The following are my (mental) notes. Use at your own risk. Ram
The May 17 conference call was more crowded than usual, with at least 25 people asking various questions and lasting about 90 minutes.
Credibility
This conference call was all about VLNC credibility.
(I recall posting on the credibility issue last Fall or so. I did not have the time to find it.)
Lev is addressing the credibility issue. VLNC will sell to all repackagers, customers, and competitors. Lev does not mind if a competitor takes a VLNC battery apart to learn the technology. He thinks that if competitors are convinced, they will eventually become VLNC customers. Lev wants all of them to know that the lithium polymer battery is real and VLNC makes it commercially.
Lev says that VLNC is the only company producing the true Li Polymer battery commercially. Lev wants to supply small orders to several customers for a diversified set of applications, so VLNC technology gets recognized throughout the battery market.
The battery market is huge; it has room for many large players. His current focus is cell phones, laptops, PDA's and a couple of specialty applications (e.g., DVD player).
Lev would rather throw away 50,000 batteries if they failed to meet the quality standards. He will never ship bad batteries!
Li Poly vs. Cobalt Battery
Many produce Li ion or cobalt based Li electrolyte gel bags enclosed in cans. The Li ion technology can not match the energy density achieved by VLNC's Li Polymer battery, upwards of 140whr/kg. If producers try to force the energy density of Li ion batteries up, they may run the risk of an explosion and scare the entire market away from the Li ion/Polymer battery technology.
Worried about the cobalt battery going off.
Recharge Cycles and Battery Life
VLNC battery can be recharged using the current Li ion battery charger, charging at 4.1 or 4.2v. Above 4.22v, the cobalt based Li ion battery becomes an explosion hazard.
VLNC batteries have both high energy density and more than 1000 recharge cycles. VLNC battery charges typically 80% of the original capacity in about an hour. VLNC considers it a failure if the recharge is below 80% of original capacity. Most battery makers target 70% of capacity.
No difference between 1 vs 5 hour charge cycle.
Since the VLNC battery can be recharged several thousand times to 80% of original capacity, VLNC battery has been designed into the product, for example, as part of a cell phone. The battery may outlast the cell phone. There may not be a need for a spare battery.
The cell phone battery operating at room temperature, can be recharged 1000's cycles, several days between cycles, may outlast the phone, battery 80% of original capacity.
On a DVD player using the VLNC large battery you can watch 2 movies. 12 hours of power for a laptop PC?
UL Approval
VLNC got the UL approval for the Gen I battery. UL approval means that VLNC battery will only need a simple and less expensive battery circuit (internal or external) for safety. VLNC is testing Gen II in a similar fashion for UL approval. Tests are done for Gen II. Usually tests are done internally before submitting a battery for UL approval.
VLNC is now building batteries with no repackaging.
Energy Density
VLNC is not producing Gen I battery anymore. Their current production is all Gen II with 140 whr/kg. Gen III will be in production in a few months. Gen III will have 5-10% more energy density than Gen II. Gen IV has about 20-25% more energy density than Gen III. Gen IV will be in production later this year or early next year.
All current customers want Gen II batteries that are currently in production.
Lev says that he sells watthours, not batteries.
Battery Disposal and Environmental Impact
The State of Nevada approved the exclusion of Li Polymer battery from the Heavy Metals disposal classification. VLNC battery does not come under the heavy metal toxic waste disposal requirements. Batteries using Nicel-Cadmium, Nickel, Cobalt, etc. come under the heavy metal waste disposal regulations. VLNC uses Li , manganese, phosphorous,etc. VLNC is initiating discussion with the States of California and Oregon on this issue. The European and Japanese governments have a strict regulation on heavy metals disposal. VLNC may appear to have an advantage over other batteries in the environmental area. VLNC battery materials are no worse than materials on the electronic circuit boards.
Hanil-VLNC
Hanil will commence commercial production this September, mainly the cell phones. They plan to run at full capacity when they begin production. Hanil has ordered an additional line, similar to VLNC's order. VLNC has been shipping the laminate material to Hanil and receiving cash payments for the shipment. VLNC did not ship much laminate to Hanil in the last two quarters because Hanil was not ready for commercial production. Their quality standards are now approaching VLNC's. Hanil will have more production lines next year for large batteries for the laptop PC application.
Alliant
VLNC is selling the laminate and semi-finished cells to Alliant JV.
100% Recovery
After the laminates are cut, the remaining laminate scrap is recycled to get 100% recovery of the raw material. The new German line allows punching out strange shapes with a minimum waste. The waste is recycled 100%.
Laminate Market too Huge
Their film making capacity at the NI plant is too large. VLNC will sell films to anyone. Market for the film is huge.
Battery Shipment
A majority of the finished batteries goes to Moltech. VLNC sells batteries to repackagers and also directly to customers like QCOM. VLNC is now allowed to mention QCOM's name. Two orders are from QCOM.
Some customers do not order the entire amount at one time. When the total order is not known, VLNC treats it as a small order and announces it so.
Lev can not talk about QCOM licensing VLNC battery technology for QCOM's own products.
HET ceased production. VLNC is receiving the total order. VLNC is negotiating a deal with the parent company of HET, which is a repackager.
Licensing
VLNC is working on licensing. Lawyers are looking into it. So far, they are thinking about licensing the raw material specifications, etc., even to competitors. Raw materials licensing may happen by the end of this year. VLNC is not ready yet to license the production technology. No idea where competitors are.
Laptop PC orders
Discussion is continuing with at least four large laptop makers, talking to repackagers. Several million $ have been invested. Important to have credibility for this market.
The slow line, Klockner, is set up to run laptop batteries. Although the line is slow, the large battery format gives the most profit. Think about watthours.
2 high speed lines are for cell phones, 2 slow machines for large batteries. The fact that there is no second source for large batteries, may be a problem. Li ion liquid gel in cans is not safe for large battery applications like laptop PC.
Laptop PC battery size cells, 4x4x1 mm or 4X5x1 mm, at 24 cells/min on Klockner or 8 meter/min. It takes 6 cells per laptop battery - a production rate of 4 laptop batteries/min on Klockner. On Fable line - the new machine - can run a minimum of 160 cells/min of 4x4mmx1mm size. It will make any size from 4 mm x 8 mm or any combination.
When will consumer see VLNC batteries in GSTR, QCOM products?
VLNC is told by CSTR and QCOM when to ship to the repackager. Lev would not know when the product will reach the consumer.
IDB funds
Expected in July. It will come in increments.
Customer names
Except QCOM, VLNC will not divulge the customer names. VLNC is bound by non-disclosure agreements.
French mobile phone customer (?)
(network congestion.)
NI Plant Capacities
Battery production to ramp up in 3 phases. 3 million to 14-15 million batteries in 15-18 months. Can not relate battery volume and revenue dollars, clearly. Lev was confident of $180-250Million revenue next year, and $75 Million this year.
Yields
Yield accounting is not in place. Yields are more than satisfactory. Difficult to account yields at present. Later in Qtr 3 or 4, VLNC may start announcing yields.
Cash flow
Understanding with banks and credit line.(??)
Analysts visiting NI Plant
No comments.
Booking revenues
Revenue is booked on shipment of products, not based on purchase orders.
Backlog
VLNC Will not announce any backlogs. Some PO's have not been announced yet. All Lev could say was that the current backlog is sufficient to keep the plant busy. Lev has more than enough customers. He would rather have 10 small customers, spread over several industries (cell, laptop pc, pda, specialties), instead of a super large, single customer. They are looking into pacemakers or watches, for now.
Account payable
Includes costs of factory expansion, ramping up costs (Expecting the German machinery ordered in 6-8 months delivery) and infrastructure building.
Plant Expansion
Next week, VLNC is accepting a new machine. All other lines are working. Expanding the conditioning section. Currently recharging (recharging generates hydrogen gas) takes 17 hours. Liquid electrolyte battery takes 5 weeks. Expanding conditioning capacity will bring the cost way down (and inventory costs down).
Profitability
Profitability depends upon growth rate. VLNC can have faster growth with poor profitability or gradual growth rate with high profitability.
$25 to 75Million revenue ramp up this year. $75M revenue by the end of this year. In 2001, expecting better than 250MM from NI plant alone. (does not include Hanil or revenues from raw materials licensing.).
Inventory costs
Since their production is ramping up so fast that average inventory does not apply. There is a 14-day quarantine before shipment.
Battison departure
Mike has 17 years of experience, knows 100's of repackagers, in Europe and Asia. Hired an agent in Asia and one in Euorpe.
Lev's departure
Lev is not leaving VLNC until VLNC achieves positive cash flow and shows profit.
Possible merger or buyout
VLNC was approached by a large company to sell all of its production to them. VLNC refused. VLNC was approached by another large company to join them as a subsidiary. VLNC refused. There is no plan to buy back VLNC stock at these prices. |
