Operator:
Good afternoon. Thank you for attending today's SES AI Fourth Quarter and Full Year 2025 Earnings Results Call. My name is Tamia, and I will be your moderator for today's call. [Operator Instructions] I would now like to pass the conference over to your host, Kyle Pilkington, Chief Legal Officer.

Kyle Pilkington:
Hello, everyone, and welcome to our conference call covering our fourth quarter and full year 2025 results. Joining me today are Qichao Hu, Founder and Chief Executive Officer; and Jing Nealis, Chief Financial Officer. We issued our shareholder letter just after 4:00 p.m. today, which provides a business update as well as our financial results. You'll find a press release with a link to our shareholder letter and today's conference call webcast in the Investor Relations section of our website at ses.ai. Before we get started, this is a reminder that the discussion today may contain forward-looking information or forward-looking statements within the meaning of applicable securities legislation. These statements are based on our predictions and expectations as of today. Such statements involve certain risks, assumptions and uncertainties, which may cause our actual or future results and performance to be materially different from those expressed or implied in these statements. Risks and uncertainties that could cause our results to differ materially from our current expectations include, but are not limited to, those detailed in our latest earnings release and in our SEC filings. On this call, we are introducing non-GAAP financial measures as a supplement to our GAAP results. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles, but are intended to illustrate alternative measures of the company's operating performance that may be useful. These non-GAAP measures should not be considered in isolation or as a substitute for any GAAP measure, and our definitions may differ from those used by other companies reporting similarly titled measures. Reconciliations of the non-GAAP financial measures to most directly comparable GAAP measures can be found in our latest earnings release. With that, I'll pass it over to Qichao.

Qichao Hu:
Thanks, Kyle. Thanks, everyone, for joining today. We had an exciting 2025 with full year revenue of $21 million compared to a little over $2 million for 2024. Jim will walk through our financials and the outlook shortly. This tremendous growth was due to the final contributions from our services agreements with Honda and Hyundai as we completed our EV development work with them. We also had 3.5 months of revenue from the acquisition of UZ Energy for our energy storage ESS business. While we are pleased to report full year revenue in the range of our previously issued guidance, as the milestone we reached and the year-over-year growth we are expecting from full year contributions in our three revenue-generating business units and for recognizing potential value in the molecular universe that has us really excited. I'm very proud that we made more progress in the past year than the previous 10-plus years combined. This development of the molecular universe has set things up for us. ESS; continues to be well positioned to solve the issues of battery development and safety requirements. With the molecular Universe, our own in-house AI science company, we have been able to help customers overcome standard time lines in the adoption of new technology. We also have a front seat to see how energy transition needs are requiring more integration of AI software and hardware along with precise battery health monitoring. As we described before, SES has three revenue-generating business units: ESS, drones and materials. ESS, which is the largest market for batteries is bigger than EVs and bigger than drones. At Battery World 2024, we announced our entry into the ESS market. And through our acquisition of UZ Energy, we are now serving customers across the globe from Australia to Europe to the Middle East, and now we are entering the North American market. The ESS business is our largest near-term revenue driver. UZ Energy is a leader in commercial and industrial ESS and has sold almost a gigawatt hours of hardware to customers ranging from residential to C&I to grid. We are now able to collect the large amount of historical ESS LFP graphite data. And then for all future UZ products, we plan to incorporate our predict feature from Molecular Universe into a small box to achieve near zero drift of charge SoC degradation, health, safety and other SOX algorithms and automated nondisruptive recalibration, which helps improve UZ's ability to predict battery health and reduce maintenance costs for our customers. Energy storage systems are financial assets. The value to our customers depends on delivering consistent and long-term performance. Historically, UZ supplied only the hardware to customers, mostly LFP and graphite lithium-ion cells. Now since we acquired UZ, SCS has the opportunity to provide an operating system to the hardware and sell customers a complete package to meet their USS needs. We are seeing some early traction with UZ sales efforts as they were able to sign a multiyear $20 million contract with a major distributor recently at the intersolar conference. Drones are the next business unit I want to highlight. The drones market requires high energy density and high-power density batteries to achieve longer flight time and greater payload. This is where our lithium metal and high silicon carbon lithium-ion batteries really shine. The U.S. defense drones market, in particular, is where we see the most consequential near-term opportunity and where we are devoting most of our attention and investment. It's worth spending a moment on why the drone market is a natural fit for deploying our lithium metal anode and proprietary electrolyte. One, a drone battery needs double the energy density of conventional lithium-ion. Ultimately, you need at least 400 watts per kg to be state-of-the-art and a realistic road map to 500 watts per kg to win. In other words, range and payload matter. Drone batteries need a high C rate and power for the drone to maneuver and accelerate. We solved for this. Third, drone batteries need to be manufactured at scale. We've demonstrated this in our EV B sample development. Fourth, drone batteries need abundant and inexpensive materials and the military demands that the supply chain to be National Defense Authorization Act for NDAA compliant. We recently announced we expect to convert our EV B-sample line in Chungju, South Korea facility to manufacture NDA-compliant cells for drones. This is the same facility that we've developed and built the world's first 100 Mpower cells largest lithium metal cell back in 2021. And this facility has been NDA compliant since 2021. To meet the drone demand, we plan to convert our lines from EV PEP 100 Mpower cells to 10 Mpower cells. In this line, we're also planning to deploy our AI for safety and AI for manufacturing to ensure quality and cost effectiveness. In addition to our Korea facility, we're also exploring even larger NDA compliant and more versatile cell form factor manufacturing capacities in Southeast Asia. We'll have more to update on our NDA-compliant manufacturing capacity and locations later this year. Our third revenue-generating business unit is materials. Both ESS and our molecular universe users have also been discovering new electrolyte materials for other applications that we don't build cells for currently. Last fall, we announced a JV with Hisun to leverage their 150,000 ton annual global capacity to produce these materials at a commercial scale to supply to other battery manufacturers for consumer electronics and assets. At this time, we are anticipating that the Hisun JV will only produce materials for molecular universe discoveries. Through the molecular universe, we discovered six breakthroughs that are currently being tested by over 40 customers -- these breakthroughs, which will be the basis of the revenue we expect from this business in 2026 include: one, better cycle life and storage for EV applications, two, better cycle life and power density for drones, three, better low-temperature cycle life and power density for heavy-duty trucking, fourth, better cycle life and longer life for consumer electronics, fifth, better cycle life and low temperature performance for ESS and EVs. And sixth, better cycle life and storage for consumer electronics. We also have a pipeline of new breakthroughs that are being tested by customers, which we expect will provide further potential revenue for this business. Last but not least is what we have been referring to as our own AI for science company. That is, of course, Molecular Universe. I want to be clear on how we view the MU role in this company. While its SaaS revenue continues to build momentum and is expected to make a small contribution in 2026, its biggest contribution is the inherent value of this business on its own and the IP that drives competitive advantage in the ESS drone and materials business. Molecular Universe has the potential to become a modern day encyclopedia with battery being its volume one. It provides extremely valuable scientific data and intuition to AI for science models. Over the course of the year, we will continue to explore how we can best demonstrate or unlock MUs value. In terms of demonstrating that value, I will point to our recent investor presentation. In that presentation, we noted there are several AI science companies that are either pre-revenue or have less revenue than the MU that have already passed valuations exceeding $1 billion through private capital raises. These are the closest comps to the molecular universe. So we are keeping an eye on how well these transactions have performed. So we are really excited about the long-term value of Molecular Universe as a platform, not just for batteries, but all science as well as the near-term revenue growth from drones, materials and ESS operating systems. Our priorities for 2026 and beyond are: one, leverage the new business unit leadership and structure to execute on the ESS and drone cell opportunities ahead of us. We've brought on industry veterans to lead these efforts as well as hardware and software integration still. Second, execute on the conversion of our NDA compliant line in Korea from EV sales to drone sales and line up additional capacity in Southeast Asia that is also NDA compliant. Third, continue the growth of UZ Energy's existing hardware business in Australia, Middle East and Europe and begin expansion into the U.S. Fourth, deliver on existing novel electrolytes discovered by the molecular universe in the materials business and expand our pipeline. Fifth, leverage MU's material discovery capabilities to accelerate new product development; and sixth, continue to focus on our CapEx-light business model in ESS sales and materials to offset the projected R&D spend in the molecular universe. Before I turn it over to Jing, I want to express my gratitude for our teams who are working super hard to make all of this happen. And thanks to all of you for being on this journey with us. And now here's Jing for financial updates.

Jing Nealis:
Thank you. I will discuss our financial performance for the fourth quarter and full year of 2025 and provide context on how we're deploying our capital to support SES AI's long-term growth and the strategies Qichao outlined earlier. Revenue for the fourth quarter of 2025 was $4.6 million, representing a $2.6 million or 124% increase year-over-year. Full year revenue came in at $21 million, in line with our guidance, but impacted primarily by logistics constraints that delayed shipments at the end of the year, resulting in approximately $1.5 million of revenue being pushed out to the first quarter of 2026. As Qichao noted earlier, revenue for full year 2025 was within our previously issued guidance range of $20 million to $25 million and was up nearly tenfold from the prior year. A year in which we first achieved revenue generation. Our Q4 gross margin on a GAAP basis was 11.3%, driven by the higher mix of ESS product sales in the quarter, which carries a lower margin profile relative to our service revenue. On a non-GAAP basis, which excludes stock-based compensation as well as depreciation and amortization allocated to cost of revenue, our Q4 non-GAAP gross margin was 11.7%. For full year 2025, our GAAP and non-GAAP gross margin was 53.8% and 55.7%, respectively. As we have noted previously, we expect gross margin to vary from quarter-to-quarter as our revenue mix across products, SaaS and services evolve. We expect the gross margins on our product revenue to improve as we scale volume and optimize the cost structure through our CapEx-light business model and JV partnerships. Turning to operating expenses. Our GAAP operating expenses for the fourth quarter of 2025 were $18.2 million, compared to $30.4 million for the same period prior year, a 40% decrease year-over-year. On a non-GAAP basis, which excludes stock-based compensation as well as depreciation and amortization. Fourth quarter operating expenses were $13.5 million compared to $24.2 million for the same period prior year, a 44% decrease. For full year 2025, our GAAP operating expenses were $93.9 million, compared to $110.5 million in 2024, a 15% decrease. On a non-GAAP basis, full year operating expenses were $73 million versus $82.3 million in 2024, an 11% decrease. The year-over-year improvement in operating expenses on both GAAP and non-GAAP basis reflects the progress we have made in optimizing our cost structure while continuing to invest strategically in Molecular Universe platform and our commercial growth initiatives. Adjusted EBITDA for the fourth quarter of 2025 was a loss of $13.8 million compared to a loss of $23.2 million in the fourth quarter of 2024, representing a 40% improvement. For the full year 2025, adjusted EBITDA was a loss of $52.6 million compared to a loss of $81.5 million in the full year 2024 in 23% improvement year-over-year. We believe this growth reflects the positive operating leverage beginning to emerge in our business as revenue scales, as well as our sustained focus on financial discipline and cost management across the organization. Our GAAP net loss for the fourth quarter was $17 million or $0.05 loss per share. Excluding stock-based compensation, depreciation and amortization, changes in fair value of sponsor earnout liabilities and including interest income, our non-GAAP net loss for the fourth quarter was $11.8 million or $0.04 loss per share. This is an improvement over 2024 fourth quarter's GAAP net loss of $34.5 million or $0.11 loss per share and non-GAAP net loss of $19.9 million or $0.06 loss per share. For the full year 2025, our GAAP net loss was $73 million, or $0.22 loss per share compared to a GAAP net loss of $100.2 million or $0.31 loss per share in 2024. On a non-GAAP basis, full year net loss was $53.2 million or $0.16 loss per share compared to a net loss of $66.4 million or $0.21 per share in 2024. The year-over-year improvement on both GAAP and non-GAAP basis reflects the progress we are making in scaling revenue and managing our cost structure as we advance customer engagement, develop the molecular universe platform and position the distance for growth in 2026. A detailed reconciliation of GAAP net loss to adjusted EBITDA and non-GAAP net loss per share is included in the financial tables at the end of the shareholder letter. I want to highlight that our GAAP net loss in any given quarter can be meaningfully impacted by noncash mark-to-market movement in the fair value of our sponsor earned liabilities, which are required to be remeasured each reporting period under GAAP. These noncash gains or losses are not reflective of our underlying operating performance. And we believe, excluding them, provides a clearer picture of the progress we're making in the business. This is one of the reasons where we're introducing adjusted EBITDA beginning this quarter. We utilized $10.4 million in cash for operations during the fourth quarter and $58.4 million for the full year 2025. We deployed $3.3 million on the UZ acquisition and $2.9 million on CapEx and returned $1.6 million to shareholders through share repurchases during 2025. This improvement in cash utilization is consistent with the adjusted EBITDA progress I noted earlier and reflects the financial discipline we have maintained as we scale the business. We exited 2025 with a strong liquidity position of $200 million, coming in at the top end of our previously communicated expectation of ending the year between $195 million and $200 million. Our CapEx-light business model remains the core financial discipline, and we are confident our current liquidity provides a strong runway to fund operations and execute on our 2026 growth initiatives. For full year 2026, we expect revenue to be in the range of $30 million to $35 million. representing approximately 43% to 67% growth over full year 2025 revenue. As Qichao noted earlier, our full year 2025 revenue included onetime contribution from OEM services contracts. If we compare the growth expected from the three businesses on an apple-to-apple basis, the revenue growth rate is even higher. On the margin front, our three businesses carry different profiles and the mix may shift as we scale our ESS hardware business, which will represent the largest share of revenue in 2026 is expected to operate at around 15% gross margin. As we layer in the hardware software bundle and grow the operating system attach rate, we see a potential path to expanding margins in that business over time. Our drone sales business is earlier in this commercial ramp, but we expect gross margins north of 20% as volumes build through the year. Our materials business, which will sell electrolyte materials, through our joint venture with Hisun. It's also a product business, and we expect it to carry a margin profile in the 10% to 20% range. On a blended basis, we expect consolidated gross margin to be around 15%, with room to improve year-over-year as we scale. Our operating expenses for full year 2026, we expect approximately 15% further reduction from the 2025 level. This reflects our continued investments in the molecular universe platform, while we are committed to financial discipline, we believe this level of investment is appropriate given the long-term value we're building and the early commercial traction we're seeing from MU driven material discoveries. We are not anticipating meaningful growth in operating expenses beyond this level, and we'll continue to evaluate opportunities to improve operating leverage as revenue scales and to accelerate the monetization of the MU platform. On capital expenditures, we continue to operate a CapEx-light model at the core financial discipline. For 2026 we expect CapEx to remain in the single-digit million, primarily directed towards the conversion of South Korea facility from EV cells to NDAA compliant grown cells, as well as the evaluation of contract manufacturing capacities in Southeast Asia. We entered 2026 with $200 million in liquidity and we are well funded to scale and grow, can us the financial flexibility to execute on the opportunities ahead of us. We believe 2026 will be the year in which the full architect of our multi-revenue stream platform comes together and began to deliver. We are well capitalized, financially disciplined and positioned to execute on that vision. We appreciate your continued support and confidence in SES AI. Thank you. Now I will turn the call back to the operator.

Operator:
[Operator Instructions] The first question comes from Derek Soderberg with Cantor Fitzgerald.

Derek Soderberg:
On the final contribution from the Honda and Hyundai development work. Just was wondering what sort of next for that program? You sort of proven manufacturability recently. Obviously, your technology is sort of game changing for the EV market, what's next for that, those relationships and Hyundai, when are you going to commercialize that for EVs?

Qichao Hu:
Derek. So in terms of next step, previously, the next step was to go from B sample to C sample. And I think now, I mean there's no surprise that the EV market is slowing down and almost no automaker is investing in next-gen battery technology. And I don't mean like early-stage better technology in terms of A and B samples, but no one is investing in mass scale production of next-gen technology, which is C sample, which is what we are trying to get to next. So we hit all the technical milestones, but the C sample is on hold. And then so in terms of next step with the OEMs, we are focusing on selling materials, selling materials that we have developed, the electro materials, we are focusing on that. And then in terms of the full-blown lithium metal C sample, then we'll see when the market returns. But the technology is there, and this is why we've been focusing on converting the lines for drones production and also applying the AI for safety, the battery analytics software that we develop for EV for ESS market. So yes, in terms of next steps for the OEMs, we're focusing on material supplies and then also converting the line for drone applications and using the safety analytics software for ESS.

Derek Soderberg:
Got it. And then just quickly, what was the onetime service amount? Can you quantify that impact to fiscal '25?

Qichao Hu:
Jing, do you want to take that?

Jing Nealis:
Yes. So for 2025, the service revenue was $13.6 million. Those are primarily driven by the Honda and Hyundai service agreement. So that's the onetime service agreement we were talking about.

Derek Soderberg:
Got it. So for '26, you don't expect any of that to sort of recur just given what Qichao just explained or guidance is really just ESS, drones and materials. And I was wondering if you could sort of break that down for us or help us try to understand by segment. ESS, drones, materials. Can you help us kind of quantify how each of those contribute to the guidance range? And then any help sort of modeling kind of the first half or second half? What portion of revenue in the first half, second half, anything like that would be helpful.

Jing Nealis:
I can take that. So yes, yes, for 2026 guidance, given is the first year we're giving guidance, including all three business units. So we -- first of all, we wanted to be more conservative to start the year. As far as breaking down the revenue sources, ESS going to still be a large portion of our revenue. So of that 30 to 35 guidance, the range, I would say, probably around 65% will come from ESS at least. And then the remaining portion will be drones and materials. And then for those two, we're expecting it to be more second half of the year loaded given we're still in the ramping and business development stage. So those two are going to be more towards second half of the year. So -- but percentage-wise, around 65% from ESS and the remaining for those two.

Operator:
The following comes from Winnie Dong with Deutsche Bank.

Yan Dong:
Just curious, if we look out to maybe like the next 2 to 3 years, if we just look at the different business areas, yes, there's raw materials, also you have the molecular universe as well. How would you characterize like the growth profile of each of these areas in the next 2 to 3 years? Which one has maybe the potential for the largest growth, if there's a way to think about it? And then separately for molecular universe, I know you've been talking about different tiers of revenue from larger corporations and smaller ones. Could you share like currently what might be the largest bottleneck for adoption from these customers? And then I have a follow-up.

Qichao Hu:
Yes. On the first one, from a size of revenue and the product perspective, ESS and drones, we expect these two to grow very rapidly, especially on ESS. After we acquired UZ, we're not just selling the hardware anymore. Now we're adding this predict feature on top. So that's really exciting because now we are turning a regular UPS battery pack into an asset that the asset owners can use for energy trading. So it's like supply and demand. And then on the demand side, you have conventional VPP software, but on the supply side, no other VPP software can have as an accurate and advanced monitoring of the battery health, battery safety, battery degradation and all the parameters than ours. So we have a really precise estimation of the state of health of the battery so that gives you an advantage. It's almost like we say that energy trading, it's almost like having Warren Buffett at your fingertip when it comes to energy trading, if you know that level of precise health of your battery. So that we are really excited about this edge box enhanced virtual power plant, especially with this tool that we can add on top of UZ's hardware. So that's ESS. And in drones, -- so drones, it's all about supply chain. It's all about being NDA compliant and then supplying to U.S. and allied drones and then also with the new drones dominance program, we've had this line in Korea, and it's been NDA compliant since 2021. We built this line for GM. It was 100 Mpower cells lithium metal cells. Now we're converting that to 10 Mpower cells for drones. So we have an advantage because we have this asset. It's been NDA compliant since 2021. And then that market is also growing very rapidly, especially under the new drones dominance program. So I think these two are the most exciting from a size of revenue growth. And then as Jing mentioned earlier, the bulk of the revenue from this year, 2026, we expect will come from these two areas. In terms of molecular universe, we are making very exciting progress, and we're getting some of the largest battery companies and car companies to sign on to this platform, and we expect to make some announcements in the coming months. And I think in terms of bottleneck, I think it's just new. For example, AI Science has been used in drug discovery a lot, not so much in materials, not so much in chemicals and not so much in batteries. So it's just new. But finally, as we said, we use that platform and we demonstrated that we could actually indeed use that and develop six new materials. I mean, previously, it was like it would take you a few years to discover material. And then we've discovered six materials in just over about 9 months, 9 months to a year. And then later, we'll add more features to it. And hopefully, we can get to 6 new materials per month and per week. So that acceleration of rate of discovery, that's something we're quite excited about.

Yan Dong:
Got it. And then I wanted to ask a question about OpEx in 2026. It seems that you're characterizing a spending level that is lower than 2025 and that is going to likely sustain at this 2026 level on a go-forward basis. Can we maybe just understand the reason for that? If you're looking to grow these different areas of the business, what is it that you've done that, I guess, allows you to not have to spend further to grow the business?

Jing Nealis:
I can address that. So I think the 2026 reduction partially is coming from just being disciplined on spending cash on OpEx in general. We have been reducing G&A and also R&D expenses year-over-year if you go back to 2023, 2024, 2025 year-over-year, we're managing our costs very efficiently. So that's that part. And second, the MU as an internal tool for AI for science is creating a lot of efficiencies. So -- and also as part of growth into these three businesses, we're more focused as far as spending cash on product development related R&D and then there will be growth as far as spending wise on the SG&A side like sales and marketing, but it's not linear to the revenue growth. So overall, together, including R&D and SG&A we forecast this year to be lower than last year and then sustain at least for the foreseeable future.

Operator:
[Operator Instructions] The next question comes from Colin Rusch with Oppenheimer.

Colin Rusch:
Can you talk a little bit about the drone market and the volume of customers you're working with and how mature those relationships are in terms of working through the design process. and potentially being able to announce a purchase award here over the next, call it, several quarters.

Qichao Hu:
Yes. The drones market is really going through a lot of pressure to change supply chain with the NDA compliance requirements. And then we are focusing on some of the top customers, for example, customers that will order in the range of single-digit millions to potentially more than $10 million a year. Yes. So we are mainly focused on those larger customers. And we actually started testing, engaging with them last year. Last year was really when everyone tried to change the supply chain. And I think if a major Jones manufacturer hasn't changed the supply chain by now, I think it's almost a bit too late. So a lot of testing engagement started last year. And then now we are just in the final stage of converting the lines. For example, right now in Boston, we can make pilot scale less than 100,000 cells per year. In Korea, we can make about 200 to 300 cells per year. We're trying to expand that. And then in Southeast Asia, we're also looking to expand to several million cells. This all for -- this is all NDA compliant sales for drones customers.

Colin Rusch:
Excellent. And then obviously, you had some really meaningful success at the molecule level, leveraging some of the AI capabilities. I'm curious about your ability to leverage some of that know-how into pack level design and even into system integration design and modeling out some of the duty cycles that may be just to accelerate some of the adoption as you look at some of the robotics and drone opportunities?

Qichao Hu:
So you're saying how we can apply this to pack level and sub cell level?

Colin Rusch:
Yes, at the pack level and even the system level design beyond that pack level. Yes.

Qichao Hu:
Yes, we're starting to add that feature. We've got some requests from automakers that want to do the design and predict features at the pack and system level. So we are adding those features. And then also for energy storage, right now, we are adding Molecular Universe predict into the systems. So the predict -- we put that in a small box, we call that edge box. And then that works at the cell level and also the back-end system level.

Operator:
Next question comes from Mark Shooter with William Blair.

Mark Shooter:
I believe I heard you say that the auto OEM JVs are on hold. Could you clarify that a bit? And then I'm seeing that the industry is -- especially the auto industry is trying to move away from lithium metal. However, at the same time, I'm seeing some local competitors actually enter the public markets here with their lithium metal product. So has any of the engagement appetite with your OEM customers changed around lithium metal? I mean how are you looking at this?

Qichao Hu:
Yes. So I mean, we were developing pure lithium metal as well as hybrid lithium metal and silicon anode, and we met all the technical requirements. It's just in terms of OEM appetite for high energy density batteries. I would say back in 2021, the OEM appetite for high energy density batteries was very high. But now -- and that's still there, but maybe at R&D level, A sample level and demo car level, but not at C-sample level, which is like mass production. And I'm not seeing any auto OEMs that's going to mass production with a next-gen chemistry. There's a lot of price pressure, cost pressure and most OEMs are switching to just LFP graphite.

Mark Shooter:
Yes. Okay. And that makes a lot of sense. And that justifies what we're seeing, too. So that confused me a bit. But switching gears to the ESS market, which is rapidly growing, that is a fragmented market with many different levels to it. And I'm wondering what do you see as the most value add? Where would you play? What is the strategy for the UZ Energy acquisition? And what section of that energy storage market would you play in? And why are you most advantaged to that section?

Qichao Hu:
Yes. Yes, exactly the ESS market is very fragmented. It's got a long tail. And the benefit that we bring -- so the ESS market currently does not have a stable widespread operating system, maybe except for Tesla. But in ESS, it's like Tesla and the long tail, very fragmented. So what we can provide is almost like the Android version. And then -- so for commercial industrial and for data center applications, the asset owners actually want to use their battery packs for energy trading, but they're not able to do that, and they're not able to differentiate if they use conventional virtual power plant softwares. So what we can do is because we actually collect the data from the battery, we can have a very accurate estimation of self charge, self-health, see safety, degradation, power, all these different features. So what that means is when you do the trading, it's supply and demand. Demand is set by the market, by weather, by -- if there's any major sporting events. But the supply, that's set by accurate estimation of SOX and then that we can provide. So that's where this edge box enhanced virtual power plant really shines. So I think the value that we can provide is we can provide this operating system to not just use these battery packs, but to multiple of this long tail of this fragmented market.

Operator:
There are currently no other questions in queue. So I'll pass it back over to Kyle Pilkington.

Kyle Pilkington:
Thank you. As within our past earnings calls, we offered investors the opportunity to submit questions in advance and we'll cover a brief selection of those questions now. The first question is, is there a binding definitive agreement with top material yet? And can you generally provide some details on current NDAA compliance status?

Qichao Hu:
Yes. So top material is one of the options we are exploring. And then as I mentioned earlier, we've had this Korea facility since 2021. It's been NDA compliant since 2021. And then we are focusing on converting this to produce drones batteries. And then in addition to this to our own Korea facility, we're also looking at options in Southeast Asia and then potentially offer better pricing, better value and larger scale to customers. And again, they're all NDA compliant. And actually, we just updated our website and now we have updated drones battery product brochure that's on our website. So -- and then the sales are NDA compliant.

Kyle Pilkington:
Great. I think we have time for one more. So the question is, with Wildcat and BMW and Aonics and Porsche securing JDAs for AI-driven materials, how is SES protecting its molecular universe data advantage to ensure it doesn't lose OEM partners to these specialized private competitors?

Qichao Hu:
So I think we announced that we're offering Molecular Universe to the public mid last year after these other announcements were made. And then Molecular Universe, if we look at the latest version of M Universe 1.5, and we have a 2.0 coming out soon, it really is a game-changing platform for battery development in the EV space. So we're seeing a lot of the OEMs and big battery companies actually using this platform.

Kyle Pilkington:
Great. That's all we have for the investor questions. So I'll pass it back to the operator to conclude the call.

Operator:
This concludes today's conference call. Thank you for your participation. You may now disconnect your lines.