Ideal Power Inc. (IPWR) Earnings Call Transcript & Summary

Good day, and welcome to the IAxis Alpha Virtual Best Ideas Fall Investment Conference 2026. Our next presenting company is Ideal Power. [Operator Instructions] I'd now like to turn the floor over to today's host, David Somo, Chief Executive Officer of Ideal Power. Please go ahead.

Okay. Thank you, and thank you for all of those who are joining us today. This is David Somo, President and CEO of Ideal Power. To start off with, I'd like to quickly introduce who's on the call with you today. In addition to myself, we have Tim Burns, our Chief Financial Officer; and to round out the executive staff here at Onsemi, 2 members that are not [indiscernible] at Ideal Power, 2 members that are not here with us on the call today would be Clay Beltran, our Chief Operating Officer, who joined us early this year and Mark Brussel, our Chief Commercial Officer, who has been with us since the end of 2025. And then from a shares outstanding basis, we have just over 16 million shares outstanding. There are about 3.4 million prefunded warrants. And then we also have about 1.2 million employee options and stock units. So altogether, about 21 million fully diluted shares. Our cash balance, and this is as of last reporting, which was June 30 is just over $41 million, which provides us with several years of cash, and we have a clean balance sheet with no debt. So now I'd like to talk about how I view the investment thesis in Ideal Power. This is something that I used as a formula for evaluating companies and previous roles where I was responsible for M&A and how I evaluated my decision to join Ideal Power in November of last year. So when looking at technology companies, the first thing I tend to do is look at technology and products, do they have a product in their technology that has a strong fit to secular megatrends in the market that is well protected from competition and differentiated. The second area is looking at markets as the company and the technology and products they develop addressing large and growing markets. Do they have access to key customers that can help validate their products in market and scale revenue with the company? And do they have an operating model that as they scale revenues that drops a strong operating profit and overall profitability for the company. Evaluating here at Ideal Power, I think we check each one of those boxes from a technology and products perspective, we have a unique and differentiated product that is highly patented specifically for the applications we're targeting in solid-state circuit protection and related applications. We are addressing a multibillion-dollar market opportunity that is growing over the next several years as part of the secular mega trend in high-voltage DC power applications. We have access to global customers and have a growing sales funnel of more than $400 million in opportunities today and an operating model that is CapEx, low CapEx requirements that can scale as we grow revenue with the company. So what is B-TRAN, for those of you who may not be familiar with it, it's a monolithic bidirectional power switch that was developed here at Ideal Power. Its uniqueness is really in that we develop a symmetrical device on both the top and the bottom side of the wafer, which allows us to conduct and block current flow in voltages in both directions natively with a single device. The same device can be deployed across multiple applications and the compelling advantages for B-TRAN for the applications that we're targeting, which are generally conducting applications in areas like solid-state circuit protection, EV contactors and battery disconnect units is its native bidirectional conduction and blocking capability. The lower conduction losses that it was designed to deliver in always on or conducting applications and that by doing so with fewer components needed to conduct and block in both directions, you can actually achieve higher power density and lower system costs with fewer components. Now quickly looking at the competitive landscape for B-TRAN in the applications that we're targeting around bidirectional power switching. If you look at more traditional devices, they typically have anywhere between 2 and 4 devices that are required for bidirectional conduction and blocking, in the case of silicon carbide requires a minimum of 2 devices and a back-to-back configuration to be able to conduct and block in both directions, whereas B-TRAN is able to do that with a single device older IGBT technology does that typically with 4 devices or more. B-TRAN was specifically optimized to deliver low conduction losses, and in the bottom left graph here, you can see that when compared to IGBT or silicon carbide MOSFETs, it can deliver substantial reduction in losses, which improves power efficiency. It make simpler the thermal solution for the device and result in energy savings where it's deployed. Now looking at the portfolio of products that we've developed. The first is a B-TRAN discrete device that's in an industry standard package. It's rated to 1,200 volts and 75 amps. Again, this one device is able to conduct in block in both directions in the applications it's used in. The second device we are developing for release is SymCool which incorporates 4 B-TRAN [indiscernible] in the first version, thereby increasing the current rating of what the device can conduct and providing a convenient, small form factor where customers may be developing applications that require higher current ratings than a single device is capable of achieving. This has also rated to 1,200 volts and 200 ounces currently. And then the final product that we will offer is B-TRAN [indiscernible], which is for those customers who are developing their own modules or their own packaging solutions want to buy known good [ die ] that has been tested to prove functionality and to be able to integrate that in their specific packaging depending on their system requirements. B-TRAN from patent perspective is now at 105 patents. And as you can see here on the slide, those are across multiple regions and geographies with 54 patents issued in the United States and 51 foreign patents to protect our inventions. If the moderator is still on, is it possible for them to push the slide forward, we're stuck on pushing, Slide 8, please wait. They're seeing the slides. We're not seeing the slides apparently. All right. So I can see it in the background here, I'll try to walk us through the slides to keep us moving for the limited time that we have today. Here, we're taking a look at the market opportunity for B-TRAN, which we break into 2 areas primarily. One is static or conducting applications that we can participate in with the current generation of B-TRAN we've developed and the second is switching applications where they're typically switching at 10-plus kilohertz where we are developing either optimized drivers for B-TRAN that can work best in switching environments or with a derivative device that we're developing for B-TRAN that we can later deliver to the market as part of our product road map. If you look at these markets, the opportunity across data center, industrial and automotive for static applications. Again, those that are primarily conducting applications is about $3.7 billion today, scope growing to about $6.5 million by 2030 is our forecast. And then switching applications can add additional market opportunity that's about the same size between now and 2030 as we deliver solutions that are able to address those specific applications for [indiscernible] expansion. What I would also point out is, as we look at the opportunity today, it's relatively equally split between automotive and industrial data center, and we expect the data center industrial to grow faster over the next 4 to 5-year horizon as EVs in the U.S., in particular have slowed in adoption while they're still being adopted outside of the U.S., primarily in China and Europe. Next slide, please. So looking at where B-TRAN goes in the different applications environments that we've targeted with the product, First, in the data center, B-TRAN today, which are static conducting applications, we can use primarily in circuit protection in multiple spots basically from the wall of the data center down to the rack level. And these typically require different current levels and different number of protection devices depending on where it's placed in the data center. The second area of opportunity is in electric vehicles, EV where B-TRAN is being evaluated for solid-state contactors and battery disconnect units with the products that we're now developing a release to market and then the final areas in EV charging also from a protection standpoint. Future opportunities for the products here as we develop switching solutions would be TAM expansion across data center into areas like traction inverter in electric vehicles and then around charging in the EV charging solutions. Next slide, please. So looking at solid state protection in the transition, the high-voltage DC power distribution systems in the data center. There's been a lot of discussion throughout the industry, led by NVIDIA, the open compute project and others that as they continue to increase the compute capability and power required at the rack level, AC systems no longer can deliver the power that's required to operate those racks. And therefore, the transition that's upcoming to 800-volt DC distribution systems in the data center. This was also through alternative energy sources like battery systems that are scaling up to 800 volts [indiscernible]. When you go to 800-volt or high-voltage DC power systems, solid-state circuit protection really becomes an essential part of the solution when compared to what has been the standard in AC operated data centers and environments, which have been more mechanical circuit breakers. First and foremost, [indiscernible] energy builds very quickly at 800 volts. You need much faster interruption capabilities as [indiscernible] arise to be able to protect the sensitive equipment throughout the data center, whereas mechanical breakers operate in about millisecond time the solid-state breakers can operate in microseconds. It needs to have controlled [indiscernible], deterministic protection, some other capabilities. So in general, solid-state circuit protection goes together with the transition to 800-volt or high-voltage DC power systems. Next slide, please. So during the recent quarterly results call in August, we talked about releasing and SSCB Reference Design Kit, rated 800 volts for customer evaluation. This is now stocked in our global distributor, Richardson Electronics for customers to purchase, and we've also delivered additional RDKs to customers for their evaluation and their labs to test our products and be able to help accelerate their own solid-state circuit maker protection. The capability of this device is rated 800-volt 63 amps. It uses 2 B-TRANs with a power efficiency that's achieved of about 99.9%, where customers are using this is to evaluate the performance of B-TRAN from a conduction standpoint, power losses, the ability to detect an interrupt alts as they occur and test the energy efficiency of the device. It can also then be used by customers to accelerate their own product development as its complete circuit breaker in the small format. Next slide please, then offering an update on two of the strategic partnerships that we have with customers. One is around Stellantis. We continue to work with them on deliverables as part of their evaluation for solid-state contactor and BDU opportunity in future electric vehicles from the company, and we are making good progress in those areas with them. The other is working with a lead customer in Asia for their evaluation of our SSCB solution for HBBC, or 800-volt DC data center and industrial energy infrastructure applications. During the quarterly results call in August, I mentioned that we were close to delivering the first prototypes for customer evaluation. We've actually since delivered those prototypes to the Elite customer. We've demonstrated the functionality of the prototypes, and they're now conducting their own internal evaluation and testing of the devices for next steps. Next slide, please. Looking at our sales funnel, I mentioned during the recent quarterly results call that the funnel has now increased to over $400 million. This is roughly split equally between industrial data center and automotive applications. So we have a healthy mix of products across different application areas, all generally aligned to solid-state circuit protection and battery disconnect unit applications. We've released the 800-volt RDK that I showed on the previous slide, that really does help customers not evaluate our products, but to accelerate their own internal development. And then we have a number of other engagements broadly with customers where we have moved things from the top of the funnel where you've identified and qualified opportunities into more of the middle of the funnel, where there's more active evaluations taking place for our products. From a manufacturing perspective, we've talked about having multiple fabs or foundries that we work with to fabricate our B-TRAN devices so that we have the source of supply that we need to be able to scale the business as we win business at customers and ramp production. We also use multiple outsourced assembly and test houses or assembly and packaging houses to build the final product for us, where it's going to be used in a packaged form. And then finally, we have a global logistics footprint established so that we can support customers in each of the regions where we do business with them. One new point that I mentioned recently was we entered into a long-term supply agreement with the high-volume wafer foundry in Asia that really gives us a strong capability to scale our production as volumes increase over time and do so at the targeted gross margins we have for the business to drive profitability as we ramp revenue. Next slide, please. From a strategic priorities perspective, first and foremost, we want to continue to add new opportunities to the sales funnel. We've seen it grow from earlier this year, was around just over $200 million or just under $200 million, excuse me, to over $400 million today. We want to continue to add new opportunities. The second area is going to be driving those opportunities in the funnel to design ins and [indiscernible] disorders so that we start the production ramp for our products with customers and get customers products out into the field to start the business growth. Then we have continuing to work with customers across the board, whether they're in data center, industrial or automotive applications, specifically around the [ Silanis ] opportunity to continue to progress this. We've met the deliverables we needed to provide for the next milestone in the project. We're working forwards with them in Q4. We'll support that activity and then the subsequent deliverables as they're required and then continue to explore strategic investment opportunities because that can be beneficial in a couple of regards. One, a validation of our product and solutions in the market; and two, have a potential customer at the end who has a vested interest in the company and its success and works together with us to commercialize B-TRAN technology. So it's something we'll continue to work towards with the discussions that I'm having with potential strategic investors to date. Next slide please. And I think that's the end of the slide presentation. So I'll turn it over to Tim for the Q&A.

All right. The first question, how does Ideal Power's brand-based solid-state circuit breaker comparing performance and total system cost to competing devices for an 800-volt AI data center application.

Yes, so there are several advantages that our product was optimized to deliver for the applications we're targeting around conducting applications like solid-state circuit protection. One of those is lower conduction losses in these always-on typically conducting applications while also being able to rapidly detect alts as they emerge and mitigate those faults. The second is our native bidirectional conducting and blocking capability. Essentially, what that means is we need 1 device to conduct and block in both directions where competitor solutions require at least 2 devices. And then the third is really fewer components that are required because of the native bidirectional capability of our device and the applications we address which can lead to better power density or improved power density and lower system cost.

All right. The next question, what are the important targets for catalysts that investors should watch out for in 2026 and 2027 as B-TRAN moves toward commercialization.

Yes. So there are probably 3 areas here that I would highlight. The first is something we are executing on today, which is the delivery of RDKs with B-TRAN for targeted applications that help customers complete their evaluation and accelerate their product development. As part of that been also prototype deliveries to customers. I think on the last financial results call in August, I mentioned that we were close to shipping the first prototype SSCB units for evaluation to a lead customer in Asia. We've since completed at Action. We've demonstrated product capability in their specific application, and they're now actively testing our prototypes in their labs. The second area is around customer prototype builds and deliveries to end customers where they take the next step after validating our B-TRAN capabilities to develop their own products that they then shift end customers as prototype systems or field testing by the customers downstream. And then the final area is really looking for NRE agreements and purchase orders that we generate for sales with B-TRAN.

Okay. The next question, can you provide an update on your project with an industry partner to deliver an intelligent SSCB prototype for planned evaluation by U.S. hyperscaler and its [indiscernible] Ruben Ultra 800-volt DC data center development environment.