Electrode: Long term initiative is to sell electrode to other companies, 2 announced. Others validating. Good long term business.
Production, cost reduction: Outfitting 5 factories worldwide, 2 in San Diego, one electrode, one cell (new). One in Switzerland; growing and expanding; two in China; one for us (Shanzou), one for partner in Shanghai. Shanzou will produce 100,000 large cell units this year, using 100,000 m^2 of electrode material.
Automation & mechanization: electrode & cell programs ongoing All factories.
Focusing on 80 class supplier status at OEM�s. Requries field integration failure rate of 10ppm of shipped product (5 9�s). Released 6th version of large cells, they are the longest lived, most robust in the industry.
Have many module variants in production some standard, some custom.
Gross margin improvement? Should continue to improve but revenue is not large enough to show with rev pushout. Cash burn? Hard to predict. Q4 was very very good, have good controls in place.
R&D: growing due to large investment in designs for each customer�s custom designs / packages over last 2 years, R&D in basic research is also very high compared to a few years ago. Industry suffers from lack of standards.
Cost reduction: Would like labor <5%, overhead 20%, material most of it. Impact of Belton will be dramatic because all 3 will drop. At least 30% better than US cost. Must complete validation, started 2 weeks ago, finish Q2.
Carbon: Not a constraint anymore. Primary & secondary suppliers have added capacity. Significant investment in carbon technology to get inexpensive carbon to perform like expensive carbon.
Market size microelectronics: Single board computers opportunity is 50MM annual. Right now 1.5MM.
When do we go parabolic? Should 2007 ultracap growth match 2006? Yes. To go forward & achieve growth rates needed, need �wedges�. One is windmills. Now into growth of them, should grow 6-8x. Another is heavy transportation. Working with small companies that have done 100 buses at 300 large cells each. NYC has 5000 buses, want to convert half. Opportunity in next 2 years of 10X installed base, and that�s one city. A single automotive win in a mainstream application will be measured in millions of units per year.
What is impact of Alcoa truck app? Will address in next call. Our content is half of unit. 6-12 cells per box. Let�s see how the reaction is in the market.
Laser welder installed? Yes, no problems. Telecom? Big opportunity, a bit lumpy, kind of basic application, will take all they can get.
Why ultracaps down sequentially. Ultracaps were up Q/Q. Telecom was a mostly Q3 event, tailed in Q4. Base business grew.
Lawsuit, not much impact, not going to comment much, no impact on business as yet.
Next gen applications? You all read about alternate technologies, companies, universities, etc. None are ready to become commercial. It took us 10-12 years, they will also. Not worried about it. Interesting, but not an impact. Nucleating competitors, nurturing companies to buy our electrodes, offering for sale electrodes to our current competitors. Mainstream competitors, only one is a threat, that is Panasonic, lots of IP, big company, they�re the one we will pay the most attention to. Epcos has gone by the wayside, expect new competitors to come along, we expect to become dominant, most aggressive player in market, IP, etc
Great information I will use it.
I am no good at discussions so here is something I leave for you.
I wonder if we are involved in enovas post transmission technology.
This is a big potential for Enova I hope Ultracaps are on that ride.
Enova Delivers Hybrid Vans to Verizon, North America's 2nd Largest Fleet Operator
Thanks for the excellent and accurate recap !!!!
I finally got to listen to the CC last night.
My 2 cents:
Cash burn this quater was greatly improved...but Balson made great pains imho to say that it was a one time event and burn rate would be back to the higher levels going forward.
Q1 will be lower due to major customer supply problems (non MXWL). My guess here is Carbon Fiber for windmills.
Earnings were not as them seemed...MXWL lost money and earnings really were negative.
Shelf Offering still looms and will be tapped at some point...appears from the call is that it is not an emergency yet and MXWL is simply waiting for a better price.
Shelf for 125 million...tap may be no where near that.
Looks like Auto pushed out to 2009 (if all goes well)At least serious rev's anyway.
On the bright side...seems that there has been incredible interest very recently on many fronts...esp. lagre application possiblilties !!!
Electrode fastning machine finally in place and doing well as of Mid-Jan. 2007. Dam...that took forever...but now finally up and running...hopefully it well help a little in the margin dept.
Speaking of margins...they still stink ...and apparently will until serious volume picks up. So does that mean until 2009 ???? I understand what was said and why on the CC...but to me that issue needs to be clarified as to timing.
Overall impression was this quarter was not as impressive as some would like to think and even took management a little by suprise...cash burn relief temporary...Q1 will be worse.Quarter also not as bad as others may want to portray.
I was impressed with the level of "serious" (my opinion) interest by some potential major long term players.Increased analyst interest a good sign...not sure if it is the possibility of getting some of the shelf business part of their recent interest. My stance of no position here remeains intact...a dip back to the $10 area my be worth a dip into MXWL again...otherwise still no hurry imho.
Comments welcone :)
Thanks dst & others... I really don't take notes that well, I had to hit replay a LOT, so maybe I can clarify a few points or give you my impressions:
Cash burn: It sounded to me like Rich didn't want to commit to repeating the same excellent improvement (or hold steady) because it's just too unpredictable, but I didn't get the impression he was worried about returning to the high burn rate. Tim also said he didn't see any compelling reason to raise cash, so this also implies a low burn rate going forward (or at least not as bad as before).
Earnings negative: Yep. It would be nice to take all this quarterly data and try to project a break even point but it seems like a difficult proposition given all the unknowns. Taking from my notes, adjusted net loss went from 3.8MM to 3.1MM or .7MM improvement / quarter at the bottom line (not GM). That puts us 4.5 quarters away from break even if all else is the same (it won't be).
Auto in 2009: The comment I heard sounded like 2007 & 2008 would rely mostly on the heavy transportation module sector which is more developed than auto, and in 2009 automotive should eclipse that (the next wedge, if you will), which implies that it has to start sooner than 2009 to grow into a mode that could eclipse HTM's. I don't think he meant auto will start in 2009 - hope that clarifies the timing.
He also said we could expect a non-locomotion auto application announcement very soon. I would bet any auto app will be an entire platform of vehicles, so it should be a nice number when announced. He also mentioned millions upon millions of ucaps for auto during a different segment of the CC, but I think he was talking about the broader market then.
I know everyone wants an auto win yesterday, but working in the auto industry myself, I know everything must be proven beyond a shadow of a doubt before it has a chance of approval. Not just the Ucaps, but any associated systems - this could be a real factor as the new components (electric power steering, brakes, etc) are likely to have their own issues in development. It does take an enormous amount of testing for even a small change in my experience. My guess is that any new announcement will be for something easy like power net stabilization or cold starting / smaller battery systems. I just don't think the other systems are ready yet. That would still be a very nice start.
Margins stinking: Going from 18% to 24% in a half year while in startup mode is excellent I think. They could do nothing further and rely on volume increases alone, (a given, I think) and margins will automatically improve by absorption of fixed costs. Not that they will stop improving by any means... And the new plants are coming online and should have much lower cost structures than anything we've seen yet. I don't remember what was promised before, but getting this far on the fast grower is still good progress in my opinion. On the other hand, any big auto win might mean a whole new round of capital spending for dedicated custom module assembly which might impact margins again for a while (startup). Hopefully the other option would be for MXWL to supply standard ucaps and outsource assembly to someone else.
1st quarter lower: The wind segment pushout seems to have been discounted already given today's action. It will make 1st quarter look bad and 2nd look good. I think most people will take the attitude that the timing is not MXWL's fault and the volume will still be there, just later than expected at first. Meanwhile, the other divisions are doing very well.
Comments also welcome... Naz
Thanks for this thorough documentation! I too think it was a strong call.
Shelf registration clarification
Microelectronics--large market into future; Lockheed-Martin win; hint at European project.
Wind--delays due only to other material shortages; selling to manufacuters other than main customer through pitch control vendors.
Alcoa unveiling cold-start product at upcoming Louisville show.
Many visits by automotive OEM's in February--"audits" imply serious interest.