Ilika plc (IKA) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Ilika plc Half Year Results investor presentation. [Operator Instructions]. The company may not be in a position to answer every question received during the meeting itself. However, the company will review all questions submitted today and publish responses, where it's appropriate to do so. Before we begin, we would like to submit the following poll. And if you give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand over to Steve Boydell, CFO; and Graeme Purdy, CEO. Good afternoon.

Thank you for that introduction, Mark. A very warm welcome to all of the people that have chosen to attend this presentation. Delighted to have the opportunity to speak to you again to review our half year results. Mark, I think, actually, if we switch off the cameras for Steve and myself, it will maximize the amount of screen that the slides can be seen on, and that will make it easier to follow the presentation. So this is our half year results. Actually, they covered the period from May 1 through to October 31 of last year. And as Mark said, I'm joined on today's call by Steve Boydell, our CFO. There are buyers, for those of you who like a quick reminder of who we are, in fact, these buyers are also on the website, on the Ilika website. So I'm not going to labor that story, you can go and look them up at your leisure, for some additional information. Thank you. So Ilika is one of the few independent global experts in the design and manufacture of solid-state batteries. There are two product lines that we've got. First of all, a miniature Stereax batteries that you see being held up by one of our engineers there, a wafer of such cells. And secondly, the Goliath product line, which are larger formats, solid-states [ pouch ] cells, that are designed for consumer appliances and also for EVs. So these are the addressable markets. First of all, MedTech and industrial IoT for the Stereax product line. In their own right, quite substantial markets, but smaller than the huge markets that are addressable by Goliath, consumer electronics being currently the biggest addressable market for lithium-ion, but expected soon certainly by 2025 to be overtaken by the market for EV batteries. So why are people interested in solid-state? Well, first of all, they are ultra compact, so they occupy about half the volume of lithium-ion and that enables smaller battery pack design. You can imagine, for people who are receiving miniature medical implants, this is a serious advantage. But also, actually, for motorists who have EVs, you can get a much more attractive design of vehicle and, of course, less weight to transport, if you have a solid-state battery pack. The other advantage is that they are tolerant of high temperature, so they operate at up to 150 degrees C, compared to the 60-degree maximum for a standard lithium-ion cell. And this has got advantages not only in industrial IoT, where such cells might be exposed to high operating temperatures, but also it allows you to shrink the design of a battery pack in a vehicle, which otherwise would require quite substantial cooling. Fast charging, also an advantage for medical device implants. If you're a patient that needs one of these implants recharged, you don't want to spend very much time plugged into a machine for that to happen, you'd much rather that it was done rapidly. But also, of course, if you're a motorist, you want the advantage of a rapid recharge of your vehicle rather than having to stop for an extended break on a motorway while that happens. One of the things that we're increasingly asked about, is how easy it is to recycle solid-state batteries because, actually, it's a significant challenge for standard lithium-ion. Currently, only about 5% of standard lithium-ion cells are recycled. One of the reasons is, actually, it's quite a challenge to do it. They are environmentally harmful due to the toxicity of the material that the liquid electrolyte is made of. And because the electrolyte is flammable, there's, of course, a risk of fire. So they can't be put into a landfill or incinerated. For the oxide solid-state batteries that we make, there's no risk of explosion. They're nonflammable. And also, once you've stripped off the outer packaging, you can actually use processes that are commonly available, typically from the mining industry, to extract the metals from those materials and return them to the supply chain. So how do we make money out of this? So the model that we've got for Stereax, is a very straightforward business model. We are a manufacturer. So we have a new facility that we have installed in Southampton, here in the U.K., which I'll talk about a bit more in a few moments, where we make sales on wafers, and then we outsource the dicing and thinning and stacking of those cells. We bring them back in for forming the batteries and then testing them before dispatching them to customers for their use. There are some companies in our portfolio of commercial interactions that have addressable markets, that exceed the capacity of our [ fab ], and that actually presents a licensing opportunity. So when we have discussions with them, there's an understanding that we will support their product development and their commercial launch. And when volumes ramp up to meet the total addressable market that actually, at that point, they have the option of taking a license, which they would then use to either manufacture the cells themselves. So some of the larger IoT and MedTech companies have their own integrated cell manufacturing companies right now, part of their own internal supply chain, or they can have them manufactured by an outsourced partner. So in terms of our fab implementation, you'll recall that in 2020, we raised a GBP 15 million round, in order to establish a facility. We secured a lease on the location and actually completed the design, installation and commissioning of a clean room. So that's a cleanroom within that facility that allows us to control humidity, temperature and particle count within the facility, to give us quality control over the wafers. Actually, back in 2020, after we'd secured the funding, we placed orders for the long-lead items, the pieces of equipment that are used in order to manufacture ourselves. They arrived at our facility, once we had completed the cleanroom, last year. And those bits of equipment were installed on time and on budget, despite global disruptions to the supply chain that have affected so many industries, globally, over the last 12 months or so. We've now commenced the qualification of our manufacturing process. And in fact, we've opened the facility with some local dignitaries, in December. And many of you actually took advantage and attended our corporate open day, our Capital Markets Day, when we had both institutional investors and private investors, who came and had tours of the facility and saw it operating. During this period, we've continued with engagement of a portfolio of Stereax customers in the markets that we address. We've continued to operate our pilot line, and that's allowed us to provide samples to customers, who have used that to progress the engineering programs within their companies. And as the volumes of cells that they require, ramp up in the course of 2022, we'll be able to satisfy that demand as the volume of supply from our new facility, which has got about a seventyfold capacity increase relative to the existing pilot line, and then ramp up for the main markets in subsequent years. So perhaps a few moments and words on the applications that we're addressing. In medical devices, these are fascinating markets with very high growth rates, smart orthopedics being one of the more interesting ones. So actually, at the moment, the market is met by the supply of pretty passive mechanical implants. And there is a need, really, to try and improve the functionality and also surgical outcomes from these devices. So in the U.S., there's currently about 1 million knee and hip replacements every year. And this is expected, unfortunately, to rise quite substantially by 2040, largely driven by an aging population, demographic and also increasing levels of obesity, which leads to joint failure. The cost of an explant, so when an implant fails and surgical intervention is required in order to replace the joint again, is about 3x that of an implant. And so the insurance companies, in particular, really wants to avoid this type of incident. So in order to provide a solution, you get a sensor that's implanted into the joint. That then sends information about the movement of the joint. And the patients can be coached by the physiotherapist to ensure that the right postoperative activity is undertaken by the patient, to ensure the best outcome from the surgical intervention. And of course, this requires batteries, and a totally-safe, miniature solid-state battery is the best solution for this application. Another very large market is nerve stimulation. This is really -- actually, partly a solution to the opioid crisis in the U.S., which is triggered by the need to solve, in particular, back pain problems. The vagus nerve is a potential area of the peripheral nervous system, where solutions to pain relief can be implemented very effectively. There are a number of key nerves that connect the brain to the body, and the vagus nerve is perhaps the most important one. It's connected to all sorts of organs within the body, and therapies have been developed, really over the past 30 years, to treat a number of different conditions, ranging from involuntary muscle spasms, like epilepsy and Parkinson's, all the way through to arthritis. So Stereax device is small enough to fit close to the nerve. It's got a lower-risk implantation processes associated with it. And there's, of course, much lower cost than trying to fit large primary batteries into a different location in the body. There are relatively few locations in the body, where such large primary batteries can be safely fitted. At our Capital Markets Day, we actually had videos from 4 of our partners, who presented. And I'm not actually going to play these videos right now because they take about 7 minutes to run. I think it's probably a better use of our time. If you're interested, you can take the opportunity to look at these videos on our YouTube channel. But the companies are very diverse. So we've got Vitruvens, which is a French technology platform company for medical devices, where they are creating the electronics together with like Stereax cells to be able to provide an energy solution to some of these different applications. We were lucky enough to have Krishnan from NXTStim present and talk about the usefulness of Stereax cells for his nerve stim applications. We've just come back from the NANS neurostimulation event in the U.S., in Florida, where Krishnan was a keynote speaker and is a very influential player in this field. Then we also had a presentation from Blink, which is an Israeli company, actually focused on the harvesting of energy from the Blink reflex for use in smart contact lenses. This is an area that's not only relevant to medical devices, but also to AR/VR deployments. And if you go to Silicon Valley and speak to some of the tech development companies there, it's a glimpse into the future really. And these companies are developing solutions to replace computer screens, like the one I'm looking at now, with actually smart lenses, which can project an image and prevent the need for you to carry around a large screen. I know it sounds like science fiction, but actually it's a glimpse of the future. And then the fourth video was from a company called WindTak, which is a wind turbine solution provider, a Polish company. And this is one of the condition-monitoring applications that we've talked about previously, where Stereax can survive the hostile conditions that you often get in infrastructure and energy generation environments. It can survive the temperatures that you get in direct sunlight. And here, of course, the idea is that you harvest energy from the vibration of the turbine blades, store it in the cell and then use that to send data about the condition of the blade and basically predict if it's starting to crack. So let's change gear and talk a little about Goliath. Well, I don't think anybody could have failed to have noticed that the EV revolution is underway, strong customer demand and, if anything, a shortage of supply of technology to meet that demand. We've got a forecast here from Bloomberg, on the bottom left, showing that solid-state technology is expected to dominate the battery supply in Europe and the U.S., in the next decade. So the light blue parts of the columns are solid-state and the purple is existing battery technology. So I think, most analysts are now convinced that the benefits of solid-state will, in time, come to dominate the market. So of course the reason that they're not deployed right now, is that they're still in development. And here is a technology S-curve to explain what Goliath needs to do, in order to become competitive for this application. So on the top right, you've got a diagram, which shows the S-curve of existing technology. So that's the dark blue line. You can see that starting to max out, as it enters that maximum theoretical energy density zone between 300- and 350-watt hours per kilo, dependent on chemistry that's used. And then the green curve associated with Goliath. And then you can see there, different data points and product points, as we move through -- get lithium-ion equivalents by the end of '22, beginning of '23, and then surpass the energy density of traditional incumbent technology and move into higher areas of maximum theoretical energy density. But it's not just about cell energy density, and this comes back to, actually, the [ issue ] that solid-state can tolerate higher temperatures, in the context of pack. What people in the industry talk about, is the gravimetric cell-to-pack ratio, or GCTP. So in a state-of-the-art battery pack, at the minute, you might get 60%, 65% GCTP, which is basically the weight of the pack that's taken up by the cells themselves. And the rest of it is actually the structure of the module, the BMS and the cooling system. And because solid-state needs a smaller cooling system, because you can run it at higher temperatures, you end up with not only less packaging, but also less cooling from -- in terms of pumps, fluid and heat exchanges. And therefore, you can get to a GCTP that's closer to 75% to 85% and therefore, get [ weight ] reductions at the pack level. So in terms of the technical progress that Goliath has made over the last 6 months or so, it's been a very rapid and pleasing journey, actually, to be part of. We were generating more than 500 cycles without cell failure, from Goliath, in Q2 of last year. We then succeeded in bringing down the operating temperature of Goliath. And that's actually one of the challenges with solid-state and generally, get higher lithium-ion conductivity at elevated temperatures. But of course, we need these cells to work at room temperature and even colder than that. So therefore, getting adequate lithium-ion conductivity at lower temperatures, is a key objective. And then we increased cathode utilization and capacity in the last quarter. This is key really to getting larger-capacity [ pouch ] cells of the size that are relevant to the automotive industry. And also, of course, we need to demonstrate batch reproducibility and baseline cell performance, which we were able to do. So the diagram on the bottom right, gives you some insights into a data set, where we -- we producibly, were able to take 3 different batches of cells, cycle them and get the same results, in terms of their performance. We've also started a mechanical-robustness testing. And at this point, I've got a little video actually, for a bit of light relief. So let's move to that now. Here we go. So hopefully, you can see that. That's one of our scientists. He's folding one of our Goliath benchmark [ M zero ] cells, and now he's rolling it. Some people have said in the past, well, if you do that to a solid-state cell, particularly one with an oxide electrolytes, it's going to crack and fail. That one didn't. The light was still on. And here is the second test, one of our scientists using a pair of scissors to cut open a Goliath pouch. If you did this with a normal cell, please don't try that at home, it would catch fire and it would spill toxic liquid. No liquid here, totally solid. And there's part of the electrode that's just been cut off. And you can see that it's still lighting that LED. So a very robust technology that delivers on expectations, on how useful it is and how safe it is. So let's go back to the presentation. That's fantastic. So which segments are we going to sell Goliath into? Well, actually, the segment for us that is going to be the early-adoption segment, is hyper cars and super cars. These are quite large pack sizes. But they are actually more tolerant of higher prices than the mass market will be. And when we first start to ramp up production volume of our cells, like the ones pictured at the top of the slide, we want to make sure that we're not selling into a price-sensitive market. And of course, if you're buying a hyper car, then you're not really worried whether the pack price is $10,000 or $20,000 because actually you paid maybe $1 million for the vehicle. And actually, it's an advantage being based here in Europe because a lot of the super car manufacturers are based here, too. So obviously, in Italy, with some of the classic brands there, but also in the U.K. and Germany. And although this isn't the mass market, when you think about the types of passenger vehicles that are sold in the largest volumes, it's still a significant volume, in the context of the commercialization of Ilika's solid-state batteries. And of course, in time, as of the manufacturing price and volume -- well, as the price comes down and volume increases, we'll be able to move out from the segment and address the larger mass transport market. Also, actually, a slightly smaller version of Goliath, outside of automotive, which should give us a first opportunity to get to market early with the technology. So, a replacement for the 18654 , so instead of two cylindrical cells, you have a rectangular [ format ] that's half the thickness. And this is also really for luxury products, luxury beauty products, as well as auxiliary power. And in these sectors, you can expect to get actually much higher prices than automotive, even less price-sensitive. And therefore, it's an attractive early rollout for our technology. So in terms of the timelines that we're looking at, you see the timelines across the top there. We've got another couple of years of process development and tech developments in parallel. That will get us to a module and pack design. And then for automotive, allow us to put our products into what the industry calls [ mules ], which are preproduction vehicles, where the performance of components is tested. And then we get through to pack validation prior to Gigafactory scale-up and mass commercialization. And on that route, you can see a number of cells that are different generations, with steadily increasing energy density and power performance or [ C rates ] as the industry calls it. So in terms of our physical facilities, we are currently operating in a development facility that we call our pre-pilot plant. We have just, this year, completed the initial engagements with Honda, McLaren and Jaguar Land Rover, where we've worked together with them to define specifications and develop our first prototypes. Last year, we did a successful placing for GBP 25 million, which is in preparation for our scale-up to the Ilika pilot level that you see there, which will be on the same footprint that we currently occupy here in the U.K. We're working together with Comau, which is the factory automation arm of Fiat, part of the Stellantis group. And that will also fund our development through to manufacturing readiness that you see in mid-2024, when we'll move to a mega facility, similar in scale to the U.K. battery industrialization center, a U.K. BIC, with which we have a framework agreement. And that Comau collaboration will allow us to prepare for that transition. And then beyond that, we're likely to license or form a JV for Gigafactory production. So Steve, at this point, I think I'll let you just summarize our financial results, please.

Yes. Thank you, Graeme. So we released this morning, our half year results for the period to October 31, 2021. They're exactly in line with the trading update that we put out back in November, particularly on these 3 key lines. So turnover was down, relative to the same period last year. That's because last year has included a full period of grant revenues, associated with the 3 initial R&D programs that we had. Those have now completed, there's a bit of gap in funding. We're anticipating additional funding to be further from the Faraday Battery Challenge, later this calendar year. But that's the rationale for that reduction, relative to last year. That turnover or grant reduction has resulted in a widened EBITDA loss, but we have also incurred some increased operational costs, as we've been commissioning the Stereax facility. And we've also been intensifying our Goliath development effort on the back of the fund raise that we completed in July, that gave us the certainty to press ahead with that. The fundraise, obviously, bolstered the cash balance at the period end. It was just under GBP 28 million, relative to GBP 12.4 million for the prior period. On the next slide, I've just outlined a summary of that raise. There was an institutional placing of about GBP 18 million. Then there was an open offer, which I know a number of you may well have participated in, as well as the retail offer, which supplements that, such that after fees we raised just under GBP 24 million. Now the specified uses for those funds were GBP 10 million to accelerate the Goliath development, that's primarily by bringing on more staff to accelerate that development. But it's also a GBP 5 million has been earmarked for the increase in the Goliath pre-pilot facility, to make that tenfold increase in productivity. The other development in the period, is that we've upgraded from the pink sheets, which is basically a, sort of, relatively unregulated market in the U.S., which was not within our control, to an OTCQX best market, where we actually control the listing. We're able to issue RNSs in the U.S. at the same time, as they're released to the market in the U.K. We've done that because we had an increasing interest from the U.S. And actually, U.S. retail shareholders now make up just over 15% of our register. There was a clamor from them, we were getting a lot of direct requests for how to trade in our shares. This OTCQX best market allows them to trade on most of the online dealing platforms in the U.S., and they can trade in U.S. dollars and in U.S. working hours. So that's helped improve the liquidity of our stock over the last few months. I'll pass you back to Graeme to summarize.

Thank you, Steve. So I think, from what you've heard, in summary, we're strongly positioned to progress the scale-up of Stereax technology through this fab implementation, complete the process and product qualification and commence commercial sales later on this calendar year, which will be in our next financial year, given that it starts on the May 1. And the Goliath story is more about technology advancement and also, actually, the partnerships that we've started to create and will mature through these defined technical milestones. And of course, both of these technology platforms position us for significant revenue growth opportunities, going forward. Thank you.

That's great. Graeme, Steve, thank you very much indeed for updating investors this afternoon. [Operator Instructions] But just while the company take a few moment to review those questions submitted already, I'd like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed after this meeting via our investor dashboard. Graeme, Steve, we did receive a number of questions throughout today's presentation, and I think there are a number of common themes within the questions that have been submitted during the live event. So what I propose to do is, maybe, just ask you a few of these pre-submitted questions and then ask if you would be so kind as to look at the live Q&A. One of the questions that we received ahead of today's event, is if Ilika 3d prints batteries, couldn't it scale up at a lot less cost and money? Maybe you could just give a little bit of color on that.

Yes. Thank you. Yes, 3D printing is actually a really useful technology and is used very broadly, actually, by a number of industries. In fact, actually, it was originally called rapid prototyping, and that's really what it's used for. It's useful for rapid prototyping of a wide range of items. So it's generally used for evaluating early product designs or carrying out short production runs, rather than for mass production. So I think, most analysts would wonder if 3D-printed batteries could really be manufactured at an affordable price. Yes, thank you.

Just moving on to the next question. I understand that margins from Stereax sales would differ across customer and segments. However, what average gross profit margin do you currently expect to be generating from the newly-opened facility? Are you forecasting positive bottom line results from Stereax division, since 2022, '23?

Steve, do you want to take that one?

We expect an average gross margin of about 50%. I think, it's probably going to be slightly less in the industrial Internet-of-Things applications. And there are applications in the medical devices sector, where it could be higher than that. The initial revenues from Stereax will offset the Stereax increased spend, next financial year. And thereafter, we expect the Stereax business to make a net contribution to group overheads and help, actually, contribute towards the Goliath development program.

And perhaps a final, pre-submitted question, a fairly open one, but what are the company's ambitions over the next 2 to 5 years, in terms of products and profits?

Yes. So regarding Stereax, we built a fab to manufacture our [ M300 ] product. That's going to be a 300 micro [ ampere ] product, specifically for the market segments that we've talked about today. And the process for that is currently being qualified. Commercial sales of that product will commence in the next financial year. And our roadmap for Stereax includes a high-temperature battery that we call our AP battery, and that's really for Internet-of-Things, Industrial Internet-of-Things, in particular, and actually a larger-capacity battery, which we call our C1, which has got the same format as an [ M300 ] but has got a higher energy density, for medical implants. They're both due, actually, to be launched next year, so 2023. And they will be followed by an even larger capacity Stereax medical implant battery, our C2, which has got 1,000 micro [ amperes], later on, actually, in 2023. We'll have a product for those smart contact lens application, scheduled in 2024. So you can see, that's actually a nice runway of different products, as we go forward for Stereax. For Goliath, the P1 is early product release, and that's going to be sent to development partners. And then we'll have increasingly energy-dense cells, in particular for EV deployment, which will include the P2 at 320 watt-hours per kilo. And then the P4 and even higher energy density levels by 2024. So in terms of revenue generation and profit, the Stereax product line will allow us to fully maximize our fab capacity. And we've previously given guidance that, that fab should generate revenues at capacity of between GBP 12 million and GBP 13 million, when fully utilized, within the next few years. The Goliath product opportunity is a larger, commercial one. The markets are bigger, and that will be ready for transfer into mega scale manufacturing by 2024, 2025, and will build up revenue from that point onwards, driven largely by the scale of the factory deployment that we land on for Goliath. At the moment, it's looking like we want to build a mega factory as opposed to a Gigafactory, for the initial commercialization, and we'll be moving forward on that basis.

That's great. And of course, there were a number of other pre-submitted questions that get a little bit more technical in nature, which, obviously, we'll review, post today's presentation. You have received a considerable number of questions throughout today's meeting. And perhaps if I may, Graeme and Steve, I'd just ask you to open up that Q&A tab and then just read through perhaps ones, where we haven't touched on or perhaps areas of interest, and then I'll pick up from you towards the end.

Fantastic. All right. So maybe the first one that has had a couple of votes from JB. What are the relative merits and demerits of sulfide electrolyte solid-state batteries as used by Toyota and Solid Power versus oxide electrolytes as Ilika uses? So this is an interesting technical discussion, a live debate, really. So sulfide electrolytes were one of the first types of electrolytes that were invented and demonstrated to work in the solid-state battery. And they were picked up by Toyota through an academic collaboration that they had in the University of Tokyo. The advantage is that they've got a high electronic -- sorry, a high ionic conductivity and are electronically insulating. So they function as a solid-state electrolyte. They're also quite malleable, so it means that you can get a reasonable contact between the positive and negative electrodes, when you make the cell. And of course, that reduces the transfer resistance of the lithium-ions, as they move backwards and forwards through the cell. The sulfides, though, are a little bit tricky to handle in a factory environment because they do give off toxic gases. So hydrogen sulfide and SO2 and the -- those gases need to be managed at very low levels. Otherwise, they pose a risk to the workforce. And also, actually, my latest intel from our suppliers, are the -- actually, the sulphide electrolytes are selling at a substantial premium to the types of materials we use in the oxide electrolytes at Ilika. So actually, a tenfold increase in price, relative to oxide electrolytes. So the oxide electrolytes that we use, technically, are more challenging to get to work. They, typically, have got a lower intrinsic ionic conductivity, which leads to higher resistances in the cells. So it's important to use the right type of additives and form the interfaces as effectively as possible between the electrolyte and the electrodes. And that's really part of the technical development that we're doing here in Ilika.

Should I take one from JB, which says, can you confirm that you'll be selling Stereax product, made in fab 1, from financial year 2023, which starts in May 2022? So yes, I think the answer to that is yes, we can. We're still going through the process and product qualification of the fab, which we anticipate to be completed in the first half of this calendar year. So the second half of this calendar year, we'll see Stereax product actually being sold to our customers. And we've got a number of pre-orders that we'll be looking to fulfill in that period.

Okay. And then we've got another one here. This is from Paul. He says, after trials with Ilika, Honda has now entered into a strategic partnership and invested in SES, which is solid energy. What should investors read into that? And does Ilika have OEM EV partners? So yes, if you were an automotive company like Honda, you would have a number of partnerships around the globe. And of course, a lot of these automotive OEMs are backing a number of forces and are making multiple investments. Honda is no exception. We don't have an exclusive relationship, by any means, with Honda. We still have an open and regular dialogue with them, and they're part of the portfolio of OEMs and supply chain partners that we interact with. So I would say, in terms of what investors should read into it, is that they should probably congratulate Honda on spreading their bets and keeping an open mind for open collaboration. Let's have a look. See, if there's some other stuff that's different. Yes, there's a question from Adrian here. Do solid-state batteries perform well in very cold temperatures as well as high temperatures? Or is there a cutoff temperature, below which performance noticeably deteriorates? Unfortunately, as one of our favorite Star Trek character said, "You can't beat the laws of physics." Unfortunately, for all batteries, ion mobility reduces at lower temperatures. So normal lithium-ion batteries, actually, don't perform particularly well in very cold temperatures. And that is a challenge, actually, for pack design, but that can be overcome by having some pack heating to start cell cycling, when you get particularly low temperatures. And that's actually incorporated into traditional lithium-ion pack design, right at the minute. So actually, there's no hard cutoff, below which you can't get any of these cells to work, but it does deteriorate gradually. Once the cells actually start cycling, they generate their own heat. So actually, once you've started the vehicle and have driven it down the road, there's no need for sustained heating. Actually, the intrinsic warmth of the pack keeps the cells in their sweet spot, in terms of the operating [ zone ]. Let's have another question here. So from Simon, it says, do you have enough customer commitment to fill your in-house fab? Or are they still evaluating samples? So yes, actually, we will need to continue to debottleneck and increase capacity in our in-house fab to meet customer demand. We've got early commitment from a portfolio of customers that will take our initial production from the fab. And over the next few years, we expect that to ramp up until the fab is fully utilized. So yes, we have patiently-waiting customers. And actually, the pressure is on the operations team to deliver those samples. So one from Adrian here. So how much more technical progress is there still to be made with solid-state batteries? Will it be incremental? Or are there possible [indiscernible]. I think, with Goliath, in particular, this is a classic technology S-curve, where the incumbent technology is still, in practical terms, performing better than the solid-state, next-generation cells that are being developed, not only by Ilika, but actually by our competitors as well. And you're going to get that parity point, which most people expect next year, when actually the advantages of solid-state can be combined with higher energy density, and then you will get an improved outcome. I think the theoretical justification for that is very clear. The initial data that's coming out of prototypes, is also extremely encouraging. So I don't think there are any big breakthroughs that are waiting to happen. It's more of a case of the classic Japanese continuous improvement that comes from Kaizen and the relentless pursuit of excellence, in order to deliver those outcomes. So got a question from Christopher here. So what yields are you achieving on the Stereax line? So on our pilot line, we were regularly seeing yields in the order of 85% to 90%. With the Stereax manufacturing line, we are still qualifying the process, as we were discussing earlier. So we are lower than that, at present. And that's really the objective of carrying out that process optimization, to make sure that we've got commercially competitive yields that are in the 90s and above. So another one from Christopher. Have you continued to see improvements in the performance of Goliath cells? And are you still on track for a commercial device? So yes, I think, as we've gone through the presentation, we demonstrated some of the improvements that we've seen in 2021. We're continuing to see that, actually, in this year, we've got a very steep S-curve to climb, and we are definitely still on track for that commercial device. So here's another one from Adrian, actually, some quite good ones from Adrian today. So besides lithium, what are the metals and minerals are commonly used in solid-state batteries? So actually, they often use fairly well-understood cathodes. So for the automotive industry, the cathode of choice is NMC, which is lithium, nickel, manganese, cobalt, oxide. So there's always a lot of discussion in the industry about the price of cobalt, in particular, and the ethics of cobalt mining. And that is -- that's just as important for solid-state cells. There are other different types of cathodes that can be used like NCA, LFP. The big attraction for LFP is that, actually, there's plenty of iron in the world. So LFP stands for lithium iron phosphate. It's a relatively inexpensive albeit lower energy-density solution, which has been heavily commercialized in China and perhaps can be used increasingly in the mass market. Even Tesla actually have talked about using LFP-based chemistries. Other metals that are important, are, of course, copper, for current collectors, and aluminum as well. So another question here from Adrian, is the outer casing for Goliath some sort of plastic? Actually, it is a foil. It's a metal foil that we use for that, which has some temperature-resistant polymer associated with it. So look, from Malcolm, we got, you state that Goliath is now capable of operating at room temperature, but my car was sitting at minus 5. yes, mine too, actually, had to scrape the frost off the wind screen, this morning. How will you cope with this? Yes. So the way that -- actually, you generally do this, is that you warm the battery pack before starting. There are technologies that already exist for that. And then once the battery pack starts to cycle, you can deal with those lower environmental temperatures. One from Paul here. What's stopping more rapid acceleration of Goliath? Capital skills or ambition? So actually, last year, in the summer, we raised GBP 25 million, which Steve was outlining before, for the additional capital that we need, in order to debottleneck the facility that we've got, in turn, our pre-pilot line into a pilot line. Of course, there is the need to hire a skilled workforce. And actually, the market for battery scientists and engineers, is pretty tight because there are lots of organizations, not only-solid state, but also traditional lithium-ion batteries, that are hiring quite aggressively. And so that capital that we raised, allows us to be able to attract some of the key skills that we need, in order to continue to scale our business. We've certainly got the ambition. And I believe that Ilika is in that leading cohort of cell designers that's well positioned for growth and market expansion, going forward.

Shall I jump in? Give you a break. Julian has asked, why no interest in computing devices, watch, phone, tablets, laptop? Is it temperature or price? I think, fundamentally, it's the fact that the batteries for those devices are produced on such a scale that it will be price that will be the initial barrier. The scale that we're at, we're looking at devices where we can demonstrate a performance benefit, be that the ability to operate in harsh environments and temperature be longer lasting, not easily replaceable low-cost applications. I mean, ultimately, once we're at mass-market scale ourselves, making on the giga-scale factory size, there's no reason why we wouldn't be cost competitive, but it doesn't seem to make sense to try and go head-to-head with these devices, currently, which are well served by the mass market applications.

Yes, another one from Adrian, we got, what are you most concerned about that might disrupt your overall plans? Actually, one thing that, I think, investors in this sector should take some comfort from, is that most analysts don't think that the sector is tending towards a monopoly. There's plenty of evidence from the existing lithium-ion industry that, actually, multiple solutions have been adopted. We were talking about some of the different chemistries that are used in lithium-ion earlier. And actually, I think, these different solid-state solutions will find different niches. So it's not really competitive disruption. Obviously, the pandemic hasn't helped, but fingers crossed, the supply chain will start to recover from that disruption. And I also don't think that it really relates to raw material shortages because the materials that we use in our solid-state cells, are, generally, very available. I mean, we've seen some volatility in commodity prices, recently, but I think that's more related, actually, to short-term supply issues rather than deposits available in the ground. Let's have one from Ben here actually. So as a long-term holder, the time scales to Gigafactories seem very long, especially given the competitive landscape. What would it take to massively accelerate this? And how much would you need to raise? And why haven't you asked us, if we would support this? Okay. So actually, when you compare our time scales to Gigafactories, I think, when you put our plans alongside other organizations, they appear just as aggressive. And I think that they're pretty sensible and rational plans. What would it take to do it ourselves? Well, my rule of thumb is that for every gigawatt-hour per year of capacity, you need to invest about USD 500 million. So that is quite a substantial sum. I know that some of our competitors have raised capital to that effect. But I don't think that, actually, it would give our shareholders the best return on capital to build their own Gigafactories. And actually, I'd much rather manage the risk of that large-scale manufacturing implementation by forming a JV with a manufacturing partner that would allow us to deploy our technology and contribute it as an in-kind contribution to the JV. And I believe that, that would be, actually, the best outcome for Ilika's investors. Question from Mike. How confident are you of achieving the forecast increases in Goliath kilowatt-hours per kilo? So yes, actually, I'm pretty confident. I think we've got a best-in-class team that has been working on this technology for a number of years now, and we're making sustained progress. I think that there is always a bit of a technology risk with new solutions like this, but we are in as good a position as anybody out there to come up with the solution that the industry needs.

A few questions lower down that are talking about competition. I think, as a theme, a bit lower down, maybe we can address some of those. I just think so. One from Douglas K, how competitive is the solid-state battery market? I think, we'd have to look at Stereax product and the Goliath products in different ways, there's not actually that much competition for our Stereax cells. There's a couple of U.S.-based companies that are relatively modest scale, that sort of competing in that market. And [ Solid-State Battery Sense ], once called Cymbet, spelled C-Y-M-B-E-T. They're possibly one of the closest to us. I think the market for EV batteries -- the competition is much broader. There's a significant number of battery developers, the likes of QuantumScape, who we've mentioned previously, Solid Power, both relatively well-funded companies that have performed [ SPACs ], and they're looking to create their own Gigafactory, so they're looking at a different market entry. But there are a number of other players with different chemistries, also operating in that area. Do you want to expand on that, Graeme? Got a whole broader perspective?

No. No, I think, that's a good overview, actually. There's -- I would say, in terms of competition, you've got the technology development activities of the incumbent battery manufacturers, the current lithium-ion battery manufacturers, that have got substantial resources, that they're deploying in the field. So you look at Panasonic in Japan. In Korea, you would include SK, LG and Samsung in that. And then in China, of course, the big companies like CATL and BYD. So those big companies don't really have a need to publicize what they're doing because they're not really trying to attract investors, they've got their own free cash flow that they're deploying in R&D. So sometimes, it's a bit tricky to follow exactly what they're doing, unless you look closely at the patent literature. And then, of course, you've got the technology developers, like Steve was just listing. A lot of them are in the U.S. but also some in Asia as well. I think, I would probably include ProLogium in that stable. And you've got to make sure you're in that leading cohort and innovating in a competitive manner to attract customers and investors. But yes, I think that Ilika is well positioned within that competitive landscape.

That was a question from Douglas K about how sensitive are our financial assumptions to the changing prices of the various elements of the products? This is something that's been raised a couple of times today or actually in other investor meetings. From the Stereax side, the bill of materials of the elements is modest, compared to the actual processing costs. So the increase in lithium price there, has little impact on our offering. I think, clearly, it's going to make more of an impact on the Goliath cells, when they come to market, given the bill of materials there represents about 80%, 85% of the total cost of the battery. So we will be exposed in the same way as all other battery developers will be, to increasing raw material prices.

Graeme, Steve, I might just jump in, just mindful of every question that you've seen to answer. There's another one [indiscernible] quite afterwards. And obviously, just mindful of time as well, and you've been pretty generous, so far. We can make all these questions available to -- post the meeting. So if there's anything, perhaps, that flags up that you'd like to give an additional response, we can publish those to investors on the call post. I don't know, if you'd want to have a quick final scan through and maybe pick up a question to wrap up with. And then, what I'd like to do is, just ask you for a few closing comments, and then I'll redirect investors to give you their feedback, if I may.

Fantastic. Well, why don't we take the one that's had the most votes, Actually, JB's right at the top there. Will you be licensing Stereax IP to your larger clients in coming years? So yes, the answer is definitely, yes. That's really our business model for Stereax, is that we aim to fill the facility that we've currently got. And there are customers within the current portfolio that we are speaking to, who have an addressable market, which is, by their own estimates, larger than the entire capacity of our fab. And what we will be doing is, saying to them, once we've supported their development and initial commercialization activities, you can take a license, and you can either build your own facility or use a third-party fab and manufacture and then license from ourselves. So that's a key part of our growth strategy.

That's perfect. Thank you very much indeed, Graeme and Steve, for updating investors today. Look, I will shortly redirect investors to give you their thoughts, expectations and their feedback. But I guess, before doing so, Graeme, if I could ask you for a few closing comments, just to wrap up with, and then I'll redirect investors.

Yes, I'd like to thank everybody, actually, who's taken the time to participate in today's broadcast and especially those that have gone to the effort of submitting questions. It's been a very lively and well-informed Q&A session. I think, Steve and I have really enjoyed participating in that. And I look forward to interacting with you all in the future. Thank you.

That's great, Graeme, Steve. Thank you very much indeed for updating investors this afternoon. Can I please ask investors not to close this session, as we'll now automatically redirect you, in order that you can provide feedback to the management team, can really better understand your thoughts and expectations. It may take a few moments to complete, but I'm sure, will be greatly valued by the company. On behalf of the management team of Ilika plc, would like to thank you for attending this evening's presentation, and good afternoon or good evening to you all.