QuantumScape (NYSE: QS) reported Q4 EPS of ($0.16), $0.05 worse than the analyst estimate of ($0.11).

2022 Financial Outlook

For full-year 2021, we spent $279M in cash opex and capex, in line with guidance of $265M to $325M, supporting investment in our Phase 1 and 2 engineering lines as well as our larger QS Campus with the QS-0 line and its long-lead equipment. Cash opex of $152M was within guidance of $130M to $160M. Capex spend of $127M was below the guidance of $135M to $165M due to payment timing unrelated to scale up schedule; QS-0 remains on track for 2023start of pre-pilot production.

In 2021, we strengthened our balance sheet through a variety of sources. In March, in response to strong inbound customer interest in samples from QS-0, we completed a follow-on offering. In April, successful completion of our cell testing milestone unlocked an investment from Volkswagen. We also received proceeds from the exercise and redemption of warrants related to our business combination with Kensington. As a result of these inflows, we ended 2021 with $450M more in liquidity than we started, and we entered 2022 with well over $1.4B of liquidity.

Our 2022 plan makes significant investments into cell development and scalable production: continuous-flow processes featuring increasing levels of automation, high throughput metrology systems, and scalable digital architecture. This investment will allow us to create the manufacturing blueprint for our QS-1 joint venture with Volkswagen and separator production facilities. Our $325M to $375M capital investment plan can be broken down by line and objective:

• Approximately $52M or 15% will flow into our Phase 1 engineering line to support R&D, process development, pre-A sample customer sampling, and additional projects including our R&D center in Japan.
• Approximately $85M or 25% will go toward our Phase 2 engineering line that supports process development, A sample production, and manufacturing of our solid-state separators in medium-size continuous kilns with automated handling. This investment is intended to enable an order-of-magnitude increase in film starts compared with current capacity.
• Approximately $215M or 60% for QS-0 and our larger QS Campus will support process development, film production in large continuous kilns with automated handling, and automated cell assembly. The primary QS-0 building is in an advanced stage of construction; we’ve already taken occupancy, and early tool installation is underway.

Looking at target weekly film starts as a function of total line facility and equipment capex, we expect to see a greater than 4X improvement in efficiency between our Phase 1 and Phase 2 lines, with a similar improvement between our targeted capacities for Phase 2 and QS-0 lines. Achieving the planned cell starts at these investment levels will be an important first step in demonstrating the cost improvement necessary to reach our QS-1 mass production targets. We continue to believe that, at scale, our anode-free design can deliver competitive economics relative to conventional lithium-ion batteries, and our QS-0 line allows us to develop and de-risk scalable manufacturing processes while serving our customer sampling objectives.

Looking at target weekly film starts as a function of total line facility and equipment capex, we expect to see a greater than 4X improvement in efficiency between our Phase 1 and Phase 2 lines, with a similar improvement between our targeted capacities for Phase 2 and QS-0 lines. Achieving the planned cell starts at these investment levels will be an important first step in demonstrating the cost improvement necessary to reach our QS-1 production targets. We continue to believe that, at scale, our anode-free design can deliver competitive economics relative to conventional lithium-ion batteries, and our QS-0 line allows us to develop and de-risk scalable manufacturing processes while serving our customer sampling objectives.

In line with previous guidance, 2021 and 2022 represent the substantial majority of investment related to our engineering and QS-0 lines. In 2023, we expect capital spending related to our engineering and QS-0 lines to decline significantly. We expect that by the end of 2022, our engineering lines will have achieved their goals of producing A samples, and we will have received the majority of equipment for QS-0, tracking to our 2023 start of QS-0 pre-pilot production goal.

We expect our 2022 cash operating expenses will be between $225M and $275M to support growth in hiring and production volumes associated with our 2022 product development, customer sampling, and scalable manufacturing process development objectives. While cash opex will grow steadily throughout the year, we expect capex to peak mid-year and then decline thereafter. We anticipate Q1’22 capex to be in the range of $30M to $60M, with higher spend in Q2’22 and Q3’22 as the bulk of spend takes place. The timing of spend is based on several factors, including lead times and payment schedules, which vary by supplier. We will continue to update our capex guidance throughout the year.

Based on these estimates, we expect to enter 2023 with over $800M in liquidity— which we believe will be sufficient to fund cash opex, final residual investment in QS-0, and the initial setup of the QS-1 production facilities: the joint venture for cell manufacturing as well as the facility to supply separators, which we will retain full ownership of.

For earnings history and earnings-related data on QuantumScape (QS) click here.