Ideal Power Inc.
Q1 2023 Earnings Call Transcript

Published: 4 May 2023

[Operator:]

Good afternoon, ladies and gentlemen, and welcome to the Ideal Power First Quarter 2023 Results Call. At this time, all participants are in listen-only mode. At the end of management remarks, there will be a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Jeff Christensen. Please go ahead.

[Jeff Christensen:]

Thank you, operator, and good afternoon, everyone. Thank you for joining Ideal Power's first quarter 2023 conference call. With me on the call are Dan Brdar, President and Chief Executive Officer; Tim Burns, Chief Financial Officer. Ideal Power's first quarter 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 as those described in the call. Please refer to the company's SEC filings for the list of associated risk, and we would also refer you to the company's website for more supporting industry information. Now, I'll turn the call over to Ideal Power's President and CEO, Dan Brdar. Dan?

[Daniel Brdar:]

Thank you, Jeff. Good afternoon, everyone, and welcome to our first quarter 2023 financial results conference call. I'll update you on our progress since the start of the first quarter and priorities for 2023 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. This is an exciting year for us. We are really getting engaged with customers as we look to commercialize our technology. Our 2023 milestones are in our press release today and in the online webcast portal for this conference call. For those not familiar with them, our objectives for this year are

[Timothy Burns:]

Thank you, Dan. I will review first quarter 2023 financial results. We recorded minimal current revenue for the first quarter. At March 31, current revenue of $36,724 remains to be recognized under the Navy funded NAVSEA program. In the second quarter of 2023, we expect to recognize revenue related to the NAVSEA program as well as revenue from Phase 1 of the custom module development program with the top 10 global automaker. Operating expenses were $2.6 million in the first quarter 2023 compared to $1.9 million in the first quarter of 2022, driven primarily by higher research and development expenses due to additional semiconductor fab runs and related wafer costs. Operating expenses were also impacted by higher personnel costs and reflect higher stock-based compensation expense. Although, we expect higher research and development spending in the balance of 2023, at or above that seen in the first quarter, 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 loans (ph) and other development activities and 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 with commercialization efforts, including new product launches. Net loss in the first quarter of 2023 was $2.5 million compared to $1.9 million in the first quarter of 2022. First quarter 2023 cash burn was $1.8 million on the lower end of our guidance of $1.8 million to $2 million and down from $2.1 million in the fourth quarter of 2022. We expect second quarter 2023 cash burn of approximately $1.8 million to $2 million and full year 2023 cash burn of approximately $8 million to $8.5 million. Cash and cash equivalents totaled $14.5 million at March 31, 2023. Given our planned cash burn, which remains modest, we have ample liquidity on our balance sheet to fund operations through 2024 is to commercialize our technology and also to be a well-capitalized partner for the broad spectrum of companies that are either already participating or that we expect to participate in the testing and evaluation of our B-TRAN technology as well as a global Top 10 automaker has engaged us to our development program. We have an asset light business model and licensing part of our strategies we've discussed on prior calls. At March 31, we had 5,931,569 shares outstanding, up slightly from December 31 and [indiscernible] outstanding, unchanged from year-end. Including 844,375 stock options, restricted stock units and performance stock gains outstanding, we had 7,816,092 diluted shares outstanding at March 31. At this time, I'd like to open up the call for questions. Operator?

[Operator:]

This time, we are conducting a Q&A session. [Operator Instructions] I will then call back over to Jeff Christensen to take questions submitted [indiscernible].

[Jeff Christensen:]

Thank you. Gentlemen, the first question that was submitted is, what differences have you seen in working with the production fab compared to your work with development fabs?

[Daniel Brdar:]

Good question. Quite a bit. There are a few things that are really substantial in terms of the development fabs versus the production fabs. First is the production fabs, we can go to larger wafers and we're running at the development fab. So we can literally produce twice as many devices out of a wafer because of the larger wafer size. Probably one of the biggest difference is there – the production fabs have a lot of automation, where development fab, there's a lot of things that we've done manually, and that drives two things. It drives very long cycle times to complete a run. And it also drives a lot of scratches as the wafers are handled manually. What we have seen with this first run in the production fab was already better than anything we've done in the development fab in terms of the device performance and just the yield per wafer, even though we're working on a larger wafer than the development tab. So pretty substantial improvement across the board in terms of volume, cycle time and quality.

[Jeff Christensen:]

Thank you. Our next question submitted is, you mentioned Forbes Global 500 power management market leaders. What kind of products do those companies make and what are some examples of those types of companies.

[Daniel Brdar:]

The account management companies are companies that make things like protective relays for utilities, circuit breakers, they make power converters for renewable energy, a whole variety of power electronics equipment for high power applications. The companies that you typically think of that are in that group are companies like Siemens, Eaton, ABB, Schneider, very large, well-recognized companies in the power space.

[Jeff Christensen:]

Thank you. Our next question submitted is, you referenced you will have two high volume fab partners. Can you quantify their volume capacity?

[Daniel Brdar:]

Yeah. Let me answer that just a little bit differently. Let's talk about their available volume capacity because they're all running other products as well. The one that we have just finished, they are a very deliberate kind of firm. Right now, they have available that we could tap into capacity to make about 250,000 units a year. The other one that we are starting has the capacity to do well over $1 million a year of actual available capacity that we can tap into. So between the 2 of them, we think we've got plenty of capacity for the near term and hopefully have the opportunity to get them to sort of compete against each other a little bit for our business, both in terms of cost and quality.

[Jeff Christensen:]

Okay. Thank you. Yeah. Investors, we appreciate your questions, and you could submit your questions by clicking on a button in the webcast portal. Our next question that was submitted is, you mentioned that you realized an additional 20% improvement in conduction losses. Are there specific applications or target markets that will benefit most from this impairment?

[Timothy Burns:]

Yeah. Once where you're continuously conducting things like circuit breakers in particular, will benefit. But even though the applications where you're doing a lot of switching, like energy storage coupled with solar will benefit from it as well. And just to give people with some context, improvements and losses in semiconductors are usually pretty hard to come by. So when we discovered that we could do something that really didn't affect the need to change what we are making in the fabs at all and get a 20% improvement. It was a pretty exciting day around here for sure.

[Jeff Christensen:]

Okay. Thank you. Next question, EDs and renewables are two markets that garner most of the attention, but your SymCool is targeting solid-state circuit breakers, where B-TRAN is enabling technology. Could you provide additional color on this specific market opportunity, why you chose the SymCool as your first product and why it should excite investors.

[Timothy Burns:]

Yes. One of the reasons is when you look at industrial products like circuit breakers, the design cycle is a lot shorter, typically an industrial company can design a new product in a year or sometimes even less versus the automobile cycle, I think most people realize is a long design cycle to get through that whole process. It's three to five years depending on the company. So we chose it partly because it's a faster path to revenue, it will be our early revenue while we go through these automotive qualification programs, but it's also one where we are truly an enabling technology. Solid-state circuit breakers have been made before with traditional semiconductors like IGBTs, but if you can bring something that has dramatically lower losses, it results in a solution that really becomes viable for the marketplace versus something that's more of a technical curiosity, which is what's been done to date with conventional semiconductors.

[Jeff Christensen:]

Thank you. There are no other questions at this time. Dan, do you have any closing remarks?

[Daniel Brdar:]

Excellent. Thank everybody for joining our call today. We've made great progress over the first few months of the year and on our path to commercialize our technology. And our talented team is on track for a successful 2023 and hitting the milestones that we've laid out there for people to monitor our progress. So we appreciate the opportunity to share our progress and we look forward to speaking with you again on the next call.