QuantumScape QS Q2 2025 Earnings Call Transcript

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DATE

Wednesday, July 23, 2025 at 5 p.m. ET

CALL PARTICIPANTS

President and Chief Executive Officer — Siva Sivaram

Chief Financial Officer — Kevin Hettrich

Chief Legal Officer — Dan Conway

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TAKEAWAYS

Expanded PowerCo Agreement: The licensing and collaboration expansion with PowerCo introduces up to $131 million in new payments over two years, tied to commercial milestones, in addition to the previously announced $130 million prepayment.

Initial Milestones Achieved: The first milestone under the upgraded PowerCo agreement has triggered more than $10 million in expected payments, with invoicing to occur in the next quarter.

Production Prioritization: Output from the San Jose pilot line is now prioritized for QSC5 cells supporting the PowerCo collaboration, with nonexclusive rights preserved for other customers.

Capacity Expansion: The PowerCo agreement now allows licensed production of up to 85 gigawatt hours of QuantumScape cells annually, including expansion beyond Volkswagen Group customers.

Next-Generation Technology Rights: PowerCo has secured future rights to license advanced technology beyond the QSC5 platform under the new deal.

New JDA Signed: A joint development agreement (JDA) was executed with another major global automotive OEM, moving beyond sampling to formal collaboration aimed at commercialization and licensing.

COBRA Process Deployment: The COBRA process has replaced Raptor as the baseline for separator production, offering a 25x productivity improvement over Raptor and 200 times greater than output earlier in 2023.

Sample Shipments: QSC5 cells for pack integration and safety testing (final Raptor-based B0 samples) were shipped; future shipments will use the COBRA-based B1 samples.

CapEx Guidance: Capital expenditures in Q2 were $8.3 million, Full-year capital expenditures guidance was narrowed to $45 million–$65 million with higher capital expenditures expected in the second half of 2025.

Liquidity Position: Quarter-end liquidity in Q2 2025 was $797.5 million, The expanded PowerCo deal extends the cash runway forecast into 2029, a six-month improvement over previous guidance.

Operating Metrics: GAAP operating expenses and net loss in Q2 2025 were $123.6 million and $114.7 million, respectively; Adjusted EBITDA loss in Q2 2025 was $63 million, matching expectations.

Adjusted EBITDA Guidance: Full-year adjusted EBITDA loss guidance narrowed to $250 million–$270 million and does not account for upside from the expanded PowerCo agreement.

Accounting Treatment: CFO Kevin Hettrich stated, Our preliminary assessment is this will not be recognized as revenue regarding the initial PowerCo payment of more than $10 million expected to be invoiced in Q3 2025, with final determination pending.

Murata Collaboration Update: Progress continues on the ceramics production collaboration with Murata Manufacturing, leveraging expertise for Japanese automotive market demand.

SUMMARY

The upgraded deal with PowerCo introduced a new two-year, milestone-based payment stream of up to $131 million and expanded licensing rights, establishing a broader industrialization partnership with output from the San Jose pilot prioritized for this collaboration. QuantumScape Corporation entered a JDA with a major automotive OEM to accelerate the commercialization and licensing of its technology platform, marking deeper commercialization efforts beyond the Volkswagen Group. The company’s transition to the COBRA separator process delivered significant production efficiency gains and enabled higher-volume sample shipments, supporting upcoming commercialization milestones with both PowerCo and new auto OEM partners.

Siva Sivaram described COBRA’s impact on production as a 25-fold improvement over Raptor, 200 times over what we had done earlier in 2023.

The PowerCo agreement expanded total annual licensed cell production capacity to 85 gigawatt hours, including capacity for non-Volkswagen customers, and includes potential access to future QuantumScape technologies beyond the first-generation QSC5 platform.

Kevin Hettrich confirmed, these payments will reduce our GAAP net loss, improve our bottom line result, and help extend our cash runway.

The company’s cash runway is now projected into 2029, a six-month extension, primarily due to new customer-linked cash inflows and operational streamlining, as disclosed by management during the Q2 2025 earnings call.

The company’s business model emphasizes near-term cash inflows from customer development activities, followed by longer-term royalty streams as customers ramp production.

INDUSTRY GLOSSARY

QSC5: QuantumScape Corporation’s proprietary first-generation solid-state lithium metal cell platform, central to current commercialization efforts.

COBRA Process: QuantumScape Corporation’s next-generation ceramic separator production method, yielding significant efficiency and output gains over the prior “Raptor” process.

B0/B1 Samples: Designations for pilot-run cell sample generations—B0 referencing Raptor-based units, B1 referencing COBRA-based units—for customer evaluation and integration.

JDA: Joint Development Agreement, a formal collaborative arrangement with customers targeting technology adaptation and commercialization, often preceding a full licensing deal.

PowerCo: Volkswagen Group’s dedicated battery development and manufacturing subsidiary, QuantumScape Corporation’s principal partner in joint industrialization activities.

Full Conference Call Transcript

Siva Sivaram: Thank you, Dan. Today, we announced an expansion of our existing collaboration and licensing agreement with Volkswagen Group's battery maker, PowerCo. This upgraded deal sees PowerCo contributing additional payments of up to $131 million to QuantumScape Corporation over the next two years to support our joint commercialization activities. These payments are connected with certain milestones to be achieved with a joint scalability. The first milestones linked to expected payments of more than $10 million have already been achieved. These new payments are additional to the previously announced $130 million that will be due to QuantumScape Corporation upon satisfactory technical progress and execution of the full licensing agreement.

As part of this upgraded deal, QuantumScape Corporation will prioritize the output of QSC5 cells from our San Jose pilot line to support our joint activities with PowerCo, though we maintain our nonexclusive arrangement and retain the right to provide sales to our other prospective customers. This expansion would allow PowerCo the right under the licensing agreement to produce up to an additional five gigawatt hours of QuantumScape Corporation cells annually, including for customers outside the Volkswagen Group, for a total of up to 85 gigawatt hours. PowerCo has also secured the future right to license certain advanced QuantumScape Corporation technology beyond our first-generation QSC5 platform.

This upgraded PowerCo deal with new cash payments of up to $131 million over two years clearly demonstrates the value of our solid-state lithium metal technology platform. The automotive sector. We are extending our cash runway forecast into 2029, a six-month improvement relative to our previous guidance. Now a word on our commercial engagement beyond PowerCo. We are happy to report that we have now entered into a joint development agreement with another major global automotive OEM. This JDA strengthens the collaboration beyond our initial sampling agreement we discussed with the customer with the intent to work towards a commercialization and licensing deal.

We continue to collaborate closely with existing and new customers, and we see market traction accelerating as these announcements provide commercial validation and increased urgency in the automotive space. With respect to our broader QuantumScape Corporation ecosystem, last quarter, we announced an agreement with Murata Manufacturing to explore collaboration on ceramics production, and this effort is progressing well. Beyond their world-class ceramics expertise, Murata provides particular value as a highly respected partner in the Japanese market, where we see strong demand for solid-state batteries in automotive applications. Our Japanese subsidiary, QuantumScape Corporation Japan, is a valuable asset in demonstrating our technology leadership to this market. Now an update on our annual goals.

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

Turning to our launch customer, in Q2, we shipped QSC5 cells for pack integration and testing, including safety testing. These cells were the final Raptor-based B0 samples to be shipped. Future shipments will be COBRA-based B1 samples in line with our third annual goal. This launch program is designed to be a low-volume, high-visibility project that will allow us to put our cells into a real-world vehicle application and generate customer feedback. We continue to target 2026 for the beginning of field testing. Last, I want to address our strategic outlook. This quarter is a major inflection point in our journey, and we are now firmly in the commercialization phase of our company.

We believe this expanded deal with PowerCo is an unambiguous demonstration of both the economic value of our solid-state platform and the power of our capital-light business model. And at this model, we have the ability to monetize development activities early on and then collect licensing royalties as our customers ramp production volumes. We are just getting started. We have long and deep relationships with additional auto OEMs, and we continue to see these engagements intensify, as demonstrated by our new JDA with an existing automotive customer.

We believe our technology platform has the potential to revolutionize the automotive industry as well as other rapidly emerging markets, amounting to a total addressable market in the hundreds of billions of dollars annually. The challenges of scaling production remain significant, and there is still much work left to do. But working together with our world-class partners, we believe we are closer than ever to achieving our long-term goals.

Operator: With that,

Siva Sivaram: let me hand things over to Kevin for a word on our financial outlook.

Kevin Hettrich: Thank you, Siva. Capital expenditures in the second quarter were $8.3 million. Q2 CapEx primarily supported facilities and equipment purchases as we prepare for higher volume QSC5 B1 sample production using the COBRA separator process. We narrow the range of our full-year guidance for CapEx to be between $45 million and $65 million. We expect the second half of 2025 to see higher levels of CapEx investment relative to the first half of the year, consistent with our narrowed guidance. GAAP operating expenses and GAAP net loss in Q2 were $123.6 million and $114.7 million, respectively. Adjusted EBITDA loss was $63 million in Q2, in line with expectations.

The table reconciling GAAP net loss and adjusted EBITDA is available in the financial statement at the end of the shareholder letter. We continue to streamline operations in line with the company's capital-light licensing focus and capture gains from cost reduction initiatives and process improvement, including the COBRA process. We narrow the range of our full-year guidance for adjusted EBITDA loss to be between $250 million and $270 million. The amended PowerCo collaboration agreement features payments up to $131 million over the next two years. Actual payments will be based on the scope of work and approved by the QuantumScape Corporation PowerCo steering committee.

In Q3 2025, we expect to invoice PowerCo for more than $10 million for development work already performed by the joint team. We ended Q2 with $797.5 million in liquidity, and in light of the expanded PowerCo deal and efforts to further streamline operations, extend our guidance for cash runway into 2029, a six-month improvement over our previous guidance. Any additional funds from other customer inflows or capital markets activity would further extend this cash runway. As always, we encourage investors to read more on our financial information, business outlook, and risk factors in our quarterly and annual SEC filings on our investor relations website, including today's PowerCo amendment press release and 8-K with the redacted amendment.

Dan Conway: Thanks, Kevin. We'll begin today's Q&A portion with a few questions we received from investors or that I believe investors would be interested in. Siva, what is the significance of this expanded agreement with PowerCo? How does this fit in with our licensing business model?

Siva Sivaram: Building upon what we just announced, our vision for the business model provides two sources of cash inflows. On the front end, we will monetize development activities for our customers to tailor our core technology to meet their specific needs. Subsequently, as the customer ramps production, we realize royalties over the lifetime of the project. Some of these payments could take the form of licensing fees or royalty prepayments, as in the PowerCo deal. As we continue to develop further generations of our technology, we will maintain both lines of business to generate consistent and compelling cash flows.

Payment for development activities has the benefit of being near-term, while the royalty payments represent the majority of the value capture through a consistent long-term stream of high gross margin revenue. This business model is unlocked by our highly differentiated technology platform. This expanded PowerCo deal is a validation of this vision, with about a quarter of a billion dollars to bring this technology to market. This program will serve as a proof of concept of the QSC5 technology and support other programs targeting VW Group vehicle applications, such as vehicle demo fleet and other programs under the scope of the overall project covered by the collaboration agreement.

The intention of the program is to leverage the combined expertise and resources of QuantumScape Corporation and PowerCo to advance the QSC5 technology, ensuring its readiness for commercial application in the automotive industry. As part of this deal, PowerCo will be contributing $131 million to QuantumScape Corporation in order for a joint team in San Jose to accelerate the scale-up of QuantumScape Corporation technologies. The agreement enables earlier PowerCo engagement in the QSC5 production and automation efforts, advancing the ramp-up of the QuantumScape Corporation San Jose pilot plant.

You can see that this expanded agreement is a clear signal of the growing strategic, technical, and financial alignment between our two companies and reflects our shared confidence in QSC5 as a game-changing platform for the battery industry.

Dan Conway: Thanks, Siva. Kevin, can you expand more on the financial impact of this expanded agreement?

Kevin Hettrich: The most important thing for investors to understand is that these are cash inflows from a customer. We expect these payments will reduce our GAAP net loss, improve our bottom line result, and help extend our cash runway. In Q3, we plan to invoice PowerCo for more than $10 million tied to development activity already performed by the joint team. Our preliminary assessment is this will not be recognized as revenue. The work to determine the accounting treatment is ongoing. We will provide an update on the Q3 call. One further point, our narrowed adjusted EBITDA guidance is driven by operational improvements and does not reflect potential upside from this expanded PowerCo deal.

We encourage investors to read our Form 10-Q, including the risk factors, as well as the amended press release and 8-Ks, and the redacted amendment for more information.

Dan Conway: Thanks, Kevin. Siva, can you elaborate further on the joint development agreement with the second major global automotive customer?

Siva Sivaram: This is one of our existing customers with whom we have had a sampling agreement. We have now entered into a JDA with the intent to progress to a full commercialization and licensing arrangement with a global auto major. We are upgrading our relationship, deploying our high-tech model to develop a customized solution for their needs, and ultimately progressing to a full licensing arrangement along the same lines as our PowerCo agreement.

Dan Conway: Thanks. Last month, we announced that the COBRA process has been baselined. Why was that such a significant accomplishment?

Siva Sivaram: Let's look at the big picture. We do not believe any solid-state technology can achieve the kind of no-compromise performance in range, charging speed, safety, etc., without a ceramic separator. The ceramic separator is a key part of our anode-free, graphite-free, lithium metal architecture. COBRA takes this technology differentiation to a whole new level. It's really a transformative innovation in ceramics, taking technical ceramic production and improving the heat treatment by more than 200 times is unheard of in the industry. Because of this advantage, COBRA is the most important technology element for gigawatt-hour scale production.

In the near term, this is what we will be using to produce our B1 samples later this year, and over the long term, it's what our ecosystem partners would be using to ramp their production. As impressive as COBRA is today, we believe that COBRA has significant headroom to improve even further. Now that it's in our baseline, our systematic and iterative improvement process will allow us to continue to build out and enhance the COBRA technology portfolio.

Dan Conway: Okay. Thank you so much. We are now ready to begin the live portion of today's call. Operator, please open up the line for questions.

Operator: Thank you. To ask a question, simply press star one on your telephone keypad. We do respectfully ask that you limit yourself to one question and one follow-up. Our first question comes from the line of Winnie Dong with Deutsche Bank. Please go ahead.

Winnie Dong: Hi. Thank you for taking my question. You talked about another Global Automotive OEM, which you now have a JDA agreement with. I was wondering if you can elaborate a bit on the agreement. It seems like, you know, there are still more steps to take before an official licensing deal is signed. Can you just elaborate on what else needs to be done? You know, what the OEM is sort of looking for before they sort of go into the full commitment?

Siva Sivaram: Many thanks for the question. The second deal we just announced after the expanded PowerCo agreement is that we have signed a JDA with a global auto major OEM. Here, our job is to make sure we take our technology platform and adapt it to this customer's needs. So the JDA does exactly that. Make sure that their specifications, the product that they need, we adapt our technology to that. Once we get that going, the same playbook that we have used with PowerCo, that same model applies. That we as a joint team will make sure that we are transferring the technology to them so they can ramp in volume.

So the playbook has been defined with the PowerCo agreement, and we are doing the same thing with our next customer. As we had originally planned. And we have had this JDA now signed and ready to go.

Winnie Dong: Got it. Thanks for that color. And then you mentioned, you know, the first milestones are linked to, you know, initial expected payment of $10 million has already been achieved and you'll start to invoice that starting Q3. I was wondering if you can maybe delineate or outline some of the details on, you know, what would be associated with the next set of milestones and subsequent payment. And how should we sort of understand that in the context of the original $130 million versus now the expanded agreement with an additional up to $131 million.

Siva Sivaram: Winnie, just to make sure we are clear, this $131 million we just announced is distinct from the prior $130 million licensing prepayment that we had announced that when we achieve certain milestones and we enter into the final licensing agreement, they pay us. This expanded agreement is really for the joint QuantumScape Corporation PowerCo scale-up team. The team is already here. We are together, starting to do the industrialization activities. And this is our way of monetizing those collaboration activities. So we think in terms of our business model having two cash flow streams. The first cash flow being what we just talked about, adapting our technology to our customers' needs, industrializing, and transferring it.

And the second one is the longer-term licensing and royalties payment. These two streams, these two cash flow streams, are distinct. We are now demonstrating the first one, which is that in the short term, we are starting to monetize our joint development activities and getting a cash flow stream out of it. And as this team is already here, we are starting to work together, and for some of the work already performed, we are starting to invoice PowerCo for that money. And there's a joint PowerCo QuantumScape Corporation steering committee that runs this, and based on the statement of work, this steering committee will approve the invoices that we'll continue to do with PowerCo.

And so this is $131 million over two years.

Winnie Dong: Yep. And if I can just sneak one in, I think Kevin mentioned that preliminarily, the $10 million that you will invoice is not going to be treated as revenue. So just so for future, like, how do we sort of understand, you know, what flows through and how the treatment's gonna be, like from, like, an accounting standpoint. Thanks.

Kevin Hettrich: Hi, Winnie. Thank you. Yeah, we did mention that we do expect this to improve the bottom line and not be revenue. On the Q3 call, we'll give more of an update on the accounting treatment.

Winnie Dong: Okay. Thank you.

Siva Sivaram: Thank you, Winnie.

Operator: Next question comes from the line of Mark Shooter with William Blair. Hi, team.

Mark Shooter: You have Mark Shooter on for Jed Dorsheimer. Congrats on the VW expansion. That's great news. Dialing in a bit more on that. Can you give us some color on what part of the manufacturer to increase the pilot capacity? And maybe some idea of what you're expecting for the end capacity of the pilot line and a timeline expected to ramp?

Siva Sivaram: Mark, thanks for the question. Just to be clear, we do not intend to be a manufacturing company. We are always going to be a high-tech technology licensing company where we develop the technology, develop and industrialize, and then transfer it to our customer. Having said that, we just announced COBRA, which gives a 25x improvement over Raptor, 200 times over what we had done earlier in 2023. So to match that level of separator output, we are increasing the cell build capacity so we can produce enough samples for this activity of industrialization of the core QSC5 technology platform, which is what we are going to be doing.

And the output of it is primarily going to be used for the joint activity by this joint scale-up team. And the expectation is that I want to be a little bit boring here. The idea of it being a systematic, methodical, iterative process that we do on our pilot sample production line will be done by this joint PowerCo QuantumScape Corporation scale-up team, and this $131 million is geared towards those pilot activities.

Kevin Hettrich: And then, Mark, just to draw the dots between what Siva was mentioning and our annual goals. When we set the goals for the year, this is how we hoped it would play out. After achieving the first goal of baselining COBRA production, which we did in Q2, the second goal with that 25x higher productivity relative to Raptor is to lift the production capacity of the downstream assembly equipment to keep up with that significantly higher flow coming from the COBRA process.

Mark Shooter: That's great. I appreciate the color. Hopefully, the increased volumes will allow the iteration process to be a bit faster. It should be nice. But nicely. I get touching that's great. The capacity as well. The VW agreement continues to expand, which is great. And now we're sitting at 85 gigawatt hours, which is, you know, double of what Tesla produces at the Nevada facility with Panasonic. So what do you think that VW needs to see to start to invest in a large facility to start chipping away at that really large opportunity you guys have for licenses?

Siva Sivaram: I want to be very careful not to speak for my customer, Mark. It is theirs to decide how they run them, at the factory at the rate that they do. Having said that, this expansion of the relationship clearly demonstrates that our interests are very aligned in this. We want to make sure this technology is transferred to them, that they can ramp and move very, very quickly. You can go to their site to see all the factories that they are building and what applications they are going to be doing, etc. Our partnership has been very, very strong. As I keep saying, there is a joint scale-up team physically present in San Jose to accomplish this.

Mark Shooter: Appreciate that. Thanks. And if I can squeeze one last one in, I know you do not want to be a manufacturer, and I totally appreciate that. But now you do have some capacity in a pilot line in the United States with a high energy density battery. So I'm wondering if you've gotten any increased engagement from maybe US defense contractors or drone manufacturers given the executive orders of the Trump administration on drones.

Siva Sivaram: Yeah. I want to talk about two allied may not be directly answering to you, but you can see the possibilities here. One of the limitations of lithium-ion batteries is the presence of graphite. Graphite comes like, upper 90% from China. As you know, there is no major graphite production in that kind of quantities within the United States. Graphite is inherently dirty, it's a greenhouse disaster trend to produce. The best way not to have graphite in your system is not to have an anode, which is what our technology is. So we are a US maker of lithium metal anode-free technology, and the last point I want to make is we're carefully curating and creating our ecosystem.

The QuantumScape Corporation ecosystem provides that optionality of how a potential customer can use our technology and how to ramp. We've been very, very careful in expanding our ecosystem to make sure that all of these new applications can also be served.

Mark Shooter: Thank you very much.

Operator: Your next question comes from the line of Ben Kallo with Baird. Please go ahead.

Ben Kallo: Hey, guys. Good afternoon. Good evening. Thanks for taking my question. Congrats on the two announcements. First, on the JDA, and then the expanded PowerCo, how many and I know you have other potential customers. How many can you manage at one time? I guess the question, both from an employee standpoint, a bandwidth standpoint, and then an equipment standpoint. And the last piece, just meaning like, do you need a new COBRA for this JDA? And new, you know, the back end for the cells. Or if you guys just help with that, that'd be helpful. Thank you.

Siva Sivaram: Ben, you're thinking just like what you are thinking, you are absolutely right. There is an upper limit on how many we are going to be handling at the same time because we want to make sure we protect this technology to chosen customers with whom we can scale in high volume because we want it to be a high-touch model. We had mentioned in our last earnings call that we were working with two other auto OEMs, and we just signed one of them. We will be careful in choosing how fast we scale.

You are right that we have to be making sure that we keep the intellectual property for each of them well protected, each of our customers, and making sure that we are servicing them very, very well. We have accounted for all of this in our current plans, and we will make sure that we keep updating you as we do sign more customers.

Ben Kallo: Thank you. Then just maybe one more on the expanded PowerCo agreement. You mentioned up to 85 gigawatt hours. And then how it wasn't exclusive. Just could you just talk more about, like, how different the process is to make keep it not exclusive from what's under the PowerCo. I guess it follows on to the same it's similar question from before. With the next customer. Is it do you have to change the process or how much difference is it than what you're doing with the PowerCo?

Siva Sivaram: Just to be clear, we do have a nonexclusive arrangement with PowerCo. PowerCo has been our first customer, an amazing partner, and we are working very well with them. Clearly, each auto OEM has their own specifics on how they like their batteries, in the product specifications that they like to use. We have developed a core technology platform which we then work with each of them to modify. Some can be maybe form factor change, some of them may be specifications tightened in one way or the other. Many such things will be customized for each of them. And that's exactly what we are doing right now.

The first generation is being customized for PowerCo, and the second JDA envisions doing the same thing for the second customer.

Ben Kallo: Great. Thank you guys very much.

Operator: Your next question comes from the line of Gabriel Gonzales with UBS.

Gabriel Gonzales: Hey, guys. This is Gabriel on for Joe. Thanks for taking my questions. Kevin, just wanted to touch on the original $130 million prepayment. Can you give us some high-level color on how that's progressing generally, and what's a ballpark expectation of when that comes to fruition?

Kevin Hettrich: Thank you, Gabe. As we stated in the press release last year, the joint QuantumScape Corporation PowerCo team needs to make satisfactory technical progress towards QSC5 industrialization, after which we grant PowerCo a license and they make the $130 million prepayment. Our public goals are aligned with that technical progress, and we just need to keep our heads down and keep executing.

Gabriel Gonzales: Understood. Okay. And it's encouraging with the new $131 million upgraded deal from PowerCo that you extended the cash runway into 2029. However, the stock has also had quite an impressive rally in recent weeks. So given where we stand now, how are you thinking about the sort of tapping into the equity markets here to further shore up the cash position on the balance sheet?

Kevin Hettrich: Our job as a management team is to set out to do important things that create value for the company and to do so systematically, methodically, and iteratively. We value a strong balance sheet. It's a differentiator for the company, and we commit to continue to be strategic regarding any capital markets activity.

Gabriel Gonzales: Understood. Thanks for the color.

Operator: Your next question comes from the line of Mark Delaney. Please go ahead.

Aman Gupta: Hi. You have Aman Gupta on for Mark Delaney. Just kind of going back to this PowerCo expanded agreement. Can you talk about the implications from an OpEx and CapEx standpoint? Appreciate the color on the $10 million not coming through as revenue. So how should we think about that, like hitting on an EBIT level? Is there any margin associated with that revenue or just any color you could provide, that would be great.

Kevin Hettrich: Thank you, Aman. Just to highlight a few things that I mentioned before. So in Q3, we plan to invoice PowerCo for more than $10 million for development activity already performed by the joint scale-up team. This will mark the first meaningful non-dilutive cash inflow from a customer. We expect this will improve the bottom line. Our preliminary conclusion is this will not be accounted for as revenue. And the work to determine the accounting treatment is underway, and we plan to provide an update on the Q3 call. We would encourage investors to read our Form 10-Q, including the risk factors, as well as the press release and the 8-K.

The 8-K does include a redacted form of the amendment.

Aman Gupta: Alright. So just to kind of maybe follow-up on that, so is there any incremental maybe to phrase it a little better. Is there any incremental OpEx or CapEx under the expanded agreement, or is this just kind of payments for the already existing OpEx and CapEx that was planned for?

Kevin Hettrich: That's a good question. Our long-term operational plans included the bulk of the work in the statement of work. So from that point of view, these inflows are accretive.

Aman Gupta: Understood. And then just the second part of my second question would be around this JDA. What are the sort of milestones? I know you spoke about needing to kind of fit the specs to the customer's needs. Any sort of specifics on what type of technical milestones that would look like or time frame in which that would happen? And how much kind of, to your earlier question, bandwidth you have to while you're still prioritizing the PowerCo agreement under the new deal. Thank you.

Siva Sivaram: Aman, just like Kevin just alluded to, these are already in our longer-term plans, and so this work is also in our works already. And the second JDA is something obviously we announced the possibility of in the last quarter, and we are following through with it. And so these are well accounted for in the financials that we hope it.

Kevin Hettrich: As a technology licensing company, our first job is to develop differentiated technology. And as you know, in a licensing business model, there's a lot of operating leverage. We celebrate the opportunity to specialize and to tailor our technology to their specific needs. Towards that two-phase cash flow set of cash inflows that Siva mentioned, both to monetize the upfront and tailoring under the collaboration phase towards longer-term royalty inflows as we jointly have success helping them scale up their factories.

Aman Gupta: Yep.

Operator: I will now turn the call back over to Siva for closing remarks.

Siva Sivaram: Thank you, operator. I'd like to thank our employees for their dedication, our partners for their trust, and our shareholders for their continued support. We look forward to updating you on further progress in the months to come. Thank you.

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