Ilika Plc (ILIKF) Q4 2024 Earnings Call Transcript

Ilika Plc (OTCQX:ILIKF) Q4 2024 Earnings Conference Call July 11, 2024 11:30 AM ET Company Participants Graeme Purdy – Chief Executive OfficerJason Stewart – Chief Financial OfficerMark Whitmore – Joint Broker, Berenberg Graeme Purdy [Call Starts Abruptly] is very reactive and reacts with oxygen and moisture. And, also, there’s a risk an enhanced risk of so called dendrite formation, which can lead to short circuits in the battery. We believe that, silicon anodes are the best choice. We believe that they give a longer cell life. They’re less expensive than lithium metal, but they can lead to volumetric expansion, which needs to be carefully managed. And the anode-less design is cheaper than, of course, lithium anode and gives a very high energy density in theory, but can lead to a compromise in cell life. So we believe that the combination of a silicon anode, with our oxide electrolyte, and the electrodes that we’ve chosen give the performance of NMC, which is nickel, manganese, cobalt chemistry that you get in car batteries, and the safety of LFP, lithium ion phosphate. So in terms of the features of our batteries, it’s a nonflammable design without any liquid. You’ve got competitive performance versus lithium ion and we’ll come back to that in a second, and a tolerance for higher temperatures. So our batteries, when you take, you know, these different features, we’re seeing designs that have a lighter vehicle altogether, a lighter vehicle with the use of these battery packs. It’s got a higher cell to pack ratio. We’re ending up with vehicles that can, are expected to have a longer range, and we’ve got a technology that’s safe to manufacture and easier to use and recycle. So it’s been a year of a fantastic progress really, on the Goliath programme. We’re very excited about some of the results and milestones that we’ve hit. You’ll probably remember that, on the back of a grant-funded programme that kicked off in Q1 of 2023 that we’ve been able to develop our technology very rapidly. We hit our D4 development milestone in November of last year, which we were then able to freeze into a prototype that we call P1, that just last week we announced we had sent to customers for them to ship. We achieved lithium ion energy density parity, which means that our batteries have got the same amount of gravimetric energy density as a standard lithium ion battery. And we’ve also done a lot of work on making sure that our process is production ready. So we’ve demonstrated roll-to-roll coating of our architecture in-house. And we’ve also entered into a programme to design and build an assembly line with a company called Mpac, which is also listed on the stock exchange here in the UK, and UKBIC, which is the Battery Industrialization Center. Also, you know, we’re very excited about the 12 month collaboration agreement we’ve got with the Tata Sons Company, Agratas, which, of course, is building a substantial gigafactory, here in the UK in Somerset. Ultimately, that will be a 40 gigawatt hour per year facility. And it’s, you know, a real pleasure to be working with them so that they can evaluate our technology with a view to potentially scaling that up within the context of some of the investments in manufacturing. So in terms of, you know, where we sit on our technology road map, I’ve mentioned achieving that D4 development milestone. That then relates directly to the P1 prototypes that we have successfully made and tested in-house. And on the back of that testing, we were confident enough to start releasing these batteries to customers for their own evaluation. We’ve actually announced a couple of interactions. Those of you who follow our news flow will have seen that one of our customers has sponsored a testing program at our facilities here at Ilika. They said, look, you’re setup to test these batteries. We have some slightly different tests. We’d like to do in addition to the data that you’ve shared with us through your own tests. And so, they are paying for us to, supervise those tests and share the findings. And then also last week, we announced that we sent a batch of batteries to another customer who actually wants to do their own in-house testing. So they’ve got quite a sophisticated setup of their facility that allows them to review the performance of the cells and feedback to us. Then in December, of course, we hit that lithium ion energy density equivalence. And now we’re moving through a number of D points, D5 through D8. Finding that is progressing very nicely. We’ve got a lot of safety testing that we’re doing at the moment and we expect to be able to share some of that information as we generate more data throughout the summer. And then by the time we get to Q1 next year, we’ve got our D8 followed by what we call our MVP, minimum viable product. This will be a generic A-Sample and we’ll also be able to release that to customers for their evaluation. Okay. So that’s the technology development plan. Well, what does our scale up plan look like? But remember, our mission is to actually scale up to the point where a customer will feel confident enough to take a license to implement the technology in their own facilities. So we’re not trying to push this all the way through to our own gigafactories. In fact, what we want to do is manufacture our generic A-Samples and you see them again at the same time point in 2025. We want to see them manufactured on our Ilika pilot line and that’s actually what that roll-to-roll coater is. That’s part of the pilot facility that we have here in the UK and also the assembly line that we are manufacturing together with Mpac will be part of that same pilot line process flow that will be installed at our own facilities. And that will give us a capacity of about 1.5 megawatt hours per year of capability which will be enough to provide samples to the customers that are interested in validating and verifying what we’ve manufactured. Then we will give OEM partners and tier one partners the opportunity to take an early license to the technology so that they can manufacture B-Samples, in their own scale up facility, also C-Samples and then transfer that into a full size gigafactory. So in contrast actually to the pipeline, the commercial pipeline for Stereax, most of the demand for a Goliath product comes from European OEMs. So, actually, about 70% of the demand comes from Europe, 12% from the US and actually the remainder, so 18% from Asia. The majority is indeed automotive, so 82%. But there is some interest from non-automotive and these typically are, you know, consumer appliance manufacturers who are interested in the technology for handheld vacuum cleaners and for beauty products like hair straighteners, etcetera. So they have a shorter time to market, but they require a different form factor to our central R&D program. And so, typically, you know, we would interact with these organizations at a point in time where we’ve achieved our MVP for automotive and then undertake specific engineering programs on behalf of other users of the technology. So we’ve got a nice portfolio of about 17 interested parties there. And then in terms of the first sector that we want to deploy this technology in, it’s really the higher end of the high volume performance vehicles. We believe that in order to ensure that our products can be rapidly adopted, we need to have customers who are not too price sensitive. Because although longer term, the Goliath technology will have a price point that makes it attractive to a broad range of sectors. Initially, it will be manufactured at a relatively modest scale. And as the supply chain organizes itself to be able to provide all of the materials at a lower price point, you know, we need to make sure that our customers are not too price sensitive. We’re not trying to compete on cost with some of the commoditized batteries that may be coming out of Asia. Just to reassure you, most of the analysts who are covering the sector, are suggesting that, solid state will become increasingly important as a percentage of the overall vehicle fleet. In terms of funding and grant funding, this continues to be really important for us. We have been fortunate enough to have received non-dilutive grant funding from the Faraday Battery Challenge for the past five years or so. We are just in the middle of our so called HISTORY programme, which is, the programme that’s helping us drive through some of those technology development points that I talked about earlier. And in parallel with that, we’ve received funding from the Automotive Transformation Fund, which is managed by the Advanced Propulsion Center. Our latest programme is the SiSTEM programme and that’s the one that is supporting the design and fabrication of our production line, our assembly line that we’re doing together with Mpac. Looking forward into next year when those programs, will be complete, we are applying for additional APC funding, which you see on the far right hand side here, to support, really the journey through to A-Sample and pack development and cell integration. And we’re, you know, very happy to be working with some of the organizations that you see listed down at the bottom there. I mean, currently, BMW Group and also WAE are supervising the HISTORY programme, so they’re giving us plenty of guidance there. And, Agratas, of course, have recently joined the SiSTEM programme that we’re working on with UKBIC and Mpac. So, Jason, over to you to talk about how we turn all of this endeavor into revenue. Jason Stewart Thank you, Graeme. So a very similar build again to the Stereax. So we do believe that there will be multiple layers to the revenue generation for the Goliath product line. You can see at the very bottom, grant funding, and we’ve done as Graeme has just talked through very well over the years in securing that and there is a lot of governmental support in the UK for the EV process and development of technology within the UK and we expect that to continue through with the APC programme that Graeme talked about. So that application going in the latter half of this year then hopefully with an award and that project starting in the first half of next year and continuing for a number of years and then further grant funding beyond that. Then on top of that, you will see, once again, a small orange section, very similar again to Stereax in terms of commercial collaboration or engineering fees. So along the journey of, Goliath, while we are talking primarily around the automotive sector as that is certainly the world’s biggest battery market and certainly that’s where the demand is. There are opportunities for other markets. Consumer electronics is one where we have a number of discussions that have commenced. So as we progress, there will be opportunities to take variants of the Goliath products that are more suited and to undertake engineering activity, which would be chargeable, so generating revenue to suit those particular applications. As we progress forward, we would then be looking to issue licenses and receive, you know, potentially quite significant license fees for the issuance of those, which ultimately then secure that partnership with the gigafactories who will ultimately manufacture those batteries. So we expect those licenses to be with the gigafactory and therefore the producers rather than the automotives themselves, but it potentially would be the automotives, who would mandate their supply chain to take on our product to supply their vehicles. Hence, why those 17 interactions that Graeme talked about with those automotive OEMs are really important because it’s their demand for the end product, the end glide cell that really drives that opportunity in licensing. And then, ultimately, royalty revenue coming through exactly the same model as the Stereax, setup, as we see that building through being deployed into the gigafactory and ultimately into vehicles onto forecourts and then driving through. So very much a similar build through. A little bit more lumpy than the Stereax setup, because of the nature of the fees, but certainly building as we go through the next few years. Just to touch on ESG. So it’s always been very important to us at Ilika. It’s good from an environmental of our own business or social requirement and the governance of the company. It’s becoming more and more a prerequisite of good business practices. But also just to bring a very personal example of why we’ve done this and why we’ve had a focus on ESG, not just because it’s required of us, but also it is a large enabler for us as we start to interact with our potential customers. So these larger OEMs are very much mandated around their own ESG requirements being bigger companies and they have to operate in a certain way. So our mode of operation, Ilika, has always been to do the best we possibly can to be as compliant over and above our particular requirements because not only is that good governance ourselves, but that eases the transition through to the adoption of our product at our new potential customer base and we have seen that recently. So as we’ve interacted with the two tier ones that Graeme talked about that we have supplied, we’ve had to go through quite intensive discussion and documentation to provide to show that we are doing exactly the right things in terms of comfort minerals, modern slavery. We’ve got the right documentation on our ISO backup and sourcing of materials. So it’s not just a paper process. It is something that really does underpin the company, our own ethos and support our interaction with our potential customer base. And then just to touch on the financials, so very much following the trends that we signposted at the half yearly results. And for those that attended that we talked about at the Capital Markets Day, which there is a large amount of video from that event on our website. If you haven’t seen it, please do go and take a look. There is a wealth of information there. The turnover for the year was 2.1 million very much driven by that grant funding that Graeme touched on. Two projects primarily driving that HISTORY project and the SiSTEM project. So each of those have really helped to drive a significant year-on-year increase. So 2.1 million versus 0.7 million. And then we’ve had other income again of GBP0.5 million and that really is R&D tax credits or RDEC scheme. So that is where we are drawing down on government research and development funding that’s available for businesses like ours. So once again maximizing what we can bring in to the company and that’s cash paid to Ilika. So that’s a really good result for the year. Probably worth signposting and we have done this before that due to the timing of those grant fundings and the way that we’ve drawn down on those funds, the HISTORY and SiSTEM projects are fixed pots of money and we have pulled a lot of that forward due to the timing of activity. So we will probably see a little bit of a decline as we look at next year before then the start of our APC programme. So a little bit of timing as we go forward into the next year before the next probably even larger APC project comes on stream towards the end of the financial year ending April 2025. Costs through the business leading down to EBITDA loss are 4.1 million versus 7 million for the prior year. A really good result underpinned both by that turnover result, but also through cost optimization. So on the back of the Stereax contract with Cirtec, we’ve been able to take around a GBP1 million to GBP1.5 million of operational cost out of the business on an annualized basis and that really has helped to manage that cost base along with that increased income just to make sure that we are looking after shareholders’ funds, optimizing that capital to give us as long a runway as we possibly can have. So really that’s a great reflection of that ability to look at what we need to do and be agile in utilizing what we have to get the most out of it. And then in terms of cash balance for the year, just under GBP12 million at the year end of April versus GBP16 million the year before. But then, additionally, we’ve taken on as a post-balance sheet event. You would have all been aware that at the end of May, we did a small capital raise to deliver another 2.3 million gross before cost of raise to provide us a little bit of cover. And that gives us a good runway for the next couple of years to make sure that we can deliver on all of those road map items that Graeme talked through, both on the Stereax side to support that journey to commercialization with Cirtec as we ramp up back into production there and also as we deliver on those milestone points through to that D8 freeze and the MVP on the Goliath side. So really that gives us a good opportunity to see us through as we start to get to those really tangible milestones that really make the commercialization feel it is upon us. Graeme Purdy So thank you, Jason, for that run through. I did summarize the key Stereax milestones that we’d achieved this year when we wrapped up the Stereax section earlier, you know, but looking forward, a bit more information on the state of manufacturing readiness will be issued in the course of the summer. And then, of course, we’ll have the strong comarketing trade shows and events through the end of the year and into 2025 with a view to setting us up for more intensive customer interactions and the start of revenue flow for Stereax on a product basis in 2025. Goliath, you know, it’s been a fantastic year of delivery really for that programme. And, you know, I have to thank our own technology development team for that delivery. Starting with our D4 development point in November, rapidly followed by, our lithium ion parity demonstration. And then the P1 prototype, manufacturing, testing and delivery through to partners for their validation. So going forward, there’s going to be actually more information about the performance of ourselves and feedback from those partners and, of course, further grant support and commercial partnering as we deliver on that asset-light business model that we’ve got here at Ilika. So many thanks to all of you for taking the time to listen to this presentation. I think we’ve got six minutes left actually of window here. Mark, before you shut us down. Mark Whitmore Graeme, you take your time. Let me just bring back your cameras up for the Q&A. Just while I give you just a couple of moments to review those questions, I’d just like to remind those on the call that, a copy of the slides, the published Q&A recording will be available via our investor meet company dashboard. Graeme, as usual and unexpectedly, you’ve got plenty of questions for investors there. I’m sure a number of the same theme. If I can just hand back to you, just read out those questions and then I’ll pick up from you at the end. Graeme Purdy That’s brilliant. Thank you, Mark. So, actually, for the first one. Jason Stewart I’ve had let me take this one. I’ve had — I’ve also had an opportunity to scan ahead. So I do note that, David, you’ve put a correction in, so I’ll pick up both parts of the question at one time. So David asked here, under the best outcome, how many years will Goliath license revenue be earned? And then there is a clarification that David has sent through later, actually clarifying that to royalty. So I did touch on that earlier and we expect to enter into really the window for licensing. So that’s the upfront fee, really from next year onwards. So as we get to that MVP, product with chemical freeze and then that final PT product that really starts to open the window then to have those discussions. And, actually, there’s been news in the market today that one of the US competitors has, QuantumScape, has licensed their product, admittedly, to one of their own shareholders in PowerCo, which is the VW Group. But they’ve done that at that stage where they’ve reached their MVP product, so before having to go further than that. So, really, that does give a lot of validation that, firstly, the solid state batteries are being adopted and being taken seriously by automotives, but also around the timing of it that, actually, they aren’t waiting to see all the way through to mass manufacturing that getting to that MVP product period really is the start of opportunity to have those licensing discussions. So, actually, that’s a really positive thing for the market for us to see, coming out as other news, from the US today. In terms then moving that into the revenue from the royalty side, which, David, is the clarification, really that’s that will start to come as that license is signed. So that will take a little bit of time for that to start to come through because once that license is signed then will take a period of time for the licensee to deploy that into their gigafactory setting to commence manufacturing. But as we’re seeing on the Stereax side, it will start we’ll start to see some income from samples coming through from the batteries from as early as we have that MVP product. Graeme Purdy Thanks, Jason. The next question we’ve got here is can you say when Stereax will be available on the NHS? So just to clarify, it would be, products made by OEMs that have integrated Stereax into their designs that would be released to patients. So it would be, you know, the big device manufacturers, who make devices like this. So let’s say, you know, for the sake of argument, companies like Medtronic and Boston Scientific and Abbott for instance. And, you know, that process for device validation would probably be led in the US initially. And then once initial commercialization had taken place, I’m sure the NHS would review the efficacy of those devices and make them available. So, you know, you might be looking at say five years before this type of product might be available in the UK, through the NHS. Jason Stewart Question here from John. How is Ilika managing the transition from pilot scale to commercial scale production for both Stereax and Goliath batteries and what are the specific milestones and timelines we can expect to see for full scale commercialization. Well, on the Stereax side, the Cirtec contract, and the facility setup there is full scale commercialization. So that facility will operate at commercial scale, not pilot scale, so it’s much larger in setup than the facility that we had originally setup here in the UK. So that is very much ready for full scale up activity. Once, as Graeme said earlier in the presentation, we get through the final stages of the, qualification of machinery and then product coming out of that, through the latter half of this year into the beginning of next year. And just to how do we manage that going forward then, the tenants of the license, that we’ve issued is that further growth and further requirement for equipment would be responsibility of Cirtec there. So no further capital required for Ilika to deploy to support the onward growth as we see that market developing. On the Goliath side, we’ve already talked about the grant funding that we’ve got supporting the Mpac stacking machine. So our own pilot scale, implementation here in the UK for the Goliath batteries. We already have some equipment with the roll-to-roll coater to do that. We’re currently implementing some of our dry room upgrades to be able to handle some of the materials. And then that Mpac stacking assembly rig that will come towards the end of this calendar year will then allow us to increase our production capability, as our pilot line up to 1.5 megawatt hours. And that really is what we need to demonstrate through to that A-Sample and produce a good quantity of batteries to get out into potential customers. But, really, as we said, we’re an asset-light model, so we’re not looking to really build beyond that from a capacity point of view. That would be the point we’d be looking to license and implement with partners going forward. So once again that capital requirement for going into those larger facilities then would be on the licensee at that point. Graeme Purdy So the next question is considering the various grants and funding received from initiatives like the Faraday Battery Challenge and the Automotive Transformation Fund. How are you planning to manage your funding requirements going forward, especially in scaling up production? Yeah, so this relates specifically to Goliath. I think, you know, the advantage of these funding bodies making available matched funding through competitions is that we can effectively leverage the R&D expenditure that we need to deploy on a 2 to 1 basis. So, effectively, we’re making our R&D investments go twice as far than they would do if this funding wasn’t available. And, you know, we’ve had very close discussions with both the Faraday Battery Challenge and the APC, who manage the Automotive Transformation Fund. In fact, if you haven’t, taken the time to have a look at the panel discussion from the recent Capital Markets Day that we had back in April. I would recommend you to do that because, Julian Hetherington from the APC and also Thomas Bartlett from the Faraday Battery Challenge speak very passionately and clearly about their commitment to this type of technology development and Ilika in particular. So we’re getting a lot of support through the UK government agencies. And I think that gives us a lot of comfort actually that we can be very effective in the deployment of shareholder funds, in this remaining journey that we’ve got from where we are now through to the commencement of licensing and beyond. Jason Stewart A question here, medical and EV sector side, is there consideration of symbiosis with defense technology sector whereby particularly Stereax, but also Goliath could be used for the burgeoning communication market. So as we have said, both for Stereax and also for Goliath, there are a number of secondary markets that are available to those. Those are not the markets that we’re pursuing as our first point of entry because, obviously, what we’re looking to do is get the most supportive markets to ensure that we can be adopted and commercialized as quickly as possible. So with Stereax, that is the medtech market, and with Goliath, that is the EV sector. Those are the ones that have the most support through the, just the size of the medtech market in the US and, obviously, the funding support that we would get here in the UK on the EV sector. But there is very much so secondary product lines and markets and we’re open to having those communications. In fact, the smart ophthalmic applications that Graeme talked about earlier are around those smart contact lenses. So there are some of the customer base that we are in interaction with and talking to are already looking to do that development bridge that would support, many different applications, whether that be, defense or consumer electronics or just the AR/VR revolution that is slowly coming through, albeit currently at large device stage, but helping to miniaturize that. So, certainly, we will continue to explore all markets as they come open and look for the most appropriate ones to apply the product into. Graeme Purdy Yeah, the next question is how heavy is Goliath relative to lithium ion? So, actually, that energy density chart that we showed earlier in the presentation gives you a feel for the degree of energy density advantage that Goliath has over incumbent lithium ion batteries. So at a cell level, you know, we’re probably realistically expecting that we might see a, you know, 30% to 50% improvement in energy density by the time that we get to P2. There is more theoretical upside, but that’s what we might expect within that time frame. But a lot of the advantages actually of the reduction in weight come at pack level because of the higher temperature tolerance of Goliath relative to what lithium ion batteries can tolerate. In a normal lithium ion batteries, they’ve got that liquid electrolytes in there and that starts swelling at elevated temperatures. And when batteries start to swell, they can burst and then that’s when you end up in trouble. You can end up with a thermal runaway event if that catches fire. So, with solid state, you don’t have that, sophisticated and heavy cooling system that you get with a normal lithium ion pack. You’ve got a weight saving and also you don’t need the same sort of mechanical protection of the Goliath batteries that you might need for normal lithium ion. You know, an EV, using normal lithium ion has got pretty substantial steel girders going down the side of the car, so that the car will pass the poll test and you won’t end up with defamation of the pack. If your pack is intrinsically safe and you are not running the same risk of fire you can get away with a much lightweight pack design. And therefore, you can see that you can lightweight that pack by as much as 50%. So a pack that’s half of the weight and that’s when you start to get the longer range. Jason Stewart Maybe time for one last question if I — given where we are. So regarding the political background, will labor policies be better or worse for Ilika or make no difference? We’ve had some early interaction prior to the election so we were [Technical Difficulty] to give you the feedback. Graeme Purdy Well, I just want to thank everybody who’s taken time out of their day to listen to this update. I see we have got a few questions left, so we will answer those and upload them onto this portal after we’ve closed down this particular update. I’d also, you know, like to thank those of you and there are many of you who took up your opportunity to participate in our recent rights offer and I can assure you that funding is being deployed very judiciously in order to proceed with the road map that we’ve talked about as we’ve gone through this presentation. And I look forward to updating you again in a few months’ time later in the year. Mark Whitmore That’s great. Thank you very much indeed Graeme, Jason for updating investors. Could I please ask investors not to close the session as we now automatically redirect you for the opportunity to provide your feedback. Question-and-Answer Session End of Q&A

Buy cryptocurrency

Source link

Refer And Earn Demat Account – Get ₹300 | Referral Program

Open Demat Account In Angel One For FREE