Research from Water Tower Research, Water Tower Research

Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

Research from Water Tower Research

Equity Research Firm

Equity Bottom-Up

<h2>KEY POINTS</h2>
<ul>
<li>SES reported an operating loss of $19.1 million, an increase of $12.5 million Y/Y due to increased personnel to support the development of battery cells and AI software. General and administrative costs ($11.9 million) and R&amp;D costs ($7.2 million) were the primary contributors to the operating loss. Complete results can be accessed here.<br>The company’s net income was $9.0 million, or $0.03 per share. The positive number was due to a non-cash gain reported for the change in fair value of its $29.0 million sponsor earn-out liability.</li>
<li>SES closed the quarter with a cash balance of $404.6 million, which it intends to use to fund the further development of Li-Metal battery technology, its AI-powered safety software platform Avatar, and to provide adequate liquidity for commercialization.</li>
<li>The company’s financial outlook for 2022 remains unchanged from the first quarter. SES aims to deliver and optimize A-samples for its three joint development agreement (JDA) partners, while maintaining supply chains for key materials. For this, in 2022, the company expects to spend $95-115 million on capital expenditures ($25-$35 million) and operating costs ($70-80 million).<br>Construction of the company’s second cell production plant in SES Korea is on track and plans to be completed by October 2022. The building’s structure is complete and assembly lines are now being installed. This plant will service at least one of the company’s JDA partners and will be equipped to manufacture its large format 50Ah and 100Ah cells.</li>
<li>SES intends to arrange a second annual Battery World event before 2022 after strong investor interest in November 2021. SES plans to provide updates on the performance of its large-format (50Ah to 100Ah) Apollo cells and Avatar, its AI-powered safety software for monitoring battery health, and demonstrate Apollo cells in a non-automotive application.</li>
</ul>
<h3>FINANCIAL SNAPSHOT</h3>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/292/366/original/image_10574086331660687148337.png?1660687151" class="editor-image img-responsive" data-smartkarma-image-id="292366"></figure>
<h2>HIGHLIGHTS</h2>
<ul>
<li>The company continues to pursue prospects and interact with a variety of industry players in verticals such as drones, delivery robots, and other markets to better understand the many potential non-automotive use cases that can have the potential to move faster than automotive applications.</li>
<li>SES is making headways in the areas of material electrolytes and coatings to improve cycle life with periodic fast charge and safety, along with exploring methods to recycle its batteries.</li>
<li>Approximately 30 of the 100 ampule cells are produced daily at the Shanghai facility, which has a monthly production capacity of a few thousand. SES is testing these cells on a smaller scale before proceeding to mass production. In addition, the company will continue to build Phase 2 of the Shanghai Giga and add new production lines to support multiple OEMs, conduct internal research, and test Avatar cells.</li>
<li>SES intends to expand its Korean facility to service a second JDA partner once it is successfully operational.</li>
<li>SES is working actively to de-risk supply chain bottlenecks by fostering partnerships with prominent raw materials suppliers. The company has an exclusive agreement with&nbsp;ENTEK&nbsp;for separators and a long-term partnership with&nbsp;Tianqi Lithium, one of the biggest lithium suppliers in the world.</li>
<li>On the software side, SES is developing the capability to collect data across the supply chain, including carbon dioxide emissions, monitoring battery health, and predicting safety. It intends to monetize this battery health monitoring capability in battery leasing via the BaaS business model by charging a license fee.</li>
<li>The software would apply to almost all lithium chemistries and would need to be trained using that particular data set; however, once trained, it can be used for most lithium batteries. The company intends to roll out its battery software before the automotive-ready battery.</li>
<li>Many OEMs are testing the beta version of the company's batteries to enhance performance under varied circumstances and charging scenarios and to cut manufacturing costs.</li>
<li>Our prior content on SES can be accessed&nbsp;here.</li>
</ul>
<h2>OUR PREVIOUS RESEARCH CONTENT</h2>
<h2>Initiation of Coverage Report</h2>
<p>04/12/22&nbsp;Driving Ahead With Commercial Scale Proprietary Li-Metal Battery Solutions For Electric Vehicles</p>
<p>Extensive coverage on SES AI Corp. assessing key opportunities, obstacles, technology, industry, risks, competition, financials, management profiles, etc.</p>
<h2>Management Series Summary</h2>
<p>03/09/22&nbsp;Explaining the Potential of Li-Metal Batteries and Its Breakthrough Technology; Roadmap to C-Sample Batteries and Production</p>
<p>CEO Dr. Qichao Hu talks about the company’s key differentiator, Li-Metal Batteries, technology, latest developments, partnerships, risks, the roadmap to commercialization, etc.</p>
<p>04/06/22&nbsp;COO Rohit Makharia Discusses Key Milestones and Drivers Behind SES's Unique Li-Metal Technology and the Drive Towards Commercialization</p>
<p>Rohit Makharia, President and COO, talks about his history and SES’s partnership with GM, OEMs requirements and expectations from battery companies, problems with solid-state batteries, key company milestones, etc.</p>
<p>07/26/22&nbsp;New AI-Powered Battery Software to Generate Recurring Revenue; CEO Discusses 2022 Key Milestones</p>
<p>CEO Dr. Qichao Hu provides a progress report on the milestones for 2022 and talks about opportunities in Battery-as-a-Service (BaaS) and how it could fit into SES’s long-term strategy.</p>
<h2>Update Note Summary</h2>
<p>03/16/22&nbsp;Shareholder Letter—Confident of the Business Plan and Aiming to Achieve Key Milestones in 2022</p>
<p>The shareholder letter provides an overview of SES and the company's path to commercialization, including key developments toward strengthening the supply chain.</p>
<p>05/16/22&nbsp;1Q22 Results: Strong Cash Balance of $426 Million to Support Key Future Milestones and Drive Commercialization of Li-Metal Technology</p>
<p>SES AI Corp. announced its 1Q22 earnings results. The company reported its financial performance for the first time since the SPAC transaction in early February.</p>
<h2>COMPANY OVERVIEW</h2>
<p>SES AI Corp. develops and produces high-performance, Li-Metal rechargeable batteries for electric vehicles and other applications. The company’s Li-Metal batteries are designed to combine the high energy density of Li-Metal with the cost-effective, large-scale manufacturability of Li-ion rechargeable batteries, which it has demonstrated by producing more than 15,000 multi-layer Li-Metal battery cells on a Li-ion-like manufacturing line. Its technology, which third parties and several OEMs have evaluated, has exhibited 43% greater density than leading Li-ion batteries, coupled with better performance across operating temperatures, faster charging, high safety, and longer life. In November 2021, the company unveiled a&nbsp;100+ Ah Li-Metal cell, the world’s first 100+ Ah and biggest Li-Metal cell (Apollo), created exclusively for the automobile sector. The company is backed by major auto OEMs, including GM, Hyundai, and Honda, with aggressive electrification targets. SES is the only company that has established A-sample (prototypes developed for OEMs based on OEMs’ technical specifications) JDAs with key OEMs for Li-Metal technology, which it aims to deliver to auto OEMs by the end of 2022. Additionally, the firm has garnered capital from OEMs Geely and SAIC Motors and strategic and financial investors such as SK, LG, Foxconn, Tianqi, Applied Materials, Temasek, and Vertex.</p>
<p>SES went public on the&nbsp;NYSE&nbsp;in February 2022 via the SPAC route. The company had $450 million of cash on its balance sheet at the closing (2/3/22), which it will use to reach commercial scale with multiple OEMs. The company plans to finish a 300,000-square-foot 1 GWh pilot facility in&nbsp;Shanghai&nbsp;by 2023.&nbsp;SES South Korea&nbsp;will also act as a pre-production site for A-sample development, complementing the existing Chinese facility. SES anticipates its next-generation batteries will be in automobiles by mid-decade. By 2028, it plans to have a total capacity of more than 100 GWh over a global network of facilities. SES AI Corp. was established in 2012 and is based in Woburn, Massachusetts, USA.</p>
<h2>The Technology</h2>
<p>According to the company, replacing the present Li-ion graphite/silicon anode with Li-Metal will achieve the highest energy density and improve performance with any cathode chemistry. Further, lithium metal anode battery cells may be exceedingly compact and light since the lithium ions do not have to diffuse in and out of the anode host material (as they do in typical Li-ion). The SES Lithium-Metal platform has significant energy density advantages over conventional lithium-ion batteries but still has the manufacturability to be cost-effective. Compared with all-solid-state Li-Metal batteries, the SES solution offers comparable energy density but high manufacturability, which is paramount to long-term commercial success. SES has a cell architecture that uses a liquid electrolyte to transport the lithium ions, preserving the high energy density advantages of Li-Metal. SES’s Apollo batteries are projected to have an energy density of at least 400 Wh/kg and 1000 Wh/liter to achieve a driving range of ~540 miles and be fast charged to 80% in less than 15 minutes. Unlike the traditional liquid electrolyte used in Li-ion cells, SES’s high-concentration solvent-in-salt electrolyte is non-flammable and less volatile.</p>
<p>SES employs an AI-powered technology (Avatar) that accurately monitors the condition of health of the battery cells, avoiding dendrite-related or other safety concerns before they occur. Through its Hermes platform, the company has a platform for new material development. Hermes™ cells consist of 25+ layers of cathode and anode (a total of 50+ layers). It is used to develop, test, and qualify novel electrolytes (high concentration solvent-in-salt), anode protective coatings, separators, cathodes (both high nickel for premium vehicles and nickel/cobalt-free for value vehicles), and other materials.</p>
<h2>The Market</h2>
<p>Automotives:&nbsp;The company believes Li-Metal batteries (LMBs) are a potential EV battery technology for maximum energy density. The global market for EV batteries is expected to grow substantially as battery capacity increases and costs decrease. This will be fueled by increasing EV adoption, with the global passenger EV market expected to grow at a CAGR of 19.1%, from 2.7 million in 2020 to 90 million in 2040 (company presentation). During the same period, the average battery pack capacity is expected to rise from 45 to 56 kWh per EV, while the cost of an EV battery pack is expected to decrease over 50% from $150 to $70 per kWh. The TAM is estimated to grow at a CAGR of 15.7%, from $19 billion in 2020 to $350 billion in 2040. SES aspires to grab 5% of the global EV battery market by 2030.</p>
<h3>DISCLOSURES</h3>
<div></div>
<p>Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.<br><br>WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information provided in this report should not be construed in any manner whatsoever as personalized advice. All users and readers of WTR’s reports are cautioned to consult their own independent financial, tax and legal advisors prior to purchasing or selling securities.<br><br>Shawn Severson, who is the writer of this report, covers the Emerging Growth &amp; Special Situations, BioEconomy, and ClimateTech &amp; Sustainable Investing sectors for WTR. Mr. Severson and members of his household have no personal or business-related relationship to the subject company other than providing digital content and any ancillary services WTR may offer.<br><br>Unless otherwise indicated, WTR intends to provide continuing coverage of the covered companies. WTR will notify its readers through website postings or other appropriate means if WTR determines to terminate coverage of any of the companies covered.<br><br>WTR is being compensated for its research by the company which is the subject of this report. WTR receives no more than a maximum of $10,500 per month from a given client and is required to have at least a 6-month commitment. None of the earned fees are contingent on, and WTR’s client agreements are not cancellable for the content of its reports. WTR does not accept any compensation in the form of warrants or stock options or other equity instruments that could increase in value based on positive coverage in its reports.<br><br>WTR or an affiliate may seek to receive compensation for non-research services to covered companies, such as charges for presenting at sponsored investor conferences, distributing press releases, advising on investor relations and broader corporate communications and public relations strategies as well as performing certain other related services (“Ancillary Services”). The companies that WTR covers in our research are not required to purchase or use Ancillary Services that WTR or an affiliate might offer to clients.<br><br>The manner of WTR’s research compensation and Ancillary Services to covered companies raise actual and perceived conflicts of interest. WTR is committed to manage those conflicts to protect its reputation and the objectivity of employees/analysts by adhering to strictly-written compliance guidelines.<br><br>The views and analyses included in our research reports are based on current public information that we consider to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, timeliness, or correctness. Neither we nor our analysts, directors, officers, employees, representatives, independent contractors, agents or affiliate shall be liable for any omissions, errors or inaccuracies, regardless of cause, foreseeability or the lack of timeliness of, or any delay or interruptions in the transmission of our reports to content users. This lack of liability extends to direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, losses, lost income, lost profit or opportunity costs.<br><br>All investment information contained herein should be independently verified by the reader or user of this report. For additional information, all readers of this report are encouraged to visit WTR’s website www.watertowerresearch.com.</p>

KEY POINTS

SES reported an operating loss of $19.1 million, an increase of $12.5 million Y/Y due to increased personnel to support the development of battery cells and AI software. General and administrative costs ($11.9 million) and R&amp;D costs ($7.2 million) were the primary contributors to the operating loss. Complete results can be accessed here. The company’s net income was $9.0 million, or $0.03 per share. The positive number was due to a non-cash gain reported for the change in fair value of its $29.0 million sponsor earn-out liability.
SES closed the quarter with a cash balance of $404.6 million, which it intends to use to fund the further development of Li-Metal battery technology, its AI-powered safety software platform Avatar, and to provide adequate liquidity for commercialization.
The company’s financial outlook for 2022 remains unchanged from the first quarter. SES aims to deliver and optimize A-samples for its three joint development agreement (JDA) partners, while maintaining supply chains for key materials. For this, in 2022, the company expects to spend $95-115 million on capital expenditures ($25-$35 million) and operating costs ($70-80 million). Construction of the company’s second cell production plant in SES Korea is on track and plans to be completed by October 2022. The building’s structure is complete and assembly lines are now being installed. This plant will service at least one of the company’s JDA partners and will be equipped to manufacture its large format 50Ah and 100Ah cells.
SES intends to arrange a second annual Battery World event before 2022 after strong investor interest in November 2021. SES plans to provide updates on the performance of its large-format (50Ah to 100Ah) Apollo cells and Avatar, its AI-powered safety software for monitoring battery health, and demonstrate Apollo cells in a non-automotive application.

FINANCIAL SNAPSHOT

HIGHLIGHTS

The company continues to pursue prospects and interact with a variety of industry players in verticals such as drones, delivery robots, and other markets to better understand the many potential non-automotive use cases that can have the potential to move faster than automotive applications.
SES is making headways in the areas of material electrolytes and coatings to improve cycle life with periodic fast charge and safety, along with exploring methods to recycle its batteries.
Approximately 30 of the 100 ampule cells are produced daily at the Shanghai facility, which has a monthly production capacity of a few thousand. SES is testing these cells on a smaller scale before proceeding to mass production. In addition, the company will continue to build Phase 2 of the Shanghai Giga and add new production lines to support multiple OEMs, conduct internal research, and test Avatar cells.
SES intends to expand its Korean facility to service a second JDA partner once it is successfully operational.
SES is working actively to de-risk supply chain bottlenecks by fostering partnerships with prominent raw materials suppliers. The company has an exclusive agreement with&nbsp;ENTEK&nbsp;for separators and a long-term partnership with&nbsp;Tianqi Lithium, one of the biggest lithium suppliers in the world.
On the software side, SES is developing the capability to collect data across the supply chain, including carbon dioxide emissions, monitoring battery health, and predicting safety. It intends to monetize this battery health monitoring capability in battery leasing via the BaaS business model by charging a license fee.
The software would apply to almost all lithium chemistries and would need to be trained using that particular data set; however, once trained, it can be used for most lithium batteries. The company intends to roll out its battery software before the automotive-ready battery.
Many OEMs are testing the beta version of the company's batteries to enhance performance under varied circumstances and charging scenarios and to cut manufacturing costs.
Our prior content on SES can be accessed&nbsp;here.

OUR PREVIOUS RESEARCH CONTENT
Initiation of Coverage Report
04/12/22&nbsp;Driving Ahead With Commercial Scale Proprietary Li-Metal Battery Solutions For Electric Vehicles
Extensive coverage on SES AI Corp. assessing key opportunities, obstacles, technology, industry, risks, competition, financials, management profiles, etc.
Management Series Summary
03/09/22&nbsp;Explaining the Potential of Li-Metal Batteries and Its Breakthrough Technology; Roadmap to C-Sample Batteries and Production
CEO Dr. Qichao Hu talks about the company’s key differentiator, Li-Metal Batteries, technology, latest developments, partnerships, risks, the roadmap to commercialization, etc.
04/06/22&nbsp;COO Rohit Makharia Discusses Key Milestones and Drivers Behind SES's Unique Li-Metal Technology and the Drive Towards Commercialization
Rohit Makharia, President and COO, talks about his history and SES’s partnership with GM, OEMs requirements and expectations from battery companies, problems with solid-state batteries, key company milestones, etc.
07/26/22&nbsp;New AI-Powered Battery Software to Generate Recurring Revenue; CEO Discusses 2022 Key Milestones
CEO Dr. Qichao Hu provides a progress report on the milestones for 2022 and talks about opportunities in Battery-as-a-Service (BaaS) and how it could fit into SES’s long-term strategy.
Update Note Summary
03/16/22&nbsp;Shareholder Letter—Confident of the Business Plan and Aiming to Achieve Key Milestones in 2022
The shareholder letter provides an overview of SES and the company's path to commercialization, including key developments toward strengthening the supply chain.
05/16/22&nbsp;1Q22 Results: Strong Cash Balance of $426 Million to Support Key Future Milestones and Drive Commercialization of Li-Metal Technology
SES AI Corp. announced its 1Q22 earnings results. The company reported its financial performance for the first time since the SPAC transaction in early February.
COMPANY OVERVIEW
SES AI Corp. develops and produces high-performance, Li-Metal rechargeable batteries for electric vehicles and other applications. The company’s Li-Metal batteries are designed to combine the high energy density of Li-Metal with the cost-effective, large-scale manufacturability of Li-ion rechargeable batteries, which it has demonstrated by producing more than 15,000 multi-layer Li-Metal battery cells on a Li-ion-like manufacturing line. Its technology, which third parties and several OEMs have evaluated, has exhibited 43% greater density than leading Li-ion batteries, coupled with better performance across operating temperatures, faster charging, high safety, and longer life. In November 2021, the company unveiled a&nbsp;100+ Ah Li-Metal cell, the world’s first 100+ Ah and biggest Li-Metal cell (Apollo), created exclusively for the automobile sector. The company is backed by major auto OEMs, including GM, Hyundai, and Honda, with aggressive electrification targets. SES is the only company that has established A-sample (prototypes developed for OEMs based on OEMs’ technical specifications) JDAs with key OEMs for Li-Metal technology, which it aims to deliver to auto OEMs by the end of 2022. Additionally, the firm has garnered capital from OEMs Geely and SAIC Motors and strategic and financial investors such as SK, LG, Foxconn, Tianqi, Applied Materials, Temasek, and Vertex.
SES went public on the&nbsp;NYSE&nbsp;in February 2022 via the SPAC route. The company had $450 million of cash on its balance sheet at the closing (2/3/22), which it will use to reach commercial scale with multiple OEMs. The company plans to finish a 300,000-square-foot 1 GWh pilot facility in&nbsp;Shanghai&nbsp;by 2023.&nbsp;SES South Korea&nbsp;will also act as a pre-production site for A-sample development, complementing the existing Chinese facility. SES anticipates its next-generation batteries will be in automobiles by mid-decade. By 2028, it plans to have a total capacity of more than 100 GWh over a global network of facilities. SES AI Corp. was established in 2012 and is based in Woburn, Massachusetts, USA.
The Technology
According to the company, replacing the present Li-ion graphite/silicon anode with Li-Metal will achieve the highest energy density and improve performance with any cathode chemistry. Further, lithium metal anode battery cells may be exceedingly compact and light since the lithium ions do not have to diffuse in and out of the anode host material (as they do in typical Li-ion). The SES Lithium-Metal platform has significant energy density advantages over conventional lithium-ion batteries but still has the manufacturability to be cost-effective. Compared with all-solid-state Li-Metal batteries, the SES solution offers comparable energy density but high manufacturability, which is paramount to long-term commercial success. SES has a cell architecture that uses a liquid electrolyte to transport the lithium ions, preserving the high energy density advantages of Li-Metal. SES’s Apollo batteries are projected to have an energy density of at least 400 Wh/kg and 1000 Wh/liter to achieve a driving range of ~540 miles and be fast charged to 80% in less than 15 minutes. Unlike the traditional liquid electrolyte used in Li-ion cells, SES’s high-concentration solvent-in-salt electrolyte is non-flammable and less volatile.
SES employs an AI-powered technology (Avatar) that accurately monitors the condition of health of the battery cells, avoiding dendrite-related or other safety concerns before they occur. Through its Hermes platform, the company has a platform for new material development. Hermes™ cells consist of 25+ layers of cathode and anode (a total of 50+ layers). It is used to develop, test, and qualify novel electrolytes (high concentration solvent-in-salt), anode protective coatings, separators, cathodes (both high nickel for premium vehicles and nickel/cobalt-free for value vehicles), and other materials.
The Market
Automotives:&nbsp;The company believes Li-Metal batteries (LMBs) are a potential EV battery technology for maximum energy density. The global market for EV batteries is expected to grow substantially as battery capacity increases and costs decrease. This will be fueled by increasing EV adoption, with the global passenger EV market expected to grow at a CAGR of 19.1%, from 2.7 million in 2020 to 90 million in 2040 (company presentation). During the same period, the average battery pack capacity is expected to rise from 45 to 56 kWh per EV, while the cost of an EV battery pack is expected to decrease over 50% from $150 to $70 per kWh. The TAM is estimated to grow at a CAGR of 15.7%, from $19 billion in 2020 to $350 billion in 2040. SES aspires to grab 5% of the global EV battery market by 2030.
DISCLOSURES

Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.  WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information provided in this report should not be construed in any manner whatsoever as personalized advice. All users and readers of WTR’s reports are cautioned to consult their own independent financial, tax and legal advisors prior to purchasing or selling securities.  Shawn Severson, who is the writer of this report, covers the Emerging Growth &amp; Special Situations, BioEconomy, and ClimateTech &amp; Sustainable Investing sectors for WTR. Mr. Severson and members of his household have no personal or business-related relationship to the subject company other than providing digital content and any ancillary services WTR may offer.  Unless otherwise indicated, WTR intends to provide continuing coverage of the covered companies. WTR will notify its readers through website postings or other appropriate means if WTR determines to terminate coverage of any of the companies covered.  WTR is being compensated for its research by the company which is the subject of this report. WTR receives no more than a maximum of $10,500 per month from a given client and is required to have at least a 6-month commitment. None of the earned fees are contingent on, and WTR’s client agreements are not cancellable for the content of its reports. WTR does not accept any compensation in the form of warrants or stock options or other equity instruments that could increase in value based on positive coverage in its reports.  WTR or an affiliate may seek to receive compensation for non-research services to covered companies, such as charges for presenting at sponsored investor conferences, distributing press releases, advising on investor relations and broader corporate communications and public relations strategies as well as performing certain other related services (“Ancillary Services”). The companies that WTR covers in our research are not required to purchase or use Ancillary Services that WTR or an affiliate might offer to clients.  The manner of WTR’s research compensation and Ancillary Services to covered companies raise actual and perceived conflicts of interest. WTR is committed to manage those conflicts to protect its reputation and the objectivity of employees/analysts by adhering to strictly-written compliance guidelines.  The views and analyses included in our research reports are based on current public information that we consider to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, timeliness, or correctness. Neither we nor our analysts, directors, officers, employees, representatives, independent contractors, agents or affiliate shall be liable for any omissions, errors or inaccuracies, regardless of cause, foreseeability or the lack of timeliness of, or any delay or interruptions in the transmission of our reports to content users. This lack of liability extends to direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, losses, lost income, lost profit or opportunity costs.  All investment information contained herein should be independently verified by the reader or user of this report. For additional information, all readers of this report are encouraged to visit WTR’s website www.watertowerresearch.com.

2Q22 Results: Operating Loss at $19.1 Million; 2022 Financial Outlook Remains Unchanged; Progress of SES Korea Facility on Track to Support JDA Partners