SES (SES) Q1 2026 Earnings Call Transcript

Image source: The Motley Fool.

Date

Thursday, April 23, 2026 at 5 p.m. ET

Call participants

• Founder and Chief Executive Officer — Qichao Hu
• Chief Financial Officer — Jing Nealis
• Incoming Chief Financial Officer (effective April 27, 2026) — Ray Liu

Need a quote from a Motley Fool analyst? Email pr@fool.com

Takeaways

• Revenue -- $6.7 million, representing a 47% sequential increase from $4.6 million in fiscal Q4 2025 due to ESS growth and early contributions from drone and Molecular Universe businesses.
• Full-year revenue guidance -- $30 million to $35 million reaffirmed, with expected contributions from each of the three business units.
• Gross margin (GAAP) -- 18.1%, up from 11.3% in fiscal Q4 2025, attributed to higher-margin UZ ESS product sales and increased subscription revenue.
• Operating expenses (GAAP) -- $19.1 million in fiscal Q1 2026 compared to $18.2 million in fiscal Q1 2025; on a non-GAAP basis, $14.3 million in fiscal Q1 2026 vs. $13.5 million in fiscal Q1 2025.
• Net loss (GAAP) -- $12.1 million, or $0.04 per share loss, improved from $17.0 million, or $0.05 per share loss, in fiscal Q1 2025.
• Net loss (Non-GAAP) -- $11.1 million, or $0.03 per share loss, better than $11.8 million, or $0.04 per share loss, in fiscal Q1 2025.
• Adjusted EBITDA -- Loss of $12.8 million versus $13.8 million in fiscal Q1 2025.
• Cash utilization -- Approximately $20 million used for operations during the quarter, described as "consistent with our operating plan."
• Liquidity -- Quarter-end cash position of $178 million, with no change in CapEx-light strategy.
• ESS business -- Majority of revenue attributed to UZ Energy; new $20 million, three-year North American distribution contract established with ATGE Power.
• Drone business -- South Korea facility conversion to drone cell manufacturing completed and ramping toward 1 million annual unit capacity, with shipments initiated to defense and commercial drone customers for qualification testing.
• Drone cell pricing -- "The market price for NDA-compliant cells—obviously depending on the specific cell format—ranges between $25 to $35 as the market price." per unit; 1 million units would represent $25 million to $35 million in revenue.
• Drone qualification timeline -- "Drones qualification typically takes one to two quarters," with testing completed and customer supply chain audits underway.
• Materials pipeline -- Approximately six customers have entered second-phase testing via the Molecular Universe platform; Hyzon joint venture leverages 150,000-ton annual production capacity for scaling materials supply.
• Molecular Universe platform -- Version 2.5 released, featuring enhanced AI workflows for lithium and sodium chemistries; a global battery manufacturer entered a multiyear subscription agreement for the Search-in-a-Box product.
• Expense reduction plan -- A 15% full-year operating expense reduction remains on track, with most impact reflected from fiscal Q3 onward.
• Management changes -- Jing Nealis stepping down as CFO effective April 27, 2026; Ray Liu, with over 20 years of experience, appointed as successor.

Summary

SES AI Corporation (NYSE:SES) reported a significant sequential revenue increase, driven by the ESS segment and augmented by early returns from its drone and Molecular Universe businesses. The company entered a major $20 million, three-year North American distribution contract for its ESS products, expanding its regional reach and validating ongoing commercial traction. Management highlighted initial shipments of NDA-compliant drone cells from its South Korea facility, with primary demand from defense customers and a multi-dozen customer pipeline in qualification, positioning the segment for future growth. Version 2.5 of the Molecular Universe platform launched during the quarter, with a global battery manufacturer committing to a multiyear subscription, underscoring broader industry adoption. The company's cash position of $178 million coupled with a CapEx-light model was emphasized as ample runway to support current growth plans.

• Management stated, "our multi–revenue stream platform is taking shape," suggesting increasing business unit diversification for fiscal 2026.
• The company confirmed ongoing progress in reducing operating expenses, with the "full-quarter impact starting from [fiscal] Q3."
• A new S-3 shelf registration statement is planned as the current shelf expires on April 28, characterized as "routine administrative filing" for financial flexibility.
• Revenue recognition for the ATGE Power contract will occur "based on shipment," clarifying cadence for new bookings from this agreement.

Industry glossary

• ESS (Energy Storage Systems): Integrated hardware and software solutions designed for storing and managing energy, often used in commercial, industrial, and utility settings.
• Edgebox: SES's proprietary on-premise hardware solution integrating AI-driven Molecular Universe features to provide real-time battery intelligence and operational security.
• NDA-compliant: Refers to manufacturing and supply processes meeting defense or government Non-Disclosure Agreement requirements for security and traceability, particularly in the drone segment.
• Molecular Universe: SES AI Corporation's proprietary AI-enabled materials discovery and manufacturing platform. Includes modular solutions such as Search-in-a-Box and Formulate-in-a-Box.
• Shelf registration statement (S-3): A SEC filing allowing a company to offer and sell securities at a future date, maintaining financial flexibility.

Full Conference Call Transcript

Kyle Pilkington: Hello, everyone, and welcome to our conference call covering our first quarter 2026 results. Joining me today are Qichao Hu, Founder and Chief Executive Officer, and Jing Nealis, Chief Financial Officer. We issued our shareholder letter just after 4 PM today, which provides a business update as well as our financial results. You will find a press release with a link to our shareholder letter in today’s conference call webcast in the Investor Relations section of our website at scs.ai. Before we get started, this is a reminder that the discussion today may contain forward-looking information or forward-looking statements within the meaning of applicable securities legislation. These statements are based on our predictions and expectations as of today.

Such statements involve certain risks, assumptions, and uncertainties, which may cause our actual or future results and performance to be materially different from those expressed or implied in these statements. Risks and uncertainties that could cause our results to differ materially from our current expectations include, but are not limited to, those detailed in our latest earnings release and in our SEC filings. On this call, we will discuss non-GAAP financial measures as a supplement to our GAAP results. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles but are intended to illustrate alternative measures of the company’s operating performance that may be useful.

These non-GAAP measures should not be considered in isolation or as a substitute for any GAAP measure; our definitions may differ from those used by other companies reporting similarly titled measures. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in our latest earnings release. With that, I will pass it over to Qichao Hu.

Qichao Hu: Thanks, Kyle. Thanks, everyone, for joining today. We had a strong start for 2026. The first quarter revenue came in at $6.7 million, a 47% increase over the fourth quarter and well above published consensus estimates. We are reaffirming our full-year 2026 revenue guidance of $30 million to $35 million, with contributions expected from all three of our revenue-generating business units. We are executing on plan, and we like the momentum we have heading into the rest of the year. Before I get into the business update, I want to take a moment to acknowledge Jing Nealis, who is on this call with us today.

As we announced today, Jing will be transitioning from her role as Chief Financial Officer effective April 27. On behalf of the entire team and our board, I want to thank her for her contributions and wish her well. We have appointed Ray Liu as our new CFO, effective April 27. Ray is a seasoned finance executive with over 20 years of experience in FP&A, strategic finance, and SEC reporting at companies including AIG and MetLife Investment Management. He is a CFA charterholder and CPA. We are confident he will be an excellent partner as we scale the business. More details on this transition are in the separate press release we issued today.

Now let me walk through each of our business units. Starting with energy storage systems. ESS remains our largest near-term revenue driver and was responsible for the majority of our first quarter revenue through UZ Energy. We continue to see growing demand for our commercial and industrial energy storage solutions, and our global footprint has expanded. Earlier this month, we provided a business update that highlighted our strong start to the year. Today, I want to add some additional context on the commercial traction we are seeing.

We have now entered the North American market through our multiyear distribution agreement with ATGE Power, a leading North American distributor of renewable energy and energy storage solutions that has been operating in the clean energy sector since 2001. This contract, valued at approximately $20 million over three years, gives us immediate access to ATGE Power’s established distribution network across residential, commercial, and industrial customer segments. This new contract builds on UZ Energy’s existing customer base in Australia, the Middle East, and Europe, and reflects our strategy to grow the ESS business both geographically and through the on-premise integration of our Molecular Universe predictive capabilities into the hardware offering, an Edgebox. Energy storage systems are financial assets for our customers.

The value depends on delivering consistent, long-term performance. Our ability to provide both the hardware and an intelligent operating system that predicts battery health and reduces maintenance cost is a key differentiator. Turning to drones. We made progress in our drone cell business during the first quarter that I want to walk through. I am pleased to report that we have completed the conversion of our manufacturing line at our Jeongju, South Korea facility from EV pouch cells to drone-format power cells. This facility, which produced the world’s first 100 m-power lithium metal cell back in 2021, has been NDA-compliant since 2021.

Our plans are for the converted line to gradually ramp up to an annual capacity of over 1 million drone cells and incorporate our AI for manufacturing capabilities to ensure quality and cost effectiveness. Early this month, we began shipping NDA-compliant cells produced in our Chengdu factory to prospective defense and commercial drone customers for evaluation and qualification testing. Customer interest has been strong, and we are encouraged by the engagement we are seeing. The U.S. defense drone market in particular continues to be where we see the most consequential near-term opportunity, and our NDA-compliant manufacturing capability in Korea positions us well relative to competitors who lack NDA-compliant supply chains.

We continue to explore additional NDA-compliant capacity in Southeast Asia and expect to have an update on this front later this year. On materials, our pipeline continues to build. Through the Molecular Universe platform, both SES AI Corporation and our customers have been discovering new electrolyte materials for applications beyond our current cell production. We now have approximately half a dozen customers who have progressed through second-phase testing of materials discovered through the platform, and the overall number of customers in our pipeline has increased. The progression of existing customers through the testing pipeline represents positive momentum.

We remain on track with the Hyzon joint venture to leverage their 150 thousand-ton annual global capacity to produce these materials at commercial scale as demand materializes. And on the Molecular Universe, we recently introduced version 2.5 of the platform, which represents our fifth major iteration since we launched in 2024. Version 2.5 delivers upgraded capabilities across our six AI-powered workflows—search, formulate, design, predict, and manufacture—along with expanded enterprise on-premise deployment options and covering both lithium and our sodium chemistries. During the quarter, a major global battery manufacturer committed to a multiyear subscription of our Molecular Universe Search-in-a-Box product, which we view as a validation of the platform’s value to the world’s leading battery companies.

While the direct on-premise revenue from the Molecular Universe continues to build and is expected to make a modest direct contribution in 2026, its biggest impact remains the IT and competitive advantages it drives across our ESS, drone, and materials businesses. We will continue to explore how best to demonstrate and unlock the Molecular Universe value over the course of the year. As we look to the remainder of 2026, our priorities remain clear: execute on the ESS opportunity through UZ Energy and our growing distribution network, advance our drone cell business to a commercial-scale customer engagement, deliver on the materials pipeline, and continue developing the Molecular Universe as both a revenue stream and a competitive advantage.

I want to thank the team for their continued execution and thank all of you for your continued interest in SES AI Corporation. And now here is Jing for the financial update.

Jing Nealis: Thank you, Qichao. I will walk through our financial results for 2026. Given that our current three-business-unit structure took shape in 2025 with the integration of UZ Energy and the launch of our drone cells and materials initiatives, we will present our first quarter results on a sequential basis compared to 2025, which we believe provides the most meaningful view of our operating trajectory. Revenue for 2026 was $6.7 million, representing a 47% increase over the $4.6 million in 2025. As a reminder, 2025 was impacted by approximately $1.5 million of revenue that was pushed into the first quarter, which benefited Q1 results.

Our revenue growth reflects the continued growth from UZ Energy’s ESS product revenue, and early contributions from our drone cells and Molecular Universe subscription revenue. We are reaffirming our full-year 2026 revenue guidance of $30 million to $35 million. Our Q1 gross margin on a GAAP basis was 18.1%, compared to 11.3% in 2025. On a non-GAAP basis, which excludes stock-based compensation, as well as depreciation and amortization allocated to cost of revenue, our Q1 non-GAAP gross margin was 18.3%, compared to 11.7% in 2025. The sequential improvement from Q4 2025 reflects margin improvements from the UZ ESS business and higher margin from sample sales and Molecular Universe subscription revenue. Turning to operating expenses.

Our GAAP operating expenses for 2026 were $19.1 million compared to $18.2 million for 2025. On a non-GAAP basis, which excludes stock-based compensation as well as depreciation and amortization, first quarter operating expenses were $14.3 million compared to $13.5 million for 2025. Our GAAP net loss for the first quarter was $12.1 million, a $0.04 loss per share, compared to a GAAP net loss of $17.0 million, or a $0.05 loss per share, in 2025. I want to remind everyone that our GAAP net loss in any given quarter can be meaningfully impacted by noncash mark-to-market movements in the fair value of our sponsor earn-out liabilities, which are required to be remeasured each reporting period under GAAP.

In Q1 2026, we recorded a $4.2 million noncash gain related to these liabilities. These noncash gains or losses are not reflective of our underlying operating performance, and we believe excluding them provides a clearer picture of the progress we are making in the business. Excluding stock-based compensation, depreciation, and amortization, change in fair value of sponsor earn-out liabilities, and including interest income, our non-GAAP net loss for the first quarter was $11.1 million, or a $0.03 loss per share, compared to a non-GAAP net loss of $11.8 million, or a $0.04 loss per share, in 2025. Adjusted EBITDA for 2026 was a loss of $12.8 million compared to a loss of $13.8 million in 2025.

We believe this continued progress reflects the positive operating leverage beginning to emerge in our business as revenue scales, combined with our sustained focus on financial discipline and cost management across the organization. We remain on track to deliver the approximately 15% reduction in full-year operating expenses that we guided on our last call. A detailed reconciliation of GAAP net loss to adjusted EBITDA and non-GAAP net loss per share is included in the financial tables at the end of the shareholder letter. We utilized approximately $20 million in cash for operations during the first quarter, consistent with our operating plan. We exited the first quarter with a strong liquidity position of approximately $178 million.

Our CapEx-light business model remains a core financial discipline, and we are confident our current liquidity provides a strong runway to fund operations and execute on our 2026 growth initiatives. On a housekeeping note, we expect to file a new S-3 shelf registration statement concurrent with our October filing, as our current shelf expires on April 28. This is a routine administrative filing to maintain our financial flexibility. We believe the first quarter demonstrates steady execution against the plan we laid out. Revenue is on plan, costs are coming down, our multi–revenue stream platform is taking shape. We are well capitalized, financially disciplined, and positioned to deliver on our full-year outlook.

Lastly, on a personal note, this is my last earnings call with SES AI Corporation. I am grateful for the opportunity to have helped build SES AI Corporation’s financial foundation during the past five transformative years of the company. SES AI Corporation is well positioned to capitalize on the momentum it has built, and I look forward to seeing the growth story unfold. Thank you to Qichao, my colleagues, our board, and our shareholders for the trust and support along the way. Thank you. With that, I will hand the call back to the operator.

Operator: At this time, if you would like to ask a question, press star, then the number one on your telephone keypad. To withdraw your question, simply press star 1 again. Your first question comes from the line of Derek Soderberg with Cantor Fitzgerald. Please go ahead.

Derek Soderberg: Yeah, hey, everyone. Thanks for taking the questions. And, Jing, it has been a pleasure working with you on this one. So just on the evaluation and qualification tests, can you talk about the typical timeline? How long might it take to transition those into firm purchase orders?

Qichao Hu: Hey, Derek. Are you referring to drones qualification or electrolyte? Which one?

Derek Soderberg: Drones.

Qichao Hu: Drones. Drones qualification typically takes one to two quarters, and then we started those last year. So most of the qualifications actually have been completed, and now it is just making those in our Korea facility and having the customers come in and then do the supply chain audit, making sure all the cathode powder, the anode powder, the processing actually take place in Korea.

Derek Soderberg: Got it. That is helpful. And then on the on-premise solution, I think you said you are going to have some contribution this year. Is there any chance you can quantify that for us at all?

Qichao Hu: Probably in the next quarter. Until this last quarter, we did have one of the largest battery companies that actually signed up to the Molecular Universe Search-in-a-Box—so only one of the six features—and then we have a few more in the pipeline that are interested in Formulate-in-a-Box, Predict-in-a-Box, and also other features of the tool.

Derek Soderberg: Got it. And then one final one for me. On the drones again, what is the split between defense and commercial interest? Can you maybe break that out for us at all? Thanks.

Qichao Hu: It is mostly defense. Even though almost all the customers come to us and will say it is dual use—like, the same drones could be used for defense, police, commercial—in reality, the customers that come in, we focus a lot on customers that want NDA compliance, and then only the customers that actually want to get defense contracts would really push for NDA compliance. So we do not have a specific breakdown between defense and non-defense, and the customers do not tell us that, but we know it is predominantly defense.

Derek Soderberg: Perfect. Thanks.

Qichao Hu: Thanks.

Operator: Your next question comes from the line of Winnie Dong with Deutsche Bank. Please go ahead.

Winnie Dong: Hi. Thanks so much for taking my question. And, Jing, thank you so much. I mean, it was a great pleasure working with you. My first question is on the multiyear distribution agreement with ATGE Power. I was wondering if you can help us understand the relationship—if this is like a wholesale relationship—and of the $20 million order over three years, what kind of shipment cadence should we be thinking about?

Qichao Hu: It is similar to what I just mentioned. It is a wholesale distribution, and then they help us bundle the UZ products with solar and then distribute that to their customers.

Winnie Dong: Got it. So, essentially, once you ship it to them, you would be able to book revenue. That is how the setup is.

Qichao Hu: In terms of revenue recognition, the timing—Jing, is that correct?

Jing Nealis: Yes. So it is based on shipment. Yes. Once we ship it, based on the Incoterm, we will be able to recognize the product revenue. That is correct.

Winnie Dong: Gotcha. Okay. And then on UZ, you know, you have achieved close to $7 million, and I think somewhere spilled over from Q4. What is the typical seasonality of this business? I understand that maybe it can be a little difficult since you are spreading across all different regions, but, holistically, is there a seasonality that we should be looking at for this business?

Qichao Hu: Maybe I can address. I think overall, the energy storage business globally has some sort of seasonality depending on the region, and Q2, Q3 usually are higher than Q4. But it also depends on the local incentives available. Like, in Australia, everybody is trying to secure something to be installed before the incentives go away. And, in Europe, there are a lot of incentives going on before they go away. So there are certainly seasons based on the region. However, because UZ sells to many regions globally, it is not tied to a particular place.

So I think for this year, at least, we see growth quarter over quarter, with some seasonality, but I would not put a lot of emphasis on that. Q2, Q3 are probably higher.

Winnie Dong: Got it. And then maybe just a follow-up. I guess within the $30 million to $35 million, what is baked in terms of contribution from materials and some of the other efforts that you guys have in place?

Qichao Hu: What is the breakdown? Yeah. I think we expect this year to come predominantly from ESS, and then the rest split between drones and materials.

Winnie Dong: Got it. Thank you.

Operator: Your next question comes from the line of Dave Storms with Stonegate. Please go ahead.

Dave Storms: Good evening, and thank you for taking my questions. I wanted to start maybe with ESS and your mention of the hardware offering Edgebox. Just hoping you could maybe take a little time to speak about how that plays into the sales cycle—maybe what some of the benefits are—or any updates.

Qichao Hu: Can you ask the last part of the question again—the sales cycle and then the part after that?

Dave Storms: Yeah, just maybe some of the benefits of adding Edgebox to your offerings, and how it may be helping the sales cycle.

Qichao Hu: Yeah. So the hardware is pretty competitive, and it is basically you purchase cells, you integrate those into a container. And in the industry, the accuracy error is typically 7% or even as high as 10%, so not so accurate. As a result of that, for example, if your project only needs 10 kilowatt-hours, you will buy 14 kilowatt-hours to allow for the error. By having this Edgebox, it does two things. One is it can very accurately tell the state of charge, the state of health, safety, energy, power—basically, what we call SOX—there are six of them—and it can give a really accurate estimation of that.

So instead of the error being 7% to 10%, now we are talking about 3% or even less. And then the other benefit is that instead of on the cloud, which a lot of customers do not like, it is totally secure. It is in a box we actually put on premise. So you also have data security. The main benefit is that now, instead of buying more capacity to allow for the inaccurate estimation, you can buy less. The customers can save cost.

For some of the customers that want to participate in virtual power plants—basically, electricity trading and then sell electricity back to the grid—because you have a more accurate estimation than your peers, you can bid at a more competitive price. Also, when you make the decision of whether or not to participate and that trade-off versus sacrificing the battery health, you can have a more accurate estimation of that trade-off.

Dave Storms: Understood. Very helpful. Thank you. And then maybe just turning to materials. It was mentioned that there are several companies completing their second phase. Maybe just thoughts around timing through this next step, this third phase, as they advance towards commercial-scale supply discussions.

Qichao Hu: Typically, it is two to three rounds of testing, each round about one quarter. We are talking about six to nine months of testing. Towards the end of the last round of testing, the customer will go through what is called commercial qualification. Basically, they will check for the plant and also check for all the toxicity, the special chemical permits needed for any special materials inside this formulation, and then make sure it is compliant to all the necessary local environmental toxicity chemical regulations. Overall, the testing is six to nine months, and then another quarter for the commercial qualification.

But, again, we started a lot of this last year, so now with a lot of these customers, we are towards the end of the second round of qualification.

Dave Storms: Understood. And maybe just one more quick modeling one for me. You reiterated a 15% expense reduction throughout the year. Should we expect that to kind of go on a linear glide path throughout the year? Maybe just any thoughts around the cadence of those expense reductions?

Jing Nealis: I will take that. So we are taking a lot of actions to further reduce our operating expenses starting from Q1. You should be able to see the full-quarter impact starting from Q3. There will be a little bit of a reduction in Q2, but not a full quarter. But starting Q3, the full-quarter impact should be coming in.

Dave Storms: Understood. Thank you for all the commentary.

Jing Nealis: Then Q4 may be slightly lower than Q3.

Dave Storms: Thank you.

Operator: Your next question comes from the line of Sean Milligan with Needham. Please go ahead.

Sean Milligan: Hey. Thank you for taking the questions. In terms of the 1 million units that you are targeting for the drone cell business, can you talk to what that potentially represents from a revenue standpoint? And then the second question is you have mentioned that you have been testing or qualifying cells with potential customers there. Is there any context you can give us on the pipeline and maybe sizing of initial orders that you would expect to see?

Qichao Hu: Sure. So the 1 million is still not the full capacity that the Korea factory could go up to—much higher. All that investment we made for EV, and then it turned out we accidentally built one of the largest drone power cell manufacturing factories outside of China. So we have a lot of customers that want NDA-compliant cells come to us. The market price for NDA-compliant cells—obviously depending on the specific cell format—ranges between $25 to $35 as the market price. So for 1 million units, it is about $25 million to $35 million. That is just at 1 million, and then we could, again, go much higher if needed.

In terms of the qualification process, again, we started most of the testing last year. The performance and the product testing have been completed. Now a lot of that is actually supply chain audit and qualification.

Sean Milligan: Okay. Is there any way to talk about the pipeline—like, number of customers that you are testing with? If you look at the revenue guidance this year, I think you said some of that comes from the drone business, but it obviously could be a much bigger piece of business. I am just trying to understand how the pipeline looks—number of customers—any stats that can help us gain some sense of potential momentum.

Qichao Hu: We have a pipeline of a few dozen customers. Again, we focus on customers that want NDA-compliant cells. We actually had some shipment recently, so we expect revenue in Q2 for the NDA-compliant cells and then to start to pick up in Q3 and then Q4. Really, next year, 2027, is going to be a full year when we actually have the ability to deliver a full year of these NDA-compliant cells.

Sean Milligan: Great. Thank you.

Operator: There appear to be no further questions at this time. Ladies and gentlemen, this concludes the SES AI Corporation First Quarter 2026 Earnings Call. Thank you all for joining. You may now disconnect.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.