Ideal Power Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 29, 2024

There are 7 speakers on the call.

Operator

Good morning, ladies and gentlemen, and welcome to the Ideal Power 4th Quarter and Full Year 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 anytime at the meeting webcast by typing them into the Q and A button on the left of your viewing screen. Analysts who publish research 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 Christensen. Please go ahead.

Speaker 1

Thank you, Matt, and good morning, everyone. Thank you for joining Ideal Power's 4th quarter and full year 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 4th quarter and full year 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 and industry prospects 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 associated risks, and we would also refer you to the company's website for more supporting company information. Now, I would like to turn the call over to Ideal Power's President and CEO, Dan Verdar. Dan?

Speaker 2

Thank you, Jeff. Good morning, everyone, and welcome to our Q4 and full year 2023 financial results conference call. I'll first update you on our progress since the start of Q4 and then review our priorities for 2024 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. We made great progress delivering against our B TRAN commercial roadmap in 2023, and that progress has continued into 2024 as our customer engagements are expanding.

Speaker 2

While we're certainly excited about our progress and recent news, we're even more excited about how 2024 is shaping up for the company. Since the start of the Q4, we successfully completed several additional milestones, had some very positive customer recognition that collectively confirms our continued progress on our B TRAN commercialization roadmap. We're thrilled about our momentum, recent successes, customer feedback and recent announcement in these major areas. First, we commenced Simcool power module shipments to fulfill customer orders. The Simcool power module targets industrial markets, particularly the solid state circuit breaker market and is expected to be the earliest source of our product revenue and sales ramp.

Speaker 2

2nd, we successfully completed Phase 2 of our development program with Stellantis, a top 10 global automaker. Notably, the name Stellantis was disclosed by Ideal Power for the first time in Q4 of 2023. 3rd, Stellantis recognized Ideal Power as a finalist in their 2023 Stellantis Venture Awards. 4th, we released demonstration videos and application notes related to our B TRAN and Simcoe products to assist the technical teams at our target customers to better understand our products and their use. These videos and application notes have already produced new opportunities in our sales funnel and are producing a high number of views with our target technical audience, demonstrating a growing interest in and awareness of our technology.

Speaker 2

5th, we are nearing completion of a qualification run with our 2nd high volume wafer fabrication partner. We'll take a deeper look at these activities, but first I want to take a step back and highlight what is driving the interest in and the need for the technology we are bringing to market. The commercialization of our technology comes at a time when there are significant macro trends in the industrial, renewable energy, energy storage and hybrid and electric vehicle markets that will act as drivers of our revenue growth for many years. It's not only the long term growth of solar energy, energy storage and the adoption of hybrid and electric vehicles. These growing markets are part of the broader global electrification of society that is occurring.

Speaker 2

The current electric utility system was designed decades ago and will require enormous investment to accommodate the fundamental changes electrification requires. Our utility transmission and distribution system was not designed to accommodate the large amounts of distributed solar power for homes and businesses, the build out of a nationwide electric vehicle charging infrastructure and the broad use of localized energy storage by businesses for backup power and electricity cost control. At the core of all these applications, renewable energy, energy storage, hybrid and electric vehicles, EV charging and utility grid modernization is the need for improved power semiconductors as they are essential to reducing the cost and improving the efficiency across all applications. Better power semiconductors mean more useful energy for a solar or energy storage installation, longer range and faster charging for an electric vehicle and lower cost and more efficient use of electricity. That's why we're so excited about the timing of our commercialization and what PeakTrend brings to the market.

Speaker 2

Our technology has the potential to improve how the performance and cost of a wide variety of applications that are part of this fundamental change and how we make, distribute and use electricity. Looking at the size of the opportunity this creates, based on the recent study by Mordor Intelligence in their Global Power Electronics Market Report, the V TRAN serviceable addressable market or SAM is predicted to more than double over the next 5 years. With a projected 16% compound annual growth rate, the total Sam for B TRAN is forecasted to grow from $3,600,000,000 in 2023 to $7,600,000,000 in 2028 driven by these macro trends. Looking forward, we'll continue to execute on our B TRAN commercialization roadmap. Our priorities for 2024 are to convert large OEMs and our test and evaluation program to design wins and or custom development agreements, sell Simpool power modules to additional target industrial customers, add distributors for Simpool products, continue the strong execution on our development program with Stellantis, begin third party automotive qualification testing, complete the qualification of a second high volume production fab and capture initial sales of our SimCool IQ intelligent power module.

Speaker 2

And I'll discuss the highlights of some of these priorities along with other opportunities and developments. There's a growing list of customers working with our team in each of our key target markets and I'm pleased and excited about our progress and the feedback we're receiving from our growing customer engagements. We expect industrial markets and in particular the solid state circuit breaker market served by our Simcool power module to be the earliest source of our product revenue and drive our initial sales ramp. The interest in our Simcoe product is driven by the need for better circuit protection within the utility distribution system, industrial facilities, the need to be able to quickly isolate solar farms and energy storage facilities and even circuit protection within hybrid electric vehicles. Later this year, we're expecting initial sales of our SimCool IQ intelligent power module.

Speaker 2

The Simcool IQ takes our Simcool power module and adds an intelligent driver to allow localized control and operation. The Simcool IQ product applies to the renewables market, particularly renewables coupled with energy storage, standalone storage and microgrids, EV charging and other industrial markets. Like the solid state circuit breaker market, these applications have a shorter design cycle compared to the automotive industry. Targeting the industrial, power and renewables markets first gives us the ability to ramp up our supply chain and revenue, so we are ready to serve the high volume we expect to be driven on auto manufacturers for their hybrid and electric vehicle platforms. With the visibility of our technology and products growing, we're now receiving numerous inbound inquiries from companies in our early target markets looking to learn more about our products.

Speaker 2

To better serve these customers and provide the ability to purchase products in smaller volumes, we're adding distributors for customers wanting parts for evaluation, some of which will later turn into volume supply agreements with us. We're finalizing our first agreement with the distributor for our products. We've also selected a second distributor with particular strength in Asia and have begun crafting an agreement with them as well. Our current focus is engaging distributors with strong technical sales teams, expertise in securing sales for new technologies and global reach. We'll add more sales reps and distributors over time to have comprehensive channel coverage.

Speaker 2

As we said previously, given the evaluation and OEM product design cycles of most industrial companies, volume and revenue will be modest in 2024 and we expect to see the start of a ramp up in sales in the second half of twenty twenty four as customers work to release products that incorporate B TRAN. Turning to Stellantis, we're thrilled with our progress in their program to use B TRAN in their future EV drive train. Due to the strong performance of our team and our technology, we're continuing to earn our place in the program and recently announced that we successfully completed Phase 2 of the program several months ahead of schedule. Phase 2 deliverables included a multi wafer run, delivery of tested B TRAN devices and drivers to both the program's packaging company and the organization building the initial drivetrain inverter and delivery of a comprehensive test plan for auto qualification that was subsequently approved by Stellantis. We collaborated closely with Stellantis and the program partners to supply D TRAN devices for integration into the custom power module and inverter designs.

Speaker 2

The device testing results by the Stellantis program team validated the expected efficiency improvements anticipated from the use of B TRAN in the drivetrain. As part of Phase 2, Stellantis also conducted a data driven comprehensive assessment of the technology readiness for implementation into their electric vehicle platform, and we're pleased to say the outcome of the assessment was very positive. Successful completion of Phase 2 was also customer validation of B TRAN and its potential impact on improving EV range and cost. Additional validation was provided by Stellantis in December when they named us a finalist in the 2023 Stellantis Venture Awards. Our selection was based on our successful collaboration and performance in the program, potential impact on customer experience, novelty of the technology and its potential scale within Stellantis.

Speaker 2

We're leveraging our success with Stellantis to attract and engage additional companies interested in our technology for their applications, including other industrial and automotive OEMs and Tier 1 automotive suppliers. We're currently finalizing the scope of work for Phase 3 of the program with Stellantis, which now includes the production side of their team. This phase is expected to include the extensive testing of the custom B TRAN module to meet automotive certification standards, enabling B TRAN to be the core of the powertrain inverter for the automaker's next generation EV platform. Their stated goal for the program is to have a custom module production ready by 2025.

Operator

Stellantis is

Speaker 2

funding the program. We had modest revenue from them in 2023 and expect modest revenue from Stellantis again in 2024. Due to its compelling advantages, D TRAN is also being evaluated for Stellantis' vehicle power management, circuit protection and EV charging ecosystem. As a reminder, this program represents our 2nd engagement with the world's leading automotive manufacturers as another top 10 global automaker is already in our test and evaluation program. Substantial progress continues with our test and evaluation program participants, particularly for solid state circuit breaker and hybrid and electric vehicle applications.

Speaker 2

This year, we expect to convert large OEMs in our test and evaluation program into design wins and to additional custom development agreements. Our test and evaluation program includes several large global companies that present multiple opportunities for Ideal Power. Taken as a whole, they address all of our target markets. While initially interested in a specific application, these program participants have in many cases expanded their interest to several applications in their product portfolios could take advantage of the benefits of B TRAN. Customer shipments to the test and evaluation 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.

Speaker 2

To date, V TRAN shipments to test and evaluation 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, a global provider of backup power and energy management solutions and several others with additional kits to follow for new participants. While these large companies move slowly, several of these customers have advanced beyond the evaluation stage and are requesting multi year product volume quotes or custom product development proposals and in many cases are providing us specific feedback for our long term product planning roadmap to closely align with their requirements. The conversion of a single opportunity could potentially significantly impact the trajectory of our pending revenue ramp. As you know, our test and evaluation program will remain an embedded process in our sales and marketing effort and a source of input to our next generation of products. We'll continue to add additional potential customers to the program for those customers that represent an opportunity for us to collaborate with a market leader for a specific market segment.

Speaker 2

The program allows us to get a good handle on customers' technology evaluation processes, their product design cycles and their commercial plans. Beyond the high profile companies in our test and evaluation program, we're already seeing customers, particularly in the circuit breaker and circuit protection markets, ready to be served by our distributors as we bring them on board. Let's turn to the supply chain that insurers will be prepared to support our sales and production ramps. Our 2nd high volume wafer fabrication partner is nearing completion of a qualification run. This wafer fab in Europe will support future revenue growth and add dual sourcing for wafer fabrication.

Speaker 2

We're very pleased with its progress with no major issues to date and look forward to receiving the wafers from this lot and assessing their performance of the completed wafers and resulting B TRAN dyes. We expect to complete the qualification of this fab as early as the Q2 of 2024. Last year, we qualified an Asian wafer fabrication supplier with high volume capability. 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. 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

This dual sourcing will provide us with sufficient supply capacity for the large customers we're engaging. We're confident each of these wafer fabs has ample capacity to meet our expected demand over at least the next 2 to 3 years. Automotive qualification testing will begin later this year. Being automotive qualified helps us across the board in both automotive and industrial applications. It says a lot about the robustness of your design and its ability to handle extremes of the environment for shock, vibration and power cycling.

Speaker 2

It helps industrial customers get a comfort level for the readiness of a new technology. With our certification test plant now approved as part of Phase 2, the certification testing firm we intend to use has been selected and once Phase 3 with Stellantis is underway, we will begin the wafer runs that we plan to use for auto certification. While it may change at some point in the future, one advantage we have for the foreseeable future is that for any application like hybrid electric vehicles or solid state circuit breakers or solar and energy storage, the wafers and resulting dies are all exactly the same. We can ramp up production robustly because we don't have to forecast wafer demand and the die design mix based on the application. Another advantage to our approach is our ability to leverage the huge investment that's already been made in silicon wafer fabrication and packaging for power devices.

Speaker 2

Our asset light business model gives us the ability to continue focusing on technology improvement of being able to quickly incorporate customer feedback for our product roadmap. Although the interest in bidirectional power semiconductors continues to grow, we're not aware of any competing inherently bidirectional technologies. Looking at our expanded B TRAN patent estate, we currently have 82 issued B TRAN patents with 36 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 our high priority patent coverage geographies. As part of our product development and introductions, we're expanding our patent efforts in what we believe to be high value patents on our driver design and controls and packaging designs, as both are unique to the bidirectional nature of our technology.

Speaker 2

As a result of our continued innovation, our list of pending V TRAN patents is now at 39. In addition, we treat our double sided wafer fabrication process as a trade secret. 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 for commercial sale. In summary, we're off to a great start already this year and we're on track to achieve our 2024 milestones.

Speaker 2

We look forward to several announcements in the coming months as we complete the key objectives we plan to accomplish for the year. When we look out over the next 12 months, we're confident we can continue to drive considerable commercial progress in our target markets. We'll maintain our relentless focus to commercialize our technology and facilitate its adoption in our target markets. We expect D TRAN to displace conventional power semiconductor solutions in many applications with the solid state circuit breaker, renewable energy, energy storage, hybrid and electric vehicle and other industrial markets. Now, I'd like to hand the call over to our Chief Financial Officer, Tim Burns, to review our Q4 financial results.

Speaker 2

Tim?

Speaker 3

Thank you, Dan. I will review the Q4 and the full year 2023 financial results. We recorded $61,000 in commercial revenue for the Q4 and $161,000 for the full year. Our grant revenue was $37,000 for the full year of 2023. Looking to 2024, we expect commercial revenue from both product sales and development agreements.

Speaker 3

Although we're continuing to pursue government funding opportunities, we do not have any such programs at this time. Operating expenses were $2,500,000 in the Q4 of 2023 compared to $2,000,000 in the Q4 of 2022, driven primarily by higher research and development expenses. We completed several wafer runs with our qualified high volume production foundry. We also are in the midst of a qualification run with a second high volume production foundry. Operating expenses reflected higher stock based compensation expense on performance stock units and new hire grants.

Speaker 3

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, product development, other research and development activities and hiring. We expect to keep general and administrative expenses relatively flat in the Q1 of 2024, excluding the impact of stock based compensation expense. Sales and marketing spending is expected to continue to increase modestly in coming quarters due to hiring and costs associated with our commercialization efforts. Net loss in the Q4 of 2023 was $2,400,000 compared to $1,900,000 in the Q4 of 2022. Full year 2023 net loss was $10,000,000 compared to $7,200,000 in full year 2022.

Speaker 3

4th quarter 2023 cash burn was $2,300,000 at the midpoint of our guidance of $2,200,000 to $2,400,000 as we continue to manage expenses prudently and aggressively. Cash burn in the full year 2023 was $7,900,000 at the midpoint of our guidance of $7,800,000 to $8,000,000 and compared to $6,800,000 in the full year 2020 sheet. We expect Q1 2024 cash burn of approximately $2,300,000 to $2,400,000 and full year 2024 cash burn of 8 $1,000,000 to $8,500,000 Net of an expected $1,000,000 benefit from proceeds from expiring heavily in the money warrants. Cash and cash equivalents totaled $8,500,000 at December 31, 2023. We have no debt and a clean capital structure.

Speaker 3

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're also exploring potential strategic relationships with our well capitalized partners. For example, Stellantis has a venture fund and we were named a finalist in the 2023 Stellantis Venture Awards. We do not know if there is a potential opportunity for us with Stellantis Venture Fund, but it is something we could choose to explore if we are convinced it wouldn't adversely impact other EV customer opportunities.

Speaker 3

As a public company, we also have access to the capital markets if necessary. At December 31, we had 5,996 1,697 shares outstanding, up slightly from the end of September and 1,040,248 warrants outstanding unchanged from the end of September. 444,180 of the warrants outstanding are heavily in the money and set to expire in November 2024, if not exercised beforehand. Including 811 1,478 stock options, restricted stock units and performance stock units outstanding, we had 7,000,000 848,423 diluted shares outstanding at December 31. At this time, I'd like to open up the call for questions.

Speaker 3

Operator?

Operator

Thank you. At this time, we're conducting a 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. Analysts who publish research may ask questions on the phone line. Your first question is coming from David Williams from Benchmark.

Operator

Your line is live.

Speaker 4

Hey, good morning, gentlemen, and thanks for taking my questions.

Speaker 2

Good morning, David.

Speaker 4

Yes, so congrats on all the progress. You're clearly making a lot of headway here, and I've always been impressed with your go to market strategy is how quickly that's developed. I guess in that vein, can you talk a little bit about the shipments you had this quarter and maybe just any color around maybe who that was or their intent or what the feedback has been since they've received those things?

Speaker 3

Yes. So they're obviously the SimCool product sales. So their initial shipments of that product is targeting the solid state circuit breaker market. We have a couple of companies in our test and evaluation program that were Forbes Global 500 Power Management leaders. There's also, I would say, a couple more that are similar in size to those companies that we're interacting with on a regular basis.

Speaker 3

So we're not going to name the specific companies, but there's some very large well known names in the space.

Speaker 4

Okay, great. And you talked about having the capacity in place for the next several years. I guess, what is the opportunity for maybe revenue to inflect a little more quickly than you anticipate? If you started receiving orders or design wins for production later this year, how quickly could you ramp? And do you feel that you have opportunity if you needed more capacity that you could maybe augment what you have currently with other opportunities?

Speaker 2

Yes. As far as our ability to produce product at the wafer fabs and the packaging firms, we can ramp down relatively quickly. Even from a material standpoint, the wafers that we use are not special. I mean, they're out there available in the silicon commodity wafer market. And there's plenty of capacity to actually just do more runs than we have been doing with them.

Speaker 2

So that ability is pretty quick. So it's really a function of how quickly do we see the customer adoption. Technology adoption with customers, especially the big customers that we're working with always seems to take longer than anybody would like. But if they decide they want to start doing something meaningful, we could respond literally within the quarter by ramping up additional product.

Speaker 4

Great. And maybe just one last one here. But maybe if you could talk a little bit about the ASP or even the bill of material potential on the solid state circuit breakers, what does that look like and maybe even a per unit basis, but what kind of revenue could we expect as that begins to ramp as you think about volumes?

Speaker 3

Yes. So for the CIMCO, it's a multi die module. If you look at the IGBT module market out there, those modules typically range anywhere from, let's say, dollars 100 to $300 We're going to be make sure we're price competitive in that market.

Speaker 2

One of the things that we've done in the design of the Simcoe power module is, for when you think about high power circuit breakers for industrial utility applications, they have a huge range in size. They could go from a couple of kV up to dozens of kV. And the product is designed so you can parallel as many units as you want to get to whatever rating you want. So we don't have to make any special modules depending on the size of the breaker. And that's one of the things that we're getting for feedback is the customers that are focusing on circuit breaker applications really like the fact that it gives them unlimited flexibility in how they size the breaker.

Speaker 4

Thanks so much for the time, Dylan. Appreciate it. And I'll jump back in the queue.

Speaker 2

Thanks, David.

Operator

Thank you. Your next question is coming from Donovan Shafer from Northland Capital Markets. Your line is live.

Speaker 5

Hey, good morning guys. Thanks for taking the questions. Sure. So the first one I want to ask about is following covering the clean energy kind of like utility scale solar space, there's an acute pain that project developers are feeling right now and it's flowing through and impacting a lot of the utility scale equipment providers that I cover. And it's one of them is high voltage circuit breakers.

Speaker 5

And I know this stuff can be pretty a lot of nuance, pretty technical, like there may be differences. For instance, the B TRAN may not be applicable for like a high voltage type grid tie application or where or there could be a long validation process where you need a utility sign off and say, yes, we're going to allow such and such a piece of equipment to connect into our wires or protect our system and so forth. But so the pain point right now is kind of more high voltage, but you go through the whole spectrum or the whole gamut going down to the panel level and building up to where you tie into the grid. So I'm curious if you're seeing any incremental interest or folks taking a greater interest in this kind of approach, if it is portable or transferable to those applications? And if with current kind of problems the industry is having there, if that's something you'd be able to benefit from or if it takes too long and so maybe not necessarily this cycle, but the next time a bottleneck like this emerges in this space, you could execute on it.

Speaker 5

Just curious if you have any color around that.

Speaker 2

Yes. I mean, the nice thing about the way we have done SymCo is you can literally do something that is at 1200 volts or you can do something that's at 12,000 volts. And that's a big part of why these Forbes Global 500 companies are really interested in understanding our technology because they'll figure out what's the right size, whether it's really high voltage or whether it's going to be something that is a much more localized level at the panel level and figure out what's the right solution there. And our technology gives them the ability to have the same semiconductor in this huge range, so they can craft the solutions that give them really a unique offering compared to the rest of the marketplace. So we expect to participate in both ends in that spectrum.

Speaker 5

Okay. So there's not some something where say a certain number of B TRAN dies would need to be connected in like series or in parallel or because I know there's this modularity to it where you can kind of mix and match and hit whatever specifications you need from a voltage and a current standpoint. But you could get like an incremental amount of losses or something because I know, of course, that's one of the benefits is you have fewer losses versus other sugar breaker types of sugar breakers. But does it get prohibitive at any point?

Speaker 2

No. In fact, what actually happens is you parallel losses, losses but now.

Speaker 5

Yeah. Okay.

Speaker 2

It actually can be really impactful as you get to bigger and bigger breakers where you just get to a level of losses that if you're doing IGBTs, you can't even begin to touch it.

Speaker 5

Okay. Okay. Well, that's great. And then with the with kind of on a similar in a similar vein, talking about EVs in Phase 2 with the process of Stellantis, I know I think in the release you said and in the prepared remarks, one of the objectives was to for the customer to validate potential improvements for range and cost in the EV. And I know that's kind of interchangeable because if you improve the range, you can then reduce the batteries required and so that lowers the cost and you can kind of pick and choose between the 2.

Speaker 5

But is there anything, I guess, first, did were they successful in that part of things where they're able to kind of come up with their own number, some kind of a quantification? And then is that something you can share? And if not, can you just maybe give more of a rough materiality or if that's an attribute that would move the needle for them? Yes.

Speaker 2

Automobile companies have just incredibly sophisticated modeling capability to assess the impact of whole variety of things on the performance of the vehicle. Just on your one comment, we haven't had any discussions with any automaker where they're talking about reducing the size of the batteries. What they're looking for are solutions that help them lower cost and extend range at the same time, because they are fighting both of those issues. So to take batteries out, it doesn't give them a gain in range with improved semiconductors so far is just kind of a nonstarter for them. They want something that tackles both of those issues.

Speaker 2

That's what B TRAN really does. Now because we're working under a non disclosure agreement with them, they won't let us say what the model improvement was from using V Tran. But what we do know is they were really happy that it met their expectations. We did some work ourselves leveraging some analysis that Toyota did looking at improving the power semiconductors. And our conclusion back then was our technology would improve the range of electric vehicle by 7% to 10% by using METRAN instead of IGBTs.

Speaker 2

So I think the answer they got must have been somewhere in that neighborhood, but I doubt they

Speaker 5

would let us disclose it. Wow! Okay. That's quite impressive. And then for we're talking about developing a module a custom module for these types of applications.

Speaker 5

Yes, I know the needs can vary, I think, quite widely. So with the Simcool module, you've got 4 V Tran dies in there. When it comes to doing let's focus specifically and just as kind of a point of reference for the Stellantis, the idea of making a and it doesn't need to be Stellantis, I mean, I guess you could talk about it just for this particular application to have a module where it's the power module that is in the drivetrain application for tying to the inverter. How many dies would be involved in something like that? I mean, if Symco is 4, is this something where you're talking tens, 100 or really more like 4, same order kind of a magnitude of SIMCOOL?

Speaker 2

It will be bigger than SIMCOOL. It spends a lot on the car, the size, the size of motor that's in there, the electric motor they want to drive, but it could be from maybe as low as 8 to 10 to maybe 20. It also depends on how many modules they want to use to get redundancy for the modules themselves. So they may break it up into a couple of groups just from a reliability standpoint.

Speaker 5

Thank

Operator

you. Your next question is coming from Brian Dobson from Chardan Capital Markets. Your line is live.

Speaker 4

Hey, good morning. So you gave some great cover

Speaker 2

on Stellantis and you mentioned also conversations with leading global companies. Do you believe that growing that has contributed to starting those conversations? And have you noticed that that relationship has opened up new opportunities for you?

Speaker 3

So yes, I think initially with the Navy program for solid state circuit breakers and then with Stellantis particularly after we were able to name them when we were named a finalist in the Stellantis Venture Awards, have both really resulted in a significant increase in our sales funnel, significant inbound inquiries, particularly around the solid state circuit breaker application in the hybrid and electric vehicle application as well. So that's something that we think will just expand our opportunities, including companies that aren't necessarily in our test and evaluation program that are now looking to purchase SIMCOOLs rather than being a test and evaluation program to obtain the customer kits that have individually packaged B TRAN I. So we think that will drive it will be very modest, but it will drive revenue early on as companies are actually looking to buy several to tens of devices for their evaluation that we haven't even discussed as part of the test and evaluation program.

Speaker 2

The other thing that we saw was as soon as we announced Stellantis, the other top 10 automaker that's already in our test and evaluation program clearly reacted to that in terms of the level of activity, engagement and things that they're looking to do with us. So, I think they all realize they've got to figure out what is their EV platform going forward, how are they going to tackle the range and cost issues And how are they going to do something that is innovative? It doesn't look like they're just copying what somebody else has already done.

Operator

Thank you. Your next question is coming from Jeff Grampp from Alliance Global Partners. Your line is live.

Speaker 6

Good morning, guys. I'm curious with respect to the Stellantis process, is there a way to kind of compare the difficulty or risk profile, if you will, between the various phases? In other words, just trying to assess as an outsider, is it harder or more challenging to pass through a given phase or is it just different and maybe a little bit apples and oranges to really characterize in such a way?

Speaker 2

I don't think they're substantially different from one phase to the next. They have different levels of focus. But they make their criteria pretty clear upfront in each phase of what we've got to do. There's a common view of what the deliverables are, what the criteria are. For example, the technology readiness assessment that they went through, they shared with us, here's all the data we're going to need for you guys to meet the criteria that we need for production.

Speaker 2

So, they've been really good to work with and their team is really, really sharp technically. I mean, we've been really impressed by the caliber of their in house team that's working on electric vehicles. So, it's one of those things where the focus is a little different in each phase, but no surprises and you just you got to do the work and produce the data and do the testing and satisfy their requirements to put something into production.

Speaker 6

Okay, great. Understood. And then for my follow-up, I'm curious on the distribution front, you mentioned being pretty close, I think, with at least 1 distributor. Can you just talk high level how important you guys view that sales channel as far as the overall opportunity set for you guys If we kind of I guess exclude the Stellantis' of the world, which sounds like those can be kind of game changers, but with respect to CIMCOOL and some of these other commercial developments, how important of a sales channel is that for you guys?

Speaker 2

It's actually very important because we're a small team. And for a new technology you spend almost as much time working with small customers as you do a big one, especially early on in that process. So having a distributor that can serve the smaller customers, those that are not likely to go into a strategic supply agreement actually is a great way for us to start getting revenue into the pipeline without having to build a huge front end of the team to be out there just chasing just individual sales.

Speaker 6

Okay. That makes a lot of sense. Thank you for the time, guys.

Speaker 2

Thank you, Jeff.

Operator

Thank you. Your next question is coming from David Williams from Benchmark. Your line is live.

Speaker 4

Hey, gentlemen. Thanks for letting me ask a follow-up. I wanted to ask just kind of following up on Jeff's question there about the distribution. You've talked in the past about one of the biggest hurdles is educating your customers or potential customers. How big of a hurdle do you think that is?

Speaker 4

Is that something that you can do with the distributors? And I'm assuming you're going to use them for demand creation as well as logistics and order fulfillment. But are there any challenges you see in terms of educating that potential sales force?

Speaker 2

Not so much a challenge is, what's happened is we have worked with customers like Stellantis and some of the other big companies that are in our test and evaluation program, it's forced us to put together material that actually helps the technical audience come up to speed, so we're not having to do it from start every time. So we're getting a lot of reuse out of both the data, the presentation material and the discussion material that we've put together for other customers. So we've already taken this first distributor through that, because they are a technical sales team, they got it. They understood it right away. So what we've told them is, look, if you get stuck at any point in time, we've got field application engineering here.

Speaker 2

You can pull in if the questions get beyond your level, but they came up the learning curve pretty quickly.

Speaker 3

Yes. And we actually issued some videos and application notes here just recently for the technical audience and we'll continue to expand the amount of information we have on website to support, for instance, sales through distribution.

Speaker 4

Okay. And one just last one, if I may. On the test evaluation program, is there a way to think about the magnitude of customers that are coming to you outside of that T and E program? And just kind of trying to get a sense of what that interest is outside of that captive T and E audience?

Speaker 3

Yes. So I would say the interest outside of the program is probably roughly equivalent to the interest in the program. So there's various reasons why someone might not want to sign a test evaluation agreement or would prefer to receive SimCool Power Modules rather than our B TRAN test kit, right, particularly if they're looking at solid state circuit breaker applications as an example. So, we haven't specified who those customers are or even provided necessarily kind of similar detail that we do with the test and evaluation program, but that's just our approach. If we don't have a signed agreement, we generally try to avoid talking about those opportunities with any form of specifics.

Speaker 4

Fantastic. Well, keep up the good work, gentlemen, and look forward to the continued success.

Speaker 2

Thanks, David.

Operator

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

Speaker 1

Thank you, Matt. And gentlemen, our first question is, can you please explain how B TRAN fits into applications? Is it different for each application? And how do you think about that for production of B TRAN?

Speaker 2

Actually, for us, it's one of the advantages of our technology and that it's the same NIVE regardless of the application. Whether it's packaged a little bit differently, what we're actually going to make in the wafer fab is the same whether it's going into an electric vehicle, a circuit breaker or an energy storage or solar installation. As I mentioned in my prepared remarks, that might change over time. We'll see as we continue to make improvements in the B TRAN is the are the wafers being made going to go to electric vehicle application or a solid state circuit breaker. They're all the same for us.

Speaker 1

Thank you. And as the operator mentioned, you can click on that Ask A Question button and submit your questions. And please submit each of your questions as you think of them in that Ask A Question button rather than all your questions at one time. We have several questions in here. Next question, gentlemen, is considering the vast interest in silicon carbide GaN, how does B TRAN performance compare with these materials?

Speaker 1

And do you see B TRAN topology being applied to these materials in the future?

Speaker 2

Yes. They were each really targeting different things. GaN really started where you needed very, very fast switching. So it was in things like radio frequency. It's been moving into power applications.

Speaker 2

And if you think about your computers, your laptop chargers, those are probably GaN based devices. They've been trying to get to higher and higher voltage. There are A, there are some limitations in terms of what you can do with GaN that come from the nature of the material and the technology. And both GaN and silicon carbide are expensive. We actually have the ability to take our technology to silicon carbide, for example, but we haven't really been too focused on that yet, simply because of the fact that silicon carbide needs to come down significantly in cost.

Speaker 2

It needs to improve in quality, and it's not trivial. For example, if I go buy a silicon wafer, it costs me $60 If I go buy a silicon carbide wafer, it's $800 And that's part of what's driving some of the things you've seen like Tesla announcing they want to reduce the amount of silicon carbide by 75%. It's all about how do you get the cost down to still improve performance. And that's what really creates the opportunity for B TRAN. Now, as silicon carbide and materials wideband gap materials improve, you'll see us make a silicon carbide device in B TRAN, but we think that's still a few years away just because there's such a big gap in terms of what silicon carbide and widening gap materials bring the performance level.

Speaker 2

So it's there's a lot of excitement around it, but it really needs to be used in places where you need the ability to go to much faster switching speeds or much higher temperature or much higher voltages than what you can do with a silicon device like B TRAN.

Speaker 1

Thank you. Another question regarding silicon carbide is, for the future EVs that will utilize silicon carbide platforms, are the enhancements to range with B TRAN similar to in the silicon carbide platform versus non silicon?

Speaker 2

Yes, it's a very similar kind of improvement because it's really the nature of the architecture itself. One of the other things that can be done that we see an opportunity, if you look, for example, what Tesla is doing, rather than going to all silicon carbide MOSFETs, they're going to a hybrid module that includes a silicon IGBT with low voltage silicon carbide MOSFETs to handle the switching. You can do the same thing with B TRAN. You can make a silicon B TRAN with low voltage silicon carbide MOSFETs to give you the really fast switching. So there's a lot of steps along the way that I think you're going to see in terms of how new semiconductor devices get adopted while everybody is working on bringing down the cost of silicon carbide and improving its quality.

Speaker 1

Thank you. Our next question submitted into that Ask a Question button is, can you talk about the interest level or make additional comments about the interest level among Tier 1 auto suppliers?

Speaker 2

Yes. We actually we're engaged with literally one of the world's largest auto suppliers. And we started with a discussion about B TRAN for the drivetrain, but they're one of the companies that I was referring to that have come back and said, hey, there's a whole bunch of other products that we make that could use B TRAN. So it's become a much broader discussion. And what we're finding is the Tier 1 suppliers are now starting to engage with us because they're trying to figure out with the automobile makers having built these EV teams in house, they want to be part of that.

Speaker 2

They want to be embedded into these designs and they have a lot of ability to innovate themselves. So B TRAN gives them the ability to innovate designs for circuit protection, for quick disconnects on the batteries, for the drivetrain itself that they actually want to come up with so they can propose them to the automakers and give them a differentiated solution.

Speaker 1

Thank you. And we still have the questions and please submit them. And we look forward to answering your questions. You can submit them into that Ask A Question button. Our next question is, can you talk about other companies developing this beach this bidirectional power switch and who are your competitors?

Speaker 2

Yes, we really don't see anybody else that's developing an inherently bidirectional device. All the bidirectional switches that we see people putting together are combination of conventional technologies. They're putting IGBTs back to back, which doubles the losses or they're putting MOSFETs back to back. And we keep a pretty close eye on what's going on both in the technical literature, things that happen in the patent office. And for example, our team is at Applied Power Electronics Conference this week, where they're specifically going to be looking at what's going on with others in bidirectional switching.

Speaker 2

We really are competing against the IGBT makers of the world. So it is the Infineon's, the On Semis, the Fujis. The advantage with us really is as we ramp up in volume and as we have customers like the automakers who are going to want a second source of supply, we actually would license our technology to them so they can leverage their own investment in their fabrication facilities, their sales and support organizations. So while they are competitors, we think at some point in time, there's going to be a couple of them that are actually really interested in collaborating with us. In fact, we had one of them reach out to us here just last week, wanting to explore collaboration.

Speaker 2

So, we know we're definitely on the radar screen and we're trying to make sure that we're creating pathway for partnerships rather than just pure competition.

Speaker 1

Thank you. It looks like there are no other questions at this time. Dan, do you have any closing remarks?

Speaker 2

I just want to thank everybody for joining our call. We made great progress here on our path to commercialize technology and our talented team is on track for a very successful 2024. So we look forward to commercial announcements in advance of our next call. Thank you everybody for joining us.

Operator

Thank you. This concludes today's conference. All parties may disconnect and have a great day.

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Earnings Conference Call
Ideal Power Q4 2023
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