Ilika Plc (ILIKF) Q2 2024 Earnings Name Transcript

Ilika Plc (OTCQX:ILIKF) Q2 2024 Outcomes Earnings Convention Name January 23, 2024 11:30 AM ET

Firm Contributors

Graeme Purdy – Chief Government Officer

Jason Stewart – Chief Monetary Officer

Convention Name Contributors

Operator

[Starts Abruptly] investor presentation. All through this recorded assembly, attendees will likely be in listen-only mode. [Operator Instructions]. The corporate is probably not able to reply each query it receives throughout at this time’s assembly. Nonetheless, the corporate can evaluation all questions submitted at this time, and can publish any responses on the Investor Meet firm platform.

Earlier than we start, we might prefer to submit the next ballot, and I am certain the corporate can be most grateful on your participation.

I would now like at hand over to CEO, Graeme Purdy. Good afternoon.

Graeme Purdy

Thanks, Mark. Good afternoon to everyone who’s taken the time to dial into this presentation. We actually admire it. And we stay up for speaking you thru this replace of Ilika’s progress. These are actually our half yr outcomes. So the these are printed on the midway level by means of the present monetary yr. The midway level was on the finish of October 2023. And these are an replace of the interval, the six-month interval as much as that, finish of month.

So to begin with, let me say that we intend to cowl the total Ilika story. Apologies to these of you who’ve been following the corporate for a while now. We are going to – as a result of there are some new attendees who aren’t fairly so acquainted – give the overview of the entire story, and we’ll be masking the entire bases and in addition giving a bit extra perception into a few of the particular progress that is been made in more moderen months.

So for these of you who’re new, there are two product traces that Ilika focuses on. We specialize within the improvement of strong state batteries. In order that’s all that the corporate does. However on the one hand, we’ve our Stereax miniature cells which might be primarily used to energy miniature medical units and industrial wi-fi sensors, generally known as industrial IoT. After which, then again, we’ve a Goliath giant format cells for the automotive trade and in addition for some cordless shopper home equipment.

Our EV batteries use an oxide electrolyte and a silicon anode. And I am going to go into the aggressive panorama and a few of the supplies decisions in a bit extra element as we progress with the presentation.

So we have got Jason and myself presenting at this time. Jason, please say whats up.

Jason Stewart

Good afternoon, everyone. Welcome alongside.

Graeme Purdy

Jason’s now been with us for a yr. He joined us CFO in January of 2023. And if you need extra element on Jason and myself, or the non-executive administrators who’re pictured right here, please go to our web site. All of their profiles are seen so that you can peruse at your leisure.

So to begin with, a number of phrases on the Ilika enterprise mannequin. I will let Jason discuss you thru this.

Jason Stewart

Thanks, Graham. And for these which might be unfamiliar with the Ilika story, we function an asset mild licensing mannequin, which is completely different from a few of the different battery improvement corporations you might have examine within the press or be following within the US for instance.

So quite a lot of these different corporations are trying to each develop the know-how after which scale all the best way to giga manufacturing facility themselves, which is a reasonably substantial funding into the billions of kilos or {dollars}, wherever they’re primarily based, and a very substantial funding from their shareholders to have the ability to convey that to market. And that additionally requires them to be masters of each the analysis, improvement and the manufacturing processes required to get that gigafactory up and operating at an environment friendly method.

At Ilika, we have determined to take a barely completely different method. We acknowledge the place our core expertise lie and that’s within the analysis and improvement entrance. So we’re going to pursue a mannequin the place we’ve the incumbent scientists to develop the know-how. We are going to display that on manufacturing intense tools, so to display that it may be manufactured on items of kit that you’d discover in a giga manufacturing facility, albeit bigger variations of these machines. However at that time, we might search to enter into licensing agreements with companions, in order that we may then piggyback off their experience from a producing viewpoint and in addition the truth that they’re already a part of that provide chain for both the med tech or the automotive atmosphere, making that transition from R&D into mass market manufacturing that a lot simpler. And that is very a lot the mannequin that we have deployed with Cirtec during the last yr.

Graeme Purdy

Thanks, Jason. So to begin with, a fast trot by means of progress for Stereax. So there is a little bit of a healthcare revolution that is happening for the time being. And that is targeted across the improvement of electroceuticals, moderately than prescription drugs, and usually depends on using sensible units to deal with a few of the debilitating situations which may beforehand have been handled with what will be fairly poisonous medicine with unintended effects that aren’t significantly wished for.

So with a view to use these miniature medical units, they should have sure properties that permit them to be efficient for the remedy, or the diagnostics software. Initially, they should have a compact structure that gives the next power density, in order that the machine is as small as doable.

Secondly, they should have an improved security profile. The very last thing you need as a affected person is to have a danger of poisonous fluid leakage. After which thirdly, they should have a excessive energy density. So what meaning is that they are in a position to ship pulses of energy, often, both for the remedy, or usually to energy a communication chip. So, say, a Bluetooth machine that must be powered with a view to ship knowledge to an exterior communication machine, usually a cell phone.

The functions are actually thrilling. Let’s cowl a number of of those. Initially, most likely the largest market truly is sensible orthopedics. And these are knee and hip replacements, and in addition some spinal surgical procedure. And that is the place you place these units into the replacements. And also you usually monitor the motion or pressure that the units are seeing after the surgical intervention and sending that knowledge, in order that the affected person will be coached within the physiotherapy that they are finishing up after the surgical intervention.

Sadly, that is very a lot a rising market with increasingly more individuals needing alternative joints. And, due to this fact, it is an fascinating alternative to reinforce the potential and performance of those knee and hip replacements.

One of many functions that we regularly speak about is neuromodulation, or actually, neurostimulation. An instance of this may be ache discount, wherein the nerves of the decrease again are stimulated to dam ache alerts. After all, decrease again ache will be actually debilitating, and once more, is a illness which could be very prevalent, significantly in older individuals in mature Western economies. And so, this represents an fascinating software space.

After which thirdly, maybe one of many functions which is closest to market is sensible orthodontics, the place you place a sensor on to a retainer, generally known as an aligner. And these sensors are usually not solely used for making certain that enamel are correctly aligned, but additionally can be utilized in sensors that may observe hint biomarkers in saliva, after which assist detect indicators of sure ailments.

When it comes to the order evaluation that we have got in these sectors. Initially, we have got two pie charts right here, one on the left, which is ordered by software, so the bulk are pertains to implanted medical functions. As well as, we have got about 12% for sensible contact lenses after which 13% for these sensible dental or orthodontic functions, a few quarter of the orders pertains to industrial IoT or industrial sensors. And these will be issues like aero engines, situation monitoring in these functions.

Then on the suitable hand aspect, you see an order evaluation by geography, about three quarters of the orders pertains to corporations which might be primarily based within the US and a few quarter right here in Europe. In order that’s one of many explanation why we needed to have a powerful footprint within the US to have the ability to have as quick a provide chain as doable and have the ability to be lively near the situation of our clients.

When it comes to what that order guide may become, I will let Jason discuss a bit about this business progress profile that we have got on slide 9.

Jason Stewart

So we’ve clearly achieved the signed licensing settlement with Cirtec during the last yr, and Greg will contact just a bit bit extra on who they’re and what they do in a second, however needed to provide a little bit little bit of extra taste as to how that may translate into the event of revenues on the Stereax aspect. So whereas we won’t give particular steerage across the numbers, we needed to assist individuals to have a greater understanding of how the assorted layers of income would develop by means of on the Stereax aspect.

In order you look on the left hand aspect of the graph there, what you may see are the assorted completely different layers that we might count on to come back by means of. Now on the very backside, there is a very small aspect of blue that is seen, and that represents, within the quick time period, that we’ll be manufacturing and can obtain an outsource manufacturing payment from the connection, as we’ve retained what we name the 201V [ph] cathode deposition course of, actually the proprietary parts of Stereax, the key sauce if you would like. And we are going to proceed to function that for the quick time period future, simply to make sure that that continues in the very best method. However because of this, we are going to obtain a small quantity of income on the again of that. Finally, that may then switch throughout to Cirtec.

Constructing on prime of that, we might then have what we count on to see coming by means of which is non-recurring engineering payment. So that is the place we might work with a few of these clients that you could see on the desk on the suitable hand aspect. And they’re looking for to make use of our experience to validate the Stereax batteries of their specific software. Now, that could be in only a validation that it really works for the heart beat necessities or no matter software they’re speaking to, or for a bigger payment that they want us to develop the Stereax battery to a specific type, match or perform to swimsuit their specific wants, whether or not that’s in dimension or form or energy density for that individual requirement. And they’d present earnings to us to help that improvement exercise. So we might derive income from that.

Then, clearly, the most important part, the grey part, you may see there actually is the event of the licensing earnings from the sale of the batteries that may come by means of. So that’s the royalty price that flows again to us from every battery bought. Within the preliminary phases, whereas it’s extremely low quantity, that may be a revenue share. So the next proportion of the earnings comes again to us. However then as we change by means of quantity and we begin to see these batteries enter by means of the FDA approval course of, we might count on that to turn out to be the majority of the earnings from the Stereax product line, actually as they develop, and a number of merchandise then obtain approval.

After which, the final aspect, these spikes that you could see on the highest actually are an evidence that whereas we’ve a licensing settlement in place for Cirtec, that is a non-exclusive license actually targeted across the med tech sector, which is the place Cirtec are specialists. In order that has preserved the suitable for us to problem extra licenses sooner or later both outdoors of that sector, if we get somebody who comes from the economic Web of Issues and needs to take a license for a big scale producer, or if we’ve actually excessive quantity manufacturing that’s perhaps past the capability that Cirtec has or needs to go to and which may want an extra license.

Simply to level out that the preliminary license that we have executed with Cirtec had no upfront payment on account of them taking over the price and sharing the price of improvement and scale up, and actually the profit to Ilika derived from that was in price avoidance, which you may see after we get to the monetary numbers on the again the place we have been in a position to scale back our price burn by finishing that tech switch and outsourcing.

And simply on the suitable hand aspect, actually that is a reiteration of the purchasers that we’ve proven earlier than, so no new information on the on the client entrance. However simply to reiterate that we’re nonetheless in lively discussions with all of those clients and never shedding any of these. So we proceed to debate with them. And as I stated, a few of these are actually growing into NRE sort discussions about how we are able to additional develop for his or her particular wants.

Graeme Purdy

Thanks, Jason. So, perhaps a little bit of an outline of the place we’re with Cirtec. So for these of you who do not know the corporate, they’re an trade main, vertically built-in outsource associate for medical units and parts. So I might say that they seem to be a tier one supplier of sub-assemblies and know-how platforms to the massive manufacturers, the bigger medical machine corporations.

We see that that is actual validation truly of the Stereax product and course of. And it is a partnership truly that gives an economic system of scale by means of their means to ramp manufacturing. They’ve a considerable facility in Lowell, Massachusetts, that, actually, they’re extending with a view to accommodate the chance that Ilika Stereax know-how provides. And the extra profit is that they’ve a considerable enterprise improvement crew with sources to have the ability to convey extra momentum to our personal enterprise improvement efforts.

So the important thing tools units that we used on our preliminary manufacturing line have been transferred to Cirtec now. And that tools set is being put in. Cirtec had been working onerous over the tip of the yr to make that occur and commissioning is in course of. They may perform a sequence of acceptance checks with our help. And we are going to perform a sequence of person acceptance checks as soon as the tools is operational. After which we’ll run it by means of some qualification with a view to beginning to ship product in direction of the tip of the yr and into 2025.

In order that covers Cirtec and Stereax. Let’s transfer on to Goliath, have a little bit of a change of drugs and speak about our giant format EV batteries. Simply to reiterate, truly, our giant format EV batteries are made utilizing a distinct course of to the method that we use for our Stereax miniature batteries.

For the connoisseurs amongst you, the Stereax batteries are made utilizing a skinny movie deposition course of, a vacuum deposition course of, which is extraordinarily correct, and really efficient, however truly too costly to make use of for placing down the quantities of fabric which might be required with a view to retailer the power that is vital with a view to energy an EV. So we use a extra typical sequence of processes that begin with powders that we flip into inks, after which we print the layers of the electrodes and the electrolyte and type a battery utilizing a reasonably commonplace set of processes that then give us the amount of battery materials that is required.

So truly, there’s all kinds of benefits to utilizing the Ilika method. We have got an oxide electrolyte and silicon anode structure that gives the next power density. We have got an improved security profile as a result of the strong state electrolytes is much less flammable than the conventional liquid electrolyte that you simply get in incumbent lithium ion batteries. We have got that increased power density, diminished cell degradation. And what’s turning into more and more necessary is healthier recyclability, in order that, truly, it is extra simple to have the ability to recycle Goliath cells than the incumbent lithium ion batteries which might be on the market.

One of many dynamics of this market is that, truly, it’s a regulatory pushed alternative. The EU has banned the sale of typical autos by 2035. And different governments have made comparable commitments. In order that implies that truly there is a very sturdy driver for EVs to be rolled out. And truly bettering the efficiency of these EVs by means of the event of strong state battery know-how, like Ilika is growing, is completely key to supporting the acceptance of EV know-how. That may make a unbelievable contribution to discount of emissions, like many nations within the West, truly transportation accounts for 1 / 4 of the CO2 emissions yearly. So by deploying battery powered autos, you make a large environmental impression.

However there are nonetheless explanation why individuals hesitate truly to buy EVs. One of many principal ones is vary nervousness. And truly strong state batteries go a great distance in direction of addressing that nervousness as a result of the upper power density of the cells themselves is augmented by the diminished engineering that is wanted with a view to guarantee the protection of the packs.

So after we speak about protected cells, truly, we, we discuss in regards to the security within the context of the engineering that is required with a view to make the pack survive a few of the automobile checks that the automobile is put by means of. So within the trade, they discuss in regards to the pole take a look at, which is successfully a crash take a look at. Regular autos or simulated wrapping themselves round a lamppost when you have got a collision. And naturally, there are crumple zones which might be constructed into a traditional automobile with a view to soak up that power, that impression with a view to defend the passengers within the automobile.

With EVs, truly, these crumple zones are usually not fairly the identical, and so the packs should be protected with substantial extra reinforcement for the protection of the passengers. With strong state, you may scale back the quantity of engineering that wants to enter defending the pack as a result of you have not bought the flammable liquid electrolyte that you’ve got in a traditional battery, and due to this fact that lightens the automobile, and due to this fact, truly, that makes an extra contribution to the vary of the automobile with a given weight of batteries. So all kinds of vary extension alternatives through the use of strong state batteries. You additionally get an enchancment in total battery life. And the recyclability of strong state batteries implies that you are able to do lots in direction of selling the round economic system.

So a market entry level goes to be the highest finish of excessive quantity autos, so let’s name them luxurious autos. As a result of they’re, within the first occasion, barely much less worth delicate than mass produced autos. There are different supplies decisions and cell decisions you may make for entry stage, low price autos. A number of the mass market Chinese language autos may use a so-called LFP, or lithium ion phosphate, chemistry with a view to ensure that the value level is saved low. After all, you compromise efficiency by doing that. And through the use of strong state, we are able to deal with the efficiency points which might be required for increased finish autos.

On the suitable hand aspect of this slide, you may see projections of EV gross sales, truly to stay sturdy by means of the subsequent few years in direction of the tip of the last decade. There have been some scare mongering headlines about maybe urge for food for EVs cooling off, however keep in mind that regulatory driver for EVs remains to be very sturdy. And truly, with the continued know-how improvement that we’re seeing within the sector, together with strong state batteries, we count on uptake to be sustained.

So the place are we when it comes to know-how improvement and manufacturing scale up? On the left hand aspect, you see a abstract of a few of the nice breakthroughs that we had simply earlier than the tip of the yr. So, we introduced that we had achieved our D4 knowledge level, which is a design freeze knowledge level that enables us to then productize our first prototype, our P1 prototype. We’d like a number of months with a view to absolutely characterize the D4 knowledge level and ensure that the cells are absolutely understood and, in fact, are protected and meet goal specs earlier than they’re despatched out to clients.

Laborious on the heels of that announcement, we additionally introduced the lithium ion equivalents level had additionally been reached, which mainly implies that our strong state cells have crossed, intersected the efficiency of conventional lithium ion batteries, and are actually providing enhancements relative to that benchmark. So the darkish blue line that you simply see there may be the hint of what is been achieved when it comes to power density by a mean lithium ion battery. And in reality, we count on that know-how to proceed bettering, however into the zone of most theoretical power density that we have coloured mild blue on that chart.

Our strong state batteries will transfer by means of that inflection level there. And we’ll be bettering cycle life and energy density as we transfer by means of to D8, which then interprets right into a minimal viable product, or MVP, because it’s known as there, which additionally truly corresponds to A samples.

So, the automotive trade refers to A, B, and C samples, the place A pattern is a product that meets a specification, however these cells are made on often a small quantity pilot line, such because the one which we’re at present constructing at our facility within the UK. That may permit us to reply to RFQs or requests for citation.

After which a B pattern is a battery with the identical specification as that A pattern, however is produced on manufacturing intense tools, however not essentially within the volumes that you simply want with a view to launch a automobile platform. And that is once you get on to C samples.

C samples are, once more, the identical batteries made on the identical manufacturing intent tools, however add quantity, after which they offer the reassurance that you could implement that course of know-how in a gigafactory.

So we count on to make A samples on our pilot line in 2025. We are going to then switch that know-how to a scale-up facility that our companions will function, as Jason defined earlier. We function a an asset mild or a capital mild enterprise mannequin the place we license the know-how to our companions to allow them to fabricate it at scale. And they’ll then produce B and C samples of their scale-up facility earlier than implementing it in a gigafactory.

So what does the aggressive panorama seem like? We at all times get questions on who ought to we be taking note of? Not like Stereax, there are a lot of builders of EV batteries. And truly, it may be fairly obscure the variations between the applied sciences and the professionals and cons of the completely different approaches.

Really, I’ve tried to cut back this aggressive panorama right into a easy 3×3 matrix. I’ve most likely oversimplified it to – apologies to anyone on the market who could really feel that really I’ve misled the viewers by this simplified method. However I believe it form of offers you a sign of a few of the advantages and a few of the drawbacks of the completely different chemistry decisions that you could make.

So we even have chosen a silicon anode and an oxide electrolyte mixture, as I stated at the start. There are others which have adopted this method in addition to far as we are able to inform, however we really feel that our method has some advantages, in that utilizing a secure oxide electrolyte, we’ve a really simple manufacturing course of. It does truly make it barely more difficult with a view to make the cells as a result of you need to handle a larger interfacial resistance once you use oxides versus sulfides. However we imagine that really, in case you can overcome that barrier, then it is value it when it comes to long run use of the supplies and ease of manufacture.

Many corporations are utilizing a sulfide-based electrolyte. We truly imagine that that may be a very simple method to make a strong state battery. You get excessive ionic conductivity, which implies successfully you may switch the lithium ions from one electrode to a different within the battery, and due to this fact, you get the next cost and discharge charges or increased energy density. Usually, the interface resistance is decrease.

However the issue is definitely that sulfides react simply with oxygen and moisture, and you’ll find yourself with poisonous gasoline releases, and due to this fact, that will increase the manufacturing price once you use sulfides.

So, when it comes to the help that we have got for our Goliath program, we’re receiving help from the Faraday Battery Problem. This system that we’re operating is the historical past program. That is very a lot our core mission. It’s a 24-month collaborative program, which began in February of final yr and can run for simply over one other yr.

The Ilika grant is £2.8 million. Really whole program worth was about £8 million. We have got 9 collaborative and steering companions, together with an anode provider, Nexeon, that has developed silicon anode materials and a few of the UK’s main universities, together with the Universities of Oxford and Imperial, St. Andrews and UCL. And likewise, an engineering firm, HSSMI, who’re delivering a full lifecycle evaluation of the battery manufacturing and supplies, in order that we are able to put extra flesh on the bones of that recyclability declare that we’ve. And we’re fortunate sufficient to have each BMW and Fortescue WAE on our steering committee to assist information this system.

One other piece of help that we have got is from the Automotive Transformation Fund, which is being managed by the APC or the Superior Propulsion Middle. This can be a program we consult with as system, which truly simply began in October. We’re working along with the UK Battery Industrialization Centre, or UKBIC, as they’re identified, in addition to an organization known as Mpac to develop an meeting line for that 1.5 megawatt hour per yr pilot line that we’re putting in at our facility, which is sufficient to ship A samples.

Really, we simply had a design evaluation of this meeting line a few weeks in the past, and that’s approaching very properly. In order that program is effectively on observe. And the concept of the UKBIC interplay is to undertake bodily trials of electrode manufacturing at a a lot bigger scale.

So, you may see by these interactions, what we’re doing is we’re de risking the scale-up of the know-how, so that really we’ve a pleasant bundle of course of know-how to have the ability to license to our companions.

After which, once you have a look at the business interactions that we have got going, we truly are in discussions, pre-commercial discussions with 17 corporations. Over 80% of them come from the automotive sector, so both OEMs or tier 1s. After which, an additional 18% who’re non-automotive, so shopper equipment corporations.

When it comes to geography, primarily right here in Europe, 70% of them from Europe, but additionally corporations from North America and Asia. So a powerful portfolio of interactions. And we count on a few of these evaluations to then flip into nearer business collaborations as we progress by means of 2024.

So now, we have got a little bit of a dialogue of ESG and I will hand over to Jason to cowl that in addition to the financials.

Jason Stewart

Thanks, Graham. So ESG, or environmental social governance, is essential for us at Ilika. It is near our core beliefs and our personal exercise round what we’re doing, how we function, but additionally it has a twin good thing about – it’s one thing that’s clearly appropriately necessary to our potential clients within the automotive sector, as they’re bigger corporations, extra regulated and have extra necessities to report their very own ESG positions.

What we are able to see is that actually there may be plenty of synergy between driving our personal place and making certain that the merchandise that we’re growing and supplies had been deciding on, provide chain choice make it as simple as doable to switch our merchandise into that automotive provide chain for the Goliath aspect and into the med tech provide chain for Stereax. So what we need to do is ensure that we’re not passing an issue ahead by selecting supplies which might be sourced from battle minerals or which have challenges round recycling.

So, Graeme already touched on with the historical past grants that we’re working with companions across the recyclability of our batteries to ensure that each in our personal improvement as an organization, however within the merchandise and processes that we are able to hand ahead as a part of that licensing exercise, we are able to make sure that we actually give a leg as much as our companions to ensure that they’re hitting the bottom operating. In order that’s a part of attempting to construct that very sturdy partnership with these 17 potential clients or licensees that Graeme talked about on the Goliath aspect over Cirtec and their final clients on the Stereax aspect. So we’re persevering with to make sure that we keep our ISO certification. So we’ve accomplished recertification for 9001 and 14001. And we’re persevering with to evaluate the opposite parts of that and proceed to push forward with monitoring as we go ahead, at all times attempting to be forward of the laws that we’re required to as a small AIM listed firm, however cognizant of the truth that we have to work inside our monetary constraints as effectively and do the suitable actions on the acceptable time to additional our ESG journey.

Transferring then to the financials. Broadly consistent with expectations, though barely forward, so barely higher than. So, simply touching from earnings down, the earnings very a lot derived from grant funding. As Graeme stated earlier, that’s the historical past grant, which is over a two-year interval, and a small quantity simply began to come back by means of from the system, Mpac equipment grants that we’ve secured by means of the final yr.

Very a lot the historical past grant has been a little bit bit extra entrance finish loaded than we anticipated. So whereas the overall quantity of £2.8 million to Ilika out of a complete of £8 million awarded for that whole venture has not modified. The phasing of it has been a little bit bit extra entrance finish loaded than we might anticipated. And that is why we might say that we most likely count on that to decelerate a little bit bit within the second half as a result of it’s a finite quantity that is been agreed as a part of our grant venture and due to this fact will decelerate.

Nonetheless, simply to provide readability on that, we’re persevering with to safe and search for extra grant funding alternatives to maintain that going. And we’re in quite a lot of conversations. As Graeme stated, we have got the historical past grant and have not too long ago had the half yr half venture evaluation with that. And we had some actually good interplay, not simply with the steering committee on historical past, but additionally with the broader APC crew who had been Ilika to say, truly, what is the subsequent journey, the subsequent piece that you’ll go on. In order that’s actually constructive from our viewpoint. And as quickly as we’ve extra to replace on that, clearly, we are going to hold that info coming. However on the minute that earnings is round each historical past and system.

In order that then falls down. And as we have a look at the P&L and the price base, we have taken a few of the prices out of the enterprise on account of that Cirtec tech switch and licensing settlement. In order we have a look at the executive prices year-on-year, they’re about £1.5 million kilos decrease than we had been at this half yr level final yr. And that actually is because of having the ability to shut down a few of these actually power intensive actions that we had round working a clear room for a few of the Cirtec associated tools that we have now despatched over and the Stereax processes. So that actually has helped to cut back our price base. And we have redeployed these individuals in direction of Goliath exercise to assist transfer the Goliath course of on.

So the mixture of that enhance in income and that discount in price helps them to fall to the underside line. So the EBITDA loss has diminished. So, £1.9 million excluding share-based funds versus £4.1 million on the similar level final yr. And each of these elements feed properly into the money steadiness with the ultimate piece of that puzzle being round our capital spend.

In order Graeme touched on, the system grant that actually is about our scale up with manufacturing tools. So, a big piece of capital merchandise that we’re within the means of procuring to put in for our A pattern manufacturing scale, our 1.5 megawatts meeting line.

Traditionally, we might have been forecasting that that may be a purchase order of one million pound piece of equipment that we might be shopping for ourselves. Now by means of the grant funded venture, we’ve been in a position to scale back that spend by half. So nonetheless securing the identical piece of equipment wanted for scale up, however utilizing the benefits and advantages that include that collaboration with Mpac and with the grant funding authority to reduce the money burn for Ilika and to increase our runway additional ahead. In order that leaves us on the half yr level with £13.2 million in money or money equivalents.

Graeme Purdy

So simply to wrap up, earlier than we go into the questions, I believe it’ll be a unbelievable yr for Ilika. We have got scale of Stereax by means of that joint manufacturing and advertising and marketing relationship with Cirtec. We will mature Goliath know-how with a few of the companions that we’re interacting with that we have hinted at by means of outlined technical milestones. And naturally, we’ll proceed to push for additional grant help alongside our improvement journey. After which in the end, business income by means of that partnering.

Many thanks on your time at this time. And we’ll transfer over to the questions now.

Query-and-Reply Session

Operator

[Operator Instructions]. Graeme, Jason, you have acquired quite a lot of questions forward of at this time’s occasion and a quantity all through. So thanks to everyone on your engagement. If I could, Graeme, perhaps simply hand again to you simply to reasonable by means of these questions. And I am going to decide up from you on the finish.

Graeme Purdy

I am simply going to take them from the highest right here. Initially, is there any aggressive know-how identified to you that causes concern as a possible menace?

So I believe in reply to that, we have to reply it in two elements. So to begin with, on the one hand, for Stereax, it is a pretty sparse aggressive panorama. There are usually not too many corporations which might be able to compete with the miniaturized USPs of Stereax. The incumbent medical machine battery producers have truly executed their best possible to miniaturize coin cell know-how. However the drawback of doing that’s that there is nonetheless various parasitic weight related to the can of the battery. So you may think about the entire lively supplies are inside a miniature can. And by having that chrome steel can, that provides various extra weight and takes up plenty of quantity that in any other case might be used for lively supplies. So we imagine that by having our Stereax lively supplies deposited on to a glass substrate that we have got an intrinsic benefit there.

When it comes to Goliath then again, in fact, there is a extra in depth aggressive panorama. And we have executed our greatest in one of many slides that we checked out earlier to attempt to make it clear how that panorama is segmented. We imagine that, truly, we have got some fairly compelling USPs for our know-how.

And truly, what I might say is that we imagine the aggressive panorama is unlikely to be dominated by one resolution. I believe historical past would validate that conclusion. In case you have a look at the prevailing lithium ion battery market, there’s various variety, primarily pushed by selection of supplies for cathode, but additionally truly in several types of electrolytes and in addition for the anodes.

So, as an illustration, most of our shopper electronics is powered by LCO batteries or lithium cobalt oxide batteries. Whereas for autos, truly, many individuals both use NMC or NCA or LFP chemistries for these batteries due to the completely different traits that utilizing these supplies confers. And I personally suppose that that is prone to be the identical for strong state. There are completely different options. There’s semi strong state which use a excessive polymer content material. There’s false strong state batteries that use sulfides and others that use oxides. After which, in fact, you have bought the selection between silicon and lithium anodes. So, all of those completely different decisions give completely different properties to the batteries. And I believe you may discover that the functions then drive the uptake of these completely different cell architectures.

So the subsequent query I’ve bought is, are the above corporations shopping for any of your merchandise? I believe the above corporations refers to a few of the corporations that we’ve named as being collaborators in our grants. So, up to now, we’ve executed Faraday Battery Problem, grant supported collaborations with McLaren and Jaguar Land Rover and Honda Europe. And, in fact, within the historical past program that we’re at present doing, we’ve BMW and Fortescue WAE on the steering committee.

Really, we’ve a portfolio of 17 analysis agreements in place, as we have talked about through the presentation, and people corporations are interacting with us on a pre-commercial foundation. In order that they’re evaluating the properties of the batteries, evaluating the information that we’re sharing with them. And coming to a conclusion as as to whether our know-how is complementary to the applied sciences that they already learn about and are evaluating. And you may count on additional progress with these relationships in the middle of 2024.

The following query is, when do you count on first revenues to be incoming? Properly, in fact, the corporate is recognizing income for the time being from the grant help that we’re receiving, but additionally, we expect to obtain product-based income. And Jason gave fairly an in depth dialogue on different sources of income too. So, particularly, for Stereax, a few of the licensing income, NRE, and manufacturing income related to electrode manufacturing that we’re nonetheless going to do, that may construct up within the coming years. And we count on that almost all of that income will begin to be generated from 2025 onwards for Stereax.

For Goliath, the close to time period income, along with the grant income, is prone to be licensing. And the rationale truly that corporations will work together with us on that foundation is that it is necessary that they get entry to know-how with a view to begin planning their scale up. So by partnering with us and taking a license, initiating that tech switch, they begin to plan their very own scale up actions in a well timed vogue. So it would not shock me that, in the middle of 2024, that we see licensing income from these interactions.

After which, in fact, there may be the sale of preliminary prototype product. And that product will likely be prepared for business launch mid-year. That is our P1 prototype. So you may see that there is quite a lot of income streams that may begin to construct as we get by means of the rest of 2024 and into subsequent yr.

Let’s take a look on the subsequent one. So, there is a query right here. What can be a typical or estimated time as soon as clients have acquired M300 batteries and gross sales to these clients?

So I believe this query pertains to how lengthy would it not take for income to begin flowing to Cirtec and ourselves as soon as clients have dedicated to the M300? And the reply to that’s that, truly, as quickly as we begin to ship gross sales to clients, then there may be income related to that. Really, final yr, after we shipped prototype M300 batteries to clients for his or her preliminary analysis, plenty of that was executed on business phrases and there was earnings from that. And we count on that when we’ve the brand new line up and operating that, truly, income will circulate from the provision of batteries to clients.

And the rationale for that, in fact, is that as we undergo the regulatory physique approval course of, or as our clients undergo that course of, they want rising volumes of batteries. And so, they may begin to purchase initially portions within the a whole lot, however then within the 1000s after which 10s of 1000s as the dimensions of the trials and the testing will increase and as they get near market. So it is not the case that it’s worthwhile to wait until the tip of the approval course of earlier than we begin producing income that may ramp up step by step over time. And that is truly fairly helpful for us as a result of there’s a must, in fact, spend money on the tools to ramp up the amount of manufacturing. And due to this fact, we do not desire a huge step change in demand that makes it troublesome to match when it comes to provide. We might moderately ramp up step by step and begin to generate revenues that may feed again into the enterprise.

Usually, the total FDA approval takes between three and 5 years relying on whether or not the product is a category two or a category one machine. And truly, we’ve a portfolio of various units that we’re supplying batteries for. And that implies that truly we’ve a properly balanced income profile that Jason talked by means of earlier within the presentation.

So we have got one other query right here that appears fairly fashionable. How does Ilika Goliath batteries evaluate with Northvolt’s sodium ion batteries which comprise no lithium, cobalt, and nickel, and many others. I requested this query in mild of UK inner restricted entry to uncommon earth supplies such because the above and Chinese language dominance over lithium.

So, yeah, it is an fascinating query that. So, sodium ion batteries are prone to be most helpful for stationary storage. So they are not anticipated to have excessive sufficient power densities for them to be helpful for automotive functions. Sodium is a a lot heavier materials than lithium. So the power density of sodium ion batteries is considerably inferior to the lithium ion equal.

So, whereas they might be cheaper, they’re primarily helpful for issues like UPS. So backup energy, particularly to say telecommunications mass and perhaps in some examples for off-grid storage. So, yeah, it is a completely different sort of know-how and not likely a competitor to the markets that Goliath is designed for.

Let’s take a look on the subsequent query. So the query says right here, you have appear to have adjusted your language describing your merchandise as addressing areas the place typical batteries can’t be used. Does this point out that you’re not focusing on the subsequent technology of current batteries, significantly in EVs, however solely aiming at new markets?

No, I believe that that is only a misunderstanding of language. I believe most analysts would agree with me that strong state batteries are anticipated to be the pure successor to conventional lithium ion batteries for EVs, nearly all OEMs have gotten strong state batteries on their roadmaps they usually’re seeking to interact with corporations to entry know-how that allow that transition. So actually from a Goliath perspective, truly, these batteries are very a lot designed for EV functions.

So one other query right here. Are there any plans to develop one other product within the Stereax line apart from the M300 battery, assuming the M300 is profitable.

Sure. So, actually, Cirtec and Ilika are collaborating with one another with a view to develop our subsequent product, which is the M1000, which is the next power density machine with a capability of 1 milliamp energy versus 0.3 million powers, which is the power capability of the M300. Battery. After which we’ve a roadmap of customized designs that we’ll be engaged on along with OEMs with a view to develop batteries for particular functions. So, there’s some actually fascinating alternatives that we’ll be addressing within the coming years. So there’s very a lot a steady R&D roadmap with a sequence of launches over the approaching years.

Jason Stewart

If I soar in with one, give Graeme an opportunity to do recuperate his voice. So, there is a query right here. The timescales to progress from A to C pattern appear prolonged, nearly two years from A to B. Does that increase issues that you simply arrive too late to the celebration in comparison with the rivals? And will this be considerably accelerated with elevated funding?

So the timelines, as we have proven it on the graph within the presentation, are actually derived by means of dialog and engagement with the automotive companions. So, we’re doing plenty of discussions with them on what their very own timescales seem like as a result of it is not simply the event of the battery itself. It is also the pack design as these batteries should be designed right into a pack that makes probably the most of them significantly USPs, as Graeme talked earlier, when it comes to the advantages of strong state batteries, permits you to modify the engineering that goes across the pack to take probably the most profit to the EV as an entire, whether or not that is in vary or weights or charging time. So there’s plenty of different exercise that may go on with the companions, whether or not that is by means of the tier one producer who additionally wants to think about their scale up and implementation on the their current gigafactory. So introducing strong state into one among their manufacturing traces inside a gigafactory. Or it is on the automotive aspect the place they should design the pack after which design that into the automobile platform that may then type the idea for his or her future generations of EV.

So though the timescale seems fairly lengthy, that’s aligned with the present expectations that the automotives have given us when it comes to how lengthy it takes for them to do this improvement themselves. So there’s plenty of work that goes on between growing the battery to then truly seeing that automobile on the forecourt with an Ilika battery in it. Though as Graeme stated, revenues would begin to circulate as we’re delivering battery. So all of these A, B and C samples would drive income for Ilika. Simply you’ll see a little bit little bit of delay to that automobile being on the forecourt because it has to undergo these steps and for all these design items to be executed by every of the companions.

Graeme Purdy

Thanks, Jason. I’ve bought one other query. Yeah, the Mercedes CTO not too long ago said the SSBs would not be a significant breakthrough as typical cells are getting so significantly better and SSBs would not supply a significant price or power benefit. BYD can be ditching pouch cells. How can traders be assured that Goliath will truly be higher than present or competing applied sciences?

So I believe many CTOs would not agree with the Mercedes CTO as a result of, truly, there are important benefits to taking an SSB method. I might, nevertheless, agree that typical cells are getting higher, however not considerably. We confirmed the power density enhance that’s doable for typical lithium ion batteries. However, realistically, we’re on the finish of that know-how S curve. Lithium ion batteries have been manufactured for quite a lot of many years now. And so they’re beginning to attain the tip of what’s theoretically doable with that method.

So, strong state actually provides plenty of benefits, not solely due to the intrinsic, increased power density that they’ll ship, but additionally truly due to the improved security, which implies as we had been speaking about earlier, that the pack design will be mild weighted, and due to this fact, truly there are automobile stage benefits.

So I believe you needn’t fear about strong state batteries not being a know-how that has matured. It should undoubtedly be the case that that know-how is a significant characteristic on OEM roadmaps as we go ahead.

Jason Stewart

If I soar in with one other one. So a query right here, Northvolt secured a European Innovation Grant not too long ago to thrust back American funding by means of the advantages of the Inflation Discount Act and guarantee Europe can hold Northvolt battery factories in Europe. Is the European Innovation Fund a possible avenue for Ilika because it appears there’s little UK authorities funding into battery scale up within the UK.

So we have already talked about that, truly, Ilika has had fairly a little bit of funding from the UK authorities by means of the Faraday Battery Problem. And that is a mirrored image of our development as an organization by means of the assorted TRL, so technological readiness ranges. And as we transfer up when it comes to that stage, we then transfer into bigger and bigger grant funding alternatives. In order I discussed earlier, when speaking in regards to the historical past venture, we’re now on the level the place we might begin to focus on across the APC, superior propulsion middle funded initiatives, that are a lot bigger in scale, and they’re very a lot there to help the transition, the commercialization of British innovation into actual merchandise. So that may be in regards to the improvement and implementation of Ilika’s batteries into mules or demonstrator autos to have the ability to display them working, to assist us transfer ahead, but additionally to assist display to these companions, these automotive companions that the know-how is viable inside a bodily demonstrator.

So I believe it is truthful to say that, truly, there may be funding on the market. And we have got an excellent observe file of having the ability to safe that and proceed to interact in these conversations. So, hopefully, sooner or later, we’ll have the ability to convey that positivity again to you once more by means of additional bulletins. However as nothing is secured at this level, we won’t decide to what we are able to or cannot say goes to occur within the close to time period or medium time period future.

Graeme Purdy

There is a query right here. At what stage will an organization search exterior funding into Goliath improvement and scale up?

I believe that is an fascinating query. As we have talked about, in the middle of this presentation, we’re in pre business discussions with 17 business companions. And it’s not unlikely {that a} subset of these will need to take part, both by means of licensing agreements or fairness investments in our journey. So I believe that may be a potential information circulate for the course of 2024. And I believe that that sort of exterior participation from the trade can be additional validation of the work that we’re doing and would increase shareholder worth as we proceed alongside our roadmap.

There is a query right here. Does your selection of anode, cathode and electrolyte restrict the applicability of Goliath to sure markets in comparison with different SSP builders?

So I believe the reply to that’s no. Really, we really feel that selecting an oxide primarily based electrolyte is a really sturdy selection and opens up all kinds of various functions. I believe the proof level of that’s the truth that we’ve some shopper equipment corporations which might be approaching us and eager to do additional analysis of the know-how. I believe the silicon anode is a really approachable resolution. And from a producing perspective, we’re actually seeing benefits relative to utilizing metallic lithium.

I believe one of many different disadvantages of truly utilizing metallic lithium is that it is a very lithium intense selection, and due to this fact, fairly a expensive selection when it comes to total cell price. So, no, I believe the market applicability of the Goliath know-how is fairly broad.

I believe I am simply wanting on the time now. We have had simply over an hour of presentation and questions. So I can see there’s a number of extra questions nonetheless stacked up. I think that we’ll exhaust one another earlier than I get to the tip of these verbally. So what we’ll do is we’ll check out these after the decision, and we’ll do our greatest to reply them, after which put up them in the end.

Operator

That is nice, Graeme, Jason. Thanks as soon as once more for taking the time to undergo these questions. And naturally, we are going to [indiscernible] assembly. Graeme, thanks on your time. And Jason. I do know investor suggestions will likely be necessary to you each. I am going to shortly redirect these on the decision to provide you their suggestions. However marvel if I could, Graeme, simply ask you for a few closing feedback.

Graeme Purdy

Yeah. Thanks very a lot to everyone for taking the time to hearken to this replace from the corporate. I actually admire your curiosity and really your continued help for Ilika. And it has been a really vibrant and engaged Q&A session. I hope we have given some extra perception into the corporate’s priorities and efforts on account of that Q&A session. And I very a lot stay up for the subsequent alternative truly to provide you an replace on our progress.

Operator

That is nice, Graeme. Thanks very a lot certainly. May I please ask traders to not shut the session as we now robotically redirect you for the chance to offer your suggestions so that the corporate can higher perceive your views and expectations.

On behalf of the administration crew of Ilika Plc, we might prefer to thanks for attending at this time’s presentation and good afternoon to you all.