Q3 2021 Ideal Power Inc Earnings Call
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Please standby.
Good day, and welcome to ideal powers third quarter 2021 results conference call.
Today's conference is being recorded.
At this time I would now like turn the conference over to Kevin Cook Sauquillo L. H eight. Please go ahead ma'am.
Thank you Sarah Thank you and good afternoon, everyone and thank you for joining ideal powers third quarter 2021 conference call with me on the call are Denver, Dar President and Chief Executive Officer, and Tim Burns Chief Financial Officer ideal powers third quarter 2021 financial results press release is available on the company's website.
That ideal power dot com.
Before we begin I'd like to remind everyone that statements made on the call and webcast, including those regarding future financial results and industry prospects are forward looking and maybe subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the call. Please refer to the company's SEC filings for a list of associated risks.
We would also refer you to the company's website for more supporting industry information now I will turn the call over to ideal powers, President and CEO, Dan <unk> Dan.
Thank you Carolyn and good afternoon, everyone and welcome to our third quarter 2021 financial results Conference call I'll begin today by giving you an update on our progress and achievements on our strategy to commercialize our B Tran semiconductor technology as well as the work we're doing with the U S Navy and the department of energy and Tim Burns, Our CFO, who will take you through the numbers.
And then we will take your questions. So let's get started.
We've made significant progress on our B Tran commercialization roadmap during the third quarter moving toward our objective of commercially launching b Tran and the second half of 2022 is a differentiated technology addressing a large and growing market during.
During the past several weeks, we made several announcements regarding large global companies that will be participating in our test and evaluation program.
We have deliberately targeted leading companies in each of our target market segments that are adopters of new technology have demonstrated a desire to take a new approach to their product offerings.
Technical resources in house to commit to evaluating our new innovative technology and the new approaches that can offer them and their product designs.
Our announcements included a top 10 global automaker, a top 10 solar power conversion provider and EV charging company, each of which will test and evaluate b Tran for use in their applications. We.
We signed additional test and evaluation agreements, we have not announced that represent collaboration partners our relationships with additional commercial businesses and our target markets and with the universities that present opportunities to pursue additional funding.
From the department of energy or the department of Defense.
Subsequent to the third quarter, we announced an additional participate.
And our sampling and evaluation program will be a Forbes global 500 leader in diverse power management markets will evaluate b Tran for use in bi directional direct current solid state circuit breaker applications for solar and wind systems.
This is ideal powers first test and evaluation announcement with a global power management product supplier to the industrial and utility circuit breaker market and builds on our work with the department of Defense and the department of energy on B Tran enabled solid state circuit breakers.
This global power management leader will evaluate B Tran initially for multiple solid state circuit breaker applications with other power conversion and distribution applications expected to follow.
We're very excited to work with this market leader and about Retrans opportunity and the solid state circuit breaker market.
We now have large program participants in all our target end markets, which include electric vehicles EV charging renewable energy UBS systems for data centers and solid state circuit breakers.
What is common among these collaborations is the level of effort and resources. These potential customers are committing to their comprehensive evaluation of B Tran for their applications.
We're finding that the talented engineering team that these companies are identifying new design approaches and rethinking their applications and power management for both DC and AC implementations.
Enabling low loss in hydro extra capabilities of B Tran.
It's our hope that as these relationships progress, we'll be able to begin naming at least some of these companies as they lead to more collaborative and potentially strategic supply agreements.
In terms of next steps will provide package b trans devices, along with the driver to these initial participants in the program to facilitate and accelerate testing.
These customers will share their testing results with us and provide application specific feedback on the design and operation of the package devices and driver the feature set they require in their priorities for individual applications. This feedback we will enable us to determine common requirements across applications with.
Let me also engage with certain of these customers for custom modules, particularly for electric vehicles and solid state circuit breaker applications, where multiple devices may need to be combined into a single package we.
We anticipate feedback from these initial entities to provide meaningful input into the design of our intelligent power module.
We continue to plan its introduction for commercial sales in the second half of 2022.
To support the evaluation program, we've already incorporated early feedback from some of our partners into an updated packaging design, which is now in fabrication.
We're also in discussions with additional companies in our targeted end market applications for the testing and evaluation of B Tran, including additional electric vehicle EV charging traditional automotive and industrial equipment companies.
We view the evaluation program is an ongoing activity as part of our effort to introduce the technology to OEM end user markets and to raise the awareness of its potential these.
These ongoing engagements will likely result in a variety of intelligent power modules over time targeted for specific market applications and uses as we commonly see in the traditional power semiconductor market will allow.
<unk> future engagements with additional companies in the program as we're able.
As evidenced by our most recent announcements we're seeing growing interest in government funded R&D and commercial partnering on solid state circuit Breakers, which is a tremendous opportunity for <unk> as an enabling technology.
This is being driven by the need to upgrade our electrical distribution and transmission systems to accommodate the growing use of distributed generation the adoption of intermittent generation in the form of solar and wind. The continued build out of the EV charging infrastructure and becoming widespread adoption of batteries for peak shaving and to enhance the value of renewable energy systems.
Energy storage is coupled with solar and wind generation.
Circuit breakers perform a critical function in power generation transmission and distribution systems to protect against power surges and short circuits and the circuit breaker market overall is projected to grow at a compound annual growth rate of over 6% to approximately $26 billion by 2027.
As you May have seen we recently released a white paper B Tran devices and solid state circuit breaker applications, which examines how retrans pass switching low conduction losses in bi directional capability and solve the challenges. The current solid state circuit breaker space potentially enabling solid state circuit breakers to become broadly adopted solution.
That is superior to both existing mechanical circuit breakers, and the high loss semiconductor solid state circuit breaker alternatives.
This is particularly applicable as the expected increase in electrification of all aspects of daily life rates, increasing demand on our circuit protection requirements from solar and wind power energy storage electric vehicles, and EV charging and associated vehicle to grid networks.
So, let's say circuit breakers offer significant advantages over mechanical circuit breakers mechanical circuit breakers operate roughly 10 times slower than solid state circuit breakers, which could open or close the circuit in microseconds.
Due to their slower speed of operation mechanical breakers can see fault currents that are orders of magnitude higher than our solid state device.
These high fault currents and damage downstream equipment, and also result of arcing, which can be a potential fire and safety hazard as well as create where on the mechanical contacts into breaker shortening its operating life.
Limitations to adoption of solid state circuit breakers, using conventional switches such as <unk>, who has been their high conduction losses, which results in significant wasted energy must be dissipated in the form of heat.
The transit currently low conduction losses solve this problem.
Along with energy savings the inherent bi directionality of B Tran It also reduce component count and thermal management requirements requirements.
And therefore, the cost of solid state circuit breakers for <unk>.
Perspective, the trend to potentially reduce power loss in a unit directional solid state circuit breaker application nearly two thirds and then a bidirectional application I almost 80%.
Let's move on now to our work with the United States Navy.
And our first of two collaborations with diversified technologies ideal power is working with the Naval Sea systems command or Nazi.
On the development and demonstration of our B Tran enabled direct current medium voltage solid state circuit breaker. This program as part of the U S. Navy's strategic focus on chip electrification and is funded under the department of Defense's Rapid innovation fund the purpose of which is to accelerate the commercialization of high value high impact technologies.
Our project with DTI for NAV C is intended to develop and demonstrate a <unk> enabled high efficiency 12 scalable medium voltage direct current circuit breaker for the U S. Navy with the subsequent objective of introducing a family of medium voltage DC circuit breaker products, incorporating b Tran for sales to the military industrial and utility.
<unk>.
Our fabrication partner Teledyne completed their most recent run and we will be testing and packaging devices from that run with our updated packaging design.
We will be providing package devices to DTI for evaluation this quarter.
The final fabrication Rod is now underway and completion of which represents the final major milestone in the program for US we will subsequently deliver optimize b Tran devices, the DTI and continuing to provide program support through the full scale demonstration of the B Tran enabled breaker in mid 2022.
Let's move now to our work with the department of energy.
We're working with DTI on our second collaboration under our Phase one small business innovation research grant funded by the U S Department of energy.
This grant is to develop a b Tran based low loss 13, eight kilovolt alternating current solid state breaker intended to be used in medium voltage power distribution and renewable energy and micro grid applications connected to the utility power grid.
Phase one of the <unk> project is focused on the stimulation device design and module packaging concepts that will allow <unk> to be assembled in series or parallel configurations for our high voltage rating capability leveraging our current by design.
This phase of the project is primarily our packaging and module development activity that enables <unk> to be used in applications like AC circuit breakers that require more than 200 volt capability.
We've completed the first milestone under the program, which is to conduct device simulations to assess the current B Tran design for the alternating current circuit breaker.
These stimulations evaluated breakdown voltage convection losses turn on and turn off performance and looked at initial approaches for parallel on devices.
These parameters will be evaluated for applications to the current guide design and any changes required will be addressed over the second major program milestone.
The last milestone in phase one for the program will be to develop a multi die module conceptual design that allows for double sided cooler to maximize performance and operated by <unk>.
The phase one of the project is successful were awarded phase III. The phase II objective will be to build and demonstrate a 50 megawatt 13, eight kv AC solid state circuit breaker voltage level, but it is commonly found in utility distribution networks. So the resulting breaker design can be applied directly to existing utility transmission and distribution.
<unk> and micro grids.
Following that demonstration DTI would have the ability to sell the breaker designed to utility industrial and military customers and licensed the designed to others for sales to end users. We'd also expect to partner with other circuit breaker companies. So they can design and bring their all b Tran based products to market.
We will provide more insight into the project as our work progresses that the program does not carry the confidentiality restrictions of our U S Navy program.
Also we expect to leverage the knowledge, we gain on combining multiple devices in parallel and in series configurations for other applications such as electric vehicles.
To support our future growth, we are progressing in our qualification of our second domestic fabric semiconductor fabricator that has strong experience, making bipolar devices to ensure sufficient supply capacity for future potential large customers and to mitigate supply chain risk.
Utilizing a second semiconductor fabrication partner will enable us to provide both packaged devices and data independent of the confidentiality requirements of our NFC program.
We are close to completing a qualifying wafer fabrication run in the interim testing we have had with them performed to date has been very positive and we're expecting to have working devices from their first run.
Shortly we will have their finished wafers and these will be diced packaged and tested and will likely be used as part of our initial customer sampling deliverables.
The support our need for additional technical information with our potential customers and also we also intend to use devices from our second source for testing and an independent third party lab.
Although most semiconductor companies generate their own device data, we intend to use a third party for a significant part of our testing.
This will enable us to conduct some of the tests that we're not equipped to perform in our lab, but also provide an independent source of data that is not constrained by the confidentiality.
Confidentiality requirements of our Dod funded activities were in the process of evaluating and selecting third party, we will use and expect to make that selection this quarter.
Looking at the B Tran patent estate. We currently have 65 issued B Tran patents with 27 of those issued outside the United States and 23 pending patents.
Our current geographic coverage includes North America, China, Japan, South Korea, and Europe with potential to expand coverage into India since.
Since the beginning of this year eight B Tran patents have issued with six of those issued outside of the United States, including ideal powers first patent issuance in South Korea.
We've made tremendous progress toward commercialization in 2021, and our plan for the remainder of the year remains the same.
First to continue to engage with prospective customers and support existing participants and our test and evaluation program.
Second to continue to achieve our milestones under the <unk> program with a target of delivering an optimized packaged device for incorporation into the demonstration of a 12 kilovolt MPD see breaker in mid 2022.
Third to achieve our initial objectives under phase one SBR grant, which is to deliver a low loss B Tran multi die module concept suitable for subsequent corporation into a $13 eight kilovolt alternating current solid state circuit breaker. If we are awarded to the program.
We will continue to apprise you of the Companys, we add to our customer test and evaluation program as we're able.
And we will update you as we are permitted on the feedback we received from the program and how this data feeds into determinations of common requirements across applications that can then be incorporated into an intelligent power module that we anticipate will accelerate b trans commercial adoption.
It's a very exciting time for ideal power as we move closer to realizing the potential fee trans unique advantages of bi directional switching capability lower switching production losses, and as a result, lower user cost and improved and more compact thermal management requirements for OEM products incorporating the vitro.
<unk> is an innovative technology with the capability of enabling emerging markets displacing conventional power semiconductors, and many applications solving problems in existing markets and addressing the immediate needs of many power electronics applications, both high growth and high demand market segments for us.
Executing well and making consistent progress toward commercialization of our technology.
Before I turn the call over to Tim for the financials I want to take a moment to acknowledge the passing of our chairman of our board of directors Mr. David Eisenhower.
He served on ideal Power's board since August of 2013.
Was named Chairman in June of 2020.
It was an engineering visionary successful entrepreneur and accomplished and vendor with over 20 engineering patents to his name.
Dave made instrumental contributions to Idaho power and <unk>.
<unk> as we made the very weighty decision of selling our power converter business and embarked exclusively on developing B Tran These guidance and technical expertise we are invaluable.
I'll Miss them and send our deepest sympathies to his family.
The board of directors has begun the process of identifying and interviewing candidates for addition to the board as well as the identification of a new chairman we will keep you apprised as that process continues.
Now I'd like to turn the call over to our Chief Financial Officer, Tim Burns for a review of the third quarter of 2021 financial results.
Thank you Dan I will review third quarter 2021 financial results.
In the third quarter, we recorded $121000 in grant revenue.
Offsetting cost of grant revenue as we continued our work on the Navy funded NAV C demonstration under the DTI sub contract, which began in mid 2020.
As we've noted on previous calls the amount of grant revenue recognized each quarter will vary.
It is a function of the timing of spending and scheduled milestones under the program.
We continue to expect almost all of the grant revenue for this program and our SBR Phase one project.
We recognize by early next year.
Operating expenses were $1 $2 million in the third quarter 2021.
Flat compared to $1 $2 million in the third quarter of 2020.
While we invested over $200000 more in research and development and sales and marketing in the third quarter compared to the third quarter of 2020.
This increase was largely offset by lower general and administrative expenses.
We continue to expect research and development and sales and marketing spending to trend higher in the fourth quarter and throughout 2022.
As we accelerate development and commercialization of our B Tran Technology, Inc.
Including.
Conducting additional wafer fabrication runs.
Third party testing of the B Tran.
Adding more engineering and front end talent.
Supporting our test and evaluation program.
Designing and intelligent power module.
In other B Tran commercialization activities with potential new customers and partners.
We do expect some quarter to quarter variability in operating expenses, particularly our research and development spending due to the timing of semiconductor fabrication runs and other development activities.
Net loss in the third quarter of 2021 was $1 $2 million compared to $4 $9 million in the third quarter of 2020.
The year ago period included a onetime noncash warrant inducement expense of $3 $7 million.
Third quarter 2021 cash used in operating and investing activities was $1 $2 million.
Up from zero point $8 million in the third quarter of 2020.
And $1 $1 million in the second quarter of this year.
Our third quarter cash burn was consistent with the guidance, we provided in our second quarter call.
We continue to invest in both sales and marketing and research and development and expect fourth quarter cash burn of approximately $1 $3 million and our full year cash burn of approximately $4 $5 million.
Cash and cash equivalents totaled $24 $5 million at September 32021.
Our balance sheet gives us ample liquidity, particularly given our planned continued modest cash burn to.
To fund multiple years of operations and we are well capitalized partner for the larger companies that are engaged and we expect to engage in the testing and evaluation of our B Tran technology.
As of September 30, we had $5 million 872046 shares outstanding.
And 1 million 4200, 48 warrants outstanding.
Including 455937 stock options outstanding our diluted shares outstanding at September 30 was $7 4 million shares unchanged from our diluted shares outstanding at June 30.
At this time I would like to open up the call for questions.
Operator.
Thank you could you would like to ask a question. Please take note by pressing star one on your telephone keypad.
You're using a speaker phone. Please make sure your mute function is turned off to allow your <unk>.
To reach our equipment.
Again that is star one to ask a question and we'll pause for just a moment to allow everyone an opportunity to signal for questions.
We will take our first question is from Don.
Lewinsky with Windsor asset group.
Good afternoon, gentlemen, thanks for taking my questions.
Can you hear me okay.
Dan could you. Please clarify a couple of issues around the total addressable markets because there were some presentations by ideal power that talks about the IGT market growing to $11 billion and then you talk about the circuit breaker market.
Growing to 26 billion. So I assume that's the overall circuit breaker market do you have a breakdown of what the solid state circuit breaker market looks like and what that component.
In the <unk> segment is can you just give us a little more color on that total addressable market.
Yes, you are correct that 26 billion is the total circuit breaker market about 40% of that market is really where b Tran is sort of in the sweet spot. If you think about circuit breakers and there's a lot of really small small circuit breakers that our low voltage for things like your home and so forth and some that are very very high.
Voltage that would use a different technology altogether, so about 40% of that market, let's call. It $10 billion 10 billion is the section that applies to B Tran what portion of that.
$10 billion will be the cost of the Retrans is too early to tell I think as we get through certainly through this demonstration that we're doing with DTI for the Navy. We will have a pretty good feel of what the percentage of the circuit breaker cost is related to B Tran will be able to give you a little bit more important at that point in time.
Okay. So it looks like $10 billion.
Addressable market for B Tran within solid state Circuit Breakers, and then outside of that segment. There are additional use cases for are there additional use cases for b tran outside of that.
Where is that yes.
Can you talk about.
Components in electric vehicles or electric vehicle charging stations are those solid state circuit breakers within those.
Applications or are those completely different and that's another additional addressable market.
The studies that I have looked at so far for circuit Breakers really don't do a very good job of accounting for the circuit protection like protection relays in the circuit breakers that are part of the EV space. They tend to do more straight line projections of what the market has been for the past year. So I think in terms of the actual size of the circa.
Breaker market I think it's probably being underestimated and the fact that they only show it expected to grow at 6% a year.
When.
The EV portion of power switches is growing at 15% a year seems a little.
I think modest in terms of their projections. So I think it would actually be bigger than what.
<unk> sure.
Yes that makes sense.
One further one when you talk about bringing in a third party lab, which I think is a great idea.
Can you give us some.
Idea on timing on that.
When you think youll identify someone and then how long it will take them to actually take B Tran devices and come back with performance and validation results.
We're going through that selection process as we speak or are there actually were calls on it earlier today just evaluating the various companies that our team is familiar with the assessor capability to make sure that theres nothing that they can't do in terms of some of the things that we wanted to have done for our data sheets and data information, we're going to make that selection.
This quarter wed like to trying to do by the end of the month. If we can and then we'll have a better feel on how long it will take them. Once we see their formal quotes and they lay out what's their timeframe because what we're finding is that.
Depending on who you talk to you they have the <unk>.
Our backlog of work of when they can actually get started but I would expect that we're going to have the information sometime in Q1 that will be able to go into public data sheet.
That's fantastic Okay. I appreciate you taking the questions.
Sure thing.
Take care.
Okay.
Thank you and once again, ladies and gentlemen, if you would like to ask a question today you may do so by pressing star one.
And next we'll take Kelly Chairman.
Hey, Dan Thanks for taking my question.
Sure.
What's the sampling program is over and the next stage takes and where you guys will be developing a product for and moving it along.
Will you guys be earning any type of revenue once you're past that sampling program.
Yes in fact, some of the some of the folks that we're talking to the reason I brought up for example, custom modules that some of the customers are talking to us about it would actually be paying us for that so there would be paid work for that.
We will have we hope we'll have some additional R&D funds from the grants.
And we've had multiple discussions with those folks where they say here's the application you want to start with but we would also see using it for applications B and C. As well so I think that getting the leverage out of those those larger companies I think it's gonna be pretty helpful. In terms of being able to proliferate beat your it into other products other than just the initial one.
We might be using as the basis for our discussions with them. We actually have multiple companies now that are literally ready they have budgets approved there. If we just waiting for us to hand them devices. So we have there's three companies that are definitely in that mode, right now and and a couple of others that are going through their budget approval process.
When do you think we will hear some company names will not be til next year.
Well I'm.
I'm, hoping it'll be next year I think it's gonna be a function of what happens with a couple of where there's opportunities for code development. You know if they end up being substantial programs I think we're going to have to have a discussion with the companies about our obligations to disclose things that will be considered material to our investment community. So I'm, hoping that even before we get.
Too far into the.
Sampling program itself that we've got a couple of other activities that will be able to start naming some people.
Alright and demanding.
Turned about the <unk>.
Just wanted to add is just what we find is that most people just don't want their competitors to know what they're doing but at some point I think the sensitivity of that it goes down as we start to work with more and more companies that are out there.
Alright, Thanks for taking my question.
Okay.
Thank you.
And this will conclude today's question and answer session I would now like kind of conference back over to Dan <unk> for any additional or closing remarks.
Well, thanks, everyone for joining our call today for the remainder of the year will be presenting at the benchmark companies technology, one on one conference the.
My Company Discovery, one on one Investor Conference and also what the Sidoti December Microcap Conference.
Wish everybody, a happy and safe rest of 2021 look forward to giving you another update on our fourth quarter call have a great day.
Thank you and that does conclude today's teleconference. We do appreciate your participation you may not disconnect.
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