Liquidmetal Technologies, Inc. (LQMT) Earnings Call Transcript & Summary

Good afternoon. Welcome to Liquidmetal Technologies Fiscal Year 2023 Conference Call. My name is Dilem, and I'll be your conference operator this afternoon. Joining us on today's call is Mr. Tony Chung, Liquidmetal's Chief Executive Officer. Before we proceed, I would like to provide the company's safe harbor statements with important questions regarding forward-looking statements made during this call as follows: All statements made by management during this call that are not based on historical fact are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of the Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. Such forward-looking statements include, but are not limited to, those made by Mr. Chung, regarding the company's cash, revenue outlook and technology development. While management has based any forward-looking statements made during this call on its current expectations, the information in which such expectations were base may change. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of risks uncertainties and other factors, many of which are outside the company's control that could cause actual results to materially differ from such statements. Such risks, uncertainties and other factors include, but are not necessarily limited to, those set forth under risk factors in the company's annual report on Form 10-K for the year ended December 31, 2023. Accordingly, you should not place any reliance on forward-looking statements as a prediction of actual results. The company disclaims any intention and undertakes no obligation to update or revise any forward-looking statements. You are also urged to carefully review and consider the various disclosures and the company's annual report on Form 10-K for the year ended December 31, 2023, as well as other public filings with the SEC, since such date. I would also like to remind everyone that this call will be available for replay starting later this evening via a link available in the Investor Relations section of the company's website at www.liquidmetal.com. I would now like to turn the call over to the company's Chief Executive Officer, Mr. Tony Chung.

Thank you, Dilem, and thank you, as always, to our investors for participating in today's call. Last year's earnings call format, which answered frequently asked questions, was very well received, and I was glad to see everyone's positive feedback. For today's call, I'd like to focus on our revenue opportunities and go into some of our processes for obtaining them. Please remember to supplement the information provided during today's call with the financial statements and disclosures in our 2023 10-K filed earlier today to get the latest full overview of our company operations. So with that said, let's first talk about the Movano Evie health ring. With this product launch, Liquidmetal has brought forth its first new product coming out of the pandemic. And I thank everyone for all the congratulatory e-mails that I received. The team here at Liquidmetal was thrilled with the excitement as well. Movano Health is a start-up company based in Pleasanton, California, and they have brought to market health rings that are specifically designed for monitoring women's health by tracking vital metrics, including heart rate, menstrual cycles and sleep quality. As a case study example for our investors, let me share with you how we brought this product to market and also go over our sales cycle to get this and other similar products into general production. We were first contacted by Movano in late 2022. At the time, they were considering a variety of materials and processes to produce their Evie health rings including aluminum, stainless steel and other typical materials for making jewelry. While researching the strengths and weaknesses of these materials, they came across liquid metal from our website and looked into the characteristics of amorphous alloy. They immediately recognized the strength corrosion resistance and elasticity of amorphous alloys, which aligned well with the material properties that they valued. As you may be aware, the Evie rings are circular in design but have an opening at the tip, allowing for flexibility and expansion. This factor was one of the many reasons Movano selected Liquidmetal as the sole material for their ring shell. Again, these rings are specifically designed for women to accommodate the natural size fluctuations that a woman's body goes through, rings that easily expand and come back to their original shape without being permanently deformed or ideal characteristics for women's comfort and ease of use. With this in mind and through a highly accelerated process, Liquidmetal was able to prototype a ring during the first half of 2023 for Movano's initial test. After examining our prototypes and confirming the benefits of amorphous alloy strength, adhesion, scratch resistance, et cetera, it was ultimately decided that we were the optimal choice. Early production orders followed on a similarly aggressive time line, and Liquidmetal and Movano worked closely to optimize design, manufacturing and post-processing, keeping in mind that the Evie Ring offers include 7 different sizes, which created even more challenges for molding and production. The sales process also requires the cooperation and coordination with our manufacturing partner, Yihao. And during mid-2023, Movano's quality team had the opportunity to audit Yihao's manufacturing sites. They were thoroughly impressed with the state-of-the-art facility and validated Liquidmetal's global production capabilities. With the first production rings in hand in the second half of 2023, Liquidmetal performed an array of quality tests and reviews before packaging the ring for shipment to me Movano's assembly plant. By the end of 2023, the Evie Rings were officially launched. Since then, we have worked closely with Movano to improve the Evie Ring durability and performance. All in all, the rings have been a huge success. At the 2024 Consumer Electronics Show, the Evie Ring won 11 Best of CES awards from major media publications, including USA TODAY and CNN. The ring was recognized as best-in-class in the fitness tech, health, wearable and mobile categories, in large part due to the company's plan to pursue FDA clearance on the ring's heart rate, SpO2 and respiration rate data. The takeaway from the entire Movano experience is that working with start-up technology companies will be a key part of our long-term success. Start-ups welcome new technology with open arms, are not hampered by delimitating internal processes and move quickly into general production. As a result, we launched a new product roughly a year from the date of initial customer contact. The global wearable technology market was valued at about $60 billion in 2022 and is expected to expand at a compound annual growth rate of 15% from 2023 to 2030. We are truly excited about the market potential and new partnership with Movano and are in talks with other wearable wellness companies to bring forth new opportunities, which we hope to announce soon. Now let's talk about the medical tool industry. Last year, I discussed the challenges of working with various companies depending on their size. This is especially true of medical device companies. We have targeted large-scale medical device companies and instrument suppliers, who typically require long-term investment in order to prove out the benefits and safety of our technology. They must navigate regulatory oversight and surpass strict vendor qualification processes. Our efforts into large-scale medical product companies have resulted in 2 Liquidmetal products that are in preproduction mode. The first is with a major surgical robotics company for a component on a handheld controlling device. And the second is with a medical device company that assembles Liquidmetal supply components into a handheld kidney stone crushing device. While these are lower-volume opportunities, it provides us a chance to get on to their qualified vendor list and be poised to interact directly with all of their internal engineers. We are working diligently with these and other medical tool companies to bring about much higher volume opportunities. We also have opportunities with small- to medium-sized medical tool customers. Though the production volumes are often lower, these customers move more quickly in adopting new technologies. One such opportunity that we are currently pursuing is with a start-up medical tool company, which makes medical devices for alleviating the effects of tendinitis. We have completed the prototype phase and are hoping to go into production during the latter part of 2024. Another industry that we have had success is musical instruments. Martin Guitar has been one of our steady customers since 2019. Their premium luxe bridge pin have become synonymous with the kind of quality sound that only resonates from amorphous alloys. They are an innovative company. And to this day, we collaborate on prototypes and bring about new product offerings made of Liquid metal alloys, which consistently add to our bottom line. Other customers we are currently in talks with are in the fintech and sporting goods sector. We'll keep you apprised as more details come into fruition on these opportunities. I hope that this gives you a good broad overview of the opportunities ahead and our internal processes to get them into general production. We will continue to be vigilant in identifying and executing on these and new opportunities and hope to have more announcements soon. Let's move on to another topic of discussion, second source manufacturing. I have indicated previously that our current setup with a full-service U.S. team and a Chinese manufacturing partner is sufficient to grow our company on a global scale, and that we currently don't have the need for additional manufacturing capacity. While this is still the case, we have been working on identifying a smaller-scale second-source opportunity to help assure customers that there are multiple options available for prototyping and manufacturing Liquidmetal parts. We are currently in active exploration to identify and secure a U.S. manufacturing source for advancing amorphous alloy technology. We hope to announce the new partnership soon. Now let's go over the financial results for 2023. On the balance sheet, we ended the year with approximately $23 million of readily available liquid cash and investments. One other important asset that we have on our books is our 41,000-square-feet corporate office and warehouse facility that we purchased in 2017. Recent market valuation reports have suggested that the building's fair market value is approximately 1.5 to 2x the $8 million on our books, which helps us with our overall liquidity position. We have no debt and are getting closer to breakeven cash flow. We are well positioned to fund our operations for the foreseeable future. And as confirmed by our auditors, we have no going concern issues. One last note. If you have not visited our website lately, please check it out. We've incorporated a sleek new design and updated information related to our technology. Initial feedback has been extremely positive, and I hope everyone will appreciate the new look and feel. Thank you, and I look forward to sharing more good news in the near future. Operator, back to you.

Thank you. Mr. Chung, at this time, this concludes today's call. You may now disconnect.