SES AI Corporation — Q3 2026 Earnings Summary

Financial Performance:

• Third quarter revenue was $6.6 million, a 31% increase from $5.1 million in the second quarter.
• GAAP net loss narrowed to $13.4 million ($0.04 per share) from $17.9 million ($0.05 per share) in the second quarter.
• GAAP gross margin was 4.9% in the third quarter, down from 22.6% in the second quarter, attributed to lower-margin sales of older energy storage hardware inventory.
• GAAP operating expenses decreased to $18.7 million from $20.3 million in the second quarter, a reduction of approximately 8%.
• Non-GAAP net loss was $10.7 million ($0.03 per share), compared to $13.1 million ($0.04 per share) in the second quarter.
• Adjusted EBITDA loss was $12.0 million, improving from a loss of $14.6 million in the second quarter.
• The quarter included non-cash gains of $1.8 million from the change in fair value of Sponsor Earn-Out liabilities and $2.2 million from the change in fair value of deferred consideration related to the UZ Energy acquisition.
• Cash, cash equivalents, and short-term investments totaled approximately $137 million at the end of the third quarter, down from $163 million at the end of the second quarter.
• The company has no debt.

Guidance and Future Outlook:

• Reiterated full-year 2026 revenue outlook of $30 million to $35 million.
• Based on $18.4 million revenue through the third quarter, the outlook implies fourth quarter revenue of approximately $11.6 million to $16.6 million.
• Expect meaningful revenue contribution from the drone business to begin in Q4 as sample orders convert to mass production purchase orders.
• Anticipate a staged expansion in Korea to increase capacity from 1 million to 3 million NDAA-compliant cells per year, with the expanded capacity expected by the end of Q2 2027.
• Expect Molecular Universe to generate independent revenue over the next three to five years and power the majority of product development.

Business Segments and Product Lines:

• Energy Storage (Charge): Contributed approximately 47% of third quarter revenue; differentiates via battery intelligence software (Edge Box, SOX) that reduces state of charge/health error to 3% or less.
• Drones and Unmanned Systems (Fly): Completed ramp of Chungju line to 1 million NDAA-compliant cells per year capacity in the third quarter; production and deliveries began in early October.
• Molecular Universe (Discover): Molecular Universe 4.0 (M-Lab) is now in evaluation with leading battery manufacturers; the closed-loop system runs fully on-premises and air-gapped.
• The company is upgrading energy storage products from 5 kWh to 16 kWh units, anticipated for the market in 2027.
• Over 50 drone makers and pack integrators are in the pipeline seeking NDAA cells; about half a dozen have audited the production line.

Market and Competitive Landscape:

• U.S. and allied defense customers are shifting battery supply chains away from China, increasing demand for NDAA-compliant supply.
• SES holds the largest installed capacity of NDAA-compliant drone cells in the world at 1 million per year.
• Ongoing customer discussions indicate potential demand exceeding 3 million NDAA-compliant cells per year.
• The company has secured purchase orders from multiple participants and winners of the U.S. Government's Drone Dominance Program Gauntlet challenge.

Risks and Challenges:

• Forward-looking statements highlight risks regarding the timing and achievement of business milestones, customer demand for drone cells, and the ability to maintain manufacturing capacity and quality standards.
• Risks include potential supply chain difficulties, raw material availability, and regulatory risks related to AI and machine learning use.
• Potential risks involve changes in federal defense spending, budget timelines, or enforcement priorities impacting NDAA compliance requirements.
• The company may face risks related to maintaining NYSE listing requirements, stock volatility, and potential material weaknesses in internal controls.

Management Commentary and Tone:

• Management expressed confidence in the long-term value of SES, citing the "Flywheel" concept where Charge provides revenue, Fly drives growth, and Discover compounds value.
• CEO Qichao Hu and CFO Ray Liu emphasized that execution on customer qualifications, orders, shipments, and repeat customers is the current focus.
• Management noted the business is exhibiting positive momentum and believes the Flywheel is working.
• The company views the recent share repurchase as an opportunistic use of capital reflecting confidence in the business.

Other Key Points:

• In September, the company used $9.2 million to repurchase 16.2 million shares at an average price of $0.57 per share; approximately $19.1 million remains under the repurchase authorization.
• In October, the company filed a proxy statement seeking stockholder approval for a reverse stock split to broaden eligibility for institutional ownership and support NYSE listing.
• The Chungju production line earned ISO 9001 certification for NDAA-compliant drone cells.
• Molecular Universe 4.0 was officially launched at the 17th Advanced Lithium Batteries for Automotive Applications (ABAA) conference.
• The company operates a capex-light business model.