and power supply that is in-rack or rack adjacent. As the generations of cabinets evolve, the compute and the power supplies are able to make these very nice, significant gains. The battery supply systems are not. The lithium-ion is not having gains at a sufficiently high rate of pace to keep up, so they are having to give higher and higher amounts of volumes to batteries. If you really want high performance and a great return on your GPUs, you want to give it exactly the power profile that it wants, which can change back and forth in tiny fractions of a second. Because of how quickly it changes back and forth, the supply of power has to be local. If it is given from a central source that is too far away, you cannot react quickly enough. In fact, you can do the opposite of what the system wants. The architectures are going for localized storage, really adjacent to those GPUs. Intuitively, what do you want? You want wonderful volumetric energy density because of the opportunity cost of the real estate there. You want great power, we talked about how that was an advantage of ours, and safety. Like billions of dollars of capital equipment sitting there. There is a pretty high premium on safety. That combination is structural to the chemistry and we think a really nice fit, and especially with this shift to an 800-volt architecture, which we have seen in automotive, we think is a really interesting kind of market opportunity. We are Silicon Valley based. We have, like half of the leadership is former semiconductors. These are kind of the circles that we know. It is having conversations everywhere in terms of those, setting the architectures of the future to understand where the industry is going, the kind of hyperscalers themselves, as well as having conversations with the ODMs in terms of who you would actually work with to get into those power supply battery backup units that we are targeting. Yeah. As we wrap up, I guess, what should investors be looking out for the next 12 - 18 months? And again, maybe if there's anything the market's missing just as we wrap up here. Yeah. I would point to three things. So one, that Eagle Line is important to all paths of commercialization. So look out for those metrics that we talked about, doubling output over the rest of the year, continuing to make progress on those efficiency metrics, and fleshing out the rest of the supply chain be it with Corning Murata and with announcements elsewhere. It's all about commercial forward progress that's within automotive, if it's with Volkswagen and Honda and the other two top 10 OEMs, and then look for announcements and progress in those other two new spaces, data centers and advanced solutions. Then finally, we did say one of our goals is to go beyond the QSE-5, so we'll put that next point on our S-curve. Great. Kevin, for sure out of time, I really appreciate you- Yeah. Sharing your insights. Thank you. Thank you, everybody.