Q4 2022 Transphorm Technology Inc Earnings Call
Okay.
Good afternoon, ladies with Ana and I will be our conference operator, I would like to welcome everyone today to transport business update conference call. All lines have been placed on mute to prevent any background noise and I think there will be a question and answer session. If he would like to ask a question. During this time. Please press star one on your telephone keypad.
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They advised that today's conference is being recorded.
Joining todays call from transformer, Mario Riva, Chief Executive Officer permanently cofounder, President and Chief operating Officer, and Cameron Mccauley, Chief Financial Officer.
Before we begin I would like to point out there is a slide presentation.
On today's call and with me and I spent will be referenced during the conference call.
Yeah.
The webcast link in the Investor Relations section of transports website, and we'll also make no mistake I'm only getting a pleasant place to todays conference call.
Additionally, during the course of this call the company May make forward looking statements regarding the company's financial position strategy, Yeah, I think your operation.
End markets in other areas of discussion.
It is not possible for the company Army that's meant to predict all of them working in a company asbestos total potential impact of all factors on its business or to the X.
Like any factor or combination of factors may cause actual results to differ materially from those contained in any forward looking statements.
In light of all these risks uncertainties and assumptions the horrible things discussed during this call may or may not occur and actual results could differ materially and adversely from those anticipated or implied.
Does that show up as to the company's future performance represent management.
As of today May 12 2022.
The company or any person with responsibility for the answer here.
Forward looking statements.
The company has no obligation.
The forward looking statements for any reason after the date of this call to conform such statements to actual results or to change in the company's expectation for more detailed information on that.
He was born from the risk factors described from one Chinese bank <unk> and other subsequent filings with the SEC.
With that I will now turn the call over to transfer CEO , Barry I'll leave us for opening remarks Mario. Please go ahead.
Yeah.
This is the one off will go through everybody's today's call. We appreciate you joining us today.
Allow me to review our fiscal fourth quarter highlights.
We achieved well obviously look does look almost all three months like under the ticker symbol <unk>.
The full year, we still do.
<unk> revenue increased 31% year over year to a record 44 $1 million, we could still grow with global growth.
The fourth quarter of fiscal year 'twenty, two global revenue grew sequentially for the ninth consecutive quarter cool group over $4 million.
Total revenue for the quarter.
For Boeing only $3 million.
We secured our largest super John Paul will June four.
Therefore, the company do vary.
Little over half a million units of three kilowatt goes forward you was the magnitude of disorder.
We demonstrated <unk> continued leadership with all of them.
We wanted to do a lot of buildup inventory room from a tier one fortune 100 company.
Including an initial purchase order of 50000 units with Superdome UN tour.
$140 million gross.
Yeah.
This will provide higher efficiency for 65 watt charger and adapter applications.
Compare with competing more done that require larger under a 15 year old device for similar applications.
So we so distrustful cheap we're done.
Our customers to do more with less.
Gotcha accruals as of March 31st 2042 were $34 million.
I'll now pass the call to agreement for a detailed walk through what the development of these first few months.
Thank you Mario and good afternoon, everyone.
Transform PGN has continued electronics revenue ramp delivering over 90 successive quarter of product revenue growth and cementing our leadership position in high power again with a new 500, Calvin plus unit order for kilowatt class gallium nitride.
Our strong results of our targeted deliberate investments both.
The past several years in high performance, Ken products for the broad market Aes from low power to high power.
To the best of our knowledge <unk> is the only company to be shipping anything in the kilowatt range in these high volume predictions today.
This places us in a very strong position to address the $3 billion again, Ken in diverse areas like blockchain computing data servers communications gaming energy renewables and electric vehicles, while systematically growing our share in the lower power fast charger and adapter consumer segments.
First I'll give a short recap of gallium nitride, the overall value proposition, our leading position clarifying market positioning of various types of Gan products and then review our strong execution in the March 2022, ending quarter and then our expansion strategy for FY 2023.
Gallium nitride Gan is the wide bandgap semiconductor materials for power conversion that reduces electrical energy.
Compact power conversion footprint and lower power systems costs. It's also a variety of electrical power conversion applications Chargers converters, Inverters and does this significantly better than traditional silicon and much better than other new semiconductors like silicon carbide.
<unk> is.
As an established innovative design pioneered a leading manufacturer and supplier of high voltage Gan power semiconductor products or the widest range of applications from 30 Watts Repower, two or four kilowatts higher power and in application areas ranging from adapters in fast Chargers for which again has been well accepted in the market today to higher power data.
Centers mining crypto mining communication infrastructure brought industrial renewable energy and in design in for automotive electric vehicle applications as a result of our targeted investments and strategy.
Our core and strong fundamental IP with over 1000 patents pending.
Strong portfolio as well as our high performance high quality products have been validated by various blue chip investors customers and partners financial partners design partners manufacturing partners, and automotive and industrial market customer partners as well as the U S Department of defense.
Our comprehensive and differentiated product offering backed by a high quality manufacturing basically essentially one has ramped in the market now with over 40 billion hours in our customers' product in the field, including both high power and low power again and resulted in a $1 $24 million of revenue in our fiscal <unk>.
2022, a record for us and a $1 nine X growth about in spite of a challenging supply chain environment.
Our focus is on building a product driven fast ramp and profitable business and we are already off to the race is doing that well.
We have multiple revenue segments like historically licensing and now government revenue and products with target over 90% of the mix from product revenue in 2023, representing a 200% CAGR from 2020.
We are committed to making the required operating and capital investments for increased scale high performance products and solutions for our customers and fostering Gan adoption over multiple end markets to achieve our targets and our target model of well over 50% long term CAGR with gross margins over 40% and operating margin.
Including over 20%.
We are in a unique and differentiated position amongst against suppliers to have products in the market today.
<unk> tremendous multibillion dollar market opportunity of Gan for public conversion across the various segments again from lower power adapters and charters to high power server critical data compilers that we had already event and our customers are already ramping in two industrial energy and renewable now also in production with quite a few.
Accounts and in the mid to long term large growth opportunities with automotive electric vehicles.
Bolstering our long term picture beyond 2020 for 2025.
Our Gan solutions delivered high efficiency complex system with easy to use and easy to interface products for the customer with proven performance benefits again, silicon could've been carmike and other gallium nitrate solutions like <unk>.
The campaign.
In the multibillion dollar range. This is again tend to be sure here that is reasonably addressable by products. We have today all in the near term pipeline over the next few years.
And from 2021 to 2026, a very strong <unk> growth of more than three X fueled by our robust faster growth in content versus the overall power semiconductor market in each of the segment data yet.
John Here and then a further inflection points through electric vehicle powertrain segment mid decade, giving Gan and transform our clinics larger any segment market in $2026 $6 billion canton.
One of our key attributes from early on this has been our philosophy is.
Doing more with less.
We want to enable our customers by taking the inherent benefits of Gan, although both silicon and silicon carbide to the next level and delivering multi pronged benefits to power conversion customers.
Our patented normally of gallium nitride architecture delivers high efficiency over a wide range of power levels with leadership and protocol, if the casino reliability failure diabetes rivaling that authentic silicon with a sub 0.36, which is called failures in time, but a billion hours of operation.
T against asset light vertically integrated value chain allows for in house Gan wafers with manufacturing control innovation and ability to scale.
Few other companies are now talking about getting into hydropower of again, we have been setting this benchmarks for over four years now for example, titanium class kilowatt scale again power supplies with our customers.
And in process also built up a very fundamental IP for the thing the.
We offer products spanning from 45 watts to.
To 10 kilowatts.
Also we have led in terms of high voltage offerings 650 volt 900 volts being the only company with 901 product in the market and are now pursuing RMB 12, 101, gallium nitride, which.
We have proven this valuable into the animal's again, not just silicon carbide to take carry anymore.
So again.
Is directly compatible with leading silicon controllers, and then EBIT drivers, bringing ease of design and drivers.
No extra components or <unk> as we call it immediate to interface. Our again without a feature that has brought us a rich ecosystem of solution partners and they appreciate this.
Above all our strong IP five to 10 times versus some other game competition underpins all of this strength the core package and not just gallium nitride materials and manufacturing that's of course very key but equally important in how the gallium nitride is used and common power application architecture. Like for example, the totem pole bridge to <unk>.
That is not widely used and is a core example of transform original game product design innovation.
Another one of our key attributes from early on is the ownership of our again visual production supply chain and advantage that is becoming even more important in today's geopolitical climate.
This starts with the design of our seek robust and easy to interface normally off can fit with.
We directly own and control over at the wafer manufacturing with multiple and most CVD reactors do you have the tools used to making our growing gallium nitride on say for example, silicon wafers that we do.
Two geographical locations owned by transformed California and Japan.
Our factory is a joint venture with other potential strategic partners and to the mine is a high quality manufacturing site.
Only formally report of yields for gallium nitride matching those of Silicon Cmos running in the same factory.
Other feature that has contributed to our high powered gan products yield and quality.
When packaging is done with our key wholesale partners, we bring Samsung IP designs for example, allowing <unk> to be efficiently used in robust field packages desired by high power customers.
That's what's on the list is our application and design efforts, both with customers and solution partners, who work preferentially with our again for the controller or driver products.
As a result.
Transform has enabled our customers with products that range from a doctor to automotive lower power to high power as shown in this chart from 30 Watt adapters and wildlife charges to more than 10 kilowatt and even higher power systems.
<unk> multiple of our <unk> Gen. Five solutions for example in multi phased applications.
Despite breath of products is also complemented by the highest voltage range 600 5900 volts.
Qualification <unk> AC qualification, which transform has always led in the first and then.
Proven robust qualification product over product and now in RMB four <unk> solutions like the <unk> hundred <unk> got it.
We are not a bunch of pony, we service the entire market the entire dynamic of customers.
Now I will discuss why it began wins in various verticals.
From lower power to higher power.
<unk> Gan adoption is happening faster, which is great. Many good companies that are in the market with gallium nitride, notably at lower power adapters and charges VIP and are systematically addressing today high power and low power together silly.
Silicon, obviously has been great in the past and steelworks today, but fall short and efficiency speed and the smaller size required for new products.
<unk> takes off from here.
Few factors that outline <unk> differentiated benefits over competing again.
<unk> access and ease of use and flexibility with tender drivers controllers interfacing with our against it.
As a result of the integration choices steady Amit.
No extra bump components or somebody is required to integrate again our again.
Which makes the solution cost effective, especially in lower power Chargers and adapters for smartphones and laptops total bond classes.
The intrinsic gallium nitrate performance fully exploited in our products to achieve the highest efficiency or Louis losses, among many other again.
And then bring in reliability and robustness across the entire policy.
This is evidenced very clearly by our proven design wins with customer systems in production <unk> is adopted in many more bucket verticals today with high range high velocity and high performance.
As you can see applications like solar power gaming blockchain crypto mining <unk> industrial and also select higher end applications like aerospace.
Some of these are more than 10 times the power levels that some of the other gallium nitride offerings enable today, and indeed more or less in the low power range.
Along with the ease of use benefits reduced volume and the intense again performance.
Underlying.
The results for our high powered dominant stemmed from the fact that typical email gallium nitride competing gallium nitride interface to the outside world is inherently weaker and hydro to operate in many common package types.
Our fundamental design innovations and directly controlled manufacturing does enable superior performance. So bigger dynamic performance as it is called from our gallium nitride.
Allowing smaller game day to be used for the same power level versus logic or sometimes even two packages for competing again versus one from transform.
For the same application.
We preferred to lay out the facts about Gan products, very clearly and hopefully seek to clear any confusion and understanding the customers are investors in this space.
First off.
Published estimates powered applications has always required normally of products that silicon nitride is just the basic fit fitting.
And Gary Mega effects on the market today are normal yield.
The transform gallium nitrate fit just like Silicon MOSFET.
Is normally of how this is achieved whether E mail again or other type of again or not.
Technicalities of little consequence, other than what matters is the implementation by each particular company distributions to performance that led to the ease of use and of course the cost of the solutions.
High performance.
First comes from the underlying again and it is not a function of a particular implementation.
For example, <unk>.
Organ IC just won't give you a high performance of the underlying again is not high performance D.
Our design partners and customers have very big at higher efficiency of the <unk> in fact with other gallium nitride versus other than <unk> had in the same application.
It is not to say that other gallium nitride cannot improve but just pointing out where the fundamental benefits of rice from.
And when it comes to high speed high frequency that is natures gift to gallium nitride at least visit than gallium nitride operating at much higher speed than silicon and silicon carbide.
Finally.
There are various shenanigans out there about the integration.
Clearly integration is a design choice.
The offer.
Clearly integration is important but there are aspects of how each product is designed for example.
We can talk about driver integrated and Dan or other levels of integration, but lot of modern day controllers have already integrated drivers in bids literally feet.
In our transform <unk> fit you choose to integrate our smallest noteworthy silicon fit with our high voltage gain.
Thus no need for any external loading terminal driver in say fast charge their phone or laptop applications, where the controller already housing as a driver.
We have a traditional silicon like interface.
The performance of.
High voltage gallium nitride.
Now the higher power space is a very large market for again and very important ladies simply put hydropower the height of the MLC centre and backup again.
Impact on electricity usage and carbon footprint at a holistic level head of the semiconductor content because the larger the chips and hence the total higher market.
Here, our Gen four and Gen <unk> offerings are compared to a leading silicon carbide offerings in this space as other types of gallium nitride like the hemo getting mic Ed I'm not quite ready to date at least for high powered especially internal legal perspective, just like the tier 247 due to the inherent device weakness.
Previously we had shown that with our highest power 15 milligram product to best we can tell this is the lowest resistance highest current highest power for 650 will again quantifying and in production.
Pre packaged into tier 247 that outperformed silicon carbide, good silicon carbide products like the MOSFET and the DFS.
And realizes a 25% to 38% lower loss.
On an apples to apples comparison, delivering 10 kilowatt class of power levels from a single box how bridge testing.
Now that are also independent third party validation confirming the thinking what we had previously said for example, the recent technical paper at the PCI in Europe Trade show in conference, where superiority of <unk> or silicon carbide in fecal what applications was published.
Customers have selected our high power Gen product across the spectrum and some of our events that all built on the foundation of efficiency performance ease of use and velocity as our customers.
As well as third party reports have ultrashape.
Recently, we secured appeal of over 500000 units for high power again.
And mind you. These are seven 810 times bigger chips, then used in lower power adaptor type applications validating our leadership in high power again.
Blockchain computing is a power hungry applications that over again has enabled a 1% efficiency.
And to put that in perspective, one system can save a few hundred kilowatt hours per year, and well over 100 pounds of carbon footprint, depending on what your source of energy.
With more than 50000 metric tons of reduction possible just from our own two.
2022 outlook in blockchain computing and gaming alone.
Shown on the right here in the solar power segment.
With our customers have enabled titanium breaking now for more than four years. Other gas suppliers are trying to follow suit, which will be all be good for the end markets and starting to talk about Titan inefficiencies.
Yet again, our existing customers.
Have increased their follow on orders and we anticipate further debt initial initiatives been regulations like the EU Eco design from 2023.
Even increase further the need for high efficiency high power again like debt from transform.
We aim to grow the high power segment continuously and maintain our leadership position here.
While there is a very significant growth for us in the biggest segments, we outlined from low power to high powered.
Applications continue to present.
The massive long term opportunity as the performance again enables continued performance of the electric vehicles address addressing and improving on fundamental issues of power loss heat generation and range in <unk> with.
With high power density enable fast charging.
The reduced size.
Lower losses that ultimately this has been hiring.
Transform is accelerating.
<unk> for electric vehicles for again.
Will accelerate in the next few years.
To date transform is addressing the EV markets specific EDI opportunity markets I think the areas of onboard charges DC DC converters and off grid DC to AC and brokers with a means to drive premium water opportunity. After 2020, 526 triple accessible game content from about $70 to well over.
$200.
As I also alluded to be announced over preliminary 1200 volts gallium nitride R&D results. In fact this week at our Premier I typically conference the Isps fee, including 800 volt operation from our gallium nitride for which a 1200 volt devices necessitated and with higher efficiency over competing 300 was set up.
By product instead of course that are well established in the market today, but it's a clear proof point that again is not sitting still we are not sitting still we are moving forward.
The site transform.
Had AUC automotive again qualified products to date the covered Jen for power solutions that are already ramped into market for various commercial and.
And industry and power segments.
Now im going to turn our attention to our our execution.
In the last quarter and then.
We expect going forward.
In the December quarter.
We had announced several vectors driving our growth.
We are very pleased in the March quarter versus the fourth fiscal quarter of 2022 to achieve our ninth successive quarter of product revenue growth.
With a key highlight of transform dominating and Gan high power segments.
Our latest proof point of our leadership is our largest single order till date for high power again.
Half a million units that we recently secured.
We also continued to gain our share in the low power fast Charger segment and have secured multiple early at.
It might take us marquee customers that I'll outline.
In the next slide.
Our management focus remains squarely on product revenue growth supply chain management and capacity expansion.
Overall, we are seeing a very strong demand for rest of the year and beyond as well as we are gaining share in every segment, including continued leadership in high power.
We do face near term headwinds due to the worldwide supply chain issues facing the industry today.
This mainland our fiscal Q2, which is the July to September quarter more in line with fiscal Q1, which is April to June quarter.
Resulting in approximately a one quarter shift.
We anticipate that continued strong growth scenario from thereon.
Targeting a robust 50% growth in the second half versus first half of the year.
The midterm scenario through calendar 2023 remains very strong as our capacity initiatives. Our current capacity initiatives are expected to be online.
Thus supply chain management as well as capacity expansion at our top focus areas over the next several quarters.
With our strong balance sheet balance sheet leadership and high power products and gaining share in lower power will allow us to continue this momentum forward.
What we show here now is the key metrics and growth vectors that we acute during the Jan to March quarter, and we had previously targeted.
As well as how they are shipping our future growth.
Product revenue in the quarter was $4 million.
Our ninth successive record quarter in this department and already representing 80% of the quarter's total revenue.
We haven't placed a strong and record backlog till date, driven by continued and robust demand for our products.
We continue to win and grow our share in our doctors in fact charges.
We added at least five design ins in the last quarter the January to March quarter.
<unk> secured important design wins, including the laptop adapter win with a tier one fortune 100 company with the first <unk> unit deal secured and pilot production. Additionally pilot production.
A leading Asia based smartphone manufacturer for 65 Watt and a pilot order for a worldwide E retailer for 140 Watt adapters.
We look to grow, especially in the 100 Watt plus segment for example, the new USB PD three one standard with enabling 141, then we will have cutting edge solutions like transform and our venue partners, who like the <unk> solution over competing against <unk> or other products because of ease of interface and not external.
Driver needed.
We are pleased to heat in Gan for higher power broadly speaking 300 watts to four kilowatts that is already in production at our customers today.
Third we continue to add designing now at 35, plus with over 15 predictions.
It is notable that more than 50% of our revenues now are already in the high power segment.
That includes multi kilowatt against solution.
We aim to further grow and get into areas like energy PV power E mobility, they've got opening up new design ins.
We have 17 high voltage Gan qualified and release products in our comprehensive portfolio today again low power to high powered <unk> hundred 50 was that 1900 volt product in the market and many of these products are either in compact surface Mount packages are terminally robust steel packages.
Our products do not have the limitations of package type.
Three of these products are already EC automotive qualified box today, including our Gen. Four Gen five AC to follow in the future.
As I mentioned, a significant emphasis and positive challenge now is on the competitive capacity expansion and managing product revenue for the rapid growth in what is still a very challenging whereby supply chain environment for the next couple of quarters.
While we have achieved sufficient <unk> packaged adapter product groups and capacities as we previously had also mentioned.
Now we have expansion efforts underway for high power packaged products and both internal and external wafer capacity in the areas of activity for growth and different production.
So key takeaways with our record quarter productivity growth with leadership and high power again, gaining all round.
And focus on supply chain execution.
And multiple capacity initiatives ongoing.
Strategic partners have always been important for our business first and foremost.
<unk> now this includes manufacturing and capacity increases and partners, who will be working with.
The global wafers partnership and that the expansion is on track with completion scheduled for mid calendar year 2023.
We're managing on track with our <unk>.
<unk> joint venture with our financial strategic partner and planning further increases in capacity wafer fab capacity in second half of the calendar year 2022, and 2023 to keep up with the rising demand that dfc.
In the industrial and automotive segment, our partners, who will also happen to be valued shareholders into yen.
Working closely with us.
Expect to complete that gets cover development program.
In the imminent future and have updated the development plan with just to cover for cost effective innovative solutions for our robotic applications.
<unk> was also automotive Parker and licensee.
Customer partner for a DB for in fact for supply has recently demonstrated independently certified organic water for Evs.
Apex trade show in Houston.
The next milestone for us.
In this area is the ADC qualification of our Gen five products, which we had already commercially qualified and already ramped in the market for commercial production.
Other EV <unk> and RBC opportunities currently in Japan, based tier two tier ones and Murali for charter and convert their iron progress with midterm concession possibilities.
The Goldman Goldman's revenue business stream remains steady.
The targeted <unk> 9 million in the Jan to March quarter done on track driven by old Navy program of <unk> for manufacturing.
And like the four excellent results on the <unk> hundred Wolfgang with our ARPA E program.
Additionally, RSV, especially government epic customers are ongoing but the primary focus now is on satisfying our internal power products for the rapid demand and rapid growth that we're seeing.
All in all we are very excited to be in the midst of an ongoing gain adoption growth states the transom and have a good <unk> companies in the market <unk>.
<unk> focus remains <unk>.
<unk> expanding our leadership in high power again, gaining share in the adapters and fast charges and capacity expansion first keeping up and then next year staying ahead of the very strong demand at our products set genuity.
With that over to Cameron to present, a detailed picture of our financials.
Thank you very much and Hello to everyone joining us today.
Let me start with a brief recap of our unaudited results for our more most recently completed quarter. Please note that these results are subject to the completion of our audit procedures, we anticipate filing our 10-K for our fiscal year ended March 31st in mid June .
Sorry, My remarks, I will refer both to GAAP and non-GAAP results, which are reconciled to GAAP in our press release tables non.
non-GAAP results exclude stock based compensation, depreciation and amortization and adjustments to fair value of our previously held convertible notes.
Starting with the income statement total GAAP and non-GAAP revenue comprising product and government was $4 $8 million in the quarter.
This represents a 7% quarterly growth when compared to $4 6 million product and government revenue for the quarter.
Total revenue for FY 'twenty, two was $24 $1 million, an increase of 18, 8% from the prior fiscal year.
This quarterly and year over year increase was driven by record product sales from ramping shipments.
Revenue no forms the majority of total revenue number over 80% in the quarter, just completed and over 50% for the year.
Continuing to focus on product sales last quarter, so our ninth successive quarter of product revenue growth and record product revenue of over $4 million.
This represents a 10% increase from the prior quarter.
<unk> sales for FY 'twenty two grew 190%.
'twenty one.
This growth is being driven across a broad range of power conversion applications, including fast Chargers and adapters gaming data center and Calypso.
So overall blended gross margin for the year was 48%.
Most margin in the quarter was 22% the company is progressing nicely towards this long term model of gross margins in excess of 40% a number of actions, including new product introductions discrete ongoing cost efficiency activities and benefits that we will receive as we continue to grow and scale will contribute to this.
Operating expenses on a non-GAAP basis were $4 $7 million in the current quarter compared to $4 five in the prior quarter as modest growth would be primarily driven by an expansion in our sales and applications teams to support our increased revenue together with one off compliance costs tied to our uplifting to Nasdaq.
Competing non-GAAP opex in the same quarter of the prior year, we saw a 60% increase.
Primarily to personnel increases across the company ongoing compliance costs and strong R&D spend.
Turning to EPS I will focus my remarks here on non-GAAP results.
The revenue growth I would like to continued Opex management resulted in a non-GAAP EPS loss of <unk> in the quarter of one <unk> improvement in Q3, our non-GAAP EPS for the fiscal year <unk> 'twenty.
Our non-GAAP EPS loss 22 for the year.
From an operational perspective, we continue to see strong traction in our targeted markets Q4, so record product bookings contributed to a strong backlog position. This record is excluding the over 500000 unit production, although the company did for kilowatt class power supplies, which was received in the quarter.
The company is fully booked for the current quarter, our short term focus being a product execution and enabling capacity expansion to support medium to long term growth.
Turning now to the balance sheet.
FY 'twenty two so a great deal of progress the cash position improved by $25 million due to a strong rig activity in the year, we exited the year with $34 million in cash providing a stable runway for the company to grow.
We also significantly reduced our liabilities and India. Firstly in the first half so basically 22 through our execution on the $10 million of development loan I don't know October a long term partner you Scala converted their $50 million loan into equity.
<unk> activity has improved the shareholders' equity position by over $55 million in the fiscal year.
These activities provide the company a strong platform to enter this fiscal year. Looking ahead, we will remain open to opportunities to further strengthen our balance sheet to ensure we are able to continue to invest in our growth.
We also successfully completed a targeted uplifting to NASDAQ in the quarter and have seen a strong increase in trading volume in the period. Since this was completed.
Transitioning from our financial performance I wanted to touch on our position.
The company is well positioned to grow across multiple segments, including consumer data centers mining.
Industrial and in the longer term.
Yes.
We are now at this stage, where we have seen and continue to see strong adoption and as illustrated in the presentation revenue growth.
Revenue traction exist in several segments, including customer data center strip to an industrial applications. Looking ahead, our strong balance sheet will allow us to continue to invest in our growth engine across all aspects of the company both from a staffing and a capacity perspective.
With this strong foundation in place are focused on execution, ensuring that we can support the growing demand and what we will believe will be a broad market inflection point in the medium term. In addition to our existing revenue streams, we expect to see initial wins in the automotive segment in this timeframe.
The company will drive towards our long term target model enabled by continued momentum across multiple segments.
Including those with a few key highlights.
On storm publicly listed on the NASDAQ exchange is a pioneer and leading provider of Gan power conversion devices. We.
We have disruptive technology provide solutions today across a number of significant growth markets. We have established a strong network blue chip partners, including KKR Morelli, Acs, Yes, Scott and others.
We are commercially ramping with strong production revenue growth no drawings for $90 successive quarters.
We have a comprehensive product offering today that meet our customers' needs across a wide range of power levels and segments.
All of which is underpinned by a strong balance sheet, the industry's strongest IP position and a deep and talented team.
This completes our prepared materials and remarks, we'd now like to open the call for any questions. Operator. Please proceed with the Q&A portion of the call.
And as a reminder, that is star one if you would like to ask a question.
Our first question will come from David <unk> with the benchmark company.
Please go ahead.
Hey, good afternoon. Thanks, so much and congrats on the progress and very impressive design win results in orders there.
Thank you.
Yes.
We kind of step back and look at just the strength of those design wins. It seems like there could be more opportunities. Here, then maybe resources you talked about adding the capacity, but I guess, if you kind of look out for the next six to 12 months do you feel that you have enough internal capacity that you can fulfill these orders.
At least to some degree or how do you kind of think about I guess, the backlog and fulfilling.
Demand.
Thank you for that so yeah, we're seeing very strong demand and like we said a record backlog is in place. The obviously fulfill strive to fulfill this opportunity across the range, but like I also said, we have the capacity to fulfill today and that are adding more capacity as equal in online <unk>.
Two to three quarters is really the supply chain impact limited by the wanted to volume like supply chain, and what we need and coming to increase that capacity.
It will be something we'll be watching very very closely.
Overall, the picture doesn't change we have several capacity efforts.
Going on which will come online towards the end of this year and then in 2023 like as you did in the quarter. So the next few quarters like I alluded to we had to grapple with that capacity balancing that with the demand which is looking very strong.
Okay, great. Thanks, so much for the color and then you had mentioned this in the script that APAC, but there was a tracks and Burger design that we saw that appeared to be again based correction Burger and it was the first one we have seen just curious if you could give us any color and if im not mistaken.
Has the license agreement with your products is that they're not thinking about that right.
And how do you think about that correction Burger seems like maybe thats pulling forward.
A little bit faster than what we would have it dissipated.
No. It's a great proof point and as you rightly said all your statements are correct.
We did it with their products they have a license agreement with transform Florida again.
Well and it's a fantastic.
A good proof point for gallium nitride that it was a demonstration, but it's a fantastic proof point of the 30 <unk>.
Demonstrated.
Okay great.
And then maybe just lastly for me is how youre thinking about the business. It seems like we're in a bit of a decelerating macro here, but I think at least from from your perspective, it's more of a demand is driven by the transition and technology analyst from demand from from ink consumption. So as I kind of think about I guess your performance through the cycle.
Through a downturn.
Should we think about your business.
No that is well trained so.
Demand gallium nitride engender transform and gallium nitride as generally is the technology transition to newer products right. So it is.
The demand has been strong oversupply site supply chain growth capacity growth are the important things that we will we will focus on but like I said. This was our we just recently landed the half a million other in hydropower that we mentioned our largest order to date was the recent.
That can be secured.
We hope to be.
Targeting those kind of teams as the as we go forward.
Okay. Thanks again I appreciate your time and best of luck.
Thank you.
Our next question will come from Ananda Baruah with loop capital.
Please go ahead.
Hey, good afternoon, guys and congrats on the progress as well.
I guess this could be for Mario and for Emperor pivot.
Let me just clear here.
Your MX system Omega about about macro.
It sounds like you guys are not yet seeing where you can see the incremental impact.
From a macro sort of slowing economic growth I just wanted to make sure that that is an sop.
You guys are not yet seeing that as far as the detail.
Yes, I'll answer it first Michael May add his comments after that yes. So we are not to a first order actually we are not seeing that yet sometimes to a second order received for example, some of our customers are designing complex systems right that as many of their products in it and even though the customer is ready to go with our.
<unk>, they could be short of and I see some other silicon prototypes or some other component in there boom of their system, which could delay our designer and so those kind of things. So we are seeing but overall macro.
Not yet seeing a director.
In fact, yet, which I guess is a good thing and then we are striving to increase our capacity to.
To keep up with the demand.
Yes.
Definitely we haven't seen.
The demand is very strong.
When we were checking out there over the next couple of quarters.
So we are intending to look very solid business mode mood.
So.
But we haven't seen any evidence at the moment.
Look there is a slowdown.
Mario that's super helpful and then to.
<unk> remark. This is more of a clarification question guys.
Kind of made a remark about.
And please just sort of sort of.
And correct. This form eight made a remark that I heard something along the lines of.
We can so that supply chain isn't really look clearly the issue right now, but maybe two three quarters out it could be in Morrow example, maybe that that's kind of what you are saying as well could you just clarify that for me I'll try and make sure that I understand that accurately.
No.
Our supply chain, yet so we have to focus definitely on manage the supply chain and focus on the supply chain downstream, our own wafer production and enrolment to yields.
Spare parts consumables et cetera that we need to be will be how to manage the supply chain.
Our demand is growing faster than we are.
Do you have a record backlog in place to the Florida next.
Apple of quarters of supply chain and our own capacity is an important for us to watch out.
Beyond that our capacity initiatives that we have already put in place.
Fruit and to increase our capacity towards the end of this year and then going into 2023. So the next couple of quarters, while the demand is very strong no changing increasing demand.
Our supply chain and capacity is something we'll be watching very carefully.
I see thank you Alicia clarified.
Just to add to that.
The last couple of quarters, we've been we've been working very hard to monitor in very tight supply chain.
So that continues going forward at least for the rest of the year as far as we can see it.
But when we consider it prudent to say, we could have headwinds because through supply chain continues to be very tight.
Hopefully we'll be successful.
Okay.
That's really helpful clarification.
And last one for me right now is I guess on the.
On the new win the 530000 either way.
Bob.
Timing for delivery on that how are you guys thinking about that that'd be helpful. Thank you.
Timing is over the next the next few quarters.
Okay awesome.
Yes.
Yes, thanks, guys I'll get back into queue.
Our next question will come from behind the Zhang with <unk> capital.
Please go ahead.
Thank you for taking my question.
Mario.
On the 500000.
Sure.
Unit order good can you maybe tell us a little bit more about what application. This is targeting what ESP that you can share.
Anything you can say we've talked about this new order.
Well.
The customer progress here at this moment and Brian .
We deployed in Q1.
14 51 days.
Peter.
And just to clarify that it's it's a higher power. It's a hydropower designing of a tablet tier 247 products that transform as absolute leader in.
It's like we said its in the three kilowatt plus classic segment.
So that is that is what the particular point plus that's the key point that transform is dominating and this is leading leadership position in the kilowatt class segments. We had other denim nitrite has not yet penetrated so it's our tier two 473 kilowatt class generally they apply to radio segments like crypto mining data.
Silver energy dose those kind of products.
Got it and what kind of ESP do you think.
The joys of what are the trends.
Segment.
Generally speaking those asp's as you can.
Can imagine scaled with the power levels are in the Venezuelan.
When did well in the multi dollar range.
Got it.
And then on the on the supply chain side.
You guys, you're able to get access to your technology like your supplies like exit Cogs.
Shared with us.
Your supply chain constraints or oil.
Already a bit of that.
Our supply chain.
Yes, so we work closely with our partners like extra <unk> that you mentioned.
The collaborative working with transform the also have as you can imagine there are many downstream elements in the supply chain, including from.
Larger.
Companies like extra onto smaller companies for spare parts and consumables, so all of that entire.
Value ecosystem has to be managed so it's not just one kind of out there as a key key partners like.
The example, you gave we work extremely closely together.
Okay, and then last question for me.
Maybe I misheard, you, but if I recall in the past.
Targeted.
Market by 2025, but I think on the call today.
46.
Did I hear that correctly.
Rehash or remind us when do you expect to have.
Meaningful penetration.
The market.
The impact impact correct, so what what we.
We have said in kind of the.
2024 timeframe getting the.
On board Charger and DC DC converter opportunities that we are in the design ins today, what I said is from 2026. It opens up the Tam for the inverter, the EV powertrain, which significantly increases the gan content possible in the in the automotive by three times, because it had much higher power levels, hence the law.
The amount of totaled 700 behaviour in total semiconductor products used.
We are today designing into the onboard charger DC DC converter that earlier.
Midterm, but thats an earlier timeframe.
What are the drivetrain in water that's the later timeframe.
Got it I appreciate the clarity, which.
This is what we had said it before as well.
Got it. Thank you I appreciate the clarification.
Okay.
Alright.
And then.
As a reminder, that is star one to ask a question and our next question will come from Richard Shannon with Craig Hallum Capital. Please.
Please go ahead.
Well hi, guys.
Excuse me hi, guys. Thanks for taking my question.
Maybe I'll ask a financial one here is I just wanted to make sure im kind of putting the teams together right. So.
Talking about pretty strong demand, but perhaps some some supply chain constraints here.
So I guess just thinking about.
Revenues going forward here, especially as we looked at it more from the product side.
<unk> point of view are we looking for a flattening of the curve here for a quarter or two or is it still going to grow but at a slower pace or I just want to make sure I'm getting the tea leaves right on this how can you help us understand that better please.
Sure No I think.
Richard we are seen as Brendan mentioned, we are seeing some some headwinds there.
<unk>.
It may be that the September quarter lines more.
In line with the June quarter, So those are flattening there but.
From there we.
We do see a resumption of strong growth.
The 50% target in the second half versus the first half of the year, So really just.
A one quarter shift in as much as anything else is certainly not a demand issue and it's certainly not a growth issue.
Okay. So just to make sure I'm understanding this cameras said September kind of bringing it in line with June but how do we think about June was June still a growth quarter here from a product point of view or or not necessarily.
Sure.
That you can expect to see.
<unk> of growth in the June quarter, I mean, I think.
We don't guide specifically, but the demand is there and.
We're continuing to execute towards that mentioned that we were fully booked as well Richard So there are constraints in that regard, but I think the.
The flattening is more than that in the June to September quarter, and then I can a resumption of the growth trajectory from there.
Got it okay that is helpful.
Maybe a camera and another one for you on.
Gross margins to stay on the product side here obviously.
Joining that specifically, but if im trying to read the numbers here right here. It seems like product gross margins have grown here a bit quarter to quarter maybe.
Maybe you can give us a sense of the degree to which that is mix versus yield.
And how that how that's tracking and how you think about kind of the path to getting to that 40% plus gross margin number.
Sure sure I think over the course of the year I think products and government.
It was 22% for the quarter of 22% for the year and I think thats.
Relatively stable over the course of the each quarter aside from the occasional blip you get which is kind of typically mixed driven I think for us I mean, we are.
We're pleased with where we are I think what we have to do no over the course of over the next year and beyond as is.
Look at different opportunities to improve the margin that's cost efficiency, that's new product introduction.
The opportunities you get from growing the business as well Richard and I think that each one of those factors will help.
Improve the margin as we think if there is a long term target of 40%.
Okay perfect. Thanks for that Cameron.
My last question for you as we as we think about the kind of high power segments of the market here.
I think you're suggesting or even saving directly that you don't believe any other game companies are are supplying.
Kilowatt class opportunities here. So maybe if you can discuss whether youre seeing that imminent inflection by other again guys and then also thinking on the other side again silicon what are the things what are the obstacles and accelerators for you're getting more share of that market.
Sure <unk>.
First point.
To the best we can say no other game companies as it keeps ramp to the extent that we have there may have been an isolated product announcements universal, but not second lien the volumes that we have had and the diversity of customers and products in the market that we have had not not all of the company's product, but customer systems in the market that is what.
As we have achieved in high power.
Second actually really good to have more game companies in the high power segment right multiple companies with this market is tremendous we are looking at a very strong year over year growth multiyear growth year in all low power high power high pilot in specific and multiple game companies.
Got that and that is what it takes to make a strong market as well.
Because that leads to the second part of your question is clearly there is an efficiency.
And lots of advantage or silicon operating at higher speeds higher frequency of smaller systems and as you go to high power. The impact of energy savings is also very important rate 100 watt adapter with a 1% improvement.
There is one what if youre looking at five kilowatts that says 50 watts and that much amount of electricity. So.
The shift from silicon to gallium nitride into high power, we believe will be a strong run over the next few years.
Okay. That's helpful. Thanks for all that is all for me.
Thank you.
Okay.
Our next question will come from Michael <unk> with B Riley Mcgarrity.
Please go ahead.
Good afternoon, guys. Thanks for letting me ask a couple of questions. This is Michael on for Craig Ellis.
And congratulations on the kilowatt class one as well.
Maybe to start with <unk>.
<unk> regarding adopters, if I believe if I recall correctly in the last.
Quarter's presentation.
There was a point that you expect it to get to five to 10 million monthly units, maybe by the end of 2022 or next year in 2023 I was wondering if that.
Target still held with everything going on and how you thought you were talking about and then if you could just walk us through the milestones to get US there in terms of investments quarter over quarter and getting equipment, just how do we get to that goal. Thank you.
Yes, so overall I believe we had mentioned.
Total wafer capacity and that obviously has a mix of high power low power and latest levels of segment right. So that depends on our mix of the products how much gets located where before the adapters specifically what we have shown and we included we had said that our packaging all set capacity we've won.
Wanted to demonstrate value over $1 million a month.
To offset our subcontractors partners in place for packaging and that we have achieved to be showed.
Proof point that we will ship over $1 million a month.
Including we have now to qualified suppliers.
The expansion the second part of your questions expansion that <unk> and <unk> the call today.
Sure.
<unk> expansion into higher power packages as well as expansion of our own wafer capacity expansion, both on the <unk> side and the wafer fab side.
Got it. Thank you and then maybe just a quick follow up on the <unk>.
On the total cost when I was just wondering if you could talk about the potential for further orders from the same customer or whether in your backlog are engaged with other customers.
You sense that you could secure similar design wins at other customers above the same size in the higher power segment.
Yes, we believe so both questions is yes, the same customers.
And the same types of customer and the application avs in similar range. We expect that will continue to be a growth segment for us.
Great. Thank you.
And our final question will come from RMB <unk> alright.
Please go ahead.
Hi, and thank you for sticking me in the question queue.
And congratulations on the progress just a follow up on the last question could it also be for the exact same application for another customer.
Is it a standard type of application.
Where it could just be tour and other customers as well for the same exact thing.
Yes that is correct.
Okay and could you just go through again quickly some of the higher power.
Design in vertical maybe end products right now not only stuff that youre shipping today, but where you actually have design ins.
Besides besides you had mentioned sort of a crypto, but let me see if I can just ask you to rattle them off again.
Yes, so it is.
But.
What some equal or dead set against but that again.
Sure.
I'm hearing some echo.
You guys had positive.
Yes.
Okay.
It's a blockchain blockchain computer game.
Gaming data center to data center servers.
<unk> energy.
We need to hold true you could be in a graphics chip card or something of that nature.
Yes, it is possible.
Shareholders are also having those sellers will have a multi kilowatt class so not so much in our graphics chip card ordering but for example, a graphics chip card that necessitates due to the high performance graphics here a three kilowatt solar for example, our two kilowatts overnight or for that matter of binocular whatsoever. There.
Those types.
We have not talked extensively about that but those type of applications, where very high powered in a compact footprint is necessitate there again and transforms gain definitely should have a value play over existing silicon products.
Do you have any design wins on that very high performance type of products for the data center.
Given the data centers, we have we have design ins into Datacenters in past, we have talked about publicly about some customers that have done public announcements with us for example, Bel power has a whole slew of power supplies from.
Starting from two kilowatts to $3 six kilowatts, so number of power supply design ins with other again targeted towards a data data server.
On a high performance card.
Like for like or were just describing.
The high performance Scott.
Publicly talked about that yet.
Okay. So you think it's something you could address that.
Our addressing but haven't announced any definitive with.
It's potentially that level.
We can do again, two kilowatt three gigawatt level of power outage at the end of the day it will be a silver right that can be addressed.
Okay. Just one last question was a clarification on the auto opportunity.
Just to go back to 2024 was actually for revenue from the initial order product and is that correct I just want make sure I caught that.
Yes that is what we are targeting that is correct.
Terms of announcements from design wins.
It sounded like just in passing.
You had.
Indicated it sounds like there are some early design wins, but I want to make sure I got that right.
No not design wins that is designed in which as you can appreciate the auto designing is a long process with the tier two tier ones and then ultimately designing with the OEM car manufacturer. So.
And we are in design ins the process not yet completed design win because that has to be validated not only with the tier two or tier one with who we would work with but the end OEM customer as well.
In terms of getting those decline.
Good design wins in order to get revenue from it.
The auto space in 2020 for knowing how they work the following years as well.
When we do our Capex, we see the early wins.
Sometimes it <unk>.
Mid of mid 2023 mid to late 2023 is what we would have to Neil.
Neil It down.
And think of an example say anything still in 'twenty two.
Likely yes.
We expect more and more in the mid 2023 segment because it takes time with not only our direct like even if we have a direct win with our tier two tier when they have to also secure subsequently and design with the end automotive customers, but as we alluded to we know we have a variety of partners also there.
Also for example, our licensee partner in <unk>, they will have their own independent.
Sure.
FX rate debt either on their own.
Creasing, the so called the reach of Gan transform scan envy supply wafers into that so there could be multiple options are avenues for us.
Okay. Thank you.
Thank you.
And that will conclude today's conference. Thank you for your participation and you may now disconnect.
[music].
Sure.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Yeah.