QS - NYSE

Good afternoon, and thank you for attending today's QuantumScape Corporation's Fourth Quarter 2022 Earnings Conference Call. My name is Jason, and I'll be the moderator for today's call. All line will be muted during the presentation portion of the call and opportunity for questions and answers at the end. [Operator Instructions] I would now like to pass the conference over to our host, John Saager.

Thank you, operator. Good afternoon, and thank you to everyone for joining QuantumScape’s fourth quarter 2022 earnings call. To supplement today’s discussion, please go to our IR website at ir.quantumscape.com to view our shareholder letter. Before we begin, I want to call your attention to the safe harbor provision for forward-looking statements that is posted on our website as part of our quarterly update. Forward-looking statements generally relate to future events, future technology progress, or future financial or operating performance. Our expectations and beliefs regarding these matters may not materialize. Actual results and financial periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. There are risk factors that may cause actual results to differ materially from the content of our forward-looking statements for the reasons that we cite in our shareholder letter, Form 10-K and other SEC filings, including uncertainties posed by the difficulty in predicting future outcomes. Joining us today will be QuantumScape’s Co-Founder, CEO and Chairman, Jagdeep Singh; and our CFO, Kevin Hettrich. Jagdeep will provide a strategic update on the business, and then Kevin will cover the financial results and our outlook in more detail. With that, I’d like to turn the call over to Jagdeep.

Thank you, John. In 2022, we made significant advances in our technology, encountered and overcame obstacles, and ultimately achieved our major goal for the year. I'd like to briefly recap our key results in 2022 and provide an overview of our plans for 2023. Our most important goal for 2022 was to ship our first 24-layer A0 prototype battery cells to customers. To achieve this, we needed to incorporate several improvements into our system, from separator film and cathode production to cell assembly, focused on the quality, consistency, and throughput of our designs and processes. We are pleased that the team successfully incorporated these improvements, and rallied to meet our target of shipping 24-layer A0 cells to customers by year end. We see this as a demonstration of the team’s ability to overcome adversity and deliver on our goals. While specific customer testing protocols and results can’t be disclosed, we can report that generally, most cells have performed well on initial testing, including fast charge and early-cycle capacity retention; however, we need continue to improve cell reliability as we move from prototype to product. This is a key focus area for 2023, and we expect that as we make progress on the quality and consistency of our materials and processes, reliability will continue its upward trajectory. We believe this 24-layer A0 milestone represents a significant step forward, though more work remains to turn our technology into a commercial product. I’ll discuss some of these remaining steps when I lay out our 2023 goals. The A0 prototypes also incorporate our proprietary cell architecture, a hybrid between pouch and prismatic cell formats, designed to accommodate the volume expansion and contraction that occurs during the charge and discharge of lithium-metal cell. We shared the first images of this new architecture in our shareholder letter, and intend to share more details on this architecture later in the year. In addition to our cell development progress, in 2022, we also focused on scaling up cell production. One goal was to continue the build-out of our QS-0 pre-pilot production line by taking delivery of a majority of the necessary equipment. We've merged our Phase 2 engineering line with QS-0 and have now received a majority of the tools necessary for initial lower volume production on this consolidated QS-0 line. Our final key goal for the year was to scale up production of our ceramic solid-electrolyte separator to a peak level of 8,000 weekly film starts. We achieved this goal, which demonstrates progress in process development, equipment qualification and manufacturing capability. Next, I'd like to briefly discuss our customer engagement. Over 2022, we continue to see strong interest in next-generation batteries for EVs from a variety of automotive OEMs. And as we previously reported, this culminated in sampling agreements with three more auto makers including a top 10 automotive OEM by global revenue and a pure-play EV OEM. For the consumer electronics industry, we shipped dozens of single layer pouch cells for customer testing with zero externally applied pressure. We're pleased to report that the sister cells from the sampling campaign we reported in our last quarter have now surpassed 800 cycles. We believe this exceeds the requirements for many consumer electronics applications. Now I'd like to lay out our goals for 2023. Beyond A0 prototype shipments, we plan to focus on subsequent generations of prototype samples, incorporating advances in cell functionality, process and reliability, as well as bringing online the manufacturing capability of our consolidated QS-0 line. Our goals for the year are focused on these four items. Our first goal is to increase cathode capacity loading to approximately 5 mAh/cm2. As in conventional lithium-ion batteries, our cathode can be optimized either for better energy density or higher rates of power. We believe our current loading of approximately 3 mAh/cm2 would be in the range required for a power cell, but to optimize for energy density, we're targeting a capacity loading in the range of approximately 5 mAh/cm2. This goal requires addressing several technical challenges, including coating thicker cathode electrodes, while maintaining quality, calendaring the cathodes to the necessary thickness, optimizing cathode microstructure and ensuring good catholyte interface with active material. Our second goal is to improve the efficiency of our cell packaging. While the active materials of the battery set a ceiling of how energy dense the battery could be, the ratio between active materials and inactive materials, the packaging efficiency determines the final energy density. So we're targeting improvements on that front this year on our path to commercialization. Our third goal for 2023 as we move from prototypes to commercial products is to improve the quality and consistency of materials and processes. Some core drivers of quality and consistency in our manufacturing process include increased precision through automation and control, quality of input materials and particle reduction across our process flow. We plan to implement such process improvements and controls, which we believe will ultimately lead to higher reliability. Finally and most exciting, our fourth goal is to deploy a new fast separator production process that's significantly faster than our current baseline. And in its initial implementation, we expect it can support up to three times more throughput using similar equipment to our current process. When this new process comes online, we expect our consolidated QS-0 line will be ready to begin initial lower-volume production. We believe that deploying this fast process in 2023 is an important step on our path to mass production in the coming years. With the focus on these four key goals, we aim to make substantial progress in 2023 towards our ultimate target of product commercialization. On that note, I'd like to say a word about our strategic outlook. In our letter to shareholders last year, we laid out four key premises that underlie our commercial opportunity. First, battery electric powertrains represent the future of transportation. Second, anode-free lithium-metal batteries have the potential to deliver compelling improvements over current lithium-ion batteries. Third, we can scale up our cells to many layers. And fourth, we can mass manufacture our cells. We continue to believe that the first 2 points are well established, and our work in 2022 was focused on the latter two propositions. Beginning shipments of 24-layer A0 cells demonstrated that it's possible to scale up our cell layer count to the multi-amp-hour scale, a range we believe is relevant for a variety of applications. By hitting our weekly film starts goal and taking delivery of equipment for our consolidated QS-0 line, we have made progress toward our scale up goals. Of course, as I mentioned earlier, much more remains to be done. However, our results over the past two years have demonstrated that when difficult problems need solving, our team consistently rises to the occasion. In the months and years ahead, new and difficult problems are sure to arise. When that happens, we're confident that we'll tackle these new challenges in the same way we solved the previous ones, with teamwork, stubborn determination and grit. Thank you for your continued support, and we look forward to sharing more of our progress over the year ahead. With that, I'll hand you over to Kevin.

Thank you, Jagdeep. In the fourth quarter, our GAAP operating expenses were $113 million and for full year 2022 was $421 million. Our GAAP net loss for the quarter was $109 million and for full year 2022 was $412 million. This level of spend was in line with our expectations entering the quarter. Cash operating expenses defined as operating expenses less stock-based compensation and depreciation, were $70 million for the quarter and $266 million for the year, in line with previous guidance of $225 million to $275 million. CapEx in the fourth quarter was approximately $38 million and for full year 2022 was $159 million, below the guidance range of $175 million to $225 million. Drivers of the variance to guidance include deliberate postponement to further develop process and hardware specifications, cancellation of certain intermediate-stage separator production equipment to focus on our new fast separator production process, and savings captured through the incorporation of Phase 2 engineering line equipment into our consolidated preproduction QS-0 line. Q4 CapEx was primarily directed towards facility investments, our medium-scale continuous film and cell imaging equipment. As we enter 2023, we continue to try to maximize capital efficiency and our ongoing build-out of the consolidated QS-0 line as well as to reduce our operating expenses. For full year 2023, we see capital expenditures of between $100 million and $150 million, the majority of which will be spent on our consolidated QS-0 line. On the operating expenses side, we've reduced spend where possible across the organization. Reductions came primarily through optimizing non-personnel resources such as services, materials and utility spend, as well as rebalancing personnel. For 2023, we see cash operating expenses between $225 million and $275 million. The midpoint of which is approximately 10% below our Q4 2022 cash OpEx run rate. As a result of these cost savings initiatives, we believe our cash runway now extends into the second half of 2025, an increase from prior guidance through the end of 2024. Historically, we focused on maintaining a strong balance sheet, and we intend to continue this, by identifying new opportunities to reduce spending and by being strategic about opportunities to raise capital to further extend our cash runway. With respect to cash, we spent $101 million on operations and CapEx in the fourth quarter and ended 2022 with $1.08 billion in liquidity, above previous guidance of over $1 billion. With that, I'll pass it over to you, John.

Thanks, Kevin. We'll begin today's Q&A portion of with a few questions we've received from investors on the sale [ph] where I believe investors would otherwise be interested.

Our first two questions are for Jagdeep. I'm summarizing several similar questions from investors here. But can you give more context on the A0 delivery? Primarily, what's the significance of that milestone and what additional work needs to be done from here?

Sure, John. So the significance of these first A0 deliveries is that they demonstrate the core functionality of our technology and our ability to make multi-amp-hour cells. We've previously shared some compelling data on the performance of our technology at smaller scales, but we think the multi-amp-hour scale is a significant milestone, because capacity in this range is commercially relevant for a variety of applications, including both automotive and consumer electronics. In terms of what's left to do, as we reported in our letter, we're now focused on two important areas. One is a set of activities relating to increasing energy density, including thicker cathodes and improved packaging efficiency. And the other is continued work on production quality and efficiency, leading to improved reliability. Finally, we're also excited about and plan to work on deploying our new fast separator production process, about which we'll share more information at a later date.

Okay. Great. How does the delivery of the A0 affect your time line to commercialization?

Regarding the commercialization time line, we haven't provided any updated communications on this front since our last earnings call. The main point I'd like to emphasize here is that the path to all subsequent samples, including BMC samples, runs through our 2023 goal. In other words, those samples all require the increased cathode electrode thickness, improved packaging efficiency, incorporate the faster-driven production process and improve quality consistency, leading to improved reliability.

Okay. Our next question is for Kevin. Turning our attention to the finances for a moment now. You mentioned the extension of our cash runway into the second half 2025. Can you help explain in more details, what the drivers of these cost savings are?

Yes, John. We found savings in a number of areas, optimization of nonpersonnel OpEx savings areas, including services, materials and utility spend. CapEx savings resulted predominantly from the merger of the Phase 2 engineering line into a consolidated QS-0 preproduction line, as well as savings associated with the new fast separator process described in the letter. As an organization, we have and always are going to want to be as lean and efficient as possible while keeping in mind our development time line, which is, of course, our highest priority. And this lean and efficient focus by the team contributed to our year-end liquidity of about $1.08 billion, which was in excess of the $1 billion guidance. So, as you mentioned, forecasting runway now into the second half of 2025, an improvement from the end of 2024. That's something that we're pretty encouraged with.

Okay. Thanks, Kevin. Turning back to you, Jagdeep. Can you talk more about the new separator process that you disclosed in the shareholder letter?

Sure, John. So we've been working on this for some time now as an advanced development project, one that we saw is high risk, but high return has worked. We've seen some very encouraging data from this process on small-scale equipment and believe this will allow us to produce significantly faster and with a higher level of quality and consistency. So based on this data, we've chosen to focus on this faster process as our primary scale pathway. Now in the fullness of time, i.e., for commercial production, we think this process can allow us to scale over an order of magnitude greater throughput than our current process. But we also believe that we can use this new process with a modified version of our current film production equipment and get about a 3x improvement in throughput in the near term as well. Deployment of this near-term version of the process is one of our key 2023 goals. And of course, we look forward to sharing progress on future calls.

Okay. Great. We also got a couple of questions in from Jose Asumendi of JPMorgan. Jose's first question is a little bit longer-term in nature. He asks, with a three to five-year view, can you remind us of the different gates and stages that you plan to go through from the current 24-layer A0 prototype to final prototypes with the OEMs?

Sure. So as we've said before, the typical automotive stage gates included A-samples, which are typically demonstrations of the core capabilities of the product, followed by B and C-samples, which typically focus on increasing manufacturing maturity. As I said earlier, the important point I'd emphasize is that the road to all the subsequent milestones leads through our 2023 goal. Adding functionality that improves cell level energy density, such as bigger cathodes, more efficient packaging as well as improved reliability through better quality and consistency as well as the new fast separator process that I mentioned earlier. Those things form the foundation for both more advanced A-samples as well as subsequent B-and C-samples and, of course, commercial products.

Okay. Jose' the second question is for you, Kevin. Can you elaborate around the topic of protecting the balance sheet, remaining cash focused and protecting the balance sheet until 2025?

As I mentioned earlier, we want to be as lean and efficient as possible while keeping in mind our development time line, which is, of course, our highest priority. And I believe we struck the right balance in our 2023 plan shared today. We're able to resource the 2023 goals laid out in the letter, while also forecasting an extension in cash runway. Our prior guidance was through the end of 2024, and we're now forecasting cash runway into the second half of 2025. And regarding the question on the protection of our balance sheet, we intend to continue this by identifying new opportunities to reduce spending and by being strategic about opportunities to raise capital to further extend our cash runway.

Okay. Thanks so much, guys. We're now ready to begin the Q&A portion of today's call. So operator, please open the line up for questions.

[Operator Instructions] Our first question is from Jordan Levy with Truist Securities. Your line is now open.

Great. Thanks for that. And then just a quick follow-up. Any commentary you could give as it relates to the stationary storage side of things. It seems like you're working kind of on the power cell side of it, but that sort of goes to kind of the other side of it?

Yeah. I think we mentioned last year that we have seen in this from stationary storage. We announced one early agreement in that space. The feedback we're hearing from that space is that the performance and specifications for cells that meet the requirements of the automotive sector are good for that sector as well for stationary storage as well. So as we get further along in terms of our production capacities, we fully intend to explore that market opportunity as well. I think the main point that I think comes out of your questions, which is a really good one, is that, if you have a better battery that has better characteristics in terms of energy density, in terms of power capability, perhaps safety, these are all things that resonate across the full spectrum of applications from automotive to consumer to stationary storage. And the question of which ones we go after, that question is going to be more based on what makes the most business sense for us rather than the fundamental applicability of our technology.

Thanks so much.

Of course.

Our next question comes from Gabe Daoud with Cowen. Your line is now open.

Hey, afternoon, guys. Thanks for all the prepared remarks. Jagdeep maybe hoping to, to the extent you could share get a bit more color on the initial A sample, the A0. So, is there an update on cycle-like performance, I think as of last quarter, you disclosed it achieved about 100 cycles or so? And then similarly, your comments around your OEM partners being pleased, I guess, with early cycle capacity retention. So, maybe could you define early cycle capacity retention and then provide an update on cycle if there is one.

Yes. So we didn't see anything on customer-specific testing, we actually -- we obviously can't comment on customer-specific tests. Those tend to be proprietary to customers themselves. What we did say is that really, the purpose of the A0 samples is to demonstrate the core functionality of the technology and our ability to make multi-amp-hour cells. And these samples did that. We've actually been pleased with the performance. We don't expect these first days efforts to have the same level of reliability as a commercial product. But we've seen, as I mentioned to you, I mentioned in the letter, good performance on both fast charge and early capacity retention. So, when we say early capacity retention, what we mean is the shape of the capacity retention curve. So, remember that one of the ways that batteries hit end of life is that with every charge discharge cycle, you lose a little bit of lithium to side reactions. And so the capacity that remains in the battery decreases with every charge in this short cycle and eventually when it gets to 80% of the original capacity, the cell is deemed to be at end of life. And what we were referring to on letter is that the shape of that capacity retention curve or capacity degradation curve was quite good. In fact, it was similar to what we've seen in previous results that we published. So that's what we meant by early capacity retention. And then what we tried to do is, as I mentioned in the letter as well and on the call, coming -- this coming year is add a few key functionality that we think are going to be very important. One set of features is going to be related to energy density. So, we mentioned the thicker cathode. We mentioned the more efficient packaging. Those are all things that will allow the energy density to the actual prototype cell to approach the energy density that we believe the system is capable of. And then the other parallel track of that is good reliability. And our path to improved liability is very simple. It comes down to basically improving the quality and consistency of our materials and processes in our system, we believe, as we get high-quality in our materials and processes that directly translates to better reliability. So, that's a quick summary of both the testing and our plans going forward this year.

Thanks, Jagdeep. Super helpful. And then I guess on that note, just hitting on cathode loading going to 5-milliamp hour. I think in one of your previous slides, you showed the QS-0 power cell and the QS energy call, both of which had pretty good or attractive fast charge capabilities. So, I guess the question is going to the energy cell and the 5-milliamp hour to bump up energy density. Would you still expect to have that, call it, 50 minutes or so charge time for 10% to 80% -- for the 10% to 80% charge window? Would that still be fair? And is that the 950 or so watt hour per liter energy density target on the energy cell, is that still fair?

Yes. So I think the long-term numbers that we've shared in the slide that you're referring to are still our targets. So we expect the energy cell to be somewhere in the vicinity of 900 to 1,000 watt hours per liter, as we've mentioned before. And we do think that cell should still be able to charge more quickly than conventional lithium-ion batteries. So yes, we think getting something in the 15-ish-minute range is not unrealistic for that cell. For the reason that we mentioned before, which is that cell does not -- even though it's an energy cell, with the thick cathode. It doesn't have an anode. So there's no extra distance for the lithium-ions to have to traverse in the anode. So we can basically use the ion transport length of a conventional lithium-ion battery, which includes both anode and cathode distance, and apply that purely to the cathode, so that we can get thicker cathodes, more to cathode than conventional cells or have those cathodes be able to charge faster the conventional cells. And then the power cell, we believe, will be -- could potentially get even faster than that. But of course, at the extent of somewhat lower energy density, because as you point out to get the power cathode you have, somewhat thinner cathode with somewhat higher amount of electrolytes. So, basically lower cathode mass loading, which gives you both higher power and lower energy density. So effectively, the short answer to your question is, yes, we do believe that our energy cell should still be compelling on the power front, and our power cell will also have an interesting level of energy density.

Great. Thanks, Jagdeep.

Absolutely.

Our next question is from Winnie Dong with Deutsche Bank. Your line is now open.

Hi. Thank you so much for taking my question. I wanted to elaborate a little bit more on the cathode capacity loading improvement. How does that change your in-process A-sample testing right now with customers, or do you then anticipate that as an improvement that will be beyond? I just want to clarify that. That's my first question. Thanks.

Yes. Yes. So as we've said before, we see the A-sample as really being a phase. There's a series of deliveries we'll make under the A-sample umbrella. And subsequent versions of that sample will have this new higher mass loading, higher capacity loading cathode as well as the more efficient packaging. And then that will lead to B and C-samples subsequently.

Got it. And then in terms of the series of A-sample prototypes that you’ll be continue to deliver this year. How long do you anticipate this sort to last? And I think previous quarters, you've alluded to B-sample and C-sample, each being around 18 months or so, which puts us into perhaps the timeframe of 2026 or so. So with A-sample sort of rolling out this year as well, keeping a picture for us in terms of the time line for ultimate commercialization?

Yes. So we haven't said anything -- we haven't provided any new communications relative to time line other than what we said on the last earnings call. I think the main thing that we, I think, are pointing out on this call is that when you look at the B and C-samples and even the commercial product, some of the key requirements for those subsequent samples and products, are the key things we're focused on in 2023. So whether it's the B or the C sample or more advanced versions of A or the product, they all need more efficient packaging. They all need the ability to have these more energy dense cathodes or higher capacity loading cathodes. And frankly, they all would need this -- we think this new fast film production process that we've also alluded to on this call. We think those are all really key things. And they all need obviously increasing liabilities you go from prototype to products. So those are all things that are a key part of our goals for this year. And regardless of which sample we want to focus on in the future, we have to get these things done this year. And that's kind of why this is an important year for us. And we just want to make sure that we execute on these key goals because they will form the foundation for all those subsequent milestones.

Got it. Thank you so much. If I may just squeeze in one more on the topic of improving quality and consistency. Could you maybe elaborate for us sort of like the steps that you're taking to achieve that goal for this year? Is it more -- perhaps more material vertical integration? Is it more automation of the equipment? Any details on that? Thank you.

Absolutely. So there's a lot of things that can lead to quality that we want to improve. So things like particles, for example, if you have any kind of a large particle sitting between the layers of your cells that could eventually lead to issues. If you have, for example, tabs that are not welded properly as you bring together all the different layers in the cell that could lead to issues. There's just a lot of things that all around, incoming materials quality. If the material is getting in had defects or process control. If things are not -- if the partners itself is not operating within your statistical buses control limits, for example, automation, which allows you to have more precision in how you assemble and align the various layers. So those are all areas that are potentially contributors to quality consistency. And those are the kinds of things that we are trying to tighten up this year to ensure better and better quality. I think the key point I would emphasize is that other industries, including some of the 1P efforts in the letter, like the multiples on the capacitor industry as well as the lithium-ion battery industry have already shown the ability to control those parameters quite well. And so we don't need to reinvent the wheel there. We just plan on having a disciplined execution process, a disciplined manufacturing team that puts in place those controls, those processes, that level of automated precision that ensures that we don't have extraneous particles floating around or that we don't have emphasized placement or we don’t have bad tab wells and those kind of things. So those are all things that a doable. We just need to implement an organization that has the discipline to repeatably execute on that front.

Great. Thank you. Appreciate all the response.

Absolutely.

Our next question comes from Chris Snyder with UBS. Your line is now open.

Thank you. I understand you cannot share specific customer testing protocols and results. But could you provide some general feedback from -- that you got from customers post delivery of the A0 sample?

I can reiterate what we said earlier, which is that we feel that most of the samples we provided have performed well. We've mentioned some of the specific tests that were done, including fast charge, some of the early capacity retention curves and so on. And I can also point out that one of the areas that we want to keep improving is, in fact, the reliability of these cells. And so that's why we spend a lot of time talking about things we plan to do this year to improve quality and consistency, all the process automation and particle reduction and so on. Other than that, there's not a lot we can say about the specifics. These are customer-specific protocols and results. But I think from our standpoint, we can say, we're actually pleased with where we are. And we think we're well positioned to go from here to the next phase, which involves adding this additional functionality that we talked about earlier today.

Thank you. I appreciate that. And then, I guess, maybe just following up on some of the prior questioning on the pathway from the A0 sample to the B sample. I guess how many generations of the A sample should we expect? And will we get updates on these as the samples progress? And then kind of another one on that same line, are the subsequent generations of A samples customer specific in that like A sample to customer X would be different than the A sample of the customer Y or is it uniform across all customers?

Yes, that's a good question. So first of all, let me more backwards from the C sample. Obviously, the C sample is going to be very customer specific because the definition of a C sample is that it's -- it's a product that is -- it's a sample made of an actual production line that's going to go into serious production. And you can't do that until you've got a customer that's told you they're planning on using that sample -- that type of sample in a natural product, right? So that will be tested. The B sample is likely also to be customer-specific, maybe less so than the C sample, but because the B sample is used to make test vehicles that's also going to have a customer-specific element to it. The A sample is typically the most technology oriented the samples, because it's a demonstration of the core capabilities of the product. But even there, different customers have different things they're most interested in. So yes, even with A sample, see one customer have a certain set of functionalities they care more about than other functionality or other customers. And so there will be some customer-by-customer variance of all those samples. Relative to where we share progress with you on all those samples, to the extent those are meaningful milestones, we absolutely will. And to the extent that they're not meaningful then we wouldn't need to. But we try to be more transparent rather than less that managed. So I would expect that we would be sharing updates on any meaningful customer milestones.

I appreciate that. If I could just squeeze a final quick one in on the A and B sample. In the past, when you guys have kind of said roughly 18 months, what kind of time line between A sample and B sample. Does that clock start with A0 delivery, or does that clock start when you deliver the last generation of the A sample? Thank you.

I think that the 18-month windows that we provided earlier were kind of approximations. And so I think if you look at it as an approximation, then I think whether you start with A0 or some subsequent version of it, you're still roughly in the same time frame. So I don't think we want to be overly precise. I think it's hard to be overly precise about milestones that are years away. The main point we wanted to provide was that mega that one is that there is a series of progressively more mature samples that we need to provide to the automotive sector. The first of those milestones, which is the A-sample phase is really focused on some core functionality and demonstration of capability. The next version, which is the B-sample phase is focused on production processes, although, it could be on smaller, lower volume versions of the tools. And the final phase is the C-sample, which is focused on the functionality and the right process, but on the actual production tooling, and we wanted to provide that rough range. So people have a sense of roughly what we're talking about, it's not a two-month delta. It's not a 10-year delta, but it was something in the range that we had mentioned. And I think that pretty much remains the case.

Appreciate all that. Thank you, Jagdeep.

Absolutely.

Our next question is from Mark Delaney with Goldman Sachs. Your line is now open.

Yes. Good afternoon, and thank you very much fore the questions and thank you for all the details in the shareholder letter. My first question was a follow-up on that same topic. And just trying to better understand in more depth, if I could, please. What's the difference between A0 sample and an A-sample and any sort of idea of how many A-samples we should be expecting?

Well, I mean, I think that -- the -- we present -- we laid out in the letter some of the key things we're working on this year, right. So we said that -- so what the A0 has is multi-amp-hour capabilities, so 24 layers and demonstrates the core capability of the product. So it's a lithium-metal anode solid-state separator, zero lithium to start with cell. All that can be tested by the customer. Customers even tested as we mentioned earlier, fast charging and capacity retention and so on. The things we're working on this year, which include thicker cathodes, more energy dense packaging, mid of the year, the fast film production process. Those are all features that will make their way into subsequent releases. And that you might imagine those going to a second generation of A-sample, and they will also make their way into the B-sample and C-sample. But I think, the key for the A-sample really is, is there new functionality that's going into the cell. And the goals we laid out this year indicate a number of areas where there's key functionality we are trying to roll in. So you can imagine probably at least one further generation of A-sample. And then subsequent to that, we think we will have a lot of the core functionality in, and we will focus more on getting some of the manufacturing maturity for the B and C samples.

That's helpful. Thank you for the clarification there. My other question was on some of the optimization efforts the company spoke about in the shareholder letter in the prepared remarks. One of the things that was mentioned was rebalancing personnel. I'm hoping perhaps you could elaborate specifically on that and any more color you can share there? Thank you.

Yeah, Mark, that was predominantly the consolidation and transfer of teams within the organization to better focus on the 2023 goals. This did include a small approximately 3% reduction in the team, as part of our planning effort, we did eliminate positions not aligned to near-term goals. There wasn't a net reduction in manufacturing operations. In fact, we had a small increased personnel assigned to manufacturing operations.

Understood. Thank you.

There are no further questions. So I'll pass the call back over to the management team for closing remarks.

Yeah. So I want to just thank you all for joining today's call. I'd like to thank our investors for their ongoing support of our mission, our customers for their commitment to helping us get this technology to market. And of course, our amazing team for their incredibly dedicated efforts to overcome the hard problems associated with bringing groundbreaking new technology to market. We look forward to reporting on further progress in the coming quarters.