Q2 2022 Transphorm Technology Inc Earnings Call
Okay.
Good afternoon, and welcome to the transform Inc. Second quarter 2022 business update conference call Today's conference is being recorded.
To ask a question on todays call. Please press star one on your telephone keypad. If you find your question has been asked you may remove yourself from the queue by pressing star one again.
At this time I'd like to turn the conference over to Brett Perry of Shelton Group Investor Relations. Please go ahead.
Good afternoon, and welcome to transform quarterly business update conference call joining us today from transform our Mario <unk>, Chief Executive Officer permit <unk> co founder and Chief operating Officer, and Cameron Mccauley, Chief Financial Officer.
Before we begin I'd like to point out that there is a slide presentation associated with today's prepared remarks, which management will be referencing during the conference call.
These slides can be accessed through the live webcast link in the Investor Relations section of transforms a website and they will also be posted and available as a link to PDF subsequent to today's conference call.
Additionally, during the course of this call the company May make forward looking statements regarding the company's financial position strategy and plans future operations specific end markets and other areas of discussion. It is not possible for the company for management to predict all risks nor can the company assess the potential impact of all factors on its busy.
<unk> or the extent to which any factor or a combination of factors may cause actual results to differ materially from those contained in any forward looking statements in light of these risks uncertainties and assumptions. The forward looking statements discussed during this call may or may not occur and actual results could differ materially and adversely from those anticipated or implied.
Any projections as to the Companys future performance represent managements estimates as of today November 10, 2021, neither the company nor any person assumes responsibility for the accuracy or completeness of the forward looking statements.
Also undertakes no obligation to publicly update forward looking statements for any reason after the date of this call to conform such statements to actual results or to the changes in the companys expectations for more detailed information.
On risks associated with the Companys business, we refer you to the risk factors described in transforms S. One 10-K T and other subsequent filings with the SEC.
With that said its now my pleasure to turn the call over to transform CEO Mario <unk>. Please go ahead Mario.
Thank you Brad.
And welcome everybody on today's call. Thank you for joining us.
For fiscal second quarter, which ended September 32021, deliver continued growth and record political revenue.
Political revenue increased sequentially for the seventh consecutive quarter and grew 30% year over year to a quarterly record.
Continued momentum in adapter and soft charter market penetration, including partnerships with leading controllers on integrated driver maker.
We completed an agreement with Thomson genomics vehicles.
As W wafer fab facility and nice to work them out with Japan.
Our strategic partner <unk> converter $15 $6 million of debt.
For common stock at $5 per share in October 2021.
We were awarded or one 4 million gun development contract by the Defense Advanced research projects agency or DARPA.
We also are proud that we achieve automotive qualification those super gun Gen. Four move take kilowatt class Butler.
Device.
We are close to $5 million private placement for strategic investment by Sino American Silicon products. So yes.
The $1 billion public company in Asia.
And also close Gary.
3 million private placement in November 2021 comprised of a follow on investments of $5 billion by KKR and $10 million by Sino American Silicon protocols.
As well as participation by institutional investors.
Now allow me to transfer the call to premium <unk>, President and CEO Grimmett.
Thank you Mario.
And good afternoon, everyone.
We are very excited to report that transform has continued our growth momentum and for several key partnerships and as announced yesterday and today.
It's more than $30 million of capital to propel our growth even faster.
First a quick recap of Gan overall value proposition and TVN transforms leadership position within gallium nitride.
So again is the future of our conversion because it reduces space.
Smaller footprint and lower power system cost across a variety of electrical electricity conversion application.
And does this much better than silicon or other semiconductors.
<unk> is an established innovator manufacturing supplier and leader in Gan power or the virus range of applications.
<unk> is one of the only companies to have ramped again in broad market segment from lower power adapters, and fast Chargers to higher power data center mining communication infrastructure broad industry other renewables UBS and in active design in for automotive.
I phenomenal again team has enabled a top patent portfolio with more than 1000 patents five to 10 times more than nearest competitors.
Full gallium nitride manufacturing capability has allowed us controlling innovation with our asset light vertical integrated model and build a comprehensive product portfolio with more than 25 billion hours of field operations.
Having delivered $12 7 million.
Revenue in our last fiscal year.
And growing product unit shipments now at a very fast pace.
We are thrilled to have all the technology IP and business validated by Blue chip investors and customer partners. The likes of KKR, Yes, Carver Marelli, and now SaaS and diodes, Inc. To name a few.
Overall, we are addressing a very exciting market opportunity for Gan and power conversion a multi billion dollar again, Tim with a further inflection point as we go through the EV powertrain segment and a couple of years to reach 10 billion by end of the decade.
In fact, some of this market opportunity may be leaning more towards the conservative side.
In the near term.
Our revenues are being derived from power adapters, and Chargers computing data center infrastructure crypto mining power.
Claude by some industrial applications industrial and renewable energy in the near to midterm and without a doubt a large growth area for automotive electric vehicles and charging in the mid to long term.
Our board is very strong with growing markets for gallium nitride.
Across this gambit of application transform Gan solutions deliver high efficiency compact systems lightweight.
Easy to use products, and becoming referring more to that the ease of use with proven performance benefits against silicon.
<unk> on the higher power site and other again solutions.
Understanding this market in a little bit more detail.
The broad power semiconductor Tam itself is exciting and growing steadily.
The gang, Tim the gallium nitride portion of debt, which is reasonably addressable with Gan offerings that we have and in today in the near future is about $1 8 billion today out of which power adapters and charge offs is one of the biggest segments.
As the underlying strong power semiconductor market will continue to grow steadily we expect the Gan Tam CAGR to be double of that.
And while all segments in the general market will grow fast over.
Over the next five years or so the largest growth is expected from the electric vehicle segment going to well over $2 billion in 2026.
For which we are positioning very well with automotive qualified parts available today.
Yeah.
What is necessary and our team aspires to do everyday is deliver abroad combined spectrum of benefit to all power conversion customers.
By taking the intrinsic benefits that Gan has to offer over silicon or silicon carbide to the next level.
Our core core organic <unk> architecture delivers performance with high efficiency over a wide range of power levels with leadership and product qualification and reliability.
Our asset light vertical integrated model allows for unparalleled in house again control supply control of other manufacturing innovation and ability to scale.
While others are talking about getting into higher Pilar, we have been there for a while and have set a number of benchmarks, including titanium class gallium nitride power supplies partnered with our customers more than two years ago.
The <unk> effect is directly compatible with leading silicon controllers and drivers.
No extra shrubbery needed to interface, our again with outside World and this is reflected in our growing ecosystem of solution partners.
And finally, our strong IP portfolio covers not only how the gallium nitride is made but also how it is used in a certain widely used power application architectures. For example, like the total rich technology topology.
Yeah.
A key market trend over the last couple of years as many of you are aware is the shift for doctors in fast Chargers to higher powered for mobile and laptops, such as $45 65 watts and over 100 watts now with fast charging which gallium nitride is extremely well suited to.
While our other good companies and our fellow Gan companies have combined very well for enabling this market. Some of the key differentiating benefits that allow customers to do more with again with simple architectures and a simple bill of materials Bom outlined here.
Silicon obviously has been working great in the past, but now fall short in efficiency speed and smaller size compact form factor required for new products.
Among the variety of Gan solutions looking at the key attributes what makes transform gallium nitride attractive for customers versus competing solutions.
<unk> E mail again or the so called <unk> <unk>.
Sure.
Is the ability to be flexible, which means ease of use compatible with standard drivers no extra bond components or somebody to interface.
Again with the ability to go to higher power and ability to do so very reliably.
For example.
Based on data verified by customers for metrics that allow Gan <unk> in a direct.
Comparison to exceeding a to exceed performance with other gallium nitride effects in this case shown with the comparison with again more.
More efficient transform Gan and does literally easy to use.
Yeah.
We also strive to not confuse the market and do our best to clear certain misinformation that sometimes proliferates in the market around gallium nitride.
First of all no matter of what you call your again.
It's the overall performance account for example, <unk>.
Normally off again is what customers and application demand and there are many good ways of doing it.
All our goodfellow competitors and again are also doing it.
But the semantics about things like E mode, or demoed as to achieving normally of bookkeeping matters.
It's a superior normally off product that matters.
Performance performance has delivered by fundamental superior underlying Gan technology, and very importantly, coupled with solutions.
There is no universal one size fits all.
Talking about high speed, our mega hubs switching.
<unk> <unk>.
We have taken gallium nitride to one mega hugs and 99% efficient operation several years ago and that too at a higher power levels, which is more challenging.
Many other systems like Transformers et cetera has to be kept in mind as one takes gallium nitride and systems, especially at higher frequency.
But as far as the power switch is concerned fast switching is not fundamentally due to any particular thing like an IC or a controlled topology.
That is what garden natures gift to maintain days, if you make good Gan it will switch fast.
There's been a lot of talk about integration and drivers and one often ignored fact is many modern day controllers.
Especially for the doctors and fast Chargers have drivers integrated for free.
So in this case working our excellent solution partners, our architecture avoids the need for any extra driver in the case of adapters and fast Chargers.
Yeah.
Another important reminder, is power conversion application spend low to mid to high and then very high power levels.
Today out of the gain offerings and this is what what is shown here is the best of our knowledge of release products in the market not talk about the future are.
Again spans from 30 watts to 10 kilowatts.
As we demonstrated recently with our Gen five products on the higher power spectrum.
Many compelling offerings will vie for higher public sources in the future, but today they are limited to lower power.
Other success at higher power comes from again in.
Inherent robustness and stability of <unk> that architecture that allows us to be all flowed in industry standard totally robust packages lagged the tiers.
Today's other solutions, which can sometimes find difficult to do due to their inherent weakness.
Yeah.
And now what are these attributes enabling us to do.
They have enabled us to build a strong ecosystem of solutions and partners. This is all very recent progress, notably these partners and manufacturers of controllers with integrated drivers.
Recently Diodes, Inc announced a 130 <unk> solution utilizing transform game and a 65 watt solution utilizing transform gain is already in place.
And as previously announced we continue to work with Solana, another strong innovator and controller architectures.
With multiple other partners that are not public at this point, we aim to lead in the solutions for the adapters and charge offs space from 45 to 250 watts.
Our strong product attributes coupled with this adapter solution space and the ecosystem of partners.
Continued to allow our expanding adoption in the fast charger space.
We have added some leading brands, including for example, the compact 65 Watt power box with Philips to add to the Qualcomm QC fight 100 Watt solution, we announced last time.
Yeah.
The highest power space is very important.
As you can imagine hired the power <unk> energy savings impact of gains and the impact on electricity usage and carbon footprint at a holistic level.
Here, our generation four and generation five offerings.
Both are leading in this space and we compare here two leading silicon carbide offerings in this space as other type of gallium nitride is not quite ready for high power, especially internally robust packages.
Again due to the inherent device weaknesses in those cases.
An example shown here on the right is our highest power a $15 million product by the way this as best as far as we can tell the lowest our own for our 650 well qualified gain in a discrete till 2007 package.
It outperformed silicon carbide, both the MOSFET and <unk> both are very good products by strong companies in.
In our standard package in a standard grade circuit.
Rising 25%.
38% loss reduction over this good silicon carbide products and able to deliver as we show 10 kilowatt level powered from a single pad in our half bridge lab testing.
Okay.
Customers have selected our higher power products in a variety of applications for example, $35 million and 50 million impact over the last four years from one kilowatt to four kilowatt solutions for gaming crypto servers, industrials renewable and medical applications.
For the ease of use superior thermal management.
Reliability high efficiency.
Power conversion this list will continue to grow.
Okay.
The electric vehicles is a very important area of focus for gallium nitride and transform.
As we know Silicon carbide has done very well in this segment and gallium nitride with the intrinsic performance as well as the ability to harness. This interest performance as I. Just showed is poised to enable long term benefits, but again in this marketplace.
These benefits include key impact avs like faster charging by packing more pilot in a smaller footprint.
Also giving more compact and lightweight systems, which coupled with higher efficiency and lower losses inherent did again translate to increase driving range improving battery efficiency.
We just announced today that our gen four product qualification under the stringent AC cue 101 criterion was completed.
It being our third automotive qualified higher power product.
Yeah.
Most of you know well the acceleration of the electric vehicles opportunity worldwide and aggressive adoption scenarios.
That make longer term scenario for Gan hyperactive.
The specific gain opportunities in EV today and in the areas of onboard charges DC DC converters and off grid DC to AC exhibiting waters and over the next several years unlocking of the drivetrain in water opportunity something we are working closely with strategic partners.
Will triple the accessible game content on in automotive.
Yeah.
Transform Gan is AC cue 101 qualified here and now today.
Shifting gears now I wanted to explain a key partnership that we announced today.
First of all we have announced a total of $33 million of investment this week, including the support of KKR, our leading shareholder U S institutional Investor group and Central American Silicon products or SaaS.
SaaS is a marquee international company, a total green energy solutions provider and patent to global Wafers Corporation, which is a top three supplier of silicon wafer materials in the world.
And a combined market cap of SaaS, and global wafers being $16 billion with worldwide manufacturing operations.
SaaS made a new $10 million equity investment and transform adding to the previous $5 million. They did in August and including that the total amount raised from SaaS as well as other investors since August stands now at $38 million.
Equally if not more importantly, the SaaS Gw's Chief Gw's partnership will help enhance our Gan MPV for supply chain in the future while protecting our core intellectual property in this area and augmenting our internal capacity.
Also they will become a distribution partner for select transform products, helping drive growth.
Yeah.
Now turning our attention to execution today, and how we are driving growth.
We are pleased to report a continued growth vector and consistent consistent to what we said last time.
Targeting a three X unit shipment growth from the first half to the second half of this calendar year.
In terms of overall product revenue growth. This is 50% below targeted again from first half to the second half of the calendar year 'twenty one.
This ramp is again coming from our increased penetration into adapters and charges and sustained shipping for gaming server and crypto segments.
Clearly managing supply chain external constraints that are facing all of us, especially the semiconductor semiconductor industry today in the near to midterm will continue to be important for us.
Yeah.
The key business focus remains on continuing to scale product revenue and targeting again, an annual growth of <unk> in this area. We outlined several vectors that help us build this foundation.
First off in the adapters and Chargers, we are steadily increasing wins and now over 20 in production with over 40 in design and including the 31 to 240 Watt range.
We are fully booked for the quarter and have added strong wins like the Philips powerbar that I talked about.
Our strong partner ecosystem is a very key to us for sustained expansion and we have 10 solutions now ahead of our target, including our own solutions as well as with partners, which are either done and released are ongoing.
This is again ahead of our plan and the recent diodes 130 Watts announcement is a strong testament to that.
We have previously also set of metrics to achieve our PQ ethane packaged capacity <unk> funded the compact package used and adapters and charging products to exceed $1 billion a month.
And we are pleased to report that our team now has a second all set.
Outsourcing partner qualified and in place and we have this package capacity exceeding $1 billion a month in place in Q4 now as we have previously said.
We have also enabled a new higher power compact <unk> side by six package on plan.
In the higher power segment, a leadership area for transform versus other again, we have overall 20 design ins now having grown that from last time, and we did more than 10 in production and recently among others. We have added a very prominent gaming supplier in production.
Solutions are key here as well and we plan to release, a new $2 five kilowatts total bull design with our partner.
Total <unk> by the way is a widely used architecture and gain and also the transform has a very broad IP coverage.
And new higher powered products today amongst new high power products today. The Gen. Four AC announcement that we did will be important to accelerate automotive design ins and also our goal remains to secure even higher power Gen five and with the record high power Gen. Five product that I talked about earlier, we have.
Commercially qualified that as we said last time and now it's in early sampling stage.
Strategic partners and our government and MP business are important parts of our value proposition and business and I am pleased to report strong all around execution in these areas as well.
Linda ease of design ability and drive the ability of <unk> fit and performance stemming from the inherent better Gan technology.
Lends itself well to the success at Diodes, Inc, 130 watt solution with minimized bomb and high performance.
We continue to partner with Salina, another very good controller innovator and other companies in this area.
With our strong customer partners, who are also of our shareholders.
Yes, <unk> not convert conversion to equity was key along the continued development with the <unk> color and progress towards our business milestones and product milestones.
With an expedia the focus now is on continued supply having recently completed the licensing technology milestone, which led to the $8 million revenue recognition in the July quarter.
And with Marelli targeted product development, especially now with Gen. Four AC qualified parts.
An important recent achievement in our MP business was completion of the transfer of Gan RF EPPY process for a major Dod customer to our facilities.
We are still continuing our activity to target our commercial gain RF oven.
As well as we will be completing the details of the SaaS GWG partnership.
That we announced and looking to get that going in full steam ahead.
Our navy contract activities will deliver more than $3 5 million revenue in.
In calendar 2021.
And we have now also commenced activity on the new Delta contract.
A quick recap on the significant very significant recent milestones before I hand over to Cameron Mccullough to talk about our financials.
First an expedia.
The licensing and associated revenue milestone has been completed.
Along with this Gen five commercial call was also achieved.
Second, yes, Carver notes converted to equity adding.
Adding $15 million to shareholder equity and reiteration of support from one of our strongest partners.
The DARPA contract continues to highlight synergy that transform Gardner from public private partnerships.
The Gen four automotive qualification here and now today for driving automotive design wins.
Adding a new solution partners, a top tier company like diodes, Inc. Backing up what we've been saying on the ease of use and performance of our Paas.
And the investments from KKR, our largest shareholder NSS. This partnership will enable faster scaling in the future as we aim to get ready for the Mega growth, we expect in Gan land.
With that over to Cameron.
Thank you very much and Hello to everyone joining us today.
I'll start with a brief recap of our most recently completed quarter.
For my remarks, I will refer both to again on non-GAAP results, which are reconciled to GAAP in our press release table non-GAAP results exclude stock based compensation amortization and adjustments to fair value of our convertible note.
Okay.
Q2, FY 'twenty two so a continuation of our growth story total GAAP and non-GAAP revenue comprising product licensing and government was $11 $3 million in the quarter.
Appeared to $3 $2 million for the prior quarter and $1 9 million for the equivalent quarter in 2020.
This sequential and year over year increase was driven by a combination of licensing revenue relating to our ongoing work with an expedient continued execution on our three year government contract and record product sales from ramping shipments.
Focusing more on product sales the three months to September so our seventh successive quarter of product revenue growth.
When comparing this quarter to the same quarter last year product revenue grew by over 200%.
This growth has been driven across a broad range of power conversion applications, including fast Chargers and adapters gaming datacenter and crypto mining applications.
Operating expenses on a GAAP basis were $5 $1 million in the current quarter compared to $5 $3 million in the June quarter. This 2% decrease was achieved despite an increase in the companys headcount to support our growth. This included head count to expand our sales and applications teams as well as increasing investments in our R&D engine and compliance efforts.
On a non-GAAP basis operating expenses in the fiscal quarter of 'twenty, two with $4 5 million compared with non-GAAP operating expenses of $4 six in the prior quarter.
Cost of goods sold were $2 $2 million in the quarter a decrease of <unk> three from the June quarter as with Opex. The spend reduction was achieved despite an increase in manufacturing footprint to support our continued growth.
So EPS and net income I'll focus my remarks here on the non-GAAP results as a reminder, non-GAAP excludes non cash items, such as stock based comp amortization and fair value adjustments.
On a non-GAAP basis net income for the fiscal second quarter of 2022 was $3 6 million.
Or <unk> <unk> per share.
Pay up to a non-GAAP net loss of $5 <unk> million dollars or <unk> 13 per share in the prior quarter and a non-GAAP net loss of $5 $3 million or <unk> 15 per share in the fiscal second quarter of 2021. These results compare very favorably to our consensus EPS of <unk>.
Turning now to the balance sheet on.
On assets cash remained stable in the quarter, our burn offset by the initial $5 million of SaaS investment dependent highlighted earlier on the call operational burn was under $5 million in the quarter a reduction of 29% from June driven by increased revenue.
$750000 from your scale in relation to our ongoing development agreement and a continuation of our pest control environment.
Inventory increased to support our improved traction and will enable continued revenue growth.
On liabilities, the fair value of our convertible debt reduced from $17, one to $15 $6 million.
This is in line with the post balance sheet conversion of this debt as expanded dorm as I will expand on in an exit.
Staying in liabilities, the 8 million development loan that was tied to the successful execution of our ASR W. Listen Expedia was also released in the quarter.
This execution strengthened our balance sheet and improved our stockholders' equity position by over $11 million in the quarter.
We're also happy to report several important developments that cover post September 30th each one strengthening our balance sheet and improving our stockholders' equity position.
On debt on October 4th we completed the successful conversion of a $15 $6 million convertible note that the company held with a long term customer partner and those shareholder yes Kayla.
From a funding perspective, the company released an 8-K yesterday announcing the completion of a $23 million equity round, including our lead shareholder picky all taking their total investment in the company to $80 million is $23 million run also includes several U S institutional investors.
In addition to this earlier today the company also announced an additional $10 million from our strategic partner SaaS, bringing their total investment in the company.
<unk> million dollars.
These developments significantly strengthen our balance sheet, providing long term financial stability through the injection of $38 million of cash, reducing our debt profile and improving our stockholders' equity position by close to $50 million. In addition to the $11 million that was realized in the quarter.
It is through these developments that we believe the company is positioned to meet the qualification requirements for up listing our common stock to the NASDAQ listening. This is an ambition that we will continue to pursue and we are working intently to realize this.
So I think from the current year to reiterate our long term business model.
We are in the process of building a high growth cash generative business. The company has three distinct revenue streams licensing government and product.
In the current year, we are continuing to generate solid revenue from both licensing and government contracts. This is being supplemented by significant growth in our product revenue.
Revenue has grown seven quarters in succession and will become a significant proportion of our overall revenue in the current year.
This growth is being driven across a broad range of power conversion applications, including fast Chargers and adapters gaming data center and crypto mining.
We've achieved annual product revenue growth of 200% in the last fiscal year, and we are targeting a continuation of this product growth into.
Into 2022.
From 2003 onwards, as we continue to ramp our production revenue across our target segments product will form over 90% of our total revenue.
This growth as before coming from multiple segments not simply consumer.
Automotive revenue will further contribute to this multi segment growth from that from 2020.
This consistent rapid acceleration of our product revenue allows <unk> to target a five year annual CAGR in excess of 50%.
From a margin perspective, our strong product portfolio now, including a gen four and Gen five parts together with our manufacturing excellence.
Our sales into a gross margin in excess of 40%.
With respect to operating margin as we have shown this year. The company will continue to invest to support all aspects of our core operations are stable existing structure, allowing us to translate gross margins and to delivering an operating margin that we believe will be in excess of 20%.
To conclude.
Again, as a pioneer and leading provider of Gan power conversion devices. We have disruptive technology that provides power conversion solutions across a number of significant growing markets. We are commercially ramping with strong production revenue growth now growing for seven successive quarters together with our manufacturing structure in place that can.
Support our long term growth.
We have a comprehensive product offering to meet our customers' needs across a wide range of power levels and sales.
All of which is underpinned by a strong balance sheet, the industry's strongest IP position and a deep talented team led by remote Gan exports.
This completes our prepared materials and remarks, and we'd now like to open the call to any questions. Operator. Please proceed with managing the Q&A portion of the call.
Thank you and as a reminder, please press star one on your telephone keypad to ask a question.
We will go first to Ananda.
Earl with loop capital.
Hey, Thanks, guys.
Congrats on the solid as Dalton.
Appreciate you taking the question.
Question, just I guess, a couple if I could.
What are you guys looking for some in looking it sounds like there's good momentum in the yield.
Stay there would be you had laid out for us what are you looking for as key signposts.
Over the next one to two quarters.
That that can continue to drive the growth.
Thank you are anticipating and you guys did a great job of walk through the presentation, Joe anything incremental in that regard that may not be laid out would be great.
I have a follow up thanks.
And thanks Amanda for that.
Later, we have laid out just the quarter over quarter, we like to on the metrics driving that foundation and the growth vectors.
These are basically of designing and production wins in both adapters as well as higher power solutions and reference designs Thats a key area, we laid out some.
You alluded to that we are working on more which is not public at this time.
As you will see we talk about the ease of use out of our pocket right and what is that getting us right in head and performance with respect to other again, what is that getting us into getting multiple of this solution and reference design partners. So as they expanded ecosystem it will drive our growth even faster.
And then commensurate milestones on new products right. We have continued our new product introduction.
And continuing that especially you saw today with the churn.
For automotive over the next few quarters.
I didn't say explicitly but gen. Five automotive qualification will also be an important vector.
Going into the second quarter of next year sometime around that timeframe, and then securing more wins or design wins with our gen. Five.
Yeah.
Permit that's super helpful. And then just a follow up on <unk>.
New wins and then this is really my follow up too.
Okay to EV in automotive when when do you guys I guess from our perspective, when should we envision that really beginning to make a contribution to you guys what year would that be do you envision it.
This is the EV, we have been in it really you have to be in the EV segment with qualified products today to have an impact in the next several years so.
Sometimes in the 2023 timeframe as we have seen said before is where the EV goes to.
These things will again will be on the cards in the design ins that we have today, but what we have also done one of the things we have established strong partnerships. Rachel for example, marelli in for example.
<unk> until we have.
For example that an expedia MPV for sales wafer sales, which are all targeted towards the end.
EV applications and this is one of our vision of expanding our ecosystem with partners to drive growth faster than we can on our own and that is contributing to revenues actually today.
As we speak.
That's great.
Thanks, a lot I'll get back in queue. Thanks, a lot.
Thank you.
Well move next to David Williams that benchmark.
Hey, good afternoon, Thanks for taking my questions and congrats on the solid quarter.
Just wanted to ask kind of maybe from a high level.
Began and you obviously have done a good job of putting this out in the past, but just the silicon carbide competitiveness and.
Versus jordanne products have you seen that you've been able to displace any silicon carbide to date or do you think that is still a possibility as we get deeper into the <unk>.
The automotive maybe Umberto section.
And again, thanks for that the Silicon carbide actually we have we've been winning because of our efficiency.
In applications that we are designed in and in production today like for example data center or.
Crypto mining or gaming powers right there.
<unk> gains, we have which likely a set transform has made the inherent performance of Gan inherent potential of Gan practical we are seeing that today right in the area of automotive like I said thats a longer designing process silicon carbide has been doing that for the last decade, or so and is doing very well in the market today, but that is where <unk>.
And with our inherent performance advantage like this 25%, 35%, 38% loss reduction that we showed the inherent fundamental performance of Gan, coupled with our partner ecosystem and the quality reliability Gen. Four AC announced today that we expect to see an impact on that in by 2023.
And we've also said this before what we expect it to look older technologies don't globally Silicon one global Silicon carbide won't go away, but newer design wins newer design ins that customer start we expect that to be started with allergan.
Okay fantastic. Thanks, so much for that and then maybe secondly, just any updates on the wafer fab JV moving forward is that the transition here as expected anything or any hurdles or constraints there.
That can be experienced in last quarter.
No that is actually growing going very well on plan and Thats one of the strong.
Backbones of our manufacturing also so that transition has gone well very synergy and like we have said.
Our operating team and the management team at the <unk> factory, that's basically unchanged.
<unk> been working in close partnership with our new partners and.
Yes, so far so far everything good in.
We expect it to be like that in the future.
Fantastic. Thanks, so much I really appreciate it and best of luck on the order.
Thank you.
Yeah.
Next we'll go to Craig Ellis with B Riley Securities.
Yes, thanks for taking the question and nice job on the quarter guys and congratulations on the things that youre doing to strengthen the balance sheet. Let me just ask a clarification.
Tung types clarification question there Ken.
Cameron.
There was the press release on the $23 million raised there was an announcement with SaaS.
Our part of the SaaS investments in the $23 million rates are those separate items. So.
This is the balance sheet benefiting from $15 million from SaaS, plus the $23 million rates or was part of the SaaS rates included in the $23 million.
It's two separate events the timing of it was the first $5 million from SaaS was in August.
And what happened in the last week was we had the $23 million that came in and then you have that $10 million, which is the second component of the SaaS investment at earlier on today.
It's kind of five plus 23, plus 10 to take us to a total of $5 million to $8 million.
And I think the press release, you indicated that there was potential to upsize the $23 million raise any color on.
When that would need to happen or where how the company is thinking about the potential for that to be realized.
I think at this point Craig No we were delighted with the investment that we go out there as an option there obviously with <unk>.
With the cash influx that we've gone and we've got a good stable platform to grow the business and long term financial stability. So in terms of the follow on.
<unk> right now with our cash position and we'll see.
Thanks, transpire in the coming months.
Got it.
<unk> I'll flip it over to you. So one of the things that we're hearing from a lot of companies that are supplying to end markets that have some similarity to transform where theres chargers or data center communication infrastructure et cetera is that demand visibility is really extended pretty meaning a player for the last couple of.
<unk> since so with that as a backdrop as you look at your engagement with your customers and partners can you characterize the visibility that you have beyond the calendar fourth quarter into.
Either the first quarter of 'twenty, two or to the extent that you've got visibility on projects or design wins and design ins.
Beyond that just give us a sense of what youre seeing in your order book.
Yes.
We're definitely seeing that is a true statement, we are definitely seeing victors and visibility that will allow us to continue the growth plan. Our goal remains to increase product revenue quarter over quarter. So we do see demand visibility adapters and charges as well as the higher power segments.
Some of them are more longer than a couple of quarters and as you can appreciate that coupled with that is the supply chain visibility also that we track closely and.
We do expect that to be remain a dynamic.
Over the next say two to three quarters.
And and.
And then just looking at.
At pure <unk> sales, but that occur under your agreement with with the Navy how should we think about the potential for those sales to persist.
As we look into calendar 'twenty, two or are you expecting those to be steady and I think there was potential for some customer expansion there what's happening with <unk>.
Customer activity in that part of the business.
Yes, so thats been going steady Craig So the Navy again, there are two things with the Navy contract and one is a direct navy contract itself, which of which I said $3 $5 million, which is actually slightly higher than target for calendar year 2021.
That's the Navy contract revenue, which helps us in the expansion of our activities.
Activities and then there is a separate piece.
Sales of which is catalyzed by the Navy contract and that I'd referred vivid dreams kind of two to two key initiatives there along with other others kind of similar.
Higher margin customers also that one major U S. Dod customers. So this is outside of the Navy contract.
Has completed the transfer of their RF wafer process to transform and then second we still are targeting commercial win.
From a commercial.
Ken out of <unk>.
Transistor manufacturer.
Got it and then lastly, you mentioned the diodes announcement.
Hmm.
What's the what's the implication for revenues either near term or intermediate to long term from that agreement and should we be expecting other such.
Relationships and announcements in the future.
Yes. So first first of all it helps support the adapter and charter growth rate in this market of one needs to be have solutions on the market and the two things. It gives forces. It gives us strong confidence on what we've been saying that and why did they choose our products because it's easy to interface with.
Standard Silicon driver electronics side without.
What we call somebody external interfacing that some other topologies may require.
And second the performance of our candidates so as what we expect the growth from that is not only we have the solution in place, but companies like diodes. They have their controller vision integrated driver on that also Rachel day independently the solution space that the customer space, we expect to be both.
Third by that because independent of transform its there.
Sales and marketing channels are also promoting that COVID-19 powered by transform.
Insight.
Got it Okay I'll hop back.
We do expect to have more announcements like that hopefully next quarter.
Okay.
I'll hop back in the queue guys. Thanks, Ben Thanks Campbell. Thank you. Thank you.
And next we'll move to Richard Shannon at Craig Hallum.
Thanks, guys. Thank you for taking my question here, maybe I'll ask a very simple question, we didn't hear about in the prepared remarks and that is how you are thinking about.
December quarter here.
Quantitatively I know youre not going to have a big license deal or not like a big license deal like you did September but how do we think about the the revenues youre excluding that if you want to compare it to like June as an example, the way we can.
Growth in.
And gross margins disguise, a starting point that would be great. Please.
Sure Let me, let me take a COO.
Revenue for Richard I think as you know as we look at as we look at the December quarter, we feel we feel pretty comfortable with the.
The consensus number for December quarter was just over $4 million in.
I think that.
There is a possibility for upside there as well dependent on on the supply stream and supply chain constraints I think from a revenue perspective, that's where we are.
From a margin perspective.
Obviously.
We're looking to continue to improve our margins we saw a good quarter, there I think they revert back more.
With the with the June quarter simply because of the mix reverts.
Spiked a little bit more.
Product and government as opposed to licensing.
Yeah.
Okay. That's helpful. Thanks for that starting point there.
A question on the fast charging market permit here you'd give us some some numbers here about number of designs in production.
And also about kind of unit capability here.
If you want to compare and contrast, with what she's youre out in the market or or or.
Or maybe kind of position where transfer.
Transform is finding success in the charter market either by.
Wattage or particular kinds of customers or other actions you're hearing out there in the market relative to other competitors.
Okay.
Yes, two things there.
We are growing penetration fast in this market again. This is a very large market a number of other companies power integration manager as they have done very well and helped actually cede some of this market.
<unk>.
It's growing faster is a good opportunity for everyone within a fast growing opportunity for the three year core leading companies in this market.
We are seeing in <unk>.
<unk> the across 65 watts is a prime segments for us, but now also in the highest quality, yes. Like this 130 <unk> recalled from the diodes.
We expect.
More and more traction.
And a clear a clear win win.
<unk> kind of which is an indicator maybe perhaps the leading leading into indicators. So to speak is the fact that our Gan is being chosen by solutions provider rates. Because again of course is a testament to the fact that our Gen architecture is easy to use interface with external electronics.
And the fundamental performance itself.
Okay, Great that's helpful perspective.
I wanted to follow up on the topic in automotive here that someone else started earlier here.
I guess, the context, I'm thinking about it and I love to love to hear your thoughts on this permitted. So we've had a few companies who have exposure to silicon carbide youre talking about huge opportunities massive pipelines are measured in a way into the billions of dollars in talking about the opportunities and onboard Chargers and DC to DC conversion with and probably even more so on powertrain.
Burgers.
How.
It just looks like Silicon carbide is dominating that market that we hear you talk about and certainly it seems probable that the gain is going to have a real place here can.
Can you kind of give us some help here and kind of offsetting or providing perspective against all of those other extremely positive comments that silicon carbide is to how Gan and how transform will have a real place there.
Theres no doubt silicon carbide and there are multiple good company right not just too that's another catalyst important for the market multiple companies with good qualified products out there which is why.
Together, our partners later, Marelli and Expedia, who we are and if you have a license.
Licensed our other.
Part of our technology as well so that's that.
First thing is we have this proof points like automotive qualified products. We will continue to get momentum there silicon carbide has been around much longer rate index for the results. They are seeing today, but the reason again companies like marelli have invested and transform the company statements media is because of the fundamental discipline of gas at <unk> and <unk>.
Overnight change, but the good thing about transform it.
Growing faster than the doctors and Chargers.
The 1% to five kilowatt segment, the data center, the gaming, which is our suites.
Sweet spot, where we've been there for a couple of years now and really no debt that ADL of at our parks and then industrial and then he be exactly kind of in the order that we have laid out but we have no doubt that gan with its proven performance over the next few years. It does take time in the automotive, but you can see.
What happened to silicon carbide suddenly exploded and VC starting began taking market share first in <unk> 2023 identical.
And then in workers in drivetrain.
Driving water that's the opportunity we look forward to after 2025 and onwards.
Okay.
Okay, great. Thanks for that permit the last quick question from me on your potential NASDAQ up listing here, what kind of timeframe should we expect and what if any obstacles or out of your control and getting that done.
Okay.
Sure I think Kim said, let me jump in we I mentioned in our prepared remarks. So it means an ambition, it's an active ongoing near term target.
And.
We've done a deep dive into and where we're positioned and I think that the.
Key developments of the quarter on is obviously is the strong rates and it positions us very well, we believe we are well positioned to up list.
It's hard to give a specific claim line, but we certainly want to get it done sooner rather than later.
Yeah.
Okay that is all for me congratulations nice nice results and also on the catheter right you guys. Thank you.
Thank you.
Okay.
Well move next to Orin Hirschman, AIG H investment partners.
Hi, how are you congratulations on the progress.
In terms of thank you thank you and.
In terms of product revenues I don't know if you traditionally break it out I don't remember if you break it if you ex out the the licenses to give us combined product and <unk>.
And the government any.
Any metrics you can give us there.
Okay.
No. We haven't we haven't traditionally what's a great detail as you say or I think the licensing is very discrete in terms of one off individual amounts. This quarter for example was $8 million.
And you can see the different sort of product and government make up the balance of that.
And what you what we typically see is government as Trevor mentioned is around $3 5 million in the year and it is it is relatively is stable at that level. So from there you can see the growth in product that we've experienced over the last seven quarters and the growth we hope to.
Achieving the subsequent quarters.
Okay, that's very helpful.
In terms of the charging market.
There are some early player at that level I would say certainly in my opinion at least had a beta overview.
Will the fast Chargers that lower.
Outages.
Can you reiterate again.
Seeing success there it sounds like as you go up on the audits.
You really shine through because of your inherent advantages.
What power levels does that really become evident and where the power levels going right now.
And then I have one other follow up.
Sure. So on the let me talk about the power levels right. So we talked about.
The lower lower power versus the entire adapting range than the higher power, which is our data centers gaming in those areas.
<unk> will transform is it clear leadership now coming to the adapted itself Youre right. We actually entered the market first at a higher power range, because our products could do high powered.
Then be secondary entered in other nascent adopters and VR to our ecosystem of partners, we had accelerating growth there so within the adapters.
<unk> 65, what is the is a <unk> three point for US and then going forward. The 130 <unk> hundred 40, <unk> hundred 50 Watt segment. We are also very excited about that but our solutions and the doctors actually are from like we got a new design win at 35 <unk> sites spanning from 35 was $250 and the reasons.
Winning in.
Other companies are also doing very well some of them have been in the market candidly.
For us the reasons, we are winning is.
He's of use our parts of the digital interfaces. It has the performance of Gan, but the look and feel of silicon, that's how COVID-19 our parts our architecture.
And then the efficiency the fundamental efficiency performance advantage, which is also due to a key dynamic of Gan itself, but those are the two reasons that.
Seeing traction and again as exemplified by more and more solution partners.
Working with us in this area.
Great.
The standard I believe it's the European standards going into effect next year I forget the name of it maybe titanium cold or something like that for the data center.
More of that Youre qualified is that helping your design win designs and if anybody else qualified than on the Gan side.
Yes, so the titanium it says it's actually a TSMC power supply manufacturing Association's standard of certain Vijay.
<unk> power efficiencies across the range. So it started with similar first than gold and platinum and now now titanium.
European standards, such as coming into play for from January 2023 are applying to certain class of data center power supplies, which will require titanium. So we expect that from the second half of 2022, we do expect to see a strong impact of that.
Yes.
The supply chain and get ready for that a couple of quarters before that Jan 2023 for a newer installations.
And then titanium what gallium nitride in general does is tighten it makes it titanium.
Z to achieve with a simple architecture.
Otherwise it is tricky to achieve that highest level of performance because like we have said before silicon.
It has reached a reaches physical limit so.
<unk> makes it easier to reach titanium we were the first to show titanium others will follow I am sure. If they can make good again. Some other companies are talking about getting to titanium levels of efficiency, but we have been therefore now.
Yes.
One of the key things, enabling that for US is this which is unique to Gan is this totem pole. So called totem pole architecture, which is which is a typical architecture using gan in those classes of power supplies and transform also happen to have very strong intellectual property position in that area no matter, how the gallium nitride is made but to use the gallium.
And in those applications. So that will also become an interesting play as the market expands in future.
Okay, great. Thanks, so much.
Thank you.
Yeah.
And we will go next gen eight in a hurry I think equity.
Yes, Hello, Thank you for taking my question and congratulations on the quarter guys.
I guess my question can we looked at kind of from a macro standpoint, and also maybe transform strategy or outlook going forward.
Has there been more adoption of recognition for Gan to be used.
And logic chips and data processors or or is the current you still primarily in power.
Okay.
The gang that transform is focused on with the power conversion devices.
<unk> is an empowered switching drivetrain power that is power management with broadly speaking at the controllers and drivers of digital and analog control and power management, which is the power switches.
Of our power conversion systems right. So we are in that power switch.
Domain with our our again.
Our what we call our second vertical which is again <unk> talked about those are addressed towards RF gallium nitride, which is more in the infrastructure wireless base station communication are different.
<unk> applications.
Yeah.
Got it.
Hey, Thank you for that.
Okay.
And that does conclude the question and answer session I will turn the conference back over to management for closing remarks.
Yeah.
Okay.
Thank you operator.
Before closing out today's call I want to highlight that we plan to participate.
Several upcoming investor conferences.
We will host meetings next week, both the great Hall of them open select on the benchmark dermatology conferences.
And we will also be the Oppenheimer <unk> summit in mid December.
For those interested in meeting with US on one of these virtual conference or in Norway will come into them.
Currency to contact the hosting firm or reach out to their silicone group in order to schedule a meeting.
I want to thank you again for joining us on today's call. Operator, you may now disconnect the call.
Thank you and again that does conclude today's conference you may now disconnect.
Okay.
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