Ideal Power Inc.

Good morning, ladies and gentlemen, and welcome to the Ideal Power fourth quarter and full year 2023 results call. At this time, all participants are on 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&A button on the left of your viewing screen. Analysts who publish research may ask questions on the phone line. For analysts to ask questions on the phone line, please press star 1 on your phone to enter the question queue at any time, and we'll open the floor for questions and comments after the presentation. 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, Matt, and good morning, everyone. Thank you for joining Ideal Power's fourth 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 fourth 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. please refer to the company's FCC 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 Powers President and CEO, Dan Bernard. Dan?

Thank you, Jeff. Good morning, everyone, and welcome to our fourth quarter and full year 2023 financial results conference call. I'll first update you on our progress since the start of the fourth quarter 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. 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 fourth quarter, we successfully completed several additional milestones and had some very positive customer recognition that collectively confirms our continued progress on our BTRAN commercialization roadmap. We're thrilled about our momentum, recent successes, customer feedback, and recent announcement in these major areas. First, we commence Simcool Power Module shipments to fulfill customer orders. The Simcool Power Module targets industrial markets, particularly the solid-state circuit breaker market, is expected to be the earliest source of our product revenue and sales ramp second we successfully completed phase two 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. third Stellantis recognized ideal power as a finalist in their 2023 Stellantis venture awards fourth We released demonstration videos and application notes related to our BTRAN and Simcoe products to assist the technical teams that are 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. Fifth, we are nearing completion of a qualification run with our second 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're 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. 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 B-Trend brings to the market. our technology has the potential to improve the performance and cost of a wide variety of applications that are part of this fundamental change in 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 five years, with a projected 16% compound annual growth rate The total SAM for B-TRAN is forecasted to grow from 3.6 billion in 2023 to 7.6 billion 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 simple power modules to additional target industrial customers, add distributors for Simcool 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. 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 Simcoe 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 and electric vehicles. Later this year, we're expecting initial sales of our Simcool IQ Intelligent Power Module. The Simcool IQ takes our Simcool Power Module and adds an intelligent driver to allow localized control and operation. The Simcoe 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 from 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. 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. As we said previously, Given the evaluation and OEM product design cycles of most industrial companies, volume and revenue will be modest in 2024. We expect to see the start of a ramp up in sales in the second half of 2024 as customers work to release products that incorporate BTRAN. Turning to Stellantis, we're thrilled with our progress in their program to use BTRAN in their future EV drivetrain. 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 two of the program several months ahead of schedule. Phase two deliverables included a multi-wafer run, delivery of tested BTRAN 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 VTRAN devices for integration into the custom power module and inverter designs. The device testing results by the Stellantis program team validated the expected efficiency improvements anticipated from the use of VTRAN in the drivetrain. As part of phase two, 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 two 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, the potential impact on customer experience, novelty of the technology, and its potential scale within Stellantis. 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 V-TRAN module to meet automotive certification standards, enabling V-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. Stellantis is 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, V-TRAN is also being evaluated for Stellantis' vehicle power management, circuit protection, and EV charging ecosystem. As a reminder, this program 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. Substantial progress continues with our test and evaluation program participants, particularly for solid-state circuit breaker and hybrid and electric vehicle applications. This year, we expect to convert large OEMs in our test and evaluation program into design wins and or 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 that 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. To date, B-TRAN shipments to 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, 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. 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 ensures we'll be prepared to support our sales and production ramps. Our second 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. 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 with the completed wafers and resultant BTRAN dyes. We expect to complete the qualification of this fab as early as the second quarter of 2024. Last year, we qualified an Asian wafer fabrication supplier with high volume capability. 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. 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. 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 two to three years. Automotive qualification testing will begin later this year. Being automotive qualified helps us to cross 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. It helps industrial customers get a comfort level for the readiness of a new technology. With our certification test plan now approved as part of phase two, the certification testing firm we intend to use has been selected, and once phase three with Delanthus is underway, we'll begin the wait for 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 hydroelectric vehicles or solid-state circuit breakers or solar and energy storage. The wafers and resulting dyes are all exactly the same. We can ramp up production robustly because we don't have to forecast wafer demand and the dye 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. Our asset-light business model gives us the ability to continue focusing of technology improvement while 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 VTRAN patent estate, we currently have 82 issued VTRAN 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. As a result of our continued innovation, our list of pending B-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. 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 DETRAN 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 fourth quarter financial results.