QuantumScape : Q1 2024 Shareholder Letter

Q1 FISCAL 2024

LETTER TO

SHAREHOLDERS

APRIL 24, 2024

Dear shareholders,

At the beginning of this year, we laid out four key goals for 2024 to help shareholders follow our progress as we move from prototype to product: begin shipment of Alpha-2 prototype battery cells, ramp our Raptor fast separator production process, begin low-volume B0 prototype production of our first commercial product, QSE-5, and prepare our Cobra process to support higher volumes of QSE-5 in 2025.

We announcedon March 27 that we started shipments of six-layerAlpha-2 prototype battery cells to automotive customers, which is the first of our four key goals for 2024. This is a key deliverable in our engagement with our prospective launch customer. The Alpha-2 prototype is more energy-dense than our earlier 24-layer A0 prototype, as it combines higher-loading cathodes with our FlexFrame cell format and improvements to packaging efficiency: tighter internal margins, thinner current collectors and a slimmer design. Alpha-2 is important because, when combined with Raptor films and other refinements and incorporated into a ~5Ah design, it represents the core of QSE-5.

As noted in our Q1 2023 Shareholder Letter, after shipping our initial A0 prototype cells to automotive customers at the end of 2022, we planned a sequence of customer samples intended to serve as stepping stones between A0 and our first commercial design, QSE-5. We already shipped the first of these samples, two-layerunit-cell prototypes known as Alpha-1, to multiple automotive customers last year.

The Alpha-2 design is intended to serve as an effective demonstration platform for customers to preview important electrical performance capabilities of the planned QSE-5. Customer feedback is the most critical input in the product development cycle, as it provides insight into areas that need improvement and strengthens collaboration.

Commercialization Roadmap

2023

2024

2025

Product Development

Separator Production

Introduce High-Loading Cathodes

Optimize Packaging Efficiency

Improve Cell Quality,

Consistency and Reliability

Deploy Raptor Equipment

Operate Prototype

Equipment for Cobra

Ship Alpha-2 Samples

Begin Low-VolumeQSE-5

Prototype Production

Ramp Raptor Process

Prepare for Cobra

Production in 2025

Higher-VolumeQSE-5

Prototype Production

Deploy and Ramp Cobra Process

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Alpha-2 Performance Focus

The following data is from Alpha-2 sister cells1 tested in our labs, as the test protocols in customer labs are proprietary and confidential. As a reminder, Alpha-2 cells are prototypes and will not have the reliability performance expected of a commercial product.

Discharge Power

In addition to improved energy density, a key performance feature of our planned QSE-5 cell is high discharge-power capability, which relates directly to vehicle acceleration in high- performance applications. Relative to cells optimized only for energy density, we believe this is an important differentiator in the EV battery market.

For context, conventional lithium-ion cells can be optimized for either high power or high energy, but not both at the same time. As the following chart shows, Alpha-2 prototypes are capable of up to 10Cdischarge rates, which in a 100 kWh pack would be nominally equivalent to over 1,000 horsepower.2 When comparing equivalent electrode areas, Alpha-2 demonstrates higher capacity than a lithium-ion energy cell, while also delivering more capacity at high power than a lithium- ion power cell.3 We believe this translates to a compelling combination of energy and power compared to lithium-ion cell designs.

Discharge Power Capability

10C Discharge Capacity [mAh/cm2]

3		Commercial Li-ion			QS Alpha-2 Prototype
				Power Cell
2
1		All cells tested			Commercial Li-ion
						Energy Cell
		at ~25 °C
0
0	1	2	3	4	5	6

1C Discharge Capacity [mAh/cm2]

Discharge capacity refers to equivalent-area electrode discharge capacity. Commercial Li-ion Energy Cell is rated by manufacturer for continuous discharge C-rate up to ~3C at 25 °C. QS Alpha-2 and Commercial Li-ion Energy Cell tested in QS labs; Commercial Li-ion Power Cell data from manufacturer spec sheet. Electrode areas measured in QS labs.

The power capability of the QS Alpha-2 prototype cell compared to a conventional power and energy cell at 1C and 10C discharge rates. The same QS Alpha-2 outperforms both the power cell at high power (10C) and the energy cell at medium power (1C) when comparing equivalent electrode areas.

1As part of any prospective customer shipment, we build additional cells with the same design, which we refer to as sister cells, and test them in our own labs.

2 The formula used to estimate power in this case is ( 3.17V3.81V ) × 100 kWh × ( hour10 ) = 832 kW, which is nominally equivalent to 1115 horsepower.

3 For more info, see our blog on electrode loading: https://www.

quantumscape.com/resources/blog/energy-density-active-materials-3electrode-loading/

Fast Charging

In addition to discharge power, fast charging is an important feature for EV applications. Improving on the results from Alpha-1 unit cells we reported in our Q2 2023 Shareholder Letter, Alpha-2 prototypes have demonstrated the capability to fast charge from 10% to 80% state of charge in less than 15 minutes, in line with our target for QSE-5 of 15 minutes.

Fast Charge Capability

State of Charge [%]

100
	QS Alpha-2 Prototype	Top-selling
				long range EV,
80		13m 36s	pack temp ≥ 45 °C
60
			QS Alpha-2 Prototype Test Conditions
40

20

0

0

10

20

30

40

50

60

Quick Charge Time [min]

C/3 (1.87 mA/cm2) charge rate from 0-10% SOC, 4C (22.4 mA/cm2) charge rate from 10% to upper cut-off voltage (4.25V). Commercially relevant dimensions may vary from 60x75 mm to 70x85 mm, depending on cell format.

The fast-charge performance of the QS Alpha-2 prototype cell compared to a top-sellinglong-range EV.

QS Alpha-2 performs in line with our fast-charging target for the QSE-5 cell design.

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Low-Temperature Performance

Conventional EV battery performance can be significantly impaired when ambient temperature drops below freezing. In this context, our technology has a unique advantage: we replace a conventional graphite anode with an anode-free architecture, which shortens the distance lithium has to travel during discharge, thereby increasing performance at low temperatures. As the following chart shows, our cells have the potential to offer good energy density, and hence range, across a spectrum of operating temperatures.

Temperature-Dependent Discharge Capacity

	7
	6								QS Alpha-2
									Prototype
[mAh/cm2]	5
								Commercial Li-ion
4								Energy Cell
Capacity
3
Discharge
								Commercial Li-ion
								Power Cell
2
	1
	0
	-30	-20	-10	0	20	30	40	50	60	70

Discharge Temperature [ºC]

Discharge capacity refers to equivalent-area electrode discharge capacity. Commercial Li-ion Energy Cell is rated by manufacturer for operating temperature -20 to 60°C. Commercial Li-ion Power Cell is rated by manufacturer for discharge operating temperature -40 to 60°C. Charging temperature was ~25 °C for all data points. QS Alpha-2 and Commercial Li-ion Energy Cell tested in QS labs; Commercial Li-ion Power Cell data from manufacturer spec sheet. Electrode areas measured in QS labs.

The relationship between temperature and discharge capacity for the QS Alpha-2 prototype cell, with conventional lithium-ion power and energy cells for reference. Over equivalent electrode area, the QS Alpha-2 prototype cell maintains higher discharge capacity across the temperature range.

Applied Pressure

Some solid-state battery technologies can appear to deliver acceptable performance when put under high externally applied pressure: we are aware of various solid-state battery groups reporting cycling results using test pressures from 20 atm to as high as 750 atm. Such high pressures are impractical for EV applications.

In the Alpha-2 prototype, we have now reduced externally applied pressure to 0.7 atm (in addition to normal ambient atmospheric pressure), within the range currently present in

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conventional EV battery pack designs, and we believe this allows us to integrate our cells into existing pack concepts. As we demonstrated in Q3 2023, our system is capable of long cycle life with zero externally applied pressure, and we continue to target zero-pressure designs for consumer electronics applications.

The Alpha-2 prototype is a key milestone on our path to our first commercial product, QSE-5, which has the potential to offer high energy density (above 800 Wh/L), high discharge power, and fast charging in a cell design that can perform in a vehicle pack environment without compromised requirements such as high pressure or elevated temperature. It's important to emphasize that all of these planned performance characteristics are enabled by a single product design, rather than individually optimized designs as is typical of conventional lithium-ion batteries.

We believe the planned combination of capabilities offered by QSE-5 represents an unmatched value proposition, and Alpha-2 represents an important step forward as we work toward ramping up our manufacturing capabilities and improving the reliability performance of our cells.

Production Outlook: Alpha-2 and Raptor Fast Separator Production

Our current-generation separator production process will continue to serve ongoing Alpha-2 sample production for customer shipment and internal testing in Q2. In parallel, increased production from the Raptor process will allow us to accelerate process development of downstream cell assembly steps, gather larger volumes of cell testing data to validate safety and reliability improvements, and begin production of QSE-5 B0 samples.

Most of the upstream and downstream automation equipment that serves the Raptor heat-treatment equipment has completed or is undergoing site acceptance testing. The Raptor process has shown encouraging improvements to separator performance with respect to certain critical-to-quality metrics. In addition to the planned Raptor ramp, we are also streamlining downstream cell assembly processes by simplifying the bill of materials, consolidating process steps and increasing automation to enable a smooth ramp of cell production.

While supporting initial production of QSE-5 prototype cells, Raptor also serves as a learning platform for our next generation of separator production, the Cobra process. Cobra is intended to combine the fundamental process innovations pioneered by Raptor with specialized equipment capable of realizing the full potential of fast separator production. The Cobra process is necessary to enable higher volumes of QSE-5 prototype production in 2025, and we continue to work toward preparing our Cobra process as another of our four key annual goals.

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Financial Outlook

Capital expenditures in the first quarter were $14.1M. Q1 capex primarily supported low volume QSE-5 prototype production, as well as the Cobra process and other equipment as we prepare for higher volume QSE-5 prototype production in 2025. GAAP operating expenses and GAAP net loss were $131.9M and $120.6M respectively; Adjusted EBITDA loss was $76.2M in Q1. A table reconciling GAAP net loss and Adjusted EBITDA loss can be found in the financial statements at the end of this shareholder letter. We maintain our full-year 2024 guidance for capital expenditures to be between $70M and $120M and for Adjusted EBITDA loss to be between $250M and $300M.

We ended Q1 with $1.01B in liquidity and continue to expect our cash runway to extend into the second half of 2026. Any additional funds raised from capital markets activity, including under our ATM prospectus supplement, would further extend this cash runway. Longer term, our capital requirements will be a function of our industrialization business model, which we believe could reflect a mix of wholly owned production, joint venture and licensing relationships. As always, we encourage investors to read more on our financial information, business outlook and risk factors in our quarterly and annual SEC filings on our investor relations website.

Strategic Outlook

We remain tightly focused on a singular goal: bringing our first commercial solid-statelithium-metal battery cell to market for electric vehicle applications. Achieving this ambitious goal requires three major elements: differentiated technology, close customer engagement and methodical execution of our milestones.

On the first point, we believe the performance differentiation of our solid-statelithium-metal technology continues to be clear, as successive iterations of samples have demonstrated. On the customer front, we are increasing our focus on intensive collaboration with our automotive partners, including our prospective launch customer. And finally, we continue to pursue a disciplined approach to product development and process deployment.

While there is still significant work ahead of us, we are as enthusiastic as ever about our technology and its potential impact, and we look forward to sharing more details over the months to come. Thank you for your ongoing support of our mission to revolutionize energy storage.

Dr. Siva Sivaram	Kevin Hettrich
President, CEO and Director	CFO

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QuantumScape Corporation

Condensed Consolidated Balance Sheets (Unaudited)

(In Thousands)

		March 31,			December 31,
		2024			2023
Assets
Current assets
Cash and cash equivalents ($3,564 and $3,522 as of March 31, 2024 and December
31, 2023, respectively, for joint venture)	$	192,321	$	142,524
Marketable securities		817,314			928,284
Prepaid expenses and other current assets		35,400			12,709
Total current assets		1,045,035			1,083,517
Property and equipment, net		315,644			313,164
Right-of-use assets - finance lease		24,422			25,140
Right-of-use assets - operating lease		54,596			55,863
Other assets		24,281			24,294
Total assets	$	1,463,978	$	1,501,978
Liabilities, redeemable non-controlling interest and stockholders' equity
Current liabilities
Accounts payable	$	11,508	$	12,959
Accrued liabilities		72,331			10,180
Accrued compensation and benefits		8,738			26,043
Operating lease liability, short-term		5,110			5,006
Finance lease liability, short-term		2,986			2,907
Total current liabilities		100,673			57,095
Operating lease liability, long-term		56,256			57,622
Finance lease liability, long-term		34,314			35,098
Other liabilities		13,073			11,986
Total liabilities		204,316			161,801
Redeemable non-controlling interest		1,790			1,770
Stockholders' equity
Preferred stock		-			-
Common stock		50			49
Additional paid-in-capital		4,260,514			4,221,892
Accumulated other comprehensive loss		(1,387)			(2,877)
Accumulated deficit		(3,001,305)			(2,880,657)
Total stockholders' equity		1,257,872			1,338,407
Total liabilities, redeemable non-controlling interest and stockholders' equity	$	1,463,978	$	1,501,978

8

QuantumScape Corporation

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) (In Thousands, Except per Share Amounts)

		Three Months Ended March 31,
		2024			2023
Operating expenses:
Research and development	$	83,847	$	76,941
General and administrative		48,054			33,037
Total operating expenses		131,901			109,978
Loss from operations		(131,901)			(109,978)
Other income (loss):
Interest expense		(572)			(600)
Interest income		12,065			6,277
Other expense		(220)			(330)
Total other income		11,273			5,347
Net loss		(120,628)			(104,631)
Less: Net income attributable to non-controlling interest, net of tax of $0		20			16
Net loss attributable to common stockholders	$	(120,648)	$	(104,647)
Net loss
$	(120,628)		$	(104,631)
Other comprehensive income (loss):
Unrealized gain on marketable securities		1,490			5,518
Total comprehensive loss		(119,138)			(99,113)
Less: Comprehensive income attributable to non-controlling interest		20			16
Comprehensive loss attributable to common stockholders	$	(119,158)	$	(99,129)
Basic and Diluted net loss per share	$	(0.24)	$	(0.24)
Basic and Diluted weighted-average common shares outstanding		496,145			440,085

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QuantumScape Corporation

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In Thousands)

		Three Months Ended March 31,
		2024				2023
Operating activities
Net loss	$	(120,628)			$	(104,631)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		11,983				9,505
Amortization of right-of-use assets and non-cash lease expense		1,985				1,933
Amortization of premiums and accretion of discounts on marketable securities		(8,159)				(2,176)
Stock-based compensation expense		19,287				37,990
Other		107				599
Changes in operating assets and liabilities:
Prepaid expenses and other current assets and other assets		(22,679)				(862)
Accounts payable, accrued liabilities and accrued compensation and benefits		61,564				(4,108)
Operating lease liability		(1,261)				(569)
Other liabilities		(144)				-
Net cash used in operating activities		(57,945)				(62,319)
Investing activities
Purchases of property and equipment		(14,120)				(28,012)
Proceeds from maturities of marketable securities		384,639				191,043
Proceeds from sales of marketable securities		1,245				1,477
Purchases of marketable securities		(265,265)				(100,422)
Net cash provided by investing activities		106,499				64,086
Financing activities
Proceeds from exercise of stock options		1,948				4,050
Principal payment for finance lease		(705)				-
Net cash provided by financing activities		1,243				4,050
Net increase in cash, cash equivalents and restricted cash		49,797				5,817
Cash, cash equivalents and restricted cash at beginning of period		160,572				252,916
Cash, cash equivalents and restricted cash at end of period	$	210,369			$	258,733
Supplemental disclosure:
Cash paid for interest	$	572			$	-
Purchases of property and equipment, not yet paid	$	9,772			$	13,437

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