QuantumScape(QS) - 2024 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) The unaudited financial statements for Q1 2024 show a net loss of $120.6 million, with total assets at $1.46 billion and increased liabilities Condensed Consolidated Balance Sheets (Unaudited) Total assets decreased to $1.46 billion by March 31, 2024, while liabilities increased to $204.3 million due to litigation accruals Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $192,321 | $142,524 | | Marketable securities | $817,314 | $928,284 | | Total current assets | $1,045,035 | $1,083,517 | | Total assets | $1,463,978 | $1,501,978 | | Liabilities & Equity | | | | Accrued liabilities | $72,331 | $10,180 | | Total current liabilities | $100,673 | $57,095 | | Total liabilities | $204,316 | $161,801 | | Total stockholders' equity | $1,257,872 | $1,338,407 | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) Net loss for Q1 2024 increased to $120.6 million due to higher operating expenses, primarily general and administrative costs Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended Mar 31, 2024 | Three Months Ended Mar 31, 2023 | | :--- | :--- | :--- | | Research and development | $83,847 | $76,941 | | General and administrative | $48,054 | $33,037 | | Total operating expenses | $131,901 | $109,978 | | Loss from operations | $(131,901) | $(109,978) | | Interest income | $12,065 | $6,277 | | Net loss | $(120,628) | $(104,631) | | Basic and Diluted net loss per share | $(0.24) | $(0.24) | Condensed Consolidated Statements of Cash Flows (Unaudited) Net cash used in operating activities was $57.9 million, offset by $106.5 million from investing activities, resulting in a net cash increase Cash Flow Summary (in thousands) | Activity | Three Months Ended Mar 31, 2024 | Three Months Ended Mar 31, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(57,945) | $(62,319) | | Net cash provided by investing activities | $106,499 | $64,086 | | Net cash provided by financing activities | $1,243 | $4,050 | | Net increase in cash | $49,797 | $5,817 | | Cash at end of period | $210,369 | $258,733 | Notes to Condensed Consolidated Financial Statements (Unaudited) Notes detail accounting policies, development status, Volkswagen JV put option trigger, and a $24.5 million litigation accrual - The company is a development-stage entity focused on solid-state batteries and has not yet generated revenue from its principal business activities[25] - In April 2024, the company agreed to settle a securities class action lawsuit. A net charge of $24.5 million was recorded in Q1 2024, representing the gross settlement of $47.5 million offset by a $23.4 million insurance receivable[96] - Due to certain development milestones not being met, Volkswagen's right to exercise its put rights in the QSV joint venture has been triggered. If exercised, QuantumScape would be obligated to purchase VW's interest for its book value of approximately $1.8 million[39] - Stock-based compensation expense for Q1 2024 was $19.3 million, a decrease from $38.0 million in Q1 2023. The decrease was primarily due to a $16.0 million reversal of previously recognized expense for forfeited options following the former CEO's departure[125][133][172] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses pre-revenue status, strategic priorities, $131.9 million operating loss, and cash sufficient through H2 2026 - The company is a development-stage entity with no revenue, an operating loss of $131.9 million in Q1 2024, and an accumulated deficit of $3.0 billion[142] - Key strategic priorities include continued improvement of prototype cells (energy density, cathode, reliability), scaling manufacturing processes at the QS-0 pre-pilot line, and advancing commercialization through customer sampling (A0 prototypes) and the targeted QSE-5 product[144][145][149] - Management believes current cash and marketable securities of approximately $1.0 billion will be sufficient to fund operations into the second half of 2026[175][179] Comparison of Operating Results (in thousands) | | Three Months Ended Mar 31, 2024 | Three Months Ended Mar 31, 2023 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Research and development | $83,847 | $76,941 | $6,906 | 9% | | General and administrative | $48,054 | $33,037 | $15,017 | 45% | | Loss from operations | $(131,901) | $(109,978) | $(21,923) | 20% | - The 45% increase in G&A expenses was primarily due to a $24.5 million litigation settlement accrual and $10.6 million in other legal costs, partially offset by a $20.1 million decrease in stock-based compensation expense[172] Quantitative and Qualitative Disclosures About Market Risk No material changes to the company's market risk exposure occurred during the first quarter of 2024 - There have been no material changes to the Company's market risk during the three months ended March 31, 2024[196] Controls and Procedures Management concluded disclosure controls were effective as of March 31, 2024, with no material internal control changes - Based on an evaluation by management, the CEO and CFO concluded that as of March 31, 2024, the company's disclosure controls and procedures were effective[198] - No change in internal control over financial reporting occurred during the quarter that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting[199] PART II. OTHER INFORMATION Legal Proceedings Company settled Warrants and Securities Class Action Litigations in April 2024, with accruals, while derivative suits remain stayed - In April 2024, the company agreed to settle the Warrants Litigation[95] - In April 2024, an agreement in principle was reached to settle the Securities Class Action Litigation. A net charge of $24.5 million was recorded for the potential settlement[96] - Multiple shareholder derivative suits are ongoing but are currently stayed[97][98][99] Risk Factors Key risks include solid-state battery development, manufacturing scale-up, Volkswagen partnership, intense competition, and stock volatility - The company faces significant challenges in developing a solid-state battery cell and producing it at high volumes with acceptable performance, quality, consistency, and cost[206] - The relationship with Volkswagen is subject to risks, including the possibility of termination. Certain unmet milestones have triggered VW's right to exercise its put rights, which would terminate the joint venture and VW's purchase commitments[233][239] - The business is capital-intensive with a history of losses. The ability to become profitable depends on controlling costs and achieving projected cost advantages at scale, which has not yet been demonstrated[223][301] - The battery market is highly competitive, with established lithium-ion manufacturers and numerous companies, including automotive OEMs and state-backed consortiums, investing heavily in solid-state and alternative battery technologies[252][253] - The trading price of the Class A Common Stock has been and may continue to be subject to extreme volatility, influenced by development announcements, competitor progress, and market sentiment[291] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the last fiscal quarter - None[336] Other Information Several directors and executive officers adopted Rule 10b5-1 trading plans for potential share sales during the last fiscal quarter - On March 1, 2024, Jagdeep Singh, Chairman, adopted a Rule 10b5-1 trading plan for the sale of up to 3,249,520 shares of Class A Common Stock[338] - On March 4, 2024, Prof. Dr. Fritz Prinz, Director, adopted a Rule 10b5-1 trading plan for the sale of up to 2,297,175 shares of Class A Common Stock[339] - On March 14, 2024, Dr. Tim Holme, CTO, adopted a Rule 10b5-1 trading plan for the sale of up to 2,544,600 shares of Class A Common Stock[340] Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL data files - The exhibits include certifications from the Principal Executive Officer and Principal Financial Officer as required by Sections 302 and 906 of the Sarbanes-Oxley Act[345]