Q3 2023 Navitas Semiconductor Corp Earnings Call
Speaker 1: Good day and welcome to the Navata Semiconductor Q323 earnings conference call. All lines have been placed on mute to prevent any background noise.
Good day and welcome to the <unk> semi conductor Q3, 23 earnings conference call.
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Speaker 1: I'd now like to welcome Stephen Oliver, Vice President of Corporate Marketing and Investor Relations to begin the conference. Stephen, over to you.
I'd now like to welcome Stephen Oliver Vice President of corporate marketing and Investor Relations to begin the conference Steven over to you.
Speaker 2: Good afternoon, everyone. I'm Stephen Oliver, Vice President of Corporate Marketing and Investor Relations. Thank you for joining Navitas then, we conduct this third quarter, 2023 Results Conference call. I'm joined today by Jean Sheridan, our Chairman, President, CEO and co-founder, and Ron Shelton, our CFO and Treasurer.
Good afternoon, everyone.
I'm, Steven <unk>, Vice President of corporate marketing and Investor Relations. Thank you for joining nevertheless, semiconductor's third quarter 2023 results conference call.
Im joined today by Gene Sheridan, our chairman, President CEO, and co founder and Ron Shelton, Our CFO treasurer.
Speaker 2: A replay of this webcast will be available on our website approximately one hour following this conference call and the recorded webcast will be available for approximately 30 days of the call.
A replay of this webcast will be available on our website approximately one hour. Following this conference call and the recorded webcast will be available for approximately 30 days following the call.
Speaker 2: Additional information related to our business is also posted on the Investor Relations section of our website.
Additional information related to our business is also posted on the Investor Relations section of our website.
Our earnings release includes non-GAAP financial measures.
Speaker 2: Our earnings release includes non- GAAP financial measures. Reconciliation of these non- GAAP financial measures with the most directly comparable GAAP measures are included in our third quarter earnings release and also posted on our website in the Investor Relations section.
Reconciliations of these non-GAAP financial measures with the most directly comparable GAAP measures are included in our third quarter earnings release, and also posted on our website in the Investor Relations section.
Speaker 2: In this conference call, we will make forward-looking statements about future events or about the future financial performance of Navitas, including acquisition.
In this conference call, we will make forward looking statements about future events or about the future financial performance of not assess including acquisitions.
Speaker 2: You can identify these statements by work like we expect, or we believe, or similar terms.
Can identify these statements by what we expect or we believe or similar terms.
Speaker 2: We wish to caution you that such forward-looking statements are subject to risks and uncertainties that could cause actual events or results to differ materially from expectations expressed in our forward-looking statement.
We wish to caution you that such forward looking statements are subject to risks and uncertainties that could cause actual events or results to differ materially from expectations expressed in our forward looking statements.
Important factors that can affect never pass business include factors that could cause actual results to differ from our forward looking statements are described in our earnings release.
Please also refer to risk factors section in our most recent 10-K and 10-Qs.
Our estimates or other forward looking statements may change and <unk> assumes no obligation to update forward looking statements to reflect actual results changed assumptions or other events that may occur except as required by law.
And now over to Jean Sheridan CEO.
Thank you, Steve and thanks to everyone for joining the call today.
As we continue our mission to electrify our world with next generation power electronics.
I'm pleased to announce another record quarter for <unk> as our gallium nitride and silicon carbide technology, continuing to displace legacy power silicon in traditional markets and enable and accelerate new energy markets.
Our Q3 revenues increased to $22 million up 22% quarter on quarter and up 115% from Q3 of last year.
On a non-GAAP basis gross margin also continued to increase for the fourth quarter in a row to 42, 1% up from 41, 5% sequentially.
From 38, 4% in Q3 last year.
We also remain confident that we will more than double revenue in total for 2023 as compared to 2022.
Just yesterday another thompsons dramatic growth stories was recognized for the second year running by Deloitte, including our company in their fast 500 list.
With annual revenue increasing over 2000% in just three years and all the cost is one of the fastest growth tech companies.
In addition to our strong financial performance, it's a very exciting time at <unk> as we're launching four major new technology platforms in the second half of this year.
Organic based technology launched last quarter set a new benchmark in our industry as the world's most protected most reliable and highest performance Gan power semiconductors.
With advanced protection higher power capability in cooperation against a break the glass ceiling that has prevented gallium nitride from entering the high power high reliability markets for a decade now.
Now applications from AI data centers, and solar Inverters to EV powertrains and traction drives can benefit from this high speed feature rich technology for higher power density higher efficiency robust reliability faster charging and lower system cost.
We are also launching our generation four <unk>, which are our most integrated gan devices, replacing dozens of components with a single again need to reduce footprint simplified design and enables switching frequencies up to two megahertz and mobile fast Chargers and consumer adapters.
For home appliance motors pumps and compressors. These application specific generation for Ice's feature losses current sensing and programmable turn on and turn off for efficient small quiet power delivery.
This quarter, we also launching a new generation of our <unk> technology called Gen III Frac with switching performance up to 50% better than competition.
Together Gen three fast silicon carbide in gas <unk> power IC are targeting electric vehicles roadside Chargers solar Inverters energy storage data center and industrial applications in the 1% to 30 kilowatt reach.
The fourth and potentially the most exciting and impactful announcement is a breakthrough innovation called bidirectional Gan.
Now for the first time, you Nic's can operate quickly and efficiently conducting and blocking correct in both directions.
This bidirectional games, so as the replacement of up to four discrete power transistor, providing similar functionality, while dramatically reducing component count.
Cost and complexity and delivering the speed and efficiency benefits of gallium nitride.
We believe this invention has the potential to create innovative advances in energy storage grid infrastructure motor drive and many other emerging topologies and architectures across multiple markets much more to come on this front.
Let me now turn to updates for each of our target markets and how these new technologies are already having an impact.
In the mobile market, we continue to see strength and upside led by our major Oems Xiaomi and oppo as they are rapidly expanding their use of Dan in a broader range of their mobile Chargers. In fact, we now anticipate that about 30% of their total global charger shipments in 2024 will utilize Dan This is.
A major milestone for our whole industry Gan has moved from beachhead to main street.
In addition, we just announced a major win as <unk> has been adopted at Samsung to power. The latest Galaxy F. 'twenty three among other models and is already contributing to our Q3 and Q4 revenue ramp.
Our new Gen. Four organic average has further accelerated our success in mobile as we now have over a dozen customer projects in development targeting the fastest charging segment of 100 watts or more already projected to contribute over $10 million per year in revenue ramping next year.
In the solar and energy storage markets. We observed the same near term macro market softness that others have observed creating headwinds for our silicon carbide business.
However, as Dan and Silicon carbide or displacement technology versus legacy Silicon MOSFET and IGT, we also see robust growth in our customer pipeline.
Our current outlook for the solar market consistent with what we've seen from various analysts for a recovery in the second half of 2024 and based on our pipeline and customer activity. We expect our revenue growth in solar to exceed that of the industry in 2024 and beyond.
It's a similar story.
While some OEM forecast have been tempered we are experiencing significant increases in our customer pipeline in both onboard and roadside Chargers.
Our EV system design centers, just completed development of a $6 six kilowatt 800 volt onboard charger platform, which sets all new industry benchmarks and system efficiency density and cost.
We see significant customer interest in this exciting new hybrid platform, which achieve such high performance by integrating both our latest gen. Three frac, so in carbon devices and our new <unk>.
In data center as discussed previously the recent dramatic technology and market development surrounding AI have created unprecedented demand for more power higher energy efficiency and greater power density.
Our system design Center has really stepped up to the challenge with a new four five kilowatt AC to DC platform design that offers energy efficiency well in excess of the 96% titanium plus standard and has twice the power density of previous best in class legacy Silicon designs.
As a result, the number of projects in our customer pipeline has grown significantly in the past quarter.
The customer pipeline in appliance and industrial is also growing significantly at major Oems initiate gan or stolen carbon programs to meet regulatory requirements for energy efficiency and consumer demands for power density improvements along with the transition from gas powered heating and cooling systems to fast adoption of heat pump.
<unk>.
As mentioned earlier, our Gen. Four Gan said cat fridge Ice's, our application optimized and a big draw for 100 to 1000 home appliance applications with Gen. Three fast silicon carbide and against a power IC addressing higher power industrial markets.
Looking across all of our target markets the system benefits derived from Gan Silicon carbide are amplified by long term secular tailwind.
These include electrical energy source conversion from fossil fuels to renewables gas powered vehicles transitioning to all forms of electric transportation and the intense and rapidly accelerating power demands of AI and edge computing.
This momentum has provided by continued energy efficiency and noise pollution regulations.
While we're not immune to some market slowdowns as displacement technologies in traditional markets and is accelerating and enabling technologies energy markets. We expect <unk> Gan on silicon carbide revenues to far exceed market growth rates in 2024 and for years to come.
You can hear more about our growth plans at our exciting in depth in person Investor day held in conjunction with our new headquarters opening day in Torrance, California on December 12.
This agenda includes a deep dive into our four new technology platforms highlighted applications in growing markets customer.
Pipeline review financial outlook, and spiteful customer presentations, and an immersive introduction to planet <unk> the future of our electrified planet.
We encourage you to join the <unk> management team Board of directors customers media and special guests at our new headquarters for this important event.
And now over to Ron to review the financials.
Thank you June and my comments today I will first take you through our third quarter results and then I'll walk you through our outlook for the fourth quarter and some of the market dynamics, we're seeing.
Revenue in the third quarter of 2023 was again, well above our guidance growing 115% year over year, and 22% sequentially to 22.0 million.
The beat was driven primarily by continued strong growth in the mobile market and initial mass production for a major tier one onboard charger customer.
Results were tempered somewhat by macroeconomic factors impacting high end consumer and solar markets.
Nevertheless, we continue to see strong positive indicators for revenue growth over the near term and long term.
Our pipeline continues to grow and has added a new record and we continue to experience strong bookings as evidenced by entering the fourth quarter nearly fully booked.
Before adjusting expenses I'd like to refer you to the GAAP to non-GAAP reconciliations in our press release earlier today and.
And the rest of my commentary I will refer to non-GAAP expense measures.
Gross margin in the third quarter increased to 42, 1% from 41, 5% in the second quarter of 2023, and 38, 4% in the second quarter of 2022.
Gross margins in the quarter, whereas the higher end of our guidance due primarily to excellent yields exceeding our internal targets, which we believe already lead the industry.
Third quarter total operating expenses were $17 9 million.
Comprising SG&A expense of $7 4 million and R&D of $10 5 million.
This is in line with our guidance and as we've discussed in the past as revenue scales. We are investing in our business in a disciplined manner as we focus on growing profitability.
Putting all this together the loss from operations was $8 7 million compared to a loss from operations of $10 3 million in the third quarter of 2022.
Our weighted average share count for the third quarter was 175 1 million shares.
Turning to the balance sheet. It remains very strong with high levels of liquidity.
Cash and cash equivalents at quarter end were $176 $7 million and we continue to carry no debt.
Accounts receivable were $17 6 million compared to $15 2 million in the prior quarter.
<unk> higher sales during the quarter, but our days sales outstanding improved as we continued to focus on working capital efficiency.
Inventories declined to $15 9 million compared to $18 9 million in the prior quarter and days of inventory outlook continued to improve better.
Better by nearly 50% from one year ago, as we continued to move towards exceeding our inventory turnover goal of better than three times.
We took an adjustment of $2 million during the quarter for reserves against Gan product that was two generations old as our customers and end markets migrate towards our gen four and other higher performance and higher integration products like <unk>.
And again since control.
Moving onto guidance for the fourth quarter, we currently expect revenues ranging between 25% to $26 million.
At the midpoint this represents substantial year over year growth of 106% over the $12 3 million, we recorded in the fourth quarter of 2022.
And then an expected 16% sequential increase over the third quarter of 2023.
Our guidance is based on continued silicon carbide capacity expansion.
Since continued strength in mobile and <unk>.
Ongoing market share gains in EV onboard charging.
I'd also like to note that at the midpoint of guidance our revenues for 2023 will have increased 108% over 2022.
Which is consistent with what we indicated at the beginning of this year.
Gross margins for the fourth quarter are expected to improve to approximately 42, 5% plus or minus 30 basis points.
In total our non-GAAP operating expenses in the fourth quarter are expected to be approximately $20 million and this excludes stock based compensation and amortization of intangible assets, we continue to invest in growth oriented initiatives for our end markets.
As we have indicated before we expect the increases in our spending will be substantially less than growth in our revenues as we continued to see leverage in our business model.
Put that in perspective compared to the fourth quarter of 2022 at the midpoint of our guidance. We expect revenues in the fourth quarter of 2023 to grow 106% yet operating.
Expenses based on our guidance are expected to grow only 18% over the same period.
For the fourth quarter of 2023, and we expect our weighted average share count to be approximately 179 million shares.
Stock based comp to be approximately $12 million in amortization of intangible assets to be approximately $4 8 million.
In closing we are extremely pleased with the results for the quarter and our near term and long term outlook.
While we see similar macro trends as others, such as the impact of higher interest rates on the high end consumer and solar markets and we arent entirely immune to those trends as our results indicate we are showing that we can outperform the market and expect that going forward, we will continue to grow significantly faster than the <unk>.
All growth rates in our targeted end markets.
Operator, let's begin the Q&A session.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
In the interest of time, we ask that you keep to one question and one follow up question per person.
Well pause for just a moment to compile the Q&A roster.
And your first question comes from the line of Quinn Bolton of Needham <unk> Company. Your line is open.
Hey, guys. Congratulations on the on the results I guess, maybe Jean it sounds like Youre going to give us a lot more detail on the four new platforms, but wondering if you might be able to just kind of give us some direction for Gan scan save the gen three sick and the bidirectional what end markets are these platforms targeting are there specific.
Perfect.
Target end markets for each platform or do these platforms kind of address most of the end markets you are targeting.
Yeah, Great question Quinn.
Gan space and Gen. Three fast silicon carbide are both targeting higher power industrial market. So in general Youll see them going into data center solar energy storage EV and industrial markets.
Again half bridge the generation four <unk> that we're just launching as.
It's very targeted on mobile and consumer at the higher power range 100 watts to maybe 500 watts bidirectional again, the fourth platform that's the newest.
So technology announcements so the actual products, we'll be launching next year.
And it's such a groundbreaking thing we're still.
Debating and discussing all the different applications that might go into it could be anything from mechanical circuit breakers being displaced by semiconductor ones very fast very efficient very reliable could be into AC to AC motors, which are huge in industrial and appliance markets and others. So it's pretty far reaching and we'll be exploring that further with customers as we launched the products.
Next year.
I guess I wanted to sort of ask a question on the bidirectional I thought.
At least in concept of fed it tends to be the bi directional in nature right.
And so what can you give a little bit more detail, what's what's unique about the new.
Bidirectional Gan fit that you've developed.
Just just.
A little bit more color would be would be helpful. Yes, yes definitely so.
A number of power semiconductors can be bidirectional in flowing the current that problems are not bidirectional and blocking the current so if you truly have a circuit that requires you to be able to block in both directions with silicon, whether it's in IGT or a super junction or even existing Gan on silicon carbide, you have to put them back to back. So one can be blocking one direction, while the other ones.
Following the current and vice versa. So you end up doubling up the components and if you want the same performance, we're actually doing this all monolithically with a single chip.
Performance the way the kind of massive performance works out it can be replacing not only to back to backs, but even for back to back for the same performance with a single chip and a fraction of the size cost and the great energy efficiency and speed you get with gallium nitride.
Got it thank you I'll jump back in the queue.
Yes, Thank you Quinn.
Your next question comes from the line of Jack Egan of Charter equity Research. Your line is open.
Hey, guys. Thanks for taking the questions.
Regarding the in sourcing of epitaxy, the different types of reactors for silicon carbide kind of come with a set of trade offs.
Regarding throughput epic uniformity. So I was just curious about your primary rationale for in sourcing epitaxy was it largely just to increase throughput and prevent any bottlenecks from developing or.
Does in sourcing actually give you more control.
Improved yields or quality or anything like that.
Yes, Great question I think there is a number of benefits you just touched on most of them right, but I think I would put cost number one I think etsy is mature to the point that we can bring this in house with a little bit of help from the equipment supplier and we've hired a top.
History expert in <unk>, that's done this for two other suppliers. So we think we've got the capability to do it and number one is the cost reduction coming from having it in house, but then there's a bunch of secondary benefits control of your supply chain likely shorter cycle times assuring ourselves of having the capacity exactly when we need it in the future, but controlling quality and <unk>.
I wouldn't rule out intellectual property different things inventions that are going to give us fundamental advantage compared to others that are buying outsource abbvie.
Got it that makes sense.
And for the new Gan since Ics. The PR said that they are expected to contribute $10 million of annual revenue is all that incremental or might some of that come at the expense of growth in some of your older product areas yes.
Yes that is a great question.
Do you believe that's all incremental.
Hi, it's $10 million annualized starting to ramp throughout next year. So it wouldn't necessarily be $10 million for the full year, but this is also emerging developing things. We've just started sampling the product and less few months launching it this quarter. So we expect those numbers to grow.
Overtime.
Got it okay. Thanks Thats helpful.
You bet.
Your next question comes from the line of Joe Moore of Morgan Stanley. Your line is open.
Yes.
Great. Thank you I Wonder if you could touch on your smartphone demand maybe.
Maybe starting with China, you mentioned the strength there.
How much of that do you think its penetration for you guys versus.
<unk> in that market and kind of where do you think you stand with inventory there.
Yes, definitely thanks, Joe.
Yes smartphone, it's obviously, a very pleasant upside for US started in Q2 of this year and has gone from strength to strength.
It started and continues to be heavily based in China, Xiaomi and <unk> are the two that we highlighted we've traditionally had a very strong relationship with both of them very high market share with our Gan.
So it's super exciting to see this kind of upside to your question, though about where is it coming from.
It's actually a classic case of this displacement technology that we have today.
They don't have to ship any more chargers for their numbers to grow dramatically, we mentioned that 30% of their total number of charges next year, we are projecting to use gallium nitride. So even if their business was flat you could be going from 10, or 15% adoption rates to 20 or 30% driving a lot of that revenue. So I think a lot of it is just conversion our dispatch.
<unk> from legacy silicon over to more efficient more powerful faster charging gallium nitride and it's not just China. We did mention also the great success, we're having at Samsung with the F. 'twenty three that's already driving second half revenue growth as well.
Yes.
Follow up I did want to ask about the F.
'twenty three win can you talk about what kind of penetration you might see there.
And how pervasive that technology could be within Samsung.
Yes, we don't have specific adoption percentages on Samsung.
Stuff like we do with Xiaomi and Oppo, clearly, they're earlier stage, but I think chalmette Xiaomi and <unk> have been kind of leading the charge. If you will for mobile charging for the last few years since Gan adoption got started so we see the other players in Korea in U S. Following.
In those footsteps, if you will from again adoption perspective it is.
Bold as I believe in inbox or at least an optional inbox. So when you go to you go to buy that F. 'twenty three from our experienced the attach rates on even what we call optional inbox can be very very high, especially when it's promoted as again charger fast charger, which I believe is like easier.
Great. Thank you.
As a reminder, if you wish to ask a question. Please press star followed by one on your telephone and wait for your name to be announced.
Your next question comes from the line of Jon <unk> of CJS Securities. Your line is open.
Hi, Good afternoon. Thank you for taking my questions and very nice quarter.
You guys mentioned some slowdown that you saw in particular in market Solar high end consumer would you say that's a net negative for your new term compared to where you expect it to be or is that being offset by these bookings in new business in other places just versus your internal plan.
Yeah, we havent, thanks, John we haven't quantified that.
Adverse impact, but there is no doubt we could have done even higher growth rates than we're achieving today in the near term quarters.
We didn't see some slowdown.
In consumer and solar with that said, we see strength in the other markets, we see strength in our pipeline growing both the number of customers now for our projects. So despite kind of a mixed market environment out there and any equipment slowdowns in growth rates in some cases, we see growing significantly faster than the market as we mentioned in our prepared.
Remarks, I think that probably translates to 50% growth or more next year, we haven't given official guidance, but it is an early indication.
That speaks to the strong growth, despite kind of a choppy or mixed market environment out there.
Okay, great. Thank you and then Ron you mentioned something about entering Q4 fully booked is that versus your.
Existing capacity or how should we.
Qualify that comment just help me understand what it means to be fully booked.
Yes. So so just just very simply when I say referenced fully booked as we look at.
Our revenue outlook for the quarter and our capacity available it's effectively fully booked.
So so any guidance I gave would suggest that most of that was in backlog at the beginning of the quarter.
Got it and then just a follow on to that how do you improve the capacity going forward to drive that.
Both that gene just mentioned in telecom.
Yes, I can.
Grab that one so we mentioned early this year, maybe it was even late last year, we signed an agreement with X fab for a 500% increase in capacity that obviously is a big deal that includes material in fab capacity and that throughout this year and into next year. So we are benefiting today by growing not only our backlog is.
As Ron said, but growing that capacity quarter by quarter appreciably throughout this year and next year in a similar way TSMC expanded the gan capacity and tripled it and finish that one up last year. So we're in a pretty strong position to fill and in fact, we're building. We're shipping all we can build on Gan as well not that we don't have the capacity, but the orders keep coming in with very short lead.
So we're constantly scrambling to try to fulfill those upside demands in Q3 Q4.
Got it that's great color. Thank you Jean you.
You bet. Thanks, John.
Once again, if you do wish to ask a question. Please press star followed by one on your telephone and wait for your name to be announced.
Your next question comes from the line of Quinn Bolton of Needham <unk> Company. Your line is open.
Hey, guys just had a quick follow up to the earn out liability seems to be jumping all over the place I think was $70 million on the balance sheet last quarter down to 30 something million. This quarter. Just wondering if you might be able to help us as we think about that earn out liability for the Genesis acquisition.
As liability comes down as does that mean that the <unk>.
Genesis ink revenue outlook is negatively affected or whats the whats what should we be reading into kind of the Genesis outlook is that liability comes down.
Hey, Good morning. Good question, just just as a point of clarification.
With the Genesis acquisition, there wasn't earn out as part of the deal, but we're past the period, where that earn out Ram. So so what you see on the balance sheet today that earn out liability actually it goes back to the IPO and that earn out liability goes up and down based on our stock price.
So it has nothing to do with the Genesis acquisition.
And is only related to earn out related to the IPO.
Got it thanks for that clarification around yes, you bet.
Your next question comes from the line of Mark <unk> from Jefferies. Your line is open.
Hi, Thanks for taking my question.
Clarification, a couple of questions. So.
To the question about the mobile strength so it sounds like that this is.
Our penetration or expansion you expanding inside of product lines of your customers.
You haven't yet seen.
Broader handsets start to bounce up off the bottom is that is that.
Accurate interpretation of what you were qualifying for your growth in mobile.
Yes, it's a good question Marc it's clearly adoption.
Adoption or conversion from Silicon is the main driver I actually couldn't quote.
Or their total mobile charger shipments, probably xiaomi and <unk> of course, we're in better position to talk about how much they're shipping and where there might be a bottom overall, but we're certainly the beneficiary of a significant conversion from silicon began.
So it's hard for me to quantify the two but clearly the predominant factor is the conversion from legacy silicon over to organic.
Gotcha Okay.
Helpful and.
Is it fair to assume that.
That linearity of bookings that you kind of ramped through the quarter and is that fair I mean, it kind of sounds like.
You guys are really hitting their stride here.
What do you mean by linearity, maybe or could you clarify.
If you think about.
What would your total bookings are for the quarter.
You could have a third a third a third or it could have ramped.
2040.
50, or something like that as 2030 50 bookings ramping through the quarter.
Yes, I think it's fair to say, while we started the quarter.
Heavily booked up as Ron said.
I also mentioned, we continue to get sort of short lead time upside orders, especially from the mobile guys. They historically don't give you a ton of advanced notice.
But.
We'd certainly like to be more linear so we're being we're building everything we can in the back of the quarter just because thats. When some of these upsides orders are also coming in early in the quarter kind of within the cycle time, putting pressure on us to try to ramp up faster.
Okay got you and then.
Ron talked about the cash balance.
How much cash would you do you feel like you need to have on the balance sheet to run the company could you talk about appetite for.
Further acquisitions.
Going forward and if so what what kind of in your sweet spot.
Yes sure good question.
Well with respect to the balance sheet and cash clearly we have enough cash and have been consistent to certainly and run the business to operating breakeven.
And execute on our expansion that we've talked about before I think beyond that.
Our need to approach the capital markets raise equity or debt would be.
Tied to a transaction.
Such as an acquisition.
So today, though we feel.
Really good about the balance sheet, and where we stand with cash no debt I think we're being much better with working capital and being efficient with working capital.
Certainly efficient with our Capex.
So, we're certainly comfortable with the balance sheet and where it sits today.
Fair enough. Thank you.
Your next question comes from the line of Kevin Cassidy Rosenblatt Securities. Your line is open.
Thanks and.
Gratulation on the great results.
And I came on the call a little late so if I'm repeating a question I apologize but.
Have your costs come down as you've mentioned tripling the capacity with.
With TSMC and then also Theres just lots of news in the.
In the press about silicon carbide wafer substrates coming down in price are you able to benefit from that and is that helping gross margin expansion.
Yes, I think that's certainly a driver I mean, we're coming out of an environment, where I think people are dealing with cost increases right. What we saw TSMC on Gan and other places throughout the whole industry. So I don't see it reversing that dramatically that quickly I think costs are reasonably stable I think prices are reasonably stable.
So I don't I don't think it translates into big gross margin jumps I think where we can capitalize on cost reductions obviously in house IP. As one example, the yields getting a bit better than even we expected with a great yields that Ron talked about.
We're generally going to try to use as for better pricing power to drive market share and continue the great growth.
And adoption rates as a general approach, but with that said, we're also committed to our.
Our margin expansion plans as we've always talked about and we continue to balance the two.
Okay.
Yes, I would assume that for major new tech platforms that you have or are all going to be margin accretive.
Yes, exactly yes, we generally expect any new new products, especially the big ones. Like these are going to be highly valuable and bringing our margins up accelerating that margin expansion and delivering margins that are well above whatever the corporate averages at the time.
Okay, great. Thanks, again, thanks, and congratulations to everyone.
Your next question comes from the line of Jack Egan of Charter equity Research. Your line is open.
Hey, guys. Thanks for taking the follow up I just had one quick one.
I was curious about the inventory write off that you had in the quarter or was that just kind of like a onetime thing or could it be implying that there's some risk of obsolescence with some of your products. So I could see also how see how thats just the technology moving so fast that things.
Obsolete pretty quickly, but I'm just curious on your thoughts on that.
Yes, Joe Good question and you nailed it.
You answered the question for me so the.
The write off had to do with older generation Gen. One Gen two product.
And our customer base as we want them to and it's moving very quickly to our Gen. III Gen four and beyond products and that is happening right now and you try to make kind of balance that balance that transition.
And it's and it's hard to do and so what we ended up this quarter as we look out over the next 12 to 15 months, we have some older generation product on the books in.
The right thing to do is take a reserve against it so.
So it's a onetime thing against those products and again, it's something we evaluate every quarter, but thats what drove it. So it's really about a transition to next gen products.
Got it that makes sense, okay, well thats all from me. Thanks.
As a reminder, if you would like to ask a question. Please press star followed by one on your telephone and wait for your name to be announced that is star. One if you wish to ask a question.
And as there are no further questions I would like to thank all speakers for today's presentation and thank you all for joining US. This now concludes today's conference you may now disconnect.
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