Prepared remarks
Good morning, ladies and gentlemen, and welcome to the Ideal Power Second Quarter 2026 Results Conference Call. At this time, all participants are in a listen-only mode. At the end of management's remarks, there will be a question-and-answer session. Operator instructions were provided. As a reminder, this event is being recorded. I would now like to turn the conference over to Jeff Christensen. Please go ahead.
Thank you, Jenny, and good morning, everyone. Thank you for joining Ideal Power's Second Quarter 2026 Results Conference Call. On the call with me are David Somo, President and Chief Executive Officer; and Tim Burns, Chief Financial Officer. Ideal Power's second quarter 2026 financial results press release is available on the company's website at idealpower.com. Before we begin, I'd like to remind everyone that a number of statements on this call are forward-looking statements. All statements on this call that are not based on historical fact are forward-looking statements. While management has based any forward-looking statements on its current expectations, the information on which such expectations were based may change. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of risks, uncertainties and other factors, many of which are outside the company's control that could cause actual results to materially differ from such statements. Please refer to the company's SEC filings for some of the associated risks, uncertainties and other factors. We would also refer you to Ideal Power's website for more supporting company information. Now I'd like to turn the call over to Ideal Power's President and Chief Executive Officer. David?
Thank you, Jeff, and thank you to everyone joining us today. I'll begin with an update on our commercial progress from the start of the second quarter. Then Tim will review our financial results. And after our remarks, we look forward to your questions. Let me start with our lead Asia customer. We're finalizing our low current solid-state circuit breaker or SSCB prototype development for shipment to the customer later this month for their internal testing. B-TRAN-enabled SSCB prototypes are expected to be available from this customer for their 800-volt AI data center and energy grid customers in the fourth quarter of 2026, with initial low-volume orders to support the prototype builds also expected in the fourth quarter. Beyond that initial project, and in order of priority, we are engaged with this customer on two additional projects: one for a medium current SSCB designed for 800-volt DC data centers, energy storage applications, EV charging and industrial microgrids, and the second for a low current SSCB for smart industrial buildings.
Technical discussions on the medium current SSCB are already underway. Second, under the letter of intent we signed in the second quarter, we advanced our co-development with an industry partner on a B-TRAN-enabled intelligent SSCB prototype for a planned evaluation by a U.S. hyperscaler in its development for the NVIDIA Rubin Ultra 800-volt DC data center power system. We're targeting prototype delivery by the end of the fourth quarter of 2026. This prototype is also planned to be offered to additional hyperscalers and other AI data center operators adopting the NVIDIA Rubin Ultra Power architecture or comparable 800-volt DC AI data center power distribution systems for evaluation. The Ideal Power team will be attending the Open Compute Project Global Summit in October, together with our industry partner, to introduce this intelligent SSCB prototype concept to AI data center and infrastructure providers for their consideration.
Third, we delivered a second set of Gen 2 B-TRAN custom packaging samples and development kits to Stellantis for their evaluation. We are working closely with the customer on a detailed analysis of our solid-state contactor system-level specification to optimize the solution and align the remaining deliverables under the purchase order. While this has impacted the timing of our expected completion of deliverables under the PO, it has not delayed nor otherwise impacted our expectations regarding the EV contactor opportunity with Stellantis. The deliverables we've completed support the next project milestone scheduled for the fourth quarter of 2026. We will work to promptly complete future deliverables as they are agreed with the customer to support subsequent project milestones. Fourth, we achieved an important operational milestone. We entered into a long-term supply agreement with a high-volume wafer foundry in Asia, not China, and achieved functional first silicon after initiating discussions with them in the first quarter of this year.
This is an automotive-qualified fab that has built more than 1 billion power semiconductors. This foundry has the capacity to support high-volume industrial and automotive customers at a cost structure we believe supports our targeted gross margins at scale. Fifth, we're seeing accelerating demand to support 800-volt DC architectures from a growing number of potential customers, including leading global electromechanical breaker manufacturers now seeking SSCB solutions. I've been asked how we are helping customers speed up adoption, and I would like to take a moment to explain the progress we're making. We introduced a new SSCB reference design kit or RDK, to assist customers with evaluating our technology and accelerate the development of their own SSCB products. This is critical to adoption as companies that have traditionally supplied electromechanical breakers may not have internal expertise with solid-state solutions or may not have started developing SSCB products.
With the rollout of 800-volt AI data center power architectures expected to start in the second half of next year, these companies need a close-to-market-ready solution to enable timely product introductions. We are already seeing traction as one of our distribution partners has placed its first stocking order for these SSCB RDKs for delivery in the coming weeks and multiple customers have requested access to our new RDKs. Sixth, after recently adding a Europe-based sales director, our team met with more than 20 potential customers at PCIM in Germany. Our European sales efforts have already led to early engagements with a Europe-based global automaker and Tier 1 automotive suppliers. We recently met with one of these global Tier 1s' preproduction and production teams as we are finding significant interest in solid-state EV contactor and battery disconnect unit solutions. We also have a new engagement with a European-based circuit protection company interested in a broad set of applications, including solid-state breakers for data centers and energy storage as well as battery disconnect units for EVs.
They're targeting both U.S. and European markets on an aggressive timeline. Seventh, our newly formed Advisory Board now includes its first member, Dr. Sanjay Parthasarathi, Chief Marketing Officer of Coherent Corporation, a key supplier for AI data center infrastructure. Sanjay brings more than 35 years of leadership across data centers, optical networking and related technology markets, aligning with our near-term revenue opportunities. His deep market expertise and industry network directly support our plans to accelerate the commercialization of our high-value, high-impact solutions. Let me spend a moment on the data center market. When people picture the AI boom, they think graphics chips, processors and servers. But the bottleneck is increasingly power — getting it to the data center, distributing and managing it once there. The forthcoming migration to 800-volt DC power architectures in AI data centers and the supporting energy infrastructure is a catalyst that is accelerating the demand for high-voltage power semiconductors.
This is reflected in the industry's growing backlog for power semiconductors and is expected to drive rapid growth over the next several years. SSCBs are essential in high-voltage DC systems as they enable ultrafast fault handling for reliability. B-TRAN provides an ideal solution for solid-state circuit protection with its inherent bidirectional operation, low conduction losses, microsecond fault handling and 1,200-volt rated operation, providing ample safety margin for 800-volt power delivery systems. The industry is in the early stages of a secular megatrend in power semiconductors that presents an exciting growth opportunity. I'll briefly discuss our product reliability testing and qualification plans. A simple way to think about it is that industrial and automotive qualification typically reflect the requirements of each end market. JEDEC industrial qualification supports our near-term opportunities in AI data centers, energy storage and grid infrastructure markets, while AEC-Q or automotive qualification is designed for automotive applications.
Given the accelerating demand for power semiconductors to support AI data centers and energy infrastructure, which represent our nearest-term revenue opportunities, we are prioritizing work on industrial reliability testing and qualification. We plan to begin the industrial qualification process during the current quarter and complete it in the fourth quarter. Automotive reliability testing and qualification will be planned to align with customer timelines. Importantly, automotive qualification is typically required for use in vehicle production but is not a gating item to advance product development for automotive opportunities, including our EV contactor opportunity with Stellantis. As such, adjusting the timing of automotive qualification is not expected to affect our sales opportunities. Our commercial progress is showing up in the size and quality of our sales funnel, which has grown to over $400 million in total revenue opportunity, up from about $300 million at our mid-May call.
It's split roughly 50-50 between automotive and the combination of AI data centers and other industrial applications, and it is global. Applications are primarily SSCBs and solid-state EV contactors with growing interest in solid-state transformers, all of which broadly fit into the category of circuit protection. While a growing funnel is encouraging, converting it into design wins, production orders and revenue remains our top priority. We are focused on execution and working closely with customers to complete their evaluations, product development and testing to advance projects through the funnel and into volume production orders and revenue growth. In closing, commercial momentum continued to build this quarter with prototype SSCB units being finalized for internal testing by our lead Asia customer, progress toward the planned evaluation of a co-developed intelligent SSCB prototype for a U.S. hyperscaler, a growing pipeline of engagements with regional and multinational customers across multiple markets, and the rollout and first stocking order for our new SSCB reference design kit designed to accelerate customer adoption.
We also achieved an important operational milestone by entering into a long-term supply agreement with a high-volume automotive-qualified foundry that we expect to be a cost-effective partner for us for years to come. Overall, the industry's transition to high-voltage DC power architectures in AI data centers and energy infrastructure is serving as a catalyst for power semiconductors and solid-state circuit protection solutions, and B-TRAN enables a differentiated solution to fill that need. Our focus remains on advancing customer opportunities into volume production orders, revenue growth and long-term shareholder value creation. Now I'd like to hand the call over to Tim Burns to review our financials. Tim?
Thank you, David, and good morning, everyone. I'll begin by summarizing our recent capital raise. We raised $27.7 million in net proceeds from a registered direct offering of common stock and prefunded warrants that closed on May 18. We are excited that the financing was led by the company's largest institutional shareholders. The offering significantly strengthened our balance sheet. At June 30, 2026, cash and cash equivalents totaled $41.3 million. Post offering, we still have a clean capital structure and no debt. Our second quarter 2026 cash burn was $2.5 million, flat compared to $2.5 million in the second quarter of 2025 and up from $2.3 million in the first quarter of 2026. Our Q2 cash burn was at the lower end of our guidance of $2.5 million to $2.7 million. Even with the flexibility provided by our recent capital raise, we will continue to manage expenses prudently and aggressively.
We expect third quarter 2026 cash burn to be approximately $2.7 million to $2.9 million with a full year 2026 cash burn of approximately $10.3 million to $10.5 million. This compares to a 2025 cash burn of $9.6 million. The higher forecasted cash burn in 2026 compared to 2025 is due primarily to the hiring of additional sales and engineering personnel. We recorded modest revenue in the second quarter of 2026. Initial orders from the companies evaluating our products for potential inclusion in their OEM products are expected to be small with order sizes increasing as customers progress through their design cycles, perform product qualification and build inventory for the commercialization of their B-TRAN-based products. Operating expenses were $3.6 million in the second quarter of 2026 compared to $3.1 million in the second quarter of 2025. The increase was driven primarily by higher stock-based compensation expense, personnel costs and noncash patent impairments as we proactively rationalized our pending patent portfolio.
Our 105 issued patents were unaffected by this rationalization and the streamlining of the portfolio lowers our future patent spend. We expect operating expenses to increase modestly in the coming quarters due to growth in our sales and engineering teams to support our commercialization efforts as well as our growing number of customer engagements. We continue to expect some quarter-to-quarter variability in operating expenses, particularly research and development spending due to the timing of semiconductor fabrication runs, product development and other research and development activities as well as hiring. The timing of equity award grants and performance stock unit vestings and related noncash stock-based compensation expense recognition will also cause variability in our quarterly operating expenses as it has in the last two quarters. Net loss in the second quarter of 2026 was $3.4 million compared to $3 million in the second quarter of 2025.
At the end of June, we had 16,421,520 shares outstanding, 1,238,553 options and stock units outstanding and 3,410,086 prefunded warrants outstanding. At June 30, 2026, our fully diluted share count was 21,070,159 shares. At this time, I'd like to open up the call for questions. Operator?
Questions and answers
Operator instructions were provided. Our first question is coming from Casey Ryan of AmerX.
I wanted to ask about the hyperscaler opportunity. Are you partnered with other component makers? And I'm just wondering if they're really sourcing their own solutions at this point, looking for better products and better pieces. And if one hyperscaler is doing it, do we think all of them will start to do it? Or is it sort of a personality of the hyperscaler in terms of how much they want to control versus turning that over to external parties like us?
Casey, I'll take that one. So I'll use your terminology. It's more of the personality of the hyperscalers. They're each involved at different levels depending on how they work with their partners that are supplying different components and systems that are deployed in the data center — either those who are all the way down to the component level that could integrate into bigger systems that then get deployed, or there are those who stay at a higher level. So the opportunity here is working with our industry partners to deliver something that's more at a circuit protection level but bring some intelligence that's intended to help with managing how power is utilized and optimized across the power distribution system inside hyperscalers. Which is why we believe it has relevance to them. It is likely to be more relevant when presented at more of a system level that they can potentially integrate in their environment; that becomes potentially more interesting, and that's what we're working towards.
What do you think the evaluation period would be? Does it feel fair to think that maybe it's a one-year type of evaluation period — shorter or longer, I guess?
Yes, difficult to call. What I would refer to is for those who are looking to be on the front end of the 800-volt DC data center power evolution that's anticipated or projected to happen starting from the second half of next year and see some aggressive adoption as we go into the end of the year and into 2028. So the evaluation timeline, if it's going to be used early in that environment, would have to line up with that schedule.
Yes. Okay. I mean that's actually consistent with what we've heard from a few other companies who are in your base necessarily, but are exposed to data center as well. Are you guys having conversations with other data center component companies that you sell with or partner with? And I'm not trying to draw a straight line to Coherent, but I did see that you added someone there to your advisory board and I think that's a positive. But are you sort of with a partner or a group of companies partnering to sort of sell solutions? Or is each of you still pursuing your own direct access to say a certain hyperscaler or a certain customer opportunity in a data center?
So let me describe it this way, and I'll use the automotive market analogy. If you think about the way automotive works now, it was historically component suppliers — semiconductor suppliers like us — would sell to Tier 1s who then would sell to the automotive OEMs. About eight to ten years ago that began to shift where the OEMs wanted direct relationships with some of the semiconductor suppliers to know what's coming down the pipe and evaluate newer technology sooner and then have some influence over what their Tier 1 suppliers are providing them at a systems level. I think there's opportunity here. Our traditional model would be us selling our semiconductor components, B-TRAN, to somebody who's going to build a solid-state circuit breaker or a solid-state contactor for automotive that then gets integrated by the next-level customer and goes eventually into a data center environment or industrial grid or something along those lines.
I think the opportunity here is with the rapid pace of innovation to be able to take something that's more like a circuit protection level and introduce new concepts directly to those who are doing higher-level system integration or even, in some cases, the hyperscalers themselves. We're looking at new technology and how to prepare for this high-voltage DC transition. We want to work at each level: direct with our more traditional customers that are building circuit protection devices or contactors for EVs, then their customers who may be doing the integration level, and ultimately, to the hyperscaler, if possible, where there could be interest and they want to work at that level.
That's actually very helpful for me to hear and to get a better understanding of that. On the capacity agreements, getting those feels positive, but it also maybe feels encouraging because perhaps customers were asking you about capacity and wanted you to sort of demonstrate a plan, which would suggest some interest on their side. So I'm curious how much getting this sort of penciled out and contracted was part of satisfying some of the sales conversations that you're having with certain potential end customers.
With the existing fabs that we have, we had capacity for two-plus years with our existing relationships. But for us, particularly as you look longer term and at things like the automotive market, our new long-term supply agreement really supports the long-term scaling of our business. Probably even more importantly, it's at a cost structure that we believe will support our targeted gross margins. We've publicly said we're looking for gross margins of 40% plus, and we have a long-term relationship now that we believe will support that.
Yes, 40% plus. Okay. All right. Terrific. And then last question, I guess, with Stellantis, we always are encouraged by any progress there. But I guess what do you think — is Stellantis sort of unpredictable for you and there's no way to say when they will start to integrate some of these products or make a decision in a definitive way? How do we think about that? And has the opportunity narrowed or widened since maybe we first started talking about them 18 months ago or 24 months ago?
Yes. The level of depth in the discussions with Stellantis toward the solid-state contactor program has definitely increased. Over the past couple of months, we are working with them very closely on the definition of their system solution level to understand how B-TRAN can be used in their environment to optimize the performance and capabilities of their system. They are evaluating different alternatives that extend beyond our contribution to the system, including things like packaging and so forth that need to be considered as the total system solution. I'm encouraged by the improved depth of the conversations we have because as discussions deepen and you get into more details, that's typically a positive sign of where things are progressing.
We appear to have reached the end of our question-and-answer session on the phone lines. I will now turn the call back to Jeff Christensen to read questions submitted through the webcast. Thank you.
Thanks, Jenny. The first question submitted is, why are the foundry agreement and functional first silicon so important for Ideal Power?
Yes. I kind of addressed this in responding to one of Casey's questions, but one, it's a long-term supply agreement. This will allow us not just to get through the initial ramp, which we had already planned for with our existing fabs, but really gets us in a place where several years out, when things like automotive volumes are potentially much more significant, we have an existing relationship that will support that. The other thing is that in a larger, more established fab, there's a cost structure we can benefit from. I mentioned earlier that we believe we can get to our targeted gross margins at scale with this new foundry relationship. It also provides confidence to customers because they'll recognize the fab if we disclose it to them under NDA, and they'll know that we'll be able to supply them even if their volumes grow very rapidly.
Our next submitted question was what gives management confidence that Ideal Power will successfully commercialize?
I'll take that one, Jeff. I think there are three key reasons. One is that B-TRAN possesses benefits and advantages for the applications we're targeting, primarily around solid-state circuit protection that span data centers, energy infrastructure and EV applications. We believe we have some unique and differentiated capabilities that serve us well and make us competitive in those applications. The second is the continued expansion of customer engagements and our sales opportunity funnel; we're seeing continued progress with adding new opportunities to the funnel and deepening engagements with customers, which helps move us along the development timeline toward production systems. And third is that we're in the right place at the right time from a market perspective with the growth outlook and secular megatrend around high-voltage DC for data centers and energy infrastructure. That fits well with where we've targeted B-TRAN from an applications perspective and from a growth opportunity.
Are there a couple of milestones that Ideal Power will achieve with the recent capital raise?
For us, our strategy doesn't change on how we're attacking the market. We don't expect enormous increases in our spend just because we have more capital on the balance sheet. We'll continue to be aggressive in managing our cash spend. What this does do is give us over $41 million on the balance sheet at June 30, providing a strong balance sheet. That will be viewed favorably by both vendors and customers as we move forward. It puts us in a better position to commercialize our technologies and gives our partners confidence that we have adequate capital for several years.
The company issued a shelf registration on July 10. Any additional commentary on that?
From my perspective, it's good housekeeping. Our prior shelf was expiring, and we wanted to put up a new shelf. We have no intention of raising capital right now. We'll have the shelf available to issue registered shares if there is a strategic investment that comes along. We're in discussions with companies on that possibility. That would be great for validation of the technology and for revenue generation as well. Again, it does not indicate intent to raise capital; it just gives us flexibility should a strategic investment opportunity arise. It's a three-year instrument, so if in two or three years there is a reason for us to raise capital or if a strategic investment opportunity comes along, it gives us the flexibility to issue registered shares.
The next question is, the company includes in its strategic priorities to continue to explore strategic opportunities with global market leaders. Does that mean corporate customers taking equity stakes, or is that the investment community?
So that would be customers. This would be a customer that is going to potentially adopt our technology, which gives them an incentive for us to succeed. They could have a very positive relationship in terms of driving revenue growth. Many large companies we talk to in terms of prospective customers have equity branches that invest in key suppliers and key technologies for their OEM products. That's what we're potentially looking at.
The next submitted question was what third-party validations exist around B-TRAN? Any comment on that?
We're in the process of, and David talked about this extensively, going through JEDEC qualification for the industrial markets, which is key for our near-term revenue opportunities. We will align our timeline for automotive qualification with the automotive opportunities in our pipeline, including Stellantis. We've worked with multiple third-party testing houses to generate a lot of data on B-TRAN, and much of that is included in the data sheets published on our website. Our customers evaluate the technology themselves — they bring it into their labs and test it under different conditions to understand how it operates. From that perspective, I think we're in good shape.
The next submitted question is: Can you help investors understand the types of current customer paid engagements?
Right now, there are a couple of primary types. One is product sampling and development kits, which are generally small volume orders where customers want to get the technology in their lab and evaluate it for use in their applications. The other is potentially NRE fees for custom development projects, for instance if a prospective customer wants a custom package for their application. Those are the main types of near-term revenue. Longer term, we'll be looking at much higher volume orders if and when companies adopt our technology for their end products.
Thank you. That concludes our question-and-answer session. I would now like to turn the call back over to David Somo for closing remarks.
Thanks, Jeff. I want to thank our employees. Their innovation and hard work are what's driving our progress. Thank you to everyone who joined us today and for your support. I look forward to our next quarterly results call in November as we execute on our plan to commercialize B-TRAN. Operator, you may end the call.
Thank you very much. This concludes today's conference call. All parties may disconnect and have a great day.