Q3 2021 Navitas Semiconductor Corp Earnings Call

Welcome to in Navvy tests semiconductor so quiet of 2021 quarterly results conference call. At this time, all participants size and I listen only mode. After the speaker's presentation and there will be a question and answer session.

To ask this question during that session, you would need to press, Taiwan or your telephone.

If you require any further assistance please press star Sierra.

I went out like to hand, they called Prince over to your speaker stiff and all of that.

How cute.

Good afternoon.

I'm Steven all of it.

Vice President of corporate marketing I'm Investor Relations.

Thank you for joining other tests semiconductors third quarter 2021 results conference call.

Oh first is N V T S a public company.

I'm joined today by gene shouted, our chairman President and CEO I'm, Todd Glickman, our C F O.

This call is being webcast on the Investor Relations section of our website.

<unk> dot com forward Slash I R.

A replay of this webcast.

Along without 20th 20, once third quarter earnings release will be available on our web sites approximately one hour. Following this call until the recorded webcast will be available for approximately 30 days following this call.

Additional information relate to 12 business is also posted on the Investor Relations section of our website.

Oh earnings release on this presentation includes certain non-GAAP financial measures.

<unk> filiation of these non-GAAP financial measures with the most directly comparable measures are included in our earnings release, which is posted separately on our website any investor Relations section.

In this conference call. We will also make forward looking statements about future events.

Or about the future financial performance of not a test you.

You can identify those statements by was like we expect or we believe or similar terms.

We wish to caution you that such forward looking statements are subject to risks and uncertainties that could cause actual events or results to differ materially from expectations expressed in a forward looking statements.

Important factors that can affect <unk> business, including factors that could cause actual results to differ from a forward looking statements are described it out anything so at least.

Please also refer to the risk factors affecting that the tests discussed in a SEC filings that were made in connection with our recently completed business combination with live Oak acquisition Coke to <unk>.

Including the proxy statement prospectus filed with the SEC by live Oak on September 20th 2021.

Oh estimates are other forward looking statements make change I'd never test assumes no obligation to update forward looking statements to reflect actual results changed assumptions or other events that may occur except as required by law.

Now I would like to welcome Jean Sheridan never test co founder and C. E O to begin the main section.

Thank you Steve.

After our I T a celebration and ringing the NASDAQ opening Bell. This is our first earnings call as a public company.

What's your third quarter and your date 2021 results as well as describe the fundamental opportunity and unique differentiation <unk> possesses without power I T technology.

In two three are total revenue grew 61 per cent euro per year to 5.6 million and 128% on a year to date basis.

Man was solid and the mobile charging market with continued in growing business from del L. G. Amazon oboe, Xiaomi, Lenovo and dozens of other customer and.

And received over 90% of the top smartphone or laptop customers designing their next generation fast Chargers without gaining power I see.

We are pleased with her growth trajectory and believe we will continue to double our revenues annually, our customers were targeting eating faster growth and gained charges, but we're limited in Q3 by industrywide silicon supply constraints.

823, we thought our customers launched 24, new game Chargers, which includes major launches from the top mobile and aftermarket players.

Last week, we announced our third generation gained power I see which integrate new games since technology, and it's already being adopted in major customer launches.

And we were making good progress on her plans to expand into datacenter solar N E V markets.

Leading customers like in phase energy Brewster, a compuware provided strong endorsement of our gain power I fees and are excellent early adopter partners to know because.

We are on track to sample these new higher power again, I see this quarter to these and other top to your customers cause there's target markets, which represents multibillion dollar market additions to the 4 billion opportunity we've already identified in mobile consumer.

Before I go into further details on the significant Q3 business highlights I want to share a brief introduction on the opportunity and strategy for again <unk> technology.

Gan, it's comprised of both gallium of nitrogen, which combined together to form an incredibly powerful bond that is 10 times stronger than delicate with two times higher electron mobility in power electronics. This translates to semiconductor devices that run up to 20 times faster than legacy Silicon and enables up to three times more power.

A three times faster charging with greater energy savings and it half the size and weight.

<unk> power I T integrate gam power and drive plus protection and control to deliver simple small fast and efficient performance.

Organic teas enables speed and efficiency that are far greater than silicon, but also far greater than other suppliers discrete <unk> implementation.

No Albatross has created this leading technology and number one market position and <unk> and just seven years based upon a unique and proven founding management team that it's worked together for decades.

We've also developed a system driven approach to create applications specific again, I see which offer more differentiation in value compared to other games supplier to offer only a standard discrete with a multimarket approach.

Let's take a more detailed look at our progress in planes in each of our target markets.

And mobile Chargers for smartphones tablets and laptops, we're pleased to announce an additional new 24 fast Chargers using the albatross scan ic's released to the market in Q3, taking the total to 164, we believe this to be more than all other game companies combined.

These include five new charges from basic one of the fastest growing aftermarket suppliers in the bubble charge your space and includes the world's smallest 100 watt charger that supports Qualcomm quick charge five point out.

Q3 launches also included significant new products from major mobile brands statues Xiaomi C D phone charger and the Novo's yoga laptop Chargers.

With Lenovo, we created an impressive co op marketing campaigns with Campath, Brandy and Lenovo online and live streaming video collateral.

Today, we are very proud to announce a new strategic partnership with anchor a global leader and fast charging technology.

An anchor as both a longtime customer and an investor and not a toss.

This new agreement dedicate engineering teams at book now that's half an acre to be co located at anchor offices to develop and launch leading edge can't fast Chargers with very short development time, the focus will be on next generation mobile charges, but will also include expansion into hydro energy storage market.

In fact, the partnership is already paying up quickly with two new Gan charges launched in Q3, including a 30 watt smartphone charger with a similar in size to the original five what so called sugar could charger and 70% smaller than the standard Silicon 31.

Last week, we announced our third generation gain power, Ice's, which integrate Dan sense technology.

<unk> enables up to an additional 10% of energy savings as well as all new autonomous protection circuits, which we expect to set a new standard in the industry for reliability and robustness not just for Gan, but also as compared to all power semi across silicon Gan in silicon carbide.

This new technology built on our already impressive track record with now over 30 million units shipped without a single reported gang related field failure.

Of greatest importance. This morning, we're very pleased to announce a new category of mobile Chargers defined as ultra fast Chargers that have been developed and launched with her new dance sense technology. This new category of charters delivers over 100 watts sufficiently to enable smartphones to achieve zero to 100 per cent charging.

And just 20 minutes or less.

This is an incredible new industry development that will redefine that charging experience for consumers globally.

The first such product was just announced by show me for the note 11 Pro plus it's 120 walks packed and the size of a typical silicon forty-five walk charger three times smaller than typical silicon based 121 laptop Chargers, yet achieved zero to 100 per cent and only 17 minutes.

In addition, these ultra fast Chargers required double began content per charger, which of course double the revenue opportunity for an appetizer bye.

By our estimates we project this ultra past charger category will represent up to half of began potential in mobile Chargers over the next few years.

This translates to up to $1 billion per year out of the broader $2 billion per year mobile gained charge your potential.

More ultra fast Chargers are in development now with our game since technology will be launched by a number of major brands in the coming months.

With worldwide, Dan shipments currently representing an adoption rate of only about 2% to 3% of the estimated 2 billion dollar market. We have an incredible opportunity ahead of us in this segment.

From mobile applications, we believe there's a relatively easy transition and expansion to broader consumer applications, including T V. All in one P C smart home devices and game console.

Here, we access another 2 billion dollar market starting with designs like all in one P. C's and Tvs, we're efficient slimline power supplies can enable the sleek design demanded by these application.

We anticipate first shipments of organic seeds into this broader nonmobile consumer market, starting this quarter and ramping throughout next year.

In particular, the change in television screen technology from Ultra H D. Two 8-K means a four times increase in power needs and Dan parties deliver that power can small low profile form factors.

Moving on to a higher power applications like data center.

Our high speed <unk> translate into shrinking the size of server power supplies, which creates more space for data processing. The Cpus G P as in memory chips.

However, the additional major value for Dan is driven by energy savings data center operators pay more in electricity per year than they do for the hardware itself.

Each efficiency point can be translated directly into significant running cost savings and with Gan typical efficiency can be increased by almost 10 points in other words about a 40% energy savings compared to silicon based data center.

Worldwide, we expected transition from silicon too damned could save up to $1.9 billion per year with an extremely fast payback estimated to be around two months.

The leader in high efficiency server power, it's compuware based in Taipei with number one chair and designs that can achieve the highly efficient platinum and titanium classes of power supplies.

Compuware declared again as a breakthrough new technology that is enabling dramatic improvements in size energy savings and power density and then now the cough is an excellent partner to compuware with our industry leading galaxy.

With over 13 million units of server shipped each year each with over $75. A game content Datacenters represents another billion dollar a year opportunity for again I see.

Given datacenter development times at 12 to 18 months, we anticipate our first datacenter designs using organic power. It sees will start mass production ramps and early twenties twenty-three.

Now, let's turn to solar energy storage renewable energy is critical for us all to reduce our dependence on fossil fuels.

Amy Phase energy, the world's leading supplier of Microinverter based solar plus storage systems recently announced their plans to adopt <unk> technology, and our cooperation with not the tops.

And they stated that it's the end of the road for Silicon MOSFET and that gallium nitride offers a tenfold switching frequency advantage at a significant system cost advantage.

<unk> estimates the ghan power sees can reduce invertor costs by 25% accelerating solar installation payback by about a year and that the total residential solar again I see opportunity is over $1 billion per year.

Installer development times of about two years, we anticipate our first solar designs using our game parties will start mass production ramps and the second half of 2023.

Acceleration is also the focus and E D S or emobility as we cover all opportunities from electric scooters and electric bikes to full passenger E D.

There are three opportunities for Gan power I season E D. The onboard charger R O B C, which charges the battery.

The D C D C converters, which convert from the battery to lower voltage to power any car electronics and.

And the attraction drive, which is the electric motor to move the car.

Our initial focus is on the O B C and D. C. D. D C. One important power electronics supplier to 80 customers worldwide is Bruce.

Bruce publicly announced their intention to move again to meet future cost and performance needs beyond what is possible with silicon or silicon carbide. They also announced their strong validation of the benefits of our gang power sees for simplicity reliability speed form factor and cost.

With a conservative estimate of $50 again content per O B C. Another 15 for the D. C. D C converter and 200 Protraction drive we believe each E V represents over 250 dollar potential skin content and a market opportunity over 2.5 billion per year.

Given E V development times typically a four years, we expect our first E V designs using or again parties to start their production ramp in 2025.

Let's now turn to novice toss his team expansion in regional news as the mobile market increases rapidly and the higher power expansion markets of EDI solar and data center begin now the cough is design applications in sales support footprint are being strengthened and expanded.

With confidence and then advertise business model. We recruited these teams in advance of our I P. S capital right. Since the start of 2021, we have now increased the team by over 50%, reaching over 150 highly skilled and experienced staff within approximately 50 50 split between U as in Asia.

This includes many with deep domain and system expertise and our expansion markets a datacenter solar an E V.

In China, we have tripled our shins and facilities to support the significant growth, we see in that region, including major expansion of our applications lab capacity, which we use with our customers and our supply chain partners to co develop these next generation Gan fast charges.

We're also investing in Europe building, a world class sales Tech support and applications design center in that region.

Europe is key to our plans for E V solar energy storage and even broader industrial applications, we expect to announce significant new business in that region soon.

And finally I wanted to discuss the important topic of climate change and D. Carbonization.

Today, only about 15% of our world's energy comes from sustainable sources utilizing electrical energy, while the balance is dependent on fossil fuels. We believe that ratio will reverse in the coming decades and gain is a critical element of this major energy transition.

Gam makes electrical energy faster more efficient and lower cost all of which will serve to accelerate the ones transition from coal fired power plants to solar and wind electricity based energy sources as well as transition energy applications from gas powered transportation buildings and industrial factories to clean it.

Chris City based energy, Oregon can have a significant impact Gan offers a carbon footprint that adds up to 10 times lower than that of silicon. It makes all electrical energy uses faster cleaner more efficient and lower cost you can anticipate major announcements in this area for now the task in the near future as we look to take a leadership role within.

The semiconductor industry and driving this energy transition and electrifying our world.

But that all handed over to Todd Glickman, our CFO for the financial update.

That's Jane and thanks to everyone for joining us today on our first public earnings call let.

Let me take you through our third quarter numbers and guidance for Q4.

Revenue grew to $5 6 million, representing 861% increase over the prior year's third quarter.

Noble demand remains strong however, our customers were targeting over $1 million of additional demand in Q3, which they couldn't achieve due to non gang related supply constraints.

Gap and non-GAAP gross margin watch, 46% in the third quarter.

I'm, 38% in the same quarter of the prior year.

We've been running about 4% to 6% on a non-GAAP basis during 2021, which is consistent with our strategy of delivering healthy margins and passing along cost reductions to our consumers during our high growth early years and targeting a 55% gross margin longterm.

With regard to expenses, we have expand our sales and marketing team to support new markets and data center solar and E V. While also expanding regionally into Europe.

As such are non-GAAP SG&A expense was 3.4 million in Q3, which is up from 2.2 million in the third quarter of 2020.

Non-GAAP R&D expense was $5.7 million and a third quarter of 2021 compared to 2.9 million last year as we are developing multiple new generations of <unk>. While also expanding our roadmap to include Gan iced tea or data center solar and E D.

Putting all this together non-GAAP net loss from operations was 6.5 million compared to a net loss of 3.7 million in the third quarter of 2020.

Turning to the balance sheet, we ended the quarter with 11.1 million up cash on the balance sheet and inventory of 11.7 million compared to 2.2 million a year ago as he put in place significant inventories to prepare for customers aggressive grunt plants, some of which were constrained by not again supply.

Jane limitations.

Moving onto guidance for the fourth quarter of 2021 revenues are expected to be $7.4 million, plus or minus 5%, which represents approximately 60% growth compared to prior year over 30% sequential growth from Q3 and more than double our revenue from 2020 on a.

Four year basis or guidance factors and continuing customer non Gan supply chain challenges as we believe this will continue for the next few quarters.

I'd also like to mention that we have posted an excel spreadsheet, showing our historical quarterly financials and seasonality.

[noise] gap and non-GAAP gross margin is expected to be approximately 44% in the next quarter. We expect sales of our Gen. Three began sense ice's will reduce costs as we move into 2022 and help offset some of the cost increases we've seen in our supply chain.

A transition to Jen four in the second half of 20 twenty-two should help with our margin expansion plans and the longterm as our business grows an industry like supply and demand come back into better balance we continue to target 55% gross margins.

Finally, after the quarter, we completed our deeds back business combination on October 19th with approximately 117.7 million shares outstanding we expect our basic and diluted share count in queue for it to be approximately 97 million the.

The majority of our shares outstanding are held by major shareholders and executive management and are currently subject to a locked up for up to one year in up to three years, respectively.

Cash cash equivalent and investments Posties back totaled approximately 260 million net of deal related to expenses. Additionally, we have $30 million in restricted assets, which is expected to be converted to cash through a Ford purchase agreement we.

We are pleased to know how to balance sheet in place to support our aggressive growth.

In summary, I'm pleased with our growth, but we have only scratched the surface of moving the market from silicon to get and are excited about the future ahead.

I add my thanks to our worldwide employees partners and customers for their hard work and driving change and bringing us one step closer to electrifying our world.

[noise], Jean and I are now ready to take your questions.

Operator, let's begin to Q&A session.

Thank you M. S. N reminder, to ask a question simply pass Taiwan or your telephone to getting the queue.

First question is from Ross <unk> with a diet to that.

Hi, guys. Thanks, So let me ask a question Jean Thanks for walking through all those longterm drivers focus a little more on the near term with my question, though Todd you talked about some of the non Dan related supply issues can you go into a little bit more detail on that is we've heard from other folks that there is.

A little bit of excess inventory, so too much supply not too little on the charge your side of things, but it seems like you're pointing to the opposite of that and and the duration that you talked about lasting for another few quarters could you explain a little bit of them on that as well.

Sure Roth I can handle that thanks for your question of this is Jean I think there's a lot of components used inside again charge will be starting to began trip chip of course, I'd say the primary shortages have been with the silicon controllers, there's actually actually multiple silicon controllers used on the primary side on the secondary side the P D control.

<unk>.

So that's where most of the limitations has been although we see even non silicon non semiconductor challenges popping up from time to time.

With all of that said I think our customers are making really good progress to approve new sources of supply.

So they have many options to make sure they can satisfy the need for those non game chips.

And free up some of these constraints, but it's still our best guess and our customers feedback to us that it's probably two or three quarters of constraints, which we factored into the guidance that Todd described.

Great. Thanks for that Jean and <unk> and I guess, you mentioned I think Todd said Ah.

A million units that they had demand for that they couldn't ship. So the size and the duration side of things was that correct that I hear that Todd correctly and the duration. Before this is fixed is that something that's another quarter or two quarters, what's your best guess on that front.

Yeah that is correct it was a million units.

Mm duration Ah, we expect to sort of have to come back on track and and going forward.

All of our forecast.

Gotcha alright, thank God.

The trust.

And next.

Question comes home at three <unk> with bird.

Hi, good afternoon.

Just talk to not be doing here and it is saying.

That you expect price boy Cavan with city Con a couple of he is from that but clearly the adoption isn't the waiting for that twice breakevens. So cody.

Customers, who are realizing the benefits.

It is this like silicon carbide, where the adoption rate in automotive is happening because of the gaming performance. Despite the price premium or do you expect a further infection point once you reach price parody because it's just going to accelerate the man. If you could just give us a sense.

You know how many people are waiting just look twice preparing your versus just choosing it takes energy for the antenna just ended offers.

Yeah, a great question interest in and I would say certainly in the mobile market. The value is clearly high end, so even with a modest premium as we have today, we see a lot of growth and adoption I'd say, that's all of the premium market and a large percentage of the mainstream you might call mainstream market, but I think as you get into the low end of mainstream and they're really low.

The end of the market, they're going to be more price sensitive at least from our view to be confident that we get the full transition from silicon again that we expect.

That cost transition is important I would also say, it's more important than the non mobile consumer in that case of course, you're not carrying around the power supply you're not charging a battery. So the valuepoint is going to be a little tougher it's going to be a little bit more price sensitive for that reason, we've been pretty conservative and our outlook for non mobile consumer, but there's a law.

Sort of untapped potential there as we cut that can premium down lower and even match silicon and go below silicon in the next two years issue as you described.

Thanks for the corner and then for my follow up questions to get talked about small ocean.

Basically sudden impact related to their shortages that it sounds like you might Ah continuing to first headsets next year and an expansion into the second half and that'll be with nexgen products. So.

Should we be looking at I know, you're not getting it [laughter] beyond this quarter, but should we be looking at with smoking sterilizing.

The range of 44% to 46% that you've been showing this year into the next two quarters and and maybe enter this in infection point test to that.

Yeah I have good question, Tristan we do expect it to.

Have more information for you after queue for earnings, but we're currently projecting a flat to slightly better margin year over year as the margin expansion from the new generation of <unk> will be partially offset by the increase in supply chain costs.

But our goal continued to be to drive again premium from Silicon two zero in the next two to three years and achieve a longterm margin of 55% and we're on track for that.

Great. Thank you very much.

Thanks, Chris.

Our next question comes from Mister Shannon with Craig Hallum.

Oh, Hi, guys. Thanks for taking my questions and Gratulation is on a nice start to your public life here.

Maybe a couple of tactical questions before I get into one or two more fundamental longer term ones here in terms of your guidance here for the fourth quarter, you've got a meaningful uptick in measured in quarter on quarter growth here for the last few quarters is this driven by seasonality or this new Windsor. Other <unk>. Other factors you you just mentioned the last couple of questions about some.

Fly probably not really easy to help you. There. So maybe you can get a sense of what's driving this increased schedule grow through for the <unk>.

Sure, Yes, Richard Thanks for your question and yes, it's driven really by both seasonality I think we'll always expect as we saw last year. The second half of the year will tend to be bigger in particular Q4 than the first half will see that pattern again, this year and likely next year, but there are and that's of course because of specific launches that tend to be holiday.

Based in the mobile and consumer space in particular, as we highlighted many new products 24, new products launched in Q3 of course, there's many more coming in queue for but even the Q3 launches help to really drive a lot of the queue for revenue goes anchor products, we talked about the basics products, especially the xiaomi ultrafast charger really.

Leading in all new category in that space and as I said, there's many more coming that we can't announce but would cover in the queue for earnings release.

Okay. Great that is that is helpful. At other quick question on its financials here in Opex, he kind of got it to fourthquarter non-GAAP Opex up to 10 million here, obviously, adding some some staff here and maybe that's continuing what do we think about the this as as trends into the first part of next year.

Yeah, Great question, and you know as we continue to grow and move into new markets, we expect to grow opex, both on the R&D side and the SG&A.

Long term, we expect opex to represent around 30%.

Revenue and that's our long term business model.

Okay.

You know I think I think you could also expect.

As you implied where in investment mode and so there is opic's growth that goes with that but the offers throws will likely be slower than the revenue growth leading towards that business model is Ted Todd described it.

Okay, that's fair enough.

Did you need a question for you you had a nice announcements here recently with Joe May and then you just talked about Orcher today in your prepared remarks, maybe you can talk about the kind of the change in partnership models you have with those two and then if you can combine it was one of your comments on the call here about 90% of all OEM.

An aftermarket laptop or phone charger players are using navi toss does this imply any sort of entirely or most exclusive relationships with one or more of your customers out there.

Yeah sort of gives you a little bit more color as you started the question with anchor we've done business with it both actually Anchorage, how many of course have been longtime partner than actually both longtime investors in our company. So the relationship goes back multiple years with anchor in particular, we've take it taken it to the next level with this strategic partnership agreement as I ask.

Plain with dedicated resources dedicated labs, and a much faster and bigger focus on really pushing the leading edge of a next generation fast Chargers.

Our show me relationship.

Isn't too different and that is extremely close longstanding relationship and there's a lot of code development that goes into those next generation Chargers as you know we do a lot more than offer it again, I see but actually offer a lot of system value and assistance in creating.

Those next generation Chargers.

With that we see them, both being pretty significant going for it in our revenue into next year was there a second part to that question.

No I think you well I guess any sense of exclusivity with any any of these customers you mentioned or other ones. That's it's coming more in your direction I guess.

But not a formal exclusivity arrangements, but as you know there's nobody that is directly second sourcing organic see all the other competitors are using discrete based again implementations. So by definition as a design and are up again I seats. It's most commonly sole source or exclusive business. It is passed.

In some cases to create dual sourcing by two different designs and sometimes that can be a smart strategy to help get the customer multisource strategy, if they really need it for very high volume programs.

Okay. That's helpful and my last question will jump out of line Here's an <unk> since I guess a quick question here is I think you've explained the other kind of added functionality here at a high level at least at the level that I can understand you, but maybe you can kind of break it down to financials here can you give us a sense of how much. This is an AD or two two S P and how much this in.

Improves if anything on on system costs or other system characteristics.

Yeah, Yeah definitely so fundamentally you could kind of look at the higher level of integration into two buckets driving related circuits, which we already had integrated these are all the analog circuits related to drive can be things like drive level shift boot strapping, others, but now we've added a whole nother second layer of sensing the sensing needs real time accurate die.

NAMIC measurement of things like voltage current in temperature and with that information sent straight on the game chip. We can immediately react to any dangerous condition to prevent any damage to the <unk> or the system around it but we can also do real time performance optimization actually do something called lossless current sensing a future we didn't highlight but it's very fundamental.

This new sensing technology, so to your earlier question.

Losses current sensing actually boost efficiency and safe cost at the same time. So there's actually again sense does not result in increased price because all of these added benefits are going to the customer actually had a lower Dan kosten system cost than the prior generations. So it's quite a great deal for the customer.

To continue down the cost reduction path continue down the energy saving improvement path and get significant protection and reliability circuits virtually for free for the customer. So that I think that's a good summary of what that's doing for the customer what it means for price and cost points to the customer.

[noise]. That's that's helpful. A great summer there gene that is all the questions for me. Thank you.

Thank you Richard.

Our next question comes from Queen in Boston with a medium <unk>, helping.

Thanks for taking my questions you know I guess I wanted to come back to your prepared script I think early in your script, you talked about the ability to double revenues.

Over I think I sort of a multiyear period, just wanted to make sure I heard you correctly.

Understanding that it's probably not formal guidance, but just wanted to make sure you know I understand you're you're kind of longer term framework.

And then a second question you've given the shortages on their controllers side is a company contemplating potentially going out and making acquisitions or perhaps forming partnerships with certain controller companies to try to alleviate some of those constraints that are affecting the <unk>.

Demand for your products at this point.

Mhm, yeah, great great questions. Thank you.

Yes on your latter question, we do obviously IPO has created a lot of excess capital you might say or dry powder, whether that means strategic integral investments or external ones or M&A that creates a lot of possibility for us, but with that said, we're seeing a huge appetite and interest for many silicon controller companies.

To make gains specific organic compatible controllers, given the huge volume that's coming and the shortage that they want to fill quickly. So we didn't short term, there's plenty of options coming to the table to our customers to solve those gas, but longterm, there's some pretty interesting strategic things, we can do headed towards our own mission of being a next generation power semiconductor company.

And that could go beyond again.

You implied.

Great and then just just a clarification on on that.

And in the script about you know kind of your longer term growth opportunity.

Yeah, you did hear it right that is our estimate right now and that factoring in some of the constraints that or at least likely to exist going into next year, but even with those constraints. Our best estimate is a is a.

Minimum of doubling going forward.

Great and then I just wanted to clarify that the gross margin outlook under understand you're not giving guidance into 2022, but I think you you made a comment that you saw gross margins flat to increasing on a year over year basis, and so I just want to make sure you know if I look back at the model looks like you were sort of in the 46 and.

And a half percent range for the first half of 2021 are you sort of implying do you think it's back above that 46, and a half per cent level in the first half of 2022 or did I Miss area.

So when when you start looking at next year, we're looking at to be flat on the full year of 2021 and as you are noticing in 21 is the second half is slightly lower than the first half now this is driven by tier one customers ramping up in the second half versus aftermarket more.

And the first half of the year.

So those are the main drivers, but we do expect it to be sort of flat and with slightly better margins year over year I'm going for it.

Understood. Thank you.

[noise]. Thank you. Our next question comes from Kevin Gerry hand, with a rush I'm glad securities.

Yeah, Hey, guys congrats on the quarter and on the I P. O I just had two questions. The first time the product side can you can kind of give us a sense of the of the expected life cycle for a smartphone power supply can kind of be used over multiple generations or does the design needs to be one with every kind of new iPhone or new.

Phone model.

Sure Kevin good to hear from you Yeah, I'd say the life cycles are typically running one to two years on average it can be a little less it can be up to three years of that lifecycle doesn't mean, it's a completely new design oftentimes, they're refreshes re using a lot of the same architecture technology course, Kansas.

Created a disruption this market is not used to so we're seeing major redesigns. When you go from Silicon again, but once we get that first scan design. There's of course, a really good strong likelihood in a pattern that we see of a reused to proliferate that either in the refresh of that model or of course into many new models.

Okay got it that's very helpful. And then just just as a follow up are you guys directly supporting and selling to your customers are you working kind of more to the distribution channels.

Yeah, Great question actually and distribution globally is actually pretty important primarily as a fulfillment partner customers still expect logistics in inventory support for those customers around the world, but our product is very much a technical cell and it's not just at the ghan level, but at the system level, we're very hands on to offer system design supported the entire again.

<unk> for some customers that might mean, we do the whole thing for him and others and very often it's a co development.

Approach. So it's very much a direct relationship with the end OEM or the brand name that you might know that would smell as their selected partners, which are often called ods with that all said, we continue to build out a stronger and stronger ecosystem sore distributors are actually investing in more applications engineers anxious to learn this new technology become more value added.

And that can actually be very important as we're seeing a long tail of <unk> customers extending up into tier two tier three smaller customers and also a wider range of applications. So having a bigger network of distributors as well as odm's that are familiar with how to do the ghan based system design is very valuable for us for the industry. It makes our business very scalable as we grew.

Though.

Got it thanks for the color on that.

Oh, Hey, My last question is and that's how do I link Claire Jefferies.

Hi, James Thanks, so much for the color. It's very helpful. I think I had a question I had was on the I want as much as opportunity for you guys. I. Appreciate that you know the types of customers are a little bit different and the seal. So I don't feel a little bit different from the plus charging market.

So I'm just curious how did you guys see your competition in that space and specifically you know how do you how do you view the certification process for your devices at that that is something that plays into the timeline of the adoption as well.

Yep. Thanks in Italia for the question.

As you alluded to the development cycles are longer at the emphasis on reliability and certification type testing is even more critical from our view that really plays into our strength, we've actually overdesigned organic technology for the mobile market, which obviously is sort of 123 year life and that's reflected in the fact that we've just 30 million units without a single can relate.

It reported failure I mean that was designed that way anticipating the higher reliability markets that we're now moving into can sense. The new generation, we've just announced only adds to that strength with even more built in protection reliability, all of which is going to help us to pass any certification tests and automotive specific test that our customers what might want to perform.

[noise] over time and as we mentioned in the prepared remarks, some customers like Bruce said, even set silicon carbide and so it can can't meet their needs for the future gain is the answer in terms of pushing cost cost performance and.

And reliability so it puts us in a good position to get through any of those certification tests and drive that adoption over the next few years.

Thank you.

Thanks to tell Ya.

Thank you and I'm not sure any final question Syndic, you I will pass it back to management for Amy Finally mikes.

Thank you operator, and thanks to everybody for joining our first public company earnings announcement, it's an exciting time for the company and we want to wish you two all gauguin fast and electrify our world with US. Thank you for attending.

And with that ladies and gentlemen, we thank you for participating you may now disconnect.

[music].

[music].

Welcome to another test semiconductor third quarter 2021 quarterly results conference call.

At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.

Ask the question do you mean that session you will need to press star one on your telephone.

If you require any further assistance please press star zero.

I would now like to hand, the conference over to your speaker depend Oliver.

Thank you.

Good afternoon.

I'm Stephen all of them.

Thompson, Vice president of corporate marketing and Investor Relations.

Thank you for joining another tower Semiconductor's third quarter 2021 results conference call.

First as N V T S a public company.

I'm joined today by Gene Sheridan, our chairman President and CEO.

Todd Glickman our CFO.

This call is being webcast on the Investor Relations section of our website.

<unk> dot com forward Slash IR.

A replay of this webcast.

Along with our 2021 third quarter earnings release will be available on our website approximately one hour. Following this call and the recorded webcast will be available for approximately 30 days following this call.

Additional information related to our business is also posted on the Investor Relations section of our website.

Our earnings release and this presentation includes certain non-GAAP financial measures reconciliation of these non-GAAP financial measures with the most directly comparable GAAP measures are included in our earnings release, which is posted separately on our website in the Investor Relations section.

In this conference call. We will also make forward looking statements about future events or about the future financial performance of Navistar.

You can identify those statements by words like we expect or we believe or similar terms.

We wish to caution you that such forward looking statements are subject to risks and uncertainties that could cause actual events or results to differ materially from expectations expressed in our forward looking statements.

Important factors that can affect <unk> business, including factors that could cause actual results to differ from our forward looking statements are described in our earnings release.

He's also refer to the risk factors.

I think that the tests discussed in our SEC filings that were made in connection with our recently completed business combination with live Oak acquisition Coke too, including the proxy statement.

Prospectus filed with the SEC by live Oak on September 20th 2021.

Our estimates or other forward looking statements may change and never test assumes no obligation to update forward looking statements to reflect actual results changed assumptions or other events that may occur except as required by law.

Now I would like to welcome Jean Sheridan never test co founder and CEO to begin the main section.

Thank you Steve.

After our IPO celebration and ringing the NASDAQ opening Bell. This is our first earnings call as a public company.

We'll share our third quarter and year to date 2021 results as well as described the fundamental opportunity and unique differentiation in all the task possesses without Gan power IC technology.

In Q3, our total revenue grew 61% year over year.

$5 6 million and 128% on a year to date basis.

Man was solid in the mobile charging market with continued and growing business from Dell LG, Amazon Opel Xiaomi, Lenovo and dozens of other customers.

And we see over 90% of the top smartphone and laptop customers designing their next generation fast Chargers with our Gan power IC.

We are pleased with our growth trajectory and believe we will continue to double our revenues annually our customers, we're targeting even faster growth in Gan Chargers, but were limited in Q3 by industry wide silicon supply constraints.

In Q3, we saw our customers launched 24, new game Chargers, which includes major launches from the top mobile and aftermarket players.

Last week, we announced our third generation Gan power, Ics, which integrates new Gan sense technology and is already being adopted in major customer launches.

And we were making good progress on our plans to expand into datacenter solar and E D markets.

Leading customers like Enphase energy Brewster, and Compuware provided strong endorsements of our Gan power Ics and our excellent early adopter partners Donato talks.

We are on track to sample these new higher power again, I see this quarter to these and other top tier customers in each of those target markets, which represent multibillion dollar market additions to the $4 billion opportunity, we've already identified in mobile and consumer.

Before I go into further details on these significant Q3 business highlights I want to share a brief introduction on the opportunity and strategy for Gan power IC technology.

Again, it's comprised of both gallium and nitrogen, which combined together to form an incredibly powerful bond that is 10 times stronger than it's felt like in like two times higher electron mobility and power electronics. This translates to semiconductor devices that run up to 20 times faster than legacy Silicon and enables up to three times more power and.

Three times faster charging with greater energy savings and then have the size and weight.

<unk> power IC integrate Gan power and drive plus protection and control to deliver simple small.

Fast and efficient performance.

Organic sees enable speed and efficiencies that are far greater than silicon, but also far greater than other suppliers discrete Gan implementation.

Nobody else has created this leading technology a number one market position in Gan power axes in just 70 year based upon our unique and proven founding management team that has worked together for decades.

We've also developed our systems driven approach to create application specific nics, which offer more differentiation in value compared to other gas suppliers that offer only a standard discrete with our multimarket approach.

Let's take a more detailed look at our progress and plans in each of our target markets.

In mobile Chargers for smartphones tablets, and laptops were pleased to announce an additional new 24 fast Chargers using nowakowski Nic's released to the market in Q3, taking the total to 164, we believe this to be more than all other gan comedies combined.

These include five new charters from basis, one of the fastest growing aftermarket suppliers on the mobile Chargers space and includes the world's smallest 100 watt charger that supports Qualcomm quick charge five pointed out.

Q3 launches often included significant new products from major mobile brands, such as Xiaomi C D phone charger and Lenovo yoga laptop Chargers.

With Lenovo, we created an impressive co op marketing campaign with Campath branding and Lenovo online and live streamed video collateral.

Today, we are very proud to announce a new strategic partnership with anchor a global leader in fast charging technology.

<unk> is both a longtime customer and an investor in <unk> costs.

This new agreement dedicated engineering teams at book now I'm Gonna toss an acre to be co located at anchor offices to develop and launch leading edge can fast Chargers with very short development times. The focus will be on next generation mobile Chargers for a while.

Also include expansion into high growth energy storage market.

In fact, the partnership is already paying up quickly with two new Gan Chargers launched in Q3, including a 30 watt smartphone charger, which is similar in size to the original five watt, so called sugar crude charger and 70% smaller than the standard Silicon 30 Watt.

Last week, we announced our third generation Gan power, Ics, which integrates Dan sense technology.

Gan enables up to an additional 10% of energy savings as well as all new autonomous protection circuits, which we expect to set a new standard in the industry for reliability and robustness not just for Gan, but also as compared to all power semi across silicon Gan on silicon carbide.

This new technology build on our already impressive track record with now over 30 million units shipped without a single reported Gan related field failure.

Of greatest importance. This morning, we're very pleased to announce a new category of mobile Chargers defined as ultrafast Chargers that have been developed and launched with our new Dan sense technology. This new category of Chargers delivers over 100 watts efficiently to enabled smartphones to achieve zero to 100% charging.

And just 20 minutes or less.

This is an incredible new industry development that will redefine the charging experience for consumers globally.

The first such product was just announced by Xiaomi for the note 11 pro plus its 120 watts packed in the size of a typical silicon 45 Watt charger three times smaller than typical silicon base 121, laptop Chargers, yet achieved zero to 100% and only 17 minutes.

In addition, these ultrafast chargers required double again content per charger, which of course doubles the revenue opportunity for <unk> bye.

By our estimates we project this ultra fast charger category will represent up to half of began potential in mobile Chargers over the next few years.

This translates to up to $1 billion per year out of the broader $2 billion per year mobile game charge your potential.

More ultrafast Chargers are in development now with our Gan technology will be launched by a number of major brands in the coming months.

With worldwide, Dan shipments currently representing an adoption rate of only about 2% to 3% of this estimated $2 billion market. We have an incredible opportunity ahead of us in this segment.

For mobile applications. We believe there is a relatively easy transition and expansion to broader consumer applications, including T. D. All in one PC smart home devices and game consoles.

Here, we access another $2 billion market, starting with designs like all in one Pcs and Tvs, where efficient slimline power supplies can enable the sleek design demanded by these application.

We anticipate first shipments of our Gan ice's into this broader non mobile consumer market, starting this quarter and ramping throughout next year.

In particular, the change in television screen technology from Ultra HD. Two 8-K means a four times increase in power needs and Gan power IC is deliver that power can small low profile form factors.

Moving on to higher power applications like data center are high speed, Dan Ice's translate into shrinking the size of server power supply, which creates more space for data processing, the Cpus Gpus and memory chips.

However, the additional major value for Gan is driven by energy savings datacenter operators pay more in electricity per year than they do for the hardware itself.

Each efficiency point can be translated directly into significant running cost savings and with Gan typical efficiency can be increased by almost 10 points in other words about a 40% energy savings compared to silicon based data center.

Worldwide, we expect to transition from silicon to Dan could save up to one $9 billion per year with an extremely fast payback estimated to be around two months.

The leader in high efficiency server power, it's compuware based in Taipei with number one share and designs that can achieve the highly efficient platinum in titanium classes of power supplies.

Compuware declared that Dan is a breakthrough new technology that is enabling dramatic improvements in size energy savings and power density and then <unk> is an excellent partner to compuware with our industry, leading again I see.

With over 13 million units of servers shipped each year, each with over $75 of Gan content data centers represent another billion dollar of your opportunities for organic.

Given datacenter development times at 12 to 18 months, we anticipate our first data center designs using our Gan power Ics will start mass production ramps in early 2023.

Now, let's turn to solar and energy storage renewable energy is critical for us all to reduce our dependence on fossil fuels.

<unk> energy the world's leading supplier of micro inverter based solar plus storage systems recently announced their plans to adopt and technology and their cooperation with all the top end.

<unk> stated that its the end of the road for Silicon MOSFET and that gallium nitride offers a tenfold switching frequency advantage at a significant system cost advantage.

<unk> estimates that Gan power fees can reduce inverter cost by 25% accelerating solar installation payback by about a year and that the total residential solar again I see opportunity is over $1 billion per year.

And solar development times of about two years, we anticipate our first solar designs using our Gan parakeets will start mass production ramps in the second half of 2023.

Acceleration is also the phone because they ev's or E mobility as we cover all opportunities from electric scooters and electric bikes to full passenger EV.

There are three opportunities for Gan power Ics and E D D.

Onboard charger or Ob C, which charges the battery.

The DC to DC converters, which convert from the battery to lower voltage to power any car electronics and the traction drive which is the electric motor to move the car.

Our initial focus is on the Ob C and D C to D C.

One important power electronics supplier to EDI customers worldwide is Brewster.

Rousseau publicly announced their intentions to move again to meet future cost and performance needs beyond what is possible with silicon or silicon carbide. They also announced their strong validation of the benefits of our Gan power Ics for simplicity reliability speed form factor and cost.

With a conservative estimate of $50 again content per Ob see another 15 for the DC to DC converter and 200 Protraction drive we believe each E. D represents over $250 potential gain content and a market opportunity over $2 5 billion per year.

Given the EV development times typically a four years, we expect our first E V designs using our Gan parties to start their production ramp in 2025.

Let's now turn to novel Thomas' team expansion in regional news as the mobile market increases rapidly and the higher power expansion markets of EV solar and datacenter begin now the top design applications and sales support footprint are being strengthened and expanded.

With confidence in that <unk> business model. We recruited these teams in advance of our IPO capital raise since the start of 2021, we have now increased the team by over 50%, reaching over 150 highly skilled and experienced staff with an approximate 50 50 split between U S and Asia.

This includes many with deep domain and system expertise in our expansion markets of data center solar in E D.

In China, we have tripled our Shenzhen facility to support the significant growth, we see in that region, including major expansion of our applications lab capacity, which we use with our customers and our supply chain partners to co develop these next generation Gan fast Chargers.

We're also investing in Europe building, a world class sales Tech support and applications design center in that region.

Europe is key to our plans for EV solar energy storage and even broader industrial applications, we expect to announce a significant new business in that region soon.

And finally I wanted to discuss the important topic of climate change and de carbonization.

Today, only about 15% of our world's energy comes from sustainable sources utilizing electrical energy, while the balance is dependent on fossil fuels. We believe that ratio will reverse in the coming decades, and Gan as a critical element of this major energy transition.

Dan makes electrical energy faster more efficient and lower cost all of which will serve to accelerate the world's transition from coal fired power plants to solar and wind electricity based energy sources as well as transition energy applications from gas power transportation buildings, and industrial factories to clean elect.

Crisil based energy organic can have a significant impact Gan offers a carbon footprint that is up to 10 times lower than that of silicon that makes all electrical energy uses faster cleaner more efficient and lower cost you can anticipate major announcements in this area for <unk> in the near future as we look to take a leadership role within this.

Semiconductor industry and driving this energy transition and electrifying our world.

With that I'll hand, it over to Todd Glickman, our CFO for the financial update.

Thanks, Jane and thanks to everyone for joining us today on our first public earnings call.

Let me take you through our third quarter numbers and guidance for Q4.

Revenue grew to $5 6 million, representing a 61% increase over the prior year's third quarter.

Mobile demand remains strong however, our customers, we're targeting over $1 million of additional demand in Q3, which they couldn't achieve due to non gan related supply constraints.

GAAP and non-GAAP gross margin was 46% in the third quarter upfront.

Up from 38% in the same quarter of the prior year.

We've been running about 4% to 6% on a non-GAAP basis during 2021, which is consistent with our strategy of delivering healthy margins and passing them on cost reductions to our consumers during our high growth early years and targeting a 55% gross margin long term.

With regard to expenses, we have expand our sales and marketing teams to support new markets and data center solar and E. D. While also expanding regionally into Europe.

As such our non-GAAP SG&A expense was $3 4 million in Q3, which is up from $2 2 million in the third quarter of 2020.

Non-GAAP R&D expense was $5 7 million in the third quarter of 2021 compared to $2 9 million last year as we are developing multiple new generations of <unk>. While also expanding our roadmap to include Gan ICP for data center solar and E D.

Putting all this together non-GAAP net loss from operations was $6 5 million compared to a net loss of $3 7 million in the third quarter of 2020.

Turning to the balance sheet, we ended the quarter with $11 1 million of cash on the balance sheet and inventory of $11 7 million compared to $2 2 million a year ago as he put in place significant inventories to prepare for customers aggressive growth plans, some of which were constrained by non Gan supplier.

<unk> limitations.

Moving onto guidance for the fourth quarter of 2021 revenues are expected to be $7 4 million, plus or minus 5%, which represents approximately 60% growth compared to prior year over 30% sequential growth from Q3 and more than double our revenue from 2020 on a full.

All year basis.

Our guidance factors and continuing customer non Gan supply chain challenges as we believe this will continue for the next few quarters.

I'd also like to mention that we have posted an excel spreadsheet, showing our historical quarterly financials and seasonality.

GAAP and non-GAAP gross margin is expected to be approximately 44% in the next quarter. We expect sales of our Gen. Three Gan since ice's will reduce costs as we move into 2022 and help offset some of the cost increases we've seen in our supply chain <unk>.

Transition to Gen. Four in the second half of 2022 should help with our margin expansion plans and the long term as our business grows and industry wide supply and demand come back into better balance we continue to target 55% gross margins.

Finally, after the quarter, we completed our deeds back business combination on October 19th with approximately $117 7 million shares outstanding we expect our basic and diluted share count in Q4 to be approximately $97 million.

The majority of our shares outstanding are held by major shareholders and executive management and are currently subject to a lockup for up to one year and up to three years respectively.

Cash cash equivalents and investments post detached totaled approximately $260 million net of deal related expenses. Additionally, we have $30 million in restricted assets, which is expected to be converted to cash through a forward purchase agreement.

We are pleased to now have the balance sheet in place to support our aggressive growth.

In summary, I'm pleased with our growth, but we have only scratched the surface of moving the market from silicon to debt and are excited about the future ahead.

My thanks to our worldwide employees partners and customers for their hard work in driving change and bringing us one step closer to electrifying our world.

Gene and I are now ready to take your questions.

Operator, let's begin the Q&A session.

Thank you M. S. N reminder, to ask a question simply press star one on your telephone to get into queue.

Our first question is from Ross Seymore with Deutsche Bank.

Hi, guys. Thanks for letting me ask question Jean Thanks for walking through all of those long term drivers are again, it took us a little more on the near term with my question, though Todd you talked about some of the non Gan related supply issues can you go into a little bit more detail on that.

We've heard from other folks that there's a little bit of excess inventory, so too much supply not too little on the charter side of things, but it seems like you're pointing to the opposite of that and the duration that you talked about lasting for another few quarters could you explain a little bit of that on that as well.

Sure Ross I can handle that thanks for your question. This is gene I think there there's a lot of components used inside again charger. Besides the gantry chip of course, I'd say the primary shortages have been with the silicon controllers, there's actually multiple silicon controllers used on the primary side on the secondary side the PD controller.

So that's where most of the limitations have been although we see even non silicon non semiconductor challenges popping up from time to time.

With all of that said I think our customers are making really good progress to approve new sources of supply.

So they have many options to make sure they can satisfy the need for those non <unk> chips.

And free up some of these constraints, but it's still our best guess at our customers' feedback to us that it's probably two or three quarters of constraints, which we factored into the guidance that Todd described.

Great. Thanks for that gene and I guess, you mentioned I think Todd said.

Million units that they had demand for that they couldn't ship for the size and the duration side of things. It was that correct did I hear that Todd correctly and the duration before this is fixed is this something that's another quarter or two quarters, what's your best guess on that front.

Yeah that is correct it was a million units.

Duration, we expect to sort of to come back on track and and going forward.

All of our forecast.

Gotcha, alright, thanks, guys.

Thank you Ross.

Okay.

Our next question comes from Tristan <unk> with Baird.

Hi, good afternoon.

You used to talk to another be during your analyst day that you expect price breakeven with city Con a couple of years from now, but clearly the adoption isn't a waiting for that twice breakeven so clearly.

Some areas are realizing the benefits.

Is this like silicon carbide, where the adoption rate in automotive is happening because of the gain in performance. Despite the price premium or do you expect a further inflection point once you reach price parity.

Because it's just going to accelerate demand if you could just.

Give us a sense of how many people are waiting just for a price parity versus just using your technology for the advantages that it offers.

Yeah, Great question, Tristan and I would say certainly in the mobile market. The value is clearly high and so even with a modest premium as we have today, we see a lot of growth and adoption I would say that all of the premium market and a large percentage of the mainstream you might call mainstream market, but I think as you get into the low end of mainstream in a really low.

The markets Theyre going to be more price sensitive at least from our view to be confident that we get the full transition from silicon again that we expect that that cost transition is important I'd also say, it's more important in the non mobile consumer in that case of course, you're not carrying around the power supply you're not charging a battery so the value points gun.

Be a little tougher, it's going to be a little bit more price sensitive for that reason, we've been pretty conservative in our outlook for non mobile consumer, but theres a lot of untapped potential there as we cut that Gan premium down lower and even match silicon and go below silicon in the next two years as you as you described.

Thanks for the color and then for my follow up question. So you talked about.

Small ocean.

Basically some impact related to the shortages that it sounds like it might continue.

Continuing in the first half of next year, and then expansion into the second half that would be with nexgen products. So.

Should we be looking at I know youre not guiding it beyond this quarter, but should we be looking at our gross margins stabilizing in the range of that 44% to 46% that you've been showing this year into the next two quarters and then maybe it or this an infection point test to that.

Yes. Good question, Tristan, we do expect it to happen.

I have more information for you after Q4 earnings, but we're currently projecting a flat to slightly better margin year over year as the margin expansion from the new generation of Gan Ics will be partially offset by the increase in supply chain cost.

But our goal continue to be to drive began premium from silicon to zero in the next two to three years and achieve our long term margin of 55% and we're on track for that.

Great. Thank you very much.

Thanks, Chris.

Our next question comes from Richard Shannon with Craig Hallum.

Well hi, guys. Thanks for taking my questions.

Questions Congratulations on a nice start to your public life here.

Maybe a couple of tactical questions before I get into one or two more fundamental longer term ones here.

In terms of your guidance here for the fourth quarter, you've got a meaningful uptick in measured and quarter on quarter growth here for the last few quarters.

Driven by seasonality or this new wins or other <unk>. Other factors you just mentioned in the last couple of questions about supply probably not really easing to help you. There. So maybe you can get a sense of what's driving this increased.

So lots of growth here for the fourth quarter.

Sure, Yes, Richard Thanks for your question and yes, it's driven really by both seasonality I think we will always expect as we saw last year. The second half of the year will tend to be bigger in particular Q4 than the first half we will see that pattern again, this year and likely next year, but there are and that's of course because of specific launches that tend to be holiday.

Based in the mobile and consumer space in particular as we highlighted.

Many new products 24, new products launched in Q3 of course, there's many more coming in Q4, but even the Q3 launches help to really drive a lot of the Q4 revenue goes anchor products, we talked about the basic products, especially the xiaomi ultra fast charger really really leading in all new category in that space and as I said there is many more coming that we can't do.

But would cover in the Q4 earnings release.

Okay, Great that is a that is helpful. Another quick question on the financials here on Opex, you've kind of got it to a fourth quarter non-GAAP opex of $10 million here, obviously, adding some staff here and maybe that's continuing how do we think about the trends into the first part of next year.

Yeah.

Great question, and you know as we continue to grow and move into new markets. We expect to grow opex. Both on the R&D side and the SG&A are long term, we expect opex to represent around 30% of revenue.

And that's our long term business model.

Okay.

I think I think you could also expect.

As you implied we're in investment mode, and so there is opex growth that goes with that but the op. Your straws will likely be slower than the revenue growth leading towards that business model is tied to Todd described it.

Okay, that's fair enough.

Jim a question for you you had a nice announcements here recently with Xiaomi and then you just talked about anchor today in your prepared remarks.

Maybe you can talk about the kind of the change in partnership.

Miles you have with those two and then if you can combine it with one of your comments on the call here about 90% of all.

OEM and aftermarket laptop or phone charger players are using navi TASS does this imply any sort of.

Entirely or mostly exclusive relationships with one or more of your customers out there.

Okay.

Yes, so to give you a little bit more color as you started the question with anchor we've done business with it both actually Anker Xiaomi of course have been longtime partner than actually both our long time investors in our company. So the relationship goes back multiple years with anchor in particular, we've taken <unk> taken it to the next level with this strategic partnership agreement as I explained with dedicated REIT.

Sources dedicated labs, and a much faster and bigger focus on really pushing the leading edge of our next generation fast Chargers.

Our xiaomi relationship.

Isn't too different in that it's extremely close long standing relationship and Theres a lot of co development that goes into those next generation Chargers as you know, we do a lot more than offer the Gan IC, but actually offer a lot of system value and assistance in creating.

Those next generation Chargers.

With that said, we see them, both being pretty significant going forward in our revenue into next year was there a second part to that question.

No I think you well I guess any essence of exclusivity with any are any of these customers you mentioned or other ones that's coming more in your direction I guess.

Not a formal exclusivity arrangement, but as you know there's nobody that has directly second sourcing organic all other competitors are using discrete based again implementations. So by definition as they design and are again I seats, it's most commonly sole source or exclusive business.

It is possible in some cases to create dual sourcing by two different system designs and sometimes that can be a smart strategy to help give the customer a multi sourcing strategy if they really need it for very high volume programs.

Okay.

That's helpful and my last question I'll jump out of line here is on Gan since I guess, a quick question here as I think you've explained the other kind of added functionality here at a high level at least at the level that I can understand here, but maybe you can kind of break it down to the financials here.

Give us a sense of how much. This is an adder to a J S. P and how much this improves if anything on system costs or other system characteristics.

Yeah definitely so fundamentally you could kind of look at the higher level of integration into two buckets driving related circuits, which we already had integrated these are all the analog circuits related to drive can be things like drive level shift to bootstrap and others, but now we've added a whole another a second layer of sensing sensing means real time accurate dynamic.

Measurement of things like voltage current and temperature and with that information right on the Gan chip, we can immediately react to any dangerous condition to prevent any damage to the gan chip or the system around it but we can also do real time performance optimization actually do something called watch list current sensing a feature we didn't highlight but it is very fundamental to this news.

Sensing technology, so to your earlier question.

Losses current sensing actually boost efficiency and face cost at the same time. So this actually Gan census does not result in an increased price because all of these added benefits are going to the customer actually at a lower Gan Boston system cost than the prior generation. So it's quite a great deal for the <unk>.

Customer to continue down the cost reduction path continue down the energy saving improvement path and get significant protection and reliability circuits virtually for free.

The customer so that I think that's a good summary of what that's doing for the customer and what it means for price and cost points to the customer.

That's a that's helpful. Great somewhere there gene that is all the questions for me. Thank you.

Thank you Richard.

Our next question.

From Quinn Bolton with Needham Your line is helping.

Thanks for taking my question I guess I wanted to come back to your prepared script I think earlier in your script, you talked about the ability to double revenues.

Over I think it's sort of a multi year period I just wanted to make sure I heard you correctly.

Understanding that it's probably not formal guidance, but just wanted to make sure I understand your kind of longer term framework.

And then a second question you know given the shortages on the controller side.

Is the company contemplating potentially going out, making acquisitions or perhaps forming partnerships with certain controller companies to try to alleviate some of those constraints that are affecting the <unk>.

Demand for your products at this point.

Mhm.

Yes, great great questions. Thank you.

Yes on your latter question, we do obviously the IPO has created a lot of excess capital you might say, our dry powder, whether that means strategic internal investments or external ones or M&A that creates a lot of possibility for us, but with that said, we're seeing a huge appetite and interest from many silicon controller companies too.

<unk> Gan specific organic compatible controllers, given the huge volume that's coming in the shortage that they want to sell quickly. So we didn't short term, there's plenty of options coming to the table to our customers to solve those gaps, but long term. There is some pretty interesting strategic things, we can do headed towards our own mission of being a next generation power semiconductor company.

And that could go beyond Gan as you implied.

Yeah.

Great and then just a clarification on that.

Comment in the script about kind of your longer term growth opportunity.

Yes, you did hear it right that is our estimate right now and Thats factoring in some of the constraints that are at least likely to exist going into next year, but even with those constraints are our best estimate is a is a minimum of doubling going forward.

Great and then for Todd just wanted to clarify that the gross margin outlook under understanding you're not giving guidance into 2022, but I think you made a comment that you saw gross margins flat to increasing on a year over year basis, and so I just want to make sure.

If I look back at the model. It looks like you were sort of in the 46 in that 5% range for the first half of 2021 are you sort of implying do you think it's back above that 46, 5% level in the first half of 2022 or did I mishear you.

So when when you start looking at next year, we're looking at to be flat on a full year of 2021 and as you are noticing in 'twenty. One is the second half is slightly lower than the first half now this is driven by tier one customers ramping up in the second half versus aftermarket.

More in the first half of the year and so those are the main drivers, but we do expect it to be sort of flat and with slightly better margins year over year going forward.

Understood. Thank you.

Thank you. Our next question comes from Kevin Garrigan, with Russ I'm glad securities.

Yeah, Hey, guys congrats on the quarter and on the IPO I just had two questions. The first on the product side can you can you kind of give us a sense of the expected lifecycle for a smartphone power supply can it kind of be used over multiple generations or does the design needs to be one with every kind of the new iPhone or a new phone.

Model.

Sure Kevin good to hear from you.

Yeah, I'd say the life cycles are typically running one to two years on average it can be a little less it can be up to three years.

That lifecycle doesn't mean, it's a completely new design oftentimes their refreshes reusing a lot of the same architecture technology of course Gan has created a disruption in this market is not used to so we're seeing major redesigns. When you go from Silicon again, but once we get that first Gan design. There is of course, a really good strong likelihood in a pattern that we see.

Reuse to proliferate that either in a refresh of that model or of course into many new models.

Okay got it that's very helpful.

And then just just as a follow up are you guys directly supporting and selling to your customers or are you working kind of more to the distribution channels.

Yeah, Great question actually in distribution globally is actually pretty important primarily as a fulfillment partner customers still expect logistics and inventory support for those customers around the world, but our product is very much a technical sell and its not just at the Gan level, but at the system level were very hands on to offer system design support of the entire.

<unk> charger for some customers that might mean, we do the whole thing for them and others and very often it's a co development.

Approach. So it's very much a direct relationship with the end OEM, where the brand name that you might know as far as their selected partners, which are often called audience with that all said, we continue to build out a stronger and stronger ecosystem. So our distributors are actually investing in more applications engineers anxious to learn this new technology become more value added.

And that can actually be very important as we're seeing a long tail of gan customers extending up into tier two tier three smaller customers and also a wider range of applications. So having a bigger network of distributors as well as Oems that are familiar with how to do the Gan based system design is very valuable for us, but the industry. It makes our business a very scalable as we.

Growth.

Got it thanks for the color on that.

No.

And our last question is and that's how you win with Jefferies.

Hygiene Todd Thanks, so much for the color.

Very helpful.

Another question I had was on the I want as much of an opportunity for you guys I appreciate that.

The types of customers are a little bit different and the sales funnel for a little bit different from the fast charging market. So I'm just curious how do you guys see your competition in that space and specifically you know how do you how do you view the certification.

Some process for your devices, if that that is something that plays into the timeline of the adoption as well.

Yeah. Thanks, Natalia for the question.

As you alluded to the development cycles are longer and the emphasis on reliability and certification type testing is even more critical from our view that really plays into our strength that we've actually overdesigned organic technology for the mobile market, which obviously is sort of one to three year life and that's reflected in the fact that we've just 30 million units without a single <unk>.

And related reported failure that was designed that way anticipating the higher reliability markets that we're now moving into Gan sense. The new generation, we've just announced only adds to that strength with even more built in protection reliability.

All of which is going to help us to pass any certification tests in automotive specific tests that our customers might want to perform.

Over time and as we mentioned in the prepared remarks, some customers like Bruce said, even said silicon carbide and silicon cant meet their needs for the future Gan is the answer in terms of pushing costs cost performance.

Reliability, so it puts us in a good position to get through any of those certification tests and drive that adoption over the next few years.

Thank you.

Thanks Antonio.

Thank you and I'm not showing any further questions in the queue I will pass it back to management for any final remarks.

Okay.

Thank you operator, and thanks to everybody for joining our first public company earnings announcement, it's an exciting time for the company and we want to wish you too all Gauguin fast and electrify our world with US. Thank you for attending.

And with that ladies and gentlemen, we thank you for participating you may now disconnect.