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Valence Technology Inc. (VLNC)F

F4Q10 (Qtr End 03/31/2010) Earnings Call

June 14, 2010 4:30 PM ET

Executives

Pierre Dubois – Director of Investor Relations

Robert Kanode – President and Chief Executive Officer

Ross Goolsby – Chief Financial Officer

Analysts

Rob Young – WM Smith

Robert McCourt – Private Investor

Bob Engbinder – Garden State Securities

Brian Caramadre – Private Investor

Paul Riney – Private Investor

John Schroepfer – UBS Financial

Patrick Metcalf – Newbridge

Michael Lew – Needham & Company

Ron Stewart – Private Investor

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Valence Technology Fourth Quarter 2010 Earnings Conference Call. My name is Alysia and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Pierre Dubois, Director of Investor Relations. Please proceed, sir.

Pierre Dubois

Thank you. Well, good afternoon, everyone and we appreciate you joining the Valence Technology fourth quarter and fiscal year-end 2010 conference call to discuss reported results. With me today are Robert Kanode, President and Chief Executive Officer and Ross Goolsby, Chief Financial Officer. This conference call is being recorded and it will be available for replay at the Investor Relations section of our website at www.valence.com.

And just a reminder to everyone that during this conference call, Valence Technology management may make comments that will reflect our intentions, beliefs and expectations for the future. As a result, some of the information disclosed on this call will include forward-looking statements and such statements are subject to a number of factors which could cause actual results to differ materially from those statements. For a discussion of those factors, please refer to Valence’s annual report on Form 10-K and the other periodic reports and documents filed with the SEC. After opening remarks, the operator will provide instructions on how to ask questions. I would now like to turn the call over to Bob.

Robert Kanode

Thanks, Pierre. And I also would like to welcome everyone to our call today. Many of you may remember during our last call, we discussed that in spite of difficult economic conditions, we expected 2010 will be a good year for Valence. I am therefore pleased to report both existing business and new business is moving forward and our backlog is at a high level that we have not seen in recent times.

We are ramping our manufacturing to respond to increasing demand from a growing customer base and expect continued growth throughout 2010 and beyond. I am also pleased to report the addition of R.J. Adleman to our Senior Management team as VP of Sales and Marketing. R.J. brings extensive sales and marketing experience to our Senior Management Team.

While we are pleased with the recovery of our existing customers and our new business opportunities, I also must caution everyone that we are experiencing short-term electronic component and sale shortages. Our electronic component shortages are driven by unexpected high demand across multiple manufacturing sectors.

Our cell shortages are driven by delayed capacity expansion of our primary sales supplier and what we believe to be short-term manufacturing quality issues. These problems are being aggressively addressed by Valence and our suppliers and we believe our supply will ramp to fulfill our customer’s current demands by summer’s end. All other components and materials are available to fulfill our customer’s requirements.

Looking beyond this summer as demand continues to grow, we expect to further -- be further challenged by isolated component shortages. To combat these shortages in the short and long term, we are relying on the experience of our senior management team who have dealt with these issues in the past, also securing additional buffer stock of critical components as well as do sourcing of selected printed circuit boards and cells.

Beyond this summer’s supply challenges, we believe component availability will improve and have minimal impact on our ability to fulfill the future demands of our customers. When I first joined Valence, we revisited and redefined our marketing and sales approach.

We recognized that although we had proven capabilities to develop custom systems like Segway, we also had a proven family of standard U-Charge products. We realized there were no developed lithium energy storage standards and that no single market sector was driving the rollout of our high-capacity lithium energy storage solutions. These factors led us to pursue a strategy targeting customers that could immediately benefit from the safety, superior performance and long-term economic advantages of our U-charge products.

And since no single market had yet emerged as the early champion for lithium applications, we chose to pursue multiple opportunities across a broad base of markets. After years of testing by numerous corporations, we belief the strategy is coming together in 2010 and will serve us well.

We are working with a growing number of corporations that are represented in their market sectors as pioneers and innovators, such as Segway, Smith Electric Vehicles, Wrightbus, Optare bus, Beneteau Yachts, Tennant and others.

We have over four years on the road and inserts commercial experience working with system development partners such as Siemen’s Corporation, Enova, Zytek, Ziad Corporation, Tennant and others designing advance electric automotive drive symptoms, Marine propulsion systems, Stationary energy systems and industrial cleaning and material handling systems.

Our U-charge family of products offers years of proven in-use reliability, system configuration flexibility upto 1000 votes, long life and safety with distribution on three continents. Our interactive command and control logic that can report 60 data points, three kinds per second to a central command center is built into every U-charge XP system, offering extensive battery monitoring and control capabilities.

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