Ideal Power Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 14, 2023

There are 7 speakers on the call.

Operator

Good morning, ladies and gentlemen, and welcome to the Ideal Power Third Quarter 2023 Results Call. At this time, all participants are in a listen only mode. At the end of management's remarks, there will be a question and answer session. Investors can submit their questions any time within the meeting webcast by typing them into the Q and A button on the left side of your viewing screen. Sell side analysts may ask questions on the phone line.

Operator

As a reminder, this event is being recorded. I would now like to turn the conference over to Jeff Christiansen. Please go ahead.

Speaker 1

Thank you, operator, and good morning, everyone. Thank you for joining Ideal Power's Q3 2023 conference call. With me on the call are Dan Bernard, President and Chief Executive Officer and Tim Burns, Chief Financial Officer. Ideal Power's Q3 2023 financial results press release is available on the company's website at idealpower.com. Before we begin, I'd like to remind everyone that statements made on the call and webcast, including those regarding future financial results all of our financial results and industry perspectives are forward looking and may be subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the call.

Speaker 1

Please refer to the company's SEC filings for a list of the associated risks. And we will also refer you to the company's website we are very pleased with the SEC for more supporting industry information. Now I'll turn the call over to Ideal Power's President and CEO, Dan Bernhardt. Dan?

Speaker 2

Thank you, Jeff. Good morning, everyone, and welcome to our Q3 2023 financial results conference call. I'll update you on our progress since the start of Q3, including the successful completion of all of our 2023 milestones to date, as well as our priorities for the balance of the year to commercialize our B TRAN Semiconductor technology. Then Tim Burns, our CFO, we'll take you through the numbers, after which we'll take your questions. The Q3 and all of 2023 showed continued excellent progress continued execution against our published milestones focused on our transition from a technology development company to a commercial company.

Speaker 2

We're stacking sequential quarters of some of the most significant accomplishments in the company's history. This quarter, we accomplished several key advances that underscore the technical commercial progress of our B TRAN commercialization roadmap. We're thrilled about our momentum and recent success in 6 major areas. 1st, we successfully completed Phase 1 and secured Phase 2 of our development program with a top 10 global automaker. 2nd, we added the SimCool IQ intelligent power module, our 2nd commercial product to our commercial product offerings.

Speaker 2

3rd, we completed shipments to all the large companies in our customer test and evaluation program and recently added a global power conversion supplier to the program. 4th, in response to customer requests, we're providing volume quotes through large test and evaluation program participants. Participants in the program have expanded their plans for B TRAN to include additional applications. 5th, we delivered hundreds of tested and packaged B TRAN devices to diversify technologies to complete our work under the NAVSEA solid state circuit breaker program. And 6th, we began discussions with potential distributors for our SimCool and SimCool iQ power modules.

Speaker 2

We're actively engaged with multiple customers in each of our key markets, and I'm pleased and excited about our progress and the feedback we're receiving from our growing customer engagements. The introduction of our technology comes at a time when there are significant macro trends in the adoption of renewables and electric vehicles, key market segments we expect to act as a driver of our revenue growth in the coming years. The increased the electrification of our society and the growing adoption of batteries for a wide range of applications is driving an increased need for more efficient semiconductors for bidirectional power control. Utilizing conventional technologies, bidirectional switches for high power applications are made using pairs of IGBTs and diodes. The downside of conventional semiconductors are that you need 4 devices to make a bidirectional switch, which doubles the conduction losses of the individual IGBTs.

Speaker 2

B TRAN enables bidirectional switching in a single device. And most importantly, B TRAN does it with 5 times lower conduction losses, translates to more useful energy for the end use application versus the conventional approach. So that means more usable kilowatt hours out of an energy storage installation Or solar plus storage installation. It means greater range for electric vehicle. It can mean faster charging for charging solutions.

Speaker 2

It's all about dramatically reducing the losses from the semiconductors that are the core of many modern products. Our B TRAN is moving into commercialization at a great time when renewables, energy storage, electric vehicles and electric vehicle charging are in the early stages of their adoption. These market segments still have the largest part of their growth curve ahead of them. The inherent bidirectionality and lower losses of B TRAN are well suited to renewables coupled with energy storage, making renewable energy a dispatchable resource and improving the usable kilowatt hours from these systems. Automotive manufacturers are finding with V Tran there's a path to reduce power semiconductor costs, the 2nd largest production cost in electric vehicles and simultaneously improving vehicle range to mitigate driver range anxiety.

Speaker 2

We're participating in a large rapidly growing market we are confident that we will be able to

Speaker 3

deliver our high power semiconductor devices. That market

Speaker 2

is projected to reach $11,000,000,000 by 2026 and will be driven for many years by the adoption of renewable energy, energy storage, electric vehicles and EV charging infrastructure. We expect industrial markets And then right behind that in a matter of a few months will be our Simcool iQ intelligent power module. That product applies to the renewables market, Particularly renewables coupled with energy storage, EV charging and other industrial markets. These applications have a relatively short design cycle of about 1 year. And behind that, our next revenue will come from automotive manufacturers.

Speaker 2

It generally takes 3 to 5 years to get through the automakers process, a process we started with a top 10 global automaker last year. So the industrial markets will drive our initial revenue ramp as we wrap the business up and continuing right behind that will be the automakers that we're engaged with that will be buying in high volume to support their EV platforms. We utilized an asset light business model and are leveraging the large investment that's already been made in the silicon wafer processing infrastructure. We're a core technology team with a testing lab here in Austin and a small but growing outward facing business development team focused on commercializing our technology. And in terms of fabrication of wafers and packaging, all that is outsourced, leveraging the existing huge industry investment in silicon wafer processing and packaging.

Speaker 2

As we continue to execute on our aggressive B TRAN commercialization roadmap, our near term priorities are begin initial sales of our SimCool power module, complete Phase 2 of our development program with a top 10 global automaker in the Q1 of 2024, continue providing sales quotes for large test and evaluation program participants continue shipments to test and evaluation program participants this is an embedded process in our sales and marketing and a source of input for our next generation products continue multiple wafer runs with our first high volume wafer foundry to support our SimCool and SimCool product builds, automotive certification testing and test and evaluation partners and qualify our 2nd high volume wafer foundry, including completion of a wafer run at their production facility. The full flow engineering run with this wafer fab is progressing well and is expected to be completed early in the Q2 of 2024. We're confident we'll have ample capacity to ship devices for the expected demand over the next few years. And I'll discuss the highlights of some of those 3rd quarter accomplishments our priorities along with other key developments. Simcoe power modules are in fabrication at both of our packaging partners.

Speaker 2

Design cycles for industrial applications such as solid tape circuit breakers vary, but they typically take about a year. Revenue for SIMCOOL is expected to begin ramping in the second half of twenty twenty four as initial customers complete their evaluation of the SIMCOOL product we are

Speaker 3

pleased with the results in solid state

Speaker 2

circuit breaker product designs. 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 B TRAN power module in collaboration with an innovative packaging company also selected by the automaker. This custom B TRAN based module is targeted for use in electric vehicle drivetrain inverters And the automaker's next generation electric vehicle platform. This represents our 2nd engagement with the world's leading automotive manufacturers another top 10 global automaker is already in our test and evaluation program.

Speaker 2

We're thrilled with the success of Phase 1 and the advancement into Phase we have 2 of our development program with this automaker. The B TRAN devices delivered to the automaker in Phase 1 outperformed the device performance specifications provided to them we are now at the beginning of the program. The successful completion of Phase 1 was customer validation of the performance of B TRAN and its potential impact on improving EV range and cost, we leveraged our success with this customer to attract and engage a Tier 1 auto supplier and expect it will also lead to engagement with other automobile OEMs Tier 1 suppliers. This program is on an accelerated timeline to get the custom module production ready by 2025. That's the customer's stated goal for the program.

Speaker 2

We successfully completed all Phase 1 deliverables of this multi year development program, including completing a wafer run, shipment of devices and test boards to both the automaker and the packaging company they selected and providing technical support and testing on B TRAN, its performance and drive circuitry. Phase 2 builds on the completion of all Phase 1 deliverables. In Phase 2, we're continuing to collaborate with the automaker and the automaker's packaging company supplying D TRAN devices for integration into the custom power module design and finalizing the test plan for Phase 3. Phase 3 will be extensive testing of the custom module incorporating D TRAN devices to meet automotive certification standards, enabling D TRAN to be the core of the powertrain inverter for the automaker's next generation electric vehicles. 3 of the 5 deliverables in Phase 2 of the program have already been completed and the 4th deliverable should be completed in the next couple of weeks, well ahead of schedule.

Speaker 2

We're already we're focused on the scope of Phase 3 with the top 10 automaker and expect us to start testing for automotive qualification in advance of completing Phase 3. Turning to our test and evaluation program, B TRAN customer shipments to program participants included multiple package B TRAN devices, a device driver and a power test board housed in a safety enclosure to facilitate and accelerate the evaluation process. Detrans shipments to date program participants include a top 10 global automaker, a global Tier 1 automotive supplier, a leading provider in the solar industry, 2 Forbes Global 500 Power Management Companies and a global provider of backup power and energy managed solutions and several others with additional kits to follow for current and new program participants. These shipments and subsequent customer evaluations have already led to requests from some of the multibillion dollar companies in our test and evaluation program for multi year high volume quotations for use in their own internal product planning. The conversion of a single opportunity could potentially have a significant impact on the trajectory of our pending revenue ramp.

Speaker 2

As previously announced this quarter, we added a European based global power conversion and energy storage supplier with over $500,000,000 in annual sales

Speaker 3

we'll now turn the call over to the B TRAN test and

Speaker 2

evaluation program roster. The company will evaluate B TRAN initially for use in its static switches in data center UPS systems, solar inverters and energy storage products. They focus on improving energy efficiency in these products to reduce operating costs for their customers. This global supplier presents multiple opportunities for us as they address 3 of our target markets: UPS systems for data centers, Renewable Energy and Energy Storage. Shifting to our 2nd product, we added the SimCool iQ to our product commercial product offerings.

Speaker 2

It's built on the multi die packaging design of SIMCOOL and adds an intelligent driver optimized for bidirectional operation. This product targets renewables, particularly renewables such as solar and wind coupled with energy storage, stand alone energy storage, UPS Data Centers, EV Charging and other industrial end markets. Similar to the solid state circuit breaker market, these markets typically have design cycles closer to a year. Revenue for the intelligent power module will start next year and ramp up as OEM product designs our results are completed. Let's turn to the supply chain that ensures we'll support our sales ramp beginning in the second half of twenty twenty four.

Speaker 2

Earlier this year, we qualified an Asian wafer fabrication supplier with high volume capability. Test results from the first full flow engineering run with this wafer fabricator demonstrated the manufacturability of D TRAN with high yield without the need for significant capital investment and excellent device performance, clearing the last and by far the biggest technical risk for B TRAN development and commercialization. This successful fabrication run was accomplished in the wafer foundry's existing silicon wafer fabrication line without the need for any special equipment or capital investment we will be conducting a pivotal accomplishment and a prerequisite for commercialization. Wafer and device testing results displayed high yield, minimal die to die variability and outperformed our expectations. We conducted switching tests on discrete package devices and demonstrated the robust nature of our device design.

Speaker 2

Our discrete package devices, which are rated at 50 amps, were successfully tested up to 150 amps we're 3x the rating shown on our data sheet. As a result of this testing, the 100 amp rating of our multi diSYM Cool power module was increased to 160 amps. The results exceeded our expectations and validated the strength of our device design and the full process flow for B TRAN we developed over several years working with development fabrication partners. As you might imagine, engineers at our target customers are excited to see that our technology performs well beyond its advertised specifications. We have multiple wafer runs ongoing with this high volume wafer foundry.

Speaker 2

These runs will provide ample devices for additional 2023 deliveries under our Test and Evaluation Program, Sim Cooled Production and to support our development program with the top 10 global automaker. We're pleased with both the performance and overall quality of wafer fabrication and the technical capability of the wafer foundries manufacturing team. This wafer foundry is also already certified to automobile standards, making it a qualified supplier for the automotive programs reflecting the high standards, capabilities and quality of their wafer fabrication. Also, as I mentioned last quarter, we're working with the 2nd high volume wafer foundry in Europe. The foundry completed a feasibility study and engineering short loops for key process steps and started a qualification run.

Speaker 2

Based on the successful short loops and the wafer foundry's experience and expertise in manufacturing bipolar devices such as IGBTs, we're confident that we'll be able to complete qualification of this foundry in the Q2 of next year. With these 2 wafer foundry partners on board, we'll have dual sourcing for wafer fabrication in different parts of the world with no exposure to China. This dual sourcing will provide us with sufficient capacity for the large customers we're engaging. Both wafer foundries have world class experience, facilities and capabilities and are eager to be engaged And 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.

Speaker 2

We're not aware of any competing inherently bidirectional technologies, and our technology is heavily protected through patents and trade secrets. Looking at our expanding B TRAN patent estate, we have 77 issued B TRAN patents, we're 33 of those issued outside of the United States. Our current geographic coverage for our patents includes North America, China, Japan, South Korea, India and Europe with pending coverage in Taiwan, all representing high priority patent covered geographies. As 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 is both are unique to the bidirectional nature of our technology. As a result of our continued innovation, our list of pending B TRAN patents is now at 36.

Speaker 2

In addition, we treat our double sided wafer fabrication process So even studying our patents, somebody wouldn't have the know how to be able to fabricate the device. There's an enormous amount of learning that's gone into the fabrication process flow to make high quality, high performing double sided devices our results are now for commercial sale. In summary, market interest is strong and we remain focused on executing our B TRAN commercialization roadmap. We're thrilled that we are successfully executing the plan, having already met all of our milestones for the 1st 9 months of the year we remain on track to meet the key milestones and objectives I outlined for the remainder of the year. We expect V TRAN to displace conventional power semiconductor solutions we are pleased to announce that we are in many applications within the electric vehicle, renewable energy, energy storage, solid state circuit breaker and motor drive markets.

Speaker 2

I would like to hand the call over to our Chief Financial Officer, Tim Burns, to review our Q3 financial results. Tim?

Speaker 4

Thank you, Dan. I will review the Q3 2023 financial results. We recorded minimal development revenue for the 3rd quarter. Development revenue in the 4th quarter is expected from the Phase 2 work under our development agreement with a top 10 global automaker. Operating expenses were $2,800,000 in the Q3 of 2023 compared to $1,800,000 in the Q3 of 2022, driven primarily by higher research and development expenses.

Speaker 4

We completed our work with our development foundry partners in the 3rd quarter we started several wafer runs with our qualified high volume production foundry. We also started our qualification run with a second high volume production foundry. Operating expenses were also impacted by higher personnel costs as we added headcount over the last year we continue to 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 and hiring as well as the potential impact of future government funding.

Speaker 1

We expect

Speaker 4

to keep general and administrative expenses relatively flat in the 4th quarter, 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 continue to increase modestly in coming quarters due to hiring and costs associated with commercialization efforts, including new product launches. Net loss in the Q3 of 2023 was we're now ready to take our call to our Q3 2023 results call. At this time, we're now ready to take our call to 1,700,000 our earnings per share was $1,900,000 on the lower end of our guidance of $1,900,000 to $2,100,000 as we continue to manage expenses prudently and aggressively. Cash burn in the 1st 9 months of 2023 was $5,600,000 compared to $4,700,000 in the same period in 2022. We expect Q4 2023 cash burn of approximately $2,200,000 to $2,400,000 and full year 2023 cash burn of $7,800,000 to $8,000,000 Cash and cash equivalents totaled $10,800,000 in September 30, 2023.

Speaker 4

We have no debt in a clean capital structure. Our business model, as Dan mentioned, is very asset light. We have a core technical team that works in the technology And a small front end team for business development. Even if we are wildly successful, we will still have a small team of tens of people Because we're outsourcing the manufacturing and the packaging, really leveraging the existing industry investment in silicon. Our cash burn was $6,800,000 in 2022 and will be $7,880,000 in 2023.

Speaker 4

We'll probably have a similar increase next year, we'll provide more definitive guidance on our year end call. Given our planned cash burn, which remains modest, we have ample liquidity on our balance sheet to fund operations through 2024. We'll potentially see several potential sources of funds, including product sales, development agreements, other commercial agreements with upfront payments and government funded programs where we see opportunities to collaborate with some of our partners. We are also exploring potential strategic relationships with our well capitalized partners. As a public company, we also have access Capital Markets, if necessary.

Speaker 4

To date, our balance sheet has not been a significant topic for discussion with partners as they recognize the commercial potential of our technology, at September 30, we had 5,945,347 shares outstanding, we are now up slightly from the end of June and 1,040,248 warrants outstanding, unchanged from the end of June, including 842,697 stock options, restricted stock units and performance stock units outstanding, we had 7,828,292 diluted shares outstanding at September 30. At this time, I'd like to open up the call for questions. Operator?

Operator

Thank you. At this time, we are conducting the question and answer session. Investors can submit their questions within the meeting webcast by typing them into the Q and A button on the left side of your viewing screen. Sell side analysts may ask questions on the phone line. We ask that while posing your question, you please pick up your handset if listening on a speakerphone to provide optimum sound quality.

Operator

Please hold just a moment while we pull for questions. Your first question is coming from David Williams with The Benchmark Company. Please pose your question. Your line is live.

Speaker 5

Good morning, Tim and Dan. Just congrats on the progress here. You've made tremendous strides and continue to A lot of really nice progress. And so I guess my first question is just around the test and evaluation program participants and you talked about From the high volume quotes and expanding their plans for B TRAN, just any additional commentary there that help maybe give us a little more color on what that could mean and Maybe the magnitude of what they're talking about.

Speaker 4

Yes. So we have some very large companies in So these are multibillion dollar companies. We've already started getting requests for multi year high volume quotes. And while they initially had a lot of these companies had initial interest in a specific application, they've really expanded To start thinking about different ways they could use the technology, different applications in their product portfolio, they could take advantage of the benefits of V TRAN. So it's really become Some pretty good commercial discussions on not only the initial opportunity that they were looking at, but also expanding in other areas.

Speaker 5

Great. And just kind of thinking about from the from a design perspective, what are you finding maybe are there challenges or hurdles? And can this be a socket for socket replacement against other competing technologies? Or is there a pretty heavy lift in terms of the design that's required in order for to use B TRAN versus maybe just a standardized MOSFET or IGBT or other technology?

Speaker 2

Well, for any new semiconductor, if it brings some significant change in performance, you're going to want to do a redesign of your OEM product To get all the benefits out of it. So for example, if you got half the losses, your thermal management system is going to look very different. So the plug and play route really would leave an awful lot of advantages on the table. And what we're finding really is, it's really more just an education, Getting you up to speed on the technology, getting them to understand how it operates, so that they can think about how they extract The full value of the performance potential for their OEM products.

Speaker 5

Okay, very good. And then maybe just lastly for me on the if you Kind of think about your bill of material content in the circuit breaker or maybe even the auto inverter. Can you give us kind of a size of what you think that Once we go into the market, just kind of curious what your total bond could potentially be there? Thanks.

Speaker 2

What we understand from Going through the Navy project and working with some of the folks that are actually doing circuit break solid circuit breaker designs, The semiconductor portion of it, it's about 30% of the BOM cost of the circuit breaker. So it's fairly substantial.

Speaker 4

For some perspective there, it's due to the market itself, the solid state switching market is over $9,000,000,000 Annual markets, it's a very large market.

Speaker 5

Great. Thanks so much guys.

Speaker 4

Thanks.

Operator

Your next question is coming from Jeff Grampp with Alliance Global Partners. Please post your question. Your line is live.

Speaker 6

Good morning, guys. I'm curious to if you guys could touch on your ability to handle additional companies in the test and evaluation program. It sounds like there's A lot of applications, a lot of demand. Obviously, it takes some internal resources to manage that. So just kind of wondering how full your plate is right now and then how you guys are thinking about, I guess, properly, resourcing that team to handle the imbalance that you might have?

Speaker 2

Yes. It is a balancing act. Part of what we're doing is we're kind of prioritizing the companies that come into that program. You can spend as much time Four guys working out of the garage as you do with a multibillion dollar company, bringing them into a new technology. So we're really prioritizing first where there's opportunities for higher volume.

Speaker 2

It drives us to create a lot of Really good material, technical material for those customers that we can reuse. So it's part of why we focused on getting a couple in each segment and as we work with them and develop the material they need for training, for support, for doing circuit analysis and so forth, It creates a lot of material that we can use over and over again, and we'll add a couple of people to that upfront team as we go here. In fact, we're looking for a couple of people right now As more and more people come into the program, but getting through those first couple of customers in each of those segments really Helps us create a lot of material that we'll get a lot of reuse out of.

Speaker 6

Great. Thanks for that detail. And my follow-up regarding the Phase 2 kind of timeline and milestones, you mentioned, Dan, I think you said 3 of the 5, another one you think is pretty close. Can you shed a little bit more light on what kind of the remaining hurdles are to get through Phase 2? Is it too simple to think of those kind of linearly in terms of 305 and 405 or some of these maybe shorter or longer milestones to get through?

Speaker 2

I think we've got pretty clear line of sight to get through the milestones here. The one we've got coming up here in a couple of weeks. We've got really all the material that's just about ready to send off to them as part of what we want to provide for that milestone. Some of them are things like we had to submit our auto certification testing plan, it's a rather detailed plan of all the things that we're going to have done at a 3rd party to meet automotive qualification. We have to wait to get feedback.

Speaker 2

The initial feedback is that it looks Pretty thorough, but there might be some comments that might drive some little changes. So for us, it's really been pretty straightforward with the things that we need to deliver. We don't see any hurdles They are in terms of getting through the last couple of them.

Speaker 6

Great to hear. I'll turn it back. Thank you.

Operator

Your next question is coming from Brian Dobson with Chardan Capital Markets. Please post your question. Your line is live.

Speaker 3

Hey, thanks very much. Do you think you could give us a little bit of color on what you're hearing from key industrial contacts as far as adoption rates Some timetables there. You had mentioned that industrial would lead the 1st wave of adoption.

Speaker 4

Yes. So for us, the most immediate opportunity is solid state circuit breakers. That's because of the timing of the launch Of our SimCool product and the interest that, that product had garnered because of our program with the Navy. So as we look at that opportunity, I would say that is furthest along and that could we should hear in the near term have initial sales and then again ramping in the second half of twenty twenty four. Right behind that is that Simcool IQ product, the intelligent power module that's really targeting more renewables, energy storage, UPS applications, etcetera.

Speaker 4

Those conversations, I would say, are just probably a few months behind, just as the product is, the SimCool product just because of the timing of the launch of that product, but we expect similar traction as we get a little bit further along with the company is in our test evaluation program that are focused in those areas.

Speaker 3

Yes. Thanks for that color. And as you expand beyond industrial and into automotive, do you anticipate that the margin on your product will remain roughly the same or will it vary by segment and volume? How do you contemplate that going forward?

Speaker 4

Yes. We think it could vary significantly customer to customer opportunity to opportunity. But what we've looked at in terms of our business model is really at scale getting to about 50% gross margins from product sales. And then as we look out and you talk about automotive, those automotive companies may very well want a second source. We would be potentially interested in outsourcing the manufacturing in terms of licensing to another large semiconductor company, So that they could secure a second source that's much larger than us.

Speaker 4

And if we have those opportunities, that licensing revenue would obviously be Pretty much 100% gross margin. So we could be incrementally better than 50% as we add more and more licensing to the mix.

Speaker 3

Excellent. Thanks very much.

Operator

I will now turn this call back to Jeff Christiansen to read questions submitted through the webcast. Thank you.

Speaker 1

Thank you, Kelly. Our first question for the team is You recently now had a press release that B TRANZ outperformed the specs That you previously provided, how would you compare B TRAN to competitors including silicon and silicon carbide solutions?

Speaker 2

Yes. If you look at, for example, bidirectional switch that was made today based on silicon devices, IGBTs and diodes. If you look for really high performance IGBTs and diodes, that system may have 2.5 to 3 volts of drop. We're 5 times better than that. We're less than actually we actually have depending on How we configure the device itself, we can be less than half of a volt, so big impact.

Speaker 2

If you look at silicon carbide, silicon carbide the advantage silicon carbide brings is the ability to go to higher temperature And faster switching, which we're finding is important in some applications, but if you look at the vast majority of high power semiconductor applications, silicon carbide is still just a small percentage of it. And part of it is because of the cost of the technology. It There's enough performance improvement to justify its costs. So we're finding that we don't see much yet in the way of New solutions for bidirectional switching. So we think we've got something that is really game changing in terms of the level of performance that it can bring Without having to incur some of the high costs of some of the more exotic materials that people have been pursuing for quite some time now.

Speaker 1

Thank you. And we have several questions in the queue here. And if you have a question, Click on the Ask a Question button and we'll be happy to address it. The Based on recent articles in e Power and Electronics Weekly, it appears that likely that Semcool has distinct advantages With a high demand to it, how are you positioning the company to make sure you can manage that demand and the expectations And satisfy these big customers.

Speaker 2

Yes, it's a good question. It's part of why we're actually in the process now of qualifying a second wafer fabricator. It's getting a wafer fabrication process tested, validated and ready to scale up It takes quite a bit of time. It can take as long as a year easily to get through that process, which is why once we got the first one done, we didn't just Okay, we're good for now. We said, well, we really need to get a second one going here, which is why we pursued the arrangement with the fab in Europe.

Speaker 2

So So we want to make sure that as we come into 2024, we have plenty of capacity. So we're not trying to ramp one facility rapidly, but can we spread that out between the two facilities. It gives us the ability to manage the supply chain a little bit better. It keeps The fad from being in a sort of a crisis situation where they're trying to ramp faster than they're comfortable with the new product it allows us to make sure we've got a good steady flow of wafers that we can use for a variety of applications. The nice thing about our technology and what we're doing is whether the wafers are going to be used in an application like electric vehicles or solid state circuit breakers or Solar and energy storage, the dies that are getting made are all exactly the same.

Speaker 2

So we actually have the ability to scale this Pretty conservatively because we don't have to forecast where the dies are going to go. We don't have to forecast which mix We're going to need based on the applications and which one ramps first. So we think we've got a pretty robust way to ramp this up now once we get the 2nd wafer fabricator

Speaker 1

Thank you. To clarify, the company did state that, if you could comment on it, the company did state that they expect Revenue commercial product revenue in the back half of twenty twenty three. And also if you could talk about the ramp and the timing of that ramp, any more color on that in the industry's markets that will be How the markets will roll out as you expect?

Speaker 4

Yes. So first in terms of revenue, so we will have Obviously, development revenue from the Phase 2 of the program with the top 10 automaker here in the Q4. In terms of the SIMCOOL fabrication, That's in fabrication now, and it's looking like we may have devices available prior to year end for commercial sales. So we'll have to see the exact timing On those sales, that product will be the first to ramp. Again, we've said given the design cycles and evaluation cycles of some of these companies, we're looking at really modest volume for the 1st several months and then really ramping in the second half of twenty twenty four.

Speaker 4

So we do expect sales in the near term, but again, it will be modest in the first half and really start ramping in the second half. And then the CIMCOOL iQ product is roughly several months, let's say, just to be conservative, say about 6 months behind in terms of expectations for that that product in terms of initial sales and also the sales ramp. So if you look at that, that's probably more of a first half twenty twenty five

Speaker 1

Thank you. How many B TRAN devices have been shipped To the evaluation partners and any comment about any more comment about pricing margins And how do we think about that?

Speaker 4

So several 100 tested B TRAN devices have been shipped to potential customers. We're not going to Go down and provide a specific quantity shipped each quarter, each year, but it's several 100 devices and we have wafer runs going now that Produce many, many hundreds of devices here for really to support things like the SIMCOOL build and also Phase 2 development agreement. In terms of pricing, so we're not going to go out there and put the price of B TRAN as X because that's just going to kill us from negotiating standpoint. Each opportunity is different, the size of each opportunity is different, the importance of each opportunity is different and all those things will be considered when we're pricing the product. If you look at a B TRAN dye or dye in general, I mean, it's tens of dollars.

Speaker 4

If you're looking at IGBT power module that would compete with a SimCool or SimCool IQ, you can be talking $200,000 $300 So we'll be market competitive in terms of pricing, but we're not going to disclose our pricing because that would hurt us in negotiations with companies When we are at the point where we have commercial agreement for large volumes. So, but for perspective, dollars 200 to $300 module price and again, So, if you look at it that way. And then margins, we said, at volume 50% it's our target for gross margins, absent the benefit of licensing and licensing will be incremental, to that 50% target.

Speaker 1

Thank you. It looks like all the questions we have. Dan, do you have any closing remarks?

Speaker 2

I just want to thank everybody for joining our call today. We made great progress on our path to commercialize our technology and our talented team is on track we are very successful 2023 2024. We look forward to some commercial announcements in advance of our next update call, And we'll continue to actively share our story with the investment community. Operator, you may end the call.

Operator

Certainly. Thank you. This does conclude today's conference. All parties may disconnect at this time.

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Earnings Conference Call
Ideal Power Q3 2023
00:00 / 00:00