Thank you for having us here. As you said, we had our quarterly earnings call yesterday, and I just wanted to start with giving a brief overview of what QS does. QS is the next-generation solid-state battery platform. We have a no-compromise battery solution. Today's lithium-ion batteries, naturally, because of their characteristics, limit the applications into which they are going. If it is a car, with respect to range, how fast you can charge, what's the safety levels, etc. We have developed a solution that is unique in being a solid-state and a lithium metal battery that increases the range significantly because of the energy density it offers. It allows for a better power density, meaning you can charge faster. At scale, it costs less because of the fact that we don't have graphite and anode as created in the battery.
It's capable of good cycle life and very, very good safety performance. That essentially gives us a platform to build the next-generation batteries on this, and last year, we looked at the overall marketplace and how large it is and decided that we are best if we are a technology licensing company, and we laid out a strategic blueprint for the company. This remarkable technology we have developed, we wanted to make sure we demonstrated it in real-life applications, made sure that it is widely available, people can see what it is capable of, and built a global ecosystem of partners.
By that, I mean, if we are going to be a technology licensing company, we want to bring along with us a supply chain, manufacturing partners, customers, OEMs, who can all take advantage of the core capabilities of the technology and move that to being, for us, a capital-light business model so that our partners who believe in our technology and who have large markets to serve end up investing in the capital to ramp up production and deliver this product in the marketplace. And we continue to be a technology provider. We enhance this platform. We are at the start of the S-curve on this remarkable technology platform. So we continue to give generationally better performance on all of those attributes that we were just talking about.
And that unlocks new markets along with the large markets such as the automotive segment, emerging markets such as data centers and defense applications. Those kinds of things are enabled by the characteristics of the battery. So that's the framework of where the company is. Now, in terms of how that business model is made into reality, we have two parallel revenue streams for monetization of the IP. We develop the core technology platform, and then we adapt that technology platform to our customers' specific needs. Each of our customers wants their batteries in their cars in a specific form factor with specific characteristics in the way they like for it to perform. So we take our core technology and adapt it along with them, with their teams working with us to make that happen.
That activity, and then subsequently transferring that technology into their ramping process, into their manufacturing, we develop a separate cash flow stream from the customer to make that happen. That happens in the short term and is very predictable on how it is realized. The longer term, which is the majority of our value capture, is as they go into high volume, we start to receive royalties from our customers, either in the form of a bulk prepay or in the form of a unit sale as they produce these products. And that's where the value capture is very high-margin cash flow stream over the life of the product as they produce. So these two cash flow streams work in parallel for us as we monetize this remarkable technology platform that we create.
It's a highly differentiated technology platform that our OEM partners are able to realize the value of, and we are able to share in their success. That's the idea behind the two revenue stream business model, one of which is realized early, and the other is a longer-term, high-value capture cash flow stream. So with that in mind, we announced this. And Kevin, would you take us through the details of the deal that we have with PowerCo, what we announced both in July of last year, 2024, and now the new expansion of that plan?
I'd be happy to. So last summer, we announced a collaboration licensing deal with PowerCo with the single focus to industrialize the QSE-5 technology. Using the same framework that Siva mentioned between collaboration and licensing. In the collaboration phase, there's a 150-person joint scale-up team where both partners bring their strengths to the table: QuantumScape regarding our innovation and strongly differentiated technology platform, and PowerCo's global industrialization strength. There are now two components to that collaboration phase in terms of cash flows. The first, which we announced originally, is a $130 million royalty prepayment, which is tied to technical progress to unlock. And the second is something we announced yesterday in the expanded deal, which there's up to $131 million in licensing payments over the next years. The initial milestones have already been achieved by the joint collaboration phase.
I'll talk a little bit more about that in the next slide, and then actually, if you stay there perfectly. So then for the licensing phase, PowerCo, upon achievement of the technical progress and the royalty prepay, would receive a non-exclusive license to the QSE-5 platform. That deal was originally up to 80 GWh , just expanded yesterday for a further five GW h, as well as with an expansion to certain technology beyond the QSE-5. The way QuantumScape gets paid in this phase is via royalty and a share of outperformance under the deal. So what we've highlighted here under the expansion that we announced on the earnings call were the three new elements: the up to $131 million in milestone payments under the collaboration phase, as well as on the licensing column, that expansion from 80 to 85 GW h for PowerCo.
That 5 GW h includes the ability for PowerCo to sell to customers beyond the Volkswagen Group, as well as that expansion of their rights to license future QS technology. And for a kind of double-click on the financial implications of the deal, I mentioned the up to $131 million of payments and that the joint team had already achieved those initial milestones. Those are linked to expected payments of more than $10 million. How mechanistically those payments work is that the work performed needs to fit the scope of work of the collaboration agreement, and then ultimately those need to be approved by the joint steering committee. We plan to invoice in Q3 this quarter for that $10 million of work already performed by the joint collaboration team. We don't expect this to be recognized as revenue.
Importantly, though, those inflows are expected to reduce our net loss and help extend our cash runway. The study of the accounting treatment is underway as we speak, and we'll provide an update on the Q3 call.
Kevin, because these two numbers are similar, I want to make sure I do emphasize that these are two separate cash flow streams. What we announced in 2024 was a licensing deal where, as we achieve certain technical milestones, they do a licensing prepay of $130 million. What we announced yesterday is $131 million for the industrialization activity. When the joint team, and this is very important, this is done by both us and PowerCo teams working together. As these teams achieve certain milestones over the next two years, we invoice PowerCo for $131 million, out of which about $10 million we'll be invoicing now for activities already performed. These are two separate distinct cash flow streams.
Just like what I was explaining earlier, one is meant to be as part of the effort to industrialize and transfer the technology, and the other is as they manufacture in high volume and they pay us for the licensing and royalty of that technology being produced in high volume. So this, as Kevin was saying, extends our runway by another six months. We are now into 2029 where we have funds to make sure we are continuing our effort to make this technology real and in high-volume production. So the big takeaways that I want to make sure that we come out of this is that we're able to monetize the IP early. So the payments demonstrate our ability to capture the value from our efforts along with the customer in turning the technology into a manufacturable, rampable process.
So that effort produces a cash flow stream to us from the customer. It allows for the partnership to get very strong because we are working on this together as a team and are working on it on a set of milestones that we need to achieve. The collaboration, the alignment between PowerCo and QS gets to be very, very strong. This deal builds the momentum so that we can take this into commercial traction as fast as possible. And of course, it extends the runway. So there are lots of benefits to the way we have structured this deal with PowerCo. So I want to stop there, Doug, and let you take the discussion in a fashion that we can explain this further to our audience.
Yeah, I think that's a great idea. And another congrats on a really nice quarter. As we talked about last night and before this call, I think what we appreciate most as sell-siders is sort of the overall cleanliness of how you lay out your goals and how you've been updating that progress. It's been very, very consistent quarter after quarter for six, eight, 10 quarters now. So with that being said, the first thing I want to start on is maybe about the updated VW PowerCo agreement. So I want to hear what those discussions were like. Obviously, you detailed how the partnership has evolved, but with up to 85 GW hours of scale, it's a great feather in the cap. What were the discussions like in expanding that partnership and working toward this incremental deal on top of your original agreement?
Doug, our relationship between Volkswagen and PowerCo has never been stronger. We see a strong commitment and involvement by the Volkswagen management team and the PowerCo management team. We are constantly visiting each other to make sure that we stay aligned. Earlier this year, we hosted the chairman of Volkswagen here in QuantumScape. And this relationship, as you can see, has evolved over time. They were an early believer in the technology and an investor in the company. We have had successive contracts and deals that have gotten better as the technology has become more and more real. And now, where I am sitting in San Jose in the QuantumScape offices, we have a team of PowerCo engineers working hand in glove with us in the lab to take this technology into being an industrialized commercial technology.
And so I cannot say more good things about how well our relationship has progressed over time.
Yeah.
Kevin, you want to add to it?
I think that's a nice summary.
Yeah, absolutely. I think that's missed by some investors and some folks who maybe aren't as familiar with the story as how collaborative this is. It is truly a partnership and not just a licensing and technology agreement. So it's definitely a great jumping-off point for the tech that you guys have sort of tirelessly developed. My next question on the commercial agreements, just remind us, is there incremental opportunity to bring on more partners in the same vein as PowerCo? How is the vetting process for those partners? And remind us on how you sort of protect your IP because this has been sort of a chemistry enigma that QuantumScape has solved, and it's obviously very important to keep that close to the chest.
I'm glad you brought that point up. Yesterday, we also announced that we have signed a JDA with a second automotive major, an established customer of ours with whom we had a relationship in the past. We made that into a much deeper relationship and signed the JDA last quarter, and this is important because it shows that the model we have developed with Volkswagen and PowerCo, it's translatable into other customers, same idea of taking a core technology platform, working with the customer, align our technology with their product, work together, the two teams from both companies work together to adapt the technology, transfer it for them to produce in volume, and this bringing in the QS ecosystem to go work with. We also last quarter announced a JDA, a contract with Murata Manufacturing, who is a world leader in high-tech ceramic manufacturing.
And we have together now created the additional optionality for our customers as to how we bring an ecosystem to help us accelerate the transfer of the technology to volume manufacturing. So the idea of us being a core technology licensing company along with a set of ecosystem partners enabling our customers to ramp allows us to have multiple customers work in this model. The question you asked, okay, how many can we do? We are being selective in our customers. We want to make sure our customers are people who are willing to work with us closely and take this technology into volume. However, we are just getting started. We've got the first PowerCo deal. The next JDA is being signed.
We will continue to expand working with multiple customers such as this to replicate this two cash flow stream model of early joint development and collaboration and licensing and royalty over the longer term, and I think we have enough bandwidth to accomplish both.
Yeah, so that leads nicely into my next question when I was going to talk about that new joint development agreement. If my understanding is correct, this new JDA is sort of an exploratory agreement. It's basically one step prior to this agreement that you had with Volkswagen, with PowerCo, where you're assessing the tech prior to what would be a licensing and commercialization deal. Mechanically, how does that deal come together? Was there outreach on your end? You stated it was someone that you've worked with before. Or did the customer more come to you and say, "Hey, we want to go further in our partnership and collaboration"?
Doug, I want to say this is all of the above. We have had very close collaborations with multiple of our early sampling agreement customers. We have had very active engagement with them. We continue to be close to them, and as we talk to these customers, we talked last quarter about us being in close conversation with two customers. This is one of them. This customer was in a good relationship with us before, and as they expand their product portfolio, they know where we are. We both sit together and say, "This is the right time for us to take this technology and adapt it to their needs," and it happens quite naturally in our close interactions with our auto OEM partners, and this is not a bluebird sudden appearance of a customer.
This is one of those that we have cultivated from before, and we'll continue to do additional customers like this in the future.
Yeah, that is all that we got from the call last night. I think my only question, just doing my job here, would be: Can you tell us even just the geography of who this global OEM might be? Obviously, they seem pretty established, probably selling in most major regions, but any more color you can provide there?
I would love to, Doug, but I do not want to violate the confidentiality of my customer. In general, we like to let our customers do the talking by their production than by us talking about them. We are working very, very closely with them, and we have a global suite of customers we are working with, and we have talked about this in the past. Our customer portfolio includes geographical diversity, product diversity, and exclusive EVs and multiple product lines, etc., so these are large global OEMs that we are working with.
Yeah, we're looking forward to learning a bit more about who that is maybe down the road here. So I guess my next question is, and I alluded to this upfront, but one of the things we love about QS and about your company, especially as a De-SPAC , is giving these clear, concise goals, providing updates in each quarter in the absence of maybe further financial information. So right now, it appears that you're going to have no problem hitting 2025's goals that you laid out as part of your Q4 print about six months ago. Can you maybe talk a little bit about looking forward, what the goals for 2026 and beyond might look like? Just give us a little flavor of what you'll be shooting for in the next year.
Doug, every year we set ourselves very challenging goals. We don't want to set goals just for the sake of saying we have achieved, and these have to be business-aligned with our goals for the future. So we set four goals for this year to take Cobra into baseline. We wanted to make sure that as Cobra comes up in volume, have B1 samples that we make out of Cobra and ship it to our customer. We increase the volume of the samples coming out because Cobra volumes go up, we need to match on our cell output and expand our commercial activities. All four are extraordinarily important for us. We announced at end of June that we have made Cobra into baseline. Cobra, as we have said in the past, is a remarkable achievement.
To get a 200x improvement in heat treatment time from where we were just two years ago to now is unbelievable. That kind of 200 x increase in the rate of heat treatment is not usually seen. I don't think it has ever been seen in the ceramic industry, and that baseline allows us to now iteratively and methodically and systematically improve that process and make sure that it is commercially transferable as part of the baseline. Now, taking that, we already shipped last quarter B0 samples with the Raptor process for building into packs. Now we need to supply them with B1 with Cobra in them, and then the third is to go increase the volume of this because we now have to match the cell-making capabilities to match the Cobra's output capabilities. And that's coming along fine.
Now take all of those and start giving it into customers' hands and ecosystems' hands like a Murata, like this new customer that we announced, continue to expand our commercial activities. Next year, one of the things that we have promised is that these cells will be going into field testing. As we expand our customers, we'll continue to announce next year what are those new things that we'll be doing. Towards the end of the year, we'll lay out our goals for next year.
Amazing. That's great stuff, and we look forward to hearing a little more on the field testing and some more press there. The last one, I think, for me, guys, and it's maybe for you, Kevin, is for our investors who are actually active on the story and sort of deep in the financials and the weeds. Can you maybe talk about just how the incremental PowerCo agreement has bolstered your financials and the sort of math that you look at to assess your runway for what you guys quoted as all the way into 2029 now?
Great question, Doug. So first on the PowerCo deal and what it means for us. The sole purpose of that collaboration is to industrialize the QSE-5 technology. That's the central focus of the company that you have further and deeper alignment with Volkswagen to do that. That's core value for the company. On the up to $131 million payment for itself, it has significance in two ways. One, it's the major driver of that six-month runway extension into 2029. And the second item, as we discussed in this presentation, is it helps evidence that technology licensing business model with two cash inflows that we walked through. That first cash inflow piece, the monetization of our efforts to take our technology platform and to tailor it to a customer, that's one cash flow.
And the second is the opportunity as the customers scale production with our technology to turn that into recurring high gross margin consistent revenue over time. So that hopefully investors see what that business model is, and they see it being evidenced right in front of them with this template deal with Volkswagen. The other thing I might add is that the entire thing is enabled by differentiated technology, which we have in the QSE-5 and will continue to work on into the future. And it's a very exciting time where this quarter will mark the first time we're invoicing a customer for a meaningful amount of money. So it's a very exciting time here.
Yeah, it's very nice, not just from the financial and monetary perspective, but it's like a proof is in the pudding type deal where you're getting revenue now, and it's showing that.
Just a correction. Cash inflow.
I'm sorry.
On the Q3, we will talk about that.
My mistake. Thank you for the clarification. Well, guys, I think we're almost done here. I'm going to give you just a chance real quick. Any parting words that you want to leave the audience with? Anything you want to convey that maybe I didn't ask about?
Doug, thank you for giving us the opportunity. We are very excited about this stage in the company. This quarter has been a sort of an inflection point in our journey where we are now moving from a purely technology development organization to being a technology commercialization organization that we are able to take this technology into producing monetary return back from the customer. So this new, as Kevin called it, meaningful non-dilutive customer cash flow into the company is a milestone for us. So thank you for giving us the opportunity to talk about how excited we are about both the technology and our partnership with customers.
Of course. Always great chatting, whether it is over webinar here, live and in person. But thank you again to Siva, to Kevin, to QuantumScape. Congrats on your progress through the first six months of the year. It's been a great six months. And we look forward to hearing more on your successes as we get into the back half of the year. Thank you for joining, everyone. And we'll talk to you guys soon. Have a good day.