Ideal Power Inc

NASDAQ:IPWR

Q3-2025 Earnings Call

[Operator]

Good morning, ladies and gentlemen, and welcome to the Ideal Power Third Quarter 2025 Results Conference Call. [Operator Instructions] As a reminder, this event is being recorded.

I would now like to turn the conference over to Jeff Christensen. Please go ahead.

[Jeff Christensen, executive]

Thank you, Jenny, and good morning, everyone. Thank you for joining Ideal Power's Third Quarter 2025 Results Conference Call. With me on the call are David Somo, President and Chief Executive Officer; and Tim Burns, Chief Financial Officer. Ideal Power's third quarter 2025 financial results press release is available on the company's website at idealpower.com.

Before we begin, I'd like to remind everyone that statements made on the call and webcast, including those regarding future financial results and company prospects, are forward-looking and may be subject to a number of risks and uncertainties that could cause actual results to differ materially from those described on the call. Please refer to the company's SEC filings for a list of associated risks. We would also refer you to the company's website on supporting company information.

Now I'll turn the call over to Ideal Power's President and CEO, David Somo. David?

[David Somo, executive]

Thank you, Jeff. I appreciate everyone joining us today. I couldn't be more excited to join you today for my first Ideal Power results conference call. As many of you know, my new role was announced last week. That said, I want to touch on a few things before handing the call over to Tim Burns. We look forward to your questions after our prepared remarks.

I'd like to briefly discuss why I took the role at Ideal Power, and then I'll discuss my approach and near-term plans. First, why did I take the CEO role here? Ideal Power has created a compelling and customer-validated solution addressing secular high-growth power applications emerging in the data center, industrial and automotive markets where power efficiency, power density and cost are key requirements. There is a multibillion-dollar addressable market for our B-TRAN technology. With the ongoing electrification of our society, we are commercializing our technology in an opportune time by delivering innovative and enabling power semiconductor solutions for a broad array of growing and B-TRAN-enabled applications. Obviously, I have high confidence in Ideal Power or I wouldn't have joined. I want to commend and thank my predecessor, Dan Brdar, for his leadership and strong contributions in guiding the company to where it is today.

Second, I see Ideal Power as a technology innovator with its B-TRAN technology that enables inherent advantages in delivering ultra-low conduction losses, improved power efficiency and power density and bidirectionality, all on widely deployed low-cost silicon. These are competitive differentiators as we begin to commercialize our B-TRAN solutions with customers.

Third, I believe I can help Ideal Power to accelerate its commercial opportunities. I know Ideal Power's markets from my more than 30 years of experience in the semiconductor industry, spanning a variety of end-use markets, including data centers, industrial and automotive. I plan on leveraging my extensive commercial experience and relationships to drive revenue growth in our target markets. Revenue is a priority. I'm sure you are wondering what I plan on doing or what you should expect from me.

Having joined Ideal Power just last week, I'm spending time getting my hands on the details of the business. During the next several weeks, I will be listening closely to feedback from our customers, distributors, suppliers and the outstanding team here at Ideal Power. Because I'd like to be highly visible with customers, both existing and prospective, I'll be meeting with them to understand their priorities, opportunities and requirements and listen to their feedback about our technology and their applications. I'll review our opportunities, progress, road map and strategic initiatives. Those discussions will deepen my understanding of our business and enable me to fine-tune our vision and strategy going forward, building on the strong foundation that is in place today.

Upon completion of that process, I anticipate scheduling a call and webcast to share more detailed information and discuss certain topics in greater depth, including my perspective for product commercialization. Before setting expectations, I want to take the necessary time to thoroughly understand the current state of our business. As an organization, we will strive to execute in all aspects of the business with rigor, discipline and a strong sense of urgency. We will endeavor to execute on what we communicate and not put ourselves in a position to have to reset expectations. It goes without saying that this is important to establishing and maintaining credibility. One thing is abundantly clear, with a strong foundation in place from which to drive our future growth, I'm not going back to the drawing board. We're well positioned to drive long-term value creation for our customers, suppliers, employees and stockholders.

In closing, I look forward to partnering with Tim Burns, our CFO. I'd like to recognize the entire team for their third quarter progress and results. I'd also like to thank my predecessor, Dan Brdar, for assisting with the transition and providing a strong foundation for our growth. I'm thrilled to be joining Ideal Power at a time when the company has such exciting opportunities ahead.

Now, I'd like to turn the call over to Tim Burns to discuss our recent progress. Tim?

[Timothy Burns, executive]

Thank you, David, and good morning, everyone. Since David just started last week, I'll share an update on our progress since the start of the third quarter. First, we secured a purchase order from Stellantis in late August for custom development and packaged B-TRAN devices targeting multiple electric vehicle applications. We successfully completed our first of 5 deliverables under the purchase order in late September. The remaining deliverables are expected to be completed next year.

Second, we expect Stellantis to award us with a multiyear EV contactor program. As part of the program scope, Stellantis has told us they want to install B-TRAN-based contactors in Stellantis test vehicles potentially as early as late 2026. We'll know more about the scope and timing specifics as we work through the program details with Stellantis in the coming months. This program has broad and substantial potential as Stellantis recently shared with us that they are evaluating the deployment of B-TRAN-based contactors across all of their EV models and platforms.

Third, we are engaged in early discussions with a sixth global automaker. This automaker is evaluating B-TRAN for next-generation high-voltage EV power switching and protection applications where bidirectionality and low conduction losses enable more compact, reliable and efficient vehicle and charging architectures. We will share further updates on this opportunity as the engagement progresses.

Fourth, our first design win customer has successfully completed testing of the updated solid-state circuit breakers that we provided them during the third quarter. We're currently working with them on the finalization of their product design as they prepare for end customer sampling and production.

Fifth, we shipped additional solid-state circuit breaker reference designs to large potential customers including a global power management market leader in Asia. Reference designs are an important part of our commercialization strategy as B-TRAN is a new technology and customers are eager to get hardware in their hands that demonstrates the advantages of B-TRAN in their target applications.

Sixth, we increased the power rating of our discrete B-TRAN product by 50% and commenced shipment of these devices with a higher power rating and power density. This development has sparked greater interest from both existing customers and new prospects in our sales pipeline as it aligns well with the market moving to higher power architectures for many applications.

Seventh, we continue to expand our global reach, adding our first direct salesperson in Asia. He's already conducting face-to-face meetings with current and prospective customers. Interest in B-TRAN is growing across Asia, which is the world's largest market for power electronics. We're excited about the opportunity for B-TRAN in this region as Asian companies typically adopt new technologies faster than their European and American counterparts.

Eighth, third-party automotive qualification and reliability testing of B-TRAN devices is well underway with more than 1,000 packaged B-TRAN devices from multiple wafer runs. Early test results are positive with zero failures to date. As a new semiconductor device without a long operating history, third-party reliability testing and the data it generates is key for both industrial and automotive customers as they evaluate and adopt B-TRAN for their applications.

Moving on to the initial market for B-TRAN, the industrial markets, and in particular, solid-state circuit protection for data centers, microgrids, industrial facilities and grid infrastructure. Our first design win customer is one of the largest circuit protection equipment manufacturers in Asia, serving data centers, industrial and utility markets and renewable energy applications.

As we have previously mentioned and based on the first design win customers' projections, the initial product from this customer could translate to several hundred thousands of dollars of revenue for Ideal Power in its first year of sales with the opportunity to exceed $1 million in revenue for us in the second year of sales. Importantly, this marks only the beginning. The initial product is anticipated to be the first of multiple products from this customer that will incorporate B-TRAN into solid-state circuit breakers.

This customer provides a variety of circuit breaker products across various power ratings and is expected that they could expand their portfolio to add a full family of solid-state circuit breakers at ratings similar to their current family of electromechanical breakers. Discussions of other B-TRAN-enabled solid-state circuit breaker products has already started, and our team recently built the solid-state circuit breaker prototype with a higher rating to share with this customer.

Looking briefly at innovation, we increased the power rating of our discrete B-TRAN product by 50% and commenced shipment of these devices with a higher power rating and power density. This development has sparked greater interest from both existing customers and new prospects in our sales pipeline. Our approach to power ratings of our products is deliberately cautious, an approach that has been well received by our customers as we bring new solutions to their markets and applications.

As we accumulate more testing hours and go through additional reliability testing, including the ongoing third-party automotive qualification testing, we're finding that we have more than ample margin in our design to increase the power rating of our products. Elevated product ratings will expand our SAM to include additional applications. It will also strengthen our product competitiveness in the marketplace as it translates to smaller, lower-cost OEM products for customers that choose B-TRAN as their power semiconductor solution.

We previously mentioned that orders near term are not dependent upon the successful completion of automotive qualification. However, achieving third-party automotive qualification would provide additional confidence among industrial customers regarding B-TRAN's long-term reliability. It would also provide evidence of the device's reliability under extreme conditions such as high humidity and temperature, which exceeds typical industrial application requirements.

Additionally, given that engineers tend to be cautious when adopting new technologies, achieving automotive qualification could help accelerate the adoption of B-TRAN-based products by early adopters in our initial target industrial markets.

Our B-TRAN patent state continues to grow. Currently, we have 97 issued B-TRAN patents with 47 of those issued outside the United States. Our patent coverage spans North America, China, Taiwan, Japan, South Korea, India and Europe, all representing our high-priority patent coverage geographies. As a result of our continued innovation, our list of pending B-TRAN patents is now at 73.

To safeguard our intellectual property further, we treat the proven double-sided wafer process flow we develop to make our devices as a trade secret and do not disclose the identity of and work under strict confidentiality with our wafer fabrication partners. So even if a competitor studied our patents, they wouldn't have the know-how to fabricate the device.

Next, I'll discuss our financial results. Our third quarter 2025 cash burn from operating and investing activities was $2.7 million, up from $2.4 million in the third quarter of 2024 and up from $2.5 million in the second quarter of this year. Our Q3 cash burn was at the lower end of our guidance of $2.7 million to $2.9 million. Our cash burn from operating and investing activities for the first 9 months of 2025 was $7.4 million, up from $6.6 million in the first 9 months of 2024.

We continue to manage expenses prudently and aggressively. We expect fourth quarter 2025 cash burn to be approximately $2.5 million to $2.7 million with a full year 2025 cash burn of approximately $10 million. This compares to a 2024 cash burn of $9.2 million, excluding the benefit of warrant proceeds. The higher forecasted cash burn in 2025 compared to 2024 is due to increased semiconductor fabrication spending and hiring.

Cash and cash equivalents totaled $8.4 million at September 30, 2025. We have no debt and a clean capital structure. We recorded modest revenue for the third quarter of 2025 as customers continue to evaluate our technology.

Initial orders from the large companies evaluating our products for potential inclusion in their OEM products will be small with order sizes increasing as customers start to prototype their OEM products, progress through their design cycles and build inventory for the rollout of their B-TRAN-based products.

Operating expenses were $3 million in the third quarter of 2025 compared to $2.9 million in the third quarter of 2024, with the increase due to higher wafer fabrication costs at our second foundry. We expect operating expenses to increase modestly in the coming quarters due to recent and future hiring and costs associated with our development and commercialization efforts.

We also continue to expect some quarter-to-quarter variability in operating expenses, particularly our research and development spending due to the timing of semiconductor fabrication runs, product development, other research and development activities and hiring. The timing of equity grants and related stock-based compensation expense recognition will also cause variability in our quarterly operating results.

Net loss in the third quarter of 2025 was $2.9 million compared to $2.7 million in the third quarter of 2024. Considering our asset-light business model, no debt and modest planned cash burn, we have sufficient liquidity on our balance sheet to fund operations through at least mid-2026. We'll potentially see several sources of funds over the next year, such as product sales, development agreements and other commercial agreements with upfront payments.

Additionally, we are exploring strategic relationships with our well-capitalized and large global partners with these opportunities strengthening as we further advance these customer relationships. As a publicly traded company, we also have access to the capital markets as necessary, providing us with additional financial flexibility.

At the end of September, we had 8,511,403 shares outstanding, 824,760 options and stock units outstanding and 653,827 prefunded warrants outstanding. At September 30, 2025, our fully diluted share count was 9,989,990 shares.

In summary, we are thrilled to share that our first design win customer has successfully completed testing of the updated solid-state circuit breakers and are now finalizing their product design as they prepare for end customer sampling and production. We're also delighted to announce that not only securing the purchase order from Stellantis for custom development and packaged B-TRAN devices targeting multiple EV applications, but also completing our first of 5 deliverables under this purchase order.

Overall, it is an exciting time at Ideal Power, and I look forward to working with David to capture the significant market potential for B-TRAN as an ultra-low loss and bidirectional power semiconductor.

At this time, I'd like to open up the call for questions. Operator?

[Operator]

[Operator Instructions] Our first question is coming from Casey Ryan of WestPark Capital.

[Casey Ryan, analyst]

David, welcome. It's great to have you on board. Tim, thank you for this good update. So I just wanted to start with generally automotive. It feels like the opportunities are with EV platforms and the growth of those platforms generally. And so I just want to sort of confirm that for myself before we go a little further.

[David Somo, executive]

Yes. Thanks, Casey. Glad to be on the call, and I appreciate the question. So automotive is one of multiple markets that we're able to sell our products into where it's a strong fit to the applications requirements. As you understand, automotive is also one of the longer development cycles and projects are typically multiyear programs. So we continue to work to, I would say, move from the initial engagement through continued evaluation where we've made progress now in delivering enhanced products to our customers. We've continued multiple stages of the development programs. And each of those is a necessary step in moving towards completing R&D evaluation of the products and qualification and moving into series engineering and eventually landing into vehicles on the EV side.

[Casey Ryan, analyst]

Okay. Terrific. And then sort of on that EV track, what's driving the automakers to look for better solutions than, say, what they have currently or what they've had previously because generally, they must be facing some limitations with sort of existing solutions. Is it battery density or the power of the amount of electronics per vehicle? And I'm sort of happy for it for Ideal Power, but I'm curious what's sort of driving it and what sort of barriers they're running into with sort of their current solutions. And of course, you guys are bringing a better solution to market.

[David Somo, executive]

Sure. Well, one of the fundamental trends in power electronics is a move to higher power architectures. And one of the fundamental ones in EV architectures is the adoption of 800-volt main battery systems, which is driving a redesign of the overall architecture and traction inverter, charging systems, contactors, battery disconnect units and so forth. So that's what's the reason for continuing to evaluate technologies that provide higher power efficiency, improved power density and minutes to cost.

[Casey Ryan, analyst]

Okay. Terrific. And then sort of quickly on like charging stations, which I think is also a potential market for Ideal Power. I think charging stations are also moving to 800-volt systems, right? Which might cause the same sort of trend where people would be interested in your solution?

[David Somo, executive]

Yes. Fast DC charging stations actually continue to increase the power to multiple kilovolts, gets partitioned out across multiple terminals. So it does present an opportunity for us. Also, in some instances, particularly home charging, there is bidirectionality involved where you can feed into the battery pack and then off-hours feed out from the battery pack back in that distributed power. So that's unique to the design of our B-TRAN technology.

[Casey Ryan, analyst]

Okay. Terrific. That's really helpful. And then I wanted to ask about the Asian, I think, power management company is what we're talking about them as a customer. So it sounds like -- and Tim, you said sort of a couple of hundred thousand dollars might be kind of a target range for potential revenues in year one. But what I wanted to ask was, is the product currently available for sale hypothetically today? Or will it start to go on sale to the commercial market sometime in '26?

[Timothy Burns, executive]

Yes. So it's not currently for sale. So they're finalizing their product design. We're working with them to do that right now. I don't know the specific timing, whether it will be here later this year or whether it will be next year. That's something we can cover here when we have the update call, in terms of timing. But they have the updated prototypes. They've completed testing. It was successful. So those prototypes look good. And we're just waiting for them to share a little bit more on their timing specifics as it relates to their rollout plan.

[Casey Ryan, analyst]

Yes. Well, I mean, from my perspective, what's significant, right, is going from concept to testing to sort of turning into a commercial product, having completed that cycle, I think, is really impressive. So that's it for me right now.

[Operator]

I will now turn this call back to Jeff Christensen to read questions submitted through the webcast. Thank you.

[Jeff Christensen, executive]

Thank you, Jenny. Gentlemen, the first submitted question is, any additional context around the CEO transition? Is this something that was planned for?

[Timothy Burns, executive]

So yes, Dan's retirement was planned. There was an extensive search that was conducted and led by our Board that Dan was involved with to identify our next CEO. And that resulted in us bringing David on board. And I'm actually really excited, particularly because of his past experience in semiconductors and commercial expertise that it's a great time to bring him on because I think it will really help with obviously is our priority and what's on investors' mind in terms of revenue generation.

[Jeff Christensen, executive]

Thank you. Our next submitted question is, how do you see the markets evolving? And this is a question for David. How do you see the markets evolving, including data centers, industrial and automotive? And what are you most excited about with Ideal Power opportunities?

[David Somo, executive]

Okay. So Casey alluded to part of this question, but I'll give a more thorough answer here. Our B-TRAN-enabled solutions, from my perspective, it's excel and high-power applications, delivering lower conduction losses for improved power efficiency, smaller system size for improved power density, bidirectionality and enabling lower systems cost. Power levels have continued to trend up, as I mentioned a moment ago, across these applications, including the AI data center, which is now planning to move to 800-volt rack architectures commencing sometime in 2027. Automotive EV with the adoption of 800-volt battery systems and fast DC charging terminals as well as other industrial infrastructure applications as the power grid is enhanced to support these growing applications.

In addition, grid-to-system and system-to-grid power transfer requires bidirectionality, where there is also a growing trend to migrate from electromechanical to solid-state semiconductor-enabled systems. Each of these major technology trends involve applications such as circuit breaking and protection, UPS and battery disconnect system, among others, that B-TRAN solutions excel at enabling.

So in summary, we see a continued trend towards higher power levels across these multiple applications, looking for improved power efficiency, improved power density and managing costs that are all a strong fit for our B-TRAN technology.

[Jeff Christensen, executive]

Thank you. Our next submitted question is, do you expect the initial sales ramp and milestones to be achieved within 2025?

[David Somo, executive]

So having been in the seat here a total of 8 days, I'm currently spending my time deepening my understanding of the details of our business. Once I've been through that process, including the opportunity for face-to-face meetings with key customers to understand thoroughly the details of the engagements that we have with them, I anticipate scheduling a call and webcast to share more detailed information and discuss certain topics in greater depth, including my outlook for product commercialization. Revenue is a priority, and I plan on leveraging my go-to-market experience achieved in my 30-plus years in semiconductors across many end sectors and customers to drive revenue growth in our target markets.

[Jeff Christensen, executive]

Thank you. We have several investors that have submitted questions, and please submit your questions using the "Ask a Question" button. And as you think a question, submit them, you don't need to accumulate all your questions and submit at one time.

Our next submitted question is, what is Ideal Power doing to expand the sales pipeline?

[David Somo, executive]

Yes. So as discussed in our prepared remarks and shared by Tim, we have added direct sales in Asia and are already conducting meetings with current and prospective customers. And we're excited about the opportunity for B-TRAN in the region as Asian companies generally adopt new technologies faster than their North American and European counterparts. While we continue to expand the sales funnel, we have a strong focus on closing the many opportunities available to us from current customer engagements. So having the additional sales capability on the ground in Asia is important to us, and we view it as a market that can actually move faster in adoption of new technology than some of the others.

[Jeff Christensen, executive]

Thank you. How would you compare B-TRAN to competitors, including silicon and silicon carbide solutions?

[David Somo, executive]

Yes. So I think about it in this way. B-TRAN has 2 significant advantages. First, it has ultra-low conduction losses, leading to higher power efficiency and improved power density. And second, it's bidirectional. These advantages translate to more power-efficient and compact customer products at lower cost compared to alternative silicon and silicon carbide power solutions that are in the market today.

[Jeff Christensen, executive]

Okay. Thanks. Can you provide us with any additional information on Tier 1s and OEMs besides Stellantis in the automotive?

[David Somo, executive]

Yes. So we're engaged with several automotive OEMs and Tier 1 suppliers as we've previously said. These prospective customers are considering a range of applications and include power switching, EV contactors and battery disconnect units, charging systems and inverters. With the automakers increasingly moving to the 800-volt architectures, as I talked about earlier in my comments, the opportunity for us in this market is expanding. At this point, it also seems likely there will be a replacement of electromechanical contactors with solid-state solutions in EVs.

[Jeff Christensen, executive]

Okay. Thanks. Our next submitted question is, when mentioning EVs with Stellantis, is either the drivetrain or contactor program likely to be included in hybrids?

[Timothy Burns, executive]

Yes. The Stellantis program is really focused on electric vehicles, but our technology would bring the same benefits to hybrid electric vehicles. So we're obviously engaged with several global automakers, several Tier 1 automotive suppliers. I assume once we start getting adopted EVs, the hybrid is also a natural extension of that. So there's definitely an opportunity there for B-TRAN.

[Jeff Christensen, executive]

Thank you. Our next submitted question is a long one, is just to understand, you upgraded the power rating to 75 amps. You stated in the release that this maintains a significant design margin to a tested long-term continuous basis of 150 amps. What does that mean? How would you -- would you, at some point in time, increase 150 amps? Or would you have to test it at above that at a safe design margin? Is there a standard margin that the industry uses? And how does the 75 amps, 150 amps margin fit within the standard?

[David Somo, executive]

Sure. So I'll take that one. You can think about it in the following manner. Increasing our power rating enables customers to evaluate our B-TRAN solutions for a wider range of applications as well as increase the power rating while lowering conduction loss of existing applications in their current designs. There isn't a specific industry guideline for safe design margin. However, we remain very conservative in rating the device at 75 amps, and we've tested it up to 150 amps. We want to ensure that we're providing the proper safety margin to our customers, and that varies by customer and by applications. But I would say that we have sufficient headroom to continue to scale the device up for higher power solutions as the trend continues in that direction.

[Jeff Christensen, executive]

Thank you. Our next submitted question is, please provide any color on where we stand with manufacturing?

[Timothy Burns, executive]

Yes. So we have 2 foundries. As we mentioned, one of them is in Europe, one of them is in Asia. We've been working with the Asian foundry for a little bit longer than we had the European foundry. So I'd say they probably are still ahead of the European foundry in terms of things like yield. But we're comfortable that we could utilize devices from either one for end product sales to customers. And we also have a great relationship with 2 packaging houses, one that we're using -- we use primarily for production, and that's actually in Asia and one here in the U.S. that we also continue to do some development work with that we could use for production, if necessary, for instance, if we received a government program that required U.S. manufacturing. So overall, I'd say we're in really good shape. Right now, it's just about commercializing the technology.

[Jeff Christensen, executive]

Thank you. Our next minute question is, what are the main barriers to closing sales?

[David Somo, executive]

Introducing B-TRAN with it being a new semiconductor technology and device structure begins with educating the customers. Engineers are generally familiar with IGBTs and MOSFETs, but B-TRAN features innovative and distinct architecture that functions differently from traditional semiconductor devices. So to help our prospective customers evaluate our products for their applications, we provide evaluation kits and reference designs to simplify this undertaking.

Additionally, engineers often adopt a cautious approach, which can extend the evaluation period. Achieving automotive qualification, as we mentioned during our prepared remarks, will help to speed up adoption by demonstrating the technology's proven long-term reliability for their applications.

[Jeff Christensen, executive]

Thank you. Our next question is, how should investors think about tariffs and trade policies on Ideal Power?

[Timothy Burns, executive]

Yes. We continue to see that the tariff situation is very fluid, but we anticipate minimal impact on our operations from tariffs in place today. And notably, power semiconductors are often exempt for many of these tariffs, which really limits the potential effect on us. While the situation continues to evolve, we're confident that we're well positioned to manage and mitigate the impact of future tariff changes, trade policy shifts and also supply chain disruptions.

[Jeff Christensen, executive]

Thank you. That concludes our question-and-answer session. I'd like to turn the call back over to David Somo for closing remarks.

[David Somo, executive]

Thank you, Jeff. I want to thank everybody for participating in today's call and for the good questions. As I mentioned earlier, we anticipate scheduling a call and webcast in advance of our year-end results call to share more detailed information and discuss some of the topics we explore today in greater depth. Operator, you may end the call.

[Operator]

Thank you. This concludes today's conference. All parties may disconnect, and have a great day.