Earnings Call Transcript
Ideal Power Inc. (IPWR)
Earnings Call Transcript - IPWR Q2 2024
Operator, Operator
Good morning, ladies and gentlemen, and welcome to the Ideal Power Second Quarter 2024 Results Call. As a reminder, this event is being recorded. I would now like to turn the conference over to Jeff Christensen. Please go ahead.
Operator, Operator
Thank you, operator, and good morning, everyone. Thank you for joining Ideal Power's second quarter 2024 conference call. With me on the call today are Dan Brdar, President and Chief Executive Officer; and Tim Burns, Chief Financial Officer. Ideal Power's second quarter 2024 financial results press release is available on the company's website. Before we begin, I'd like to remind everyone that statements made on the call and webcast, including those regarding future financial results and the company's 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 in the call. Please refer to the company's SEC filings for a list of associated risks, and we would also refer you to the company's website for more supporting information. Now I would like to turn the call over to Ideal Power's President and CEO, Dan Brdar. Dan?
Daniel Brdar, CEO
Thank you, Jeff, and thanks, everyone, for joining us today on our second quarter conference call. I'm excited to update you on our progress since the start of the second quarter. We've accomplished a couple of our key milestones for the year and made significant progress with several key customers. Then I'll turn things over to Tim Burns to discuss our financial results. We'll be pleased to answer your questions after our remarks. I’m delighted to report on a number of new developments at Ideal Power. I'll cover the key highlights briefly then discuss them in a little more depth and provide context for their importance. First, we are collaborating with our third global automaker, along with our previously announced engagements with Stellantis and a second top 10 global automaker. Second, we announced a global distribution agreement with a second distributor that is particularly strong in Asia. This distributor is already placing orders with us. Adding distributors and channels to market is one of our key 2024 milestones. Third, we qualified a second wafer fabrication supplier with high-volume production capability. This is also one of our 2024 milestones. Fourth, we secured orders for B-TRAN devices and circuit breaker evaluation boards from a global leader in power semiconductor and power electronic solutions. Fifth, we secured an order for B-TRAN devices for evaluation in solar inverter applications from a top 10 global provider of power conversion solutions to the solar industry. This company was a participant in the B-TRAN test and evaluation program. Sixth, we secured an order for SymCool Power Modules and drivers from a Forbes Global 500 power management market leader that also participated in our B-TRAN test and evaluation program. Seventh, we added a global leader in circuit protection, industrial fuses and power conversion technology with over $1 billion in annual sales to the roster of our test and evaluation program. And eighth, based on the results of testing, we increased the current rating of our SymCool Power Modules by 25%. When combined with an approximate 50% size reduction we recently implemented, we dramatically increased the SymCool Modules' power density. Looking first at the automotive market, we continue to leverage the work we're doing with Stellantis to attract other auto OEMs and to evaluate B-TRAN for their next-generation electric and hybrid vehicle platforms. This quarter, we added a third global automaker to our list of customer engagements. After learning more about our technology and products, their team realized the potential benefit of B-TRAN in several locations in the EV drivetrain. Their initial focus is on EV contactors. This global automaker's engineering team is working closely and meeting regularly with our engineers on the use of B-TRAN-enabled contactors to potentially replace electromechanical contactors in their EV platform. Contactors serve as cutoff switches for high-power applications in EVs. They play a critical role in isolating the battery, inverter, and high-speed charging system to ensure safety when the vehicle is off or being serviced. Contactors are bidirectional, and there are typically 4 to 6 high-power contactors in every EV. In the assessment of the automotive OEM, the bidirectional nature, ability to accommodate higher voltage DC platforms, fast speed, and low conduction losses of B-TRAN make a solid-state contactor a good first use case for their EVs. The solid-state contactors in EVs are an emerging market, and our technology is potentially enabling for this application due to its very low conduction losses and inherent bidirectionality. The high-power EV contactor market is forecasted to grow to over $3.7 billion in 2025. We believe that over time, solid-state contactors will potentially displace electromechanical contactors in half or more of this market. This market is additive to the serviceable addressable market for B-TRAN that we've shared with you previously. We're excited to add another global automotive OEM and look forward to expanding our collaboration with them. Turning to Stellantis; as many of you know, we successfully completed Phase 2 of our program with them a few months ago and are eagerly waiting to begin Phase 3. In the meantime, we continue to meet with their team weekly, while they developed and sent out the drivetrain inverter solicitation to roughly a half a dozen Tier 1 suppliers. The Tier 1 suppliers were asked to provide their proposals to supply the B-TRAN-based drivetrain inverter. Stellantis introduced our team to the Tier 1 suppliers we were not already working with, so we could bring them up to speed on the technology, our products, the unique configuration that we developed for the application, and the corresponding test data that demonstrated we provide better performance compared to other silicon and silicon carbide solutions. The Tier 1 inverter proposals have been submitted, and Stellantis is in the process of reviewing the proposals and will downselect to one or two Tier 1 suppliers to design and build the drivetrain inverter for their new EV platform. In a parallel effort, Stellantis is working with us and a large semiconductor company with expertise in driver control circuitry for the B-TRAN inverter drivers. After the Tier 1 inverter supplier is selected by Stellantis, we expect to start Phase 3 working with the Tier 1 suppliers and Stellantis' team with the objective of developing a production-ready B-TRAN Power Module for use in their EV drivetrain. Completion of the B-TRAN module is still targeted for 2025. While their focus continues to be on a custom B-TRAN Power Module for use in the EV drivetrain platform, they also continue to express interest in B-TRAN for battery circuit protection as well. Turning to the previously announced top 10 global automaker in our test and evaluation program, we've been able to share the unique B-TRAN configuration we developed for EV drivetrain inverters with them, as well as the test data we generated under the Stellantis program. Since we're not constrained under our arrangement with Stellantis, we're using the design work and test data to attract other automotive OEMs and Tier 1s to explore and adopt B-TRAN for their next-generation vehicles. As a result of the test data we provided, the top 10 automaker is moving forward and is expected to order hardware for testing by their design team. We're also introducing them to the concept of B-TRAN-enabled EV contactors, giving us two opportunities with this automaker that could evolve into formal programs. Now let's discuss industrial markets as they are expected to be the early source of our product sales and revenue. We secured orders for B-TRAN devices and circuit breaker evaluation boards from a global leader in power semiconductor and power electronic solutions in connection with its launch of a multiyear DC power distribution system program. This opportunity was introduced to us through our new distributor relationship with RYOSHO. The company presents multiple opportunities for us as it addresses several of our target industrial markets, solid-state circuit breakers for industrial facilities and electric utility grid infrastructure and renewable energy. In solid-state circuit breaker applications, our B-TRAN technology has clear advantages, providing dramatically lower conduction losses, lower costs, and bidirectionality compared to electromechanical breakers and IGBT and silicon carbide MOSFET-based solid-state circuit breakers. Also during the quarter, we secured an order for B-TRAN products for evaluation in solar inverter applications from a top 10 global provider of power conversion solutions to the solar industry. This customer was a previously announced participant in our B-TRAN test and evaluation program and is one of several who are advancing from that program to begin ordering products from us as part of their application-specific development work. While moving through the test and evaluation program with these large companies takes time, we're excited to see many of them taking that next step with us and beginning to order commercial products in small quantities. We're also pleased that we haven't had any companies drop out of the test and evaluation program. We also secured an order for SymCool Power Modules and drivers from a Forbes Global 500 power management market leader that was also a participant in our test and evaluation program. This global power management market leader is evaluating SymCool against IGBT modules for use in solid-state circuit breaker applications. This customer's order for SymCool Power Modules follows their testing of discrete B-TRAN devices. In response to this customer's request, Ideal Power provided high-volume quotes for SymCool Power Modules. This customer may also evaluate our technology for other power conversion applications. We're very pleased that multiple customers in our test and evaluation program are advancing to initial orders with us. We also added a global leader in circuit protection and industrial markets with over $1 billion in annual sales to the roster of the B-TRAN test and evaluation program. This global supplier presents multiple opportunities for us as they address several of our targeted industrial markets, including industrial fuses, renewable energy and energy storage power conversion, rail transportation, and EV power management. As part of our effort to expand our geographic and application diversification, we added a second global distributor, RYOSHO, a subsidiary of RYODEN CORPORATION. RYODEN is listed on the Tokyo Stock Exchange and has almost $2 billion in annual sales. They have 21 international sites, including RYOSHO USA. RYOSHO is focused on the sale of semiconductors and other electronic components. This distributor already placed orders with us from a large global customer in Asia, interested in the company's products for solid-state circuit protection applications. This is a significant development in the commercialization of our B-TRAN technology. As a small company, we cannot efficiently reach the large global customer base for our products on our own. By leveraging the large investment in semiconductor sales and distribution networks, we can reach many customers that would be difficult for us to engage or educate about our products and technology. Like Richardson Electronics, RYOSHO has a strong technical sales team with expertise in generating demand and securing orders for new products and technologies and has a global customer base. Their sales focus is particularly strong in Asia, which complements Richardson's geographic strength. We look forward to collaborating with RYOSHO to secure additional orders, particularly in the Asian markets, where they have an extensive customer base. Adding distributors for our products is one of our key milestones for this year and will likely add others in the coming quarters to address geographies or customer segments not covered well by our existing distributors. Another key milestone we completed in the quarter was the qualification of a second wafer fabrication supplier with high-volume production capability. This facility in Europe, along with our previously qualified wafer fabricator in Asia, adds dual sourcing for wafer fabrication, geographic diversity to our supply chain and will support future revenue growth, providing ample capacity to support anticipated customer demand over the next several years. This fab successfully completed a multi-wafer full process engineering run of double-sided B-TRAN wafers. By leveraging our proprietary proven process flow, this foundry was able to produce functional bidirectional devices under initial run without the need for special equipment or capital investment. Initial devices from this run have already been packaged by our packaging partners and successfully tested in our lab. This fab has demonstrated expertise in commercial manufacturing of high-power bipolar devices such as IGBTs. It's a qualified manufacturer of semiconductor wafers to multiple Tier 1 automotive suppliers. This will help Ideal Power to attract and engage prospective automotive OEMs and Tier 1 suppliers as customers since the fab is ISO 9001 and ISO 14001 certified to globally recognized standards for quality and environmental management systems. Our dual sourcing for wafer fabrication in disparate geographies has no exposure to China or Taiwan to mitigate supply chain risk. Turning to product development; based on the results of testing, we confirmed that our initial product ratings are quite conservative, and our device design is very capable of providing high performance and handling the current and voltage ratings required for our target applications. For example, our discrete device is currently rated at 50 amps and has been tested on a long-duration basis at 150 amps without failure or any loss of performance. As a result of our test data, we are modestly increasing the current rating of our SymCool Power Module by 25% from 160 amps to 200 amps. While we feel this is still a conservative rating, the customer feedback we've received from our test data reflects our comfort level in making this change. Along with the rating increase, we also implemented a reduction in the physical size of our Power Module of approximately 50%. This combination dramatically increases the power density of the SymCool Power Module, which allows customers to use less space in their OEM products to accommodate the semiconductor devices, helping them lower cost while improving efficiency and overall performance. As part of our cost reduction initiatives, we're also planning on reducing the cell size of our B-TRAN die. This will allow us to double the number of dies per wafer, effectively doubling the number of dies per year that our wafer fabrication partners can produce, significantly expanding our available capacity for our large volume target customers such as automakers. Also, since wafer processing cost is on a per-wafer basis, this will yield a significant cost reduction for our products as we scale up production. We recently began our first engineering run of this second-generation B-TRAN die design. While it will take us a few runs to incorporate and finalize any learning from this effort, no significant process changes are expected. Also in the third quarter, we expect to begin the wafer runs we'll use for third-party reliability testing and automotive qualification. This tends to be a lengthy process due to the time it takes to complete thousands of power cycles and all the other testing required to meet automotive standards. Completing this process will also help us with industrial customers since automotive standards are the most stringent testing requirements; the acceptance of a new technology with large industrial customers as well as automotive OEMs and Tier 1 suppliers definitely benefits from being able to share the third-party reliability and qualification data with prospective customers. We're not aware of any impeding inherently bidirectional, high-power technologies that are using anything similar to our technology. Looking at our expanding B-TRAN patent estate, we currently have 87 issued patents with 40 of those issued outside of the United States. Our current geographic coverage for our patents includes North America, China, Japan, South Korea, India, and Europe with pending coverage in Taiwan, all representing our high-priority patent coverage geographies. As part of our product development and introductions, we've expanded our patent efforts to include what we believe to be high-value patents for our driver design and controls and double-sided packaging designs, as both are unique due to the bidirectional nature of our technology. As a result of our continued innovations, our list of pending B-TRAN patents is now 45. In addition, we treat the proven process flow we use to make our devices as a trade secret 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. The bottom line is we continue to execute on our B-TRAN commercialization roadmap to prepare for the significant sales growth we're expecting initially in industrial markets and then followed by opportunities in hybrid and electric vehicles. We remain on track to achieve our 2024 milestones and look forward to continuous progress with existing relationships, new collaborations, and several commercial announcements in the coming months. Now I'd like to turn the call over to Tim Burns to review our financials. Tim?
Tim Burns, CFO
Thank you, Dan, and good morning, everyone. Second quarter 2024 cash burn was $2.2 million, up from $1.9 million in the second quarter of 2024 and up from $1.8 million in the second quarter of 2023. Our Q2 cash burn was at the low end of our guidance of $2.2 million to $2.4 million due to the timing of spending and related payments. We also added $2.1 million to our cash balance in the second quarter due to the exercise of the overallotment option by the underwriters from our late March public offering. In total, we raised net proceeds of $15.7 million from the public offering. We continue to manage expenses prudently and aggressively. We expect third quarter 2024 cash burn of approximately $2.4 million to $2.6 million and a full year 2024 cash burn of approximately $8.5 million, net of an expected $1 million benefit from proceeds from expiring heavily in the money warrants. Cash and cash equivalents totaled $20.1 million at June 30, 2024. We have no debt and a clean capital structure. We recorded minimal revenue for the second quarter on low volume orders from the large companies evaluating our products for potential inclusion in their OEM products. Looking at the balance of 2024, we expect modest volume in commercial revenue from product sales and potentially development agreements depending on the timing of revenue recognition under any such programs. Operating expenses were $2.9 million in the second quarter of 2024 compared to $2.4 million in the second quarter of 2023, driven primarily by higher research and development spending as we were engaged with two fabs and added engineering personnel. We expect both research and development and sales and marketing spending to increase modestly in coming quarters due to 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 weighted stock-based compensation expense will also cause variability in our quarterly operating expenses. Net loss in the second quarter of 2024 was $2.7 million compared to $2.3 million in the second quarter of 2023. At the end of June, we had 7,693,917 shares outstanding, 887,160 prefunded warrants outstanding, 977,313 options in stock units outstanding, and 786,420 warrants outstanding. 444,180 of these warrants outstanding are set to expire in November if not exercised beforehand. At June 30, 2024, our fully diluted share count was 10,344,810 shares. At this time, I'd like to open up the call for questions. Operator?
Operator, Operator
Thank you. And the first question today is coming from Brian Dobson from Clear Street. Brian, your line is live.
Brian Dobson, Analyst
Thanks very much for taking that question this morning. So just to kick it off, as you're looking out over the next 12 months, how do you feel about the macroeconomic environment, given recent market fluctuations? How confident are you in continued growth? And what does your broader product demand landscape look like over the next 12 months?
Daniel Brdar, CEO
Yes. It's interesting when we're working with folks like the automakers who are working on models in the out years, there's a lot of noise around what's going on in the auto industry with plant closures and high costs of cars and cost of financing. But the groups that we're working with are pretty focused because they're not working on the products that are going to come out this year. They're working on the products for the future. So we see really no shortage of funding or focus in those areas. The macro trend in the long term that we are benefiting from is the adoption of electric vehicles, the need for EV charging, and the adoption of renewable energy and energy storage. Those macro trends are there. They're going to go through their own growing pains. And obviously, some of those are really susceptible to project financing costs and interest rates. But in general, we haven't seen any impact or even get a sense from the teams that we're working with that they are being told to slow down what they're doing. So we're excited about that.
Brian Dobson, Analyst
Yes, good. Thanks. So you're working with a third OEM now. How do you believe your work with past OEMs has prepared you for this trial? And is there something unique about these three OEMs that are moving them to an early adoption versus others?
Daniel Brdar, CEO
Yes, good question. Going through the process with Stellantis has really helped us a lot with engaging the other automakers because we understand how they look at technology. We're understanding the kind of data they want, what kind of testing they want, how they want it packaged and presented. So I think it's really helped us come across as a very professional company with these other automakers because we work so closely with the Stellantis team. So that's been really beneficial for us.
Brian Dobson, Analyst
Thanks. And as a follow-up to that, would you describe the margin opportunity in industrials compared with automotive? And what would be reasonable timelines from testing to implementation for both industrial clients and OEMs?
Tim Burns, CFO
So in terms of timelines, I mean, on the industrial side, design cycles are roughly a year. So as we look at converting some of these customers to design wins, that's kind of the rough timeframe you need to look at. Now with the automotive company, I would say it's significantly different. It's three-plus years, even with everything they've done to try to speed up that design cycle for EVs. I still think that's probably what we're looking at in terms of the EV cycle. Obviously, we have a head start on that cycle with Stellantis since we've been engaged with them now for an extended period. But that will remain true. In terms of gross margins, our overall target gross margin, including mix, is about 50% gross margins at scale. If we look at that, we actually think that the industrial opportunity is probably a little bit higher margin for us, particularly in places where we're an enabling technology like solid-state circuit breakers, and we believe we're the best alternative and there probably isn't another very good alternative.
Brian Dobson, Analyst
Excellent. Thank you very much.
Operator, Operator
Thank you. The next question is coming from Kris Tuttle from Blue Caterpillar. Your line is live, Kris.
Kris Tuttle, Analyst
Hi. Thanks for taking my question, and congratulations on the progress. I wanted to understand a little bit more about the solid-state semiconductor application. Specifically, you've got Richardson and now RYOSHO as distributors. In order for them to be effective, do they need to provide a set of field engineering services around packaging the B-TRAN into a fully functioning replacement? So that's kind of my first question, sort of understanding what other pieces are involved in that part of the go-to-market.
Daniel Brdar, CEO
Yes. What we provide them is the SymCool Power Module, which is already packaged up for electrical connection. We teach them about the application. We educate them about the device so they can sell it. They are selling to customers that will ultimately make the circuit breaker. So we provide them the data that shows, for example, you can parallel devices to reach whatever rating you want. We provide them the information so they can teach the customers how to control it. So what they're really providing is a technical sales function. They don't actually have to do any kind of product modification or provide any hardware or software. It's really education about the application and how to use our device in it.
Kris Tuttle, Analyst
Okay. Yes, that's helpful. And then in terms of the kind of looking at your device versus existing solutions, I understand about the power loss thermal efficiency, etc. But is there a cost differential here? Can you quantify kind of what it might look like in some of the applications that you started working on, your device fully integrated versus the existing circuit breaker technology that's out there?
Daniel Brdar, CEO
Yes. The existing circuit breakers that are out there, unfortunately, there really isn't much in the way of solid-state circuit breakers at the industrial and utility level. It's because of the fact that existing semiconductors like IGBTs have conduction losses that are too high. So there's too much power loss, too much heat that needs to be generated. The conventional circuit breakers are electromechanical devices. There are a couple of issues with those. The electromechanical devices are basically contactors that open. When you open the contacts, you get an arc that creates wear. They need to have maintenance associated with them. The bigger challenge that we're hearing from the customer base and the folks that want to design these solid-state circuit breakers is our utility system is changing. It wasn't originally designed for all this energy storage that’s going into distributed locations, all the solar, all the EV charging that is going to be put in. Better circuit breakers that can act faster in the event that there is a fault that occurs at one of these installations are needed. A solid-state circuit breaker can act literally orders of magnitude faster than a conventional electromechanical breaker. That’s a big part of what's driving that adoption.
Operator, Operator
Thank you. I will now turn the call back to Jeff Christensen to read questions submitted through the webcast.
Operator, Operator
Thanks, gentlemen, and thanks, operator. The first submitted question is, Stellantis Ram charger extended range EV with an advertised 690-mile driving range is slated to debut next year. Sales of extended range EVs in China have more than doubled in the last year, and extended range EV sales are projected to grow rapidly in the U.S. in coming years. Do you view this as a new potential trend as a threat or a benefit to Ideal Power?
Daniel Brdar, CEO
Actually, it's a benefit because what they're doing with the charger, the Ram charger and across the industry is they want to address a couple of their key issues. One of those is the range of the vehicles. The other is the time it takes to charge vehicles. What they're doing on the Ram charger, it already exists. I think in Porsche's vehicle. Several other auto manufacturers are making this move themselves. They want to shift from a 400-volt system for the batteries to an 800-volt system because that enables them to do a couple of things. One is they can drive the motors with higher voltage and lower current, which means there's less heat produced because heat's really a function of current. If there's less heat produced, electronics last longer, wiring harnesses cost less, and most importantly, managing the heat during charging is one of the elements that dictates how long it takes to charge the car. So if you can charge it at higher voltage and lower current, you can charge faster. They’ve moved to an 800-volt bus that fits well with Ideal Power because we have a 100-volt rated device. We're actually happy to see them going in that direction because addressing some of the market concerns with charging time and range creates more opportunity for us where we can leverage the full voltage capability of our devices.
Operator, Operator
Thank you. Our next submitted question is, can SymCool Power Modules be configured for the high voltage and current needed for high-power EV contactors?
Daniel Brdar, CEO
Yes. The nice thing about our devices is they can be paralleled and they exhibit behavior that's different than devices like MOSFET. They have what's called a positive temperature coefficient versus a negative temperature coefficient. If one device is failing for some reason, with a positive temperature coefficient, more power is sent to the devices that are at lower temperature. In other words, not getting so hot. In devices like MOSFETs that are negative temperature coefficient, it ultimately ends up in a failure because the hotter the device gets, the more current it conducts. Having devices you can parallel with a positive temperature coefficient allows you to string them together to whatever size rating you want to target for voltage and current, which gives you flexibility when looking at a line of solid-state circuit breakers. You can use the same core device and configure the products for whatever market applications you are targeting.
Operator, Operator
Thanks, Dan. We have several questions that have been submitted. If you have a question, you click on the Ask a Question button in the webcast portal. Our next submitted question is, do silicon carbide devices have much higher heat tolerance? How does B-TRAN compete against the high tolerance of silicon carbide?
Daniel Brdar, CEO
Silicon carbide as a material has a higher heat tolerance, but the packaged devices are typically limited to about 175 degrees C. Silicon devices are typically 125 degrees to 150 degrees C. The problem isn't the silicon carbide material. It's the packaging where you have a limitation because high-temperature packaging has a lot of challenges. When we see people using silicon carbide, it's less for the higher temperature capability and more because their application requires faster switching than what you could do with any silicon device. Faster switching is inherent to the silicon carbide material. The challenge with it, though, is you've got to have higher heat tolerance if you generate more heat, and silicon carbide devices have higher conduction losses, so they will generate more heat. You've got to deal with the cost of that material, which is 3x to 5x higher for a silicon carbide device compared to a silicon device. In the semiconductor world, there are trade-offs in terms of what you get for performance versus cost.
Operator, Operator
Thank you. Our next submitted question is, will B-TRAN be cost effective compared to 500 A mechanical high-voltage contactors that can be as low as $120 for a single unit?
Daniel Brdar, CEO
Yes. The high-power side, what we're hearing from the automobile OEM, they're actually higher cost today, I guess just because of some of the changes that they require for high-voltage or high-speed charging. Our product will be competitive. We've received really good feedback from the automobile OEM in terms of what they're looking for in terms of the cost target and the performance level. We can parallel dies to reach the amp rating they want to design for the contactor. Plus what the OEMs are telling us is they like the fact that the contactor can act orders of magnitude faster than the traditional mechanical contactor. You have the added benefit of it being programmable, and there are no contacts to wear or fuse. That combination of reliability, programmability, and speed is pretty attractive in terms of what they need to address the demands, particularly as they go to higher voltage buses and faster charging on the vehicles.
Operator, Operator
Thank you. Our next question is, do Richardson and RYOSHO have similar agreements with Ideal Power?
Daniel Brdar, CEO
Yes, they're very similar. What we like is that they are very complementary companies because they both have great technical sales teams. They are very good at demand creation and bringing new semiconductor technology to their customer base, but have complementary geographies in terms of where they’re focused. Under our agreements with them, they are compensated in the same way. We think that the two of them will complement our own business development team nicely to reach those customers that would be difficult for us to engage on our own.
Operator, Operator
Thank you. Our next submitted question is, in general, what would be the argument for not purchasing Ideal Power products? Do they need to be proven to meet quality standards? Are they more expensive than status quo?
Daniel Brdar, CEO
Well, as I mentioned in the prepared comments, we're going to start third-party testing for automotive qualification. The reason for not purchasing is that engineers, by nature, are conservative. The adoption of new technology doesn't happen quickly. They need to understand the technology. They didn’t learn about B-TRAN in school the way they probably learned about what a MOSFET is. You don’t have years of devices operating out in the field. It's the conservative nature of engineers that will likely be an issue that any new technology faces. GaN devices have seen that, and silicon carbide saw that when they first started coming to market. It's really just part of the new technology adoption issue that would be a reason to not purchase. Our costs will certainly be competitive, and we will certainly have the same codes and standard certifications that other traditional devices will have. So it's just that education process you have to go through with any new technology you bring to market.
Operator, Operator
Thank you. The module size reduction is great news, but will that impact customer testing timelines?
Daniel Brdar, CEO
It won't. It actually came from some of the customer feedback. As they got to know the device, we shared with them what the internal layout is. They wanted to know if we could make it smaller since we were pretty conservative in the design that we did. It really reflects what they were looking for to match the size of an Infineon package that’s out there, so it helps them be a little bit more plug and play regarding their own products and maintain the size as small as possible while gaining the benefits of B-TRAN. I don’t think it'll affect it at all. I think it's actually going to help with acceptance since it reflects the feedback we received from multiple customers that are already testing the first version of our SymCool module.
Operator, Operator
Can one B-TRAN be used for the positive and negative sides of an EV contactor due to B-TRAN's inherent bidirectionality?
Daniel Brdar, CEO
We don't know exactly how the OEMs are going to want to configure the contactor itself. We're in the early stages of getting them up to speed on it. They're looking at their options in terms of how they want to use the device. So as we get further along with the OEM that we announced here recently, we'll have a better feel in terms of how they want to configure it.
Operator, Operator
Thank you. How would your strategy change in the face of a potential global glut of silicon carbide with much lower silicon carbide MOSFET prices?
Daniel Brdar, CEO
Well, we know that's going to happen over time. There's a lot of silicon carbide capacity that's being built out there. Silicon carbide still, though, has some core issues in terms of materials challenges that need to be dealt with. We will be lower cost. I mean, silicon is a lower-cost material. It's already in huge volume in terms of its availability. Our wafers are not anything special; it's easier to process. Silicon carbide is a very hard material physically in terms of polishing it and processing wafers. As silicon carbide gets lower-cost and as the quality of the material improves, we will make a silicon carbide B-TRAN. There's nothing stopping us from starting to work in those advanced materials other than our observation of high cost and challenges with materials that haven't been resolved yet.
Operator, Operator
Thank you. Dan, it looks like there are no other questions. Do you have any closing remarks?
Daniel Brdar, CEO
I just want to thank everybody for joining today's call. It's been an exciting quarter as we added another global automotive OEM, added a second high-quality distributor for our products, qualified a second high-volume wafer fabricator, saw multiple customers from our test and evaluation program transition to placing orders, and increased the power rating of our products. We look forward to continuing commercial announcements before our next update call. And with that, operator, you can end the call.
Operator, Operator
Thank you. This concludes today's conference. All parties may disconnect. Have a great day.