Q1 2024 Navitas Semiconductor Corp Earnings Call
Okay.
Operator: Thank you for standing by. My name is Benjamin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Navitas Semiconductor First Quarter 2024 Results Conference Call.
Thank you for standing by my name is Benjamin and I'll be your conference operator today.
Operator: At this time I would like to welcome everyone to never test semiconductor first quarter 'twenty 'twenty four Russo results conference call.
Operator: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would like to turn the call over to Stephen Oliver, Vice President of Investor Relations. Please go ahead.
Benjamin: All lines have been placed on mute to prevent any background noise.
Stephen Oliver: After the Speakers' remarks, there'll be a question and answer session.
Stephen Oliver: If you'd like to ask a question. During this time simply press star one on your telephone keypad.
Stephen Oliver: If you would like to withdraw your question Press Star one again.
Operator: Oh.
Stephen Oliver: I would like to turn the call over to Steven Oliver Vice President of Investor Relations. Please go ahead.
Operator: Yeah.
Stephen Oliver: Good afternoon, everyone. I'm Stephen Oliver, Vice President of Investor Relations. Thank you for joining Navitas Semiconductor's first quarter 2024 results conference call. I'm joined today by Eugene Sheridan, our chairman, president, CEO, and co-founder, and Janet Chou, EVP, CFO, and treasurer.
Stephen Oliver: Good afternoon, everyone I'm, Steven <unk>, Vice President of Investor Relations. Thank you for joining <unk> Semiconductor's first quarter 2024 results conference call.
Speaker Change: Joined today by Jim Sheridan, our chairman, President CEO, and co founder and Janet Joe EVP, CFO and treasurer.
Stephen Oliver: 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. Additional information related to our business is also posted in the Investor Relations section of our website. Our earnings release includes non-GAAP financial measures. Reconciliations of these non-GAAP financial measures with the most directly comparable GAAP measures are included in our first quarter earnings release and also posted on our website in the investor relations section.
Stephen Oliver: 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.
Stephen Oliver: Additional information related to our business is also posted on the Investor Relations section of our website.
Stephen Oliver: Our earnings release includes non-GAAP financial measures reconciliations of these non-GAAP financial measures with the most directly comparable GAAP measures are included in our first quarter earnings release and also posted on our website in the Investor Relations section.
Stephen Oliver: In this conference call, we will make forward-looking statements about future events or about the future financial performance of Navitas, including acquisitions. You can identify these statements by words like "we expect," or "we believe," or similar terms.
Stephen Oliver: In this conference call, we will make forward looking statements about future events or about the future financial performance of novel tests, including acquisitions. You can identify these statements by wood like we expect or we believe or similar terms.
Stephen Oliver: 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 Navitas' business, including factors that could cause actual results to differ from our forward-looking statements, are described in our earnings release. Please also refer to the risk factors sections in our most recent 10-K and 10-Qs. Our estimates or other forward-looking statements may change, and Navitas assumes no obligation to update forward-looking statements to reflect actual results, change assumptions, or other events that it may accept as required by law. And now, over to Gene Sheridan, CEO.
Stephen Oliver: We wish to caution you that such forward looking statements are subject to risks and uncertainties.
Eugene A. Sheridan: Could cause actual events or results to differ materially from expectations expressed in our forward looking statements.
Eugene A. Sheridan: Important factors that can affect another perhaps business, including factors that could cause actual results to differ from our forward looking statements are described.
Eugene A. Sheridan: Please also refer to the risk factors section in our most recent 10-K and 10-Qs.
Eugene A. Sheridan: 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.
Eugene A. Sheridan: Except as required by law.
Eugene A. Sheridan: Now over to Jim Sheridan.
Stephen Oliver: Oh.
Eugene A. Sheridan: Thanks, Steve. And thanks to all of you for joining us today. I'm pleased to announce Q1 revenue of $23.2 million, which reflects 73% year-on-year growth. These results reflect continued market leadership with our GAN technology, displacing silicon in our BTEC mobile charger market, but also expansion into home appliance and AI-based data centers with continuing shipments of our leading-edge Genesix technology into the industrial, EV, solar, and energy storage segments. Let me give further specifics on each of our target markets.
Eugene A. Sheridan: Thanks, Steve and thanks to all of you for joining us today.
Eugene A. Sheridan: Please to announce Q1 revenue of $23 2 million, which reflects 73% year on year growth.
Eugene A. Sheridan: These results reflect continued market leadership with our Gan technology, displacing Silicon Beach had mobile charger market, but.
Eugene A. Sheridan: But also expansion into home appliance and AI based data center with continuing shipments of our leading edge Genesis technology into the industrial EV solar and energy storage segments.
Eugene A. Sheridan: Let.
Eugene A. Sheridan: Let me give further specifics in each of our target market.
Eugene A. Sheridan: In data centers, AI is driving an unprecedented and accelerated increase in power requirements. Traditional data center processors required only 300 to 400 watts each last year, while NVIDIA's latest generation demanded 700 watts. And now the recently announced Blackwell chipset requires well over 1,000 watts. This 300% increase in power in just 18 months, in combination with the EU-driven titanium standard that requires a 96% minimum energy efficiency, creates a very big challenge for our power supply customers and a very big opportunity for Navitas.
Eugene A. Sheridan: In data centers, AI is having an unprecedented and accelerating increasing power requirements.
Eugene A. Sheridan: Traditional datacenter processors required only 300 to 400 watts each last year, while in various latest generation amounted 700 block.
Eugene A. Sheridan: And now the recently announced Blackwell chipset requires well over 1000 bottles.
Eugene A. Sheridan: This 300% increase in power in just 18 months in combination with the EU driven titanium standard that requires at 96% minimum energy efficiency creates a very big challenge for a power supply customers and a very big opportunity for in Alberta.
Eugene A. Sheridan: In the last six months, we've stepped up to that challenge, enabling server power supplies to increase from 3.2 kilowatts and 96% efficiency to 4.5 kilowatts and 97% efficiency. And now we are well on our way to 8 to 10 kilowatts at 97% efficiency to be delivered to our customers later this year. These advances are attributable to our leading-edge scan-safe technology, combined with our industry-leading Gen 3 fast silicon carbide and our unique data center system design capability.
Eugene A. Sheridan: In the last six months, we have stepped up to that challenge, enabling server power supplies to increase from $3 two kilowatts at 96% of efficiency to four five kilowatt and 97% proficiency.
Eugene A. Sheridan: And now we are well on our way to eight to 10 kilowatt that 97% to be delivered to our customers later this year.
Eugene A. Sheridan: These advances are attributable to our leading edge <unk> technology combined with our industry, leading gen three fast silicon carbide and our unique datacenter system design capability.
Eugene A. Sheridan: We are pleased to announce three major design wins at some of the world's largest power supply companies. Taken in combination with over 30 customer projects now in development, in the coming quarters, we expect to enable YAN-based data centers with AWS, Azure, Google, Supermicro, Inspire, and Bybit.
Eugene A. Sheridan: We are pleased to announce three major design wins at some of the world's largest power supply company.
Eugene A. Sheridan: And in combination with over 30 customer projects now in development in the coming quarters, we expect to enable Gan based datacenter with AWS Azure, Google Supermicro infer and Baidu.
Eugene A. Sheridan: In total, we anticipate multiple millions of revenue this year, and 10 to 20 million in 2025, all being accelerated by these recent AI developments, which we expect to continue for years, if not decades to come. In EV, we are seeing a significant expansion in our customer pipeline, given strong penetration into mainstream passenger battery EVs. And also plug-in hybrids, commercial EVs, and even fuel cell hydrogen clean energy cars. Our EV system design team originally created a 6.6 kilowatt onboard charger platform, which is driving significant customer adoption. Recently, we launched a 22-kilowatt OBC platform that enables 3x faster charging while delivering double the power density, up to 30% greater energy savings, and 40% lighter weight relative to comparable solutions on the market.
Eugene A. Sheridan: In total we anticipate multiple millions in revenue this year and $10 million to $20 million in 2025, all being accelerated by these recent AI developments, which we expect to continue for year.
Eugene A. Sheridan: <unk> com.
Eugene A. Sheridan: In <unk>, we are seeing a significant expansion in our customer pipeline given strong penetration into mainstream passenger batteries. Indeed.
Eugene A. Sheridan: And also plug in hybrid commercial eds, and even fuel cell hydrogen clean energy cars.
Eugene A. Sheridan: Our EV system define key originally created a six six kilowatt onboard charger platform, which is driving significant customer adoption.
Eugene A. Sheridan: <unk> launched a 22 kilowatts ABC platform that enables <unk> faster charging while delivering double the power density up to 30% greater energy savings and 40% lighter weight relative to comparable solutions on the market.
Eugene A. Sheridan: These system capabilities are once again enabled by a combination of our Gen 3 fasted silicon carbide and our GANSafe industry-leading technology. We anticipate these platforms will drive considerable new revenues with additional Silicon Carbide customer projects ramping in the first half of 2025 and GAN EV adoption on track to ramp in the second half of 2025. In total, we are now engaged with over 160 ED-related customer projects across all major regions, which are expected to drive tens of millions of sales in 2025.
Eugene A. Sheridan: These system capabilities are once again enabled by a combination of our gen three fastest silicon carbide and our D&C industry, leading technology.
Eugene A. Sheridan: We anticipate these platforms will drive considerable new revenues with additional silicon carbide customer projects ramping in the first half of 'twenty five.
Eugene A. Sheridan: An easy adoption on track to ramp in the second half of 'twenty.
Eugene A. Sheridan: In total we are now engaged with over 160 EDI related customer projects across all major regions, which are expected to drive tens of maiden some sale in 2025 and these projects have already increased our total <unk> pipeline by over 50% since we reported our $400 million pipeline in December.
Eugene A. Sheridan: And these projects have already increased our total ED pipeline by over 50% since we reported our $400 million pipeline in December. In the appliance and industrial segments, we're also making excellent progress. Our latest motor-optimized DanSense package now has over 15 customer projects in development, with major wins at a European leader in hair care that will launch at the end of this year, a Tier 1 U.S.-based dishwasher supplier, and two of the top European leaders in pumps and motors, which will all launch in 2025.
Eugene A. Sheridan: In the appliance and industrial segments, we're also making excellent progress.
Eugene A. Sheridan: Our latest motor optimize Dan said Capex now has over 15 customer project in development with major wins at a European leader in hair care, but will launch at the end of this year.
Eugene A. Sheridan: Tier one U S based dishwasher supplier and two of the top European leaders in pumps and motors, which will all launched in 2025.
Eugene A. Sheridan: All told, Ganset's half-rich total pipeline is now over $100 million in home appliances. In more industrial applications, our latest Gen 3 fats, silicon carbide, and GANS-AID technology are achieving rapid adoption in over 25 customer developments with over $150 million pipeline potential. Combining these together with other opportunities, our appliance and industrial pipeline has grown significantly beyond the $360 million that we reported in December. In solar and energy storage, we are seeing signs of recovery with six new wins across the US, Europe, and Asia for solar optimizers, microinverters, strain inverters, and energy storage applications, all expected to start ramping in 2025.
Eugene A. Sheridan: All told <unk> total pipeline is now over $100 million in home appliance.
Eugene A. Sheridan: In more industrial applications, our latest Gen III fast silicon carbide in gas a technology are achieving rapid adoption in over 25 customer development with over $150 million pipeline potential.
Eugene A. Sheridan: Combining these together with other opportunities our appliance and industrial pipeline has grown significantly beyond $360 million that we reported in December.
Eugene A. Sheridan: In solar and energy storage, we are seeing signs of recovery with six new wins across U S. Europe and Asia for solar Optimizer micro inverter strainer Burger and energy storage applications, all expected to start ramping in 2025.
Eugene A. Sheridan: In particular, a major microinverter leader has publicly committed to a major transition to GAN double ramp in the first half of 2025, which we expect represents tens of millions in annual revenue potential. In total, our solar and energy storage pipeline has also increased significantly beyond the $250 million we reported in December. In mobile and consumer markets, we continue to see strength as all major mobile OEMs across smartphone, tablet, and notebooks continue to adopt GANs to replace silicon in a growing percentage of their chargers, especially those at $65 and above, a sweet spot for our GAN. In Q1, we added over 20 new fast chargers into production, taking the total released customer products to over 450. This includes 10 of the top 10 mobile OEMs across smartphone and notebook
Eugene A. Sheridan: In particular, a major micro inverter leader is publicly committed to a major transactions again double ramp in the first half of 'twenty, five which we expect represents tens of millions in annual revenue potential.
Eugene A. Sheridan: In total our solar and energy storage pipeline has also increased significantly beyond the $250 million we reported in December.
Eugene A. Sheridan: In mobile and consumer markets, we continue to see strength as all major mobile Oems across smartphone tablet and notebooks continue to adopt <unk> to replace silicon and a growing percentage of their chargers, especially those at 65, often above a sweet spot for organic.
Eugene A. Sheridan: In Q1, we added over 20, new fast Chargers into production, taking the total released customer products to over 450.
Eugene A. Sheridan: This includes 10 of desktop and mobile Oems across smartphone and notebook.
Eugene A. Sheridan: Notably, Xiaomi launched another two smartphone models, the Mi 14 Ultra and the CV4 Pro using our Gen 4 GaN Sense ICs to support ultra fast charging, and Lenovo launched the Facebook 170-watt desktop 5-port charger and docking station with Gen4 GaNs. Finally, I'm excited to announce an all-new GAN FC family we call GAN Slim. GAN Swim offers all the impressive features of our existing GANSENSE technology, such as integrated drive and lossless current sensing, but it also slims down the solution by integrating additional external components.
Eugene A. Sheridan: Notably Xiaomi launched another two smartphone models the me <unk> ultra and <unk> for prep using our Gen. Four Gan, France ice's to support ultra fast charging.
Eugene A. Sheridan: And Lenovo launched the Facebook 170, <unk> desktop five charger and documentation with Gen four handsets.
Eugene A. Sheridan: Okay.
Eugene A. Sheridan: Finally, I'm excited to announce that all new gain a family we call Dan Flynn.
Eugene A. Sheridan: Gan swam offers all the impressive features of our existing Gan technology, such as integrated drive and losses current sensing, but also slimmed down the solution by integrating additional external components.
Eugene A. Sheridan: Further simplifying the system design and reducing customer manufacturing costs. Dan Schwinn is a major step forward that could increase our Dan Tam by enabling lower system costs compared to silicon designs for many applications. Ganswim targets applications under 500 Watts across mobile, consumer, and home appliances.
Eugene A. Sheridan: Further simplifying the system design and reducing customer manufacturing costs.
Eugene A. Sheridan: <unk> is a major step forward that could increase our Jan Tam by enabling lower system cost compared to silicon design for many applications.
Eugene A. Sheridan: <unk> targets applications under 500 loss across mobile consumer and OMA plants.
Eugene A. Sheridan: While the formal product launch will not occur until June, we started sampling just two months ago and already have over 20 customer projects in development and added over $20 million to our pipeline. We anticipate over $10 million in new revenue for 2025 from our Gantt-Slim product line. Overall, we have not yet observed any signs of a broader market recovery in the second half of the year, and this may translate to more moderated growth in 2024.
Eugene A. Sheridan: While the formal product launch will not occur until June we started sampling just two months ago and already have over 20 customer projects in development and added over $20 million to our pipeline.
Eugene A. Sheridan: We anticipate over $10 million in new revenue for 2025 from organic land product line.
Eugene A. Sheridan: Overall, we have not yet observed any signs of a broader market recovery in the second half of the year and this may translate to a more moderated growth in 2024.
Eugene A. Sheridan: Nonetheless, we're very pleased with the significant success and adoption of our latest industry-leading technologies, GANSafe, GANSense haperglycines, Gen3 Fast silicon carbide, and our newest GANSlim family, all of which are driving important increases in our customer pipeline that has increased nearly 30% from December to $1.6 billion. Much of that existing opportunity and pipeline growth is coming from new 2025 production programs across all major regions and markets, which is increasing our confidence for strong, diverse growth in 2025 and beyond. With that, let me turn it over to our CFO, Janet Chou, to discuss the financial aspects.
Eugene A. Sheridan: Nonetheless, we're very pleased with the significant success and adoption of our latest industry, leading technology <unk> <unk> Ics Gen. Three fast silicon carbide, and our new <unk> family all of which are driving important increases in our customer pipeline that has increased nearly 30% from December to one.
Janet Chou: 6 billion.
Janet Chou: Much of that existing opportunity and pipeline growth is coming from new 2025 production programs across all major regions and markets, which is increasing our confidence for strong diverse growth for 2025 and beyond.
Janet Chou: That let me turn it over to our CFO Janet show to discuss the financials.
Janet Chou: Thank you, Gene. In my comments today, I will first review our first quarter financial results, and then I'll take you through our outlook for the second quarter. Revenue in the first quarter of 2024 grew 73% year over year to $23.2 million, slightly above the midpoint of our guidance range. While we are experiencing similar macroeconomic factors as others in certain of our end markets, such as EV, industrial, and solar, our mobile business was strong in the first quarter, demonstrating the benefits of our smaller, faster, more energy efficient technology, as we continue to gain significant traction in mobile and consumer charging applications. Before addressing expenses, I'd like to refer you to the gap to non-gap reconciliations in our press release earlier today. In the rest of my commentary, I will refer to non-gap expense measures.
Janet Chou: Thank you Jane and my comments today, our first review our first quarter financial results I'll now take you through our outlook for the second quarter.
Janet Chou: Revenue in the first quarter of 2024 grew 73% year over year to $23 $2 million slightly.
Janet Chou: Slightly above the midpoint of our guidance range, while we are experiencing similar macroeconomic factors.
Janet Chou: Certain of our end markets, such as industrial and solar.
Janet Chou: Our mobile business was strong in the first quarter, demonstrating the bandwidth of our smaller faster more energy efficient technology as we continue to gain significant traction in mobile and consumer charging application.
Janet Chou: Before addressing Stanford.
Janet Chou: To refer you to the GAAP to non-GAAP reconciliations in our press release earlier today and the rest of my commentary I will refer to non-GAAP expense measures.
Janet Chou: Growth margin in the first quarter was 41.1%, the same as the first quarter of 2023 due to mobile market product mix, as we continue to see strength in that part of our business. Total operating expenses for the first quarter were $21.3 million, comprised of SG&A expenses of $8.5 million and R&D expenses of $12.9 million. This expense increase of 20% year over year is much slower than our revenue growth as we sharpen our focus on profitability while continuing to emphasize investments in new products, technologies, and emerging markets. The sequential growth was primarily driven by higher payroll taxes and annual salary increases.
Janet Chou: Gross margin in the first quarter was 41, 1% the same as the first quarter of 2023 due to mobile market product mix.
Janet Chou: You need to see strength in that part of our business.
Janet Chou: Total operating expenses for the first quarter were $21 3 million comprised of SG&A expenses of $8 5 million and R&D expenses of $12 9 million.
Janet Chou: This expense increase of 20% year over year is much slower.
Janet Chou: <unk> growth as we sharpen our focus on profitability, while continuing to emphasize investments in new products technologies and emerging markets.
Janet Chou: Sequential growth was primarily driven by higher payroll taxes and annual salary increases.
Janet Chou: As expected, we sequentially increased our R&D to support significant new product developments like Genselin and many others planned to launch this year and next. Putting all this together, the loss from operations for the first quarter of 2024 was $11.8 million compared to a loss from operations of $12.3 million in the first quarter of 2023. Our weighted average share count for the first quarter was 180 million shares. Turning to the balance sheet, it remains very strong with high levels of liquidity. Cash and cash equivalents at quarter end were $129.7 million, and the company will continue to carry no debt. Accounts receivable declined to $22.2 million compared to $25.9 million in the prior quarter.
Janet Chou: As expected we sequentially increased our R&D to support significant new product development.
Janet Chou: Again solid.
Janet Chou: And many others planned to launch in this year and next.
Janet Chou: Putting all this together the loss from operations for the first quarter of 2024 was $11 8 million.
Janet Chou: Care to a loss from operations up $12 3 million in the first quarter of 2023.
Janet Chou: Our weighted average share count for the first quarter was 180 million shares.
Janet Chou: Turning to the balance sheet. It remains very strong with high levels of liquidity cash and cash equivalents at quarter end were 100.
Janet Chou: <unk> $29 $7 million and we continue to carry no debt.
Janet Chou: <unk> receivables declined to $22 2 million compared to $25 9 million in the prior quarter.
Janet Chou: Inventory increased to $33.2 million compared to $23.2 million in the prior quarter. The inventory increase reflects additional strategic purchases of silicon carbide materials and increases to support major product launches and customer program runs later in the year. Moving on to guidance for the second quarter, we currently expect revenues of $20 million, plus or minus $500,000. At the midpoint, this represents year-over-year growth of more than 10 percent compared to the $18.1 million we recorded in the second quarter of 2023.
Janet Chou: <unk> increased to $33 2 million compared to $23 2 million in the prior quarter.
Janet Chou: The inventory increase reflects additional strategic purchases of silicon carbide materials and <unk>.
Janet Chou: Creases to support a major product launches and customer program ramps later in the year.
Janet Chou: Moving on to guidance for the second quarter. We currently expect revenues of $20 million plus or minus 500 elegant.
Janet Chou: At the midpoint this represents year over year growth of more than 10% compared to the $18 1 million. We've recorded in the second quarter of 2023.
Janet Chou: And the guidance is down sequentially from the first quarter due to decreased demand in our EV, solar, and industrial markets, partially offset by projected continued strength in the mobile market and an initial ramp for data. Growth margin for the second quarter is expected to be approximately 40%, plus or minus 50 basis points, as our mix continues to lean more toward the mobile market in the near term. As we move through the year, we expect margin improvement to align with growth in higher-margin markets.
Janet Chou: And the guidance is down sequentially from the first quarter due to decreased demand in that way.
Janet Chou: At industrial markets, partially offset by projected continued strength in the mobile market and the initial ramp for data centers.
Janet Chou: Gross margin for the second quarter is expected to be approximately 40%.
Janet Chou: Plus or minus 50 basis points.
Janet Chou: Our mix continues to lean more to worry for mobile market in the near term.
Janet Chou: As we move through the year, we expect margin improvement will align with growth in higher margin market.
Janet Chou: In total, our non-GAAP operating expenses in the second quarter are expected to be approximately $21.5 million, and this excludes stock-based compensation and amortization of intangible assets. We will continue to invest in growth-oriented initiatives, particularly in R&D. We expect growth in operating expense dollars will be modest during 2024. In closing, while we're not immune to some of the same macro trends seen by others, we continue to deliver growth that significantly outpaces the overall power semiconductor market.
Janet Chou: In total our non-GAAP operating expenses in the second quarter are expected to be approximately $21 5 million and this excludes stock based compensation and amortization of intangible assets.
Janet Chou: Although we will continue to invest in growth oriented initiatives, particularly in R&D, we expect growth in operating expense dollars will be modest Gary 2024.
Janet Chou: In closing, while we are not immune to some of the same macro trends seen by Abbvie.
Janet Chou: We need to deliver growth that significantly outpaced the overall power semiconductor market.
Janet Chou: We're very pleased with the customer reception and adoption of our new products, the expansion of our customer pipeline, and the outlook for much faster growth as some of our end markets recover. Operator, let's begin the Q&A session.
Janet Chou: Very pleased with the customer reception and adoption of our new products.
Speaker Change: As mentioned our customer pipeline and.
Janet Chou: Outlook for much faster growth as some of our end markets recover.
Speaker Change: Operator, let's begin the Q&A session.
Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the conversation. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loud speaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star 1 to join the queue. And your first question comes from the line of Kevin Cassidy with Rosenblatt Securities. Please go ahead.
Speaker Change: Thank you we will now begin the question and answer session. If you have dialed in and would like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue.
Kevin Edward Cassidy: Would like to withdraw your question simply press Star one again.
Operator: If you are called upon to ask your question and they're listening they're loud speaker in your device. Please pickup your handset and ensure that their phone is not on mute when asking a question.
Kevin Edward Cassidy: Again breast I wanted to join the queue.
Operator: And your first question comes from the line of Kevin Cassidy with Rosenblatt Securities. Please go ahead.
Kevin Edward Cassidy: Yes, thank you for taking my question. Congratulations on the great result. And also, congratulations, Jane, for a well-deserved nomination as a finalist for Entrepreneur of the Year in LA.
Kevin Edward Cassidy: Yes. Thank you for taking my question congratulations on the great results.
Kevin Edward Cassidy: And also congratulations gene for a well deserved nomination as a finalist.
Kevin Edward Cassidy: For entrepreneur.
Kevin Edward Cassidy: The year in la.
Kevin Edward Cassidy: Congratulations to Kevin.
Jane: Thank you Kevin.
Unknown Attendee: You know, it's exciting news what you're showing about data centers. And yeah, we did, we hosted a tour of a core site data center. And the clear message from the management team was that they needed more power.
Kevin Edward Cassidy: It's exciting news, what youre showing about.
Unknown Attendee: Data Center and we did we hosted a tour of our core site data center and the clear message from the management team was they need more power.
Unknown Attendee: And yeah, it looks like, you know, there's definite demand from data centers and it's pretty exciting that you're winning the designs now. And you're going to start seeing revenue. But is this revenue going to be accretive to gross margin right away? Or does it take a while to get the volumes up to get to gross margins that would be above corporate average?
Unknown Attendee: Yes, it looks like.
Unknown Attendee: There is definitely demand from data centers.
Unknown Attendee: Pretty exciting that youre, winning the designs now.
Unknown Attendee: I'm going to start seeing revenue.
Unknown Attendee: As this revenue is going to be accretive to gross margin right away or does it take a while to get the volumes up to get to gross margins that would be above corporate average.
Eugene A. Sheridan: Yeah, no, good, good question, Kevin, and it's accretive straight away, running above the average, I think, typical of any of the industrial markets, especially with the new products like GANSAFE and Generation 3 FAST, silicon carbide; we expect them to be accretive on gross margin straight away. And as I mentioned in my remarks, you know, a few million dollars are ramping up, already started this first half, but ramping more significantly in the second half, and 10 to 20 million anticipated at this point for next year.
Speaker Change: Yes, good question Kevin.
Eugene A. Sheridan: Straightaway running above the average I think typical of any of the industrial markets, especially with the new products like Gan safe in generation three fast silicon carbide, we expect them to be accretive on gross margin straight away and as I mentioned in my remarks.
Eugene A. Sheridan: A few million dollars of ramping already started this first half, but ramping more significantly in the second half and 10 to 20 million anticipated at this point for next year.
Eugene A. Sheridan: Okay, great. And can you give us a ballpark for the dollar content, you know, like, if there's a dollar content per watt or per kilowatt for Navitas? Yeah, it's going to depend a lot on power, as you said, but depending upon the power level.
Kevin: Okay, Great and can you give us a ballpark for the dollar content.
Eugene A. Sheridan: If there's a dollar content per.
Eugene A. Sheridan: Per watt or per kilowatt for <unk>.
Eugene A. Sheridan: Yeah, it's going to depend a lot on power, as you said, but depending on the power level, you could probably assume $15 to $50. It's in that kind of range, and it's going up as the power level goes up. Our design center delivered a 3.2 kilowatt last year, and more recently, 4.5 kilowatt, and we're trying to push that to 5.5 kilowatt with customers, and now we're working on an 8 to 10 kilowatt. With each of those, that content's going up and up.
Eugene A. Sheridan: Yes, it's going to depend a lot per power as you said, but depending upon power level, you could probably assume <unk>.
Jonathan E. Tanwanteng: Your next question comes from the line of Jonathan Tanwanteng, CJS Securities. Please go ahead.
Unknown Attendee: Hi, yes, it's actually Charlie Strathairn on behalf of John. Just a couple of questions for you. When do you expect to see a normalization in demand? And is 40 to 50 percent revenue growth still possible this year?
Eugene A. Sheridan: Yeah, we're obviously seeing continued softness in Q2. There's a good chance Q2 is a bottom. It's a little early to call as we don't have perfect visibility into Q3. But I think the general consensus in the industry from our peers, who are seeing a lot of more dramatic degradation, I'd say, in revenue than we are in the first half, is that by summer it should turn. So we're looking forward to those signs to confirm growth. But right now, as we said in our remarks, we would be a little bit more moderate in our growth expectations compared to the 40 to 50 percent we indicated last.
Eugene A. Sheridan: Great. Thank you. And just one more question for me. Have pipeline opportunities identified in December been converted to designs yet or orders at the expected rate?
Eugene A. Sheridan: That varies by market, but, of course, mobile consumers tend to be shorter term. And you can see those adoption rates happen faster. For some of the other markets, they're still developing data center ramp-up later this year. I did mention a large percentage of the 1.6 billion that we've added to it since 1.25, and it was already there, are concentrated in 25 programs, which is why we're so bullish across each of the markets in the conversion rate and indicate 10s of millions of new revenue in most of the key markets that we target.
Jack Egan: Your next question comes from the line of Jack Egan with Charter Equity Research. Please go ahead.
Jack Egan: Hey guys, thanks for taking the question. So you mentioned that some automotive weakness might be contributing to slower near-term growth, but I thought automotive was more kind of on the long-term spectrum and that it wouldn't really kick in for a while. So is that more reflective of actual, you know, fewer shipments near-term or is it more just customers kind of slowing that, slowing their, you know, development process?
Eugene A. Sheridan: Yeah, no, great question, Jack. And it's definitely, you know, today we're only shipping silicon carbides into EV, so we have ongoing production there. And with the slower growth rates recognized in the overall industry, that's created some pockets of inventory, some slowdown in production pull through from customers. With that said, we haven't seen any delays in new programs. You know, we announced the joint labs with Shinry and Geely. Those guys are shipping to major OEMs like Hyundai, BYD, Volvo, and Honda.
Eugene A. Sheridan: Those programs are all tracking for the 25 ramp. We're also still on track for GAN to go into EVs for the first time in the second half of 25. So we don't see much slowdown at all in the overall pipeline. It's actually growing, probably the biggest. We highlighted 50% growth. So from 400 million to 600 million, we don't see a slowdown in the programs, but we certainly feel some slowdown in the short term just on the production ship.
Eugene A. Sheridan: Got it. Okay.
Jack Egan: And then just sticking on the automotive side, you know, this quarter and last quarter, you've heard quite a few companies in the automotive supply chain, at least on the semiconductor side. They've talked about sentiment kind of shifting away from fully electric vehicles and a bit more towards hybrids. And so I understand that, long term, that would probably be a negative development for silicon carbide since I don't think you really need or really can use silicon carbide in the traction of a hybrid. But for some of the smaller, lower power slots, like the DC-DC converter, is there still an opportunity for GAN or STIC in hybrids?
Eugene A. Sheridan: Yeah, that's right. We've observed the same trend. While there's a bit of a slowdown on battery EV in the near term, we've seen plug-in hybrid pickups and commercial EV still going strong, and I mentioned those in my remarks. The content is pretty solid. Battery EV can be up to $400 or $500 in GAN or silicon carbide wideband gap content, but the plug-in hybrids can also, depending on the configuration, be $200 to $300. So it's very significant, albeit smaller, it's very significant, and we've got a number of nice projects in the pipeline that we added.
Jack Egan: Got it. That's helpful. Thanks, guys.
Nathaniel Quinn Bolton: Your next question comes from the line about Queen Bolton with Needham. Please go ahead.
Unknown Attendee: Hi, this is Nick Doyle. I'm from Quimble, and thanks for taking my questions.
Unknown Attendee: Can you talk more about your appliance segment? Any details on that?
Unknown Attendee: Performance, Embedded in the Corridor, and Guide. Are you still on track to hit
Unknown Attendee: I'm on track to hit the 10 million per year run rate by the end of the year.
Eugene A. Sheridan: Yeah, good questions. Thanks for focusing on that.
Eugene A. Sheridan: Appliance is maybe not as exciting or sexy as some of the other segments, but really promising progress. I highlighted four major wins just in the last quarter, one of which is that leading European hair care product that's still on track to ramp at the end of the year, and that's expected to be $10 million a year as it ramps starting this year and throughout next year. But we also added the dishwasher, a leading dishwasher name. These guys don't want us to release the names yet. We'll release them as soon as we can, but you can probably guess at some of these.
Eugene A. Sheridan: And two really top pump and motor leaders in Europe. Not surprisingly, Europe tends to be leading in high energy efficiency home appliances. So that business actually is pretty stable. We didn't highlight it too much in the short term, but we did say going into Q2, it's pretty stable. And then I think we're going to see nice growth towards the end of the year and definitely next year. That pipeline, by the way, was $360 million in December and has grown since then. So we're pretty bullish on the home appliance and industrial markets.
Unknown Attendee: Thanks. And for my follow-up...
Unknown Attendee: Gross Margin Guide
Unknown Attendee: https://thevenusproject.com
Unknown Attendee: by the mobile being a little bit better, like you talked about in the comments. Thank you for your questions.
Unknown Attendee: Our growth margin is heavily dependent on mix. We see very strong momentum going on in the mobile space, but higher mix in mobile actually is margin diluted. We do anticipate margin expansion once we see growth in higher margin markets like EV, industrial, and data centers.
Unknown Attendee: Thank you for your question. You are absolutely right.
Richard Cutts Shannon: Your next question comes from the line of Richard Gould with Gould Tactical. Please go ahead.
Richard Cutts Shannon: Hi, I just wanted to drill into the customer pipeline a little bit more. If I recall about a year ago, I think that pipeline was a few hundred million, and then into the summer, it got up to, I think, $700 million. And then by your December 12 investor meeting in Torrance, California, it was 1.2 billion.
Richard Cutts Shannon: And I think last quarter you said it was north of that.
Richard Cutts Shannon: And now at 1.6 billion, it's really pretty remarkable. I was wondering if you could give a little bit of detail about how you scribe.
Eugene A. Sheridan: I'm going to rub that in if you have any sense of what the conversion is ultimately about.
Eugene A. Sheridan: ultimately into revenue. Yep, a good question. Thanks, Richard, for bringing it up.
Eugene A. Sheridan: So, first of all, on definition, Pipeline has a few important criteria. One is that it's a valid, committed production program. There's a lot of R&D going on out there, especially in Gallium Nitride and Silicon Carbide. So we always check it to make sure it's really a valid, committed program. Number two, we see a good technical fit for what they require from GAN or Silicon Carbide or for a product to make sure the technical fit is there. And then, third, there is the value proposition and a strong opportunity and motivation from the customer to use the product. It's not confirmed design wins. It's not a contract.
Eugene A. Sheridan: But we consider those to be qualified opportunities, and we track unqualified ones, but we don't report them in the 1.6 billion. They have to meet that.
Eugene A. Sheridan: And then within that 1.6 billion qualified opportunities, we're tracking them by stage as they go through evaluation, system design, design validation, pre-production, and then into production. In terms of conversion, it's a little too early to call. I think on mobile, where we've seen mobile, our conversion rates have been pretty high, 30% or higher, sometimes 40%. On the other markets, which are really just forming, some of those take two years to come to market or 18 months or 36 months.
Eugene A. Sheridan: We're still seeing that roll out. So we'll be able to judge conversion rates a lot better in data center solar and EV later this year and into next year. And then when you think of the 1.6 billion, I guess you put that 1.6 billion in different buckets. You know, one bucket would be, you know, purchase orders and production.
Eugene A. Sheridan: And then it goes from there all the way to, you know, you know, perhaps just some new.
Eugene A. Sheridan: program that's just kind of been talked about, but you haven't really Well, no, I guess if it's committed, it has to be committed to be part of the qualified, right? No, Qualified meets the criteria I said, so it's a committed production program, not committed to us, but the customer is committed to going to production. We have a good technical fit.
Richard Cutts Shannon: We have a strong value proposition and high interest in using our product. But let me clarify too, it's a development pipeline, so once the products go into production, we actually remove them from the pipeline. So it's from the first qualification stage, committed production with high interest and technical fit to our product, through to pre-production. Once it goes into production, we then count that in our production forecast. So for that number to grow, the number of additional programs going into the pipeline needs to exceed those products that are going from the pipeline into production. Okay, that's from... Yeah, that's remarkable. Thanks. Thanks so much.
Eugene A. Sheridan: One other clarification to Richard, it's a lifetime estimate. So that's not an annual revenue. The lifetime of these programs, we're trying to be super conservative; some could, in theory, last five or 10 years, but we don't want to be too optimistic. So we generally assume about a three or four-year lifetime for the more industrial markets and mobile consumers. We assume they run for about one year. So you have to factor in the lifetime of the product when you're thinking about how that might translate into our revenue, period.
Richard Cutts Shannon: Great. Great Thank you.
Richard Cutts Shannon: Do that!
Richard Cutts Shannon: Your next question comes from the line of Richard Shannon with Craig Hallen. Please go ahead.
Richard Cutts Shannon: Hi guys, thanks for taking my question as well. Maybe I'll focus on one of the markets that's doing relatively better right now, being in the mobile space here. I think a couple quarters ago, or maybe it was more than two, you talked about a couple of your charger customers, you know, committing to like 30% usage of GAN here with, you know, higher levels of power. Your conversations you're having with both aftermarket guys, and I guess, more importantly, on the OEM side here, what do you think in terms of commitment to ramp up with the higher, you know, 65 watt and above?
Richard Cutts Shannon: I mean, from my perspective, having, you know, multiple Navitas gifted chargers in my possession, looking at one of them right here, the value proposition is so high, it seems like it'd be a fairly fast conversion. So what do you get in terms of those conversations? And what's their, you know, pushback or delay in committing to something?
Eugene A. Sheridan: Yeah, no, those are great observations. And thanks for appreciating the chargers, as everybody usually does.
Eugene A. Sheridan: So, but you're right. And you know, well, 30 watts and below is relatively slow charging again, doesn't bring that much of a value profit in already a pretty small case. You get into 50-60 watts, that's pretty fast charging for a laptop and really fast for a smartphone. You get to 100 watts, now you can charge multiple devices super fast. And that's because as you go up in power, that leads you right into the sweet spot of organic technology, while also increasing the GAN content from one chip to two chips, or, or in many cases, our Gansens half-rich, which is one of our most advanced products and one of the things I highlighted. So we continue to see the trends of faster and faster charging. I think it's an obvious and compelling thing.
Eugene A. Sheridan: super fast and that's so as you go up in power that leads you right into the sweet spot of organi-sea technology while also increasing the GAN content from one ship to two chips or or in many cases our GANS Haprich which is one of our most
Eugene A. Sheridan: Advanced Products and one of the things I highlighted.
Eugene A. Sheridan: Consumers don't change overnight, but Xiaomi and Oppo are great examples. The Chinese tend to be early adopters and have been the most aggressive. Most of those products I mentioned about the me 14
Eugene A. Sheridan: So we continue to see the trends of faster and faster charging. I think it's an obvious and compelling thing. Consumers don't change overnight.
Eugene A. Sheridan: But, Xiaomi and Opo are great examples. The Chinese tend to be early adopters and have been the most aggressive. Most of those products I mentioned about the Mi14 Ultra, the CB4 Pro, these are all 100 watt and up, really powerful products, super fast charging. We're seeing those same trends out of the other mobile leaders in the different regions.
Eugene A. Sheridan: Ultra, the CV for pro, these are all 100 watts and up, really powerful products, super fast charging. We're seeing those same trends out of the other mobile leaders in the different regions, albeit at a bit slower pace. But I think what you're seeing from China is what you're going to see from the others. A lot of it actually comes down to battery technology; the battery technology needs to safely accept in your phone 30 watts or 65 watts or 100 watts.
Eugene A. Sheridan: albeit at a bit slower pace, but I think what you're seeing from China is what you're going to see from the others.
Eugene A. Sheridan: A lot of it actually comes down to battery technology. The battery technology needs to safely accept in your phone 30 watts, or 65 watts, or 100 watts.
Eugene A. Sheridan: So it's not as simple as just switching from a 30 watt charger to 100 watts; you do need to advance that battery technology. The Chinese and others are certainly proving that you can safely accept 100 watts or more. And that's zero to 100% charge in under 15 minutes.
Eugene A. Sheridan: So it's not as simple as just switching from a 30-watt charger to 100-watt. You do need to advance that battery technology. The Chinese and others are certainly proving that you can safely accept 100 watts or more, and that's zero to 100% charge in under 15 minutes.
Eugene A. Sheridan: So they're setting the example. I think it's just a matter of time; you'll see that same trend. And we're already seeing it with Samsung is now up to 45 watts and, therefore, in their fast charger, for example, using our GAN technology. So those trends are solid, and they're coming. And that's going to lead them right into our GAN IC strength.
Eugene A. Sheridan: So they're setting the example. I think it's just a matter of time. You'll see that same trend. I'm already seeing it with Samsung is now up to 45 watts in their fast charger, for example, using our GAN technology. So those trends are solid and they're coming, and that's going to lead them right into our GANIC strength.
Richard Cutts Shannon: I guess I didn't realize about the batteries. So, thanks for that detail, Gene. My second question is just kind of the general competitive dynamics in both the material systems here. You know, we've seen some more suppliers getting into the GAN space and increasing capacity, you know, looking to be more aggressive. And then in the silicon carbide space, we've obviously seen a slowdown here, and so I just want to get any sense of any changing competitive dynamics, pricing, etc. that you've seen here in the last six months in either of those materials?
Richard Cutts Shannon: Okay, I guess I didn't realize about the batteries, so thanks for that detail, Gene. My second question is just kind of the general competitive dynamics in both the material systems here. You know, we've seen some more suppliers getting into the GAN space and increasing capacity, you know, the
Richard Cutts Shannon: looking to be more aggressive. And then in the silicon carbide space, we've obviously seen a slowdown here. And so I just want to get any sense of any changing competitive dynamics, pricing, et cetera, that you've seen here in the last six months in either of those materials.
Eugene A. Sheridan: Yeah, as much as if you take GAN, as much as there are, you know, various startups that pop up, you know, I have to admit, it doesn't feel like it's changed too much. You know, it's primarily Navitas, we see Infineon and Infineon GAN systems, we see power integrations, we see InnoScience on the low end, and it trails off pretty quickly from there.
Eugene A. Sheridan: Yeah, as much as if you take GAN, as much as there are, you know, various startups that pop up, you know, I have to admit it doesn't feel like it's changed too much. You know, it's primarily novitas. We see Infineon and Infinion GAN systems. We see power integrations.
Eugene A. Sheridan: We see Inno Science on the low end, and it trails off pretty quickly from there. So we haven't seen any change to ASP degradation or anything sort of unusual there.
Eugene A. Sheridan: So we haven't seen any change to ASP degradation or anything sort of unusual there. Surprisingly, not much of a change in the competitive landscape. Silicon carbide, you still have the big players, of course, the IDMs, as you might call them.
Eugene A. Sheridan: So, surprisingly not much of a change in the competitive landscape.
Eugene A. Sheridan: Silicon Carbide, you still have the big players, of course, the IDMs, as you might call them. We're a small, single-digit market share player.
Eugene A. Sheridan: We're a small, single-digit market share player with a lot of upside; just 1 or 2 percent market share gains for us can really matter. Last year, things were really tight, so there was almost no ASP degradation. This year, I'd say supply and demand, with the softening of demand and some increase in supply, I'd say we now have sort of normal ASP degradation. But our focus tends not to be on, you know, obviously we're not a price leader, we're not going part to part, we're very focused on system value. In many cases, we're designing the system or co-designing the system for the customer with the customer, especially in the data center space and the...
Eugene A. Sheridan: with a lot of upside, just one or two percent market share gains for us can really matter. Last year, things were really tight, so there's almost no ASP degradation. This year, I'd say supply and demand with the softening of demand and some increase in supply. I'd say we now have sort of normal ASP degradation.
Eugene A. Sheridan: But our focus tends to not be on, you know, obviously we're not a price leader, we're not going part to part. We're very focused on system value. In many cases, we're designing the system or co-designing the system for the customer, with the customer, especially in the data center space and the EV space.
Richard Cutts Shannon: Okay, great. Thanks, Gene.
Speaker Change: Okay, great. Thanks, Jean.
Operator: Again, if you would like to ask a question, press star 1 on your telephone keypad, and your next question comes from the line of Jon Tanwanteng with CGS Securities. Please go ahead.
Jonathan E. Tanwanteng: Again, if you would like to ask a question, press Tarwan in your telephone keypad. And your next question comes from the line of John Tanwan Tang with CGS Securities. Please go ahead.
Jonathan E. Tanwanteng: Hi, just one quick follow-up. Can you provide us with an update on cash burn and when you think you might achieve breakeven? We think
Jonathan E. Tanwanteng: Hi, just one quick follow-up, can you provide us an update on Cash Burn when you think you might achieve break-even?
Janet Chou: We think we can achieve operating margin level breakeven when revenue reaches 50 to $55 million. In addition to driving profitable growth as the new CFO on board, I'm sharply focused on driving working capital efficiency and improving processes and systems. We remain very confident with our long-term target financial model, which we laid out on Investor Day.
Janet Chou: Uh
Janet Chou: We think we can achieve operating margin level break-even when revenue reaches 50 to 55 million dollars.
Janet Chou: In addition to driving profitable growth as the new CFO on board, I'm Shoplin focused on driving working capital efficiency and improve processes and assistance.
Janet Chou: We remain very confident with our long-term target financial model, which we laid out on Investor Day.
Speaker Change: Great, thank you.
Operator: We have no further questions at this time. This concludes today's conference. Thank you for participating. You may now disconnect. For further comments or questions, please email IR at navitasemi, that's N-A-V-I-T-A-S-S-E-M-I.com.
Speaker Change: Thank you.
Operator: We have no further questions at this time. This concludes today's conference. Thank you for participating. You may now disconnect. For further comments or questions, please email IR at Navitassemi. That's N-A-V-I-T-A-S-E-M-I.com.
Operator: and
Operator: and so on. The President,
Operator: [music].