$LQMT Axiom: Open House Summary (sorry for the delay, it was overwhelming)
The Turnout
I got there at 8:30am and left just after 4pm and in that time there were approximately 100 visitors in the building at any given time.
I estimate around 250 people showed up in total.
These were a mix of investors, vendors, partners, suppliers and potential customers.
I talked with a few visiting engineers who were very interested in potentially incorporating this into their products.
I even talked to a current Apple engineer in attendance... who didn’t give me any inclination of why he was there (official capacity or just personal interest) but it was mid-day on a Tuesday, so read into that what you will.
The Building
There were 2 Arburg MIM machines (one 66t and one 110t), 2 EON machines, 2 Engel machines (with space allocated for 2 more in the near future), 2 CNC machines and 2 water jet machines (only machines I didn’t see personally).
I was told that the EON machines have only been in operating capacity for only a week or two, I speculate that the reason behind this is that the EON machines are actually repurposed LK Technology Holdings Ltd machines that are converted for BMG production.
I believe this is why they were delivered about 6 months ago but are only production ready now (pure speculation).
There were also robotic arms on the factory floor that will be attached to the EON machines in the very near future for enhanced automation capability.
The difference between the old building and the new one is night and day. The old building was an office with a prototyping lab attached.
This new building is purpose built to be a full fledged production facility. I cannot emphasize enough the massive difference between the two.
There were 3 shelves measuring approximately 10’x5’x2’ in the back of the warehouse that were cardboarded and taped up which the employees could not talk about.
My speculation is they were filled with prototypes or customer orders. I can’t think of any other reason why they had something hidden on a shelf that they could not talk about.
I tried to look for molds and there seemed to be about 40 sitting around (that I could see).
I saw a number of crates full of ingots, my estimate would be about 20 crates measuring approximately 30”x24”x18”.
More interesting is that behind the Engel machines there were approximately 100 “boats” which hold and induction heat the LM105 alloy before injecting them into the molds.
A large number of them looked used and I saw this as the best evidence of actual runs of the Engel machines prior to the open house. Again, pure speculation, but i thought it was interesting to note.
Talking to some of the Liquidmetal neighbours to the warehouse they were telling me that the whole warehouse has been under extensive renovations for the last 3 months leading up to this week. They used the phrase “non-stop renovations.”
The warehouse is scheduled to have an extensive electrical upgrade in February 2018, and forgive me for not getting this straight but it will either be upgraded to 4000A or is already at 4000A and will be upgraded from there, this suggests potential future expansion.
Another near-term expansion that was mentioned is adding a PVD (Physical Vapor Deposition) machine to serve customers that care about appearance of the finished product.
A lot of people have seen that there are currently just 4 BMG machines in the warehouse making it seem almost empty, however a quick back of the napkin calculation yields a surprising production capability:
If we assume the following: 80% uptime in a lights-out operation (3 shifts), 80% shot yield rate and 90% quality assurance yield rate, then 300g shot for the EON, 100g shot for the Engel, 90 second cycle time for the EON and 150 cycle time for the Engel we get the following:
(((24h X 60m X 60s) X 80% uptime) ÷ 90s per cycle) X 80% shot efficiency X 90% Yield Rate X 300g shot = ~166kg/day capacity (EON) of finished shipable product
(((24h X 60m X 60s) X 80% uptime) ÷ 150s per cycle) X 80% shot efficiency X 90% Yield Rate X 100g shot = ~33kg/day capacity (Engel) of finished shipable product
For comparison this is 20,000 of the Liquidmetal flag promo pieces per day (5,100,000/year).
When I thought about it from that perspective that’s a lot of capacity. Also, I roughly estimated there were room for 15-20 machines in the warehouse (100,000/day or 25,500,000/year).
This doesn’t even take into account the contract manufacturing capability of the 27 machines in China.
With that kind of capacity, don’t you think it’s important to ask why they are adding 2 more Engel machines soon? ??
The Business
They made it clear at the open house that the business model has changed over the past 12 months from essentially a licensing/prototyping facility to a full production (and full service) facility.
The boots on the ground opinion I got is that a lot of customers were scared away by the licensing model as it was such a huge commitment.
They believe that being able to help customers by doing smaller production runs at the Liquidmetal facility to start and scaling up the orders before committing to a full production facility of their own will allow them to approach 2-3 orders of magnitude more customers.
-
EON Machines are simply there as an alternative for more cost conscious customers that don’t need the full capabilities of the Engel machines and the slightly superior LM105. Considering these are still amazing machines I see it as customers who don’t need the Rolls Royce because a Bentley will do.
-
MIM Machines are not just run of the mill machines (they said they didn’t want to compete in that arena) instead they are going to be targeting high-end and specialty alloys to allow customers to be serviced by a wide variety of metal production options and keep more customers in the Liquidmetal family.
Everything I encountered at the open house was geared towards 1 goal: return to profitability as quickly as possible.
This was articulated to me by multiple employees and sound explanations given for why with the expanded capabilities it will be much easier now than at any time in the past: cost reduction for the customer, a full service production facility and much wider product variance.
Cost Reductions
One of the most interesting things I learned at the open house is the massive cost reduction of producing LM105 by Materion.
I was told directly that in the last 12 months they have reduced the cost of LM105 by 50% and are on track to reduce the processing costs by another 30% over the next little while (processing is ~2/3 the cost of producing LM105).
This is absolutely incredible as the raw LM105 material cost of Liquidmetal is the #1 cost of any finished LM105 product.
Liquidmetal is now sourcing some of it’s molds from EON and I overheard a 75% reduction in cost, which is another huge source of expense as these molds do wear out over time.
EON Machines and their 80-90s cycle time and larger shot volume.
Less cycle time increases the rated capacity/hour as well as the 300g shot size can produce more parts each cycle.
They also told me that with optimization they can reduce the cycle time by potentially another 10-20% but it’s not a priority for them until they start running into production capacity limitations.
The Engel machines are theoretically capable of 90s cycle times (down from current 150s) but there needs to be a fair bit of fine tuning for this to take place. It is something they are working on but no timeline on when they can achieve it.
Engel is exploring the idea of adding automated CNC degating capabilities into future versions of their machines to increase automation, reduce labor costs and factory footprint area.
Overall, everything just felt really tight and well managed.
There were clear goals about needs for the future and some good sense in how to spend money most effectively with the sole purpose of seeing profitability as fast as possible.
Conclusion
Everything I saw at the open house made me extremely optimistic about the future of the company:
* A real production facility instead of a prototyping facility
* My personal estimate of 10-100x increase in potential customers by offering lower cost EON BMG production and specialty alloy MIM keeping potential customers in the Liquidmetal sphere (And potentially upgrading to LM105 in the future)
* Massive cost reductions for the product with Materion efficiency leaps (and in turn potential to charge higher margins as a result)
* Real focus and direction as well as a shrewd business acumen from Professor Li. He really under promised and over delivered... in just 11 months!!
The Turnout
I got there at 8:30am and left just after 4pm and in that time there were approximately 100 visitors in the building at any given time.
I estimate around 250 people showed up in total.
These were a mix of investors, vendors, partners, suppliers and potential customers.
I talked with a few visiting engineers who were very interested in potentially incorporating this into their products.
I even talked to a current Apple engineer in attendance... who didn’t give me any inclination of why he was there (official capacity or just personal interest) but it was mid-day on a Tuesday, so read into that what you will.
The Building
There were 2 Arburg MIM machines (one 66t and one 110t), 2 EON machines, 2 Engel machines (with space allocated for 2 more in the near future), 2 CNC machines and 2 water jet machines (only machines I didn’t see personally).
I was told that the EON machines have only been in operating capacity for only a week or two, I speculate that the reason behind this is that the EON machines are actually repurposed LK Technology Holdings Ltd machines that are converted for BMG production.
I believe this is why they were delivered about 6 months ago but are only production ready now (pure speculation).
There were also robotic arms on the factory floor that will be attached to the EON machines in the very near future for enhanced automation capability.
The difference between the old building and the new one is night and day. The old building was an office with a prototyping lab attached.
This new building is purpose built to be a full fledged production facility. I cannot emphasize enough the massive difference between the two.
There were 3 shelves measuring approximately 10’x5’x2’ in the back of the warehouse that were cardboarded and taped up which the employees could not talk about.
My speculation is they were filled with prototypes or customer orders. I can’t think of any other reason why they had something hidden on a shelf that they could not talk about.
I tried to look for molds and there seemed to be about 40 sitting around (that I could see).
I saw a number of crates full of ingots, my estimate would be about 20 crates measuring approximately 30”x24”x18”.
More interesting is that behind the Engel machines there were approximately 100 “boats” which hold and induction heat the LM105 alloy before injecting them into the molds.
A large number of them looked used and I saw this as the best evidence of actual runs of the Engel machines prior to the open house. Again, pure speculation, but i thought it was interesting to note.
Talking to some of the Liquidmetal neighbours to the warehouse they were telling me that the whole warehouse has been under extensive renovations for the last 3 months leading up to this week. They used the phrase “non-stop renovations.”
The warehouse is scheduled to have an extensive electrical upgrade in February 2018, and forgive me for not getting this straight but it will either be upgraded to 4000A or is already at 4000A and will be upgraded from there, this suggests potential future expansion.
Another near-term expansion that was mentioned is adding a PVD (Physical Vapor Deposition) machine to serve customers that care about appearance of the finished product.
A lot of people have seen that there are currently just 4 BMG machines in the warehouse making it seem almost empty, however a quick back of the napkin calculation yields a surprising production capability:
If we assume the following: 80% uptime in a lights-out operation (3 shifts), 80% shot yield rate and 90% quality assurance yield rate, then 300g shot for the EON, 100g shot for the Engel, 90 second cycle time for the EON and 150 cycle time for the Engel we get the following:
(((24h X 60m X 60s) X 80% uptime) ÷ 90s per cycle) X 80% shot efficiency X 90% Yield Rate X 300g shot = ~166kg/day capacity (EON) of finished shipable product
(((24h X 60m X 60s) X 80% uptime) ÷ 150s per cycle) X 80% shot efficiency X 90% Yield Rate X 100g shot = ~33kg/day capacity (Engel) of finished shipable product
For comparison this is 20,000 of the Liquidmetal flag promo pieces per day (5,100,000/year).
When I thought about it from that perspective that’s a lot of capacity. Also, I roughly estimated there were room for 15-20 machines in the warehouse (100,000/day or 25,500,000/year).
This doesn’t even take into account the contract manufacturing capability of the 27 machines in China.
With that kind of capacity, don’t you think it’s important to ask why they are adding 2 more Engel machines soon? ??
The Business
They made it clear at the open house that the business model has changed over the past 12 months from essentially a licensing/prototyping facility to a full production (and full service) facility.
The boots on the ground opinion I got is that a lot of customers were scared away by the licensing model as it was such a huge commitment.
They believe that being able to help customers by doing smaller production runs at the Liquidmetal facility to start and scaling up the orders before committing to a full production facility of their own will allow them to approach 2-3 orders of magnitude more customers.
-
EON Machines are simply there as an alternative for more cost conscious customers that don’t need the full capabilities of the Engel machines and the slightly superior LM105. Considering these are still amazing machines I see it as customers who don’t need the Rolls Royce because a Bentley will do.
-
MIM Machines are not just run of the mill machines (they said they didn’t want to compete in that arena) instead they are going to be targeting high-end and specialty alloys to allow customers to be serviced by a wide variety of metal production options and keep more customers in the Liquidmetal family.
Everything I encountered at the open house was geared towards 1 goal: return to profitability as quickly as possible.
This was articulated to me by multiple employees and sound explanations given for why with the expanded capabilities it will be much easier now than at any time in the past: cost reduction for the customer, a full service production facility and much wider product variance.
Cost Reductions
One of the most interesting things I learned at the open house is the massive cost reduction of producing LM105 by Materion.
I was told directly that in the last 12 months they have reduced the cost of LM105 by 50% and are on track to reduce the processing costs by another 30% over the next little while (processing is ~2/3 the cost of producing LM105).
This is absolutely incredible as the raw LM105 material cost of Liquidmetal is the #1 cost of any finished LM105 product.
Liquidmetal is now sourcing some of it’s molds from EON and I overheard a 75% reduction in cost, which is another huge source of expense as these molds do wear out over time.
EON Machines and their 80-90s cycle time and larger shot volume.
Less cycle time increases the rated capacity/hour as well as the 300g shot size can produce more parts each cycle.
They also told me that with optimization they can reduce the cycle time by potentially another 10-20% but it’s not a priority for them until they start running into production capacity limitations.
The Engel machines are theoretically capable of 90s cycle times (down from current 150s) but there needs to be a fair bit of fine tuning for this to take place. It is something they are working on but no timeline on when they can achieve it.
Engel is exploring the idea of adding automated CNC degating capabilities into future versions of their machines to increase automation, reduce labor costs and factory footprint area.
Overall, everything just felt really tight and well managed.
There were clear goals about needs for the future and some good sense in how to spend money most effectively with the sole purpose of seeing profitability as fast as possible.
Conclusion
Everything I saw at the open house made me extremely optimistic about the future of the company:
* A real production facility instead of a prototyping facility
* My personal estimate of 10-100x increase in potential customers by offering lower cost EON BMG production and specialty alloy MIM keeping potential customers in the Liquidmetal sphere (And potentially upgrading to LM105 in the future)
* Massive cost reductions for the product with Materion efficiency leaps (and in turn potential to charge higher margins as a result)
* Real focus and direction as well as a shrewd business acumen from Professor Li. He really under promised and over delivered... in just 11 months!!
Liquidmetal Technologies Inc (LQMT) Stock Research Links
$MJ
