SES AI Q1 2026 Earnings Call - Revenue Surges 47% as Drone and ESS Segments Gain Momentum

Tiffany, Conference Operator: Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the SES AI First Quarter 2026 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star, then the number one on your telephone keypad. I would now like to turn the call over to Kyle Pilkington, Chief Legal Officer. Kyle, please go ahead.

Kyle Pilkington, Chief Legal Officer, SES AI: 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 4:00 P.M. today, which provides a business update as well as our financial results. You’ll 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 ses.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.

The 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, and 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’ll pass it over to Qichao.

Qichao Hu, Founder and Chief Executive Officer, SES AI: 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-$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 updates, 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 27th. 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 27th. Ray is a seasoned finance executive with over 20 years of experience in FP&A, strategic finance, and SEC reporting at companies including Aiden and MetLife Investment Management. He’s a CFA charterholder and CPA, and 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 is expanding. 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 multi-year distribution agreement with ATG E 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 ATG E 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 Predict capabilities into the hardware offering and Edge Box. 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 costs 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 Chungju, South Korea facility from EV power cells to drone format power cells. This facility, which produced the world’s first 100 amp-hour lithium metal cell back in 2021, has been NDAA 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 incorporates our AI for manufacturing capabilities to ensure quality and cost effectiveness.

Early this month, we began shipping NDAA compliance cells produced in our Chungju 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 NDAA-compliant manufacturing capability in Korea positions us well relative to competitors who lack NDAA-compliant supply chains. We continue to explore additional NDAA-compliant manufacturing capacities in Southeast Asia and expect to have more to update on this front later this year. On materials, our pipeline continues to build. Through the Molecular Universe platform, both SES and our customers have been discovering new electrolyte materials for applications beyond our current cell production.

We now have approximately 6 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 Heisen joint venture to leverage their 150,000-ton annual global capacity to produce these materials at commercial scale as demand materializes. 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 6 AI-powered workflows: ask, search, formulate, design, predict, and manufacture. Along with expanded enterprise on-premise deployment options and covering both lithium and now sodium chemistries.

During the quarter, a major global battery manufacturer committed to a multi-year 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 toward commercial scale customer engagements, 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. Now here’s Jing for financial updates.

Jing Nealis, Chief Financial Officer, SES AI: Thank you, Qichao Hu. I will walk through our financial results for the first quarter of 2026. Given that our current three business unit structure took shape in the fourth quarter of 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 the fourth quarter of 2025, which we believe provides the most meaningful view of our operating trajectory. Revenue for the first quarter of 2026 was $6.7 million, representing a 47% increase over the $4.6 million in the fourth quarter of 2025. As a reminder, the fourth quarter of 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 MU subscription revenue. We’re reaffirming our full year 2026 revenue guidance of $30 million-$35 million. Our Q1 gross margin on a GAAP basis was 18.1%, compared to 11.3% in the fourth quarter of 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 the fourth quarter of 2025. The sequential improvement from Q4 2025 reflects margin improvements from the UZ ESS business and higher margin from sampled drone sales and MU subscription revenue. Turning to operating expenses, our GAAP operating expenses for the first quarter of 2026 were $19.1 million, compared to $18.2 million for the fourth quarter of 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 the fourth quarter of 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 million or $0.05 loss per share in the fourth quarter of 2025. I want to remind everyone that our GAAP net loss in any given quarter can be meaningfully impacted by non-cash 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 non-cash gain related to these liabilities.

These non-cash gains or losses are not reflective of our underlying operating performance, and we believe excluding them provides a clearer picture of the progress we’re 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 3 cents loss per share, compared to a non-GAAP net loss of $11.8 million or 4 cents loss per share in the fourth quarter of 2025. Adjusted EBITDA for the first quarter of 2026 was a loss of $12.8 million, compared to a loss of $13.8 million in the fourth quarter of 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 S3 shelf registration statement concurrent with our 10-Q, as our current shelf expires on April 28th. 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, and 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. I am grateful for the opportunity to have helped build SES’s financial foundation during the past five transformative years of the company. SES 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 Hu, my colleagues, our board, and our shareholders for the trust and support along the way. Thank you. With that, I’ll hand the call back to the operator.

Tiffany, Conference Operator: At this time, if you would like to ask a question, press star, then 1 on your telephone keypad. To withdraw your question, simply press star 1 again. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Derek Soderberg with Cantor Fitzgerald. Please go ahead.

Derek Soderberg, Analyst, Cantor Fitzgerald: Yeah. Hey, everyone. Thanks for taking the questions. Jing, it’s been a pleasure working with you on this one. 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, Founder and Chief Executive Officer, SES AI: Hey, Derek. Are you referring to drones qualification or electrolyte? Which one?

Derek Soderberg, Analyst, Cantor Fitzgerald: Drones.

Qichao Hu, Founder and Chief Executive Officer, SES AI: Drones qualification, typically 1-2 quarters, and then we’ve started those last year. Most of the qualifications actually have been completed, and now it’s just making those

In our Korea facility and have 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, Analyst, Cantor Fitzgerald: Got it. That’s helpful. On the on-premise solution, I think you said you’re going to have some contribution this year. Is there any chance you can quantify that all for us?

Qichao Hu, Founder and Chief Executive Officer, SES AI: Probably in the next quarter. This last quarter we did have one of the largest battery companies that actually signed up to the Molecular Universe Search in a Box. Only one of the six features, and then we have a few more in the pipeline that are interested in Formula in a Box, Predict in a Box, and also other features of the tool.

Derek Soderberg, Analyst, Cantor Fitzgerald: Got it. One final one from me on the drones again. What’s sort of the split between defense and commercial interest? Can you maybe break that out for us at all? Thanks.

Qichao Hu, Founder and Chief Executive Officer, SES AI: It’s mostly defense. Even though almost all the customers come to us will say it’s 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 NDAA compliance, and then only the customers that actually want to get defense contracts would really push for NDAA compliance. We don’t have a specific breakdown between defense and non-defense, but because also the customers don’t tell us that. We know it’s actually predominantly defense.

Derek Soderberg, Analyst, Cantor Fitzgerald: Perfect. Thanks.

Qichao Hu, Founder and Chief Executive Officer, SES AI: Thanks.

Tiffany, Conference Operator: Your next question comes from the line of Winnie Dong with Wit Bank. Please go ahead.

Winnie Dong, Analyst, Wit Bank: Hi, thanks so much for taking my question. Jing, thank you so much, and it was a great pleasure working with you. My first question is on the multi-year distribution agreement with ATG E Power. I was wondering if you can help us understand the relationship, if this is like a wholesale relationship in the $20 million order over three years, what kind of shipment cadence we should be thinking about?

Qichao Hu, Founder and Chief Executive Officer, SES AI: It’s similar to what I just mentioned. It’s a wholesale distribution, and then they help us bundle the UZ products with solar, and then distribute that to their customers.

Winnie Dong, Analyst, Wit Bank: Got it. Essentially, once you ship it to them, you will be able to book revenue. That’s how the setup is?

Qichao Hu, Founder and Chief Executive Officer, SES AI: In terms of revenue recognition, the timing, Jing, is that correct?

Jing Nealis, Chief Financial Officer, SES AI: Yeah. Yes. It’s based on shipment. Yes. Once we ship it, based on the Incoterm, we will be able to recognize product revenue. That’s correct.

Winnie Dong, Analyst, Wit Bank: Got you. Okay. On UZ, you’ve achieved close to $7 million, and I think some were spilled over from Q4. What is the typical seasonality of this business? I understand that maybe it can be a little difficult since you’re spreading across all different regions, but holistically, is there a seasonality that we should be looking at for this business?

Qichao Hu, Founder and Chief Executive Officer, SES AI: Jing, you want to address that?

Jing Nealis, Chief Financial Officer, SES AI: Maybe I can. Yeah, maybe I can address. I think overall, the energy storage business globally has some sort of seasonality depending on the region. Q2, Q3 usually are higher than Q4. It also depends on the local incentives available. Like Australia, everybody is trying to secure something to be installed before the incentives go away. In Europe, there are a lot of incentives going on before it goes away. There are certainly seasons based on the region. However, because UZ sells to many regions globally is not tied to a particular place. I think for this year at least, we see growth quarter-over-quarter, with some seasonality, but I wouldn’t put a lot of emphasis on that. Q2, Q3 are probably higher.

Winnie Dong, Analyst, Wit Bank: Got it. Maybe just a follow-up. I guess within the $30 million-$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, Founder and Chief Executive Officer, SES AI: What’s the breakdown?

Winnie Dong, Analyst, Wit Bank: Yeah.

Qichao Hu, Founder and Chief Executive Officer, SES AI: I think we expect this year to come predominantly from ESS and then rest split between drones and materials.

Winnie Dong, Analyst, Wit Bank: Got it. Thank you.

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

Dave Storms, Analyst, Stonegate: Evening, thank you for taking my questions. Wanted to start maybe with ESS and your mention of the hardware offering Edge Box. Was hoping you could maybe spend a little time speaking about how that plays into the sales cycle and maybe what some of the benefits of it are.

Qichao Hu, Founder and Chief Executive Officer, SES AI: Can you ask the last part of the question again, the sales cycle and then the part after that?

Dave Storms, Analyst, Stonegate: Yeah, just maybe some of the benefits of adding Edge Box to your offerings.

Qichao Hu, Founder and Chief Executive Officer, SES AI: I see.

Dave Storms, Analyst, Stonegate: how it may be helping the sales cycle.

Qichao Hu, Founder and Chief Executive Officer, SES AI: The hardware is pretty competitive, and it’s basically you purchase cells, and then you integrate those into a container. In the industry, the accuracy, the 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 kW, you will buy 14 kWh to basically allow for that error. By having this Edge Box, this Edge Box 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, and then there are 6 of them. It can give a really accurate estimation of that. Instead of the error being 7%, 10%, now we’re talking about 3% or even less.

The other benefit is that it’s instead of on the cloud, which a lot of customers don’t like, it’s totally secure. It’s in a box that we actually put on-premises, so you also have data security. The main benefit of that is now that instead of buying more capacity to allow for the inaccurate estimation, you can buy less, so the customers can save cost. For some of the customers that want to participate in virtual power plant, basically electricity trading and then sell electricity back to the grid, because you have a more accurate estimation than your peers, you can bid in a more competitive price. When you make the decision of whether or not to participate in that trade-off versus sacrificing the battery health, you can have a more accurate estimation of that trade-off.

Dave Storms, Analyst, Stonegate: Understood. Very helpful. Thank you. Maybe just turning to materials. It was mentioned that there’s 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, Founder and Chief Executive Officer, SES AI: Typically it’s 2-3 rounds of testing, each round about one quarter. We talk about 6-9 months of testing. Then towards the end of the last round of testing, then the customer will go through what’s 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 making sure it’s compliant to all the necessary local environmental toxicity, chemical regulation. Overall, the testing 6-9 months, and then another quarter for the commercial qualification. 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, Analyst, Stonegate: Understood. Maybe just one more quick modeling one for me. You reiterated 15% expense reduction throughout the year. Should we expect that to go on a linear glide path throughout the year? Maybe just any thoughts around the cadence of those expense reductions?

Qichao Hu, Founder and Chief Executive Officer, SES AI: Jing Nealis, you want to take that?

Jing Nealis, Chief Financial Officer, SES AI: Yeah, I’ll take that. 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 full quarter. Starting Q3, the full quarter impact should be coming in. Q4 may be slightly lower than Q3.

Dave Storms, Analyst, Stonegate: Understood. Thank you for all the commentary.

Qichao Hu, Founder and Chief Executive Officer, SES AI: Thank you.

Tiffany, Conference Operator: As a final reminder, it is star one on your telephone keypad to ask a question. Your next question comes from the line of Sean Milligan with Needham. Please go ahead.

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

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

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

Sean Milligan, Analyst, Needham: Okay. Is there any way to talk about the pipeline? 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’m just trying to understand.

Qichao Hu, Founder and Chief Executive Officer, SES AI: Yeah

Sean Milligan, Analyst, Needham: how the pipeline looks, like number of customers that you’re testing with. Any kind of stats that can help us gain some sense of potential momentum.

Qichao Hu, Founder and Chief Executive Officer, SES AI: We have a pipeline of a few dozen customers, and again, we focus on customers that want NDAA compliant cells. We actually had some shipment recently, so we expect revenue in Q2 for the NDAA compliant cells, and then start to pick up Q3 and then Q4. Next year, 2027, is going to be a full year when we actually have the ability to deliver a full year of these NDAA compliant cells.

Sean Milligan, Analyst, Needham: Great. Thank you.

Qichao Hu, Founder and Chief Executive Officer, SES AI: Thank you.

Tiffany, Conference Operator: There appear to be no further questions at this time. Ladies and gentlemen, this concludes the SES AI first quarter 2026 earnings call. Thank you all for joining. You may now disconnect.