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spk01: Good afternoon, ladies and gentlemen, and welcome to the Odyssey Semiconductor fourth quarter and full year 2022 earnings call. At this time, all participants are in a listen-only mode. At the end of today's presentation, there will be an opportunity to ask questions. Investors can submit their questions within the meeting webcast by typing them into the QA button on the right side of your viewing screen. Analysts who publish research may ask questions on the phone line. For analysts to ask a question on the phone line, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. 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, Investor Relations. Please go ahead.
spk03: Thank you, Operator. Joining me today are Mark Davidson, CEO, and John Edmonds, Chairman of the Board. Earlier today, we issued a press release announcing our results for the fourth quarter and full year of 2022. We'll start today's call with prepared remarks from Mark, followed by those prepared remarks, Mark and John will respond to your questions. Some statements made today are forward-looking. Forward-looking statements are subject to risks, uncertainties, and other factors that may cause actual results to differ materially from those contemplated by these statements. Additional information regarding these factors can be found in our annual, quarterly, and other reports filed with the SEC. During our prepared remarks, we will be referring to slides available for viewing in the webcast and posted to the investor relations section of odysseysemi.com. I will now turn the call over to Mark Davidson, Chief Executive Officer.
spk04: Thank you, Jeff, and thank you to everyone who's listening live or reviewing this earnings call on demand. Before I move into my prepared slides, I want to start with some perspective on the year ended and the upcoming year. As a refresher, I joined Odyssey in April of 2022, and as I reflect on our company's progress since then, I'm proud of each and every employee here at Odyssey Semiconductor. We are a small team of highly capable and committed people who are delivering impressive accomplishments in a very constrained environment. There are two areas where the company is delivering meaningful results. First, it's pushing the new technology out of the lab and into our customers' hands. As our team pivoted to focus on designing and fabricating large devices that could be used in customer circuits versus small test chips, we had the breakthrough on 1200 volt performance. That was the stated goal. We uncovered and solved a few other technical challenges that became exposed when building larger devices. We were also able to validate what could only be tested when larger device dimensions are fabricated. To say it more succinctly, A great deal of new IP was generated as we fabricated devices to be used for customer samples. The other benefit of this approach, combined with all of our public announcements, is the quantity and quality of customers who have reached out looking to evaluate samples. We're in regular communication with a number of these customers who are committed to evaluating the technology to identify projects where they could purchase our products in high volumes. The second area where we're creating value is in our external foundry business. This business is where we use our manufacturing capacity to build product and technology for other companies. In this area, we have amazing talent and a strong track record of delivering challenging projects for customers. I know we can be doing significantly more here to deliver additional cash to our operations. While we haven't yet turned that corner, we have put a great deal of focus to win more projects. I expect 2023 to be the year where we can deliver even more significant results from our Foundry business. More on that later. As we wrap up 2022, I can say with conviction that we accomplished a great deal to get Odyssey Semi on the right path to delivering high-value products to a large and growing market. We remain diligent on spend, focused on creating valuable products, and we have a path to grow the Foundry business significantly, which leads me to my outlook on 2023. Very simply, the objective for 23 is to convert our potential into results to make sure we're prepared for high volume adoption of our new products and to deliver cash from our foundry operations. We don't see the headwinds of the economy improving greatly, so while we will have to raise additional capital by the middle of 2023, we will remain efficient in our operations as we deliver samples to customers and use this milestone to secure commitments from these customers. We'll be preparing these new products for qualification to prove to the market the vertical gain delivers on the promises of improved performance, high reliability, and commercial viability. Our suppliers are working very closely with us on these efforts as well, so the supply chain will be ready. We're also going to turn the potential of our foundry business into more significant results. Our pipeline is strong, and we've made a few new business development investments, which we'll further add to it. We know exactly where we fit in the semiconductor manufacturing landscape. Succinctly, we help innovators turn their new idea into reality by providing the expertise and manufacturing capacity to help them move from a little quote that we made up, from the lab to the fab. We provide expertise and flexibility. There is a significant market for this, especially as the US government has put so much focus on new semiconductor innovation. And speaking on the US government, we have made progress in our pursuit of CHIPS funding. More on that later. Okay, at this point, let's move to the presentation, and we'll start on slide three. Slide three is a reminder of why Odyssey Semiconductor exists and why we're a great investment. In short, we validated that we can build 1,200-volt vertical GAN power FETs with performance better than anything else in the market. We have order of magnitude advantage versus the competition, and we're pursuing a very large and fast-growing market. Odyssey is uniquely positioned to win as we remain focused on the milestones needed to scale our business. When we look at slide four, it represents the press release, the latest press release we put out in early January. And this is the press release announced that we had completed fabrication of customer samples at the end of Q4, which was our plan. We've been working with our packaging supplier to have these devices assembled so they can be mounted on circuit boards and tested in real life applications. Once we get these parts back, we'll be doing our internal testing and characterization with the plan to ship samples to customers in March. Slide five is a slide I like to present and spend some time on because it really represents where we are on our journey. It's a very simple visual to help us show that we have taken a step from research into product development partnered with our teacher customers. For example, earlier today we had a discussion with a multi-billion dollar company where they've provided detailed specs for a product that they need for a project with a major automotive OEM. And they're coming to Odyssey Semiconductor to deliver on this. everything that they ask for in these technical specs is well within our product capabilities and this is one of the many opportunities we have with leaders in the market so again we've made this step from research into product development working closely with these teacher customers slide six slide six summarizes a lot of what we've discussed so far with some specific numbers. On the technology front, again, we've completed fabrication in our facility and are currently having products assembled. As I mentioned, we'll do our internal testing and we'll get samples to customers in March. And these customers are customers that are committed to us and we've committed to them. Out of a relatively large backlog of interested parties, we are focused on customers that represent what we believe to be large market opportunity. as well as customers that are willing to work closely with us, collaborate with us to make sure that we have good engineer-to-engineer collaboration. You'll hear me refer to them often as teacher customers. Our objective in these customer engagements is to use this step to secure product development agreements from these customers. And what I mean by that specifically, these will be commitments from customers that when we design and deliver products to their specs, they'll purchase these products in volume. This will be an important milestone in validating that our products fill a very important solution gap that our customers can only fill with Odyssey. On the business front, we were able to secure funding that will get us through the middle of the year. That's the additional $2.35 million. And as I stated earlier, we will have to secure more funding around the middle of the year. Foundry pipeline remains strong. $62,000 of revenue in the quarter bringing the total for the calendar year to $321,000. Our target is to grow this business by at least 50% in 2023 relative to that 2022 number as a step towards more significant revenue from Foundry operations. And lastly, $269,000 per month in cash use and operations remaining very efficient on the money that we spend. And at this point, I'm not going to present any additional slides. They are there for your reference. And as you go through them, What you'll see is the megatrends that have hit the electronics and specifically the semiconductor industry over the last few years are accelerating the new need for solutions in this 1,200-volt range. Silicon carbide is starting to take some market. However, really vertical gain is poised to meet the multi-billion-dollar market opportunity, and no company is positioned better than Odyssey. We have order of magnitude improvement over silicon carbide. We're going to deliver the performance with the economics and supply chain needed. Now is the time. So again, the rest of the slides are available. If you want to review them at your leisure, feel free to contact Jeff or myself if you'd like to dig into any details. So at this point, I'd like to thank you for your time and interest in Odyssey Semiconductor. And I'm going to turn it back over to the moderator for Q&A.
spk01: Thank you. At this time, we are conducting a question and answer session. Investors can submit their questions within the meeting webcast by typing into the QA button on the right side 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 telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, submit a question through the Q&A button on your right side of your viewing screen.
spk05: One moment while we poll for questions. Once again, that's star one if you have a question or a comment.
spk01: Again, investors can submit their questions within the meeting webcast by typing them into the QA button on the right side of your viewing screen. Okay, there are currently no questions in queue. I will now turn the call back to Jeff Christensen to read questions submitted through the webcast.
spk03: Thank you. Thanks, Operator. Mark, the first question is for you. Why is the timing right now for the company's 1,200-volt vertical GAN?
spk04: That's an interesting question. Timing is always an interesting question. So I think if you look at the way – and I'll talk about one – you know, kind of the largest and most exciting market for our products is electric vehicle. And we're seeing the adoption of electric vehicles accelerating. And the move to higher voltages in electric vehicles. Silicon, as we've said, you know, is recognized as falling short for meeting the demand. Silicon carbide is there. But the fact is that silicon carbide is even falling short. We quote a report from the old development market research firm that silicon carbide economics have to come down by, I think, two and a half times, not percent, two and a half times. So silicon carbide can deliver better performance than silicon, but not quite as good as what we're going to deliver with vertical GAN. So the market is there. The market is asking for higher voltage solutions, and here we are coming in with something that is in order of magnitude better than what's readily available in the market now. I think the intersection of those two things make some timing right.
spk03: Okay, thank you. Next question is from Mark on the webcast, and the Q&A button is, what will prevent a big power semiconductor company from creating 1200 volt or higher vertical gain?
spk04: Yeah, you know, having worked with big semiconductor companies, I think I have some good perspective here. What we're doing is different. Big companies are in the GAN space, but they're all going that lateral GAN route. And maybe there's some R&D efforts at big companies, but working with bulk GAN substrates, which is what our expertise is, is very foreign to big companies, big semiconductor companies. And I think that, you know, what we expect is the big companies are going to be looking to companies like Odyssey Semiconductor to bring this brand-new, almost revolutionary technology to market. What I'll say, and if you hear a little hesitation in my voice, I guess what I'll say is we've had conversations with some of the absolute market leaders in semiconductors, large, multibillion-dollar semiconductor companies that are very interested in what we're doing because their customers are asking them about vertical GANs. So through some of the connections I have, we've had some conversations with large semiconductor companies. And I wouldn't be surprised if maybe in the future we're announcing some partnerships with one or two of these large semiconductor companies because we're bringing something to market that they don't have and would struggle to even begin to develop in-house. So interesting question. Hopefully it's a little bit of a... of a leading answer there. But I'm excited about some of these initial conversations we've had with them.
spk03: Thanks. Our next question on the Q&A button is, Odyssey received a bridge loan of $1.25 million from John Edmonds in August 22 and $2.35 million in December of 22. This question is for John Edmonds. Is the company achieving what you expected with the bridge loans?
spk02: Can you hear me, Jeff?
spk03: Everybody? Yes, we can.
spk02: Thanks, John. Okay, great. Thanks. I just wanted to check. So in my view, the short answer to that question is yes. You know, I started to put money into the company last summer because I felt it was just sort of an unfortunate circumstance that we had done all this work and hired a great candidate in Mark to take over and become the CEO, and we were hoping to go right out and do an offering and then you know, inflation hit the capital markets last spring. And, uh, uh, you know, we were soon told by the, some of the underwriting firms we were working with that, you know, uh, these, uh, trying to go out and do startup financing right now isn't going to happen anytime soon. You know, maybe June of this coming year might be your next best opportunity. Um, and so, you know, we were going to have to weather the storm. Uh, I've been through this a few times before in my career. So I understand, uh, The big black limo turns left and you've got to go with it. So that's what we're trying to do here. And I think Mark has been everything and more. We actually had three good candidates. Mark really fit in the best with the folks that we had. I think you can all see he's a good leader. But more importantly for us is he brought in a better understanding of where we're going and probably more importantly of how we would need to get there. including all the steps we'd have to take and all the processes that we'd have to go through. And so when Mark says from lab to fab, he's relying on the experience he's had in other large semiconductor companies. His own expertise is actually in from fab to customer. So pretty soon you'll hear this phrase switch from lab to fab to customer. And Mark will have the benefit and background of having worked something like six or seven years with National Semiconductor, another six or seven years with Texas Instruments, and another substantial number of years with Altera and Intel when he took over an acquisition that Altera had done by the name of Imperion. I had actually looked at Imperion as a potential acquisition for Infi at one time, so I was familiar with what he took over there. And I think he's done a great job wherever he's been. And he has a great background in more specifically in power semiconductor and what we're trying to achieve. And so when I started to invest money last summer, it's because I wanted to see how this movie would end, at least give market a good chance to be successful here with Odyssey. And I think it's been very promising so far. You'll notice about every three to four months, the company makes substantial improvement, whether it's, you know, hitting the breakdown voltage threshold last summer, about three months or so into Mark's tenure. Another four months or so later, we fabricated our first, you know, sampleable product, which is really an aggregation of the transistors that we started to make last summer into something that could actually be tested, you know, with good voltage throughput. And then... you know, in another three months or so after having reached the fabrication threshold, we'll be sending those samples out to customers and really getting some real-time feedback. And I think we've been getting a lot of good interest. And so, you know, we're very pleased with the opportunity in front of us. And, you know, we're all working as hard and as efficiently as we can. You know, in any startup, everybody wears multiple hats. And so, and we are, I think, positioned, we've made progress to the point where we're we can become a larger company and raise money effectively, and that's what Mark and I are more directly focused on ourselves. And I think, once again, as we move into engaging with customers here, you'll see Mark's background in sales and marketing really come to the fore and, once again, bring a lot of value to the table in terms of what Odyssey is going to be able to deliver and execute as a company here.
spk03: Thanks, John. our next question in the Q and a button is, uh, can you talk about your ability to go from sample to volume in the future? And I'll add a question. I'll combine a couple of questions and the other related to it is in the development process and production of samples in any way cost shared with a customer prospect.
spk04: Yeah. So, um, So the process that we're undertaking right now is we're putting out a product sample and I'll refer to it as almost a generic product sample. Now it's a product that we're going to commercialize, but it's not optimized yet for any one particular opportunity. We optimized it to prove to the world that we can build these products and to start get characterization data. Nobody has characterization data on vertical gain, high current vertical gain FETs operating up to 1200 volts. So we wanted to get some initial characterization data. Those are the samples that go to customers this quarter. And then the follow on after that is customers will give us detailed specs. As I mentioned, we had a call with a large customer today. They'll give us detailed specs and for something that is directly applicable to one of their use cases or applications. At that point, when we commit to building that product on a schedule, et cetera, yeah, we will be asking not only the customer to sign a commitment, but also provide some type of non-recurring engineering, some type of investment to make sure that they're contributing to the cost of developing that product. Now, that's something that we've done quite a few times, have done quite a few times in my career. It becomes a conversation with the customer, but that's the expectation. And I think we're in a strong position there because we're not going to be able to build every product for every customer. We will probably have more opportunities to pursue than we could actually have the capacity for. So I think it puts us in a good position to make sure that we're getting paid up front for some of the work that we'll be doing on this product development.
spk03: Thanks, Mark. The next question is, Another one for Mark is the company is clearly focused on meeting milestones. What gives you confidence in achieving the company's 2023 milestones?
spk04: Sleepless nights and people working their butts off. Now, look, we are maniacally focused on a very narrow set of priorities. You know, one of them clearly is getting these package parts right now ready to go, characterized and ready to go to customers, believing that based on at least our prepackaged testing that we've done that these things are going to perform as expected. And then just knowing that the customers are hungry for a solution like this and knowing that, you know, we're taking the right steps in the right order to get them to feel confident. So, you know, the milestones that we've talked about so far is getting – getting samples to customers and then using that to get some commitments and agreements with customers before the end of Q2. That's focus and I think it takes focus like that in order to have confidence in hitting milestones. On the second part, on the commitment about growing the foundry business by 50% in 2023, The pipeline's there. The opportunities are there. We just need to be, you know, again, maniacally focused on closing, on solving some of the technical challenges you get. It keeps customers from bringing their business to us. And I tell you that right now our pipeline is very strong, and I'm confident in our ability to close those actions and close those opportunities.
spk02: So, Mark, let me just pitch in a question here, too, and ask you. Have you seen the employees get excited about the progress we're making? I mean, has it been difficult to get them to focus the way you'd like them to?
spk04: I think early on, you know, there was a little bit of head scratching on, you know, wait, why are we going to build the larger version of the product and not just stay on this kind of R&D focus on the test chip size? And then quickly, I think things fell into place. I don't know that I've heard as much, so the excitement that I hear from people across the board just in the last two or three months versus my first few months, it's night and day. Very exciting about everybody feeling that that work, that research work that had been done since the company was founded is really turning into validation in the market. And yeah, so I think everybody here is excited and reinforcing that this focus is the right thing.
spk05: Thank you.
spk03: Next question, and again, we appreciate we can see your questions in the Q&A button, so continue to submit them. Mark, since you've assumed leadership, what, if anything, has surprised you with the overall business and the opportunity at Odyssey?
spk04: Yeah, I've said this before. I can't remember a time in my career where we put a press release out where customers read that press release and reached out to us and wanting to get samples. Normally, you know, the press release goes to the press, and then the press will pick up your news and run it in their publications and then maybe based on that. But I'm having customers read our press releases directly, and that's new for me. Very exciting for me because, you know, they're not necessarily directly intended for customers, but I think that's most surprising, but also, you know, makes me very happy that we're on their watch list and they really are that, you know, that proactive in wanting to come out and get samples. So, yeah.
spk03: Thanks. What our next question, what are the expected use of funds and the operating milestones on the company's next capital raise?
spk04: Yeah, great. So, you know, as I mentioned, so we have the funding we need to get to the middle of the year. The next raise will be money to get us to revenue. So it'll be a little bit of capital we need in order to round out our fab. And then the rest will just be the operating funds we need to, to, add a little bit to our team and make sure that we're delivering, getting these products that we're talking about, these customer-defined products, and getting them process frozen and get the process qualification done so we can start generating production revenue.
spk03: Thanks. Our next question for Mark is, I'll combine a couple questions in the platform. What's your latest take on the funding under the CHIPS Act
spk04: and do you expect the chipset funding process to unfold timing allocation process how do you think about that yeah um well it's february now and the application you know was due to open in february we um look we're first of all as a as a U.S. semiconductor guy. I'm pleased that the government has put the emphasis on semiconductors here in the U.S. that I think many of us have recognized to be critical for a long time. And we see the CHIPS Act funding as something important for, first and foremost, what I would call kind of a large-scale manufacturing strategy. And what we decided to do is we're talking to some other companies, other partners around CHIPS Act funding We feel that being part of a larger application would strengthen our ability to get the money we need to build a large-scale family. So that's the approach we're taking right now. Nothing's done yet. Nothing's signed yet. But that's the approach that we're leaning towards. And we think that'll give us the additional capital needed to build large-scale manufacturing for vertical GAN products. Because there is no... In the world right now, there is no large-scale family for vertical GAN. It's not hard to build it, and I think we'll be the ones to lead the way. So that's how we look at Chips Act.
spk03: Thanks. Our next question is for Mark. How do you get on more prospective customers' watch lists to get more exposure for the company?
spk04: Yeah. Well, Let me think about that for a second. Right now, we have more customers than we can support, which is a really good problem because we get to be selective. But then on top of that, you'll start to see more kind of digital marketing working with some of the big trade publications, et cetera. We're not ready to hire a kind of door-to-door sales organization. We're going to continue to rely on digital communications, digital lead gen. And I think that by itself, combined with the fact that what we've already validated is the customers are looking for us more so than us need to look to the customers. So we can make some moderate improvements here, but we don't have a problem where we have a solution with no customers. So I think at this stage, we're going to not try to turn those floodgates on too much because we're not going to be able to support every customer at this stage yet. Anyway, as time goes on, when we get into 2024, we'll do some of the traditional approaches of, you know, channel sales, et cetera. But for now, I think we're happy with the quantity and quality of the customer interactions that we're having.
spk03: Thanks. It looks like there are no other questions. Mark, do you have any closing remarks?
spk04: Yeah, thanks, Jeff. Just for all of the folks that are on live now or watching on demand, just wanted to say thank you for your interest in Odyssey Semiconductor. We actively share our story with the investment community as we move forward in our markets. We hope to meet with each of you at upcoming investor events or in future one-on-ones. And as a note, I'm presenting at the Emerging Growth Virtual Conference tomorrow, 1235 Eastern Time, The live interactive webcast and slide presentation can be accessed on our investor relations website. As a matter of fact, some of the slides that I didn't present today but included in our release will be presented. If you have further questions, want to learn more, by all means, please reach out. Jeff and my contact information is available in the presentation and, of course, our press releases. Uh, thanks everyone. Have a great day.
spk02: Mark.
spk04: Mark.
spk02: Yes.
spk04: Yeah, please.
spk02: Hey Mark. It's John. Sorry. I had one other question. I thought I'd ask you since not everybody might pick up the Philly accent there. You got to let everybody know who you're rooting for in the Superbowl this weekend. And, uh, I just wanted to ask, did the Eagles still have a walk on tryouts every year? Like they did back in 76. Is that what they do?
spk04: They don't. And you know, it's funny, John, because I was going to put a go birds at the end of my comments, but, uh, Knowing that there's a large investor population in New York that might be Giants fans, I decided against it. But no more walk-ons. And with the depth and quality of our roster, I don't think we need that. But go, Burbs.
spk02: Okay. Well, good luck to you.
spk04: Thank you.
spk03: So I think we're all set. You can end the call, Operator.
spk01: Thank you. Thank you. Thank you. This concludes today's conference. All parties may disconnect and have a great day.
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