Q2 2023 Ideal Power Inc Earnings Call
Good morning, ladies and gentlemen.
Welcome to the ideal power second quarter 2023 results call.
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I would now like turn the conference over to Jeff Christensen.
Please go ahead.
Thank you operator and good.
Morning, everyone.
Thank you for joining ideal Power's second quarter 2023 conference call.
With me on the call are Dan Berger, President and Chief Executive Officer.
Jim Burns Chief Financial Officer.
Ideal powers second quarter 2023 financial press release is available on the company's website.
At Idaho 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.
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Also refer you to the company's website for more supporting industry information.
Now I'll turn the call over to Idaho, Power's, President and CEO , Dan but aren't Dan.
Thank you, Jeff Good morning, everyone and welcome to our second quarter 2023 financial results Conference call.
Date, you on our progress since the start of the second quarter, including the successful completion of all of our first half 2023 milestones as well as our priorities for the balance of the year to commercialize our B Tran semiconductor technology, and then Tim Burns our CFO will take you through the numbers after which we'll take your questions.
The second quarter and all of 2023, thus far for transformative and our transition from a technology development company to a commercial company included some of the most significant accomplishments in the company's history as we continue to advance our aggressive b Tran commercialization roadmap.
ROE was about our recent success in five major areas.
First we successfully completed the full process flow engineering, Ryan as we proved that our B Tran device was manufactured at our high volume wafer fabrication supplier with high yield and excellent device performance. This cleared the last and by far the biggest technical risk for B Tran development and commercialization.
This was a pivotal accomplishment and a prerequisite for commercialization.
Second we delivered hundreds of B Tran devices, the diversified technologies to complete our work under the <unk> solid state Circuit breaker program.
Third we implemented it innovation and how we drive and control B Tran subs.
Subsequent testing validated an additional 20% improvement in conduction losses, making detracting conduction losses, five times better than conventional bidirectional circuits utilizing <unk>.
<unk> and two diodes.
This improvement was incorporated into all of the B Tran customer kits, we delivered the test and evaluation program participants.
Fourth we completed shipments to the large companies and our customer test and evaluation program.
And fifth we successfully completed all of the phase one deliverables under our development agreement with a top 10 global automaker.
We're actively engaged with multiple customers in each of our key target markets and I couldnt be more pleased are excited about our progress.
And now I'll discuss each of our 2023 milestones along with other key developments.
We were excited to announce the introduction of our first commercial product the Sim cool power module earlier this year.
Simple product is a multi die <unk> module well suited for the large growing solid state circuit breaker market.
The global solid state switching equipment market is projected to grow at a compound annual growth rate of seven 6% to approximately $9 3 billion by.
By 2028 with semiconductors, comprising a significant portion of the switching equipment cost.
Solid state circuit Breakers are of great interest to utility industrial and military customers. Since they can act orders of magnitude faster than traditional electromechanical breakers, thereby eliminating electrical arcing and its associated maintenance due to contact wear as well as the fire hazard associated with RJ.
The downside of solid state circuit Breakers has been the high conduction losses of traditional semiconductors, such as <unk>.
Since circuit breakers are continuously conducting devices high losses from traditional semiconductors results in a significant loss of useful energy and the generation of a large amount of wasted must be removed from the breaker, which increases the breaker cost and size.
With clear advantages over electromechanical breakers, and IGT based solid state circuit Breakers nutrient enabled solid state circuit breakers are ideal for a range of utility industrial power control and military high power applications from 600 volts that tens of thousands of volts.
We targeted our initial product for the solid state circuit breaker market, because <unk> can be an enabling technology for the application due to its very low conduction losses.
We continue to see significant customer interest in our simple product and the solid state circuit breaker application as a result of our recently completed program with the U S. Navy.
This interest includes the participation of to Forbes' Global 500 power management market leaders and our test and evaluation program.
In addition, we recently conducted switching pass on discrete packaged devices up to 150 apps. This compares to the 50 amp rating shown in our <unk> discrete data sheet, we're testing at a level of three times higher than the published a device rating.
As a result of this testing the planned 100 amp rating of our multi die Sim core module will be increased prior to first sales exceeding the power handling expectations set earlier this year with respective cyclical customers.
We've begun fabrication of initial Simcoe power modules and continue to expect low volume sales of simple to start later this year.
The design cycles for industrial applications, such as solid state circuit Breakers varies that's relatively short typically about a year revenue for simple is expected to ramp up in the second half of 2024 as initial customers complete their solid state circuit breaker product designs.
Let's turn to the supply chain necessary to support our sales ramp beginning in the second half of next year.
During the second quarter, we qualified a wafer fabrication supplier in Asia with high volume capability.
Test results from the first flow engineering run with this wafer fabricator demonstrated the manufacture ability of B Tran with high yield and excellent device performance clearing the last and by far the biggest technical risk for B Tran development and commercialization.
This successful fabrication Ron was accomplished in the wafer foundries existing silicon fabrication line without the need for any special equipment, our capital investment to produce high quality wafers fabricated on both sides.
This was a pivotal accomplishment was a prerequisite for commercialization.
Wafer and device testing results displayed high yield minimal die to die variability and excellent performance characteristics.
While it's reasonable to expect some improvement in results when you transition from a development path to a production fab. The first run at a wafer foundry is often called the pipe cleaner lot is every production facility is different equipment and established process recipes and there is an expectation that process slow adjustments will be necessary in future lots.
Even though it was the first round and we were working on larger diameter wafers than we used in development. The results from this engineering run exceeded expectations and really validated the strength of the full process flow for <unk> that we developed over several years working with development fabrication partners.
We now have multiple runs ongoing with this high volume wafer foundry with the first of these <unk> is expected to be completed later this month.
These runs will provide ample devices for additional 2023 deliveries under our test and evaluation program simple production in support of our development program with a top 10 global automaker as well as initial internal and third party discrete device and Sim cool testing.
We're pleased with both the performance and overall quality of the wafer fabrication and the technical capability of the wafer foundries manufacturing team.
This wafer foundry is also already certified for automotive standards, making them a quality supplier for our automotive programs and reflects the high standards of capabilities and quality of their wafer fabrication.
Also as I mentioned last quarter, we're working with a second high volume wafer foundry in Europe , and expect to complete a similar full process slow run with them.
The second wafer foundry is very experienced in manufacturing bipolar devices, such as <unk> and the detailed review of the process flow went well we are in the process of qualifying this wafer foundry and expect to begin a wafer run their production facility later this year.
With these two wafer foundry partners onboard will have dual sourcing for wafer fabrication and different parts of the world with no exposure to China. This dual sourcing will provide us with sufficient supply capacity for the large customers we're engaging.
Both wafer foundries have world class experience facilities and capabilities and are eager to be engaged in a new high performance technology, such as B Tran.
Overall, our dual sourcing strategy will allow us to proactively secure not only the necessary production capacity, but also the ability to source components and services from partners in disparate geographies as part of our strategy to mitigate supply chain risk.
Now, let's turn to our Vod funded Knapp C program with the U S Navy.
We're excited to have shipped hundreds of package and tested devices through our partner on the project diversified technologies for DTI completing our work under this program.
The medium voltage solid state circuit breaker designed by DTI for this project will have direct applicability to military applications and commercial markets, where circuit breakers are in wide use such as electric utility solar wind and energy storage installations.
As I mentioned our participation in this highly visible nap seat program resulted in the expansion of companies participating in our test and evaluation program.
As part of its final deliverables to the Navy DTI will introduce a family of solid state circuit breakers for potential sales to the Navy as part of its future ship electrification program.
Our objective is to continue to build on our work for the Navy and we're pursuing other solid state circuit breaker opportunities with DTI, while commercializing <unk> for utility and industrial solid state circuit breaker applications from process that started earlier this year with the launch of our cynical product.
On the technology development front the testing we conducted in our lab on the devices, we shipped to DTI enabled our technical team to realize an additional 20% improvement in conduction losses, making detrain conduction losses, five times better than conventional bidirectional circuits utilizing two <unk> and two diodes.
This improvement did not require any changes to the B Tran died design or packaging. It was incorporated into the driver are provided to participants in our test and evaluation program.
It will also be used in the Companys intelligent power module product, we will be introducing later this year and is the basis for one of several new patent applications, we filed in the quarter.
Following the completion of our deliveries to DTI for the <unk> program, we completed <unk> customer shipments to the large companies in our test and evaluation program utilizing package devices from our newly qualified fabrication partner.
The response from customers and the program has been overwhelmingly positive as they appreciate and innovative very low loss, new semiconductor and the advantages it can bring to the OEM products.
This quarter and as previously announced we also added a second Forbes Global 500 leader in diverse power management markets to the <unk> test and evaluation program roster.
This company will evaluate <unk> initially for use in solid state circuit breakers, and its smart infrastructure Division.
Our management companies to make things like protective relays for utilities circuit Breakers power converters for renewable energy and a whole variety of power electronics equipment for high power applications. The.
The company is you typically think of as being in that group of companies like Siemens Eaton ABB and Schneider very large well recognized equipment providers in the power space.
Nutrient customer shipments to program participants included multiple package B Tran devices, the device driver and a power test board housed in our safety enclosure to facilitate and accelerate the evaluation process.
<unk> shipments to date for test and evaluation program participants include a top 10 global automaker, a global tier one automotive supplier.
A leading provider in the solar industry to.
<unk> Forbes Global 500 power management companies and a global provider of backup power and energy management solutions with additional kits to follow for card and new program participants.
As you know our test and evaluation program will remaining embedded process and our sales and marketing effort and a source of input to our next generation of products will continue to add additional potential customers to the program.
Through the test and evaluation program will gather valuable feedback on their application specific product requirements and potentially secure product development or other commercial agreements.
The program will allow us to get a good handle on customers' technology evaluation process their product design cycles and their commercial plans.
Moving on we entered into a development agreement late last year with a global top 10 automotive OEM.
We're partnering with this automaker's advanced technology development team to develop a custom <unk> power module in collaboration with an innovative packaging company also selected by the automaker.
This custom <unk> based model module is targeted for use in electric vehicle drivetrain Inverters and the automakers next generation electric vehicle platform.
This represents our second engagement with the world's leading automotive manufacturers is another top 10 global automaker is already in our test and evaluation program.
This program is on an accelerated timeline to get the custom module production ready by 2025 that is the customers stated goal for the program.
We successfully completed all phase one deliverables of this multi year program, including the completion of a wafer run shipment of devices and pass boards to both the automaker and the packaging company they selected.
And providing technical support and test data on B Tran is performance and drive circuitry.
Working closely with the automaker, we've already agreed on the scope of work and objectives for phase III program with their engineering team and await final approval of the phase II purchase order.
And phase two will work closely with the automakers innovative packaging company to integrate <unk> into the power module design.
Phase III will be extensive testing of the custom module, incorporating b tran devices to meet automotive certification standards, which are pretty substantial.
So, it's really us and the packaging company working independently in phase one.
And then ideal power providing devices to the packaging company for incorporation into the module in phase II and then phase III is all about testing and certification of the module itself. So it can be the core of the powertrain inverter for their next generation of electric vehicles.
Shifting to our upcoming milestones we are on track to launch our second commercial product in the third quarter, which will build upon the multi die packaging design is simple and add a bi directional intelligent driver.
This product will target renewables, particularly renewables, such as solar and wind coupled with energy storage.
Standalone energy storage EV charging and other industrial end markets.
Similar to the solid state circuit breaker market. These markets typically have design cycles closer to year Rep.
Revenue for the intelligent power module will start in late 2024 and ramp into early 2025 as it gets through OEM product design cycles.
Our <unk> is moving into commercialization.
Great time, when renewables energy storage electric vehicles electric vehicles charging are in the early stages of their adoption.
These market segments still have the largest part of their growth curve ahead of them.
Automotive manufacturers are finding with B Tran, there's a path to reduce our semiconductor costs. The second largest production cost on electric vehicles and simultaneously improve vehicle range to mitigate driver range anxiety.
Parent bi directionality and lower losses of B Tran are well suited to renewables, coupled with energy storage, making renewable energy, a dispatch able resource and improving the usable kilowatt hours from these systems.
Our approach is that will be feeding the marketplace with products and incorporating customer feedback into our product planning and.
In the long term as large customers such as electric vehicle manufacturers look for second sources of supply our objective will be to license our technology to other large players in this space that have production capacity and have already invested in the front end of the business for sales and service support.
This will allow us to stay focus on technology and not be spending capital replicating was already out there for semiconductor distribution and service to customers.
Looking at our expanding <unk> patent estate. We currently have 75 issued B Tran patents with 32 of those issues outside of the United States.
Our current geographic coverage for our patents includes North America, China, Japan, South Korea, India, and Europe , all representing our high priority patent covered geographies.
Part of our product development and introductions, we're expanding our patent efforts to include improvements in the architecture itself and what we believe to be high value patents on our driver and packaging designs as both are unique to the bidirectional nature of our technology.
As a result of our continued innovation. Our list is pending patents increased from 22 to 35 since our last report and.
When we treat our double sided wafer fabrication process as a trade secret.
So even studying our patents somebody wouldn't have the knowhow to be able to fabricate. The device. There is an enormous amount of learning that's gone into the fabrication process flow to make high quality high performing double sided devices for commercial sale.
In summary, the second quarter was transformative for the company as we prove that our double sided retrans device was manufacturer will at a high volume wafer foundry with high yield and without the need for capital investment the.
Fabricated devices improved upon the already high expectations for Retrans performance as demonstrated through the testing of hundreds of packaged devices market interest is strong and we remain focused on executing on our <unk> commercialization roadmap.
We're thrilled that we are successfully executing the plan having already met all our milestones for the first half of the year and being on track to meet the key milestones and objectives I outlined for the remainder of 2023.
We're confident <unk> will displace conventional power semiconductors in many applications within the electric vehicle renewable energy energy storage, So I would say circuit breaker and motor drive markets.
Now I'd like to hand, the call over to our Chief Financial Officer, Tim Burns to review, our second quarter financial results.
Thank you Dan I will review the second quarter 2023 financial results.
In the second quarter, we recorded development revenue of $98 in grant revenue of $37000.
We completed our work on the subcontract with DTI and will not recognize any additional grant revenue from the <unk> program.
As a result, we do not expect grant revenue in the third quarter.
Development revenue in the third quarter is dependent on the timing of the phase two work under our development agreement with a top 10 global automaker.
Operating expenses were $2 4 million in the second quarter of 2023 compared to $1 $7 million in the second quarter of 2022.
Driven primarily by higher research and development expenses.
Harley packaging costs associated with devices shipped to DTI, a top 10 global automaker under phase one of the program.
And with the large companies in our test and evaluation program.
Operating expenses were also impacted by higher personnel costs as we added head count over the last year and reflected higher stock based compensation expense on performance stock units and new hire grants.
Although we expect higher research and development spending in the balance of 2023 at or above that seen in the second quarter.
We continue to expect some quarter to quarter variability in operating expenses, particularly in research and development spending due to the timing of semiconductor fabrication runs and other development activities in hiring as well as the potential impact of additional government funding.
We expect to keep general and administrative expenses in 2023 close to 2022 levels, excluding the impact of stock based compensation expense. Despite the impact of inflation on the cost of services.
Sales and marketing spending is expected to increase modestly in 2023 from 2022 levels due to hiring and costs associated associated with commercialization efforts, including new product launches.
Net loss in the second quarter of 2023 was $2 3 million compared.
Compared to $1 7 million in the second quarter of 2022.
Second quarter 2023, cash burn was $1 $8 million on the lower end of our guidance of one $8 million to $2 million.
Cash burn in the second quarter was unchanged from the first quarter of 2023.
Cash burn was $3 $7 million in the first half of 2023.
We expect third quarter 2023, cash burn of approximately one 9% to $2 $1 million.
And full year 2023, cash burn of $8 to $8 5 million.
Cash and cash equivalents totaled $12 7 million at June 32023.
Given our planned cash burn, which remains modest we have.
Ample liquidity on our balance sheet to fund operations through 2024.
As we commercialize our technology and also to be a well capitalized partner for the broad spectrum of companies. There is are already participating or do we expect to participate in the testing and evaluation of our B Tran technology as.
As well as the global top 10 automaker that has engaged us for development program.
We have no debt, a clean capital structure, and an asset light business model.
At June 30, we had $5 million 938458 shares outstanding up slightly from the $5 million 931569 shares outstanding at the end of March.
And 1 million 4200, 48 warrants outstanding.
Unchanged from the end of March.
Including 849586 stock options restricted stock units and performance stock units outstanding.
We had $7 million 828000.
292 diluted shares outstanding at June 30.
At this time I would like to open up the call for questions.
Operator.
Thank Keith.
At this time.
We will be conducting a question and answer session.
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One moment, please while we pull for questions.
Thank you.
Our first question is coming from David Williams, Sir Your line is life.
Hey, good morning, gentlemen, congrats on the progress.
It's really come a long way this year, so definitely a deserving of congratulations there, but thank you.
I appreciate that.
Yes, just a couple of quick things, but what I wanted to see if you could touch on just the importance of the initial TNT customer shipments and maybe talk a little bit about the early feedback that you received.
Yes.
Part of what we're going through is an education process because it is a new semiconductor architecture, so getting devices in people's hands on the technical teams of our customers is really key to just get them comfortable with it.
Feedback we've been getting has been really positive because we position this with.
Educating them about the technology before we shifts getting the data sheet and what they are finding is that the devices that we gave them are performing better than we said they would.
So.
Engineers engineers, because I am one.
We get excited when we get new technology that does better than it was supposed to so what they saw where the devices that we ship them at lower losses. The switching was better than I think what they were expecting and they got this kit. That's already there is ready for them to hook up and instrumentation that made it really easy for them to start exiting exercising devices. So we've got a lot of <unk>.
<unk> from people that have received their kits and are starting to exercise them.
Okay.
Fantastic.
Just wondering if you could provide a little more color maybe on the the performance improvements that you did you realize on the production units versus what was observed in the lab or on the development devices. What led to that and is this something you think you can further expand on or have we reached some kind of theoretical threshold in terms of the performance advantages.
We don't think were at the theoretical threshold non factor in our team has already got sort of the next generation that they've been doing simulations on.
There's a couple of things that really led to it.
Lesser level at the di level as we transitioned.
The development fab to the production level Fab, we incorporated summit last changes that we learned in the development process into the diode design itself, but the bigger change really happened on the driver and how we were choosing to drive the device itself once we once.
Our technical team actually had a whole bunch of devices that can go into lab and really start to test enforced to failure and really explore the margins in terms of the design, what they discovered where theres some pretty innovative ideas of what we can incorporate into the driver itself that allowed us to drive the device even more efficiently that gave us the <unk>.
Sure conduction losses, and ultimately the subject of a patent that we've submitted.
Is that also what has helped you achieve the three X increase in the both the tests at Enbridge.
I know you talked about 150 amps alright.
It's not but our focus here has been with the new technology under promise and over deliver so we were very conservative in terms of what we rated the.
Initial devices at in terms of what was in our data sheets and what we're sharing with customers.
The last thing you want is for customers to find out that there's either no margin in your design or or even worse. It doesn't meet the specs that you gave them. So it was really us just being conservative in terms of how we were introducing the technologies to customers because we wanted to continue to be excited.
And a good way not excited because it didn't do what it was supposed to do.
Does that open up additional Tam do you think with the increased power level.
Yes, it does because.
Some of the folks that we're talking to for example, the circuit breakers. The way people are going to make solid state circuit breakers as theyre going to parallel devices.
And if your current rating is significantly higher it just means you need less devices to get to the power levels that you ultimately want to size the breaker for us. So it makes it the breaker even more cost effective if you have to use fewer semiconductors, because theres more current carrying capability in them.
Okay, and then lastly, just wanted to see if you've seen an acceleration in the inbound calls or maybe customer activity. After the recent announcements that are clearly pointed that progression towards commercial availability here in just activity.
Activity picked up any I guess.
Yes.
What we're really starting to see as we worked pretty early on to get some really high quality names, but now as we're starting to approach other customers.
We're finding these customers already know who we are so clearly we're seeing technical teams that are doing their backward groundwork on the technology, we're finding and when we're talking to these large customers.
We're not starting from ground zero of what is a b tran their diving right into very deep.
Deep technology questions.
Indicate that <unk> already been doing their homework on that technology. So it's all part of that missionary work that we need to do to raise the awareness and the technical community.
Thanks, so much for the color and congrats again on the progress guys. Thanks, David appreciate it.
Thank you as a reminder, research analysts can ask live audio question.
All others should take their question in the webcast portal.
Thank you. Our next question is coming from Jeff Gramm.
Your line is nice.
Good morning, Dan Good morning, Tim.
Thanks for the time.
I'm curious on Sim cool, what would you guys kind of characterize as the biggest risk to achieving the first commercial sales later this year and maybe just taking a step back. If you guys kind of have to do a a postmortem on where you are today versus.
Where you thought you'd be at the start of the year here or are we kind of on track ahead of schedule behind schedule, just kind of qualitatively or directionally, how would you kind of characterize the progress year to date there. Thanks.
Year to date, we are tracking to exactly what we said we were going to do this year. So we're actually.
Rich.
When youre doing a new technology, new products, there's always surprises that come along but our team has been really.
I think just diligent and very talented hard working group of people when we get a surprise that we all get together and we figure out what to do about it and get corrective action in place and move forward. So we are very much on schedule for everything we said we were going to do this year end.
Our team just gets kind of more and more excited as we go along here because it's becoming very very real for them.
On the Simco module itself part of it is it is a device it doesn't have a long operating history. So I think it's going to take.
Just doing some independent reliability testing, which we have plans to start here a little bit later this year.
And the customers deliberately breaking some devices themselves to find out how much margin is in the designed to make themselves comfortable. So I think it's really getting everybody comfortable that youre not looking at a product thats got tens of thousands of of operating hours in the field on it but we see that all the time in Silicon carbide has had to go through that again devices have had to go through that even.
Even new designs of Ibp's kind of have to go through that it's just the natural course of convincing the technical community that the device.
We will do what it's supposed to do and the fact that we've been conservative in how we've approached the rating I think gives the technical community that we've been talking to a lot of confidence that we're not we're not heightening what the device will do.
Okay, Great I appreciate that.
Follow up you guys.
Instead of two commercial products in the market as we look into 'twenty four.
You guys had mentioned maybe some change to the opex profile as it relates to having those products in the market, but like philosophically. How do you guys think about balancing conserving the burn rate conserving the capital versus making sure you put enough kind of proverbial kindling wood too to make sure your products have the best chance to succeed how do you strike that balance.
Yes, so for us I mean thats what it is it's a balance we tried to be very judicious in our cashiers.
And as we look forward, we try to plan for the major expenditures and also see where we can potentially cut back a little bit. So we will still have a modest increase in cash burn as we look at 2024, but if you look at even 2022 versus 2023, we were at six eight and 2022 for cash burn will probably be in the <unk>.
Low eights here coming out this year, they'll probably be somewhat somewhere close to a similar increase next year.
Because we'll continue to make sure we leveraged the resources, we have leveraged our internal capabilities the silicon infrastructure that's out there.
And then for the things we can control G&A for instance, where.
Won't be adding people and we'll be keeping a really tight rein on that kind of spend as well. So it is a balancing act, but it's one that I think we can.
Do pretty well here as we commercialize the technology.
One of the things we do to Jeff is we've been able to build a great network of partners and folks will collaborate with so.
For example, we need to do high power testing of our simple module.
While we'd like to do it in our lab, we'd have to spend money on capital to go do that so we'll go do it at Ut Austin.
Semiconductor center, so having access to places, where we can avoid or defer any capital investment on our own by working with some of the development partners. We have really helps us be pretty aggressive in keeping the cost side of this as low as possible.
Understood is there an argument to be made that maybe in 'twenty four.
Reallocate.
R&D.
Investments into sales and marketing or is the R&D just two important our lifeblood of the company to view that way.
I think.
The competition is always getting better so if you're not continuing to invest in your technology and bring products out that really give you a competitive advantage in the market segments, we're going after.
Putting the company at risk.
Yes Fair point, alright, thanks, guys.
Sure thing.
Thanks Keith.
I will now turn this call back to Jeff Christensen to read.
Any submitted questions through the webcast turnkey.
Thank you operator.
And I wanted to do those questions that were asked their warehouse by David Williams Theyre, both analysts sell side analyst David Williams of benchmark.
Jeff Grant of Alliance Group partners.
We have several questions that have been posted into the ask a question.
And the webcast portal. Thank you Arthur.
Our first question is where do you see the sales of products and markets.
It will contribute to revenue the most over the next 24 months.
Yes, it's clearly going to be power switching.
Activities like solid state circuit breakers protective relays that'll be sort of where the first revenue is and then.
That will take advantage of our intelligent power module that is coming out later this year that are really going to be things like solar coupled with energy storage.
Variety of power converter applications that can use bi directionality, because they incorporate batteries.
So really more industrial kind of applications, while we get through the longer design cycle and certification requirements for the automobile sector.
Thank you.
What what reception and traction have you seen from B Tran devices released to participants in the test and evaluation program anything that surprised you.
We were a little surprised that just.
How excited.
He is aware when they actually.
They wanted to make sure that they were using the kit correctly because of the data they were getting was better than what we.
We filed the initial data sheets so.
It's energizing for our team to to see that the customers are excited about what they're getting and they're actually.
Really starting to dig pretty deeply into the device and now starting to share with us their thoughts on how we might want to use. It for example, one of the.
Fortune 500.
Fortune Global 500 companies Thats in our.
Test and evaluation program.
Wanted to start with a solid state circuit breaker, but as we've talked to them. We realize that they are thinking about this for a bunch of other things that are in there smart infrastructure division like protective relays and power converters and a few other things so.
It's just nice to see the technical community really responding in such a positive way now that they have got devices in their hands.
Our next question there was posted as are you still pursuing the data center market.
This appears to be a promising opportunity.
Yes in fact, one of the companies that in our test and evaluation program. They make UBS systems Thats one of their main product line. So.
We actually had there we had our technical teams meet together here what was about two weeks ago.
Just <unk>.
Them through the test and evaluation kit and <unk>.
We're talking about issuing a solicitation to us to get the.
Let's do some co development work for them so.
It looks like it's still going to be a pretty nice market for us in the long term.
Yeah.
Thank you we have several questions that were posted and please continue to post your questions and also just post your questions one at a time.
As you think about it you don't need to consolidate all your questions as opposed to one time.
Our next question is has b trans been tested for reliability or failure rate compared to conventional solutions.
If there is any improvements simply correlate to lower compact count sub.
Sub sub component count or does the B Tran technology have an additional reliability benefit compared to conventional solutions.
But we've done some of our own reliability testing here in house, but we're actually going to go to a third party to begin reliability testing here later this year now that we've got many devices because when you do third third party reliability testing you actually need a lot of devices.
Hundreds of hundreds of devices and they need to come from multiple fabrication lots. So they can make sure that there is no lot to lot variability issues.
What we're seeing is there are things that are inherently indicative of higher reliability for b Tran for two reasons.
One is if you look at a typical IGT they use wire bonding as part of the process and if you look at in the IGT failure modes, one of the things that.
As a high area for failure or the wire bonds that are used within the package to connect dies.
Electrically to the IGT.
Our design deliberately does not use any wire bonding. It has what's called a flip chip design, where everything is soldered do conductive surfaces. So theres not a wire bond back in fatigue and fail.
The other key contributor that we're seeing that looks like it's going to be a major factor and reliability is the fact that.
We just generate less heat in heat is the killer of electronics, so if you're producing less heat and if you have west you've got to take out of the package you inherently should expect longer life from that but we will get that all validated because of reliability testing will do at the third party will have temperature extremes in cycling at a whole bunch of other stuff, but so far its looking pretty encouraging.
In terms of some of the design choices that we made that will really drive high reliability for the package.
Thank you.
Another question was posted was on semi CEO recently stated that drivetrain content.
Ice is $50 per vehicle versus 750 per vehicle for the.
For Evs, how are you positioned to compete against that.
What I think is the silicon carbide products that companies like an <unk>.
Well I think we've put a pretty good stake in the ground here a couple of months ago, where they said, they're going to reduce their amount of silicon carbide, 75%.
The challenge is it's a cost issue I mean silicon carbide is a much more expensive material, it's harder to process.
We know from our own work and wafer supply if we go buy a silicon wafer cost us about $6. If we want to buy a silicon carbide wafer it's $800.
You take that coupled with the fact that it's a much harder material to Polish.
The process you can see why silicon carbide devices are much more expensive.
So the covenant will get better in terms of cost and quality over time, but for now part of what we're seeing directly from the Oems and the automobile side is they're looking for lower cost solutions.
That help them improve range because of the fact that silicon carbide is just.
It really is a challenge for the EV makers because cost is one of their big impediments right now to broad scale adoption.
Thank you.
Congratulations on removing the manufacturing risks now the remaining risk seems to be adoption.
How should we think about the speed and breadth of adoption and the corresponding Tam associated with the markets.
We're targeting.
Yes, if you take a look at our website. We have a presentation that gives you some idea of the PMC LGBT market is really the market that we are pursuing because it's the high power semiconductor market, which is really where our technology fits best.
And that is 11.
$11 billion by 2026, I think is the targeted market. What's interesting is things like the solid state circuit breaker market are incremental to that because igt's haven't made much progress in those kind of markets. So we think the addressable market is going to be pretty substantial for us.
The adoption really varies a lot by industry, obviously automotive is the most challenging due to long design cycles certification standards.
<unk> products have to withstand shock and vibration. So thats why we are targeting.
Things in the industrial space that are less demanding in terms of certifications things like solid state circuit breakers protective relays power converters for renewable energy or design cycles or lower their risk profiles are lower and that will be where the early adoption is and that all helps us build volume.
Two.
Really satisfied the data and the operating time, that's going to be needed for the automobile sector. So they really fit together pretty nicely and they both have these two large macro trends behind them the adoption of renewable energy and electric vehicles.
Thank you.
We've had several questions posted continue to post in place and look forward to answering them.
What are the what are the specific opportunity do you see as a result of the massive tailwind we expect for Green Tech from the reduction to your inflation reduction Act.
And the chipset.
Yes, let me start with the chips at the chip back. It is initially focused on wafer fabrication, where a lot of investment is going to go and then there's going to be programs that come out after that that relate to R&D.
We'll certainly be pursuing some of the R&D kind of activities that come out for funding, but more interestingly for us is.
It should create the opportunity to have a domestic fab as the investment in wafer production facilities goes into building our capability here on market, which.
For us it is important for.
Markets, particularly like the military where they want domestic sourcing. So I think it's going to generally be beneficial Unfortunately going to just take a while because these government programs take quite a while to get form to get funded.
And to go through their solicitation process, but long term I think we'll see opportunities both on the R&D side and future wafer fab collaboration.
The push for Green Tech.
It really fits into our sweet spot because what we're going to see here as more and more solar and wind are deployed.
You really need to start coupling energy storage with them because of their intermittency. It makes them more valuable resource and as battery costs continue to decline it creates the need for.
Fast switching bidirectional devices that can operate as efficiently as possible and that really is what we do very very well. So I think it's going to create.
Great global opportunity for us.
As we bring the particular intelligent power module to the marketplace.
Thank you.
Where the form fours that Dan and 10.
Pertaining to Tim in a second quarter, where those open market buyers.
Yes, they were.
They were all open market by us.
Thank you.
When do you when do you expect being able to disclose who some of your development partners are.
That's a good question, we're hoping on the automobile side that we can.
To put some pressure on them that it's material.
A material relationship for us, particularly as we really start to ramp up their spending with us for development.
For the rest of them, it's kind of case by case I think most of them. They don't want their competitors to know what they're doing but I think at some point when they are far enough along we will be able to start naming who they are.
And the written comments I mentioned some companies for example that are in like that.
Power management markets.
Obviously.
Won't say, which ones, but some of the companies I named are in our in our test and evaluation programs. So we hope to be able to be more specific about that as some of these companies get further along and start to actually buy product from us.
Thank you how should we think about your revenue model.
And expect to implement across your offerings, whether it's Sim cool or the custom drivetrain modules for the top auto Oems or other offerings.
So for the revenue model overall, so initially there'll be some development revenue.
Probably relatively modest with product sales. So our initial focus will be on product sales, but longer term.
We are open in part of our overall strategy is to start licensing the technology as well to some of the large semiconductor players that are out there that already have the infrastructure in place too.
And the sales of the B Tran product offering.
For the Sim cool again, we're going to have initial sales here later this year due to the timing and design cycles with those Oems It will really be in the second half of 2024 until we see the revenue ramp.
And the intelligent power module is probably three to six months behind that in terms of the overall ramp and then the EV revenue really will start probably in 25, but it will be after that when you really start to see the ramp as it's incorporated into production models for sale.
Thank you if the automaker is expecting to include <unk> in its 2025 EV models when would the company expect to deliver product to the automaker.
And realized revenue.
We will actually start to see revenue in 25, because to get through that certification process.
It's not a matter of tens of thousands of dollars they've got to spend quite a bit to get all the modules built that they need to take through automotive certification and all the reliability testing, they're going to need to do so while it won't be in the production vehicle yet we will start to see revenue from it in 2025 to support their plan.
To actually have a production ready.
In the design of cars that'll be coming out in subsequent years.
Thank you what is the revenue range per electric vehicle that Idaho power will recognize.
Yes.
Is going to vary somewhat based on the vehicle.
Been targeting the <unk>.
Drivetrain inverter is the first point of this but Theres also other places in the vehicle where.
Our technology applies to some of the.
Circuit protection, that's in vehicles the onboard Chargers.
The DC converters and so forth.
If you look at what's been published the semiconductors that are in an electric vehicle tend to make up about 8% to 10%.
The full production cost of the vehicles. So if you think about.
Cars that are in the 80 to $100000 range, which is where they are now that would tell you it's going to be in the range of $800000.
So it's really going to be a function of.
How do they use semiconductors, how do they drive cost out of the products, but for us.
The per vehicle costs.
It is pretty substantial I think most people are surprised that after the batteries. The semiconductors are the second highest cost component and I'm sure. It will decrease over time somewhat but right now we estimate based on some data that's out there that it's about $2 to $3000.
Per vehicle for power semiconductor devices in the year average EV.
Thank you.
What does production ready in 2025 <unk> for the automotive OEM does that mean that they would have they would have in their vehicles in 2025.
No that means that there is a design that has been completed it's been tested it's been through certifications here automobile standards and it's been proven that it can be made in sufficient volumes at sufficient costs.
So that the rest of the vehicle design is already incorporating it and you would expect to see it coming into the vehicle probably in the subsequent model year.
Thank you.
The warrants that are outstanding when those are exercised will they bring cash into the company.
Yes. They will so there is a couple of different tranches of those warrants.
All of them are highly in the money there are some $2 30, <unk> warrants and some at $8 59 as well.
First warrants expire actually in November of 2024.
So we're forecasting cash coming in for those warrants again in November 24.
The other large tranche of warrants is in I believe it's August of 2025. So overall there is over $4 million of exercise price out there that we'd anticipate over that period.
Thank you.
How should we think about your margin profile.
So if volume we're expecting margins in roughly the 50% range. So if you look at gross margin so and we.
Lower volumes, obviously were going to have to work up to that number.
Initially I would even probably say, we shouldnt be expecting gross profit on initial very low volume sales just because of the volume number but.
The B Tran technology, if we start to scale. It here, we think 50% is probably the right targeted longer term and as you think about particularly the automakers who are going to want a second source that will ultimately be a licensing arrangement that we put in place with another semiconductor company and licensing revenue is essentially.
100% gross margin.
Thank you.
The ideal shareholders as an ideal shareholder friendly company that is committed to maximizing future dilution.
To the benefit of shareholders and rewarding long term shareholders commencement with the company's growth.
Yeah, So Jeff first I would say it would be minimizing future dilution would be our goal.
So yes, we're very.
Consider how and when we raised money in the impact that that will have.
On our investors that's why we take the approach.
When we can we don't want to try to raise money when you need money because thats. Those deal terms just don't look as good to the current existing shareholder base. So.
We evaluate the impact on the.
Existing shareholder base anytime, we consider anything involving capital.
Thank you do you anticipate or are interested in entering into any exclusivity agreements with customers such as automakers.
Me personally no.
Okay.
I don't like exclusive agreements.
Typically what you would get for them, particularly if you are an early stage company you'd give up an awful lot.
And I think it's too early to really know who are going to be the volume customers for us in the long term. So our objective is really going to be let's get as many customers engage as possible. It helps drive volume and drive costs down and it just opens more markets. So.
We would not be terribly interested in exclusivity, particularly at such an early stage in the company.
Thank you.
Can you talk about other companies developing this bi directional power switch who are your competitors.
Yes, there is there's a lot of interest in bi directional switching distribute out of the fact that energy storage is going into so many applications.
But what we've seen are approaches that are out there that are basically using existing topologies and just putting devices back to back and doubling their losses, our technical team and in fact some of them were at a conference. This week.
And so we scan pretty pretty routinely to see what's being done out there for bidirectional switching and we haven't seen anything that is really terribly innovative that is going to dramatically impact the losses. The way B Tran can it's just these repackaging of multiple MOSFET or multiple.
<unk> as a way to make a bidirectional switch that might be convenient for electrical connection, but it doesn't bring any significant improvement in terms of losses.
Do you do you have any specific opportunities in EV charging and your comment about those.
Yes. In fact, we have some folks that are involved in EV charging in our test and evaluation program.
EV charging.
Really is focused on a couple of things one is.
Faster charging so if you can push more.
Power into a battery charging you can charge it in lower amount of time. The other thing. We're seeing is some of the business models that are coming out for the EV charging folks are actually incorporating buffer batteries with the EV Chargers because what they are what they are finding is for a lot of people, they're charging their electric vehicles on their way home from work.
If they stop at the grocery store has stopped around Aaron's. So the electric vehicles are being charged during the peak demand of the day and the highest rates if a couple.
Backup batteries with them they can charge those those batteries from the grid at night and then use those to chart vehicles. So theres an interest in the bi directionality that we're seeing in EV charging as people get more sophisticated business models out there. So I think theres going to be some pretty good opportunities for us in that marketplace because those business models are certainly.
<unk> evolving and looking to innovate so that they have something that helps them get more useful kilowatt hours into the vehicles.
Thank you.
About garnering capital support from some of these major players you're dealing with.
Yes, I think if there is an opportunity too, particularly form a little more strategic relationship with some of them. We would certainly be open to that discussion because it certainly gives you valid.
Validation among others in the customer base.
I think we have to get a little bit further along in terms of our engagement with some of them where they are actually starting to incorporate <unk>.
Actual finished product into their OEM products, but I.
I think it's something that can be pretty important for us in terms of just the strategic relationships and how we access capital and how we grow the markets.
Thank you.
Hello semiconductor supply chain disruptions impacted the company to date and what will be the impact as you commercialize the technology and start to ramp volumes.
Well as we were going through the development work, we use development fabs in the U S.
So we didn't really see any disruption in what we were doing.
As we are working on our driver we saw some issues with parts availability, but generally when you're designing a circuit board. If there is not a certain resistor that youre looking forward Theres. One that is close to it you can get as an alternative.
But it's been very much our focus in terms of.
Where should our wafer fabs be who should they be who are we partnering with for packaging. So.
Think.
The disruptions that the industry saw as a result of Covid figure very prominently in our thinking in terms of who we work with and what those arrangements look like <unk>.
Fortunately since we are working in silicon wafers that we use are commonly available. They are typically the same kind of specs you would make in IGT with so theyre made in high volume.
In many places around the world. So it's really who's fabricating your wafers and who's doing your packaging that we focus on making sure that we've got diversity in terms of capability and geography. So if there is another global disruption in supply chains. We've done the best that we can do to insulate ourselves from interrupting the business.
Thank you.
It looks like we're all out of time.
Dan do you have any closing remarks.
I just want to thank everybody for joining our call. We've made great progress on our path to commercialize our technology and our talented team is on track for a very successful 2023, we look forward to some commercial announcements in advance of our next update call and also our introduction of our our next product to the marketplace and we will continue to.
Actively share our story with the investment community. So at this point I'd like to thank everybody for joining us and operator, you may end the call.
Yes.
Thank you ladies and gentlemen. This concludes today's conference and you may disconnect. Your lines at this time, we thank you for your participation.