Ideal Power Inc.

Good morning ladies and gentlemen and welcome to the Ideal Power second quarter 2023 results call. At this time all participants are on a listen only mode and at the end of management's remarks there will be a question and answer session. Investors can submit their questions anytime within the meeting webcast by typing them into the Q&A button on the left side of your screen. Analysts may ask questions on the phone line. For analysts to ask questions on the phone line, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue and you may press star 2 if you would like to remove your question from the queue. As a reminder, this event is being recorded. I would now like to turn the conference over to Jeff Christensen. Please go ahead.

Thank you, Operator, and good morning, everyone. Thank you for joining Ideal Power's second quarter 2023 conference call. With me on the call are Dan Berdar, President and Chief Executive Officer, and Tim Burns, Chief Financial Officer. Ideal Power's second quarter 2023 financial 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. Please refer to the company's SEC filings for a list of associated risks. And we will also refer you to the company's website for more supporting industry information. Now I'll turn the call over to Idaho Power's President and CEO, Dan Bernard. Dan?

Thank you, Jeff. Good morning, everyone, and welcome to our second quarter 2023 Financial Results Conference call. I'll update you on our progress since the start of the second quarter, including the successful completion of all of our first half 2023 milestones, as well as our priorities for the balance of the year to commercialize our B-TRAN semiconductor technology. And then Tim Burns, our CFO, will take you through the numbers, after which we'll take your questions. The second quarter and all of 2023 thus far were transformative in our transition from a technology development company to a commercial company, included some of the most significant accomplishments in the company's history as we continue to advance our aggressive B-TRAN commercialization roadmaps. We're thrilled about our recent success in five major areas. First, we successfully completed the full process flow engineering run as we proved that our B-TRAN device was manufacturable at our high volume wafer fabrication supplier with high yield and excellent device performance. This cleared the last and by far the biggest technical risk for B-TRAN development and commercialization. This was a pivotal accomplishment and a prerequisite for commercialization. Second, we delivered hundreds of VTRAN devices to diversify technologies to complete our work under the NAVSEA Solid State Circuit Breaker Program. Third, we implemented an innovation in how we drive and control VTRAN. Subsequent testing validated an additional 20% improvement in conduction losses, making VTRAN conduction losses five times better than conventional bidirectional circuits utilizing two IGBTs and two DIOs. This improvement was incorporated into all the B-TRAN customer kits we delivered to test and evaluation program participants. Fourth, we completed shipments to the large companies in our customer test and evaluation program. And fifth, we successfully completed all the phase one deliverables under our development agreement with a top 10 global automaker. We're actively engaged with multiple customers in each of our key target markets, and I couldn't be more pleased or excited about our progress. I'll now discuss each of our 2023 milestones along with other key developments. We were excited to announce the introduction of our first commercial product, the Simcool Power Module, earlier this year. Our Simcool product is a multi-dyed B-Tran module well-suited for the large, growing solid-state circuit breaker market. The global solid-state switching equipment market is projected to grow at a compound annual growth rate of 7.6% to approximately $9.3 billion by 2028, with semiconductors comprising a significant portion of the switching equipment cost. Solid-state circuit breakers are of great interest to utility, industrial, and military customers since they can act orders of magnitude faster than traditional electromechanical breakers, thereby eliminating electrical arcing, and its associated maintenance due to contact wear, as well as the fire hazard associated with arcing. The downside of solid-state circuit breakers has been the high conduction losses of traditional semiconductors, such as IGBTs. Since circuit breakers are continuously conducting devices, high losses from traditional semiconductors result in a significant loss of useful energy and the generation of a large amount of waste heat that must be removed from the breaker, which increases the breaker cost and size. With clear advantages over electromechanical breakers and IGBT-based solid-state circuit breakers, VTRAN-enabled solid-state circuit breakers are ideal for a range of utility, industrial power control, and military high-power applications from 600 volts to tens of thousands of volts. We targeted our initial product for the solid-state circuit breaker market because VTRAN can be an enabling technology for the application due to its very low conduction losses. we continue to see significant customer interest in our Simcoe product and the solid-state circuit breaker application as a result of our recently completed program with the U.S. Navy. This interest includes the participation of two Forbes Global 500 power management market leaders in our test and evaluation program. In addition, we recently conducted switching tests on discrete package devices up to 150 amps. This compares to the 50-amp rating shown in our BTRAN discrete data sheet, or testing at a level three times higher than the published device rating. As a result of this testing, the planned 100 amp rating of our multi-die Simcool module will be increased prior to first sales, exceeding the power handling expectations set earlier this year with prospective Simcool customers. We've begun fabrication of initial Simcool power modules and continue to expect low volume sales of Simcool to start later this year. The design cycles for industrial applications, such as solid-state circuit breakers, varies, but it's relatively short, typically about a year. Revenue for Simcoe is expected to ramp up in the second half of 2024 as initial customers complete their solid-state circuit breaker product designs. Let's turn to the supply chain necessary to support our sales ramp beginning in the second half of next year. During the second quarter, we qualified a wafer fabrication supplier in Asia with high-volume capabilities. Test results from the first flow engineering run with this wafer fabricator demonstrated the manufacturability of BTRAN with high yield and excellent device performance, clearing the last and by far the biggest technical risk for BTRAN development and commercialization. This successful fabrication run was accomplished in the wafer foundry's existing silicon fabrication line without the need for any special equipment or capital investment to produce high quality wafers fabricated on both sides. This was a pivotal accomplishment. It was a prerequisite for commercialization. Wafer and device testing results displayed high yield, minimal die-to-die variability, and excellent performance characteristics. While it's reasonable to expect some improvement in results when you transition from a development fab to a production fab, The first run at a wafer foundry is often called the pipe cleaner lot, as every production facility has different equipment and established process recipes, and there's an expectation that process flow adjustments will be necessary in future lots. Even though it was the first run and we were working on larger diameter wafers than we'd used in development, the results from this engineering run exceeded expectations and really validated the strength of the full process flow for B-TRAN that we developed over several years working with development fabrication partners. We now have multiple runs ongoing with this high volume wafer foundry with the first of these runs expected to be completed later this month. These runs will provide ample devices for additional 2023 deliveries under our test and evaluation program, Simcoe production in support of our development program with a top 10 global automaker, as well as initial internal and third party discrete device and Simcoe testing. We're pleased with both the performance and overall quality of the wafer fabrication, and the technical capability of the wafer foundry's manufacturing team. This wafer foundry is also already certified to automotive standards, making them a quality supplier for our automotive programs and reflects the high standards, capabilities, and quality of their wafer fabrication. Also, as I mentioned last quarter, we're working with a second high-volume wafer foundry in Europe and expect to complete a similar full process flow run with them. The second wafer foundry is very experienced in manufacturing bipolar devices, such as IGBTs, and the detailed review of the process flow went well. We're in the process of qualifying this wafer foundry and expect to begin a wafer run at their production facility later this year. With these two 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 supply capacity for the large customers we're engaging. Both wafer foundries have world-class experience, facilities, and capabilities and are eager to be engaged in a new high-performance technology such as DTRAN. Overall, our dual sourcing strategy will allow us to proactively secure not only the necessary production capacity, but also the ability to source components and services from partners in disparate geographies as part of our strategy to mitigate supply chain risk. Now let's turn to our DOD-funded NAVSEA program with the U.S. Navy. We're excited to have shipped hundreds of packaged and tested devices to our partner on the project, Diversified Technologies, or DTI, completing our work under this program. The medium-voltage solid-state circuit breaker designed by DTI for this project will have direct applicability to military applications and commercial markets where circuit breakers are in wide use, such as electric utility, solar, wind, and energy storage installations. As I mentioned, our participation in this highly visible NAVSEED program resulted in the expansion of companies participating in our test and evaluation program. As part of its final deliverables to the Navy, DTI will introduce a family of solid-state circuit breakers for potential sale to the Navy as part of its future ship electrification program. Our objective is to continue to build on our work for the Navy, and we're pursuing other solid-state circuit breaker opportunities with VTI while commercializing VTRAN for utility and industrial solid-state circuit breaker applications, a process that started earlier this year with the launch of our Simcoe product. On the technology development front, the testing we conducted in our lab on the devices we shipped to VTI enabled our technical team to realize an additional 20% improvement in conduction losses. making B-Tran conduction losses five times better than conventional bidirectional circuits utilizing two IGBTs and two diodes. This improvement did not require any changes to the B-Tran die design or packaging. It was incorporated into the driver provided to participants in our test evaluation program. It will also be used in the company's intelligent power module product we'll be introducing later this year and is the basis for one of several new patent applications we filed in the quarter. Following the completion of our deliveries to DTI for the NAVSEA program, we completed VTRAN customer shipments to the large companies in our test and evaluation program, utilizing packaged devices from our newly qualified fabrication partner. The response from customers in the program has been overwhelmingly positive, as they appreciate an innovative, very low-loss new semiconductor and the advantages it could bring to the OEM products. This quarter, and as previously announced, We also added a second Forbes Global 500 leader in diverse power management markets to the BTRAN test and evaluation program roster. This company will evaluate BTRAN initially for use in solid state circuit breakers in its smart infrastructure division. Power management companies make things like protective relays for utilities, circuit breakers, power converters for renewable energy, and a whole variety of power electronics equipment for high power applications. The companies you typically think of as being in that group are companies like Siemens, Eaton, ABD, and Schneider, very large, well-recognized equipment providers in the power space. B-TRAN customer shipments to program participants included multiple packaged B-TRAN devices, a device driver, and a power test board housed in a safety enclosure to facilitate and accelerate the evaluation process. B-TRAN shipments to date for test and evaluation program participants include a top 10 global automaker, a global tier one automotive supplier, a leading provider in the solar industry, two Forbes Global 500 power management companies, and a global provider of backup power and energy management solutions with additional kits to follow for current and new program participants. 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. Through the test and evaluation program, we'll gather valuable feedback on their application-specific product requirements and potentially secure product development or other commercial agreements. The program will allow us to get a good handle on customers' technology evaluation process, their product design cycles, and their commercial plans. Moving on, we entered into a development agreement late last year with a global top 10 automotive OEM. We're partnering with this automaker's advanced technology development team to develop a custom VTRAM power module in collaboration with an innovative packaging company also selected by the automaker. This custom VTRAM-based module is targeted for use in electric vehicle drivetrain inverters in the automaker's next generation electric vehicle platform. This represents our second engagement with the world's leading automotive manufacturers as another top 10 global automaker is already in our test and evaluation program. This program is on an accelerated timeline to get the custom module production ready by 2025. That is the customer's stated goal for the program. We successfully completed all phase one deliverables of this multi-year program, including the completion of a wafer run, shipment of devices and test boards to both the automaker and the packaging company they selected, and providing technical support and test data on VTRAN, its performance, and drive circuitry. Working closely with the automaker, we've already agreed on the scope of work and objectives for phase two of the program with their engineering team and await final approval of the phase two purchase order. In phase two, we'll work closely with the automaker's innovative packaging company to integrate VTRAN dives into the power module design. Phase three will be extensive testing of the custom module incorporating VTRAN devices to meet automotive certification standards, which are pretty substantial. So it's really us and the packaging company working independently in phase one. And then ideal power providing devices to the packaging company for incorporation into the module in phase two. And then phase three is all about testing and certification of the module itself, so it can be the core of the powertrain inverter for their next generation electric vehicles. Shifting to our upcoming milestones, we're on track to launch our second commercial product in the third quarter, which will build upon the multi-die packaging design of Simcool and add a bidirectional intelligent driver. This product will target renewables, particularly renewables such as solar and wind coupled with energy storage, standalone energy storage, EV charging, and other industrial end markets. Similar to the solid-state circuit breaker market, these markets typically have design cycles closer to a year. Revenue for the intelligent power module will start in late 2024 and ramp into early 2025 as it gets through OEM product design cycles. Our B-Tran is moving into commercialization at a great time when renewables, energy storage, electric vehicles, 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. Automotive manufacturers are finding with V-TRAN there's a path to reduce power semiconductor costs, the second largest production cost on electric vehicles, and simultaneously improve vehicle range to mitigate driver range anxiety. The inherent bidirectionality and lower losses of V-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. Our approach is that we'll be feeding the marketplace with products and incorporating customer feedback into our product planning. In the long term, as large customers, such as electric vehicle manufacturers, look for second sources of supply, our objective will be to license our technology to other large players in the space that have production capacity and who've already invested in the front end of the business for sales and service support. This will allow us to stay focused on technology and not be spending capital replicating what's already out there for semiconductor distribution and service to customers. Looking at our expanding B-TRAN patent estate, we currently have 75 issued B-TRAN patents with 32 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, all representing our high-priority patent coverage 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, as both are unique to the bidirectional nature of our technology. As a result of our continued innovation, our list of pending patents increased from 22 to 35 since our last report. 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, the second quarter was transformative for the company as we proved that our double-sided B-TRAN device was manufacturable at a high-volume wafer foundry with high yield and without the need for capital investment. The fabricated devices improved upon the already high expectations for B-TRAN performance as demonstrated through the testing of hundreds of packaged devices. Market interest is strong, and we remain focused on executing on our B-TRAN commercialization roadmap. We're thrilled that we are successfully executing the plan, having already met all our milestones for the first half of the year and being on track to meet the key milestones and objectives I outlined for the remainder of 2023. We're confident B-TRAN will displace conventional power semiconductors in many applications within the electric vehicle, renewable energy, energy storage, solid-state circuit breaker, and motor drive markets. I would like to hand the call over to our Chief Financial Officer, Tim Burns, to review our second quarter financial results.