Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis provides information which our management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. The following discussion and analysis should be read in conjunction with the accompanying unaudited interim condensed consolidated financial statements as of and for the three months ended March 31, 2026 and the related notes included in this Quarterly Report on Form 10-Q and our audited consolidated financial statements as of and for the year ended December 31, 2025 and the related notes contained in the 2025 Annual Report on Form 10-K. This Quarterly Report on Form 10-Q includes forward-looking statements. These forward-looking statements within the meaning of the federal securities law are based on our current expectations and beliefs concerning future developments and their potential effects on us. These forward-looking statements are not statements of historical fact and may include statements regarding possible or assumed future results of operations. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Factors that might cause or contribute to such forward-looking statements include, but are not limited to, those set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q and in Item 1A. Risk Factors in the 2025 Annual Report on 10-K. Unless the context otherwise requires, references in this section to "the Company," "we," "us" and "our" refer to the business and operations of SES Holdings Pte. Ltd. ("Old SES") and its consolidated subsidiaries prior to the Business Combination and to SES AI Corporation and its consolidated subsidiaries following the Closing. References in this section to our future plans that indicate the timing of when we expect such plans to be completed by a certain year mean at any point during that year.

Overview

We are a leading developer and manufacturer of high-performance, AI-enhanced Lithium-Metal ("Li-Metal") and Lithium-ion ("Li-ion") rechargeable battery technologies for electric vehicles ("EVs"), Urban Air Mobility ("UAM"), drones, robotics, Energy Storage Systems ("ESS") and other applications. The Company's mission is to accelerate the world's energy transition through material discovery and battery management. SES accelerates its pace of innovation by utilizing superintelligent AI across the spectrum of our business, from research and development, materials sourcing, cell design, engineering and manufacturing, to battery health and safety monitoring.

Key Trends, Opportunities and Uncertainties

Historical Performance

We are an early-stage growth company. We incurred net losses of $12.1 million and $12.4 million for the three months ended March 31, 2026 and 2025, respectively, and had an accumulated deficit of $384.0 million and $311.3 million from our inception through March 31, 2026 and 2025, respectively. We expect to sustain substantial operating expenses, without generating sufficient revenues to cover expenditures, for a few more years. Our historical results may not be indicative of our future results for reasons that may be difficult to anticipate and our ability to generate revenue in the future that is sufficient enough to achieve profitability will depend largely on the successful development of our products and services. Accordingly, the drivers of our future financial results, as well as the components of such results, may not be comparable to our historical results of operations.

We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose significant risks and challenges, including those discussed below and in "Part I, Item 1A. Risk Factors."

Acquisition of UZ Energy

We believe that the acquisition of UZ Energy strengthens our capabilities in the ESS market and will provide opportunities for revenue generation. See "Note 3 - Acquisition" of our accompanying consolidated financial statements for further discussion.

Commercialization of Molecular Universe

We believe that the commercialization of the Molecular Universe platform represents a significant opportunity to drive future revenue growth and margin expansion, as it should enable us to offer differentiated AI-driven solutions to customers. We expect that successful adoption of Molecular Universe, both as a software product and as an integrated component of our hardware and software offerings, could increase revenues and improve gross margins over time. However, we also recognize that the market for AI-based scientific discovery tools is nascent and rapidly evolving, and that the pace of adoption and competitive dynamics are uncertain. If adoption is slower than anticipated or if competing platforms gain traction, our ability to achieve revenue growth and profitability could be adversely affected.

Shift to Joint Venture Manufacturing with Hisun

Our strategic shift away from in-house manufacturing of certain battery materials, and the announcement of a joint venture with Hisun to produce novel materials at commercial scale, is expected to reduce capital intensity and accelerate time-to-market for new products. We anticipate that this approach will allow us to scale more efficiently and address a broader customer base, which could positively impact future revenues. However, the transition introduces new uncertainties, including the risk of production delays, quality control challenges, and dependence on third-party manufacturing partners. These factors could result in variability in cost of goods sold, potential supply chain disruptions, and fluctuations in cash flows.

NDAA-Compliant Drone Cell Manufacturing

Our plan to develop NDAA-compliant manufacturing capacity for drone cells is intended to position us to capture new business from U.S. government and defense-related customers, which we believe could be a driver of future revenue growth. Achieving NDAA compliance may also enhance our competitive positioning and open additional market opportunities. However, this initiative will require substantial capital investment and ongoing compliance costs, and there is uncertainty regarding the timing and magnitude of customer demand. If we are unable to achieve commercial-scale production or if demand for NDAA-compliant drone cells does not materialize as expected, we could experience underutilization of assets and negative impacts on cash flows.

Results of Operations

The following table sets forth our historical operating results for the periods indicated:

Factors Affecting Operating Results

Revenue from Customers

For the three months ended March 31, 2026 and 2025, we generated revenue from two primary sources:

Revenue from customers for the three months ended March 31, 2026 increased $0.9 million to $6.7 million compared to $5.8 million for the three months ended March 31, 2025.

Service revenues decreased $5.5 million, or nearly 95%, to $0.3 million for the three months ended March 31, 2026 compared to $5.8 million for the three months ended March 31, 2025. This decrease was primarily attributable to completion of the service revenue projects with OEMs and other manufacturers in last quarter of 2025. Product revenue increased $6.4 million, or nearly 100%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. This increase was primarily attributable to ESS systems sales from UZ Energy, which was acquired during the third quarter of 2025.

Cost of Revenue

Cost of revenue includes materials, labor, depreciation and amortization expense, inventory, freight costs, warranty, and other direct costs related to manufacturing our products and service contracts. Labor consists of personnel-related expenses such as salaries, benefits, and stock-based compensation.

Costs of revenue for the three months ended March 31, 2026 increased $4.3 million, or nearly 78%, to $5.5 million compared to $1.2 million for the three months ended March 31, 2025. Costs related to service revenues decreased $1.1 million, or 92%, to $0.1 million for the three months ended March 31, 2026 compared to $1.2 million for the three months ended March 31, 2025. This decrease was primarily attributable to completion of the service revenue projects with OEMs and other manufacturers in last quarter of 2025. Costs related to product revenue increased $5.4 million primarily attributable to ESS systems sales from UZ Energy, which was acquired during the third quarter of 2025.

Gross Profit Margin

Gross profit margin has been and will continue to fluctuate over time affected by a variety of factors, including the average sales price of our product and service offerings and changes in our mix of revenue between ESS systems, drone batteries, battery materials and service offerings to automotive OEMs and other manufacturers.

Gross profit margin for the three months ended March 31, 2026 and March 31, 2025 were 18.1% and 78.7%, respectively. The fluctuation was primarily due to the effect of changing revenue mix between product and service offerings as explained above.

Research and Development

We are an early-stage growth company conducting business activities through one operating segment. Research and development expenses include personnel-related expenses, such as salaries, benefits, and stock-based compensation, for scientists, experienced engineers and technicians. These expenses also cover materials and supplies used in product research and development, process engineering efforts and testing, payments made to consultants, and patent related legal costs. Furthermore, they encompass depreciation, allocated facilities expenses, and information technology costs, including costs incurred for renting graphic processing units ("GPUs") to train AI models.

Research and development expenses for the three months ended March 31, 2026 decreased $9.5 million, or 46.2%, to $11.0 million, compared with $20.5 million for the three months ended March 31, 2025. This decrease primarily resulted from a $5.4 million decrease in automotive OEM JDA related lab equipment expenses, a $3.4 million decrease in AI infrastructure costs incurred from renting Graphic Processing Unit ("GPU") computing resources, and a $0.5 million decrease in stock-based compensation expense attributable to reduced headcount resulting from the company's strategic shift to an AI-based focus.

General and Administrative

General and administrative expenses include personnel-related expenses, such as salaries, benefits, and stock-based compensation for our finance, legal and human resource functions. These expenses also cover director and officer insurance, outside contractor fees, and professional services, including audit, compliance, legal, accounting, investor relations, and other advisory services. Additionally, the expenses encompass allocated facilities and information technology costs, such as depreciation and amortization.

General and administrative expenses for the three months ended March 31, 2026 increased $0.7 million, or 10.0%, to $8.1 million, compared with $7.3 million for the three months ended March 31, 2025. This increase primarily resulted from a $0.8 million increase in salaries, and benefits expense due to UZ acquisition and hiring of sales personnel, a $0.3 million increase in professional recruitment fees, a $0.2 million increase in software expenses, and a $0.2 million increase in office and utility expenses. These increases were partially offset by a $0.9 million decrease in stock-based compensation expense due to generally lower headcount.

Non-Operating Items

Interest Income

Interest income primarily consists of interest earned on our cash and cash equivalents and marketable debt securities, which are primarily invested in money market funds and U.S. treasury securities, and accretion income from the U.S. treasury securities.

During the three months ended March 31, 2026, we had interest income of $1.7 million compared with $2.7 million for the three months ended March 31, 2025. The decrease was lower average short-term investment balances and a decline in market interest rates since the prior year period.

Change in Fair Value of Earn-Out Liabilities

During the three months ended March 31, 2026, we incurred a gain of $4.2 million associated with the change in fair value of the Sponsor Earn-Out liabilities compared with a gain of $7.9 million for the three months ended March 31, 2025. This gain on the change in fair value

of the Sponsor Earn-Out liabilities is tied to SES's stock price, continued volatility in the stock price or changes in the expected term. Refer to "Note 9 - Sponsor Earn-Out Liabilities" to the unaudited interim condensed consolidated financial statements for additional information.

Miscellaneous Income, Net

During the three months ended March 31, 2026 and 2025, there was no significant change in the miscellaneous income.

Provision from Income Taxes

The provision for income taxes for the three months ended March 31, 2026 was $0.4 million compared to nearly $0.0 million for the three months ended March 31, 2025 mainly due to pre-tax income in China and South Korea.

Liquidity and Capital Resources

As of March 31, 2026, we had total cash and cash equivalents of $46.9 million and investments in marketable debt and equity securities of $130.7 million. As an early-stage growth company, the net operating losses we have incurred since inception are consistent with our strategy and budget.

We expect to sustain substantial operating expenses, without generating sufficient revenues to cover expenditures, for a few more years. Our ability to successfully develop our products and services, scale up our commercial operations and expand our business will depend on many factors, including our working capital needs, the availability of equity and/or debt financing and, over time, our ability to generate positive cash flows from operations. We believe that our cash on hand and marketable securities will be sufficient to meet our principal working capital and capital expenditure requirements and ongoing research and development costs, operational and commercial activities, including expenditures for deferred cash payments of an estimated approximately RMB 55.5 million ($8.0 million) related to the acquisition of UZ Energy as well as activities related to the recently acquired ESS business, our plans for NDAA-compliant manufacturing capacity to develop drone cells and development and commercialization of Molecular Universe material discoveries, for a period of at least 12 months from the date of this Quarterly Report. However, additional funding may be required during or after this period to finance certain needs beyond our principal working capital and capital expenditure requirements and ongoing costs, including additional opportunities to purchase data and equipment, develop and train our AI models, and/or develop commercial operations in the United States and abroad, acquisitions or other strategic transactions, and unexpected delays in the development of our battery cells. See "Note 3 - Acquisition" of our accompanying consolidated financial statements for further discussion of the estimated deferred cash payments related to the acquisition of UZ Energy.

If we need additional funding beyond these existing short- to medium-term sources of liquidity, or if we are not able to fund our operations from cash flows generated from anticipated product sales and service offerings, we expect that we will need to raise additional funds. This may be through a variety of possible methods, including, but not limited to, entry into joint ventures or other strategic arrangements, issuance of equity, equity-related or debt securities, and obtaining credit from financial institutions. We currently maintain an at-the-market equity offering program with certain investment banks (the "Agents"), pursuant to which we may offer and sell into the open market from time to time, at our option, shares of our Class A common stock with an aggregate offering price of up to $150.0 million. Subject to the terms and conditions of our agreement with them, the Agents will use their commercially reasonable efforts to sell shares of our Class A common stock from time to time, based on instructions from us (including any price, time or size limits or other parameters or conditions we may impose), in exchange for a commission of up to 3.0% of the aggregate gross sale proceeds. We have also provided the banks with customary indemnification and contribution rights. We are not obligated to sell any Class A common stock and may at any time suspend solicitation and offers thereunder. We sold no shares under the at-the-market equity offering program during the three months ended March 31, 2026, and to date have sold no shares under the program.

Summary of Cash Flows

The following table provides a summary of our cash flow data for the periods indicated:

​

Operating Activities

Our cash flows used in operating activities to date have primarily comprised research and development and general and administrative activities as discussed above. As we continue to hire research and development personnel to accelerate our Molecular Universe AI-enhanced materials discovery and battery management, we expect our cash used in operating activities to increase before we start to generate any material cash inflows from our operations.

Net cash used in operating activities of $19.8 million for the three months ended March 31, 2026 was primarily attributable to net loss of $12.1 million, as adjusted for a gain on change in fair value of Sponsor Earn-Out liabilities of $4.2 million, gain on change in fair value of deferred consideration of $0.8 million, accretion income from marketable securities of $0.5 million, stock-based compensation expense of $2.1 million, depreciation and amortization of $2.7 million, and $0.4 million of other items. These non-cash operating items were combined with a $7.4 million working capital outflow. The working capital outflow was driven primarily by a $3.4 million increase in trade accounts receivables, a $1.7 million increase in inventories, a $1.3 million decrease in accrued expenses and other liabilities, a $0.9 million increase in prepaid and other assets, and a $0.4 million decrease in net lease activity. These working capital outflows were partially offset by a working capital inflow of a $0.4 million increase in accounts payable. The increase in inventories was primarily due to purchases for ESS commercial operations as a result of the acquisition of UZ Energy in the third quarter of 2025. The decrease in accrued expenses and other liabilities was primarily due to decreases in accruals for purchases of equipment for a JDA, accrued income taxes payable, and payroll related accruals. The increase in prepaids and other assets was primarily due to payments for licenses or hosting software data. The changes to operating lease liabilities and right of use assets was primarily driven by lease modifications. The changes in trade account receivables and accounts payables were driven by timing of receipts.

​

Net cash used in operating activities of $22.8 million for the three months ended March 31, 2025 was primarily attributable to net loss of $12.4 million, as adjusted for a gain on change in fair value of Sponsor Earn-Out liabilities of $7.9 million, accretion income from marketable securities of $0.8 million, stock-based compensation expense of $4.0 million, depreciation and amortization of $2.5 million, and a $8.0 million working capital outflow. The working capital outflow was driven primarily by a $5.3 million decrease in accrued expenses and other liabilities, a $1.7 million increase in prepaid and other assets, a $1.0 million decrease in operating lease liabilities, a $0.5 million increase in trade accounts receivables, and a $0.1 million decrease in accounts payable. These working capital outflows were partially offset by working capital inflows of a $0.7 million increase in right of use assets. The decrease in accrued expenses and other liabilities was primarily due to accruals for purchases of equipment for a JDA, accrued income taxes payable, and payroll related accruals. The increase in prepaids and other assets was primarily due to accrued receivables for services rendered to customers. The changes to operating lease liabilities and right of use assets were primarily driven by lease modifications. The changes in receivables and payables were driven by timing of receipts.

​

Investing Activities

Net cash provided by investing activities was $39.1 million for the three months ended March 31, 2026 compared to net cash used in investing activities of $49.8 million for the three months ended March 31, 2025. This increase in cash provided was primarily attributable to an $88.4 million increase in cash provided by the maturities of short-term investments, net of purchases in the current year period compared to the prior year period and $0.6 million of lower capital expenditures

Financing Activities

Net cash used in financing activities for the three months ended March 31, 2026 was $2.0 million, consisting mainly of payments for withholding taxes on share vesting, compared to an immaterial amount for the three months ended March 31, 2025.

Recent Accounting Pronouncements

See "Note 2 - Basis of Presentation" of our accompanying unaudited interim condensed consolidated financial statements for the three months ended March 31, 2026 included in this Quarterly Report on Form 10-Q for more information about recent accounting pronouncements, the timing of their adoption, and their potential impact on our financial condition, results of operations and cash flows.

Critical Accounting Estimates and Judgments

Our financial statements have been prepared in accordance with U.S. GAAP. In the preparation of these unaudited interim condensed consolidated financial statements, we are required to use judgment in making estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the unaudited interim condensed financial statements, as well as the reported expenses incurred during the reporting periods.

There have been no significant changes to our critical accounting policies or in the underlying accounting assumptions and estimates used in such policies from those disclosed in our annual consolidated financial statements and accompanying notes included in our 2025 Annual Report on Form 10-K.

Other Information

The Company's website is www.ses.ai. Information contained on the Company's website is not part of this report. Information that we furnish to or file with the SEC, including the Company's annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to, or exhibits included in, these reports are made available for download, free of charge, through the Company's website as soon as reasonably practicable. The Company's SEC filings, including exhibits filed therewith, are also available directly on the SEC's website at www.sec.gov.

The Company may use its website as a distribution channel of material company information. Financial and other important information regarding the Company is routinely posted on and accessible through the Company's website at www.ses.ai. Accordingly, investors should monitor this channel, in addition to following the Company's press releases, SEC filings and public conference calls and webcasts. The contents of our website are not, however, a part of this report.

​